Blue Whale Interview|Guo Zhenyu, Chairman of Bethany: Domestic beauty opens a new era of "technology + skin care".

Image courtesy of Bethany

Blue Whale financial reporter Wang Hanyi

In 2023, China's economy will enter a new cycle, and the remarks that "domestic brands are difficult" will emerge one after another.

Recently, Mushroom Xiaomushroom opened a farewell live broadcast, like Winona, this is a sensitive skin care brand with a pharmaceutical company background. The end of this live broadcast also means the end of the brand's fall in the cosmetics industry.

In fact, many beauty brands, factories and stores have collapsed since the beginning of this year. According to the Tianyancha data survey, the Blue Whale financial reporter found that at least more than 6,500 cosmetics companies established in the past year have been cancelled, and more than 10,000 enterprises or stores whose business scope includes "cosmetics" as the keyword have been cancelled, whether they are facing "bankruptcy" or have "disappeared", it means that the life of these enterprises is less than one year.

On the sensitive skin track, Bethany (300957. SZ), will build "Winona" into a successful and effective skin care head brand, with a considerable market share. The Blue Whale character interviewed and talked to Guo Zhenyu, the head of Bethany, the "handle" of the efficacy subdivision track of the domestic beauty industry, trying to find a more visible direction for domestic beauty and daily chemicals. Based on the development of the industry and the changes in the industry in 2023, observe Bethany's competitiveness through internal and external factors, and explore what it has done right to dominate the subdivided field?

In 2023, the competition in the beauty industry will intensify, and the sensitive skin track has great potential

With the continuous effectiveness of pro-consumption policies and the continuous enhancement of the overall vitality of the market, the consumer market has maintained a stable recovery trend in the first three quarters of 2023. According to the release of the Bureau of Statistics from January to September 2023, the cosmetics company increased by 6.8% year-on-year, and the overall year-on-year growth of the company, which is expected to exceed 510 billion yuan in 2023. Especially in the two important areas of Chinese cosmetics, skin care products and color cosmetics, it is estimated that the market size of China's skin care products and color cosmetics will be about 260 billion yuan and 50 billion yuan respectively in 2023.

Although the consumer market is recovering steadily and residents' spending capacity and confidence need to be further improved, with the further implementation of the strategy of expanding domestic demand and the effective consumption policy, the recovery and expansion of the consumer industry will be further consolidated. Guo Zhenyu believes that the beauty industry maintains a high degree of prosperity, and companies are expected to increase their share through multi-product, multi-category and multi-brand strategies.

This year, there have been many changes in the beauty industry.

"On the whole, the capital operation of the industry has become more frequent, the overall scale of refinancing has increased significantly, and with the growing consumer demand for cosmetics, more and more companies have entered the cosmetics market, which makes the market competition more intense. Guo Zhenyu said, "In addition, consumer demand and industry competition are spilling over, and the continuous development of cross-border e-commerce has made domestic beauty brands choose to go overseas and expand overseas markets." ”

At the same time, with the continuous development of Internet technology, digital marketing has increasingly become an important marketing method for beauty companies. In addition, with the continuous improvement of environmental awareness, more and more enterprises have begun to pay attention to the environmental protection of products to meet market demand.

As far as consumers are concerned, Guo Zhenyu said that the needs of consumers have changed, and they are more rational in their consumption and pursue high-quality products. Consumers are paying more attention to the efficacy, ingredients, environmental friendliness, and safety of cosmetics. "This change is a structural change, the high prosperity of domestic beauty products, the intensification of competition on the supply side of the industry, and the diversity of consumer demand have led to structural changes in the overall industry, but the overall prosperity has been maintained. ”

Guo Zhenyu told the Blue Whale financial reporter, "Beauty companies should have in-depth insight into consumer needs, continue to carry out product research and development and technological innovation, and continue to provide consumers with professional cosmetics that meet the needs of different skin characteristics." ”

According to the "Expert Consensus on the Diagnosis and Treatment of Sensitive Skin in China", the incidence of sensitive skin among Asian women is between 40% and 55.98%, of which 36.1% are Chinese women. Guo Zhenyu said that this is a huge consumer group, providing a broad market space for the cosmetics industry, and sensitive skin problems are becoming more and more common, resulting in a rapid growth in consumer demand for products that can solve sensitive skin problems. "However, as far as the entire sensitive skin market is concerned, it is still in the early stage of development, the market penetration rate is low, and with the increasing attention of consumers to sensitive skin problems, the market potential of sensitive skin products is huge. Guo Zhenyu is optimistic about the track of sensitive skin products.

Monopolizing the leader in the subdivision field, what does Bethany "fight"

At the beginning of its establishment, Guo Zhenyu keenly captured the continuous increase in consumers' attention to product ingredients and formulas in the Chinese market. With the change of consumers' skin care concepts, the penetration rate of the sensitive skin market continues to rise, and the market size of dermatology-grade skin care products has also grown rapidly.

Therefore, Bethany has been actively engaged in basic research on functional skin care products for a long time. Guo Zhenyu said, "In the future, Bethany will also actively follow Healthy China 2030, based on Yunnan's rich characteristic plant resources, focus on product research and development and technological innovation, focus on making effective skin care products more refined and deeper, and break through the growth cycle with all-round innovation." ”

The skin is the largest organ of the human body, and it is necessary to carry out skin physiology and pathology research through a large number of literature searches. Guo Zhenyu introduced: "In Yunnan, we have the Yunnan Characteristic Plant Extraction Laboratory, which is a provincial-level laboratory platform given to Bethany by the Yunnan Provincial Government and the Department of Science and Technology, and is committed to driving the development of Yunnan's local specialty plant industry, including the Skin Health Research Institute, the Specialty Plant Screening Platform and the CXO R&D Platform for Functional Foods. ”

Regarding marketing, Guo Zhenyu put forward the concept of "four or two thousand pounds". According to the third quarterly report, Bethany's sales expenses from Q1 to Q3 in 2023 will be 1.604 billion yuan. Nowadays, under the current situation that traffic is becoming more and more expensive, Guo Zhenyu put forward a more "cost-effective" marketing concept - "Specifically, first of all, the C-end creates demand, empathy and cognition of the enterprise, that is, spiritual induction, and then generates transactions, and then we will have new logistics, and the experience, convenience and interconnection of its products will be the ultimate." Of course, these are all based on our strong R&D foundation, and our product strength, academic strength, and operational strength are our pillars. ”

Bethany has been involved in the e-commerce field since 2012, when it set up an e-commerce business department, laid out on major e-commerce platforms, seized the online traffic dividend, and increased the contribution of online sales revenue to total revenue. According to the prospectus and financial report, in 2017, Bethany's online revenue accounted for 62% of total revenue, and by 2022, the proportion of online revenue has been as high as 80.59%.

For Bethany, e-commerce means being able to reach consumers more directly, better grasp consumer needs and market trends, and at the same time be able to reduce marketing costs and improve sales efficiency. Through online channels, Bethany is not only able to sell its products directly to consumers, but also to promote and market its brand through social media and other platforms to further expand its brand awareness and influence.

At present, Bethany has a layout on major e-commerce platforms, among which the Tmall platform has always been its key online channel. In addition, Bethany has also opened flagship stores or cooperative stores on platforms such as JD.com, Vipshop, and Douyin. At the same time, Bethany also independently operates the WeChat mini-program "Winona Member Center" to provide consumers with a more convenient shopping experience and after-sales service.

However, Guo Zhenyu emphasized: "On the whole, the company adheres to the omni-channel sales model based on offline channels and dominated by online channels, with sales channels covering online and offline, including self-operated sales, distribution, and consignment sales, covering multiple channels in all aspects, effectively achieving channel diversification." ”

Obviously, Bethany's most eye-catching item is still Winona, which focuses on sensitive skin, and some opinions equate Winona with Bethany, is the recent acquisition also Bethany's attempt to get rid of Winona's single dependence?

In this regard, Guo Zhenyu said that Bethany not only strengthened the professional line of high-end functional skin care products represented by Winona, but also expanded the mass market brand through investment and mergers and acquisitions to broaden the brand portfolio, further promote the ecosystem of skin health, and meet the individual needs of more consumers.

R&D strength is the key to enhancing the competitiveness of enterprises

Under the trend of increasingly mature consumers, the gradual weakening of traffic dividends and the strengthening of industry supervision, the operation of domestic beauty enterprises will face greater challenges, the operation of enterprises will tend to be differentiated, and the industry pattern will also be reshuffled. As the capacity of China's functional skin care products market continues to expand, involution intensifies, and competition escalates, the overall growth rate of the market has begun to slow down.

When the enthusiasm of the market gradually fades, only beauty companies with deep R&D strength, solid brand influence and refined marketing and promotion capabilities can create excellent product power in the fierce market competition. In this regard, Guo Zhenyu emphasized: "Among them, R&D strength is the key to enhancing the competitiveness of enterprises, which can provide strong support for enterprises in market competition. ”

Under the fierce competition in the skincare market this year, how does Bethany view the cornerstone of its competitiveness and development space? Guo Zhenyu said: "Behind the brand building is Bethany's continuous strengthening of R&D investment. ”

"Bethany adheres to the concept of making medicine to make effective skin care products, and has a 'dimensionality reduction' competitiveness for skin care products and cosmetics. Guo Zhenyu said.

"We insist on focusing on functional skin care products and insisting on technological innovation, and currently have a strong R&D team and a complete R&D system, and have successively established R&D centers in Kunming City, Yunnan Province, Shanghai, and specially invested in the establishment of Bethany Research Institute. According to the data of the third quarter report of 2023 recently disclosed by Bethany, the company's R&D expenses from Q1 to Q3 of 2023 will reach 182 million yuan, an increase of 43.9% year-on-year.

How can technology become a new driving force for the cosmetics industry to enter the next stage? How will Bethany achieve market breakthroughs with the help of new technologies? Guo Zhenyu said that in this year, Bethany has been constantly looking for and exploring new development opportunities.

"Consumer needs are always diverse, and the company has been expanding its product line to meet the needs of more consumers. Therefore, in the past year, Bethany has launched a number of professional care products for different skin problems and needs, including products for different skin types, products for different needs such as anti-aging, whitening, and moisturizing.

Guo Zhenyu said: "Bethany has always regarded scientific research and innovation as an important driving force for the development of the company, which is a key factor to maintain the leading position of the brand and continue to meet the needs of consumers. ”

What changes will there be in China's beauty and daily chemical field after 2023? Guo Zhenyu's attitude is to "make the road narrow and wide", that is, the positioning can only be 1 meter wide, but it must be 10,000 meters deep. In addition, at the same time, we continue to improve the group's brand matrix to accurately cover more diverse consumer groups.

Guo Zhenyu said that as the competition in China's cosmetics market intensifies, Bethany will enter overseas markets and reach other markets in Asia to seek new growth points. Enhance their competitiveness through cooperation or mergers and acquisitions, and face the rapid changes and competitive pressure of the market.

"In the future, China's beauty and daily chemical industry will continue to grow and develop, but it will also face some challenges and changes. Businesses need to strengthen their own innovation and development, while also paying attention to market changes and changes in consumer demand to maintain a competitive advantage. Guo Zhenyu said.