With a population approaching 250 million and promising economic growth, the Indonesian growing beauty market is increasingly alluring for Paris-based cosmetics giant L’Oreal which aims to make that French style affordable here.
Last week, the company’s CEO Jean-Paul Agon flew in for a market visit to what he referred to as one of the countries that “will very soon represent the majority of the business of L’Oreal worldwide” alongside China, Brazil and India.
The company has long seen the lion’s share of its sales, or 90 percent, coming from outside France.
During the third quarter of 2009, sales in Asia reached ¤512.8 million (US$716.8 million), a 11.4 percent increase on a like-for-like basis.
This contrasted with sales from Western Europe, which dropped 2.4 percent, although remaining one of the biggest contributors to sales at ¤1,683 million.
With products ranging from Garnier whitening lotion and more luxurious Lancome mascara, L’Oreal saw Indonesia come in as it’s fourth fastest growing market in terms of sales last year.
“The beauty market in Indonesia is growing very fast. The two markets in the world with the highest growth in 2009 were China and Indonesia at 12 percent, which is fantastic. There was no crisis for the beauty industry in Indonesia,” he said.
He added that he expected this kind of growth to continue for some 20 years into the future.
“The drive for that growth will [reflect the way that] Indonesian consumers want more and more to have access to high quality products and that’s what we can provide,” he said, while adding L’Oreal’s business expansion plan for Indonesia to his priority list.
The company is planning to build another plant in Indonesia to produce its consumer products for brands such as Garnier and L’Oreal Paris. Agon said the plant’s capacity would be “very large” compared to the existing plant in Ciracas, East Jakarta, which already produces 100 million units annually.
“The new plant will export about 80 percent of its production, just like what we’re doing now [with the current plant],” Agon said.
The investment value for the plant, he added, will be $50 million.
“I think Indonesia is really now a strong force in the economy of Asia and we really believe in the future of this country and that’s why we want to invest and participate in the development of the country,” he said.
The company is now seeking to gain stronger grounds in the lucrative Indonesian beauty market.
“We think that we have a lot potential. Our market share here is still limited… Although the market has accelerated in the last two years but we still have a much lower market share here than we have in other countries,” he said.
L’Oreal Indonesia president director Jean-Christophe Letellier said the company held the third biggest market share after consumer goods manufacturer Unilever, which produces skin care products under a popular brand name Pond’s, and P&G.
Agon said his strategy to build the company’s presence in the Indonesian market is to go deeper in distribution and make the mass products more affordable for the world’s fourth largest population.
He added that he learned some important things during his visit to several stores that sell L’Oreal’s products in Jakarta.
“I was very impressed with the dynamism of the market. Also, there are very different options for the consumers, in terms of types of stores. Indonesia is quite developed already in terms of choice for consumers and in terms of stores. And so for us it means that we have to be ready to be present in all these type of stores if we want to play a full role in the country,” he told The Jakarta Post.
He also said that he was open to the possibility of acquiring local brands to add to the company’s portfolio.
“It’s an opportunity that we could consider if there are Indonesian brands that would like to discuss with us,” he added. (adh)
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