The credit crunch and recession have seen women in Europe and North America sacrifice cosmetics and hair care, according to the fourth quarter figures for the giant L’Oreal cosmetics group, partly owned by Nestle, the big Swiss food group.

Cosmetics might be on the economic outer, but fast food is booming. Overnight KFC announced it would add 9000 jobs across Britain and Ireland by 2014. It has 760,000 outlets (11,000 worldwide) in the UK and Ireland and 20,000 employees. KFC says it will open 300 new stores in a $A600 million-plus splurge because the chain is selling more in what is the worst UK and Irish recession in 60 years. 

McDonald’s reported a 7% plus rise in January sales from around the world, with sales in the US and UK up strongly. 

The L’Oreal results show a rare slump in sales in the fourth quarter, driven by a 11.6% fall in comparable sales in North America, a 1.9% drop in Western Europe (with sales in southern Europe slumping, offsetting steady dales in the North). Sales in Asia held up, but face a big fall in this quarter as economies from Japan to Singapore sink and job losses surge. 

Women in some markets also cut the number of visits they made to hair and beauty salons, leading to a slump in professional sales, while sales of so-called luxury lines like Lancôme, fell, but those in the mass market consumer categories, such as Garnier and Maybelline did well relatively to the company’s overall performance. 

The company said luxury products, such as Lancôme creams, which account for one quarter of sales of $17. 5 billion euros, and hair salon products, were badly affected as customers bought cheaper items or cut visits to the hairdresser. Sales at The Body Shop, the UK-based chain of natural beauty products, fell in each quarter of 2008, with a fall of 7.5% in the final three months of the year, compared with the previous year. Overall they fell 3.9% for 2008 as a whole as consumers stayed away from the high-priced chain.

With its Garnier and Maybelline brands positioned in the “value” market, the company is following the customer down market, just as McDonald’s is at the moment by stepping up its advertising to get value conscious customers in the US, Europe and Asia to trade down. And they are.

L’Oreal is emphasising new, cheaper products for men and women, pushing products from its consumer brands into hard European discounters like Lidl (a big competitor to Aldi in Germany and the UK) and pushing deeper into markets across Asia, including India and Pakistan. Even cable TV home shopping networks in the US and Europe are seeing the company’s products being offered for sale.

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Peter Fray
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