Description
Masstige and high mass segments take the lead in Chinas cosmetics market.
China’s cosmetics
market, 2012
March 2013
Fung Business Intelligence Centre
China’s cosmetics market, 2012 2
In this issue:
I. Industry overview p. 3
II. Competitive landscape p. 20
III. Latest developments p. 31
IV. Snapshots of sub-sector
performance
p. 50
(1) Market size and market segments
(2) Retail price of cosmetics
(3) Distribution channels
I. Industry Overview
3 China’s cosmetics market, 2012
China’s cosmetics market, 2012
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.
4
* Designated size: with annual sales of 5 million yuan or above and with an employment of or over 60.
Exhibit 1: Retail value of cosmetics by wholesale and retail enterprises above designated size*: 2008-2012
Source: National Bureau of Statistics of China
597
740
889
1103
1340
22.1%
16.9%
16.6%
18.7%
17.0%
0%
5%
10%
15%
20%
25%
0
200
400
600
800
1000
1200
1400
1600
2008 2009 2010 2011 2012
y
u
a
n
(
1
0
0
m
n
)
Sales value Growth
4
China’s cosmetics market, 2012
? 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.
5
Lower-tier cities posted stronger cosmetics sales growth than
key cities in 2011
* Kantar Worldpanel China – “Spotlight on China”, May 2012
China’s cosmetics market, 2012
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.
6
* Guosen – “Research Report on China’s Cosmetics Industry ll”, 28 November 2012
Exhibit 2: Examples of the Three Major Segments of China’s Cosmetics Products
Source: Guosen
SK-II
Lancôme
Estee Lauder
Laneige, Kose, DHC,
Fancl, Biotherm
Herborist (???), Olay,
Neutrogena, L'Oreal
Pond's, Mentholatum, Nivea, Inoherb
(????)
Herborn (???), Cathy (??), Tjoy (???)
Maxam (???), Dabao(??), Longliqi (???)
High Prestige
Masstige
High Mass
Mid-to-low Prestige
Mid Mass
Low Mass
China’s cosmetics market, 2012
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%).
? 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.
7
* Guosen – “Research Report on China’s Cosmetics Industry ll”, 28 November 2012
Exhibit 3: Market Segments and Corresponding Price Ranges for Cosmetics in China, 2011
25-30%
50%
20%
High Prestige (>RMB400) and Mid-to-low
Prestige (RMB200-400)
Masstige (RMB100-200) and High Mass
(RMB40-100)
Mid Mass (RMB20-40) and Low Mass
(>RMB20)
Source: Guosen
(1) Market size and market segments
(2) Retail price of cosmetics
(3) Distribution channels
I. Industry Overview
8 China’s cosmetics market, 2012
China’s cosmetics market, 2012
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.
9
* Euromonitor International – “Beauty and Personal Care in China”, May 2012
China’s cosmetics market, 2012
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%.
10
* CTR -http://www.ctrchina.cn/ctrwebsite/en/News_Article.php?articleid=412
Exhibit 4: Retail price index of cosmetics in China, January 2011-December 2012 (Same month of preceding year = 100)
99.5
100.0
100.5
101.0
101.5
102.0
102.5
103.0
Source: National Bureau of Statistics
(1) Market size and market segments
(2) Retail price of cosmetics
(3) Distribution channels
I. Industry Overview
11 China’s cosmetics market, 2012
China’s cosmetics market, 2012
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.
12
* Euromonitor International – “Beauty and Personal Care in China”,
May 2012
% retail value rsp 2007 2011
Store-Based Retailing 85.4 80.4
-Grocery Retailers 40.2 37.6
--Small Grocery Retailers 4.6 3.6
--Hypermarkets 26.5 26.5
--Supermarkets 9.1 7.5
-Non-Grocery Retailers 45.2 42.8
--Health and Beauty Retailers 11.9 13.9
---Beauty Specialist Retailers 4.8 6.4
---Chemists/Pharmacies 1.4 1.5
---Parapharmacies/Drugstores 5.5 5.9
---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
Total 100 100
? However, the market share
of grocery retailers and
department stores has been
decreasing; while health and
beauty retailers and Internet
retailing has witnessed
significant increase in
market share from 2007 to
2011.
Exhibit 5: Market Share (Retail Sales) by Distribution Channels for Beauty and
Personal Care in China, 2007 and 2011
Source: Euromonitor International
China’s cosmetics market, 2012
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
13
China’s cosmetics market, 2012
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.
14
China’s cosmetics market, 2012
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.
15
China’s cosmetics market, 2012
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 (????) and Cosmart (???).
? Some professional chains have explored opportunities online.
• Watsons launched its websitehttp://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.
16
China’s cosmetics market, 2012
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.
17
China’s cosmetics market, 2012
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.
? 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.
18
* Euromonitor International – “Beauty and Personal Care in China”, May 2012
Self-operated online platforms
• Orbis (http://www.orbis.com.cn)
• Kiehl’s (http://www.kiehls.com.cn)
• Benefit
(http://www.benefitcosmetics.com.cn)
Online stores on integrated
B2C platforms such as Tmall
• SK-ll (http://skii.tmall.com)
• Olay (http://olay.tmall.com)
• Laneige (http://laneige.tmall.com)
• Tsubaki (http://tsubaki.tmall.com)
Third-parties B2C online
platforms which provide a
wide range of cosmetics
brands
• StrawberryNET
(http://strawberrynet.com)
• SaSa (http://sasa.com)
China’s cosmetics market, 2012
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.
19
* iResearch – “China’s Online Cosmetics Shopping Research”, March 2012
Exhibit 6: Online Transaction Value for China’s Cosmetics, 2008-2015e
Source: iResearch
60.2
124.9
223.6
372.6
576.6
762.5
988.1
1237.2
97.0%
107.4%
79.0%
66.6%
54.8%
32.2%
29.6%
25.2%
0.0%
20.0%
40.0%
60.0%
80.0%
100.0%
120.0%
0
200
400
600
800
1000
1200
1400
2008 2009 2010 2011 2012e 2013e 2014e 2015e
Online cosmetics
transaction value
(100 million yuan )
Growth (%)
II. Competitive landscape
(1) Foreign cosmetics companies
(2) Domestics cosmetics companies
20 China’s cosmetics market, 2012
China’s cosmetics market, 2012
Foreign cosmetics enterprises captured a larger market share in
key cities
? According to a report by Orient Security (????), 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.
21
* Orient Security – “Research on China’s Cosmetics Industry”, 30 November 2012
China’s cosmetics market, 2012
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 (??) in 2008, Johnson & Johnson
acquired Elsker (??) in January 2013***, hoping to further extend its influence in the
mother and baby care market in China.
22
* China Business News (??????)http://www.yicai.com/news/2013/03/2565276.html
** Zghzp.com (??????)http://www.zghzp.com/news/hyzx/ppdt/48731.html
*** Johnson & Johnson (China) Investment Co., Ltdhttp://www.jnj.com.cn/news201312617.html
China’s cosmetics market, 2012
Foreign cosmetics groups and their major brands
23
Exhibit 7: Foreign Cosmetics Groups and their Major Brands in China (as of February 2013)
Enterprise Brands
L’Oréal
???
L’Oréal Paris ?????
Garnier ???
Maybelline New York ?????
L’Oréal Professional ???????
Kérastase ??
Lancôme ??
shu uemura ???
Giorgio Armani ?? ???
LA ROCHE-POSAY???
Mininurse ???
Yue Sai ??
Vichy ??
Biotherm ???
Helena Rubinstein HR ???
Kiehl’s ???
Skinceuticals???
Matrix ???
P&G
??
Head & Shoulders ???
Rejoice ??
SK-II
Oceana ???
Braun ????
Vidal Sasson ??
Clairol Herbal Essences ???
Wella ??
Safeguard ???
Sebastian ????
Camay ???
Clairol Professional ?????????
Pantene ??
Olay ???
Gillette??
Shiseido
???
Shiseido ???
Clé de peau beauté ????
Aupres ???
Urara ??
Elixir White ???? ????
Elixir Superieur ????????
Melanreduce ????
IPSA ???
UNO ??
DQ ??
Pure & Mile Soi ????
Dicila ???
Handasui ??
Tsubaki ???
Pure & Mild ??
Hand Cream ?????
Za ??
Aqua Label ???
Be ??
Aquair ????
Perfect ????
Kuyura ???
Super Mild ??
PF-COVER ????
Unilever
????
Vaseline ???
Lux ??
Dove ??
Pond’s ??
Clear ??
LYNX ??
Hazeline ???
Rexona ??
Source: Respective company websites, compiled by Fung Business Intelligence Centre
? Exhibit 7 shows some of the foreign cosmetics groups and their major brands in
China.
China’s cosmetics market, 2012
Foreign cosmetics groups and their major brands (cont’d)
24
Exhibit 7: Foreign Cosmetics Groups and their Major Brands in China (cont’d)
Enterprise Brands
Johnson & Johnson
??
Clean & Clear ????
Neutrogena ???
Johnson’s Baby ????
Dabao ??*
Johnson’s Body Care ????
Elsker ??**
Estée Lauder
????
Estée Lauder ????
Aramis ???
Clinique ??
M.A.C. ??
La Mer ????
Bobbi Brown ????
Tommy Hilfiger ?????
Donna Karan Cosmetics ????
Beiersdorf
?????
NIVEA ???
Nivea for men
Florena
La Prairie ???
Eucerin ???
Beiersdorf Hair Care***
(previously known as C-Bons
Hair Care)
Slek ??
Sdew ??
iSPA Home ????
Hairsong ??
Maestro ??
Costyle ???
Kanebo
???
Impress ????
Lunasol ????
Sui sai ???
Blanchir Superior ????????
Dew Superior ??????
Aqua ???
Aqua Sprina?????
Aqua Lunash ??
Freeplus ????
Kate
Coty Inc.
????
TJOY**** ??? TJOY for men ?????
Source: Respective company websites, compiled by Fung Business Intelligence Centre
*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.
China’s cosmetics market, 2012
Enterprise Brands
Kao
??
Kao ??
Bioré ??
Men’s Bioré ????
Sofina ???
Liese ??
Asience ???
Sifoné ??
Feather ????
Curél??
Kosé
??
Kosé ??
Beauté de Kosé ????
Prédia ???
Sekkisei ???
Refine ??
Esprique ???
Junkisui ???
Seikisho ???
Shirosumi ??
Cosme Decorte ??
Avenir ???
Recipe-O ???
Junkisei ???
White St??
Nature & Co ??
Moisture Skin Repair
Astalution
Grandaine ????
Infinity
Avon Products, Inc.
??????????
Avon ??
Amore Pacific Corp
????????
Laneige ??
Mamode ??
Innisfree ????
Amore ???
Sulwhasoo ???
Lirikos ???
Nu Skin Enterprise Inc.
????
Nu Skin ??
LVMH Group
Guerlain ??
Fresh ???
Benefit ???
Make Up For Ever
DHC Corp
DHC
Fancl Corp
Fancl
Foreign cosmetics groups and their major brands (cont’d)
25
Exhibit 7: Foreign Cosmetics Groups and their Major Brands in China (cont’d)
Source: Respective company websites, compiled by Fung Business Intelligence Centre
II. Competitive landscape
(1) Foreign cosmetics companies
(2) Domestics cosmetics companies
26 China’s cosmetics market, 2012
China’s cosmetics market, 2012
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 (????) 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 (????). The company has entered into
strategic alliance with Kao in November 2011** on marketing and sales.
27
* 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
Domestic cosmetics groups and their major brands
28
* Ping An Group has acquired 100% of share in Shanghai Jahwa in 2011.
**Shanghai Jahwa has acquired 51% stake in Cortry in 2008.
? 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 ???
Chinfié ??
Herborist ???
ShanghaiVive ??
Gf ??
Liushen ??
Cocool ??
Ruby Orient ??
Sichuan Jahwa Cortry Cosmetics Co. Ltd**
???????????????
Cortry ?? LiveliCutee ??
Jiangsu Longliqi Group Co., Ltd.
???????
Longliqi ???
Evergreen ??
Arche Cosmetics Co., Ltd
???????????
BNS ??
Ariar ??
Cathy ??
Effi ??
Eveae ??
Zhuhai Sunrana Cosmetics Co., Ltd.
????????????
Sunrana ???
Bawang International
??????
Bawang ??
Herborn ???
Litao ??
Royal Wind ??
Smerry ???
Source: Respective company websites, compiled by Fung Business Intelligence Centre
China’s cosmetics market, 2012
Enterprise Brands
Shanghai Huayin Commodity Co., Ltd.
???????????
Bee & Flower ??
Guangzhou Houdy Cosmetics Co., Ltd.
????????????
Houdy ?? Tongle ??
Decolor Cosmetics Co., Ltd.
????????????
Decolor ??
Luxe-Lotus ??
Enevous ???
Crystal ??
Lotuses ???
Nenuph ???
Lafang Group
????
Lafang ??
Raclen ??
Duo Zi ??
Bétrue ??
Sunfeel ??
Mese ???
Guangzhou Tobaby Cosmetics Co., Ltd.
???????????
Tobaby ???
Huaya Group Co., Ltd.
???????????
Franic ????
Leila ??
Meifubao ???
Jala (Group) Co., Ltd.
??(??)??????
Chcedo ???
Aglaia ????
Maysu ??
Insea ??
Domestic cosmetics groups and their major brands (cont’d)
29
Exhibit 8: Domestic Cosmetics Groups and their Major Brands in China (cont’d)
Source: Respective company websites, compiled by Fung Business Intelligence Centre
China’s cosmetics market, 2012
Enterprise Brands
Proya Cosmetics Co., Ltd.
????????????
Proya ???
Shanghai Inoherb Cosmetics Co., Ltd.
???????????????
Inoherb ????
Softto Co., Ltd.
?????????
Softto ???
Foshan Shunde Modern Health Care Products Co., Ltd.
???????????????
Xian Dai ?? Syqu ??
Shanghai Savol Health & Cosmetics Co., Ltd.
??????????????
Savol ??
Sikin ??
Savol Hair Care Exper ??
????
Herb Extract ???
Savol Ecologic ????
Tianfeng ??
Yimo ??
Deep Sea ?????
Color Easy ???
Youngrace Cosmetic International Group Limited
?????????????
Youngrace ??
Domestic cosmetics groups and their major brands (cont’d)
30
Exhibit 8: Domestic Cosmetics Groups and their major Brands in China (cont’d)
Source: Respective company websites, compiled by Fung Business Intelligence Centre
III. Latest developments
31 China’s cosmetics market, 2012
China’s cosmetics market, 2012
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
32
China’s cosmetics market, 2012
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 (???), one of the most sought-after brands in China, introduced new
mid-to-high-end skin care products in 2011.
33
China’s cosmetics market, 2012
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*.
34
* Euromonitor International – “Beauty and Personal Care in China”, May 2012
China’s cosmetics market, 2012
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 (????) set up offline experience store in Guangzhou in June 2012*.
? Uzise (???) has revealed its plan to open seven retail stores in Beijing, Shanghai and
Chengdu; and Lefeng (???) has also planned to tap into the offline market**.
35
* 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
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 (????), well-known for its hair care line Health King (??), launched two
new cosmeceutical lines Freeface (????) and Beirun (??) in 2012.
? Jawha, after successfully launching Herborist, also introduced another cosmeceutial line Dr. Richia (
??) in 2010.
? Beijing Tongrentang Cosmetics (???) 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.
36
* HKTDC -http://china-trade-research.hktdc.c...smetics-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
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.
37
* Baidu Data Research Center – Report on China’s Cosmetics Industry for Q3 2012, November 2012
China’s cosmetics market, 2012
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 (??) by Beijing Tongrentang
Cosmetics, GF (??) by Jawha, Inoherb Men (??????), and Chcedo Men (??
???).
38
* Euromonitor International – “Beauty and Personal Care in China”, May 2012
China’s cosmetics market, 2012
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.
39
China’s cosmetics market, 2012
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 (????),
Yumeijing (???), Elsker, Pigeon and Hai Er Mian (???).
? 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.
40
* Euromonitor International – “Beauty and Personal Care in China”, May 2012
China’s cosmetics market, 2012
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 (?????), Lijiababy (????) and Leyou (??)
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 (???)
by Kong Fengchun (???) and Jiabaole (???) by Beijing Tongrentang
Cosmetics (???).
41
China’s cosmetics market, 2012
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.
42
* Guosen – “Research Report on China’s Cosmetics Industry ll”, 28 November 2012
China’s cosmetics market, 2012
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.
43
Exhibit 9: Market Share of the Top 10 Anti-Agers Brands for Cosmetics in China, 2008 and 2011
Source: Euromonitor & Guosen
* Euromonitor International – “Skin care in China”, May 2012
0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0%
L'Oreal Dermo-Expertise
Olay
Aupres
Mary Kay
Lancome
Estee Lauder
Chcedo
Artistry
Shiseido
Avon
2008
2011
China’s cosmetics market, 2012
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.
44
China’s cosmetics market, 2012
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.
45
China’s cosmetics market, 2012
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.
46
China’s cosmetics market, 2012
Some old brands have started to rejuvenate
? Some time-honored Chinese homegrown brands including Pechoin (???),
Maxam, Shanghai Vive (??), Liushen (??) and Zhaogui (??) 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.
47
China’s cosmetics market, 2012
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.
48
China’s cosmetics market, 2012
Rules and regulations of the cosmetics sector in China (cont’d)
49
Rules and Regulations Publication
Date
Highlights
Guide for Registration and Evaluation of
New Ingredients for Cosmetics *
???????????????
12 May 2011 The Guide aims to strengthen the
administrative licensing of new raw materials
for cosmetics so as to ensure the quality and
safety of cosmetic products.
The CFDA is seeking public opinion on 3T3
Neutral Red Uptake (3T3 NRU) Phototoxicity
Test (Draft) **
???????????????????
???3T3???????????????
?????
10 February
2012
The CFDA proposed an alternative method to
animal testing. The move is considered a very
positive step which could hopefully alter the
requirement for animal test for cosmetics.
Currently, China is the only country in the
world requiring animal testing of cosmetics.
Guide for the Application and Review of
Children's Cosmetics ***
??????????????
22 October
2012
The Guide aims to ensure the quality and
safety of cosmetics for children and further
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.
Exhibit 10: Selected Rules and Regulations of Cosmetics Sector, 2011-2012
* 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
IV. Snapshots of sub-sector performance
50 China’s cosmetics market, 2012
China’s cosmetics market, 2012
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.
51
China’s cosmetics market, 2012
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.
52
94.6
65.2
79.2
67.7
71.0
93.9
68.7
78.7
69.0
75.3
0
10
20
30
40
50
60
70
80
90
100
Shampoos and
conditioners
Other hair care
products
Skincare products Color cosmetics Fragrances
S
h
a
r
e
o
f
t
o
t
a
l
s
a
l
e
s
v
a
l
u
e
(
%
)
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.
Exhibit 11: Market Share of the Top 10 Brands of Selected Sectors, 2010-2011
China’s cosmetics market, 2012
Performance of selected product sectors (cont’d)
53
? 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.
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.
Exhibit 12: Shampoos, Conditioners and 2-in-1 Conditioning Shampoo: Share of Total Sales Value 2010-2011
Source: CNCIC
27.5
19.8
16.3
4.9
6.1
28.8
19.0
14.9
8.1
7.4
0 10 20 30 40
Head & Shoulders ??? (P&G)
Pantene Pro-V ?? (P&G)
Rejoice ?? (P&G)
Clear ?? (Unilever)
Lux ?? (Unilever)
Share of total sales value (%)
2010 2011
China’s cosmetics market, 2012
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
54
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.
11.1
9.9
8.6
11.0
10.6
16.0
11.3
10.1
10.1
9.7
0 5 10 15 20
Youngrace ??
(Youngrace Cosmetics Group)
Maestro ??
(C-Bons Group*)
L’Oréal ??? (L'Oréal )
Decolor ??
(Guangzhou Decolor Cosmetics)
??(Savol)
Share of total sales value (%)
2010 2011
China’s cosmetics market, 2012
Performance of selected product sectors (cont’d)
Exhibit 14: Skin Care Products: Share of Total Sales Value 2010-2011
55
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.
15.5
14.7
15.8
9.2
9.7
14.7
14.3
12.5
11.3
11.2
0 5 10 15 20
L’Oréal ??? (L'Oréal )
Aupres ??? (Shiseido)
Olay ??? (P&G)
Estée Lauder ???? (Estée Lauder)
Lancôme ?? (L'Oréal )
Share of total sales value (%)
2010 2011
China’s cosmetics market, 2012
Performance of selected product sectors (cont’d)
Exhibit 15: Color Cosmetics: Share of Total Sales Value 2010-2011
56
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.
25.6
11.4
5.6
5.9
4.9
26.6
11.5
6.1
6.0
5.5
0 10 20 30
Maybelline ??? (L'Oréal )
L'Oréal ??? (L'Oréal )
Christian Dior ?? CD
(Christian Dior (China) Fragrance & …
Aupres ??? (Shiseido)
Chanel ???
Share of total sales value (%)
2010 2011
China’s cosmetics market, 2012
24.3
18.4
7.3
5.8
3.9
27.1
19.4
8.6
5.2
4.8
0 10 20 30
Chanel ??? (Chanel SA)
Christian Dior ?? CD
(Christian Dior (China) Fragrance & Cosmetics)
BOSS (Hugo Boss AG)
Burberry ??? (Inter Parfums)
Lancôme ?? (L'Oréal )
Share of total sales value (%)
2010 2011
Performance of selected product sectors (cont’d)
Exhibit 16: Fragrances: Share of Total Sales Value 2010-2011
57
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.
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China’s cosmetics market, 2012
doc_930290007.pdf
Masstige and high mass segments take the lead in Chinas cosmetics market.
China’s cosmetics
market, 2012
March 2013
Fung Business Intelligence Centre
China’s cosmetics market, 2012 2
In this issue:
I. Industry overview p. 3
II. Competitive landscape p. 20
III. Latest developments p. 31
IV. Snapshots of sub-sector
performance
p. 50
(1) Market size and market segments
(2) Retail price of cosmetics
(3) Distribution channels
I. Industry Overview
3 China’s cosmetics market, 2012
China’s cosmetics market, 2012
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.
4
* Designated size: with annual sales of 5 million yuan or above and with an employment of or over 60.
Exhibit 1: Retail value of cosmetics by wholesale and retail enterprises above designated size*: 2008-2012
Source: National Bureau of Statistics of China
597
740
889
1103
1340
22.1%
16.9%
16.6%
18.7%
17.0%
0%
5%
10%
15%
20%
25%
0
200
400
600
800
1000
1200
1400
1600
2008 2009 2010 2011 2012
y
u
a
n
(
1
0
0
m
n
)
Sales value Growth
4
China’s cosmetics market, 2012
? 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.
5
Lower-tier cities posted stronger cosmetics sales growth than
key cities in 2011
* Kantar Worldpanel China – “Spotlight on China”, May 2012
China’s cosmetics market, 2012
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.
6
* Guosen – “Research Report on China’s Cosmetics Industry ll”, 28 November 2012
Exhibit 2: Examples of the Three Major Segments of China’s Cosmetics Products
Source: Guosen
SK-II
Lancôme
Estee Lauder
Laneige, Kose, DHC,
Fancl, Biotherm
Herborist (???), Olay,
Neutrogena, L'Oreal
Pond's, Mentholatum, Nivea, Inoherb
(????)
Herborn (???), Cathy (??), Tjoy (???)
Maxam (???), Dabao(??), Longliqi (???)
High Prestige
Masstige
High Mass
Mid-to-low Prestige
Mid Mass
Low Mass
China’s cosmetics market, 2012
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%).
? 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.
7
* Guosen – “Research Report on China’s Cosmetics Industry ll”, 28 November 2012
Exhibit 3: Market Segments and Corresponding Price Ranges for Cosmetics in China, 2011
25-30%
50%
20%
High Prestige (>RMB400) and Mid-to-low
Prestige (RMB200-400)
Masstige (RMB100-200) and High Mass
(RMB40-100)
Mid Mass (RMB20-40) and Low Mass
(>RMB20)
Source: Guosen
(1) Market size and market segments
(2) Retail price of cosmetics
(3) Distribution channels
I. Industry Overview
8 China’s cosmetics market, 2012
China’s cosmetics market, 2012
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.
9
* Euromonitor International – “Beauty and Personal Care in China”, May 2012
China’s cosmetics market, 2012
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%.
10
* CTR -http://www.ctrchina.cn/ctrwebsite/en/News_Article.php?articleid=412
Exhibit 4: Retail price index of cosmetics in China, January 2011-December 2012 (Same month of preceding year = 100)
99.5
100.0
100.5
101.0
101.5
102.0
102.5
103.0
Source: National Bureau of Statistics
(1) Market size and market segments
(2) Retail price of cosmetics
(3) Distribution channels
I. Industry Overview
11 China’s cosmetics market, 2012
China’s cosmetics market, 2012
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.
12
* Euromonitor International – “Beauty and Personal Care in China”,
May 2012
% retail value rsp 2007 2011
Store-Based Retailing 85.4 80.4
-Grocery Retailers 40.2 37.6
--Small Grocery Retailers 4.6 3.6
--Hypermarkets 26.5 26.5
--Supermarkets 9.1 7.5
-Non-Grocery Retailers 45.2 42.8
--Health and Beauty Retailers 11.9 13.9
---Beauty Specialist Retailers 4.8 6.4
---Chemists/Pharmacies 1.4 1.5
---Parapharmacies/Drugstores 5.5 5.9
---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
Total 100 100
? However, the market share
of grocery retailers and
department stores has been
decreasing; while health and
beauty retailers and Internet
retailing has witnessed
significant increase in
market share from 2007 to
2011.
Exhibit 5: Market Share (Retail Sales) by Distribution Channels for Beauty and
Personal Care in China, 2007 and 2011
Source: Euromonitor International
China’s cosmetics market, 2012
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
13
China’s cosmetics market, 2012
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.
14
China’s cosmetics market, 2012
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.
15
China’s cosmetics market, 2012
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 (????) and Cosmart (???).
? Some professional chains have explored opportunities online.
• Watsons launched its websitehttp://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.
16
China’s cosmetics market, 2012
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.
17
China’s cosmetics market, 2012
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.
? 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.
18
* Euromonitor International – “Beauty and Personal Care in China”, May 2012
Self-operated online platforms
• Orbis (http://www.orbis.com.cn)
• Kiehl’s (http://www.kiehls.com.cn)
• Benefit
(http://www.benefitcosmetics.com.cn)
Online stores on integrated
B2C platforms such as Tmall
• SK-ll (http://skii.tmall.com)
• Olay (http://olay.tmall.com)
• Laneige (http://laneige.tmall.com)
• Tsubaki (http://tsubaki.tmall.com)
Third-parties B2C online
platforms which provide a
wide range of cosmetics
brands
• StrawberryNET
(http://strawberrynet.com)
• SaSa (http://sasa.com)
China’s cosmetics market, 2012
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.
19
* iResearch – “China’s Online Cosmetics Shopping Research”, March 2012
Exhibit 6: Online Transaction Value for China’s Cosmetics, 2008-2015e
Source: iResearch
60.2
124.9
223.6
372.6
576.6
762.5
988.1
1237.2
97.0%
107.4%
79.0%
66.6%
54.8%
32.2%
29.6%
25.2%
0.0%
20.0%
40.0%
60.0%
80.0%
100.0%
120.0%
0
200
400
600
800
1000
1200
1400
2008 2009 2010 2011 2012e 2013e 2014e 2015e
Online cosmetics
transaction value
(100 million yuan )
Growth (%)
II. Competitive landscape
(1) Foreign cosmetics companies
(2) Domestics cosmetics companies
20 China’s cosmetics market, 2012
China’s cosmetics market, 2012
Foreign cosmetics enterprises captured a larger market share in
key cities
? According to a report by Orient Security (????), 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.
21
* Orient Security – “Research on China’s Cosmetics Industry”, 30 November 2012
China’s cosmetics market, 2012
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 (??) in 2008, Johnson & Johnson
acquired Elsker (??) in January 2013***, hoping to further extend its influence in the
mother and baby care market in China.
22
* China Business News (??????)http://www.yicai.com/news/2013/03/2565276.html
** Zghzp.com (??????)http://www.zghzp.com/news/hyzx/ppdt/48731.html
*** Johnson & Johnson (China) Investment Co., Ltdhttp://www.jnj.com.cn/news201312617.html
China’s cosmetics market, 2012
Foreign cosmetics groups and their major brands
23
Exhibit 7: Foreign Cosmetics Groups and their Major Brands in China (as of February 2013)
Enterprise Brands
L’Oréal
???
L’Oréal Paris ?????
Garnier ???
Maybelline New York ?????
L’Oréal Professional ???????
Kérastase ??
Lancôme ??
shu uemura ???
Giorgio Armani ?? ???
LA ROCHE-POSAY???
Mininurse ???
Yue Sai ??
Vichy ??
Biotherm ???
Helena Rubinstein HR ???
Kiehl’s ???
Skinceuticals???
Matrix ???
P&G
??
Head & Shoulders ???
Rejoice ??
SK-II
Oceana ???
Braun ????
Vidal Sasson ??
Clairol Herbal Essences ???
Wella ??
Safeguard ???
Sebastian ????
Camay ???
Clairol Professional ?????????
Pantene ??
Olay ???
Gillette??
Shiseido
???
Shiseido ???
Clé de peau beauté ????
Aupres ???
Urara ??
Elixir White ???? ????
Elixir Superieur ????????
Melanreduce ????
IPSA ???
UNO ??
DQ ??
Pure & Mile Soi ????
Dicila ???
Handasui ??
Tsubaki ???
Pure & Mild ??
Hand Cream ?????
Za ??
Aqua Label ???
Be ??
Aquair ????
Perfect ????
Kuyura ???
Super Mild ??
PF-COVER ????
Unilever
????
Vaseline ???
Lux ??
Dove ??
Pond’s ??
Clear ??
LYNX ??
Hazeline ???
Rexona ??
Source: Respective company websites, compiled by Fung Business Intelligence Centre
? Exhibit 7 shows some of the foreign cosmetics groups and their major brands in
China.
China’s cosmetics market, 2012
Foreign cosmetics groups and their major brands (cont’d)
24
Exhibit 7: Foreign Cosmetics Groups and their Major Brands in China (cont’d)
Enterprise Brands
Johnson & Johnson
??
Clean & Clear ????
Neutrogena ???
Johnson’s Baby ????
Dabao ??*
Johnson’s Body Care ????
Elsker ??**
Estée Lauder
????
Estée Lauder ????
Aramis ???
Clinique ??
M.A.C. ??
La Mer ????
Bobbi Brown ????
Tommy Hilfiger ?????
Donna Karan Cosmetics ????
Beiersdorf
?????
NIVEA ???
Nivea for men
Florena
La Prairie ???
Eucerin ???
Beiersdorf Hair Care***
(previously known as C-Bons
Hair Care)
Slek ??
Sdew ??
iSPA Home ????
Hairsong ??
Maestro ??
Costyle ???
Kanebo
???
Impress ????
Lunasol ????
Sui sai ???
Blanchir Superior ????????
Dew Superior ??????
Aqua ???
Aqua Sprina?????
Aqua Lunash ??
Freeplus ????
Kate
Coty Inc.
????
TJOY**** ??? TJOY for men ?????
Source: Respective company websites, compiled by Fung Business Intelligence Centre
*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.
China’s cosmetics market, 2012
Enterprise Brands
Kao
??
Kao ??
Bioré ??
Men’s Bioré ????
Sofina ???
Liese ??
Asience ???
Sifoné ??
Feather ????
Curél??
Kosé
??
Kosé ??
Beauté de Kosé ????
Prédia ???
Sekkisei ???
Refine ??
Esprique ???
Junkisui ???
Seikisho ???
Shirosumi ??
Cosme Decorte ??
Avenir ???
Recipe-O ???
Junkisei ???
White St??
Nature & Co ??
Moisture Skin Repair
Astalution
Grandaine ????
Infinity
Avon Products, Inc.
??????????
Avon ??
Amore Pacific Corp
????????
Laneige ??
Mamode ??
Innisfree ????
Amore ???
Sulwhasoo ???
Lirikos ???
Nu Skin Enterprise Inc.
????
Nu Skin ??
LVMH Group
Guerlain ??
Fresh ???
Benefit ???
Make Up For Ever
DHC Corp
DHC
Fancl Corp
Fancl
Foreign cosmetics groups and their major brands (cont’d)
25
Exhibit 7: Foreign Cosmetics Groups and their Major Brands in China (cont’d)
Source: Respective company websites, compiled by Fung Business Intelligence Centre
II. Competitive landscape
(1) Foreign cosmetics companies
(2) Domestics cosmetics companies
26 China’s cosmetics market, 2012
China’s cosmetics market, 2012
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 (????) 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 (????). The company has entered into
strategic alliance with Kao in November 2011** on marketing and sales.
27
* 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
Domestic cosmetics groups and their major brands
28
* Ping An Group has acquired 100% of share in Shanghai Jahwa in 2011.
**Shanghai Jahwa has acquired 51% stake in Cortry in 2008.
? 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 ???
Chinfié ??
Herborist ???
ShanghaiVive ??
Gf ??
Liushen ??
Cocool ??
Ruby Orient ??
Sichuan Jahwa Cortry Cosmetics Co. Ltd**
???????????????
Cortry ?? LiveliCutee ??
Jiangsu Longliqi Group Co., Ltd.
???????
Longliqi ???
Evergreen ??
Arche Cosmetics Co., Ltd
???????????
BNS ??
Ariar ??
Cathy ??
Effi ??
Eveae ??
Zhuhai Sunrana Cosmetics Co., Ltd.
????????????
Sunrana ???
Bawang International
??????
Bawang ??
Herborn ???
Litao ??
Royal Wind ??
Smerry ???
Source: Respective company websites, compiled by Fung Business Intelligence Centre
China’s cosmetics market, 2012
Enterprise Brands
Shanghai Huayin Commodity Co., Ltd.
???????????
Bee & Flower ??
Guangzhou Houdy Cosmetics Co., Ltd.
????????????
Houdy ?? Tongle ??
Decolor Cosmetics Co., Ltd.
????????????
Decolor ??
Luxe-Lotus ??
Enevous ???
Crystal ??
Lotuses ???
Nenuph ???
Lafang Group
????
Lafang ??
Raclen ??
Duo Zi ??
Bétrue ??
Sunfeel ??
Mese ???
Guangzhou Tobaby Cosmetics Co., Ltd.
???????????
Tobaby ???
Huaya Group Co., Ltd.
???????????
Franic ????
Leila ??
Meifubao ???
Jala (Group) Co., Ltd.
??(??)??????
Chcedo ???
Aglaia ????
Maysu ??
Insea ??
Domestic cosmetics groups and their major brands (cont’d)
29
Exhibit 8: Domestic Cosmetics Groups and their Major Brands in China (cont’d)
Source: Respective company websites, compiled by Fung Business Intelligence Centre
China’s cosmetics market, 2012
Enterprise Brands
Proya Cosmetics Co., Ltd.
????????????
Proya ???
Shanghai Inoherb Cosmetics Co., Ltd.
???????????????
Inoherb ????
Softto Co., Ltd.
?????????
Softto ???
Foshan Shunde Modern Health Care Products Co., Ltd.
???????????????
Xian Dai ?? Syqu ??
Shanghai Savol Health & Cosmetics Co., Ltd.
??????????????
Savol ??
Sikin ??
Savol Hair Care Exper ??
????
Herb Extract ???
Savol Ecologic ????
Tianfeng ??
Yimo ??
Deep Sea ?????
Color Easy ???
Youngrace Cosmetic International Group Limited
?????????????
Youngrace ??
Domestic cosmetics groups and their major brands (cont’d)
30
Exhibit 8: Domestic Cosmetics Groups and their major Brands in China (cont’d)
Source: Respective company websites, compiled by Fung Business Intelligence Centre
III. Latest developments
31 China’s cosmetics market, 2012
China’s cosmetics market, 2012
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
32
China’s cosmetics market, 2012
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 (???), one of the most sought-after brands in China, introduced new
mid-to-high-end skin care products in 2011.
33
China’s cosmetics market, 2012
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*.
34
* Euromonitor International – “Beauty and Personal Care in China”, May 2012
China’s cosmetics market, 2012
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 (????) set up offline experience store in Guangzhou in June 2012*.
? Uzise (???) has revealed its plan to open seven retail stores in Beijing, Shanghai and
Chengdu; and Lefeng (???) has also planned to tap into the offline market**.
35
* 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
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 (????), well-known for its hair care line Health King (??), launched two
new cosmeceutical lines Freeface (????) and Beirun (??) in 2012.
? Jawha, after successfully launching Herborist, also introduced another cosmeceutial line Dr. Richia (
??) in 2010.
? Beijing Tongrentang Cosmetics (???) 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.
36
* HKTDC -http://china-trade-research.hktdc.c...smetics-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
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.
37
* Baidu Data Research Center – Report on China’s Cosmetics Industry for Q3 2012, November 2012
China’s cosmetics market, 2012
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 (??) by Beijing Tongrentang
Cosmetics, GF (??) by Jawha, Inoherb Men (??????), and Chcedo Men (??
???).
38
* Euromonitor International – “Beauty and Personal Care in China”, May 2012
China’s cosmetics market, 2012
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.
39
China’s cosmetics market, 2012
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 (????),
Yumeijing (???), Elsker, Pigeon and Hai Er Mian (???).
? 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.
40
* Euromonitor International – “Beauty and Personal Care in China”, May 2012
China’s cosmetics market, 2012
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 (?????), Lijiababy (????) and Leyou (??)
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 (???)
by Kong Fengchun (???) and Jiabaole (???) by Beijing Tongrentang
Cosmetics (???).
41
China’s cosmetics market, 2012
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.
42
* Guosen – “Research Report on China’s Cosmetics Industry ll”, 28 November 2012
China’s cosmetics market, 2012
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.
43
Exhibit 9: Market Share of the Top 10 Anti-Agers Brands for Cosmetics in China, 2008 and 2011
Source: Euromonitor & Guosen
* Euromonitor International – “Skin care in China”, May 2012
0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0%
L'Oreal Dermo-Expertise
Olay
Aupres
Mary Kay
Lancome
Estee Lauder
Chcedo
Artistry
Shiseido
Avon
2008
2011
China’s cosmetics market, 2012
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.
44
China’s cosmetics market, 2012
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.
45
China’s cosmetics market, 2012
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.
46
China’s cosmetics market, 2012
Some old brands have started to rejuvenate
? Some time-honored Chinese homegrown brands including Pechoin (???),
Maxam, Shanghai Vive (??), Liushen (??) and Zhaogui (??) 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.
47
China’s cosmetics market, 2012
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.
48
China’s cosmetics market, 2012
Rules and regulations of the cosmetics sector in China (cont’d)
49
Rules and Regulations Publication
Date
Highlights
Guide for Registration and Evaluation of
New Ingredients for Cosmetics *
???????????????
12 May 2011 The Guide aims to strengthen the
administrative licensing of new raw materials
for cosmetics so as to ensure the quality and
safety of cosmetic products.
The CFDA is seeking public opinion on 3T3
Neutral Red Uptake (3T3 NRU) Phototoxicity
Test (Draft) **
???????????????????
???3T3???????????????
?????
10 February
2012
The CFDA proposed an alternative method to
animal testing. The move is considered a very
positive step which could hopefully alter the
requirement for animal test for cosmetics.
Currently, China is the only country in the
world requiring animal testing of cosmetics.
Guide for the Application and Review of
Children's Cosmetics ***
??????????????
22 October
2012
The Guide aims to ensure the quality and
safety of cosmetics for children and further
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.
Exhibit 10: Selected Rules and Regulations of Cosmetics Sector, 2011-2012
* 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
IV. Snapshots of sub-sector performance
50 China’s cosmetics market, 2012
China’s cosmetics market, 2012
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.
51
China’s cosmetics market, 2012
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.
52
94.6
65.2
79.2
67.7
71.0
93.9
68.7
78.7
69.0
75.3
0
10
20
30
40
50
60
70
80
90
100
Shampoos and
conditioners
Other hair care
products
Skincare products Color cosmetics Fragrances
S
h
a
r
e
o
f
t
o
t
a
l
s
a
l
e
s
v
a
l
u
e
(
%
)
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.
Exhibit 11: Market Share of the Top 10 Brands of Selected Sectors, 2010-2011
China’s cosmetics market, 2012
Performance of selected product sectors (cont’d)
53
? 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.
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.
Exhibit 12: Shampoos, Conditioners and 2-in-1 Conditioning Shampoo: Share of Total Sales Value 2010-2011
Source: CNCIC
27.5
19.8
16.3
4.9
6.1
28.8
19.0
14.9
8.1
7.4
0 10 20 30 40
Head & Shoulders ??? (P&G)
Pantene Pro-V ?? (P&G)
Rejoice ?? (P&G)
Clear ?? (Unilever)
Lux ?? (Unilever)
Share of total sales value (%)
2010 2011
China’s cosmetics market, 2012
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
54
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.
11.1
9.9
8.6
11.0
10.6
16.0
11.3
10.1
10.1
9.7
0 5 10 15 20
Youngrace ??
(Youngrace Cosmetics Group)
Maestro ??
(C-Bons Group*)
L’Oréal ??? (L'Oréal )
Decolor ??
(Guangzhou Decolor Cosmetics)
??(Savol)
Share of total sales value (%)
2010 2011
China’s cosmetics market, 2012
Performance of selected product sectors (cont’d)
Exhibit 14: Skin Care Products: Share of Total Sales Value 2010-2011
55
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.
15.5
14.7
15.8
9.2
9.7
14.7
14.3
12.5
11.3
11.2
0 5 10 15 20
L’Oréal ??? (L'Oréal )
Aupres ??? (Shiseido)
Olay ??? (P&G)
Estée Lauder ???? (Estée Lauder)
Lancôme ?? (L'Oréal )
Share of total sales value (%)
2010 2011
China’s cosmetics market, 2012
Performance of selected product sectors (cont’d)
Exhibit 15: Color Cosmetics: Share of Total Sales Value 2010-2011
56
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.
25.6
11.4
5.6
5.9
4.9
26.6
11.5
6.1
6.0
5.5
0 10 20 30
Maybelline ??? (L'Oréal )
L'Oréal ??? (L'Oréal )
Christian Dior ?? CD
(Christian Dior (China) Fragrance & …
Aupres ??? (Shiseido)
Chanel ???
Share of total sales value (%)
2010 2011
China’s cosmetics market, 2012
24.3
18.4
7.3
5.8
3.9
27.1
19.4
8.6
5.2
4.8
0 10 20 30
Chanel ??? (Chanel SA)
Christian Dior ?? CD
(Christian Dior (China) Fragrance & Cosmetics)
BOSS (Hugo Boss AG)
Burberry ??? (Inter Parfums)
Lancôme ?? (L'Oréal )
Share of total sales value (%)
2010 2011
Performance of selected product sectors (cont’d)
Exhibit 16: Fragrances: Share of Total Sales Value 2010-2011
57
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.
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China’s cosmetics market, 2012
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