French firms join in China cosmetics boom

18th February 2004, Comments 0 comments

SHANGHAI, Feb 18 (AFP) - A spate of recent deals and strategies by French, Japanese and US cosmetic companies highlight renewed efforts to tap China's booming beauty market and lock in greater market share.

SHANGHAI, Feb 18 (AFP) - A spate of recent deals and strategies by French, Japanese and US cosmetic companies highlight renewed efforts to tap China's booming beauty market and lock in greater market share.

No longer the beauty products backwater it was 15 years ago, cosmetic giants are aggressively turning their attention to China, which with USD 7 billion in sales last year and growing at an average clip of 20 percent a year is already Asia's second largest beauty market.

After decades of repression by China's ruling communist party, notions of feminine beauty and personal care have returned to the fore as the country has, in fits and starts, marched towards a market-based economy yielding greater personal freedoms.

Aiming to capitalise on what is now a near-obsession with looking good, French beauty products giant L'Oreal, which saw China 2003 sales soar nearly 70 percent to EUR 159 million from a year earlier, signed in late January a contract to buy popular Chinese make-up brand Yue-Sai.

The purchase of Yue-Sai, a company run by Chinese-born American entrepreneur Kan Yue-Sai which last year recorded estimated worldwide sales of around USD 48 million, is L'Oreal's second mainland deal in less than two months.

The agreement on Yue-Sai, a company with mid-market positioning "specially for the Chinese woman," follows the Paris-based company's announcement in December of its takeover of Chinese cosmetics and skincare brand Mininurse.

"L'Oreal is accelerating operations in China ... it is becoming a high priority for the group in its developmental strategy," Paolo Gasparrini, general manager of L'Oreal China, said at a press briefing.

Although L'Oreal or US-based Estee Lauder have had a presence in China for nearly 10 years, the country's rapidly shifting economic demographics are paving the way for fiercer competition among overseas rivals intent on opening up the market beyond China's wealthier coastal cities.

For the makers of Lancome and Maybelline brands, the buyout of domestic skincare brand Mininurse, which has a five percent domestic market share and estimated sales of nearly
USD 50 million, provides an opportunity to target average consumers in China's second- and third-tier cities.

"We are trying to have a brand for every need, and more and more in terms of purchasing power," Gasparrini said.

"We want to serve the rich consumer, and we want more and more to be close to people that have lower purchasing power."

China's cosmetic market is already largely open to overseas firms, with foreign brands accounting for some 70 percent of sales last year and eight of the top 10 brands foreign-owned.

While domestic companies are no match for the deep advertising budgets of foreign firms, distribution does not come easy with 3,000 small- to medium-sized domestic firms battling for shelf space.

The acquisition of Yue-Sai and Mininurse, which have a powerful network of distributors and outlets with strong brand recognition among the young, gives L'Oreal access to secondary and tertiary cities where it has not sold well before.

"The department store is a very strategic distribution channel for us. This is why we are very happy to have Yue-Sai because it will strengthen our position in department stores," said Gasparrini.

You Gong, executive director of the China Association of Fragrance, Flavors and Cosmetic Industry, said China's cosmetics landscape was undergoing consolidation.

"Lots of foreign companies are really active in the Chinese market - buying domestic companies and establishing investment companies in order to expand market share and make good profits," said You.

"It's not only a matter of funding a factory or selling their products in China, it's not that simple any more, it's a matter of the further development in the huge Chinese market."

Although not yet ready to manufacture in China, New York-based Estee Lauder announced in January it was relocating its Asia-Pacific regional headquarters to Shanghai from Singapore.

"We will become more aggressive in the New Year. Estee Lauder plans to launch more counters on the mainland. And we are considering the launch of more brands," said Michel Grunberg, regional head of Lauder's Asia-Pacific operations.

Not planning on being left behind, Shiseido, Japan's top cosmetics maker, said last week it would carry out organisational changes in China on April 1, including the appointment of a senior official, to boost its expanding operations on the mainland.

Meanwhile, the country's top household products maker, Kao Corporation, said it would grow its Sofina cosmetics brand to China, targeting an emerging market of affluent women in their 20s and 30s.


                                                              Subject: France news


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