L’Oréal, a name synonymous with beauty, is known for its consistent trajectory of growth and stability. It has been satisfying global beauty aspirations in their infinite diversity for over 110 years. This beauty giant, with a myriad of brands, ranging from Garnier shampoo to Armani Privé perfume, is continuously evolving and adapting to the dynamic landscape of the beauty industry. However, recent trends indicate a shift in its strategy towards premiumization. L’Oréal, with its broad spectrum of initiatives and collaborations, is pushing towards more expensive products across its key divisions.
L’Oréal’s annual results conference offers significant insights into the company’s growth, as well as industry-wide growth, touching upon micro and macro trends in the beauty space. According to recent results, L’Oréal has reported an 11 percent rise in full-year revenue, reaching €38 billion, or $41 billion. Profits rose by 21 percent year on year to €7.46 billion. The company has painted a picture of cautious optimism for 2023, intending to move on from the “polycrises” such as the Covid-19 pandemic, inflation, and the war in Ukraine.
While this upswing in financials is a testament to the company’s resilience and strategic agility, a careful examination also reveals an underlying theme that’s been steering its strategy – premiumization. So, why is the world’s biggest beauty company moving upmarket? Let’s delve deeper into the reasons.
Embracing Universalization and Glocalisation
The most critical factor driving L’Oréal’s shift upmarket is its strategic commitment to ‘Universalization’ and ‘Glocalisation.’ Universalization, according to L’Oréal, means globalization that captures, understands, and respects differences in desires, needs, and traditions. This strategy aims to offer tailor-made beauty solutions and meet the aspirations of consumers worldwide. Similarly, Glocalisation refers to the globalization of its brands while understanding and respecting local differences. It focuses on offering bespoke and inclusive beauty solutions that cater to the specific aspirations of consumers in every region of the world.
Valorization Strategy and Premiumization
L’Oréal has also embarked on a ‘valorization strategy.’ The company rolled out this strategy at the beginning of the year, and its effects have been particularly pronounced in Europe and North America. Coupled with the premiumization strategy, this has led to a significant increase in the company’s sales, especially in the Consumer Product Division, which grew by 8.7% in the third quarter. The launch of Superstay Vinyl Ink lipstick by Maybelline New York, Bare With Me concealer serum by NYX Professional Makeup, and the rollout of Elvive Hyaluron Plump, contributed to this division’s growth.
Driving Growth in Key Markets
L’Oréal has also seen an increase in sales in its Active Cosmetics Division, reporting a significant growth of 22.6%. The primary contributor to this was the skincare brand La Roche-Posay, followed by CeraVe and Vichy. The Active Cosmetics Division’s growth further exemplifies the company’s drive for premiumization.
One of the key strategies propelling L’Oréal’s move upmarket is its focus on developing markets. For instance, India’s rapidly growing middle class and young Chinese consumers’ recent adoption of perfume have opened new opportunities for L’Oréal. The company has made a concerted push towards high-quality products to tap into these markets, thereby accelerating its premiumisation strategy.
Embracing Digital Trends and Social Media
The beauty giant is also effectively leveraging digital trends and social media platforms to drive its premiumisation strategy. For instance, the company has established partnerships with TikTok-famous doctors, contributing to the growth of brands like CeraVe and SkinCeuticals. By associating its products with popular influencers and medical professionals, L’Oréal effectively markets its products as premium and reliable.
In conclusion, L’Oréal’s move upmarket is an amalgamation of strategic shifts and adaptation to market trends. The company is leveraging Universalization and Glocalisation to cater to diverse consumer needs and aspirations. Its valorisation and premiumisation strategies aim to offer high-quality, innovative products. Simultaneously, L’Oréal is effectively leveraging digital platforms and focusing on growing markets to drive its premiumisation strategy. As the world’s largest player in the beauty industry, L’Oréal’s move upmarket is a testament to its strategic agility and its unwavering commitment to delivering the best in beauty to its consumers worldwide.