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L’Oreal targets growth in the East Africa with new Kenya subsidiary

By Simon Pitman , 06-Dec-2011

L’Oreal says it is targeting growth in the East Africa region with the opening of a new subsidiary in Kenya that will form a hub for the company.

As well as Kenya, the company says it is targeting faster growing markets such as Uganda, Tanzania, Rwanda, Burundi and Ethiopia, which it describes as ‘dynamic markets with a large number of potential new consumers.

The investment builds on the recent opening of a subsidiary in Nigeria back in September of this year, which focused on placing this, the most important market in Western Africa, as a hub for that region.

Focusing on growth in the Africa region

“By opening these two new subsidiaries in Africa, the L’Oreal Group is reaffirming its confidence in the region’s growth potential,” the company stated in an official release.

Until now L’Oreal’s strategy in the African market has focused on South Africa, where it has been operating since 1963. The opening of the other two hubs now means a total of nine subsidiaries throughout the Africa and Middle East region.

In Africa the tradition has been that hair care takes a precedent over skin care, a phenomenon that is underlined by the fact that L’Oreal has invested significantly in ethnic hair care at its research and development centre in Chicago, US, resulting in the Softsheen Carson hair care brand – the top seller in Africa.

Chasing double-digit growth

According to Euromonitor International, the market for personal care and beauty product stood at $17.74bn in 2010 compared to $10.79bn in 2005, representing market growth of 10.46 percent CAGR over the five year period, a growth rate that is expected to be sustained in the next five years.

In an interview with the Financial Times last month, Frank Braeken, executive president of Unilever Africa stated his belief that the division could sustain the ten percent growth rate it has experienced in Africa during 2010.

“It’s not difficult to believe that we can achieve more than double digit growth in Africa – and that is because of the momentum of the economies, but more importantly, because the opportunities right in front of us are just enormous,” he told the publication.

Going beyond the BRIC markets...

With established markets for cosmetics and personal care in Europe and North America continuing to stagnate or in some cases decline, the big players have increasingly turned to developing and emerging markets for revenue growth.

Initially investment concentrated in the biggest and fastest growing markets, especially the BRIC – Brazil, Russia, India and China.

However, more recently, those markets have started to show the first signs of maturation, which means that cosmetic companies are increasingly turning to less developed emerging markets, particularly in Asia and Africa.

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