L'Oreal sees Middle East and Southeast Asia as next growth engines as China slows: ‘Eventually demographics have to win'

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14 hours ago

For more than a decade, China's aspirational shoppers, spurred by a fast-growing economy and rising wages, snapped up products from cosmetics giants like L'Oreal, Estee Lauder, and Shiseido. Before the COVID pandemic hit, China appeared set to overtake the U.S. as the world's largest makeup market.
Those boom times are over, as more Chinese consumers now turn to up-and-coming local brands, like Mao Geping and Florasis.
L'Oreal's sales in Mainland China dropped last year, shrinking its overall North Asia sales by around 3%. The Chinese market, the bulk of the firm's North Asia revenue, now accounts for 17% of group sales, down from 23% in 2022. The French firm continues to call China an important market, but has reportedly started cutting its retail workforce due to slower Chinese demand.
As China stagnates, L'Oreal is now looking to regions, like the Middle East and Southeast Asia, as a source of growth.
SAPMENA—L'Oreal's term for 'South Asia Pacific, Middle East, and North Africa'—will soon 'play a much bigger role' when it comes to beauty, says Vismay Sharma, who oversees the region for the French cosmetics firm.
L'Oreal, No. 91 on Fortune's Europe 500, reported sales of 1.1 billion euros ($1.19 billion) for the first quarter of 2025, up 12.2% year-on-year, across SAPMENA and Sub-Saharan Africa (SSA).
That's still small compared to other regions, sitting far behind Europe, North America and North Asia. But while SAPMENA-SSA only contributed 9.2% of L'Oreal's quarterly revenue, it was the only region to log double-digit growth.
SAPMENA covers a huge swathe of the globe, stretching from Morocco all the way down to New Zealand just under 19,000 kilometers away. The region's 35 markets cover 3 billion people, or about 40% of the world's population, yet only accounts for 10% of global beauty sales. 'It has to come together, and eventually demographics have to win,' Sharma says.
SAPMENA's quick growth doesn't surprise Sharma. 'The consumers in this part of the world are about 5 years younger than the rest of the world, live in aspirational societies and in economies that are growing fast,' he says.
China has proved to be a tricky market for global cosmetics firms post-pandemic. Sluggish China sales have dragged down the financial results of U.S. firm Estee Lauder and Japan's Shiseido.
A sluggish economy and stagnant consumption are partly to blame. But there's also new competition. 'C-Beauty' brands are starting to pick up steam among Chinese shoppers, with new brands going viral on Douyin, the Chinese version of TikTok, and other social media platforms. (L'Oreal is paying attention, investing in local Chinese brands like To Summer)
Still, Sharma thinks China offers lessons for SAPMENA.
Southeast Asia, like China, has highly connected consumers who are used to e-commerce and livestreaming. For example, Sharma notes that over 50% of L'Oreal's business in Vietnam comes from e-commerce.
This is less true of the Middle East and North Africa.
'When you look at the ecosystem of beauty over there, you still don't have TikTok Shop. They're still a few years behind platforms like Shopee, like Lazada,' he says.
Yet consumers in the Middle East share similar preferences to those in Southeast Asia. 'Expectations for beauty are very similar. We can see aspirations in terms of kind of hair, skin, lips, and eyes,' Sharma says, pointing to a preference for longer black hair as an example.
That gives L'Oreal a chance to grow in the region. 'Our ability to create content at scale in the GCC becomes a huge advantage,' Sharma says.
This story was originally featured on Fortune.com