INSIGHTS
Monthly Digest: China Cosmetic Sector Review | Sep 2022
BY Rita BaoOct 08, 2022
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Contents

  • Market Condition

  • Company Dynamics

  • E-commerce & Social Commerce News

  • Regulatory Compliance

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Market Condition

1. According to the National Bureau of Statistics, in August 2022, the retail sales of consumer goods totalled 3.620 trillion yuan, a year-on-year (YoY) increase of 5.4%. The retail sales of cosmetics reached 28.8 billion yuan, declining by 6.4% on a YoY basis but increasing by 13.8% on a month-on-month (MoM) basis. The total retail sales of cosmetics from January to August 2022 dropped by 2.7% YoY to 245.3 billion yuan.

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Data source: National Bureau of Statistics

2. Based on the national import and export data released by the China General Administration of Customs (GACC), China's total import value in August was 1.59 trillion yuan, up 4.6% YoY. Specifically, the import value of cosmetics and personal care products was 12.82 billion yuan in August, a YoY decline of 6.42% and a MoM growth of 7.1%. The total import value of cosmetics and personal care products from January to August was 97.26 billion yuan, down 4.6% YoY.

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Data source: GACC

3. According to MKTindex’s data, the gross merchandise volumes (GMVs) of cosmetics (including skincare and makeup products) on Ali and JD platforms were under stress in August due to the emerging of new e-commerce platforms, the absence of top influencers because of their incompliant behaviors, as well as the low season after 618 shopping festival. Specifically, the GMV of cosmetics (including skin cares and makeup products) on Ali platforms was 18.29 billion yuan, down 20.0% YoY, but up 9.5% MoM. On JD platform, the data was 3.73 billion yuan, down 9.7% YoY, up 37.1% MoM. Notwithstanding the weak performance of traditional e-commerce platforms, emerging platforms such as Douyin maintained good momentum in e-commerce business. According to Feigua’s data, the total GMV of the beauty category on Douyin e-commerce platform grew by 27% YoY to 10.36 billion yuan in August 2022, attesting to Douyin's increasing significance as one of the key channels for beauty brands promotion. Read more.

4. According to Sinolink Securities's research on the performance of Chinese beauty companies in H1 2022, the advantages of beauty giants have become more prominent. Leading beauty companies such as Proya and Botanee maintained rapid growth in both revenue and profit. In Q2 2022, Proya's revenue and profit increased by 35% and 19% YoY, and Botanee's revenue and profit increased by 37% and 34% YoY. In addition, some companies saw an upsurge in revenue. The cosmetics business of Lushang Group and the functional skincare business of Bloomage Biotech soared in H1 2022 with a YoY increase of 62% and 77% in revenue. The performance, as mentioned above, unveils a landscape of beauty industry in which strong players become ever dominant despite COVID-19’s impact and intensified competition.

5. According to the Insights in the Chinese Collagen Market released by Beauty Evolution Big Data, the scale of China's collagen market was about 28.8 billion yuan in 2021, and the scale of recombinant collagen was 10.8 billion yuan. With a CAGR of 63% from 2017 to 2021, the market scale of recombinant collagen is estimated to exceed 100 billion yuan in 2027. In the past three years, the application of collagen-based ingredients in skin care products is mainly concentrated on essences, lotion, and cream categories with increasing attention to sunscreen. Chinese brands are dominant in the competition, with Comfy and Collagen brands of Giant BioGene company outperforming other brands.

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Data source: Beauty Evolution Big Data

 

Company Dynamics

1. Prada's fragrance and beauty boutique officially landed in Shanghai's Réel Mall with newly launched product Paradoxe. It marks Prada's first fragrance store in China. On the same day, Prada Beauty and Tmall entered strategic cooperation. Prada's move reflects the recent wave of high-end brands breaking into the booming Chinese perfume market.

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2. L'Oréal China's subsidiary Shanghai Meicifang Investment Co., Ltd. conducted its first minority equity investment in the Chinese high-end perfume brand Documents. This investment revealed L'Oréal 's insights and confidence in the vast Chinese perfume market, and further exposed the popularity of perfume brands with oriental or Chinese local elements, aesthetics and lifestyle. This breakthrough proved the Chinese market's significance in L'Oréal 's global landscape.

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3. BASF announced a strategic investment in Ingredi—a Chinese start-up company that provides botanical actives and solutions for the personal care industry. According to BASF, this cooperation empowers it to explore new formulas of personal care products and commercialize those formulas for the expanded global personal care market.

4. Shiseido launched its open innovation program—fiBona, in China. Under the themes of "medical beauty technology" and "holistic beauty technology", Shiseido has called for the participation of Chinese start-ups in collaboration with Plug and Play China to provide efficient beauty solutions for Chinese consumers. In recent years, beauty giants have begun penetrating emerging areas through cooperation with start-ups, to complement their brand matrix for broader categories and positioning. On the other hand, through collaboration with local start-ups, beauty giants are able to accelerate the localization with deeper insights into the local market and consumers.

图片6-1.jpg5. At the investor analysis conference, Coty Group announced its new strategy for the skin care category, with a focus on the company's high-end skincare brands, including Lancaster, Orveda, philosophy, Kylie Skin and SKKN by Kim. In addition, based on strong sales momentum and optimistic expectations, Coty raised its sales growth forecast for the first quarter of fiscal year 2023 to 8- 9%. Besides, Coty indicated that Lancaster's business in China was crucial to its skincare strategy. According to Sue Nabi, the CEO of Coty Group, Lancaster will be transformed into a scientific skincare brand with emphasis on the duty-free market in Chinese mainland, especially in Hainan due to the duty-free policy for passengers leaving Hainan. 

6. Biohyalux, a leading Chinese hyaluronic-acid skincare brand of Bloomage Biotech, launched an integrated marketing campaign under the theme of "Grow with Tenacity" on the Douyin E-commerce Super Brand Day. As this campaign highlighted female’s power, it struck a chord with potential customers and contributed to brand building. This 13-day marketing campaign boosted an increase of 313% in Biohyalux’s GMV, and an explosive growth of 2,000% in the search for Biohyalux. Bloomage Biotech's functional skin care products cover four major brands: Biohyalux, Quadha, Medrepair and Bio-Meso. Supported by the expansion of online channels, the functional skincare business achieved 77.17% revenue growth in H1 2022.

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7. Winona launched its new product—Soothing Moisturizing Extra Care Essence, and participated in People's Daily's "Chinese Innovation" feature program on the Douyin platform. Moreover, Winona and experts in dermatology jointly released the 2022 China Precise Repair Guide for Sensitive Skin. Supported by professional endorsement from dermatologists and the national-level media’s credibility, Winona further demonstrated its strength in precisely repairing sensitive skin.

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8. Proya and China Education Network Television jointly launched a public-benefit film with the theme of anti-bullying. This film received over 16.8 million views and brought related topics 140 million views . This public welfare activity enhanced Proya's image as a brand with strong social responsibility. The success of this branding event also implied that, as commercial marketing campaigns go viral, differentiated method may be advantageous in establishing an impressive brand image.

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9. Chinese high-end beauty brand Maogeping and Alipay launched a limited-edition digital collection of payment codes during the Mid-Autumn Festival. This digital collection integrated new technologies with Maogeping’s continued commitment to Chinese culture and aesthetics. Indeed, faced with the trend of Metaverse, Chinese and international beauty brands such as Chando, Lancôme, Estée Lauder, and Clinique have successively launched digital collections, catering to the interest and consumption demands of the Gen-Z.

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E-commerce & Social Commerce News

1. According to Data Insider, in H1 2022, despite the decline in the total retail sales of cosmetics in China, the skin care category on Douyin e-commerce platform outperformed the market, with the total sales increasing by 108% YoY to 28.59 billion yuan. Moreover, the total sales of skin care products on Douyin platform reached one-third of that on Ali platforms, making Douyin a critical channel for skincare brands. Skin care products with explosive sales growth are mainly masks, eye creams and facial skin care kits, with the main functions of whitening, lightening and anti-wrinkle.

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Data source: Data Insider

2. According to Data Insider, in August, L'Oréal's GMV on Douyin e-commerce platform soared by leaps and bounds to 136 million yuan, up 120% MoM, exceeding half of L'Oréal's total GMV in H1 2022. L'Oréal secured this remarkable result by leveraging FACT (short for Field, Alliance, Campaign and Top KOL) marketing mix on Douyin platform. Specifically, through operating self-owned accounts, establishing influencer matrix targeting different groups of potential customers, participating in diversified platform-supported marketing activities, and cooperating with Top KOL for endorsement, L'Oréal won massive traffic that contributed to GMV surge.

3. Tmall Global announced the latest new-seller attraction policy. Four business models are provided for cross-border merchants' flexible settlement, including Tmall Global Store, Tmall Direct Import, Tmall Global Ministore, and Tmall Overseas Fulfillment. To relieve the financial pressure of cross-border merchants, Tmall Global reduces the deposit by 50% and exempts them from the official operation commission for the first three months. Moreover, in the upcoming Double 11 Shopping Festival, merchants can enjoy a 40% discount on the service fee for speedy payment collection. In addition, Tmall Global will support many other aspects such as marketing resources, incubation of new brands, and cross-border supply chain improvement in the Double 11 Shopping Festival and daily operations.

 

Regulatory Compliance

1. On September 6, 2022, the Endangered Species Import and Export Management Office of China and GACC jointly issued a new version of the Commodity Catalog of Import and Export Wild Fauna and Flora. More details on ChemLinked.

2. On September 8, 2022, China's State Council released a notice, announcing to further strengthen the governance of excessive packages for commodities. Departments shall clarify and detail requirements to manage excessive packaging through the whole supply chain, covering production, sales, delivery and recycling stages. Commodities like cosmetics, health food, edible agricultural foods, takeaway food, and express parcels are underlined. More details on ChemLinked.

3. On September 13, 2022, China National Medical Products Administration released a new cosmetics supplementary testing method, BJH 202202 Determination of Eight Components Including Elubiol in Cosmetics, which specifies the determination method of eight prohibited ingredients. More details on ChemLinked.

Rita Bao
ChemLinked Market Research Analyst
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