China’s cosmetics market, 2012
March 2013 Fung Business Intelligence Centre
In this issue:
I. Industry overview p. 3
II. Competitive landscape p. 20 III. Latest developments p. 31 IV. Snapshots of sub-sector p. 50 performance
China’s cosmetics market, 2012 2 I. Industry Overview
(1) Market size and market segments
(2) Retail price of cosmetics
(3) Distribution channels
China’s cosmetics market, 2012 3 Retail sales value continued to soar in 2012, albeit slightly slower growth against 2011
China’s cosmetics market has registered sustained growth for the past few years. China today is the largest emerging cosmetics market in the world.
According to the National Bureau of Statistics of China (NBS), retail sales of cosmetics of enterprises above designated size* reached 134 billion yuan, up by 17% year-on-year (yoy) in 2012.
However, China’s cosmetic market has demonstrated slightly weakened growth as opposed to 18.7% yoy in 2011. Exhibit 1: Retail value of cosmetics by wholesale and retail enterprises above designated size*: 2008-2012
1600 25% 22.1% 1340 1400 18.7%
16.6% 1103 20% ) 1200 16.9% 17.0% mn 1000 889 15% 740 800 597 600 10%
yuan (100 yuan 400 5% 200 0 0% 2008 2009 2010 2011 2012
Sales value Growth Source: National Bureau of Statistics of China 4 * Designated size: with annual sales of 5 million yuan or above and with an employment of or over 60.
China’s cosmetics market, 2012 4 Lower-tier cities posted stronger cosmetics sales growth than key cities in 2011
According to China National Commercial Information Centre (CNCIC), cosmetics sales growth in tier 1 cities was 11.3% yoy in 2011, weaker than those realized in tier 2 cities (18.3% yoy) and tier 3 cities (21.4% yoy).
A report released by Kantar Worldpanel China in May 2012* also indicated that county level cities and counties posted robust growth at above 20% yoy in the first quarter of 2012, while growth in key cities and provincial capitals was less than 15% yoy in the same period.
* Kantar Worldpanel China – “Spotlight on China”, May 2012
China’s cosmetics market, 2012 5 Masstige and high mass segments take the lead in China’s cosmetics market
According to Guosen*, China’s cosmetics products can mainly be classified into three major segments, mass, masstige and prestige.
Exhibit 2: Examples of the Three Major Segments of China’s Cosmetics Products
SK-II Lancôme High Prestige Estee Lauder Laneige, Kose, DHC, Mid-to-low Prestige Fancl, Biotherm Herborist (佰草集), Olay, Masstige Neutrogena, L'Oreal Pond's, Mentholatum, Nivea, Inoherb High Mass (相宜本草) Herborn (本草堂), Cathy (佳雪), Tjoy (丁家宜) Mid Mass
Maxam (美加淨), Dabao(大寶), Longliqi (隆力奇) Low Mass
Source: Guosen
* Guosen – “Research Report on China’s Cosmetics Industry ll”, 28 November 2012
China’s cosmetics market, 2012 6 Masstige and high mass segments take the lead in China’s cosmetics market (cont’d)
The masstige and high mass segments had the largest market share of almost 50% in China’s cosmetics market in 2011, followed by the prestige segment (25-30%) and the mid-to-low mass segment (20%).
Exhibit 3: Market Segments and Corresponding Price Ranges for Cosmetics in China, 2011
25-30% High Prestige (>RMB400) and Mid-to-low 20% Prestige (RMB200-400) Masstige (RMB100-200) and High Mass (RMB40-100) 50% Mid Mass (RMB20-40) and Low Mass (>RMB20)
Source: Guosen
To break into the middle-income segment and satisfy consumers’ rising demand for better cosmetics products, major players have introduced a number of masstige products in recent years. For example, international brand Shiseido has introduced ZA and Aupres.
* Guosen – “Research Report on China’s Cosmetics Industry ll”, 28 November 2012
China’s cosmetics market, 2012 7 I. Industry Overview
(1) Market size and market segments
(2) Retail price of cosmetics
(3) Distribution channels
China’s cosmetics market, 2012 8
Retailers raised retail prices amid higher operating costs
Although China’s cosmetics retail price slid slightly in the second half of 2012, the average retail price in 2012 was still higher than that of 2011.
− According to a report by Euromonitor*, Dior, Chanel, Lancôme and Biotherm lifted their unit prices at the beginning of 2011; retail price for some products may go up by up to 10%.
− Unilever, Procter & Gamble have also hiked their prices for some personal care categories like shower and hair care products.
* Euromonitor International – “Beauty and Personal Care in China”, May 2012
China’s cosmetics market, 2012 9
Escalating cost pressure on cosmetics retailers
The higher cosmetics retail price in China reflects the escalating cost pressure on cosmetics retailers. The escalating cost pressure was largely attributable to the continuous increase in raw material costs, labor cost, rents, marketing costs and other expenses.
Despite the higher overall cost, cosmetics brands still spent a huge sum of money on marketing and advertising in China in 2012. − According to CTR*, the advertising expenditure of the cosmetics/ toiletries sector increased by 6.1% yoy in 2012, and ranked first in total advertising spending among all other sectors. L’Oreal remained the largest spender on overall advertising in China, posting impressive growth of 24.5%.
Exhibit 4: Retail price index of cosmetics in China, January 2011-December 2012 (Same month of preceding year = 100)
103.0 102.5 102.0 101.5 101.0 100.5 100.0 99.5
Source: National Bureau of Statistics
* CTR - http://www.ctrchina.cn/ctrwebsite/en/News_Article.php?articleid=412
China’s cosmetics market, 2012 10 I. Industry Overview
(1) Market size and market segments
(2) Retail price of cosmetics
(3) Distribution channels
China’s cosmetics market, 2012 11 Grocery retailers and department stores are signaling decreasing market share; while health and beauty stores and Internet retailing are booming
According to Euromonitor*, department stores, hypermarkets and health and beauty retailers were the three most popular sales channels for beauty and personal care products in 2011. Exhibit 5: Market Share (Retail Sales) by Distribution Channels for Beauty and Personal Care in China, 2007 and 2011 However, the market share % retail value rsp 2007 2011 of grocery retailers and Store-Based Retailing 85.4 80.4 department stores has been -Grocery Retailers 40.2 37.6 --Small Grocery Retailers 4.6 3.6 decreasing; while health and --Hypermarkets 26.5 26.5 beauty retailers and Internet --Supermarkets 9.1 7.5 -Non-Grocery Retailers 45.2 42.8 retailing has witnessed --Health and Beauty Retailers 11.9 13.9 significant increase in ---Beauty Specialist Retailers 4.8 6.4 market share from 2007 to ---Chemists/Pharmacies 1.4 1.5 ---Parapharmacies/Drugstores 5.5 5.9 2011. ---Other Health and Beauty Retailers 0.2 0.2 --Department stores 33.2 28.7 --Other Non-Grocery Retailers 0.1 0.2 Non-Store Retailing 14.6 19.6 -Direct Selling 13.0 13.9 -Internet Retailing 0.8 5.0 -Other Non-Store Retailing 0.9 0.8 * Euromonitor International – “Beauty and Personal Care in China”, May 2012 Total 100 100 Source: Euromonitor International China’s cosmetics market, 2012 12
Features and characteristics of selected distribution channels
Features and characteristics of selected retail formats are examined:
− Department stores
− Supermarkets/hypermarkets
− Professional stores
− Specialty stores
− Internet retailing
China’s cosmetics market, 2012 13 Characteristics of selected distribution channels – department stores
Department stores
Department stores offer a wide range of merchandises and provide one-stop shopping experiences to consumers.
Department stores play an important role in brand building.
Competition for counter spaces is fierce, many lesser-known brands are forced to phase out.
Department stores may gradually lose appeal to Chinese consumers due to poor differentiation.
China’s cosmetics market, 2012 14 Characteristics of selected distribution channels – supermarkets/hypermarkets
Supermarkets/hypermarkets
Supermarkets/ hypermarkets are important channels particularly for low- to mid-range cosmetics products or products with lower unit prices (e.g. shampoo, facial cleanser).
Brands need to pay a fairly high slotting fees to supermarkets/ hypermarkets for the display and sale of their products; some weaker local brands are facing tough cost challenges.
China’s cosmetics market, 2012 15 Characteristics of selected distribution channels – Professional stores
Professional stores
Cosmetics professional stores provide one-stop services for consumers so that they can buy cosmetics products and accessories in different quality and price tiers in the same store.
Examples: • Hong Kong-based Watsons and Sasa; • France-based Sephora; • China-based Gialen (嬌蘭佳人) and Cosmart (歌詩瑪).
Some professional chains have explored opportunities online. • Watsons launched its website http://www.watsons.com.cn/ in March 2013.
In general, the quality of products available in professional stores is less assured as there may be other substandard parallel imports and even counterfeit products being sold in the professional stores.
China’s cosmetics market, 2012 16 Characteristics of selected distribution channels – Specialty stores
Specialty stores
Cosmetics brand owners can achieve autonomy over store operation through opening specialty stores. Specialty stores help promote brand image, ensure standardized prices and services.
In recent years, many Korean cosmetics brands such as Missha and Innisfree are especially interested in distributing their products through specialty stores, in addition to other retail formats.
It is expected that specialty stores will become another key retail channel for cosmetics products.
China’s cosmetics market, 2012 17 Characteristics of selected distribution channels – Internet retailing
Internet retailing
Apart from store-based retailing, non-store retailing, particularly internet retailing has grown exponentially in recent years. According to Euromonitor*, the market share of Internet sales increased from only 0.8% in 2007 to 5% in 2011.
There are many types of B2C online retailing portals in China. Below are some of the examples.
Self -operated online platforms Online stores on integrated Third-parties B2C online B2C platforms such as Tmall platforms which provide a wide range of cosmetics brands •Orbis (http://www.orbis.com.cn) •SK-ll (http://skii.tmall.com) •Kiehl’s (http://www.kiehls.com.cn) •Olay (http://olay.tmall.com) • StrawberryNET (http://strawberrynet.com) •Benefit •Laneige (http://laneige.tmall.com) •SaSa (http://sasa.com) (http://www.benefitcosmetics.com.cn) •Tsubaki (http://tsubaki.tmall.com)
However, it is observed that most branded color cosmetics have not put much effort in online retailing; online channel still serves largely as brand building and promotion purpose.
* Euromonitor International – “Beauty and Personal Care in China”, May 2012
China’s cosmetics market, 2012 18 Characteristics of selected distribution channels – Internet retailing (cont’d)
Internet retailing
According to iResearch* , online cosmetics transaction value in China hit 37.26 billion yuan in 2011, up by 66.6% yoy from 2010 of 22.36 billion yuan. The online sales for cosmetics in China is expected to grow rapidly in the coming years, with online cosmetics transaction value estimated to top 120 billion yuan in 2015.
Exhibit 6: Online Transaction Value for China’s Cosmetics, 2008-2015e
1400 120.0% 107.4% 1237.2 97.0% 1200 100.0% 988.1 Online cosmetics 1000 79.0% 80.0% transaction value 762.5 (100 million yuan ) 800 66.6% 576.6 60.0% 600 54.8% 372.6 32.2% 40.0% 400 29.6% Growth (%) 223.6 25.2% 200 124.9 20.0% 60.2 0 0.0% 2008 2009 2010 2011 2012e 2013e 2014e 2015e Source: iResearch
* iResearch – “China’s Online Cosmetics Shopping Research”, March 2012
China’s cosmetics market, 2012 19 II. Competitive landscape
(1) Foreign cosmetics companies
(2) Domestics cosmetics companies
China’s cosmetics market, 2012 20 Foreign cosmetics enterprises captured a larger market share in key cities
According to a report by Orient Security (東方証劵), foreign cosmetics brands have been expanding rapidly and captured a larger market share (around 70%- 80%) in tier 1 and 2 cities.
Despite the overall slowdown in cosmetics sales in 2012, international premium brands continued to post solid retail sales growth in the market in the third quarter of 2012, with Lancôme and Biotherm achieved retail sales growth of 20% yoy and 15% yoy, respectively.
* Orient Security – “Research on China’s Cosmetics Industry”, 30 November 2012
China’s cosmetics market, 2012 21 Foreign cosmetics enterprises captured a larger market share in key cities (cont’d)
To expedite market penetration, foreign cosmetics enterprises are looking ways to expand their share of the mass market. Some examples include:
− Cosmetics retailer Sephora opened its first outlet in Wuhan in 2011.
− Chained professional store Watsons, which owns 1,000 retail stores across 150 cities of China, has also announced plans to expand its presence in more than 300 cities in China with a total of 3,000 stores by 2016*.
− New Zealand cosmetics brand Jagar** entered Tmall in December 2012 and is planning to set up offline retail stores in China later.
− Upon completion of the acquisition of Dabao (大寶) in 2008, Johnson & Johnson acquired Elsker (嗳呵) in January 2013***, hoping to further extend its influence in the mother and baby care market in China.
* China Business News (第一財經日報) http://www.yicai.com/news/2013/03/2565276.html ** Zghzp.com (中國化妝品網) http://www.zghzp.com/news/hyzx/ppdt/48731.html *** Johnson & Johnson (China) Investment Co., Ltd http://www.jnj.com.cn/news201312617.html
China’s cosmetics market, 2012 22
Foreign cosmetics groups and their major brands
Exhibit 7 shows some of the foreign cosmetics groups and their major brands in China. Exhibit 7: Foreign Cosmetics Groups and their Major Brands in China (as of February 2013) Enterprise Brands L’Oréal L’Oréal Paris 巴黎歐萊雅 shu uemura 植村秀 Biotherm 碧歐泉 歐萊雅 Garnier 卡尼爾 Giorgio Armani 喬治 阿瑪尼 Helena Rubinstein HR 赫蓮娜 Maybelline New York 美寶蓮紐約 LA ROCHE-POSAY理膚泉 Kiehl’s 科顏氏 L’Oréal Professional 歐萊雅專業美髮 Mininurse 小護士 Skinceuticals修麗可 Kérastase 卡詩 Yue Sai 羽西 Matrix 美奇絲 Lancôme 蘭蔻 Vichy 薇姿
P&G Head & Shoulders 海飛絲 Vidal Sasson 沙宣 Camay 卡玫爾 寶潔 Rejoice 飄柔 Clairol Herbal Essences 伊卡璐 Clairol Professional 伊卡璐絲煥專業美髮 SK-II Wella 威娜 Pantene 潘婷 Oceana 海肌源 Safeguard 舒膚佳 Olay 玉蘭油 Braun 德國博明 Sebastian 塞巴斯汀 Gillette吉列
Shiseido Shiseido 資生堂 UNO 吾諾 Za 姬芮 資生堂 Clé de peau beauté 珂麗柏蒂 DQ 蒂珂 Aqua Label 水之印 Aupres 歐珀萊 Pure & Mile Soi 泊美舒亞 Be 彼嘉 Urara 悠萊 Dicila 蒂思嵐 Aquair 水之密語 Elixir White 怡麗絲爾 純肌淨白 Handasui 肌水 Perfect 洗顔專科 Elixir Superieur 怡麗絲爾優悅活顏 Tsubaki 絲蓓綺 Kuyura 可悠然 Melanreduce 臻白無瑕 Pure & Mild 泊美 Super Mild 惠潤 IPSA 茵芙莎 Hand Cream 美潤護手霜 PF-COVER 無瑕修顏
Unilever Vaseline 凡士林 Pond’s 旁氏 Hazeline 夏士蓮 聯合利華 Lux 力士 Clear 清揚 Rexona 舒耐 Dove 多芬 LYNX 凌仕 Source: Respective company websites, compiled by Fung Business Intelligence Centre
China’s cosmetics market, 2012 23
Foreign cosmetics groups and their major brands (cont’d) Exhibit 7: Foreign Cosmetics Groups and their Major Brands in China (cont’d)
Enterprise Brands Johnson & Johnson Clean & Clear 可伶可俐 Dabao 大寶* 強生 Neutrogena 露得清 Johnson’s Body Care 強生美肌 Johnson’s Baby 強生嬰兒 Elsker 噯呵**
Estée Lauder Estée Lauder 雅詩蘭黛 La Mer 海藍之謎 雅詩蘭黛 Aramis 雅男士 Bobbi Brown 芭比波朗 Clinique 倩碧 Tommy Hilfiger 唐美希緋格 M.A.C. 魅可 Donna Karan Cosmetics 唐娜凱倫
Beiersdorf NIVEA 妮維雅 La Prairie 莱珀妮 拜爾斯道夫 Nivea for men Eucerin 優色林 Florena
Beiersdorf Hair Care*** Slek 舒雷 Hairsong 順爽 (previously known as C-Bons Sdew 風影 Maestro 美濤 iSPA Home 悅美芳達 Costyle 珂絲美 Hair Care) Kanebo Impress 印象之美 Aqua 雅呵雅 佳麗寶 Lunasol 日月晶采 Aqua Sprina雅呵雅絲睿 Sui sai 水之璨 Aqua Lunash 潤希 Blanchir Superior 馥蘭哲兒極致系列 Freeplus 芙麗芳絲 Dew Superior 潤活極致系列 Kate
Coty Inc. TJOY**** 丁家宜 TJOY for men 丁家宜男士 科蒂集團 *Johnson & Johnson completed the acquisition of Beijing Dabao in 2008. ** Johnson & Johnson completed the acquisition of Shanghai Elsker in January 2013. ***Beiersdorf acquired 85% stake in C-BONS Hair Care in 2007. Upon the acquisition, the name of C-Bons Hair Care has been changed to Beiersdorf Hair Care. **** Coty has acquired a majority stake in TJOY in December 2010.
Source: Respective company websites, compiled by Fung Business Intelligence Centre
China’s cosmetics market, 2012 24
Foreign cosmetics groups and their major brands (cont’d) Exhibit 7: Foreign Cosmetics Groups and their Major Brands in China (cont’d) Enterprise Brands Kao Kao 花王 Asience 亞羨姿 花王 Bioré 碧柔 Sifoné 詩芬 Men’s Bioré 碧柔男士 Feather 花王飛逸 Sofina 蘇菲娜 Curél珂潤 Liese 莉婕
Kosé Kosé 高絲 Avenir 艾文莉 高絲 Beauté de Kosé 美諦高絲 Recipe-O 蘭哲歐 Prédia 貝締雅 Junkisei 潤肌精 Sekkisei 雪肌精 White St妍哲 Refine 萊菲 Nature & Co 娜蔻 Esprique 綺絲碧 Moisture Skin Repair Junkisui 純肌粋 Astalution Seikisho 清肌晶 Grandaine 葛倫黛娜 Shirosumi 白澄 Infinity Cosme Decorte 黛珂
Avon Products, Inc. Avon 雅芳 美國雅芳産品有限公司 Amore Pacific Corp Laneige 蘭芝 Amore 愛茉莉 愛茉莉太平洋集團 Mamode 夢妝 Sulwhasoo 雪花秀 Innisfree 悅詩風吟 Lirikos 儷瑞恩 Nu Skin Enterprise Inc. Nu Skin 如新 如新集團 LVMH Group Guerlain 嬌蘭 Benefit 貝玲妃 Fresh 馥蕾詩 Make Up For Ever DHC Corp DHC Fancl Corp Fancl Source: Respective company websites, compiled by Fung Business Intelligence Centre
China’s cosmetics market, 2012 25 II. Competitive landscape
(1) Foreign cosmetics companies
(2) Domestics cosmetics companies
China’s cosmetics market, 2012 26
Domestic cosmetics enterprises dominated in lower tier cities
Domestic cosmetics brands have made great strides in lower tier cities in recent years.
− As a case in point, Inoherb (相宜本草) has expanded rapidly and shown outstanding performance in lower tier cities for the past three years. It is now the second large domestic brand in the skin care segment, with its market share reaching almost 10%, immediately after Olay*.
To vie for larger market share in the market, some domestic players have cooperated with international players to expand their product portfolios and enhance their competitiveness.
− A typical example is Shanghai Jahwa (上海家化). The company has entered into strategic alliance with Kao in November 2011** on marketing and sales.
* Orient Security – “Research on Cosmetics Industry”, 30 November 2012 ** Kao - http://www.kao.com/jp/en/corp_news/2011/20111125_001.html
China’s cosmetics market, 2012 27
Domestic cosmetics groups and their major brands
Exhibit 8 shows some of the domestic cosmetics groups and their major brands in China. Exhibit 8: Domestic Cosmetics Groups and their Major Brands in China (as of February 2013) Enterprise Brands Shanghai Jahwa Co., Ltd.* Maxam 美加淨 Gf 高夫 上海家化集團 Chinfié 清妃 Liushen 六神 Herborist 佰草集 Cocool 珂珂 ShanghaiVive 雙妹 Ruby Orient 露美
Sichuan Jahwa Cortry Cosmetics Co. Ltd** Cortry 可采 LiveliCutee 伶采 四川家化可采化妝品股份有限公司
Jiangsu Longliqi Group Co., Ltd. Longliqi 隆力奇 Evergreen 雅妍 江蘇隆力奇集團
Arche Cosmetics Co., Ltd BNS 繽麗 Effi 玉麗 廣東雅倩化妝品有限公司 Ariar 清逸 Eveae 維鮮 Cathy 佳雪
Zhuhai Sunrana Cosmetics Co., Ltd. Sunrana 姍拉娜 珠海姍拉娜化妝品有限公司
Bawang International Bawang 霸王 Royal Wind 追風 霸王國際集團 Herborn 本草堂 Smerry 雪美人 Litao 麗濤
* Ping An Group has acquired 100% of share in Shanghai Jahwa in 2011. **Shanghai Jahwa has acquired 51% stake in Cortry in 2008. Source: Respective company websites, compiled by Fung Business Intelligence Centre
China’s cosmetics market, 2012 28
Domestic cosmetics groups and their major brands (cont’d)
Exhibit 8: Domestic Cosmetics Groups and their Major Brands in China (cont’d) Enterprise Brands Shanghai Huayin Commodity Co., Ltd. Bee & Flower 蜂花 上海華銀日用品有限公司
Guangzhou Houdy Cosmetics Co., Ltd. Houdy 好迪 Tongle 童樂 廣州市好迪化妝品有限公司
Decolor Cosmetics Co., Ltd. Decolor 迪彩 Crystal 晶彩 廣州市迪彩化妝品有限公司 Luxe-Lotus 蓮尚 Lotuses 千蓮薈 Enevous 伊儂華 Nenuph 藍蓮花
Lafang Group Lafang 拉芳 Bétrue 繽純 拉芳集團 Raclen 雨潔 Sunfeel 聖峰 Duo Zi 多姿 Mese 美多絲
Guangzhou Tobaby Cosmetics Co., Ltd. Tobaby 丹芭露 廣州露純化妝品有限公司
Huaya Group Co., Ltd. Franic 法蘭琳卡 Meifubao 美膚寶 環亞化妝品科技有限公司 Leila 蕾拉
Jala (Group) Co., Ltd. Chcedo 自然堂 Maysu 美素 伽藍(集團)股份有限公司 Aglaia 雅格麗白 Insea 醫婷
Source: Respective company websites, compiled by Fung Business Intelligence Centre
China’s cosmetics market, 2012 29
Domestic cosmetics groups and their major brands (cont’d)
Exhibit 8: Domestic Cosmetics Groups and their major Brands in China (cont’d)
Enterprise Brands Proya Cosmetics Co., Ltd. Proya 珀萊雅 杭州珀萊雅化妝品有限公司
Shanghai Inoherb Cosmetics Co., Ltd. Inoherb 相宜本草 上海相宜本草化妝品股份有限公司
Softto Co., Ltd. Softto 索芙特 索芙特股份有限公司
Foshan Shunde Modern Health Care Products Co., Ltd. Xian Dai 現代 Syqu 思青 佛山市順德現代保健用品有限公司
Shanghai Savol Health & Cosmetics Co., Ltd. Savol 章華 Savol Ecologic 章華生態 浙江章華保健美髮實業有限公司 Sikin 絲精 Tianfeng 天峰 Savol Hair Care Exper 章華 Yimo 一抹 護髮專家 Deep Sea 深海植物派 Herb Extract 百草晶 Color Easy 輕鬆染
Youngrace Cosmetic International Group Limited Youngrace 溫雅 溫雅化妝品國際集團有限公司
Source: Respective company websites, compiled by Fung Business Intelligence Centre
China’s cosmetics market, 2012 30 III. Latest developments
China’s cosmetics market, 2012 31 Product premiumisation and trading up have become a major development trend
Increasing disposable income led by dynamic economic growth and greater presence of premium brands in lower tier cities subsidize premium cosmetics sales growth.
− According to Euromonitor*, retail sales of premium cosmetics turned higher from 25.89 billion yuan in 2010 to 30.46 billion yuan in 2011, up 17.6% yoy; in particular, sales of premium baby and child-specific products during the same period even jumped more than 20% yoy to 459.3 million yuan.
− Premium cosmetics are expected to post a 14% compound annual growth rate between 2011 and 2016, higher than overall beauty and personal care’s annual average growth of 8%.
* Euromonitor International – “Beauty and Personal Care in China”, May 2012
China’s cosmetics market, 2012 32 Product premiumisation and trading up have become a major development trend (cont’d)
To satisfy the growing demand for higher-end cosmetics, a number of international and domestic brands have expedited their penetration in the high- end segment.
− L’Occitane has introduced hair care products and an upgraded premium lip care product “Shea Butter Lip Balm” in China in recent years. − Estee Launder has also launched a new premium skin care line “Osiao” which targets the Asian market, especially China.
On the other hand, some domestic brands have launched premium cosmetics to compete with international players.
− Jiangsu Longliqi (隆力奇), one of the most sought-after brands in China, introduced new mid-to-high-end skin care products in 2011.
China’s cosmetics market, 2012 33
Brands are striving to enhance competitiveness
In response to fierce competition and more sophisticated consumers’ needs, key players in the cosmetics market have increased efforts to widen their product portfolios, develop functional products and change the packaging to enhance their competitiveness in the market.
− Unilever has changed the packaging and launched various promotions to reinforce its hair care brand, Clear for Men, in order to compete with Head & Shoulders for Men, one of the best known hair care brands by P&G in China.
− Shanghai Inoherb introduced an upgraded toner product “Rhodiola Fine Whitening Toner” in 2011, targeting Chinese consumers with a greater desire for whitening function.
− Henkel (China) posted the strongest sales growth in the hair care segment in 2011 after launching its new hair care brand, Syoss, as well as expanding the range of hair care products it offers*.
* Euromonitor International – “Beauty and Personal Care in China”, May 2012
China’s cosmetics market, 2012 34 Business-to-consumer (B2C) online players are tapping into brick and mortar retailing
While many cosmetics brands have been expanding into online retailing in recent years, some brands that originally sold only through business-to-consumer (B2C) model are starting to break into store-based retailing to grab more market share.
− Mask Family (膜法世家) set up offline experience store in Guangzhou in June 2012*.
− Uzise (柚子舍) has revealed its plan to open seven retail stores in Beijing, Shanghai and Chengdu; and Lefeng (樂蜂網) has also planned to tap into the offline market**.
* Guangdong E-business Association - http://www.gdeba.org/article/view/id/2993 ** iResearch - http://www.iresearch.com.cn/Report/View.aspx?Newsid=176039
China’s cosmetics market, 2012 35
Cosmeceutical market is growing in prevalence
According to HKTDC*, more than 170 enterprises have tapped into the cosmeceutical market. It is estimated that the cosmeceuticals sector in China would grow by 10% to 20% yoy to reach 20 billion yuan in three to five years. Chinese herbal cosmetics brands are playing an active role in the sector.
In addition, data released by HKTDC** also suggested that China’s cosmeceutical market posted annual sales growth of up to 10% to 20% yoy between 2004 and 2012, with the market share increasing from 20% to 40%. The sales growth of China’s cosmeceutical market was twice as high as that of the European and U.S. markets.
Indeed, many players have entered the cosmeceutical market in recent years. − Dihon Pharmaceutical (滇虹藥業), well-known for its hair care line Health King (康王), launched two new cosmeceutical lines Freeface (芙芮芬絲) and Beirun (倍潤) in 2012. − Jawha, after successfully launching Herborist, also introduced another cosmeceutial line Dr. Richia ( 玉澤) in 2010. − Beijing Tongrentang Cosmetics (同仁堂) announced that it will increase the total number of its retail stores to 2,000 worldwide by the end of 2015, with total sales estimated to hit 20 billion yuan.
* HKTDC - http://china -trade-research.hktdc.com/business-news/article/China-Consumer-Market/China-s-cosmetics-market/ccm/en/1/1X000000/1X002L09.htm ** HKTDC - http://product-industries-research.hktdc.com/business- news/article/%E5%81%A5%E5%BA%B7%E5%8F%8A%E7%BE%8E%E5%AE%B9%E7%94%A2%E5%93%81/%E8%97%A5%E5%A6%9D%E6%88%90%E4% B8%AD%E5%9C%8B%E6%97%A5%E5%8C%96%E5%B8%82%E5%A0%B4%E6%96%B0%E5%AF%B5/imn/tc/1/1X3WLQ9L/1X09RYZ7.htm
China’s cosmetics market, 2012 36
Cosmeceutical market is growing in prevalence (cont’d)
Although the cosmeceutical market in China has long been dominated by foreign brands such as Avene, Vichy, La Roche-Posay, Sulwhasoo and Freeplus, data released by Baidu Data Research Center* showed that domestic cosmeceutical brands Inoherb and Herborist ranked first and second, respectively in terms of popularity in the cosmeceutical market in the third quarter of 2012, outstripping foreign cosmeceutical brand Avene which only ranked the third.
The data also indicated that the dominant position of foreign cosmeceutical brands is being challenged by some outstanding domestic brands.
* Baidu Data Research Center – Report on China’s Cosmetics Industry for Q3 2012, November 2012
China’s cosmetics market, 2012 37
Male grooming market is growing exponentially
According to Euromonitor*, men’s grooming market posted a 20% yoy sales growth to 5.518 billion yuan in 2011; in particular, men’s skin care witnessed the highest sales growth of 34% yoy, while men’s toiletries registered retail sales growth of 26% yoy.
To penetrate the lucrative market, many foreign and domestic brands have introduced product lines for men. − Examples of foreign brands include Fancl, L’Oreal Men Expert, Mentholatum, Kiehl’s, SK-ll Men and Orbis. − Examples of domestic brands include Pai Lang (派朗) by Beijing Tongrentang Cosmetics, GF (高夫) by Jawha, Inoherb Men (相宜本草男士), and Chcedo Men (自然 堂男士).
* Euromonitor International – “Beauty and Personal Care in China”, May 2012
China’s cosmetics market, 2012 38
Male grooming market is growing exponentially (cont’d)
Furthermore, some major players have stepped up their efforts to launch more new products to satisfy different consumer needs.
− For instance, following L’Oreal Men Expert introduced an anti-aging line in 2008, Mentholatum also launched Coenzyme Q10 Lifting Face Cream and Power-up Essence in 2009.
− In 2011, Mentholatum (Zhongshan) Pharmaceuticals also widened its product ranges from men’s facial cleansers and facial creams to bath and shower products, and posted remarkable results in key cities.
China’s cosmetics market, 2012 39
Children and baby care market sees propelling growth
According to Euromonitor*, retail sales of China’s children and baby care products continued to register strong growth, posting 17% yoy growth to 4.852 billion yuan in 2011. It is estimated that retail sales of China’s children and baby care products will hit 9.263 billion yuan in 2016.
Major players in the market include Johnson’s Baby, Frog Prince (青蛙王子), Yumeijing (郁美淨), Elsker, Pigeon and Hai Er Mian (孩兒面).
The market has long been dominated by foreign brand, Johnsons’ Baby (with market share of about 50%), however, the brand saw share decline from 2008 onwards. Meanwhile, some domestic brands have experienced strong growth in market share, for instance, the market share of leading domestic brand, Frog Prince increased from 3.3% in 2008 to 6.9% in 2011.
* Euromonitor International – “Beauty and Personal Care in China”, May 2012
China’s cosmetics market, 2012 40
Children and baby care market sees propelling growth (cont’d)
With the increasing demand for children and baby care products, the number of retail stores selling mom and baby products has grown rapidly in recent years. Retailers such as Redbaby (北京紅孩子), Lijiababy (麗家寶貝) and Leyou (樂友) have set up a number of retail stores offering skincare products for expectant mothers and babies.
Some cosmetics brands have also introduced skin care products designed specially for expectant mothers and babies. Examples include Mamale (媽媽樂) by Kong Fengchun (孔鳳春) and Jiabaole (佳寶樂) by Beijing Tongrentang Cosmetics (同仁堂).
China’s cosmetics market, 2012 41
Anti-aging products becomes increasingly popular
Anti-aging products have gained increasing attention among Chinese women, in particular, in recent years.
− According to Guosen and Euromonitor*, sales of anti-agers has increased 2.4 times over the past five years; in 2011, the total sales of anti-agers increased by 17% yoy to reach almost 20 billion yuan.
− In the past, the main consumers of anti-agers were women over 30 years of age. Nowadays, female consumers are now more conscious about their beauty and youthfulness and many of them start to use anti-ageing products in their early 20s.
* Guosen – “Research Report on China’s Cosmetics Industry ll”, 28 November 2012
China’s cosmetics market, 2012 42
Anti-aging products becomes increasingly popular (cont’d)
Some key cosmetics players have increased their investments in anti-aging products and captured a larger market share in the sector.
− Estee Lauder’s market share was 5.1% in 2011, up by 1.9 ppts when compared to 2008, while Mary Kay’s market share was 5.5% in 2011, also ahead by 1.9 ppts against 2008. − Domestic player Chcedo also gained a larger market share in the sector, with its market share jumping up from 3.2% in 2008 to 4.6% in 2011.
Exhibit 9: Market Share of the Top 10 Anti-Agers Brands for Cosmetics in China, 2008 and 2011
0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% L'Oreal Dermo-Expertise Olay Aupres Mary Kay 2008 Lancome 2011 Estee Lauder Chcedo Artistry Shiseido Avon
Source: Euromonitor & Guosen
* Euromonitor International – “Skin care in China”, May 2012
China’s cosmetics market, 2012 43
Anti-aging products becomes increasingly popular (cont’d)
Apart from launching premium anti-aging products, some major players have introduced anti-aging products targeting the mass segment.
− For instance, Olay have launched its anti-aging lines, Regenerist and Pro-X for the mass segment in recent years.
− L’Oreal also introduced its mass anti-aging product, L’Oreal Paris Youth Code Prodigious Rejuvenating Pre-essence in 2011.
China’s cosmetics market, 2012 44
Green cosmetics products are gaining popularity
Green products are products that have less impact on the environment or are less detrimental to human health.
Nowadays, more and more consumers in China are looking for green cosmetics, as cosmetics products are applied directly to the body and excessive chemical substances present in the product may cause skin allergy.
Having identified the huge growth potential, a number of foreign and domestic players have entered the sector.
− Examples of foreign brands include Jurlique, The Body Shop, Origins, Avene, Fancl, and L’Occitane.
− Domestic brands include Longliqi Organic Plus, Inoherb, and Herborist.
China’s cosmetics market, 2012 45
Green cosmetics products are gaining popularity (cont’d)
Chinese consumers’ increasing concerns over product safety has become the major growth driver for green products.
Cosmetics products with natural and chemical-free ingredients benefited remarkably from this trend.
− L’Occitane, an international natural cosmetics brand from France, experienced a 22.7% yoy sales increase in China for the period ended 30 September 2012.
− Japanese natural cosmetics Fancl, which witnessed rapid sales growth in China in recent years, has increased the number of retail stores from 115 in 2010 to 148 in March 2012 in order to cope with Chinese consumers’ strong appetite for green cosmetics products.
China’s cosmetics market, 2012 46
Some old brands have started to rejuvenate
Some time-honored Chinese homegrown brands including Pechoin (百雀羚), Maxam, Shanghai Vive (雙妹), Liushen (六神) and Zhaogui (昭貴) have embarked on brand rejuvenation in recent years. Many of the heritage brands have stepped up their efforts in research and development and introduced new product lines in order to regain lost ground in the market.
A typical example is Shanghai Vive. The homegrown brand, founded in 1898, has caught on again upon its revival in 2010. The brand has changed its product package and formula and introduced a number of new cosmetics products aiming at the mid-to-high end segment in recent years. As at the end of 2012, the brand has successfully set up 15 retail stores in key cities like Shanghai, Beijing and Chengdu.
China’s cosmetics market, 2012 47
Rules and regulations of the cosmetics sector in China
Product safety has long been a major concern in China’s cosmetics market. − In the past years, even famous foreign brands were embroiled in scandal of defective cosmetics products.
As Chinese consumers are now more discerning, product safety is expected to gain more attention in the future. More regulations are expected to be launched by the government to better regulate the cosmetics industry.
Exhibit 10 shows some latest rules and regulations related to China’s cosmetics sector.
China’s cosmetics market, 2012 48
Rules and regulations of the cosmetics sector in China (cont’d)
Exhibit 10: Selected Rules and Regulations of Cosmetics Sector, 2011-2012 Rules and Regulations Publication Highlights Date Guide for Registration and Evaluation of 12 May 2011 The Guide aims to strengthen the New Ingredients for Cosmetics * administrative licensing of new raw materials 《化妝品新原料申報與審評指南》 for cosmetics so as to ensure the quality and safety of cosmetic products.
The CFDA is seeking public opinion on 3T3 10 February The CFDA proposed an alternative method to Neutral Red Uptake (3T3 NRU) Phototoxicity 2012 animal testing. The move is considered a very Test (Draft) ** positive step which could hopefully alter the 國家食品藥品監管局發布《化妝品用化學原 requirement for animal test for cosmetics. 料體外3T3中性紅攝取光毒性試驗方法（徵求 Currently, China is the only country in the 意見稿）》 world requiring animal testing of cosmetics.
Guide for the Application and Review of 22 October The Guide aims to ensure the quality and Children's Cosmetics *** 2012 safety of cosmetics for children and further 《兒童化妝品申報與審評指南》 standardize the application and technical review of children's cosmetics. It stipulates the scope of application, principles of formulation, safety of cosmetics, application requirements for children's cosmetics and review principles.
* China Food and Drug Administration - http://www.sda.gov.cn/WS01/CL0846/61608.html ** China Food and Drug Administration - http://www.sda.gov.cn/WS01/CL0781/68975.html *** China Food and Drug Administration - http://eng.sfda.gov.cn/WS03/CL0757/75588.html
China’s cosmetics market, 2012 49 IV. Snapshots of sub-sector performance
China’s cosmetics market, 2012 50
Background
The China National Commercial Information Centre (CNCIC) conducts monthly survey to around 200 major department stores* in China to study the performance of different cosmetics sub-sectors.
In this newsletter, performance of 5 sub-sectors is examined: − Shampoos and conditioners − Other hair care products − Skincare products − Color cosmetics − Fragrances
*Note: It is noteworthy that the CNCIC data covers sales in major department stores only. Retailers of other formats such as professional and specialty stores are growing in popularity. The actual overall market share of cosmetics brands may deviate from the CNCIC data.
China’s cosmetics market, 2012 51 China’s cosmetics market in 2010 was generally less concentrated than the previous year
The top 10 players in the 5 major sub-sectors achieved over 68% of the market share in major department stores in 2011.
The top 10 players in the shampoos and conditioners sub-sector had the highest market share among other sub-sectors, reaching 93.9% in 2011. The top 10 players in the skincare products sector had a share of 78.7% in 2011. Exhibit 11: Market Share of the Top 10 Brands of Selected Sectors, 2010-2011
100 94.6 93.9 90 79.2 80 78.7 75.3 68.7 71.0 70 65.2 67.7 69.0 60 50 40 30 20 10
Share Share oftotal sales value (%) 0 Shampoos and Other hair care Skincare products Color cosmetics Fragrances conditioners products 2010 2011 Source: China National Commercial Information Centre (CNCIC) Note: It is noteworthy that the CNCIC data covers sales in major department stores only. The actual overall market share of cosmetics brands may deviate from the CNCIC data.
China’s cosmetics market, 2012 52
Performance of selected product sectors (cont’d)
Exhibits 12-16 show the performance of the top 5 players in selected sub-sectors, including Shampoos, conditioners and 2-in-1 conditioning shampoos, other hair care products (colorants, hair mask & styling agents), skincare products, color cosmetics and fragrances.
Exhibit 12: Shampoos, Conditioners and 2-in-1 Conditioning Shampoo: Share of Total Sales Value 2010-2011
Share of total sales value (%)
0 10 20 30 40
Head & Shoulders 海飛絲 (P&G) 27.5 28.8
Pantene Pro-V 潘婷 (P&G) 19.8 19.0
Rejoice 飄柔 (P&G) 16.3 14.9
Clear 清揚 (Unilever) 4.9 8.1
Lux 力士 (Unilever) 6.1 7.4
Source: CNCIC 2010 2011 Note: It is noteworthy that the CNCIC data covers sales in major department stores only. The actual overall market share of cosmetics brands may deviate from the CNCIC data.
China’s cosmetics market, 2012 53
Performance of selected product sectors (cont’d)
Exhibit 13: Other Hair Care Products (Colorants, Hair Mask & Styling Agents) : Share of Total Sales Value 2010-2011
Share of total sales value (%)
0 5 10 15 20
Youngrace 溫雅 11.1 (Youngrace Cosmetics Group) 16.0
Maestro 美濤 9.9 (C-Bons Group*) 11.3 8.6 L’Oréal 歐萊雅 (L'Oréal ) 10.1
Decolor 迪彩 11.0 (Guangzhou Decolor Cosmetics) 10.1
章華(Savol) 10.6 9.7
2010 2011
Source: CNCIC Note: It is noteworthy that the CNCIC data covers sales in major department stores only. The actual overall market share of cosmetics brands may deviate from the CNCIC data.
China’s cosmetics market, 2012 54
Performance of selected product sectors (cont’d)
Exhibit 14: Skin Care Products: Share of Total Sales Value 2010-2011
Share of total sales value (%)
0 5 10 15 20
L’Oréal 歐萊雅 (L'Oréal ) 15.5 14.7
Aupres 歐珀萊 (Shiseido) 14.7 14.3
Olay 玉蘭油 (P&G) 15.8 12.5
Estée Lauder 雅詩蘭黛 (Estée Lauder) 9.2 11.3
Lancôme 蘭蔻 (L'Oréal ) 9.7 11.2
2010 2011
Source: CNCIC Note: It is noteworthy that the CNCIC data covers sales in major department stores only. The actual overall market share of cosmetics brands may deviate from the CNCIC data.
China’s cosmetics market, 2012 55
Performance of selected product sectors (cont’d)
Exhibit 15: Color Cosmetics: Share of Total Sales Value 2010-2011
Share of total sales value (%)
0 10 20 30
Maybelline 美寶蓮 (L'Oréal ) 25.6 26.6
L'Oréal 歐萊雅 (L'Oréal ) 11.4 11.5
Christian Dior 迪奧 CD 5.6 (Christian Dior (China) Fragrance & … 6.1
Aupres 歐珀萊 (Shiseido) 5.9 6.0
Chanel 香奈兒 4.9 5.5
2010 2011
Source: CNCIC Note: It is noteworthy that the CNCIC data covers sales in major department stores only. The actual overall market share of cosmetics brands may deviate from the CNCIC data.
China’s cosmetics market, 2012 56
Performance of selected product sectors (cont’d)
Exhibit 16: Fragrances: Share of Total Sales Value 2010-2011
Share of total sales value (%)
0 10 20 30
Chanel 香奈兒 (Chanel SA) 24.3 27.1
Christian Dior 迪奧 CD 18.4 (Christian Dior (China) Fragrance & Cosmetics) 19.4
7.3 BOSS (Hugo Boss AG) 8.6
Burberry 巴寳莉 (Inter Parfums) 5.8 5.2
Lancôme 蘭蔻 (L'Oréal ) 3.9 4.8
2010 2011 Source: CNCIC Note: It is noteworthy that the CNCIC data covers sales in major department stores only. The actual overall market share of cosmetics brands may deviate from the CNCIC data.
China’s cosmetics market, 2012 57 For more information
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China’s cosmetics market, 2012