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Foreign Brands Lose Market Share in China

Foreign consumer product brands lost market share to their Chinese competitors in 2013, particularly succumbing ground in skin care and cosmetics.

BEIJING — Foreign consumer product brands lost market share to their Chinese competitors in 2013, particularly succumbing ground in skin care and cosmetics, according to a new study by Bain & Co. and market research firm Kantar Worldpanel.

The China Shopper Report 2014 surveyed 40,000 Chinese households to find out where foreign companies gained and lost share in the personal-care, home-care, beverages and packaged food markets, while also asking about online consumption. Overall, about 60 percent of foreign brands in the study lost market share.

Foreign color-cosmetics brands lost 6.3 percent market share, while skin-care brands conceded 5.5 percent. The statistics appear to confirm a tougher environment for beauty brands in a year when Revlon Inc. exited the China market and L’Oréal stopped selling its Garnier brand there.

Meanwhile, foreign companies gained ground with hair-care products, picking up an additional 2.6 percent share in hair conditioner and a 1.9 percent share in shampoo.

The report highlights certain companies that won share in personal care categories. The Chinese brand Pechoin increased its position in the skin-care market by 0.8 percent “through integrated product and brand upgrades and celebrity endorsements.” The Mainland’s Proya also succeeded by drawing on celebrity support, while “increasing penetration in emerging channels, such as personal-care stores.”

In hair care, Schwarzkopf gained 1.2 percent in market share for conditioners by launching a professional line of products. L’Oréal Paris gained 1.1 percent with the launch of its essential oil line and aggressive marketing.

Foreign brands hold more than two-thirds of the market for shampoo, roughly half the market for hair care and color cosmetics and about 40 percent of the skin-care market, according to the report.

For both foreign and domestic brands, overall market growth slowed in the 106 product categories surveyed, which the report refers to as “fast-moving consumer goods.” Bain and Kantar blame the slowing “pace of premiumization,” which led to smaller price rises than the previous year. Personal-care product prices increased only 1.6 percent in 2013 from previous year, whereas in 2012 prices rose 4.1 percent.

Sales volume, however, continued at a brisk pace, increasing 6.1 percent in 2013, compared to 2012.

While brick-and-mortar stores face a tougher environment, growth in online sales continued to surge. Online spending grew 53 percent for shampoo, 35 percent for color cosmetics and 21 percent for skin care. Treatment continues to lead online selling among products in the survey, accounting for more than 20 percent of spending.

Among the households surveyed, 18 percent reported buying skin-care products online at least once per year and 12 percent bought cosmetics.