Monthly Digest: China Cosmetics Industry Review | July 2020

Market updates

1. China fashion retail companies Top100 report 2019-2020 was released in July. The total revenues of these TOP100 companies reached 732.84 billion yuan, increasing by 12.47%. 60 companies disclosed their proportion of online sales. Among them, most companies’ online sales accounted for 10% - 30% of total sales (31 companies), and only 7 companies saw online sale proportions reaching 30%-50%. Perfect Diary, Yujiahui (御家汇), and PROYA achieved a high online sale proportion rate of over 50%.

2. One week after implementing the new tax-free shopping policy, the total shopping volume on Hainan Island exceeded 450 million yuan. The tax exemption amount reached 65.71 million yuan, with an average daily tax exemption of 9.39 million yuan, an increase of 58.2% compared to the average daily increase in the first half of the year.

3. Bilibili, one of the top live-stream/video platforms in China, will join the live-stream e-commerce competition after Douyin, Kuaishou.

4. After the price rise of La Mer and Estee Lauder, Whoo, a high-end Korean beauty brand, announced to increase its products’ price by from 2.4% to 9.5% in August. It seems that price hike has become trending among high-end beauty brands.

Duty Free Store in Hainan

Company dynamics

1. Pechion, a domestic skincare brand, cooperated with Merck to launch a series of anti-aging new products tailored for Asian women’s skin.

2. L’Oreal Group announced to complete the deal of selling its perfume and personal care brand Roger & Gallet to a French company, Impala.

3. Watsons App cooperated with SF Express to provide “Fastest Half-day Delivery” for consumers. Now this service has covered 31 provinces, in a total of 326 cities.

4. On July 14, PIEN TZE HUANG (片仔癀), a traditional domestic skincare brand, released its half-year financial report. The report showed that in the first half of 2020, Pien Tze Huang's total revenue was approximately 3.2 billion yuan, an increase of 12.15%. Operating profit reached 1 billion, a year-on-year increase of 15.4%; net profit was 860 million yuan, a year-on-year increase of 15.32%.

5. On July 15, Clarisonic, a beauty instrument brand under the L'Oréal Group, announced on the brand’s official website and Instagram account that it would be officially closed on September 30, 2020.

6. On July 21, L’Occitane Group announced unaudited data for the first quarter of the Group’s 2021 fiscal year. In the three months ending June 30, 2020, L’Occitane Group achieved sales of 274 million euros (approximately RMB 2.2 billion), a decrease of 22.2%. In this period, the growth rate of online channel sales was as high as 95.8%, accounting for 56% of total sales in the first quarter. The Group’s flagship brands L’Occitane and ELEMIS were greatly affected by the epidemic in sales, decreasing by 25.7% and 28.8%, while L’Occitane’s third-largest brand Lime Life achieved a strong growth of 51.6% against the trend. By region, L’Occitane sales in the United States in the first quarter were fewer than 60 million euros (about 480 million yuan), a year-on-year decrease of 14.2%. But in mainland China, L’Occitane achieved 44 million euros (about 350 million yuan) in sales in the quarter, an increase of nearly 25%.

7. On July 21, Japan's Yakult Group officially introduced its cosmetics into Tmall Global, opening "Yakult Overseas Flagship Store." The store's brands include LACTDEW S.E., REVECY WHITE, PARABIO AC, IKITEL, and others, covering cream, serum, facemask, face cleanser, and other categories. The price range is large, ranging from 100 yuan to 2,000 yuan.

Cosmetics from Yakult

8. On July 23, Unilever announced the second quarter and first half of 2020 earnings data. As of June 30, its quarterly turnover was 13.3 billion euros (approximately 108.2 billion yuan), a decrease of 3.1%. In the first half of 2020, the group's overall turnover fell 1.6% to 25.7 billion euros (approximately RMB 209 billion). The e-commerce business in the second quarter witnessed a rapid increase. Based on the 62% growth of e-commerce business in the entire market, the growth rate of e-commerce sales in the Chinese market reached 59%. Cleaning products have experienced explosive growth during the global spread of the epidemic. The sales of hand sanitizer and disinfection products of the company's multiple brands have increased by about 600 times year-on-year.

Data browse

1. From January to June this year, the total retail sales of consumer goods in China was 17.2256 trillion yuan, a year-on-year decrease of 11.4%. Among them, the total retail sales of cosmetics were 147.7 billion yuan, a year-on-year reduction of 0.2%; the total retail sales of cosmetics in June was 32.6 billion yuan, a year-on-year increase of 20.5%, ranked the first in all sectors.

2. MINISTRY OF COMMERCE OF THE PEOPLE’S REPUBLIC OF CHINA released a report named E-COMMERCE IN CHINA 2019. The report shows some highlights: In 2019, the nationwide e-commerce transactions amounted to 34.81 trillion yuan, of which online retail sales amounted to 10.63 trillion yuan, increasing by 16.5%, and e-commerce employees reached 51.265 million; the online sales in the rural areas reached 1.7 trillion yuan, a YoY increase of 19.1%; new models are emerging, including live stream e-commerce, social media e-commerce, and cross-border e-commerce. Meanwhile, the development of e-commerce has promoted the integration of online and offline businesses; online retail contributed to 45.6% of the growth of total retail sales.

Regulatory compliance

1. On July 10, China Ministry of Industry and Information Technology solicited public consultations on regulatory changes of 145 industry standards, including the abolishment of QB/T 1994-2013 Bath Agents and Shower Agents and QB/T 2654-2013 Hand Sanitizer.

2. China National Institutes for Food and Drug Control announced that from July 13 cosmetic companies or responsible agents shall submit the scanned copies of special use cosmetics initial registration dossiers. The USB flash disk with the scanned copies, together with the paper dossiers, shall be expressed to the NMPA Acceptance Center or submitted in person. The scanned copies shall be in full-color and PDF format, must not be encrypted and are allowed to be copied. A scanned letter of commitment with a signature and stamp to ensure the consistency of dossiers shall be submitted.

3. On July 14, Guangdong MPA released the Annual Report on the Safety Risk Management of Cosmetics (2019-2020). The report introduces the development of Guangdong's cosmetics risk supervision model, the risk supervision status quo in 2019, and the risk monitoring results, predict the cosmetics risk trends in 2020, and formulates a risk supervision plan in 2020.

4. China released 3 National Standards for public consultation. The 3 draft national standards are the determination of banned trichloroacetic acid in cosmetics, determination of azelaic acid in cosmetics by gas chromatography method, and determination of synthetic musk in cosmetics by gas chromatography-mass spectrometry. The public consultation period will end on September 9, 2020.

5. On July 10, 2020, NDRC (National Development and Reform Commission), together with eight other departments jointly released, issued Notice on Making Solid Progress in Treatment of Plastic Pollution, effective immediately. It clarifies that daily chemical products containing plastic microbeads are rinse-off cosmetics, toothpaste, and toothpowder with intentionally-added solid plastic particles that are less than 5 mm in size and are used for scrubbing, exfoliating, cleansing, etc. The manufacture and sale of these products are banned by the end of 2020, and by the end of 2022 respectively.

6. On July 24, 2020, China SAMR (Standardization Administration) approved 9 national standards for daily chemicals, including Consumer Product Safety Guidelines, Essential Oil Nomenclature and Characterization.

7. In July, China National Medical Products Administration released four CSAR subsidiary regulations for public consultation. They are

China Cosmetics Manufacture and Operation Supervision and Management Measures

Administration Measures on Cosmetic Registration

Cosmetic Classification Rules and Catalog

Technical Guidelines for Cosmetic Safety Assessment