Following U.S. rival Revlon’s announcement to pull out of China in order to try and restructure its struggling departments, L’Oréal has said it will stop sales of Garnier products in China as it appears to be a slowing market.
Instead, the company says it will focus on its L’Oréal Paris and Maybelline New York product lines, which have been better performing in China.
Re-focus
“To strengthen our leading position, we have decided to discontinue the sales of Garnier products in China and focus our efforts on our two leading brands – L’Oréal Paris, the number one beauty brand, and Maybelline New York, the number one make-up brand in China,” a spokeswoman tells Reuters.
According to Euromonitor figures, China’s $25.9-billion cosmetics market is the third biggest in the world and is expected to grow 63% for the five years to 2015.
In its third quarter results last October, L’Oréal alluded to the fact that China, which is its third biggest with a 17% market share, was “slowing, although still dynamic”.
Despite the decision to pull out of mainland China, L’Oréal insists that the Garnier brand will remain present in Hong Kong, Macau and Taiwan.
As for the 100+ employees of the Garnier brand in China, L’Oréal claims it has given them new positions in the group as far as possible.
Vice president of L’Oréal China, Lan Zhenzhen, insists that it is not a major challenge to L’Oréal or its brands, simply a reallocation of resources. Simply put, sales growth did not meet expectations, and the company are attempting to be proactive.
Tough nut to crack
The Chinese market is full of potential for Western brands and the cosmetics sector more than doubled in size between 2008 and 2012, according to a report last year by Fung Group that cited the National Bureau of Statistics in China.
But China is also a complex market with many pitfalls for foreign companies, while a slowing economy and crackdown on extravagance has weighed on luxury brands sales.
Last week, colour cosmetics firm Revlon announced it would be exiting China in an effort to restructure struggling departments, which as a result, will see it eliminate 1,100 positions, including 940 beauty advisers.