"The rest of the world" brings in higher growth

Related tags Cent Europe Eastern europe

World leading cosmetics companies have rediscovered "the rest of
the world" - everywhere outside Western Europe, North America
and Japan - as one of the strongest forces driving sales growth.
With increasing incomes, the former communist and third world
countries are becoming important markets for the beauty industry.

Complaining about sluggish Western European and North American markets, the world's biggest cosmetic companies are focusing their attention on new markets. "The rest of the world"​ cosmetic markets, especially Asia and Eastern Europe, have been rapidly expanding for years and they are now becoming extremely important for total sales growth.

According to L'Oréal, while the worldwide cosmetics market grew by 3.2 per cent in the first half of 2004, in "the rest of the world" cosmetics sales were up by 8.3 per cent.

"One of the main reasons for the company's good performance this year is also the growth of new markets in Latin America, Eastern Europe and particularly Asia,"​ said Lindsay Owen-Jones, L'Oréal's CEO, presenting the company's half year financial results.

L'Oréal's sales grew 3.6 per cent to €7.4 billion in the half with operating profit up 7.8 per cent to €1.1 billion.

"The rest of the world"​ is already responsible for 21 per cent of L'Oréal's total cosmetics sales: sales in Asia rose by 22 per cent, with figures of 85 per cent for China, 49 per cent for Hong Kong, 28 per cent for Taiwan and 32 per cent for Malaysia. L'Oréal's sales in Eastern Europe grew 33 percent with Russia up 46 percent, and Poland and the Czeck Republic both up about 20 per cent. Sales in Latin America grew by 18 per cent.

"In a few years, these markets could generate the company's largest sales,"​ said Owen-Jones.

Avon, another leading cosmetics company, which is focusing on the new markets, saw sales growth in the second quarter of 28 per cent in Europe, and 20 per cent in Asia Pacific driven mainly by Russia and China with growth of 80 per cent and 60 per cent, respectively. Growth in the US was just 3 per cent.

"Our international regions performed above expectations, with Europe, Latin America and Asia Pacific all generating double-digit gains in sales, operating profit, units and active representatives,"​ said Andrea Jung, Avon's chairman and CEO.

Last year Avon's sales in Russia were $241 million. Sales in China were $157 million, but the company said it expected to reach $400 million by 2007.

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