Image source @ vision china
Wen | Mantis Observation, Author | Tu Lin
From being squeezed by Japanese and Korean brands and European and American brands, to finally finding the "home advantage" in China, the rise of domestic beauty cosmetics in the past decade is not unpleasant.
According to the data of Toubao Research Institute, the market size of beauty care products in China will continue to grow from 2015 to 2021, with an average compound annual growth rate of 9.5%. It is estimated that the market size will exceed 600 billion yuan in 2024.
But at the same time, the label of "emphasizing marketing and neglecting R&D" has also been attached to those rapidly rising brands. With the traffic advantage gradually fading, the competition between brands has to return to rationality, and R&D has begun to be placed at a new high level.
Different from the overwhelming traffic play before, recently, the actions of domestic beauty brands in research and development have begun to accelerate.
Hua Xizi announced its five-year plan to build a research and development system of Oriental Beauty Cosmetics in Hangzhou headquarters in early March: in the next five years, Hua Xizi will invest more than 1 billion yuan to deploy in many areas of product innovation, basic research and applied basic research. Earlier, Lin Qingxuan also opened the first modern factory and scientific research center in Shanghai with the development concept of carbon neutrality.
Of course, this is not all. According to Mantis Watch, the "involution" in the research and development of domestic beauty products is mainly reflected in the following three levels:
First, the investment of major brands in R&D is gradually increasing.
Hua Xizi and Lin Qingxuan are not listed yet, so it is difficult to consider their specific R&D investment from the time dimension. However, judging from the brands that have been listed, their investment in R&D is basically expanding year by year.
The perfect diary, which has been criticized for "emphasizing marketing but neglecting R&D", basically shows a trend of increasing R&D expenses year by year. According to its previous prospectus, from 2018 to 2020, the research and development expenses of Yixian e-commerce increased from 2.641 million yuan to 66.5 million yuan, a 25-fold increase in three years. The latest financial report shows that the R&D investment of Yixian e-commerce increased by 113.5% year-on-year in 2021, exceeding 142 million yuan.
The same is true of Winona, who has frequently appeared in the hot list of domestic beauty sales in the past two years. According to the latest financial report released by its parent company Betaine, the R&D investment of Betaine in 2021 was 120 million yuan, up 78.47% compared with the same period in 2020. It is higher than 68.8517 million yuan in 2020 and 58.1102 million yuan in 2019.
It is true that the R&D investment of just over 100 million can’t be compared with that of international brands such as L ‘Oré al, which is 1 billion. However, compared with themselves, the importance of domestic brands to R&D is indeed rising with the naked eye.
Second, more and more brands are starting to set up R&D laboratories independently/cooperatively.
Hua Xizi and Lin Qingxuan are not the first brands to start acting in the R&D lab. Last March, the R&D building of the cutting-edge brand HFP, which spent over 100 million yuan, was officially opened. In August last year, a number of domestic beauty brands announced their actions in the R&D laboratory in the same month.
At the beginning of August, Perfect Diary’s parent company Yixian E-commerce announced that it had reached a cooperation with Huazhong University of Science and Technology’s National Nanopharmaceutical Engineering Technology Research Center to jointly build a joint laboratory.
On August 19th, Winona’s parent company Betaine also announced that in order to focus on Yunnan’s characteristic plant industry and continuously research and develop functional products, the company plans to invest 100 million yuan to set up a subsidiary in Kunming to carry out experimental technology research and other related businesses;
On August 20th, the parent company of Ximuyuan, Nord Traceability, officially reached a strategic cooperation with the National Engineering Research Center for Genetically Engineered Drugs, and the joint functional skin care laboratory jointly established by the two parties was unveiled.
Moreover, some laboratories have made substantial progress. According to the person in charge of product research and development of Yixian E-commerce, at present, the joint laboratory of Yixian E-commerce and Nano-drug Engineering Center has jointly developed and landed a number of raw materials, which have been applied in the products of several brands of Yixian E-commerce.
This may become a new trend. In addition to the above-mentioned brands, according to the incomplete statistics of "Quality View APP", nearly 10 cutting-edge domestic brands, including Youshiyan, Hechu, Skin Hunter and Lifelong Research, all have independent R&D centers or laboratories cooperating with third parties.
Third, talents with mature R&D experience in the industry are being "snapped up" by brands.
A typical example is Li Huiliang who joined Hua Xizi as the chief scientist at the beginning of this year.
Li Huiliang was the first to participate in the research and development of shanghai jahwa’s Liushen toilet water, and was also the main creator and developer of Meijiajing hand cream and herborist products, and later served as the chief technology officer and deputy general manager of Huaxi Bio. It can be said that Li Huiliang’s experience in cosmetics research and development for more than 30 years has successfully made it a "fragrant cake" of cosmetics brands.
However, there are not many talents with both professional knowledge and market experience like Li Huiliang on the market. For more brands, it is also a good choice to "settle for second best" and absorb the professional experience of college talents.
Last July, Huaxi Bio signed a strategic cooperation agreement with beijing university of chemical technology to jointly build "Huaxi Biotechnology Co., Ltd.-beijing university of chemical technology Joint Research and Development Center for Synthetic Biology and Green Bio-manufacturing Technology".
Not only Huaxi Bio, according to the statistics of "Qingyan" data, brands such as Baiqueling, Polaiya, shanghai jahwa and Lin Qingxuan have cooperated with many universities to consolidate their R&D strength.
The effect is also remarkable. According to shanghai jahwa, shanghai jahwa is cooperating with institutions and universities at home and abroad. Every year, there are nearly 700 new products and 50-60 patents, including 15-20 invention patents.
It is worth mentioning that Hua Xizi is still recruiting besides Li Huiliang. By the end of February, 2022, the number of R&D personnel of Huaxi Zi’s parent company had increased to more than 200, which shows its emphasis on R&D..
In short, with the acceleration of the layout of major brands in the field of research and development, the second half campaign of domestic beauty brands has officially started.
Further, there are multiple factors behind why brands shift their focus from marketing to research and development.
On the one hand, most brands have realized that intensive traffic play is difficult to become a brand moat.
A notable example is that after Perfect Diary became popular and went on the market, brands such as Orange Blossom and Ke Laqi quickly occupied the consumer mind by continuing their playing style. According to the "Tmall 618 Makeup/Perfume Brand Pre-sale List" released by ECdataway, international brands represented by YSL and Estee Lauder account for 9 seats, while domestic brands only have the cutting-edge brand Ke Laqi on the list.
This does not mean that marketing is not important. In this era of "wine is also afraid of deep alleys", it is reasonable for brands to attach importance to marketing. However, with more and more brands taking advantage of traffic, consumers’ consideration of brands is also constantly advanced. Among them, the research and development ability linked with product efficacy and composition is particularly important.
According to CBNdata, at present, 73% consumers will pay attention to the proportion/formula of ingredients, and over 40% consumers will pay attention to the production technology and related research background of ingredients.
And those brands that attach importance to R&D investment are often more likely to gain the good reputation of "conscience domestic products", and then realize the growth of revenue and gross profit. For example, Winona mentioned earlier.
Benefiting from the promotion of product brands brought about by increased R&D efforts, last year, Winona’s parent company Betani achieved an operating income of 4.022 billion yuan, a year-on-year increase of 52.57%; The net profit of returning to the mother was 863 million yuan, a year-on-year increase of 58.77%; The gross profit margin was about 76.01%, which remained stable year-on-year.
On the other hand, it is inseparable from the improvement of research and development strength to move towards "high-end" domestic beauty cosmetics.
An obvious fact is that domestic beauty cosmetics have not yet mastered the "right to speak" in the high-end market.
According to the Analysis Report of High-end Cosmetics Market in China in 2021 released by Guanyan Report, at present, the high-end skin care brand market is mainly occupied by international brands such as Hailan Mystery, Guerlain and helena rubinstein, and there are few domestic brands.
However, the high customer unit price brought by high-end brands and the national mission of "China can also have high-end beauty cosmetics" have driven more and more domestic brands to attack high-end brands.
In addition to Lin Qingxuan, who aims at high-end skin care, and Hua Xizi, who aims at high-end makeup, Ke Laqi, a new brand, is also promoting brand upgrade with new products.
On March 31st, Ke Laqi WeChat official account announced that Ke Laqi’s base makeup officially started the 2.0 luxury era, and launched the White Tea Platinum Essence series. The products include touch-up makeup pre-cream, soft mist golden bottle foundation, high satin powder cream, clutch powder cake, shell-wrapped blush and high gloss. The appearance is inspired by high-definition jewelry, which keeps the makeup exquisite at all times.
In the field of beauty, the strength of research and development often determines whether the brand can get a share in the high-end market. Therefore, we can see that those brands that want to hit the high-end market often pay more attention to the investment in research and development.
For example, Lin Qingxuan, who launched the strategy of "China High-end Skin Care Brand" in 2018, started the industrial chain layout as early as 2008, and he has never been "opportunistic" in research and development, and his annual investment in scientific research has remained above 4%. As mentioned above, Perfect Diary and Betani, whose R&D income is growing, account for only 2% of the R&D investment.
Another example is Mao Geping, which is known as high-end make-up. Before that, the research and development level was also controversial. In the first half of 2014-2017, the company’s R&D expenses accounted for less than 1% of revenue, and there was not even a self-built factory. Therefore, in the subsequent IPO, Mao Geping announced that it planned to raise 512 million yuan for channel construction and R&D center construction.
But even so, there is still a big gap between domestic beauty brands and international brands.
Up to now, Huaxi Bio, which has been established for 12 years, has 304 patents. According to the latest research and development progress announced by L ‘Oré al Group, the number of new patents in 2021 has reached 517, far ahead of domestic brands.
The reason for this gap is that international brands have accumulated experience in research and development for a long time, especially in the layout of some core raw materials. For example, it took Shiseido 26 years to develop the patented raw material 4-msk, and L ‘Oré al started research on the patented raw material "Boson" in 2008. The brand’s layout of core raw materials is undoubtedly conducive to the breakthrough of later products in the market.
Moreover, international brands have accumulated "original funds" because they occupied the high-end market earlier, and their investment in research and development will be more emboldened. According to the report of Ping An Securities, L ‘Oré al’s R&D expenditure in 2020 has reached nearly 1.2 billion US dollars, and the number of global R&D personnel is as high as 4,000.
The good news is that although domestic brands started late at the R&D level, the catch-up speed is actually not slow.
By April 2022, Huaxizi, which was established four years ago, had nearly 140 patents, including 38 invention patents and 19 utility model patents. The number and quality of patents were among the best in domestic cosmetics. Winona, established 10 years ago, has 132 patents. The number of patents of Nature Hall and Quadi, which were established earlier, has exceeded 300, and the number of invention patents has reached 158 and 256 respectively.
Judging from the number of new patents. According to the data of the World Intellectual Property Organization, the number of patents of Estee Lauder Group has increased by 97 since 2021. In 2021, the number of new patents of Huaxi Zi’s parent company also reached 50, and the gap with the former is not too big.
What is certain is that the research and development of domestic beauty cosmetics is worth rolling up as soon as possible, whether it is to get rid of the label of "emphasizing marketing but neglecting research and development" or to realize the "high-end dream".
References:
- 1. The Perfect Diary/Hua Xizi/Winona’s "R&D War"-Science and Technology Materials
- 2. What is the R&D gap between local cosmetics enterprises and foreign cosmetics enterprises? "-Zhihu author" makeup "
