Interface journalist | Zhou Fangying
Interface News Editor | Lou Qinqin
In mid-May, the 27th China CBE Beauty Expo, which was postponed for one year, was held in Shanghai New International Expo Center. Over 220,000 square meters of the venue, the memorable lively scenes reappeared shoulder to shoulder. It is not difficult to see the enthusiasm of people in the beauty industry and their confidence in boosting the industry.
During the epidemic period, the demand for beauty products as non-essential products was cold, and the offline circulation links such as warehousing, logistics and retail stores were stagnant, and the upstream and downstream enterprises in the whole industry chain all encountered "dark moments". Fortunately, after entering 2023, these enterprises have seen hope again.
The total retail sales of cosmetics from January to April was 129.9 billion yuan, up 9.3% year-on-year, which exceeded the level of the same period in 2019 before the epidemic. This is also reflected in the financial reports of various local listed beauty companies-Marubi shares and Shuiyang shares all returned to growth in the first quarter of 2023, getting rid of the "most difficult 2022".
But all this has just begun. Many people in the industry who participated in the Expo admitted that the sales rebound in January and February was less than expected, and the response of e-commerce promotion on Women’s Day on March 8 was flat. Enterprises need to speed up the solution of those problems that are not obvious in the period of rapid development, so as to seize new growth opportunities.
As a partner of many international brands such as L ‘Oré al, Lancome and Sisley when they first entered the e-commerce channel in China, Liren Lizhuang successfully landed in the capital market in 2020 and became a cosmetics online retail service provider with comprehensive data insight, online operation and brand marketing. After listing, Liren Lizhuang began to develop its own brand based on its original experience in the cosmetics industry. At present, it has effective skin care brand Meiyitang, China characteristic plant brand Yurongchu and so on.
Qiao Xiaoling, director of the research and development department of Liren Beauty Cosmetics, who is leading the research and development of new products, told the interface fashion that from the data of e-commerce market, the current consumer preferences are polarized. Consumers with strong economic ability are still loyal to high-end cosmetics, while some consumers whose mentality has changed from excitement to conservatism pursue products with higher cost performance.
This means that the mid-range beauty products are cold.
Cosme Meishi, the head foundry behind famous beauty brands at home and abroad, such as L ‘Oreal, Estee Lauder, Perfect Diary and Hua Xizi, also found the same rule from the needs of cooperative customers.
Cosmis is a Korean cosmetics ODM company, but China has already become its second largest market. Liu Yuanli, deputy general manager of Cosme Meishi’s production headquarters in China, told Interface Fashion that some brand customers are focusing on products with high performance-to-price ratio and strong efficacy, that is, "increasing the quantity without increasing the price", and improving the added quantity and efficacy of ingredients to the critical value as much as possible under the same pricing.
Qiao Xiaoling also mentioned the same development idea. In addition to maximizing the efficacy of products, they will also make precise development according to consumer demand and provide consumers with combined products to cover all their needs. For example, sensitive muscle consumers may need to spray in the sun environment in addition to daily water emulsion, so they will develop it based on the needs of the scene.
In cooperation with local beauty brands, Liu Yuanli also found that some brands that were originally priced by the public began to try to pursue high-end. For example, a brand originally sold lipstick for one or two hundred yuan, and now it will consider launching products with a price of four or five hundred yuan. Some local skin care brands have also begun to put on shelves skin care products with a retail price of thousands of yuan, and they have the courage to fight with international brands.
In the past three years, due to the epidemic, the traffic and logistics were not smooth, and the influence of online and offline sales was a common problem disclosed by many beauty brands in financial reports and external information, and this problem was solved with the liberalization of the epidemic. However, the "stuck neck" problem that the main raw materials depend on overseas markets has become more prominent after this epidemic.
A cosmetics researcher told the interface fashion that during the epidemic period, the problems of overseas raw material procurement interruption and price increase caused many brands to rush to the local market to find alternative raw materials. However, it is very complicated and time-consuming to replace raw materials by re-debugging the formula, filing and registering. Therefore, the delay in launching new products and the increase in development costs have been more problems in the past three years.
The reason why substitute materials are hard to find is that there are not many local manufacturers of daily cosmetics raw materials in China cosmetics industry chain.
Qiao Xiaoling said that this is because if the basic raw materials such as surfactants are only used in a single domestic market, the output may not cover the input, and the quantity efficiency is not high; On the other hand, head chemical enterprises such as BASF and Dow started from large chemical industry, and then gradually entered the fine chemical industry in the fields of daily cosmetics. These international manufacturers basically monopolize the global market share, and it is difficult for domestic small manufacturers to start from scratch.
For the present cosmetic manufacturers, the development of functional active ingredients, a subdivision of raw materials, is a new starting point for competition.
In 2018, Kosmet Group established a raw material company in China, aiming at developing exclusive raw materials with China characteristics. Its newly introduced X-fine ultra-fine powder treatment technology claims to make the base makeup lighter and lighter. Liu Yuanli said that these exclusive technical raw materials can not only help Cosme to expand its own quantity, but also feed back the upstream raw materials companies that provide basic raw materials.
In China, similar manufacturers of raw materials focusing on active ingredients have begun to show their edge.
Qiao Xiaoling takes ergothionine, a popular ingredient in the skin care market, as an example. When ergothionine was first synthesized abroad, its cost price was very high, reaching 200,000 yuan per kilogram. However, after using biosynthetic technology to increase the output of ergothionine in China, the price reduction is immediate, and its current market cost price is basically 60,000 yuan to 70,000 yuan per kilogram.
The technical realizability and broad application market prospect of these functional active ingredients undoubtedly bring new opportunities to local brands. Oriental plant components, peptides, oligopeptides and other peptide compounds are the hot research directions in the domestic cosmetic market at present.
In the past, there were many local skin care brands featuring herbs in China, such as Yiyibucao and Baique Ling. However, compared with the efficacy memory of nicotinamide, boson and other compounds, the efficacy of herbal skin care products always has a sense of distance.
Liren Lizhuang’s own brand Yurongchu has listed a series of products with saffron extract as the main functional ingredient since the beginning. In Qiao Xiaoling’s view, there is still a lot of room for development of oriental herbs. The key is to thoroughly study how to better extract and retain their active ingredients, how to make them work with other ingredients in the formula, scientifically present their mechanism of action, and further verify their safety.
Since L ‘Oré al, Revlon and other international brands entered China for a century, the cosmetics market in China has only developed for more than 20 years. However, local cosmetics enterprises have begun to ponder how to surpass these international competitors by admiring, learning from and learning from them. Everyone reached a consensus that independent research and development is the way to build core competitiveness and barriers.
Local listed cosmetics companies such as Polaiya, Shuiyang, Marubi and Betani all invested in heavy assets projects such as production R&D bases after raising funds. For some brands that get goods from foundries and start with online marketing, in-depth cooperation with foundries is a path to overtake in corners.
In 2020, Yixian (Guangzhou) R&D and production base jointly established by Perfect Diary parent company Yixian E-commerce will be officially put into production this year. In 2022, Kosmet also established a joint venture with Pellet Group, the parent company of new brands such as UNNY, RNW and Aiyu, in Fengxian, Shanghai. Eye-catching shows that the equity ratio of Zhongke Simesi and Pellet in the joint venture company "Pellet Cosmetics (Shanghai) Co., Ltd." is 82%.
Liu Yuanli said that this is a two-way win-win model. The brand side can gain the inclination of the R&D and production capacity of Cosme Meishi, shorten the development cycle, reduce the production cost and so on, and stabilize its own supply chain. Cosme poetry can cultivate more long-term and stable customers, maximize its own production capacity and ensure sales.
In the past three years, the pain felt by downstream brands has also been transmitted to upstream manufacturers, which is reflected in problems such as reduced orders and vacant production capacity. To stand out from the fierce competition in the supply chain, upstream manufacturers must also change the previous thinking of "waiting for customers to come" and actively increase service to stabilize old customers and expand new customers.
In order to recover quickly after the epidemic, Kosmet reconfigured the personnel structure, reduced the number of front-line production personnel by upgrading automation equipment, and increased the recruitment of R&D personnel.
In the past, Cosme Poetry Research Department was only divided into two sections: skin care and make-up, and the increase of researchers also made it refined into the special development of specific product categories such as cream and tissue substances. In addition, Cosme has set up a testing service center to shorten the time and cost of sending products to a third-party testing company for efficacy evaluation.
Because OEM manufacturers often receive orders from brands one to two months in advance to stock up, they are more sensitive to the recovery of the cosmetics market.
Liu Yuanli said that with reference to the data in 2021, Kosmet will achieve year-on-year growth in the second quarter of this year, and the company has begun to feel the atmosphere of 618 e-commerce promotion this year. In addition, from the communication with many brands, the third quarter, which was sandwiched between 618 and double 11 in the past, was a low point in sales, but this year may become a "turnaround" moment in the beauty industry. And the fourth quarter, which includes double 11’s big promotion node, is the expected opportunity for the big outbreak.
At the time of the outbreak of local beauty brands two years ago, it was a hot topic to seize the opportunity and eat up the bonus. However, in the period of fading traffic and low industry, introspection and self-cultivation are the starting points of the brand’s long March from 1 to 100.
Beauty companies based on a single main brand began to exert their brand matrix, such as the make-up brand Caitang to Polaiya, and the high-end anti-aging brand Jieke to Betani; New subdivided blank areas have begun to attract attention. For example, Nature Hall launched the efficacy brand "Own Out" focusing on baby’s fragile muscles at the US Expo; Starting from the cutting-edge brands who have made a fortune online, we are beginning to pay attention to the importance of offline channels. For example, Hua Xizi opened its first flagship store in Hangzhou, and tested the water in pop-up shop in Japan.
These new attempts are new opportunities for local cosmetics enterprises to explore and create for themselves, and they are also important signs of industry recovery and future development.
