L’Oreal to concentrate on new markets in 2010

By Simon Pitman

- Last updated on GMT

Related tags Developed country Investment

Having been hard hit by the economic downturn in 2009 L’Oreal says new markets will help to counteract limited growth opportunities in developed markets.

CEO Jean-Paul Agon detailed the strategy in a financial presentation, given in Paris on Tuesday in front of both shareholders and press, helping to explain part of how the company aims to double the number of people that use L’Oreal brands worldwide within the next ten years.

Talking about the financial performance, Agon stressed that the company had continued to maintain market share in most of its divisions, while continuing to innovate with new products and extend into new markets - strategies that will also prove vital to its three-pronged future focus strategy.

Looking ahead, Agon stressed how growth in new markets had continued to power ahead in 2009, and that new smaller markets are expected to be the focus of further developments in the future.

Growing importance of smaller new markets

In addition to traditional developing markets such as Russia, China, Brazil and India, Agon underlined the growing importance of markets such as Thailand, South Africa, Korea, Ukraine and Indonesia, Philippines and Turkey.

“Likewise the opening of new subsidiaries in Vietnam, Egypt, Pakistan and Kazakhstan constitute additional steps in our globalization strategy,”​ Agon said.

“The growth in new market zones has been spectacular and the value of those markets is expected to overtake that of Europe in the next two to three years… and in less than ten years new markets will account for 50 percent of the company’s total sales.”

New market focus is a turn around

L’Oreal’s strategy to target new markets is a marked turn around from its traditional strategy to increase penetration in existing leading markets.

However, given that the value of sales in new markets has doubled every decade since 1990 and the fact that growth in Western markets has either stagnated or fallen in the face of the economic downturn, the renewed focus is not surprising.

To attract consumers in new markets, as well as to hold on to consumers in established markets, Agon stressed that the company would continue to develop the most comprehensive product portfolio possible, and one that is aimed at keeping every type of consumer involved.

Research and development to maintain innovation

“To do this we will be involving research and development centers on all continents to help create products that are most effective and best suited to the needs of all these consumers, including women and men,”​ Agon said.

“We will be using marketing hubs in all the key countries as a means of developing product portfolios that can contribute to creating both local successes as well as international blockbusters.”

Ultimately L’Oreal believes that the focus on new markets will help to increase profitability for the company through the generation of new revenue streams and reduce its dependence on the developed markets where growth potential remains limited.

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