Mao Geping's super worries

DT Business Watch

2024-05-13 13:49Posted on the official account of Shanghai DT Finance

This original article originates from the WeChat public account: DT Business Observation, ID: DTcaijing; Author: Lin Meishan Editor: Zhang Chenyang; Data: Lin Meishan Design: Qi Tonghui; Operator: Su Hongrui Producer: Li Jingyu.

Many people know Mao Geping, and they all started with the founder's "head swapping".

In 1994, Mao Geping worked as a makeup artist for the TV series "Wu Zetian", creating the makeup of a 16-year-old girl for Liu Xiaoqing, who was in his 40s, leaving the legend of "magic makeup artist".

(Photo: Stills from Liu Xiaoqing's version of "Wu Zetian")

In 2000, Mao Geping founded the eponymous brand MAOGEPING, and three years later set up the first counter in Shanghai Ganghui Hang Lung Plaza, becoming the only domestic beauty brand in high-end shopping malls at that time.

At that time, L'Oreal Paris, Maybelline, and Lancôme had also entered China and were all the rage, while domestic beauty brands were in the limelight with Dabao and Little Nurse.

As a high-end positioning of domestic beauty, Mao Geping can be regarded as "small and beautiful", but it is difficult to reach mass consumers.

However, Little Nurse was acquired by L'Oreal in 2003, and Dabao was acquired by Johnson & Johnson in 2008, and then gradually "lost their voice". Today, 24 years later, Mao Geping, who was inconspicuous at the time, bucked the trend and successfully squeezed into the TOP10 domestic cosmetics companies.

According to the prospectus, Mao Geping's revenue in 2023 will be 2.886 billion yuan, ranking ninth among cosmetics companies in the country, with a year-on-year growth rate of 57.8%, leading other companies in the top ten.

In the popular consumption environment, how did Mao Geping achieve a revenue growth of more than 1 billion in a year? Under the glamour, what are the hidden worries of Mao Geping?

"DT Business Observer" uses the prospectus data to dismantle the positive and dark sides of Mao Geping.

Makeup holds up half the sky, and skin care also revolves around "makeup"

Where does Mao Geping's confidence come from, the answer may be two words: makeup.

As the founder of the brand, Mao Geping's makeup skills are known as "Asian evil arts", he does not rely on painting his face into a blank sheet of paper and then retouching it to "explode change", but to fit everyone's bone physiognomy to play shadows, to achieve the effect of "changing a head".

Under the cries of netizens vying to "send their heads to Mr. Mao Geping", the makeup business has become Mao Geping's basic plate.

It is worth illustrating the background that in the structure of the high-end beauty market, skin care products account for the majority and makeup accounts for a small share. The "2024 Beauty Industry Research Report" released by the Commercial Enterprise Research Institute gives an approximate proportion: high-end skin care accounts for more than 6 percent, high-end makeup accounts for more than 2 percent, and high-end perfume accounts for about 1 percent, and among high-end makeup brands, international brands are the mainstay.

This is also reflected in the concept of consumption, when buying beauty products, the post-95 @Xiaomei is more willing to spend more money on creams, essences and other functional products, and makeup products such as eyeshadow tend to be affordable products.

The unique point of Mao Geping's revenue is that he relies on "expensive domestic makeup" to support half the sky:

In 2023, the sales revenue of Mao Geping's makeup products will be 1.622 billion yuan, accounting for 56.2% of the company's total revenue.

Among them, the best-selling makeup products are not cheap, and most of them are the foundation makeup and contouring products that Mao Geping is good at: caviar cushion 430 yuan/14g, makeup primer "skin coat" + foundation liquid 740 yuan/30ml, powder repair plate (4-color highlight + 3-color shadow) 880 yuan/18g......

The position of makeup is strong, and Mao Geping's skin care products also have the characteristics of serving makeup.

In 2023, the revenue of the large single product "luxury caviar mask" will exceed 600 million yuan.

The introduction of luxury caviar mask on the official website is a "beauty partner", and there are also many tap water users on Xiaohongshu who comment on the makeup effect, mentioning that "it really doesn't get stuck after use" and "it is more comfortable to put on makeup and base makeup the next day".

Mao Geping's skincare products provide preparation for makeup, and cosmetics themselves need skincare products to "activate".

Some consumers said that when they only used Mao Geping powder cream, "the card powder was mottled and the powder felt heavy was a disaster", and after using the companion essence to activate the powder cream, they found out how divine Mao Geping was.

However, the strategy of using beauty and skincare together has also attracted some complaints:

"A fan is so troublesome to get on the face, isn't it just that the powder is not good? Good fans are directly on the face" "I still need to be served by the hand not to buy things, too tired".

However, Mao Geping's identity as a senior makeup artist has provided the best endorsement for the product, and there are still consumers who pay for this.

Nearly 6% of the revenue of offline channels provides a "makeup trial experience"

Cosmetics are available, but consumers inevitably have concerns - "Am I missing cosmetics?" What I'm missing is Mr. Mao's magical hands! ”

Mao Geping's offline makeup try-on service has become a highlight that distinguishes it from other domestic beauty brands.

Unlike the new consumer brands that have emerged in the Internet era, offline channels have always been Mao Geping's strength. Before the perfect diaries appeared, Mao Geping developed his own offline network at shopping mall counters across the country.

By the end of 2023, Mao Geping already has 357 offline self-operated counters, ranking second among all beauty brands, and is equipped with more than 2,500 beauty consultants.

Different from other brands, Mao Geping has opened up the two major businesses of product sales and makeup art training through offline counters, and Mao Geping has nine makeup art institutions across the country, among which some students have entered the counters after graduation.

The students used Mao Geping's products to learn Mao Geping's makeup techniques, and after graduation, they came to the brand counter and still used the same products and tools to provide consumers with makeup services, focusing on a professional counterpart.

For consumers, even if they can't let Mao Geping put on makeup in person, they can also experience the "Mao Geping" makeup trial service at the counter.

"DT Business Observer" learned that at present, members who register in the Mao Geping Mini Program can get a free makeup or care experience, and every 800 yuan of offline consumption will be given a free experience, and more experiences can be obtained as members upgrade.

Generous benefits have invisibly enhanced the stickiness of consumers.

In the past two years, despite the rapid development of Mao Geping's online channels, offline channels are still the majority, accounting for 57.6% of revenue in 2023. According to the prospectus, Mao Geping has accumulated more than 3 million registered members in offline channels, which means that each offline counter has nearly 10,000 members on average.

In general, whether it is the concept of incorporating makeup services into skin care products, or providing makeup trial services in offline stores, Mao Geping's uniqueness revolves around a core selling point - to create an exclusive and ultimate makeup experience for consumers.

And this core selling point is deeply bound to makeup artist Mao Geping.

Consumers came out of Mao Geping's makeup education video, expecting to have the same "head changing" experience, so they turned around and walked into Mao Geping's brand store.

Makeup artist Mao Geping has become a signature feature of the brand, on the other hand, this has also made the brand fall into a delicate situation of "inseparable from Mao Geping's aura" to a certain extent.

Mao Geping, inseparable from "MAOGEPING"

What many people don't know is that Mao Geping has two brands, namely MAOGEPING, which focuses on high-end positioning, and "Zhiai Life" for the second- and third-tier markets.

Although "Love for Life" was launched in 2008, its popularity and actual revenue were very small, and it was only sold in the sinking market through dealer channels.

From the perspective of product revenue structure, the main brand MAOGEPING accounts for 99%, and this proportion is still increasing year by year.

Mao Geping's name has become a double-edged sword.

On the one hand, it brings a halo to the brand, which quickly and effectively enhances the brand's popularity and recognition; On the other hand, this influence has also become a limitation, making it difficult for the company to take charge of new brands on its own.

At present, domestic cosmetics companies are improving their brand matrix, using differentiated pricing and diversified categories to cover more people and gain more growth.

For example, in addition to the main brand, Proya has incubated the beauty brand Caitang and the scalp health brand Off&Relax. Although in 2023, Proya's main brand will still occupy a dominant position, accounting for about 8% of revenue, but the revenue proportion of other brands such as Caitang is steadily increasing.

Similarly, Bloomage Biotech owns brands such as Quadi, Runbaiyan, Medrepair, and BM Muscle Active. Bloomage Biotech's 2023 annual report no longer discloses the revenue of specific brands, but in the 2023 semi-annual report, the revenues of Runbaiyan, Quadi, BM Muscle Active, and Mirepair are 630 million, 540 million, 340 million and 220 million yuan respectively, all of which are more balanced than Mao Geping's revenue.

Mao Geping holds MAOGEPING in his hand and relies on a big brand to do the company to IPO, but he can't avoid the growth concerns brought by a single brand.

After all, the "lifelong love" that tore off the "Mao Geping" logo has not grown up so far. If the next brand is incubated, whether consumers will pay for it has become a challenge for Mao Geping.

“MAOGEPING”也离不开毛戈平

Looking back at the development process of Mao Geping and the MAOGEPING brand, we found that Mao Geping has been out of the circle on social media several times, almost all of which revolve around the founder's magical "head change".

In 2016, someone uploaded a makeup video of Mao Geping 20 years ago on station B, and the video received more than 2 million views, and the comment area said, "Mao Geping Niu feels like he hasn't painted much in his makeup, no heavy makeup, but it is really like a change of head, and what is even more terrifying is that this is still the technology of 20 years ago."

The next critical juncture is 2019. This time, Mao Geping is not a legend in the old CD, he personally went out of the mountain to carry out a "head-changing" make-up for the Internet celebrity blogger @ Late Night Mr. Xu, which set off a heat on the whole network.

Since then, Mao Geping has been active in social media, entering Station B and Xiaohongshu in 2020, and Douyin in 2021.

However, with the gradual enlargement of "Mao Geping's" personal IP, Mao Geping was also questioned that "the product itself does not work entirely on makeup technology".

In 2023, Mao Geping's gross profit margin will reach 84.8%, which is higher than that of major cosmetics companies in China such as Yatsen E-commerce, Shangmei Co., Ltd., and Proya.

In 2021, the Issuance Examination Committee of the China Securities Regulatory Commission inquired about "the reasons and reasonableness of the company's gross profit margin higher than that of first-tier brands when its R&D capabilities and brand awareness are not as good as those of first-tier brands".

Mao Geping's explanation for this is-

Compared with international brands, Mao Geping's gross profit margin is comparable to that of L'Oreal and Shiseido's high-end brands, but the pricing of these companies' popular brands is lower, which lowers the company's overall gross profit margin;

Compared with domestic makeup brands, such as Proya's "Proya", Bethany's "Winona", and Marubeni's "Marubeni", these brands are positioned as popular for the public, and there are differences between Maogeping's high-end positioning, so Mao Geping's gross profit margin is generally higher than that of domestic peers.

In Mao Geping's elaboration, the high-end positioning of the brand seems to provide logical support for high gross profit. However, when we continue to explore, in addition to the high-end positioning of the price, whether the scientific and technological content of Mao Geping's products has also reached the corresponding level, the answer may be criticized.

In 2023, Mao Geping's R&D investment will be 24 million yuan, accounting for 0.83% of operating income. In the same period, Bethany's R&D expense ratio was 6.1%, Yatsen's e-commerce was 3.3%, and Shangmei's shares were 3.0%, all of which were much higher than Mao Geping.

From the perspective of the product development team, by the end of 2023, Mao Geping will have a total of 56 R&D personnel, accounting for 1.6% of employees. In the same period, there were 498 R&D personnel in Bethany, accounting for 12.9%; Proya has 322 R&D personnel, accounting for 10.8%.

In addition, Mao Geping currently adopts the mode of entrusting ODM/OEM suppliers to produce, that is, finding factories to produce OEM and then OEM, the obvious advantage of this model is low cost, which may be the main reason for MAOGEPING's high gross profit.

It can be said that Mao Geping's "high-end positioning" is the first to achieve the high-end in price and experience services under the halo effect of the founder, while the product itself has low R&D costs and relies on OEM.

On the consumer side, there is no shortage of such doubts: "It is not Mao Geping's products that are easy to use, but Mao Geping's hands that can make up."

Write at the end

Mao Geping is not the first beauty brand to be named after a makeup artist.

Looking at the world, beauty brands such as Shu Uemura, Bobbi Brown, and Charlotte Tilbury are all named after their founders and makeup artists, and these brands have finally come out of the cycle of "inseparable from the founder's light".

What these brands have in common is that, beyond the background of the founder's makeup artist, the products themselves are remarkable, even breaking the tradition of the time and opening up new trends.

In the 60s, when the public perception that cleansing oil could clog the skin, Shu Uemura pioneered the introduction of a two-in-one cleansing oil that removers and cleanses, which became the brand's signature product.

In the early 90s, Bobbi Brown and pharmacists developed 10 lipsticks in natural colors in the slogan market dominated by bright colors, which quickly gained consumer acceptance; After that, he also broke the tradition of using pink tones as the mainstream of foundation, and used yellow as the base to create a natural color foundation.

Looking at Mao Geping again, consumers' recognition of the product never seems to exceed the degree of attention to the founder. This means that people may choose Mao Geping out of trust in the founder rather than the product itself, and once it is separated from Mao Geping's own influence, the brand value may also shrink.

Mao Geping's long-term development cannot only rely on the founder's magic, but also make the product full of magic.

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