Monthly Digest: China Cosmetics Industry Review | July 2021

Market Updates

1.       China Duty Free, the biggest duty-free company in China, released its half-year financial result recently. In 2021H1, China Duty Free reached 35.501 billion yuan revenue, increasing by 83.85% YoY. Its profit was 8.607 billion yuan, with a YoY growth rate of 626.77%. Its offshore island duty-free business contributed most to its explosive growth.

2.       Japanese department store, KINTETSU Department Store Co, announced to open stores in Hainan, a duty-free zone in China. It will mainly sell Japanese beauty products and expect to achieve 200-300 million Japanese yen annual sales.

3.       On July 29, Tmall Global released three new measures to better serve the business entities, including the allowing the business entities to temporarily withdraw the guarantee deposit, opening rapid entry channels, and establishing business-entity entry service centers. Business entities are required to pay a guarantee deposit when they enter the e-commerce platform. It is used as a penalty paid to consumers when the business entity violates the rules. The new measure indicates that business entities can apply for temporarily withdrawing up to deposit to cover marketing, logistics, and other expenses from August 1 to November 15.

Company Dynamics

1.       The government fined Estee Lauder’s two brands, Clinique and Origins 500,000 yuan for exaggerating product efficacy and misleading consumers. SEPHORA was also fined 400,000 yuan for false promotion.

2.       MANUP, a male grooming and haircut brand, completed its seed round of financing. It has three primary businesses: barbershop, male care product, and men’s barber training program. At present, it has a WeChat mini program store but hasn’t engaged in other e-commerce channels.

Manup’s barbershop

3.       On July 5, male care brand Lanseral completed its Pre-A round of financing, securing over 10 million yuan. Established in May 2019, this brand uses blue as the main color and has launched two product lines, skincare and makeup. Its ace products are multi-effect energizing essence, refreshing mouth spray, and Niacinamide Brightening Body Wash.

4.       KK Group secured 3 billion dollars in its latest round of financing. As an O2O e-commerce platform, it owns various chain retail brands, including KK Pavilion, KKW, and The Colorist. The Colorist, as the representative of new cosmetic retail brands, gains much attention in the beauty market.

5.       After acquiring a cosmetic company in May, Renhe Pharmaceutical acquired another seven companies to expand its business, covering cosmetics, medical devices, health food, and mother&baby products.

6.       Singapore’s high-end perfume brand Maison 21G is quickly expanding. It provides consumers with customized perfumes through algorithms and technology. After entering Hong Kong SAR and Thailand, it will enter Vietnam soon and plans to expand its business to mainland China in 2022.

7.       La Terapia, a scalp care brand, completed its latest strategic financing. Founded in 2021, this new brand now only sells its products through its WeChat mini program and in offline stores. Scalp care is another popular sector among investors in recent years.

LA TERAPIA’s products

8.       On July 15, Givenchy Beauty from the LVMH group officially announced to enter JD.com and provide AR virtual makeup swatch function for consumers.

9.       Xiaomi, the top Chinese smartphone brand, invested inFace, which became the third beauty device brand Xiaomi invested in in 2021.

10.   P&G released a new health personal care brand, Quiet&Roar, covering shower gels, scrubs, and body lotion. This brand found through market research that 91% of Gen Z currently suffer from varying degrees of anxiety, so Quiet & Roar adds essential oil in every product to help consumers to feel relief.

11.   Perfect Diary’s latest dynamics:

• Its parent company, Yatsen Global, announced the resignation of Mr. Yuwen Chen as a director and chief operating officer. Chen is one of the company’s three co-founders and played an important role in its past development.

• Perfect Diary launched a new product line to cover male makeup products and male skincare products, implying its next move in the male cosmetic market.

Perfect Diary’s male collection

Data Browsing

1.       According to the National Bureau of Statistics, in July, China’s total retail sales of consumer goods reached 3.7586 trillion yuan, a YoY increase of 12.1%. Among them, the total retail sales of cosmetics were 37.9 billion yuan, a YoY increase of 13.5%. In 2021H1, the total retail sales of cosmetics were 191.7 billion yuan, a YoY increase of 26.6%.

2.       Chinese cosmetic category’s online GMV in 2021Q2 was 65.739 billion yuan, with a growth rate of 0.06%.

Among domestic brands, Florasis and Winona kept a high speed growth, while Perfect Diary was slowing down. Brands from Bloomage Biotech, the hyaluronic acid giant in China, were experiencing explosive growth.

International brands were outperformed by domestic brands in April and May, but successfully rebounded in June, attributed to the good performance in the 618 shopping festival.

More information on ChemLinked.

3.       According to statistics from Haikou Customs, in the first half of 2021, Hainan imported 21.47 billion yuan of consumer goods, a YoY increase of 140.5%, accounting for 48.4% of the province's total import goods value. Among consumer goods, imported cosmetics amounted to 12.36 billion yuan, a YoY increase of 105.9%. Duty-free business plays an important role in Hainan.

Financial Result

Unilever 2021H1

• Turnover reached €25.8 billion, increasing by 0.3% YoY.

• Its Beauty & Personal Care sector’s turnover was €10.4 billion, increasing by 3.3%, among which skincare grew double-digit.

• E-commerce business has grown by 50%, now accounting for 11% of sales.

Johnson & Johnson 2021Q2

• Strong sales growth of 27.1% to $23.3 Billion in 2021Q2.

• Consumer Health worldwide operational sales increased 10.0%, primarily in skin health/beauty. Sales growth was driven by skin health/beauty products, including NEUTROGENA, AVEENO, and OGX.

L'Occitane 2021 (FiscalYear Ended 31 March, 2021)

• Net sales reached €1,537.8 million, representing a decrease of 1.1%.

• The Group delivered its highest ever net profit of €157.0 million, up 36.3% and representing 10.2% of net sales.

• Sales through the Group’s online channels expanded 69.2% and accounted for more than one-third of the Group’s total sales. These strong online sales compensated for most of the sales lost through the Group’s brick-and-mortar stores, of which more than 75% were shuttered at the peak of the COVID-19 pandemic.

• China was undisputedly the Group’s best-performing market and one of the first markets to emerge from COVID-19. In FY2021, sales in China grew 36.0% and became the Group’s largest market.

LG Household & Health Care 2021H1

• The Company reported 4.1tn won in sales (+10.3% YoY), 706bn won in operating profit (+10.9% YoY) and 485bn won in net profit (+10.6% YoY).

• The strong performance in 2021H1 was mainly supported by the continuing growth of luxury cosmetics and China business.

• In the Chinese market, Whoo achieved strong sales growth. Especially at the 6.18 shopping festival in the first half of the year, Whoo increased by 40%, and OHUI increased by 31%.

SA SA INTERNATIONAL  2021Q1

• Turnover reached 839 million Hongkong dollars, increasing by 42.1% YoY, mainly because of the low base last year and high-speed growth of online sales and sales in Macao China.

• Online business’s sales reached 163 million Hongkong dollars, with a YoY growth rate of 108.8%, mainly attributed to the marketing campaign for the 618 shopping festival in mainland China.

• In the future, Sa Sa plans to close 15-20 stores in Hong Kong while open over 30 stores in mainland China.

Bloomage Biotech 2021H1

• Revenue in 2021H1 was 184.720 million yuan to 194.192 million yuan, increasing by 95% to 105% YoY.

• Functional skincare sector continued its high-speed growth.

Regulatory compliance

1.       National Medical Product Administration (NMPA) recently approved two new cosmetic ingredients for the first time after the implementation of Cosmetic Supervision and Administration Regulation (CASR). These two ingredients are N-acetylneuraminic acid and Lauroyl Alanine, which the government will closely monitor in the following three years. REACH24H also provided professional support for compliance demands.

2.       Governments emphasized that cosmetic claims, such as edible, food-level, etc., are strictly forbidden.

3.       On July 5, 2021, NMPA released National Cosmetics Safety Risk Monitoring Plan for 2021 H2, clarifying the cosmetic product categories, sales channels, and items to be monitored. Eighteen categories, including children cosmetics, hair growth products, etc., are the emphases. More details on ChemLinked.

4.       On July 8, 2021, China General Administration of Customs (GAC) released "Customs Clearance Notice" and "Facilitation Measures" for 2021 China International Import Expo. The requirements remain substantially unchanged compared with 2020 CIIE. More details on ChemLinked.