INSIGHTS
Monthly Digest: China Cosmetic Sector Review | Feb 2023
BY Jekyl HeMar 16, 2023
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 Contents

  • Market Condition

  • Company Dynamics

  • Financial Results

  • E-commerce & Social Commerce News

  • Regulatory Compliance

Market Condition

1. China has become the third-largest market for French cosmetics. According to the French Federation of Cosmetics Enterprises, the total export sales of French cosmetics hit 19.2 billion euros in 2022, with a year-on-year growth of 18.8%, among which 1.95 billion euros were exported to China, a 3.1% increase YoY.

2. The total number of notified imported general cosmetics in 2022 was approximately 110,000, decreasing by 35% compared with 2021, since overseas brands need a longer time to adapt to the new policy. France, South Korea, the United States and Japan were the top 4 sources of imported products. Overseas brands such as Estee Lauder, Dior, etc., are the primary notification applicants of newly imported products.

3. In February, there were 15 cases of financing in the cosmetic industry, with the total value of approximately 1 billion yuan. The investments mainly involve hair care products, beauty technology, functional cosmetics, aesthetic medicine enterprises, cross-border e-commerce platforms, etc.

4. Guangzhou government proposed to raise Guangzhou’s output value of cosmetics to approximately 150 billion yuan with a number of leading enterprises and well-known brands by 2025. By 2035, Guangzhou will be built as a global cosmetic manufacturing center and consumption center. To achieve these goals, the government is expected to launch preferential policies for companies established in Guangzhou.

Company Dynamics

1. Natura &Co, a Brazilian cosmetics giant, is planning to sell its highly profitable brand, Aesop, to relieve financial pressure. Due to Aesop’s strong profitability and uniqueness, its valuation may come up to 2 billion dollars or even higher. Many enterprises like LVMH, L' Occitane, CVC Capital Partners, etc., are in fierce competition to acquire it.

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2. Myriam Cohen-Welgryn, global president of L'Oreal Active Health Cosmetics, said publicly on LinkedIn that the original L'Oreal Active Cosmetics was officially renamed L'Oreal Dermatological Beauty, which signified L'Oreal’s more attention to consumer skin health issues and participation in dermatology track.

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3. This year, many notable cosmetic brands open offline stores with sophisticated technologies in China. Shu Uemura opened the brand’s first offline flagship store in Shenzhen C Future City on February 11. This flagship store can provide consumers with detailed facial analysis through AI technology and recommend suitable make-up. Biotherm launched its first offline self-operated shop in Shanghai on February 14, which attracts customers with interactive games and product trials by digital technology. Kans, a brand under one of the leading Chinese cosmetic enterprises Chicmax, also opened its first offline experience centre at Shanghai Hongqiao International Airport on February 14. Equipped with an imported skin detector on a par with professional research institutions and hospital dermatology departments, the experience centre can offer customized solutions for consumers’ skin problems and recommend corresponding products.

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4. Two cosmetic brands, Revlon and e.l.f., announced withdrawal from the Chinese market. Revlon’s official flagship store on Tmall platform issued a notice, indicating the store’s plan to terminate its operation on March 30, 2023. American cosmetic brand e.l.f also released notices on its Tmall and TikTok flagship stores, implying that the brand will drop out of the Chinese market on March 31, 2023. The commodity in its Tmall flagship stores will be pulled off the shelf on March 15, 2023. The withdrawal of the two brands is primarily due to their lack of localisation strategies and promotion of products.

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5. Sidekick, a skincare brand under Shiseido for young Asian males, rolled out two new essence products on February 15. One serum product is used for relieving skin problems like skin darkness and roughness, and the other is for improving oily skin. The two products are currently available in the brand’s Tmall flagship store.sidekick.png

6. Cosmax launched a “texture measurement” technology that can predict the use sense of cosmetics without wearing and express the sense as a quantitative value, which helps accelerate product development. In addition, this technology can be extensively applied in the development of customized cosmetics, by precisely adjusting the use sense according to the customer needs.

7. Tmall and Spanish cosmetic giant Puig, will jointly launch a scent visualiser tool, to help consumers “see” the perfumes’ aroma through a database containing 1400 pictures of perfume materials. Trialed for 7 weeks, the tool supports 25 international brands. The results showed that the GMV of each brand would increase by 5% on average for adding a picture to every perfume.

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Financial Results

Company

Revenue

Growth Rate

Note

L'Oreal

(FY 2022)

EUR 38.36 billion

18.5%

1. L'Oreal saw strong sales growth in 2022 and remarkable performance in all divisions and zones. The sales reached 38.26 billion euros, with a reported increase of 18.5%. The operating profit came up to 7.46 billion euros, with a YoY increase of 21%.

2. The sales in North Asia were 11.32 billion euros, with a reported increase of 14.8%. In the Chinese Mainland, despite the impact of public health restrictions, L'Oreal grew with a double-digit increase in online sales. In addition, it gained substantial offline and online market share due to innovative products with premium quality.

Estee Lauder

(Sep.-Dec.2022)

USD 4.62 billion

-17%

1. The net sales of Estee Lauder were 4.62 billion dollars in 2022 Q4, declining by 17% from 5.54 billion dollars in the prior-year period. The operating income decreased by 61% to 565 million dollars in the same period.

2. In Asia, the net sales declined by 17% to 1.57 billion dollars due to the ongoing COVID-related impacts affecting brick-and-mortar in the Chinese Mainland and Dr.Jart+’s travel retail in Korea. Instead, Fragrance and Hair Care’s net sales grew double digits in Aisa.

Shiseido

(FY 2022)

JPY 1,067.4

     billion

5.7%

1. The net sales of Shiseido reached 1067.4 billion yen in 2022, with a YoY increase of 5.7%. In China, the net sales were 258 billion yen, down 6% YoY but still accounting for 24.2% of the total net sales. Despite the decline impacted by the epidemic, China is still the largest market for Shiseido globally.

2. In the China Business, Shiseido is shifting from a growth model led basically by large-scale promotions to a more sustainable growth model focusing on value-based brand and product communication tailored to consumer needs. On the back of expansion into major platforms and enhanced communication focusing on effect and efficacy, the group’s annual e-commerce sales achieved growth. 

Amore Pacific

(FY 2022)

KRW 4.1 trillion

-15%

1. In 2022, the revenue of Amore Pacific dropped to 4.1 trillion Korean won. The operating profit was down 37.6% to 214.2 billion Korean won.

2. China’s revenue decreased by 30% on account of the slowdown in consumption due to the COVID-19 resurgence, Zero-COVID policy in the majority of 2022 and the restructuring of offline stores of major brands.

Joy Group

(FY 2022)

RMB 1.76 billion

30%

1. The total sales of Joy Group reached 1.76 billion yuan, with an approximately 30% YoY increase in 2022. The group has maintained double-digit growth for many consecutive years.

2. The annual sales of Judydoll, the group’s initial cosmetic brand exceeded 1 billion yuan in 2022 and ranked respectively top 5 and top 2 in Tmall's and TikTok’s domestic cosmetics sales.

 E-commerce & Social Commerce News

1. According to the statistics from MarketIDX, feigua, etc., the total online cosmetic sales in January 2022 were 22.62 billion yuan, with a YoY decrease of 7.5%. The online cosmetic sales on Ali platforms declined significantly to 12.28 billion yuan, down 40.4% YoY. In contrast, TikTok’s online cosmetic sales increased by 169.6% to 10.34 billion yuan. In terms of category, the online sales of make-up and skincare products were respectively 3.36 billion and 6.98 billion yuan, with a YoY increase of 243.1% and 144.4%.

Online Sales of Major Cosmetic Companies in January

Companies

Sales

YoY

Proya

338 million yuan

3.7%

Botanee

80 million yuan

-59.4%

Bloomage Biotechnology

155 million yuan

-27.3%

Shanghai Jahwa

45 million yuan

-61.6%

Marubi

118 million yuan

58%

Giant Biogene

68 million

26.4%

2. In February 2023, Tmall Beauty, Tmall Innovation Center (TMIC), Kantar and a Chinese domestic beauty brand One leaf, jointly released the first white paper on the Chinese clean beauty industry. The white paper analysed the development differences between the Chinese domestic and foreign clean beauty markets, the core consumer characteristics of the Chinese market, and the future trends of the Chinese domestic clean beauty industry. According to the paper, during July 2021 to June 2022, the growth rate of the clean beauty market was 7.8 times that of the beauty and skincare industry. In June 2022, the consumer population of clean beauty on Ali platforms increased by 31% YoY.

Regulatory Compliance

1. On February 23, 2023, China National Institutes for Food and Drug Control (NIFDC) opened a public consultation on six technical guidelines for in vitro testing, determination for sun protection factor (SPF) and waterproof performance, as well as acute inhalation toxicity testing. More details on ChemLinked.


Jekyl He
ChemLinked Market Research Analyst
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