L’Oreal SA (OR), the world’s largest cosmetics maker, aims to double sales in Brazil by 2015 and add 50 million new customers there in the next decade as Latin America’s largest economy expands.
“We are still very much in opportunity territory,” said Alexandre Popoff, head of Paris-based L’Oreal’s business in Latin America, Africa and the Middle East, in an interview. “The big part of the growth will be coming from mass-market products.”
The company may also buy a Brazilian brand to expand in the country, where consumers spend more per capita on cosmetics than in any other so-called BRIC nation. L’Oreal plans to use its 1.5 billion-euro ($2.1 billion) cash pile to make acquisitions, Chief Executive Officer Jean-Paul Agon said last month.
Agon has said “he would like to have in his portfolio a Brazilian brand and an Indian brand,” Popoff said, declining further comment on the matter.
L’Oreal’s Brazilian sales climbed 21 percent to 705 million euros in 2010, making it the company’s seventh-largest country, Popoff said. As much as 70 percent of its sales there last year came from mass-market products like Total Repair 5 shampoo and Colorama nail varnish. Brazil is tied with China as the world’s third-largest country for cosmetics overall after the U.S. and Japan, according to L’Oreal.
Hair-care is a key part of the company’s growth strategy, Popoff said. More than 60 percent of women in Brazil use four or five hair-care products a day, making the nation the world’s largest for the category by volume and second to the U.S. in terms of value, the executive said.
“Women in Brazil use a lot of post-shampoo products” because of their hair type and outdoor lifestyle, he said. Those two factors plus a strengthening economy “explains why the market is so important.”
The French company is seeking to win customers in Brazil through new products like L’Oreal Paris Elseve Hydra Max shampoo, which was developed at its Rio de Janeiro factory, Popoff said. About 20 percent of L’Oreal’s annual sales in Brazil come from new products, the executive said.
L’Oreal plans to accelerate investment in research and development in Brazil, where it currently employs 20 researchers. The company is introducing products including a Garnier body lotion it claims will moisturize for seven days.
Separately, Avon Products Inc. (AVP), whose sales reached $10.9 billion last year, has been touted as a possible takeover target for L’Oreal by beauty industry specialists including Strategic Resource Group’s Burt Flickinger. Avon gets more than 40 percent of its sales from Latin America where consumers are accustomed to buying cosmetics, skincare and fragrances from door-to-door vendors.
L’Oreal won’t get into direct selling, Popoff said. “We are really focusing on the channels that we know best.”
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