The recession and weak sales in North America and Europe have seen the
industry talk up the BRIC markets - particularly those in Asia - even
more than usual. Asia is where the growth is, fueled of course by China.
The Chinese market is now being considered as the first port for call
for new brands, and in some cases even before launching in their
domestic market in the West. And of course the country is also beginning
to take on a lot more weight in the major groups’ sales mix. French
group L’Oréal, for example, recently announced that China is now its
third-largest market and that its business in the country should ring up
€1bn in sales this year. L’Oréal had a market share of 11.7% in China
in 2009, up from 8% in 2004. Its position is second only to P&G,
which has 19% of the market in China—a share that L’Oréal points out has
declined from 24% in 2004.
But although global players have expanded rapidly in markets such as
China in the past 10 years, industry watchers feel manufacturers are
still a little too West-centric for the consumer there. Millions of
dollars have been invested in R&D centers in China and efforts have
been made to come up with products adapted to the consumer’s skin types
and habits.
However, some ask how long it will be before the local consumer will
question the legitimacy or even the inherent contradiction of a brand
with a French glamour positioning trying to market products based on
traditional Chinese medicine. Or more simply, how long the proud Chinese
consumer will accept having to buy foreign beauty and turn to local
alternatives.
This is all probably a long way off. But having a local brand in the
portfolio now may well provide a wealth of market insight and a strong
base for future growth in the country. The same could also be said of
other fast-developing beauty markets. L’Oréal for example, has said it
was interested in adding a Brazilian or Indian company to its brand mix.
Emerging-market M&A may be on its way
Link to related articles:
For more analysis on the Chinese beauty market go to BW Confidential’s website
To read the Asia beauty market watch in BW Confidential’s print magazine No 2,
click here