Contents

• Market Condition

• Company Dynamics

• E-commerce & Social Commerce

• Regulatory Compliance

Market Condition

1. According to the National Bureau of Statistics, the cosmetic retail sales in June 2023 reached 45.1 billion yuan, a growth of 4.8% YoY. In the first half of 2023, the total cosmetic retail sales increased by 8.6% YoY to 207.1billion yuan, reaching a record high.

2. According to the General Administration of Customs (GACC), in the first half of 2023, the import value of cosmetics in China declined by 8.7% YoY to 66.2 billion yuan. The decline was observed for four out of six months. In contrast, the export value of Chinese cosmetics witnessed significant growth, with a notable increase of 37% in the first five months of 2023.

3. The controversy surrounding the Fukushima wastewater discharge has sparked extensive discussions within the Chinese beauty industry. Consumers are concerned about potential nuclear contamination of cosmetic products and raw materials from Japan.

Consumers' concerns about cosmetic products and raw materials from Japan

4. According to Tmall Beauty, the clean beauty market in China is expected to achieve a compound annual growth rate (CAGR) of 10% from 2021 to 2024, surpassing the global clean beauty market's growth rate of 8%. The concept of clean beauty has evolved beyond basic skincare products like toners and moisturizers to encompass the entire skincare routine and makeup categories.

Company Dynamics

1. Le Labo, the prestigious niche fragrance brand under Estée Lauder, has made its highly anticipated debut in the Chinese mainland with the opening of its flagship store at Shanghai Xintiandi on June 1st. The store showcases Le Labo's signature perfumes, as well as body care, skin care, and hair care products. The exquisite perfumes are priced at 1,680 yuan for a 50ml bottle and 2,380 yuan for a 100ml bottle. In addition to the offline store, Le Labo has also launched its online store on WeChat Mini Program.

2. LVMH Perfumes and Cosmetics (Shanghai) Co., Ltd. has recently expanded its business scope to include the production of cosmetics in China. Industry experts speculate that as part of the growing trend to optimize supply chains, LVMH may be localizing its production in China. In April 2023, LVMH set up its Asia Research and Development Center in Shanghai. This move further demonstrates the company's commitment to strengthening its operations and presence in China.

3. Brenntag, a global leader in chemical and additives distribution, has announced its acquisition of Shanghai Saifu Chemical Development Co., Ltd., a prominent distributor of personal care chemicals in China. This strategic move is aimed at expanding Brenntag's footprint in the Chinese and Asian personal care chemical market. The acquisition reflects Brenntag's confidence in and commitment to the Chinese market, with the potential to drive the entry of more international raw materials, particularly niche ingredients, into the Chinese market.

4. After being acquired by Apex Brands under THE BEAUTY LAB COLLECTIVE, Snowberry, as a representative brand from New Zealand, has made a comeback in the Chinese market, with the opening of its flagship store on Tmall Global. As one of the early pioneers in introducing the concept of clean beauty to China, Snowberry’s key ingredient, blue copper peptides, caused a stir in the Chinese market. However, due to intense competition from emerging brands in the rapidly evolving Chinese beauty market, Snowberry faced challenges and subsequently withdrew from China in 2022. This latest re-entry by Snowberry marks its third attempt to tap into the Chinese market.

5. Bloomage Biotech and Fuyuan Investment have partnered to establish the Fuyuan Synthetic Biology Fund, the first industry fund in China focused on synthetic biology. This fund will primarily target biopharmaceuticals, biotechnology, and the application of biomedicine in sectors like functional foods, consumer goods, and cosmetics. Specifically in the cosmetic sector, synthetic biology is driving technological advancements and industrial upgrades through breakthroughs in ingredient research, cost reduction, efficiency improvement, and green and sustainable practices.

E-Commerce & Social Commerce

1. Douyin has officially rebranded its self-operated beauty business from "Meili XinXuan" to "Douyin E-commerce Self-operated Beauty." Seizing the opportunity of the 618 Shopping Festival, Douyin has officially launched the "Douyin E-commerce Self-operated Beauty Flagship Store" within its app, bringing this business into the spotlight. One of the major features of the store is that products are mainly sourced from domestic counters, ensuring a comprehensive and qualified supply chain.

2. According to third-party data agencies, the total GMV during this year's 618 E-commerce Shopping Festival amounted to 798.7 billion yuan, with a YoY growth of 14.7%. Specifically, the beauty category on comprehensive e-commerce platforms like Tmall and JD.com reached 40.6 billion yuan, experiencing a slight decline compared to the previous year. But the beauty category on Douyin achieved an impressive GMV of 15 billion yuan, marking a remarkable YoY increase of 69.12%. To gain more insights into this year's 618 Shopping Festival, please visit China's 618 E-commerce Shopping Festival Report 2023.

3. According to GACC, the total value of cross-border e-commerce imports in 2022 amounted to 527.8 billion yuan, a stable performance compared to the previous year. Among the imported goods, cosmetic products accounted for 28.4% of the total, signifying their notable presence in the cross-border e-commerce market.

Regulatory Compliance

1. In the first half of 2023, new cosmetic ingredients (NCIs) notified in China exhibited the following characteristics:

• NCIs sources: chemical sources remain dominant; plant extracts are on the rise;

• Use purpose: skin protectant, moisturizer and antioxidant account for more than half;

• Notifiers: Chinese domestic enterprises account for 67%;

• Future trends: the total number of NCI notifications is expected to grow, with a focus on ingredients that have already been allowed for use in cosmetics abroad.More detailed information on ChemLinked

2. On June 15, 2023, the China State Administration for Market Regulation (SAMR) issued the Guidelines on the Code of Conduct for Blind Box Operations (Trial). The Guidelines clearly stipulates the situations that food and cosmetics should not be sold in the form of blind boxes.

3. On June 5, 2023, China National Institutes for Food and Drug Control (NIFDC) released nine guidelines pertaining to the registration of Chinese domestic and imported special cosmetics, as well as high-risk NCIs. These guidelines provide clear details and time limits for the first registration, registration change, registration renewal and registration cancellation applications, which are highly informative for enterprises seeking guidance. More detailed information on ChemLinked