Domestic beauty in the second half, began to roll "research and development"?

Image source @ Visual China

Text | Praying Mantis Observation, author | Tu Lin

From being squeezed by Japanese and Korean brands and European and American brands, to finally finding the "home field advantage" in China, the rise of domestic beauty in the past decade is not fast.

According to the data of the "Head Leopard Research Institute", the scale of China's beauty and personal care market will continue to grow from 2015 to 2021, with an average compound annual growth rate of 9.5%, and the market size is expected to exceed 600 billion yuan in 2024.

But at the same time, the label of "heavy marketing over research and development" has also been attached to those rapidly rising brands. As the traffic advantage gradually faded, the competition between brands had to return to rationality, and research and development began to be placed at a new high level.

Domestic cosmetics engaged in research and development, "rolled up"

Different from the previous overwhelming traffic play, recently, the domestic beauty brand's action in research and development has begun to accelerate.

Huaxizi announced at its headquarters in Hangzhou in early March that it has a five-year plan to build an oriental beauty R&D system: in the next five years, Huaxizi will invest more than 1 billion yuan to deploy in a number of product innovation, basic research and applied basic research fields. Earlier, Lin Qingxuan also opened Shanghai's first modern factory and research center with carbon neutrality as the development concept.

Of course, that's not all. In the view of "Mantis Observation", the research and development of domestic beauty "inner volume" is mainly reflected in the following three levels:

First, the investment of major brands in research and development is gradually increasing.

Hua Xizi and Lin Qingxuan have not yet been listed, and it is difficult to consider their specific R& D investment from the time dimension. However, from the perspective of brands that have been listed, their investment in research and development is basically expanding year by year.

The perfect diary, which has been criticized by "heavy marketing and light research and development", has basically shown a trend of increasing year by year. According to its previous prospectus, from 2018 to 2020, the R&D expenses of Yixian E-commerce increased from 2.641 million yuan to 66.5 million yuan, an increase of 25 times in 3 years. The latest financial report shows that the R&D investment of Yixian E-commerce in 2021 increased by 113.5% year-on-year, exceeding 142 million yuan.

In the past two years, Winona, who has frequently appeared on the hot list of domestic beauty sales, is also the same. According to the latest financial report released by its parent company Bethanie, the amount of R&D investment in 2021 was 120 million yuan, up 78.47% from the same period in 2020. It is both higher than 68.8517 million yuan in 2020 and 58.1102 million yuan in 2019.

It is true that only more than 100 million yuan of R & D investment and L'Oréal and other international brands often 1 billion strength, but compared with their own, the importance of domestic brands to research and development is indeed visible to the naked eye.

Second, more and more brands are beginning to set up R&D laboratories independently/cooperatively.

Hua Xizi and Lin Qingxuan were not the first brands to start making a move in the R&D lab. In March last year, the R&D building of the cutting-edge brand HFP, which spent more than 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 the National Nanopharmaceutical Engineering Research Center of Huazhong University of Science and Technology, and the two sides would jointly build a joint laboratory;

On August 19, Winona's parent company Bethanie also issued an announcement that in order to focus on the characteristic plant industry in Yunnan and continuously study and develop functional products, the company plans to spend 100 million yuan in Kunming to set up subsidiaries to carry out experimental technology research and other related businesses;

On August 20, Ximuyuan's parent company NORD Traceability officially announced that it had reached a strategic cooperation with the National Engineering Research Center for Genetic Engineering Drugs, and the joint laboratory of functional skin care jointly built by the two sides was inaugurated.

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 Nanopharmaceutical Engineering Center has jointly developed and landed a number of raw materials, which have been applied in the products of multiple brands under Yixian E-commerce.

This may become a new trend. In addition to the above brands, according to the incomplete statistics of "Pinguan APP", nearly 10 cutting-edge domestic brands, including Youshiyan, Andchu, Skin Hunter, lifelong research, etc., have independent research and development centers or laboratories that cooperate with third parties.

Third, talents with mature R&D experience in the industry are being "robbed" by brands.

A typical example is Li Huiliang, who joined Hua Xizi as chief scientist at the beginning of this year.

Li Huiliang first participated in the research and development of Liushen Flower Dew Water under Shanghai Jahwa, and was also the main creator and developer of Meijia Net Hand Cream and Herborist Collection products, and later served as the company's chief technology officer and deputy general manager in Bloomage Biotech. It can be said that Li Huiliang's more than 30 years of experience in the field of cosmetics research and development has successfully made him a "fragrant feast" for cosmetics brands.

However, there are not many talents like Li Huiliang who have both professional knowledge and market experience. For more brands, it is also a good choice to "retreat to the second place" to absorb the professional experience of university talents.

In July last year, Bloomage Biotech signed a strategic cooperation agreement with Beijing University of Chemical Technology to jointly build the "Bloomage Biotechnology Co., Ltd. - Beijing University of Chemical Technology Synthetic Biology and Green Biomanufacturing Technology Joint R&D Center".

Not only Bloomage Biology, according to the statistics of "Blue Eye" data, brands such as Baijiling, Polaria, Shanghai Jahwa and Lin Qingxuan have cooperated with many universities to consolidate their research and development strength.

The effect is also remarkable. According to Shanghai Jahwa, Shanghai Jahwa cooperates with domestic and foreign institutions and colleges, with nearly 700 new products per year, 50-60 patents, including 15-20 invention patents.

It is worth mentioning that Hua Xizi is also recruiting in addition to "worshiping general" Li Huiliang. As of the end of February 2022, the R&D staff of Huaxizi's parent company has increased to more than 200, which shows the importance it attaches to research and development.

In short, with the acceleration of the layout of major brands in the field of research and development, the second half of the battle of domestic beauty brands has also officially started.

The road to maturity is long and obstructive

Further, there are multiple factors behind the shift in focus of brands from marketing to research and development.

On the one hand, most brands have realized that dense traffic play is difficult to become a brand moat.

A more significant example is that after Perfect Diary became popular and went public, brands such as Orange Androck and Kolaqi 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 Estée Lauder accounted for 9 seats, and only the new brand Kolaqi was on the list.

That doesn't mean marketing isn't 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 that ride on traffic, consumers' consideration of brands is also constantly advancing. Among them, the research and development capabilities linked to the efficacy and composition of the product are particularly important.

According to CBNdata, 73% of consumers currently pay attention to the ratio/formulation of ingredients, and more than 40% of consumers 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 harvest the good reputation of "conscience domestic products", and then achieve revenue and gross profit growth. Take, for example, the aforementioned Winona.

Benefiting from the increased research and development efforts to enhance the product brand, last year, Winona's parent company Bethanie achieved operating income of 4.022 billion yuan, an increase of 52.57% year-on-year; net profit attributable to the mother of 863 million yuan, an increase of 58.77% year-on-year; gross profit margin of about 76.01%, maintaining stability year-on-year.

On the other hand, domestic cosmetics to move towards "high-end", can not be separated from the improvement of research and development strength.

An obvious fact is that domestic beauty has not yet mastered the "right to speak" in the high-end market.

According to the "2021 China High-end Cosmetics Market Analysis Report" released by the "Guanyan Report", the current high-end skin care brand market is mainly occupied by international brands such as Aquamarine Mystery, Guerlain, and Helena, and there are few domestic brands.

However, the high customer unit price brought by the high-end brand and the national mission of "China can also have high-end beauty" have driven more and more domestic brands to want to impact the high-end.

In addition to Lin Qingxuan, who aims at high-end skin care, and Hua Xizi, who positions high-end makeup, the new brand Kolaqi is also promoting brand upgrading with new products.

On March 31, the public account of Kolaqi announced that Kolaqi base makeup officially opened the 2.0 era of light luxury, launching the white tea platinum series, including retouching primer, soft mist small gold bottle foundation, high satin powder cream, clutch bag powder, shell bag blush and highlighter. The exterior is inspired by couture jewelry, so that the makeup can also be kept refined at all times.

In the field of beauty, the strength of research and development often determines whether the brand can get a piece of the high-end market. Therefore, we can see that those brands that want to impact the high-end market often pay more attention to investment in research and development.

For example, Lin Qingxuan, who launched the "China's high-end skin care brand" strategy in 2018, launched the industrial chain layout as early as 2008, and it has never been "opportunistic" at the research and development level, and the annual scientific research investment has remained above 4%. And the aforementioned R&D revenue is growing Perfect Diary and Bethanie, the proportion of R& D investment is only about 2%.

For example, Mao Geping, who is known as high-end makeup, has also been controversial in his previous research and development level. From 2014 to the first half of 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 he intends to raise 512 million yuan for channel construction and research and development center construction.

But even so, there is still a big gap between domestic beauty brands and international brands.

Up to now, Bloomage Biologics has been established for 12 years, with a total of 304 patents. According to the latest research and development progress of L'Oréal Group, the number of new patents added by L'Oréal Group has reached 517 in 2021, far ahead of domestic brands.

The reason for this gap is mainly due to the fact 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 a patented raw material 4-msk, and L'Oréal started research in 2008 on the patented raw material "Bosein". The brand's layout of the core raw materials is undoubtedly conducive to the breakthrough of the later products in the market.

Moreover, because international brands occupy the high-end market earlier and accumulate "original funds", their investment in research and development will be more confident. According to the "Ping An Securities" report, L'Oréal's R&D expenditure in 2020 has reached nearly 1.2 billion US dollars, and the number of global R&D personnel has reached about 4,000.

The good news is that although domestic brands started late at the research and development level, the catch-up speed is actually not slow.

As of April 2022, Huaxizi, which has been established for four years, has a total of nearly 140 patents, including 38 invention patents and 19 utility model patents, and the number and quality of patents rank among the top domestic makeup. Founded 10 years ago, Winona also has 132 patents. The number of patents in Nature Hall and Kwadi, which was 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 World Intellectual Property Organization, the number of patents of the Estée Lauder Group has increased by 97 so far in 2021. The number of new patents added by Huaxizi's parent company in 2021 also reached 50, and the gap with the former is not too big.

To be sure, whether it is to take off the label of "heavy marketing and light research and development", or to achieve the "high-end dream", the research and development of domestic cosmetics is worth "rolling" up as soon as possible.

Resources:

1. "Perfect Diary/Hana xizi/Winona's "R&D war"" - scientific and technological materials

2. The R&D Gap between Local Cosmetics Companies and Foreign Cosmetics Companies? "------------------------------------