Bawang’s Chemical Reaction

The Chinese group’s sales continued their downward spiral after press reports in 2010 alleged that its core shampoo line contained dangerous levels of dioxane.

Appeared In
Special Issue
Beauty Inc issue 08/10/2012

Safety fears about cosmetics have helped drive sales of natural and organic products over the past decade in many markets. China is no exception, as health scares in numerous sectors—including beauty and food—can have dramatic effects on business. Bawang International is a case in point.

This story first appeared in the August 10, 2012 issue of WWD.  Subscribe Today.

The Chinese group’s sales continued their downward spiral last year after press reports in 2010 alleged that its core Bawang shampoo line contained dangerous levels of dioxane, a purportedly cancer-causing chemical. The company, which generated 97.5 percent of its business domestically, saw beauty revenues nosedive a massive 51.6 percent to CNy 656.5 million, or $101.6 million at average exchange, de- spite Bawang avidly defending its products and taking legal action against the claims’ original publisher, Hong Kong–based Next Magazine.

“There are a lot of hidden chemicals in Chinese products in all categories,” Organic Monitor director Amarjit Sahota says. He adds that while Chinese consumers are keen to use more natural alternatives—indeed, Bawang is positioned as a purveyor of traditional Chinese herbal remedies—few options are available to them due to strict rules on cosmetics imports, notably regarding premarket testing on new products that must be performed on animals. “Chinese consumers want organic and want chemical-free, but they don’t have many choices, unfortunately,” he says. Sahota emphasizes that the few international natural brands to have made inroads in China, including Australian labels Jurlique and Jasmin, are registering strong growth there.

In the meantime, Bawang is working hard to diversify its portfolio away from cosmetics, adding categories such as herbal teas. The Bawang shampoo brand accounted for 47 percent of group sales in 2011, compared with 67.4 percent in 2010. whether the firm will be able to bounce back onto WWD Beauty Inc’s Top 100 ranking (last year it was number 75, and its 2011 sales drop meant it didn’t make the current list) remains to be seen.