Monthly Digest: China Cosmetics Industry Review | December 2021

Market updates

1.       Yiyouth cooperated with CBNData to release GEN-Z Favored Brands List of 2021, containing 41 brands from different sectors. Multiple cosmetics brands entered the list: male care brand Biotherm, skincare brand ZHUBEN, luxury makeup brand ARMANI beauty, fragrance brand to summer, personal care brand Rever, emerging makeup brand Girlcult, functional skincare brand MedRepair, etc.

2.       BCG and Little Red Book recently co-released the 2021 China New Consumption Market Insight Report, covering 6 industries and 59 new consumer brands. The report reveals that the Chinese market is witnessing the rise of new consumption when new consumer brands have become a popular choice among consumers, especially young people who live in high-tier cities. In this trend, cosmetics brands, food&beverage brands, and mother&baby brands are the pioneers.

3.       Three top live-streamers, Viya(薇娅), Cherie(雪梨) and Sunny(林珊珊), were fined a massive amount of money for tax problem. Later, all their social media accounts were shut down. These fine tickets also released an alarm for other live-streamers. Many immediately self-check their tax conditions and pay back taxes. The tax event can be a turning point for this wild-growing live-streaming industry.

4.       Multiple social media platforms launched campaigns to regulate the content:

• Little Red Book shut down 29 brands for false marketing, including big brands such as Dove, NIVEA, etc. These brands are no longer searchable on Little Red Book.

• Douyin e-commerce removed low-priced beauty products with poor quality on its platform. The stores that sell these products were also shut down.

Company dynamics

1.       Emerging skincare brand UNISKIN (优时颜) completed its B-round of financing, securing over 100 million yuan. Founded in 2018, this brand stands out by focusing on anti-aging products. During 2021 Double 11, its sales reached 80 million yuan, increasing by 216%.

2.       Unilever invested in a Chinese beauty lab, Hangzhou Zhimo Biotech Company. Its brand ZIMMER LAB focuses on scalp care, providing consumers with customized hair care products.

3.       New oral care brand Ecoobix (白惜) gained ten million yuan investment. Its first product, mouthwash achieved ten million yuan sales in the first three months after entering the market. Positioning itself as a high-end mouthwash brand, Ecoobix targets GEN Z, providing them with functional oral care products.

Ecoobix’s products

4.       Nestlé, the second-largest shareholder of the L'Oréal Group, announced that it would sell worth 8.9 billion euros (approximately RMB 63.867 billion) of L'Oréal shares. After completing the transaction, Nestlé's holding of L'Oréal fell from 23.29% to 20.1%.

5.       German chemical industry giant BASF announced that it would invest in establishing Uvinul® A Plus production line in Shanghai, China. The capacity of the new production line is about 1,500 tons per year, and it is expected to be put into operation in the first half of 2023. Uvinul® A Plus is one of the light-stable UVA filters on the market. It can effectively filter the harmful UVA rays from the sun.

6.       P&G issued voluntary recall of Aerosol Dry Conditioner Spray Products and Aerosol Dry Shampoo Spray Products for containing carcinogenic substances. Related news went viral on Chinese social media, forcing P&G to announce that the recalled products were not related to the Chinese market.

7.       L'Oreal Paris invited female artists to create NFT art for the new lipstick Reds of Worth. Five female artists-Amber Vittoria, Arina BB, Hueman, Lili Tae, and Puks, will collaborate with UTA to create six artworks. Reds of Worth NFT can be obtained through auctions on the OpenSea market. The minimum price of each NFT starts at US$1,500 (approximately RMB 9,600), and artists will receive 100% of the sales.

8.       Kate, a makeup brand from the Japanese KAO group, is launching a clearance sale in its offline channels. After that, it will close most offline channels in the Chinese market but keep the online stores.

9.       Unilever invested in a Chinese functional skincare brand ohb+ (禾宝). Founded in 2011, ohb+ positions itself as Chinese medicine functional skincare brand with three product lines, acne removal, smoothing, and oral beauty.

10.   Chinese high-end fragrance brand DOCUMENTS (闻献) completed its Angel round of financing. Different from most fragrance brands mainly promoting EDP, DOCUMENTS focuses on Parfum. This brand also believes that offline experience is important in the fragrance industry, so it soon opened its first offline store within one year after its launch. Its average amount per order exceeded 1,000 yuan. 80% of its consumers are GEN Z.

DOCUMENTS’ products

11.   Amorepacific Group is making a new round of strategic adjustments for the Chinese market. Digitization and high-end are the two focuses. It plans to reduce its offline stores in China from nearly 800 to about 140 and will invest more resources in online channels and mid-to-high-end brands in the future.

12.   Popular functional skincare brand Winona opened its first offline store in a high-end department store in Hangzhou. As a popular skincare brand in the Internet era, Winona achieved great online sales. Its first offline store in a high-end department store sends the message that online sales will not be the only focus of Winona.

13.   Skincare brand Fresh has recently teamed up with POPMART's popular IP MOLLY to launch a New Year's limited edition of skincare box. This limited series contains four MOLLY toys sold in blind boxes, a red gift box in Chinese style, and a printed red envelope.

Fresh New Year Gift Box

Data browse

1.       According to the National Bureau of Statistics, in November, China's total retail sales of consumer goods reached 4.1043 trillion yuan, a YoY increase of 3.9%. Among them, the total retail sales of cosmetics were 57.1 billion yuan, a YoY growth of 8.2%.

It is worth noting that the growth rate of total retail sales of cosmetics in November has slowed downsharply year on year. Data shows that the total retail sales of cosmetics in November 2020 is 51.1 billion yuan, a year-on-year increase of 32.3%. In contrast, this year's growth rate has shrunk by more than 70%.

2.       Recently, Bain & Company and KANTAR WORLDPANEL co-launched their research report about Chinese consumers. Here are some highlights:

After a strong post - Covid-19 recovery in the first quarter of 2021, China's FMCG sales declined to negative 0.8% growth by the third quarter, the result of mounting macroeconomic pressures.

Still, the fundamentals for sustained growth exist in food, beverages, home care, and personal care.

In terms of categories, personal care and home care continued to grow along with a volume recovery as locked-down and anxious consumers stocked up on many packaged food categories, such as instant noodles, biscuits, and infant milk formula. That hoarding has come back to haunt those categories in 2021. The story was much better in beverage categories, which saw a 6.3% rise in volume and 0.9% ASP gain for a value increase of 7.2% in the first three quarters of 2021.

Regulatory compliance

1.       On December 1, 2021, China NMPA published the children cosmetics' logo, and its labeling area and color matching information. From May 1, 2022, children cosmetics that apply for registration/notification must be labeled with the logo. More details on ChemLinked.

2.       China NMPA issued a notice on November 26, 2021, detailing the enforcement rules of the Supervision and Administration Measures on Cosmetics Manufacture and Operation in terms of cosmetic production license, cosmetic production management, and cosmetic operation management. More details on ChemLinked.

3.       On November 30, 2021, a notice from China NMPA implied that products containing SymWhite 377 (a whitening cosmetic ingredient) must be registered as special cosmetics. Many products containing SymWhite 377, which used to be notified as general cosmetics rather than registered as special cosmetics, were removed from shelves later. This notice suggests that regulatory authorities' supervision of whitening ingredients and whitening products is becoming stricter and more standardized, so many industry practitioners also consider that there will be further inspection on other whitening ingredients. More details on ChemLinked.

4.       Another two new cosmetic ingredients were approved by NMPA, NO. 005 and NO. 006. Unlike NO.001-004 that registered Chinese companies register, these two new cosmetic ingredients are registered by two international companies, Honeywell and Innospec. NO.005 is Tetrafluoropropene, a propellant suitable for leave-on-skin and rinse skin and hair cosmetics. NO. 006 is Sodium Lauroyl Methyl Isethionate, used in cleansing cosmetics such as detergents, shampoo products, bath products, facial cleansers, etc.