On March 26, Beauty Farm Medical and Health Industry Inc (hereinafter referred to as “Beauty Farm”) announced that it would strategically invest 350 million yuan in Guangzhou Naturade Health Consulting Co., Ltd. (hereinafter referred to as “Naturade”) at a price. It is worth noting that this is also the largest acquisition in the domestic beauty industry so far this year.
The first and second Chinese beauty service providers join forces
According to the acquisition announcement released by Beauty Farm, a wholly-owned subsidiary of the company will acquire a 70% equity stake in Naturade for 350 million yuan. After the acquisition, Naturade will become an indirectly non-wholly-owned subsidiary of Beauty Farm, and the performance, assets, and liabilities of the former will be consolidated into the performance report of Beauty Farm.
Public information indicates that Beauty Farm was founded in 1993, with its flagship brand “Beauty Farm” primarily providing traditional lifestyle beauty services, including daily facial and body care services. Since 2011, Beauty Farm has expanded into medical beauty services through its second brand “Xiuke’er,” focusing on energy instrument and injection services. In 2016, Beauty Farm strategically invested in the “Bellefontaine” brand, a high-end skincare brand. Starting in 2018, Beauty Farm began offering sub-health assessment and intervention services through its “Yanyuan” brand.
On January 16, 2023, Beauty Farm successfully listed on the Main Board of the Hong Kong Stock Exchange, becoming the first beauty company to go public last year and earning the title of “the first listed beauty salon.”
Naturade, founded in 2007, is a beauty service company primarily operating under the Naturade brand. Reports suggest that Naturade has nearly 200 directly operated stores, mainly concentrated in the Greater Bay Area, with a presence in 9 major cities nationwide. According to disclosures, Nerier’s revenue in 2023 was 514 million yuan, with a net profit of 33.4 million yuan.
It is understood that Naturade’s core stores have 47,000 active members, mainly female users aged between 25 and 45, including white-collar workers, housewives, entrepreneurs, and government officials, all of whom are high-end female customers in first-tier cities, aligning closely with Beauty Farm’s customer profile. This implies that after the acquisition, Beauty Farm’s active members may significantly increase on an existing basis.
Beauty Farm stated that this acquisition is an important move to complete its layout in the Greater Bay Area. Currently, Beauty Farm’s stores have seized prime locations in over 23 first- and new-tier cities across the country, gradually establishing a nationwide operating network. Furthermore, acquiring Naturade will enhance Beauty Farm’s capabilities in the health business, laying a foundation for its long-term growth, and further increasing its market share in the beauty and health field. Additionally, integrating Naturade’s member assets can drive the company’s revenue and profit scale.
Another point of note is that according to Frost & Sullivan industry reports, based on 2021 revenue, Beauty Farm and Naturade are respectively the largest and second-largest traditional beauty service providers in China. This means that after the completion of the transaction, the first and second top brands in the Chinese beauty salon industry will merge. This indicates that Beauty Farm’s leading position in the industry will be further solidified.
Over 20 acquisition moves in the past 10 years
As is well-known, the Guangdong-Hong Kong-Macao Greater Bay Area serves as one of the most significant beauty markets in China. The acquisition of high-quality Naturade stores by Beauty Farm undoubtedly further enhances the latter’s influence in this advantageous region.
Reportedly, Naturade’s service offerings integrate the concept of Oriental beauty and wellness, setting it apart from most beauty spas in the market. From this perspective, this acquisition also enriches Beauty Farm’s brand portfolio. Additionally, Naturade’s product focuses primarily on body and health-related categories, complementing Beauty Farm’s business and generating synergies that will bring more opportunities for Beauty Farm’s development.
It is worth noting that this is not Beauty Farm’s first acquisition move. Accelerating the expansion of the group’s business through investment and matching resources from its own medical beauty and health-oriented medical institutions to further expand its business scale in the region has always been the main theme of Beauty Farm’s rapid development.
Especially after going public, Beauty Farm has frequently made moves in investment and acquisition with its ample financial strength.
For example, in May 2023, Beauty Farm invested approximately 4 million yuan in the Chengdu Youlan brand, and this year, it opened medical beauty and sub-health medical clinics in the Chengdu area, comprehensively laying out its three beauty business sectors in Chengdu. In June of the same year, Beauty Farm also acquired three franchise stores of Beauty Farm in Changsha, Hunan, upgrading Changsha to a directly operated area under the company; in August of the same year, Beauty Farm acquired Hangzhou Yange Studio Beauty Co., Ltd., involving three beauty salons, further strengthening its direct operation layout and market position in Hangzhou.
According to public information, Beauty Farm has completed over 20 merger and acquisition transactions in the past 10 years. The company stated that with its thirty years of management experience in various fields such as chain enterprise management, digital transformation, customer operations, and product innovation, Beauty Farm will fully empower the acquired companies, generating maximum systemic effects in the future.
The first annual report after the IPO showed double-digit growth in revenue and net profit
It’s worth noting that on the same day as the disclosure of the acquisition information mentioned above, Beauty Farm also released its first annual report after the company’s IPO. According to Beauty Farm’s 2023 annual report, the company achieved a revenue of 2.145 billion yuan, a year-on-year increase of 31.2%; a net profit of 230 million yuan, with a staggering year-on-year growth rate of 108.2%; and the net profit margin also increased by 4 percentage points from 2022 to reach 10.7%. This indicates that Beauty Farm achieved double-digit growth in both revenue and net profit last year.
The increase in revenue, driven by economies of scale and continued optimization of business structure, has led to an overall improvement in Beauty Farm’s profitability. The company’s gross profit margin for 2023 increased from 43.9% in 2022 to 45.6% in 2023.
In terms of specific business segments, in 2023, Beauty Farm’s revenue from beauty and health services amounted to 1.194 billion yuan, representing a year-on-year growth of 26.1% and accounting for 55.6% of total revenue. Revenue from medical beauty services reached 850 million yuan, marking a year-on-year growth of 37.1% and accounting for 39.7% of total revenue. Meanwhile, revenue from sub-health medical services amounted to 101 million yuan, representing a year-on-year growth of 47.6% and accounting for 4.2% of total revenue.
It is reported that beauty and health services are the cornerstone of Beauty Farm’s “Dual Beauty” business model. This segment relies on outstanding beauty products and advanced technology, combined with high-level standardized services, to provide high-quality beauty and health services to Chinese women.
Beauty Farm stated that the rapid growth of the company’s business scale last year was mainly due to the firm execution of a development strategy combining internal and external growth. In terms of internal growth, the company actively expanded its store network with significant results. As of December 31, 2023, Beauty Farm’s store count had exceeded 400, including 201 directly operated stores and 199 franchised stores. Throughout the year, the company opened or acquired 50 new stores, including 19 new or acquired directly operated stores and 31 new franchised stores. Additionally, Beauty Farm closed a total of 30 stores in 2023, including 7 directly operated stores and 21 franchised stores.
Furthermore, Beauty Farm stated in the annual report that since beauty and health services are important entry points for traffic growth in the unique Dual Beauty business model, the company considers user growth as a strategic focus for sector development. According to the annual report, in 2023, active users at beauty and health service stores reached 90,468, a year-on-year increase of 19.4%, with an average annual spending per member of 11,288 yuan, a year-on-year increase of 905 yuan.
It is worth noting that Beauty Farm also explicitly stated in the annual report, “In the future, we will actively explore opportunities for mergers and acquisitions, horizontally expand store coverage, and explore new opportunities in the health industry to expand business breadth. In terms of product and service development, we will always be customer-centric, develop products and services that lead the industry, and layout health service projects to enhance core competitiveness.” It can be foreseen that the company’s acquisition map will continue to expand in the future.
