Monthly Digest: China Cosmetic Sector Review | Nov 2023

Contents
Market Condition
Company Dynamics
Financial Results
E-commerce
Regulatory Compliance

Market Condition

1. According to the General Administration of Customs, the cosmetic import value was CNY 11.61 billion in October, down 22.7% YoY. The cumulative import value from January to October reached CNY 107.93 billion, with a 13.9% YoY decrease. It is noteworthy that after experiencing growth in February and March, cosmetic import data has exhibited a continuous downward trend for seven consecutive months this year.

2. According to the National Bureau of Statistics, the retail sales of cosmetic products in October amounted to CNY 31.74 billion, a 1.1% YoY increase, a slight slowdown in growth. The cumulative cosmetic retail sales from January to October increased by 6.2% YoY to CNY 329.1 billion, reaching a new high.

3. The 6th China International Import Expo took place in Shanghai from November 5 to 10. The expo attracted over 3,400 exhibitors, including 289 Fortune 500 companies and key industry leaders. International beauty giants such as L'Oréal, Estée Lauder, Shiseido, Coty, P&G, Unilever, Amorepacific, Kao etc, showcased an unprecedented array of new products, technological innovations, and strategic plans.

4. Short drama marketing has become a fresh and effective traffic strategy for beauty brands. Compared to live streaming and product seeding notes, short dramas offer a more captivating narrative, capable of conveying brand messages with a softer approach. Moreover, unlike traditional television commercials, short dramas do not incur exorbitant endorsement fees and seamlessly incorporate sales links to drive conversions. Chinese beauty brands have embraced this trend to increase exposure and boost sales.

The poster of Chinese beauty brand Kans' short drama "Always For You" surpassing 1 billion views

5. More consumers are opting to purchase beauty products through instant retail platforms like Meituan and Eleme, with Generation Z accounting for 20% of this group. The key strength of instant retail lies in its emphasis on convenience and rapid delivery, effectively addressing consumers' urgent needs. According to Meituan Instashopping Platform, the sales of beauty and personal care products during this year's Double Eleven shopping festival surged by an impressive 196%, with a staggering 426% increase in the sales of high-end cosmetics

Company Dynamics

1. Shiseido's "ULTIMUNE FOUNTAIN" scheme has officially launched in China. The standout feature of this scheme is the "Refill" option, marking an innovative stride in the Chinese cosmetics industry's commitment to sustainable practices. It's worth noting that one of the prerequisites for the scheme’s launch is obtaining a license for on-site personalized cosmetic services, ensuring security and compliance in operations.

2. Japanese beauty giant Pola Orbis Holdings announced to establish a subsidiary-Pola Orbis (shanghai) enterprise management Co, Ltd, to supervise its regional operations in the Chinese market. According to Pola Orbis Holdings, starting from 2024, the group aims to leverage local leadership to navigate market dynamics in diverse business regions, thereby accelerating global expansion. China is identified as a pivotal market driving the group's growth on the international stage.

3. LONGTAKE, the personal care brand known for its nature-inspired fragrance therapy under the Amorepacific Group, has partnered with the prominent Chinese brand management company, Ruoyuchen. In this strategic collaboration, Ruoyuchen takes on the role of LONGTAKE's cross-border general agent in China, undertaking comprehensive responsibilities for the brand's cross-border promotion and sales initiatives. Notably, LONGTAKE's Tmall global flagship store has been officially launched.

4. SEPHORiA, Sephora's beauty carnival, made its debut in Shanghai from November 17 to 19, attracting over 3,000 consumers. SEPHORiA unveiled 146 exclusive new products of 52 brands, and also featured master classes covering skincare, makeup and styling skills, as well as a diverse range of lifestyle and trend-related content. This multifaceted approach is designed to engage a broader consumer base and foster a deeper recognition of the SEPHORA brand.

5. Confime, the recombinant collagen skincare brand under Giant Biogene, has recently opened its first flagship self-operated store in Xi'an. Previously, apart from its robust online presence, Confime primarily reached the offline market through channels such as beauty specialty stores, chain supermarkets, and pharmacies. Nevertheless, the intrinsic value of a brand-operated store remains unparalleled, as the profound manifestation of brand value necessitates direct, in-person interactions with consumers. Additionally, it is noteworthy that during this year's "Double Eleven" shopping festival, Confime achieved a remarkable YoY growth of over 100% in its overall GMV across online channels.

6. The Chinese perfume brand Boitown has introduced a new perfume series named Ruyin, exclusively available at the Shanghai Jade Buddha Temple. The Ruyin perfumes are designed to embody blessings such as "blessed marriage," "good fortune," "good health," "wisdom," etc. Boitown strategically aligns with the growing interest in temple culture, marking the first collaboration between a perfume brand and a temple in China.

7. Luzhou Laojiao, one of China's leading liquor brands, has unveiled a beauty series named "Bai Diao," covering facial masks, shower gel, and shampoo. Positioning itself as "Chinese Baijiu Cosmetics," the series incorporates "Chinese Baijiu by-products" as a core ingredient, venturing into innovative avenues of Baijiu-based skincare. It's worth noting that Luzhou Laojiao has previously entered the beauty sector. In 2016, the brand collaborated with the perfume brand Scent Library to introduce a co-branded perfume. Subsequently, Luzhou Laojiao entered into a cross-marketing collaboration with the beauty brand Florasis.

8. Beijing Mo Yan Customized Biotechnology Co., Ltd. has unveiled its personalized cosmetic service experience center, marking the official launch of personalized cosmetic services in Beijing.

E-commerce

According to Syntun, in this year's Double Eleven Shopping Festival, the overall GMV of beauty products on comprehensive e-commerce platforms (including Taobao Live), amounted to 78.6 billion yuan, reflecting a 4.38% decline compared to the previous year. Looking at specific categories, skincare products achieved a GMV of 58.2 billion yuan, down 4.0% YoY, and makeup products decreased by 5.6% YoY to 20.4 billion yuan.

Financial Results

Regulatory compliance

1. On November 7, 2023, China officially enacted the Convention of Abolishing the Requirement of Legalisation for Foreign Public Documents. According to it, effective since November 7, notarized documents essential for importing cosmetics, new cosmetic ingredients, and toothpaste from certain countries, including authorization letters and GMP documents, no longer require consular (embassy) legalization. More information on ChemLinked

2. On November 17, 2023, China National Medical Products Administration (NMPA) disclosed that a Japanese cosmetic company failed a recent unannounced inspection organized by the NMPA. The company was found to have made unauthorized changes to the production process of a black hair cream product, suspecting that its cosmetics production had not been in accordance with the technical requirements stated in the cosmetics registration dossiers. This marks the first instance of an overseas company receiving unannounced inspections under China's new cosmetics regulations, signaling heightened official supervision in the cosmetics market.

3. On November 22, 2023, China National Medical Products Administration (NMPA) unveiled the definitive edition of the Provisions for Management of Toothpaste Notification Dossiers (the Provisions). Comprising 3 chapters, 32 articles, and 3 annexes, the Provisions specifies the responsibilities and obligations of toothpaste notifiers, the user-information-related dossiers, and the necessary documentation for initial toothpaste notification, etc. More information on ChemLinked

Disclaimer: All images used in the article are from the Internet.