L'Oréal posts strongest growth in 20 years, beauty fuels record profits for LVMH, Australia tops list of travel destinations for Chinese, and existing products prove key to longterm success says Nielsen.
L'Oréal posts strongest growth in 20 years
Its US competitors may be suffering from the effects of a surging American dollar but L'Oréal Paris is in a pole position says Chairman and CEO Jean-Paul Agon. The world's largest cosmetics company has posted its strongest growth in 20 years with an 8.5 per cent jump in net profits for the first half of the year. A sales hike of 14.7 per cent to 12.8 billion euros (AUD$19.19 billion) is just a foretaste says Agon of an even more successful second half.
All divisions are growing but L'Oréal's luxury brands, including Giorgio Armani, Yves Saint Laurent and 's, are in double digit growth. The Active Cosmetics Division, powered by La Roche-Posay, is strengthening its position worldwide. With demand surging in Europe and the US, the only downbeat news for the beauty giant is a decline of sales in Brazil.
Agon predicted that the sales growth of the global cosmetics market would increase to 3.5 to 4 per cent by the end of the year. He also noted that online sales for the group were up 40 per cent in the first half and now accounted for 4 to 5 per cent of L'Oréal's total revenue. Refusing to be drawn on the current rumour that the multinational might be interested in trying to acquire the Gucci fragrance license from Coty - a key part of the recent P&G sell-off - he did comment on the US$12.5 billion mega-deal itself. "It's great news. It means that P&G abandoned its ambition, set 15 years ago, of becoming a world leader in the beauty market".
Beauty fuels record profits for LVMH
Sephora and the Perfumes & Cosmetics division of LVMH made up almost half of the world's largest luxury goods group's revenues in the first half of the year. Total revenues, including fashion, accessories, wines and spirits, climbed to 16.7 billion euros (AUD$25 billion) - an increase of 19 per cent.
The Selective Retailing Division, anchored by Sephora, pulled in 5.29 billion euros (AUD7.9 billion). The beauty chain achieved strong growth worldwide and continued to carve out increased market share in key markets such as the US, China and France.
LVMH's Perfumes & Cosmetics division reported an increase in sales in the first half to 2.15 billion euros (AUD$3.22 billion) - up from 1.83 billion euros (AUD$2.74 billion) in the same period last year. Ace performers included the J'adore and Miss Dior fragrances, Guerlain's La Petite Robe Noire and Abeille Royale skincare, Benefit and Makeup For Ever. LVMH is expecting an equally successful second half, driven by the as-yet-unnamed men's fragrance from Dior fronted by Johnny Depp set to launch in Australia in late August.
Australia tops list of travel destinations for Chinese
Leading prestige skincare brands such as , Sisley Paris, and Lancome Absolue have hired Mandarin-speaking beauty consultants in top doors across the country. Harper's Bazaar Australia publishes a much-anticipated luxury shopping guide in Mandarin and many prestige beauty brands have also translated their product information to appeal to Chinese customers. Australia is already the third largest overseas destination for wealthy Chinese travellers behind France and the US but a new report reveals we should brace ourselves for an upsurge.
The fourth edition of the Chinese International Travel Monitor report from Hotels.com has fingered the top 10 list of travel destinations Chinese travellers would like to visit in 2015. Australia ranks number one, followed by Japan, France, Hong Kong, South Korea, USA, the Maldives, Germany, Thailand and Taiwan.
According to research, the number of outbound Chinese is predicted to reach 174 million by 2019. As Japan is discovering since the country eased its visa requirements last October, Chinese visitors love to flash their cash on skincare and makeup. A forecast from the Bank of America Merrill Lynch predicts that Chinese tourists will spend US$264 billion worldwide by 2019.
Existing products key to longterm success says Nielsen
Beauty media have long experienced an awkward silence after asking about a product launched only 18 months prior with great fanfare. Then comes the reply - It's been discontinued. Whatever the category it's a common story, says Nielsen, in a new report - Nurturing Innovation: How To Succeed in Years Two and Three. Sales of new launches can plummet by up to 55 per cent in the second year and by year three the downward trajectory can reach 69 per cent.
The reason isn't because consumers are constantly chasing the new says the researcher. After analysing 600 new launches it quickly became apparent that much of the blame for lack of buyer interest can be traced to brands allocating fewer resources and support to new lines in year two. Following an initial campaign, many companies assume that growth will stabilise and sales will increase with little or no help.
Not so, says Nielsen. A new product must generate at least 80 per cent of its sales in the first 12 months in year two to continue to be a longterm success. According to the study, brands that cut their media spend in the second year routinely experience significant sales drops. While brands that continued to spend continued to grow in year two. Nielsen advises brands to promote launches in the second year even when budgets are tight, rather than launch a new product and continue the boom-and-bust cycle.
Snippets from the wires
- Saint Laurent was the star performer for the Kering luxury conglomerate in the first half of the year with sales increasing 24.3 per cent. But the big news is that Gucci has pulled out of a two year slump with a spike in fashion and accessories sales of 4.6 per cent.
- Sergio Rossi, another Kering brand, is also in the headlines. Private equity firm Emerisque is now the sole buyer for the luxe shoe brand, following the withdrawal of Lion Capital and Investindustrial.
- There's no escaping the fact that London's Burlington Arcade was looking more than a little tired. The 19th century shopping arcade has re-opened following a multi-million dollar renovation and houses a Chanel beauty boutique, an outpost of Laduree and other swish shops including Eres, Maison Michel, Harrys of London handmade shoes and accessories and Theo Fennell jewellers.
- A small double chin can afflict even the slimmest of women. But liposuction and surgery have several drawbacks. The USFDA has approved KYBELLA, a first-to-market injectable drug that claims to contour and improve the appearance of moderate to severe submental fullness - the correct medical term for a double chin.
- A new study from the UK has confirmed what most marketers already know. Online reviews have the greatest influence on consumers. What's not as widely known is that it's important not to have too many. According to lead researcher Dr Raffaele Filieri: "Very few consumers will read more than 10 reviews before making a decision to buy a product or service. What's important, to evaluate a product's quality and performance, is the quality of information in those first few reviews".
- Beauty eds are used to receiving gifts with their names on them but such personalisation is novel for most women. Over the Christmas period, iconic Brit department store Selfridges is offering engraving services on three styles of tweezers from Tweezerman.
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has made another important hire hot on the heels of 's Roxana Daver. The Japanese giant has appointed Marc Rey as President and CEO of its US division. The former President of Coty USA, Rey has also held senior psoitions at L'Oreal and Yves Saint Laurent Beaute. He will also become the Global Strategic Brand Holder for the Shiseido-owned Bare Escentuals and NARS brands.
