COVID-19 implications

1. The outbreak of COVID-19 has seen demand for masks, disinfectants, and sterilization products skyrocket. In addition to traditional daily chemical enterprises, several cosmetic enterprises have rolled out or plan to produce hand sanitizer products, including Chando, Spring-Summer of JALA Group, One Leaf of CHICMAX Group, Geoskincare, Manuka Bee, and JMsolution, etc.

2. Sales of facial, lip, and eye makeup have been hit hard by the epidemic. There are several reasons: including serious disruption to the supply chain, particularly logistics, offline shops being forced to close, and consumer demand dropping off. However, as lockdown goes on, we are seeing demand beginning to rebound. 

3. Sales data on L'Oreal's February 2020 performance shows a significant YOY increase in online sales of beauty and skincare products in China. The increased spike in online sales has been able to offset the negative impact of the epidemic on bricks and mortar retail.

4. Airport retail sales have fallen off drastically because of the epidemic, and the beauty industry has suffered most. A lot of domestic airport duty-free shops have begun special-offer promotion campaigns to stimulate sales. In the duty-free stores of the China Duty-Free Group, consumers that purchase three or more pieces of Estée Lauder products can avail of a 40% discount, including their high-end brand LAMER. 

5. Department retail group Yintai (Intime) launched a "BA Home Live-streaming" campaign with Taobao and has achieved wonderful results. The number of online customers of one BA in 3 hours was equivalent to half a year's worth of customers in their bricks and mortar locations.  The turnover of one live-streaming session was equal to a week’s turnover in their bricks and mortar malls. Beauty advisors of many cosmetic brands like Estée Lauder, Lancôme, Origins, and Kiehl’s have joined this campaign.

Regulatory compliance

1. As an interim measure to help combat the spread of COVID-19, both Guangdong and Zhejiang Provincial Medical Product Administrations will no longer accept the in-person submission of imported cosmetic filing certificates. During the temporary hiatus on in-person submission, hardcopy filing dossiers should be submitted by courier after an initial application is made online.

2. Guangdong Provincial Medical Product Administration has issued a notice on the supervision and sampling of cosmetics recently. Biaoting and Softto, two skincare brands that are familiar to Chinese consumers, violated Chinese national standards.

3. Jiangsu Provincial Medical Product Administration has released an analysis report on hand sanitizer product quality supervision and spot check. A total of 30 batches of products were spot-checked, and 28 batches were qualified. The overall pass rate was 93.3%.

4. The National Medical Product Administration has issued two circulars announcing 160 batches of fake cosmetics, most of which were hair dye products.

Company dynamics

1. Estée Lauder plans to build a world-class R&D center in China, according to the group President and CEO Fabrizio Freda. The center will use cutting-edge technology and equipment to promote beauty innovation in China.

2. A number of beauty brands have released limited edition products for Valentine's Day using traditional valentine day tropes in their marketing and package design. Etude House has a co-branded product with Hershey’s and will launch two chocolate-shaped eye shadows and lip gazes.

3. L'Oreal will sell its personal care fragrance brand Roger&Galle, which the group acquired in 2008. Roger&Galle entered China in 2016. According to its Tmall flagship store sales data, the brand has struggled to gain any meaningful traction in China. Even its top-selling item sold no more than 1000 units a month.

4. A lot of overseas cosmetic enterprises have made donations to help China fight against the COVID-19. For example, L'Oreal China, a subsidiary of L'Oreal, donated RMB 5 million ($716 thousand) to the Chinese Red Cross Foundation. Shiseido Group donated RMB 1 million ($143 thousand) to Wuhan Charity Federation and then donated another RMB 10 million ($1.43 million) to the Charity Fund of Shanghai. Estée Lauder donated RMB 5 million ($716 thousand) to the Red Cross Society of China.

Financial results

1. Shanghai Jahwa's 2019 revenue reached 7.597 billion yuan ($1.09 billion), a year-on-year increase of 6.43%. Among its brands, Dr. Yu has performed best, with sales increasing by nearly 80%.

2. In the 2019 fiscal year, L'Oreal’s sales rose 8% year-on-year to 29.87 billion euros (229.623 billion yuan). This was the group’s highest year-on-year revenue growth since 2007. The Asia Pacific region was the largest contributor to sales.

3. Estée Lauder’s sales rose 15% to $4.62 billion (32.282 billion yuan) from October 1, 2019, to December 31, 2019. The company lowered its profit forecast for the fiscal year 2020 in response to the COVID-19 pandemic.

4. In the fiscal year 2019, Shiseido achieved annual sales of 1.1315 trillion yen (72.049 billion yuan), up 5.7% from a year earlier. Purchases by tourists were the group's fastest-growing business sector in 2019.

5. In 2019, Unilever's overall sales reached 52 billion euros (about 400 billion yuan), but the year-on-year growth rate was only 2.9%, lower than expectations. Sales in the beauty and personal care sector rose 2.6% year on year to 21.9 billion euros (about 168.354 billion yuan), showing a slower growth rate.

6. According to P&G’s Fiscal Year 2020 Second Quarter Results, it achieved sales of $18.2 billion (about 127.172 billion yuan), up 5% from a year earlier. The beauty division, which includes brands such as Olay, Head&Shoulders, led the way with 7% year-on-year growth, translating to a valuation of $3.598 billion (25.141 billion yuan).

7. In 2019, AMORE PACIFIC's sales reached 6.2843 trillion won (37.076 billion yuan), up 3.4% from the previous year. Sales in the beauty department were 6.5533 trillion won (38.795 billion yuan), up 3.7% from a year earlier.

8. In 2019, sales of LG Household & Health Care reached 7.6854 trillion won (45.342 billion yuan), achieving year-on-year growth of 13.9%. The group said it had realized 15 consecutive years of growth in sales and operating profits. High-end cosmetics are still the most significant contributor to this growth in revenue. Brands including Whoo, Su:m37°, and O HUI achieved a high growth rate of 48% in sales in major overseas markets such as China and Japan.

Disclaimer: All images used are from the internet.