Text: Wuzhou.
In 2023, the overall performance of domestic beauty brands will be significantly better than that of foreign brands, and a landmark event is that "the top prize of this year's Tmall Double Ten Promotion was won by domestic brand Proya for the first time".
Node Finance believes that behind this is not only the assistance of consumption grading, but also the overall strength of domestic brands. In the continuous short-term confrontation between the two sides, China's cosmetics industry will undoubtedly move towards a higher quality competition stage.
This article will answer:
1) Where has the process of replacing domestic products gone?
2) What are the key decisions made by the leading domestic brands?
3) What are the gaps with foreign brands?
Where has the replacement of domestic products gone?
Node Finance has always believed:The biggest development theme of domestic cosmetics companies is the replacement of foreign brands.
Regardless of the exciting business gimmick event that the replacement will allow Chinese consumers to have "their own 'L'Oréal'". From the perspective of serving local consumers well and making reasonable profits from them, the replacement of domestic products can bring enough room for growth to local cosmetics companies.
In fact, the volume of cosmetics in China is not small, according to Euromonitor data, the overall size of China's cosmetics market in 2022 will exceed 600 billion yuan. In comparison, local cosmetics do not get much of the cake, and the annual revenue of Shanghai Jahwa, the largest local cosmetics company in the same year, was only 7.1 billion yuan.
According to Euromonitor's statistics, in the decade from 2021 to 2021, the market share of local cosmetics brands in the skincare category (including face, hand, and body skincare) hovered between 25% and 34%, and showed a fluctuating trend of first rising and then falling.
Skincare products are the largest segment of China's cosmetics industry, accounting for more than half (52%) in 2022. This statistic means:"In the big cake of China's skin care market, foreign capital is actually the biggest beneficiary."
During the same period, makeup, another major cosmetics sector corresponding to skin care (accounting for more than 10% of the total scale of cosmetics), its local brands also accounted for less than 30%, but unlike the trend of skin care products, with the help of social ** marketing and DTC model, makeup with lower barriers has walked out of an upward slash.
From the above market share data, it can be seen that whether it is skin care or makeup, foreign brands are still the peak that local cosmetics brands are difficult to surpass.
However, in 2023, this inconspicuous year, some leading domestic cosmetics companies have taken magnificent steps, and they are setting off a momentum of catching up, squeezing, and even surpassing foreign brands.
Two key events can support this conclusion.
The first event is that this year's Double 11 Proya surpassed foreign brands for the first time to become the first place in the "Tmall Promotion" beauty list, and Winona (Bethany's subsidiary) also won the best ranking since the establishment of the brand - No. 5.
As the core beauty sales position in China, the Tmall Double 11 promotion ranking is often regarded as synonymous with the strength of beauty brands. The phenomenal performance of Proya and Winona directly shows that the current head domestic products have the ability to wrestle with foreign brands.
The second event is that in the first three quarters of this year, only L'Oreal and Procter & Gamble recorded positive revenue growth among major foreign cosmetics giants, including L'Oreal, Estee Lauder, Shiseido, Procter & Gamble, Amore, and LG Life. However, on the other hand, the vast majority of major domestic cosmetics companies such as Proya, Bethany, Juzi Biotech, Shangmei, Marubeni, and Shanghai Jahwa have achieved positive year-on-year growth in revenue.
After such an increase and a decrease, the share of foreign capital has been eroded by local brands. In this way, we have reason to believe that after 2023, the catch-up of domestic cosmetics brands with foreign brands will show an "acceleration" trend.
What are the key decisions made by the leading domestic brands?
In the business world, it is not common for latecomers to catch up with leaders, because in the same competitive dimension, leaders basically have a crushing advantage over latecomers.
However, the phenomenon of "corner overtaking" that occurred in the mobile phone industry and the automobile industry in the past has made us have to look forward to the possibility of the existence of domestic cosmetics brands.
By reviewing the rise of domestic products in the smartphone and automotive industries, we believe that "opening up a new competitive dimension" is the key to the latecomers surpassing, and this "new competitive dimension" is "intelligent" in the mobile phone industry and "electrification" in the automotive industry.
Similarly, the "new competitive dimension" opened up by domestic cosmetics companies is "efficacy".
First of all, let's talk about what is "efficacy"?And why "efficacy will become the primary indicator for consumers to buy cosmetics"?
The so-called "efficacy" of cosmetics refers to the fact that cosmetics can solve the specific problems of consumers like drugs. As early as 2018, the cosmetics industry caused the phenomenon of "cosmeceutical fever" due to the enthusiastic pursuit of efficacy, but the concept of "cosmeceuticals" did not meet the relevant regulations, and then it was replaced by "functional skin care products" and "** academic skin care products".
It was not until 2020 that China officially entered the era of effective skin care, marked by the introduction of the "Regulations on the Hygiene Supervision of Cosmetics" by the regulatory authorities that year, which clearly stated that ""cosmetics brands must evaluate the efficacy claims in accordance with relevant regulations to claim product efficacy, and the implementation time will be from January 1, 2022."
It can be seen that the current industry's top domestic skin care hot products, such as Proya's "Ruby Essence" and "Double Anti-Essence Essence", Giant Biotech's "Collagen Stick", Bloomage Biotech's "Quadi" and "Mirepair" were all launched around 2020.
Behind the pursuit of functional products by cosmetics brands is inseparable from the evolution of consumer demand.
In the past, the public's knowledge of skin care products was not much, and cosmetics products were more common with false claims, so in order to avoid pitfalls, consumers naturally tended to choose international brands with higher reputation and longer history. However, with the penetration of the social media marketing environment and the widespread problem caused by the abuse of cosmetics, beauty bloggers and ingredient parties have cultivated a group of "Kochi" cosmetics consumers.
At this time, for consumers, "what effect to solve the best problem is far more real than the brand", so the effect has become the core appeal of consumers to buy cosmetics.
In the past few years, leading domestic cosmetics brands have made many classic products with accurate consumption insights and ingredient innovation.
Among them, there is Proya's "Morning C and Evening A", which has its own oxygen glucose bispecific antibody ingredient "NOX-AGE".There are also Winona that incorporate plant extracts such as "purslane" and "green thorn fruit" into a series of skin care productsThere are also effective skin care products that use leading ingredients such as hyaluronic acid and recombinant collagen, such as Quadi and Kefumei.
Through the efficacy innovation to solve specific problems, the head domestic skin care brand has not only gotten rid of the strategy of following foreign capital, but has even become the object of imitation by foreign capital. For example, in L'Oreal, the launch of the "real C bottle" this year is to benchmark Proya's "morning C and evening A", but the sales volume of this year's Double 11 "real C bottle" is only 1 40 of morning C and evening A.
There is no other reason - the consumption mentality of "antioxidant and anti-sugar" has been occupied by early C and late A.
In addition to the innovation of core ingredients, another major advantage of domestic cosmetics over foreign brands is the rapid response to changes in the local market. This is especially reflected in the capture of channel dividends by local brands, the most vivid example is the rapid growth of makeup brands such as Perfect Diary and Huaxizi using social media "grass marketing" and the ability of top anchors to bring goods.
At present, the channel dividends of the cosmetics industry have been transferred to the short ** platform. According to Mojing insight data, in the first three quarters of this year, the sales proportion of the beauty and skin care market on "Tao Department", "Douyin" and "Jingdong" were respectively. 3% vs. 107%, of which Douyin's channel share increased by more than 10 percent compared with the same period in 20228 percentage points.
In the dividend channel of Douyin, domestic brands accounted for more than half of its skin care TOP10 cumulative sales list in the first three quarters of this year, including not only head brands such as Han Shu and Proya, but also niche domestic brands such as Xu Haili and Gu Yu.
Node Finance believes that:Different from 2012 to 2014, the Tao channel brand represented by Afu essential oil "rises and falls quickly", the Douyin channel has higher user stickiness due to both content dissemination and channel function attributes, and the ability of domestic leading domestic products to capture consumer demand and product differentiation is no longer what it used to be, and the brand of Douyin channel will undoubtedly maintain its popularity for a longer time.
However, the clarion call for domestic brands to overtake has been sounded, but in view of the imperfect vertical high-end upgrade and the construction of a multi-brand matrix, the foundation of most domestic cosmetics brands is not stable.
What are the gaps that need to be faced?
We have said a lot of good things about domestic cosmetics, which is not only an affirmation of its excellent achievements in the past, but also for the purpose of encouraging local consumers to support domestic products.
At the same time, we also need to face up to the current gap between domestic products and foreign brands, and "Node Finance" believes that this gap mainly comes from the following four aspects:
1) Multi-brand matrix building ability;
2) Multi-category coverage capability;
3) "High-end capability";
4) Globalization capability;
If we look back at the growth history of L'Oreal, Estee Lauder, Procter & Gamble, Shiseido, and other global leading cosmetics companies, the "Global Cosmetics Group" may be the best summary of them.
Taking L'Oréal as an example, as of the first three quarters of this year, L'Oréal's four business divisions have 36 brands, covering the whole field of cosmetics such as skin care, makeup, care and styling, and its products are sold to more than 150 countries at home and abroad.
Among the skin care products in the largest sector of cosmetics, L'Oreal not only eats "mass, high-end and luxury" in the first category, but also covers "high-end categories such as facial essence, cream lotion, eye care, and basic and tonic categories such as lotion, sunscreen, etc."
In contrast, the leading domestic cosmetics companies are either facing a single brand dependence, or have made achievements in a few skin care categories. In addition, high-end and internationalization are their common shortcomings.
Specifically, from the perspective of brand matrix construction, Bloomage Biotech temporarily ranks in the first echelon. In 2022, Bloomage Biotech has two skin care brands with an annual revenue of more than 1 billion yuan, "Runbaiyan" and "Quadi", as well as two skin care brands with an annual revenue of more than 500 million yuan, "Mirepair" and "BM Muscle Active".
In the second echelon, there are Proya, Bethany, Shanghai Jahwa, Juzi Biotech, Shangmei Co., Ltd., Freda, Marubeni, etc. Among these beauty companies, in addition to Proya, which has the prototype of a brand matrix of "one super and many strong", Bethany, Shangmei, Juzi Biotech, Freda, Marubeni, etc., each have a head brand with a revenue of more than 1 billion yuan, and some sub-brands with a revenue volume of 5-1 billion yuan and 1-500 million yuan.
In terms of competition in skin care categories, the advantages of domestic cosmetics companies are generally reflected in individual categories, and they cannot be among the best in all categories like foreign investors.
The most typical example is Marubeni, whose products only rank high in "eye care", and have a weak presence in facial serums and creams on a larger market. Giant Biotech's Kefumei, Bloomage Biotech's Runbaiyan, and Shangmei's Han Shu and Freda's Dr. Aier all have similar problems.
"Node Finance" believes that "the weak ability to expand the category will naturally limit the income ceiling of domestic cosmetics companies."
Comparatively speaking, Proya and Winona performed much better in all categories of skin care, not only penetrating many categories, but also performing well in high-potential categories such as facial essences and creams that can best reflect the competitiveness of skin care products.
Finally, in terms of high-end and internationalization, the progress of domestic brands is not obvious. At present, the revenue volume of domestic leading brands such as "AOXMED (owned by Bethany)" and "Yamada Farming (owned by Shangmei)" in the high-end market is less than 100 million yuan. In terms of international market expansion, domestic beauty brands have not even really started.
Overall, the performance of domestic cosmetics companies in 2023 is commendable, but the internal problems left to them are still very thorny, including:
How to get rid of the dependence on the top anchors in marketing?Such as Shangmei shares, Bethany, etc.;How to effectively distinguish it from the sub-brand positioning?Such as Bloomage Biotech and so on;How to make the core ingredients generally recognized by the market, such as Han Shu's blue copper peptides, etc.;and how to really squeeze into high-end categories such as essences and creams, such as refumei.
These remaining problems will also be an important reference point for the market to pay attention to the growth of domestic cosmetics companies in 2024. At the time of the acceleration of consumption recovery next year, we will wait and see how domestic cosmetics companies will perform.
Node Finance Statement: The content of the article is for reference only, the information in the article or the opinions expressed do not constitute any investment advice, and Node Finance does not assume any responsibility for any actions taken as a result of the use of this article.
Text: Wuzhou.
In 2023, the overall performance of domestic beauty brands will be significantly better than that of foreign brands, and a landmark event is that "the top prize of this year's Tmall Double Ten Promotion was won by domestic brand Proya for the first time".
Node Finance believes that behind this is not only the assistance of consumption grading, but also the overall strength of domestic brands. In the continuous short-term confrontation between the two sides, China's cosmetics industry will undoubtedly move towards a higher quality competition stage.
This article will answer:
1) Where has the process of replacing domestic products gone?
2) What are the key decisions made by the leading domestic brands?
3) What are the gaps with foreign brands?
Where has the replacement of domestic products gone?
Node Finance has always believed:The biggest development theme of domestic cosmetics companies is the replacement of foreign brands.
Regardless of the exciting business gimmick event that the replacement will allow Chinese consumers to have "their own 'L'Oréal'". From the perspective of serving local consumers well and making reasonable profits from them, the replacement of domestic products can bring enough room for growth to local cosmetics companies.
In fact, the volume of cosmetics in China is not small, according to Euromonitor data, the overall size of China's cosmetics market in 2022 will exceed 600 billion yuan. In comparison, local cosmetics do not get much of the cake, and the annual revenue of Shanghai Jahwa, the largest local cosmetics company in the same year, was only 7.1 billion yuan.
According to Euromonitor's statistics, in the decade from 2021 to 2021, the market share of local cosmetics brands in the skincare category (including face, hand, and body skincare) hovered between 25% and 34%, and showed a fluctuating trend of first rising and then falling.
Skincare products are the largest segment of China's cosmetics industry, accounting for more than half (52%) in 2022. This statistic means:"In the big cake of China's skin care market, foreign capital is actually the biggest beneficiary."
During the same period, makeup, another major cosmetics sector corresponding to skin care (accounting for more than 10% of the total scale of cosmetics), its local brands also accounted for less than 30%, but unlike the trend of skin care products, with the help of social ** marketing and DTC model, makeup with lower barriers has walked out of an upward slash.
From the above market share data, it can be seen that whether it is skin care or makeup, foreign brands are still the peak that local cosmetics brands are difficult to surpass.
However, in 2023, this inconspicuous year, some leading domestic cosmetics companies have taken magnificent steps, and they are setting off a momentum of catching up, squeezing, and even surpassing foreign brands.
Two key events can support this conclusion.
The first event is that this year's Double 11 Proya surpassed foreign brands for the first time to become the first place in the "Tmall Promotion" beauty list, and Winona (Bethany's subsidiary) also won the best ranking since the establishment of the brand - No. 5.
As the core beauty sales position in China, the Tmall Double 11 promotion ranking is often regarded as synonymous with the strength of beauty brands. The phenomenal performance of Proya and Winona directly shows that the current head domestic products have the ability to wrestle with foreign brands.
The second event is that in the first three quarters of this year, only L'Oreal and Procter & Gamble recorded positive revenue growth among major foreign cosmetics giants, including L'Oreal, Estee Lauder, Shiseido, Procter & Gamble, Amore, and LG Life. However, on the other hand, the vast majority of major domestic cosmetics companies such as Proya, Bethany, Juzi Biotech, Shangmei, Marubeni, and Shanghai Jahwa have achieved positive year-on-year growth in revenue.
After such an increase and a decrease, the share of foreign capital has been eroded by local brands. In this way, we have reason to believe that after 2023, the catch-up of domestic cosmetics brands with foreign brands will show an "acceleration" trend.
What are the key decisions made by the leading domestic brands?
In the business world, it is not common for latecomers to catch up with leaders, because in the same competitive dimension, leaders basically have a crushing advantage over latecomers.
However, the phenomenon of "corner overtaking" that occurred in the mobile phone industry and the automobile industry in the past has made us have to look forward to the possibility of the existence of domestic cosmetics brands.
By reviewing the rise of domestic products in the smartphone and automotive industries, we believe that "opening up a new competitive dimension" is the key to the latecomers surpassing, and this "new competitive dimension" is "intelligent" in the mobile phone industry and "electrification" in the automotive industry.
Similarly, the "new competitive dimension" opened up by domestic cosmetics companies is "efficacy".
First of all, let's talk about what is "efficacy"?And why "efficacy will become the primary indicator for consumers to buy cosmetics"?
The so-called "efficacy" of cosmetics refers to the fact that cosmetics can solve the specific problems of consumers like drugs. As early as 2018, the cosmetics industry caused the phenomenon of "cosmeceutical fever" due to the enthusiastic pursuit of efficacy, but the concept of "cosmeceuticals" did not meet the relevant regulations, and then it was replaced by "functional skin care products" and "** academic skin care products".
It was not until 2020 that China officially entered the era of effective skin care, marked by the introduction of the "Regulations on the Hygiene Supervision of Cosmetics" by the regulatory authorities that year, which clearly stated that ""cosmetics brands must evaluate the efficacy claims in accordance with relevant regulations to claim product efficacy, and the implementation time will be from January 1, 2022."
It can be seen that the current industry's top domestic skin care hot products, such as Proya's "Ruby Essence" and "Double Anti-Essence Essence", Giant Biotech's "Collagen Stick", Bloomage Biotech's "Quadi" and "Mirepair" were all launched around 2020.
Behind the pursuit of functional products by cosmetics brands is inseparable from the evolution of consumer demand.
In the past, the public's knowledge of skin care products was not much, and cosmetics products were more common with false claims, so in order to avoid pitfalls, consumers naturally tended to choose international brands with higher reputation and longer history. However, with the penetration of the social media marketing environment and the widespread problem caused by the abuse of cosmetics, beauty bloggers and ingredient parties have cultivated a group of "Kochi" cosmetics consumers.
At this time, for consumers, "what effect to solve the best problem is far more real than the brand", so the effect has become the core appeal of consumers to buy cosmetics.
In the past few years, leading domestic cosmetics brands have made many classic products with accurate consumption insights and ingredient innovation.
Among them, there is Proya's "Morning C and Evening A", which has its own oxygen glucose bispecific antibody ingredient "NOX-AGE".There are also Winona that incorporate plant extracts such as "purslane" and "green thorn fruit" into a series of skin care productsThere are also effective skin care products that use leading ingredients such as hyaluronic acid and recombinant collagen, such as Quadi and Kefumei.
Through the efficacy innovation to solve specific problems, the head domestic skin care brand has not only gotten rid of the strategy of following foreign capital, but has even become the object of imitation by foreign capital. For example, in L'Oreal, the launch of the "real C bottle" this year is to benchmark Proya's "morning C and evening A", but the sales volume of this year's Double 11 "real C bottle" is only 1 40 of morning C and evening A.
There is no other reason - the consumption mentality of "antioxidant and anti-sugar" has been occupied by early C and late A.
In addition to the innovation of core ingredients, another major advantage of domestic cosmetics over foreign brands is the rapid response to changes in the local market. This is especially reflected in the capture of channel dividends by local brands, the most vivid example is the rapid growth of makeup brands such as Perfect Diary and Huaxizi using social media "grass marketing" and the ability of top anchors to bring goods.
At present, the channel dividends of the cosmetics industry have been transferred to the short ** platform. According to Mojing insight data, in the first three quarters of this year, the sales proportion of the beauty and skin care market on "Tao Department", "Douyin" and "Jingdong" were respectively. 3% vs. 107%, of which Douyin's channel share increased by more than 10 percent compared with the same period in 20228 percentage points.
In the dividend channel of Douyin, domestic brands accounted for more than half of its skin care TOP10 cumulative sales list in the first three quarters of this year, including not only head brands such as Han Shu and Proya, but also niche domestic brands such as Xu Haili and Gu Yu.
Node Finance believes that:Different from 2012 to 2014, the Tao channel brand represented by Afu essential oil "rises and falls quickly", the Douyin channel has higher user stickiness due to both content dissemination and channel function attributes, and the ability of domestic leading domestic products to capture consumer demand and product differentiation is no longer what it used to be, and the brand of Douyin channel will undoubtedly maintain its popularity for a longer time.
However, the clarion call for domestic brands to overtake has been sounded, but in view of the imperfect vertical high-end upgrade and the construction of a multi-brand matrix, the foundation of most domestic cosmetics brands is not stable.
What are the gaps that need to be faced?
We have said a lot of good things about domestic cosmetics, which is not only an affirmation of its excellent achievements in the past, but also for the purpose of encouraging local consumers to support domestic products.
At the same time, we also need to face up to the current gap between domestic products and foreign brands, and "Node Finance" believes that this gap mainly comes from the following four aspects:
1) Multi-brand matrix building ability;
2) Multi-category coverage capability;
3) "High-end capability";
4) Globalization capability;
If we look back at the growth history of L'Oreal, Estee Lauder, Procter & Gamble, Shiseido, and other global leading cosmetics companies, the "Global Cosmetics Group" may be the best summary of them.
Taking L'Oréal as an example, as of the first three quarters of this year, L'Oréal's four business divisions have 36 brands, covering the whole field of cosmetics such as skin care, makeup, care and styling, and its products are sold to more than 150 countries at home and abroad.
Among the skin care products in the largest sector of cosmetics, L'Oreal not only eats "mass, high-end and luxury" in the first category, but also covers "high-end categories such as facial essence, cream lotion, eye care, and basic and tonic categories such as lotion, sunscreen, etc."
In contrast, the leading domestic cosmetics companies are either facing a single brand dependence, or have made achievements in a few skin care categories. In addition, high-end and internationalization are their common shortcomings.
Specifically, from the perspective of brand matrix construction, Bloomage Biotech temporarily ranks in the first echelon. In 2022, Bloomage Biotech has two skin care brands with an annual revenue of more than 1 billion yuan, "Runbaiyan" and "Quadi", as well as two skin care brands with an annual revenue of more than 500 million yuan, "Mirepair" and "BM Muscle Active".
In the second echelon, there are Proya, Bethany, Shanghai Jahwa, Juzi Biotech, Shangmei Co., Ltd., Freda, Marubeni, etc. Among these beauty companies, in addition to Proya, which has the prototype of a brand matrix of "one super and many strong", Bethany, Shangmei, Juzi Biotech, Freda, Marubeni, etc., each have a head brand with a revenue of more than 1 billion yuan, and some sub-brands with a revenue volume of 5-1 billion yuan and 1-500 million yuan.
In terms of competition in skin care categories, the advantages of domestic cosmetics companies are generally reflected in individual categories, and they cannot be among the best in all categories like foreign investors.
The most typical example is Marubeni, whose products only rank high in "eye care", and have a weak presence in facial serums and creams on a larger market. Giant Biotech's Kefumei, Bloomage Biotech's Runbaiyan, and Shangmei's Han Shu and Freda's Dr. Aier all have similar problems.
"Node Finance" believes that "the weak ability to expand the category will naturally limit the income ceiling of domestic cosmetics companies."
Comparatively speaking, Proya and Winona performed much better in all categories of skin care, not only penetrating many categories, but also performing well in high-potential categories such as facial essences and creams that can best reflect the competitiveness of skin care products.
Finally, in terms of high-end and internationalization, the progress of domestic brands is not obvious. At present, the revenue volume of domestic leading brands such as "AOXMED (owned by Bethany)" and "Yamada Farming (owned by Shangmei)" in the high-end market is less than 100 million yuan. In terms of international market expansion, domestic beauty brands have not even really started.
Overall, the performance of domestic cosmetics companies in 2023 is commendable, but the internal problems left to them are still very thorny, including:
How to get rid of the dependence on the top anchors in marketing?Such as Shangmei shares, Bethany, etc.;How to effectively distinguish it from the sub-brand positioning?Such as Bloomage Biotech and so on;How to make the core ingredients generally recognized by the market, such as Han Shu's blue copper peptides, etc.;and how to really squeeze into high-end categories such as essences and creams, such as refumei.
These remaining problems will also be an important reference point for the market to pay attention to the growth of domestic cosmetics companies in 2024. At the time of the acceleration of consumption recovery next year, we will wait and see how domestic cosmetics companies will perform.
Node Finance Statement: The content of the article is for reference only, the information in the article or the opinions expressed do not constitute any investment advice, and Node Finance does not assume any responsibility for any actions taken as a result of the use of this article.