BALMAIN may foster new growth points of Estée Lauder and further enrich its high-end brands. On September 26, Estée Lauder announced that it has signed a licensing agreement with French fashion brand BALMAIN to cooperate in the development, production, and distribution of a series of beauty products, BALMAIN BEAUTY. It is reported that Estée Lauder will be responsible for production, quality control, product research and development, publicity, and distribution, while BALMAIN will be responsible for packaging design, collecting money, and reckoning. The first product in the series is expected to launch in the autumn of 2024. Public information showed that BALMAIN was founded by Pierre Balmain in 1945 and is a French clothing brand. BALMAIN launched its first perfume, Vent Vert in 1947, and subsequently launched many perfumes such as Ambre Gri and Carbone. In 2016, the company was purchased by Mayhoola Investments Fund for 500 million Euros and now has 357 international points of sale. In 2012, BALMAIN signed a 12-year perfume franchise agreement with perfume production giant Interparfums SA, which was terminated early in 2017. Inter Parfums also stopped selling BALMAIN brand perfume products in March 2017. In addition, BALMAIN has collaborated with L'Oreal to launch co-branded beauty products in 2017 and has since been selling hair care products under the Balmain Hair Couture in stores such as Net-a-Porter, Neiman Marcus, and Saks Fifth Avenue. The BALMAIN beauty business has been largely dormant since 2017. This collaboration with Estée Lauder is the new start of the beauty business of BALMAIN after a long time. Olivier Rousteing, the creative director of BALMAIN, said that BALMAIN has always strived to reflect the way of living and dressing that today’s diverse generation wants. Estée Lauder has always made it clear that it supports BALMAIN’s unique vision and its goal of disrupting the global luxury beauty paradigm. Guillaume Jesel will be named as the Global Brand President of TOM FORD BEAUTY, BALMAIN BEAUTY, and Estee Lauder Luxury Business Development Department. Jesel said that BALMAIN and Olivier Rousteing are visionary forces in the global fashion industry, and Estée Lauder also hopes to expand the world of BALMAIN and help it create a new space for luxury beauty. Estée Lauder Q4 FY 2022 (April-June 2022) report shows that Estée Lauder’s net sales in the fourth quarter of the fiscal year 2022 were US$3.56 billion, a year-on-year decrease of 10%; the net profit was US$50 million, down 95% year-on-year. Estee Lauder indicated in its fiscal report that Tom Ford Beauty promoted the fragrance business and made it soar by 30%. Previous news reported that Tom Ford offered for sale. Insiders showed that Kering, Gucci’s parent company, was one of the most likely buyers. Therefore, some analysts said that Estée Lauder began to look at other brands with potential in the beauty field. In the field of luxury fashion, BALMAIN is undoubtedly a brand that meets the needs of Estee Lauder Companies Inc. Previously, some insiders predicted that if the two parties reach cooperation,Estée Lauder will realize the branding of the BALMAIN beauty line and undergo a qualitative change. Additionally, BALMAIN can bring new performance growth points toEstée Lauder and further enrich its high-end brands.

Estée Lauder recently announced the appointment of Justin Boxford as president of Estée Lauder Global Brands, effective Sept. 1, 2022. It is reported that Estée Lauder's former Global Brand President, Stephane de La Faverie, has been promoted to Executive Group President. Going forward, Justin, as the new Estée Lauder Global Brand President, will report to Stephane and will continue to serve on the company's Executive Leadership Team (ELT). In his new role, Justin will be responsible for driving Estée Lauder's short- and long-term strategies, including innovation, product development, North American and international growth, consumer marketing and distribution evolution. Stephane said Justin Boxford can bring a good reputation and expertise in luxury brand building to Estée Lauder. In addition, he has a deep understanding of the global business landscape and an extensive background in transforming online and omnichannel experiences. Justin has led La Mer for nearly six years. During his tenure, he boosted La Mer's net sales, making it the Group's best performing brand and consolidating its leadership position in the global luxury skincare space. Justin also helped La Mer expand and diversify its portfolio and build multiple growth engines. In addition, Justin led La Mer's strategic expansion across omnichannel platforms to reach new consumers through digital technology. La Mer raised the bar for the luxury experience on key platforms such as TMALL, as well as new platforms in innovative markets. Since joining the Estée Lauder Group in 2004, Justin has held several leadership roles across multiple brands, regions and channels worldwide. Prior to La Mer, Justin served as Senior Vice President of International for Estée Lauder and Tom Ford Beauty. Prior to that, Justin resided in Hong Kong and led the same brands in the Asia Pacific (APAC) region. Justin was instrumental in driving the Estée Lauder brand internationally with digital, omnichannel and locally relevant strategies, and the successful international launch of Tom Ford Beauty, which includes in China and APAC. It is understood that within the fourth fiscal quarter ended June 30, Estée Lauder Group sales declined 10% year-over-year to $3.56 billion, gross margin slipped to 71% and net profit plunged 95% to $50 million. By category, fragrance sales soared 30 percent year-over-year and posted strong growth of 16 percent in the fourth quarter, while operating profit jumped more than 100 percent to $456 million, with Tom Ford Beauty the strongest performer. By region, the Asia-Pacific market covering China performed the worst, with full-year sales down 1% to $5.437 billion and a 23% plunge in the fourth quarter, with operating profit also falling 20% to $993 million, said Estée Lauder Group CEO Fabrizio Freda, adding that repeated outbreaks in core markets such as China in the fourth quarter put huge pressure on the group's growth. In terms of earnings, Tom Ford Beauty and the China market are crucial to Estée Lauder. Justin Boxford, on the other hand, has not only successfully launched Tom Ford Beauty internationally, but also has extensive experience in the Chinese market. He may bring new possibilities for Estée Lauder in the future.

Alan Jope expressed that growth will remain Unilever's top priority in the coming quarters and he will continue to rigorously execute its current strategy. On September 26, Unilever announced on its website that its CEO Alan Jope informed the board that he will retire from the company at the end of 2023. Unilever's board is currently looking for a successor, with both internal and external candidates under consideration. Unilever chairman, Nils Andersen, said that under Alan Jope's leadership, Unilever had made significant changes to its strategy, structure, and organization and that these changes had also laid a solid foundation for Unilever's success. Alan Jope's reforms are continuing and the board will also be working on an orderly succession process to support Alan Jope and the management team to further drive Unilever's performance. Alan Jope said that this is the right time for the Board to find a successor and that growth remains Unilever's top priority in the coming quarters and he will continue to rigorously execute the current strategy. Publicly available information shows that Alan Jope joined Unilever in 1985 and was appointed Chief Executive Officer in January 2019. During this time, his primary focus was on addressing the impact of the pandemic, including the disruptions to the global supply chain and consumer habits. Prior to his appointment as CEO, he served as President of the Beauty & Health and Personal Care Departments. He also spent 14 years in leadership roles in North America and 13 years in Asia, including Chairman of Unilever Greater China Region. During his tenure as Chairman of Unilever Greater China Region. Alan Jope doubled the size of Unilever's business in China and laid a significant foundation for Unilever's future success. Since becoming the CEO of Unilever, Alan Jope has also led a number of reforms and acquisitions, including the sale of Lipton, a major tea company. He also implemented a new organizational structure, reorganizing the company into five business units: Beauty & Health, Personal Care, Home Care, Nutrition, and Ice Cream. Meanwhile, staff optimization was carried out, and 1,500 positions were eliminated. Among them, 15% of the executive positions were layoffs. Furthermore, in January this year, Unilever offered to buy GlaxoSmithKline's consumer health business for 50 billion pounds. After being rejected, Unilever said it would not raise its bid and chose to abandon the acquisition. Reuters reported that the acquisition plan also sparked opposition from some investors, while it also quoted investors as saying that a fresh start of the new Chief Executive Officer could give investors confidence in Unilever's upward momentum again. According to Unilever's previously announced interim report for 2022, its overall turnover in the first half of the year was 29.6 billion euros, up 14.9 percent year on year, with the beauty and personal care segment posting a turnover of 12.2 billion euros, up 7.5 percent year on year. Its major growth forces came from deodorants and high-end beauty businesses, both of which achieved double-digit gains.

TikTok China’s beauty market will become more and more standardized. Recently, the TikTok China e-commerce learning center issued a Special Treatment Announcement on Beauty Category’s Confusing Information Behavior. The TikTok China platform will carry out special treatment for the beauty category from September 30. The announcement shows that recently, the platform found through investigation that some merchants/creators have released confusing information, seriously disrupting the normal business order of the platform. Confusing scenarios include: sharing/publishing goods using other brands' graphic variations or brand deformation words/derivatives, or the products are identical or similar to other brands' product names, packaging, and decorations, confusing consumers. The announcement gave violation examples of "Armani", "Whoo", and "YSL", which included logos and product appearances similar to those of the famous beauty brands cited, most of which the products are highly similar to the authentic packaging. It is worth mentioning that the treatment object includes the commodity dimension and the creator dimension, which means that both the goods sold and the products featured are part of the treatment. Among them, those with minor mistakes will be restricted from promoting marketing activities. The general mistakes (the more serious degree or many related products), the relevant goods will be blocked. If the product is refunded or reported by a large number of consumers, the store will be cleared up and all deposits will be deducted. In April this year, TikTok China e-commerce issued a special treatment announcement on "confusing information" behavior, expressed that it would launch special management of "confusing information" and has issued special treatment announcements for alcohol, clothing, shoes, and jewelry. For the beauty category, in August 2020, TikTok China issued a notice to strengthen the content control of the beauty and personal care category. Last December, TikTok China e-commerce issued again a special governance announcement that said that for a large number of sales of low-cost low-quality products disrupt the healthy ecology of the platform, it will introduce special measures to make key monitoring and suppression. TikTok China has already become a major growth pole for beauty brands. According to the Cosmetics market investigation released by Sinolink Securities, the GMV of cosmetics e-commerce reached 116.7 billion yuan ($16.315 billion) in the first quarter of 2022, up 8% year-on-year. Among them, the beauty GMV of the TikTok China platform was 9.6 billion yuan ($1.342 billion), up 164% year-on-year, with the growth rate at the top of the head e-commerce platform and accounting for 23% of the overall GMV online. Previously, an industry veteran said that regulation is all about chasing clouts. The management of the beauty category in recent years has also confirmed the prosperity of this market. For the platform, the merchants take advantage of the loopholes of policies to obtain benefits to damage the platform’s image. The release of the rectification announcement is also a final wake-up call to those who falsify and speculate on the part of the business. In addition, TikTok China is gradually increasing its focus on e-commerce channels, its beauty market will also be more and more standardized.

Skinbetter Science is the addition to the brand portfolio of L'Oréal's Active Cosmetics Department. On September 23, L'Oréal announced on its official website that it had signed an agreement to acquire Skinbetter Science, an American skincare brand, with specific terms not yet disclosed. 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 America. Skinbetter Science is known for developing innovative products with active ingredients for anti-aging, moisturizing, cleansing, exfoliating, and sun protection. Currently, Skinbetter Science's products are available primarily through a network of leading dermatology, plastic surgery, and medical aesthetic practices in the United States. For the past 12 months ended August 31, 2022, Skinbetter Science generated sales of nearly $95 million. Upon completion of the acquisition, the current brand leadership team will continue to operate the business and will be integrated under the leadership of Christina Fair, President of L'Oréal American Active Cosmetics Department, which is L'Oréal's fastest growing department. In the three months ended June 30, the department's revenues grew 33.9% on a reported basis and 23.8% on a like-for-like basis. L'Oréal's financial report for the first half of 2022 shows that the L'Oréal Group achieved €18.36 billion for the period ended June 30, 2022, up 13.5% year-on-year, with a consolidated growth of 20.9% and an operating margin of 20.4%. In particular, North Asia, where China is located, has become the L'Oréal Group's number one market, with 10.5% year-on-year growth and 20.3% growth on a consolidated statement basis. For the Chinese market, Skinbetter Science has opened an overseas flagship store in Tmall International, with products including essence, night cream, eye cream, mask, premier cream, sunscreen stick, etc. The prices of individual products in the essence category range from 1,290-1,430 yuan ($180.44-$200.03). Jonah Shacknai, founder and executive chairman of Skinbetter Science, said he looks forward to working with a global organization like L'Oreal. He believes that L'Oréal's leadership, resources, and international reach will help Skinbetter Science maximize its future value. In response to the acquisition, Myriam Cohen-Welgryn, Global President of L'Oréal Active Cosmetics Department, expressed that 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, and L'Oréal believes that this high-growth American brand has great potential for international growth. David Greenberg, CEO of L'Oréal USA and President of L'Oréal North America, added that L'Oréal believes in the dynamic growth potential of the medical skincare area. It can leverage the strength of the talented team behind the brand and enhance the collaboration between the Active Cosmetics Department and the healthcare specialty area to take this part of L'Oréal's business to the next level. It is known that the transaction is expected to finish in the early fourth quarter of 2022.

The total investment is about 69.5 billion yuan ($9.702 billion), which is the largest single project invested by a German company in China and BASF's largest investment project to date. On September 6th, the BASF (Guangdong) integration base project invested by the German BASF Group in Zhanjiang, Guangdong Province, held a ceremony for the full construction and commissioning of the first unit. The total investment in the project is reportedly about 69.5 billion yuan ($9.702 billion). According to the plan, by 2030, the site will be BASF's third largest integrated production site in the world. It will provide solutions to local and multinational manufacturers in South China for industries such as automotive, home and personal care, aerospace, and pharmaceuticals. Focusing on the cosmetics section, the construction of the site will also facilitate BASF's further development in the personal care area. BASF's 2022 semi-annual report shows that sales in BASF's nutrition and personal care section in the first half of this year were 28.1 billion yuan ($3.923 billion), an increase of 29.8% compared to the same period, with the fastest growth rate in EBITDA. According to public analysis, this is due to the significant growth of the data related to the Care Chemicals business unit. According to the financial report, its Care Chemicals business sales of 19.6 billion yuan ($2.736 billion) in the first half of this year, up 31.8% year-on-year, ahead of the Nutrition and Health business. Meanwhile, BASF has continued to increase its investment in the Chinese cosmetics market in the past two years. For example, in June 2021, it established a long-term partnership with Shanghai Jahwa, including various aspects of TCM (Traditional Chinese Medicine) modernization, skin efficacy mechanism research and visualization, and sustainable development. In May this year, BASF also plans to expand its care chemicals site in Shanghai with a total investment of approximately 280 million yuan ($39 million), which will be used to build BASF's integrated headquarters for the production and sales of high-end cosmetic ingredients and care chemicals. Moreover, on September 2 this year, BASF publicly announced the signing of a cooperation agreement with a local Chinese company, Ingredi Bio. It is known that Ingredi Bio is a start-up company headquartered in Yunnan, China focuses on the development and production of innovative, highly active, and sustainable botanical ingredients obtained from species native to the pan-Himalayan region, providing innovative natural active ingredients and total market solutions for the personal care industry. In addition, over the past two years, international raw material giants such as Givaudan, Dow, and BASF have made several investments in the Chinese market. Among them, BASF’s (Guangdong) integration base is not only the group's largest investment project to date but also the largest investment of foreign raw material enterprises in China. Overall, the current global situation is complex and volatile, international cosmetic ingredients giants are using their investment actions to grasp the long-term opportunities of the Chinese cosmetics market.

Another Korean makeup brand has been hit hard. Recently, according to a CCTV-2 report, Venus One, the largest shareholder of ABLE C&C Co., will list its shares for sale. ABLE C&C Co. is the parent company of Korean makeup brand MISSHA. According to the report, ABLE C&C Co. will lose up to 110 million yuan(about $15.4 million) in 2021 due to multiple factors such as the COVID-19. At the same time, the number of MISSHA offline stores is now less than half of the peak 700. CHAILEEDO noticed that not only MISSHA was reported the weak performance. Innisfree, ETUDE HOUSE and other Korean makeup brands are also not optimistic as they repeatedly rumored the news of pulling out of China or closing offline stores. All signs show that the era of the mass Korean makeup brands are gradually fall with the fading of the Korean wave. Only 121 offline stores left in China “It has ebb and flow”. This saying fits in the Korean makeup brands. As far as we know, MISSHA, established in 2000, is one of the first Korean brands to create a single brand of street-side cosmetics stores. It wins the love of Korean consumers with its cost-effective low-end line. MISSHA sales exceeded 505 million yuan in just its two-year launch. It sets up the era of single-brand stores. The brands such as The Face Shop or SKINFOOD, which were popular in China were founded after MISSHA’s success. In 2006, taking advantage of the Korean Trend, MISSHA’ officially entered the Chinese market. In addition to opening single-brand stores, it also expanded into stores in department, CS stores and Watson's channels. At that time, the product line of MISSHA covered skincare, color cosmetics, beauty tools and other categories. Among them, the products launched by MISSHA such as MISSHA Perfect Cover BB Cream and Air Cushion were all well-known for a while. MISSHA Perfect Cover BB Cream was the market initiator of BB Cream category. Some media reports said that in 2014, MISSHA completed the laying of 947 stores in the Chinese market in the mode of direct operation and regional agents. Among them, there are 25 department stores and single-brand stores in directly managed areas in Beijing and Tianjin and 250 department store counters, 200 brand stores and nearly 500 CS stores operated by distributors around the world. MISSHA has also entered online platforms such as Tmall, Jumei, JD and others. At its peak, ABLE C&C, the parent company of Mystique, ranked 3rd in the Korean cosmetics industry in terms of volume. It just followed behind Amore Pacific and LG. However, after the outbreak of the THAAD in 2016, the Korean Trend gradually ebbed in China and the company was also affected. In 2017, the parent company of MISSHA was acquired by Korean private fund Venus One, which is the largest shareholder of ABLE C&C. After that, its performance has declined severely due to multiple factors as well as the impact of the epidemic, . According to CCTV-2 reports, the operating loss of ABLE C&C, the parent company of MISSHA, was up to 110 million yuan(about $15.4 million) in 2021. In the Chinese market, the situation of MISSHA is also much worse than before. According to the financial report, ABLE C&C’s China branch sales were 107 million yuan(about $15 million), 63 million yuan(about $8.8 million) and 44 million yuan(about $6.15 million) in 2020, 2021 and the first half of 2022, respectively. It is shown a clear downward trend. As of now, the number of offline stores announced on the official website of MISSHA China is also only 121, which has long since lost its former style. Mass Korean cosmetics are collectively defeated In fact, the defeat of MISSHA in the Chinese market is only a microcosm of the weakening of mass Korean cosmetics. Among them, the 2016 THAAD affects not only MISSHA, but also the inflection point of the whole mass Korean cosmetics in the Chinese market. After this, the market share of Korean cosmetics in China has been decreasing year by year. According to public data, in the first five years of 2017, the annual average export rate of Korean beauty products in China exceeded 60%. In 2014, China became the largest cosmetic exporter of Korea. While in 2018, the export of Korean cosmetics to China fell to 20%, and by 2019, only 14%. It is worth mentioning that the performance of the two major Korean beauty groups also began to show weakness from 2017. According to Amore Pacific's financial report data, its cosmetics business saw its first negative growth in 2017, down 10%, and slumped 21.50% in 2020. It did not increase by more than 4% in both 2018 and 2019. The LG cosmetics business also did not increase by more than 2016 in both 2017-2020. So far in the first half of this year, both Amore Pacific and LG have seen their sales decline by more than 10% (Read more: Top 10 Global Beauty Brands in The First Half of 2022 ). In contrast, mass Korean cosmetics that were once popular, such as Face Shop, Innisfree and ETUDE HOUSE, struggle to regain their momentum. Specifically in terms of brands, at the end of August 2018, The Face Shop completely shut down its single-brand stores in China. In 2019, Amore Pacific's brand Innisfree closed 40 stores in bulk, 90 more in 2020, and announced in December 2021 that it would be scaled down to 140. In March 2021, ETUDE HOUSE announced the closure of all offline flagship stores in mainland China. So, why did the golden age of Korean makeup not continue? As we all know, the popularity of Korean makeup in China cannot be separated from the Korean culture as the pioneer. However, the THAAD has led to the ebb of Korean culture in China, which also makes the driving effect of Korean culture on Korean makeup brands significantly reduced. In addition, Korean cosmetics in China are also popular for reasons including high value, high cost performance, fast product updates, hot-selling products, etc.. However, as an import brand agent said, as international brands and local Chinese brands began to do pop-ups, the freshness and core competitiveness of Korean makeup brands became missing. Consumer demand for Korean makeup began to reduce a lot. Moreover, the rise of Chinese local brands in recent years has also seized the lost share of Korean Cosmetics. At the recently held 5th CHAILEEDO Conference on China’s Cosmetics Trends, Xie Yong, chairman of Beijing Dr. Plant Biotechnology Co., Ltd. said, "Innisfree was once particularly brilliant. But the THAAD had a huge effect on them. While Japanese and Korean cosmetics fell off, Chinese cosmetics companies caught up at the right time. Because the two have similar targeted audience and share the same philosophy of oriental skincare concept." Some think that there is no need to be overly optimistic about the development trend of Korean cosmetics. Some think that Korean makeup has its own development trend. A practitioner with more than 20 years of experience in Korean Cosmetics business, said that because of the epidemic, e-commerce development and other factors, the layoff of offline stores is normal. "Because of the impact of the Chinese epidemic and political factors, some Korean cosmetic brands have shifted to Southeast Asia, Russia, North America and other markets. Many Korean makeup performed very well in Russia this year." He revealed. To sum up, under the double attack from the United States big brands and Chinese local brands, Korean cosmetics is difficult to return to the peak. What's more, the future of China's cosmetics market will only become more competitive. The new generation of consumers will only become more discerning. If the Korean cosmetics can't make a breakthrough, it will only be more and more difficult in China.

Efficacy is the buzzword in China's cosmetics industry. If you want to win in the future, you have to win in efficacy. In recent years, the most important trend in China's cosmetic industry is efficacy. If you want to win in the future, you have to win in efficacy. 2022 5th CHAILEEDO Conference on China’s Cosmetic Trends, hosted by CHAILEEDO, was held in Hangzhou, China on September 22nd. Efficacy-based skincare generally refers to products that can address certain skin problems in a targeted, safe and effective manner through scientific ingredients and formulations. According to Frost & Sullivan, the market size of efficacy skincare in China reached 56.7 billion yuan(about $8 billion) in 2021 and will continue to expand. It is expected to reach 175.7 billion yuan(about $24.7 billion) by 2025. Based on this, CHAILEEDO interviewed Chinese cosmetic industry players on site of this conference to share their views on future efficacy trends. The general manager of the natural plant-based skincare company NAFUTURE said that in the future, efficacy trends will go in three directions: anti-aging, sensitive skin repair and whitening. In terms of anti-aging, companies need to combine the current new ingredients and new technologies to achieve. The second is sensitive-skin repair. Although China's sensitive skin market has the successful brand Winona. But in terms of feel and effect of skin, there can still be some segmented demand. The third is whitening. How to find safe and effective ingredients for cosmetics companies is also a very important direction. And while pursuing efficacy, safety is also an aspect that companies need to pay attention to. According to the Chinese director of Symrise's cosmetic Ingredients department, Lao Shuquan, the misuse of efficacy ingredients can create safety problems. Efficacy and safety is a double-edged sword. Safety is the biggest efficacy. It is meaningless to talk about any efficacy away from safety. Regarding the trend of efficacy skincare, cosmetic OEM/ODM also has its own views. Cosmetics ODM/OEM manufacturing factory OLEHANA Yang Zhao said that companies should think about the future direction of efficacy skincare after the end of the window period. In the consumer market now, consumers have been slowly cultivating their own system for efficacy. What companies need to do is to think about the next step in the competition to create their own advantages. Yang Zhao also believes that the route of strong combination of beauty device and skin care products is sustainable. The conference brought together big names in China's cosmetic industry to discuss the future trend of efficacy skincare in depth. It is believed that in the future, the efficacy skincare market will be more mature and better serve consumers.

In 2022, the main tone of the beauty industry is "alive". But alive, itself is a continuous pursuit of the future process. And to win in the future, it must win in efficacy. On September 22, the 5th Conference on China’s Cosmetics Trends, hosted by CHAILEEDO, was held in Hangzhou with the theme of "Winning in Efficacy". There are the world’s top 500 companies, leading OEM/ODM factories in China, leading recombinant collagen companies, emerging brands with GMV exceeding 1 billion yuan in 3 years, etc. attending the conference Chinese cosmetics is still a sunrise industry CHAILEEDO founding partner Cai Chaoyang delivered a speech, saying that the development of a company depends mainly on the scale of its market and the professionalism of the company. UN data predicts that the number of young Chinese beauty consumers (20-45 years old) will decrease by nearly 100 million in the next 30 years, including 45 million fewer young female consumers. But even so, Chinese cosmetics is still a sunrise industry. In terms of data, comparing January-August 2021 with that of 2022: the number of financing decreased by 73.4% YoY, sales in the CS channel declined by 11% YoY, total retail sales fell by 2.7% YoY, and the market capitalization of 8 top listed companies decreased by 39% YoY ...... In the first half of this year, the number of imported cosmetic pieces dropped 58.5% YoY, and the number of Chinese filings declined 25.5% YoY. On the other hand, in the first 8 months of this year, sales of TikTok China grew 79%, efficacy skincare increased 33.4% YoY, total beauty financing surged 68.47%, total sales of 8 top listed companies climbed 3.5% YoY, and R&D investment grew 33.6% YoY. Comparing these figures, it can be seen that the vast majority of the decline is due to objective reasons such as poor market conditions, while the rise is partly based on subjective reasons related to operational capabilities. Observing the cosmetics industry as a whole, safety has been the theme of the cosmetics industry for the past 20 years. After the new regulations, it has come the era of efficacy. But Cai believes that the window period of efficacy lasts at most 5 years, and now there are still 3 years to go. In the next phase, the market will enter into the era of brand competition, to fight with their brand culture, brand story, etc. In the future, Cai expressed that the beauty industry will become a dumbbell-shaped structure. The concentration increases again for top companies, and the newcomers rely on innovation to meet different segmentation requirements. Finally, the middle part of the group has the largest number and is very tough to run, and needs to create differentiation. This year, CHAILEEDO is concerned about three characteristics of the cosmetic industry. The first is to focus on the main business and eliminate the unprofitable items, the second is to wait for opportunities, and the third is to stay alive, which is the basic element of long-termism. CHAILEEDO predicts that by 2024, China's beauty market will reach trillions of yuan. Enter the era of efficacy after the new regulation In 2022, with the efficacy claim evaluation coming online, China's cosmetic industry officially enters a new year of efficacy. Zhu Hong, General Manager of Zhongtong Biochemical, said that in the future, for each efficacy product, the net development cost will be more than 100,000 yuan. This is the most important change of the new regulations for the products. Giant Biogene is the first to use synthetic biology technology to develop and mass produces recombinant collagen, which can be used in many fields such as biomedical materials, dermatology, and cosmetology. According to Duan Zhiguang, Senior Vice President of Giant Biogene, there is still a high technical barrier in this field. However, as more and more companies enter the recombinant collagen area, the cost of recombinant collagen will become lower and lower. It is worth noting that Lao Shuquan, Director of Symrise's cosmetic ingredients department in China, mentioned that the abuse of efficacy ingredients can lead to safety problems. Efficacy is necessarily related to regulation, otherwise, it will lead to the illegal addition of ingredients. Therefore, safety is the biggest efficacy. At the same time, he also said that sustainable, biofermentation technology, human homologous sources, skin microecology, synthetic biology, and precise target regulation will be the future direction of efficacy ingredient development. Moreover, Ashland personal care functional ingredients Asia Pacific Business Development Director Ling Feng also stressed that the promotion and application of efficacy raw materials need real scientific research data as a scientific endorsement, but also need to do scientific communication with consumers. Zou Yue, General manager of JALA Group's R & D center, agreed with this. He believes that the current success of some efficacy of skincare brands lies in transforming the scientific content of the professional end into the communication content of the To Customer end. For example, the dermatologist recommended products for patients, which were turned to the public end. Meanwhile, Zou also shared the key to telling a good core ingredient story which needs to return to content shaping and consumer psychology. Except for pleasing people after use, cosmetics are more important than pleasing themselves, so the texture, skin feel, and fragrance of the formula are very important. Dr. Jeff, a dermatologist at the First Affiliated Hospital, College of Medicine, Zhejiang University, also added that in terms of scientific communication, it is important to be clear who you are talking to. There are a lot of sensitive skin brands emerging in China, and repair and moisturizing are a big part of the Chinese skin care system. In addition, China and the United States have different concerns about whitening and sun protection, and because of the different skin characteristics, highly concentrated products from overseas brands are not necessarily suitable for Chinese people. The market share of high-grade efficacy cosmetics has exceeded 50% At the conference, Ding Lan, the Intelligence Director of CHAILEEDO, said that "efficacy cosmetics" are in a golden stage of development. Research shows that by 2027, China's efficacy skincare market will reach 211.8 billion yuan ($29.856 billion), which is closely related to China's huge population base, increasingly mature consumers, favorable policies, and improved R&D strength of Chinese local brands. With the TikTok China platform as the main research direction, what is the market situation of efficacy cosmetics? CHAILEEDO investigated and found that its market share of high-grade efficacy cosmetics exceeds 50%, with anti-aging, whitening and spot removal, soothing and repairing, and acne removal as the main demands. Currently, compound efficacy and high-priced products are more popular among consumers. Offline, the price of efficacy cosmetics continues to rise, and imported products and repairing efficacy cosmetics are more popular among offline consumers. In consumer research, product efficacy, safety, ingredients, and technology are critical factors that influence consumers' purchases. In the past year, consumers' attention to product ingredients and technology has increased significantly. When efficacy skincare products have the strong technological power, consumers are willing to pay high prices for them. Nowadays, Chinese ingredients have become the hot ingredients in the efficacy market. Compounding multiple ingredients to satisfy multiple skincare demands is also more likely to meet consumer needs. Furthermore, a single product strategy, online and offline combination of multiple marketing, such as content recommendation, professional endorsement, IP co-branding, etc., is also a major trend in the development of the efficacy skincare market. EVENTS | CHAILEEDO

Skincare portfolio revenue is expected to double by the fiscal year 2025. At an investor event on September 21, Coty announced a comprehensive update to the company's skincare strategy, which is one of Coty's six strategic growth priorities. Meanwhile, it also announced its financial goals for the fiscal year 2025 and beyond, with revenue from its skincare portfolio expected to double by 2025. According to previous Coty Group financial reports for the second quarter of the fiscal year 2022 (Oct. 1-Dec. 31, 2021), Coty Group’s revenue grew 11.5% to $1.58 billion in the second quarter, missing expectations of $1.6 billion. The net profit was $192.7 million, a significant improvement over last year's loss of $275.4 million. In terms of the regional market arrangement, its Asia Pacific market reported second-quarter net revenues of $196.2 million, up 16% over the same period. The report mentioned that the growth in the Asia Pacific was driven by strong performance in China and the continued recovery of travel retail. At the investor event, Coty CEO Sue Y. Nabi said the skincare portfolio has grown into one of the key growth engines for the company's business, building on Coty's years of scientific innovation, leadership, patent, and intellectual property accumulation, and a large and expanding team of skincare experts. Currently, it has now further developed its skincare market in Hainan and mainland China and is gradually strengthening the appeal of its brand, formulation, and communication power to consumers. In the future, Coty will focus on the company's portfolio of well-known skincare brands, including Lancaster, Orveda, Philosophy, Kylie Skin, and the Kardashian personal brand SKKN by Kim, said Constantin Sklavenitis, Coty's Chief Brand Officer, and the transformation of Coty's skincare portfolio has begun with Lancaster. In the past year, Lancaster has become one of the fastest-growing brands among major retailers in Hainan Province. Coty believes that all of the above is enough to give it the confidence to capture significant opportunities in the $150 billion global skincare market. By FY2025, it expects to double its skincare portfolio revenue to $500-600 million. Earlier in the first half of 2021, Coty Group had released its long-term strategy, in which the Group's goals for FY2025 included tripling the contribution of its China business to the revenue mix to more than 10%. With all the key elements of the strategy now prepared, Coty expects to accelerate its growth further in FY26 and beyond. At present, its Prestige and Consumer Beauty business departments, as well as its European, Americas, and global travel retail businesses, are driving the improved perspectives. In the near term, Coty is raising its FY2023 first quarter LFL sales increase estimate to 8%-9% growth from the previous 6%-8% growth. Adjusted EBITDA (earnings before taxes, interest, depreciation, and amortization) is $955-965 million.

PRADA PARADOXE entered China, reflecting the international brand's confidence in the Chinese perfume market. Recently, the first specialized store and the first flash store of PRADA Beauty in China officially landed in Jing'an Reel Department Store, and also brought the world's first new product - PRADA PARADOXE perfume for women, which is the first product launched after the brand joined L'Oreal Group. In August 2022, PRADA opened a new independent account @pradabeauty on Instagram, marking the beginning of the brand's beauty business.Judging from its posts, PRADA will launch a fragrance called Paradoxe, with international actress Emma Watson as the spokesperson. What is noteworthy is that the PRADA PARADOXE female fragrance comes in a recyclable box and perfume bottle. Not only does it use a groundbreaking multi-step biotransformation process, but the bottle's chic design also reduces the amount of glass used, and the box is made of sustainable paper. Meanwhile, the fragrance's three main ingredients are sustainably sourced, including Moroccan orange blossom essence, Madagascar premium bourbon vanilla infusion, and Calabrian bergamot. According to CHAILEEDO's 2022 Fragrance Product Insight Report, the Chinese fragrance market is at a CAGR of 22.5% between 2021 and 2025, far exceeding the 7% CAGR of the global fragrance market. The Chinese fragrance market is expected to reach 16.9 billion yuan ($2.378 billion) in 2022, and by 2025, the Chinese fragrance market retail sales are projected to reach 30 billion yuan ($4.221 billion) 2025 and are estimated to become the second largest market in the world. At the first store opening ceremony, PRADA Beauty Brand Director Xu Haiyan said, PRADA PARADOXE female perfume enters China, reflecting the brand's confidence in the Chinese perfume market. The first offline specialized store of PRADA Beauty in China landed in Shanghai, and after that, will gradually open specialized stores in other cities, to bring more beauty products to Chinese consumers. L'Oréal China Vice President and General Manager of the Premium Cosmetics Division Ma Xiaoyu said, L'Oréal Group has always been committed to bringing outstanding, innovative, and assured cosmetic products to consumers. The new start of Prada Beauty in China will inject new momentum into the booming premium market and perfume market. At the same time, it will also do its part to build an international consumer center city for Shanghai and develop a high-end industrial cluster for fashion consumer goods. Public information shows that in 2019, Prada signed a long-term license agreement with L'Oréal Group that L'Oréal Group ought to create, develop, and sell luxury beauty products for Prada, with the license agreement taking effect on January 1, 2021. Prior to that, Prada perfumes were handled by the Spanish beauty and fragrance group Puig.

How to efficiently improve product capability and brand power will be a key factor in determining whether beauty brands can win in future competition. YSG is the first Chinese beauty group to be listed on the US stock market, with a market capitalization of over $600 million. It owns brands such as Perfect Diary, Little Ondine, and Pink Bear, and completed the acquisition of two high-end skincare brands, France Galenic and EVE LOM in 2021. CHAILEEDO invited a related person in charge of YSG to talk about the future trends of China's cosmetics industry. YSG said that in recent years, Chinese cosmetic brands have rapidly risen under China's mature supply chain, the combination of online and offline omnichannel advantages, and the "national trend", and initially have the ability to compete with international brands. However, compared with international brands, YSG believes that local brands are still in the initial stage of technological R&D and conversion, which also restricts the sustainable development of Chinese brands. Therefore, in the future, huge investment in research and development, to improve product capability, and scientific research scale will become the biggest trend for Chinese beauty brands. Data shows that YSG's R&D investment for the year 2021 soared 113.5% year on year to 142 million yuan ($20 million), accounting for 2.43% of revenue. The R&D expense ratio ranks top among the local beauty companies in China and is not inferior to the head international beauty groups. By the end of last year, YSG had 118 patents worldwide, a 71% YoY increase in the number of patents, including 39 invention patents. As the main brand of YSG, Perfect Diary has maintained continuous growth for 3 years in a row and has been the No. 1 national brand in the color cosmetics category of the Tmall Double 11 shopping festival. Observing the development of YSG, it is undeniable that the early Perfect Diary did rise quickly with the traffic dividend and marketing methods, and was called "the light of national products". In the face of increasingly expensive traffic, it believes that, with the development of the new e-commerce industry, in addition to the existing promotion platform, the new traffic platforms such as TikTok China have gradually become a new area for the promotion of the cosmetics industry. Currently, traffic shows a trend of decentralization. This has prompted beauty brands to increase the omnichannel and all-rounded arrangement of the online market, and online operations will become more refined. YSG expressed that, entering the post-traffic dividend era, for beauty brands, how to efficiently improve product capability and brand power will be the key factor to determine whether they can win in future competition. After the traffic mindset, cosmetic companies may need to turn to a product mindset and user mindset to better cope with the future of China's beauty market.