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The chief executive of L’Oréal, the world’s biggest beauty company, has predicted that price increases will slow this year after they helped to propel growth in the global beauty market for the past three years.
Nicolas Hieronimus said he expected industry-wide price rises to fall back to about 5 per cent in 2024, in line with pre-pandemic averages, from a sector average of 8 per cent in 2023 as the cost of supplies and raw materials stabilised or declined.
“Looking forward at the beauty market, the only normalisation that I see happening is price normalisation,” he told the Financial Times in an interview.
His remarks came as L’Oréal reported a 7.6 per cent rise in sales last year to €41.18bn, slightly below consensus estimates compiled by Visible Alpha and below the double-digit growth it had recorded in the previous two years. Operating profit for the year rose 9.2 per cent to €8.14bn.
Price increases contributed 4 per cent to annual revenue growth, Hieronimus said, while the rest came from an increase in the volume of products consumers bought.
L’Oréal only passed on two-thirds of its input cost inflation to consumers last year but has also used research and innovation improvements to justify increasing the amount it can charge for its products.
Fourth-quarter sales grew 2.8 per cent year on year to €10.6bn, below consensus estimates, and the pace decelerated from quarter to quarter through the year, in large part due to adverse currency impacts in the second half.
“There was a bit of a slowdown in the second half, but overall, it’s a super dynamic market which confirms that people need beauty and probably even more so when times are tough and gloomy,” said Hieronimus. “This industry and this market has confirmed once again that it defies all laws and it continues to grow.”
The Paris-based company’s growth was led by its dermatological beauty division — which houses brands such as La Roche-Posay and Cerave — followed by its mass-market consumer products division, its largest by sales, where all four of its biggest brands grew by double digits driven by demand in Europe.
Growth in its luxury division was more sedate, however, reflecting a soft market in mainland China and a crackdown on offshore travel retail by Beijing midway through the year.
“The [Chinese] market is going to remain soft, at least for the first part of 2024, but we will grow in that market, we will beat that market, and more importantly, I believe that in the next couple of years it will accelerate again,” said Hieronimus. “They are going to need to grow [and] they need consumption to grow.”
Rapid growth in emerging markets including India, Brazil and Mexico provided a boost, accounting for 15 per cent of L’Oréal’s annual sales, but 30 per cent of its growth.
L’Oréal’s “above-trend growth for dermatological beauty and consumer products in western and emerging markets should continue to successfully offset a soft Chinese beauty market,” said Rogerio Fujimori, analyst at Stifel.
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