Interview, Fireside Chat
The Outlook for China’s Beauty Sector
- Onshore cosmetics retail growth is projected at 1% year-over-year (YoY) in the first half of 2020, accelerating sequentially to 26% in the second half, with the combined onshore and offshore total expected to decline approximately 1% YoY for the full year 2020.
- China's beauty consumption is forecast to reach a record 22% YoY growth in 2021, totaling 650 billion RMB (approximately 95 billion USD), driven by offline recovery and online penetration.
- Travel retail represents a variable factor for 2021, with recovery potential contingent on global vaccination rates increasing in the second half of the year.
- Online penetration is expected to rise from 38% in 2020 to 57% by 2025.
- Digital-savvy companies are positioned to reach refined consumer targets and historically unreachable segments, leveraging the low overlap between consumers purchasing personal care via WeChat versus Tmall and Taobao.
- Leading brands currently generate 50% to 60% of sales online, with notable spending expansion expected among consumers over the age of 40.
- Consumption is anticipated to increase across personal care categories beyond skincare and makeup, including body wash, hair wash, and hair care, as purchasing shifts to diverse online platforms.
- Competitive dynamics may evolve as companies expand multi-brand portfolios, such as Yaksin's expansion from three to seven brands, though long-term impacts remain to be observed.
- Premiumization trends face potential risks from shifts in consumer value perception, illustrated by a historical decline in multi-year cosmetic spending in South Korea in 2010 despite income growth.
- ESG awareness regarding environmental impacts and animal testing is expected to grow, with other companies likely following Shanghai Jawa's precedent of issuing ESG reports after becoming the first Chinese listed cosmetic company to do so in February.