L’Oreal’s Consumer Products, Dermatological Divisions In ‘Hyperdrive’; H1 Sales Leap 13%
Executive Summary
L’Oreal’s organic top-line growth has been 8.2% on a compound annual basis since the start of 2019. The beauty giant’s overall net sales totaled roughly €3.74bn for the first half of 2023, an increase of 13.3% like-for-like, reflecting outstanding, broad-based performances across the business.
L’Oreal SA’s Consumer Products division saw a 15% increase in like-for-like sales to roughly €7.7bn ($8.4bn) in the firm’s fiscal 2023 first half, driven both by volume and value, the firm reported on 31 July.
Consumers’ appetite for high-quality beauty products hasn’t diminished despite ongoing inflationary pressures, and valorization continues to be a critical piece of L’Oreal’s growth strategy.
CEO Nicolas Hieronimus noted in a same-day call, “What makes our virtuous circle so unique is that it's constantly fueled by our obsession with valorization. Every time we launch a new product, we do it at a premium to the existing range. Why? Because our unrivaled R&I backbone ensures that we make it better for the consumer and that the consumer is willing to pay for the added value.”
He provided two examples. “You might be surprised that they are both from our Consumer Products Division, which most of you probably least associate with valorization. Well, you're wrong. The first one is Garnier Good. It is two times more expensive than our existing [hair] color ranges. The second one is Elvive Bond Repair. Its price per milliliter is three times above that of our existing hair-care products, and they are both very successful.”
"These new brands – Prada, Valentino, Garnier – they need to be supported. So that's what we do. It's preparing the billionaires of tomorrow through a stronger investment.” – CFO Christophe Babule
Makeup fueled Consumer Products growth in the first half. L’Oreal credited recent launches including Maybelline Falsies Surreal Mascara, L’Oreal Paris Telescopic Lift Mascara, and Fat Oil Gloss by NYX Professional Makeup.
In skin care, new products from L’Oreal Paris and Garnier propelled double-digit growth, namely the former’s new Revitalift Clinical Vitamin C Anti-UV Fluid and the latter’s Pure Active AHA + BHA anti-blemish range.
Geographically, Consumer Products benefited from exceptional performances in Europe and the emerging markets of Mexico, Brazil and India, L’Oreal says. The division also recorded double-digit growth in North America.
L’Oreal’s fastest growth continues to come from Dermatological Beauty, which is also its most profitable business. The division – in “hyperdrive” along with Consumer Products, in the words of Hieronimus – experienced 29% like-for-like sales growth to approximately €3.3bn for the first half, bolstered by a strong performance in mainland China, where the market continues to recover gradually, L’Oreal says.
La Roche-Posay gains continue on the strength of Effaclar acne-prone skin care, Cicaplast dry skin therapy, and Anthelios UVmune 400 sun defense. CereVe delivered again, particularly in North America, and Vichy sales got a boost from Dercos scalp psoriasis solutions in addition to sun care.
Medical-dispensed brand SkinBetter Science – acquired in October 2022 for approximately €858m, according to the firm's H1 financial report – is off to a promising start. (Also see "L’Oréal Plans Largest Deal: $2.52Bn For Aesop" - HBW Insight, 4 Apr, 2023.)
L’Oreal’s Professional Products and Luxe divisions both recorded 7.6% like-for-like growth for the first six months of fiscal 2023, ended 30 June.
Advertising and promotion expenses increased for the period, reaching nearly €6.7bn, or 32.5% of sales. More than 70% of that is in digital channels currently, company leadership said.
CFO Christophe Babule noted, “We have, of course, our big billionaire brands that we have to continue to support. … But we are bringing in new brands. And these new brands – Prada, Valentino, Garnier – they need to be supported. So that's what we do. It's preparing the billionaires of tomorrow through a stronger investment.”
On targeting L’Oreal’s media messaging and optimizing spend, Babule offered, “We have invested and we are developing our own AI-powered A&P allocation tool, which is right now in pilot mode in a couple of countries, which gives spectacular results in terms of increased ROI, both short-term and long-term.”
The firm outlined its innovation plan for the fiscal 2023 second half and holiday season. Per Hieronimus, “This will allow us to keep winning in the beauty market that is forever premiumizing.”
He continued, “Some of the launches that I’m particularly excited about include the new male fragrance of YSL and the extension of Prada in makeup and skincare, Super Stay from Maybelline, Absolute Repair from L'Oreal Professional, the daily UV protection from CeraVe, and much more particularly in makeup. Needless to say, they will all come with strong valorization,” he said.
L’Oreal’s group net sales totaled roughly €3.74bn for the first half of 2023, an increase of 13.3% like-for-like. The firm’s organic top-line growth has clocked at 8.2% on a compound annual basis since the start of 2019, the CEO said.
“That puts us well ahead of the global beauty market,” he said.