Tao Wengang

Wuhan Pinguan Midia Co.,China

After being settled in Shanghai for 25 years,L’Oreal formally announced in May 2021 that the Headquarter of North Asian Zone of L'Oreal Group was established in Shanghai,covering 3 Asian core markets—China,Japan and South Korea.In less than two year after the new domestic brand PMPM was established in Shanghai,its transaction volume in the first quarter of 2021 surpassed that of the whole year of 2020,and its sales volume in May exceeded 0.1 billion yuan.There should have been no intersection between a gigantic international group and a newborn domestic brand.However,both chose to take root in Shanghai and are developing rapidly.

In China,there are two recognized beauty makeup industrial cities:Guangzhou and Shanghai.In recent years,Shanghai is assuming a tendency of rising again.From China time-honored brand to classical domestic brand,from international big brand to new domestic brand,from supply chain to frontline consumer,at those moments most memorable for the industry,Shanghai has scarcely ever been absent.From VIVE,Pechoin,MAXAM to the imported brands Max Factor,Ponds and Hazeline,for more than 100 years,myriads of domestic and foreign beauty makeup brands have met or even“fought against each other” in Shanghai.Amid the intermingling and surging of domestic and foreign brands,the beauty makeup industry in Shanghai has gradually come to a new height.

A “powerful capital of beauty makeup”

As the only “Chinese cosmetic capital”,Shanghai fully deserves the title of “powerful capital of beauty makeup”.Shanghai is powerful because its import quantity of beauty makeup products remains stably in the first place.Shanghai is the largest port for cosmetics import in China.In recent years,the import amounts of domestics from Shanghai Port have maintained over 60% of that of China.According to the statistics of Shanghai Customs,the total import and export value of Shanghai in 2020 reached a new historical height again to be RMB 3.48 trillion yuan.Of it,the import amount of beauty products and toiletries was 52.63 billion yuan,with a year-on-year increase of 17.9%.It is reflected in the filing record of imported non-special cosmetics.

According to the statistics of Enter Technology,the filing volume of imported non-special cosmetics in China in 2020 was 11,143,which was 3.3 times that of Guangdong taking the second place.In addition,the top 11 domestic duty officers for filing of imported products in 2019 filed 4,544 in total,accounting for about 29% of the overall filing quantity of domestic duty officers in 2020.Moreover,the Chinese headquarters of these domestic duty officers are all located in Shanghai.For filing record of imported non-special cosmetics in China in 2020 (Top 6).

Shanghai is powerful because it is a “hub” of international beauty makeup giants in China.As a city with the greatest concentration of regional headquarter institutions of transnational companies in China’s mainland,Shanghai is also a preferred place for famous international cosmetics enterprises to enter China.Many international giants such as Johnson &Johnson,Unilever,L’Oreal and Shiseido are gathering here.For details,please see Table 1.

Table 1.Chinese cosmetics enterprises headquartered in Shanghai (Part)

Shanghai is powerful because it is the “cradle” of domestic brands.Well-known domestic brands such as VIVE,Pechoin,Inoherb,Chcedo,KANS,Chioture and Judydoll were all born in Shanghai.For details,Please see Table 2.

Table 2.Foreign enterprises headquartered in Shanghai (Part)

Shanghai is powerful because it has perfect beauty makeup upstream and downstream industrial chains.In fact,not merely in brand terminal,Shanghai has superpower strengths in both upstream and downstream of the beauty makeup industry,in raw material terminal,there are Royal DSM,BASF and Henkel Germany;in supply chain terminal,top enterprises such as COSMAX and Intercos have been attracted to build plants and R&D centers;in beauty makeup TP,there are two listed enterprises - Lily&Beauty and Baozun E-commerce;in beauty makeup e-commerce,Shanghai’s local platforms such as Pinduoduo,Bilibili and Little Red Book are in the ascendant.

Shanghai is powerful because it is leading the consumption strength of the Chinese people.According to the data released by Shanghai Statistics Bureau,the per capita disposal income of Shanghai

in 2020 was 72,232 yuan,ranking the first in China’s 31 provinces (municipalities,autonomous regions).It is the only province whose per capita disposal income exceeded 70,000 yuan.According to 2020 Report about City of New Domestic Brand released by CBNData with Tmall,Shanghai ranks the first on the TOP 20 list of “City of New Domestic Brand Consumption” and the sales amount of new brands with Shanghai as registered place accounted for nearly one-sixth of that of new brands in China.Of them,there is no lack of beauty makeup brands such as Little Ondine,Zhiben and Judydoll.In addition,according to the 2020 female consumption data released by Kwaishop,the makeup purchasing powerful of Shanghai’s clients ranked the first in China.

Once occupying half of China's cosmetics market

The beauty makeup industry of Shanghai can be traced back to the beginning of the 20th century.In 1910,the cosmetics brand “VIVE” created by Kwong Sang Hong in Guangxu period was settled in Nanjing Road,lifting the curtain of national brands surging Shanghai Bund.At that time,it was an advanced fashion front in Shanghai Bund.Kwong Sang Hong was the predecessor of the present Shanghai Jahwa.According to some materials,dozens of domestic daily chemical brands were simultaneously active in Shanghai in 1920s and 1930s.As one of China’s first treaty port cities,Shanghai was a place where imported cosmetics were very common.For example,brands such as Max Factor,Hazeline,Tangee,Three Flower and Ponds once crossed seas and oceans to reach this city infested with foreign adventurers.

Zhang Ailing,who lived in Shanghai for a long time,wrote inChildren and Fools Speaking the Truth,“It was in my middle school days that I earned money for the first time of my life.I drew a cartoon and contributed it to the English Shanghai Evening Post and Mercury.The paper office gave me five yuan and I immediately bought a Tangee lipstick of small size.” From it,we can see how popular imported cosmetics were in that era.

According toShun Pao,the then most influential newspaper,China’s input amount of the perfume,rouge and powder from January to August,1934 was 1.155,1 million yuan and Shanghai alone accounted for 75% with 0.8739 million yuan.Imported products including cosmetics sold so well that a domestic product campaign was started in Shanghai in the 1930s.EvenShun Paoset a special page as a front for domestic product publicity,on which we can see slogans such as “I am a Chinese and I love Chinese products.”

However,from the founding of new China to the end of the 20th century,a host of domestic beauty makeup brands from Shanghai,including VIVE,Pechoin,Shanghai,MAXAM,Gongdeng,Yongmei and BEE&FLOWER,began to become“hard currencies” salable all over China.According to public materials,in 1981,the total output value of 68 enterprises joining China Association of Fragrance Flavor and Cosmetic Industries was 0.415 billion yuan and the output value of enterprises in Shanghai was 0.191 billion yuan,accounting for 46% of the total output value of China.In 1988,the total output value of China’s 91 cosmetics factories subordinated to the system of the Ministry of Light Industry was 1.1 billion yuan and the total output value of 58 cosmetics enterprises from Shanghai was 0.612 billion yuan,accounting for 55.6%.It can be said that in this period,Shanghai contributed to one half of China’s cosmetics industry almost on its own strength.

Domestic and overseas brands flying together

At the end of the 20th century,imported cosmetics began to “return” to Shanghai.In 1992,the report of the 14th National Congress of the CPC pointed out that Shanghai would be built into one of international economic,financial and trade centers.In this background,Shanghai first raised the strategic assumption of attracting headquarter institutions of transnational companies and in the subsequent dozen years,through keeping on strengthening the supporting policies about regional headquarters of transnational companies,it attracted many transnational companies to make money.

Unilever was the first to be settled in Shanghai.Then Johnson &Johnson came,L’Oreal,Shiseido and Estee Lauder came… By December 2020,with 767 regional headquarters of transnational companies,including many cosmetics giants,Shanghai became a city with the greatest concentration of regional headquarter institutions of transnational companies in China’s mainland.This achievement was made through economic benefit drive.For example,in 2007,the annual output value of COSMAX in China was only 30.00 million yuan,but in 2021,its output value exceeded 3.3 billion yuan with an increase of 110 folds.Enterprises such as L’Oreal,Shiseido and Estee Lauder are refilled with vitality in China.

When domestic and foreign brands “fought against each other at close quarter” and the old pattern was being replaced by the new pattern,almost all high-end markets were occupied by international brands,and domestic brands could only survive between cracks.

However,in recent years,with domestic brands doing everything to catch up and facilitated by many favorable factors such as markets in lowertier cities,online channels,young consumers and short videos,the local domestic brands of Shanghai kept on exceeding themselves to actually assume the“responsibilities of domestic brands”.

According to an investigation report of Kaiyuan Securities,among TOP 10 companies with the largest Chinese cosmetics market occupancy in 2018,there were three domestic enterprises,i.e.Pechoin,CHICMAX and Jala Group,with a total percentage of 7.5%.To mention the beauty makeup industry of Shanghai,Fengxian District is one of core regions that cannot be neglected.There are more than 400 cosmetics enterprises settled in Fengxian District,with the total number accounting for more than 25% of that of Shanghai and with a sales amount of 40%.It is worth mentioning that new brands such as Perfect Diary,Rocking Zoo,Zhuben and PMPM have been settled there successively.

Jointly driven by traditional domestic brands,international big brands and new brands,the beauty makeup industry of Shanghai was again pushed to a new height.

Who can dominate in the future?

In the industrial map of beauty makeup industry of China,Shanghai now doubt occupies a key position.However,Guangzhou,as an“old king” can never be underestimated.According to relevant data,by February 2021,there are more than 5,400 licensed cosmetics enterprises in China,but Guangdong Province alone has 2,997,accounting for more than 55%.Of it,Guangzhou alone accounts for 70% of Guangdong Province.While in Shanghai,there are 227 licensed cosmetics enterprises,accounting for only 4% and this number is behind Zhejiang and Suzhou.is about the number of licensed cosmetics enterprises in China (Top 6).

It means that in terms of the number of cosmetics enterprises,Guangzhou fully deserves the title of “old brother”.In the aspect of brand,there are foreign-funded brands such as P&G,domestic brands such as Marubi,Liby,La Fang,Danz,Houdy and Carslan and new brands such as HFP,Perfect Diary,Simpcare,Colorkey and Grain Rain.In the aspect of factory,there are Nox Bellcow,COSMAX.

Therefore,the strength of Guangzhou’s beauty makeup industry is evident.However,some industry insiders point out that although Guangzhou is a big industrial city,there are some disadvantages.Factors such as too many factories,fierce competition and easy accessibility to low-price raw materials and packing materials have affected the overall image of Guangzhou’s cosmetics industry to some extent.Actually,in addition to Pearl River Delta represented by Guangzhou,the beauty makeup industry in Yangtze River Delta is also taking a stronger momentum.A “pan-Shanghai urban circle” with a radius of 180 kilometers centering on Shanghai,composed of cities such as Hangzhou,Suzhou and Huzhou,has almost taken shape and is constituting a new pattern of China’s cosmetics industry.

In Hangzhou,apart from classical brands such as Proya,Osmun and MGPIN,a host of new beauty makeup brands including Florasis,LAN,Newbie and Formulator are emerging.Relying on China’s largest cosmetics e-commercial platform Taobao Tmall and a good e-commercial environment,Hangzhou has evidently become the “third industrial pole” besides Shanghai and Guangzhou.

According to relevant data,by April 2021,there are 576 cosmetics manufacturers with production permits and about 6,000 cosmetics brand operation companies in Zhejiang Province.Of them,there are about 30 enterprises with a scale exceeding 0.1 billion yuan and about 10 enterprises with a scale exceeding 1.0 billion yuan.

The “ambition” of Hangzhou does not stop here—Implementation Program about High Quality Development of Cosmetics Industry of Zhejiang Province(2020-2025)issued by Economic and Information Technology Department of Zhejiang and Zhejiang Medical Products Administration pointed out,“By 2025,the annual sales revenue of the cosmetics industry in Zhejiang Province will exceed 200.0 billion yuan… The beauty makeup brands of Zhejiang Province will occupy a share of more than 25% in the domestic beauty makeup market.”

In Suzhou,world-leading OEM factories such as Intercos,L’Oreal Shangmei,Japan Kolmar and Cosmecca are located in Suzhou Hi-tech Development Zone with foreign investment as the core,and cosmetics produced in Suzhou are being sold to all over the globe.

In Huzhou,the “Chinese beauty makeup town”has introduced through contract signing more than 170 enterprises relevant to cosmetics,including the domestic leading enterprise Proya,Asia’s largest packaging material enterprise Yonwoo,South Korea’s third largest cosmetics enterprise Hanbul,Italy’s famous brand VIRIDIS and famous retailer Gialen,with a total investment of more than 30.0 billion yuan.

Whether in Guangzhou or Shanghai or in Hangzhou,Suzhou or Huzhou,they have their own distinctive characteristics - Guangzhou’s popularity,Shanghai’s high-end orientation,Hangzhou’s social commerce,Suzhou’s factorization …Complementing each other,they jointly constitute a complete industrial map about China’s cosmetics.

However,it is evident that the key for any city to carry the banner for the development of China’s cosmetics industry is still science and technology.The innovation that domestic cosmetics industry should adopt most is scientific and technological innovation.If scientific research is neglected,the cosmetics industry can hardly have a future.