Chinese Cosmetics Enterprise Shanghai Jahwa is Undergoing New Changes

“To further enhance operational quality, activate organizational efficiency, and accelerate business growth, the company has decided to adjust its domestic business organizational structure: establishing the Beauty Skincare and Maternity Business Unit, Personal Care and Home Cleaning Business Unit, and Overseas Business Unit. Each business unit will serve as the decision-making body and be accountable for performance outcomes.”

This announcement was made by Shanghai Jahwa in October last year regarding organizational restructuring.

As widely recognized, the organizational structure of a company plays a crucial role in supporting strategic implementation, enhancing operational efficiency, strengthening market adaptability, and ensuring internal management rigor. Behind this concise announcement of less than one hundred words lies the reflection of the numerous challenges faced by Alex Pan during his four-year tenure at Shanghai Jahwa.

Alex Pan also frankly stated that Shanghai Jahwa’s previous organizational structure, online and offline operations, and the separation of brands and channels had greatly slowed down the company’s responsiveness to the market, becoming a hindrance to its development.

For instance, CHAILEEDO understands that under the previous functional structure at Shanghai Jahwa, each brand had two channel managers, dividing responsibilities between online and offline channels. “With fixed resources, resources naturally tilted towards offline channels due to their larger volume, which also resulted in Shanghai Jahwa’s slow progress in online business in recent years.”

Alex Pan firmly believes that decision-making authority should be handed over to those who understand the business. This is the only way to truly focus resources on consumer-centric initiatives and drive business performance growth.

Therefore, the establishment of the three major business units is aimed at making the business unit the decision-making body, with business as the driver, and all support departments in the middle and back office supporting the business development of the business unit. Based on efficient cross-channel coordination, accelerating category decision-making speed, and market responsiveness, ultimately being accountable for performance outcomes.

In terms of results, the success of last year’s popular “Old Baby Squad” (a group of new anchor hosts composed of four management members over the age of fifty from Shanghai Jahwa, with educational backgrounds from top universities such as Fudan, Tsinghua, and East China University of Science and Technology) also validates the correctness of the organizational restructuring. It is reported that in September last year, after the Personal Care and Home Cleaning Business Unit captured the market hotspot, based on cross-departmental coordination and efficient decision-making, the “Old Baby Squad” was able to be formed and efficiently attract traffic for the rising trend of domestic products within one day. Data shows that the debut live broadcast of the “Old Baby Squad” brought in 12.9 million exposures and had 5.45 million viewers, driving growth in the sales of the MAXAM brand on interest-based e-commerce platforms, traditional e-commerce platforms, and even offline channels.

It can be seen that even though the establishment of the “business unit system” was only truly implemented last October, it has already become the backbone of Shanghai Jahwa’s efficient operation. It ensures a clear delineation of responsibilities and functions, effective resource allocation, and smooth communication channels. It also brings new vitality and vitality to this 126-year-old enterprise.

Advancing towards high quality and sustainable development

For businesses, building and adjusting organizational structures is an ongoing process closely linked to long-term development strategies. Alex Pan candidly acknowledges that business units are not a panacea.

In pre-conference interviews, Alex Pan emphasized multiple times that organizational restructuring is driving the implementation of Shanghai Jahwa’s overall strategy—continuously increasing investment in high-margin, premium brand, high-growth categories, while “discarding” low-margin, low-net-profit, zero-growth, or even business segments that hinder the company’s medium- to long-term development.

So, how will Shanghai Jahwa implement this strategy in 2024? Recently, Alex Pan proposed five key focus areas at the conference: “innovation-driven, brand reshaping, channel advancement, value-driven, and overseas expansion,” all aimed at promoting the company’s high-quality sustainable development.

Specifically, in terms of innovation-driven initiatives, Shanghai Jahwa will continue to iterate and update brand products based on consumer insights. For example, last year, Dr.Yu successfully entered the sensitive skin market with the launch of “Oil-Sensitive Cream,” becoming one of the top contributors to the brand’s core products. Meanwhile, Liushen introduced innovative outdoor “Mosquito Repellent Eggs” and “Cooling Eggs” with new packaging formats.

According to Jia Haidong, Senior Director of R&D at Shanghai Jahwa, the number of patents applied for by Shanghai Jahwa increased by 194% in 2023 compared to 2020. By the end of 2023, Shanghai Jahwa had obtained a total of 423 valid patents, including 102 domestic invention patents and 22 foreign patents.

In addition, according to Alex Pan, in the current consumer environment, consumers’ pursuit of value for money will become extremely intense. “Value for money is not about absolute high or low prices, but rather about consumers expecting to get products, services, and experiences that outweigh the price they pay today.”

Therefore, in the process of brand reshaping, Shanghai Jahwa will comprehensively promote the advancement of beauty and skincare brands towards “professionalization, high-end, and experientialization,” and promote personal care brands towards “youthfulness, seasonality, and professionalism.” This will be achieved through the creation of explosive products, comprehensive synergy, and content development, driving high-quality growth for the brands.

A typical example is the Herborist brand. Over the past year, Shanghai Jahwa has streamlined Herborist’s historical 23 product lines to 7 and reduced the number of product SKUs from over 600 at its peak to 178. The brand has also focused on the anti-aging and whitening tracks, driving the overall brand upgrade towards high-end through celebrity endorsements and influencer marketing.

Regarding channel advancement, Alex Pan revealed, “In 2023, we proactively downsized our agency business, essentially closed down traditional CS businesses, and reduced retail inventory by hundreds of millions in department store channels.”

While reducing costs, the company targets high-growth tracks to achieve efficiency. As Alex Pan mentioned, interest-based e-commerce has become the only high-growth channel in the beauty category market. Therefore, Shanghai Jahwa will focus on enhancing content marketing capabilities in 2024, further accelerating the development of interest-based e-commerce, and improving advertising efficiency.

As mentioned earlier with the “Old Baby Squad,” Shanghai Jahwa has already achieved visual success in exploring interest-based e-commerce content marketing. It is reported that since the establishment of the “Old Baby Squad,” MAXAM has further unleashed its brand potential on interest-based e-commerce platforms, successfully driving the rejuvenation of its consumer base. Currently, MAXAM’s mainstream consumer group aged 25-40 accounts for nearly 60%, with an increase in average order value of over 50%.

Value creation, in essence, means “the company makes a profit, customers make a profit, and consumers gain benefits.” This year, Shanghai Jahwa will enhance enterprise profitability through supply chain cost reduction and price control, while improving efficiency in personnel and advertising expenditure. Leveraging synergy across various channels, the company aims to ultimately enhance consumer service experiences and create ultimate value for money.

Finally, in terms of overseas expansion, it is understood that Shanghai Jahwa, through its newly established Overseas Business Unit, relies on a “2B+2C” dual-driven model. In the 1.0 stage, it targets essential markets with classic brands such as Liushen and MAXAM to capture market share. In the 2.0 stage, it conducts localized operations to promote brand localization. In the 3.0 stage, it aims to scale up both sales and profits, ultimately establishing overseas operations as the company’s second growth curve.

Since 2024, the overseas market has seen the addition of 4 new brands, over 100 SKUs, and over 10 distributors. Customer expansion has reached 5 continents and 11 countries and regions.

Stubborn idealism and long-term

As is well known, large enterprises typically possess the advantages of extensive scale and abundant resources. However, they often appear clumsy and slow in responsiveness and change due to their cumbersome organizational structures. The difficulty of transitioning from an elephant to a galloping elephant is self-evident.

Why does Alex Pan insist on leading Shanghai Jahwa to undertake these tasks?

“Perhaps I am a stubborn idealist combined with a long-term thinker. If we want to bring Chinese beauty to the world someday, we need to adjust the shortcomings in the history of Shanghai Jahwa to a reasonable extent,” was Alex Pan’s response.

Alex Pan also candidly admitted that due to historical shortcomings, Shanghai Jahwa would inevitably encounter numerous difficulties in the process of strategic adjustment.

Foremost among these challenges is the shortage of talent within the company and the lack of a self-sustaining mechanism. It is understood that through initiatives such as establishing a trainee program and reviving internal management personnel development plans, both internal and external talent cultivation mechanisms have undergone significant changes, resulting in a notable increase in the number of “tiger-like talents” willing to exert high effort for high challenges.

Secondly, there is the issue of execution capability. In 2023, Alex Pan revamped the company’s 16-character values—innovation, integrity, trust, accountability, and efficient execution—to ensure the improvement of employees’ execution capabilities under the driving force of corporate culture. It is reported that over the past year, employee dedication and satisfaction within Shanghai Jahwa have been effectively enhanced.

In addition to addressing past shortcomings and striving to capitalize on missed opportunities in history, Shanghai Jahwa is also setting its sights on future development.

For instance, the company is investing in AI digitization. As indicated by Jia Haidong, the future of the Chinese cosmetics industry may surpass foreign counterparts, primarily through the application of AI technology and research and development of Chinese botanical resources.

Based on this understanding, Shanghai Jahwa has pioneered an innovative model in the industry, combining AI with Traditional Chinese Medicine (TCM) research. This addresses pain points such as the lack of clarity on effective ingredients, low recognition, and unclear efficacy mechanisms in traditional TCM applications. The research outcomes have already been successfully applied to brands such as Yuze and Baiqueju.

At the press conference on March 18th, Shanghai Jahwa signed an “AI Innovation Technology Cooperation Framework Agreement” with the artificial intelligence company Megvii Technology. It is reported that the two parties will continue to deepen their cooperation by leveraging facial key point skin testing technology to create customized skincare solutions tailored for the Chinese people.

To achieve the vision of “bringing Chinese beauty to the world,” Shanghai Jahwa proposed its ESG (Environmental, Social, and Governance) strategy as early as 2021, and has consistently adhered to the philosophy of “Born for Beauty, Acting for Good.” According to Alex Pan, Shanghai Jahwa has made remarkable achievements in ESG governance, establishing three pillars: “an innovative and vibrant enterprise,” “a green and low-carbon ecosystem,” and “shared and win-win social value.” The sustainable development governance system established by Shanghai Jahwa has also reached the best level in the domestic industry.

As stated by Yan Jiangying, China Association of Fragrance Flavour and Cosmetic Industries, Shanghai Jahwa is a well-known century-old national enterprise in China and one of the few that has witnessed the historical development of the Chinese cosmetics industry and still stands at the forefront of the industry.

Looking back, in 1915, at the Panama-Pacific International Exposition in San Francisco, the “Vive Pink Cream” won the gold award. Since then, Shanghai Jahwa has achieved numerous milestones: the first mousse, the first styling wax, the first-hand cream, the first domestic men’s skincare brand; the first listed company in the domestic daily chemical industry; the first Chinese cosmetics brand to enter Europe and succeed overseas; the first high-end beauty brand in China to exceed a century… These are all labels associated with Shanghai Jahwa.

As Alex Pan believes, in the context of changing channels, upgrading consumption, and technological iteration, the era of past glory has ended. However, after a series of transformations such as organizational restructuring and reshaping values, Shanghai Jahwa has successfully positioned itself at the starting point of a new era.

“As nightfall may bring darkness and chill, moving forward will bring dawn.” As long as dreamers carry their dreams and gather their strength, even when venturing into darkness and the unknown, they will surely overcome obstacles and move toward brightness. Today, Shanghai Jahwa, having cleared obstacles and embarked on a new journey, sees a clear path ahead.