Welcome to the conference call regarding L'Oréal sales at September 30th, 2021. If you need some help, please press star zero on yourtelephone keypad. The conference will now begin. I will now hand over to Mrs. Françoise Lauvin. Madam Françoise, please go ahead.
Thank you, Philippe. Good evening to all. [Foreign language] . Thank you for joining this conference call for the release of L'Oréal sales at the end of September 2021. On behalf of L'Oréal, I'm pleased to welcome our Chief Executive Officer, Nicolas Hieronimus.
Good afternoon.
Our Chief Financial Officer, Christophe Babule.
Hello.
We hope you received and read our press release, which was sent out a short while ago. Let me briefly share with you the highlights of this release before we move to the Q&A session. At the end of September, sales increased 15.3% to EUR 23.2 billion. The change in the scope of consolidation was positive by 0.8%. It consists mainly of the first-time consolidation in 2020 of Mugler and Azzaro Perfumes, of the U.S. skincare brand Thayers Natural Remedies, and in 2021, of the Prada Beauty license and of the Japanese premium skincare brand Takami, marginally offset by the termination of Clarisonic brand in 2020. Foreign exchange had a -3.5% impact, mostly linked with the decline of the U.S. dollar, of the Russian ruble, the Brazilian real and the Japanese yen.
Note that extrapolating the end of September currency rates against the euro, i.e., with a euro at around $116 until year-end, would lead to a negative currency impact of -1.9% over full-year sales. On a like-for-like basis, growth came to a strong 18% at the end of September. Turning to the third quarter figures, sales advanced 13.6% on a reported basis to EUR 7,996,000,000. After taking account of a positive 0.3% impact of the changes in the scope of consolidation and of a positive 0.2% currency impact, like-for-like growth came out at + 13.1% over the third quarter of 2020, which was marked by L'Oréal's return to growth.
Hence, over two years versus 2019 on a comparable basis, growth accelerated quarter -after -quarter since the beginning of the year, with +5% in the first quarter, +8.4% in the second quarter, and +14.9% in the third quarter, leading to +9.3% over the first nine months. All divisions recorded like-for-like growth, both in the third quarter and at the end of September. The Professional Products Division posted another quarter of double-digit growth and ended the period at +28.7%. The Consumer Products Division recorded 5.2% growth over nine months. The division is almost back to its pre-pandemic level on a comparable basis after two-year comparable growth of +4% in the third quarter, despite its heavy makeup footprint. L'Oréal Luxe continues to outperform its market with 25.4% like-for-like growth at the end of September, and Active Cosmetics remains ahead of the race at +34.5%.
All regions contributed to growth. Europe grew by 10.3%. North America achieved an excellent third quarter and ended the period at +23.1%. North Asia posted strong growth of +22.6%. In a challenging public health environment, L'Oréal China continued to post double-digit growth in the third quarter, sustaining a high comparable 42.8% growth over two years. SAPMENA-SSA increased 13.6%, with the third quarter affected by COVID resurgence in some Southeast Asian and Pacific countries, while India showed a sharp recovery. Latin America sustained its rapid pace at +25.8%. e-commerce posted once again strong growth of 29.7% like-for-like at the end of September to 26.6% of total sales, while in-store sales also recovered. Meanwhile, we pursued on our sustainability journey.
We are proud to announce that in September, L'Oréal has been confirmed as a United Nations Global Compact Lead company for the seventh consecutive year, and that L'Oréal USA., our largest subsidiary, has reached carbon neutrality for scopes 1 and 2 emissions for all its 25 manufacturing, distribution, administrative, and research and innovation sites. Thanks to relevant strategic choices, strong investments in our brands, offensive launches of cutting-edge innovations, and agility of our teams, L'Oréal continues to significantly outperform a beauty market that is gradually returning to its pre-crisis levels. As you can see, all divisions and all regions contributed to a well-balanced growth and a strengthened dynamic. In an environment that is still marked by some uncertainty, our third quarter performance reinforces our confidence and leads us to confirm that in 2021, we will achieve growth in both sales and profits.
I thank you for your attention, and we are now ready for your questions.
Ladies and gentlemen, if you wish to ask a question, please press zero one on your telephone keypad. Please use your handset before asking your question and set your microphone on mute once you have asked your question. Thank you. You have a first question from Bruno Monteyne from [Bernstein]. Please go ahead.
Hi. Good evening, Nicolas. It's very hard to come up with scrutinizing questions after such a release. I'm almost tempted to congratulate on the numbers. In terms of trying to ask some questions, first of all, there's been a lot of discussion about the slowdown in beauty in China, particularly online, that is hard to see in the numbers you've published. Is there any element of the exit rate in China starting to slow down, particularly online? The second one, U.S. growth was clearly exceptional. Do you really think that America can be an equal partner in growth as China has been for the last few years, so you would have two big engines of growth, or is that too much to aspire to? Thank you.
Thank you, Bruno, for your question and your quasi-congratulation. I do take it with great pleasure. I will obviously answer your questions. Just maybe a quick overall overview, and I'm going to dig into your specific Chinese and Americas questions. The good thing is that I think we continue to see the recovery of the beauty market. We do not have accurate numbers, but we estimate the beauty market growth to be at +10% after nine months, getting closer and closer to its 2019 results, which we think will happen by year-end, and we are at +18%, significantly beating the growth of the market. As we'd said after first half, it's still a grand slam, all divisions, all regions, and all categories as it relates to overperformance.
Considering China, it's clear and it's been said and commented that there has been turbulences over the summer, which are mainly related to COVID cases resurgence, which have led to the lockdown of over 40 cities, 45 cities in China. Store closures, limited travel, that has slowed the market down, which has not prevented us from achieving a double-digit growth, as Françoise said, and having a Q3 over two years at over 40% growth. It's mainly a brick-and-mortar slowdown. E-commerce has remained dynamic in China. It's fair also to say that the beauty market, the weight of this Q3 in China is significantly lower than other quarters. As you know, Chinese consumers tend to more and more wait for the big festival. There was 618 just before that quarter, and now they're gearing up to 11. 11. It was mainly a brick-and-mortar slowdown.
The market size is now huge. We continue over two years to see growth. Overall, I'm not worried about China, all the more as all the long-term fundamentals of that market are extremely positive. As we've discussed before, the projections in terms of middle classes and upper middle classes are quite spectacular. I was looking at the number. Today, there's around 850 million upper classes, people in the middle classes are in China. There's going to be another 300 million more by 2030. That's a third more, and that's spectacular. If I take the upper classes, which are smaller in numbers, from 5 million - 16 million, they're going to be developing. It's a huge market potential. Spend per capita will increase.
As we discussed in some of the road shows that we did over the summer, the vision of the Chinese Premier of common prosperity, which aims at making the middle classes wealthier and bigger, is very positive for us and for beauty, which is a category that contributes to these consumers' wellbeing. We remain very confident for China despite the summer turbulences. As far as the U.S. are concerned, you're right to assume it is the second growth engine. For many years, it was a big growth engine for the group. We had a couple of years where we're not super happy with our results.
We did the transformations that needed to be done, which were mainly rebalancing in terms of channels, categories. Now we have our four divisions really beating the market and growing when, if we take a year ago or two years ago, it was mainly Professional and Active Cosmetics. The U.S. economy is very dynamic. Our intention is really to have these two engines, which are about similar in size, to really drive the growth of the group for the years to come. Overall, pretty positive and confident for the future of China as well as for the U.S.A.
Congratulations, and thank you.
Thank you.
Our next question is from Celine Pannuti from JP Morgan. Please go ahead.
Yes. Good afternoon, everyone. My first question maybe, if we stay in the U.S., the number was really amazing, at 22%. Could you say whether there was a sell in, sell out differences? I remember that in Q1 you had issues with the supply of materials. Has there been a catch up or have you been, maybe some of your customers are eager to build inventory when there is a bit of a supply constraint overall? That will be helpful. Yeah, if you could give us a bit of a steer, that 22%, which categories did better and which did, well, still very well, but maybe less well than the average. Maybe, coming back to China, could you talk about Hainan?
What kind of growth have you seen in the quarter and if effectively you've seen an improvement through the end of that quarter or maybe as well as putting that in the context of travel retail. Just to finish on China, thank you for giving us this middle class number and clearly the opportunity. What is your thought about the impact of the changes that the country is going through in terms of confidence, consumer confidence in the very short term, and as well go to market and the ability to use celebrity or fandom culture that seems to have been cracked down. Thank you.
That's a lot of questions, Celine. I hope I can remember them all.
Excuse me. It's U.S. and China. Yeah.
The sub-questions are pretty detailed. Let's take them one by one, and I will speak under the control of Christophe. Overall, there's no sell in, sell out difference in the U.S.A. Actually, there are several divisions where sell out is superior to sell in. It's the case of CPD, where there was some destocking, plus some, as you said, some supply shortages. Same for Active Cosmetics, where we still are trying to running after the demand of CeraVe, which is again over +68%, I think, year -to date. There's no restocking. Professional, the market has reopened for a while. There might have been a couple of salons taking some extra inventory, but I don't think so.
The only division where traditionally Q3 sees restocking, but it's the same every year, it's luxury because most retailers are buying their fragrance inventory to be ready for the holiday season. There's probably on L'Oréal Luxe, a slight extra sell in versus sell out, but nothing material and nothing unusual. It's really the acceleration of all four divisions. They're all gaining shares above 2019 level for most cases. We keep on having the Professional Products Division, and ACD extremely strong, Active Cosmetics extremely strong in the U.S.A. In the U.S., Active Cosmetics is today at more than double the level of 2019, which is really spectacular. What's new this year is that we both have L'Oréal Luxe, which is benefiting from its reorganization, the cutting the long tail of our stores in the U.S.A, and focusing our resources both on online and on the best performing stores.
That's really productive. You have makeup starting strongly more on CPD side. We have a fantastic performance in fragrance in the U.S.A. The fragrance market overall is bouncing back pretty strongly globally. It's a market that's close to +20%. We are growing at the group level +40%. That's global. The U.S. is the part of the world where this market share gain and performance in fragrance is the highest. We have, as I said, CPD is really accelerating, gaining share in skincare, in progressing seriously in hair care. We're benefiting on makeup, both from the rebound of the market. The makeup market in mass in the U.S.A. is above 2019 levels over the last period. We are gaining share in a very spectacular manner with many innovations from the brand, from Maybelline and NYX. NYX is doing great.
On top of my mind, three of the top 10 launches in the U.S.A. are CPD makeup. By the way, I just come back from the U.K., and it's out of the 10 new makeup products launched in the U.K. market are for CPD. Great innovation plan. We have all four engines- roaring, and it's of course boosted by the quality and the dynamism of the U.S. economy. It's really positive on the U.S. On China, your question was around the climate that may be generated by a number of decisions that have been taken or enforced on the Chinese market. I'm talking about, I've mentioned turbulences over the summer. COVID clusters were the main ones. We can't eliminate the idea that a number of measures that were announced may have created some uncertainty within Chinese consumers.
I think this is not going to last for the reasons that were mentioned before. We have absolutely, as far as we are concerned, we see no issue in doing our business. You were mentioning influencers or celebrities being challenged in China. We have many brands. We have Lancôme, L'Oréal Paris, which are Chinese favorite brands. We use influencers like everybody, we do not rely on one big star that's under contract or that makes or breaks our brand. Today our go-to market in China is exactly as it is. Our teams are in the pre-sale period of 11.1 1, which is off to a good start. We can't predict what's going to happen, we are carefully optimistic for that. There's no reason to be worried about the measures of China.
As I told Bruno, I think the desire of the Chinese authorities to share the wealth and to increase the size of middle classes is something that should benefit us. Finally, as Hainan is concerned, if I'm correct, it was your last question. Hainan, like China, had a bad Q3 in terms of traffic. Traffic was down. Hotels occupancy rates were down. It was not a great summer for Hainan. Since then, we've had the Golden Week, and the Golden Week in Hainan was very buoyant. It's slightly outside Q3, but we see that the total duty-free sales in Hainan increased by, I think, over 60% with a number of shoppers that more than doubled.
It seems that the appetite, as soon as the COVID restrictions are ended, the appetite both for traveling where they can, right now it is only Hainan, and to shop beauty remains intact, at least for this part of Travel Retail Asia. Voilà, Celine, I hope I did not forget anything.
No, I forgot to tell you congrats for this quarter. Thank you.
Thank you very much.
We have a next question from Guillaume Delmas from UBS. Please go ahead.
Good evening, all. Two questions for you, please. Before my two questions, just a housekeeping one, if you could provide us with your like-for-like sales growth by product category, that would be very helpful. My two questions. The first one on value growth. Could you give us a feel for what value growth was in Q3? What I'm more interested in is, have you seen an increasing contribution from pricing and mix since the first quarter of the year? I mean, historically at L'Oréal, my understanding is that mix is the main driver of value growth, but are you also now implementing maybe more proactively some pricing actions as well to mitigate the cost headwinds? My second question is on the makeup category. Could you shed some light on where sales are in the makeup category versus 2019?
Nicolas, you said that it was ahead in the U.S., on a global basis, are you ahead as well or slightly below 2019 levels still? I guess the big question, has the recent development of the makeup category make you more confident about a imminent makeup boom? Thank you.
Okay. We'll start with the valorization question, which I'll happily hand over to Christophe Babule.
Okay.
And I may add a little bit of icing on the cake if necessary. Christophe, I let you.
As you know, we've been valorizing, in fact, thanks to different components, different elements. First, I want to reassure you that we are using all the levers when it concerns valorization. End of September, we have both equally valorization, both in terms of mix within divisions, but also valorization in terms of by product. Within the division, we have also been selling a more valorized product. We don't forget also to add price. Close to 1.5% as of today, and even a bit more in the third quarter.
We are above 2% on pure pricing regarding the valorization. All the rest is the mix. As you can see, all elements are going into the right direction.
Maybe as far as offsetting the inflationary pressure that you were referring to, we can say two things. First of all, considering the structure of our P&L with over 73% gross margin and the relatively low weight of the most inflationary components today such as palm oils or even plastic, we do not see at the global level a material impact. However, it is true that the inflation cost of some of these materials, plastic, palm oils, et cetera, will impact a bit more our Consumer Products Division, which is the one that is more concerned by these elements.
They will for 2022 have to compensate these inflationary pressures with a blend of price increases and what we call revenue growth management, which is a blend of formats and promotional strategy. The sum of all these should allow us to offset these negative elements. As far as categories are concerned, so there are two questions. Overall, if we take our year-to-date 2021, as I said earlier on fragrance, we are at +40% over a market that we estimate at +19%. On skincare, we are at +20%-ish, a bit more on a market that we estimate at +9%. On makeup, and then I'll go back to the comparison with 2019, but on makeup, we're close to +15% on a market at +9%.
On hair, which is a blend of hair color and hair care, we are close to +12% on a market that we estimate around +7%. That's the global picture where we're beating the market. Within hair color, if you want to give a little bit of detail, there's a rebalancing between professional and mass market. Last year, we had great growth in mass market when salons were closed, and as women are going back to hair salons, it's penalizing our CPD and helping our professional division. As far as makeup is concerned, the makeup market remains overall double-digit negative versus 2019. We remain also negative versus 2019, better than the market, but still we are below the levels of 2019.
There are a few exceptions like as we said, we are getting progressively positive in CPD, so in the mass market, but overall, the markets remain negative. What we see is that the eye categories are doing great, and that still as long as the masks are worn, lips and even foundation remain a bit more difficult, even though we had many great launches in that arena. As far as the future is concerned, I remain very confident. We saw in China good numbers. We've seen in mass market in the U.S.A., when we come up with the right innovations, good numbers too. In China, the market is significantly positive versus 2019.
When people go back to normal life, they go back to makeup and they go back to lipstick, and we'll have, as we always do, to tempt them with new ideas, new initiatives, and we have a few in the bags for the end of the year and for 2022. I remain, makeup, as I often say, it's a very cyclical category. We were in a down cycle. We had COVID, and now we hope that with the return, which I wish to be as soon as possible to a normal, healthy life, mask free, I'm confident that makeup will go back to above 2019 level.
Thank you very much.
You're welcome.
Thank you. Our next question is from Tom Sykes from Deutsche Bank. Please go ahead.
Good evening, everybody. Thank you. Firstly, just on North America. You mentioned before the channel reorganization, I wondered if you could just talk about the importance of online and particularly offline growth in the recovery, and perhaps the importance of beauty stores, maybe more so department stores, and in particular to the categories which have rebounded quite strongly in terms of makeup and fragrance. Does that at all limit the operational gearing that we may get out of the North American recovery? Just a question on China, given potentially some of the regulatory changes in maybe lending via tech companies. Are you able to say how much of your e-commerce business in China involves some sort of short-term credit offered at point of sale, please?
I'm not sure I understand. I apologize. I'm not sure I understand the last question. Can you maybe elaborate?
Yeah. It's just whether payment via short-term credit is an important factor in your e-commerce sales, particularly in China, and where those may be being looked to be a little bit more limited in terms of their growth by the authorities.
No, we haven't seen any of this. To answer quickly to the last question, we haven't seen any problems around credit on our e-commerce sales in China. I don't know, Christophe, do you want to elaborate?
No, I can tell you that, first, it's not a practice in China. Contrary to the U.S., usually, when it comes to that kind of purchase, it's mainly cash. When I see the growth of e-commerce on the Q3, which is in the range of 70% over two years, it gives you an idea of the speed at which online is still flying in China, probably a bit slower than Q1 or Q2, but still extremely dynamic.
Okay, thank you.
As far as the U.S.A is concerned, our growth is driven by, I would say, two phenomenon. The reopening, therefore the acceleration of brick and mortar, without any impact, no negative impact on e-commerce sellout. Brick and mortar accelerates year -to -date Q3 at almost +27% versus 2020, and positive versus 2019. Our e-commerce sales continue to grow and have not been slowed down. We see, of course, different consumer behaviors, people that tend to work from home are a bit more on e-commerce. It's clear that the brick-and-mortar doors of mass market have accelerated a bit more with the return to work, whereas if we take some department stores and specialty stores, they are recovering a bit slower, although they were closed, so they have good comparatives.
As I said in the earlier comments, we also have refocused or sharpened our distribution footprint in the U.S.A. We closed over 1,000 doors of the long tail of our luxury distribution, so many small department stores that were not really productive. That also allows us to invest in, I would say, in a more effective manner to drive our brick and mortar. We have the two channels growing in the U.S.A.
Okay. Thank you.
You're welcome.
Our next question is from Olivier Nicolaï of Goldman Sachs. Please go ahead.
Good afternoon, Nicolas, Christophe, and Françoise. I've got two questions, please. First, a follow-up on China and Hainan. Could you please give us more details on your typical customers in Hainan and if there is a high proportion of daigou among those? Also, if you believe that the Hainan sales are actually mostly incremental to the rest of your Chinese business, or if it actually raises a bit of cannibalization. Secondly, on L'Oréal Luxe, you flagged the exceptional growth of Absolue by Lancôme. I think it's one of the first time that you flagged this, could you perhaps give us a bit more details on the driver behind the growth of this super premium skincare? Thank you.
Okay. On Hainan, I will start with the second part of your question, which is it incremental or cannibalizing our business in China? What is clear today is that a lot of the Chinese consumers, or daigou sometimes, that were traveling outside China, whether to Hong Kong or to Korea or to other parts of the world to buy products at a more affordable price, are now all going to Hainan because it's the only place where they want to go. Hainan is a bit the new Hong Kong as we speak. The good thing is that Hong Kong is accelerating again with the progressive lift of sanitary measures, so Hainan is concentrating the Chinese consumers that were buying elsewhere. It's not cannibalizing the domestic sales of L'Oréal China.
It's replacing sales that were down outside China, knowing that overall, as the population and the middle classes are increasing and their appetite for beauty is not satisfied, the size of the Chinese cake overall continues to increase regularly. As far as the proportion of daigou, is very hard to tell, and I would not be able to give you a number. What's important maybe for you to know, I think, is that we are valorizing strongly our prices in travel retail. It's a strategy that we've embarked upon over the last two years to reduce the price gap between our travel retail prices. We've increased our net prices for travel retail to reduce the gap with China.
If I look at our growth, which is pretty strong in Hainan in value, our volumes are flattish because we precisely want to make sure that this is not spilling over in an uncontrolled manner. I think it's a pretty strong and effective policy, more value, controlled volume, and in the end, consumers that probably would not have bought our products in a traditional department store of China, that are looking for more affordable prices. We see there's a bit more people from tier three and four cities, where our market share is lower than the one we have in Shanghai, Beijing, and tier one and two cities. Overall, it's a good recruitment place, and it's not cannibalizing or hurting our Chinese business where we continue to grow.
By the way, when you look at the growth YTD of Mainland China on one side, Travel Retail Asia on the other side, and Hong Kong, they are all flying between 25%-35% growth. There is no negative compensating a very huge growth. They are all growing more or less at the same speed.
Thank you. On L'Oréal Luxe-
Sorry.
Happy to buy Lancôme.
I've forgotten that one. It's true that skincare is the biggest category in China. It continues to grow. Within skincare, the fastest-growing category is, it's been for a while, premium skincare. In that domain, we have two brands that we have animated and in which we have innovated strongly. They are Absolue from Lancôme and Helena Rubinstein, which is a brand that we have discreetly, over the years, repositioned as a pure premium skincare player, going out of makeup and launching high-value products. Both brands are doing very well in mainland China, and obviously also in Hainan because as we all know, in travel retail, the higher the price positioning of the product, the more interesting the savings. These two brands are doing well.
We had probably commented in the past on Absolue, but it's true that this year it's a particularly good performance in the wake of a couple of interesting launches.
Thank you very much.
You're welcome.
Our next question is from Rogerio Fujimori from Stifel. Please go ahead.
Hi. Good evening, everyone. I have two questions. The first one is on Asia. What's the current situation at the start of Q4 in markets like China, Japan, Korea, which were all penalized during the quarter by COVID-related restrictions? What I mean is how the store opening rate in these Asian markets at the start of the quarter compared to the Q3 average brick and mortar opening rate. My second question is more generic on the promotion environment for the consumer division. Was there any change in trend in Q3 versus the first half, or do you see any of your key markets experiencing becoming a bit less promotional to offset industry cost pressures? Or have you seen any of your key Western markets getting a bit more promotional as life gradually normalizes? Just trying to get a sense of competitive spending trends for CPD. Thank you.
As far as Asia is concerned, it's a bit early to say much about Q4. What I can say is that Korea and Japan, which were under very strict lockdowns over Q3, are progressively reopening their stores. The news are positive. I have no numbers to give you. The only thing we can say is that in other countries, we've seen that when stores reopen, we don't see a slowdown or a major slowdown of e-commerce. Pretty positive. I think Korea, Japan can only get better in Q4 than versus Q3. As I said earlier in China, that China is really in the preparation of 11.11 . Pre-sales are okay. We'll see what's coming. Hong Kong is doing good too, and I have no news on Taiwan. The overall Greater China plus North Asia seems to be correctly oriented.
Yes, if I may. I think it's very early to say today. As you know, Japan was in the lockdown till October 1st, so it's a bit too early to comment on the recovery. Of course, the big thing will be the 11.11 operation in China, for which we have good confidence on the first elements that we have on hand.
As far as the mass market is concerned, most of the changes in dynamics between Q3 and first half were more related to the situation of the pandemic in countries, India reopening, Indonesia and the rest of Southeast Asia remaining quite difficult. As I mentioned already, the slowdown in China over the summer, and the very good health of the North American market. The European market remains pretty flat, but we are gaining significant shares in Europe. As far as pricing or valorization is concerned, we see valorization of the mass market. We don't see devalorization. We see premium haircare growing faster than the basic products, both because it's the retailers' interest, but also because e-commerce, which has taken a bigger share of the market. E-commerce algorithms push up higher value items, and our innovations also are a source of innovation.
If I take a product like the Elvive Dream Lengths Wonder Water, it's a valorized care product. We've launched a hyaluronic shampoo line in Asia. In China, it's doing great, and now it's being replicated in other parts of the world. Overall, both through innovation and through e-commerce impact, we see more valorization than over-promotionality, which doesn't change the fact that, as I said, our Consumer Products Division will have to increase a little bit its prices to offset inflationary pressure in 2022, but not in a major manner.
Thank you very much.
We have a next question from Javier Escalante from Evercore. Please go ahead.
Good evening, Françoise, Nicolas, Christophe. I do need a clarification from Christophe. If you can come back to the commentary with regards to the build of growth between unit growth, price mix, and actual price increases, just to give us a sense of what's happening there. More structurally with Nicolas, I would love to hear your opinion when it comes to the differences in e-commerce in the U.S. and China, which are your largest e-commerce markets, and to what extent this promotional environment in China is detrimental to pricing, and is that a concern? Also, what is the role of places like Amazon in terms of driving valorization in the portfolio? Thank you.
Okay. Maybe I will start with the question regarding valorization. When you take the growth at 18% YTD, 1/3 is generated by volume, 2/3 is generated by value. That gives you already a good idea of how much valorization is strong. Within the valorization, we measure three components. One is pure pricing, and then the different mix. I can tell you, as I said before, that all three are positive. For sure, the mix one is the component that is driving the biggest part in terms of growth in the value. Pretty confident that we'll keep with this pattern in the coming months.
Nicolas, Go ahead. Sorry for that.
No, no. Go ahead.
In that context of valorization and trade-up, how does e-commerce play?
Well, e-commerce globally has always played favorably, for the reasons that I mentioned, is that especially when you're dealing with pure players or even your retailers, their shipping costs are the same, whether they ship a $10 or a $20 or a $50 item. Their algorithms tend to push both the best innovation and the most valorized items. That's what's happening in the U.S.A. as it's happening in Asia and in China, where the weight of e-commerce is the highest for us, over 50%. We have a lot, obviously, of luxury goods that are selling on e-commerce. The e-commerce plays globally in favor of valorization. As far as promotionality, as you mentioned, it's our role to control the way we animate our brands and try, as always, to find the right balance between image, market share, and profitability.
That's what we do in China as well as in the U.S.A. To complement on what I was saying, which is important for you to know as well, is that this valorization is positive on all divisions and in all zones. It's really something that we measure very carefully, and it's positive everywhere.
Thank you very much.
You're welcome.
Thank you. Our next question is from Jeremy Fialko from HSBC. Please go ahead.
Good evening. Thanks for taking my questions. Just one quick follow-up on China and then a bigger question. Sorry for laboring this point, but you've had some amazing growth in China in the last two 11.11, so I think over 40% growth each year. Is that anything we need to bear in mind in terms of the sort of growth rate we might need to expect in 2021? Any reason for, let's say, moderating our expectations for this year? The second question is one of the themes that we've seen in L'Oréal's results really going back over the last several quarters, is this remarkable outperformance of the market. What was historically growing 1%, 2%, 3% better than the market, you're now doing 7%, 8%, 9%, 10% better than the market.
The question is, are there elements of this huge market outperformance that you would view as being unsustainable? Is this potentially this very big outperformance becoming a new aspiration for the company? Thanks.
We have two questions.
The first one is on the 11.11 of this year.
That's the one I can't comment upon. Our objectives are our objectives, you will see, I let you do your own extrapolations, obviously I will not give you guidance on that. That's something I cannot comment upon. The other question was?
On the growth relative to the market.
Overperformance. Yes. Overperformance, I think there are several reasons to our overperformance. First of all, and I think it's important to remind this, is the fact that in the middle of the crisis, when a lot of our competitors were folding their innovation plan, were reducing their spend, if we accept Q3 of 2020, where obviously because we didn't know what was happening, we cut both our launches, some of our launches and fuel. From Q3 and onwards, we've gone full steam, both in terms of launches and in terms of fuel. That's also what we've done in the first half. When we commented on the first half result, there were a number of comments on the importance increase of our A&P, and I think that's one of the things that we are doing and we will continue to do.
That's what we call the L'Oréal virtuous circle, is we have a high gross margin, and growth allows us, generates resources that we can invest in fueling the growth of our brands and their desirability. Of course, we continue regularly to improve the level of profitability, but it's really a growth model, and that is a long-term strategic commitment to continue to invest regularly behind our brands, behind our innovations. As you know, innovation has always been one of the drivers of L'Oréal, and we continue to fuel all of our brands. It's true that during the crisis, on top of continuing to invest, we have reorganized and rebalanced some of our activities. I'll give you two examples.
We've talked a lot about the distribution in the U.S.A., and the fact that we've refocused in terms of channels and also categories in the U.S.A. I could also talk about the way we've reshuffled our P&Ls, moving resources from brick and mortar to digital. In fact, a good example is our Professional division which is, as you could see, which is flying at +28% yea r-to -date. It's both the consequence of becoming more online plus offline, so having this double distribution strategy, but also reshuffling the resources within our P&L from, I would say, not dead investment, but not super productive investment to training and recruiting stylists online, engaging consumers on the social networks. That's really transformed the dynamic of the division, and I think that's here to stay. As it relates to the overall overperformance, it doesn't depend only on us.
In any competition, you've got several players, and it depends on the quality of the other players. I think that we have strong plans, strong teams, good P&L. Probably one thing that I like to insist upon is our balance. We have a very balanced both regional, divisional, and category portfolio. In a world that's very unstable, being very balanced is extremely powerful because we can always compensate. As we discussed about the fact that there was a bit of a Chinese slowdown over the summer, and we could accelerate in the U.S.A. Makeup has not totally recovered. We are accelerating in skincare. Of course, we are now running on both brick-and-mortar and e-commerce legs. Overall, I remain confident in our ability to overperform the market.
The level of overperformance, frankly, I can't neither commit to nor extrapolate because I can't predict what my competitors are going to be doing.
Okay. Thanks very much.
We have the ambition.
Yeah. We want to overperform, and we want to overperform as much as possible. That's not easy to predict.
Thank you very much. We have another question from Pinar Ergun from Morgan Stanley. Please go ahead.
Hello. Thanks for taking my question. How should we think about the different moving parts that feed into your profit margins this year and possibly next? I appreciate input cost inflation is rising. You have a very strong top-line momentum here and high gross margins. Is it not reasonable to expect a very strong year when we think about profitability? Thank you.
I'll let Christophe answer that one.
As you may understand, you are right that it's an option. It's also our decision to decide on what we want to do with this power that we have in our P&L. As you have seen recently, we are still over-investing in growing for more growth. Of course, and up to now, the strategy has been a winning one because, as you can see, the overperformance is still there quarter one, quarter two, quarter three. If we can maintain, and if our investment can still fuel that kind of growth, we'll still keep also investing.
As we said, we have returned to what I would call our cruising speed, our pre-crisis growth rhythm, and strategy. Usually, we've always had a first half profit that was always significantly higher than the second half because the later part of the year, whether it's because of 11.11 , Black Friday, Christmas, fragrance, it's money time, and that's where we have to invest behind our brands. Our strategy is always to grow the cake, and so that the regular improvements in profitability are, in absolute terms, getting bigger and bigger. That's what we are trying to achieve, and that's what you should expect.
That's great. Thank you. Just a quick follow-up. Would you expect the next few quarters to continue on this path of quarter -after -quarter acceleration on a two-year view? I appreciate as we get to next year, maybe that will no longer hold. As you're looking at the next few months, are you optimistic? Thanks.
Well, it's getting a bit more difficult because last year, our Q4 was already the first quarter where we got back to growth. We were close to +5% last year. I think we are now more trying to maintain our rhythm than continuing to accelerate it.
Thank you so much.
Thank you. We will take the last question, if there is one.
Yes, absolutely. We have a last question from David Hayes from Societe Generale. Please go ahead.
Thank you. Good evening, all. Just two questions, please. One on Active and one on the U.S. growth. On the Active side, you talked about capacity constraints in the past. Is that still something you're struggling with? Is this growth that you're seeing still being limited by the fact you can't make the product quickly enough to satisfy the demand? I guess relate to that, the second question is on the U.S. growth, which obviously is pretty stellar in the quarter. Can you just give us a sense of how much of that is the Active growth still contributing, and then versus that with luxury? Are they both growing at similar levels and contributing at similar levels to the North American growth, or is there still a big delta between those two divisions within the U.S.? Thank you.
As far as Active Cosmetics is concerned, it's true that we continue to have a very strong demand on CeraVe. Even though things have increased, the appetite of consumers seem to be increasing, too. Our CeraVe brand did globally is year to date at almost over +85%. It's still very high growth versus even in Q3. We are running after it. We are getting closer and closer. We have been ramping up using other factories within the group. We are hopefully getting closer to being able to fulfill all the desire of CeraVe. It's true that, as we said earlier, there's globally, because I'm talking about CeraVe, but I could talk about La Roche-Posay, who's growing over 20%. There is this consumer quest and appetite for products that are safe, effective, prescribed by dermatologists.
It's true that the power of this division and the brands that it carries seems to continue to be very strong and will continue to be very strong in the years to come. Christophe, you want to say a word on the U.S. balance, although we don't comment too much in details, but maybe you want to give a hint.
Just to give a hint, both divisions are growing YTD at more than 40%. It means that, as we said at the very beginning, first, there is no slowdown in the U.S. What is very visible is that the rebalancing of this country, whether in terms of growth by channel, growth by category, and growth by division, is really very visible. It makes also the growth of the U.S. very well-balanced.
Yes. Clearly, Active Cosmetics is the fastest-growing division in the U.S.A. Still well ahead of the others.
Thank you.
That's as far as we go.
No, that's great. Thanks so much.
All right.
Thank you.
Well, thank you very much, everyone. I let you close, Françoise.
Thank you very much. We wish you a very good autumn and holiday. For the next conference call and meeting, it will be in February. Thank you.
Thank you very much.
Thank you.
Good evening.
Thank you. Ladies and gentlemen, this concludes today's conference call. Thank you all for your participation. You may now disconnect.