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LVMH MOT HENNESSY LOUIS VUITTON SA IN

BEAUTY AND PERSONAL CARE (WORLD)


November 2014

SCOPE OF THE REPORT

Scope
All values expressed in this report are in US dollar terms, using a fixed
exchange rate (2013).
2013 figures are based on part-year estimates.
All forecast data are expressed in constant terms; inflationary effects are
discounted. Conversely, all historical data are expressed in current terms;
inflationary effects are taken into account.
Colour Cosmetics
US$55.5 billion
Microwaves
Refrigeration
Home
60,669
Appliances
Laundry
Large
Cooking
Home Laundry
Confectionary
144,010
121,107
Appliances
Appliances
132,745
121,107
US$185,477 mn

Microwaves
60,669

Beauty and Personal Care


US$454.4 billion

Disclaimer
Much of the information in this
briefing is of a statistical nature and,
while every attempt has been made
to ensure accuracy and reliability,
Euromonitor International cannot be
held responsible for omissions or
errors.
Figures in tables and analyses are
calculated from unrounded data and
may not sum. Analyses found in the
briefings may not totally reflect the
companies opinions, reader
discretion is advised.

Fragrances
Small
US$45.1Appliances
billion
Jewellery
1,724,022
Skin Care
US$107.3 billion

Sun Care
US$9.5 billion
Sets/Kits
US$17.9 billion

Euromonitor International

BEAUTY AND PERSONAL CARE: LVMH MOT HENNESSY LOUIS VUITTON SA

LVMH is the worlds largest


luxury goods company. Despite
beauty being one of its smallest
divisions, it has increased its
investment in the category, and
it aspires to become a top 10
beauty player globally. While its
revenues derive primarily from
fragrances and colour
cosmetics, skin care remains
the category to watch as it will
be contributing the highest
revenue over the forecast
period. Expansion and
strengthening category
positions remain key strategies
of the company.

PASSPORT 2

STRATEGIC EVALUATION

COMPETITIVE POSITIONING
MARKET ASSESSMENT
GEOGRAPHIC AND CATEGORY
OPPORTUNITIES
BRAND STRATEGY
OPERATIONS
RECOMMENDATIONS

STRATEGIC EVALUATION

Key company facts


LVMH Mot Hennessy Louis Vuitton SA
Headquarters:

Paris, France

Regional involvement:

Global

Category involvement:

Premium beauty and


personal care

World BPC value share


1.5%
2013:

World BPC value


growth 2012-2013:

5.9%

35,000

7,000

30,000

6,000

25,000

5,000

20,000

4,000

15,000

3,000

10,000

2,000

5,000

1,000

0
2009

2010
2011
2012
2013
Revenue
Operating Profit

Euromonitor International

Operating profit ( million)

Revenue ( million)

LVMH: Revenue vs Operating Profit


2009-2013

LVMH Mot Hennessy Louis Vuitton SA is the worlds


largest luxury goods company and operates five main
business divisions: Wines and Spirits; Fashion and
Leather Goods; Perfumes and Cosmetics; Watches
and Jewellery; and Selective Retailing.
Within beauty and personal care, LVMH is one of the
top 15 players in the global market. Its positioning is
strongest in fragrances, followed by colour cosmetics.
However, it has significantly invested in innovation
with a new research centre and it is hoping to increase
its competitiveness in other categories such as skin
care.
LVMH posted 3.7% revenue growth in 2013, driven by
positive performance across all geographies, including
Asia Pacific, Europe and the US. Within its Perfumes
and Cosmetics division, the company highlighted
Christian Dior fragrances as a key growth driver.
In 2014, LVMH and Google signed a cooperation
agreement to tackle the advertising and sale of
counterfeit products online. While the internet has
been a key tool for engaging with consumers, it has
also been a two-edged sword as it has also been a
huge source of counterfeit luxury products.

BEAUTY AND PERSONAL CARE: LVMH MOT HENNESSY LOUIS VUITTON SA

PASSPORT 4

STRATEGIC EVALUATION

Positive growth continues in 2014

Euromonitor International

LVMH: Perfumes and Cosmetics 9-Month Interim


Results 2013/2014
million

June 2013 June 2014

Revenue
Profit (recurring
operations)

% growth

2,683

2,800

200

204

Perfumes and Cosmetics: Revenue by


Geography H1 2013 vs H1 2014
35
30
25
Euro million

LVMH continued to report positive growth in 2014.


Consolidated revenue for the nine months to
September 2014 reached 21.4 billion, up 4% over
the same period in 2013. In constant currency
terms, revenue increased by 8%.
Perfumes and Cosmetics revenue increased by
8% on a constant consolidation scope and
currency basis, and by 4% based on published
figures. The division reported particularly positive
growth in the Middle East and in Asia, specifically
China.
LVMH highlighted its Christian Dior brand as a
particularly strong performer, specifically its Jadore
and Dior Addict lines. Diors make-up lines
performed strongly, especially in Asia. Guerlain
also contributed to the divisions growth, with the
new fragrance LHomme Ideal as well as growing
support for its skin care Abeille Royale line.
LVMHs smaller BPC brands such as BeneFit also
posted robust performance, driven by the
combination of product innovation and geographic
expansion. BeneFit successfully launched a new
eyeliner They are Real.

20
15
10
5

0
France

Europe
(exc
France)

US

Jun-13

BEAUTY AND PERSONAL CARE: LVMH MOT HENNESSY LOUIS VUITTON SA

Japan

Asia
(exc
Japan)

Other

Jun-14

PASSPORT 5

STRATEGIC EVALUATION

SWOT: LVMH Mot Hennessy Louis Vuitton SA


STRENGTHS

WEAKNESSES

Global brand equity

Premium womens
fragrances
LVMHs enviable portfolio LVMHs area of strength
of premium brands
is premium fragrances,
carries significant equity. particularly womens,
It represents an excellent where it ranks second
platform for developing
globally, with Christian
its presence in traditional Dior by far its most
and newer marketplaces valuable brand and its
with beauty increasingly most important growth
becoming a focus.
driver in the category.

Small skin care portfolio Credibility in premium skin


care
While Guerlain, Christian
LVMHs beauty
Dior, Ole Henriksen and
brands have strong
Fresh all have skin care
presence in
lines, only the latter two
fragrances and
are known for skin care.
colour cosmetics but
LVMH with its new
less so in skin care,
research centre Helios
beauty and personal
aims to gain credibility in
cares largest
skin care and thus
category.
become more competitive.

OPPORTUNITIES

THREATS

Premium skin care - anti- Premium colour


Fierce competitive
Intense competition in US
agers
cosmetics
environment
LVMH is a small player LVMHs heritage brand
Beyond the strong
LVMH faces strong
in premium skin care,
Christian Dior and its
international premium competition from the likes
the largest premium
youthful brands BeneFit
beauty companies of
of Este Lauder and
BPC category, and anti- and Make Up For Ever
Este Lauder and
LOral. With a smaller
agers, the key growth
have strong potential in the LOral, LVMH faces
beauty portfolio, it is
subcategory within
fast-growing Asia Pacific
strong competition from harder for LVMH to
premium skin care over
and MEA regions which the smaller private firms
compete.
the forecast period.
company is exploring
such as Chanel and
increasingly
Clarins.
Euromonitor International

BEAUTY AND PERSONAL CARE: LVMH MOT HENNESSY LOUIS VUITTON SA

PASSPORT 6

STRATEGIC EVALUATION

Strategic objectives and challenges


Flagship brands

High potential brands

The impact of the global recession has led LVMH


to intensify its focus on its flagship brands, such as
classic labels Christian Dior, Givenchy and
Guerlain. Christian Dior in particular has become a
key growth driver for the company over 2008-2013,
contributing one third of the companys total BPC
growth globally. Guerlain has also been growing
and more investment has been going into
developing a stronger skin care portfolio for the
brand.

The companys portfolio of star brands is


complemented by a number of smaller brands that
LVMH considers to have strong growth potential.
BeneFit, Fresh and Make Up For Ever are all
targeted towards a younger demographic with a
fun image and more approachable prices. These
bands together with Ole Henriksen are LVMHs
pure beauty brands, ie not fashion brands that
extended into beauty.

Own retail network

Innovation to increase presence in skin care

LVMH has focused in recent years on its own retail


network, reducing its presence in wholesale and
investing in new store openings and development
of its stores in flagship markets. Examples range
from its Dior new store concept to Guerlains
reopening of its flagship store on the Champslyses in Paris. Furthermore, Sephoras rapid
growth, primarily in emerging markets, has further
allowed the company to manage its distribution.

In 2013, the company opened the Hlios research


centre in Frances Cosmetic Valley. The centre is
designed to foster synergy and accelerate the
development of innovative products. With over 250
researchers carrying out studies and testing
formulas, the company has made a significant
investment in driving innovation across all of its
three key categories and especially the more
challenging premium skin care market.

Euromonitor International

BEAUTY AND PERSONAL CARE: LVMH MOT HENNESSY LOUIS VUITTON SA

PASSPORT 7

STRATEGIC EVALUATION

COMPETITIVE POSITIONING
MARKET ASSESSMENT
GEOGRAPHIC AND CATEGORY
OPPORTUNITIES
BRAND STRATEGY
OPERATIONS
RECOMMENDATIONS

COMPETITIVE POSITIONING

LVMH remains outside the global top 10


Beauty and Personal Care: Leading Global
Companies by Value Share 2013 and Ranking
2010-2013
2013

Euromonitor International

2012

Procter & Gamble Co, The


L'Oral Groupe
Unilever Group
Colgate-Palmolive Co
Beiersdorf AG
Este Lauder Cos Inc
Johnson & Johnson Inc
Avon Products Inc
Shiseido Co Ltd
Henkel AG & Co KGaA
Kao Corp
Coty Inc
LVMH Mot Hennessy
Louis Vuitton SA

2011

2010

Company

1 1 1 1
2 2 2 2
3 3 3 3
4 4 4 4
6 5 5 5
8 8 6 6
7 7 7 7
5 6 8 8
9 9 9 9
11 11 11 10
10 10 10 11
12 12 12 12
14 14 13 13

The global BPC market is concentrated, with the


top three companies generating 29% of total sales
in 2013. Characteristically, market share is based
on very large global brands; Dove, Axe, Olay,
LOral Paris, Garnier and Nivea are just a few of
the worlds biggest BPC brands, all of which are
positioned in the mass segment.

%
company
share
2013
11.3 With a primary focus on premium products, and a
9.7 much smaller portfolio than some of its
competitors, LVMH ranks just outside the top 10
8.1
players in the global BPC market in 2013. The
3.8 companys growth slowed significantly during
3.0 2008-2009, although its beauty division was among
2.9 the less impacted.
2.8 However, it returned to strong growth in the latter
2.4 years of the review period and ranked among the
2.1 strongest performers in 2012, with near 10%
growth as the company benefited from a revival in
1.7
demand for premium products, specifically in the
1.7 US, as a result it moved up one place in the
1.7 ranking, a position it held on to in 2013. While
growth in 2013 was more moderate, it still held its
1.5
position due to strong growth in Asia and MEA.

BEAUTY AND PERSONAL CARE: LVMH MOT HENNESSY LOUIS VUITTON SA

PASSPORT 9

COMPETITIVE POSITIONING

Company performance significantly improves

10

LVMH: Competitive Performance by Value vs Global Premium Beauty and Personal


Care Market 2008-2013

% y-o-y growth

6
5
4
3

2
1
0
2008-2009

2009-2010

2010-2011
Premium BPC

A: 2008-2009: Consumers downtrading behaviour as a result of


the economic downturn
negatively impacts LVMHs
performance, with the company
posting just 2% growth, its worst
result in over half a decade.

Euromonitor International

2011-2012

2012-2013

LVMH

B: 2010-2011: LVMH outperforms


the global premium BPC market
thanks to continued buoyant
demand for premium products in
emerging markets. The company
also benefits from a revival in
demand for premium products in
the US, where it posts doubledigit growth.

C: 2012-2013: Company growth


slows down slightly due to a
slowdown in premium cosmetics
spending in North America and in
particular in the US. However, the
company is taking a stronger hold
in emerging markets such as
Asia Pacific and the Middle East
and Africa.

BEAUTY AND PERSONAL CARE: LVMH MOT HENNESSY LOUIS VUITTON SA

PASSPORT 10

STRATEGIC EVALUATION

COMPETITIVE POSITIONING
MARKET ASSESSMENT
GEOGRAPHIC AND CATEGORY
OPPORTUNITIES
BRAND STRATEGY
OPERATIONS
RECOMMENDATIONS

MARKET ASSESSMENT

Fragrances remain LVMHs main focus area


LVMH is only present in the premium segment of beauty and personal care. As the third largest premium
BPC player globally, LVMH will be among the main beneficiaries of the predicted US$14.7 billion increase
in sales over the forecast period.
Fragrances is by far LVMHs most valuable category, accounting for more than half of the companys total
sales. LVMH is the second largest player, only marginally behind LOral. Through strong brands, mainly
Christian Dior and Guerlain, the company is well positioned to capitalise on the predicted US$3.3 billion
increase in global sales of premium fragrances, the second biggest contributor to absolute premium BPC
value growth over 2013-2018.

% CAGR 2013-2018

LVMH is a smaller player in premium skin care - the biggest category within premium BPC, and the most
important growth contributor, expected to gain US$6.7 billion by 2018. More importantly Asia Pacific - the
companys key regional growth contributor - is also skin cares key growth contributor by region. The
company is expanding Fresh in the region, whose natural positioning fits well with consumer demand, as
well as expanding Ole Henriksen another natural skin care brand with a spa positioning and strong antiageing offerings.
LVMH: Premium BPC Presence 2013 and Growth Prospects 2013-2018 by Category
7
Premium baby and child6
specific products
5
4 Premium bath and shower
3
2
Premium sun care
1 Premium deodorants
0
0
5,000

Premium skin care


Premium colour cosmetics
Premium fragrances

Premium sets/kits

10,000

15,000
20,000
25,000
Market size 2013 (US$ million rsp)

30,000

35,000

40,000

Note: Bubble size represents company value share of category in 2013, range displayed: 0.2-14.5%

Euromonitor International

BEAUTY AND PERSONAL CARE: LVMH MOT HENNESSY LOUIS VUITTON SA

PASSPORT 12

MARKET ASSESSMENT

Growing in Asia but Europe remains LVMHs money maker


LVMH has a cross-regional presence, with Western Europe the largest contributor to its sales (accounting
for over 40% of the companys global BPC sales in 2013). Demand for premium BPC was subdued in this
region over the review period, despite the company posting a respectable near US$200 increase in sales
over 2008-2013. While the outlook for premium BPC in Western Europe remains poor (0.3% CAGR over
2013-2018), the company is in a strong competitive position and growth through further share gain should
be achievable.

% CAGR 2013-2018

In terms of actual gains, premium BPC is expected to record the largest increase in Asia Pacific over 20132018, with China set to contribute nearly three quarters of the predicted US$7.8 billion category gain in the
region. LVMHs brands, which are both well known through their fashion heritage and have strong brand
image, are in a strong position to capitalise on the increasing number of consumers whose incomes are
rising and have a high desire for luxury brands. LVMHs beauty offerings are expected to capitalise the
most, being the entry price point into the brand for the majority of aspirational consumers.
LVMH: Premium BPC Presence 2013 and Growth Prospects 2013-2018 by Region
7
6
5
4
3
2
1
0
-1

Middle East/Africa
Asia Pacific
Latin America
North America
Eastern Europe

Western Europe

Australasia
0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

Market size 2013 (US$ million rsp)


Note: Bubble size represents company value share of region in 2013, range displayed: 3.1-18.6%

Euromonitor International

BEAUTY AND PERSONAL CARE: LVMH MOT HENNESSY LOUIS VUITTON SA

PASSPORT 13

STRATEGIC EVALUATION

COMPETITIVE POSITIONING
MARKET ASSESSMENT
GEOGRAPHIC AND CATEGORY
OPPORTUNITIES
BRAND STRATEGY
OPERATIONS
RECOMMENDATIONS

GEOGRAPHIC AND CATEGORY OPPORTUNITIES

A multi-point battlefield in premium fragrances

Very strong growth is expected in the Middle East and Africa, where
some 40% of global premium fragrances absolute value growth will
come from over 2013-2018. The leading market will be Saudi Arabia
with a contribution exceeding US$600 million. However, this is a
market where local players continue to dominate, although LVMH has
made important inroads, reaching 6% of premium fragrances in 2013
(ahead of its multinational rivals).
LVMH leads premium fragrances in Asia Pacific as a result of a
strong cross-market presence, and its leadership position in the
regions largest market of Japan. While growth prospects are poor in
the latter, opportunities exist specifically in the high-growth markets of
China and India. Jadore replaced Chanel N5 as the top-selling
fragrance in China in 2013.
Euromonitor International

LVMH: Premium
Fragrances Presence 2013
and Growth Prospects
2013-2018 by Region
9
Middle
East/
Africa

8
7
6
% CAGR 2013-2018

Premium fragrances is LVMHs core area of business in beauty and


personal care. The company has a cross-regional presence but
derives nearly half of premium fragrances sales from Western
Europe. While category growth is expected to be very moderate at
0.5% CAGR, this will still translate into a significant gain of US$248
million by 2018. Moreover, premium fragrances is expected to
outperform mass fragrances which is predicted to see a value decline
over the forecast period. As the leading player in premium fragrances
in Western Europe, LVMH should be able to claim much of the
predicted category gain.

Latin
America

5
4

Asia
Pacific

North
America

2
1

Western
Europe

Eastern
Europe

Australasia

-1
-2
0

10,000

20,000

30,000

Market size 2013 (US$ million rsp)


Note: Bubble size represents company value share
in region in 2013, range displayed: 5.9-32.0%

BEAUTY AND PERSONAL CARE: LVMH MOT HENNESSY LOUIS VUITTON SA

PASSPORT 15

GEOGRAPHIC AND CATEGORY OPPORTUNITIES

Strong competitive positioning in premium fragrances


Premium fragrances is highly consolidated with the top five players
controlling nearly 60% of global value sales in 2013. LVMH ranks first,
with a 14.5% value share, having overtaken previous market leader
L'Oral in 2013. LVMH gained further share in 2013 due to the strong
performance of key brands, above all Christian Dior (specifically Miss
Dior, Dior Homme and Jadore).

In contrast, leader L'Oral has been consistently losing value share


since 2008, with most of the companys key brands losing share, such
as Giorgio Armani, Ralph Lauren and Lancme, despite the success
of its La Vie est Belle which climbed to third position in France. A
stronger performer among the leading players was Chanel, whose
eponymous brand gained significant share in its key regions of North
America and Western Europe. Chanel remains LVMHs main rival
with a similar fashion background and iconic fragrances such as
Chanel N5 and Coco Mademoiselle.

Euromonitor International

16
15

14
13
% value share

LVMHs strong portfolio in its classic range plays to its strength as


consumers are growing increasingly tired of celebrity lines and
looking for more sophisticated brands. It also aims to reach out to a
younger audience with products such as its new La Petite Robe
Noire, part of the Guerlain brand family. The fragrance was so
successful in its home market France it quickly climbed the ranking to
number two.

Premium Fragrances:
Global Value Shares of
Leading Companies
2008-2013

12
11
10
9
8
7
2008 2009 2010 2011 2012 2013

BEAUTY AND PERSONAL CARE: LVMH MOT HENNESSY LOUIS VUITTON SA

LVMH
L'Oral
P&G
Coty
Chanel

PASSPORT 16

GEOGRAPHIC AND CATEGORY OPPORTUNITIES

Local competition keeps Saudi Arabia a challenging field


Saudi Arabia is one of the largest premium fragrances
markets globally. While local and traditional Arabian brands
will remain the strongest in driving future growth, consumers
are looking increasingly towards imported French-style
fragrances, which epitomises LVMHs portfolio. Moreover, a
Fatwa was issued in June 2012, which stated that Muslims
can use alcohol-based fragrances, due to the proportion of
alcohol in fragrances being low. This Fatwa thus encouraged
many Saudi consumers to expand their purchase of
fragrances to include alcohol-based fragrances from
prestigious global brands. LVMH is well positioned to
capitalise on this opportunity, as the largest multinational
player within premium fragrances.
A further challenge has been consumers preference for
strong deep scents with oud as a key ingredient. Many
fashion brands have been introducing oud- based
fragrances, especially Tom Ford, which although still niche
has been growing in the market.
Despite consumers desire for luxury brands, which fits well
with LVMH, catering to consumers olfactory tastes is also
necessary. Thus the key challenge for international players is
to convince consumers that they can create oud products as
well as locals do.
Euromonitor International

Premium Fragrances: Leading


Absolute Value Growth Markets
2013/2018
Saudi Arabia
US
China
Brazil
South Africa
UK
India
Israel
South Korea
UAE
0

100

200

300

400

500

600

700

Absolute value growth (US million) 2013/2018

BEAUTY AND PERSONAL CARE: LVMH MOT HENNESSY LOUIS VUITTON SA

PASSPORT 17

GEOGRAPHIC AND CATEGORY OPPORTUNITIES

Opportunities in colour cosmetics remain East for LVMH


LVMHs performance was also strong in premium colour cosmetics,
where its global share steadily increased throughout the review
period, reaching 8.9% in 2013 (from 7.8% in 2008). LVMH competes
in the category with its Christian Dior, Givenchy and Guerlain brands,
as well as colour cosmetics specialist brands BeneFit and Make Up
For Ever.

LVMH is particularly strong in Eastern Europe, where it dominates


premium colour cosmetics with a 27.6% share. LVMH is second with
a 14.3% share of premium colour cosmetics in the Middle East and
Africa where Este Lauder has been increasing its presence,
launching in Nigeria in 2013. Finally, in Asia Pacific, the company
raised its competitive share from 4% in 2008 to 6% in 2013, indicating
the region as a big white space for the company to expand in. As
such, for LVMH, the eastern fast-growing regions remain the most
dynamic markets to expand its presence in.

Euromonitor International

6
Middle
East/
Africa

4
% CAGR 2013-2018

Premium colour cosmetics has recovered from the fall in demand


during the economic downturn, although growth is expected to remain
moderate, at 2% CAGR, over the forecast period. While growth will be
marginal in Western Europe, North America is expected to show
positive growth, at just above the global average (2.3% CAGR).
Category growth in the latter will be driven by foundation/concealer,
where Christian Diors latest launches have been concentrating on.

LVMH: Premium Colour


Cosmetics Presence 2013
and Growth Prospects
2013-2018 by Region

Latin
America

Asia
Pacific

Eastern
Europe

Australasia

North
America

Western
Europe

-1
0

2,000

4,000

6,000

8,000

Market size 2013 (US$ million rsp)


Note: Bubble size represents company value share
in region in 2013, range displayed: 4.6-27.6%

BEAUTY AND PERSONAL CARE: LVMH MOT HENNESSY LOUIS VUITTON SA

PASSPORT 18

GEOGRAPHIC AND CATEGORY OPPORTUNITIES

Estee Lauders domination remains unchallengeable


LVMH is moving up the global premium colour cosmetics ranking, edging ahead of Shiseido in 2011, and
approaching LOral slowly but steadily. LVMH outperformed the premium colour cosmetics market by
posting 7% value growth in 2013, significantly above the global average of 4.6%. Among the top leading
players, only AmorePacific Group grew stronger (17%) as the company continued its expansion beyond
South Korea to the rest of Asia and North America where its brands have been very popular. Both Este
Lauder and LOral grew weaker than the category overall, indicating that with continued strong
performance LVMH can close the gap to the two leading players.
LVMH benefits from a strong brand portfolio, ranging from its classic brands Dior, Givenchy and Guerlain,
which have a well-established consumer base, to its youthful brands BeneFit, and Make Up For Ever.
In 2013, LVMH highlighted a particularly positive performance of Diorskin Star foundation and concealer.
BeneFit also continued to perform strongly, specifically products such as Theyre Real! Mascara and
Eyeliner and Hello Flawless! Powder foundation, while key growth contributors within Make Up For Ever
were HD (foundation) and Aqua (eye make-up).
Premium Colour Cosmetics: Global Value Shares of Leading Companies 2008-2013
% value share

30
25
20
15
10
5
0
2008

2009

2010
Este Lauder

Euromonitor International

2011
L'Oral

LVMH

2012

2013

Shiseido

BEAUTY AND PERSONAL CARE: LVMH MOT HENNESSY LOUIS VUITTON SA

PASSPORT 19

GEOGRAPHIC AND CATEGORY OPPORTUNITIES

Premium skin care growth to be driven by anti-agers


Skin care accounted for 15% of LVMHs total BPC
sales in 2013, with sales of US$966 million. Yet
this category is set to add the most value sales of
over US$6.7 billion in premium BPC over 20132018, indicating even better growth potential than
LVMHs core fragrances.
Within premium skin care, anti-agers is the growth
driver - the category is expected to grow by US$3.6
billion globally over 2013-2018, which represents
over half of total premium skin care growth.
Demand for high-end products offering valueadded benefits will continue to grow, benefiting
LVMHs premium-positioned brands and products,
such as Dior Capture Totale.

Premium Skin Care: Leading Absolute


Value Growth Categories 2013/2018
Anti-Agers
Facial Moisturisers
Toners
Liquid/Cream/Gel/Bar Cleansers
Face Masks
0

2,000

3,000

4,000

Anti-Agers: Global Value Shares 2013

LVMH recorded positive growth in the key antiagers category - its most valuable category within
skin care (36% of its total skin care sales).
However, the company remains a small player,
ranking just 15th in 2013. To fully benefit from
premium skin care opportunities, a focus on
strengthening its position in the key anti-agers
category would be wise.

Euromonitor International

1,000

Absolute value growth (US$ million) 2013/2018

BEAUTY AND PERSONAL CARE: LVMH MOT HENNESSY LOUIS VUITTON SA

L'Oral
P&G
Este Lauder
Shiseido
Beiersdorf
Avon
Unilever
Mary Kay
Nu Skin Enterprises
AmorePacific
Amway
J&J
LG Household & Health Care
LVMH
Clarins
Others

PASSPORT 20

GEOGRAPHIC AND CATEGORY OPPORTUNITIES

US and China key growth markets for premium anti-agers


In premium anti-agers, sales are very much skewed
towards Asia Pacific, Western Europe and North America,
with the three regions combined accounting for 90% of
total category sales in 2013. Asia Pacific and North
America will also remain the largest contributors to
category growth over 2013-2018, while sales are expected
to increase only marginally in Western Europe, where
growth remains constrained by economic weakness.
Anti-agers is expected to lead premium BPC growth in the
US, in both percentage (8% CAGR) and absolute (US$900
million) terms over 2013-2018. However, LVMH is a very
small player in US premium anti-agers, which is dominated
by Este Lauder (37% share) and LOral (17%) throughout the review period, LVMHs category share
hovered at around 2%. The company should prioritise
investment in this key growth category - a true bright spot
in this mature market.
Within Asia Pacific, China is by far the most important
growth market, with a predicted 16% CAGR set to translate
into a category gain of over US$2 billion over 2013-2018.
LVMH is active in this market, but needs to strengthen its
competitive position, with its category share showing a
downward trend over the review period.
Euromonitor International

Premium Anti-Agers: Growth


Prospects by Region 2013/2018
Western Europe

North America

Middle East & Africa

Latin America

Eastern Europe

Australasia

Asia Pacific

500

1,000

1,500

2,000

2,500

Absolute value growth (US$ million) 2013/2018

BEAUTY AND PERSONAL CARE: LVMH MOT HENNESSY LOUIS VUITTON SA

PASSPORT 21

GEOGRAPHIC AND CATEGORY OPPORTUNITIES

Premium face masks: A rising category


Apart from the core skin care categories, opportunities also exist to exploit within premium face masks.
China is already one of the most valuable markets for the category globally, and is expected to see very
dynamic growth, 12% CAGR, set to translate into a value gain of nearly US$194 million over 2013-2018.
LVMH is active in the category with its Christian Dior and Guerlain brands, as well as its Fresh brand, which
is positioned as combining ancient rituals with cutting-edge technology with a focus on natural ingredients
- a positioning that should appeal to the Chinese market. Indeed, LVMH opened its first Fresh store in
Shanghai in 2013 to exploit the brands potential.
As in other skin care categories, LVMH also faces very strong competition from larger rivals in face masks.
Over 2008-2013, the companys share steadily declined, while rivals LOral, Este Lauder and Procter &
Gamble all recorded share increases. LVMH needs to become more competitive if it is to fully capitalise on
the growth opportunity this category offers.
Premium Skin Care in China: Top Five Categories 2013-2018
4,000

% value share

3,500
3,000
2,500
2,000
1,500
1,000
500
0
2013
Anti-Agers

Euromonitor International

2014
Facial Moisturisers

2015
Toners

2016

2017

Liquid/Cream/Gel/Bar Cleansers

BEAUTY AND PERSONAL CARE: LVMH MOT HENNESSY LOUIS VUITTON SA

2018
Face Masks

PASSPORT 22

STRATEGIC EVALUATION

COMPETITIVE POSITIONING
MARKET ASSESSMENT
GEOGRAPHIC AND CATEGORY
OPPORTUNITIES
BRAND STRATEGY
OPERATIONS
RECOMMENDATIONS

BRAND STRATEGY

A luxurious offering for everyone?


LVMH has maintained its status as a resolutely luxury beauty player despite core market recession-led
pressure to engage with the mass market, a strategy that many peers have employed.

The companys premium portfolio is led by Christian Dior, Guerlain and Givenchy, whose equity in
fragrances LVMH has used to build a strong profile in secondary categories, including colour cosmetics and
skin care. Guerlain in particular launched LHomme Ideal in 2013 and increased focus on skin care with its
Abeille Royale line. Its Orchide Imperiale line is growing rapidly in Asia and Russia. Givenchy introduced
Dahlia Divin, a new fragrance for women in 2013, and Gentlemen Only.

Value sales (US$ million)

In addition, its high potential brands, which include BeneFit and Make Up For Ever (colour cosmetics),
Fresh (skin care), Acqua di Parma and Fendi (fragrances) and Parfums Loewe, are considered by the
company as an ideal complement to its timeless stars as they are offering new growth avenues for the
company. Loewe is going through a period of transition with a new creative director, the young and muchacclaimed J.W. Anderson. The Spanish brands fragrance line is also expected to be influenced by the
young director. Fendi also introduced new fragrances in 2013, Fan di Fendi pour Homme and
L'Acquarossa, with an emphasis on its Italian heritage.
LVMH: Sales of Leading Brands 2008/2013
3,000
2,500
2,000
1,500
1,000
500
0
Christian Dior

Guerlain

Givenchy

Kenzo
2008

Euromonitor International

BeneFit

Bvlgari

Loewe

2013

BEAUTY AND PERSONAL CARE: LVMH MOT HENNESSY LOUIS VUITTON SA

PASSPORT 24

BRAND STRATEGY

Christian Dior the brightest star

Christian Dior: Sales and Growth 2009-2013


4,000

6
5
4
3
2
1
0

3,000
2,000
1,000

0
2009

2010

2011

Retail Value (US$ million)

Euromonitor International

2012

% y-o-y growth

Sales (US$ million)

Christian Dior is LVMHs leading BPC brand, with sales of US$2.9 billion in 2013 and the most important
growth contributor, with global sales increasing by just short of US$500 million over 2008-2013.
The brand derives the majority of its sales from fragrances (45% in 2013), where it operates with a variety
of lines including Jadore, Dior Addict and Miss Dior. In addition, Christian Diors colour cosmetics (28%)
and skin care (21%) are growing rapidly. Christian Dior performed strongly in 2013, recording just over 4%
growth, slightly lower from 2012 due to premium sales slowing in North America.
In terms of product lines, the company highlighted Jadore, which saw a new communication campaign,
and Miss Dior, whose 67 years of history were celebrated with an exhibition devoted to it at the Grand
Palais in Paris. This raised the image of both brand and fragrance. Dior Homme was a continued strong
performer in mens fragrances and Voile de Parfum was launched in womens fragrances. The Dior makeup lines were highlighted as making significant inroads in Asia. Their new product offerings from BB creams
to the light-boosting Diorskin Star foundation and concealer are catering to a younger demographic whose
obsession with social media makes them always want to be camera-ready.
Most importantly, Dior launched pop-up stores dedicated to its beauty offerings with a pop-up in Saint
Honore in Paris where consumers can get engravings on their fragrances and facial massages among
others. Diors takeover of Harrods in the UK in April 2013 also elevated the brands image.

2013

Y-o-Y Growth (%)

BEAUTY AND PERSONAL CARE: LVMH MOT HENNESSY LOUIS VUITTON SA

PASSPORT 25

BRAND STRATEGY

BeneFit: Unique positioning among LVMHs brands

Euromonitor International

BeneFit: Sales and Growth


2009-2013
300

16

14
250
12
200
10

150

% y-o-y growth

Sales (US$ million)

BeneFit is one of the companys high potential brands, with


rapidly growing sales from a still relatively low base. In 2013, the
brand recorded sales of US$277 million, up 14% on the previous
year.
The BeneFit brand continues to derive the bulk of sales in the
US, however it has also established itself among the top five
premium BPC brands in the UK, and is making inroads in Asia
Pacific. In 2013, it also shook up its distribution with increasing
presence in several US airports in the form of Glam Up & Away
kiosks. These are vending machines in the shape of vintage pink
buses offering beauty products.
BeneFits focus is on premium colour cosmetics, with a unique
positioning among LVMHs brands, with a more offbeat and
playful glamour image, as well as strong innovation from its
latest make-up offering FakeUp, a moisturising concealer, and
expansion of its flagship products such as Theyre Real! mascara
and eyeliner and The POREfessional series. As such it perfectly
complements LVMHs traditional, classic brands and offers the
company an opportunity to attract an entirely different audience.
Fashion collaborations are becoming part of the brands growth
strategy. In 2013, BeneFit collaborated with British designer
Matthew Williamson for the launch of a 1970s inspired make-up
kit called The Rich is Back.

6
100
4
50
2

0
2009

2010

2011

Retail Value (US$ million)

BEAUTY AND PERSONAL CARE: LVMH MOT HENNESSY LOUIS VUITTON SA

2012

2013

Y-o-Y Growth (%)

PASSPORT 26

BRAND STRATEGY

Sephora: LVMHs emerging market engine


Can Sephora make it in Brazils premium
market?

Digital innovation and Asia expansion for


Sephora

Sephora arrived in Brazil in 2012, causing initial


Sephora, grew strongly in all key regions and
excitement among consumers and since then it has
continued to generate notable comparable-store
amassed 14 stores in the country, distributed through revenue growth in North America and the Middle
So Paulo, Rio de Janeiro, Paran and Braslia. But
East. Sephoras first stores opened in Indonesia
Brazils high import taxes as well as the higher profit
during the last quarter in 2014, while it entered
margin applied in Brazil by retailers has placed the
Thailand at the end of 2013 and online sales saw
retailer above much of the populations budget. On
continued rapid progress. Furthermore, the
average, the same product is more than double the
Chinese business is holding up extremely well with
price in Brazil than the US.
the company claiming that it will break even much
faster than anticipated.
In 2014, Sephora decided to reduce prices of
products of its own range of cosmetics and
New technologies such as SkincareIQ or ColorIQ,
accessories imported from France, the Sephora
are adding to customer experience and the
Collection. By doing this, it will be directly competing
company has revamped its website for
with local major players O Boticrio and Natura. To
multichannel reach and launched a mobile app
make its products even more affordable, Sephora
called My Sephora for its sales associates. My
has also changed its pricing terms with purchases
Sephoras purpose is to help sales associates
over R$180 to be paid over six instalments in retail
provide stronger personalised recommendations to
outlets. Online, payments made by credit card can
consumers as it holds customers purchase history,
be repaid in up to 10 instalments of as little as R$10.
tastes and habits. This way Sephora hopes to build
Thus Sephora hopes to convince Brazilians that they
intimacy with customers and renew their in-store
shopping experience.
can get good quality imported products as cheaply
as their local offerings.

Euromonitor International

BEAUTY AND PERSONAL CARE: LVMH MOT HENNESSY LOUIS VUITTON SA

PASSPORT 27

BRAND STRATEGY

Kendo: Sephoras cosmetic product development division


In 2014, it was announced that Kendo, Sephoras product
development division, will go independent of the retailer while
remaining under LVMH leadership. This gives it the advantage of
choosing the best strategy for each of its brands while still taking
advantage of Sephoras network.
Kendo is not only the manufacturer of Sephoras private label
cosmetics but also owns Marc Jacobs Beauty, Kat Von D Beauty,
Formula X, Elizabeth and James fragrances, Ole Henriksen, and Bite
Beauty which it acquired in November 2014.
Marc Jacobs Beauty has been the largest single brand launched in
the history of Sephora North America. Its global success beyond
North America to Europe and Middle East showcases the potential for
the other brands.
Ole Henriksen has doubled in size since its acquisition in 2011. The
brand will be updated with new product offerings and branding to
prepare it for global distribution. With Asia key to global success for
any skin care player, the brand, currently one of Sephoras top five
skin care brands in North America, will be eyeing cross-regional
expansion.
Kendos key strategy is to create offerings including brands
developed specifically for markets outside North America and
expanding existing ones globally.

Euromonitor International

Source: Ole Henriksen

BEAUTY AND PERSONAL CARE: LVMH MOT HENNESSY LOUIS VUITTON SA

PASSPORT 28

STRATEGIC EVALUATION

COMPETITIVE POSITIONING
MARKET ASSESSMENT
GEOGRAPHIC AND CATEGORY
OPPORTUNITIES
BRAND STRATEGY
OPERATIONS
RECOMMENDATIONS

OPERATIONS

Production and operational strategies


Tightly controlled distribution
As a leading global premium fragrances and colour
cosmetics company, LVMHs distribution profile is
varied and multi-tiered. However, the company tightly
controls the channels through which it retails its
brands.
LVMH operates its own selective retail network,
comprising the Sephora chain of specialist beauty
stores, the DFS Galleria chain of duty-free outlets
and the Le Bon March chain of prestige department
stores. LVMHs total selective store network reached
1,541 outlets in 2013, up from 1,368 outlets in 2011.
LVMHs specialist Sephora chain comprised over
1,400 stores across over 30 countries in 2014, with
the majority located in Europe and the US.
Emerging market expansion forms a key part of
Sephoras growth strategy, with a particular focus on
China. In 2012, Sephora also entered India and
Brazil. In 2014, it entered Indonesia, while in
launched in Thailand at the end of 2013.
In terms of its cosmetics operations, it revamped
Guerlains flagship store on the Champs-lyses in
Paris, while it launched a series of pop-up stores for
Christian Dior in London and Paris in 2013.

Euromonitor International

Western Europe-focused manufacturing


LVMH carries out the vast majority of its beauty
and personal care product manufacturing in
Western Europe, reflecting the companys origins
and regional sales bias, as well as the luxury
nature of the brands. The company employed
106,348 people in 2012, 12% of whom were
production workers. The number of production
workers increased by 6% in 2012, as LVMH
responded to rising demand for its products.
In 2014, Guerlain opened a new cosmetics
production site La Ruche at Chartres in France,
while in 2013 it also opened Hlios, its new
perfumes and cosmetics research centre in SaintJean-de-Braye. Hlios is home to 250 researchers
working for Parfums Christian Dior, Guerlain,
Parfums Givenchy and Fresh and covers an area
of 18,000 sq m, making it one of Frances largest
BPC R&D centres.
While committed to developing cosmetics that offer
safety assurances to consumers, LVMHs
perfumes and cosmetics brands no longer test on
animals.

BEAUTY AND PERSONAL CARE: LVMH MOT HENNESSY LOUIS VUITTON SA

PASSPORT 30

STRATEGIC EVALUATION

COMPETITIVE POSITIONING
MARKET ASSESSMENT
GEOGRAPHIC AND CATEGORY
OPPORTUNITIES
BRAND STRATEGY
OPERATIONS
RECOMMENDATIONS

RECOMMENDATIONS

Expand, acquire, develop, exploit


Expand further into Asia Pacific and MEA
Both Asia Pacific and MEA will be regions of
strong premium growth over 2013-2018, especially
for skin care, colour cosmetics and fragrances.
As these remain LVMHs key categories,
strengthening positions and expanding newer
brands such as Fresh, Ole Henriksen, BeneFit and
Kendos colour brands in Asia makes strategic
sense. Furthermore, cementing Christian Dior and
Guerlain in the MEA fragrances market can help it
become a top 10 beauty player.
Acquire in skin care to fill gaps
While LVMH has a wide portfolio of brands, they
are largely skewed towards fragrances and colour
cosmetics. With premium skin care adding another
US$6.7 billion to global premium BPC, twice as
much as premium fragrances, it remains the key
BPC category.
An acquisition of a premium skin care brand with
strong anti-ageing offering and luxury brand image
would make LVMHs Perfumes and Cosmetics
division more competitive in skin care.
Euromonitor International

Develop product portfolio


With two new research centres built in France, one
for Guerlain, and Hlios, which will be home to
over 250 scientists, LVMH can further develop its
product portfolio. Innovation in skin care remains
weak and niche but fast-growing categories such
as face masks, face mists and eye care are
relatively undeveloped. For LVMH to further
compete with LOral and Este Lauder it should
continue to diversify its product portfolio across all
categories.
Exploit brand heritage
LVMHs greatest asset is the strong heritage that
its brands carry. As disposable incomes rise,
increasingly more consumers are looking for an
entry into the aspirational lifestyle these brands
provide, LVMH is in a strong position to exploit any
growth by offering affordable luxury. Furthermore,
while consumers in mature markets have cut back
on spending, premium beauty remains within
budget and a strong brand heritage can capitalise
on this.

BEAUTY AND PERSONAL CARE: LVMH MOT HENNESSY LOUIS VUITTON SA

PASSPORT 32

FOR FURTHER INSIGHT PLEASE CONTACT


Nicole Tyrimou
Analyst Beauty and Personal Care
Nicole.tyrimou@euromonitor.com

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PASSPORT 34