Estee Lauder, Shanghai Jahwa package material supplier Zhejiang Jinsheng New Material Co., Ltd. (hereinafter Jinsheng) operating income fell 2.18% year-on-year, net profit attributable to shareholders of listed companies fell 79.09% over the same period last year. Another package material supplier Shenzhen Baixinglong Creative Packaging Co., Ltd. (hereinafter Baixinglong) was also declining in its cosmetics business revenue year by year. This year, CHAILEEDO noted that China's consumer market as a whole is showing wilting. From January to October, the total retail sales of consumer goods was 360.5755 trillion yuan (about $50.9 trillion), down 0.5% year-on-year. The total cosmetics category was 308.4 billion yuan (about $43.5 billion), down 2.8% year-on-year. Since this year, the total retail sales growth rate of cosmetics has remained at the lowest level in five years and has been negative for three consecutive months. When the cosmetics market as whole declines, cosmetics-related industries will also be affected and cosmetic packaging companies are in a hard time. Weak consumption and a declining economy causes the slump Jahen Household Products Co., Ltd (hereinafter Jahen), one of China's package material manufacturers, released its 2022 third quarterly report. From January to September, Jahen achieved operating revenue of 763 million yuan, down 8.29% year-on-year, and net profit attributable to the mother was 48.3 million yuan (about $6.8 million), down 25.07% year-on-year. In particular, the net profit attributable to the parent company was down by 28.67% year-on-year in the second quarter, which was the largest drop since going public. From the main customers of Jahen, most of them are well-known Chinese domestic and international daily chemical and cosmetic companies, such as Johnson & Johnson, Shanghai Jahwa, BTN, Yumeijin, Pechoin, Victoria's Secret, Shell and other well-known brands, with high concentration of customers. Among them, in the first half of this year, the revenue of its five customers Johnson & Johnson, Shanghai Jahwa, BTN, Yumeijin, Shell accounted for 81.33% of its total revenue. Jahen said that its revenue and net profit both fell largely because the restriction affected its production, logistics and terminals. The same happened to Jinsheng. The packaging supplier Jinsheng's operating income fell 2.18% year-on-year in the first half of this year, and net profit attributable to shareholders of the listed company dropped 79.09% compared with the same period of the previous year. Jinsheng is the packaging material supplier of Estee Lauder, L'Oreal, Shanghai Jahwa and other well-known Chinese and international cosmetic companies. The company said that the main business gross margin of Jinsheng in the first half was 14.55%, down 12.60%. In the same period last year, the figure was 27.15%. For the revenue and net profit have declined in the first half year, Jinsheng stated that its customers, cosmetic brand selling worse is also a major factor. After searching the financial report of main customers of Jahen and Jinsheng, CHAILEEDO found that Johnson & Johnson, Shanghai Jahwa, Estee Lauder and so on have declined to varying degrees. Johnson & Johnson's consumer health business is the only segment where Johnson & Johnson's revenue declined from January to September. In the previous quarter, the segment's revenue was $3.805 billion, down 1.3% from the same period. The consumer health business, to which beauty and personal care products belong, reported third-quarter sales of $3.795 billion, down 0.4% from the same period last year. Shanghai Jahwa's recently released third-quarter financial results show that from January to September, Shanghai Jahwa reported operating revenue of 760 million yuan (about $107.3 million), down 8.29% year-on-year, and net profit attributable to shareholders of the listed company of 48.3 million yuan (about $6.82 million), down 25.07% year-on-year. In terms of categories, the skin care category, which includes Dr. Yu, Herborist, GF, Shuangmei and Maxam, reported revenue of 453 million yuan (about $64 million), down 15% overall. Estee Lauder Group's latest financial results show that in the first quarter of the fiscal year 2023 (July-September 2022), Estee Lauder Group's total net sales were $3.93 billion, down 11% year-over-year, with organic sales down 5%. its net profit also fell 29.33% year-over-year to $489 million. Rising raw materials and declining consumer power cut the profit of package suppliers CHAILEEDO noted that the rise in raw materials is another major factor in the lower profits of package dealers. Package supplier Baixinglong, which provides creative packaging services for famous brands such as L'Oreal and Dr. Alva, said in its prospectus that the direct materials of the company's packaging products are mainly various types of raw paper products. During the reporting period, the ratio of direct material cost to the main business cost of the company was 28.09%, 25.78%, 27.68% and 29.89% respectively. It can be seen that the company's direct material costs accounted for nearly one-third of the main business costs. If the direct material costs fluctuate significantly, the company's costs will also change. Baixinglong said that with the tightening of environmental protection policies and relevant Chinese domestic policies in recent years, the price of paper products fluctuated significantly during the reporting period. Meanwhile, according to CLS.CN, in June, several paper companies issued price increase notices, saying that their white cardboard series was raised by 300 yuan/ton (including tax) from July 1 due to high production costs. Jahen also mentioned in its semi-annual report that the main raw materials that account for a large proportion of the company's purchases are PE, PP and other synthetic resins as well as surfactants and other raw materials and that raw material prices are one of the important factors affecting the company's profit level. It is reported that PP is used in the packaging of conventional daily chemical products. "In addition to some high-end cream products, almost most of the skincare products and toiletries use PP. Meanwhile, PP is also used in general plastic pump heads, vacuum bottles, etc.," a cosmetic packaging material supplier introduced to CHAILEEDO. PE and PP belong to the downstream products of petrochemical industry and their prices are greatly affected by the fluctuation of international crude oil market prices. In the first half of 2022, international oil prices climbed sharply and then oscillated at a high level. The average price of Brent crude oil futures was USD 104.94/barrel, up 37.27 % month-on-month and 60.90 % YoY. Among them, the average price in the first quarter was USD 97.90/barrel and the average price in the second quarter was USD 111.98/barrel. Oil prices directly affect PE, PP material production costs. Since the first half of this year, crude oil prices continue to rise and continue to break new highs, which also brings considerable pressure on the petrochemical downstream industry. An industry insider told CHAILEEDO that the rise of raw materials is one of the factors. The other factor is the lack of downstream consumption power, resulting in the plant and cosmetic brand demand is not high. It also leads to oversupply. The two sides cuts the profit of the package manufacutures and ultimately led to the manufacutures decline. The economic downturn, declining consumer power and other issues are shown in this year. For cosmetics-related companies, 2022 is undoubtedly a tough year.

On November 30, Johnson & Johnson announced that the Board of Directors elected Joaquin Duato, Chief Executive Officer, as Chairman of the Board, effective January 2023. (Credit: Website) Last August, Johnson & Johnson's website indicated that Alex Gorsky would step down as Johnson & Johnson's chief executive officer (CEO) on Jan. 3, 2022, and would serve only as executive chairman. Alex had said that he wanted to return to his family for health reasons and that this was the best time for Johnson & Johnson and his personal transition. Alex Gorsky is one of just seven leaders who have served in the dual role since the company was listed on the New York Stock Exchange in 1944. Johnson & Johnson writes on its official website, under Alex’s leadership, Johnson & Johnson continues to be one of the world’s exceptional corporations and is currently the number one pharmaceutical company on Fortune magazine’s list of the “World’s Most Admired Companies.” Alex has made many achievements in his ten years at the helm of Johnson & Johnson. In Johnson & Johnson's fiscal year 2022 third-quarter earnings report, Johnson & Johnson reported revenue of $23.8 billion for the third quarter, beating previous market expectations of $23.336 billion, net income of $4.458 billion, up 21.57% year-over-year from $3.667 billion in the same period last year. In terms of transactions, the largest deal in Johnson & Johnson's history was completed, acquiring Actelion for $30 billion to advance the development of rare disease drugs. Joaquin Duato, who takes over this role, has been with Johnson & Johnson for a whopping 32 years. He graduated from ESADE Business School in Spain and joined Johnson & Johnson in 1989 as CEO of Johnson & Johnson. Previously, Joaquin served as vice chairman of the executive committee, providing strategic direction for the pharmaceutical and consumer health sectors and overseeing information technology and the global supply chain. “Joaquin’s appointment to the additional role of Chairman reflects his tremendous 30-year track record at Johnson & Johnson, as well as the Board’s thoughtful and engaged approach to succession planning,” said Anne Mulcahy, lead independent director. Source: Johnson & Johnson

L'Oréal said the partnership aims to develop natural and renewable ingredients together with Microphyt. This follows L'Oréal's commitment to reduce carbon emissions per unit of finished product by 50% by 2030. On November 29, L'Oréal Group announced a strategic partnership with French biotech company Microphyt, with L'Oréal's venture capital fund BOLD acquiring a minority stake in Microphyt. The partnership is part of L'Oréal's research and innovation strategy for green science and its investment in innovative biotech startups in France and around the world, L'Oréal said. Founded in 2007 and headquartered in Baillargues, Microphyt has developed a revolutionary process with a low carbon impact to produce microalgae - microscopic plant organisms used in cosmetics and other fields. Thanks to this patented process and its control of natural stimuli (e.g. light, salt, nutrients, temperature variations, etc.), Microphyt is one of the companies producing the largest variety of microalgae in a large-scale, controlled manner. Microphyt has an integrated platform to transform microalgae to develop natural and renewable ingredients that fit perfectly with L'Oréal's sustainability objectives. In the future, L'Oréal and Microphyt will build a technological platform and combine material and human resources to extract raw materials from microalgae. The two companies aim to establish a long-term partnership to develop new cosmetic solutions together. Indeed, this partnership comes on the heels of several strategic partnerships L'Oréal has forged to strengthen its groundbreaking green science beauty ecosystem, including precision health heavyweight VERILY, the National Institute for Materials Research (NIMS) in Japan, the Singapore Center for Environmental Life Sciences Engineering (SCELSE) and the Bordeaux Laboratoire de Chimie des Polymères Organiques (LCPO). On November 28th, L'Oréal's supplier, A.P.Label's plant in Suzhou (hereinafter referred to as A.P.Label Suzhou plant), officially achieved carbon neutrality, becoming the first successful pilot of supplier collaboration for carbon reduction in L'Oréal North Asia. And, in July this year, at Indirect Sourcing Supplier Day, L'Oréal made a new carbon reduction commitment: to reduce carbon emissions per unit of the finished product by 50% by 2030 (Scope 1, 2 and 3). Barbara Lavernos, Head of Global R&D, Innovation and Technology Affairs of L'Oréal Group, said that L'Oréal aims to further accelerate L'Oréal's drive towards sustainable beauty by partnering with the world's most disruptive green science entities to conduct large-scale development and innovation research and make them available to as many people as possible.

Although the epidemic restrictions have been lifted, the former Black Friday business boom has not yet returned. (Credit: Website) This year was a long-awaited Black Friday shopping holiday without the restrictions of the epidemic, but the global economic downturn and cost-of-living crisis affected this year's Black Friday sales. The Organization for Economic Co-operation and Development (OECD) said in its medium-term economic forecast released on September 26 this year that global economic growth is expected to remain at 3.0% this year, but will slow further to 2.2% in 2023, down from the previous estimate of 2.8%. According to the data of Boston Consulting Group, the pressure of rising cost of living has led to a decline in consumer confidence and reduced consumer spending during the discount sales period in 2022. For example, British consumers cut 18%, French and German consumers planned to reduce spending by 15%, and Spanish consumers planned to reduce spending by 13%. In the survey of nine countries, only American consumers said they expected to increase spending this year, with spending increasing by 6%. In the economic downturn, what changes are coming to Black Friday? Black Friday hit by the epidemic Black Friday has always been one of the most valued promotional holidays for U.S. businesses, but the arrival of the epidemic has affected its trend. In 2020, the epidemic has yet to affect U.S. consumers' willingness to spend on Black Friday, but it has also prompted more consumers to consider an online shopping lifestyle. Adobe found that consumer spending on smartphones grew 25.3% year-over-year to $3.6 billion, accounting for 40% of total e-commerce spending. Adobe said this makes Black Friday 2020 the second largest online spending day in U.S. history. In 2021, the impact of the epidemic on Black Friday spending begins to be felt. According to Sensormatic Solutions, Black Friday retail store traffic is down 28.3 percent compared to levels before the outbreak (2019). In addition, online sales for Black Friday in 2021 were just $8.9 billion. It marked the first time ever that growth reversed from the prior year, Adobe said. In this year, Black Friday online sales rose 2.3% year-over-year to a record $9.12 billion. Previously, Adobe predicted that Black Friday sales would rise by only 1%. But compared with the double-digit growth before the epidemic, the entire Black Friday growth trend was as if the pause button was pressed to stop in place. Features of 2022 Black Friday Starting in 2021, retailers are increasing their promotions and starting their Black Friday sales earlier. According to a survey from the National Retail Federation, the retail industry’s leading trade group, 61% of consumers had already started purchasing holiday gifts before Thanksgiving. In 2022, many retailers are starting holiday sales in early fall. Retail giant Target kicked off its Deal Days promotion with early Black Friday deals. E-commerce giant Amazon launched a new membership promotion on Oct. 11. Retail giants such as Walmart, Macy's, and Best Buy also launched their promotions in quick succession. According to Adobe's data, the highest increases were in electronics, innovative home technology, toys, and fitness equipment sales. Online sales of electronics soared 221 percent on Black Friday compared to the October 2022 average, with top sellers including Apple's Macbook and Watch. In addition, Adobe's data shows that the proportion of online sales with cell phone shopping on Black Friday has been increasing, reaching 48%. However, Adobe believes that traditional brick-and-mortar shopping is still expected to account for the majority of holiday sale spending. Adobe also expects Cyber Monday online sales are expected to exceed those of Black Friday, reaching $11.2 billion. Beauty continues to appeal to Black Friday shoppers According to Salesforce, shopping cart abandonment rates also dropped 5% worldwide during Cyber week compared to the previous three weeks, likely because consumers were attracted to the larger discounts. The top discount categories globally were General Apparel (34%), Makeup and Skincare (32%), the higher discounts reduced consumers' spending and increased their willingness to buy. According to retail technology company Bluecore, beauty retailers saw a 26% year-over-year increase in website traffic on Black Friday, which was 97% higher than the average daily traffic in 2022. Beauty attracted more consumer attention on Black Friday than other categories. (Credit: Bluecore) According to Bluecore, 50% of Black Friday beauty orders came from fifth-time buyers, and Apparel was the second most loyal group of shoppers, with 32% being fifth-time buyers. Bluecore's analysis of this says that during inflation, consumers are more likely to buy brands they trust and are familiar with, with beauty consumers being the most loyal. (Credit: Bluecore) Online financial services provider Klarna surveyed consumers who purchased beauty products on Black Friday. 22% of consumers purchased beauty products for gift-giving purposes, while 28% said they purchased them for themselves. This means that Black Friday beauty shoppers were about equally split between personal purchases and gift-giving needs. (Credit: Klarna) Although the impact of the epidemic on Black Friday is still ongoing and it will take some time to return to 2019 levels, it is clear that consumer demand for beauty is still strong. In a sense, cosmetics are still the "must-buy" items for consumers during the holidays.

On November 28, L'Oréal China announced that its supplier, A.P.Label's plant in Suzhou (hereinafter referred to as A.P.Lable Suzhou plant), has officially achieved carbon neutrality, becoming the first successful pilot of supplier collaboration for carbon reduction in L'Oréal North Asia. L'Oréal's Senior Vice President of North Asia and China Operations, Pan Kaijie, said "We are delighted to witness the carbon neutrality of A.P.Lable Suzhou plant in the same year that all of L'Oréal's North Asia operations became carbon neutral. This is not only inspiring for us, but will certainly inspire our supplier partners who are looking to make a more positive impact on the planet. I am confident that with L'Oréal's efforts to reduce carbon in partnership with our suppliers, we will continue to drive sustainable development and create a better tomorrow for our planet." A.P.Label Chairman Cai Yuqin said, "A.P.Label will continue to adhere to its mission of 'green printing' by minimizing waste in the production process, effectively using raw and auxiliary materials, reducing energy consumption, and coordinating and balancing the aspects of environment, health and safety, so as to achieve sustainable development and work with L'Oréal together to create a better future." It is reported that in 2020, L'Oréal put forward a new sustainability commitment for 2030 - "L'Oréal, for tomorrow", which sets new emission reduction targets for the entire value chain including scope 1, 2 and 3. A major target is that L’Oreal strategic suppliers will reduce their direct emissions (Scope 1 and 2) by 50% in absolute terms compared to 2016 by 2030. Thanks to L'Oréal's support, the A.P.Lable Suzhou plant has achieved carbon neutrality in three major steps: first, by maximizing energy consumption, such as building more than 44,000 square meters of insulated walls in the plant, replacing office fluorescent lights with LED lights and implementing a centralized office system. Second, by systematically upgrading plant equipment, such as pioneering the use of LED curing lights in the drying equipment on the shop floor to reduce electricity consumption by 50%. Third, the introduction of renewable energy sources, such as the installation of approximately 1,820 square meters of solar photovoltaic panels on the roof of the plant, and the use of electric vehicles for employee shuttles and logistics delivery vehicles in the city, saving approximately 4,500 liters of fuel per year. In October, L'Oréal grounded on the world's first self-built Intelligent Fulfillment Center in Suzhou, which also marked the official start of production of a 100,000-grade cleanroom that far exceeds beauty industry standards. Regarding the investment in Suzhou Intelligent Fulfillment Center, L'Oreal North Asia President and CEO of China, Fabrice, told the media at the 5th China International Import Expo in November that L'Oreal has been in China for a full 25 years and its first investment project was the Suzhou factory, so it is symbolic that L'Oreal is now back here. L'Oreal fully believes in the potential of the Chinese market, and also fully believes that to do beauty in China. L'Oreal has celebrated its 25th anniversary of entering the mainland China market. Facing the changing market and future changes, L'Oreal, as a leader in the development of the beauty industry, is looking for more new trends and opportunities for the development of the Chinese, and even Asian, beauty markets through theoretical research and cross-line innovation.

YA-MAN's consolidated net profit from May to October 2022 was 1600 million yen (approximately $11.6 million) higher than previously expected, reaching a record high for May-October figures previously. The main reason for the growth in performance was higher than expected sales in China. Recently, Japanese beauty device brand, YA-MAN, announced its financial results for the six months to the end of October 2022. According to the financial results, YA-MAN's consolidated net profit for May-October 2022 increased 62% year-on-year to 4.5 billion yen (approximately $32.7 million), 1.6 billion yen (approximately $11.6 million) higher than previously expected, reaching a record high for the May-October data. Operating income rose 27% year-on-year to 26.5 billion yen (about $192.3 million), 4.5 billion yen (about $32.7 million) higher than previously expected. The main reason for the growth was higher-than-expected sales in China, according to YA-MAN. In addition to the strong performance from events such as the Chinese 618 Shopping Festival, the sales growth was also helped by orders from the Chinese Double Shopping Festival, where RF beauty devices and other series of products were hot sellers. According to data of Meritco, from October 24 20:00 to October 31 24:00, YA-MAN ranked TOP1 in the pre-sale list of personal care category and TOP29 in the brand list of all categories in Tmall's Double 11 Shopping Festival. At the same time, due to the sharp depreciation of the yen exchange rate, the foreign currency exchange gains held by YA-MAN will be booked much higher than expected. China's beauty instrument market is vast, according to data from the Qianzhan Research Institute, the market size of Chinese beauty instrument is about 10 billion yuan (about $1.4 billion) in 2021, and the figure is expected to reach 25.1 billion yuan (about $3.5 billion) to 37.4 billion yuan (about $5.2 billion) by 2025. And in this tens-of-billions-yuan market, YA-MAN has been ranked in the front. According to Yonghushuo data, from March 2021 to February 2022, in the sales of beauty device category on Taobao platform in nearly one year, TOP10 beauty device brand accounted for 54.16%, YA-MAN ranked first with 26% market share in the beauty device category, more than double the market share of the second place. Due to the stronger financial data, YA-MAN said in the report that its full-year fiscal year 2022 results are expected to remain unchanged, with operating income expected to grow 22% year-on-year to 50 billion yen (about $362.8 million) and net profit up 19% to 6.6 billion yen (about $47.9 million). For future operations, YA-MAN said it will further strengthen its advertising campaign for new categories of hair care and razors to increase product awareness and expand sales in the second half of the year. In terms of research and development, it will continue to respond to standards certification, while increasing product development push and joint research investment through industry-academia cooperation.

Previously, some innovative Chinese brands such as Zhuben, LAN gained a firm foothold in the beauty market which relied on their face oil products. Recently, Chanel and La Prairie launched high-end face oil one after another. From this point of view, China's face oil sector will reshuffle and this category will strengthen the intensity of competition. A few days ago, the high luxury beauty brand Chanel launched a new Chanel Sublimage L’Extrait Concentre-Huile Reparateur Intense claiming to add vanilla planifolia and swertia chirata with efficacy of deeply repair skin. Its price is 4820 yuan (about $669.5) on its flagship store on Chinese leading e-commerce platform Tmall. This means that the face oil, which has been viral for more than a year in China, has welcomed high-end players. So, why is face oil trendy? What new opportunities are there now? Over-1000-yuan essence oil shows up Not long ago, Chanel's official account on Chinese social platform Weibo released the promotional post of its new Chanel Sublimage L’Extrait Concentre-Huile Reparateur Intense. According to the introduction, the product combines the pure empowering energy of vanilla planifolia and the intensive repairing power of swertia chirata, which can make the skin smoother, softer and more even. The product is priced at 4820 yuan (about $669.5)/15ml. As of press time, the total sales of the product is 500+ pieces on its flagship store on Tmall. Through the Imported General Cosmetics Filing Information System, CHAILEEDO found that record date of Chanel Sublimage L’Extrait Concentre-Huile Reparateur Intense is September 16, 2022. It is understood that the product efficacy claims include seven aspects: beauty modification, nourishing, repairing, moisturizing, anti-wrinkle, firming, soothing. In addition to the beauty modification, the remaining six efficacy are uploaded to the human efficacy evaluation test brief, of which anti-wrinkle, firming efficacy of the human efficacy evaluation test is completed in the Chinese laboratory, the rest is completed in international laboratories. It is worth mentioning that in the recommended beauty steps by Chanel official, the face oil is ranked between the essence and eye cream. CHAILEEDO noted that the face oil launched by Chanel before did not post such beauty steps. In other words, Chanel's new collection this year has made the face oil an essential skincare step. Similarly, the ultra-high-end beauty brand La Prairie has also launched La Prairie Skin Caviar Nighttime Oil this year. The product is priced at 4,530 yuan (about $629.2) / 20 ml. As of press time, La Prairie’s official flagship store on Tmall shows that its monthly sales was 100+ units. According to the Imported General Cosmetics Filing Information System, the product claims to have nourishing, moisturizing, anti-wrinkle, firming and soothing effects and has uploaded a brief description of human efficacy tests. In the skin care steps unveiled by La Prairie, La Prairie Skin Caviar Nighttime Oil is ranked after the essence and before the facial cream. Some analysts believe that that may indicate the high-end brands represented by Chanel and La Prairie intend to make a big splash in the face oil category in China. The continued increase of high-end players is also enough to show that the face oil, which has been popular for more than a year, is becoming more mature and has a larger potential. Meanwhile, China's face oil sector will reshuffle and this category will strengthen the intensity of competition. The market of face oil continues to grow What attracts these high-end brands to the market may also be related to the continued growth of the face oil sector. According to CHAILEEDO data, the market size of China's face oil products will be about 48.8 billion yuan (about $6.8 billion) in 2022, and as the consumer market for face oil products continue to expand, the size of the upstream supply market for these products will also grow reaching 18.36 billion yuan (about $2.6 billion). As of press, there are 230,000+ notes related to face oil on Chinese sharing platform Xiaohongshu. The rise of innovative Chinese brands such as LAN Lan, Zhuben and so on are almost all related to the trend of face oil. They have gained a firm foothold in the skincare market with the help of oil products. Among them, LAN and Zhuben are both using makeup remover oil to enter the market, such as LAN Rice Essence Cleansing Oil claiming to be skin nourishing makeup remover oil, and Zhuben makeup remover oil also emphasizing "maintenance of sebum film". More brands are actively expanding their oil products under the prosperity of face oil and they are not limited to makeup remover oil and facial essence oil. For example, Bloomage Biotech’s QuadHA launched Refresing Multi-recovery Soothing Oil Essence in 2021. FanBeauty Secret also launched the Oleaeuropaeal Extract Nourishing Water+Oil Mask. Personal care brand Little Dream Garden launched a new essential oil fragrance series this year, which includes bath oil, essential oil fragrance body lotion, essential oil fragrance hand cream and body oil. It is easy to see that the prevalence of the face oil has broadened the category of oil products, from traditional facial care to the whole body, scalp, hair and so on. An industry insider with more than 20 years of experience in beauty brand operations believes that "the competition of skincare skincare products today such as lotion, cream, masks and other categories are increasingly serious. The industry continues to hype the concept, ingredients. The original common water-based products were changed to relatively few oil-based products, plus the concept of skincare. In that way, the face oil category is chased after by many consumers. "Domestic(Chinese) brands do not do well enough in research and development, efficacy ratio. They can only make up from the type of product, change the product traits and push some new concepts." He said. For this view, a number of industry sources said, "From the past experience of the essential oil market and the positioning of the population, the targeted group of face oil is limited." The person in charge of a listed company's beauty brand believes that oil products are more limited in terms of the population and the season. Essential oil products are not a necessary step in skincare. Creams contain oil and feel better than the essential oil. Although the "oil for skin" will be affected by seasonality, there are many brands are changing the inherent stereotypes through product formulations and publicity, so as to actively broaden the use of oil products scenarios and applicable people. For example, PMPM Rose Squalane Repair Essence was launched during this year's Chinese 618 Shopping Festival emphasizing that it can be used in summer even on oily skin. LAN also launched Time Miracle Ace-defying Oil claiming non-greasy and meeting the needs of young skin to fight against aging. For the face oil sector, some industry insiders also express their opinion. As one industry veteran said "it depends on brands to launch more differentiated products and build more scenarios with contemporary characteristics, as well as to create higher quality products to meet the diverse and individual and personalized needs of the younger generation of consumers. Only then can we lead the new trend in skincare."

Recently, in two civil rulings released by the China Judgements Online, LVMH sued L'Oréal China for trademark infringement and unfair competition, and claimed 10 million yuan (about $1.4 million). What happened? Back to March 18, 2021, Shanghai Pudong New Area People's Court filed a case against the plaintiff LVMH Perfume & Cosmetics Shanghai Co., Ltd, a China affiliate of luxury giant LVMH, and the defendant L'Oréal (China) Co., Ltd.(L’Oreal China) LVMH claimed $1.4 million from L'Oreal According to the civil ruling of the Pudong New Area People's Court, LVMH claimed that L'Oreal's skin care products NECTAR ROYAL series, launched in 2019, imitated the honey-based skin care products ABEILLE ROYALE launched by Guerlain France, a brand of the LVMH Group, in 2010. In addition, the L'Oréal campaign intentionally used the same design elements as the "ABEILLE ROYALE" product. According to LVMH, Guerlain launched its skin care products in 2010 under the name "ABEILLE ROYALE" and was granted registration No. G1102506 in the category "Soaps, fragrance products, essential oils and cosmetics". The trademark "ABEILLE ROYALE" was registered in the category "Soaps, Fragrances, Essential Oils and Cosmetics" under the exclusive right to use the trademark for the period from September 19, 2011, to September 19, 2021. "The promotional materials for ABEILLE ROYALE products use a series of creative visual and design elements that have been used by Guerlain France for many years and invested heavily in advertising, and have formed a stable association with the Guerlain brand. L'Oréal's move clings to the goodwill and market influence that Guerlain has long built for its 'ABEILLE ROYALE' products and is suspected of constituting unfair competition." LVMH also believes that the word "NECTAR ROYAL" used in the above-mentioned products by L'Oréal China is similar to the trademark "ABEILLE ROYALE", which is likely to cause confusion among consumers and allegedly constitutes trademark infringement. (Credit: from Guerlain official) LVMH said that the ingredients of L'Oreal China's "NECTAR ROYAL" products are not nectar, but honey. The use of "NECTAR ROYAL" as product description is likely to mislead consumers and constitutes unfair competition through false advertising. Accordingly, LVMH requested that L'Oreal China be ordered to stop using the "NECTAR ROYAL" logo, to take down the products, to publish a clarification statement in its official store and account, and stop advertising the relevant products, related logos and so on. At the same time, LVMH demanded L'Oreal China pay damages of 10 million yuan (about $1.4 million). For LVMH's lawsuit, L'Oreal China objected to the jurisdiction during the submission of its reply, and the relevant court and department rejected L'Oreal China's appeal and upheld the original decision. It is worth mentioning that recently, the Shanghai Pudong New Area People's Court issued a civil ruling but showed that "the epidemic has affected the relevant litigation activities for a longer period, so the lawsuit has been suspended". Up to now, no new progress in the case has been announced. (Credit: from Chinese social media Xiaohongshu) The price difference between the two products involved in the case is nearly 1,000 yuan Public information shows that the founder of Guerlain, Pierre-François-Pascal Guerlain, was inspired by the Vendôme Column and decorated the perfume bottle with bees and a colorful ribbon, thus the Bee Bottle was born and became the brand emblem, which continues to this day. Its "ABEILLE ROYALE" skincare products launched in 2010 are also a continuation of the brand's history and innovation. Currently, Guerlain's official Tmall flagship store shows that the "ABEILLE ROYALE" series of products include Youth Water Oil, Lotion, Night Cream, Day Cream and other products. From the performance of this year's Double 11 published by Tmall, this series of products has become Guerlain's blockbuster. According to the data, ABEILLE ROYALE Youth Water Oil ranked No. 4 on Tmall's Double Eleven Hot-selling Products List, and Guerlain's official flagship store ranked No. 14 on the FMCG list and No. 13 on the beauty list in terms of cumulative GMV. In the financial report of LVMH, it also praised the contribution of Guerlain ABEILLE ROYALE series products to the brand several times. The L'Oréal "NECTAR ROYAL" products mentioned in the case, include light cream, golden supplement essence and other products. This series of products is also hot-selling for L'Oreal. For example, in L'Oreal's Tmall flagship store, the NECTAR ROYAL Light Cream Nourishing Edition has sold 200,000+ pieces, with monthly sales reaching 10,000+ pieces. (Credit: from L'Oreal's official account on Weibo) However, the price difference between these two series of products is nearly a thousand yuan. It is reported that Guerlain ABEILLE ROYALE series of single products are priced at 540 yuan - 2100 yuan ($75.4-$293.2), while L'Oreal "NECTAR ROYAL" series of single products are priced at 199 yuan to 429 yuan ($27.8-$59.9). International beauty giants' battle in China Although the above case is still inconclusive, the two international beauty giants of the lawsuit have caused widespread concern in the industry. A senior industry source believes that "the actual reflection behind this is the fierce competition between international beauty groups in the Chinese market." According to the recent three quarterly reports released by the beauty groups, L'Oreal Group achieved a 12% growth in performance, with sales of 28.68 billion euros (about $30 billion), firmly sitting at the top of the global cosmetics group. Although L'Oréal China achieved double-digit growth, it certainly took some pressure. In order to consolidate its market position, L'Oréal is also continuously expanding the Chinese and even Asian markets with new brands and new products. For example, recently, a number of international media released news that L'Oreal Group, in cooperation with South Korea's Hotel Shilla and private equity firm Anchor Equity Partners, has launched a new luxury skincare brand Shihyo through a third-party joint venture, Loshian, with the intention of developing the Asian market. L'Oréal even exhibited a total of 225 exhibits, which set a new record high, at the fifth edition of the China International Import Exhibition. LVMH's cosmetics and fragrance division have also been growing year on year in recent years. According to the latest ranking, the group's global beauty company ranking has risen from the bottom in 2020 to rank seventh. LVMH even said in this year's third quarterly report, Dior and Guerlain's performance is particularly good, the former with the Sauvage, J'adore, Miss Dior and other classic perfume products maintaining high growth, while Guerlain is thanks to the growth of ABEILLE ROYALE skincare series. China is already the world's second-largest beauty market. In recent years, the beauty giants in the Chinese market have begun to fierce war. As a result, LVMH and L'Oreal are also tensing up in the face of the Chinese beauty market, which is increasingly competitive but still attractive.

Firmenich and DSM have released the latest exchange offer as part of their merger process, which was first announced in May. On November 22, Royal DSM, the international nutraceuticals, chemicals and pharmaceuticals group, and Swiss perfume and fragrance giant Firmenich announced new developments in their merger, with the Dutch Authority for the Financial Markets (AFM) having approved an offering notice in connection with the transaction, officials said. On May 31 2022, DSM and Firmenich announced a merger and will jointly form a new company, DSM-Firmenich. After the merger, will the company will become one of the largest perfume, beauty, health and nutrition suppliers on time, with revenues of more than $11.5 billion and total revenues of $3.3 million in the perfume and beauty division. The announcement said the acceptance period for the transaction began at 9 a.m. on Nov. 23 and ended at 5:40 p.m. on Jan. 31. After the successful merger, DSM shareholders will own 65.5 percent of the shares and Firmenich shareholders will own 34.5 percent and receive about $3.6 billion in cash. This follows DSM and Firmenich's announcement that they will accelerate strategic delivery by further driving innovation in high-growth and resilient market segments, with the merger expected to be completed in the first half of 2023 and listed on Euronext Amsterdam upon completion. Firmenich's fragrances and ingredients business will further expand the share of the beauty market for both businesses through a merger with DSM's personal care and fragrances business. The combined fragrance and beauty division will be a leader among fragrance ingredients companies and will also have high-end renewable, natural and biodegradable technologies, the sources said. Geraldine Matchett and Dimitri de Vreeze, co-CEOs of DSM, said: "We are entering the exciting next phase as we look to bring together DSM and Firmenich's complementary capabilities, likeminded and passionate people, and unite the heritages of two great and historic companies". In addition, on the 22nd, the two companies announced their corporate results. In 2021, DSM's total revenue was about $7.6 billion and Firmenich's total revenue was about $4.4 billion, with a combined revenue of about $11.9 billion. In the first half of this year, DSM's total revenue was about $4.3 billion and Firmenich's total revenue was about $2.5 billion, with a combined revenue of about $6.8 billion.

On November 22, YSG released its financial report for the third quarter of 2022. The skincare sector maintained a strong growth momentum, achieving revenue of 269 million yuan ($38 million), up 33% year on year, accounting for 31.4% of the total revenue. （Credit：Website） YSG had an initial public offering in NYSE at the end of 2020, to create a Chinese cosmetics brand to meet a huge and rapidly growing market. According to the market research data quoted in the YSGF-1 registration statement, China has become the largest cosmetics market in 2019, with a market size of $39 billion. It is estimated that by 2025, with the increase of per capita expenditure, purchase frequency, and adoption from low-end cities, the Chinese market will grow to nearly $70 billion. The financial report showed that YSG's total net income in the third quarter was 857.9 million yuan ($120.6 million), down 36.1% year on year. This was mainly due to the 48.8% drop in the net income of the company's color cosmetics brand, and the 33.0% increase in the net income of the skincare brand, partially offsetting this decline. （Credit：YSG financial report） For the performance of the next quarter, YSG expects the total net income in the fourth quarter of this year to be between 916.7 million yuan ($128.1 million) and 1.07 billion yuan ($149.5 million), down about 30% to 40% year on year. At the same time, YSG is continuously increasing R&D investment to enhance the company's development resilience. According to the data, YSG's R&D expenditure was about 33.9 million yuan ($4.7366 million) in Q3, and the proportion of revenue rose to 3.9% from 2.7% in the same period last year. By the end of the third quarter, YSG had invested more than 100 million yuan in R&D in 2022, the proportion of which ranked first among China's beauty groups and was the same as the average proportion of R&D investment in the global industry. According to the analysis of insiders, due to the repeated impact of the epidemic in China, the beauty industry is still under pressure from the recovery of fluctuations, but the transformative effect of YSG in the third quarter is gradually emerging. Regarding the annual performance outlook, Huang Jinfeng, CEO of Yatsen, said, "In the future, we will continue to promote the sustainable development transformation of YSG and lay a solid foundation for the healthy development of the company in the medium and long term." Source: YSG If there is any infringement, please contact us to delete it.

Three import makeup brand, Korean makeup brand HERA, the affordable luxury makeup brand GlamGlow and Korean mass makeup brand Etude House all have announced to close their Chinese Tmall flagship store one after another. (Credit: from internet) Since 2020, Etude House has had several adjustments before such as pulling off offline single-brand stores, deploying its products into beauty collection stores and developing online channels. Why did they decide to close its online store on Tmall? What happened to the imported makeup brands in China? Another Korean makeup brand makes strategic adjustments in China Shortly after the Chinese Double 11 Shopping Festival, CHAILEEDO noticed that many netizens recently said on social media platforms that "flagship store of Etude House on Tmall was closed." Some of them even worried that they would never be able to buy the brand's products again. The announcement released by Etude House's Tmall flagship store shows that the store will suspend operations and take down all its products from the store from November 12, with the resumption time to be determined. It is understood that the store has 3.69 million followers. The company's parent company, Amore Pacific, was contacted by CHAILEEDO, who did not provide details, but said that the store would be reopened afterwards. Looking back the company's development in the Chinese market, this is at least the third time the brand has made adjustments. According to public information, Etude House was founded in 1985 and entered China in 2013, and was loved by Chinese domestic consumers for its pink, dreamy princess style and trendy creativity when it first entered China. In its heyday, Etude House had nearly 60 stores in the Chinese market. Due to the early entanglement with Chinese agents, the brand once changed its thinking and adopted a self-operated model, which can be regarded as the first major adjustment. The second time was when Etude House shut down its offline single-brand stores and instead started to focus on online and beauty collection stores. Now, Etude House is adjusting again by closing its Tmall flagship store, does this mean that it is wavering on the Chinese market? CHAILEEDO found that, in addition to the Tmall flagship store has been suspended, Etude House official mall on WeChat has been closed as early as February 23 this year. Although the official flagship store on JD is in normal operation, only two products primer and Palette are available for purchase in the store. In this regard, customer service told CHAILEEDO, in addition to the above two products, the rest of the products are not in stock, "Products is arranged by the company. We can not determine the specific date of replenishment." CHAILEEDO also call COLORIST, a makeup collection stores, in Wuhan, Shenzhen, Shanghai, Hangzhou and other places. We learned that the Etude House is still available normally with a full range of its products. It can be seen that although the channel is frequently adjusted, the Etude House is still holding on. However, it will be difficult to recapture the market that Etude House missed. CHAILEEDO previously compiled according to Amore Pacific's financial report, Etude House made a total loss of 250 million yuan (about $34.9 million) in 2018 and 2019. (Credit: from official account of Etude House on Weibo) Amore Pacific's third quarter 2022 results report showed that both makeup and skin care sales at Etude House increased, but overall sales declined by 3.6% due to the impact of the closure of its duty-free stores (sales of approximately 138 million yuan about $19.3 million in the third quarter of 2021 and 133 million yuan about $18.6 million in the third quarter of 2022) In its research report, Huaxi Securities also pointed out that Korean makeup brands first caught the express train of cultural industry development. With the help of film and television works to promote the brand, Korean makeup brands also integrated traditional cultural elements to enhance brand identity. But the history of overseas expansion period shows that cultural empowerment can only help short-term overtaking, and long-term reputation will depend on product quality and technology content to establish. Several imported makeup "lost" By the overall environment, makeup market growth pressure on the industry is obvious to all in the past two years. Relying on reputation and quality to lay the cornerstone of the market, the strategy that gain a foothold in the Chinese market also applies to other imported brands. However, in the face of the high-speed sector and rapidly changing channels that color cosmetic is in, some imported brands are slow to respond. Some brands do not understand the market, then they adjusted the strategy or simply exit China. It is understood that the Korean makeup brand HERA has withdrawn from Chinese offline counters in March, and closed the online WeChat mall on March 25. In June this year, Estee Lauder Group's makeup brand Too Faced Tmall overseas flagship store issued an announcement, saying that in August to end the operation of the flagship store, Too Faced Tmall overseas flagship store store is no longer searchable. It is no coincidence that in July this year, Stila, an American makeup brand, announced the end of its overseas flagship store on Tmall. GlamGlow, another online luxury makeup brand, also closed its flagship store on Tmall in August and exited the Chinese market in disgrace. It is worth mentioning that recently, Lilah B., one of the first high-end brands to enter the clean beauty market, also announced the closure of its brand at the end of the year, and the brand's retail partners include Sephora, Net-a-porter and BlueMercury. As you can see, it will take some time for the makeup market to recover globally, not to mention a market with many brands and full competition like China. Compared with Korean makeup, which continues to wither, and imported niche makeup, which frequently loses ground, Chinese cosmetics brands are growing rapidly under the rise of e-commerce platforms and new social platforms. Taking the Double 11 list as an example, in the past 3 years, the Tmall Double 11 makeup Top 10 list has had 2 Chinese brands on the list every year, with Perfect Diary and Florasis both having topped the list respectively. (Credit: from official account of Florasis on Weibo) At the same time, Timage, Blank me, Maogeping, etc. has been recognized by the public. It is understood that Timage sales in the first half of the year reached 232 million yuan (about $32.4 million), an increase of 110.57% year-on-year. During Double 11, Timage gained 137 million yuan (about $19.1 million) in total commodity transactions ranked 12th in the makeup list. Blank me also once into the top 10 of this year's Chinese double 11 Shopping Festival makeup pre-sale list. A beauty e-commerce industry practitioners told CHAILEEDO that the beauty market is changing at a faster pace. With the rise of Chinese products, the younger generation of consumers have more choices. If beauty brands lack iteration in product quality and innovation, they may be vulnerable in terms of cost performance and product functionality, while quality and innovation are precisely the most important point for Chinese domestic brands. Another beauty retail leader also said, "Chinese consumers are now more rational." Currently, the beauty market competition is fierce, color cosmetics products trends are changing with rapid iteration. The cosmetic brands should follow the current consumer trends and capture user demand to achieve the product with the times. They also should take in-depth insight into the pain points of young consumers in order to win a place in the beauty market.

Ohana & Co.: The beauty M&A market has become more favorable to acquirers. According to the data of HKTDC, the size of China's cosmetics market in 2021 will account for about 17.3% of the global market, making it the world's second largest cosmetics market after the United States. Euromonitor forecasts that the CAGR of China's cosmetics market is expected to be 7.54% from 2022 to 2026, and will grow to 817.7 billion yuan in 2026. Leading international beauty enterprises began to have more capital operations, and more and more beauty enterprises invested in China. For example, L'Oreal invested in China's local high-end perfume fragrance brand Documents, and Shiseido invested in Jiangsu Trautec Medical Technology, which focuses on recombinant collagen 2-based biomaterials. However, the impact of the epidemic on consumption has not yet receded, and the recovery of the beauty industry is still on the way. According to the latest retail sales data of consumer goods released by the National Bureau of Statistics on November 15, from January to October this year, the total retail sales of domestic consumer goods amounted to 360,575 billion yuan, up 0.6% year-on-year, with a slower growth rate. Among them, the retail sales of cosmetics reached 308.4 billion yuan, down 2.8%. The increased competition in the Chinese market has also prompted more and more Chinese companies to look overseas. For instance, YatsenGlobal was listed on the New York Stock Exchange, and China's high-end new luxury beauty brand group USHOPAL announced the acquisition of the UK high-end skincare brand Argentum. The market changes rapidly, and what trend will the beauty market show? CHAILEEDO interviewed Ariel Ohana, the founder of Ohana & Co., and discussed the development direction of the cosmetics industry and the overseas investment trend of Chinese cosmetics enterprises. Make friends prior to do business Founded in 1994, Ohana & Co. is a global independent investment bank focused on the consumer and digital sectors, have offices in New York and Los Angeles, and a China desk in Paris to support M&A transactions with Chinese clients or counterparties. “In concrete terms, we represent business owners in selling their company or raising capital and represent large cap conglomerates in buying or investing in brands.” Ariel said. In his nearly 3 Decades experience, Ohana & Co. have successfully closed transactions with the top luxury groups, such as LVMH, Kering and Richemont, and many beauty conglomerates. For instance, they represented luxury performance cosmetics Hourglass on its sale to Unilever, represented Kosé Corp on its acquisition of Tarte Cosmetics, and represented Procter & Gamble on the sale of Rochas to Inter Parfums. Ariel Ohana, the founder of Ohana & Co. When talking about the beauty investment case, CHAILEEDO specifically asked Ariel which aspect he valued most in the beauty investment process. Ariel smiled and shared the Hourglass case with us. He said that he first contacted with Carisa Janes, the founder of hourglass, when her company was small. At that time, they did not talk about transactions, but rather exchanged ideas and experience in the beauty industry. In the process of continuous communication between the two sides, they understand each other and build trust. ”We tend to grow and to nurture relationships with people before we represent them.” Ariel said this when recalling this story. Not only big deals，While most of Ohana & Co.’s activity is on established brands, Ohana & Co. also participate in the growth of startup brands. Ariel said that since three years ago, Ohana & Co. have started an incubation activity whereby invest in early-stage brands, and they usually do this by bringing along as co-investors from their personal network. For example, Ohana & Co. co-invested with Manzanita Capital in What Matters (refillable personal care products) and invested in FRE (personal and skincare for active women), in which Chalhoub group recently invested. Outside of beauty, Ohana & Co. also invested in RTFKT with Adrien Cheng – just a few months later, RTFKT was sold to Nike. “For mid and large size companies we advise on M&A, and for small size companies we invest.” Ariel sums up Ohana & Co. In this way. The overseas investment strategy of Chinese beauty enterprises has two characteristics Ohana & Co. started working with Asian groups more than a decade ago. Their earliest partner was AmorePacific, a well-known cosmetics company in South Korea, and they ended up representing AmorePacific on two M&A transactions, one in France and one in the US. Since then, Ohana & Co. have represented a number of Asian clients, including Adrian Cheng’s C-Ventures in Hong Kong, S’Young group in Changsha, and Kose Corp from Japan. Investment strategies are usually to acquire successful brands, to fill a gap for the buyer in terms of product category or geography. These strategies also apply to Chinese buyers, however, Ariel believes that Chinese enterprises’ investment strategies differ from those of other international enterprises mainly in two aspects. First, “There is a strong focus on brands that are showing great promise in China”. Chinese enterprises like to acquire overseas enterprises, and then feed the domestic market competitiveness through the advantages of foreign enterprises. Second, “Ability to use management of the target as a platform for the entire group”. After acquiring foreign enterprises, Chinese companies will prefer to retain the acquired enterprise structure as overseas headquarters, which will be conducive to the expansion of Chinese enterprises overseas. Ariel identified four pain points for Chinese enterprises during their acquisition process. Identifying the right brand to acquire、Approaching the brand owners、Management Retention and Deal Negotiation. These are typical pain points in any deal, but they are heightened for Chinese acquirers due to the long distance of geography and the difference of cultural background. This is where Ohana & Co.’s industry knowledge in beauty and experience in cross border deals and negotiations can really help. What trends have beauty investment activities shown in recent years? Like any other market, Beauty M&A is a market that has trends. From the category analysis, Ariel believes that Clean Beauty and Hair Care are gradually attracting investors' attention. In addition, the focus of the fragrance category M&A has shifted from celebrity brands to authentic niche brands, such as the Spanish beauty giant Puig Group's acquisition of Sweden's Byredo. In addition, Ariel also stressed that from the current market situation, in the US, the mass channel (Walmart, Target, Kohl’s, etc) is likely to become the next "next frontier" of the beauty market. As he said, Estee Lauder Group, which has always been taking the high-end route, has acquired a majority stake in Deciem, the parent company of the ingredient skincare and beauty brand The Ordinary, at a valuation of 2.2 billion dollars in 2021. Furthermore, both Sephora and Ulta have announced initiatives to sell in the mass channel. Ariel told CHAILEEDO that compared with last year, the overall beauty investment environment has not changed much this year. As beauty consumption has shown greater resilience than other industries this year, the beauty M&A situation is still strong. “I would say the main difference is that last year the market was clearly a ‘pro-seller’ market and this year it is much more balanced between buyers and sellers, but still active.” Ariel summarized.