November 7, 2012 / 3:00 PM / in 5 years

L'Oreal sees Indonesia as fastest growing Asia market

JABABEKA, Indonesia, Nov 7 (Reuters) - L‘Oreal, the world’s biggest cosmetics group, sees sales in Indonesia growing 30 percent in 2012 and next year, making it the firm’s fastest growing Asian market, executives said on Wednesday.

L‘Oreal opened its biggest factory globally in the country’s main Java island on Wednesday, with investment of 100 million euros over several years, as it eyes growing middle class wealth in the world’s fourth most populous nation.

The plant will make 200 million hair and skin products next year under its L‘Oreal Paris and Garnier brands, with 30 percent for the local market and the rest for export to Southeast Asia.

Foreign firms manufacturing products within Southeast Asia get tariff-free shipments within the region of 600 million people, under a free trade pact by the Association of Southeast Asian Nations (ASEAN). L‘Oreal has followed other firms this year in making Indonesia its manufacturing hub.

L‘Oreal sees the beauty market in Indonesia growing from 1.5 billion euros now to be worth 5 billion euros by 2025, said the firm’s Asia-Pacific Managing Director Jochen Zaumseil.

“That’s the size of the total ASEAN beauty market now,” Zaumseil said, before joining the country’s investment chief in cutting a ribbon of jasmine flowers to launch the plant, where gleaming steel tanks and automated production machinery gave off a smell of moisturiser.

The plant has a potential capacity of 500 million hair and skin products a year. L‘Oreal is vying to take market share from Indonesian leader Unilever , which is also seeing double-digit sales growth and expanding production.

Both firms say they are gaining market share. L‘Oreal’s Indonesian sales growth jumped to 300 percent for men’s products.

“We think Indonesia will be the number three beauty market in Asia,” said Zaumseil, adding the firm sees it as a world top 15 market by 2025. “These are very aspirational consumers.”

The G20 member’s strong economic growth of around 6 percent a year could lead to an additional 90 million members of the “consuming class”, or a new market bigger than the population of France, Zaumseil said.

L‘Oreal’s optimism on Indonesia contrasts with “brutal” trading conditions in South Korea and Taiwan this year for its luxury products, which include Yves Saint Laurent perfumes and Biotherm and Lancome creams. It has also seen a slowdown in China, the main driver of luxury goods in recent years.

It is still expanding production in other emerging markets, with a new factory in Mexico this year and another planned in Egypt for next year, Zaumseil said.

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