07.07.11
A Growing Demand For Cosmeceuticals
As press coverage grows over potentially harmful ingredients in cosmetics here, Chinese consumers have become more in tune regarding the safety of their personal care products. But at the same time, they demand effective products, which should propel sales of cosmeceuticals even higher.
While there has been no consensus on a clear-cut definition of a cosmeceutical in China or elsewhere, it is reported that the sales in this crossover category, which normally refers to the cosmetics positioned as medicated formulary and/or sold through specialized channels such as pharmacy or professional stores, have been growing at an annual rate of 15-20% since 2007, and are expected to continue at this pace until 2012.
Influx of Manufacturers
The concept of “cosmeceutical” became known to the Chinese cosmetics industry when L’Oréal introduced its Vichy brand into Chinese pharmacies in 1998. Ever since then, this market has been dominated by foreign brands such as Vichy, La Roche-Posay and Avene, which together have accounted for 60% of segment sales in recent years. Key reasons behind this are these brands have well-established marketing strategies, as well as the fact that Chinese consumers tend to trust these imported brands due to safety concerns.
Although foreign firms currently dominate the domestic cosmeceutical market, Chinese companies are flooding the category with products of their own in the hopes of gaining share within this dynamic segment. As a result, no single local company has annual cosmeceutical sales above $15 million, although some local brands did achieve amazing success. For example, two local brands, Longliqi and Cortry, followed Vichy’s distribution strategy and gained great recognition through their Traditional Chinese Medicine (TCM)-based formularies.
Among local cosmetic manufacturers, Shanghai Jahwa is not the first, but it is perhaps the most high profile company to enter the cosmeceutical sector. Nearly two years ago, Shanghai Jahwa introduced Yu Ze, its first cosmeceutical brand. Designed to relieve winter pruritus for older consumers, this new brand is strategically positioned to fill the gap in the cosmeceutical sector. The first product, Yu Ze moisturizer, was jointly developed by Jahwa and the Ruijin Hospital, a renowned general hospital in China. With this launch, Jahwa now owns more than 10 brands, forming an extended product line in each segment of the cosmetics market.
In the Name of Medicine
A long-awaited medical reform plan passed China’s State Council two years ago. The changes, which are aimed at reducing medical treatment costs, led several pharmaceutical companies to enter the cosmeceutical market in search of new profits. Compared to costly and lengthy investment in research and development in the pharmaceutical industry, it is relatively easy for pharmaceutical companies to get involved in cosmeceuticals. No wonder then, that industry sources estimate that more than 170 Chinese pharmaceutical firms have been engaged in the personal care sector. Among them are quite a few household names in China, including some time-honored brands accredited by the China Ministry of Commerce.
For example, Beijing Tongrentang Co. Ltd., a 300-year-old TCM company, entered the cosmeceutical market in 2004 and has posted 10% gains every year. In its five-year plan announced in 2010, the company proposed to have one third of its 300 newly developed products to be cosmeceuticals.
Multifunctional Toothpaste
Yunnan Baiyao Group Co. Ltd., another Chinese herbal medicine company known for its “trauma panacea,” has also set up a cosmeceutical division. In 2004, the group had great success with the launch of a high-end toothpaste that is said to help inhibit gingival bleeding, repair oral cavity ulcers and relieve pain and gingiva swelling. In 2008, Yunnan Baiyao signed a technology transfer agreement with Maleave Cosmetics Co., Ltd. of Japan, and launched the Qiancaotang itching-relieving skin care series in 2009 and Yangyuanqing hair care series at the beginning of 2011.
Since its introduction hundreds of years ago, Mayinglong has been a well-known proctologic hemorrhoids treatment. More recently, the brand owner, Mayinglong Pharmaceutical Group, has extended its ointment series into the cosmetics category. In 2009, it launched an eye cream called Ba Bao anti-dark circle eye cream, which claims to reduce eye bags and dark circles with its unique TCM formulation, Ba Bao powder. Now Mayinglong has expanded this eye care line with an eye patch and herbal tea.
Numerous other companies with pharmaceutical manufacturing backgrounds, such as 12WAYS, Pientzehuang and Chen Li Ji, have already branched out into this potentially lucrative market. All of them market TCM-based cosmetics, which appeal to Chinese consumers. But as industry experts point out, TCM may play a bigger role if researchers can solve such problems as purification techniques and conduct more scientific analyses on the effectiveness of TCM.
Expanded Distribution Channels
In comparison to traditional cosmetics, which are mainly sold through department stores, specialty stores, or supermarkets, hypermarkets and grocery stores, the vast majority of cosmeceuticals can be found in pharmacies, cosmeceutical stores and professional stores. The “medical grade” image of cosmeceutical developed in professional environments has been attracting an increasing number of consumers who wish to buy cosmetic products emphasizing specific functions, such as whitening and anti-acne, with greater credibility and safety.
Since the successful debut of Vichy, pharmacy chains and cosmeceutical stores have been regarded as a popular distribution channel for medicated and natural cosmetic products. And with the medical reform of 2009, retail drug stores in China are shifting more toward cosmeceuticals in order to maintain their profit margins.
Dominated by numerous small players and some big ones targeting the mid- to high-end segment, professional stores sell a wide variety of cosmetic products, from anonymous branded products to some famous foreign ones, at relatively low prices or with customized service. Today, cosmeceuticals account for an increasing percentage of sales in these stores.
Unsolved Issues
As demand for cosmeceuticals increases, the arguments over its definition and legitimacy are also heating up. There may be a middle ground between drug and cosmetic for marketers in China, but according to many experts, the current system only allows the term, “cosmetics with specific functions,” which collectively refer to hair color/perm, hair removal, breast beautifying, body slimming, deodorant and sun protection products. These special cosmetics must be approved by the State Council Administrative Department of Health.
Therefore, some experts suggest that the term cosmeceutical should fall in the category of cosmetics with specific functions. So far there has been no official word on this, and it remains to be seen which path the cosmeceutical segment will follow.
Ally Dai, Happi China
Ally Dai is senior editor of Happi China. She has more than 10 years of experience in the cosmetic and food industries. Happi China is a leading media for the China household & 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.
Website: www. industrysourcing.com
As press coverage grows over potentially harmful ingredients in cosmetics here, Chinese consumers have become more in tune regarding the safety of their personal care products. But at the same time, they demand effective products, which should propel sales of cosmeceuticals even higher.
While there has been no consensus on a clear-cut definition of a cosmeceutical in China or elsewhere, it is reported that the sales in this crossover category, which normally refers to the cosmetics positioned as medicated formulary and/or sold through specialized channels such as pharmacy or professional stores, have been growing at an annual rate of 15-20% since 2007, and are expected to continue at this pace until 2012.
Influx of Manufacturers
The concept of “cosmeceutical” became known to the Chinese cosmetics industry when L’Oréal introduced its Vichy brand into Chinese pharmacies in 1998. Ever since then, this market has been dominated by foreign brands such as Vichy, La Roche-Posay and Avene, which together have accounted for 60% of segment sales in recent years. Key reasons behind this are these brands have well-established marketing strategies, as well as the fact that Chinese consumers tend to trust these imported brands due to safety concerns.
Although foreign firms currently dominate the domestic cosmeceutical market, Chinese companies are flooding the category with products of their own in the hopes of gaining share within this dynamic segment. As a result, no single local company has annual cosmeceutical sales above $15 million, although some local brands did achieve amazing success. For example, two local brands, Longliqi and Cortry, followed Vichy’s distribution strategy and gained great recognition through their Traditional Chinese Medicine (TCM)-based formularies.
Among local cosmetic manufacturers, Shanghai Jahwa is not the first, but it is perhaps the most high profile company to enter the cosmeceutical sector. Nearly two years ago, Shanghai Jahwa introduced Yu Ze, its first cosmeceutical brand. Designed to relieve winter pruritus for older consumers, this new brand is strategically positioned to fill the gap in the cosmeceutical sector. The first product, Yu Ze moisturizer, was jointly developed by Jahwa and the Ruijin Hospital, a renowned general hospital in China. With this launch, Jahwa now owns more than 10 brands, forming an extended product line in each segment of the cosmetics market.
In the Name of Medicine
A long-awaited medical reform plan passed China’s State Council two years ago. The changes, which are aimed at reducing medical treatment costs, led several pharmaceutical companies to enter the cosmeceutical market in search of new profits. Compared to costly and lengthy investment in research and development in the pharmaceutical industry, it is relatively easy for pharmaceutical companies to get involved in cosmeceuticals. No wonder then, that industry sources estimate that more than 170 Chinese pharmaceutical firms have been engaged in the personal care sector. Among them are quite a few household names in China, including some time-honored brands accredited by the China Ministry of Commerce.
For example, Beijing Tongrentang Co. Ltd., a 300-year-old TCM company, entered the cosmeceutical market in 2004 and has posted 10% gains every year. In its five-year plan announced in 2010, the company proposed to have one third of its 300 newly developed products to be cosmeceuticals.
Multifunctional Toothpaste
Yunnan Baiyao Group Co. Ltd., another Chinese herbal medicine company known for its “trauma panacea,” has also set up a cosmeceutical division. In 2004, the group had great success with the launch of a high-end toothpaste that is said to help inhibit gingival bleeding, repair oral cavity ulcers and relieve pain and gingiva swelling. In 2008, Yunnan Baiyao signed a technology transfer agreement with Maleave Cosmetics Co., Ltd. of Japan, and launched the Qiancaotang itching-relieving skin care series in 2009 and Yangyuanqing hair care series at the beginning of 2011.
Since its introduction hundreds of years ago, Mayinglong has been a well-known proctologic hemorrhoids treatment. More recently, the brand owner, Mayinglong Pharmaceutical Group, has extended its ointment series into the cosmetics category. In 2009, it launched an eye cream called Ba Bao anti-dark circle eye cream, which claims to reduce eye bags and dark circles with its unique TCM formulation, Ba Bao powder. Now Mayinglong has expanded this eye care line with an eye patch and herbal tea.
Numerous other companies with pharmaceutical manufacturing backgrounds, such as 12WAYS, Pientzehuang and Chen Li Ji, have already branched out into this potentially lucrative market. All of them market TCM-based cosmetics, which appeal to Chinese consumers. But as industry experts point out, TCM may play a bigger role if researchers can solve such problems as purification techniques and conduct more scientific analyses on the effectiveness of TCM.
Expanded Distribution Channels
In comparison to traditional cosmetics, which are mainly sold through department stores, specialty stores, or supermarkets, hypermarkets and grocery stores, the vast majority of cosmeceuticals can be found in pharmacies, cosmeceutical stores and professional stores. The “medical grade” image of cosmeceutical developed in professional environments has been attracting an increasing number of consumers who wish to buy cosmetic products emphasizing specific functions, such as whitening and anti-acne, with greater credibility and safety.
Since the successful debut of Vichy, pharmacy chains and cosmeceutical stores have been regarded as a popular distribution channel for medicated and natural cosmetic products. And with the medical reform of 2009, retail drug stores in China are shifting more toward cosmeceuticals in order to maintain their profit margins.
Dominated by numerous small players and some big ones targeting the mid- to high-end segment, professional stores sell a wide variety of cosmetic products, from anonymous branded products to some famous foreign ones, at relatively low prices or with customized service. Today, cosmeceuticals account for an increasing percentage of sales in these stores.
Unsolved Issues
As demand for cosmeceuticals increases, the arguments over its definition and legitimacy are also heating up. There may be a middle ground between drug and cosmetic for marketers in China, but according to many experts, the current system only allows the term, “cosmetics with specific functions,” which collectively refer to hair color/perm, hair removal, breast beautifying, body slimming, deodorant and sun protection products. These special cosmetics must be approved by the State Council Administrative Department of Health.
Therefore, some experts suggest that the term cosmeceutical should fall in the category of cosmetics with specific functions. So far there has been no official word on this, and it remains to be seen which path the cosmeceutical segment will follow.
Ally Dai, Happi China
Ally Dai is senior editor of Happi China. She has more than 10 years of experience in the cosmetic and food industries. Happi China is a leading media for the China household & 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.
Website: www. industrysourcing.com