L’Oréal Egypt factory targets producing over 80m units this year

Omar Abdel Hamid
7 Min Read

L’Oréal Egypt, through its leading exemplary factory of cosmetics, aims to produce more than 80m units, to be distributed in Egypt and the MENA region during 2018.

Benoit Julia, L’Oréal Egypt managing director, stated that the company seeks to lead the cosmetics sector in the Egyptian market.

He further added that L’Oréal Group decided to invest in Egypt by establishing its first factory in the 10th of Ramadan industrial city in 2013, with investments amounting to €50m, to become its export base in the MENA region. 

In 2015, the company ranked sixth in the Egyptian market, and this year became one of the top three.

Julia highlighted that the Egyptian market includes 100 million inhabitants. Thus, the company pays due attention to providing a variety of L’Oréal international products, reaching 12 brands. Some of these brands are locally manufactured at L’Oreal’s Egypt factory, while others, produced by L’Oreal Group, are imported to be available for consumers. 

“The economic decisions taken by the government recently have impacted all sectors, including cosmetics. The liberalisation of the exchange rate affected the production costs and consequently the final product,” Julia mentioned.

Morover, Julia asserted that the company tackled the issue of production cost increases in several ways, namely through gradual price raising, in order not to generally affect sales. The increase ranged around 40% based on the type of product.

He noted that the imported products were the most affected by the exchange rate liberalisation compared to the locally manufactured ones. In addition, Julia pointed out that the company headed to highly depend on locally manufactured packaging materials to support local manufacturers and the Egyptian industry, and hence reduce production costs.

Depending on locally manufactured packaging last year represented 85% of production versus 50% in 2015. The local component of raw materials in production further increased to 25% instead of 15% in the same year.

In addition, he confirmed that the company is working on developing local suppliers to rely on them more in providing the factory’s needs during the coming years, in particular with regard to the product packaging, in order to be in line with the standard specifications to reach products conforming to local and export market requirements.

Julia estimated the factory’s current production capacity at 120m units, pinpointing that besides there is potential to expand its productivity to 300m units. However, such an endeavour mainly depends on the level of demand in both local and regional markets.

Moreover, he mentioned that the company intends to increase L’Oreal Egypt’s factory production by the end of the current year to more than 80m units versus 75m units last year. Also, 85% of the production is export-oriented, while the local market represents only 15%. Saudi Arabia, the rest of the GCC, Lebanon, and Morocco are the company’s main exporting markets.

L’Oreal’s general director emphasised that the company defied the market’s trajectory last year and recorded a 10% sales growth in volume against a decrease in the sector as a whole by 10% as a result of increased prices and poor purchasing power.

In reference to the counterfeit cosmetics products on the market and to what extent they affect the company, L’Oreal Egypt’s managing director affirmed that they have no impact on L’Oreal Egypt, as such products mainly target different consumer classes than the ones of the company.  Adding to this, he stressed that it is difficult for a consumer to risk using poor quality cosmetics products as they directly affect skin health. On the other hand, the high-quality cosmetics grant users confidence and self-esteem; the consumers prefer the quality ones regardless of their prices, he said.   

Julia indicated that the company tries to confront such products by launching educational awareness campaigns and cooperating with the Ministry of Health to curtail these harmful products and raise people’s awareness of the related risks.

Concerning L’Oreal Group’s research and innovation sector, Julia estimated the amount of expenditure in this regard at €850m annually, seeking high quality products and innovations. The company registered around 500 patents until last year.

L’Oreal Group is considered the largest beauty company worldwide with total sales amounting to €26.02bn last year, through 34 brands, it distributed products to 150 countries, and had about 82,000 employees.

As for the cosmetics sector in Egypt, L’Oreal Egypt’s managing director said that this sector needs development, awareness raising. and educating campaigns to inform consumers of the significance of beauty.

With this in mind, Julia referred to two main elements for community development, highly taken in consideration by the company: the first is related to women and gender equality in rights and duties and the other is that of education.

To illustrate, he pointed out that the company is working on four social responsibility-related programmes. The first is the establishment of the first specialised institute for hairdressing training courses, L’Oreal Professional Institute. Notably, 100 trainees were graduated in the first year after inauguration.

The second programme is L’Oreal-UNESCO For Women in Science (FWIS). The programme provides €16,000 through two fellowships for two Egyptian women researchers. Regarding the third programme, it is titled Women Entrepreneurs – Boost Her, developed in cooperation with NGOs, the NCW, and Sawiris Foundation. It aims at providing women with training and job opportunities in disadvantaged areas.

The fourth programme was established in collaboration with Helm Foundation. It targets the development of hairdresser shops, trained to serve and  deal with people with special needs. There is also a mobile phone application clarifying the places of such shops, which are equipped to host people with special needs.

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