L’Oreal confident on China despite tensions over trade secrets

L’Oreal SA remains confident on the potential of the Chinese market despite tensions over the level of ingredient disclosure the country is requesting from cosmetics makers.

China “will remain a very important source of growth for L’Oreal and the beauty market because middle classes are going to be increasing,” Chief Executive Officer Nicolas Hieronimus said during an interview from the CES consumer technology trade show in Las Vegas. “We continue to invest in the Chinese market.”  

L’Oreal is able to respect the Chinese regulations without disclosing all the secrets of its recipes, the executive added.

The comments come after the European Union raised concerns last year with China about the detailed product information that beauty companies like L’Oreal and LVMH Moet Hennessy Louis Vuitton SE have to provide in order to sell their goods in this crucial market.

China is phasing in rules making cosmetics firms supply data spanning from ingredients to details of manufacturing processes, the sourcing of raw materials, and the precise composition of formulas. Much of the information is collected and stored in a database managed by Chinese authorities, Bloomberg reported last year.

The main concern for European companies is that they may be forced to surrender trade secrets under the guise of product safety, Bloomberg has reported, citing people familiar with the situation. There is no evidence or indication to suggest that China is using the information it collects from cosmetics companies for malign purposes. 

France and China have agreed to work together on improving the regulatory environment surrounding cosmetics to protect both market access and product safety.

Separately, Hieronimus said sales trends in travel retail, in Asia in particular, should gradually improve this year. “Probably in the second half of 2024, we should be very good for travel retail,” following a challenging environment last year, he said. L’Oreal reports annual results on Feb. 8.