Welcome to the conference call regarding L'Oréal's 2023 half-year results. The conference is about to begin. I now hand over to Ms. Françoise Lauvin. Ms. Lauvin, please go ahead.
Thank you, Alicia. Bonjour à tous . Good morning to all, and welcome to this webcast and conference call for the release of L'Oréal's first half 2023 sales and results. Let me introduce today's participants on the call. We are together with CEO, Nicolas Hieronimus.
Good morning, everyone.
CFO, Christophe Babule.
Hello, good morning.
Global Head of Corporate Finance and Financial Communication, Laurent Schmitt.
Good morning.
The agendas of today's meeting is as follows: Christophe Babule will start with a presentation of the financial figures of the first semester. After this financial review, Nicolas will cover the main developments of our business in this first half and share with you his views and strategic perspectives. After this presentation, you will be able to raise your questions. The press release, which was sent out yesterday, and the slides shown this morning, can be found on our website, loreal-finance.com, and on the L'Oréal Finance app. You will be able to access a replay of this call on the same website later today, and the French and English versions of the half-year financial report will be available at the beginning of next week. Timing-wise, we expect to close this call by around 10:15 A.M.
I wish you a good conference, and let me now hand over to Christophe.
Thank you, Françoise. Ladies and gentlemen, good morning. L'Oréal show another remarkable performance in the first half, on top of a high 2022 base of comparison in a globally buoyant beauty market. If I had to summarize the past first half in three key figures, I would highlight first, the continued strong like-for-like growth of 13.3%, the operating margin of 20.7%, an increase of 30 basis points, the 11.2% increase in earning per share, excluding non-recurring items to EUR 6.73. Sales increased by 12% and exceeded EUR 20 billion for the first time over a half year. Foreign exchange had a negative 2.4% impact over the period, with currencies evolving differently.
The Mexican peso, and to a much lesser extent, the U.S. dollar and the Brazilian real, appreciated against the euro, whereas most other invoicing currencies were down. More detail on our invoicing currencies and their evolution against the euro can be found in the appendix of this presentation, posted on our website, loreal-finance.com. The change in scope of consolidation was a positive 1.1%. It is mainly due to the acquisition last October of the American dermocosmetics skincare brand, Skinbetter Science, and of the impact of hyperinflation accounting in Argentina and Turkey. On a like-for-like basis, growth came to a strong 13.3%. As you can see on those two charts, like-for-like growth accelerated from 13% in the first quarter to 13.7% in the second quarter.
However, the currency impact, which was still slightly positive in Q1, turned negative to -5.5% in Q2. Therefore, on a reported basis, sales were up 14.6% in the first quarter and 9.5% in Q2. Note that extrapolating end of June currency rates or 1 euro at around $1.09 until year-end, will lead to a negative impact on full-year sales of around 5%. On this chart, you can see the different components of growth. Units rose almost 5%, contributing slightly more than a third to growth. In a more inflationary environment, particularly in developed economies, the significant value component, which combines price increases and mix improvements, therefore had no impact on volume.
The increase in volume is all the more remarkable as it follows an increase of nearly 7% in the first half of last year, a pretty unique position amongst our peers. Let's take a look at sales by division. Like-for-like, they all grew strongly. The Professional Products Division continued its momentum, up 7.6%, driven by the success of its omni-channel strategy. The Consumer Products Division, whose growth accelerated to 15%, achieved its best half year on record. L'Oréal Luxe accelerated quarter after quarter and posted growth of 7.6% at the end of June. Lastly, L'Oréal Dermatological Beauty continued to lead the pack with an increase of 29%. Momentum remained very dynamic in all regions compared to a year 2022, which was already showing very strong growth.
With an 80.2% like-for-like increase, Europe, which is our largest region in size, recorded remarkable growth. L'Oréal strengthened its position in the vast majority of markets. Business grew by more than 10% in the major markets, in particular in the German, Austrian, Swiss cluster, the U.K., France, Italy, as well as in many other countries, such as Poland, the Nordics, and Turkey. In North America, momentum remained very strong at +13% in a buoyant market. In North Asia, growth came to +3.9% with contrasted trends.
In Mainland China, growth in the second quarter returned to mid-teens, ending the first half at more than 7% in a market that is gradually recovering. In travel retail, momentum slowed under the actual effect of a high comparison basis in the second quarter last year, due to early invoicing, and this year, of a drop in sales in certain markets such as Korea and Hainan. In emerging markets, L'Oréal continued its very dynamic pace of +23.6%, both in SAPMENA and in Latin America. Let's now look at categories. Skincare, our largest category, which represented more than 41% of our sales, grew 14.6%. Makeup continued to rebound at +11.1%. It accounted for 20% of our sales.
Hair care was very dynamic at +15.8%, growing in double digits, both in professional and in consumer products. Hair coloring advanced by 7.2%. Let's move to the profit and loss account. Gross profit increased by 13.8% to EUR 15.3 billion. Gross margin improved by 120 basis points to 74.3% of sales. The objective of restoring the gross margin to its 2021 level was therefore achieved in the first half. The change in the scope of consolidation had a negative 20 basis points impact on gross margin. Currency effects, including conversion and transaction, were positive by 60 basis points. The underlying improvement in gross margin therefore stands at +80 basis points.
Positive value effect, which combines price increases and mix improvement, more than offset the additional increase in input cost. Research and innovation expenses advanced by more than 15% to EUR 622 million. They now represent 3% of sales versus 2.9 in the first half of last year. Advertising and promotion expenses also increased strongly by 15.3% or more than EUR 900 million in value. They amounted to 32.5% of sales, 100 basis points above last year's level. We have therefore continued to invest significantly in media, advocacy and influence at point of sales, and in consumer experience to support the growth of our brands. SG&A expenses were up 10.9% in absolute value, but continued to decline by 20 basis points as a percentage of sales.
This demonstrates the continued strict cost discipline and increased efficiency of our organization, thanks to the creation of clusters and of shared service centers. In total, operating profit increased by 13.7% to over EUR 4.2 billion. The operating profit margin reached a new record for a first half, at 20.7% of sales, 30 basis points higher than that of H1 2022. You see, our virtual circle is in full swing. At this stage, every year, we point out that the L'Oréal group is managed on an annual basis, and that the division's profitability in the first half cannot therefore be extrapolated for the full year. By division, at the half year stage, the profitability of the Professional Products Division was unchanged at 21.2%.
The consumer product division improved its profitability by 100 basis points to 21%. L'Oréal Luxe margin came out at 23.2%, down 80 basis points. L'Oréal Dermatological Beauty increased its margin by 70 basis points to 28.4%. Non-allocated expenses, consisting mainly of corporate and fundamental research costs, were stable at 2.3% of sales. Overall, the operating margin improved 30 basis points to 20.7. From operating profit to net profit, excluding non-recurring items, the net financial result was negative by EUR 45.3 million. For the full year 2023, you should expect net financial expenses to the tune of EUR 100 million, all other things being equal. Sanofi's dividend amounted to EUR 421 million, down 10% compared to 2022.
It should be recalled that in 2022, Sanofi had paid an additional dividend in kind in the form of EUROAPI shares for an amount of EUR 74.5 million. The ordinary dividend therefore increased by almost 7%. Income tax amounted to EUR 1 billion, representing a tax rate of 21.9%, slightly below that of H1, 2022, which stood at 22.5%. For the full year 2023, all other things being equal, we can anticipate a tax rate slightly below 24%. Net profit, excluding non-recurring items, amounted to EUR 3.6 billion. Diluted EPS, excluding non-recurring items, stood at EUR 6.73, up by 11.2%. No doubt you have seen that we are launching a share buyback program for an amount of EUR 500 million.
To help you in estimating your EPS for the full year and taking into account the share buyback, I will recommend that you base your calculation on a diluted number of shares of around 537 million. We will now complete the review of the P&L account. Non-recurring items, net of tax, amounted to a negative EUR 257 million, compared with a negative EUR 31 million in H1 2022. This year, the other income and expenses of EUR 321 million, mainly included asset impairments of EUR 270 million, including EUR 250 million for goodwill on IT Cosmetics business, and EUR 20 million for the Decléor brand.
limited restructuring costs of EUR 25 million, mainly related to Ambition France, our project to reorganize the entities in France, and philanthropic donations and costs related to acquisitions for a total amount of EUR 24 million. After taking into account all non-recurring items, net profit after non-controlling interest came out at EUR 3.33 billion. Gross cash flow increased by 14.5% to EUR 4.4 billion. As every year, during the first half, the working capital requirement increased, this year less than in H1, 2022. Capital expenditure of EUR 724 million represented 3.5% of sales. For the full year, it should be reached around 4% of sales.
Net operating cash flow exceeded EUR 2 billion, up more than 50% year-on-year. After payment of dividends, acquisitions, and redemptions of the lease debt, residual cash flow was negative to the tune of EUR 1.7 billion. The balance sheet remained robust, with shareholders' equity of EUR 28 billion, or more than half of the total balance sheet. In May 2023, the group issued a bond for a nominal amount of EUR 2 billion in two tranches of EUR 1 billion each, with maturities of two and five years. The proceeds of this bond will be used for the acquisition of Aesop, which is presently being finalized. At the end of June, net debt amounted to EUR 4.8 billion and to EUR 3.3 billion, excluding financial lease debt.
The gearing ratio stood at 17.3%, and the financial leverage of net debt over 12 months rolling EBITDA at 0.5 times. The financial situations remain healthy. I thank you for your attention.
Good morning, everybody. As you've seen, we've delivered a very strong first half. I'd like to walk you through some of my personal highlights before I share with you why we remain confident for the rest of the year and beyond. In the first half, our sales increased by 13.3% like for like, and we crossed the EUR 20 billion threshold for the first time in a half year. Since the beginning of 2019, our organic top-line growth has amounted to 8.2% on a compound annual basis. That puts us well ahead of the global beauty market over that same period. In an environment still marked by considerable inflationary pressures around the world, our growth was driven by a strong contribution from volume, up 4.9%, and value, up 8.5%.
We estimate that the beauty market grew by close to 10% in the first half, so we outperformed again, which is obviously fantastic news. What makes me especially proud is that this comes after not one, but two years of exceptionally strong share gains. In terms of channels, both were dynamic. Offline stayed a strong comeback. We grew 14% in a market that was up 9%. Our online sales grew 12%, slightly ahead of the market. Let us take a look at our divisions. All four were growing, but two were in what I would like to call hyperdrive, the Consumer Product division and L'Oréal Dermatological Beauty. Consumer Products achieved its best half year on record. It grew 15% like for like, and significantly outperformed the dynamic mass market. Growth was not just strong, but also well-balanced. All major brands grew in double digits.
All categories advanced, boosted by strong innovations. All regions were up, with Europe and emerging markets especially impressive. Illustrating the division's ability to, at the same time, democratize and premiumize, I want to emphasize the contribution from both volume and value. With 29% like for like growth, L'Oréal Dermatological Beauty delivered another outstanding performance, well ahead of the dermocosmetics market. All regions advanced strongly, with a particular shout-out to emerging markets and Europe. Growth in mainland China was three times that of the market. As you know, our brand portfolio is highly complementary, and all global brands recorded double-digit growth. The two billionaire brands, La Roche-Posay and CeraVe, remained extremely dynamic. The newly acquired Skinbetter Science was off to a very strong start. L'Oréal Luxe was at 7.6% and has been improving quarter after quarter.
My key takeaways are the remarkable bounce back in China, with high teens growth in the second quarter, and the double-digit growth in all other regions. It is worth mentioning that year to date, the division's market share in China is equal to that of the number two and three combined. By category, we continue to outperform a very dynamic fragrance market, thanks to many of our designer brands. In skincare, Helena Rubinstein continued to grow at high speed. Professional products grew 7.6%, cruising ahead of the market. Particularly remarkable was the strong momentum of the two leading brands, L'Oréal Professionnel and Kérastase, which were supported by successful innovations like Metal Detox, the new iNOA, and Symbiose. Mainland China and India continued to be very dynamic. Sales were up in all channels: salons, salon-centric, e-commerce, and the selective channels. Now, let's talk about categories.
They all grew double digits, led by fragrances at +22%, skincare at +15%, haircare hair at +13%, and makeup at +11%. When it comes to the regions, I'm pleased to say that all five grew in the first half, making for a very broad-based performance. Another way to look at the power of our balanced geographical footprint, the top 5 growth contributors by country. The U.S.A., China, the German, Austrian, Swiss cluster, France and Mexico represent each one of our regions. Our two emerging markets were particularly strong, with identical growth of +24% in SAPMENA and Latin America, growing around 1.5 times faster than the market. They represent 15% of our business, but contribute a quarter to our growth. Our business in Europe advanced by an impressive 18%, 5 points ahead of the market.
The region contributed over 40% of our total growth. Momentum was broad-based, including in some of our key markets. In North America, we grew +13% with a strong contribution from both price and mix. All divisions advanced. Growth was in double digits in consumer products and dermatological beauty. As you may know, we launched Lancôme on Amazon earlier this year, redefining luxury beauty on the platform. In North Asia, we grew +4%, implying a very encouraging acceleration from +2 in the first quarter to +6 in the second quarter. As you can imagine, there are many moving parts behind the second quarter performance, most of them linked to what we call the Chinese consumption ecosystem, which includes notably mainland China, Hainan, and Hong Kong, three markets between which consumption is becoming increasingly fluid. What is happening in that Chinese ecosystem?
In mainland China, we are seeing clear signs that consumption is recovering. Consumer confidence is improving, restaurants are full, local travel is resuming. The recovery has been a bit slower than expected, but let's be honest, three years of Covid will take a bit of time to be fully digested. Appetite for beauty remains strong, both offline and online. In the second quarter, beauty growth recovered to +6.5%. As you remember, it was still negative in the first quarter. How did we do? Our growth accelerated strongly from broadly flat in the first quarter to mid-teens in the second quarter. Our innovations resonated well with consumers. We introduced new brands like Valentino, Prada, and Takami, and we entered lower tier cities. We significantly outperformed the market and continued to gain share.
In itself, that's very impressive, but I'm particularly proud of this achievement by our Chinese teams as it comes after two years of very strong share gains, further cementing our clear leadership position. We had a very successful 618 . Lancôme and L'Oréal Paris were the number one and two brands, and we had another six brands in the top 20. I want to highlight that our growth outside 618 was equally strong, signaling that the market is gradually getting back to normal. In Hainan, however, there's been a clear deterioration between the first and the second quarter. As you know, in mid-May, the authorities started to exercise much tighter control over the daigou trade to preserve what they call Hainan's Golden Brand, and travel retail operators have consequently refocused on the individual traveler. This has had a severe impact on industry-wide sellouts. We're obviously not immune to this.
We estimate that if the current policy remains the same, it could lead to a couple of months of inventory reduction, keeping in mind that our absolute priority is the protection of our brand's equity within the Chinese ecosystem. To put our exposure into context, Hainan represents less than 3% of our business, the total Chinese ecosystem around 23%. Mainland China has always been our focus, and we believe that the new paradigm in Hainan should have a positive impact on sellouts in the domestic market. This plays in our favor, given how strong our market share is in mainland China. As we have seen on Douyin recently, there has already been a partial transfer of purchases to the domestic market.
All in all, our first half sell-through in the Chinese ecosystem amounted to +10% and was indeed well ahead of the market at +2.6%. With this, let's now move to our financial performance. You have heard me speak about our virtuous circle many times, we have really seen it in action in our first half. Our OVD, operating margin increased 30 basis points, that was after we spent an additional 100 basis points on our brands. To me, what makes our virtuous circle so unique is that it's constantly fueled by our obsession with valorization. Every time we launch a new product, we do it at a premium to the existing range. Why? Because our unrivaled R&I backbone ensures that we make it better for the consumer and that the consumer is willing to pay for the added value.
Let me share with you two examples. You might be surprised that they are both from our consumer products division, which most of you probably least associate with valorization. Well, you're wrong. The first one is Garnier Good. It is two times more expensive than our existing color ranges. The second one is Elvive Bond Repair. Its price per milliliter is three times above that of our existing haircare products, and they are both very successful. I would like to highlight that our financial performance came with a solid extra financial performance. In early July, L'Oréal was recognized by S&P Global for its sustainability performance with an ESG rating of 85 points out of 100. L'Oréal ranked among the world's most gender equitable companies by Equileap. More than ever, we are focused on our sustainability transformation and committed to our net zero trajectory.
You've seen that in the first half, our growth engine fired on all cylinders and our virtual circle was in full swing. Of course, we can't deny that we are facing a few headwinds for the second half. Currencies will be less favorable, as mentioned, Hainan, which we addressed earlier, and price will make a smaller contribution to total value growth as last year's increases are starting to roll out. Despite that, we are very confident in our ability to maintain very good momentum in the second half, and let me give you five reasons why. First, we really believe that consumer demand for beauty remains and will remain very solid. You saw how strong the markets were in the first half of the year, and as we are entering the second half, we do not see any sign of down trading in the Western world.
Our consumers are relatively affluent and always on the lookout for high quality, indulgent beauty products. Emerging regions remain equally dynamic. Another way to gauge consumer interest in the beauty category is through the level of search queries and social conversations around the world's beauty. On Google, we saw an increase of 14% across all categories and regions. Fragrance was up as much as 26%, and on TikTok, beauty is the number one topic. Second, our 36 international brands have strong innovation planned for the second half and the holiday season. This will allow us to keep winning in the beauty market that is forever premiumizing. Some of the launches that I'm particularly excited about include the new male fragrance from YSL and the extension of Prada in makeup and skincare.
Super Stay from Maybelline, Absolut Repair from L'Oréal Professionnel, the daily UV protection from CeraVe, and much more, particularly in makeup. Needless to say, they will all come with strong valorization. Third, we continue to reinforce our digital leadership, which has always contributed to our outperformance. Let me give you three examples. We are the global number one in beauty share of influence last year, and managed to increase our lead by five points to over 26%. We were the first movers on TikTok in China and the Western world. You may also have seen that in cooperation with Microsoft, we debuted Ready in a Click, three weeks, two weeks ago.
This is a virtual makeover from our brand, Maybelline New York, which gives 300 million Microsoft Teams users access to a digital makeup bag that contains all the must-have products needed to create up to 1,000 different looks. We're confident that the users will want to buy the looks in the real world. Of course, we're exploring the possibilities of GenAI and the metaverse. Fourth, we stay true to our R&I roots. R&I is at the very heart of L'Oréal and has been for the last 114 years. Last year alone, we spent over EUR 1 billion on R&I and continued that trend in the first half of 2023. In the spirit of seizing what is starting, we have built a unique biotech and green ecosystem for beauty over the last two years.
In the first half alone, we invested in Debut, a U.S. biotech company, through our VC fund BOLD , and announced a partnership with Bakar Labs, the biotech incubator at Berkeley. Earlier this month, in cooperation with Verily, we launched the world's largest and most diverse skin and hair health study, and there's more to come. Hand in hand with our digital transformation, R&I has extended into what we call beauty tech. As we showed at VivaTech, this will allow us to serve four major trends: personalization, sustainability, inclusivity, and improved company-wide efficacy. Last, but definitely not least, our engaged teams. Our strong performance in the first half would not have been possible without them, and I want to say a big thank you for all their hard work.
I'm glad to share that in our yearly employee satisfaction survey, our engagement rate has reached 78%, 6 points ahead of the industry norm. L'Oréal's culture and the commitment and agility of our teams are a truly fantastic competitive advantage in today's world. Before I conclude, let me remind you that our brand portfolio will soon be enriched by Aesop. In the global luxury market, Aesop is uniquely positioned. The brand stands out with its sensorial product, distinct packaging, and unique retail philosophy. We expect the acquisition to be completed in the second half. Let me remind you that the first time consolidation should have an estimated dilutive impact of around 25 basis points on L'Oréal's operating margin on a 12-month running basis. In conclusion, we had a very good first half.
As always, there were many good surprises, a few not-so-good ones. With our 13.3% like-for-like growth, our continued market share gains, our new record operating margin, we have proven that we know how to make the most of the good surprises and how to swiftly deal with the not-so-good one. Despite the remaining uncertainties of the economic landscape, we are confident that we will deliver another very good performance in the second half. We look beyond 2023 with great conviction. We operate in an incredibly dynamic market. We have created for ourselves an unrivaled, well-balanced footprint by category, channel or region. It is this balance that has allow us to weather turbulences in our industry well many times over. Our virtuous P&L will continue to fuel our growth while helping us improve our margins.
Thank you very much for your attention, and I would like now to open up for questions.
This is the operator. Ladies and gentlemen, if you wish to ask a question, please press star 1 on your telephone keypad. Please use your handset before asking your question and set your microphone on mute once you asked your question. The first question is from Bruno Monteyne from Bernstein. Please go ahead.
Hi, good morning.
Morning, Bruno.
Good morning. So you know, some of your, your, your numbers are really fantastic, It's confusing, right? Historically, we were used to Luxe growing very fast, China and U.S., and now it's good old Europe and its mass market consumer division. It's a bit of a world upside down in terms of driving growth, but the end result is always the same: it's high growth. My question really is, is this kind of rapid shift into new, of where you're getting your growth driven by the markets, or would you say it's really driven by L'Oréal itself in the way it deploys its A&P and growth resources? Is it the market that caused the shift of where the growing commerce, or really you guys optimizing whatever you can get to growth?
The second related question to that is, Nicolas, you sort of talked in the past about how you manage A&P on a global basis to be able to go and chase the growth, wherever the growth is. Could you explain a little bit more, you know, the frequency and the speed at which you redeploy A&P growth? Let's say, if you do suddenly see China going on lockdown, how long does it take you to react? Can you explain a little bit how you're able to activate growth so quickly? Is it brand advertising? Is it activating more new innovations, more new launches? I'm just confused about how quickly you can redeploy resources to keep finding that growth. Thank you.
Well, thank you for this great question. I think, you know, as you pointed out, the, the strength of the L'Oréal model is precisely its balance and something we've, we've, we've worked hard on. You mentioned Europe, but, you know, we also announced that we will accelerate in emerging markets, and they now represent 25% of our growth. We are trying to be as balanced as possible so that we can seize all ascending currents and be a bit more prudent when the weather is a bit tougher in some parts of the world.
We do that constantly, and clearly, when we see the appetite for our consumers for dermatological beauty, we are, you know, ready to overinvest there. When we see that the emerging markets economies are remain extremely dynamic and their currencies are very strong, we can accelerate there. We try to seize opportunities. I think that's the magic of L'Oréal model, and we try to make the most of it. We see that if you remember back a few years ago, consumer products, the divisions were struggling a little bit, so it took also some time to fix the brands, the innovation portfolio, the footprint.
Now we see-- when we see that i it's ready to roll, we, we invest behind it. T he way we do it, to answer your questions about flexibility, is that we have, without entering into too many secrets, but we have monthly meetings between Christophe Babule and myself and our, and our head of business finance. We look at the evolution of the markets, and we either increase or drop the expected profitability of some parts of the business to give more fuel or less fuel to others so that. C learly, we can do it very quickly.
If I even if we take this year, we knew that the first quarter of China was gonna be difficult because of the inventory we had and because people were sick, so we cut, and the decision was done very quickly to cut media investment or social media investment from our Chinese team. On the flip side, because we were seeing that the Chinese market was indeed going to be accelerating in Q2, with 618 approaching, we reincreased the president of China, of the L'Oréal China, reincreased its investment on second half. A lot of our fuel is media, is social media, and it's very flexible.
I have to say even that social media is even more flexible than the good old TVs, where you had to commit long in advance. It gives us a lot of flexibility. Not 100%, because you have some point of sale materials that you can't just eliminate, but we are very flexible, and that allows us to indeed to accelerate where the growth is.
If I may complement, regarding the growth by region, I have to highlight that today, the region that is growing the fastest, I mean, the market is still Europe, at 13%. Ahead of America, the market is growing as well, but at 11%, and in North Asia, only at 4%. That's also the reason why, you know, our growth is in Europe.
Thank you.
The next question is from Céline Pannuti , from J.P. Morgan. Please go ahead.
Good morning, everyone. Thank you for taking my question. My first question would be on North Asia, a few moving parts there. Could you please.. I think you said in Q1 that the Asia travel retail was flat. What was Asia travel retail in Q2, and could you give us with the moving parts in terms of South Korea and Hainan? Should we expect the sell out and the sell-in both to be negative in the second half of the year? My second question is on, sorry, I'm following just on China to Mainland, you said was accelerating from -2 to +6.5 in Q2. What is your best guess for the second half?
Just, you know, I saw in one interview that you alluded to the middle class being a bit more regarding in terms of the price points. Just how you feel about the mainland China demand unfolding in the second half? Second question is North America. Yeah, you mentioned that the market was still quite good at 11%. We saw that your performance decelerated from, I think, 16.5% to close to 10% in Q2. I just want to understand whether this is really what we see in terms of the fading of the price points, or what's going on there that led to such a deceleration quarter-on-quarter? Thank you.
Okay, Céline, I'll start with North America, because, indeed, it's quite easy. We do not see any slowdown in America. The difference of sell-in between our two quarters is very simple, is that in Q1, the comparative for last year was a COVID lockdown comparative. We still had lots of stores that were not all reopened, so there was an extra boost. There was, as I said in the previous call, a little bit of reloading from luxury retailers, notably in fragrance in North America. In fact, if we look at our sellout performance, it's pretty consistent.
We had a great Prime Day recently in North America, and we overall see, you know, a very pretty good optimism in America. I think yesterday, the GDP for Q2 was announced and higher than expected. The level of employment is really high, so it means that people are confident that they will not lose their jobs. Level of employment is 66%. For women, it's 77%, which is, you know, and knowing that our number one prime target are women.
Of course, you know, we don't have a crystal ball as to predict the future, but North America, in our products, we do not see a slowdown, and we see consumers that want to buy beauty, whether they are Gen Z or working people. As far as North Asia is concerned, you are right to say there are lots of moving parts. On the one hand, you've got a change of... I would say, a change of paradigm in travel retail. As you rightly pointed out, in the first quarter, the Korean operators reduced their buying and particularly their trade with Daigou.
As I explained, in May, the authorities in China decided to put a strong control over daigou. O f course, that has a strong impact on sellout, particularly because during the years of lockdown where there was barely any traveler that was going to real traveler that was going to travel retail, that was probably the way to keep the retailers in shape. There's a change of paradigm.
Short term, it will be negative, but mid-term and long term, it's very positive because in the end, this is market that's going back to Mainland China and will contribute to the acceleration, I believe, of Mainland China, where we have , you know, both better shares, lots of fuel. I mentioned the share we have in L'Oréal Luxe, which is above 30, close to 33%. Yeah, it's gonna be a different profile for the months to come. A slowdown in travel retail, probably a couple of months of destocking, but I guess there'll be continued acceleration on the Mainland Chinese market.
Giving you a number is very difficult, but what is true is that you had a 6.5% growth on Q2. May and June were good. 618 , the 618 festival in terms of total GMV, that's before returns, but the overall market was at +25%. We see that consumers that probably take some time to get, you know, to see the confidence go totally back up. It's picking up, but not yet at the pre-COVID level. They want, they are going back to beauty.
What I can say is that they also, the Chinese consumers are more rational about their beauty purchase than they were before COVID, and they are really looking for efficacious product for performance. Again, that's, for me, a good omen for the L'Oréal products, which, as you know, are always created and based on, on efficacy. I don't know if Christophe, you want to add something to, to this?
No, I think we can be very reassured, to see a Q2, I mean, the market growing at more than 6% in China. You remember that, Q1 was still polluted by COVID issues. On top of that, from what I hear and I see, at least from the political stance, and there is a wish to push for more consumption. It's now about us, you know, to keep exciting our consumers with fantastic new product and launches, which will come very soon in S2.
I must say, I'm very happy to see that in the... if we look at sellout in China, in Q2, we're almost at 2.5 times the market. It's important because I remember sitting, we had a little conversation in Cagny, where you were wondering whether we would be still be able to keep winning share in China, considering that we had benefited from our strong e-commerce footprint when stores were closed. Well, I must pay tribute to my Chinese teams because they continue to do so, and and let's hope it continues.
Thank you. The next question is from Olivier Nicolai, from Goldman Sachs. Please go ahead.
Hi, good morning, everyone. I got two question, please. First of all, historically, on marketing spend as a percentage of sales, it's been around 31%. Now, y ou step up marketing a lot in H1 to 32.5%. That's up nearly EUR 900 million year-on-year. Is it linked to the phasing of product launch, or is it a good proxy for the years? In other words, essentially, should we expect an acceleration in H2 EBIT margin, driven by growth margin improvement, particularly as luxury will continue to rebound in H2, and presumably, your input costs are, are going to be, to be coming down? Second question is on Europe, which was clearly the main surprise today.
Could you give us, first of all, an idea of the volumes growth you had in H1 out of the 18% sales growth? Then also, can you give us a bit more details on which category was the main driver for the growth? Is it sun care, for instance, as per your comments, related to the Vichy brand or La Roche-Posay? Thank you.
You want to take the first one, Christophe?
Yes, I will take the first one. Yes, we've been pushing hard, you know, in terms of investment. This is due to the fact that first, as you know, the market is very dynamic, so it's the good momentum to invest. Also we have still to develop many of our brands in the new market. This is something that we have already seen in the past, the CeraVe, the Valentino, the Prada. CeraVe still is 60% of the sales are in the U.S., so there is still a lot to do and a lot of investment to do in new markets to push the brand. That's one of the reasons, but the same for other brands, and mainly in luxury.
We are using this momentum to, yes, prepare for the growth of the future.
Traditionally, our EBIT margin is unbalanced between-
Yes
-first half and second half. Maybe you can comment on that.
When it comes to the EBIT margin, there is a pattern, of course. As you know, there are high investment in the second half, mainly due to big promotions to Christmas, to 11.11. There is usually a gap between first semester and second semester, could be 0.5, up to 100 basic points. We just follow the usual pattern in terms of profit share between S1 and S2. Be reassured that, of course, we will keep increase our margin, because this is in a market that is growing at more than, at 10%, I have to say. There is space, of course, to keep improve our bottom line.
As far as Europe is concerned, in terms of value volume component, out of the 18%, there's 7.4 in volume. A very strong growth in volume, which means that the consumption for- of our categories, or at least our brands in our categories, has remained very, very solid. There's both a strong valorization effect, which is quite new for Europe, but a great volume growth. Of course, we've had a better sun care season this year, particularly, well, both in mass market and in dermatological beauty. It's really across all competition, all categories. We have a great momentum in makeup.
Maybelline is really flying, NYX, with whom you may have seen is, has done a great partnership with the Barbie, the movie, which is the hottest movie of the moment, and has really sold off on that. We have a great performance also in hair care with the success of Elvive Bond Repair. Hair color is a bit soft, but we intend to reignite it with good from Garnier. Skincare is also, is also, is also good. I t's not just sun care, it's, it's across the board. I have to say, it's a really good balance of innovations.
We had a great vintage of innovation this year, and I hope that the second half will be as good and confident, confident about it. We're also progressing in, in fragrance. What's interesting, I think, in the volume value strategy is that of course, we've taken price increases across the board to offset some of our, you know, the input costs that impacted us. We've been, I would say, using our RGM tools, we've been relatively sound and wise on the catalog of products that have been increased, but I would say below the input costs that we took. All the new products have been really and as I showed in my presentation, launched at super premium.
We're in this dynamic where if you want the really the great new product, you will pay more, and it attracts people, you know, novelty lovers. If you want to stay loyal to something that you've always been able to afford, you still can do it. That's been proven to be a pretty good recipe. When I compare with other mass market players, I see that the balance between volume and value is en masse , has been has been pretty pretty good.
Thank you very much.
Welcome.
The next question is from Iain Simpson from Barclays. Please go ahead.
Good morning, everyone. Couple of questions from me. Firstly, in terms of the components of Greater China growth in the second quarter, you've very helpfully given us mainland China. I just wondered if, if we could have kind of Hong Kong, Macau, and Hainan, just to get a sense of how those things fit together. Then secondly, I wondered if we could dive into some of your emerging markets. You've done a great job turning around Mexico and Brazil in recent quarters. I wondered what levers you've pulled to get those performing as well as they now are. Perhaps a quick update on India as well would be great. Thanks very much.
Okay. O n Greater China, or what we call the Chinese ecosystem, we have given you the sum of the parts. T he sell out on our sell through, where the market was at 2.6, and we're at 10. We're not going to to breaking down in little pieces, but China is very positive, Hong Kong is very positive, and on Q2, China retail was negative. T hat gives t he total that that you've seen. I think it's, again, I think it's a good rebalancing of the of the ecosystem.
B y the way, I want to add to this, that we continue to have very good performances in other North Asia country. Japan is at +18%, which is great, and we're at a smaller base obviously there, but we have very good performance. A s far as the emerging markets are concerned, we indeed are very happy with our performance there. Latin America was a good, we had, you know, higher shares than in South Asia, for example. But it's true that the market was not easy. H ere it's really a win across the across the countries.
First of all, with two strong countries that are, Mexico and Brazil, where we are indeed, gaining shares, with a strong mass market performance, a very strong LDB performance. Dermatological Beauty is doing fantastic. I would add in terms of countries before maybe going back more back to, to divisions, but that, we also had created a new cluster. We've regrouped, countries where we had probably several subsidiaries, but little business. We've regrouped them into a cluster, a bit like what we've done with Germany, Austria, and Switzerland.
We created the cluster called CERAN, which is Colombia, Ecuador, in Region Andina, which goes up to Peru, and this is becoming a strong third growth engine for the region. That's overall very positive for Latin America. The other good thing about Latin America is that we have currencies that are holding very strongly versus the euro. Overall, you know, in Latin America, the second quarter at +25%, after a strong Q1 at +22%, is very promising. As you heard, Mexico was our number five growth contributor for the first half.
As I've run this country a few years ago, I'm very happy and proud to see Mexico up in the lead. Strong, strong performance from makeup. Also, I wanted to mention Maybelline is doing great in this region. If I take the other parts, which is the SAPMENA region, it's also doing great, with, you know , again, +25, on in in the first half. All countries are growing very, very, very strong in Australia, New Zealand. India is in line with the average. India is is is doing is overall doing good. That first half is at +20, and we're gaining share, a nd we're very excited by the prospect in this market.
The economy is very solid, there's an appetite for beauty, and e-commerce is, as we said, a good contributor to this growth. TikTok has expanded into Southeast Asia, you know, with their TikTok Shop model after the Douyin model in China. Of course, we've transferred all the know-how from our Chinese teams very quickly to our SAPMENA teams in Singapore, and that allows us to make strong inroads in e-commerce in this space.
Maybelline, Garnier, and what's interesting in Southeast Asia is that we see luxury space starting to go strong, and particularly, again, the same, a very strong interest in fragrance, with Libre, Y, Prada, Mugler, that seems to be having a good, a good moment.
Thank you very much.
You're welcome.
The next question is from Guillaume Delmas from UBS. Please go ahead.
Thank you very much. Good morning, all. Two questions for me, please. The first one is on your outlook. Nicolas, you've indicated that you have not seen any changes in the consumer behavior so far, but at the same time, you're calling out the two headwinds of Hainan and the price effect gradually annualizing. Putting all this together, are you basically pointing towards a clear sequential slowdown in your like-for-like from the elevated 13%+ in H1? You still remain very confident that you will outperform a beauty market, probably growing high single digits in the second half of the year. That would be my first question. My second one is on A&P, because you've added another EUR 900 million.
I mean, you're almost on track to reach EUR 14 billion in A&P spend this year. That would be double your A&P budget of 2016. Arguably, during this years, using digital precision advertising, you've had a far more bang for your bucks. What I'm wondering here is: have you considerably, during this year's, increased your share of voice, or is it more down to, you know, the cost of doing business that has increased? I guess the other sub-question on this is, is there a glass ceiling? I mean, at a point where you would start getting diminishing returns on your incremental A&P spend. Thank you.
Okay. I will, let Christophe, loves the outlook question, so, I will, I will leave it to him, and I'll answer on the, on the media.
The first question was about--
I'm not pointing out to a significant slowdown of--
I want to reassure you, because, of course, all what we have mentioned in the presentation of Nicolas is, of course, already well embedded into our trend. What is important is, first, I want to stress the fact that Hainan is less than 3% of the net sales of the group. If there is a slowdown, it won't impact, you know, dramatically the growth of L'Oréal. What we are monitoring, because there are always some one-offs that are polluting, you know, the visibility of the growth. We're still monitoring the CAGR growth over the four years. If you look at the figures, you will see that we are constantly a bit above 8% growth now.
This is, I will say, our roadmap is to keep, you know, with this trend, the long-term trend of a growth around 8%. Of course, depending on the one-off in some markets, last year, probably, the growth will be a bit, bit lower than S1. What is important is to keep, you know, this CAGR above 8% in the coming quarters. That's the first point. Regarding the price, there will be, of course, a slight impact because part of the price increase came in the second half of last year. Meaning that in the second half, we'll have in terms of price effect, maybe a little bit less than at the first half.
this is already, as you know, in our trend, so, it won't impact the rhythm of the growth of the group.
In the end, you know, what's interesting, and I remember we had debates, and I guess you guys were right when I was saying the beauty market was gonna grow 4%, 5% on average. It's true that this year, because of the, in fact, the effect of prices, and I have to say, of, very strong appetite for from consumers for beauty. The beauty market is growing, you know, it's growing at +10% at the end, or close to +10% at the end of six months. It probably will slow down a little bit, but not really much.
I think it's gonna be a great year for beauty, which is to some extent, explainable, because on the one hand, you've got always this trend to, you know, want to have some indulgence, when the times are tough. Plus, we're in the world, and we see that in several parts, including in the U.S.A, where beauty is very dynamic. When you've got high interest rates, people tend to be a bit shyer, more shy in real estate, cars, you know, expensive items, and typically this benefits beauty. Yes, we have a few headwinds, and I think it's important for me to flag them to you in total transparency. Overall, I remain very, very confident and very optimistic.
As far as.. Do you want to add something, Christophe?
No, no, regarding the second question?
Yeah, regarding the second question, you know, t hat's always a tricky one because it's either too low or too high, but I'll give you my perspective. The big difference with 2016, is that we have much more brands. We have, of course, our big, billionaire brands that we have to continue to support. There is a lot of productivity happening, even though there's more and more fragmentation in media, but it's better targeting, so it's okay for us. W e are really getting more and more productive on that.
As I told you in a previous sequence, we have invested, and we are developing our own, AI-powered, A&P, allocation tool, which is right now in pilot mode in a couple of country, which gives spectacular results in terms of increased, increase in ROI, both short-term and long-term. W e have these, you know, existing brands, which we have to continue to support, and where the percentage of fuel relative to sales is globally stable or going progressively down, thanks to productivity. We are bringing in new brands. These new brands, if you take Prada, if you take Valentino, if you take Payers, they need to be supported. That's, that's what we do.
It's, it's preparing the billionaires of tomorrow, through, through a stronger, stronger investment. We'll enter soon, with a new model where, with AZAP, which will be much less media-dependent, and more, retail, more retail investment. Even for that brand, we see in the world of today that, you know, managing the, the influencer game is very important. The fact that we have a 26% share of influence, which is kind of twice the size of our global market share, shows that our teams are getting better and better at mastering this game. Which is not an easy one, because it's constantly, evolving and moving. There are also new instruments to play with that relates to media.
Overall, you will see productivity over time. As we add brands, we also have to add fuel for the new brands.
In S1 also, we have been investing more in the brick-and-mortar-
Yeah.
-since the business now is back to a high growth. That's also an area where we've been investing more than last year.
Very clear. Thank you.
You're welcome.
The next question is from Fulvio Cazzol, from Berenberg. Please go ahead.
Yes, good morning, and thank you for taking my questions. I've got two. The first one is on travel retail. It sounds like you think that this channel has rebased permanently. My understanding is that travel retail was a very profitable channel for you, and also an important channel for consumers from smaller cities in China to discover products while they're traveling. I was just wondering, how will you reach some of these consumers now? Will you need to invest more in physical presence in higher tier cities? If so, could this have a dilutive effect on your gross margins. My second question is on the premiumization theme.
We've seen luxury brands underperform mass for a few quarters now, so I'm just wanted to get your thoughts if this marks a new era in beauty and if these trends are here to stay. My question is, you know, has the product quality gap narrowed between mass and prestige products? You highlighted in the presentation the valorization that you had, for example, on Garnier and L'Oréal Paris, or maybe has the cost of living and the economic uncertainty perhaps tilted in favor of mass versus prestige brands. Just interested in your thoughts on these topics as well, please. Thank you.
Okay. On travel retail, travel retail remains a fantastic channel, both for business and to showcase our brands, and we'll continue to use travel retail as such, and it's always been its purpose, by the way. You know, right now, with the worldwide traffic is at +56% versus 2022. Very dynamic in the West, in Western Europe, and it's beginning to pick up in North Asia, with Chinese traveling to Thailand and to other parts. It is definitely a, a showcase for our brands.
The only thing is that, as we said, I think this, the Covid, the lockdowns have kind of fostered an unusual development of this daigou business, which is now being brought to normal levels. We do not know exactly what the Chinese authorities will want to do in the future because, you know, the rules can change from one day to another. We'll, we'll adapt as we always do, but very clearly, we will continue to invest in travel retail, which by the way, contrary to what you say, has a lower gross margin than the traditional business, because to much duty-free prices. W e will indeed continue to invest.
If you look... if you go to airports, now we go to Hainan, next year again, but if you go to airports, whether it's LAX Airport, or whether it's the new terminals of Roissy-Charles de Gaulle or Dubai Airport, you will see, you should see fantastic display of our brands. It's indeed a way for, as you rightfully pointed out, for China, a way for consumers of tier five, six and four cities to discover our brands. They are overrepresented, and they also buy on Douyin, the same people. That's why I'm saying there is a limit of transfer within Douyin. We, by the way, continue to open counters or brand presence in these new, these more remote cities.
On the first half of 2023, we have opened 50 new doors in either a new tier four or five cities or in new neighborhoods in existing cities. T here is still a lot of brick-and-mortar depth to be gained. Overall, no travel retail will continue to play its role, but now it's being, I would say, normalized, and I think it's a good thing for us.
As far as premiumization is concerned, you know, it's, it's always been the game in for L'Oréal to invest in quality and to sell quality at a higher price, which doesn't prevent us from having very affordable brands like, you know-- E ven in Maybelline, you have the new mascara, which is Surreal, which may be sold at EUR 13, but you still have Great Lash, which is a good old-timer, which is EUR 5 less.
We're trying, that's the, I think, the strength of our model to be able to offer products to all purchasing powers, even though the L'Oréal customers are more on the middle, upper classes, and that's probably why we are more protected from the impact of inflation in ourselves than others. What I think the great thing behind this is that we see, and that's probably one of the side benefits of COVID, when people have had the time to pamper themselves, is that people really want when they're going to spend money, they really want quality. For the rise, the development of hair of sophisticated premium hair products is a strong sign. It's the results of this trend.
It's also another interesting element, is the fact that hair is longer, women have longer hair, and hair is more racially mixed. If you take the U.S.A, it's spectacular to see, how the... you know, if you take the Gen Z of the U.S.A, 50% of the Gen Z in the U.S.A is considering themselves as non-white. i.e., they have more mixed hair, curly hair, et cetera, and this hair is much more demanding. Therefore, haircare is super important for them, and among the best. W e continue, of course, to serve them, but it also applies for prestige. Kérastase, Kérastase brand, I think, is growing at double digits. I don't remember if it's, 17% or 18%.
I t's not a transfer from, you know, from selective to mass, it's everybody upping their level of demand. T he mass consumer wants the best of mass, and the professional consumer wants the best of professional, and we see it across most categories.
Thank you so much for that.
You're welcome.
The next question is from Sarah Simon, from Morgan Stanley. Please go ahead.
Yeah, hi, I've got a couple of questions. First one was on marketing. Can you give us an idea of how much of your AMP is now on social and digital versus more traditional media, and how that would compare with, say, five years ago? The second one was on competitor brands, and I'm thinking about sort of the many small players that you see popping up all over the place. Are you seeing that the increase in interest rates is having any effect on the level of competition from those guys now? The third one was just on margins. I think, you know, the perception was, has been that, that mass market would have a lower margin, but you've talked a lot about valorization and premiumization.
Do you see the sort of mass market brands trending towards luxe, or do you think that in the end, there will still be a distinction between the two? Thanks.
Okay. Social media, you have t he exact number, Christophe, I guess. I see you with the chart in front of you.
Yes. Just to give you a broad understanding of how we spend, but most of it is still, of course, on the on the media advertising. As you know, it's 75% driven by digital media. This is still the main investment we do. When we look at what we call advocacy media, so which we group social media and some smaller kind of media, it's smaller, but it has been a bit increasing, and it's in the range of a bit less than 20% of the total. It's now quite important.
It's not the major one, but it's still increasing a little bit, mainly in, by the way, in emerging markets, where, you know, e-commerce is booming and young people, they are pretty much looking at what's happening in the social media.
Overall, a bit more than 70% of our media is digital.
Yeah.
Then we are, as always, constantly adapting and changing a strategy to adapt to the rise or fall of different networks. It's true that, I mean, the big phenomenon of the last couple of years has been the explosion of TikTok, which is not only a phenomenon in China, but also in Southeast Asia, and of course, in North America. I f you look at the incredible success of CeraVe, the brand continuing to grow at 38%, it's because it's a great brand. It's a great brand that's, you know, recommended by dermatologists, but it's also the brand of L'Oréal that has mastered the codes of TikTok, the best, and all the other brands are trying to learn from them.
I t's really, I have to say, it's fascinating because you can, as well, our brands have very different targets who are getting better and better at targeting, and I'm making sure you have not only the right influencer, the right channel, but also the right tone of voice to be successful is an art. I'm trying to make sure that my teams are getting better and better at that art, and that's very positive. As far as the indie brands are, or small brands are concerned, they are always both a, you know, a challenge and an opportunity.
They're a challenge because indeed, and that's not new, since the [sea open] platforms and the rise of e-commerce and social networks, we've seen the explosion of small brands. Many do not last. A few are very successful, and they are fierce competitors. When I say they are an opportunity, it happens that they are also the ones that are pushing us to adapt and transform. Lots of our.. You know, when we see the first appearance of indie brands, it forced brands like Lancôme or L'Oréal Paris, that were a bit the establishments, to become a bit more agile, to learn to work with these influencers we're talking about, to adapt their tone of voice.
W hen you see some of the stuff they do now, I think they're getting better at it. Then if you have the benefit of both scale and indie agility, you can be very, very, very strong. Actually, if we look over the period of the last probably five or even 10 years, we see that our biggest brands have often, almost always grown faster than the average of L'Oréal, because when you have the benefit of scale and this new, you know, tricks of the new trade, you can be pretty good. As far as, as profitability, you know, we are trying to improve the overall profitability of the group. We always play. We have four instruments to play with.
My, of course, my aim, and I'm always pushing each division to up their- to improve regularly the profit. A s it was debated in a prior question, we always try to adapt our investments to the opportunities. When there's one that needs more fuel, we will, you know, allow them to either stop growing their profitability or temporarily drop it. Some others will take it up. In the end, I'm very happy to say that today, the fastest growing division of the group is the most profitable one. It's L'Oréal Dermatological Beauty. That's good for the overall performance of the L'Oréal group.
Thanks.
You're welcome.
The next question is from Robert Ottenstein from Evercore. Please go ahead.
Great. Thank you. Thank you very much. First, a question of clarification. You mentioned, I think during the prepared comments, that China was, I think, 23% of sales, Hainan, 3%. Can you give us, you know, precisely which year or period that referred to? Then in that year how big Korea and daigou overall would have been. That's, that's the first question. Then the second question, if you could give us a little bit more sense of your strategy in China skincare, you know, focusing on Helena Rubinstein, the role that Aesop is going to play, Carita, and how, you know, the evolution of the China skincare strategy is going. Thank you.
Okay. Well, on the numbers, 23% was the full Chinese ecosystem, which includes mainland China, Hong Kong, and Hainan. It doesn't include, Korea, and it doesn't include, of course,-
Taiwan
-Taiwan or, or Japan. I'm not gonna break it down. As far as the weight of daigou, frankly, it's very hard to know because many of it's managed by the operators themselves. It really depends on the brand, on the periods. I think the important message here is that for us, and that's something we explained many times, and I guess we are reaping the fruits of it today in our Chinese performance, is that we have always, always, always worked at favoring and at protecting the Chinese domestic market.
We have a specific working group, which is called CCCT, which includes our travel retail teams and our Chinese teams, managing to make sure that the level of prices, the type of promotions, in done in travel retails, were never detrimental to the Chinese business. That's why we valorize so much our travel retail business. Overall, we feel we've done the right thing for China, and that's why our share continues to increase in L'Oréal Luxe China. As far as, as skincare is concerned, even though there are lots of opportunities in China, in fragrance, which is booming, in haircare, that's premiumizing, it's true that skincare is by far the number one category.
We intend to grow it with our with all our divisions, well, at least through the three divisions that are in skincare. Clearly, I will finish with luxury and to answer specifically your questions. We have L'Oréal Dermatological Beauty is still quite small in China, but it's going three times the market, and we see that La Roche-Posay has some good tractions, and we believe- and SkinCeuticals is also very strong in China. That the country where the brand is sold not only by derms, but also in stores and boutiques and counters. It's a luxury medical brand in China. L'Oréal Paris is also very strong on skincare, including men's skincare, where we have big Men Expert business in China.
But what is true is that L'Oréal Luxe is our number one weapon or division for skincare gains. There, it's true that we are pushing because that's what Chinese consumers want. We are pushing the most premium brands, because it's about the quality of the product, and it's about also the experience that you can provide at a counter. On Helena Rubinstein, for example, we do not just have nice counters, we have cabins where consumers can come and have treatments like they would do in a spa, this is either in a department store or in a separate room. That's what we do with Carita. Carita is just very early days, so today, it's very, very small.
We have great ambitions because it's this idea to have a super luxurious, aesthetic, inspired, skincare brand is very promising. Today, Carita has just opened a couple of counters and is providing services in a few spas of hotels. I want to mention, and I'll finish with Aesop. I want to mention Takami because Takami is our Japanese brand, and, you know, it's a brand that happens to be the Takami serum is the number one skincare item in Japan, and we've just begun to roll it out in China. I went a couple of months ago in China to see the first counters, first beautiful blue counters of Takami, and it starts very, very well.
This is another very high tech, premium, and credible brand. Of course, Aesop, which you rightfully mentioned, which is not just a skincare brand, because it's about, you know, they have many categories. It 's a brand that's just in its early days in China. Again, it's very aspirational, very premium, and the experience you have in stores, as I'm sure you've already been in one are very unique. Last time we went to Shanghai with Christophe, that was before signing the deal. We had the pleasure to visit the Aesop store in Shanghai, and it was like packed with Chinese consumers, both male and female.
I think that's one of the very interesting thing, both in skincare, but particularly for a brand like Aesop, is that it's not just for women, it's really across, genders, and that, of course, doubles the market potential. Very optimistic about, about Aesop.
The final question is from Tom Sykes, from Deutsche Bank. Please go ahead.
Yeah, thank you.
What's up?
Thank you for, thank you for your time this morning. To just briefly, could you remind us, please, when, when are the toughest sell-in comps for you in Hainan? Please, because it won't just be sort of destocking, a question of when you're up against the tougher comps as well. Just thank you for putting the comments about volume and number of units. Just to be clear, I suppose, on the accounting sort of say, units literally is that if you sell two times 50 versus one times 100, you'll see an increase in volume because the number of units will have gone up. I suppose just to that, are you seeing anywhere a trend towards smaller unit size? Is that something that may have some seasonality as well?
Thinking particularly about Europe, maybe travel mini sizes, and whether that sort of helped at all, please.
Okay. These are two complicated questions because, I'm not sure I got all the math of the second one. I don't know if you can help me or Christophe on that.
Maybe we can start with the first question. I think it was related to the growth in Hainan and travel retail. You know, it depends really on the local situation. Today, we have this problem of crackdown decided by the Chinese authorities. Of course, the overall market is down, pretty down, as Nicolas said before, in the region of -30% in the past two months. It may last one month, two months, we don't know. Obviously, it will have probably some effects in the coming months. Again, we are not that much worried because most of our business, by far, is mainland China, which is the trend that we have been always depending.
What is important is the mainland Chinese consumer, and here we have a growth that is above 15%, so, it won't impact, you know, the overall result that we have shown before on the Chinese ecosystem. The second question was about--
About units. What I can tell you is that we are not, we are not seeing a reduction in size of units. We are, aside from some emerging countries where we sell mini sachets, we've been managing our price volume ratios, according to the brands, according to the initiatives. Specifically, if I take Elvive Bond Repair, because it's a highly concentrated formula and therefore, and it's more premium, it's a smaller packaging than the traditional Elvive, but it's a bit of an exception. Most of the products we sell are sold at the same type of size. Also, we also, on some categories, bring a lot, and that's probably something.
I take the opportunity to mention it, even though it might not be exactly answering your question. We invest a lot in refills, because part of our sustainability transformation and roadmap is about reducing significantly the amount of plastic. Of course, we're transferring all our plastic to recycle progressively, but also we're trying to entice consumers to shift to even lesser packaging with refills. When it's in mass market, like shampoos, you have refills that are bigger than the basic size of the shampoo. If I take the refills we're pushing in fragrance, all our new fragrances have refills, therefore, less glass, no pumps, less packaging. They are also a bigger size than the traditional, the basic, standard product of the fragrance.
That it allows consumers both to have a price saving and to be able to refill several times. That would be the only case where I see small format differences between our, I would say, our usual business and what's happening today. In the greater scheme of things, it's not a big there's no big change in our in our activities. It's just that our, our growth, our growth in units is the result of, I think, the quality of our innovations and sound pricing.
Many thanks, indeed.
You're welcome.
Gentlemen, there are no more questions registered at this time.
Well, thank you very much for your attention, and looking forward to our next exchange.
Thank you very much.
Thank you.
Ladies and gentlemen, this concludes the conference call. Thank you all for your participation. You may disconnect now.