L'Oreal Group, the world's largest cosmetics and beauty company, on Friday said it plans to beef up its presence in the over 30-billion yuan Chinese mass shampoo market and pose a stiff challenge to market leader Procter & Gamble (P&G).
L'Oreal, known for its hair care products, was until now present in the high-end shampoo segment. The change in focus, primarily stems from the vast size of the low-end segment in China and the fast pick up in domestic consumption due to the recent government stimulus measures.
"The move will enhance our presence in the mass shampoo market," said Paolo Gasparrini, president, L'Oreal China.
"We are confident of being present as a significant competitor, and as an innovator of hair-care products," he said.
It is estimated that the Chinese shampoo market is worth 30 billion yuan, one-third of the nation's consumer cosmetics and beauty sector market.
For years, P&G has held the dominant market share in the shampoo segment with its wide range of products, strong sales network and aggressive advertising efforts. Its four major brands including Rejoice, Pantene, Sassoon and Head & Shoulders have found favor with Chinese customers. Unilever and C-Bons control around 30 percent of the market.
L'Oreal expects to get "huge" sales from the mass shampoo categories and also outperform competitors, said Gasparrini.
"We are not worried about being late, as we have the best formula and the passion for beauty business," he said.
L'Oreal mass shampoo entered the US market 30 years after P&G and has since then taken the lead position. The company added that it intends to replicate the success in the Chinese markets.
"We welcome competition as it is good for us, the industry and consumers," said Charles Zhang, corporate communications manager, P&G China.
"We are also confident on defending our market share, thanks to brand awareness, sales and research and development," he said.
P&G's four major shampoo brands target different segments, while L'Oreal has launched four categories tailored for different types of damaged hair. Its products are priced at 25 yuan per 200 ml, one-sixth of the high-end category prices and a little over P&G rates.
"We are not too worried about the price difference. We have our own methods to compete," said Gasparrini. Typically, L'Oreal spends around 3.3 percent of its revenue on R&D, with higher outlays for hair care.
The four segment categories for China have been developed after years of research and tests by L'Oreal's five R&D centers.
L'Oreal's sales and profit for 2008 grew 2.8 percent and 3.8 percent from a year earlier. China made a splash with sales growing by 27.7 percent year-on-year mainly driven by mass consumer products, making it the seventh largest market for the company. It is also the eighth year that L'Oreal has achieved double-digit growth.