The story of the acquisition of local cosmetic brands will also be repeated

After L'Oreal acquired the nurse and Dabao was acquired by Johnson & Johnson, another local cosmetic brand in China fell into the hands of foreign investors.

The world's largest perfume company Coty Inc (Coty Inc.) was announced on December 6th and Ding Jiayi reached a share purchase agreement. According to reports, Coty purchased 50 to 60 percent of Ding Jiayi’s stock at a consideration of US$400 million. Industry insiders predict that due to the collective weakness of local cosmetics companies in China, coupled with insufficient government attention, the story of the acquisition of local brands will be repeated.

Ding Jiayi began to look for buyers last year. "In the outside world, it seems that the profitability of the cosmetics industry is not high. Ding Jiayi's net profit margin level does not exceed 8%." Feng Jianjun, marketing expert of the daily chemical industry, said that it could not pass the listing, external In the case of investments and other channels, cosmetics companies can only sell their shares if they want to survive.

The Morning Post reporter learned from a number of people in the industry that Ding Jiayi’s annual payment amount during the period from 2002 to 2008 maintained an increase of 15%, but it began to decline after the financial crisis in 2008, and Ding Jiayi’s brand showed signs of aging.

Since 2009, Ding Jiayi has started looking for buyers. During the period, he had contacted Shanghai Jahwa United Co., Ltd. (hereinafter referred to as Shanghai Jahwa) at a selling price higher than the price of Dabao. The Shanghai Jahwa chairman Ge Wenyao believes that although Ding Jiayi’s annual sales amounted to 800 million yuan, which is higher than that of Dabao, its category is rather fragmented. Therefore, Ding Jiayi’s cooperation proposal has not been accepted.

Ding Jiayi eventually formed an alliance with Coty thanks to Coty's impulse to return to the Chinese market. “Coty had withdrawn from the Chinese market after selling the Yuexi brand to L'Oréal. It did not act in the huge Chinese consumer market and has always been criticized by shareholders.” informed sources said.

"The national brand is left with grasses."

With the acquisition of Ding Jiayi, the market renewed concerns about the acquisition of local brands.

In December 2003, after four years of negotiations, L'Oréal, the world’s largest cosmetics group, finally acquired a small nurse’s wholly-owned subsidiary. Afterwards, the Little Nurse brand was once silenced. It was considered by the outside world that L'Oréal’s “snow-covered” nurse was in order to develop Garnier. The market share of small nurses has also rapidly declined.

In 2006, there were only two domestic brands in the top ten cosmetics brands in China – Dabao and Ding Jiayi. However, two years later, Johnson & Johnson announced that it had won Dabao at a price of 2.3 billion yuan.

"If there is a national brand in China's cosmetics industry, that's only Shanghai Herbalism." Feng Jianjun said.

Why do local brands fall on the hands of foreign companies? In the industry's view, there are not only bottlenecks in the development of enterprises, but also the general environment for the development of the daily chemical industry is not optimistic.

Ge Wenyao said yesterday that it is not easy for a cosmetic company with a very low threshold to be bigger and stronger. It is not easy for a cosmetics company to stand up to the fierce competition with foreign capital. It needs not only effective sales risk control, but also branding. With operations, effective supply, and strong scientific research support, Shanghai Jahwa only has more than 100 researchers.

It is understood that at present, the sales volume of local cosmetics companies that are close to Bacheng's local cosmetics companies is in the range of 30 million to 50 million yuan. There is no financial power to develop independent scientific research forces. After a certain popularity is reached through advertisements, it will inevitably encounter development bottlenecks.

“China’s daily chemical companies have a relatively short history of development as a whole. There are few brand operation experiences, and most of them can only survive in the low-end market. The domestic peer companies that have acquired strength are very rare, and the local cosmetics brands eventually fall into the pocket of foreign investors. "Feng Jianjun said.

"Insufficient local brand support"

In addition, consumer goods brands are not valued, and are also seen as the reason why the cosmetics industry has not been able to grow.

“Some leaders once told me jokingly, 'You are the most likely to paste', they think that doing cosmetics is a very simple matter, as long as the paste can be.” Ge Wenyao believes that China's current development of domestic consumer brands Insufficient protection and support.

“In China’s daily chemical industry, there are only six listed companies, but there are as many as 50 pharmaceutical industries. If the country can attach importance to the daily chemical industry as much as pharmaceutical companies, it is believed that China’s daily chemical industry can also develop.” It is said that the government has not paid enough attention to the daily chemical industry in terms of policy support or management guidance.

Feng Jianjun believes that with regard to China’s current environment, the acquisition of localized daily chemical brands will also take place repeatedly. “In May last year, a foreign-funded company found me and listed six Chinese companies, hoping to help recommend it, among them ranked number one. One is Ding Jiayi. I did not expect that after one year, Ding Jiayi was acquired by Coty."

However, Ge Wenyao is optimistic about the future development trend of China's daily chemical industry. “Chinese people are very smart. If you want to do most of them, Jahwa has already thoroughly understood the business of the cosmetics industry. Now there are already a number of local cosmetics brands, including Overlord, Expensive Herbs, etc., and there are hopes that there will be Some local brands stand still."