BEIJING — China is the second-largest market for beauty and personal-care products globally, trailing only the U.S., and yet for many beauty companies, it might as well not exist.
Government rules implemented in 2012 that require animal testing on imported beauty products have forced brands to make a judgment call on whether to enter the market, which is set to top $39 billion this year, according to figures from the Hong Kong Trade Development Council.
While beauty’s biggest players — Procter & Gamble, Estée Lauder, L’Oréal, Unilever, Shiseido and Avon — all sell in China, others such as Andrew Goetz, cofounder of skin-care brand Malin + Goetz, summed up how many feel about the market when he told WWD earlier this summer that “our integrity is much stronger than our desire to have lots of dollars. So it’s not on the table.”
Cruelty-free brands can target the growing number of Chinese tourists overseas but a number have also been experimenting with ways to work with the regulations inside the country, which are gradually opening up some wiggle room for brands to sell without compromising their values.
This is what model Miranda Kerr did with her line Kora Organics, which had its official China debut this year with Tmall. Her brand takes advantage of a loophole that requires animal-testing only for products physically retailed within the country, but not when sold direct to consumers online.
Brett Riddington, general manager for Kora Organics, noted also that some companies utilize daigou as a psuedo-authorized distribution method, and a very strong case was made to the company to use gray market channels to access China.
“I spoke to seven different companies, most of them suggested the daigou route would be commercially successful for us, and I’m sure it would be,” Riddington said. Ultimately, the brand didn’t like the possibility of brand dilution.
“There are other brands in the beauty segment in Australia that have used that route but now are trying to control it a little better because they’ve realized. They wouldn’t do it in any country but have been convinced it’s been the right way to be successful in China,” Riddington added.
Eugene He, founder of Ceramiracle, a young cosmeceuticals brand, also uses the cross-border option although without the help of a big platform like Tmall.
“It took us two years. Going back and forth, building my network and contacts there,” he said, “We had to drive to the free trade zone, find partners there who know what they’re doing.”
Why don’t more brands jump on this wagon?
“Because of the lack of information,” He said, adding that even as a fluent Mandarin speaker, the process was bureaucratic and opaque.
“When we first started out, my first place to get information was online but there’s so little. You need to understand and read Chinese to even know what’s going on. Even so, it’s not a directory.”
For instance, He points out there is no explicit wording in Chinese law requiring animal tests on imported beauty products. To gain approval to sell in the market, products must be submitted to government-mandated testing centers and would-be sellers would then realize that all of those approved labs only use animal-testing methods.
Beyond that, it may work out to a lot of effort for not the biggest of rewards since the government imposes a cap on the amount of cross-border purchases a consumer can make, explained Susie Shao, a senior cosmetics regulatory consultant for the firm CIRS, which helps companies carry out chemical compliance services.
Starting Jan. 1, China is raising the cap, allowing shoppers to purchase 26,000 renminbi — or about $3,800 at current exchange — a year, up from 20,000 renminbi, and raising the limit on each transaction to 5,000 renminbi, or $728, from 2,000 renminbi. But it goes across all purchases made, not just from a single company and so given the considerable undertaking it can be for the companies and faced with a cap on spending, many don’t bother.
For other companies, locally manufacturing the products within the country is a more appealing option. Since 2015, China has allowed “non-special” products — beauty products without active claims such as SPF, anti-acne, or anti-perspirant — to forgo pre-market testing if produced domestically.
Jenny Frankel, a MAC Cosmetics alumna, has done this with her label Nudestix, starting in May 2017. The four-year-old Canadian brand is now in 100 doors in China, representing 10 percent to 15 percent of global sales for this year.
“I don’t think the China girl is well-informed about cruelty-free beauty, yet. This is what we would like to bring to market: education and choices,” Frankel said. She expects China to become one of Nudestix’s top three markets by 2020, out of the 30 countries the brand is stocked in now, echoing similarly rosy outlooks from Kerr, who predicted China could become Kora Organics biggest market over the next five years.
Known for its makeup crayons, it took Nudestix 18 months to go from regulatory research to product development and launch in market. Getting classified as a locally made brand also helped avoid the additional import taxes and keep the products priced competitively for the Chinese consumer.
But this choice does not satisfy all. Some animal rights activists take issue with the fact that post-market testing is still a possibility — that is, authorities could pull products off shelves to still test them on animals. Most likely this would occur in the event of a safety recall and some companies argue that it is rare, if it ever happens at all. But without being able to guarantee the product is never tested on a single animal, it fails to meet standards for cruelty-free from groups like PETA.
“Many beauty experts and cruelty-free groups refuse to acknowledge we are cruelty-free because we sell in China,” Frankel said. “These groups expressed we should boycott China until the country adopts ethical treatment of animals policy nationally rather than promote our brand as an alternative to animal testing and provide cruelty-free awareness through education.”
Frankel’s view — that brands need to be in the market as a stakeholder to have sway in the larger conversation about ending animal testing — is a popular although divisive opinion.
“This has been a hot topic in our research and work,” said Amanda Nordstrom, company liaison for PETA’s Beauty Without Bunnies program. “Right now as it stands, a company [that locally produces] cannot say for sure that their products for sure are not tested animals, and we don’t certify them as cruelty free.”
There could be other drawbacks to moving part or all of a brand’s production to China, too. The Made in China label, rightly or wrongly, can carry a stigma to consumers in other markets, affecting perception of the brand image.
On this, Frankel is careful to note that “we educate that the brand was designed in Canada, originally formulated in Europe and made in China to be cruelty free. This is an important message we continue to share to elevate brand perception.”
Ultimately, though, many in the industry hope that animal testing will be dropped in China. The method, in addition to being painful or fatal for animals, is considered outdated and less accurate than other kinds of tests. That would eliminate the need for these workarounds, and there are positive signs the Chinese government may shift.
In October, toxicology nonprofit Institute for In Vitro Sciences was invited by the Chinese government to join its working group to revise animal test requirements for cosmetics, and the year before, In Vitro Sciences succeeded in opening a non-animal testing lab near Shanghai, the first of its kind in China.
“What we found is that [Chinese authorities] did want to learn, they just didn’t have access to this information before,” Nordstrom said. “This might seem to some like a slow process, but we really are making great strides.”
“There has been less awareness and there’s just a different culture between countries,” said Troy Seidle, vice president of research and toxicology for Humane Society International (HSI), who added that it was nearly a 40-year campaign before the EU banned animal testing. “In Europe, animal welfare ethics have driven the progress. In the U.S., the way you get government and industry interested is money. You explain the non-animal approach is more efficient. It saves time, money, you get better predictions.”
When it comes to China, Seidle advised, “Don’t talk to them about animal welfare.” Instead, he said “one of the significant drivers with the HSI cruelty-free campaign we’ve taken is trade pressure.”
Since 2013, the EU has banned not only animal testing within its own borders but the import of any animal-tested products. Seidle reasons that if China exports to a growing list of major markets using non-animal testing methods, the resulting availability of the science and the government’s comfort levels with the methods would help China go cruelty-free with the flow of products into its nation as well.
“So much of it is the dance of who needs to go first. What buttons need to be pressed?” Seidle said. “No one is looking to shame. It’s very much constructive. I think it’s a combination of awareness raising for the public, practical training for those who would be using and interpreting non-animal methods, and foreign trade pressures.”
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