L’Oréal CEO Nicolas Hieronimus said that the string of crises in recent years has seen the world enter a new, more constrained era, but nonetheless underlined his confidence in the potential of the beauty market.
Hieronimus made the comments at a lunch organized by the Chinese Business Club in Paris in December.
“When I took over the reins of L’Oréal in May 2021, we were seeing the light at end of the tunnel with Covid; it was a period of euphoria and growth and it was like that or several months. […] Then there was an accumulation of crises: inflation, supply-chain tensions, obviously the invasion of Ukraine by Russia, geopolitical tensions, border closures, the return of Covid and the zero-Covid policy in China, which until very recently was an important limiting factor for our business. All that was the end of a very happy interlude, and the beginning of a new era. Because I fundamentally believe that this succession of crises is the end of a cycle, the end of a totally liberal, open cycle where the circulation of people and goods, international cooperation were almost like a blue sky, and we have entered another much more constrained era,” Hieronimus stated.
In addition to the market’s current uncertainty, he stated that there has also been a profound cultural transformation in how today’s generation relate to companies and the world of work, whether in terms of work-from-home or the expectations employees now have about the companies they choose to work for.
He noted that in a year marked by the ‘the great resignation,’ L’Oréal saw a 20% increase in job applications in 2022.
Market growth
In terms of the market, Hieronimus said the beauty sector is expected to add around €100bn in sales by 2030.
“The market today is estimated to have sales of around €230bn and is expected to reach €340bn between now and 2030 just with the development of the middle classes – that is extremely promising.”
As well as the development of the middle class in China, India and other emerging markets, Hieronimus said that science and technology will be key growth drivers for the market.
Asked about how L’Oréal has weathered difficulties related to the zero-Covid policy in China, Hieronimus said that in its most recently reported results at the end September, the group reported growth in a market that was negative, thereby gaining market share.
“We have an industrial and logistics footprint in China that is extremely well distributed around the country, so were not blocked when Shanghai was blocked and could continue our business. We are also very strong in digital in China, where we do more than 60% of our sales in e-commerce.”
He added that the group’s Chinese teams managed the situation well, citing the recent 11.11 shopping festival as an example.
“The teams who operate [11.11 sales] for L’Oréal are based in Guangzhou. There was a lockdown in Guangzhou the week before [11.11], but the team managed this activity, where we do more than €1bn in sales, from their homes through WeChat [etc…], it was very impressive.”
Lastly, in terms of the outlook for the market in 2023 and the impact of a potential recession, Hieronimus said: “Overall we see an appetite for consumption. We have products that are quite accessibly priced and with quite a wide price bracket. Today, we see a level of consumption in Europe – despite what you read in the press – that is positive for [beauty] products. Our consumers want to consume and have the savings to do so, so in the mid term we have very strong growth prospects.”