(Report Producer/Author: CITIC Securities, Du Yifan, Xu Xiaofang)
We divide the analysis of cosmetics industry into two dimensions: category and efficacy, and discuss the market segments. In the analysis of specific race tracks, we start from the market size, maturity and competition pattern, and implement the market size and its growth rate, the changing trend of sales volume and price band, market share and concentration to judge the prosperity of different segments.
Category: the positioning and upgrading of essence water emulsion depends on the improvement of market share, and there are opportunities for the growth and expansion of sunscreen products
The demand for skin care is becoming more and more sophisticated, and the subdivided cosmetic categories have different scales. From the category point of view, cosmetics can be divided into cleansing, toner/toner, muscle lotion, essence, eye cream, cream, sunscreen, makeup and facial mask as intermittent care. Generally speaking, skin care products with small molecules, low concentration and thin texture are used first, and then heavy cream products are used.
According to Euromonitor’s consulting data, in 2021, the beauty care market in China will be 568.6 billion yuan; Among them, the skin care market is the largest, with a market scale of 293.8 billion yuan. It is estimated that CAGR+7% will be used in the next five years. The makeup market is 65.7 billion yuan, and it is estimated that CAGR+8% will be used in the next five years. The market size of perfume is 14.1 billion yuan, and it is estimated that CAGR +21% in the next five years. Specific to facial care, the market size of China milk/cream/essence products will reach 178.7 billion yuan in 2021, and CAGR+10% is expected in the next five years; The market size of sunscreen category is 16.7 billion yuan, and it is estimated that CAGR +10% will be used in the next five years. The market size of other categories is relatively small, and the growth rate is expected to be low.
Facial essence, emulsion cream, cleansing products are upgraded, and there are still opportunities for sun protection. Eye care and toner are relatively mature in the upgraded products. According to the data of Magic Mirror Amoy platform, we divide the category sales growth into sales growth and price growth, and divide the main cosmetic categories into three stages: growth, upgrading and relative maturity. In 2021, the sales volume of sunscreen products and cleansing products increased by +13%/+12% and the average price increased by +7%/+5% respectively, showing strong growth attributes; The sales of facial essence, emulsion cream and facial care set declined slightly, but the average sales price increased significantly, with the same ratio of +27%/+18%/+17% respectively, and the product positioning was obviously upgraded. The sales of eye care and patch mask declined, among which the average sales price of eye care was +25% year-on-year, and the average sales price of patch mask increased slightly by +5%, which was also in the category upgrading stage, but the category of cream was relatively mature.
In 2022, the cosmetics market was greatly affected by the local epidemic, and the main categories showed a year-on-year decline in sales. In terms of the average sales price of categories, the prices of major categories all increased by +10%~+20%. Among them, the sales of emulsion cream and facial essence declined slightly, and the upgrade attribute was stronger; The sales of toner, facial care set, eye care and patch mask declined more significantly.
In terms of the competition pattern of sub-categories, domestic brands occupy a dominant position in the mask field. The higher-end toners, lotions/creams, facial essences and eye essences are still dominated by international brands, but Winona and Polaiya, the leading domestic brands, have made breakthroughs. According to the sales data of Magic Mirror in Tmall Double Eleven in 2022, the concentration of eye essence and sunscreen products is relatively high, with CR10 reaching 73% and 76% respectively, while other categories of CR10 are in the range of 50%-60%, which has a strong overall head effect. Judging from the occupation of domestic brands, the mask category is dominated by domestic brands, and 9 brands in the Top 10 list are domestic brands, accounting for 40% of the mask category sales. There are more international brands in the category of lotions/creams, facial essences and eye essences with higher value, but the sales of Winona and Polaiya, the leading domestic products, have achieved breakthroughs in the category of lotions/creams and facial essences Top 1 respectively. In the field of eye essence, brands such as Estee Lauder and Lancome have great advantages.
Efficacy: Humidity tolerance is nearly mature, domestic products grow rapidly against aging, and have great potential for whitening and sun protection.
From the perspective of efficacy, according to NMPA’s Classification Rules and Catalogue of Cosmetics, cosmetic efficacy claims are classified into 27 items, including 10 items related to skin care. Combined with the clinical efficacy of cosmetics, we roughly divide the main efficacy of cosmetics into five categories-anti-aging, pigment regulation, strengthening tolerance, sun protection and acne regulation. Anti-aging, pigment regulation and moisturizing tolerance are the core efficacy fields of cosmetics. The market of anti-aging cosmetics is large. According to Euromonitor consulting data, the market size of anti-aging cosmetics will reach 82 billion yuan in 2021, and CAGR+16% is expected in the next five years. Pigment regulation and moisturizing tolerance take the second place, and the market size of whitening essence and sensitive muscle is the representative of pigment regulation and strengthening tolerance: iResearch predicts that the market size of whitening essence will reach 28.5 billion yuan in 2021, and CAGR+9% in the next three years; IResearch predicts that the market scale of sensitive muscle will reach 19.2 billion yuan in 2020, with CAGR +23% in 2020-2022.
Major brands focus on anti-aging and moisturizing tolerance, international brands have a more complete layout in pigment regulation, the acne market is small, and some brands are laid out as single products. Judging from the layout of major brands’ efficacy, anti-wrinkle and firming efficacy are the main competitive positions of major brands’ current "high efficacy"; Each brand has a relatively complete layout in terms of moisturizing, repairing, nourishing and soothing effects; The layout of international brands in the field of freckle whitening and sun protection is more complete, and domestic brands are gradually following up; Major brands of acne and oil control efficacy are involved in single products.
The market share of high-end international brands and domestic products (Winona, Polaiya) in anti-aging track has increased, domestic products in whitening track have gradually been laid out, domestic products in the field of moisturizing tolerance are comparable to international brands, the layout of sunscreen track is less, and acne treatment is relatively small.
4.1%/1.4%/1.1%/0.7%/0.5%/0.4%, which is-0.6/-0.2/-0.2/+0.1/+0.0 pct compared with 2020; In 2021, the market share of Estee Lauder, Lancome, L ‘Oreal, Shiseido and Mystery of Sea Blue were 11.1%/9.7%/6.0%/3.5%/2.9%, respectively, with the same ratio variation of +0.5/+0.1/-0.2/+0.3/0.5 pct, which was high-end international.
The whitening market is represented by international brands such as Olay, Shiseido and Xiuliko, and domestic brands such as Osman and Winona. According to the data of iResearch, with the focus on layout and competitiveness improvement of domestic brands, domestic brands have gradually surpassed American international brands in the mass whitening market, but the top players in the high-end whitening elite track are still dominated by international first-line brands such as SK-II, POLA, Estee Lauder, Shiseido and Xiuliko. In the sensitive muscle track in the field of strengthening tolerance, domestic brands such as Winona, Ximuyuan, Zhuben, Yuze, Polaiya and Runbaiyan have entered the top ten of Tmall’s sales list in 2022. The track of acne treatment is relatively small, and the China market is dominated by professional brands such as Biddock. At present, the sunscreen market is dominated by international first-line brands, and Winona and meifubao are among the top domestic brands. According to Euromonitor consulting data, Winona and meifubao will account for 3% and 3% of the sunscreen market respectively in 2021.
Analysis of high-prosperity track: select categories and subdivide the high potential of track
Considering the track market scale, the expected growth rate and the data structure reflected by the Amoy platform, we think that the sunscreen track with sales growth space has great potential; In the track of category upgrading, we think that the emulsion/cream, facial essence and eye essence with greater price elasticity and relatively low market share in Longtou have great potential. In addition, in terms of efficacy, we believe that the whitening track dominated by international brands has the opportunity to break through domestic products.
The expansion of consumer groups drives the continuous growth of sunscreen products. With the further popularization of the concept of sun protection, more and more people realize the importance of sun protection, and the sun protection category has entered a period of rapid growth. Although the epidemic restricted consumers from going out, the sunscreen category maintained its growth in 2022. According to Euromonitor consulting data, the market size of sunscreen products in China will be 16.7 billion yuan in 2021, and it is estimated that the market size will increase by+13% in 2022. According to the White Paper on Sunscreen Trends in 2022 jointly released by TMIC, Yuze, Tmall Beauty and Kaidu, the sales index of the sunscreen market increased by +10.14% in 2022, of which the main driving force was the self-purchasing crowd +8.02%.
Efficient and long-lasting, emphasizing experience. According to BASF’s Development Trend of Sunscreen Products in China, in the consumption habits of sunscreen products, because Asian consumers, including China, are more prone to sunburn and tanning than Caucasian skin, most China consumers will use sunscreen products as daily skin care products. Under the unique consumer demand, the sunscreen market in China reflects five trends: 1) more efficient and safe; 2) more long-lasting; 3) more refreshing; 4) more convenient; 5) multiple functions are compounded.
Mistine and Anjesha occupy a dominant position in the market, and Winona has taken shape in domestic products. According to the market intelligence of Magic Mirror, the market of sunscreen products is relatively concentrated, with 25% of CR3, 34% of CR5 and 48% of CR10. The head is dominated by international brands, and the Top 3 categories are Mysitine (owned by Batway), Anjesha (owned by Shiseido) and L ‘Oreal, with market share of 10%, 9% and 5% respectively. Winona, a domestic brand, has a large scale in sunscreen products, with a market share of 5%.
The positioning of emulsion cream has been upgraded, but the competitive environment of water emulsion is fierce.
Emulsion/cream, make-up water/toner are the basic categories of cosmetics. As the basic link of skin care, water emulsion products have greater demand for rigidity, and their sales remain stable for a long time. Under the overall pressure of consumption in 2022, the sales scale of water emulsion products remained stable. At the same time, the price increase effect of emulsion cream is obvious. From 2020 to 2022, the average price of emulsion cream on Taobao platform maintained an upward trend. Only in October 2022, the average sales price dropped slightly year-on-year. In November 2022, the average sales price of emulsion cream exceeded 200 yuan.
The water emulsion market is fully competitive, and it is difficult for a single brand to gain a larger market share. Mainstream international brands and domestic brands all have the layout of water and milk. Under the fierce competition, head brands have failed to gain a larger market share. According to the market intelligence of Magic Mirror, in 2022, only 10% of the cream categories of Amoy platform (Sisley, Estee Lauder and Winona), 16% of CR5 and 30% of CR10; Toner CR3(SK-II, Lancome, Hailan Mystery) is only 13%, CR5 is 20%, and CR10% is 34%.
Facial essence: category upgrade, efficacy breakthrough
The facial essence category was upgraded, and high-end, ultra-high-end products performed better. Facial essence has the characteristics of high efficacy and high price, which is the core category of market competition and an important carrier of brand image. Under the consumption pressure brought by the epidemic, the consumption of noodle essence products is under pressure. According to the market intelligence of Magic Mirror, in April 2021, the sales growth of facial essence products on Taobao platform turned negative, and entered a stage of low growth or negative growth after the "618" promotion in 2021. In 2022, the sales growth was under pressure until the sales of Double Eleven shopping festivals returned to +15% year-on-year. According to the sales data of facial essence from 2020 to 2022, the proportion of high-end and ultra-high-end products increased, while the proportion of low-end products decreased obviously, and the category upgrade trend was obvious. According to the market intelligence of magic mirror, the facial essence of Taobao platform in 2020 is mainly distributed in the price band of 100~300 and > 1000; In 2022, the price ranges with the highest proportion of sales were 300~500 and > 1000, respectively, and the sales proportion of products with the price range of 400~700 and > 1000 yuan continued to increase. The continuous improvement of high-end products and ultra-high-end products confirmed the trend of upgrading facial essence categories.
The facial essence is dominated by international brands, and the leading domestic products are positioned in the middle and high end, and the effect is broken. According to the statistics of the Magic Mirror Taobao platform, in 2020, the Top 10 facial essences of the Taobao platform were all international brands, and Runbaiyan, Kwadi, Yiye, Polaiya and Winona ranked 14th, 16th, 22nd, 23rd and 26th among the leading domestic products. In 2021, Polaiya and Quadi ranked among the Top 10；; In 2022, Polaiya ranked first in the category with sales of facial essence of 1.92 billion yuan, while Quadi ranked ninth with sales of 950 million yuan, and Winona rose to 13th.
The head brand has a certain leading edge, and the sales scale of key items is large. In terms of brand competition pattern, according to the data of Magic Mirror Amoy platform, the Top 5 sales of facial essence in 2022 are Polaiya, Estee Lauder, Xiulike, Olay and Hailan Mystery, all of which are high-end or ultra-high-end brands, accounting for 6%/5%/4%/3% respectively. Brand CR3 reaches 15%, CR5 reaches 22% and CR10 reaches 37%. Judging from the sales of single products on the Taobao platform, Olay anti-sugar small white bottle, Polaiya double anti-essence, Guerlain recovery honey and Olay light spot small white bottle have a single link sales of more than 300 million yuan, and the advantages of single products are strong.
Eye care: eye cream and essence are dominated by international brands, and the eye mask is in the growth stage.
Eye care products are similar to essence products in positioning, and also have the properties of strong efficacy and high unit price, and usually have a small capacity, aiming at caring fine lines around the eyes and bags under the eyes. The product types usually include eye cream, eye essence, eye mask and others. According to the market intelligence of Magic Mirror, in 2022, 77% of eye care products will be eye cream, 14% eye mask and 7% eye essence.
Eye cream and eye essence are dominated by international brands, and the eye mask market is relatively scattered; Polaiya and Marumi have their own strengths. According to the market intelligence of magic mirror, in 2022, the eye CR10 of Amoy platform will reach 37%, 44% and 55% respectively, and the international brand of head will occupy a large market share. From the product point of view, the products that sell Top 5 in 2022 come from Estee Lauder, Lancome, L ‘Oreal and Polaiya, among which Estee Lauder and Lancome are positioned at the high end, while L ‘Oreal and Polaiya are positioned at the middle and high end. According to the market intelligence of magic mirror, the competition pattern of eye essence is similar to that of eye cream, with Lancome and Estee Lauder taking the leading position, with market share of 11% and 10% respectively, and category CR10 reaching 47%, with relatively high category concentration. Domestic brand Marubi has a market share of 4%, ranking fifth in the category. The eye mask market is relatively dispersed, with 21% of CR3, 27% of CR5 and 38% of CR10. Head brands including Spa Treatment, Axxzia and Shiseido are all from Japan, focusing on collagen-related ingredients.
The sales volume of eye cream category is shrinking, and the unit price of products is obviously upgrading. Eye cream products have been negative since the second half of 2021, and the category scale is weak; However, from the distribution of price bands, the proportion of 200~500 yuan price band and > 1000 yuan price band has increased obviously, and it is in the stage of category upgrading.
The eye essence market is relatively mature, the overall scale remains stable, and the ultra-high-end range continues to grow. According to the data of Magic Mirror Amoy platform, the market scale of eye essence remained relatively stable, the proportion of sales in the middle and high-end price range declined, and the sales of ultra-high-end products continued to grow.
Eye mask products are in the growth stage, and the price range of 100~200 yuan is growing rapidly. According to the market intelligence of Magic Mirror, the sales of eye mask category will face great pressure after 2021. From the perspective of price, the sales proportion of 0~100 yuan dropped significantly, while the sales proportion of 100~200 yuan price band increased, and the category is in the growth stage.
Other categories: the cleansing category has been upgraded, and the application of masks has increased.
Cleansing categories are upgraded, but the value is generally low.
As a basic facial care product, the price of cleansing products is generally low, and the overall market scale is stable. Judging from the competition pattern, the market of cleansing products is scattered as a whole, and only Frestex has a large market share. According to the market intelligence of Magic Mirror, in 2022, the market share of Taotai Fulifang Silk Cleanser reached 12%, which was significantly ahead of other head players.
Under the lower price positioning and more dispersed market structure, cleansing products show the trend of upgrading products. According to the data of Magic Mirror Amoy Platform, the sales proportion of cleansing products with price range from 0 to 100 yuan continued to decline in 2020-2022, while the sales contribution of cleansing products from 100 to 150 yuan and > 200 yuan continued to increase.
The patch mask market is stable, and the applied mask has grown.
According to the market intelligence of magic mirror, the sales of patch mask turned negative year-on-year in 2021, and then entered the adjustment stage; However, after a high increase in 2020, the smear film still maintained a double-digit growth in 2021-2022.
The market structure is scattered, and L ‘Oré al has an advantage in patch mask. According to the market intelligence of Magic Mirror, in 2022, the competition pattern of Taobao platform masks was scattered, with 15% of patch masks CR3 (L ‘Oreal, Winona and Polaiya), 21% of category CR5 and 30% of category CR10. The face mask is still in the growth stage, and the market structure is more dispersed, with 13% of CR3, 19% of CR5 and 29% of CR10.
In the analysis of brand dimension, we think we should start from three dimensions: brand story, product layout and price positioning, among which: 1. The perfection and influence of brand story and concept are the cornerstones of brand development, and its consistency, matching and investment level are important angles for us to observe; 2. From the perspective of product layout, 1) high-value category brands are more intelligent and have room for dimension reduction and expansion; 2) The contribution degree of single product is an important indicator, which is too high/too low or reflects that the brand development stage is not mature or there is "partiality"; 3) Through filing, we can observe the brand new product reserve and product direction. 3. Price positioning: the brand’s sales price should be stable within its core price band, and excessive fluctuation of sales price will affect consumers’ price perception and further affect the brand’s daily sales; The strength of the brand can be judged by subdividing the average selling price trend of the brand in the price zone and the price control ability during the promotion period.
Brand story: consistent brand story is a plus item for development.
We believe that a brand story and brand image with rich connotation and extension is the foundation of brand development, and brand marketing is the brand’s continuous investment in stories and images. From the perspective of international brand positioning:
1) L ‘Oré al-high quality, high efficiency and innovation: L ‘Oré al’s aim is to provide everyone in the world with the best quality, high efficiency, safety, sincerity and responsibility of beauty products, so as to meet all people’s endless and diversified beauty needs and desires. The company keeps innovating to develop more efficient products and services. 2) Estee Lauder-Quality and Excellence: One of the core values of Estee Lauder is its firm commitment to quality and Excellence. The brand continues the values of Lady Estee Lauder, "respect for everyone, uncompromising morality and integrity, generous spirit and fearless motivation". 3) Shiseido-Innovation: Shiseido emphasizes the possibility of expanding beauty through innovation to discover and create new values.
Domestic leading companies are also making great efforts to build their own core brand concepts: Polaiya-youthful strength, scientific and technological strength: Polaiya focused on marine ingredients in the early days, and publicized rare marine ingredients from all over the world, such as Haematococcus Atlantic, Japanese jellyfish/proteoglycans, and Antarctic glacial marine active bacteria. Nowadays, more emphasis is placed on young age and scientific and technological components. Ocean series has been inherited by Ruby series, emphasizing the efficacy concepts such as hexapeptide and vitamin A alcohol. Winona-Sensitive Muscle and Characteristic Herbs: Winona relies on Yunnan’s characteristic plant resources to deeply cultivate sensitive muscle skin care, and based on this, she exerts her dermatological skin care; Huaxi Bio’s brand-Group R&D strength: Huaxi’s brands such as Runbaiyan, Kuadi, Mibel and BM Muscle Life all emphasize Huaxi Bio’s cutting-edge technology when they are launched, and take the Group’s R&D strength as the brand efficacy basis; Yilian-hyaluronic acid: Yilian continues to deeply cultivate hyaluronic acid skin care, emphasizing high efficacy and high quality; Dr. Yael-Skin Microecology: Based on the theory of skin microecology, Dr. Yael continued to dig deep into the field of microecological skin care and began to promote the brand’s unique "brown algae" ingredients; Yuze-hospital joint development: Yuze brand emphasizes the joint development of hospital dermatologists, with medical professionalism as the functional endorsement, to create dermatological standard products; Giant creature-collagen: Giant creature emphasizes the strength of brand scientific research, takes the background of medical dressing as the brand efficacy, and focuses on recombinant collagen and ginsenoside bioactive components.
Some domestic cosmetics have continued to carry out brand marketing in addition to investment, and cultivate brand image all over the world. According to WeChat official account, the official WeChat of all brands, brands such as Polaiya, Winona, Run Baiyan and Dr. Ai have begun to launch continuous brand marketing, not limited to planting grass. Among them, Polaiya has launched its brand for many years, Winona and Runbaiyan have achieved continuous coverage of important marketing nodes, and Dr. Ai has started brand marketing since 2022 and made initial progress.
Product layout: product value, single product contribution depends on the stock and stage, and new product reserve depends on the future.
High-value brands are more intelligent and have room for dimension reduction and expansion.
We believe that brands of high-value skin care products are more intelligent, and it is easier to be accepted by consumers if they stand firm in high-value categories and expand the product matrix with relatively low value. Therefore, brands that already have mature high-value items have stronger brand attributes and are easier to expand the product matrix. Polaiya, Huaxi Bio, Marumi stand firm in high-end categories and expand categories from point to area. Judging from the categories of the top five items of each brand: Polaiya, Runbaiyan, Quadi, BM Muscle Life, Marubi and international brands Lancome and Estee Lauder have relatively mature products, occupying a relatively high-end position; Winona, Lushang’s brands and Yuze may need to further develop high-value categories. Winona, Mibel, Dr. Ai, Elaine and Yuze sell more products with lower value such as facial mask and cleansing, and the product matrix may need to be expanded to higher value categories. Recoverable beauty has certain particularity, and its main sales item is medical dressing, which is more expensive than ordinary mask.
The contribution of single product is too high/too low or reflects that the brand development stage is not mature or there is "partiality"
In the construction of brand product matrix, we think we can get a glimpse from the sales contribution of the top five single products of the brand. CR1 is the single product that contributes the main sales revenue to the brand at present, while CR5 is extended to the brand flagship product series. The higher contribution of single product reflects the strong mind and strong sales of brand big single product to a certain extent, but the higher contribution of single product also reflects that the brand product matrix can be further expanded. We believe that the contribution of international brands after more than ten years of development is of reference significance, because it has entered the relatively mature stage of brands, and L ‘Oré al, Lancome and Estee Lauder, which are cited as international targets, all have their core products and have built a relatively mature product matrix. According to the market intelligence of Magic Mirror, in 2022, the more mature international first-line brands, L ‘Oreal, Lancome and Estee Lauder, have CR1 in the range of 20%~30%, CR3 in the range of 45%~60% and CR5 in the range of 60%~80%. Based on this, Dr. Polaiya, Dr. Winona, Dr. Run Baiyan and Dr. Ai are similar to those of international standard brands, while those of Quadi, Mibel, BM Muscle, Yilian and Yuze are relatively high, while those of Marubi are relatively low.
Each brand actively builds a family/series product matrix to achieve rapid sales expansion through product linkage. In the aspect of product linkage, we believe that based on the strategy of large single product, brands can use the consumer’s mind they have built to promote the development of series products and expand the product matrix efficiently. Among them, representatives such as: Polaiya made ruby cream and ruby eye cream on the basis of ruby essence, and made double anti-nightlight eye cream and double anti-mask on the basis of double anti-essence; Winona creates Shu Min moisturizing lotion and Shu Min moisturizing silky mask based on Shumin moisturizing special cream; Dr. Ai created an anti-gravity emulsion suit based on microcrystalline water; Yuze creates barrier repair conditioning milk and barrier repair moisturizing water based on skin barrier repair moisturizing cream; Runbaiyan launched a white gauze mask based on white gauze second throw, and launched a HACE cream based on HACE second throw.
Through the filing situation, we can observe the brand new product reserve and product direction.
In terms of product reserve, domestic product leaders put a large number of new products on record and reserve new products to accumulate strength. According to the data of the State Food and Drug Administration, domestic product leaders such as Polaiya, Betani, Huaxi Bio, Marubi Co., Ltd. began to record a large number of products from about 22M9, so as to reserve new products for future development and accumulate strength.
Price positioning: domestic products make great efforts to face the competition of international brands in the middle and high end, and the average selling price has steadily increased.
In the analysis of price dimension, we think that the sales price of the brand should be stable in its core price band, and the excessive fluctuation of the sales price will affect consumers’ price perception and further affect the daily sales of the brand. Therefore, we believe that we can judge the strength of the brand by subdividing the average selling price trend of the brand in the price zone and the price control ability during the promotion period. In terms of the price bands of major brands, some product lines of domestic brands have been bordered by international brands that are positioned at the mid-end, and entered the stage of direct international mid-end brand competition. At present, most domestic brands are in the price range of 100~400 yuan, and the 500 yuan+price range is tested by individual products, which is basically in the same price range as L ‘Oré al. The high-end product line borders on the international high-end brands Estee Lauder and Shiseido, but the main brand has not yet formed direct competition with the high-end product lines of international high-end brands.
In terms of brand specific price occupation, we divide the main cosmetic brands in the price range where domestic products are leading into middle and high-end brands and mid-end brands. High-end brands are priced at Runbaiyan and Kwadi > L ‘Oré al and Polaiya, and Marubi and Winona are widely distributed. Among the middle and high-end brands, the sales price range of Runbaiyan and Kwadi under Huaxi Bio is high and concentrated, and the sales concentration is from 400~500 yuan and 300~400 yuan price bands; The main sales price range of L ‘Oré al and Polaiya is 300~400 yuan, and the distribution of the overall pricing range is smoother; Marubi’s main sales contribution comes from the price band of 100~400 yuan, and the proportion of sales in the high price band of 800 yuan is higher than that of other brands. Winona’s main sales contributions are from 100~200 yuan and 500~600 yuan, showing a bimodal shape. Among the mid-range brands, the sales price range of each brand is concentrated in 100~200 yuan. The sales price zones of Mibel and Yilian are concentrated in 0~200 yuan; Most sales of BM muscle activity are concentrated in the price range of 100~200 yuan; Dr. Ai’s sales division is relatively even between 0 and 300 yuan; The sales of Yuze and Fumei are also concentrated in the 100~200 yuan price band, in which Yuze is smoother in the 100~300 yuan branch, and Fumei is more concentrated in the 100~200 yuan branch.
The average sales price of major high-end domestic brands has steadily increased. Among the mid-to-high-end brands, since 2020, the average sales price of Polaiya, Winona and Marubi Tmall has shown a steady upward trend, among which Marubi’s average sales price is higher, and Polaiya’s increase rate is slightly higher than Winona’s; As an international benchmark, the average sales price of L ‘Oreal remained basically stable; The average selling price of Run Baiyan and Kuadi fluctuated relatively. The average selling price of mid-range brands is generally stable. The average sales price of BM Muscle, Dr. Yi Er and Yilian remained basically stable; Since 2021, the average sales price of Fumei has shown a slight upward trend; The average selling price of Mibel and Yuze fluctuates relatively.
The maintenance of the price of key items is also an important node of brand positioning. Excessive price reduction may damage the brand image and affect the daily sales of brands in the future. According to the sales situation of key items of various brands in 2022, the price reduction of Polaiya, Dr. Ai and L ‘Oreal as the target is relatively small, and the brand will control the price discount during the event at around 10%; Winona, Run Baiyan, Kuadi, Mibel, Yilian, Marubi and Kerfumei are in the middle level of the industry, and the price discount is about 20%. The discount range of BM muscle activity and Yuze is relatively large.
At present, the traffic is relatively concentrated in Amoy Department and Tik Tok. We can analyze the brand’s channel layout and sales quality from a more detailed dimension, and also reflect the brand’s offensive and defensive mentality: Amoy Department focuses on traffic sources and traffic costs, and can be subdivided into the amount of silk, traffic structure and super-cooperation; According to daily sales and activities, Tik Tok can be further subdivided into self-operated businesses, talent matrix, activity operation and head talent; Other channels focus on traffic and planting grass, which is reflected in the number of brand fans, while paying attention to the offline layout of each brand.
Online is the main sales channel for cosmetics enterprises. In the choice of cosmetics sales channels, Polaiya, Betani, Dr. Ai and Yilian, subsidiaries of Lushang Development, all focus on online sales. Polaiya online includes direct sales and distribution, covering platforms such as Tianmao, Tik Tok, JD.COM, Aauto Quicker and Pinduoduo, among which direct sales account for 60.66% and distribution accounts for 24.27%. Offline channels operate through dealer mode, and channels cover CS, Shangchao and single-brand stores. Betaine’s online self-management accounts for 63.19%, online sales account for 19.15%, offline self-management accounts for 0.04%, and offline distribution accounts for 17.62%; Huaxi Bio-offline is dominated by dealers selling off sales; Lushang Development’s brands account for a higher proportion of online sales. In 2021, the online sales of Yilian and Dr. Yi ‘er accounted for 96.17% and 97.98% respectively, mainly entering offline channels through distribution; As an old-fashioned high-end domestic product, Marumi has made great contributions from offline channels, and its online business has continued to exert its strength. In 2021, online direct sales increased by 66.79%, and online business revenue increased by 8.17% as a whole; Shanghai jahwa operates three categories: skin care, personal care, and maternal and child. Personal care and maternal and child categories focus on offline channels, and the Group continues to promote online and offline integrated operations; The sales of giant biological dealers account for a relatively high proportion, most of which are sold in the mass market, followed by sales to medical institutions.
Amoy sales are dominant in online channels. According to the data of magic mirror and cicada mother, in 2022, Amoy sales accounted for 76% of cosmetics sales, which was in a dominant position. According to the monthly data, except during the promotion period in June and November, the proportion of sales in Tik Tok continued to increase, from 20% in January 2022 to 32% in December 2022, and the importance of channels increased day by day.
According to the market information of Magic Mirror, Amoy is still the main channel for brand sales, with the contribution of Polaiya, Winona, Quadi, herborist, Yuze, Dr. Ai, Kerfumei and international brands L ‘Oreal, Lancome and Estee Lauder reaching over 70%. In the context of the increasingly important channels in Tik Tok, further efforts in Tik Tok may bring some growth.
Amoy system: analyze the operational efficiency from the perspectives of traffic source, conversion rate, customer unit price and return rate.
Paid traffic helps to innovate, and free traffic reflects brand power.
The basic links of e-commerce transactions include traffic, conversion and customer unit price. Traffic is the first step in the transaction link, and Amoy platform can further subdivide the traffic source. We believe that the larger free traffic base reflects the stronger brand grass planting and brand power, while the paid traffic is based on the brand power to further incite the amoy traffic market. Therefore, we believe that the contribution of free traffic can partly reflect the scale and quality of traffic, channel expenses and brand power.
Amoy traffic channels are mainly divided into paid traffic (through train, Wanxiangtai, Gravitational Rubik’s Cube, Pinxiao Bao, etc.), CPS(Cost per Sale) traffic (hand Taobao live broadcast, taobao guest/Taobao Alliance, Yitao, etc.) and free traffic (hand Taobao search, hand Taobao recommendation, my Taobao and others). Core payment incites new passenger flow. In the paid traffic, Taobao/Tmall through train displays the goods in the store in a prominent position on the search results page and sales ranking, and charges according to the number of clicks. Its core lies in providing accurate traffic to the store; Gravitational Magic Square combines super recommendation (guess you like information flow by hand) and super drilling exhibition, the core of which is to provide low cost and high efficiency crowd flow; Pinxiaobao is the first pit on the search results page, and it is the product with the largest search page area, the highest position and the most interactive forms. Wanxiangtai is a one-stop delivery tool for integrating Amoy resources.
CPS covers traffic sources such as live broadcast, talent, and off-station. Taobao live broadcast covers live broadcast domains such as live broadcast attention, recommendation, anchor homepage, store domain of store/baby details page and advertising domain promoted in the station, and the sales generated by live broadcast will be given to the platform and talent at a certain commission ratio; Taobao Alliance is a form of linking the baby to the promotion team leader for promotion and paying a certain commission. The core lies in covering the off-site traffic of Taobao. Yitao is a discount promotion platform under Taobao, and the sales generated are returned to the platform and users. Free traffic reflects the brand’s existing people’s minds, frequent customers’ repurchase and planting grass outside the station. Free traffic includes Taobao search, Taobao recommendation, my Taobao and others, which mainly reflects the established brand of the brand itself, product mentality and brand planting outside the station. My Taobao includes collections, past orders, etc., reflecting the repurchase performance of the brand among existing customers.
The number of fans in the store can reflect the brand traffic base.
The number of fans in the store will affect many traffic factors, such as whether the goods can enter the home page traffic, micro-amoy broadcast traffic, hand-amoy search weight and ranking, etc. To a certain extent, a larger fan scale represents a larger free traffic base and traffic quality of the brand. At the same time, the data of Amoy fans is available, so we take the number of fans in the store as a lateral reflection index of brand traffic. Among the domestic brands, fans of Nature Hall, Polaiya and Winona have accumulated a leading position, and their traffic base advantages are remarkable. In terms of the accumulation of fans in Tmall flagship store, international brands have obvious advantages because of their stronger popularity and larger fan base. Among domestic brands, Natural Hall, Polaiya and Winona have accumulated large-scale fans, and the number of fans in flagship stores exceeds 10 million; Runbaiyan, Marubi, herborist, Kans, Yiye and other brands have begun to take shape, and flagship store fans have accumulated more than 5 million; Among other brands, Caitang, Kuadi, Yuze and Kerfumei fans have accumulated better.
The subdivided flow structure reflects the flow quality.
Proya and Winona contributed a lot to free traffic, or reflected strong brand power; Quadi’s repurchase performance is good and the live broadcast contribution is high. ○1 The core traffic channels of Polaiya’s daily sales are my two free channels, Taobao and Handamoy Search, and the paid traffic of taobao guest and Pinxiaobao. In September 2022, the traffic contribution was 18%/13%/16%/13% respectively; During the promotion period, in June, 2022, for example, Polaiya invested in taobao guest CPS channel to further enhance sales. In general, free traffic contributed a lot, reflecting strong brand power and fan base. ○2 Winona’s contribution to free traffic is also high. On weekdays, the contributions of mobile Taobao Search, My Taobao and other free traffic are 15%/11%/14% respectively, and the contributions of mobile Taobao Live, taobao guest and Pinxiaobao are 17%/14%/14% respectively. During the promotion period, taking November 2020 as an example, Winona’s core traffic came from other free traffic, manual scouring recommendation, manual scouring search and my Taobao, and the free traffic channel contributed 59%, reflecting Winona’s brand’s comprehensive grass planting and strong potential. ○3 Caitang is in the brand growth period, and it is relatively more dependent on payment channels. In June and July of 2022, the paid traffic was 59%/56%, and the contribution of hand-amoy live broadcast was higher. In June and July of 2022, the contribution of hand-amoy live broadcast traffic was 24%/16% respectively. ○4 Quadi’s hand-amoy live broadcast traffic contributed a lot.Li Jiaqi contributed 71% of the traffic source of Quadi brand in the month of rebroadcasting, and at the same time, the brand repurchased well. In June 2022, my Taobao contributed 27% of the traffic source.
Strong sales ability, but the channel cost may be relatively high; Whether the super-head products on the shelves are "value-oriented" or "volume-oriented" may reflect the cost pressure of brand super-head, and the pressure of leading brands is relatively low. In the hand-washing live broadcast, the contribution of the super-head anchor can’t be ignored. The super-head anchor represented by Li Jiaqi has a strong sales ability, and also has a certain ability to plant grass, but the cost may be relatively high. In 2022, the double eleven beauty brands made a great contribution, with Winona, Quadi, Mibel and L ‘Oré al Li Jiaqi contributing more, with GMV above 40%; The sales contribution of Polaiya and Estee Lauder in Li Jiaqi is about 30%. From the perspective of products with goods, the products of leading domestic brands and international brands on the shelves in Li Jiaqi are of high value. Among them, the products of Polaiya, Winona, Quatti, L ‘Oreal and Estee Lauder are mainly brand core essence and cream products, and the pressure of channel expenses on profits may be more controllable.
The conversion rate of domestic brands is high and the promotion flexibility is great, or it reflects that the operation of domestic brands has a comparative advantage. The availability of conversion rate data is relatively poor. Taking some cosmetic brand data as an example, we notice that the conversion efficiency of official flag ship stores of Winona and Caitang is higher, or it reflects that their relatively more subdivided brand positioning has brought more accurate traffic; At the same time, the conversion rate of Winona and Caitang official flagship stores also showed greater flexibility during the promotion period. The conversion rate of international brands Lancome and L ‘Oré al is generally stable, compared with Winona and Caitang. The unit price of brand customers more reflects the brand strategy and price positioning, and we have put it in the brand dimension analysis, so I won’t repeat it here.
Tik Tok: FACT is fully operational, focusing on the proportion of self-broadcasting and the structural advantages of the talent matrix.
With the maturity of Tik Tok channel, Tik Tok channel operation has been paid more and more attention by brands. In terms of channel operation, according to Bain Consulting and Tik Tok E-commerce’s White Paper on Business Methodology of Tik Tok E-commerce in 2021, FACT is the four major business positions of businesses in Tik Tok, including self-broadcasting, talent matrix, marketing activities and big V, covering two major aspects: brand daily sales operation and product sales outbreak. Through four-dimensional comparison, we can roughly evaluate the development trend and operating efficiency of brands in Tik Tok.
Self-broadcasting by merchants: continuous output of content, accumulation of crowd assets and stable long-term operation.
Self-broadcasting by merchants is the most basic business position of the brand in Tik Tok, which emphasizes content control and accumulation of crowd assets for stable and long-term operation. "Precipitation" means "powder increase" and "re-purchase" in the short term. By adding attention, fan groups and fan groups, businesses can deepen their fan operations step by step. In the self-broadcasting of merchants, merchants also have stronger control over key operating nodes such as brand image, product selection, preferential strength and live broadcast. Through long-term accumulation, operating costs are relatively controllable. In terms of merchant self-broadcasting, we think that the store setting, fan accumulation, relatively high conversion rate, low commission rate and stable self-broadcasting ratio that match the traffic structure of Tik Tok reflect more stable merchant self-broadcasting operation to some extent, and can be used as some indicators to measure the advantages of merchant self-broadcasting. 1) Multi-store differentiated positioning operation: In terms of Tik Tok operation, due to Tik Tok’s relatively "decentralized" traffic distribution attribute, major cosmetics brands such as Polaiya, Winona, Run Baiyan, Dr. Ai, Marubi and so on have adopted the way of opening multiple stores to avoid algorithm disadvantages, gain a larger customer base, and at the same time achieve more accurate customer base matching through positioning differentiation. 2) Fans and content build store crowd assets: The number of brand fans means the basic traffic of the brand to a certain extent, and high content interaction means better traffic quality. In terms of store crowd asset accumulation, L ‘Oré al, an international brand, and Polaiya, a domestic product leader, have formed a large fan base, followed by Winona, Marumi and Dr. Ai, and the fans of other brands are smaller. In terms of store content operation,Proya, Winona, Dr. Ai, Marumi and L ‘Oré al, as international targets, invested more resources; In terms of content volume, international brand L ‘Oré al and domestic product leader Polaiya have a significant lead; 3) Brand self-broadcasting control ability is stronger: Tik Tok channel goods are mainly divided into brand self-broadcasting, talent broadcasting and small shop broadcasting. Among them, brand self-broadcasting is directly managed by the brand side, with strong price control ability and relatively good profitability; Talent broadcasting is relatively more dependent on anchor traffic, and its profitability is relatively weak. Therefore, we take the proportion of self-broadcasting as another dimension to measure the brand, and a higher proportion of self-broadcasting may mean better profitability with goods. Because of the multi-level organizational structure and relatively slow management efficiency, international brands have a relatively low proportion of self-broadcasting, which has become a major competitive advantage for domestic brands;
In terms of the proportion of self-broadcasting, the proportion of self-broadcasting of domestic brands such as Polaiya, Winona, Dr. Ai, Marumi and Yuze is relatively high, maintaining above 50%, with relatively strong brand control and more guaranteed profitability; Run Baiyan, Kuadi, Yilian, Kefumei and L ‘Oreal made relatively high contributions to broadcasting. 4) Pay attention to the indicators of high conversion and low commission: the conversion rate directly measures the flow efficiency. In terms of the operating efficiency of the shake shop, Winona, Runbaiyan, Marubi, Kerfumei and L ‘Oreal have higher conversion efficiency; The commission rate reflects the cost of bringing goods to people. The brands such as Polaiya, Winona, Dr. Ai, Kerfumei and L ‘Oreal are set at around 1%, and the commission rate of some brands is relatively high.
Talent Matrix: Decentralized features empower the central anchor, and the contribution of beauty and store broadcasting is improved.
With the help of talent resources, businesses can enter the market faster and quickly establish popularity and sales performance; Talent with a certain scale can stabilize the supply by expanding the flow, talent with different characteristics can expand the consumer group, and sustainable close cooperation can ensure the long-term stability of matching efficiency and commission cost.
Tik Tok’s talent ecology is relatively diverse, and both superstars and small and medium-sized talents have great potential to bring goods, showing the decentralized characteristics of the platform. Taking the data of the promotion period in November 2022 as an example, there are hundreds of millions of fans of Xiao Yang Ge and millions of fans of Sui Xin in the Top 10 of all categories, and the unit price of sales customers covers 60~800 yuan, which is highly diversified; Judging from the list of beauty and skin care experts, there are Zheng Jianpeng & Yanzhen, a lifestyle blogger with over 50 million fans, and Ma Shuai, a fashion blogger with millions of fans, all of whom have strong ability to carry goods.
The importance of beauty anchors and store broadcasts is increasing. According to cicada mother’s data, in the past six months, the proportion of beauty anchors in the list of beauty and skin care products has further expanded, and the contribution of shop broadcasters has increased rapidly. During the promotion in November, 2022, non-American anchors with a large number of fans contributed a lot; On weekdays, the beauty category and store broadcast contributed a lot. In December 2022, all the Top 10 people with goods were beauty category or store broadcast.
Activity operation: strong flow aggregation effect, integration of planting grass and weeding products and marketing.
Marketing activities have the effect of large-scale traffic aggregation, including platform promotion, marketing IP activities, industry activities, theme activities, etc. Merchants can match different business objectives such as brand announcement, new product release, and explosion promotion, and can also match different growth stages. In addition to enhancing GMV, event operation can also help brands build their influence and user awareness, and bring long-term value through the accumulation of crowd assets, creating a scene of "planting grass to pulling grass".
Head-to-head: Aggregation activity flow helps the outbreak of product sales, and the beauty anchor has a strong effect of planting grass.
The cooperation between the brand and the star and the head talent can help the brand realize the double detonation of product promotion and sales. Stars and heads have a huge fan base and strong social influence. With its professionalism and influence, Head V provides endorsements for brands and commodities, which can drive explosive sales growth. You can also create hot marketing events by inciting fan groups to help brands break the circle. In the aspect of cooperation with talents in the head, we believe that the anchor of the beauty category has a stronger ability to plant grass and publicize because of its relatively professional explanation, so it is suggested to pay attention to the types of talents that the brand side focuses on cooperating with. Head talent+activity operation resource aggregation can help explosive sales growth. For example, in 2021, South Korea’s skin care brand Whoo joined hands with Guangdong couples to create a Super Brand Day. Through long-term cooperation with goods+measurement+stocking in advance+advertising, before the launch of the event, the tag has accumulated 1 billion broadcasts, plus the daily traffic support of super products, and finally achieved a record of over 300 million yuan for a single game and over 289 million yuan for a single product.
Brands usually give consideration to planting grass and sales when building cooperation among top talents: domestic leading brands such as Polaiya, Winona, Runbaiyan, and Quady have built a comprehensive cooperation matrix for talents. In 2022, Top 5 talents with goods will cover various types of anchors such as beauty, stars, funny stories, and Yan values; And the top five head artists of Dr. Ai’s brand cooperation are all beautiful, and the brand tendency is obvious.
Other online channels: pay attention to the traffic advantage brought by the accumulation of fans.
In the analysis of other online channels, we return to the transaction link of "traffic × conversion × customer unit price", and focus on the number of shop fans that can directly affect the traffic scale and traffic quality of the store. On the whole, the multi-channel layout of domestic products leaders Polaiya, Winona and Marubi is more comprehensive and has certain traffic advantages, and Dr. Ai is outstanding in Xiaohongshu. On the Aauto Quicker platform, L ‘Oré al, Lancome, Shiseido, SK-II and other international brands have not officially settled in, and Estee Lauder, which has an official account number, has not continuously operated the Aauto Quicker platform account; Domestic brands such as Polaiya, Winona and Marumi have accumulated large-scale users here and have certain traffic advantages. On the JD.COM platform, international brands such as L ‘Oré al, Lancome and Estee Lauder authorized JD.COM’s self-operated stores to sell, while some leading brands of domestic products also laid out JD.COM’s self-operated stores and JD.COM’s flagship stores, among which Proya, Marumi and Zirantang JD.COM’s self-operated stores have accumulated more than 10 million fans; In terms of flagship stores, Nature Hall is led by 20 million+10,000 fans, and the number of fans of Pele Ya and Winona is around 3 million. The other brands are still in their infancy.
The advantages of international brands are remarkable, and Dr. Polaiya, Cai Tang, Winona and Dr. Ai made initial efforts. According to the core logic of reading number and interaction number, we make statistics on the number of fans, notes, praises and collections of some cosmetic brands. As of February 2023, the number of notes, fan accumulation and fan interaction of international brands such as L ‘Oreal, Lancome and Estee Lauder on the platform of Little Red Book is significantly higher than that of domestic brands, and brands have certain advantages in planting grass. Among domestic brands, Polaiya, Caitang, Winona and Dr. Ai have formed large-scale user interactions such as praise and collection with fewer fans, and the efficiency of planting grass is high. We believe that this kind of planting grass will empower the transactions of platforms such as brand Taobao.
Offline channels: experience and brand effect are re-valued.
Under the background of declining online dividends, the experience and brand effect of offline channels may be re-valued. Offline channels mainly include supermarkets, department stores, beauty shops and other forms: department store counters have been promoted by international brands to expand the China market since the 1990s, with strong brand attributes and high entry threshold, but the development of channels is relatively backward; Shangchao channel started in 2000s, and international brands have a dominant position with strong financial strength and strong marketing ability, but the brand of the channel itself is weak. In the 2000s, Chinese brand began to set up a beauty collection shop with lower threshold, wider distribution and stronger service. In recent years, cutting-edge beauty collection stores such as KKV, Huamei, Wow Colour, etc. have closely followed the changes in offline new retail formats, becoming the grass for a new generation of consumers, and the industry scale has steadily increased. iResearch predicts that the market size of new beauty collection stores will reach 13 billion yuan in 2023. At present, the online dividend in the market is declining, and the growth rate of online channel sales is slowing down. The value of offline channels in user experience and brand building will be valued again. We suggest paying attention to the offline channel layout of cosmetics brands, and the brand-building effect brought by department store counters and single-brand stores in department stores.
The offline channels of Polaiya cover daily chemical monopoly and department stores, and the daily chemical channels adjust and upgrade the product structure. Department stores focus on building department stores such as Yintai, Chongbai and over the rainbow and expanding other high-quality department stores, with the focus on enhancing brand image and exporting brand power; Bettini adheres to the offline channel, has nearly 500 outlets, 1,000+member communities and more than 100,000 members in China, and actively integrates into the new offline retail system; Run Baiyan, a subsidiary of Huaxi Bio, opened 3 physical stores, developed more than 200 offline franchise stores in Quadi, and stayed in KKV for multi-channel expansion; The development of offline sales of Lushang relies on the mode of supermarkets and dealers, covering hundreds of stores such as Ginza and Hualian in Shandong, and entering CS collection stores such as KKV, Colorist, Sanfu and Ole, and actively arranging Dr. Ai’s single brand stores and business circle stores for multi-channel common development; Marubi continues to actively promote offline marketing. In 2021, 1,800+salons and 7,000+new product experience meetings will be held offline, focusing on building offline experiences and services; Shanghai jahwa continues to promote the smart retail of offline channels, the strategic downsizing of department stores, and the deep cooperation between CS channels and Watsons into Sephora; Juzi Bio builds a professional brand image by covering 1000+ public hospitals, 1700+ private hospitals and clinics, and 300+ chain pharmacies through distribution+direct sales, and also covers 2000+ cosmetics chain stores and supermarket chains to enhance brand awareness and meet the needs of multi-channel customers.
Cosmetics sales are gradually returning to product strength, and the Group’s comprehensive R&D strength and product technology are presented to build product strength. In terms of product analysis, we mainly start from two aspects: First, we can directly quantify the R&D investment, R&D team, patent accumulation and other data. We believe that a perfect R&D team and continuous large-scale and standardized R&D will help improve the overall R&D strength of brand products. Secondly, we divide cosmetic products from bottom logic to product presentation into: basic research (action mechanism)-ingredient raw materials (ingredient efficacy)-formula scheme (formula efficacy)-product creation (product efficacy)-product feeling. Some cosmetic enterprises have gradually deepened their research on efficacy, formula and ingredients from the superficial to the deep, supplementing their technical strength; There are also enterprises based on ingredients, which are popularized from technical basis to application end. In each subdivision of the R&D chain, we think that the basic research direction, R&D accumulation of ingredients and raw materials and product efficacy can be relatively clearly studied and reflected, and we also discuss it on the basis of product R&D. We believe that under the background of increasingly perfect cosmetics laws and regulations, rapid iteration of production technology of ingredients and raw materials, continuous expansion of technical talents, continuous improvement of content richness and professionalism of social media platforms, and expansion of specialized consumer groups, the efficacy of cosmetics has been pushed to the stage, and the importance of brand technical image has become prominent, and the R&D strength of related companies will further extend to the front end of the R&D chain. At the same time, the efficacy skin care products need to achieve a perfect research and development evidence chain.Only in this way can we withstand the scrutiny of specialized KOL and specialized consumer groups, and brands with good technical image and exploring the front end of the R&D chain will benefit from the trend of rising efficacy.
Overview of R&D investment and R&D team’s product strength
Huaxi Bio and Shandong Merchants with medical background have a leading investment scale. From the perspective of R&D investment, Betani, Huaxi Bio, Lushang Development and shanghai jahwa’s R&D expenditure in 2021 exceeded 100 million yuan, and Polaiya, Marumi and Juzi Bio invested 10 million yuan; From the perspective of R&D expense ratio, Huaxi Bio and Lushang Development, which have medical backgrounds, have invested heavily at the company level. In 2021, the R&D expense ratio will reach 5.75% and 4.96% respectively, while the R&D expense ratio of companies such as Polaiya, Betani, Marubi, shanghai jahwa and Juzi Bio will be around 2%.
Judging from the scale of R&D teams, the number of R&D personnel in cosmetic enterprises is expanding. Huaxi Bio and Lushangfa have a strong medical background, and they keep ahead in the number of R&D personnel. In 2021, the number of R&D personnel reached 571 and 336 respectively, followed by Betani and shanghai jahwa, with 236 and 212 respectively. The R&D teams of Polaiya, Marumi and Juzi Bio are 100 people. Domestic product leaders have rapidly accumulated patent barriers, which is still far behind international brands. Judging from the accumulation of patents, most domestic brands have accumulated more than 100 patents, among which Polaiya, Huaxi Bio, Marubi Co., Ltd. and shanghai jahwa have formed more invention patents. However, compared with the international leading enterprises, there is still a certain gap between China enterprises. L ‘Oré al applied for more than 500 patents worldwide in 2021.
Basic research: get through the whole link of functional raw materials research, and the mechanism of action is clear and effective.
We believe that basic research is the underlying logic of whether cosmetics can play a role. Facing the increasingly specialized KOL and consumer groups, a perfect research link and a clear efficacy mechanism will gradually become the scientific research foundation that beauty cosmetics leaders need to focus on. This kind of research does not necessarily need to be led by beauty companies, but beauty companies should fully understand the core ingredients they use and develop products based on the fully verified mechanism of raw material ingredients. Take the most important moisturizing, anti-aging and whitening effects of cosmetics as an example: moisturizing: the principle of moisturizing mechanism of cosmetics can be simply divided into five types, namely, ① absorbing external moisture, such as natural moisturizing factors and glycerol; (2) preventing water from evaporating and forming internal barriers in the skin, such as ceramide, squalene squalane and lecithin; ③ Biological regulation, activation or protection of keratinocytes; (4) prevent water evaporation and form a skin surface barrier; ⑤ Absorb external moisture and form a film on the skin surface (macromolecular polysaccharide). Among them, ① ② ③ acts in the skin, ④ ⑤ forms on the skin surface.
Whitening: Skin whitening and freckle removing cosmetics are mainly used to lighten the skin color of freckles, pigmented nevi, sunburn, dark or uneven tanning and beautify the face. The pathway of melanin synthesis is an oxidation process controlled by arginase, and the main mechanism of skin whitening agent decoloration is to interfere with the production of pigment and the transfer of pigment particles. Most of the active components target arginase, inhibit the activity, synthesis and migration of arginase, or have cytotoxicity to melanocytes, representing active substances such as hydroquinone, kojic acid, ascorbic acid and arbutin.
Taking hyaluronic acid as an example, the moisturizing effect of hyaluronic acid has been fully verified, and the ingredients are widely used in skin care products. Hyaluronic acid can form hydrogen bonds with water molecules through hydroxyl groups in its molecular structure, thus adsorbing water molecules on the skin surface or stratum corneum, so as to enhance the moisture content and water retention capacity of skin. This mechanism has been confirmed by many studies, including the Effects of Topical Moisturizers on the Mechanical Properties of Human Skin (Wang, F., Garza, L.A., Kang, S., Varani, J., & Orringer, J.S.) and so on. At the same time, experiments have proved that the external use of ultra-small molecular hyaluronic acid with 5nm can penetrate the skin gap, and play a role in reducing the depth of wrinkles and enhancing the hydration of the skin. Experiments have proved that the smaller the molecular weight of the active substance, the greater the skin penetration and hydration observed in the controlled environment. There are also many documents proving that small molecular HA polymer is a kind of Distress Signal, which can induce inflammation. （Hyaluronic acid: A key molecule in skin aging，Eleni Papakonstantinou, Michael Roth, and George Karakiulakis）
Ingredients and raw materials: ingredients are increasingly becoming the focus of research and development, and the research directions are different.
Raw materials are the basis of cosmetic formula, in which the effective components directly play the role of moisturizing, anti-aging, pigment regulation, sun protection and so on. Therefore, raw materials have become the focus of R&D in the industry, and it is also a symbol of the basic R&D capability of enterprises. Among them, the moisturizing effect can be partially realized by oils in the cosmetic matrix; The soothing and nourishing effects are mostly extracted from plants; The field of anti-aging is a field where the competition for functional components is fierce, and anti-sugar, anti-oxygen, polypeptide, collagen and other raw materials shine; Whitening ingredients are generally achieved by inhibiting the activity of arginase, and commonly used ingredients include nicotinamide, arbutin and 377; Acne conditioning components are mostly acids or natural plant extracts; Sunscreen components are divided into physical sunscreen and chemical sunscreen. In May, 2021, the Regulations on the Management of Registration and Filing Data of New Cosmetic Raw Materials was officially implemented, and the registration and filing process of new raw materials was further standardized, helping manufacturers to carry out research on new raw materials. As of March 2023, the number of new raw materials announced by the State Food and Drug Administration has reached 60, among which the cosmetics enterprises have declared: the filtrate of yeast/pearl fermentation lysate declared by Ou Shiman, which is used for protection, moisturizing and antioxidation; Hydroxyethyl imidazolidinone declared by Shiseido is used for moisturizing; Hydrolyzed zinc hyaluronate, hydrolyzed calcium hyaluronate and N- acetylneuraminic acid declared by Huaxi Bio are used for skin protection/moisturizing, skin protection/moisturizing, anti-wrinkle/skin protection/moisturizing/antioxidant.
Head domestic enterprises continue to research raw materials and build product strength with high-efficiency ingredients. Starting from the core ingredients of various cosmetic brands, international brands have accumulated a large number of exclusive patents in a long history of development; Among domestic brands, Polaiya’s former product line adopts more raw materials from international leading raw materials factories; Betaine, Huaxi Bio, Lushang Development, Marubi Co., Ltd. and Juzi Bio have patented the layout of functional raw materials. Betaine focuses on Yunnan characteristic plants, Huaxi Bio and Lushang develop from hyaluronic acid to fermentation components, and Marubi Co., Ltd. and Juzi Bio focus on developing collagen.
Product efficacy: the laws and regulations clearly declare the efficacy, and the product efficacy is pushed to the stage.
Efficacy claims need to be certified by efficacy evaluation to simplify the cognitive difficulty of consumers, and the efficacy of products is put in front of the stage. The Specification for Evaluation of Cosmetic Efficacy Claims came into effect in May 2021. Cosmetic registrants and filers should evaluate cosmetic efficacy claims according to the requirements of the Specification, and upload a summary of product efficacy claims on the special website designated by the State Food and Drug Administration. Since then, the efficacy of products has been clearly regulated and pushed to the stage by various cosmetic brands as product features.
According to the official flagship stores of major brands Tmall, technical information such as efficacy claims, efficacy demonstration and efficacy components has become an important propaganda point of major brands. Proya, Winona, Quadi, Kerfumei, Marumi and other leading domestic brands all emphasize the efficacy of products in the details of product introduction, and provide the measured efficacy data of third-party testing institutions as support. In terms of the third-party testing mechanism, according to the Research Report on Merger and Reorganization Opportunities and Decision-making Consultation of Cosmetic Testing Industry (2020-2025) by China Research Institute Puhua, in 2020, the State Food and Drug Administration only filed more than 280 testing institutions, among which only more than 10 institutions can undertake human efficacy evaluation; According to the State Food and Drug Administration, as of April 11, 2023, there were about 360 institutions that had obtained the registration of cosmetics testing institutions, but the inspection items obtained by each institution were not nearly the same. Among them, representatives such as SGS Standard Technical Service Co., Ltd., an international inspection organization established in 1878, have set up five branches, more than 90 branches and more than 200 laboratories in China, and the test results are authoritative.
From the specific content of marketing, efficacy claims, efficacy components, efficacy demonstration and technical background are emphasized by major brands. Take L ‘Oré al, the international leader, and the representative products of Polaiya and Winona as examples: L ‘Oré al takes Black Essence, the number one in the best-selling list of brand liquid essence, as an example: L ‘Oré al’s product promotion covers product overview-efficacy claims-efficacy demonstration-action mechanism-efficacy components-technical strength, among which "seven patented technologies" are the core endorsements of its technical strength, and the patents include: compositions using adenosine or adenosine analogues to smooth wrinkles, microorganisms and sphingosine derivatives.
Winona takes the brand’s special care essence selected in the praise list of Tmall’s repair essence as an example: the special care essence focuses on the repair effect. Starting from the mechanism of Claudin-5, it focuses on promoting the characteristic components such as the extract of green thorn fruit, the essence of salvia miltiorrhiza root, the essence of Sakyamuni fruit, etc., and adds various components such as icodoline, olive squalane, purslane, sour calyx and inositol.
Run Baiyan takes the new product essence in 2023 as an example: the polished rod claims anti-oxidation+anti-sugar+repair barrier+no fear of aging, and uses ergothionine Pro (patented ingredient of Huaxi Bio-technology), EUK-134, Vibrant VC, carnosine and Huang Cen glucoside for anti-oxidation, and adds hyaluronic acid and glucoside to improve the penetration efficiency of raw materials.
(This article is for reference only and does not represent any of our investment suggestions. For relevant information, please refer to the original report. )
Selected report source: [Future Think Tank]. "link"
