L’Oreal Sees 35% Indonesia Sales Growth on Rising Middle Class

L’Oreal SA, the world’s largest cosmetics maker, expects to boost sales in Indonesia by as much as 35 percent over the next five years as an expanding middle class spurs demand.

Annual revenue for this year and next will probably rise more than 30 percent in Southeast Asia’s biggest economy, Vismay Sharma, the company’s country chief, said in an Oct. 29 interview. L’Oreal today inaugurates a new West Java plant that will be its largest factory globally.

L’Oreal, which lags global competitors Procter & Gamble Co. and Unilever Plc in Indonesia, is investing in the country as economic growth topped 6 percent for eight quarters. The beauty and personal care market is expected to surge 86 percent by 2016 to 54.1 trillion rupiah ($5.6 billion), according to London-based researcher Euromonitor International.

“If we had to compare with either Singapore or Malaysia, these economies are more developed, the per capita consumption may be much higher but the overall size of the market is not that interesting,” Sharma said. “What’s very interesting for us from Indonesia is the size of the population and young consumers.”

The Paris-based cosmetics maker is investing 100 million euros ($128 million) in the new plant that will have capacity for as many as 500 million units, four times more than the first and its only factory set up in the country in 1986, Sharma said.

Market Share

L’Oreal, which entered the Indonesian market in 1979, ranked third in its beauty and personal care market with a 6 percent share last year. Unilever NV ranked first with a 38 percent share and Procter & Gamble Co. second with 11 percent, according to Euromonitor data. The French company plans to increase its share to 15 percent by 2025, Sharma said.

A quarter of the goods made at the factory, mostly for the L’Oreal Paris and Garnier brands, will be for the local market with the rest for exports to other Southeast Asian countries, according to Sharma. He expects the proportion manufactured for the domestic market to increase over time as local sales rise.

Indonesia may surpass Germany and the U.K. by 2030 to be the world’s seventh-largest economy, generating $1.8 trillion in annual sales for agriculture, consumer and energy companies by that year, McKinsey & Co. said in September.

McKinsey estimates consumer spending in Indonesia’s urban areas will rise 7.7 percent a year to become a $1.1 trillion “business opportunity” by 2030, according to the report.

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