Euromonitor: P&G no match for L’Oréal as R&D is diluted

In light of the second quarter financial results that were announced over the last few weeks, senior beauty and personal care research analyst Oru Mohiuddin states in a Euromonitor video that results are not dissimilar to last year.

“It is becoming ​[clearer] that manufacturers with more streamlined beauty focus are in better position to take advantage of the growth potential in the market, and this is because they’re able to dedicate more resources, at least in proportionate terms to R&D, to drive growth through product sophistication,”​ she says.

P&G no match for L’Oréal​

Mohiuddin has focused on L’Oréal, P&G, Unilever, Beiersdorf, Colgate and Estée Lauder, and found that L’Oréal comes out on top at 5 per cent growth rate whereas P&G’s performance was least favorable at -1 per cent, reiterating that manufacturers with more exclusive beauty focus are able to do better.

The French cosmetics giant invests heavily in R&D which leads to more scientific breakthroughs and enables it to develop product based on scientific claims, whereas P&G may be struggling as it is present in home care and beauty, meaning resources are more diluted.

Mohiuddin points out that as it is competing with L’Oréal in the category of skin care, the Ohio-based firm has not been able to match the same level of scientific development, and is thus not performing as well.

Not a time to dwell for Unilever​

The interesting point could lie with Unilever, as it has a cross-industry presence but it is still doing well, which the Euromonitor expert believes is down to te Anglo-Dutch firm specialising in commodities, such as bath and shower, deodorant and oral care; as these categories have not been so much reliant on product sophistication to drive growth.

“Going forward this may change because companies such as Beiersdorf and Colgate are targeting commodities categories to drive growth through product sophistication,”​ says Mohiuddin.

“Unilever’s model has been to consolidate its global operations and use that to roll out its existing brands to new markets and fill the gap in the pricing spectrum. But now, with competitive threats from Beiersdorf and Colgate, it may need to increase its investment in R&D to increase its claims of scientific development.”​

R&D importance​

Over the next year, as emerging markets slow down and Western markets remain volatile, growth may take a hit on the whole.

This means that it is all the more important to drive growth through product sophistication, according to Mohiuddin.

“This means manufacturers will have to invest in R&D and try and development new ingredients with new claims. So streamline beauty focus is not something that has helped to drive growth in past, but will become more and more prominent going forward,”​ she ends.