Recently, according to the Hong Kong Stock Exchange, Shanghai Shangmei Cosmetics Co., Ltd. submitted a prospectus to the Hong Kong Stock Exchange. When it comes to Shangmei, many consumers may not be familiar with it, but the mention of Han Shu, Yiyezi, and red elephants must have been heard.
According to the prospectus, the funds raised by Shangmei Group are mainly used for brand building, which will further implement the multi-brand strategy, consolidate and upgrade the main brand, create new brands, enhance brand image and popularity, enhance research and development capabilities, maintain continuous innovation of brands, strengthen production and supply capabilities, increase the breadth and depth of sales networks, and improve digital and information infrastructure.
Nowadays, a number of domestic beauty and skin care companies have been listed one after another: "The first share of functional skin care" Bethanie sits on a market value of 70 billion yuan and plans to go to Hong Kong for an IPO; Shi Erjia, who specializes in medical beauty masks, and Mao Ge, a number of companies are also impacting IPOs. With the listing of Shangmei Group in Hong Kong, it may become the "first share of Hong Kong domestic beauty".
Entrepreneurial journey
Lü Yixiong was born in July 1977 in Shantou, Guangdong Province.
In May 2002, Lu Yixiong started a business.
Since 2012, under the leadership of Lu Yixiong, the company's strategy has been upgraded to "multi-brand, multi-category, omni-channel", with Han Shu BB Cream as the entry point, and gradually outlined the multi-category territory of daily chemicals from creating super single products.
In 2014, Lu Yixiong founded the mask brand Yiyezi.
In 2015, the Chinese maternal and infant cosmetics brand Red Elephant was born.
From 2015 to 2018, Lui Yixiong founded a company, built a factory and established a scientific research center in Japan.
At the beginning of 2019, the Han Shu brand comprehensively upgraded in the technical and professional dimensions, and achieved empirical skin care efficacy with the exclusive patented ingredient Tiracle developed from Japan, becoming the leading brand of China's EBC concept.
On the night of Chinese New Year's Eve 2020, Shangmei donated 1 million yuan to Wuhan for the first time and called on the whole industry to take action; under the leadership of Lu Yixiong, Shangmei achieved continuous growth in performance in the first half of 2020.
In 2020, Lv Yixiong raised talent training to the height of enterprise strategy, and under its promotion, Shangmei promulgated three major talent documents of "Salary System System", "Talent Introduction Management System" and "Talent Bonus Plan", which provided a scientific foundation for the construction of talent echelons.
▲ Lu Yixiong
A shares moved to Hong Kong stocks
As early as the beginning of 2021, there were media reports that Shangmei and CITIC Securities signed a listing counseling agreement and planned to sprint A shares. At that time, the official website of the CSRC also disclosed the basic situation table of the counseling and filing of The United States Group.
However, a year later, The Shanghai American Group chose to switch to Hong Kong stocks. Some people in the financial community have analyzed that the A-share registration system has not yet been fully implemented, and the move of the United States may be to speed up the listing process.
It is understandable that the younger Polariya and Marumi, who has experienced 3 IPOs, have completed the listing action, while Shangmei has not made much progress in this regard, and it is inevitable that Lu Lixiong, who has been ringing the bell for a long time, is inevitably anxious.
At present, Shangmei has 9 brands, of which 6 have been introduced to the market. Its prospectus mentions many times that Shangmei's advantage is that "as a leading multi-brand domestic cosmetics company in China's cosmetics industry, we go through the cycle and are always young."
The so-called "multi-brand" is that Shangmei wants to attract consumers of different ages, different skin types and different needs through the layout of different product lines. For example, Han Shu targets women aged 25 to 40 with anti-aging needs, Yiyezi advocates the concept of environmentally friendly skin care for women aged 18 to 35, and the red elephant focuses on maternal and child care.
Han Shu propped up half of the country
In 1999, Lu Yixiong opened a specialty store specializing in cosmetics wholesale and retail in The Xi'an Wholesale Market, earning his first pot of gold.
With chaoshan people's keen sense of business, In 2002, Lu Yixiong turned to Shanghai to start a business. After arriving in Shanghai, the first thing he did was to understand the top three companies in the national cosmetics market, determined to be a domestic brand well known to Chinese consumers.
Coinciding with the popularity of Korean dramas such as "Blue Life and Death Love" and the prevalence of Hallyu, Lu Yixiong named the brand "Han Shu", positioned scientific anti-aging, and the target customer base is 25-40-year-old women. Under the momentum, consumers flocked to it.
At the beginning of its development, with offline direct stores, HanShu was very popular in third- and fourth-tier cities, and achieved sales of 100 million in 2005. While grasping TV shopping and breaking into micro-business, Lu Yixiong ate the channel dividend.
According to Lu Yixiong, in 2011, Han Shu accounted for 38% of the national TV shopping cosmetics category. Rooted in the sinking market, and the micro-business group is highly matched. In 2015, Han Shu even proposed an annual sales target of 6 billion yuan, and the micro-business channel should contribute 3 billion yuan.
Shangmei Group was established in 2002, formerly known as Shanghai Hanshu Cosmetics Co., Ltd. A very important turning point in its development process was after entering 2010, when the micro-business industry was on fire, Han Shu joined the micro-business channel, and at the same time, the "Han Shu Red BB Cream" launched by Han Shu was fired in 2012, and Lin Chiling was invited to endorse. Han Shu was also an excellent representative of domestic products at that time, and from 2002 to 2012, it was also called the 1.0 era by Shangmei Group.
In fact, as early as 2015, Lu Yixiong, the founder of Shangmei Group, posted in the circle of friends that he planned to complete the listing in 2018, until 2021, Shangmei Group signed a listing counseling agreement with CITIC Securities and registered with the Shanghai Securities Regulatory Bureau, intending to enter A-shares, and Marumei, Yu Nifang, Polaria and Bethany, which are also domestic products, have also chosen to list on A-shares.
However, why in 2022 to switch to The Hong Kong stock market, Shen Meng, executive director of Chanson Capital, analyzed in an interview with reporters: "(Because) the current economic downturn and insufficient consumption boom, so from the time window of listing, It is not ideal for Han Shu, and it can only retreat to choose Hong Kong stocks with lower listing thresholds." ”
So in the delayed time, what about Han Shu's business? According to the prospectus, from 2019 to the first three quarters of 2021, Shangmei Group achieved revenue of 2.874 billion yuan, 3.382 billion yuan and 2.596 billion yuan respectively; adjusted net profit was 114 million yuan, 265 million yuan and 285 million yuan, respectively; gross profit margin was 60.86%, 64.67% and 65.2%, respectively, of which the gross profit margin was almost the same as that of Polaraya and Marumei in recent years.
In terms of products, the main brands of Shangmei Group include Han Shu, Yiyezi, and the mother and baby brand Red Elephant. Its main income also comes from these three brands, and in the past three years, the proportion of the three total revenues has been more than 86%. In the first three quarters of 2021, Han Shu, Yiyezi and Red Baby Elephant accounted for 43.8%, 24.9% and 22.4% of the total revenue, respectively. It can be seen that the three brands of Han Shu, Yiyezi and Red Elephant contributed nearly 90% of the revenue. As the main product of Shangmei Group, Han Shu, the earliest established group, accounted for 43.8% of its revenue in the first three quarters of 2021, at 1.136 billion yuan, supporting half of the revenue.
According to the Frost & Sullivan report, in 2020, Shangmei Group is the only domestic cosmetics company with two skin care brands (Han Shu and Yiyezi) with annual retail sales of more than 2 billion yuan.
Liu Ming, vice president of Shangmei Group, once summarized the company's core competitiveness with several keywords: through the cycle, multi-brand layout across multiple tracks, and self-built Sino-Japanese dual scientific research.
"Multi-brand success is the key to a cosmetics company's true scale." Lu Yixiong insisted on the common development of multiple brands, and then successively launched Brands such as Bio-G, Asnami, Jifang, An Minyou, One Page Newpage, yamada Farming and so on.
Although the launch of the brand is constantly improving, covering skin care, masks, high-end washing, maternal and child care, makeup and other categories. But after the red baby elephant, the Shangmei Group has not produced explosive products.
In terms of R&D investment, in 2019, 2020 and the first three quarters of 2021, the company generated R&D expenditure of 82.9 million yuan, 77.4 million yuan and 71.7 million yuan respectively, accounting for 2.9%, 2.3% and 2.8% of the revenue, compared with the industry average.
It is also worth noting that according to the prospectus, before the IPO, Lu Yixiong, chairman of Shangmei Group, directly held about 40.96% of the shares, and held about 50.31% of the shares indirectly, controlling a total of 91.27% of the company's interests, Youngor Investment held 2.31%, and Ximei Capital, founded by Ge Wenyao, former general manager of Shanghai Jahwa, held 2.12%.
▲Shangmei Group has established school-enterprise cooperation with many colleges and universities
Since 2020, Shangmei Group has fully embraced the rejuvenation of talents and launched a series of effective "talent strategies" to attract many young people to join and become a veritable talent "cornucopia".
In 2021 alone, Shangmei Group has established in-depth cooperative relations with Fudan University, Nanjing University, East China University of Science and Technology, Donghua University and many other top universities in China, and worked together to build an internship teaching base, including many strong ace colleges such as the School of Management of Fudan University and the School of Fashion and Design of Donghua University.
At the same time, Shangmei Group also launched the latest talent project - "Star Plan" management trainee project. The project has now attracted a number of outstanding fresh graduates from well-known universities at home and abroad, such as Tsinghua University, Fudan University, Nanjing University, Zhejiang University, Shanghai Jiao Tong University, London School of Economics and Political Science and King's College London.
High selling expense ratio
Like most domestic products, Shangmei Group chooses to "brush the presence" to open the market. Lu Yixiong is well versed in marketing, once said that "investing in advertising may not be able to make a brand, and it is difficult to make a big brand without advertising", and under his leadership, Han Shu quickly gained popularity in the market through title sponsorship and other forms.
In 2014, Shangmei Group named Jiangsu Satellite TV's blind date program "Non-sincere Do Not Disturb" for 240 million yuan, and later named Tianjin Satellite TV's young people's job search program "None but You" for 55 million yuan. In 2015, Shangmei Group invested another 500 million yuan to renew the contract of "Do Not Disturb", becoming the "first big order in the history of Chinese advertising" that year. Since 2013, it has also been called the 2.0 era by Shangmei Group. Basically, Shangmei Group is to grasp the rhythm of whoever fires who signs who is the spokesperson, and many stars such as Guo Caijie, Lu Han, Xie Tingfeng, Zhao Wei, Yang Ying and so on have served as spokespersons.
The increased marketing has brought great exposure to Shangmei Group and attracted the attention of capital. In 2015, Shangmei Group received an angel round of financing of 400 million yuan, including the personal investment of Ge Wenyao, former general manager of Shanghai Jahwa. According to media reports, this financing was the largest financing in the local cosmetics field at that time. In 2020, Shangmei Group received another 500 million yuan of angel round financing from youngor and other investors.
But the other side of the coin is the rising selling expenses of the Shangmei Group. According to the prospectus, from 2019 to the first three quarters of 2021, the sales and distribution expenses of Shangmei Group reached 1.325 billion yuan, 1.536 billion yuan and 1.119 billion yuan respectively, and the sales expenses in the past three years totaled about 4 billion yuan, and the sales expense ratio reached 46%, 45.42% and 43.1% respectively. In contrast, the sales expenses are higher than those of Pleia in the same period, and the marketing rates of Pleia from 2018 to 2020 are 37.52%, 39.16% and 39.9%, respectively.
In terms of R&D investment, Shangmei Group is also almost the same as most domestic brands. In the first three quarters of 2019-2021, the proportion of R&D of Shangmei Group was 2.9%, 2.3% and 2.8% respectively. In 2020, the research and development of Shanghai Jahwa and Marumei accounted for about 2% and 2.04% of the total revenue. This kind of research and development proportion has become very common in domestic brands.
The continuation of marketing is also reflected in the use of raised funds. The listing of Shangmei Group said that 23.9% of the funds raised from the IPO will be used for brand building; 13.4% will be used to increase the breadth and depth of the sales network; 14.8% will be used to strengthen production and supply chain capabilities; 9.1% will be used to enhance research and development capabilities; and 22.9% will be used for investment or acquisition. The investment in brand building exceeds the investment in research and development.
The success of Shangmei Group is inseparable from marketing. Taking out nearly half of the revenue to do strong marketing is the top priority of Shangmei Group's development strategy. Lu Yixiong once said bluntly: "Advertising, not necessarily able to make a brand, without advertising, it is difficult to make a brand." ”
In the "2021 China Micro-business Market Research White Paper", iResearch listed Han Shu, Yiyezi, Pretty Ten Years old, and O'Shiman as typical cases of the four major micro-business marketing beauty brands. Han Shu micro-business also once set a record of 40 days of sales of more than 100 million, so it has the name of "the first micro-business".
In the past two years, The products of Shangmei Group have also cooperated with the head anchor Li Jiaqi for many times, and one of its King Kong masks has set a record of 8 minutes and 12 seconds of wild sales of 400,000 + boxes; from January to November 2021, Han Shu's GMV in Douyin is about 820 million, entering the top ten GMV of Douyin beauty and so on.
"Insist on walking on two legs", although the offline channels of The United States Group have not relaxed, the proportion is rapidly shrinking. As of September 30, 2021, SG has partnered with Watsons (with more than 4,000 stores) and 557 offline distributors across all provinces, municipalities and autonomous regions in China.
From TV shopping, high-priced spokespersons, advertising variety shows with named TV, and then to popular network variety shows, short video live broadcasts, and KOL planting, Shangmei Group can be said to be "spending money like soil" in marketing, never absent, and truly achieved "all-media marketing".
New and old domestic beauty capital breaks through
According to Euromonitor data, the top five local cosmetics groups in China in 2020 are: Baijiling Group, Galan Group, Shanghai Jahwa, Shangmei Group and Polaria.
Established skincare groups such as Baijiling and Shanghai Jahwa have long since grown, with Shanghai Beauty Group's rival Pleia ringing the bell on the Shanghai Stock Exchange in 2017; the latecomer Yixian E-commerce, which started online, was listed on the New York Stock Exchange in 2019; Winona's parent company Bethanie was successfully listed on the Shenzhen Stock Exchange in March 2021.
Han Shu products have also been punished many times. In 2015, Han Shu was fined one million yuan for advertising problems; in 2016, 3 batches of products such as Han Shu sunscreen were detected, involving the actual detected ingredients that did not match the product approval and logo; in 2019, a certain mask of Han Shu was detected to add preservatives other than the product label identification, etc.
Starting from a micro-business and focusing on the sinking market has also become a resistance for Shangmei Group to enter the high-end, and it is not popular with first- and second-tier young people. In contrast, the advantages of Shangmei Group are not obvious. Looking at the large domestic old beauty companies, there are few left that have not yet been listed.
The outbreak of live streaming in 2021 also stimulates cosmetics brands to enter the stage of comprehensive inner volume. With the steady development of established domestic brands and the continuous rise of emerging domestic brands, the competition in the domestic beauty market has gradually intensified, and the pressure on Shangmei Group is not small.
Industry insiders said that in the long run, the core competitiveness of cosmetics companies is reflected in the research and development level, and the core active ingredients with competitive barriers will enhance the bargaining power of brands, stabilize their market position, and obtain the loyalty of consumers corresponding to brands.
2017-2021 is five years of rapid rise of cutting-edge makeup brands. HFP jumped flat, Perfect Diary quickly and smoothly listed to the peak, Huaxizi's hot whole network accelerated its extension, tens of billions of capital entered, and beauty became one of the most watched industries.
According to incomplete statistics, there will be more than 80 investment and financing incidents in the beauty track in 2021, with a total financing amount of nearly 7 billion yuan. In 2021, 33 beauty-related companies have opened the road to listing.
According to the data of enterprise investigation, a total of 538 investment and financing incidents have occurred in the mainland beauty track in the past 10 years, and the total amount of disclosed financing exceeded 35.6 billion yuan, involving 311 projects.
The primary market is hot, and so is the secondary market. According to the incomplete statistics of Cosmetics Observation, 33 beauty-related companies have opened the road to listing in 2021. Among them, a total of 14 companies have been successfully listed.
The competitiveness of local beauty enterprises has increased year by year, and domestic beauty has ushered in the best era of development. 2022 is destined to be a year of breakthrough for China's new and old domestic beauty capital.
Source: Guanchao New Consumption, Blue Whale Finance, Bohu Finance, China Times, etc