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Lipstick that's the star of the show

By Shi Jing in Shanghai | China Daily | Updated: 2017-01-17 09:55

Lipstick that's the star of the show

Stephane Rinderknech, CEO of L'Oreal China, and actress Angelababy show up at a party to launch Maybelline's new global brand statement "Make it happen" in the Chinese market. [Photo provided to China Daily]

One item swept through the Chinese cosmetics industry in 2016 and made every girl scream at the sight of it. The YSL Star Clash Edition lipstick.

Even though the lipstick was not officially launched until late 2016, many consumers could not wait to get one and asked for help from overseas shopping agents. Some customers were willing to pay a 40 percent premium to get one in advance. Local cross-border e-commerce platforms such as ymatou.com realized this golden opportunity and imported the lipstick from Hong Kong.

Many voices claimed that was a very successful marketing campaign launched using the internet, but L'Oreal-the group that owns YSL-denied this, explaining that the product had not been launched in China until late October 2016 and that there had not been any such marketing activity.

So, was it purely the charm of the product that won the hearts of customers?

Jean-Paul Agon, chairman and chief executive officer of L'Oreal Group, was very happy to see that the lipstick was so popular among Chinese consumers. Thanks to Star Clash Edition, sales of the YSL series increased by 40 percent during the third fiscal quarter of 2016 globally. The group's sales in emerging markets, including China, was intrigued and increased by 7.1 percent.

This is just one of the success stories that L'Oreal has realized in the booming Chinese market. But more importantly, it is the embodiment of the group's dream of "putting a lipstick in the hands of every Chinese woman" when it entered the market 20 years ago.

L'Oreal made its first step into China in 1997 with four brands-L'Oreal Paris, Maybelline, Lancome and haircare product L'Oreal Professional. The product portfolio has grown significantly in the past two years. A total of 23 brands now make up the portfolio, which includes well-known brands and local ones such as Yue Sai, Mininurse, and MG.

With continuous investment in China, L'Oreal has grown rapidly. Up until now, it has one headquarters, one research and innovation center, three plants, five distribution centers and one academy in the country. The employee head count has reached 7,800.

And the numbers show that the group's investment philosophy was correct. The group's third-quarter fiscal report of 2016 showed that the high-end cosmetics and fragrance sector continued to seize more market share in the Chinese market.

Despite economic ups and downs, L'Oreal has maintained its growth in the past 20 years. China has become the second largest contributor to the group's total revenue in 2015, only next to the US. Figures provided by global market research firm Euromonitor International shows that L'Oreal's two leading color cosmetics brands Maybelline and L'Oreal Paris have grabbed the top two positions in China since 2010.

The rapid expansion of the Chinese beauty industry has provided much room of growth for L'Oreal. As Euromonitor calculated, the retail revenue of Chinese cosmetics industry was 293.7 billion yuan ($42.4 billion) in 2014 but is expected to amount to 423 billion yuan by 2019, with the annual growth rate remaining at 8 percent.

Lipstick that's the star of the show

Jean-Paul Agon, chairman and chief executive officer of L'Oreal Group.

The rapid growth of the Chinese cosmetics industry has proved what Stephane Rinderknech, CEO of L'Oreal China, felt about the Chinese market when he first came to the country in 2011.

"I visited Shenyang city. The moment I stepped into this northern city, I was so astonished and amazed by it. There were crowded shops, busy construction going on and the streets were filled with people. But I was told that Shenyang is only the one of the numerous rising second tier cities in China, which made me realize the huge potential and enormous opportunities here in China," he said.

More than a decade ago, Agon believed that one day China would become the No 1 country in terms of economic importance globally and for L'Oreal as well. Agon says he still has this vision.

The reasons for his vision vary from the group's knowledge of the local market, to its research and innovation ability, and to its strong team established here. But to him, the most important thing is the deeply rooted beauty traditions both for women and men in China.

"China today is the beauty capital of the world. The market will continue to increase with the rising spending power of the middle-class and the younger generation," he said.

Statistics provided by global management consulting firm McKinsey show that China's middle-class-who have an average annual personal income of 75,000 yuan to 280,000 yuan-will reach 275 million by 2020.

This means a huge difference in future consumption. As these people tend to have large disposable incomes and prefer personalized products and services, they will put a higher demand on product quality and in turn demonstrate a higher brand loyalty.

As global market consulting firm Bain & Co has already discovered in the past 12 months, the rising middle-class are showing more attention to high-end products such as personal care products.

"I see how beauty changes people's life not only by inspiring Chinese people's desire for beauty with excellent brands, products and services, but also by bringing people confidence, happiness and fulfillment," said Agon.

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