At the beginning of 2024, the cosmetics industry in China has witnessed multiple investment and financing events.
On January 2nd, Ruoyuchen invested in the technology skincare brand KEYiN. On January 4th, Edge Ventures exclusively invested in the personal care brand Watercome. On January 5th, USHOPAL carried out equity financing for the high-end fragrance brand Documents…
So, does this mean a turnaround for the previously freezing beauty and cosmetics investment and financing in this year? What new industry trends are emerging from these developments?
3 deals in 5 days
Recently, on January 5th, the international luxury beauty brand group USHOPAL officially announced a minority equity investment in the Chinese high-end perfume brand Documents. This marks USHOPAL’s first equity investment in a Chinese local brand. It is worth noting that this is the third round of financing obtained by Documents. Back in 2021, the brand received angel investment of tens of millions from ZCapital, and in 2022, L’Oreal’s Shanghai Meicifang Investment Co., Ltd. and Cathay Capital invested another tens of millions in Series A+ funding.
The favorable attention from multiple investment institutions and companies can be attributed to the high-end positioning and excellent market performance. According to the “China Vitality List of High-end Fragrance Brands”, data shows that from October 1, 2022, to September 30, 2023, Documents ranked third in overall activity among the top 20 high-end fragrance brands in the Chinese market. In terms of new store openings, Documents tied for first place with international brands L’Artisan Parfumeur and Penhaligon’s.
Meanwhile, just before Documents secured financing, another skincare brand, Watercome, announced the completion of an exclusive A-round financing from Edge Ventures. Watercome stated that this round of financing would be used for brand building, product research and development, product line expansion, and supply chain construction. Public information shows that Watercome, established in 2008, is an efficacy-focused personal care brand specializing in Asian skin types, offering products such as body lotion, shower gel, and hand cream. Notably, its Watercome Dual Whitening Body Lotion, launched in July 2021, has sold over 15 million bottles to date, maintaining a leading position in its category on various e-commerce platforms.
The first investment in the beauty and cosmetics sector this year was made by Ruoyuchen. On January 2nd, Ruoyuchen invested millions in the technology skincare brand KEYiN, founded in 2022. It’s worth mentioning that even in the early stages of the brand, Ruoyuchen had already invested millions in its initial funding round. In other words, Ruoyuchen has made two rounds of investments in the KEYiN brand.
Additionally, apart from KEYiN, in recent years, Ruoyuchen has continuously invested in several emerging consumer brands, including SPD Care, Best Care, OUNGMAY, RELEASE U, and STEE HILL, covering various sectors such as oral care, pet health products, technology skincare, and functional foods. The industry interprets Ruoyuchen’s consecutive investments in multiple brands as a sign that the traditional agency operation model has reached its limit, and building brands is the optimal choice for increasing market value and establishing long-term value.
It is evident that within the first 5 days of 2024, at least 3 investment and financing transactions have occurred in the beauty and cosmetics sector, indicating a clear sign of capital resurgence in the beauty industry.
Upstream raw material suppliers are receiving high praise, and there are clear signs of increased investment and financing activity.
In fact, since the second half of last year, the beauty industry has experienced a wave of increased investment and financing.
According to incomplete statistics from CHAILEEDO, there were a total of 56 investment and financing events in the beauty industry in 2023. Among them, there were 21 in the first half of the year and 35 in the second half. This means that the number of financings in the second half of last year was approximately 1.6 times that of the first half. In particular, there were the most financing events in December of last year, with a total of 9.
Looking at the whole year, a total of 50 brands/companies received financing. Some of these brands/companies received multiple rounds of financing last year. For example, Chinese makeup brand Blankme, which focuses on foundation, received equity financing from UMF, Hangzhou eBeauty Group, and strategic investment from L Catterton, a fund under LVMH, in January, August, and December of last year. However, the amounts of these three investments were not disclosed. Another example is the medical skincare brand JuYou Bio-tech, which received angel and strategic financing in October and December of 2023, with exclusive investment from CDH Investments and joint investment from CDH Investments again and Chuchang Investment Group, respectively.
In terms of the types of invested brands/companies, the majority are raw material companies, with a total of 25. In addition, 22 brand/brand owner companies were also invested in. The remaining few invested companies are channel operators or service providers in the beauty industry, such as consumer digital operation technology company Shuyun, skincare empowerment company Liugemiao, and high-end beauty retailer COCOKUMO.
It is worth mentioning that the majority of invested raw material companies are synthetic biology companies. Several synthetic biology companies, such as GsynBioT, MicroCyto, Cataya Bio, Ueny, Hechen Bioworkx, and Liying Biology, received investments from Lenovo Capital, SBCVC, Gouldport Capital, Broad Capital, Guoyuan Innovation Investment, and Hygeia Capital last year, with investment amounts ranging from tens of millions to nearly hundreds of millions of yuan.
As we all know, in recent years, synthetic biology has been increasingly involved in the cosmetics industry. For example, astaxanthin, resveratrol, glycosides, squalene, ethanol, butanol, glycerol, and organic acids are all cosmetic ingredients that can be developed using synthetic biology technology. Due to its ability to overcome limitations of natural raw materials, accelerate production efficiency, and promote environmental protection, synthetic biology companies have become a new focus of attention in the cosmetics industry.
For example, Liying Biology, a protein modification synthetic biology company established in 2022, announced the completion of angel round financing and Pre-A+ round financing of tens of millions of yuan in April and November of last year. According to public reports, the Liying Biology team has successfully developed recombinant protein production technology and achieved industrialization, assisting in the development of over 50 difficult protein raw materials. The Liying platform technology has been widely applied in various scenarios such as daily chemical medical beauty, vaccine sequence design, large molecular protein drugs, enzyme engineering, synthetic biology, and in vitro diagnostic reagents.
As one of the new materials derived from the application of synthetic biology technology, recombinant collagen is one of the hottest category in China and China is currently leading the world in this field. Therefore, companies rooted in this field have become important targets for capital investment. For example, Trautec, established in 2015, received investments from beauty giants Shiseido and LVMH.
It can be seen that although upstream raw material suppliers were in a relatively weak position in the industry chain in previous years and received relatively little attention from the capital market, in recent years, due to the industry’s increased focus on material innovation and changes in regulations, among other factors, raw material companies with strong scientific research capabilities have become highly sought after by capital.
The beauty brand has become “popular” again
Another noteworthy point is that when we look at the types of invested and financed companies in the first and second halves of last year, only eight brands received investments in the first half of the year. These brands include skincare brand Xindong Yichuang, scalp care brand Young, oral care brand Weimeizi, makeup brand Blankme, baby care brand Dr. SERMiNY and three skincare brands Arome Manpo, ESORAMANI and HEPROA.
In the second half of last year, 14 brands/companies received investments, mainly focusing on skincare brands, with a few perfume brands, children’s skincare brands, and personal care brands. Especially in December last year, five brands received investments. These brands are HEONE, a skincare brand, Subtl Beauty, a functional makeup brand, melt season, a Chinese high-end perfume brand, Hi!Papa, a children’s skincare brand, and Blankme.
It can be seen that starting from the second half of last year, not only has the investment and financing in the entire beauty industry gradually increased, but the capital investment in beauty brand-related companies has also become more frequent.
In fact, looking back at the investment and financing trends in the beauty industry over the past three years, after reaching its peak in 2021 (with nearly a hundred cases of financing), the pace of financing in the cosmetics industry has been slowing down. According to CHAILEEDO data, in 2022, the number of investment and financing events in the Chinese cosmetics market decreased by 31.34% compared to the previous year, and this cooling trend continued until 2023. However, based on the situation in the second half of last year, there are signs of a recovery in beauty investment and financing.
Industry experts believe that based on the momentum of investment and financing in the second half of last year and early this year, it is expected that beauty investment and financing will rebound this year. “In addition, considering the current difficulties in going public, it may further promote the financing heat.”
