L’Oreal eyes Africa’s hair-care market
Emerging markets with potential a key to growth
L’OREAL SA is trying to determine what African women want — and make money from it.
In a dimly lit room in a laboratory near Johannesburg, a young woman pores over single strands of hair held in delicate copper tubes.
A laser machine nearby draws a horizontal red line over the face of a motionless volunteer wearing a black T-shirt.
“African consumers don’t have great freedom to do what they want with their hair without pain, money and effort,” said Alice Laurent, a 39year-old French biochemist who built up the research centre from scratch after a five-year stint for L’Oreal in China. “I’d say that L’Oreal is quite a pioneer.”
The world’s biggest maker of beauty products is hoping to capture a market that it estimates at 100 million middle-class consumers. Unlike Europe, Africa holds the promise of high growth: the number of middleclass African women who live in cities and work outside the home will continue to grow for years to come. Their average age is an alluring 24.
The idea is to develop new hair products especially for them rather than offering brands developed for black consumers in the US, thus giving L’Oreal an advantage over competitors such as Unilever and Avon.
Pointing at a study pinned on a wall detailing degrees of curliness in countries across sub-Saharan Africa, Laurent said her first priority is identifying the habits and needs of African consumers, about whom there is little data.
Bloomberg Intelligence analyst Deborah Aitken said the laboratory was part of the company’s plan to tap into new markets.
L’Oreal seeks to sustain growth by carefully chosen acquisitions and going into emerging markets with long-term potential.
Aitken said: “Africa is a big market for key product categories like hair care, and to really capture that will help develop L’Oreal versus peers like Unilever.”
Worldwide, L’Oreal has extended its lead in recent years by expanding its stable of luxury lines. The company said this month that high-end brands had fueled expansion in North America, where like-for-like sales were up 6.3% in last year’s fourth quarter. Although its share price has slightly lagged the Stoxx 600 Personal & Household Goods Index over the past 12 months, L’Oreal expects to outperform the beauty market globally this year.
But in Nigeria and South Africa, the region’s two largest economies, L’Oreal’s sales in all beauty and personal care categories combined are trailing Unilever, Avon and P&G.
And it faces strong competition from local brands which, according to L’Oreal, account for two-thirds of the African hair-care market.
Most of the money African women spend on beauty products goes to hair care. Among popular brands that L’Oreal already sells across sub-Saharan Africa are the relatively pricey Garnier and the mass-market Dark & Lovely, the purple-tinted bottles and jars of which are coveted from salons in Tanzania to shantytowns in Sierra Leone.
The beauty market in Africa is divided into two segments: local brands and international brands.
“African women will use both, and they’re also very good at customising their own pomades,” said Laurent.
Although L’Oreal considers sub-Saharan Africa “very promising”, the company won’t disclose sales forecasts or targets.
But sales data tell the story. The total value of sales of beauty and personal care products in South Africa and Nigeria rose to almost $5billion (about R65.4-billion) last year.
Hair care was among the fastestgrowing categories of product sold from 2010 to 2015 with the value of sales climbing 38% in South Africa and 63% Nigeria in the period, according to Euromonitor, which collects data for four countries in Africa.
“The big manufacturers are realising that there’s a lot of potential,” said Thomas Verryn, research manager for sub-Saharan Africa at Euromonitor International. “They’re investing now to make increased sales in the long term.”
African hair comes with challenges: it is more fragile than Caucasian hair, grows more slowly and is more difficult to manage. Braids are widely considered the most convenient style as they can stay in for several weeks and barely require maintenance, Laurent said.
But years of braiding or chemically straightening curly hair can cause receding hairlines and even baldness as some products, relaxers especially, are “very harsh to the hair”. To be sure, the African hair-care market is tiny compared to Asia or Europe, accounting for roughly $450-million in sales in South Africa and more than $300-million in Nigeria, according to Euromonitor data.
And like other big-name western brands, L’Oreal faces the scepticism of a generation of media-savvy African women who latched on to the natural hair movement that originated in the US about a decade ago. Although US sales of relaxers fell 19% from 2013 to 2015, market research company Mintel reports that in Africa they are climbing steadily.
At the same time, the trend towards natural hair is rapidly gaining a foothold in Africa, with at least 10 specialised salons opening in Johannesburg in the past few years, each selling their own pomades.
Back in her office, Laurent brings out a sample of the first brand to come out of the lab: Au Naturale, a range of four products designed to untangle and moisturise African locks.
“We redeveloped the range specifically for Africa. We tested it here and we worked with our experts here.”
African consumers don’t have freedom to do what they want with their hair without pain, money and effort
The big manufacturers are realising that there’s a lot of potential in Africa