Monthly Digest: China Cosmetics Industry Review | October 2020

What Are The Tech Giants Doing?

1. On October 5, DUFRY AG, the world’s biggest duty-free retailer, announced establishing a joint company with Alibaba, the e-commerce tech giant in China, implying Alibaba’s ambition for the Chinese duty-free market. Further reading can be found on ChemLinked.

2. Kuaishou, one of the top vlog platforms in China, is accelerating to develop its e-commerce business. It has announced a new shopping festival, 116 Shopping Carnival. From October 31 to November 11, Kuaishou will reduce its tech support charge to 1% for new merchants and provide subsidy for small and middle merchants.

3. Douyin, the Chinese version of Tik Tok, announced to charge 500 Yuan for every account for opening products sharing function from October 20, signaling the end of free e-commerce on Douyin.

4. On October 12, Suning, another e-commerce tech giant in China, announced cooperating with Darling Family, a new e-commerce brand focusing on supply chains, to release two domestic beauty brands, Color Lock and Native Beauty. Also, Suning announced to release its own beauty brand, EADAELE, implying the beginning of Suning’s OBM (Own Branding & Manufacturing) Plan.

5. On October 18, Pinduoduo launched “10 billion RMB subsidies” in the high-end cosmetics sector. Plus the existing discounts, the subsidy was further expaned.

Pinduoduo Page Information

How Are Beauty Brands Doing?

1. On October 12, Menxlab, a domestic male care brand, completed its seed round financing. As a new Internet brand, Menxlab focuses on male health, such as skincare, health care, and anti-hair loss.

2. On October 12, Chando, a traditional brand in China, began its “whole inventory” plan. The plan is to manage all product inventory of online, offline, self-owned stores, and agencies together through a unified warehouse and logistics management.

3. On October 13, Florasis, the popular domestic makeup brand, released a new series of products based on Hmong culture and invited a famous Hmong singer, ADuo, as the promotion ambassador. The Hmong are a minority ethnic group in China with a rich culture.

4. On October 14, Amorepacific, a Korean cosmetic giant, signed a contract with China Duty Free Group, to promote their partnership, implying another movement in the Chinese duty-free market.

5. In 2020, at least 10 international brands have increased their products’ prices in China, including Estee Lauder, The History of Whoo, and Lancome. It seems that these brands are trying to diminish the pandemic’s impact by increasing prices.

6. On October 15, MINISO, a Japanese-inspired lifestyle product retailer offering high-quality household goods, cosmetics and food at affordable prices, successfully launched its IPO on New York Stock Exchange.

Florasis's new ambassador

What Can The Data Tell Us?

1. On October 9, The General Administration of Customs announced that in the first Mid-Autumn National Day holiday after the implementation of the new duty-free policy in Hainan, the total amount of duty-free shopping on Hainan’s outlying islands reached 1.04 billion yuan, covering 146,800 passengers and 998.9 thousand items, a year-on-year increase of 148.7%, 43.9%, 97.2% respectively.

2. From October 1 to 7, Tmall Global’s overseas “Overseas Direct Procurement” transactions increased by 429% year-on-year. Among them, European warehouse sales increased by 621% year-on-year, Korean warehouse sales increased by 607% year-on-year, and Japanese warehouse sales increased by 242% year-on-year.

3. According to National Bureau Statistics, social consumer goods’ total retail sales reached 3.529,5 trillion yuan in September, increasing by 3.3% Year-on-Year. Among them, the cosmetic category’s total retail sales were 29.6 billion yuan, with a year-on-year growth rate of 13.7%.

4. Double 11 Data: At 00:00 on October 22, the double 11 shopping festival started pre-sale. Live-streaming e-commerce was extremely popular. The total GMV of TOP2 live streamers, Austin Li and Viya, reached 8 billion yuan that night. In the beauty sector, 12 products’ turnover reached 100 million yuan in one hour.

What Do Beauty Companies’ Financial Reports Tell Us?

Recently, big beauty companies have released their quarterly financial reports. Here are some highlights:

	Financial results	Highlights
Johnson & Johnson	In the third quarter of fiscal 2020, the sales reached 21.082 billion dollars, increasing by 1.7%, and the net earnings were 3.554 billion dollars, with a YoY increase of 102.7%.	Regions: sales in Europe increased by 8%, while sales in Asia-Pacific & Africa dropped by 2.7%. Segments: The consumer health segment’s sales reached 3.514 billion dollars, increased by 1.3%. In this segment, the skin health/beauty slightly dropped by 0.2% while the oral care category increased by 8.5%.
P&G	In the first quarter of fiscal 2021, the net sales amounted to 19.318 billion dollars, with a 9% YoY growth rate. The net earnings were 4.308 billion dollars, increasing by 19%.	Regions: sales in U.S. and Greater China increased by 16% and 12%. Segments: Fabric & Home care has the highest growth rate, 14%. Home Care organic sales increased more than 30% driven by increases in consumer demand for home cleaning products during the pandemic, resulting in double-digit growth in every region. Dish Care, Air Care, and Surface Care each grew 20% or more. Health Care has an 11% growth rate. Beauty sector increased by 7% in sales.
L’Oreal	In the third quarter of fiscal 2020, the sales were 7.0368 billion Euros, decreasing by 2.0%.	Regions: the sales in mainland China recorded a 20.8% increase while almost all other regions recorded decreases. Segments: Active Cosmetics Segments reached record growth of +29.9% while other segments all witnessed decreases.
Unilever	In the third quarter of fiscal 2020, the turnover was 12.9 billion Euros, increasing by 4.4% (USG).	Regions: China grew double-digit led by beauty and personal care categories and a return to growth in food service. Underlying sales growth in North America was 9.1% mainly due to the healthy growth of home care products. Segments: Home Care underlying sales grew 6.7% while Beauty&Personal Care underlying sales grew 3.8%.
UNIFON (Domestic)	In the third quarter of fiscal 2020, the sales reached 927 million yuan, increasing by 53.6%. The net earnings were 38.65 million yuan, increased by 2398.17%.
Jahwa(Domestic)	In the third quarter of fiscal 2020, the sales reached 1.678 million yuan, decreasing by 7.45%. The net earnings were 129 million yuan, increased by 33.37%.

Any Regulatory Updates?

1. On October 7, National Medical Products Administration emphasized the prohibition of using and claiming “EGF” (aka “Human oligopeptide”) in cosmetics.

2. On October 12, the Ministry of Industry and Information Technology released General Safety Technical Requirements for Oral Care and Cleansing Products for public consultation.

3. On October 26, China National Institutes for Food and Drug Control (NIFDC) released an announcement consulting on the Inventory of Existing Cosmetic Ingredients in China (IECIC) 2015. More information can be found on ChemLinked.