Collagen Sector is Accelerating

In recent years, the collagen sector in China has gradually become popular among international beauty giants as well as local Chinese companies.

---

Recently, the high-end skincare brand SH has completed strategic financing with tens of millions RMB with the investor being the listed company RuoYuChen and Chao Capital acting as the exclusive financial advisor for this round of financing. Established in 2021, SH is a mid-to-high-end skincare brand based on high-end synthetic biotechnology with humanized collagen as its core ingredient.

Collagen Market CAGR 38.8%

CHAILEEDO noticed that the current skincare industry has upgraded from natural skincare based on plant extracts in the past to biotech skincare based on cellular technology. Due to this trend, collagen has become one of the hot terms in the cosmetic industry in recent years. According to Duan Zhigang, senior vice president of Giant Biogene, in the 5th Conference on China’s Cosmetics Trends held by CHAILEEDO, collagen is a particularly important type of protein in animals, including mammals, which can rejuvenate the skin and make it firm and elastic.

According to Grand View Research, the global collagen market size rose from $12.66 billion to $15.36 billion from 2016 to 2019, with a CAGR of 6.7%. The collagen market size in China rose from $790 million to $980 million, with a CAGR of 7.8%, 1.1% higher than the global figure for the same period. According to Grand View Research, the collagen market in China is expected to grow at a CAGR of 6.6% to reach $1.58 billion by 2027, accounting for approximately 7% of the global market, a CAGR 1.2% higher than the global level for the same period.

The government in China also provided rich support. In early August, the Pharmaceutical Industry Standard of the People's Republic of China YY/T 1849-2022 Recombinant Collagen was officially released and implemented. The standard was promulgated and implemented by the National Medical Products Administration, which represents the recognition of recombinant collagen in medical and skincare applications by the government. It will also promote a healthier and more orderly development of the recombinant collagen market.

International/Local Beauty Giants Efforts in Collagen Industry

Just in August, international beauty giant Shiseido announced a nearly 100 million yuan investment in the recombinant collagen-based biomaterials company Trautec, the first investment by Shiseido's first innovation fund in China, Ziyue Fund. Founded in 2015, the company's main business is also the development and production of recombinant collagen-based biomaterials. For this investment, Shiseido China said, "Shiseido China aims to advance the layout of new biomaterials for beauty and plans to explore the cooperation space of functional skincare products by combining the advantages of product development, ingredients supply and channel resources of both parties. At the same time, the investment of Ziyue Fund will help Trautec further consolidate its leading edge during the critical period of recombinant collagen development." Shiseido's move has apparently aimed directly at upstream technology companies as well as creative companies to enhance the overall competitive strength of the brand by applying the core technologies of these companies to existing brands.

In May of this year, China's leading recombinant collagen company Giant Biogene launched its application for listing in Hong Kong. Its prospectus showed that the company's revenues from 2019 to 2021 would reach 957 million yuan(about $134.6 million), 1.191 billion yuan(about $168 million) and 1.553 billion yuan(about $218 million), respectively, with adjusted net margins of 60.1%, 56.5% and 53.9%. According to Frost & Sullivan, Giant Biogene is one of the world's largest producers of recombinant collagen. According to the company, Collgene and Kefumei are the third and fourth best-selling brands in the professional skincare products industry in China in 2021, respectively.

Several other Chinese collagen-focused companies have also applied to go public together this year, with Trauer applying to list on the Beijing Stock Exchange in January, Voolga updating its prospectus in June to continue its IPO, and Jinbo Bio application to go public being accepted by the Beijing Stock Exchange. These companies operating collagen ingredients and products have applied for listing also reflects that collagen has become a territory that beauty companies are competing for.

Can collagen be comparable to hyaluronic acid?

It is worth noting that besides Shiseido, hyaluronic acid giant Bloomage Biotech has also started to enter the collagen industry, announcing in April that it had acquired 51% of the biotechnology company YEK, which has been deeply involved in collagen-based medical end products for many years. According to Bloomage Biotech, after establishing a leading position in hyaluronic acid, collagen may bring more possibilities for Bloomage Biotech's existing medical terminal, functional skincare products and functional food business.

In terms of retail sales, the overall size of China's professional skincare market will be 56.6 billion yuan(about $8 billion) in 2021. From the perspective of ingredients, the market size of collagen professional skin care is 13.5 billion yuan, accounting for about 23.9%; the market size of hyaluronic acid professional care products is 19.3 billion yuan(about $2.7 billion), accounting for about 34.1%.

From the perspective of demand, collagen and hyaluronic acid are both used for filling skin depressions, but collagen injection has unique advantages, for example, it can replenish collagen lost by the human body and stimulate its own collagen production. The injectable effect is more closely fitting than hyaluronic acid and less likely to cause Tyndall's phenomenon.

The collagen market is still in its infancy from the perspective of cost-effectiveness, and medical institutions are selling hyaluronic acid + collagen compound, with the defects of the two components complementing each other, and collagen injection still needs market education to improve in the long run.

Overall, although the industrialization of collagen in China is not yet mature, the market still attracts international giants as well as leading local Chinese companies to enter the market compared to the already competitive hyaluronic acid market. Coupled with China's national support, collagen may be able to achieve greater potential in the future.