In the past three years, viewing the top 10 global beauty rankings, L’Oreal remains firmly in the first place and the second and third have been occupied by Estee Lauder and Unilever in turn, while Natura & Co, LVMH and Beiersdorf have been in the last four ranks “vying” for a higher position.
With the disclosure of Shiseido’s latest earnings report recently, the world’s major cosmetic groups have handed in the first three-quarters of this year’s report card. From January to September 2022, what new pattern does the global beauty group present in the case of repeated epidemics, the international political and economic environment turbulence?
The global Top 10 are competing
CHAILEEDO found that the top 10 global beauty companies achieved sales totaling $114.28 billion from January to September this year, an increase of $7.48 billion or 6.6 percentage points over the same period last year ($106.8 billion). According to the data from the National Bureau of Statistics in 2021, the retail sales of cosmetics is 402.6 billion yuan (about $56.4 billion), the global top 10 is equivalent to 2 Chinese markets. The retail sales of cosmetics in China from January to September this year were only 277.4 billion yuan (about $38.9 billion).
In terms of the ranking of the top 10 global beauty, L’Oreal remains firmly in first place with cosmetics sales of more than $28.6 billion, followed by Unilever with sales of $19.61 billion. Estee Lauder’s sale was $11.74 billion, ranking third. The fourth to sixth place is taken by Johnson & Johnson, Procter & Gamble and Colgate. The last four are: LVMH, Beiersdorf, Shiseido and Natura & Co.
Looking through the ranking of the top 10 global beauty companies in the past three years, CHAILEEDO found that the companies have not changed on the list, but the ranking has changed.
First of all, L’Oréal has been in first place and the second and third places is occupied by Estée Lauder and Unilever, which take turns to compete for the second place. In 2020, Unilever ranked second. It was overtaken by Estee Lauder in third place last year. However, in the first three quarters of this year, Unilever returned to second place. Overall, the pattern of the top three global beauty players is basically set. Natura & Co, LVMH and Beiersdorf have been in the last four places for a higher position.
It is worth noting that Johnson & Johnson has risen more significantly in the past two years, from seventh place in 2020 to fourth place last year. Johnson & Johnson also maintained this ranking in the first three quarters of this year. This year, Johnson & Johnson spun off its consumer health business and named the new company Kenvue. the new company will focus on iconic brands such as Johnson & Johnson Baby, Aveeno, Band-Aid, Listerine, Neutrogena, and Dr.Ci:Labo for an independent going list.
In addition, LVMH’s performance is outstanding. The group was at the bottom of the ranking in 2020. Last year, it rose to ninth. This year, it again rose two places to rank seventh.
There are ups and downs. While Johnson & Johnson and LVMH rose in the rankings, Shiseido began to decline. In 2020, Shiseido was in sixth place, however, it fell to eighth place last year. In the first three quarters of this year, it fell again to ninth. Natura&Co has experienced a process of rising and then falling, rising from seventh in the previous year to sixth last year, and then temporarily at the bottom in the first three quarters of this year.
Compared to last year, the first three-quarters of this year’s top ten rankings, Johnson & Johnson, P&G and Colgate did not change.
This shows that, in addition to the firm leading position of L’Oreal, the other nine companies have new changes in the ranking. The major beauty groups staged a competitive race.
Performance of many companies out of expectation
The actual change in ranking is the “barometer” of business performance. In the first three quarters of this year, a total of six companies among the top ten beauty companies recorded growth. Sales growth of LVMH, Beiersdorf, L’Oreal ranked the top three, respectively, at 19.73%, 17.24% and 12%. In addition, Unilever, P&G, Shiseido received a slight increase of less than 10%.
Estee Lauder, Johnson & Johnson, Colgate, Natura & Co recorded a decline in performance. Among them, Natura & Co decline at the highest rate of 9%. Because of this, the company also slipped from last year’s ranking of seventh to this year’s ranking at the bottom. Not only did sales decline, but in the first three quarters of this year, Natura & Co posted a net loss of 2.758 billion yuan (about $387 million), down a whopping 658.7% year-over-year. The financial report shows that in Natura & Co’s four brands Natura & Co Latam, Avon Global, The Body Shop, and Aesop, only Aesop net income recorded positive growth.
Among the six companies that recorded growth, LVMH performed the best. In this regard, LVMH mentioned in its earnings report, Dior and Guerlain performed particularly well, with the former maintaining high growth with classic fragrance products such as Sauvage, J’adore and Christion Dior while Guerlain benefited from the growth of Abeille Royale skincare line, its Aqua Allegoria collection. It is worth mentioning that in the first round of pre-sale of this year’s Chinese Double 11 Shopping Festival, Guerlain’s above two series of products were sold out in seconds when they are selling in Li Jiaqi’s live broadcast, with more than 700,000 people buying.
In fact, the perfume category has now become an important engine of growth for major global cosmetics companies. For example, Estee Lauder Group said that in the fiscal year 2022, the group’s net sales grew in each region and each perfume brand. In the first half of L’Oreal’s financial results, its perfume category has also achieved 35% growth in performance, which is more than twice the growth rate of the group’s overall performance
Beiersdorf, which had the second-highest sales growth rate in the first three quarters of this year, benefited from its four brands, Nivea, Eucerin, Aquaphor, and La Prairie, which recorded organic sales growth of 10.8%, 25.3%, 25.3% and 5.5%, respectively.
Korean cosmetic falls out
Although there are ups and downs in the performance of the top 10 global beauty companies, it is still the European and American companies that are more resilient in terms of global cosmetics, while Japanese and Korean companies are beginning to fade. At present, only one company from Asia, Shiseido is left on the top 10 list.
But in fact, before 2018, Amore Pacific and Kao had been on the stage of the global beauty top ten. However, after 2019, there is no longer figure for these companies. Korean makeup in particular has dropped off significantly
As illustrated by recent earnings reports, LG reported sales of 17.5 billion yuan (about $2.46 billion) in its cosmetics/home and personal care business in the first three quarters of this year, down 20.4% year-on-year. Amore Pacific is not optimistic either, as the group reported revenue of 15.526 billion yuan (about $2.18 billion), down 13.9% year-on-year, and operating profit of 810 million yuan (about $113.6 million), down 50.5%.
The decline of Korean cosmetics, on the one hand, is related to the THAAD in 2016, which made the once-popular Korean culture suddenly cool down. More importantly, after the rise of international brands and Chinese local brands, the core advantages of Korean product updates and marketing have also weakened a lot.
Global growth depends on China
Global cosmetics growth depends on China. From public information, China is currently the largest overseas market for L’Oreal, Shiseido, Estee Lauder and many other companies, the rise and fall of the Chinese market, to a large extent, determine the overall performance of most international companies.
On the whole, L’Oreal, Beiersdorf, LVMH, Unilever have grown in China or Asia Pacific. Specific to the performance of each, L’Oréal Group said in the third quarter of this year, despite the severe situation of the sanitary control and travel restrictions, L’Oréal still achieved double-digit growth in the Chinese market, while the L’Oréal group as a whole also achieved a 12% growth in performance.
Nicolas Hieronimus, CEO of L’Oreal said that Mainland China has maintained strong quarterly growth over the past two years. For two years, L’Oréal China has maintained a very high growth rate, with third-quarter sales up 42.8% compared to the same period in 2019. In China, L’Oréal’s Premium Cosmetics division performed particularly well, continuing to lead the market with double-digit growth, with Lancôme and HR as the main growth engines.”
Moreover, Beiersdorf also said that La Prairie’s growth was mainly due to a slowdown in the travel blockade in the third quarter, with strong growth in China while the group’s Nivea also achieved significant growth in the region.
Some of the beauty companies whose performance was under pressure were also due to the larger impact of the Chinese market. Estee Lauder Group said that external pressures such as epidemic restrictions in China, high global inflation and the strong U.S. dollar affected the company’s earnings. In the first three quarters of this year, Shiseido’s sales in China were 8.52 billion yuan, down 9.9% year-on-year, and Shiseido’s overall results were up only 4.7%.
LG earnings report pointed out that the third quarter was mainly affected by the unfavorable travel retail and operating environment in China, resulting in continued sluggish performance. Amore Pacific, on the other hand, said that “revenue in China fell 40% in the third quarter due to the restructuring of offline channels for major brands and a slowdown in cosmetics consumption.”
In the past January-October, the overall Chinese cosmetics market was sluggish. According to the National Bureau of Statistics, the total cosmetics category from January to October was 308.4 billion yuan (about $43.3 billion), down 2.8% year-on-year. In October, the total retail sales of the cosmetics category were 30.9 billion yuan (about $4.3 billion), down 3.7% year-on-year. In September, it also fell 3.1% year-on-year. In this context, some international beauty giants are not having a good time in China.
At the same time, international companies are still reinvesting in the Chinese market. Unilever publicly revealed, “In the third quarter of this year, the growth rate of China’s performance dropped by 9.3%. But China, as one of the three priority markets, will certainly be taken care of in the future.” In addition, Natura &Co has also made it clear that the only brand to receive growth in performance. Aesop, is preparing to enter the Chinese market. It is understood that Aesop’s first store in mainland China will open in Shanghai on November 25.
Seeing that 2022 is nearing its end, the performance of the first three quarters has also laid the foundation for the full-year performance of each beauty group. Therefore, some companies have also adjusted their expectations for the full fiscal year based on the performance of the first three quarters. For example, Estee Lauder Company said it would lower its performance expectations, with net sales for the second fiscal quarter expected to fall 17% to 19% compared with the same period last year. The full-year net sales for fiscal 2023 are expected to fall 6% to 8% compared with the same period last year.
From the external environment, rising raw material prices, exchange rate changes, the global situation, epidemics are common problems faced by foreign companies, but according to the rankings of the past few years, not all companies have found a way to determine growth, the global top ten pattern or a new change.
Note 1: Global beauty’s top 10 sales data due to exchange rate fluctuations such as conversion there is a certain error.
Note 2: The data in the text comes from the financial reports of the companies. Among them, L’Oreal, Estee Lauder, Shiseido and Natura&Co are the overall business. Unilever and P&G are beauty and personal care businesses. Colgate is the oral, personal and home care products division; Johnson & Johnson is the health consumer segment. Beiersdorf is the consumer business. LVMH is a perfume and cosmetics business.