French cosmetics giant L'Oreal is to expand its research and development (R&D) facilities in China to help it better understand its customers here.

In a deal signed yesterday, the company bought a 20,000-square-metre plot of land in Pudong, Shanghai close to its R&D centre in the Jinqiao Export Processing Zone.

Didier Saint-Leger, director of L'Oreal R&D China, refused to disclose the purchase price, but said it was "a large sum of money."

He said the land is earmarked for an extension of the firm's research facilities.

"We are still in the early stages," Saint-Leger said. "But we hope to start the project soon and finish it in 2008."

Last September, L'Oreal unveiled its Shanghai R&D centre one of its 14 research facilities in the world covering 3,000 square metres.

It sits next door to the factory compound of Yue-Sai, a local cosmetics producer acquired by L'Oreal in 2004.

Over the past half year, the centre has mainly been upgrading cosmetic products for Yue-Sai, a job that is half-way completed.

"Yue-Sai is selling very well with the new formulas," Saint-Leger said.

The centre will start other operations in July using traditional Chinese medicines (TCM) as additional ingredients in future L'Oreal products.

"We plan to integrate the philosophy of TCM into our products," said Saint-Leger. "It's a big subject and takes a lot of research."

Repeated purchases of land reflects the long-term commitment by L'Oreal to China.

Saint-Leger said: "We wanted to buy the land first and then consider the details (of the project)."

The purchase follows a tour of China by L'Oreal's global CEOs both the incumbent Lindsay Owen-Jones and the incoming Jean-Paul Agon several months ago.

"Apart from Yue-Sai, we want to adapt many of our products, especially the whitening series, to the needs of Chinese customers," Saint-Leger said.

"We want to study the special skin and hair qualities of Chinese and better serve them."

L'Oreal markets 17 skincare and hair care brands in China, all imports except for products from Yue-Sai and Mininurse, which L'Oreal also owns.

In terms of sales revenues, L'Oreal earned 290 million euros (US$348 million) from China in 2004, less than 2 per cent of its global total.

Last year, the group netted 14.5 billion euros (US$17.4 billion) in global sales, up 6.5 per cent year-on-year.

China sold 58 billion yuan (US$7.25 billion) worth of cosmetics in 2004, up nearly 12 per cent over 2003. Another rise of 18 per cent is projected for 2005 to 68 billion yuan (US$8.5 billion) in sales.

Source: China Daily