Have you ever noticed a strange paradox in consumer behavior? When the economy slows down, people do not completely stop shopping – they simply change what they buy. Instead of a thousand-dollar designer handbag, they choose a high-end lipstick, a luxury perfume, or an expensive skincare routine. This phenomenon is called the "lipstick effect", and it is precisely one of the reasons why L'Oréal just delivered a performance that made Wall Street tip its hat.
On October 23, 2026, shares of the French cosmetics giant surged 5%, hitting a more than two-year high after the company reported third-quarter results that far exceeded all forecasts. But behind that impressive growth figure lies more than just luck. It reflects a disciplined, consistent, and highly calculated strategy that any marketer should study.
The Numbers Speak: 7.7% and a Spectacular Beat
Let us start with the undeniable numbers. In the third quarter of 2026 (from July to September), L'Oréal recorded sales of 11.56 billion euros (approximately $12.95 billion), an increase of 7.7% on a like-for-like basis adjusted to exclude currency fluctuations and the implementation of a new global IT system.
This figure was not only higher than the 5.9% forecasted by analysts. It also far outpaced the growth rate of the overall global beauty market, which only achieved about 5% in the same quarter. In other words, L'Oréal is not just going with the flow – they are swimming significantly faster than the current.
And the market reacted immediately. L'Oréal shares rose 5% to 433.65 euros at 09:58 GMT, the highest level since June 2024. Year-to-date, the stock has gained 18%. Barclays analysts even forecasted that the stock could reach the 450 euro threshold as investors increasingly recognize the company's "superior growth profile."
Even more notable is the analyst consensus. Jefferies called it an "incredibly strong update." Barclays remarked that L'Oréal "once again cleared a high bar." When the toughest critics in the industry sing in unison, you know this is no temporary stroke of luck.
The Secret Behind the Numbers: When "Premiumization" Becomes a Weapon
So what drove this surge? The answer lies in a single keyword: premiumization.
In recent years, L'Oréal has steadily driven its high-end segment. They have added more couture fragrance lines to their star-studded brand portfolio while launching new hair care products under the professional salon brand Kérastase. And this strategy is yielding brilliant returns.
Let's look at the big picture by segment:
| Segment | Q3/2026 Sales | Like-for-Like Growth | Highlights |
|---|---|---|---|
| Professional Products (Kérastase, Redken) | 1.47 billion euros | +12.1% | Benefited from the hair care premiumization trend |
| Dermatological Beauty (La Roche-Posay, CeraVe, SkinCeuticals) | 1.87 billion euros | +12.2% | Double-digit growth driven by scientific skincare demand |
| L'Oréal Luxe (Lancôme, YSL, Prada, Creed) | 4.18 billion euros | +6.4% (adjusted +7.0%) | Beat the 4.5% forecast, driven by high-end fragrances and skincare in China |
| Consumer Products (L'Oréal Paris, Maybelline, Garnier) | 4.04 billion euros | +4.3% (adjusted +3.8%) | Stable but slower growth, fully in line with expectations |
It is worth noting that all four segments grew. However, the growth rates were uneven. While Consumer Products – the mass-market division – grew by only 4.3%, Professional Products and Dermatological Beauty – two divisions requiring higher expertise and better profit margins – both grew by over 12%.
This is the essence of the premiumization strategy: it is not about abandoning the mass market, but about shifting focus higher, where customers are willing to spend more for products that deliver higher perceived value.
China: When a "Double-Edged Sword" Becomes a Growth Engine
For years, China was an obsession for global beauty brands. The market had experienced two years of decline, throwing many heavyweights into turmoil. But for L'Oréal, the story is playing out in reverse.
In the third quarter of 2026, sales in the North Asia region – with China as the main driver – reached 2.2 billion euros, an increase of 7.8% like-for-like, far surpassing analysts' forecasts of 4.14%. Even more astonishingly, L'Oréal stated that it is growing three times faster than the average of the Chinese market.
How did they achieve this? The answer lies in their product portfolio mix. One-third of L'Oréal's revenue comes from the Luxe division. But in China, this division accounts for about two-thirds of the company's sales in that market. As demand for premium cosmetics recovers in China – with the middle class shifting from low-end luxuries to prestige beauty brands – L'Oréal is among the biggest beneficiaries.
CEO Nicolas Hieronimus called this an "exceptional third quarter." He emphasized: "The global beauty market has, once again, proven its resilience in a challenging environment – and we continue to significantly outperform it."
Lessons for Vietnamese Marketers: When the "Lipstick Effect" Knocks
You might be thinking: "L'Oréal is a global corporation, and I am a marketer in Vietnam. What do these numbers have to do with me?"
The answer is: a lot.
First, the "lipstick effect" is happening right here in Vietnam. When the economy shows signs of slowing down, Vietnamese consumers – especially the middle class and Gen Z – do not completely stop shopping. They shift from expensive luxury items to "small luxuries" that deliver instant gratification: a lipstick, a bottle of perfume, or a skincare treatment. If you operate in the beauty, fashion, or high-end F&B sectors, this is an opportunity to position your product as a small reward that customers feel they deserve.
Second, the SAPMENA-SSA region – including Vietnam – is currently L'Oréal's strongest growth engine. Sales in South Asia, Southeast Asia, the Middle East, North Africa, and Sub-Saharan Africa reached 1.2 billion euros, a 19.5% increase like-for-like, well ahead of the 11.8% forecast. Hieronimus specifically highlighted Vietnam and Indonesia as markets with impressive growth levels, despite fierce competition from local brands. This is a clear signal: Vietnamese consumers are increasingly willing to spend money on high-quality beauty products.
Third, the segment diversification strategy is a valuable lesson. L'Oréal does not put all its eggs in one basket. They have mass-market products for the general public, professional products for salons, scientific products for dermatology, and luxury items for the elite. Each segment serves a different need, but all contribute to the overall growth picture. Vietnamese marketers can learn from this market stratification approach to avoid missing any customer group.
When Consistency is Rewarded
I have witnessed quite a few brands struggle during tough market phases. They cut marketing budgets, lower product prices, and chase temporary trends. And then, when the market recovers, they realize they have lost their positioning because no one remembers them anymore.
L'Oréal did the exact opposite. Throughout difficult times, they remained committed to their premiumization strategy. They continued to invest in R&D, acquire prestigious brands like the House of Creed, and expand their scientific skincare portfolio. They did not chase the crowd. They believed in long-term value.
And now, when the market bounces back, they are the ones benefiting the most.
The lesson here is not "sell expensive products." The lesson is: truly understand what your customers want, and consistently serve that need even when the surrounding market is in panic.
L'Oréal does not just sell cosmetics. They sell the feeling of being cared for, pampered, and being oneself. And in an unstable world, that is a gift everyone is willing to pay for.
Have you ever witnessed the "lipstick effect" in your market – when customers tighten their spending but remain willing to buy small items that bring joy? And if you are a marketer, how will you position your product to become the "small reward" customers seek out during tough times – instead of the first thing they cut? Share your thoughts below, because in this game, whoever understands consumer psychology wins!
0 Comment
Add your comment to this article