The Ministry of Industry and Information Technology of the People’s Republic of China issued the Digital “Three Quality” Action Plan for Consumer Goods Industry (2022-2025) (Draft for Comments) stating that China will cultivate 200 intelligent manufacturing demonstration factories in the field of food, household appliances, cosmetics, clothing, home textiles, electronic products and other consumer goods, to create 200 well-known brands with a scale of 10 billion yuan. This also means that, the Chinese cosmetics industry is very likely to give birth to brands with value of 10 billion yuan in the next four years with the promotion of the above program.
On April 6, Beijing time, the Ministry of Industry and Information Technology of the People’s Republic of China publicly solicited comments on the Digital “Three Quality” Action Plan for Consumer Goods Industry (2022-2025) (Draft for Comments) (hereinafter referred to as The Draft for Comments). The main purpose is to accelerate the digital transformation of China’s consumer goods industry and promote the in-depth implementation of the “three quality” strategy of increasing variety, improving quality and creating brands.
The Draft for Comments said to cultivate 200 intelligent manufacturing demonstration factories in the field of food, household appliances, cosmetics, clothing, home textiles, electronic products and other consumer goods, to create 200 well-known brands with a scale of 10 billion yuan.
This also means that, the Chinese cosmetics industry is very likely to give birth to brands with the value of 10 billion yuan (about $1.572 billion) in the next four years with the promotion of the above program.
What kind of beauty group, then, could become one of them?
On March 10, 2022 Beijing time, Chinese cosmetics brand Perfect Diary’s parent company, YATSEN E-Commerce, released its 2021 financial results. According to the data, YATSEN E-Commerce’s 2021 revenue reached $916 million, up 11.6% year-on-year, with full-year gross margin up 2.5 percentage points to 66.8% and net loss narrowed by 42.5% year-on-year.
On March 16, Beijing time, Shanghai Jahwa, a Chinese cosmetics company with brands such as Dr. Yu and Herborist, released its annual results announcement for 2021. During the year, the company achieved operating revenue of $1.204 billion, up 8.73% year-on-year and its net profit of $102 million, up 50.92% year-on-year. Its net profit after deduction achieved $106 million, up 70.76% year-on-year, reaching the highest level in the past six years.
Among them, the skin care category grew at a rate of 22.22% for the year, far exceeding the average growth rate of China’s cosmetics industry. Its revenue share rose to 35% soaring to become the company’s top business category.
On March 22, Beijing time, China skincare brand especially for sensitive skin Winona’s parent company BTN released its 2021 results report: BTN achieved its revenue of $632 million in 2021, up 52.57% year-on-year. Its net profit attributable to shareholders of the listed company was $136 million, up 58.77% year-on-year.
Since its listing on China GEM in March 2021, BTN has rapidly risen to become a listed company with a high market capitalization in A-share cosmetics. During 5 years from 2017 to 2021, BTN’s total revenue has doubled 5 times and its net profit has doubled 5.5 times.
The 2021 annual report disclosed by Bloomage Biotech, which was named “the first hyaluronic acid stock” in March, showed that its revenue rose 87.93% to $783 million in 2021, and its net profit attributable to shareholders of the listed company was $124 million, up 21.13% year-on-year. The reason for the generous increase in revenue is that Bloomage Biotech focused on the cosmetics business in 2021 and continued to launch market demand products, such as “Biohyalux” and “Quadha”, which are well known among young people. It achieved sales revenue of functional skin care products compared with the previous year. The sales revenue of functional skin care products increased by $312 million, or 146.57%, compared with the previous year.
In summary, if the four companies, YATSEN E-commerce, Shanghai Jahwa, BTN and Bloomage Biotech, plan to become $10 billion groups in 2025, their compound growth rates in the next four years should reach 14%, 7%, 26% and 19% respectively.
Besides, China government and related departments also implement policies to support cosmetic industry. In the normalization of the epidemic today, Chinese consumers spend more time online, thus China’s major beauty brands increase online advertising on China’s social media. More and more young people recognized brand innovation design, marketing and so on.
In addition, due to restrictions on online overseas shopping and procurement service, Chinese beauty brands even surpassed international brands in sales during the epidemic.
As traditional Chinese brands such as Herborist regained their popularity through brand upgrades and so on. A large number of Chinese national trendy brands also sprang up and became new favorites in the market.
At the same time, those Chinese cosmetic companies with high market share and large scale will also go public one after another, such as Shangmei Group, which owns brands such as KANS and One Leaf, will go public in Hong Kong for IPO.
In 2025, China’s cosmetics industry may usher in its own 10-billion beauty group.