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| ==Trends and Forces== | ==Trends and Forces== | ||
| - | [[Image:LRLCY_Geography.jpg|500px]]<ref>[http://www.lorealfinance.e-loreal.com/site/us/contenu/rapport/rapport2007/pdf/2007_Full_Annual_Report.pdf LRLCY 2007 Annual Report, pg.21]</ref> | + | [[Image:LRLCY_Geography.jpg|500px|right]]<ref>[http://www.lorealfinance.e-loreal.com/site/us/contenu/rapport/rapport2007/pdf/2007_Full_Annual_Report.pdf LRLCY 2007 Annual Report, pg.21]</ref> |
| ===60% of L'Oreal's Revenue Growth Came from Emerging Markets in 2007=== | ===60% of L'Oreal's Revenue Growth Came from Emerging Markets in 2007=== | ||
| As [[Emerging Markets|emerging markets]] in Asia, Africa, and South America grow, income growth will spur consumption. This presents an opportunity for consumer product companies like L'Oreal, and L'Oreal is already reaping the benefits. Eastern Europe, Asia and Latin America have the fastest-growing sales, ranging from 14.3% to 29.4%.<ref>[http://www.lorealfinance.e-loreal.com/site/us/contenu/rapport/rapport2007/pdf/2007_Full_Annual_Report.pdf LRLCY 2007 Annual Report, pg.62]</ref> In Eastern Europe, for example, the Luxury Products segment grew faster than the market in 2007, fueled primarily by Giorgio Armani fragrances and Biotherm. Also, the Professional Products segment became market leader in the Czech Republic, Poland and Russia. L'Oreal has followed an aggressive plan to enter these markets and their continued economic growth will serve to make them more profitable.<ref>[http://www.lorealfinance.e-loreal.com/site/us/contenu/rapport/rapport200/pdf/2007_Full_Annual_Report.pdf LRLCY 2007 Annual Report, pg.62]</ref> | As [[Emerging Markets|emerging markets]] in Asia, Africa, and South America grow, income growth will spur consumption. This presents an opportunity for consumer product companies like L'Oreal, and L'Oreal is already reaping the benefits. Eastern Europe, Asia and Latin America have the fastest-growing sales, ranging from 14.3% to 29.4%.<ref>[http://www.lorealfinance.e-loreal.com/site/us/contenu/rapport/rapport2007/pdf/2007_Full_Annual_Report.pdf LRLCY 2007 Annual Report, pg.62]</ref> In Eastern Europe, for example, the Luxury Products segment grew faster than the market in 2007, fueled primarily by Giorgio Armani fragrances and Biotherm. Also, the Professional Products segment became market leader in the Czech Republic, Poland and Russia. L'Oreal has followed an aggressive plan to enter these markets and their continued economic growth will serve to make them more profitable.<ref>[http://www.lorealfinance.e-loreal.com/site/us/contenu/rapport/rapport200/pdf/2007_Full_Annual_Report.pdf LRLCY 2007 Annual Report, pg.62]</ref> | ||
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| ===Male Cosmetics on the Rise=== | ===Male Cosmetics on the Rise=== | ||
| - | Cosmetics for men makes up about 7-8% of the world cosmetics market.<ref>Oppenheim Research, Reinitiating Coverage, pg.26</ref> However, about 22% of L'Oreal's sales come from male cosmetics, primarily in the form of cologne and deodorant. Together male perfumes and deodorant made up about two thirds of L'Oreal's male cosmetic sales in 2007. The usage of male cosmetics has grown considerably over the last two decades. From 1990 to 2001, men's skincare usage increased from 4.5% to 21%. In addition, men skincare usage in Western Europe has increased about 28% between 2001 and 2005.<ref>Oppenheim Research, Reinitiating Coverage, pg.26</ref> Cosmetics companies have even began to penetrate the over-40 market, which is not as saturated as the women's and young men's markets. In 2007 53 anti-ageing skin care products were released, four times the number of new products released in 2005.<ref>[http://www.guardian.co.uk/lifeandstyle/2008/apr/27/healthandwellbeing.uk "Cosmetics firms tempt men over 50"]</ref> There are two key reasons why the male demographic is receiving so much attention from cosmetics companies: first and foremost, it is still not as saturated as the female market. More importantly, men have proven to be more loyal to specific products and brands than women are, who are more likely to switch to whatever the next trend is. Therefore cosmetics companies are trying to appeal to the male market in order to secure long-term loyal customers.<ref>[http://www.guardian.co.uk/lifeandstyle/2008/apr/27/healthandwellbeing.uk "Cosmetics firms tempt men over 50"]</ref> | + | Cosmetics for men makes up about 7-8% of the world cosmetics market.<ref>Oppenheim Research, Reinitiating Coverage, pg.26</ref> However, about 22% of L'Oreal's sales come from male cosmetics, primarily in the form of cologne and deodorant. Together male perfumes and deodorant made up about two thirds of L'Oreal's male cosmetic sales in 2007. The usage of male cosmetics has grown considerably over the last two decades. From 1990 to 2001, men's skincare usage increased from 4.5% to 21%. In addition, men skincare usage in Western Europe has increased about 28% between 2001 and 2005.<ref>Oppenheim Research, Reinitiating Coverage, pg.26</ref> Cosmetics companies have even began to penetrate the over-40 market, which is not as saturated as the women's and young men's markets. In 2007 53 anti-ageing skin care products were released, four times the number of new products released in 2005.<ref>[http://www.guardian.co.uk/lifeandstyle/2008/apr/27/healthandwellbeing.uk "Cosmetics firms tempt men over 50"]</ref> There are two key reasons why the male demographic is receiving so much attention from cosmetics companies: first and foremost, it is still not as saturated as the female market. More importantly, men have proven to be more loyal to specific products and brands than women are, who are more likely to switch to whatever the next trend is. Therefore cosmetics companies are trying to appeal to the male market in order to secure long-term loyal customers.<ref>[http://www.guardian.co.uk/lifeandstyle/2008/apr/27/healthandwellbeing.uk "Cosmetics firms tempt men over 50"]</ref> |
| ==Competition== | ==Competition== | ||
Revision as of 16:28, March 24, 2009
L'Oreal is the world's largest cosmetics producer by revenue -- €17B-- and a world market share of 15.3% .[1] L'Oreal offers products in hair care, skincare, make-up, deodorants, and perfumes through its 27 brands. Hair care and skin care make up the largest percentage of L'Oreal's sales, 24% and 26%, respectively.[2]
L'Oreal has begun to penetrate emerging markets such as Asia, Eastern Europe and Latin America, which has bolstered its revenues from the already-saturated North American and Western European markets. Two more markets that the company has penetrated include men, who have shown an increasing amount of attention to cosmetics, and an older population that has an interest in anti-aging products.
Business Outline
L'Oreal operates the following business divisions:
Consumer Products (49%)
The consumer products segment sells its goods through mass-market drugstores.
- Garnier
- L'Oreal Paris
- Maybelline New York
- Softsheen-Carson
Professional Products (14%)
The professional products segment produces products that are used by professional stylists in hair salons.
- L'Oreal Professionel
- L'Oreal Technique
- Kerastase
- Matrix
- Mizani
- Redken
Luxury Products (23%)
The luxury products division sells its goods through a smaller collection of department stores and the boutique's own retail locations.
- Biotherm
- Viktor & Rolf Fragrances
- Cacharel
- Giorgio Armani Perfumes & Cosmetics
- Kiehl's Since 1851
- Lancome
- Ralph Lauren Fragrances
- Shu Uemura
Active Cosmetics (7%)
This segment produces skincare products sold in pharmacies and specialty drugstores.
- Dermablend
- La Roche-Posay
- Skinceuticals
- Vichy
The Body Shop (4%), and Dermatology (2%) are individual stores owned by L'Oreal. Professional products commands the largest market share, compared to other divisions, in all of L'Oreal's geographic segments.
Sales increased 8% from 2006 to 2007 including a decrease of 3.5% due to currency exchange rate fluctuations. The professional products division saw a 7.5% increase in sales, Sales for the Consumer Products segment increased by 7.9% from 2006, the largest contributor to which was skincare. The Luxury Products segment had 8.4% growth, with an increase in sales of 12.1% in the last quarter, driven primarily by new fragrance releases such as Diesel Fuel for Life and Emporio Diamonds. Active Cosmetics achieved full-year sales of 10.8% with a 4th quarter increase of 14.2%.[5]
New markets throughout the world have shown accelerated growth during the 2007 fiscal year. Eastern Europe grew the fastest, seeing a 29.4% increase in sales at the end of fiscal year 2007. Sales in Asia and Latin America for the same period were 14.3% and 14.6% respectively.[6]
Trends and Forces
60% of L'Oreal's Revenue Growth Came from Emerging Markets in 2007
As emerging markets in Asia, Africa, and South America grow, income growth will spur consumption. This presents an opportunity for consumer product companies like L'Oreal, and L'Oreal is already reaping the benefits. Eastern Europe, Asia and Latin America have the fastest-growing sales, ranging from 14.3% to 29.4%.[8] In Eastern Europe, for example, the Luxury Products segment grew faster than the market in 2007, fueled primarily by Giorgio Armani fragrances and Biotherm. Also, the Professional Products segment became market leader in the Czech Republic, Poland and Russia. L'Oreal has followed an aggressive plan to enter these markets and their continued economic growth will serve to make them more profitable.[9]
Aging Populations Demand More Cosmetics
L'Oreal projects that by 2025 41.5% of all the people in Europe, the US, and Japan will be over 50 years old (34% were over 50 in 2005).[10] This is a promising trend for L'Oreal because older age groups, comparatively, demand more cosmetics, especially anti-aging skin care and other age related products. In addition, cosmetic demand from all age groups, in particular those between 40 and 70, has been on a steady incline. The world cosmetics market has had an average annual growth of 4.6% between 1993 and 2007.[11] In 2005, half of all people between the age 55-59 used anti-age skincare, according L'Oreal.[12]
However, while the percentage of older people in these populations is growing, the actual number of older people is not necessarily increasing. Native populations in France, Italy, Netherlands, Japan, as well as many other developed countries, are growing older, percentage wise, as a result of lower birthrates. Birthrates below replacement in these countries, as well as below historical levels, means that new generations are smaller than previous ones creating a proportionally older population.. While the US experiences a similarly low birthrate from Caucasians, aging baby boomers means that the older population is in fact larger than in the past.
Male Cosmetics on the Rise
Cosmetics for men makes up about 7-8% of the world cosmetics market.[13] However, about 22% of L'Oreal's sales come from male cosmetics, primarily in the form of cologne and deodorant. Together male perfumes and deodorant made up about two thirds of L'Oreal's male cosmetic sales in 2007. The usage of male cosmetics has grown considerably over the last two decades. From 1990 to 2001, men's skincare usage increased from 4.5% to 21%. In addition, men skincare usage in Western Europe has increased about 28% between 2001 and 2005.[14] Cosmetics companies have even began to penetrate the over-40 market, which is not as saturated as the women's and young men's markets. In 2007 53 anti-ageing skin care products were released, four times the number of new products released in 2005.[15] There are two key reasons why the male demographic is receiving so much attention from cosmetics companies: first and foremost, it is still not as saturated as the female market. More importantly, men have proven to be more loyal to specific products and brands than women are, who are more likely to switch to whatever the next trend is. Therefore cosmetics companies are trying to appeal to the male market in order to secure long-term loyal customers.[16]
Competition
Neither Procter & Gamble nor Revlon are in direct competition with L'Oreal. Cosmetics makes up a small portion of Procter & Gambles business. Revlon, on the other hand, only sells cosmetics. Delivering new and innovative products is key in any beauty or fashion industry, and cosmetics is no different. Of the three, L'Oreal spends the most on R&D as a percentage of sales: L'Oreal (3.5%), Procter & Gamble (2.7%), and Revlon (1.7%). L'Oreal is more specialized than Procter & Gamble, and far outspends Revlon on R&D, and both facts help L'Oreal remain a leader in the cosmetics market. On the basis of revenue, L'Oreal is much larger than Revlon, therefore L'Oreal has more money to spend on marketing which is an extremely important factor to success in the cosmetics industry. Although the company is dwarfed by Procter & Gamble on a sales basis, the majority of Procter & Gamble's R&D and marketing expenses go to its other product categories that form a more significant portion of its revenues.
| Company | Revenue (mm) | Operating Income (mm) | Operating Margin | R&D Spending (mm) | Major Brands/Products |
|---|---|---|---|---|---|
| Revlon (REV) [17] | $1,400 | $121 | 10.14% | $24.4 | Revlon, Almay, Charlie, Bozzano, Ultima II |
| Procter & Gamble[18] | $76,476 | $15,450 | 20.20% | $2,075 | Pantene, Crest, Tide, Downy, Bounty, Folgers, Gillette |
| L'Oreal[19] | $23,134 | $3,833 | 16.57% | $759 | Garnier Fructis, L'Oreal Paris, Maybelline |
<autowikidata/>
References
- ↑ LRLCY 2007 Annual Report, Consolidated Financial Results, pg. 20
- ↑ LRLCY 2007 Annual Report, pg.21
- ↑ LRLCY 2007 Annual Report, pg.21
- ↑ LRLCY 2007 Annual Report, pg.20
- ↑ LRLCY 2007 Annual Report, pgs. 60-61
- ↑ LRLCY 2007 Annual Report, pgs. 61-62
- ↑ LRLCY 2007 Annual Report, pg.21
- ↑ LRLCY 2007 Annual Report, pg.62
- ↑ LRLCY 2007 Annual Report, pg.62
- ↑ Oppenheim Research, Reinitiating Coverage, pg.26
- ↑ LRLCY 2007 Annual Report, pg.27
- ↑ [Oppenheim Research, Reinitiating Coverage, pg.27]
- ↑ Oppenheim Research, Reinitiating Coverage, pg.26
- ↑ Oppenheim Research, Reinitiating Coverage, pg.26
- ↑ "Cosmetics firms tempt men over 50"
- ↑ "Cosmetics firms tempt men over 50"
- ↑ REV 2007 10-K, Item 15, pg. F-5
- ↑ PG 2007 10-K, pg. 49
- ↑ LRLCY 2007 10-K, pg. 23
- ↑ Oppenheim Research, Reinitiating Coverage, pg.19
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