Market update
1. 618 mid-year shopping festival in 2020 has ended. Tmall’s sales reached 698.2 billion yuan, while JD’s sales were 269.2 billion yuan. The sales data of skincare and makeup sectors are shown in the following table:
2. As racism becomes a trending topic worldwide, some international cosmetic companies have reacted. Johnson & Johnson have stopped selling skin whitening products in the Asian and middle-east markets. Unilever stopped marketing products with skin whitening functions (美白), and skin-brightening (提亮). L’Oreal also took similar action as Unilever.
3. Brand Finance, an international brand valuation agency, released COSMETICS 50 2020. The TOP 10 brands are L’Oreal, Gillette, NIVEA, Estee Lauder, Clinique, Guerlain, Shiseido, Pantene, Dove, and Garnier. Three Chinese brands are also ranked. They are Pechoin (ranked 19), Rejoice (ranked 37), and CHANDO (ranked 43).
Regulatory compliance
1. On June 1, the Central Committee of the Communist Party of China and the State Council issued the master plan for the Hainan Free Trade Port to support the establishment of a Free Trade Port System in steps and stages. Hainan Free Trade Port Law, the laws and regulations of the Special Economic Zone, and a diversified commercial dispute resolution mechanism are expecting to be enacted in the future.
2. On June 3, the Henan National Development and Reform Commission announced a ban on the production of daily chemical products containing microbeads by 2020. In 2022, the sale of daily chemical products containing microbeads will also be banned.
3. China Association of Fragrance Flavor and Cosmetic Industries released 2 Group Standards. The 2 group standards are the Determination of Dihydrocoumarin in Fragrance Compound and Neohesperidin Dihydrochalcone. The CAFFCI permits and encourages companies to adopt the standards.
4. Under the plan of the China General Chamber of Commerce, 2 group standards, “Basic Specifications for Livestreaming Shopping Operations and Services” and “Evaluation Guide for Online Shopping Credit Service System,” have been basically completed and are expected to be released and implemented in July 2020. The standards impose new regulatory requirements on industry and specify terms and definitions, product quality, software and hardware, the supervision and management of regulatory authorities, etc.
5. Hebei Medical Products Administration clarifies requirements for Non-special Use Cosmetics using “Original Liquid (原液)”(equivalent to the term essence) in the product name. Liquid cosmetics for care using a single component or a single category of components as a functional ingredient, mixed with necessary solvents, antioxidants, preservatives, used directly or diluted according to a prescribed ratio, can use the "Original Liquid (原液)" as the product attribute name. Products that use "Original Liquid (原液)" as the attribute name should clearly identify the used body parts (skin or hair) in the instructions or be used together with the common name of "skincare" or “hair care."
6. China releases 5 Cosmetic Industry Standards for public consultation. The Ministry of Industry and Information Technology has released 430 Industry Standards for public consultation, which include five cosmetic standards, HG/T 5737-2020 Magnesium Sulfate in Cosmetics, HG/T 5778-2020 UV Curing Coatings for Cosmetic Packaging, HG/T 3505-2020 Determination of Surfactants Saponification Value, JC/T 2577-2020 Sericite Powder and QB/T 5529-2020 Determination Method of Water-soluble Pyrophosphate and Tripolyphosphate in Oral Care Products. The consultation period will end on July 22, 2020.
7. On June 29, the new fundamental cosmetic legislation-Cosmetic Supervision and Administration Regulation (CSAR), was officially published by the Chinese State Council to replace the existing Cosmetics Hygiene Supervision Regulations (CHSR), which was firstly released in 1989. The new regulation is scheduled to be effective on January 1, 2021.
ChemLinked Interpretation:
Company dynamics
1. On June 8, Abby’s Choice, the sister brand of Perfect Diary, officially made its debut in China. This move is a major signal that Yatsen Global, Perfect Diary’s parent company, is embarking on a multi-brand strategy. On the same day, Abby’s Choice Tmall official flagship store, and two offline stores in Guangzhou and Chengdu, were officially opened.
2. In June, Pinduoduo, one of the TOP3 e-commerce platforms, announced plans to cooperate with Guangzhou Baiyun District to open a cosmetic good product store together. Brands like Water Code, Hanhoo, and Caeslan have entered this store. Pinduoduo also plans to help Baiyun district develop its livestreaming capacities, brand development, and live-stream talent training.
3. PROYA, a domestic cosmetic brand, cooperates with Nayuki Tea & Bakery (奈雪の茶), top bubble tea brand in China, to launch the “White day, Blue dream” cosmetic collection containing three products: facial care set (the gift box contains a Nayuki unicorn girl toy, facial cleansing, toner, and lotion); a foundation with six shades to choose; facial masks.
4. On June 12, Dior opened its Tmall Official Flagship Store. The page shows it will start pre-sale on June 21 and be officially opened on July 30. The main products in this store are cosmetics and perfumes. Meanwhile, Dior opened its official account on Bilibili (one of the top social media and video platforms among Chinese young people). These moves send a signal that Dior is actively embracing digitalization.
5. On June 15, Unilever announced plans to set up a one billion euro fund to invest in climate change projects and strive to achieve zero greenhouse gas emission for all products by 2039.
6. Luxury down brand Moncler has signed a contract with perfume manufacturer and distributor Interparfums. The latter will produce and develop perfume and fragrance products for Moncler. The first fragrance series will be launched in the first quarter of 2022.
7. Two niche perfume brands, KILIAN and Editions de Parfums Frédéric Malle, from Estee Lauder, officially entered China’s market. Both brands chose Shanghai to open its first offline stores.
8. Shiseido’s new moves in June:
It appointed two senior executives for its perfume business, suggesting Shiseido’s set up in the perfume industry.
After PURE&MILD, a lower-priced brand in Shiseido, withdrew from the CS channel in China, another high-end brand, Revital, in Shiseido Group entered the CS channel, suggesting Shiseido’s strategic adjustment.
9. Winona, a domestic skincare brand, cooperated with China Post to launch a limited gift box in the 618 shopping festival and gained much traction. Meanwhile, this brand entered Watsons on June 25.
Data browse
1. From January to April of this year, the total number of new cosmetics filing cases in China reached 83,000, a 24% decline from the same period last year. However, after the lowest number of filing cases were recorded in February, the total number of filing cases has increased steadily. It is worth noting that in the past four months, while the number of domestic cosmetics filings have fallen sharply compared with the same period last year, the number of imported cosmetics filings has achieved significant growth. Among them, the year-on-year growth rate was 83% in February and 92% year-on-year in March. The growth rate in April declined, but it still reached 40%.
2. According to the National Bureau of Statistics, in May, the total retail sales of consumer goods were 3197.3 billion yuan, a YoY decrease of 2.8%. The retail sales of cosmetics were 27 billion yuan, a YoY increase of 12.9%.
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