On November 28, the 2023 Zhongguancun Forum series event, the 2023 FORUM ON BEAUTY ECONOMY AND SUSTAINABILITY,ONE OF ZGC FORUM SERIES OF ACTIVITIES, co-hosted by Foreign Cooperation and Exchange Center of Ministry of Ecology and Environment of the People’s, the China Health Care Association, and the Beijing Municipal Medical Products Administration, was grandly inaugurated in Beijing. CHAILEEDO, as the exclusive strategic media partner of this forum, provided comprehensive coverage of the event. With the theme “Innovation, Green, Integration,” the conference attracted domestic and international enterprises, as well as industry organizations from Europe, France, ASEAN, and other countries and regions, gathering in Beijing to collectively explore topics such as cosmetic safety assessment technology and development trends, RCEP country regulations and markets for cosmetics, the green transformation of the beauty economy industry, and innovation in beauty products. During this conference, what are the latest developments in cosmetic safety assessment? What are the leading trends in the cosmetics industry that we can observe?
The Complete Imperative of Safety Assessment
Due to the nature of cosmetics directly contacting the surface of the human body, the safety of products has always been the most important and closely watched aspect of the beauty industry, whether at the raw material or product level. Regulations and safety assessments, therefore, serve as safeguards driving the beauty industry.
In recent times, the complete version of safety assessments has become one of the hottest topics in China’s beauty industry. The latest regulations stipulate that starting from May 1st next year when registering or filing cosmetics, registrants or filers are required to submit the complete version of safety assessment reports. In contrast to the simplified version, this requires additional toxicological information for each ingredient in the formula. The safety assessment report will be mandatory for product registration and filing. In other words, if companies cannot submit a complete safety assessment, their products cannot be launched smoothly.
At this conference, Dr. Yu Zhenxi, Deputy Director of the Cosmetic Safety Evaluation Center of the National Institutes for Food and Drug Control, also shared his insights on safety assessment issues. He expressed that the complete version of safety assessment is imperative and is the general trend of the entire industry.
The National Institutes for Food and Drug Control stated that they do not have information regarding any postponement of the implementation of the complete version of the safety assessment. Therefore, companies should actively prepare for the complete version of the safety assessment. According to the Technical Guidelines for Cosmetic Safety Assessment and transitional period requirements, starting from May 1st, 2024, the submission of complete safety assessment reports will be required. Companies should focus on talent development, strengthen the collection of toxicological data, and prepare technically for this requirement.
At the conference and during an exclusive interview with CHAILEEDO, Gerald Renner, Director of Technical Regulatory and International Affairs, at Cosmetics Europe, emphasized the pivotal issue of safety assessment.
During his speech at the conference, Gerald Renner stressed that safety assessment is currently the most critical topic facing the cosmetics industry, and the transition to 2024 must proceed smoothly. Safety evaluation of cosmetics is essential because exposure to certain risk substances upon skin contact may pose risks to the entire body.
Simultaneously, due to the increasing trend in consumer preference for purchasing natural and harmless ingredients, the European Union’s Scientific Committee on Consumer Safety (SCCS) included botanical ingredients materials in their safety assessment for the first time this year.
Gerald Renner provided significant insights regarding the safety assessment of botanical ingredients. He stated that assessing the safety of botanical materials and extracts is complex. In Europe, various aspects of botanical extracts are analyzed. The initial step involves identifying the botanical source, including its classification, the part used for extraction, and the original product. Additionally, assessing the safety of botanical extracts requires understanding the physicochemical characteristics of the component and its functions, which should be quantified as much as possible. Moreover, it involves determining whether the component contains additives or impurities.
At the conference, Shen Chunlin, Deputy Director of Estée Lauder Innovation and Research (China) Co., Ltd, delivered a speech titled Application of Cross Reference in Cosmetic Safety Assessment. He mentioned that the cosmetics industry lacks successful cases of cross-referencing applications. International authoritative bodies often conduct safety assessments for a group of chemicals based on their categories or biochemical metabolism. If a target chemical belongs to a certain group or shares structural, physicochemical, biological, and toxicological properties with previously assessed group chemicals, referencing the conclusions of authoritative bodies is feasible for cross-referencing. Quality is crucial in cross-reference assessment documents, which should include decision elements like descriptions of the chemical characteristics of the target and similar chemicals, validation of cross-reference assumptions, and structural/mechanistic similarities between the target and similar chemicals, along with their data matrices.
Additionally, Gerald Renner, in an interview with CHAILEEDO, emphasized Europe’s historical challenges in cosmetic safety assessment. He highlighted the paramount importance of safety assessment in the industry’s development. Renner suggested that establishing a complete safety assessment system and network structure for the Chinese cosmetics industry is a long-term exploration that demands time and effort. Whether for raw material enterprises, manufacturers, or brand owners, learning and adjustment is inevitable. However, gradually becoming familiar with safety assessments will immensely benefit the industry’s development.
Beyond safety assessment, legal regulations serve as crucial safeguards in the beauty industry. Safety assessments and regulations establish standards and norms, ensuring product quality and safety. They help prevent low-quality or harmful products from entering the market, fostering the industry’s sustainable growth.
During the parallel forum RECP National Cosmetics Regulations and Market Forum, representatives from ASEAN countries’ cosmetics industry provided detailed insights into the cosmetics markets and regulatory aspects of several member states, addressing industry professionals at the conference.
Halal cosmetics are projected to occupy 13.3% of the global market share by 2027
In 2022, the global cosmetics trade reached USD 741.33 billion, with China ranking first as the most active trading country. Europe emerged as the most active region, securing five positions among the top ten countries.
With the RCEP agreement taking effect on January 1, 2022, ASEAN became Asia’s third-largest economy and the world’s sixth-largest. ASEAN is poised to become a crucial component of the global cosmetics market. Projections indicate that by 2025, the market size is expected to exceed USD 30 billion, displaying significant trade activity. In 2022, ASEAN’s cosmetics trade with the world amounted to USD 21.41 billion.
Deputy Director-General of the TCM Department, China Chamber of Commerce for Import & Export of Medicines & Health Products (CCCMHPIE), Secretary General of Cosmetics Association of China (Sub-Chamber of Cosmetics of CCCMHPIE), Yan Liu, stated that in 2022, China’s cosmetics trade with ASEAN reached USD 1.2 billion, marking a staggering 48% increase. Looking at specific countries, Thailand emerged as China’s top cosmetics export destination, recording an export value of USD 397 million in 2022, followed by Indonesia, Malaysia, the Philippines, Singapore, and Vietnam. In terms of exported categories, skincare and beauty products held the highest proportion at 46%, followed by body care at nearly 31%. Perfumes accounted for the smallest share, at around 1%.
For the harmonized development of cosmetics and to reduce trade barriers within the ASEAN region, ASEAN member countries have adopted the unified ASEAN Cosmetic Directive (ACD). The ACD serves as a regulatory framework governing the manufacturing, importation, and sale of cosmetics within the Association of Southeast Asian Nations (ASEAN) region. ASEAN member nations include Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam. The directive was initially implemented in 2008.
One of the primary objectives of the ACD is to establish a system for cosmetic registration, notification, and post-market surveillance. According to the ACD, cosmetic manufacturers must register their products with the relevant authorities in each ASEAN member country before they can be marketed. The registration process involves submitting product information and safety data to regulatory bodies, such as product formulations, labeling, and packaging. Once a product is registered in one member country, seeking registration in other ASEAN countries will have advantages, as the fundamental principles and safety standards outlined in the ACD are generally consistent across regions.
Furthermore, the ACD specifies specific requirements for cosmetic labeling. For instance, cosmetic labels must be clear, legible, and easily understandable for consumers. Labels should include information such as the product name, ingredient list, net weight or volume, directions for use, country/region of manufacture, manufacturing date, and expiration date. Additionally, labels must not contain any false or misleading statements regarding the product.
The characteristics of the ASEAN cosmetics market are primarily evident in three aspects.
Firstly, there’s a hunger for botanical ingredients. In interviews conducted by CHAILEEDO with cosmetics industry officials from ASEAN countries, “Clean beauty” and “Natural” were the two most frequently mentioned terms. Thant Zaw Wo, Vice President at Myanmar Cosmetics Association, highlighted during a conference speech that Myanmar’s consumers are drawn to natural substances as they perceive them to be more skin and hair-friendly than chemical alternatives. Many cosmetics companies have begun incorporating more natural elements, such as Myanmar’s Thanakha and traditional herbs. Lee Pang, Chairman of FMM-Malaysian Cosmetics and Toiletries Industry Group (MCTIG), mentioned in an interview with CHAILEEDO that one of Malaysia’s most significant trends in cosmetics is the emphasis on sustainability and natural ingredients, as consumers perceive natural materials and products as healthier choices.
Secondly, there’s a rapid growth in social media marketing and e-commerce. Thant Zaw Wo mentioned in an interview that in Myanmar, online shopping surged by 200% year-on-year, largely due to a matured supply chain, especially in logistics, citing China’s JD Logistics as a key player. He noted that Myanmar has 25 million TikTok users, highlighting the significant impact of social media marketing on consumers. In Singapore, the total e-commerce market for cosmetics is projected to reach $3.7 billion by 2024. The top three e-commerce websites are Shopee, Lazada, and Qoo10. By 2023, e-commerce sales in the beauty industry are estimated to constitute 22.7% of the total revenue. In Indonesia, there’s a rise in e-commerce, mobile shopping, and live streaming on platforms like TikTok.
Thirdly, and most notably, there’s the rise of halal cosmetics. According to Thant Zaw Wo, nearly half of ASEAN’s population is Muslim, particularly in Indonesia, where almost 86% of the population is Muslim, Juanita Aditiawan, President of ASEAN Cosmetics Association (ACA), Vice President of Indonesian Cosmetics Association(PERKOSMI), mentioned during a conference speech that over 90% of surveyed Muslims stated that their faith influences their consumption choices. Lee Pang stated that the compound annual growth rate for the halal cosmetics industry from 2021 to 2027 is projected to reach 12.0%, accounting for 13.3% of the overall global cosmetics market share.
The road ahead for Chinese brands going global is a challenging journey
In reality, despite a significant 50% year-on-year surge to $1.2 billion in 2022, China’s export of cosmetics to ASEAN countries, there are still notable challenges for Chinese brands expanding globally.
Discussing the performance of Chinese cosmetics brands in ASEAN nations, officials from these countries indicated a scarcity of physical stores retailing Chinese brands, with their products mostly available for purchase online only. Additionally, they noted that while Chinese cosmetics brands tend to be competitively priced, the quality assurance of their products appears promising. This reflects the limited brand influence of Chinese brands abroad, and a lack of product competitiveness, relying solely on flashy packaging to attract consumers. Moreover, they are perceived to lack proximity to local consumers. When discussing the reasons, industry leaders from ASEAN countries highlighted cultural and language differences as the primary factors. Some Chinese cosmetics might not align well with the preferences of ASEAN consumers in terms of formulation, fragrance, or color.
In summary, the main challenges for Chinese cosmetics venturing into international markets lie in inadequate product competitiveness and a failure to establish close connections with local consumers.
The Deputy Director-General of the TCM Department, China Chamber of Commerce for Import & Export of Medicines & Health Products (CCCMHPIE), Secretary General of Cosmetics Association of China (Sub-Chamber of Cosmetics of CCCMHPIE), Liu Yan, highlighted the crucial need for Chinese companies to identify the positioning of Chinese cosmetics in their cooperation with ASEAN countries during the conference.
Firstly, she emphasized the role of cosmetic manufacturers as problem solvers specializing in their product categories, equipped with ample technical capabilities and diverse product advantages in the industry chain. Addressing the challenges faced by Chinese cosmetics in expanding internationally, Julia Ji Xinyan, a member of the Executive Committee of the Singapore Cosmetic, Toiletry & Fragrance Association and former Regulatory Advisor/Deputy Director at Singapore’s Health Sciences Authority, recommended that for Chinese cosmetics to venture overseas, they should leverage unique Chinese characteristics, such as traditional Chinese herbal ingredients. These exclusive components, which are unavailable abroad, necessitate enhanced scientific research and development by Chinese enterprises to create natural botanical ingredients materials unique to China.
Secondly, she discussed the significance of cosmetics distributors needing to be well-versed in market procurement demands, engage in multi-channel wholesale operations, establish familiarity with suppliers, and engage in overseas market sales. Distributors, through their extensive distribution networks and channels, facilitate the delivery of cosmetic products to a wider array of retailers and end consumers. They aid brands in establishing broader market coverage, subsequently increasing sales volumes and market shares. Moreover, distributors have direct access to end consumers, providing crucial market insights and feedback. Their understanding of consumer preferences, trends, and evolving demands is pivotal for brands in devising product and marketing strategies.
Lastly, she underscored the role of cosmetics brand owners in building their brands, envisioning global expansion, engaging in product development, team building, and channel exploration to export capital, technology, and services. Julia Ji Xinyan, Executive Committee member of the Cosmetic, Toiletry and Fragrance Association Singapore (CTFAS), Former Regulatory Consultant/Deputy Director of Health Sciences Authority (HSA) Singapore, also stressed the criticality of brand building in an interview, citing it as paramount. A strong brand fosters trust and loyalty among consumers, instilling confidence in the enterprise and fostering loyalty. A reputable brand image and consistent product quality influence consumers to prefer brand products, garnering continuous support. Additionally, it elevates market value, as a renowned and influential brand typically commands higher market value. This translates not only into product pricing but also into additional business opportunities for enterprises, such as partnerships and market expansion. Ultimately, a robust brand creates long-term value; it is a driver for the enterprise’s long-term value, maintaining competitiveness in the market and providing continuous business opportunities and growth prospects.
Furthermore, what’s crucial is the alignment of Chinese regulations with international market standards. Gerald Renner, the Director of Technical Regulatory and International Affairs, Cosmetics Europe, emphasized in an interview with CHAILEEDO that both Chinese brands entering the European market and European brands entering China encounter a significant issue: the duplication of registrations and assessment requirements. Gerald Renner pointed out that often, when a Chinese brand enters Europe, certain materials or testing protocols that comply with Chinese regulations might not align with European standards, leading brands to reiterate certain testing procedures, inadvertently increasing operational costs.
However, Gerald Renner expressed strong confidence in China’s cosmetics industry. He highlighted that during the initial phase of assessment introduction in Europe, many enterprises lacked understanding, and the industry underwent an extended period of transformational challenges. Nevertheless, he deemed this transition as an inevitable path toward industry standardization. Gerald Renner expressed eagerness for Chinese enterprises to eventually become members of the European regulatory institutions, hoping for better insights into China’s cosmetics market.
Overall, the challenges faced by Chinese cosmetics in international expansion stem from inadequate product capabilities, cultural disparities, and language barriers. Addressing these concerns requires an increased focus on product development, adapting to local consumer preferences, and leveraging Chinese characteristics and advantages. Throughout the international expansion process involving manufacturers, distributors, and brand owners, collaboration is vital to establish product quality, market coverage, and brand influence. Simultaneously, adhering to international regulatory standards is critical to reducing regulatory barriers when entering foreign markets. Ultimately, the Chinese cosmetics industry needs to enhance product innovation, brand development, and synchronization with international markets to achieve better global positioning.
