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after being squeezed by foreign brands for many years, domestic beauty brands are now "holding their heads high" and are gradually taking over the "cake" of other brands.

in this half-year earnings season, when foreign brands are eclipsed, domestic beauty brands are celebrating double-digit or even doubling growth in the first half of the year. last year, domestic brands’ share of the domestic beauty market exceeded 50% for the first time, surpassing foreign brands. according to the latest data from the china flavor and fragrance cosmetics industry association, this figure rose to 56.7% in the first half of this year.

domestic cosmetics consumption has entered the era of inventory, and beauty companies are almost "fighting to the death". the reporter of "daily economic news" sorted out 18 domestic beauty-related companies, including brand companies, raw material companies, and oem companies, and found many new characteristics of domestic beauty products in the first half of the year.

on the brand side, proya's half-year revenue exceeded 5 billion yuan, and the first domestic beauty company with an annual revenue of over 10 billion yuan is expected to emerge. the penetration rate of e-commerce has increased significantly. the online channel revenue of proya and shangmei co., ltd. (data not audited, the same below) accounts for more than 90% of the total revenue, almost becoming pure e-commerce brands. brands that can "play" online marketing and are willing to continue to invest money will eventually use the rising marketing costs to increase market share. on the other hand, shanghai jahwa and shuiyang co., ltd., which are undergoing adjustments and changes, are more or less facing performance growth pressure.

in the beauty industry, the hottest raw materials for cosmetics have changed, with hyaluronic acid fading and recombinant collagen becoming the new hot commodity. the scale and profitability of local oem factories are relatively weak, and the three local oem factories combined cannot beat south korea's cosmax.

image source: daily economic news data map

scan of 18 companies: proya aims for annual revenue of 10 billion yuan; medical beauty and raw materials are the most profitable

the semi-annual reports of domestic cosmetics companies have all been released, with proya taking the lead with a revenue of 5 billion yuan. this is the first time that a domestic cosmetics company has achieved a half-year performance of over 5 billion yuan. if it performs steadily in the second half of the year, proya may become the first domestic cosmetics company with an annual revenue of 10 billion yuan.

shangmei co., ltd. and shanghai jahwa co., ltd. entered the "3 billion yuan club". shangmei co., ltd. doubled its growth rate and ranked second in the industry, while it ranked eighth in the same period last year. shanghai jahwa co., ltd., a long-established daily chemical company and ranked first in the same period last year, lacked growth momentum and fell to third place.

data source: financial report, compiled by reporters (note: net profit continues to rank according to operating income)

in the first half of this year, the four domestic beauty companies with revenues between 2 billion and 3 billion yuan include huaxizi biology, beitanni, juzi biotechnology (data unaudited, the same below) and shuiyang cosmetics; the companies with revenues between 1 billion and 2 billion yuan in the same period include fureada, aimei, perfect digest, kosei, haohai biotechnology and marubi; the companies with revenues below 1 billion yuan in the same period include fulejia, qingsong cosmetics, jinbo bio, jiaheng home cosmetics and bawei cosmetics.

overall, among the 18 domestic beauty companies, 12 saw positive revenue growth in the first half of this year. the company with the highest growth rate was shangmei co., ltd. (120.72%), followed by jinbo bio (90.59%) and juzi bio (58.21%), both of which are representative companies in the field of recombinant collagen cosmetics and raw materials.

it is worth mentioning that most of the top-ranked companies are brand-based enterprises facing the c-end, while the raw material and medical beauty product companies facing the b-end are ranked in the middle, and the ones at the bottom of the list are mainly cosmetics oem companies. this also means that the commercial value and market size of brand-based enterprises are still at the top of the industry chain.

in addition, from the perspective of profitability, the largest company, proya, is not the most profitable. among the 18 companies, the company with the highest net profit attributable to its parent company is aimei (1.121 billion yuan), followed by juzi biotechnology (983 million yuan). proya can only rank third with a net profit of 702 million yuan. this is mainly related to the gross profit margin of its industry.

aimei and juzi biotechnology have mastered the production processes of hyaluronic acid and recombinant collagen, which have relatively high barriers. their products are widely used in skin care products and medical beauty scenarios, and the company's overall gross profit margins are as high as 94.91% and 82.40%, respectively. both companies have also been sought after in the capital market and are at the top of the market value list of domestic beauty companies. aimei is known as the "medical beauty giant" with a market value of over 40 billion yuan, while juzi biotechnology has been listed for less than two years, and with a market value of 37.2 billion hong kong dollars, it is almost the same as proya, which has been listed for seven years and ranks first in domestic sales (market value as of the close of september 13).

c-end brand melee: 90% of online sales, hansu and proya "grow" in e-commerce

on september 14, the national bureau of statistics released data showing that from january to august, the total retail sales of cosmetics was 273 billion yuan, down 0.5% year-on-year, lower than the 3.4% year-on-year growth rate of total retail sales of consumer goods. the era of inventory has arrived, and the "cake battle" has become more intense.

data source: financial report, compiled by reporters

the operating income of proya, shangmei, beitanni, juzi bio, and marubi all achieved double-digit or even triple-digit year-on-year growth, taking away the market share lost by many domestic small and medium-sized brands and some mid-range international beauty brands. shanghai jahwa, huaxi bio, yatsen e-commerce, and aries are still in the process of getting rid of difficulties such as brand aging and path dependence, and were in an adjustment period in the first half of the year, so their performance was not good.

the reporter of daily economic news noticed that the leading domestic brands have provided a new paradigm for the growth of beauty products, that is, online sales are the main battlefield. the reporter found that the online sales of proya and shangmei accounted for more than 90%, and their business was almost all on e-commerce platforms. the online sales of marubi accounted for more than 80%, and beitanni and juzi biotechnology accounted for nearly 70%.

data source: financial report, compiled by reporters (note: juzi bio's online channel revenue only counts the direct sales model revenue)

compared with traditional "taobao" e-commerce, beauty brands are more willing to "invest heavily" in douyin channels, and the two major online channels are growing and declining. citic securities research report cited data from alchemy furnace and chan mama, saying that in the first half of 2024, the sales of beauty products (skin care + makeup) on taobao platforms will reach 107.3 billion yuan, a year-on-year decrease of 3.6%, and sales on douyin platforms will reach 90.5 billion yuan, a year-on-year increase of 43.5%.

in the e-commerce channels, on the one hand, hansu brand under shangmei co., ltd. achieved soaring sales with the help of douyin short dramas, and also led the short drama marketing trend of its peers; on the other hand, brands focused on "hitting the hot spots" with star-studded products, constantly updated and iterated, and sold them in set gift boxes, thereby reducing consumers' decision-making costs.

this logic has become an industry consensus. proya's "dual antibody" and "ruby" series, hansu's "red waist" series, juzi bio's "collagen stick", and beitanni's "weinona special care essence" are all top-selling products online. according to shangmei co., ltd., as of the end of june, hansu's "red waist" gift box had sold more than 10 million sets through all channels.

however, grabbing traffic online is not without cost, and brands have paid high marketing costs for this. reporters have found that the sales expenses of many brands have risen sharply, accounting for about 50% of their revenue. among them, shangmei shares has a more aggressive marketing, with sales expenses increasing by 137.1% in the first half of the year (proportional to the increase in revenue), accounting for 57.6% of total revenue.

data source: financial report, compiled by reporters

many companies also explained the necessity of marketing in their financial reports. shangmei co., ltd. said: "in order to increase brand exposure and seize new channel opportunities, we will increase brand publicity and channel construction." marubi co., ltd. also said: "while online competition is fierce and traffic costs are rising, the company is determined to promote brand building and scientific communication investment."

regarding the high growth brought about by high marketing, wu zhigang, founder of brand consulting agency oib.china, analyzed to reporters: "a big reason for the growth of these beauty brands (performance) is that they communicate with the new generation of consumers in a content-based way and have reaped the dividends of the douyin channel. such dividends are short-lived and there is a high probability that there will be a time for callback. when new content marketing methods and channel media change, traffic will also decline. therefore, before the decline, whether the company has found the second and third growth curves is a key issue."

he further stated that this first requires brands to have a balanced development curve across all channels. "for some brands, online business accounts for more than 90%. online growth is fast, but the risks are also obvious. in addition to a single online channel, is it possible to develop more offline channels? however, the short-term recovery of domestic offline channels still faces some challenges." he analyzed that, secondly, companies need a multi-brand growth curve, and the growth path of some companies' second brands may take some time; the third is to go overseas, and some brands have gone to southeast asia, which are all potential growth dimensions.

competition for b-end raw materials: hyaluronic acid "dies" while recombinant collagen "rises"

raw materials are to cosmetics what chips are to electronic products. in the first half of the year, beauty companies not only competed in marketing, but also in ingredients. the development of raw materials and their technical applications have become the "highlight" of research and development for beauty companies.

in the field of beauty and medical beauty, hyaluronic acid used to dominate the market, which also pushed up the market value of the "three musketeers of hyaluronic acid" (aimeike, huaxi biotechnology, and haohai biotechnology). among them, aimeike's peak market value exceeded 170 billion yuan. however, the concept of hyaluronic acid began to cool down in the second half of 2021. the market value of the three companies now almost presents an "inverted v" shape, and aimeike's market value has now dropped to 40.9 billion yuan.

this can also be seen from the performance. in the first half of this year, huaxi bio's revenue and net profit both declined year-on-year, and its performance showed a downward trend; the revenue of aimei and haohai bio increased by 13.53% and 6.97% year-on-year respectively, but it was far less than the high growth rate in the first half of 2021.

data source: financial report, compiled by reporters

popular raw materials are accelerating their iteration, and recombinant collagen is likely to become the "next hyaluronic acid". juzi bio and jinbo bio, which mainly produce recombinant collagen, both achieved a revenue growth of more than 50% in the first half of the year. on the other hand, cosmetics brand companies have also begun to enter the market, including proya, marubi co., ltd. and dr. aier under freda, all of which are developing skin care products with recombinant collagen as the core.

even huaxi bio, which was not optimistic about the application of recombinant collagen in skin care products, announced that it would regard collagen as "the second strategic bioactive substance after hyaluronic acid". international brands also attach importance to this raw material layout. l'oreal's second-generation mini pot cream added recombinant collagen for the first time, and shiseido's aupres new electric eye essence added recombinant humanized collagen.

chen laicheng, founder of guangzhou mashanghui biotechnology co., ltd. and senior cosmetics r&d engineer, told reporters: "hyaluronic acid has been very mature in the domestic cosmetics industry for more than a decade, and has become very popular among ordinary consumers in recent years. cosmetic formulators basically add sodium hyaluronate when developing skin care products. the high popularity rate also means that there is not much room for imagination, so the recombinant collagen that started two years ago has filled this gap."

he mentioned: "recombinant collagen is a chinese-style biosynthetic fermentation raw material. currently, there are more than 20 recombinant collagen r&d and production companies that have deployed from the raw material end. although recombinant collagen is currently popular, the transdermal performance, effectiveness, and safety (toxin removal degree) of recombinant collagen for skin care are still controversial. the scale of raw materials is still in the climbing stage, and the price is relatively high. therefore, there are still challenges in large-scale popularization and application."

in addition to recombinant collagen, other raw material innovations are also flourishing. according to statistics from the daily economic news, since the implementation of the "new cosmetics regulations" in 2021, the registration of new cosmetic raw materials has increased rapidly. so far, more than 180 new raw materials have completed the registration procedures. among listed companies, beitani is relatively active in filing. it disclosed in its 2024 semi-annual report that in the first half of the year, "brachia brevis extract", "lychee grass extract", "taxus chinensis seed oil", "taxus chinensis twig extract" and "meconopsis racemosa extract" have completed filing.

the "three kingdoms" of oem factories: three local companies are no match for one foreign company, so they have to scramble to get the "thighs" of customers

compared with the brand and raw material ends, the gross profit margin of cosmetics oem factories is lower, mostly below 30%, which makes it more difficult to "make money". in the ranking of domestic cosmetics companies in the first half of 2024, qingsong cosmetics, jiaheng home cosmetics, and bawei cosmetics, three cosmetics oem companies, all ranked at the bottom of the list with revenues of less than 1 billion yuan.

in general, the scale and profitability of domestic cosmetics oem factories are relatively weak. qingsong cosmetics and jiaheng home cosmetics saw a year-on-year decline in revenue of 7.1% and 5.1% respectively in the first half of 2024. in terms of net profit, jiaheng home cosmetics turned from profit to loss year-on-year, and bawei cosmetics fell 32.14% year-on-year. although qingsong cosmetics, the largest company, turned losses into profits, it was mainly achieved through cost control, and the profit was less than 7 million yuan, which was still thin compared with the revenue of more than 800 million yuan.

data source: financial report, compiled by reporters

a reporter from the daily economic news found that the financial reports of the three companies all mentioned the issues of "customer stability" and "fierce market competition."

china's cosmetics oem industry is characterized by a fragmented structure and dominated by small and medium-sized enterprises. according to a research report by western securities, there are currently more than 5,000 companies with cosmetics production licenses in china, most of which have a total sales volume of less than 200 million yuan. as a leading local company, north bell, a subsidiary of qingsong co., ltd., has a market share of 6.36%, jiaheng home cosmetics has a market share of 1.6%, and bawei co., ltd. has a market share of 1.06%. the combined market share of the three companies is less than 10%, and other small and medium-sized oem companies occupy more than 90% of the market.

in addition, upstream oem factories of international brands have also entered china, intensifying market competition. korean manufacturer cosmax has factories in shanghai and guangzhou, and italian manufacturer intercos has its chinese production base in suzhou. according to the financial report, cosmax's east china market, which is mainly in china, achieved sales of 305 billion won (about 1.629 billion yuan) in the first half of 2024, exceeding the total of the three local oem factories in china; intercos's revenue in asia in the first half of the year was 101 million euros (about 794 million yuan), of which china and south korea both resumed double-digit growth.

as competition intensifies, maintaining customer stability becomes the key to sustained growth, especially with international big brand customers. to this end, when bawei co., ltd. went public, it proposed to implement the strategy of "serving big customers and focusing on big single products" to improve performance by optimizing the customer structure. qingsong co., ltd. pointed out the key to grabbing customers in its financial report: "well-known brands are very strict in selecting suppliers and tend to establish stable business relationships with high-quality suppliers, thus providing a good guarantee for the stability of the business of north bell (north bell cosmetics co., ltd., the main business operator of the listed company)."

in comparison, as the leading local beauty oem company, qingsong co., ltd. has more valuable customers than the other two companies, and has more top international customers, such as unilever, procter & gamble, sephora, shiseido, nivea, etc., as well as well-known domestic brands such as shanghai jahwa, perfect diary, huaxizi, and winona.

despite the many challenges currently facing it, the cosmetics oem industry still has broad development opportunities. frost & sullivan predicts that from 2022 to 2025, the scale of my country's cosmetics oem industry is expected to grow from 43.41 billion yuan to 62.29 billion yuan, achieving an average annual compound growth rate of 12.79%. huaan securities' financial report analysis stated: "the downstream demand for cosmetics has maintained rapid growth. the diversification of brands, populations, and channels has prompted brand owners to have higher production capacity, bringing opportunities for the development of oem/odm companies. at the same time, the implementation of the new cosmetics regulations has raised production quality requirements. small and medium-sized oem companies with insufficient production capacity are expected to be cleared out, which is good for the leading oem companies."

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