Thu, Nov 08, 2012 - Page 15 News List

L’Oreal looks to Indonesia’s middle class for growth

‘INTERESTING’:The Southeast Asian country’s large and young population offers more opportunities as per capita consumption rises, the cosmetic firm’s country head said

Bloomberg

Indonesians work at L’Oreal’s largest global factory, in Jababeka Industrial Estate, Cikarang, West Java, Indonesia, yesterday.

Photo: EPA

L’Oreal SA, the world’s largest cosmetics maker, plans to boost sales in Indonesia by as much as 35 percent over the next five years as an expanding middle class spurs demand.

Annual revenue for this year and next will probably rise more than 30 percent in Southeast Asia’s biggest economy, Vismay Sharma, the company’s country head, said in an Oct. 29 interview.

L’Oreal yesterday inaugurated a new West Java plant that will be its largest factory globally.

L’Oreal, which lags global competitors Procter & Gamble Co and Unilever PLC in Indonesia, is investing in the country as economic growth topped 6 percent for eight quarters.

The beauty and personal care market is expected to surge 86 percent by 2016 to 54.1 trillion rupiah (US$5.6 billion), according to London-based researcher Euromonitor International.

“If we had to compare with either Singapore or Malaysia, these economies are more developed, the per capita consumption may be much higher, but the overall size of the market is not that interesting,” Sharma said.

“What’s very interesting for us from Indonesia is the size of the population and young consumers,” he said.

The Paris-based cosmetics maker is investing 100 million euros (US$128 million) in the new plant that will have capacity for as many as 500 million units, four times more than the first and its only factory set up in the country in 1986, Sharma said.

L’Oreal, which entered the Indonesian market in 1979, ranked third in its beauty and personal care market with a 6 percent share last year. Unilever ranked first with a 38 percent share and Procter & Gamble second with 11 percent, according to Euromonitor data. The French company plans to increase its share to 15 percent by 2025, Sharma said.

A quarter of the goods made at the factory, mostly for the L’Oreal Paris and Garnier brands, will be for the local market with the rest for exports to other Southeast Asian countries, he said.

Sharma expects the proportion manufactured for the domestic market to increase over time as sales rise.

Indonesia may surpass Germany and the UK by 2030 to be the world’s seventh-largest economy, generating US$1.8 trillion in annual sales for agriculture, consumer and energy companies by that year, McKinsey & Co said in September.

McKinsey estimates consumer spending in Indonesia’s urban areas will rise 7.7 percent a year to become a US$1.1 trillion “business opportunity” by 2030, according to the report.

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