Cai Xing

Wuhan Pinguan Media Co.,China

Governments in different regions are attaching more and more importance to the makeup industry.Ever since “the 14th Five-Year Plan” set a keynote,provinces/municipalities such as Guangdong,Shanghai and Zhejiang have released policy documents to promote high-quality development of the cosmetic industry successively.From their planning blueprints,we can catch a glimpse of the makeup industry blueprint for 2025: By 2025,Yangtze River Delta is expected to replace Pearl River Delta to become the first pole of Chinese makeup industry;by 2025,there will be 14 enterprises with an operating revenue exceeding 10 billion yuan in China;by 2025,the market share of local makeup brands will exceed 75%,completely getting out of the dilemma of being crimped by international brands;by 2025,Shanghai is still a makeup brand clustering area highlighting tonality,quality and technology yet Guangdong will tear off the label of “l(fā)ow-quality OEM”,and take the lead in brand building in China…

“To realize the above goals,domestic makeup enterprises including those in Zhejiang still need some time,but there is a good beginning now.” said one makeup brand principal of Zhejiang.It’s true that there is still an enormous gap between local makeup brands and international brands.However,driven by the policies,makeup industry in different regions will widen dominant positions and improve weak links,and the makeup industry in China is sure to usher in an upgrading and metamorphosis.

With changes in the pattern,three growth poles will support a market of over 500.0 billion yuan

According to my incomplete statistics,focusing on the promotion of high-quality development of the cosmetic industry,provinces/municipalities such as Guangdong,Shanghai and Zhejiang released 8 related documents successively to portray a “blueprint” of industrial development (Table 1).

As Shanghai aims to achieve a market size of 300.0 billion yuan,Yangtze River Delta is expected to become the first pole of China’s makeup industry.According to Action Plan of Shanghai Municipality on High-quality Development of the Cosmetics Industry (hereafter referred to as “Shanghai Action Plan”),by 2023,the cosmetics market size of Shanghai is expected to reach 300.0 billion yuan,and the main business revenue of the cosmetic industry will exceed 100 billion yuan.Zhejiang and Guangdong have made a plan up to 2025.Of them,the annual sales revenue of Zhejiang’s cosmetic industry is expected to reach 200.0 billion yuan,and the output scale of Guangdong’s cosmetics industry is expected to exceed 175.0 billion yuan (the output scale of Guangzhou’s cosmetics industry is expected to reach 150.0 billion yuan,and the sales revenue of Zhongshan’s cosmetic industry is expected to reach 25.0 billion yuan.).It means that if these targets can be realized according to the plan,the sales revenue of the cosmetic industry of these three industrial centers will reach about 500.0 billion yuan by 2025.Yangtze River Delta with Shanghai and Zhejiang as the core has a strong development momentum.

According to public data,the cosmetic industrial scale of Guangzhou reached 107.9 billion yuan in 2021,ranking the first in China.At present,the number of certified cosmetics manufacturers in Guangzhou accounts for 57.45% of the number of certified cosmetics manufacturers in China.Guangzhou’s certified cosmetics manufacturers are mainly clustering in the three major makeup industrial parks,which are “Baiyun Beauty Bay”,“Cbcity”and “South Beauty Valley” respectively.Zhejiang,Jiangsu and Shanghai have 585,349 and 239 certified cosmetics manufacturers respectively.That is,these three provinces have a total of 1173 certified cosmetics manufacturers,accounting for 18.63% of the number of certified cosmetics manufacturers in China.

Relatively speaking,though Shanghai and Zhejiang have fewer certified manufacturers,Shanghai is a high-quality representative of China’s makeup industry for its high proportion of excellent enterprises above designated size,and has attracted more than 30 multinational groups such as L'oreal,Estee Lauder,Unilever and Shiseido to settle there;Zhejiang has formed a cosmetic industrial center with Hangzhou and Huzhou as the core.The e-commerce industry of the former is taking the lead in China,while the “makeup town” of the latter is developing rapidly,and has a relatively complete industrial chain.

According to a certain industrial senior person,at present,Pearl River Delta represented by Guangzhou is the first pole of China’s makeup industry for its scale advantage because the number of makeup manufacturers there account for half of the number of makeup manufacturers in China.If the above targets can be realized,it means that Yangtze River Delta is expected to surpass Pearl River Delta to become the first growth pole of the cosmetic industry.Though Guangdong is barely satisfactory in brand building,judging from the current situation,it is still far and away “number one” in terms of output scale of cosmetics and number of cosmetics enterprises.Due to its rich historical accumulation in makeup industry,mature supply chain and abundant talent reserve,Guangdong has an evident industrial advantage,and is more hopeful to realize the above targets.

The brands of Guangdong and Zhejiang account for 75% of the market share.The goal of increasing the market share has been incorporated into the strategic program of various regions.According to Implementation Program of Guangdong Province on Promoting High-quality Development of the Cosmetics Industry (hereafter referred to as “Guangdong Implementation Program”),by 2025,the market share of local proprietary makeup brands of Guangdong will exceed 50% of that of China.As a bright younger generation,Zhejiang has a great ambition.According to Implementation Program of Zhejiang Province on Promoting Highquality Development of the Cosmetics Industry(hereafter referred to as “Zhejiang Implementation Program”),by 2025,the market share of Zhejiang’s makeup brands will account for more than 25% of the domestic makeup market share.That is to say,by 2025,the makeup products of Guangdong and Zhejiang will account for 75% of the market share,while the remaining 25% will be scrambled for by brands of other regions.According to Domestic Makeup Insight Report released by Tencent,domestic makeup brands have accounted for 56% of the makeup market share;viewed from the purchase willingness of consumers,42% of them prefer to choose domestic makeup brands,and 90% of them say that they will buy domestic makeups again in the future.

At present,domestic cosmetics account for less than 60% of the total makeup market share,so it is very difficult for Guangdong and Zhejiang to seize 75% of the total makeup market share by 2025,but it is hopeful that they can seize 75% of the domestic makeup market share.To realize the above goals,Guangdong needs to improve enterprise brand building,making the enterprises more elaborated and powerful,while Zhejiang needs to expand the overall industrial scale.If the above targets can be achieved as scheduled,it means that Guangdong will be further strengthened in four aspects,i.e.brand strength,product power,fashion and degree of internalization,and take the lead in China’s makeup industry.

Shandong will become the third pole of the makeup industry.According to Implementation Opinions of Shandong Province on Promoting Highquality Development of the Cosmetics Industry(hereafter referred to as “Shandong Implementation Opinions”),by 2025,there will be 1 cosmetic enterprise with an annual sales volume of 10.0 billion yuan,2 cosmetic enterprise with an annual sales volume of 5.0 billion yuan,and 10 cosmetic enterprise with an annual sales volume of 2.0 billion yuan,and more than 100 enterprises above designated size in the province.By 2025,Shandong will become a cosmetic industrial center in the north,and is hopeful to become the third pole of China’s makeup industry.Pearl River Delta and Yangtze River Delta will get a firm foothold in the makeup industry by relying on mature supply chain and e-commerce advantage respectively.By contrast,the makeup industry in Shandong has three advantages: The first is geographical advantage.Shandong is now the largest makeup consumer market north of the Yangtze River,and is close to Japan and South Korea,so it is called a “strategic place” in the circle.The second is material advantage.The largest hyaluronic acid and alginate production,research and development base in the world,and the largest peony and rose planting and deep-processing base are in Shandong.The third is industrial advantage.Shandong has many cosmetics-related universities and talents,and the labor cost there is relatively lower.

Of the 14 enterprises with an operating revenue exceeding 10 billion yuan,who will become the first to make a breakthrough?

Reviewing policy documents of different regions,we can find that to cultivate enterprises with an operating revenue exceeding 10 billion yuan and famous brands has become a core key word.According to the plan,by 2025,China will have 3～5 cosmetics enterprises with an annual operating revenue of more than 20.0 billion yuan,9 cosmetics enterprises with an annual operating revenue of more than 10.0 billion yuan,22 cosmetics enterprises with an annual operating revenue of more than 5.0 billion yuan,and more than 20 famous international brands.Of them,Guangdong is most resolute.It plans to have 3～5 cosmetics enterprises with an annual operating revenue of more than 20.0 billion yuan,3～5 cosmetics enterprises with an annual operating revenue of more than 10.0 billion yuan,more than 10 cosmetics enterprises with an annual operating revenue of more than 5.0 billion yuan,and more than 10 famous national brands.Shanghai claims to have 10 cosmetics enterprises with an annual operating revenue of more than 5.0 billion yuan,10 cosmetics enterprises with an annual operating revenue of more than 2.0 billion yuan and 3～5 leading brands going globally,and cultivate 20 domestic first-rate classical brands.According to the plan of Zhejiang,it will have 3 cosmetics enterprises with an annual operating revenue of more than 10.0 billion yuan,and meanwhile have more than 5 famous international brands.

At present,Guangdong,as a base camp of domestic brands,has generated a batch of old domestic brands such as Marumi,Carslan,Liby,Lafang and Houdy,and is also a cradle of emerging brands such as Perfect Diary,Colorkey,Simpcare and Grain Rain.Shanghai at the top of the fashion,has gestated famous domestic makeup enterprises such as Shanghai Jahwa,Jala Group,Joy Group and Pechoin.As the e-commerce center of China,Zhejiang not only has traditional makeup enterprises such as Proya and OSM,but also has incubated emerging brands such as Florasis and Zhuben.Shandong,as a “a promising youth” of the cosmetic industry,has advantages in raw materials.Bloomage Biotech,Freda and Little Dream Garden have a violent development momentum.The operating revenue of a single brand can hardly exceed 10.0 billion yuan in the short run,but listed enterprises are hopeful to make a breakthrough.

Bloomage Biotech and Botanee are undoubtedly excellent enterprises.In 2022,Bloomage Biotech realized an operating revenue of 6.359 billion yuan,with an increase of 5 folds within 5 years to exceed the threshold of 6.0 billion yuan for the first time.According to the forecast of many securities institutions,judging from the development tendency of Bloomage Biotech,its annual operating revenue may exceed 8.0 billion yuan by 2023,and is expected to exceed 10.0 billion yuan to reach 12.102 billion yuan by 2024.The annual sales volume of Botanee reached 5.014 billion yuan in 2022.Based on the market prospect of care products for sensitive skin and the high increase rate of Botanee,Huaxi Securities and many other securities institutions forecast that by 2025,the annual operating revenue of Botanee is expected to reach 11.46 billion yuan,of which,the the annual operating revenue of Winona will reach 10.4 billion yuan,accounting for 98%of the total.Proya and Syoung Group Co.,Ltd also have vigorous growth.Ever since 2018,they have maintained a double-digit high growth rate.In detail,the annual sales volume of Proya reached 4.633 billion yuan in 2021,and exceeded 6.0 billion yuan to reach 6.385 billion yuan in 2022.According to the forecast of Zheshang Securities Co.,Ltd and other institutions,by 2024,Proya is expected to realized an operating revenue of 9.346 billion yuan.Syoung Group Co.,Ltd.entered the 5.0 billion yuan club in 2021,and realized an operating revenue of 3.343 billion yuan during the first three quarters of 2022.Based on that,Caitong Securities Co.,Ltd and other institutions forecast that by 2024,the operating revenue of Syoung Group Co.,Ltd will increase to 9.372 billion yuan.Both have only one step away from the threshold of 10.0 billion yuan.

Shanghai Jahwa is also a vigorous candidate.It has remained stably on the top of the list of a-share makeup enterprises as its annual operating revenue crossed the threshold of 7.0 billion yuan in 2018.According to the Performance Express for 2022,Shanghai Jahwa realized an operating revenue of 7.106 billion yuan.Though the growth was not evident,at the “2023 Strategic Press Conference of Shanghai Jahwa”,Shanghai Jahwa claimed to make“brand innovation” focusing on specialized,high-end and experiential products.According to the forecast of Guosheng Securities,with the renewal of the product structure and the implementation of refined operation measures,its operating revenue is expected to reach 9.901 billion yuan by 2024,very close to the threshold of 10.0 billion yuan.

At the same time,the subdivided track of functional skincare products has a broad prospect.According to the data of Euromonitor International,the market size of China’s functional skincare products is expected to reach 101.0 billion yuan in 2024.It means that leading enterprises such as Bloomage Biotech,Botanee,Shanghai Jahwa,Proya and Freda still have a large development potential.It is worth noting that while the head enterprises are taking the lead with powerful strength,the emerging brands are doing everything to catch up.According to public materials,the annual sales volume of Florasis reached 5.4 billion yuan in 2021;the total net revenue of YSG was 3.71 billion yuan in 2022,which means the first profiting after the company was listed.It can be seen that Yige Group and YSG are also “seeded candidates” for enterprises with an operating revenue exceeding 10 billion yuan.Which will become the first makeup enterprise with an operating revenue exceeding 10 billion yuan is still to be verified by time,but it is sure that with the support of relevant policies,enterprises with an operating revenue exceeding 10 billion yuan are just around the corner.

What “missed lessons” to be made up?

Through sorting,I find that to realize the above targets,different regions have formulated favorable policy,putting emphasis on vigorous layout from 5 orientations.Promote the construction of makeup industrial parks.Makeup industrial parks occupy an important position in the development of the makeup industry of each region,almost contributing to more than one half of the total output value of the local cosmetic industry,therefore,emphasis should be put on supporting them.For example,Shanghai Action Plan has mentioned the role and function of “East Beauty Valley” several times,explicitly claiming to build “East Beauty Valley” into a golden card of makeup industry and capital of makeup live stream,as well as a core carrier with full industrial chains and full functions for Shanghai’s cosmetics industry.Zhejiang Implementation Program has planned a new blueprint in addition to the “makeup town”,putting emphasis on creating a Jinhua makeup industry cluster which “promotes industry with trade,promotes trade with industry and combines industry with trade”.Guangdong,which has the largest number of makeup industrial parks,will encourage key scientific research institutes,R&D institutions,inspection and testing institutions,and enterprises to be settled in industrial parks.

Strengthen the live e-commerce construction.It is the strong e-commerce advantage that makes the makeup industry of Zhejiang develop rapidly,so many makeup brands have put the e-commerce operation and live stream modules in Zhejiang.According to Statistical Report on Internet Development in China issued by China Internet Network Information Center,the live e-commerce scale will reach 2.1 trillion yuan in 2025.Based on that,live e-commerce has become an important part in the makeup industry plan of each region.Shanghai stresses that it will cultivate a makeup live e-commerce platform with national influence,build some makeup live e-commerce bases,cultivate excellent MCN institutions and encourage makeup e-merchants to develop in Shanghai.Guangdong and Shandong have made it clear that it will offer support policies to live stream bases and MCN institutions in the provinces.

Promote the industry-university-institute cooperation.Shanghai,Guangdong and Zhejiang all stress that they will vigorously develop fundamental research and manufacturing of materials for cosmetics and guarantee the safety of the material supply chain to solve common problems such as over-reliance of the industrial chain of the cosmetics materials on import,and lack of bargaining power.Of them,Guangdong has stipulated explicitly that it will support enterprises to make technological breakthrough focusing on cosmetics materials,production technology,function &efficacy and safety assessment,promote industry-university-institute cooperation,and accelerate the industrialization of scientific achievements.“Guangdong has been criticized for weak R&D strength and insufficient product innovation all along.It means that Guangdong has realized its weak points and is accelerating the transformation and upgrading of the cosmetic industry.” said a senior industry insider.

Quicken talent cultivation and introduction,especially R&D and design talents.In terms of talents recruitment,each region will encourage institutions of higher learning to add disciplines and majors associated with cosmetics,improve the talent team of cosmetics,and afford policy support in talent settlement,talent green card and fund reward.However,as to the gap in industrial talent demand and the industrial development bottleneck,different regions have different points of focus on talent selection.Guangdong supports key enterprises to introduce top-level talents of industrial R&D and design and marketing.Shanghai will vigorously attract domestic and overseas talents of cosmetics R&D and design,brand planning and marketing.Shandong puts emphasis on introducing key talents of R&D and design,Brand planning and product recipe.Zhejiang puts emphasis on cultivating practical R&D talents and high-skilled talents.“At present,the competitiveness of local cosmetics brands is relatively weak. They are highly homogeneous,with a low added value,and in a jumbled state where good and bad are mixed together.The key is low technological contents,and talent is a cornerstone for technological development.” said the principal of a Hangzhou enterprise.

Develop in the direction of becoming“specialized,refined,differential and innovative”.Zhejiang Implementation Program lays stress on carrying out an “eaglet action”,guiding small and medium-sized enterprises to develop in the direction of becoming “specialized,refined,differential and innovative”,expanding subdivided areas such as children’s cosmetics,sports cosmetics and functional cosmetics,and creating a batch of “hidden champion”industrial enterprises.The key to the development of local enterprises is to form their own characteristics and popularity,and to own some products that others don't possess,or to own better products than others’.An enterprise should create its own features,otherwise,it can hardly form its own advantages.As he said,the key for Bloomage Biotech to quickly become a seeder candidate for enterprises with an operating revenue exceeding 10 billion yuan lies in its capacity advantage of raw materials.In the present stage when hyaluronic acid is very popular,the four brands,i.e.Biohyalux,QuadHA,Medrepair and Bio-MESO have won a head start.

The largest global cosmetics market in Era 2.0

The makeup industry is a sunrise one.It is an active signal that governments can attach importance to it and formulate encouraging policies.It is very beneficial to the industry.Governments of each region are attaching more and more importance to the cosmetic industry.On the one hand,the enterprises will gain more advantageous resources.On the other hand,more players and capitals will be attracted.It will form siphon effect and promote the cosmetic industry to enter Era 2.0 from Era 1.0.Pharmaceutical enterprises such as Freda have entered the makeup industry successively,holding and hitting high.It will keep on improving the competition pattern of the whole cosmetics industry to some extent,and promote its high-quality development.

At the same time,with the fast recovery and continuous growth of China’s economy,the cosmetics industry has a great development potential in the future.According to the forecast of Prospective Industry Research Institute,by 2028,the market size of China’s cosmetics industry will reach 937.4 billion yuan,with an annual average increase rate of 7.11% from 2023 to 2028.By that time,China will become the largest cosmetics market in the world.It also means that the development of local cosmetic industry is far from touching the ceiling and still faces enormous opportunities.

However,many industry insiders say that to realize the magnificent goal of high-quality development,they need some detailed and substantive programs that can be implemented.The general orientation is good because it can boost the confidence of enterprises.However,these policy documents can only play a guiding role.Only when the supporting policies are more down to earth can they truly promote enterprises to become larger and stronger.Governments set up the stage,and enterprises put in the show.Only in this way can the show be performed well.A certain enterprise principal spoke highly of it.For example,Guangdong Implementation Program has clearly stated that “By 2025,there will be more than 10 famous national brands”.However,the selection mechanism and the assistance policies for candidates are not clear.“All these need detailed executable measures.After all,it is not a low target,and requires efforts from both governments and enterprises.”

The new regulation encourages the development of characteristic plant resources,and policies issued in each region also stress it.However,only Shandong has definitely pointed out in Shandong Implementation Opinions that “peony,rose,seaweed,great burdock,ganoderma lucidum,ginkgo and honeysuckle” are local characteristic plant resources.When governments support the use of these materials,enterprises will have a definite orientation.In the past,industrial development was not administered by the National Medical Products Administration.At present,the National Medical Products Administration has been involved.For example,behind many of the above documents is the National Medical Products Administration.Apart from regulatory compliance,they should clearly tell enterprises what to do and how to do them.