Cosmetics giant L'Oreal opens huge Indonesia plant

JABABEKA - Cosmetics giant L'Oreal on Wednesday opened its biggest factory in the world in Indonesia, as it seeks to profit from strong demand for beauty products in fast-growing Asia.

The French group, the world's biggest cosmetics company, said the factory outside Jakarta would churn out 200 million products next year, with the potential to raise its output to 500 million.

Joechen Zaumseil, L'Oreal vice-president for Asia-Pacific, said the 100 million euros ($130 million) plant in the Jababeka industrial zone would be its "production hub for Southeast Asia".

He said the company planned to double the number of its customers worldwide from its current level of one billion, and it hoped the majority of those new clients would be in Asia.

L'Oreal hailed Indonesia and Southeast Asia as "the new frontier of growth" -- its Asian sales have jumped by around 20 percent between January and September to 3.2 billion euros.

The huge new factory covers 66,000 square metres (710,000 square feet) and will have several hundred employees.

It will export 70 percent of its output to Southeast Asia, with the rest destined for the Indonesian market, the country's Industry Minister Mohamad S. Hidayat said at an opening ceremony.

The increasing demand for beauty products is driven by a growth in Indonesia's middle-class, as Southeast Asia's biggest economy maintains a strong growth rate above six percent, even as the global economy stumbles.

L'Oreal has seen its Indonesian sales grow 30 percent a year on average in the past four years -- the fastest growth it has enjoyed in any Asian country, Zaumseil said.

The cosmetics market in Indonesia, where L'Oreal has had a presence since 1986, is currently worth $1.5 billion, out of a total of $47 billion for the whole of Asia, he said.

"In 10 years, Indonesia will be in the top three markets in Asia-Pacific," he said, adding that the country would have 90 million new consumers in 10 to 15 years. He said L'Oreal wanted 60 million of them to use its products.

More production facilities would be needed in Asia in the next three to five years to cope with growing demand, he said, but stressed that factories would also be opened elsewhere, noting that sites had been set up recently in Russia and Mexico.

Jean-Philippe Blanpain, vice-president for operations at L'Oreal, said there were no plans to close production facilities in wealthier countries and shift production to places where it would be cheaper.

"We have a strategy to produce regionally. In principle, we will keep the number of factories that we currently have in Europe the same," he said.

"We make 25 percent of our luxury products in France, where we sell only 10 percent (of our goods)."