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January 2011 Li & Fung Research Centre
In this issue:
Market Overview Competitive landscape
p. 3 p.7 p.12 p.22 p.28
III. Latest developments IV. Snapshots of sub-sector performance V. Appendix
I. Market Overview
0 20. 2005-2009 80. the retail value of China’s cosmetics registered a slower nominal growth of 16. In 1-3Q 2010.0 0.8 20% % yoy 15% 10% 59. Retail value of cosmetics by wholesale and retail enterprises above designated size*.3 Source: National Bureau of Statistics of China (NBS) *Designated size: with annual sales of 5 million yuan or above and with an employment of or over 60.3% yoy. 4 .0 60.8 16.0 10.0 2005 2006 Sales value 2007 2008 2009 Growth 5% 0% 38.7 33. showing nominal growth of 16.0 30% 25% • yoy growth (%) Cosmetics FY09 1Q10 1H10 1-3Q10 16.9% year-onyear (yoy).0 Billion yuan 50.China’s cosmetics retail value showed steady growth in 1-3Q 2010 • According to National Bureau of Statistics.5 48.7 74.0 40.9 15.0 70.0 30.0 billion yuan in 2009.6 15. China’s cosmetics retail value reached 74.
4 101. January 2009 – October 2010 (Same Month of Preceding Year =100) 101.4 Ja n09 Fe b M ar Ap r M ay Ju n Ju l Au g Se p O ct No v De Ja c n10 Fe b M ar Ap M r ay Ju n Ju Au l g Se p O ct Source: NBS 5 .Retail price of cosmetics in China on a rising trend • Cosmetics retail price has been on a rising trend since July 2010.0 99.6 100.0 100.8 99.2 101.2 100. Retail Price Indices of Cosmetics in China.8 100.6 99.4 100.
especially those with poorer brand equity. logistics. Many cosmetics players. industry players said that it has lagged behind the cost increase. Increase in costs such as rental. are exerting heavy pressure on cosmetics enterprises. have witnessed their profit margin eroding. advertisement. labor. • 6 .Increasing margin pressure on cosmetics enterprises • • Although retail price has been on a rising trend. and slotting fee etc.
Competitive landscape 7 .II.
Foreign players have a strong foothold in the mid-range to high-end segments • Comparatively.2% yoy in China in 2009.23 billion yuan in 2009. According to Access Asia. 8 . (See Appendix) • Foreign players have a strong foothold in the mid-range to high-end segments. the sales of P&G in China reached 13. • China has become one of the most important markets for many foreign cosmetics companies. foreign players have a more extensive brand portfolio than domestic players. after the North American market. with a market share of 19%. – Greater China is the second largest market for Procter & Gamble. L’Oréal Paris recorded 25.5% yoy growth in China market’s sales in 2009. – L’Oréal International sees China as its major growth engine: Garnier recorded a sales growth rate of 61.
had agreed to acquire a majority stake (~400 million USD) in domestic skincare group TJoy Holdings Ltd (丁家宜). 9 . a number of foreign cosmetics players have been actively exploring merger and acquisitions (M&As) opportunities. A number of well-known local brands were acquired by foreign brands over the past years. The acquisition is expected to close in January 2011.. Coty Inc. local connections and distribution channels.Foreign enterprises have acquired a number of renowned domestic brands • As a shortcut to acquire resources such as brand equity. one of the leading global beauty companies. Homegrown cosmetics brands that had been acquired by foreign companies: – Acquisition of Dabao (大寳) by Johnson & Johnson in 2008 – Acquisition of C-Bons (絲寳) by Beiersdorf in 2007 – Acquisitions of Yue-sai (羽西) and Mininurse (小護士) by L’Oréal in 2004 • • In December 2010.
(See Appendix) Though generally weaker in brand building and supply chain management. – e. Some are developing new brands to target higher-income consumers. a number of domestic players have strived hard to move up the value ladder. They have less extensive brand portfolio compared with foreign counterparts.Domestic brands are more popular in lower-end segments • Domestic brands generally priced lower and target the mass and lower-end segments. Ltd (上海家化). 10 • • • .g. the launch of Herborist (佰草集) and ShanghaiVive (雙妹) by Shanghai Jahwa co.
Brands from other industries also jump on the bandwagon to offer cosmetics products. hand cream and lip balm etc. Watsons. – Fujifilm introduced its skincare products (Astalift) to mainland China and Hong Kong markets in 2010. including shower gel. moisturizer. The brand Astalift is also available in Taobao Mall. – For example. Sephora and Sasa have launched private label cosmetics products in recent years to improve profitability. Swedish apparel brand H&M launched a new line of Ecocert certified organic-ingredient-based skin care products in 2010. one of China’s most popular online shopping platforms. body scrub. • 11 .Many new players are tapping the market • An increasing number of retailers in China such as Wal-Mart.
III. Latest developments 12 .
Sasa.Department stores.com. supermarkets and hypermarkets remained the major distribution channels • According to Access Asia.cn • • Many players have opted for multi-channel operations 13 *Include Baby Care. Sasa. Men’s Toiletries. Clinique. Bath & Shower.sephora. Deodorants. Some other emerging channels that are gaining popularity: – Professional stores Watsons.2%) were the major distribution channels for cosmetics and toiletries* by sales in China in 2009.tmall. Sephora and Cosmart (歌詩瑪) – Beauty parlors Herborist SPA (佰草集漢方SPA). DHC. Lancôme. Perfumes & Fragrances. Estée Lauder. hypermarkets and supermarkets (20. .com. department stores(56. Skin Care and Sun Care. Chlitina (克麗緹娜) and Natural Beauty SPA (自然美SPA生活舘) – Online retailing platforms Corporate websites Integrated B2C online retailing platforms Professional online stores L’Oréal. Biorthem Joyo Amazon Taobao mall (http://beauty. www.com/) strawberrynet. Hair Care.2%). Make-up and Colour cosmetics. Oral Hygiene.
Beijing and Tianjin. had planned to open 100 stores by the end of 2010.000 outlets by the end of 2011.Cosmetics retailers are accelerating their penetration into China • Sephora. the leading health and beauty retail chain in Asia. which has already established presence in more than 20 cities including Shanghai.or 3rdtier cities such as Wuxi. Changsha and Changshu. Watsons aims to have 1. Management of Sasa said in 2010 that it planned to increase the store number to 100 in two and half years. Wenzhou. covered more than 100 cities of mainland China. It has begun to expand to many 2nd. Watsons. has opened more than 700 outlets in more than 100 cities of mainland China as of December 2010. • • 14 .
1 billion yuan). • – 15 . during 1-3Q 2010 on advertising in China when compared to other industries.Massive advertising by cosmetics companies • According to CTR. – P&G has been the biggest spender at the annual auction for prime time advertising slots of the China Central Television (CCTV) for the past few years. Cosmetics players have spent huge sums of money on advertising in China. celebrity endorsement is one of the most popular methods for players to create noise in the market. According to CTR.0 billion yuan) on advertising in China during 1-3Q 2010. Advertising on China’s largest national television network enables P&G to promote brand awareness. P&G was the biggest spender (25.1 billion yuan) and Unilever (8.3 billion yuan). followed by LO’réal (9. Thus far. the cosmetics and toiletries industry was the biggest spender (67.
GF (高 夫).7% of the total cosmetics market in 2008.Male grooming market is growing fast • The male grooming market is growing very fast and still has much untapped potential. LO’réal reported that sales in men’s skincare products in China rose by 27% in 2009 and the company expected it to increase by 40% in 2010. Domestic companies such as TJoy (丁家宜). are increasingly keen to offer cosmetics for men as well. L’Oréal. The segment is expected to grow exponentially for the next few years. Bawang (霸王). Softto (索芙特) and Inoherb (相宜本草) etc. five times the increase of women’s skincare products. According to HKTDC. • • • 16 . men’s cosmetics accounted for 12. The sales of male specific skincare products of brands such as Nivea. Biotherm and Garnier etc has been growing rapidly.
Distribution channels for cosmeceuticals include mainly drug stores. Inoherb (相宜本草) and Shiseido have tapped the cosmeceuticals market. Herborn (本草堂). China Shenghuo Pharmaceutical (昆明聖火藥業).Yunnan Baiyao (雲 南白藥). dispensary chains and counters in department stores. Jiangsu Longliqi (江蘇隆力奇). Companies such as Beijing Tongrentang (北京同仁堂). Shanghai Jahwa (上海家化).More players tap into the cosmeceuticals market • Many players (including pharmaceutical companies) have introduced cosmeceuticals in the past few years. • • 17 .Herborist (佰草集).
Sisley. Clarins. Origins. • 18 . and L’Occitane are some well-known brands that offer natural and organic ingredient-based cosmetics products. Yves Rocher. Jurlique. Aveda.Demand for natural and organic cosmetics is growing • Demand for natural and organic products is growing amid increasing awareness of sustainability.
Bianque 扁鵲). – Cosmetics companies are required to display detailed information such as ingredients. are prohibited.More stringent regulations on cosmetics • The State Food and Drug Administration (SFDA) issued the Regulations on Naming of Cosmetics (化妝品命名規定). – Wordings. 19 . the products should not include wordings such as “anti bacteria”. Inspection and Quarantine (AQSIQ). which was effective from February 2010. such as names of well-known traditional Chinese herbalists (e. “anti-allergy”.化妝品通用標簽 ) was effective from July 2010. “fat burning” and “truly natural” in their names. “detox”.g. • Implemented by China’s General Administration of Quality Supervision. Huatuo 華佗. the Instruction for Use of Products of Consumer Interest – General Labeling of Cosmetics (消費者使用説明. expiry date etc on the labeling. Besides.
Renminbi appreciation against US dollar and easing travel restrictions. as compared to food (12%) and accommodation (11%).pdf” for more information. Mainland tourists like to travel abroad to purchase cosmetics due to cheaper price and more product varieties. Cosmetics are top on their buying list. With increasing income. 20 • • • .com/eng/knowledge/research/china_dis_issue 75. Currently.Buying cosmetics products abroad is popular • Chinese tourists spent a fairly large proportion on shopping (32%). a consumption tax of 30% is levied on luxury and high-end cosmetics in China. many Chinese consumers shop for cosmetics products abroad. Luxury cosmetics products in mainland are generally more expensive than that in overseas markets.lifunggroup. Please refer to our newsletter China’s Outbound Tourism : “http://www.
g. More players now try to incorporate advanced biotechnologies in new product developments. Coati (小浣熊). e.) are gaining popularity. Major players include Frog Prince (青蛙王子). BB Cream etc.Other trends to watch • Multi-functional products (e. sulphate-free shampoo. • • 21 . color cosmetics with skincare function. Kids’ cosmetics market is still underdeveloped.g. Mentholatum. Yumeijing (鬱美淨) and Johnson & Johnson.
Snapshots of subsector performance 22 .IV.
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 specialty stores are growing in popularity. In this newsletter.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. The actual overall market share of cosmetics brands may deviate from the CNCIC data. 23 .
Top 10 players in the shampoos and conditioners sub-sector achieved more than 95% of the market share in 2009.82 70.85 71.70 72. 2009 Share of total sales value (%) 100 90 80 70 60 50 40 30 20 10 0 Shampoos and conditioners Other hair care products Skincare products Color cosmetics Fragrances 95.19 79.China’s cosmetics market is relatively concentrated • • Top 10 players in the 5 major sub-sectors achieved over 70% of the market share in department stores in 2009. Market share of top 10 brands of selected sectors.10 Source: China National Commercial Information Centre (CNCIC) 24 .
68 王霸 Bawang (Bawang International) 蕾舒 Slek (C-Bons Group*) *Beiersdorf acquired 85% stake in C-BONS Hair Care in 2007.88 17.41 25.04 10. 2009 Share of total sales value(%) 0 5 10 15 20 25 30 Share of total sales value (%) 0 2 4 6 8 10 12 14 16 18 20 Rejoice (P&G) 10.12 6.24 Youngrace (Youngrace Cosmetics Group) Decolor (Guangzhou Decolor Cosmetics) Maestro (C-Bons Group*) 彩迪 雅溫 17.95 12. 2009 Other hair care products (colorants. conditioners and 2-in-1 conditioning shampoos: share of total sales value.48 11. hair mask & styling agents): share of total sales value. Source: CNCIC 華章 雅萊歐 L’Oréal (L'Oréal ) (Savol) 6.31 25 .Performance of selective product sectors Shampoos.37 濤美 柔飄 婷潘 Pantene Pro-V 絲飛海 Head & Shoulders (P&G) (P&G) 20.
20 12.87 Lancôme (L'Oréal ) 5.22 Aupres 雅萊歐 L’Oréal (L'Oréal ) 17. 2009 Color cosmetics: share of total sales value.62 6.13 5.98 L'Oréal 蓮寶美 黛蘭詩雅 蔻蘭 萊珀歐 雅萊歐 油蘭玉 Olay (P&G) 19.79 4.96 CD Christian Dior (Christian Dior (China) Fragrance & Source: CNCIC 油蘭玉 Estée Lauder (Estée Lauder) Olay 奧迪 萊珀歐 Aupres (Shiseido) 16.Performance of selective product sectors (Cont’d) Skin care products: share of total sales value. 2009 Share of total sales value (%) 0 2 4 6 8 10 12 14 16 18 20 Share of total sales value (%) 0 5 10 15 20 25 30 27.02 Maybelline (L'Oréal ) (L'Oréal ) (Shiseido) (P&G) 26 .31 7.
Performance of selective product sectors (Cont’d) Facial cleanser for men: share of total sales value.75 16.02 14.81 5.24 6.30 Christian Dior CD (Christian Dior (China) Fragrance & Cosmetics) BOSS (Hugo Boss AG) Burberry (Inter Parfums) (L'Oréal ) 奧迪 兒奈香 雅維妮 Nivea (Beiersdorf) 38. 2009 Fragrances: share of total sales value.31 Chanel (Chanel SA) 27 .16 Lancôme 莉寳巴 雅萊歐 L’Oréal (L'Oréal ) 柔碧 Bioré (Kao) 16.08 9.03 Source: CNCIC 蔻蘭 敦雷秀曼 Mentholatum (Mentholatum) 13.07 25 宜家丁 TJOY (Nanjing Jianong Chemical Co Ltd) 6. 2009 share of total sales value (%) 0 5 10 15 20 25 30 35 40 45 0 5 Share of total sales value (%) 10 15 20 19.
Appendix 28 .V.
Beiersdorf NIVEA Nivea for men Vidal Sasson Clairol Herbal Essences Wella Camay 絲 奇美 姿薇 西羽 士護小 泉 膚理 尼 瑪阿 治喬 秀村植 shu uemura Giorgio Armani La Roche-Posay Mininurse Yue Sai Vichy Matrix Skinceuticals 影風 雷舒 夫道 雅維妮 斯爾拜 可魅 碧倩 士男雅 黛蘭 黛 蘭詩雅 詩雅 兒嬰 生強 清得露 生強 俐 可伶可 蓮士 夏 芬多 士力 林士凡 華 利合聯 珂蒂 顏 修瑕無 諾吾 妃珊 顔娣白 麗泊愛 瑕 無白臻 顏活悅 優 爾絲麗 怡 爾 絲麗怡 萊悠 萊 珀 歐魅思 萊 珀歐 沙 熱安 白優 薇悅 蒂 柏麗珂 士男堂 生資 堂生資 堂 生資 油蘭 玉 婷潘 柔飄 絲飛海 潔寶 娜蓮 赫 泉歐碧 蔻蘭 詩卡 髮 美業專雅 萊歐 約紐蓮寶美 爾 尼卡 雅萊歐 黎巴 雅 萊歐 .Foreign cosmetics enterprises and their major brands in China Company Name L’Oréal Brands L’Oréal Paris Garnier Maybelline New York L’Oréal Professional Pond’s Clear Rexona Dabao * Johnson’s body care 濤美 爽順 C-Bons Hair Care** Slek Sdew La Mer Bobbi Brown Tommy Hilfiger Donna Karan Cosmetics La Prairie Eucerin Florena Hairsong Maestro 妮珀莱 倫凱娜唐 格緋希 美唐 朗 波比芭 謎之藍海 肌美 生強 寶大 耐舒 揚清 氏旁 氛香 禈紀世 怡綺 漪 花 海上 美泊 綺蓓絲 水肌 霜手護潤美 香欣 妝彩 機心 潤惠 然 悠可 科專顔洗 語密 之水 嘉彼 印之水 芮姬 露蜜 色紅 Shiseido Eudermine Za Aqua Label Be Aquair Perfect Kuyura Super Mild Maquillage Tessera Hand Cream Handasui Tsubaki Pure & Mild Shanghai Bouquet Qi Zen 璐卡伊 宣沙 爾 玫卡 娜威 Kérastase Lancôme Biotherm Helena Rubinstein HR Kiehl’s P&G Head & Shoulders Rejoice SK-II Pantene Olay Shiseido Shiseido Shiseido Men Clé de peau beauté Revital UV White Anessa Aupres Supreme Aupres Urara Elixir Elixir Superieur Melanreduce Asplir Whitia Selfit UNO PF-Cover DQ Unilever Vaseline Lux Dove Hazeline Johnson & Johnson Clean & Clear Neutrogena Johnson’s Baby Estée Lauder Estée Lauder Aramis Clinique M.C.A.
Moisture Skin Repair Astalution Grandaine 蔻娜 哲妍 精肌潤 歐 哲蘭 莉文艾 逸飛王 花 芬詩 姿羨亞 列 系致極 活潤 絲芳麗芙 睿絲雅 呵雅 雅呵雅 晶肌 清 粋肌純 菲萊 精肌雪 精肌雪 雅 締貝 絲高諦 美 絲高 娜菲 蘇 士 男柔碧 柔碧 王花 列系致極 兒哲蘭 馥 燦 光炫金 璨 之水 采晶 月日 美之象印 寶麗 佳 Kanebo Impress Lunasol Sui sai Coffret D’or Blanchir Superior Kao Bioré Men’s Bioré Sofina Kosé Beauté de Kosé Prédia Sekkisei Sekkisei Supreme Refine Esprinque Precious Junkisui Seikisho Aqua Aqua Sprina Freeplus Kate Dew Superior Asience Sifoné Feather . in 2008. Ltd. Source: Li & Fung Research Centre and respective company websites 娜黛倫 葛 澄白 絲高 Kosé 王花 Kao Avenir Recipe-O Junkisei White St Supreme Nature & Co. ** Beiersdorf acquired 85% stake in C-BONS Hair Care in 2007.* Johnson & Johnson has completed the acquisition of Beijing Dabao Cosmetics Co.
Domestic cosmetics enterprises and their major brands in China Company Name Shanghai Jahwa Co Ltd Brands Maxam Chinfié Herborist ShanghaiVive Cortry Sichuan Jahwa Cortry Cosmetics Co. Source: Li & Fung Research Centre and respective company websites 絲 多美 峰聖 純繽 Bétrue Sunfeel Mese 宜家丁 美 代現 潔雨 芳拉 萃純物植 宜 家丁 Nanjing Jianong Chemical Co TJOY** Ltd ** Lafang Group Lafang Raclen Scenty 華章 Shanghai Savol Health & Cosmetics Co Ltd Savol TJOY for men 花 蓮藍 薈 蓮千 彩晶 樂童 靚可 代現 華儂伊 尚蓮 彩迪 婷信 迪好 Guangzhou Houdy Cosmetics Houdy Co Ltd Sincir Coian Tongle 風追 士男 王霸 花蜂 堂 草本 王霸 Bawang International Bawang Herborn Men’s Bawang Royal Wind 鮮維 麗玉 Effi Airiny 人 美龍 妃婭 娜 拉姍 雪佳 逸清 麗繽 妍雅 寶 之浴 奇力 隆 Jiangsu Longliqi Group Co Ltd Longliqi Yuzhibao Evergreen Arche Cosmetics Co. Ltd* LiveliCutee Shanghai Huayin Commodity Bee & Flower Co Ltd Guangzhou Decolor Cosmetics Co Ltd Foshan Shunde Modern Health Care Products Co Ltd Decolor Luxe-Lotus Enevous Xian Dai Crystal Lotuses Nenuph *Shanghai Jahwa has acquired 51% stake in Cortry in 2008.. Ltd BNS Ariar Cathy Zhuhai Sunrana Cosmetics Sunrana Co. Ltd YaFei Dragon Beauty 采伶 珂珂 神六 夫高 Gf Liushen Cocool 采可 妹雙 集 草佰 妃清 淨加美 司 公 限有 業實髮 美健保 華章江浙 司公 限 有品 用健保 代現德 順市山佛 團集奇 力隆蘇江 司公 限 有份 股品妝 化采可 化家川四 團集 際國王霸 司公 限有品 妝化娜 拉姍海珠 司公 限有品 妝化彩 迪市州廣 司公 限有品 妝化迪 好市州廣 司 公限有 品妝化 倩雅東廣 司 公限有 品用日 銀華海上 團集芳拉 司公限 有化生 儂珈京南 團集 化家海上 . ** Coty has agreed to acquire TJOY in 2010 and is expected to close in January 2011.
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