French cosmetics giant, L’Oréal, has announced its minority stake acquisition in Chinese skincare brand, Lan, signifying its second investment in China within recent months. This investment comes at a time when local brands in China are experiencing significant growth.
L’Oréal has chosen not to disclose the size or cost of the stake. However, Vincent Boinay, L’Oréal North Asia president and China CEO, emphasizes the importance of China in the company’s global strategy. Boinay affirms the company’s faith in China as a key player in the future of the industry.
“This investment demonstrates our belief that investing in China equates to investing in the future. We intend to continue to nurture the Chinese market and collaborate with additional Chinese brands to create a prosperous future. Our aim is to meet the expectations of discerning Chinese consumers,” stated Boinay.
This investment in Lan follows L’Oréal’s recent acquisition of a 6.67 per cent stake in Chando – a transaction that cost the company 442 million yuan (US$62 million), according to last month’s prospectus for the Shanghai-based company’s Hong Kong IPO.
International brands have encountered challenges in China’s beauty and personal care market. This $75 billion industry has seen a growing proportion of domestic market share, known as C-Beauty, shift to local brands in recent years. This has taken place amid a backdrop of slowing overall growth, attributed to a long-standing property crisis and broad concerns over job stability.
Investing in popular domestic brands could serve as a shortcut for L’Oréal to capitalize on the momentum of C-beauty, according to Ben Cavender, MD at Shanghai-based China Market Research Group.
“L’Oréal, along with other international brands, are facing considerable pressure from domestic brands, which are launching new products at a faster rate and often exhibit more aggressiveness in marketing new skincare ingredients, concepts, and routines,” Cavender said.
Last month, L’Oréal CEO, Nicolas Hieronimus revealed that the group’s China business experienced a quarterly growth of around 3 per cent, marking its first increase in two years.
Consultancy data obtained from Frost & Sullivan indicates that Chando Group ranks as China’s third-largest home-grown beauty player in retail sales, following Proya and Chicmas. Both Chando and Lan emphasize natural, clean ingredients as their unique selling points.
Yang Hu, Apac insight manager at Euromonitor International, suggests that Chando’s stronghold in the mass-market price range (mainly retailing between 49-390 yuan) and its accessibility in China’s smaller cities could offer resources to aid L’Oréal’s recovery in the country, without directly competing with the group’s central brands.
Why is L’Oréal investing in Chinese brands?
L’Oréal is investing in Chinese brands to capitalize on the rapidly growing domestic market, which could provide a platform for their expansion and recovery in China.
What challenges are international brands facing in China’s beauty market?
International brands are facing pressure from domestic brands, which are launching new products more rapidly and executing more aggressive marketing strategies for new skincare ingredients, concepts, and routines.
How is L’Oréal’s investment in Chando aiding their position in the Chinese market?
Chando’s stronghold in the mass-market price range and its accessibility in China’s smaller cities could offer resources to aid L’Oréal’s recovery in the country, without directly competing with the group’s central brands.
