The new CEO of L ‘Oreal gave an important speech, giving six new insights into the beauty industry

On Feb 9, French beauty giant L ‘Oreal Group reported better-than-expected sales for 2021, driven by holiday spending in mainland China and the United States.On February 10, Nicolas Hieronimus made his first appearance as CEO of L ‘Oreal group at the annual results conference.”The global beauty market has been transformed by COVID-19,” he told the conference.In an increasingly digital marketplace, consumers want healthier, safer, more transparent, more sustainable and more scientific products.”Nicolas Hieronimus has been the CEO of L ‘Oreal group since 1 May 2021.Here are six key insights from Nicolas Hieronimus about the overall state of the global beauty industry today: 1) Beauty is a brand-driven market, scale matters According to L ‘Oreal Group estimates, the global beauty market grew by 8% last year.”There was a rebound in 2021 after an 8% decline in 2020,” Nicolas Hieronimus said.”This year has taught us that the desire for beauty is vast and universal, and that beauty is essential to humanity,” he said.”Beauty is a market driven by innovation, technology, intuition and creativity;Beauty is a brand-driven market in which each consumer is personalized and forms infinitely diverse connections with the brand….Scale is important in the beauty market: the big brands, the big star products will win.”2) The beauty market will continue to upmarket, although inflation is likely to squeeze purchasing power and tight supply chains will lead to higher prices, Nicolas Hieronimus is optimistic for 2022 as a whole.”We are confident that the beauty market will continue to grow.In addition to being driven by a larger middle class, the market will continue to be upmarket.””We expect the beauty market to grow 4 to 5 percent by 2022.”L ‘Oreal is trying to reduce inflationary pressures through a number of initiatives.Nicolas Hieronimus explained: “Inflation and rising commodity costs will be a headheadin the first half of [2022] and our operating teams will offset some of this through value-based negotiations or alternatives.”Apart from product premiumization, the group will also mitigate the impact of rising costs through an AI-driven price management strategy that integrates revenue growth management, mixed price increases, promotional forms and other aspects, most of which have already been agreed with retail partners, he said.The L ‘Oreal Group’s investment in upgrading technology is affecting its business at all levels, not just on the consumer side.Nicolas Hieronimus said: “What will really enable L ‘Oreal (Group) to weather the challenges ahead is our transformation around beauty technology and sustainability.”On recipes, for example, “our AI recipe tool can save months while we adjust recipes to meet the SDGS and changing regulations,” he said.Ai also helps us collect all the reviews about our products posted online in real time, and we upload the feedback to our research database.”In consumer-facing projects, he added, “our brands are already exploring new worlds in gaming and the metasomes.”On channel, Nicolas Hieronimus said: “Travel retail has experienced a significant rebound, but is still well below pre-pandemic levels, and we can bet on a further recovery in 2022.””E-commerce remains a strong growth driver.”The recovery in physical stores has come and gone with the pandemic, but has generally bounced back.”The group estimates global e-commerce channel growth of 6% in 2021, physical store channel growth of 6% and travel retail growth of 16%, driven in large part by continued growth in Hainan, China.When it comes to China’s slowing economy, the executive is optimistic, saying: “The Chinese market slowed in the second half of the year, compared to the period of high growth [when China was not newly infected in the global lockdown].But compared to 2019, China’s growth is still very strong and the medium-term outlook is very positive.By 2030, there will be 370 million more people in the middle class and they will need beauty products.”For the fiscal year ending December 31, L ‘Oreal group reported sales of 32.28 billion euros, up 16.1% year-on-year, 16.9% at constant exchange rates and 11.3% compared to the same period in 2019.The group described it as a “historic year”, Posting its strongest growth since 1988 and more than twice the market average.”Every division, every region, every category of the L ‘Oreal group has outperformed the market,” said Nicolas Hieronimus, describing it as a “grand slam”.The group benefited from strong demand in the US and North Asia, particularly China, although it acknowledged that demand in both regions had slowed in the second half.L ‘Oreal group estimates that the global beauty market will evolve by region in 2021 as follows: North America led the growth of the global beauty market, with overall sales increasing by 12%.Europe, North Asia and Latin America all grew by 7%, and the SAPMENA/SSA region (South Pacific, Middle East, North Africa and sub-Saharan Africa) grew by 5%.The global beauty market is “driven by skincare and fragrance categories, while make-up is recovering,” says Nicolas Hieronimus.”With the exception of cosmetics, almost all categories are back to their 2019 levels.”L ‘Oreal estimates that, at constant exchange rates, the global skincare market grew 7 per cent last year, perfumes 21 per cent, beauty about 8 per cent and hair care 6 per cent.Regarding l ‘Oreal’s own operations, Nicolas Hieronimus said: “The pandemic has allowed us to move away from inefficient ‘long tail’ stores and focus on developing the best stores, which is critical to our strategy.”L ‘Oreal has closed 1,300 underperforming stores in the U.S. over the past few years.

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