Win in efficacy, welcome the future. 5th CHAILEEDO Conference on China’s Cosmetic Trends and China Cosmetic Efficacy Trend Exhibition, themed "Win in Efficacy", was held in Hangzhou on September 22nd. At the conference, Liu Zhi, a professor from the College of Life Science & Technology of Huazhong University of Science and Technology, delivered a keynote speech. The following is the transcript of the speech. I have been engaged in microbiology research. I used to study intestinal microorganisms and started to do work related to skin microecology the year before last. I would like to take this opportunity to share with you the summary of our scientific research and our view on the trend. I hope to help you and promote the development of the whole industry. The title of my talk is: Global Perspectives on Microecological Research. Three aspects will be elaborated. The first is skin microecology, what exactly are microorganisms? Microorganisms themselves are very small, all the little things that are not visible to the naked eye. But, of course they are also living organisms. Life is generally divided into three main categories: animals, plants, and microorganisms, and microorganisms are divided into eukaryotic cells, such as fungi. There are two types: prokaryotic cell types, and non-cellular microorganisms. The development of the microecology industry has been made possible by microbiomics research. Through the study of a variety of histological techniques, the data really shows that the microbiome as a whole can work on the human body. Microbiomics and microecology research has revealed that microorganisms are closely related to life and cover almost all life functions. The main microorganisms now include five major ecosystems: the oral cavity, the skin, the gastrointestinal tract, the reproductive tract, and the respiratory tract, all of which have microbial communities functioning within them. Their functions are almost linked to bone development, disease, and all kinds of skin health, so microbiological research has attracted a lot of attention. Second, the whole microecology program has received a lot of research and investment in the health field. Global research dynamics in skin microecology. Skin microbiology, which is a whole of various types of microorganisms together with skin surface cells, various secretions, and microenvironment, which work together to maintain the microecological balance of the skin. Various diseases, such as atopic dermatitis, like acne, and psoriasis are all basic manifestations of microbial dysbiosis. Together, these microorganisms guard our skin and they form a microbial barrier, a chemical barrier, an immune barrier, and a physical barrier. Skin microbes have five main functions. 1. Metabolism, which is able to metabolize the sebaceous substances secreted by the sebaceous glands and inhibit the growth of pathogenic microorganisms. 2. Nutritional role, producing multi-chain fatty acids, which are direct nutrients for skin cells. 3. Immune effect, secreting or inducing the body's own production of antibacterial peptides, inhibiting the reproduction of pathogenic bacteria. 4.Sebum formation of sebum substances for degradation and removal of metabolites. 5.Formation of a stable and harmonious biological barrier. Skin type is naturally also related to skin microbial structure. This is the research of Ms. He Congfen from Beijing Technology and Business University, who found that different skin types have multiple classification in microbial types obviously such as neutral, oily and comprehensive skin structure. In other words, it is very important to design different micro-ecological care programs for different skin types. The microbial structure of sensitive skin is very interesting. There is a structurally big difference between the skin index of sensitive skin and normal skin. But there is no big difference in microbial structure, and it may be in some rare species. That is, there may be some special treatments needed for sensitive skin care regimens. Then look at whether cosmetic use has any changes for the skin microbiome. The choice of preservatives is critical. Different preservatives have different effects on propionic acid, Acinetobacter, Staphylococcus aureus, and Staphylococcus epidermidis. That is, it is important to pay attention to the preservative test when designing cosmetics, not just to keep the regular pathogenic bacteria at bay, but actually to have a very important impact on the skin flora as well. Korean studies have found that cosmetic use can affect skin flora. For example, as using cosmetics after 4 weeks, the growth of Propionibacterium and Streptococcus are promoted, which may be the ultimate role of cosmetics. The above story tells a lot of scientific research, which fully demonstrates the relationship between skin microorganisms and skin function, let's look at the application in the product world. That is, thirdly, skin microorganism applications and trends. In the era of "micro-ecological" skincare is coming. The original cosmetics are from the beginning of the untreated plant and animal, mineral ingredients, to the natural plant extracts. Now, it has reached the era of bio-fermentation, bionic technology and micro-ecological skincare. Micro-ecological skincare can make our skin ecology more balanced and help the skin "wall" structure become stronger, and repair the skin micro-ecology as a whole. It is not a single efficacy factor to act, but the overall skin micro-ecological balance. The micro-ecological skincare market has also become a global trend with a CAGR of 6.1% from 2019 to now, of which China far ahead of international trends. Major beauty companies have also made micro-ecological skincare a strategic development plan for their own companies. L'Oreal, Estee Lauder, and P&G launched micro-ecological products and these have become breakout products in the market without exception. In the application of sunscreen, such as cyanobacteria. It can produce a substance that will become a microbial sunscreen, such as amino acids, which can effectively isolate UV rays. There are also applications in dermatology. Overall, clinical trials of skin microecological agents have many applications in atopic dermatitis, acne, rashes, wrinkle removal, psoriasis, etc. I would like to talk about some cases of products such as L'Oreal's Youth Code, which are popular in China. And SK-II Facial Treatment Essence is a yeast fermentation solution with a minimalist formula. And bifidus yeast (bifidobacteria) and hyaluronic acid work in Estee Lauder Advanced Night Repair. Dr. ALVA, a Chinese brand specializing in skin microecology, focuses on probiotic lactic acid bacteria fermentation solution. Another case: BASF launched Scalposine, a scalp micro-ecological care product. Valmont launched micro-ecological skincare, which is based on the concept of maintaining the balance of the skin microbiome. The company AO+ is a researcher of sweat gland substances, which effectively degrade ammonia and nitrogen. Sequential Skin, a Singaporean start-up, is a pioneer in precision therapy, targeting products by detecting skin micro-ecological types. In summary: skin is an ecosystem, whether it is due to social or personal reasons that lead to imbalance of skin micro-ecology, it needs to be turned into a healthy ecology through ecological restoration. We need to understand the user's skin, the user's microecology. We need to understand the microecological structure after AI data analysis to launch accurate strategic formulations. Through strain optimization and efficacy, colony network construction, we can develop microecological products, which is also the overall idea of our project in Guangzhou Guangdong, Hong Kong and Macau Bay Area. We have produced some patents and products after more than a year of research, and we hope to meet with you colleagues in the market next year. Q&A: Is there any basis for the claim that some skincare products accelerate skin metabolism and cell metabolic cycle from 28 days to 21 days? Liu Zhi: From the perspective of scientific research, what we need to do is to learn from nature, not to change nature artificially. The concept of ecology, in general, does not emphasize on taking something further and enhancing it. From the point of view of doing research, nature's choice is the optimal choice. For example, during the COVID-19, many people asked me if the COVID-19 was man-made. I myself have engaged in some of the research on the COVID-19, and I can tell you that it is not possible. Because laboratory design modification is very difficult to do. It is all caused by natural selection and I personally do not agree with forcing the metabolic genes to change. Of course, if a person's metabolism is slow due to various diseases and needs to be adjusted to a normal rhythm, this is possible. I always believe that human beings should learn from nature, rather than artificially changing these things. Q&A: I would like to ask you what research and what interesting findings your lab has done on skin microecology? Liu Zhi: We are involved in the skin microecology industry from 2019. We are still based on the basic strategy of microbial research. First of all, we build a bacterial library. We have more than 5,000 strains of microbial library from human health humans and then evaluate the efficacy. At present, we are also working with Beijing Technology and Business University and other units to do the skin propriety project. We combined microecology and skin propriety hoping to achieve accurate skin microecology typing and promoting precision skincare products. At present, we have two teams in Wuhan and Guangzhou to conduct scientific research and translational work respectively and welcome you to visit.

How to efficiently improve product and brand power will be the key factor in determining whether they can win in the future competition, and is also the root of whether the brand can break through. The beauty industry has encountered various challenges this year. The total retail sales of consumer goods in China for cosmetics was 245.3 billion yuan(about $34.1 billion) from January to August 2022, down 6.4% year-on-year. However, China's efficacy skincare market has been growing rapidly in recent years, with a compound annual growth rate of 23.4%, and is expected to reach 41.1 billion yuan(about $5.7 billion) in 2022. CHAILEEDO invited the person in charge of YSG to share with us the cosmetic trends in China. CHAILEEDO: From the perspective of YSG, what are the biggest trends in the cosmetic industry next year? YSG: In recent years, Chinese cosmetic brands have rapidly emerged by virtue of their mature Chinese supply chains, the combination of online and offline omni-channel advantages, and the "Chinese-style trend", and have the initial ability to compete with international brands on the same stage. However, compared with international brands, Chinese brands are still in the initial stage of technology development and conversion, which restricts the sustainable development of Chinese brands. Therefore, in the foreseeable future, heavy investment in research and development, product strength and scientific research content improvement, will become the biggest trend of Chinese beauty brands. CHAILEEDO: Traffic is getting more and more expensive, what is the new breakthrough point for brands? YSG: With the development of the new e-commerce industry, in addition to the existing promotion platforms, new traffic platforms, including the TikTok system, are gradually becoming a new position in the promotion of the cosmetics industry, and traffic is showing a significant decentralization trend, thus prompting beauty brands to increase the omni-channel and all-round layout of the online market, and online operations will become more refined. In the post-flow dividend era, for beauty brands, how to efficiently improve product and brand power will be the key factor in determining whether they can win in the future competition, and is also the root of whether the brand can break through. CHAILEEDO: Where is the opportunity to flip for color cosmetics next year? YSG: This is closely related to the general economic environment, consumer confidence, epidemic prevention and control policies, etc. It is not very good to judge for the time being.

This demand can also be seen in the data recorded this year, where the repair effect is ranked first among the few product. The beauty industry has encountered various challenges this year. The total retail sales of consumer goods in China for cosmetics was 245.3 billion yuan(about $34.1 billion) from January to August 2022, down 6.4% year-on-year. However, China's efficacy skincare market has been growing rapidly in recent years, with a compound annual growth rate of 23.4%, and is expected to reach 41.1 billion yuan(about $5.7 billion) in 2022. CHAILEEDO invited Li Shiwei, the head of YOUZ TESTING, to share with us the cosmetic trends in China. CHAILEEDO: From your point of view, what are the biggest trends in the cosmetics industry next year? Li Shiwei: Environment-friendly, natural and simpler skincare processes, multi-functional and ingredient innovation in single products, convenience claims, synthetic biological ingredients and the integration of sustainable environmental and health concepts, where efficacy and convenience are the keys to stand out. In addition, according to market data, more and more people are concerned about the impact of the environment on the skin barrier, especially during epidemics, so cosmetics that strengthen the skin barrier will be more popular. This demand can also be seen in the data recorded this year, where the repair effect is ranked first among the few products that have been filed for human efficacy in general cosmetics. In terms of efficacy, special purpose cosmetics are trusted by more and more consumers because of rigorous audits and clear testing methods, anti-wrinkle products will continue to occupy a certain market position because of the wide range of people in need, and repair products will be a trend at some stage as people become more concerned about the impact of the environment on the skin. At the same time, according to data, the past six months, fragrance trends continue to influence not only beauty and personal care products, but also the home market. Fragrance personal care products have been in the consumer's daily life and occupy a fairly important position, and these products do not require special requirements, less process, product scalability, the pursuit of minimalism, strong presentation, and fast filing, listing, upgrade iterations. Body and fragrance product categories will also grow rapidly at a certain stage. CHAILEEDO: In the face of regulatory changes, what are the most important initiatives for companies? Li Shiwei: To respond to the current changing situation with strong conviction. In order to survive and have long-term development, companies must operate legally and in compliance. With the tightening of regulation, non-compliant products or companies will be ordered to rectify, or notified or punished in the heavy case, which may even lead to elimination in the case of extreme market transparency. Therefore, to adhere to the bottom line of quality, to keep the quality of the gate, to build the moat of the enterprise, to build the core competitiveness of the enterprise. After the introduction of the new rules, many brands slowed down the filing speed, from the media statistics show that as of August 18, the information showed in NMPA Special Cosmetic Registration Platform for 2022 registration and batch status in the "current batch" of a total of 1,759 domestic special cosmetics, not yet reached half of last year's number. From January 1 to June 30, 2022, the number of domestic general cosmetic products filed was 170,000+, but moisturizing, cleansing, cosmetic finishing and fragrance accounted for nearly 90% of the total. With the implementation of the requirements of the efficacy claims, enterprises can not be as arbitrary as before, claims to be in accordance with the national regulations of the 26 types of efficacy claims, each product from the surface, the efficacy of similar, and the current form of the formula open and transparent, transparent prices, how to build their core competitiveness is particularly important. A company without core competitiveness is easily homogenized and eliminated from the market. CHAILEEDO: What are the opportunities for beauty testing organizations in the next year? Or what is the competitive advantage? Li Shiwei: The country has introduced the fastest and largest number of regulations in the history of the cosmetics industry since 2020, and the introduction of these regulations has brought a lot of business to the inspection and testing organizations, but the lag of the relevant methods has led to a mixed bag of testing organizations. The NMPA has just issued a draft of the "Accreditation of Cosmetic Inspection and Testing Organizations" for public comment, indicating that the national regulation of inspection and testing organizations in the beauty industry is getting stricter and stricter, and that cosmetic inspection and testing organizations want to develop in a good direction, first to ensure compliance and legality, and then to seek development. Although our country has given laboratory and consumer trial experiments methods, it is difficult to make a breakthrough in the short term, as laboratory methods still need to be verified by a large amount of data to match the human body. But in the long run, testing organizations have human efficacy evaluation laboratories, more development prospects, especially so far only three dozen institutions with three special cosmetic registration test qualifications will have more advantages. Of course, safety assessment is a module of the state that must be managed, as a third-party testing organization, its ability to assess safety is also crucial. In the longer term, China's cosmetics have to go abroad, and testing organizations should be able to understand the regulations of each country and be ready to serve the export products.

In the future, Green Pine will focus on cosmetics and other large consumer-related businesses to improve operating results. On September 28, Fujian Green Pine Co., Ltd. announced that in order to focus its main resources on cosmetics, it intends to transfer the equity of two wholly-owned subsidiaries engaged in the turpentine deep processing business, and is now open to inviting transferees. According to the announcement, the two wholly-owned subsidiaries to be transferred include 100% equity of Nanping Green Pine Chemical Co. and Longsheng (Hong Kong) Trading Co. The transfer is an overall sale of the equity interest in the aforementioned wholly-owned subsidiary, including all assets and liabilities. Cosmetics and turpentine deep processing are the two main business segments of Green Pine. The cosmetics business is mainly operated by the subsidiary NBC, and the main holding company for the turpentine deep processing business is Green Pine Chemical. If the transaction is successful, all of the turpentine deep processing business of Green Pine will be divested and its main revenue will be derived from the cosmetics business. According to Green Pine's 2022 semi-annual report, its total revenue was 1.416 billion yuan ($197 million) in the first half of the year, with a loss of 159 million yuan ($22 million) in net profit attributable to the parent company, and NBC's revenue was 957 million yuan ($133 million), accounting for 67.58% of the total revenue, with an operating profit loss of 118 million yuan ($16 million). Green Pine Chemical, the main holding company for the turpentine deep processing business, reported operating revenue of 454 million yuan ($63 million) and an operating loss of 53.5143 million yuan ($7.4373 million) in the first half of the year. The other subsidiary of the sale, Longsheng (Hong Kong), had first-half revenue of HKD35.2533 million ($4.4909 million) and a net profit of HKD63,000 ($8000). In terms of transaction price and transaction object, Green Pine said the price will be offered by mutual agreement and the counterparty has not been determined yet. The company will openly solicit the intended transferee, and the solicitation date is from September 29, 2022, to October 18, 2022. Green Pine said that the sale is in accordance with the company's established strategic development plan to dig deeper into the value of cosmetics and other big consumption business industries. In the future, the company's main resources will be focused on the direction of cosmetics and other big consumption businesses and improve operating results. Previously, the analysis of China's cosmetic industry by Green Pine concluded that the ceiling of China's cosmetic industry is high and the market scale still has more room for improvement. In addition, the pandemic in China is expected to be effectively controlled, and favorable factors such as the rising share of young consumers, the continued high growth and penetration of e-commerce, the upgrading of high-end brand consumption, and the explosion of short-video live streaming/influencers’ e-commerce will continue to play a role in driving the long-term trend of high growth in cosmetics. Its analysis also expressed that in recent years, China has continued to introduce regulations on cosmetics and tighten industry supervision, which will have a short-term impact on the industry but will be beneficial to the healthy development of the cosmetics industry in the long term.

Cosmetic testing organization will move to high-quality development. The beauty industry has encountered various challenges this year. The total retail sales of consumer goods in China for cosmetics was 245.3 billion yuan(about $34.1 billion) from January to August 2022, down 6.4% year-on-year. However, China's efficacy skincare market has been growing rapidly in recent years, with a compound annual growth rate of 23.4%, and is expected to reach 41.1 billion yuan(about $5.7 billion) in 2022. CHAILEEDO invited Li Zhikun, cosmetic division of Weipu to share with us the cosmetic trends in China. CHAILEEDO: From your point of view, what are the biggest trends in the cosmetics industry next year? Li Zhikun: I think it is "seeking truth". Under the regulation of new regulations, the cosmetic industry is no longer as "impetuous" as in the past, and many products have been eliminated. In terms of product development, it is particularly important for companies to gain insight into the segmented needs of users, or to find the needs of users who have not received the best solutions, and then develop targeted products. Cosmetic companies will pay more and more attention to "Why", while at the same time, companies will gradually establish or upgrade their core technologies and increase investment in research and development. CHAILEEDO: What is the most important step for companies to take in the face of changing regulations? Li Zhikun: The new regulations have a wide impact on product declaration, labeling and claims, quality and safety, and business management, all of which are very important. If you choose three recommendations to the enterprise, then the following three points may be the need for extra attention in the past two years. 1、Strict control of advertising: whether it is the traditional form of advertising, or the new live streaming and other Internet online promotion, enterprises as advertisers need to strongly control the promotional information of each channel. From the Internet Advertising Management Measures (Public Consultation Draft) at the end of the 2021 to the Cosmetics Network Operation Supervision and Management Measures (Consultation Draft) in August this year, the regulatory authorities have gradually heated up their attention to the cosmetics industry. This year, the regulatory authorities also began to focus on and punish some of the non-compliant enterprises, so it is recommended that enterprises start to prevent in advance. 2、Strict assurance of ingredients compliance: Since the Cosmetic Ingredients Safety Information Registration Platform was launched, many ingredients suppliers fill the ingredients safety information according to the regulatory requirements, but there are many ingredients filled in the lack of information rationality, there are also many ingredients that are not filled in and not ready to prepare offline information. According to the transition policy announced by the NMPA, from January 1, 2023 onwards, the registration of new products for the record to provide all raw material safety-related information, May 1, 2023 has been declared before the product to supplement the provision of product formulations of all ingredients safety-related information. Time is getting closer and closer, companies should communicate with ingredients suppliers as soon as possible to supplement the information. In addition to the time problem, ingredients have a direct impact on the quality of the product. The regulatory authorities around the world in recent years have also publicized a large number of prohibited raw materials or substandard ingredients caused by the use of unqualified products and penalties for enterprises. Therefore, it is recommended that enterprises early investigation. 3、Take the monitoring of adverse reactions seriously: From the landing of the new regulations, the monitoring of adverse reactions is required to be outlined in the Enterprise Application Account Authority, "Cosmetic Adverse Reaction Monitoring Management Measures" will also come into force on October 1, 2022. Companies should look at adverse reactions rationally and monitor them in accordance with the regulatory requirements. Standardize the implementation of the monitoring process, not only to respond to supervision and inspection, but also to understand the actual situation of the product in the process of information collection, to help companies improve the product to adapt to the population and due warning information, and effective prevention of serious accidents. CHAILEEDO: What are the opportunities for testing organizations in the beauty field next year? Li Zhikun: We can't talk about opportunities here, because next year is a big test for cosmetic testing organizations, so it's more about what kind of testing organizations can survive: First, the Cosmetic Testing Organization Accreditation Conditions (Draft for Public Comment) will prompt testing organizations to improve their own capabilities, qualifications, orienting to the high-quality development of the cosmetics testing industry. Second, as the industry's knowledge of efficacy evaluation programs deepens, new research-based needs will gradually emerge, and having research capabilities is the key to breaking the circle of testing organizations. Finally, at a time when the industry involution is more serious, firmly holding on to quality will be fundamental to the survival of testing organizations.

The most important thing for new brands to become popular is the uniqueness of their products. The beauty industry has encountered various challenges this year. The total retail sales of consumer goods in China for cosmetics was 245.3 billion yuan(about $34.1 billion) from January to August 2022, down 6.4% year-on-year. However, China's efficacy skincare market has been growing rapidly in recent years, with a compound annual growth rate of 23.4%, and is expected to reach 41.1 billion yuan(about $5.7 billion) in 2022. CHAILEEDO invited the person in charge of UNISKIN to share with us the cosmetic trends in China. CHAILEEDO: What aspects if new brands want to become widely known? UNISKIN: For new brands, it still depends on differentiation. Differentiation includes product, channel, promotion, team and other aspects. In terms of channels and promotion, the development of E-commerce and social media has been very fast in these years, and the dividend may not be so rich at this stage. In terms of team, there are still some opportunities for new brands to find the right team for their own rapid development and growth. But the team you create be more efficient than the team of the large beauty group. Then you will have advantage of speed. Of course, the most important thing is the product. You should consider that whether the product has technological uniqueness, or the product design can meet the consumer demand that other brand products can not meet on the market. Even the design of some product changes can meet some demands that consumers themselves are not aware of. For example, the invention of the first “laundry gel” met such a demand. However, this kind of revolutionary product design is difficult. New brands should at least create differentiated products so that they can be known by more people. CHAILEEDO: Traffic is getting more and more expensive, what is the opportunity for brands to gain profit? UNISKIN: As traffic is getting more and more expensive, there are two directions. One is still to squeeze the bonus of traffic. But we may need to capture the traffic windfall keenly, actively innovate and adjust. The other is to do a good job of conversion, which requires polishing strength of your brand and products so that when limited traffic comes in, it can convert them better.

In March 2021, Gallinée opened a Xiaohongshu account for product previews. Recently, Shiseido announced on its website that it will acquire Gallinée, a British micro-ecological skincare brand, with details of the deal not yet disclosed. Responsible for the acquisition of Gallinée is Shiseido Europe S.A., an affiliated subsidiary of Shiseido and the head office for EMEA (Europe, Middle East, Africa). Shiseido claimed the acquisition will allow it to add new value skincare brands to the company's portfolio and further strengthen the skincare section. Gallinée, founded in 2017 by French pharmacist Marie Drago, is a probiotic skincare brand from the United Kingdom. Its products are said to focus on regulating the skin microbiome and stabilizing the skin barrier, meanwhile, caring for the good bacteria in the microbiome and restoring a healthy skin condition. The core ingredients of the products include prebiotics, probiotics, postbiotics & lactic acid, etc. For the acquisition of Gallinée, Shiseido expressed that microbiology plays an important role in skin and health. By acquiring Gallinée, it will gain a new customer tier that focuses on microbial skincare and will use this as a base to accelerate research in microbiology, with the European Innovation Center as the center. Following the acquisition, Marie Drago, the brand's founder, will continue to lead the brand under the leadership of Franck Marilly, CEO of Shiseido EMEA, and cooperate with the team at the EMEA regional headquarters to further develop the brand by leveraging Shiseido's infrastructure and rich resources. Currently, Gallinée products include essence, toner, cleanser, shampoo, and many other products, mainly sold in the UK and France, and no flagship store of the brand has been opened in China yet. However, Gallinée products can be searched in some Taobao C-stores. Moreover, a search for "Gallinée" in Xiaohongshu shows 200+ notes. As early as March 2021, Gallinée opened a Xiaohongshu account for product previews and has now published several product-related contents with a total of 13,000 likes. At present, Shiseido, Estee Lauder, SK-II, L'Oreal, Lancome, HR, Dr.Alva, Pechoin, PMPM, and other brands domestically and overseas, have all entered the market. Microecology is accelerating the penetration in the cosmetics industry, and some industry professionals believe that Chinese brands are expected to outperform international brands in this area. Data from Beauty Data.AI shows that from 2021 to July 2022, the total sales volume of products that focus on the microecological concept reached 82.61 million in China online, with sales revenue exceeding 14.5 billion yuan ($1.847 billion). Among them, skin care products accounted for 67.04% market share in this market. According to the online sales situation, it was found that Chinese brands accounted for 60% of the TOP 10 brands in sales, with Dr.Alva ranked TOP1, and Estee Lauder and L'Oreal in the second and third places respectively. The micro-ecological skin care market is mainly focused on facial care, which accounts for 79.68% of sales, and brands entering the market in the future can focus on this niche section.

The introduction of this provision is no longer restricted to the product packaging design for companies, which reduce the burden on the cosmetic brands.

L'Oréal has acquired Skinbetter Science, a brand that L'Oréal says is a perfect addition to the brand portfolio of L'Oréal's Active Cosmetics division. It believes the high-growth U.S. brand has great potential for international growth. On September 23, L'Oréal announced on its website that it had signed an agreement to acquire Skinbetter Science, a U.S. skincare brand, on undisclosed terms, and that the transaction is expected to close in early Q4 2022. Acquisition of one of the fastest growing medical skincare brands in the US Publicly available information shows that Skinbetter Science was co-founded by pharmaceutical industry professionals Jonah Shacknai, Justin Smith and Seth Rodner in 2016. According to L'Oréal, it is now one of the fastest growing medical skincare brands in the U.S. Skinbetter Science is known for developing innovative products with active ingredients for anti-aging, moisturizing, cleansing, exfoliating and sun protection. Upon completion of the acquisition, the current brand leadership team will continue to run the business and will be integrated under the leadership of Christina Fair, President of L'Oréal USA's Active Cosmetics Division. CHAILEEDO found that Skinbetter Science has entered the Chinese market with an overseas flagship store in Tmall Global, positioned as a "high-end American institutional skincare brand". The brand storefront hosts 29 products, covering such categories as essence night cream, face wash, eye cream, sunscreen, etc., mainly focusing on anti-wrinkle, wrinkle reduction, whitening, moisturizing and other effects. The lowest priced single product is the "Interfuse Treatment Cream" at $29.7/5ml. The highest priced single product is the "Alto Defense Serum" at $219.4/30ml. The "Alto Defense Serum Free Pack (5ml)", priced at $25, sells 500+ per month and becomes the highest-selling product in the store. In response to the acquisition, Myriam Cohen-Welgryn, Global President of L'Oréal Active Cosmetics, said Skinbetter Science is a perfect addition to L'Oréal Active Cosmetics' brand portfolio and will further contribute to the long-term mission of L'Oréal Active Cosmetics, a high-growth U.S. brand. L'Oréal believes has great potential for international growth. Skinbetter Science's products are currently available primarily through a network of leading dermatology, plastic surgery and medical aesthetics practices in the United States. In the past 12 months ending August 31, 2022, Skinbetter Science generated sales of nearly $95 million. Why are skincare brands with medical backgrounds favored by consumers? The "Rational Skincare in the Post-Epidemic Era White Paper" released by CBNData shows that consumers' skincare concerns have shifted toward safety, efficacy, and ingredients in the wake of the pandemic. As a result, compared to mass market daily skincare products, skincare products with medical background are favored by more and more consumers due to their more segmented, targeted and safer ingredients for skin types. CHAILEEDO notes that medical background skincare brands are favored by consumers partly because of their stronger efficacy, such as the B5 cream of LaRoche-Posay, a brand of L'Oreal's active cosmetics division, which is very popular among Chinese consumers. For example, L'Oreal's LaRoche-Posay Baume B5 is very popular among Chinese consumers. On the Chinese sharing platform Xiaohongshu, there are 40,000+ notes related to the LaRoche-Posay Baume B5. Consumers share the most about the product's acne-fighting and repair functions. On the other hand, because of its medical background, consumers are more confident about the safety of its products. It is worth noting that the active cosmetics division that Skinbetter Science entered is one of L'Oreal's most rapidly growing divisions, including brands such as LaRoche-Posay, CeraVe, SkinCeuticals and Decléor. Among them, LaRoche-Posay has previously been deeply bounded to medical care. For example, LaRoche-Posay held the LaRoche-Posay Blue Ribbon Caring for Cancer Patients’ Skin Health Summit in collaboration with authoritative experts from the Dermatologists Branch of the Chinese Dermatologist Association (CDA) and the Chinese Society of Clinical Oncology (CSCO). In the reviews of the forum, many viewers of the live streaming said that this public welfare activity was very meaningful. For the fiscal year 2021 ended December 31, L'Oréal Group Active Cosmetics Division sales rose 30.3% year-on-year to $3.8 billion, contributing 12.2% of the Group's sales. For the first half of fiscal year 2022, L'Oréal Active Cosmetics Division sales rose 20.9% year-on-year. Among the Chinese brands, the success of Winona is inseparable from its tie to its medical background. The medical profession has further strengthened the roots of Winona's core technology. In the process, Winona has established deep links with dermatologists, precipitating and accumulating a lot of academic results. Currently, Winona's products have been clinically verified and their effects observed in 63 Chinese and international hospital dermatology departments. In "the Red Book Essence of Clinical Application of Winona's Efficacious Skin Care Products" released by Winona, a total of 128 papers on basic research and clinical validation of Winona's products published in core journals in China and abroad are included, which are highly concerned by the dermatology industry. According to the financial report of Winona's parent company, BTN, Winona revenue accounted for 98%. It is reported that BTN 2022 first half of the company achieved revenue of 2.050 billion yuan(about $283 million), up about 45.19% year-on-year. It is worth noting that this is not L'Oreal's first foray into medical background skincare brands. In July this year, L'Oreal's French luxury skincare brand Carita into the Chinese market, would open its first boutique in Asia on August 1 in Nanjing Deji Plaza. It would be stationed in Beijing SKP counter on the same day. The brand positioning is high-end medical beauty hospital products. L'Oréal Group has noted that the active cosmetics division is growing much faster than the dermocosmetics market by strengthening its cooperation with healthcare professionals. It can be seen that L'Oreal may continue to be tied to its medical background in the future to provide a safe and effective approach to skincare.

Recently, "alive" has become a hot word, and the beauty industry has encountered various challenges this year, but we can also see that the efficacy cosmetic track is still lively.CHAILEEDO invited Fu Fei, Director of Brand Center of Shanghai Finhere Cosmetics Ltd. (Affiliates of the T3C), to share the beauty trends in China. CHAILEEDO: From your perspective, what do you think will be the biggest trends in the cosmetics industry next year? Fu Fei: Now is the era of the “beauty economy", and consumers' demand for cosmetics is rising year by year, especially the post-00 generation, which is focusing on skin care. Since 2020, the cosmetic industry has seen a series of trends such as "continuous segmentation of categories", "three-dimensional marketing channels" and "rapid growth of emerging channels". Under the influence of the current environment, I believe that as a company, we should always look for "the same" in "all changes", which is the real foundation of our existence. In my opinion, next year the cosmetics industry will return to two keys: one is "efficacy value" and the other is "emotional value". From the standpoint of consumers, the primary point of consideration for building brand trust and loyalty is "efficacy," which is the underlying logic that really moves consumers to buy. Relying on efficacy testing and safety testing, we are able to justify and substantiate the "efficacy" claim. When the "efficacy value" is satisfied, people will then pursue the "emotional value". For the brand, the positive emotional value can help the brand in the hearts of consumers to establish a sense of satisfaction outside the product function. For stores, providing the right service and establishing a good customer relationship with customers, can also bring more positive feedback. CHAILEEDO: Which categories are you optimistic about next year and why? Fu Fei: These years I'm focusing on the track of anti-aging. From the layout of the international market, not only the focus of international brands on anti-aging lines is increasing year by year, but also brands are more inclined to launch complex products, mostly by combining other effects with anti-aging effects. I believe that in the future, anti-aging products synergize different ingredient formulations to better meet the trend of consumer functional preferences. From the consumer's point of view, anti-aging is a category that almost everyone has a need for. Not only for mature skin, but I have also done research before and found that among the consumers who are concerned about anti-aging claims, students are the group we cannot underestimate. The demand for anti-aging has also become more segmented, with the younger group focusing more on anti-aging, hoping to keep their skin in good condition and solve the aging anxiety caused by staying up all night and other lifestyle habits. The mature group is more concerned about solving fine lines and sagging skin, preferring products that can target specific aging problems. Therefore, for the whole anti-aging market, not only the user demand is relatively stable, but also the future consumption space still has great potential. CHAILEEDO: In the future, what are the major rules of survival for offline cosmetic stores? Fu Fei: Most of the consumption behaviors are carried out in specific scenarios, and users get to know the products through the perception of the scenarios. In different scenarios, users' feelings and impressions of the product experience will be different. Therefore, if stores want to break the game and open up sales, they must first open up the scene and establish a channel between product selling points and application scenarios in order to effectively grasp the user's pain points, establish a good interactive relationship, and then stimulate the user's desire to buy. The next step to opening the scene is to do a good job of user operations. Our concept is "User First", not only to deep insight into the needs of users, insight into their habits, age and preferences, but also through online combined with offline marketing model to really "reach" users through online and offline marketing mode, such as good content design, user maintenance and activity planning, to achieve a win-win virtuous cycle with users.

Recently, "alive" has become a hot word, and the beauty industry has encountered various challenges this year, but we can also see that the efficacy cosmetic track is still lively.CHAILEEDO invited Huang Bo, General Manager of Zhejiang Jinzhuang Cosmetics Co., Ltd., to share the beauty trends in China. CHAILEEDO: Will it be more difficult for offline agents next year? Huang Bo: It will be more difficult for agents next year, that's for sure. I feel that the traditional agents have reached the end of their lives because they can not keep up with the development of the properties of the times. No one said that destroying the agent. The main reason for the decline in the value of agents is the impact of channel change. Currently, the channel has developed from the past single department store, KA, CS, to now more and more cosmetic channels. In the past, we did a good job with 3 channels, relatively closed, information is not transparent enough. Agents naturally have a certain space for survival. But now, the channel is almost borderless, and the whole price is very transparent, so it will lead to the traditional agents being eliminated, which is the inevitable result of development. CHAILEEDO: What is the next new channel of beauty? Huang Bo: At present, traditional agents can not stand still, we are also starting to do other things. What we are currently doing is a supply chain for the whole country. For brands that have more traffic online, we help them do 0~1 things offline, such as expanding stores and building channels. From my observation, the best place to do cosmetics business now is the wholesale market because the depth and breadth of products in their supply chain are very strong and the prices are very competitive. I think agents can learn from the operation mode of online TP service providers and offline wholesalers to find a breakthrough point for their business. In the past, we often said that agents are service providers, but now this service has been very empty. Because there is no cost to supporting the service. The so-called service team may not be as professional and service level as the store itself, so they naturally do not need your services. Some years ago, it was always said that the offline has gotten whacked by online, but in fact, now you have me and I have you. For example, now the community associations or community group purchase. Does it belong to online or offline? In the past, we defined them as online new retail, but many of their transactions are done offline, just because their platform transaction properties are online. From a business perspective, they are all To C oriented. So I still think that the agents do some flow of brands to help the stores to gain traffic. This may be a very important role to play in the future.

The new R&I is the largest investment to R&I in the history of L'Oréal USA. On September 27, L'Oréal USA announced on its website that it will open a new Research and Innovation (R&I) Center in Clark, New Jersey, to replace its existing facility, with an investment of $140 million, and is expected to be fully operational by 2024. According to the report, the new R&I center will help L'Oréal USA strengthen its R&I capabilities to maintain its high-quality service and product iterations and meet the diverse beauty needs of consumers in the U.S. and around the world. The new R&I center will focus on beauty innovation in the hair, skin, and beauty categories, and will also conduct research in strategic science areas such as green science and beauty technology. David Greenberg, President, and CEO of L'Oréal USA said the new research center will help L'Oréal USA deliver more innovative, inclusive, and sustainable beauty products to consumers. As the largest subsidiary of the L'Oréal Group, the construction of the new R&I also represents the largest investment in R&I in the history of L'Oréal USA. Sanford Browne, President of L'Oréal North America Research & Innovation, said the new R&I Center will serve L'Oréal North America's scientific teams in product innovation, development, and testing, and L'Oréal will provide consumers with products of higher quality, efficacy, and safety standards. The new R&I Center will cover 250,000 square feet and will house more than 550 employees in positions with responsibilities that include advanced research, evaluation, and product development, the news release claimed. L'Oréal USA expressed that the center will create a comprehensive ecosystem for greater interdisciplinary collaboration and innovation by building modular labs, etc. The R&I Center will also as a center for external partnerships and scientific collaborations under L'Oréal's open innovation strategy. Also, to reinforce the company's commitment to L'Oréal's sustainable future, the new R&I Center will be designed to the highest sustainability standards, reducing energy use, resource consumption, and waste generation, while developing multifunctional indoor and outdoor green spaces to support the ecology and biodiversity of the area. Research and innovation are at the heart of the L'Oréal Group's strategy. Publicly available information shows that the L'Oréal Group will spend a total of €1.029 billion on R&D in 2021, with a global R&D headcount of around 4,000 people, both figures far higher than the rest of the beauty giants. The R&D expense ratio steadily maintained above 3%, and it has not been reduced to below 3% in the crisis environment in 2008 and 2000. In order to match the beauty needs of different regions and skin tones around the world, the company has 21 R&D centers in 11 countries around the world.