On July 18th, according to the official website of the Hong Kong Stock Exchange, Eternal Beauty Holdings Limited (referred to as “Eternal Beauty”) has submitted an application for listing on the main board of the Hong Kong Stock Exchange. BNP Paribas and CITIC Securities will act as joint sponsors.
The prospectus reveals that Eternal Beauty is the largest perfume brand management company in mainland China, Hong Kong, and Macau. Its fiscal year revenue as of March 31, 2024, reached 1.864 billion yuan ($256.4 million). Among this, revenue from perfume products accounts for over 80%.
This means that if the IPO is successful, Eternal Beauty will become the “leading public company in perfume brand management.”
Eternal Beauty has achieved over 5 billion yuan ($687.8 million) in revenue over the past three fiscal years.
Public information reveals that Eternal Beauty is a full-channel brand management company in China’s beauty, perfume, and eyewear industries. It provides services such as brand consulting and marketing, omnichannel strategy and management, user insights and operations, creativity and visual design, warehousing, and logistics. As early as 1987, Eternal Beauty obtained authorization to distribute imported perfume products from a French brand in mainland China. Over the course of its 37-year development, Eternal Beauty has continuously increased the number of brands it introduces and manages.
According to the prospectus, as of July 11, 2024, Eternal Beauty manages a total of 63 brands. Among them, perfume is the most extensively covered category within the Ying Tong Group. Eternal Beauty’s perfume brand portfolio includes 48 brands, encompassing well-known global brands, famous perfume brands, and emerging niche brands such as Versace, Parfums de Marly, and Xerjoff.
The deep cultivation in the perfume category has established Eternal Beauty’s leading position in perfume brand management. According to Frost Sullivan data, based on 2023 retail sales figures, Eternal Beauty is the largest brand management company in mainland China, Hong Kong, and Macau. It is also the fourth-largest perfume group in China, with the top three positions held by French companies established in 1910, 1987, and 1909, respectively. The fifth position is held by a US-listed company established in 1946.
In terms of performance, according to the prospectus, the revenue for the three fiscal years ending on March 31, 2022, March 31, 2023, and March 31, 2024, were 1.675 billion yuan ($230.4 million), 1.699 billion yuan ($233.7 million), and 1.864 billion yuan ($256.4 million), respectively. During the same period, the net profits were 171 million yuan ($23.5 million), 173 million yuan ($23.8 million), and 206 million yuan ($28.34 million). The company’s business and operating performance have maintained stable growth. It is evident that over the past three years, Eternal Beauty’s total revenue reached an impressive 5.238 billion yuan ($720.5 million), with a net profit of 550 million yuan ($75.66 million).
Looking at the product categories, perfume is the main business segment for Eternal Beauty and represents the major source of revenue. According to the prospectus, for the three fiscal years ending on March 31, 2022, March 31, 2023, and March 31, 2024, the revenue from perfume products was 1.495 billion yuan ($205.6 million), 1.504 billion yuan ($206.9 million), and 1.523 billion yuan ($209.5 millioin), accounting for 89.3%, 88.5%, and 81.7% of the total revenue, respectively. Skincare products accounted for 4.4%, 5.1%, and 6.1% of the sales revenue, while makeup products accounted for 3.9%, 4.0%, and 10.4%. It is noticeable that in recent years, Eternal Beauty has been gradually increasing the proportion of skincare and makeup products, with makeup experiencing particularly significant growth.
It is worth mentioning that in addition to managing external brands and products, Eternal Beauty has also actively developed its own brands. In 1999, Eternal Beauty started selling eyewear under its own brand, Santa Monica, and in 2022, it launched five perfumes under the Santa Monica brand.
According to the prospectus obtained by CHAILEEDO, the funds raised through Eternal Beauty’s IPO will be used to further develop its own brands, including Santa Monica, as well as for acquiring or investing in external brands. The funds will also be used for developing and expanding the company’s self-operated retail channels, including online and offline stores and counters, and accelerating the company’s digital transformation, among other purposes.
Direct sales accounting for nearly 70% of the total, Eternal Beauty has over 7,500 offline sales points.
In terms of distribution channels, Eternal Beauty has an extensive omnichannel sales and distribution network, including online sales channels such as social media platforms and e-commerce platforms, as well as offline sales channels such as malls, department stores, travel retailers, and chain cosmetics stores. All channels are operated directly by Eternal Beauty or by its retailers and distributors.
According to the prospectus, for the three fiscal years ending on March 31, 2022, March 31, 2023, and March 31, 2024, the online revenue for Eternal Beauty was 794 million yuan ($109.2 millioin), 735 million yuan ($101.21 million), and 670 million yuan ($92.16 million), accounting for 47.5%, 43.3%, and 36.0% respectively. The offline revenue was 842 million yuan ($115.82 million), 931 million yuan ($128.07 million), and 1.182 billion yuan ($162.6 million), accounting for 50.3%, 54.8%, and 63.4% respectively. Overall, the offline revenue of Eternal Beauty has been increasing year by year, and the gap between offline and online revenue continues to widen.
Among them, direct sales channels have contributed a significant amount of business revenue for Eternal Beauty. According to the prospectus, for the three fiscal years ending on March 31, 2022, March 31, 2023, and March 31, 2024, the direct sales channel generated sales revenue of 1.167 billion yuan ($160.5 million), 1.099 billion yuan ($151.2 million), and 1.292 billion yuan ($177.7 million), accounting for 69.7%, 64.7%, and 69.3% respectively. The distribution channel revenue was 469 million yuan ($64.51 million), 567 million yuan ($78 million), and 560 million yuan ($77 million), accounting for 28.1%, 33.4%, and 30.1% respectively.
It is reported that Eternal Beauty’s direct sales channels include retailer channels and self-operated channels. The retailer channels include online retailers and offline retailers (large customers, travel retailers), while the self-operated channels refer to the online stores operated by Eternal Beauty on e-commerce and social media platforms, as well as the offline stores and counters operated in malls and department stores.
According to the prospectus, for the three fiscal years ending on March 31, 2022, March 31, 2023, and March 31, 2024, Eternal Beauty sold products through 1, 3, and 3 e-commerce platforms, as well as 56, 72, and 73 online retailers respectively. In terms of offline sales channels, they have over 7,500 sales points spread across more than 400 cities in mainland China, Hong Kong, and Macau.
Regarding self-operated channels, for the three fiscal years ending on March 31, 2022, March 31, 2023, and March 31, 2024, Eternal Beauty operated 102, 92, and 87 offline stores and counters in mainland China, Hong Kong, and Macau respectively. In addition, Eternal Beauty has also established its own retail brand called “Shifenqihao” (meaning “Ten Perfume Box”), which includes both online stores and offline sales channels. Currently, they operate a physical Shifenqihao store in Shanghai. Based on the data, the sales through self-operated channels accounted for 22.8%, 19.9%, and 24.0% during the reporting period.
In addition to direct sales channels, Eternal Beauty also sells a variety of products through online and offline distributors. For the three fiscal years ending on March 31, 2022, March 31, 2023, and March 31, 2024, the company had 32, 37, and 48 distributors respectively.
Given the intense competition among high-quality retailers and distributors in the industry, the prospectus also mentions that Eternal Beauty may encounter challenges in maintaining, expanding, or optimizing its sales and distribution network. The data shows that for the three fiscal years ending on March 31, 2022, March 31, 2023, and March 31, 2024, 74.9%, 78.2%, and 75.4% of Eternal Beauty’s total revenue was generated from sales to distributors and retailers.
China is becoming the next frontier market for perfumes globally.
Following the trends of “beauty economy” and “play economy,” the “perfume effect” has gradually replaced the “lipstick economy” and is regarded by the investment community as the last untapped market in China’s “five-senses economy.”
According to Frost Sullivan, from 2018 to 2023, China has been the fastest-growing perfume market among the top ten countries in terms of perfume retail sales worldwide, with a compound annual growth rate of 15.0%. In 2023, the retail sales of perfumes in China reached 22.9 billion yuan ($3.15 billion), and it is projected to grow to 44 billion yuan ($6.05 billion) by 2028, with a compound annual growth rate of approximately 14.0%.
The rise of the fragrance industry is attributed to the continued prosperity of the “she economy” and the entry of an increasing number of overseas perfume brands into the Chinese market, as well as investments from capital and the emergence of domestic up-and-coming perfume brands.
An evident trend is that international beauty giants are making efforts to enter the fragrance market. For instance, Estée Lauder has been introducing its perfume brands to the mainland Chinese market in recent years, starting with Jo Malone, followed by TOM FORD, Editions de Parfums Frédéric Malle, and others. Perfume and fragrance business has become a growth engine for the Estée Lauder Group, as indicated by its latest financial reports, showing organic sales growth in the perfume department for the 11th consecutive quarter.
At the same time, perfume is also a significant focus for the L’Oréal Group. In April of this year, L’Oréal launched a brand revitalization plan for its Parisian fragrance brand, Guerlain, in the Chinese market, aiming to revive the high-end perfume market. L’Oréal’s Chief Growth Officer, Fabrice Megarbane, publicly stated that perfume has now become one of the fastest-growing categories in the Chinese market.
In addition to the efforts made by major beauty giants to introduce promising perfume brands, domestic perfume brands have also emerged in recent years as a force to be reckoned with in the fragrance industry, attracting the attention of international giants.
For example, in September 2022, L’Oréal China’s subsidiary, Shanghai Meicifang Investment Co., Ltd., made a minority equity investment in the high-end perfume brand “Wenxian DOCUMENTS.” In February of this year, L’Oréal announced another minority equity investment in the Chinese high-end perfume brand “Guangxia to summer.” In December of last year, Estée Lauder Group made its first investment in a Chinese high-end perfume brand, “melt season,” with a strategic investment exceeding tens of millions of Chinese yuan.
However, beneath the prosperity, the Chinese perfume market also faces several thought-provoking challenges. For instance, the market size is relatively small, with low penetration, low consumer frequency, and low returns. Additionally, due to the unique nature of perfumes and fragrances, conquering offline channels remains a crucial stronghold. In its prospectus, Eternal Beauty also points out that the main barriers to entry in the Chinese perfume market include comprehensive operational capabilities and qualifications, a rich brand history, financial strength, and a wide and multi-channel sales network.
Overall, the perfume and fragrance industry, as a long and challenging race, offers great opportunities, but the road ahead is still long. Eternal Beauty’s IPO attempt not only affirms the company’s business model and operational strength in the capital market but also sends a positive signal to the entire perfume and fragrance market. However, in the current cold IPO climate, whether Eternal Beauty can successfully overcome the challenges remains to be seen.
