01. The revenue was 2.3 billion more
The story of "grassroots counterattack" has finally been staged in the beauty circle.
On the afternoon of April 18, Proya disclosed its 2023 results: revenue increased by 39.45% year-on-year to 8.905 billion yuan, and net profit attributable to the parent company increased by 46.06% year-on-year to 1.194 billion yuan. As soon as the dazzling data landed, China's beauty boss officially changed hands.
This is after the market value and profit surpassed, Proya threw out the "big brother" Shanghai Jahwa in terms of revenue, and the revenue was 2.307 billion yuan more than that of Shanghai Jahwa, which was 1.34 times that of the latter.
According to the data released by Shanghai Jahwa earlier: in 2023, its revenue will decrease by 7.16% year-on-year to 6.598 billion yuan, and the net profit attributable to the parent company will increase by 5.93% year-on-year to 500 million yuan.
The counterattack itself is not unexpected. More than half a year ago, the two companies successively disclosed semi-annual reports, Shanghai Jahwa was only 2.47 million yuan more than Proya, and the outside world had long expected this. However, this time, Proya not only surpassed Shanghai Jahwa for the first time in revenue, but also widened the gap to 2.3 billion, which was unexpected by the industry. On April 19, Proya opened up more than 4%, and finally closed at 103.6 yuan, up 0.14%, with a total market value of 41.104 billion yuan.
Since its launch in 2017, Proya has spent most of her time with a "follower" script. From 2017 to 2021, its revenue has been significantly behind Shanghai Jahwa, with gaps of 4.705 billion yuan, 4.777 billion yuan, 4.473 billion yuan, 3.28 billion yuan and 3.013 billion yuan respectively. At the beginning of 2022, Proya stepped on the accelerator, first narrowing the gap to 721 million yuan, and then making a perfect turn, rewriting the annual revenue from "721 million yuan behind" to "2.307 billion yuan ahead".
Judging from the dismantling of the financial report, there are three key words in the narrative of Proya upward and Shanghai Jahwa downward: Double 11, channels and categories.
Double 11 is a key battle for beauty brands to rush for annual performance and disguised advertising. Some practitioners once told "City Boundary" that during the Double 11 promotion, brands will not only spend money to increase orders, but some even spend money to reduce the exposure of competing products. "The No. 1 battle report on the whole network is worth tens of millions, which is equivalent to advertising. ”
At the moment, Proya is the biggest winner of Double 11. In 2023, it will win the top spot on the Tmall beauty list. As a result, Proya recorded a revenue of 3.656 billion yuan in the fourth quarter of 2023, accounting for 41.06% of the annual revenue, pushing up the performance in one fell swoop.
In contrast, Shanghai Jahwa's Double 11 performance was mediocre, with revenue in the fourth quarter of 2023 only 1.506 billion yuan, accounting for 22.83% of the annual revenue, 2.15 billion yuan less than Proya's data in the same period. This is where almost all of the year's performance gap between the two comes from.
Further deduction, the difference in the performance of Proya and Shanghai Jahwa during the promotion period is inseparable from the channel.
By channel, in 2023, Proya's revenue from online channels will be 8.274 billion yuan, accounting for 93.07%. Proya said in its financial report that the increase in the company's revenue was mainly due to the growth of online channel revenue.
Shanghai Jahwa, on the other hand, blamed the channel for the decline in revenue: "Although Shanghai Jahwa has continued to adjust its channel structure for several years, the current offline proportion is still high" "During the reporting period, the company's offline business was under pressure, mainly reflected in the supermarket channel affected by the industry's store closure, and the department store channel took the initiative to reduce social inventory."
"There are many brands in Shanghai Jahwa, and in addition to counters, cosmetics franchise stores and other offline channels, there are also mother and child stores, hypermarkets, and supermarket channels. There are many offline channels and online channels have to be paid attention to, and Shanghai Jahwa will inevitably pay more sales expenses. Some analysts once described the difficulties of Shanghai Jahwa's channels.
In addition, in terms of categories, Proya focuses on skin care products with high gross margins, and Shanghai Jahwa has many categories, with gross profit margins of only 58.44% and 52.24% respectively for personal care and maternal and child categories.
In 2023, the difference between the two in terms of net profit attributable to the parent company will be 694 million yuan, Proya will be 2.39 times that of Shanghai Jahwa, and the gross profit margin will be 70.0% and 58.94% of Shanghai Jahwa.
02. The seeds have already been planted
As the first local beauty and daily chemical company to go public, Shanghai Jahwa had high hopes. An investor recalled, "More than 10 years ago, Shanghai Jahwa was the top match in terms of industry status, revenue growth and management team."
In contrast, Proya, who was "born from the grassroots", did not carry too many expectations in the early days, but because of the successive strokes, it gradually became a "sweet and sweet" in the consumption and capital markets.
On January 16, 2020, Ge Wenyao, who was the chairman of Shanghai Jahwa and was known as the "godfather of Jahwa", posted a Weibo: "Today's market value of Proya's stock is 20.66 billion, surpassing that of Shanghai Jahwa. On the same day, Proya rose 6.44%, with a total market value of 21.3 billion yuan, exceeding the market value of Shanghai Jahwa of 20.6 billion yuan. As of the close of trading on April 19, 2024, Proya has 29.1 billion yuan more than Shanghai Jahwa, and the former is 3.4 times the market value of the latter.
But the seeds of "drifting apart" between the two were planted earlier.
Now browsing the official website of Shanghai Jahwa, its "regular report" disclosure column can only be traced back to the 2014 financial report at the earliest. This century-old enterprise was listed on the Shanghai Stock Exchange as early as 2001 and is the first listed company in the domestic cosmetics industry. In 2014, external professional managers became the owners of Shanghai Jahwa.
The past of Ge Wenyao's struggle with Ping An of China is still fresh in the memory of many people in the industry and shareholders. In 2011, the state-owned enterprise system constrained the development of Shanghai Jahwa, and Ge Wenyao hoped to introduce strategic investors to break through the constraints of the mechanism. Ping An, which has strong capital strength, has become the first choice. After a year of "honeymoon period", the two sides began to have frequent conflicts in equity incentives, real estate disposal, brand investment, etc., and finally ended with Ge Wenyao being recalled.
During Ge Wenyao's tenure, Shanghai Jahwa did not establish a decision-making mechanism and an organizational inheritance mechanism. As a result, the three professional managers appointed by Ping An of China are trying to redefine Shanghai Jahwa with their existing knowledge. Bai Yunhu, a daily cosmetics expert, once sighed to the "city boundary".
In terms of strategic trade-offs, Xie Wenjian, who has a medical background in Johnson & Johnson, suspended the launch of the two brands of Yuze and Shuangmei into the market during his tenure because the R&D cycle of the two was too long; Zhang Dongfang from Vinda International vigorously increased the maternal and infant market during his tenure; and Pan Qiusheng, who has a work experience at L'Oreal, has regained attention to Yuze and Shuangmei during his tenure.
The helmsmen of Shanghai Jahwa have spent nearly 10 years correcting each other. But outside of Shanghai Jahwa, the beauty and daily cosmetics rivers and lakes have long changed the world.
As a representative of taking advantage of the momentum, Proya has climbed all the way up the ladder, relying on three "sharp weapons": channels, large single products and marketing.
As early as 2012, Proya set up a company dedicated to online channels. After the successful listing in 2017, the company began to vigorously deploy the field of e-commerce, that year, the proportion of online business was 36.08%, and three years later in 2020, the proportion reached 70.01%, and then it continued to strengthen, firmly grasping the e-commerce dividend period. In order to open up the entire marketing chain, Proya has also invested in many MCN institutions.
Compared with offline, online channels are easier to create explosive products. In the category of "large single products", Proya specially chose the anti-aging and essence track, which not only fits the trend of the ingredient party and the efficacy party, but also continuously extends the life cycle of the product through iteration and pushes up the unit price of customers.
In the following 2021, Proya successfully bundled a phenomenal marketing concept - morning C and evening A. Through promotion, the wind of "morning C and evening A" blew through the major e-commerce platforms, not only blowing Proya into various sales lists, but also making the company's sales continue to rise.
Looking at the rise of Proya and other domestic beauty brands, some rules can be summed up. Some industry insiders said that in view of the early days of the birth of new media, new platforms and new concepts, there are few content producers and little competition on the platform, and the brands that enter the game first can precipitate the rapidly increasing customer traffic at lower channel prices.
But at the same time, Shanghai Jahwa, which was busy with internal correction, had no time to take care of it, and failed to make "money other than cognition".
03. There is still a long way to go from L'Oreal
"In 2023, we benchmarked against our industry-leading competitors, reflected on the main reasons for Jahwa's lagging performance in the past period, and made major adjustments in several aspects such as corporate strategy, organizational structure, marketing innovation, talent echelon and sustainable development. At the beginning of the financial report, Pan Qiusheng, the current chairman of Shanghai Jahwa, attached a long speech.
Pan Qiusheng, 50, became the third professional manager of Shanghai Jahwa in April 2020. Ping An, the majority shareholder, is pleased with his successor. In the relevant introduction, there are many praises such as "familiar with the cosmetics industry", "once held a senior management position in L'Oreal Group", "good at channel strategic transformation" and so on.
In the beauty circle, L'Oréal France is like a "reference". Its acquisition history, profitability, and R&D level are still being repeatedly speculated by peers. Proya's senior management also did not hesitate to open the microphone in public, saying that it would continue to be like L'Oreal, "pushing the strategy of expanding single products and building a brand matrix".
But I have to admit that Shanghai Jahwa, with the help of Pan Qiusheng, an "old minister of L'Oreal", once became more and more like a traditional daily chemical company.
In the first half of 2023, the revenue proportion of Shanghai Jahwa's personal care and home cleaning category (mainly Liushen and Jia'an) is still at a historical high of 47.59%, much higher than its 24.06% revenue proportion of skin care products. It is true that daily chemical products can protect the basic plate. However, the "six gods" sold too much, which is not conducive to the overall profitability of Shanghai Jahwa.
The good sign is that in the 2023 annual report, Shanghai Jahwa has made some obvious changes, especially in categories: in 2023, in addition to skin care products, Shanghai Jahwa's revenue proportion in personal care and home cleaning, mother and child, and cooperative brands has decreased, with a decrease of 4.88%, 13.35% and 37.00% respectively.
Behind the adjustment, it points to Shanghai Jahwa's intention of "wanting to be more like a beauty group". "In the next few years, we will focus on categories with high gross profit, high growth rate and high brand premium", Pan Qiusheng said in the financial report, which means that the company will take the initiative to abandon the "three low" (low gross profit, low profit, low brand premium) business and gradually increase the proportion of beauty business.
In addition, Pan Qiusheng also revealed that in order to better operate and digitize, Shanghai Jahwa has poached many people from Procter & Gamble, L'Oreal and other companies.
Today's Shanghai Jahwa is on the road of Proya. Back then, in order to match the characteristics of online channels with marketing, Proya also took the lead in "poaching people" and hired Ye Wei, a marketing veteran who had worked in Procter & Gamble, as the chief marketing officer.
And Proya, which has won the title of domestic beauty leader, also has new topics and targets.
On April 19, L'Oreal disclosed its financial report for the first quarter of 2024: sales increased by 9.4% year-on-year to 11.24 billion euros, or about 86.6 billion yuan. To put it simply, L'Oreal's revenue in a quarter is nearly 10 times that of Proya's annual revenue. The gap is obvious.
"Globally, the revenue ceiling for a single brand is around $1 billion. Some people in the industry admitted to the "city boundary" that Proya's next challenge lies in the development of multiple brands, "the test is whether the organizational ability can be replicated and whether the incentive mechanism is effective".
At present, Proya has 8 brands, covering skin care, makeup, washing and care and other fields, but it is still the main brand Proya that carries the banner of revenue. In 2023, its revenue will account for 80.73%. In contrast, L'Oréal has more than 30 brands operating in more than 100 countries and regions.
Behind the brand matrix and business scope, the deeper gap lies in the brand accumulation and R&D accumulation.
"There is a fundamental difference between the playing style of foreign brands and local brands. For example, Estee Lauder and L'Oreal will establish a tone for consumers at the beginning, and continue to spread the history and reputation of the brand, which is a way to tell the story. Domestic products take the idea of explosive models, first launch a particularly cost-effective product, continue to accumulate precipitation, and then go back to tell the brand story. A practitioner once told the "city boundary".
On the R&D side, unlike L'Oreal, which has Bosonin, the "king of raw materials", Proya has caught the trend of "morning C and evening A", and more often wins with "high concentration" and "cost-effective". Although its large single product sales data is eye-catching, it has only been on the market for three or four years, and it is in the stage of being tested by the market and time.
Whether it is to tell the brand story, or to continue to make efforts on the R&D side to consolidate the strength of raw materials and formulas, Proya has a long way to go.
Through the 2023 financial report, the outside world can see the fact that "Proya has comprehensively surpassed Shanghai Jahwa". In addition to the financial report, Shanghai Jahwa is catching up with Proya again, and the story of Proya's approach to L'Oreal has just begun.
Author | Li Dan
Edit | Chen Fang
Operations | One Sail