The French firm is shifting its focus towards the Middle East and Africa as growth projections reveal improved prospects; set to be the second leading regional market for beauty and personal care over 2012-2017, marginally trailing Latin America.
Beauty and personal care in the Middle East and Africa is predicted absolute growth of nearly $7 billion, with colour cosmetics and hair care, both key categories for L’Oréal, expected to make a significant contribution to the region’s overall beauty and personal care absolute growth over the next five years.
Therefore, Oru Mohiuddin, senior analyst, Home and Personal Care at Euromonitor, predicts L’Oréal’s acquisition of Interconsumer Products Ltd (ICP), the largest local manufacturer of beauty products in Kenya, is a good move.
Due to this move, L’Oréal will be able to access an already established R&D centre dedicated to sub-Saharan beauty needs, benefit from ICP’s infrastructure allowing for deeper market penetration, and further expand its brand portfolio along ethnic lines.
The beauty behemoth already has a presence in Egypt, Kenya, Nigeria and Saudi Arabia; however, as the beauty needs in this region derive from two distinct ethnic groups whose skin tones and hair types vary widely, these require different R&D technologies.
“While L’Oréal aims to serve the Saudi market through its plant in Egypt and R&D centre in India, the divergent nature of consumer needs in sub-Saharan Africa will require the company to set up an entirely different structure from that in Egypt,” notes Mohiuddin.
“ICP is one of the leading local beauty care manufacturers in Kenya, not just catering for the domestic market but also neighbouring Uganda and Tanzania. ICP will widen L’Oréal’s portfolio of ethnic brands.”
Development in Africa
Speaking at the time of the acquisition earlier this year, L’Oréal’s executive vice president for the region, Geoff Skingsley, reiterated that the acquisition would broaden the company’s brand portfolio and accelerate its development in Eastern Africa.
Mohiuddin also believes that this may not spell the end of L’Oréal’s acquisition trail particularly in Nigeria where it may look to rival Estée Lauder, which has launched its MAC brand there.
“There are a number of options to choose from in Nigeria, but these will depend on a cost-benefit analysis,” she continues. “L’Oréal could decide that it would be more commercially viable to make an acquisition in another region altogether and set up a base from scratch in the remaining African markets.”
“There has also been speculation that L’Oréal is looking to make an acquisition in India, but this has yet to be confirmed.”