Fortune Magazine feature beauty & cosmetic industry in china

Recent issue of Fortune magazine feature beauty and cosmetic industry in China with it cover story title "Battle for the Face of China".

MAC, a company under US's Estee Lauder, compete with Japanese Shiseido herb-infused face cream developed especially for Chinese skin at Shiseido's R&D center in Beijing, French's Loreal group and LVMH group's Sephora and Dior.

The magazine descripe above is David. Stated that the Goliath is Procter & Gamble. because its Olay whitening skin creams outsell every other brand, and its shampoos (Rejoice, Head & Shoulders, and Pantene) hold the top three hair-care positions in China. In March P&G launching Cover Girl and Max Factor to compete with L'Oréal's Maybelline. Along with its high-end SK-II skin-care line and its other household and food brands. Roughly 70% of that from hair and skin products, compared with a fifty-fifty split with food brand in other countries. "We are the beauty company of the P&G company," says Daniela Riccardi, P&G's president for Greater China. "Nowhere else is beauty such an important part of the business."

L'Oréal's 2004 sales of $350 million (including makeup and other beauty products), were up 58% over the previous year; Shiseido's China sales last year were $204 million, up 27%.

"It's the only big market growing this fast in China," says Jacques Penhirin, a McKinsey partner who tracks retailing. "This is a market that was almost nonexistent 15 years ago, and about 70% of it remains to be developed."

Read the full article above here.

"Chinese people ask for even whiter tone than what is selling well in Japan," says Tadakatsu Saito, chairman of China operations for Shiseido, which has the most experience of all the multinationals with whitening because of the huge market in Japan. "When we try to sell them their exact color, they say, 'Too dark. Do you have anything lighter, brighter?' "

Women in China who can afford it think little of spending at least as much money on facial moisturizer as on clothes. That would be unusual in the U.S., where 87% of women spend less than $20 when they buy skin cream. But at Plaza 66, an upscale mall in Shanghai, fashionable Shanghainese women toting designer purses and Starbucks coffee cups pause all day long to buy expensive moisturizer at the counter of La Mer, another Estée Lauder brand.

One of them, Qiao Hong, 42, says. "It's really worth the money. With money, you can just make more of it, but your skin—if you lose your beauty and youth, you cannot get it back."

La Mer's counter has 32 other women on a waiting list to purchase a 500-milliliter jar of face cream. Cost: $1,750. Shiseido finds similar demand for its Clé de Peau line, which, at $500 for 30 grams, is more expensive than gold. On any given Saturday afternoon, the comfy chairs at the Clé de Peau sections of department stores are filled with buyers and with women waiting to take their places.

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L'Oréal's new laboratory in Pudong is a 32,000-square-foot facility stocked with pigments, waxes, and oils. Didier Saint-Leger, a biochemist, oversees the microscopes and chromometers that measure the effectiveness of skin-whitening creams, the ovens that heat emulsions to test stability, and the two-way mirrors that enable him to observe the way Chinese women apply face creams and makeup. The center opened in September with 43 Chinese researchers, most of them chemists. Next year, when L'Oréal completes construction of Phase II, currently an empty field at the back of the lab, there will be 75. Chinese herbs, roots, and flowers will be tested there, distilled and researched for their impact on skin and hair. Hua jiao, the flower of the prickly ash tree that adds tongue-scorching spice to Sichuan cuisine, is reputed to clear up acne and will be among them, as will traditional whitening agents such as ginkgo leaf, ginseng, and mulberry.

The R&D center is part of L'Oréal's transition from the image it currently projects in China. Its recent acquisitions of Yue Sai, for a decade the most popular cosmetics brand in China, and the low-end skin-care line Mininurse are steps in that direction.

But Shiseido is already ahead in the traditional-formulations game, with its "Chinese national brand" Aupres and its recently expanded three-year-old Beijing R&D center. It has already launched its first product (Eternal Total Recharge) and has more on the way.

Estée Lauder opened its own 15-scientist Innovation Institute in Pudong in November, stacked with pigments with names such as "gleamer flake" and "magic mauve." As a latecomer, Estée Lauder's strategy has been to build a finally-this-glamorous-American-brand-is-available-in-China buzz for its prestige lines long before they go on sale. It also gives away cosmetics to China's leading makeup artists to encourage them to experiment on models for shows and movies.

Carol Chen, Lauder's Taiwan-born general manager and the only ethnic-Chinese woman heading a major beauty company in China, says "China changes so fast," "You blink, and the market is there." Chen used the same strategy to launch the Clinique and Estée Lauder lines, advertising in the Chinese edition of Elle years before they were for sale in China.

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L'Oréal may also begin introducing products differentiated by region—heavier creams for China's cold northern climes and lighter ones for the tropical south—as well as by skin tone. "Segmentation is something that's becoming more and more important," says Gasparrini. "There's still huge space in the market to take." L'Oréal, like all beauty companies in China, finds there also is space to educate Chinese consumers, who know little about applying cosmetics or why they need exfoliants. "In other countries women learn how to use cosmetics from the mom," says Gasparrini. "That's not the case in China. We have to substitute the mom."

Shiseido has built a chain of 25,000 stores in Japan, a country one-25th China's size. Last year it started doing the same thing in China. The company is selling hundreds of products it has developed and manufactured through two joint ventures in China, under brands with names such as Za, Uno, and Fitit. Shiseido expects to double its annual China sales, on operating margins of more than 20%, and make China contribute one-fourth of Shiseido's overall global revenue. "Ten years ago we thought that 1% of Chinese women would be Shiseido customers," says Masaru Miyagawa, president and CEO of Shiseido China. "Now we think that 10% of Chinese women will be Shiseido customers."

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There are Chinese companies in the beauty game as well, and being Chinese, they are best poised to play the tradition card. One of those is Shanghai Herborist Cosmetics, a division of state-owned Jahwa. "We're the Body Shop of China," says Herborist's fashionable brand manager, Lily Xu. Herborist makes 130 products for use from head to toe; one of its most popular is a "whitening revitalizing mask," which uses seven herbs that claim to lighten skin tone in 15 minutes, producing faces "as white as a lotus seed." Herborist now has 180 freestanding boutiques in 40 cities in China and plans 100 more by next year. Xu is excited about a recent agreement with Sephora to sell Herborist products in its China stores and ongoing discussions with the company to sell Herborist abroad. "Back to nature is the cosmetics and skin-care trend in fashion now," says Xu. "Once Origins or L'Occitane come to China, then we'll have real competition. But we'll still be able to distinguish ourselves as coming from Chinese tradition and Chinese medicine."

It's all about mixing tradition and modernity to reach Chinese consumers, says Yue Sai Kan, a TV celebrity in China who founded the cosmetics line acquired by L'Oréal. Sitting on a plush sofa in her New York City townhouse, where she spends her time when not working on a new show in Shanghai, she opens a book of paintings from the Tang dynasty, when China was ruled by an empress, Wu Zetian. She points out the red lips and painted brows in the depictions of women who lived more than 1,000 years ago. "See, Chinese women have always used cosmetics," she says. "In the Tang dynasty they used as many steps of makeup as we do today. Chinese women had been discouraged from using cosmetics for 35 years. It was a world of darkness, of no color. Now it is changing. What you have to do is give them international, yes, but Chinese have a lot of pride in themselves and their traditions. The best thing you can give them is a belief in themselves."

The above is excerpt here.

Link : estee lauder owned cosmetic companies



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