Monthly Digest: China Cosmetics Industry Review | March 2021

Company dynamics

1. Yatsen Global, the parent company of Perfect Diary, had three major moves in March:

• On March 2, it announced to acquire Eve Lom, a high-end British skincare brand that is popular for its cleanser and makeup remover.

• Perfect Diary, the ace brand of this company, started to enter the cosmetic contact lenses market. Its first product line is called Starry Night and now mainly sells on WeChat mini program.

• On March 16, its new makeup brand, Pink Bear, officially opened its Tmall store. Now, this brand has 2 SKUs, including lip glaze and beauty blender.

Perfect Diary’s contact lenses

2. Hermès launched a second collection of beauty products, the 2021 Spring-Summer Limited Edition. The new collection draws its inspiration from rose and contains a blush, a blush brush, a leather cosmetic bag, and three lipsticks.

3. Etude House, a Korean makeup brand, has closed all of its offline stores in China because of the large loss. However, besides online channels, consumers can still purchase Etude House in The Colorist, a new offline cosmetic store brand that has cooperation with Etude House cooperates.

4. As the Chinese government’s regulation on animal tests changed, Aesop and The Body Shop are actively preparing to enter the Chinese market. According to Roberto Marques, the CEO of Natura, these two brands will complete filing in China in the first half of 2021. Aesop is expected to open its first mainland store in Shanghai in 2021 Q4, and The Body Shop's first store in mainland is likely to open in 2022.

5. On March 25, Botane, the parent company of Winona (a popular domestic functional skincare brand), successfully launched an IPO on the Shenzhen stock market. Its stock price rose 272.09% on the first day with its market share reaching 70 billion yuan, making this company the most valuable Chinese cosmetic company (Higher than Yatsen Global, Proya, and Jahwa). The company plans to reduce its reliance on Winona by promoting a multi-brand strategy and launching makeup products, according to sources.

6. BIOLAB, a new domestic skincare brand, completed its Pre-A round of financing. Founded in 2019, it is positioned as a household light medical beauty skincare brand. Its founder, Kiki, has a background in medical beauty. This brand opened its Tmall store in April 2020, and its GMV reached 10 million yuan in the first half of the year.

BIOLAB

7. Jurlique, an Australian skincare brand, closed most of its counters in China. Founded by Dr. Jurgen Klein and Ulrike Klein, Jurlique is a skincare brand focusing on the natural and organic skincare concept. Jurlique entered China in 2009 and began to strategize its expansion incrementally. However, its sales began to drop in 2015, and its operator failed to turn it around since then.

8. Shiseido announced to close WASO, an entry-level skincare brand designed for young people. It will stop selling at the end of 2021.

9. On March 23, UP, a domestic male care brand, gained a new round of financing. This brand was founded in June 2020 and now has 9 SKUs covering makeup, skincare, and personal care.

Data browsing

1. On March 9, Douyin E-commerce announced that, from February 27 to March 8, the total turnover of Douyin e-commerce "Queen's Day" campaign was 13.63 billion yuan. Kuaishou e-commerce also announced its female consumption data on March 10. In 2020, the sales of facial skincare products increased by nearly 40 times on Kuaishou, and the sales of perfumes increased by more than 3 times. And the annual growth rate of the number of female merchants reached 57%.

2. According to the National Bureau of Statistics, from January to February 2021, China’s total retail sales of consumer goods reached 6.9737 trillion yuan, a YoY increase of 33.8%. Among them, the total retail sales of cosmetics were 55.8 billion yuan, a YoY increase of 40.7%, outperforming the overall growth in the total retail sales of consumer goods.

3. According to data from Ali platforms, in February, the total online GMV of makeup and skincare products was 14.739 billion yuan, an increase of 11.31%. Among them, skin care’s online GMV reached 9.872 billion yuan, which is 2.02 times makeup’s online GMV.

Florasis was the NO. 1 domestic brand in sales, and its online GMV was 288 million yuan, followed by Perfect Diary.

As for international brands, L'Oréal Group is still the "king." In February, Lancome’s online GMV was 269 million yuan, followed by L'Oréal Paris with 227 million yuan, and Estee Lauder ranked third with its online GMV of 226 million yuan. (Lancome and L'Oréal Paris both belong to the L'Oréal Group while Estee Lauder belongs to Estee Lauder Group.)

Financial reports

1. Watsons parent company CK Hutchison Industrial Co., Ltd. disclosed the previous year’s results as of December 31, 2020. Watsons global sales were 159.619 billion Hong Kong dollars (approximately 133.639 billion yuan), a year-on-year decrease of 6%. Sales in China were 19.984 billion Hong Kong dollars (approximately 16.739 billion yuan), a year-on-year decrease of 19%.

Watsons

2. Affected by the international spread of the epidemic, Revlon's sales in 2020 decreased by 515 million U.S. dollars (approximately 3.361 billion yuan) to 1.9 billion U.S. dollars (approximately 12.4 billion yuan) in 2020, with an operating loss of 226 million U.S. dollars (Approximately 1.475 billion yuan). In the past 12 months, Revlon’s e-commerce sales accounted for 16% of annual net sales, compared to only 9% in 2019.

Regulatory compliance

1. On March 2, China approved seven cosmetic testing methods, including two efficacy evaluation methods for freckle removing (whitening) and anti-hair loss products. The efficacy evaluation cycle of freckle-removing (whitening) products is at least 37 days, and for anti-hair loss products, at least 12 weeks. This will extend the time for products to enter the market and increase the R&D costs. More details on ChemLinked.

2. On March 4, China NMPA finally released the finalized Instructions for Cosmetic Registration and Notification Dossiers (renamed as Provisions for Management of Cosmetic Registration and Notification Dossiers). As per the finalized regulation, imported general cosmetics will be permitted to exempt from animal testing from May 1, 2021. More details on ChemLinked.

3. On March 4, China NMPA released the Provisions for Management of Cosmetic Registration and Notification Dossiers (short for “the Provisions”), spelling out the documentation requirements for the application, modification, renewal, and cancellation of cosmetic registration and notification. The Provisions will take effect on May 1, 2021. More details on ChemLinked.

4. On March 15, the State Administration for Market Regulation issued the "Measures for the Supervision and Administration of Online Transactions", which will be implemented on May 1 this year. They are mainly formulated for issues of concern such as insufficient after-sales service of live-streaming, automatic renewal, fictitious data, and platform "mandatory selection of one".

5. To ensure the implementation of the Cosmetic Supervision and Administration Regulation and the Administrative Measures on Cosmetics Registration and Notification, China NMPA will launch an information service platform (https://zwfw.nmpa.gov.cn) on April 1, 2021 for cosmetic companies to carry out cosmetics registration and notification. More details on ChemLinked.

6. Since Jan. 2021, the regulatory authorities in more than 20 regions in China, such as Beijing and Zhejiang, have issued the Special Inspection Work Plan for Children Cosmetics. Most of the work plans are similar, carrying out special rectification work on children cosmetics from Mar. 1 to Sep 30. More details on ChemLinked.

7. On March 26, China National Institutes for Food and Drug Control (NIFDC) opened a public consultation, which outlawed the use of Cannabis Sativa Fruit, Cannabis Sativa Seed Oil, Cannabis Sativa Leaf Extract, and Cannabidiol (CBD) in cosmetics. Stakeholders with any comments can send back to the NIFDC by email at hzpbwh@nifdc.org.cn before April 19, 2021. More details on ChemLinked.