CAFFCI: Focus on Frontier Technology Turns the Corner

On one hand, the industry is facing loads of opportunities of the integration and exchanges of frontier science. On the other hand, no substantive breakthrough has been made whatsoever.

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A year's plan starts with spring, and the industry changes at a fast clip. What new trends will emerge in 2023? Where do the new growth points lie in the market? Based on the upcoming 6th Chinese Cosmetics Trend Conference on February 13, CHAILEEDO interviews the founders and industry personages of 50 + well-known companies in China and internationally to get the cosmetics industry off to a flying start with a fresh view. CHAILEEDO invited Chen Shaojun, president of the China Association of Fragrance Flavour and Cosmetic Industries(CAFFCI), to share with us the cosmetic trends in China.

CHAILEEDO: What industrial changes have impressed you over the past year? What achievements has CAFFCI made?

Chen Shaojun: Recently, I have commented on the brief development history of our county's cosmetics industry, saying it was featured by a brilliant history, a tortuous road and a promising future. And I mentioned that, as of June 2021, total sales of cosmetics had been growing faster than retail sales of consumer goods for years except for some months. In 2021, the pandemic persisted, but the cosmetic industry still achieved a great deal, with a year-on-year increase of 14%, which is still higher than GDP by 6.1 percentage points, and higher than the above-norm total retail sales of consumer goods by nearly 2 percentage points.

In the first half of 2022, due to the raging pandemic, and with the main cosmetics-producing area Shanghai getting the hardest hit, the year-on-year growth rate of total retail sales of consumer goods dropped below the curve for the first time. As of June (by cumulative value), the year on year growth stood still below the total retail sales of consumer goods by nearly 2% (-2.7 for September, -3.7 for October), which was a real tough going.

In 2022, the month-on-month increase was 9.87% in March, showcasing signs of recovery. But in April, it plunged to -37.97%. And while total retail sales of consumer goods have increased by -13.88%, cosmetics dropped by 24 percentage points. But we still need to recognize the resilience of the industry, as the sales then grew by 35.98% in May and by 45.7% in June, 30 percentage points higher than the total retail sales of consumer goods once again. The increase was -40.33% in July and bounced back to 13.83% in August. In September it fell to 10.07% and slid to -2.5% in October.

In retrospect, despite the volatile trend of the industry's development, the 2022 scenario is arguably unprecedented.

During this period, our Association has kept pace with the times, helping the resumption of work and production through various forms of service to ease difficulties. And we conducted multiple online and offline meetings. In the first half of 2022, five topical meetings with each including over 10 thousand participants were held; An online public service fair was held; multiple anti-pandemic events were made a success; A number of questionnaires and online surveys were conducted; We have also launched the schoolbag donation activities for poverty alleviation; and we participated in many communication meetings with relevant government departments, and allowed to postpone the May 1st deadline to the end of the year(May 1, 2022 is the deadline for cosmetics companies to submit product documentation and certification documents), gaing an industry-wide applaud.

CHAILEEDO: Since 2023 is around the corner, do you have any plans for the development of the association to share? What's your future exploration and innovation be like in the beauty industry?

Chen Shaojun: I had put forward several suggestions on the status quo of the industry: First, show reverence for the law; Second, step up R&D; Third, focus on the latest frontier science and technology; Fourth, pay attention to the impact of the macroeconomic economy on the industry.

In view of where the majority of the small and medium-sized enterprises(SMEs) stand, I propose that enterprises should set store by the K-shaped recovery(A K-shaped recovery is characterized by contradictory trends: Certain professions and classes of people thrive, while others continue on a downward path). In this context, that is, the asymmetric impact of the recession on firms of different sizes, making the strong stronger, and the weak weaker.

Second, shore up self-confidence on the basis of full recognition of the importance of SMEs. MEs are the "capillaries" of market economy that is crucial in promoting macro-economic "blood circulation". Once they get debilitated, even a mighty giant will get heavy limbs and suffer slow movement. China's past glory can be attributed to the little-chips-can-light-great-fires grassroots enterprises in the early days of reform and opening up, and it is what sustains China's prosperity till today. But the future of China must lie on SMEs without a doubt. In this regard, SMEs should have firm confidence.

Third, how can SMEs turn the corner and continue the glory? My humble opinion: first, strive to develop the ability of scientific research and innovation. Innovation is the primary driving force of national development and the key factor of enterprise competition. The more difficult the situation is, the more enterprises shall be focusing on innovation. The era of relying only on the concept and propaganda has become the past tense as we witness stricter supervision, consumption upgrading and rational consumption. We must have a clear understanding of the current picture. Second, hone the ability to fill up the market. The huge market makes it difficult to compete with big enterprises head-on, but a wise way is to deal with the gaps, stepping up efforts in "SRDI"(Specialized+Refinement+Differential+Innovation) can be another way out. Third, adhere to the national development strategy. Follow closely the national development strategies, look for opportunities and seize them as they pop up. After all, at any time, the big picture rules the small one. Fourth, seek unity with others. In general, the internal systems of small enterprises are not necessarily complete, which requires solidarity and complementarity. Fifthly, show reverence for the laws and regulations and make sure to learn them well. Strict supervision calls for severe penalties, so one single slip can bring eternal regret.

CHAILEEDO: Where do you see the Chinese beauty market's trend going in the year ahead? What kind of opportunities for product types can be tapped?

Chen Shaojun: After decades of rapid development, the industry R&D and sales are hitting a bottleneck. Despite temporary difficulties, the cosmetics industry is still rising, that is beyond doubt.

 In R&D, on one hand, the industry is facing loads of opportunities of the integration and exchanges of frontier science. On the other hand, no substantive breakthrough has been made whatsoever.

In sales, how the internet dividend works bears resemblance to that of the traditional sales model, which is basically featured by stock-based consumption, also it expects breakthroughs. This leads to the grave involution within the industry, which calls for more endeavor in R&D, innovation, and in-depth research in search of breakthroughs.

In addition, the industry should pay attention to cross-border cooperation, such as deep integration with beauty parlours in product and sales models, and expand flexible manufacturing space; Attention should be paid to the new, these enterprises 'thinking often gives the industry new inspiration.

In short, we hope that the industry will be make R&D the foundation, efficacy the breakthrough point, science and technology the lead, existing technology the foundation, and take all-round innovation as the mission, leading enterprise as the benchmark to expand step by step. Forge ahead with a down-to-earth attitude and the big picture in mind, thus seizing the opportunity of the industry that turns small growth to a quantum leap.