L'Oreal brand and Revlon call time in China

While most multinational firms are fighting to make their way into mainland China, two well-known Western beauty brands are calling it quits.

L'Oreal, the world's largest cosmetics company, recently announced it would be pulling its Garnier brand out of the mainland market, the same week that United States beauty stalwart Revlon said it would completely exit the country.

The news is at odds with the mainland cosmetic industry's impressive top lines numbers. Industry turnover totalled 24 billion yuan (HK$30 billion) in 2010 and, despite some sluggishness over the past year, is projected to double over the next two years, according to analyst forecasts. It's a young, growing segment and penetration is low, but the market is highly fragmented.

Mainland consumers saw little reason to buy mass market Garnier and Revlon products when they were priced higher than local brands and also were not perceived to offer any added benefits.

"[Chinese consumers] want to see the beauty benefits and prefer to invest in more quality products," research firm Ipsos' associate director Bertrand Ternat said. "It's not too big an investment. Even a pack of cream is not that expensive if you use it in the long run and think of the daily cost … Garnier being present at supermarkets decreased its image. They don't believe in the effectiveness in the low positioning."

Revlon also confused customers by selling at supermarkets and also at high-end department store beauty counters.

Chinese brands such as Inoherb, PehChaoLin and Herborist are increasingly forces to be reckoned with and are improving product quality and sales channels distribution said Li Jianan, a cosmetics analyst with CI Consulting.