There have been new developments in the bankruptcy liquidation case of Shanghai Huayimei Cosmetics Co., Ltd. (referred to as “Huayimei”).
Recently, according to the information obtained from the National Enterprise Bankruptcy Reorganization Case Information Network, three items belonging to Huayimei, including three patents, 21 registered trademarks, and one copyrighted work, were put up for auction on the Alibaba Asset Platform from 10:00 on April 5th to 10:00 on April 6th. The starting price for each item was 1 yuan ($0.138).
It is worth noting that the reserve price for this auction is the same as the starting price. This means that as long as someone bids 1 yuan ($0.138) and there are no other bidders or bidders who do not place a bid, they can acquire one of the items for just 1 yuan ($0.138).
On April 6th, CHAILEEDO learned through the Alibaba Asset Platform that all three items were successfully auctioned. Among them, the 21 trademarks were sold for 5,201 yuan ($719), which was the highest price among the three auction items. The entire auction process lasted only 32 minutes.
After four rounds of auctions, Huayimei’s patents dropped from 121,100 yuan ($1672.7) to 1 yuan ($0.138)
According to the National Enterprise Credit Information Publicity System, Huayimei was established in January 2003 with a registered capital of 36 million yuan ($4.98 million). It is a wholly-owned subsidiary of Anhui Huayimei Technology (Group) Co., Ltd. (referred to as “Huayimei Group”). Public information reveals that Huayimei Group is an enterprise that integrates research, production, sales, and high-end beauty chain services.
Just recently, the National Enterprise Bankruptcy Information Disclosure Platform released three announcements related to Huayimei, titled “(2023) Shanghai 03 Bankruptcy 918 Auction Notice – Patents,” “(2023) Shanghai 03 Bankruptcy 918 Auction Notice – Copyrights,” and “(2023) Shanghai 03 Bankruptcy 918 Auction Notice – Trademarks.”
According to the details of the announcements, this auction includes three cosmetic packaging bottle design patents owned by Huayimei, 21 trademarks including ZEPING, Dingjianbo, Chang’e Tu, and one copyrighted work titled “Huayimei Gourd-shaped Mascot.” It is worth mentioning that the starting price and deposit for these three items are all 1 yuan ($0.138), the bidding period is 1 day, and the bidding increment is 100 yuan ($13.8).
On April 6th, CHAILEEDO learned through the Alibaba Asset Platform that all three items, including Huayimei’s trademarks, patents, and copyrights, were successfully auctioned with transaction prices of 5,201 yuan($719), 301 yuan ($41.6), and 601 yuan ($83.1), respectively. CHAILEEDO checked the “Bid Result Confirmation Letter” and found that after an open bidding process, Zhejiang JingXingTang Pharmaceutical Technology Co., Ltd. won the auction for “One Copyrighted Work under Huayimei” with the highest bid of 601 yuan. Yao and Wang separately won Huayimei’s patents and 21 trademarks with bids of 301 yuan and 5,201 yuan.
It is understood that these three items of Huayimei were auctioned for the fourth time, with the first auction taking place in early March this year. Looking at the four rounds of auctions for the trademarks, the prices have been continuously decreasing. On March 5th, the starting price for Huayimei’s 21 trademarks was set at 121,100 yuan ($1672.7). On March 15th, it was changed to 84,800 yuan (11,722.8), and on March 26th, it was lowered to 59,300 yuan ($8,197.7). This time, it was directly reduced to 1 yuan ($0.138).
It is worth noting that although this auction did not impose any special requirements on bidders, the “Important Notice” section of the bidding announcement states that bidders need to independently inspect and identify any flaws in the subject matter and bear the investment risk themselves.
“In fact, it is not uncommon for auction platforms to start trademarks and patents at 1 yuan ($0.138) ,” said Deng Gang, a lawyer at Guangdong Fazhi Shengbang Law Firm. Auctions are a legal process, and the final transaction price may be higher than the starting price. If they fail to sell after multiple rounds of auctions, they can be resold on the same judicial auction platform. If they still cannot be successfully transferred in the end, the court may no longer proceed with the matter.
A cosmetics industry insider in Guangzhou bluntly stated, “The design patents for cosmetic appearances are related to trends and often become outdated within a year or so. Therefore, these patents basically have no market value. In addition, due to the impact of Huayimei’s bankruptcy, acquiring the brand trademarks may bring negative effects rather than value to the bidders.”
“A mere trademark is not valuable. A trademark needs to incorporate cultural value, scientific value, and market value to have a brand effect,” admitted a senior engineer in the cosmetics industry. If the accumulated value of a brand is not market significant, it won’t find new investors to continue the struggle. Furthermore, patents need to have technological value to be meaningful, and the concepts represented by the appearance of some cosmetic brands are generally not recognized by the market.
“It is relatively rare for employees to directly apply for the bankruptcy of a company”
Huayimei’s trademarks and patents have been auctioned online multiple times, which is a way for the company’s administrators to liquidate its existing assets.
According to the National Enterprise Bankruptcy Information Disclosure Platform, due to the inability to repay matured debts and a clear lack of repayment capacity, Huayimei was sued by one of its employee creditors, Ye Jia, who applied to the court for the company’s bankruptcy liquidation. On December 11th of last year, the Shanghai Third Intermediate People’s Court ruled to accept the case of Huayimei’s bankruptcy liquidation and appointed Shanghai Jiehua Law Firm as the administrator. CHAILEEDO reported on this matter immediately.
On January 24th of this year, a notice titled “Huayimei Employee Creditors’ Situation” was published on the National Enterprise Bankruptcy Information Disclosure Platform, indicating that the administrator of Huayimei investigated the company’s owed wages, medical expenses, disability benefits, and funeral expenses to its employees. According to preliminary investigations, as of January 22nd, 2024, the total amount of employee creditor claims against Huayimei was 1.86 million yuan ($257,100), involving 35 employee creditors, with Ye Jia being one of them, with a confirmed claim of 159,500 yuan ($22,049.4).
“It is relatively rare for employees to directly apply for the bankruptcy of a company,” said Deng Gang, indicating that for employees, applying for the bankruptcy of a company is a way to safeguard their legitimate rights and interests.
From the disclosed annual report information of Huayimei, CHAILEEDO noticed that in 2022, the number of insured employees in the company sharply decreased to only 15. In the period from 2019 to 2021, the number of employees covered by social security remained around 40 to 50.
CHAILEEDO found that with Huayimei being subjected to bankruptcy liquidation at the request of its employees, the company has encountered significant difficulties in its operations.
According to information from the China Judicial Documents website, Huayimei has been involved in 23 judicial cases, including disputes over sales contracts, advertising contracts, labor contracts, and others. Looking at the years of publication of the judicial documents, in 2022, Huayimei was involved in 7 judicial cases, the highest number in recent years.
Furthermore, according to publicly available information on Qichacha, Huayimei has a total of 28 final cases, with a total amount of enforced targets reaching 10.09 million yuan ($1.39 million), and the total amount of unfulfilled targets being 10.01 million yuan ($1.38 million), resulting in an unfulfillment rate of 99.24%. Additionally, Huayimei has been listed as a dishonest debtor 23 times and has been subject to 27 restrictions on high consumption.
In addition, CHAILEEDO also found that since 2019, out of the 421 hair care milk, face masks, essences, hair care oils, and other products filed by Huayimei, most of them are currently in a canceled state, with the cancellation dates around August 2023. Recently, CHAILEEDO attempted to contact Huayimei for further details by calling the contact phone number listed in the company’s 2022 annual report, but the call indicated that the phone was turned off.
Huayimei’s brands have achieved over 100 million yuan ($ 13.8 million) in sales for their acne treatment products
It is worth mentioning that as a well-established cosmetics company with a 20-year history, Huayimei and Huayimei Group have had their “glory moments.”
According to reports, Huayimei Group’s own brands include ZEPING, Xianchen, Huayimei, and eievi. Among them, ZEPING was founded in 2001 and focuses on acne control, oil control, spot lightening, moisturizing, and repair. Its product range includes masks, essences, and creams, making it one of the most well-known brands under Huayimei Group.
According to the WeChat official account “ZEPING,” which is certified under the name Huayimei, ZEPING has been recognized as the “National Exempted Product,” “China’s Most Satisfying Brand for Users,” and “China’s Most Popular Brand among College Students.” Furthermore, media reports have stated that ZEPING has been the best-selling acne brand in pharmacies for consecutive years, with one of its acne treatment products achieving sales of over 100 million yuan ($13.8 million).
However, according to the latest investigation by CHAILEEDO, as of now, ZEPING’s Tmall flagship store has around 51,000 followers, with only one ZEPING product, the “Big Acne Clear Essence,” available for sale, and its sales volume is only around 600+. Additionally, the Douyin account “ZEPING Flagship Store” has not updated since April 2022, and the product links in the Douyin store have been cleared.
“ZEPING has a long brand history,” as several industry insiders have mentioned. “Before 2005, it could be found in stores like Watsons and Mannings, but then it disappeared for unknown reasons.”
It is worth mentioning that in recent years, Huayimei has also ventured into cosmetics OEM (Original Equipment Manufacturing) business. Traditional Chinese medicine health has become one of the most promising industries from 2020 to 2021. Taking advantage of this trend, Huayimei established an intelligent new factory in Songjiang, Shanghai, in 2021. According to publicly available information, Huayimei’s intelligent new factory covers an area of over 20,000 square meters. The annual output value of its cosmetics production workshop can reach 3 billion yuan ($414.7 million), and it has a 100,000-level purification workshop and a 10,000-level purification quality inspection room.
An industry insider who has worked at Huayimei in Shanghai for many years told CHAILEEDO, “Huayimei’s bankruptcy may be related to the company’s failure to keep up with the changing times in its business strategy.” The insider also revealed, “Currently, Huayimei has stopped operating its factories, but the brand is still running.”
According to another industry insider familiar with Huayimei, “Initially, ZEPING mainly focused on large distribution and department store channels, but as traditional channels were squeezed by e-commerce, ZEPING declined. After the outbreak of the pandemic, ZEPING also started to expand into e-commerce channels, but with little success. In addition, in recent years, Huayimei has vigorously promoted its OEM business, but due to a lack of understanding of the cosmetics OEM market, they failed to turn the situation around.”
“The cosmetics industry changes very quickly. Innovation is always relevant, and companies need to increase their innovation efforts in channels, product research, and other areas to avoid being eliminated by the market,” said a cosmetics industry insider from Guangzhou.
