Recently, LAF released its 2021 financial report with its net profit falling by more than 40% year-on-year. With Lafang as the core brand of LAF, a Chinese shampoo brand, which once had daily sales of more than 140,000 yuan (more than $21,200) and won the title of “king of Chinese shampoo”.
Recently, LAF released its 2021 financial report, with about $168 million in sales revenue in 2021, an increase of 11.91% year-on-year, with approximately $10.51 million in the net profit attributable to shareholders of listed companies, down 40.98% year-on-year. Among them, the sales revenue of the daily chemical business reached about $167 million, an increase of 11.81% year-on-year, with a 51.12% of gross profit margin.
According to the official website, founded in 2001, LAF is a personal care products enterprise integrating research and development, production, sales, and independent brands and is one of the leading enterprises for washing shampoo of national brands in China.
According to the financial report, Lafang and RACLEN are still the main sources of income for LAF, with sales revenue of $115 million, accounting for 68.78% of the total revenue.
According to the official website of LAF, Lafang is the national leading brand of Chinese shampoo. Over the years, the brand has collaborated with the internationally renowned suppliers of Germany Symrise, German WACKER, Switzerland Givaudan, and other strategic cooperation in selecting global high-quality raw materials, spending huge sums of money to create fully automated production equipment and GMP production environment, with the air cleanliness reaching 100,000 levels and reaching the pharmaceutical-grade standards.
In terms of research and development, Lafang joined hands with the Chinese Academy of Sciences to establish Lafang Hair Research Institute, Lafang International Daily Chemical Research Center, Guangdong Cosmetics Engineering Technology Center, and established Lafang Postdoctoral Research Workstation in 2018, applying for 146 authorized invention patents.
In the early years, the two advertising slogans “Love Life, Love Lafang” and “Lafang, create the beauty of Chinese hair” were almost well-known in China. In the era of the star economy boom, Lafang invited stars including Zheng Xiuwen, Ren Xianqi, Zhao Wei, Yang Mi, An Yixuan, Sun Honglei, Tang Yan and other stars to endorse and cooperate, and quickly made fame for the brand. In the supermarket, Lafang products at that time were piled up on the shelves and could compete with international giants such as Procter & Gamble and Unilever.
From 2014 to 2016, the market share of Lafang’s washing and care products ranked sixth for three consecutive years, ranking first among domestic brand enterprises. For a while, Lafang won the reputation as “the first brand of Chinese local shampoo” and “the king of China’s domestic shampoo”.
In 2015, in July, which was recognized as the sales off-season of the daily chemical industry, Lafang launched three large-scale promotional activities in three different regional systems across the country, achieving sales of more than 2 million yuan (over $300,000) in 14 days, which means that the daily sales of these three regions exceeded 140,000 yuan (over $21,200). During the event (from June 26 to July 9), the highest sales revenue of some stores exceeded 100,000 (over $15,200).
At that time, Lafang was dominated by traditional retail methods, with sales revenue contribution of dealer channels and supermarket channels reaching 70.78% and 24.2% respectively in 2016.
In 2017, Lafang’s parent company LAF entered the capital market and was successfully listed, with a market value of up to 12 billion yuan (over $1.82 billion) at that time, laying the foundation for Lafang’s status as a “giant” in China’s shampoo industry.
However, as the competition in China’s shampoo market has become more intense, and the rise of e-commerce platforms, the over-reliance on the dealer model has become a drawback for Lafang. A large wave of overseas brands have begun to show up among Chinese consumers through cross-border e-commerce channels, and local brands such as seeyoung and KANS have also won a place for themselves with innovative concepts such as “silicone-free oil”.
In contrast, Lafang failed to adjust the strategy of channels, marketing, products, etc., so it encountered a series of problems such as ageing product channels, low-end products, and lack of innovation.
In recent years, from the series of operations of Lafang’s parent company LAF, the company seems to have decided not to rely solely on the main brand Lafang, but to carry out other aspects of the layout to save itself.
For example, the traditional washing and care brand will be upgraded to the high-end and youthful direction, and a number of high-end shampoo sub-brands such as Mese, Taoran, MLESNA, Jiaocaotang, and so on have been launched. It intervenes in the field of beauty and skincare products through independent research and development, overseas brand agency, outsourced production, and other ways.
In 2019, China’s domestic animation NE ZHA: I am the destiny became popular. La Fang first obtained the exclusive authorization of the shampoo category of NE ZHA: I am the destiny, and officially launched the Nezha joint brand new product at the Double Eleven shopping festival in 2019, which brought a wave of heat and exposure to Lafang.
A series of adjustments to LAF have also been successfully reported accordingly. LAF’s 2020 annual report shows that the company’s annual net profit increased significantly by 135.72% to over $17.76 million thanks to the “combination fist” layout of products and channels.
According to the annual report data, the net profit of LAF fell by more than 40% in 2021, but the company did not explain the reason in the financial report. But in any case, today’s Chinese shampoo industry competition is becoming increasingly fierce, which can be described as not advancing or retreating. As the former “king of domestic shampoo”, there is still a long way to go for La Fang who wants to take a place.