01.07.11
BACKED BY ROBUST ECONOMIC growth, the Chinese cosmetic market continues to surge. According to the China Association of Fragrance Flavor and Cosmetic Industries (CAFFCI), cosmetics sales are expected to grow 12% or more during the next five years, exceeding $30 billion by 2013. Among all sectors, skin care is no doubt dominant, accounting for more than 37% of cosmetics and toiletries sales in China in 2009, according to Euromonitor. Facial skin care is especially successful in this sector—the latest report from Datamonitor shows that four out of every five new skin care products launched in China is for the face, and the number of skin care product launches reached nearly 2,000, an increase of almost 20%, in 2009. Skin whitening and sun care creams and lotions accounted for much of the new launch activity.
By subcategory, while basic products such as facial moisturizers and facial cleansers still account for a large proportion of total skin care value sales in China, other products, such as face masks, antiaging/ nourishing products and toners, are enjoying dynamic growth, driven by continued sophistication of Chinese consumers and ongoing product innovation as well as a better understanding of such products within mass consumer groups, according to Euromonitor.
Furthermore, Euromonitor data shows that facial moisturizers, with more than 44% of total skin care value sales in China, reported slower growth of just 10% in 2009, mainly due to its higher penetration among mass consumers than other categories. Toners and nourishers/anti-agers, however, posted higher growth, largely as a result of increasing marketing and promotional efforts by key brands. Eye care products within anti-agers outperformed those with only basic moisturizing function, and acne treatments still accounted for a relatively small share of sales in skin care in 2009.
A Competitive Landscape
While the competition between multinational and local players is heating up across the Chinese cosmetic market, it is still dominated by international brands, which made up 60% of sales volume and 90% of sales revenue in 2009, according to CAFFCI. The association also reports that only about 50 out of 4,000-plus domestic cosmetic manufacturers have annual sales of more than $15 million.
This uncompetitiveness of domestic manufacturers is also reflected in Euromonitor’s 2009 top 10 list for China personal care sector, as nine out of the top 10 players are international players. While L’Oréal China and Procter & Gamble (Guangzhou) Ltd. continue to lead the way, C-Bons Group was the only domestic company on this list.
Compared with their international counterparts, domestic players have apparent disadvantages in terms of marketing campaigns, brand-building and sufficient market investment. Currently, the vast majority of them are concentrated on middlerange and/or low-end market, targeting the consumers in second- and third-tier cities, as well as rural cities. But this competitive landscape seems to be changing, as more international players that once focused on first-tier cities are now penetrating into those regions, offering a wide range of skin care brands covering both premium and mass. The vast rural market is expected to become the next battlefield.
Whitening Appeal
Whitening claims are particularly popular in China, and are widely used across most skin care subcategories, especially facial care. Skin whitening has a long history in this country, stemming back to ancient times when the saying “one white covers up all ugliness” was passed on from generation to generation. A recent consumer survey by Datamonitor also proves this obsession, with nearly half of the respondents in China considering it an important attribute of a skin care product. As manufacturers attempt to capitalize on this trend, a wide range of skin care products promising whitening properties has been flooding the Chinese market. By subcategory, penetration of skin whitening products in toners and face masks was relatively higher, accounting for around 36% and 35% of value sales, respectively, in 2009, followed by facial moisturizers and facial cleansers, with 30% and 20% respectively in 2009. However, skin whitening products within nourishers/anti-agers registered the lowest penetration rate, around 10% in 2009, as most consumers prefer to buy skin whitening products and anti-agers separately, according to Euromonitor. With competition becoming more fierce, manufacturers are seeking to differentiate themselves by adding innovative whitening ingredients and/or making their products multifunctional with whitening/brightening claims. At the same time, consumers’ attitude toward a white complexion are shifting.
Embracing another popular trend, Nu Natural, consumers now prefer claims of transparent rosy whitening, removing dark and yellowish tone and spot clearing, instead of purely unnatural pale. For example, in a recent survey conducted by Shanghai Huashan Hospital, one of the most prestigous derm hospitals in China, an even skin tone is regarded as healthier than a pure white tone by most respondents.
Emergence of TCM
Herbal solutions are another trend in today’s Chinese skin care market. Deeply rooted in traditional Chinese culture, Traditional Chinese Medicine (TCM) philosophy is well-accepted in the mainstream society, and therefore TCM-based skin care are increasingly heralded by fashion beauty magazines due to safety concerns over chemical ingredients among general public. There is a strong belief among Chinese consumers that TCM-based products are safe.
According to Euromonitor, the annual growth rate of TCM-based skin care is expected to reach 65%, well above the average growth rate of general skin care, and the market share of TCM-based subcategory will expand to 40% in 2010. As a result, both domestic and international players are keen to jump on the bandwagon. For domestic players, TCM is widely viewed as some secret weapon to gain the upper hand over their international rivals, since there is a public consensus that local brands can better draw on the experience of Chinese culture. That idea works for Shanghai Jahwa, one of the pioneers in this category. Its TCM-based skin care series Herboist is one of the leading brands in China, and sales revenue tripled in the past three years.
More international players are also paying attention to this trend, and L’Oréal, P&G, Unilever, Estée Lauder and Shiseido all have their research facilities in China focused on adapting TCM. L’Oréal, for example, has a botanical center in the Yunnan Province, and is aggressively marketing its TCM line under the Yue-Sai Kan brand. It seems, though, that approaches to utilize TCM ingredients are distinctively different between domestic and international players. While most western brands focus on incorporating some particular types of TCM ingredients into their products that also contain other contemporary ingredients, many national brands tend to adopt a holistic way of combining various TCM herbal ingredients for their synergistic effects based on well-known formularies. Either way, the growth of TCM underscores the growing importance of the Chinese personal care industry.
About the Author
Ally Dai is senior editor of Happi China. She has more than 10 years of experiencein the cosmetic and food industries. Happi China is a leading media for the China household and personal care industry. Published by Ringier Trade Media, in strategic editorial partnership with Happi, it helps local manufacturers update their knowledge on formulating, testing and packaging, as well as providing market insight.
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