China’s homegrown cosmetics contenders face battle to glow up

{"text":[[{"start":7.28,"text":"Whimsical Chinese cosmetics brand Flower Knows hopes to win the hearts of British consumers with products such as its £20 Strawberry Rococo and Shell Ballet blush. Its fairytale aesthetic is part of a vast cosmetics industry in China — and one that is showing signs of overseas ambitions."}],[{"start":25.4,"text":"Soon after making its debut on the shelves of UK retailer Boots earlier this year, Flower Knows was consolidated into Proya, the biggest Chinese player to emerge in a sector that has transformed dramatically in recent decades."}],[{"start":38.36,"text":"While foreign companies still hold the top spots in China, local challengers had by 2025 seized more than half of the market worth almost Rmb1tn ($149bn), according to Frost & Sullivan."}],[{"start":52.16,"text":"The approach of Proya and rivals with similar international plans echoes Chinese companies such as Luckin Coffee, which have emulated foreign competitors before beginning to take them on at their own game overseas."}],[{"start":63.36,"text":"“They have been learning the tricks of the trade from very important international brands and then understanding the market gap,” said one person familiar with the market, who declined to be named. “Designing a product that was China consumer-first . . . was the big transformation.”"}],[{"start":null,"text":"

"}],[{"start":78.88,"text":"But at home they face a challenging backdrop, from slowing economic momentum to intense competitive pressure."}],[{"start":86.1,"text":"The country’s cosmetics sector offered few options in the 1990s before a rush of international entrants in the 2000s. It is now the world’s second largest, albeit one that is extremely fragmented."}],[{"start":98.48,"text":"Proya, which became the first local player to surpass revenues of Rmb10bn ($1.5bn) in 2024, has just 1.5 per cent of the Chinese market, according to filing documents for a Hong Kong listing. It is the only Chinese company in the top five and has a strategic plan that includes new geographic markets and potential acquisitions."}],[{"start":120.76,"text":"L’Oréal, by contrast, has by far the biggest market share in China at 8.6 per cent, with global revenues of €44bn and a vast suite of products and brands. Proya and Chando, another company trying to list in Hong Kong and in which L’Oréal has a stake, rely heavily on their flagship brands."}],[{"start":138.56,"text":"“There’s still a long runway for the Chinese companies, both domestically and in the region,” said Lorraine Tan, director of equity research for Asia at Morningstar. “Until they are able to expand their portfolio of brands, I think they are going to be subject to trend changes.”"}],[{"start":154.88,"text":"Chando, whose revenues last year rose 16 per cent to Rmb5.3bn, sells Himalaya-themed serums and toners. Its finance chief Li Zhuoguang says Chinese firms have an advantage in their “agility”, with a “naturally faster” reaction time to market changes given local leadership — even if foreign firms hold a “significant advantage” at the top end."}],[{"start":177.4,"text":"“We anticipate this competitive landscape will remain unchanged for quite some time,” he adds."}],[{"start":null,"text":""}],[{"start":183.16,"text":"Like the market itself, mainland supply chains are both international and Chinese. Cosmetics companies often work closely with global suppliers such as South Korea’s Cosmax and Italy’s Intercos, which entered China in 2001 initially to make products for export but later for the domestic market as well."}],[{"start":201.48,"text":"“In China you have the strongest ecosystem in the world: besides the manufacturer, you also have raw materials, the biggest packaging industry in the world, machine equipment,” said the person familiar with the market. “Not only can you innovate well but you can innovate fast.”"}],[{"start":218.2,"text":"Chinese companies have also in some cases bought foreign brands. Yatsen, a Guangzhou-based company that listed in New York in 2020, has bought Galénic from L’Oréal, Eve Lom in the UK and the mainland rights to Taiwanese skincare brand Dr Wu."}],[{"start":232.68,"text":"In 2023 Yatsen, which also sells its own brand Perfect Diary, launched a factory with Cosmax and also has research and development centres in Shanghai and Toulouse. Proya also this month held a launch ceremony for its Innovation Center Laboratory in Paris."}],[{"start":247.68,"text":"“I think the global expansion for us is a two-way strategy,” said David Huang, chief executive of Yatsen, referring to selling the company’s own brands overseas and bringing foreign brands into China. “Chinese consumers are very sophisticated.”"}],[{"start":259.56,"text":"Sohail Shaikh, the British deputy trade commissioner for China, said UK brands aim to sell “science-led products” in China. Consumers in China were “inquisitive”and “do more research than in most other parts of the world”, he said."}],[{"start":null,"text":""}],[{"start":273.36,"text":"However, the cosmetics market has come under pressure at a time of weak consumer confidence in the world’s second-biggest economy, with the market’s total size declining in 2024 according to Frost & Sullivan, before edging higher last year."}],[{"start":287.92,"text":"Yatsen shares have fallen 98 per cent since listing in New York in late 2020, leaving it worth less than $225mn. Yatsen made a loss in the second quarter, while Proya’s revenues fell 1.7 per cent last year and rose by just 0.2 per cent in the first half."}],[{"start":306.48,"text":"Revenues at Mao Geping, another well-known Chinese company that listed in Hong Kong in 2024, increased by 26 per cent in the first half to Rmb3.3bn ($492mn). Morningstar noted that its “brand strength” helped support gains in a “weak and crowded beauty market”."}],[{"start":325.44,"text":"“The next step for them is to expand in south-east Asia,” said Morningstar’s Tan. Yet she noted that the global industry was “very difficult”, with South Korean brands struggling to break through."}],[{"start":336.64,"text":"Li at Chando said “internationalisation is a crucial part of our corporate strategy”, including in south-east Asia, but that China remained the “primary battleground”."}],[{"start":345.36,"text":"“We remain fully confident in both the Chinese economy and the cosmetics market — otherwise we wouldn’t have expanded our production capacity last year to meet anticipated future demand,” he said."}],[{"start":356.36,"text":"Still, the wealthiest consumer markets in the world could offer a potential reprieve from pressures at home. In November Proya will launch two of its skincare collections in 400 US stores operated by Illinois-based retailer Ulta Beauty."}],[{"start":370,"text":"Such ambitions ultimately rely not only on domestic consolidation but also a greater focus on branding."}],[{"start":376.28,"text":"International shoppers are not yet choosing a Chinese product in the same way they might select one from Estée Lauder, said the person familiar with the market. Chinese brands “are not speaking in a branded way to consumers of the west”, they added. “They need to focus on the market gaps.”"}],[{"start":396.64,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1793341546_9453.mp3"}