Recently, JINFA LABI MATERNITY & BABY ARTICLES CO., LTD (referred to as “Labi Baby”) announced that on December 28th, the company received an “Administrative Penalty Decision” from the Jinping Municipal Supervision Bureau in Shantou. According to the announcement, Labi Baby was fined over 2.6 million yuan due to the production of “Baby Labi Egg Oil” that did not meet technical specifications and the dissemination of false advertisements on its Tmall store.
In recent years, the detection of prohibited substances in baby skincare products has become a common occurrence. Several industry insiders have pointed out that under stricter regulations, the issuance of million-yuan fines serves as a warning to companies and reminds them of the importance of compliance in their operations.
Labi Baby has been fined over 2.6 million yuan ($363,900)
According to the National Enterprise Credit Information Publicity System, Labi Baby was established in 1996 with a registered capital of 354 million yuan ($49.5 million). Based on public information, Labi Baby is one of the early Chinese enterprises specializing in the research, design, production, and sale of maternity and baby consumer products, including baby skincare products, baby clothing, and cotton products for infants. It has three independent brands: “Labi Baby,” “I Love Baby,” and “Baby Labi.” Labi Baby achieved an A-share listing in 2015 and is known as the “leading company in the maternity and baby industry.”
According to the announcement, Labi Baby had five main issues. Firstly, the ingredient proportions in the “Baby Labi Egg Oil” product (batch numbers: 03CH021A, 01AC021A, 08BHO21A), including egg yolk Egg Oil, tocopherol, and plant sterol oleate, were 89%, 10%, and 1% respectively, while the general cosmetics filing management system showed that the ingredient proportions should be 60%, 30%, and 10%.
Secondly, the production timing of Labi Baby’s “Baby Labi Egg Oil” product (batch numbers: 02BE023C, 07AE023A, 04CD022A) did not match the registered production process. Thirdly, Labi Baby’s quality management system had incomplete inspection records for finished products, and some of the production records were found to be untrue and non-standard.
Fourthly, on May 16, 2023, the Mengla County Market Supervision Administration sampled the “Baby Labi Egg Oil” product (batch number: 02BE023C) at the Mengla Aihu Mother and Baby Store and found the presence of the prohibited substance progesterone. On August 2, 2023, Labi Baby had the same batch of Baby Labi Egg Oil tested, and progesterone was detected. As a result, Labi Baby was deemed to have engaged in the illegal production of cosmetics that did not meet technical specifications.
Additionally, Labi Baby sold the “Baby Labi Cherry Moisturizing Mask” in its Tmall flagship store, claiming that it could be used during breastfeeding, pregnancy, and postpartum. However, upon investigation, it was found that this product was a regular cosmetic.
Specifically, Labi Baby was found to have produced the “Baby Labi Egg Oil” product in a manner that did not meet the technical requirements specified in the filing documents. They also produced “Baby Labi Egg Oil” that did not meet technical specifications and disseminated false advertisements on their Tmall store, among other violations. As a result, the Jinping Municipal Supervision Bureau in Shantou confiscated 1,779 bottles of Labi Baby’s “Baby Labi Egg Oil” (batch number: 02BE023C), confiscated illegal gains amounting to 115,700 yuan, and imposed a fine of 2,491,200 yuan. The total amount fined was 2,606,900 yuan.
Furthermore, the announcement mentioned that after the “Baby Labi Egg Oil” product (batch number: 02BE023C) was found to contain prohibited substances during sampling, Labi Baby canceled the product registration on the regular cosmetics filing system platform on August 8, 2023. Labi Baby also urged its affiliated cosmetics factories under the “Baby Labi” brand to conduct strict self-inspections and to rigorously select and manage raw material suppliers while ensuring strict compliance with the cosmetic production management process and maintaining product quality standards.
Today, the product in question is no longer searchable on major e-commerce platforms such as Taobao and JD.com.
According to CHAILEEDO’s search, since 2014, Labi Baby has registered a total of 227 products. However, apart from the 20 products registered in 2023, most of the products are either in the “canceled” or “abnormal, production not conducted in accordance with regulations” status.
Labi Baby’s cosmetics business has shrunk by 37.5%
In the announcement, Labi Baby stated that the temporary suspension of production and operation at the Baby Labi cosmetics factory from September 23, 2023, until December 5, 2023, resulted in a cost of approximately 500,000 yuan.
Regarding the cosmetics sector involved in this incident, Labi Baby stated that the temporary suspension of production and operation affected the cosmetics factory under the Baby Labi brand. In addition, Labi Baby’s cosmetics business generated approximately 25.1893 million yuan in revenue in 2022, accounting for 10.27% of the company’s total operating income in 2022.
It is worth mentioning that even before its initial public offering in 2015, Labi Baby’s cosmetics segment had generated around 40 million yuan in revenue from “personal care products” in 2013 and 2014, accounting for approximately 10% of total revenue. However, compared to the approximately 25 million yuan revenue generated in the previous year, Labi Baby’s cosmetics business revenue has decreased by 37.5%.
Regarding the stock price, Labi Baby went public in 2015 with an initial offering price of 26 yuan per share. After experiencing market fluctuations over the years, the company’s stock price has mostly remained around 8 yuan. As of the time of writing, Labi Baby’s stock is trading at 9.06 yuan per share, with an increase of 0.89%, and a total market value of 3.207 billion yuan.
As one of Labi Baby’s three major brands, Baby Labi is a major contributor to the company’s cosmetics segment performance.
According to Labi Baby’s previous statements, the brand concept of Baby Labi is to provide “safe, healthy, and suitable” mother and baby care products, targeting the mid-to-high-end mother and baby consumer group. Their product range includes functional products for washing, care, and skincare. The sales outlets mainly cover second, third, and fourth-tier cities, with expansion into fifth and sixth-tier cities, and online channels are established on major mainstream platforms.
CHAILEEDO noticed that on the Tmall platform, Baby Labi’s flagship store has over 80,000 followers and offers 32 SKUs. The best-selling product is the Baby Labi Baby Soothing Moisturizing Cream (fragrance-free), with over 10,000 units sold. In contrast, the Baby Labi flagship store on JD.com has only about 1,900 followers. In terms of the number of followers and product reviews, Baby Labi lags behind emerging mother and baby care brands such as Baby Elephant and Hi!Papa. The former has over 6.94 million followers on their Tmall flagship store, while the latter has over 550,000 followers.
In the competitive field of the multi-billion-dollar mother and baby skincare market, the competition is fierce. Not only do international renowned brands like Johnson & Johnson and Pigeon occupy dominant positions, but many emerging brands are continuously upgrading their products with scientific formulations, more refined effects, and diverse categorizations through technology and research and development. This further intensifies market competition.
For example, in late December of last year, Hi!Papa received the first global investment from L Catterton and announced its goal to become the leading brand in children’s sun protection skincare. The brand’s sales revenue across all channels steadily entered the billion-yuan club, dominating various platform rankings in the baby skincare segment. In addition, the functional skincare brand Winona Baby launched the Winona Baby brand for children’s skincare in 2014. In this year’s 618 shopping festival, Winona Baby already secured the 4th position in the Tmall baby skincare segment.
Surrounded by strong competitors, Labi Baby’s cosmetics segment faces numerous challenges in the market. This incident will undoubtedly cause certain damage to Baby Labi’s reputation, and in the future, the brand will need to work hard to turn the situation around.
Tightening Regulations on Baby Skincare
According to CHAILEEDO, it has been found that Labi Baby’s Baby Labi Baby Egg Oil contained the prohibited substance progesterone, which is a biologically active hormone secreted by the ovaries. According to the current “Cosmetic Safety Technical Specification” (2015 edition), sex hormones (estrogens, substances with androgenic effects, and progesterones) are listed as prohibited substances.
Progesterone, as a common hormone, can temporarily alleviate symptoms such as skin redness and itching caused by delayed diaper changing and irritation in the baby’s buttocks. However, long-term use may lead to metabolic disorders and hormonal imbalances. Therefore, some manufacturers, even at the risk of being caught, add this substance illegally to enhance product effectiveness and increase profits.
In Labi Baby’s announcement, they claimed that progesterone was introduced through raw egg Egg Oil, and the company’s procurement of raw egg Egg Oil did not detect progesterone in the “analysis test report.” They also stated that their laboratory meets the testing capabilities specified in Article 17, Paragraph 1 of the “Cosmetic Production Quality Management Specification” but lacks the ability to detect progesterone.
A representative from a biotechnology company stated, “The raw material suppliers and agents were probably not aware that the raw materials contained prohibited substances, and there was no warning. Furthermore, they may not have thoroughly read the regulations to confirm the threshold for exceeding prohibited substances.”
“The product formula only has three ingredients, with Egg Oil being the primary one, and even in the lowest case, egg Egg Oil exceeds 33.4%. Therefore, during product testing, progesterone introduced through egg Egg Oil is likely to exceed the detection limit and be identified as present,” the representative further explained.
An anonymous industry veteran engineer commented, “It is possible that the substance was introduced through the raw materials. The new regulations require companies to control and identify risk substances in key raw materials and conduct safety assessments. This may be the reason.”
“However, the excuse of not being able to conduct internal testing is not valid. The detection method for progesterone is clearly defined in the Cosmetic Safety Technical Specification. Companies can send raw materials to third-party authoritative institutions for testing, provided they are ‘authoritative’ and not just randomly chosen institutions to meet the requirements. It is recommended to seek institutions like pharmaceutical inspection agencies,” the engineer added.
It is worth noting that the detection of prohibited substances in baby skincare products is not uncommon. CHAILEEDO noted that as early as April last year, the Hubei Province Food and Drug Administration announced that three batches of Yuebu Baby Buttock Cream produced by Lihuahechuang (Wuhan) Biotechnology Co., Ltd. were found to contain the prohibited ingredient progesterone.
In October of last year, the National Medical Products Administration issued a notice stating that seven batches of cosmetics contained prohibited ingredients, including Labi Baby’s Baby Labi Baby Egg Oil in two batches, and Guangzhou Henglan Biotechnology Co., Ltd.’s Yingbeixuan Baby Skincare Cream. It is worth mentioning that as early as October 2022, Henglan Biotechnology had previously been found to contain prohibited ingredients in the “Yingbeixuan Baby Skincare Cream” and “Yingkang Probiotic Body Lotion,” and the person in charge of production was banned for life.
Li Jincong, the founder of the Prohibited Substances in Cosmetics website, stated that since the implementation of the new regulations, about half of the cases where production licenses were revoked were related to “baby product safety.” This indicates that regulatory authorities have adopted a zero-tolerance attitude towards the safety of baby products and established an untouchable red line.
“With the continuous improvement of detection methods for prohibited substances and the increasing sensitivity of detection equipment, even trace amounts of prohibited substances in cosmetic products can be accurately detected. Additionally, the safety of baby products is a key focus of national supervision. Therefore, in terms of raw material safety control, stricter measures should be taken compared to general cosmetic factories,” he further stated.
As an industry insider put it, “OEM/ODMs are facing increasingly lower profits, and costs are becoming more transparent. Establishing the capability to detect prohibited substances comes with significant challenges. Companies can only minimize costs and survive in the long run by sending products to testing institutions for random inspections.”
