While growth is decelerating in China for some western brands, the same cannot be said for the country’s homegrown beauty firms. China’s cosmetics market growth slowed to 17 percent in 2012, compared with 18.7 percent in 2011, according to data from the National Bureau of Statistics of China.
Although international companies still filled China’s top 10 in 2012, local players Shanghai Jahwa, Jala Group and Jiangsu Longliqi weren’t far behind— ranking 11, 12 and 13, respectively, according to Euromonitor International.
With the exception of Shanghai Jahwa, which has a major presence in larger cities, this is largely due to local brands’ stronger presence in China’s tier- three and tier-four cities, areas with populations of between 1 million and 5 million that are still relatively untapped by western companies.
Local brands “have really been riding the demand growth in lower-tier cities, particularly with consumers unable to afford major international brands,” says James Roy, a senior analyst with China Market Research Group in Shanghai. In lower-tier cities, he explains: “There’s a lot stiffer competition from these local brands because they were there earlier and are in touch with local consumers.”
Jala, for example, has been promoting its products with advertisements featuring popular Taiwanese celebrities. “They’re getting good distribution and competing in the value segment,” says Roy.
The key selling point for Longliqi is that its products are based on traditional Chinese medicine. Like Jala, Longliqi “has continued to grow strongly because they’re in areas that are continuing to see strong growth,” Roy says.
Certain players, however, are setting their sights further afield. Shanghai Jahwa, which has been making a concerted push abroad, posted international revenues up 74.7 percent last year.
This July, meanwhile, LVMH Moët Hennessy Louis Vuitton–backed investment vehicle L Capital announced it had acquired a minority stake in Marubi Holdings Group, with the stated aim of helping the masstige Marubi cosmetics brand to compete internationally.