Wen | AI Finance and Economics Agency Chen Chang
Editor| Yang Jie
Mao Geping, known as the "head changing master", is expected to bring the "first share of domestic makeup" in China.
On October 21, according to the information on the website of the China Securities Regulatory Commission, Mao Geping Cosmetics Co., Ltd. (hereinafter referred to as "Mao Geping Shares") successfully passed the issuance review committee and will be listed on the main board of the Shanghai Stock Exchange.
In the public perception, Mao Geping himself is more famous than the cosmetics company he founded. Since he began working as a makeup artist at the age of 20, he has designed makeup for more than 40 films, television and more than 20 stage plays, the most famous of which is the 1994 TV series "Wu Zetian". Wu Zetian, played by Liu Xiaoqing, has an age span from 15 years old to 80 years old, and the makeup effects of actors of different ages are quite appropriate, especially the 15-year-old girl performed by Liu Xiaoqing makes many audiences "stunned", and makeup artist Mao Geping also became famous in one battle, and was called "head changing master" and "magic makeup artist" by netizens, and praised her "makeup is comparable to plastic surgery".
For more young consumers, they know Mao Geping, through Mao Geping and the Forbidden City cooperation launched makeup series, once known as "the light of domestic products".
In 2000, Mao Geping founded his own cosmetics company. But unlike the imagination of the outside world, the company founded by the "makeup master" is not mainly to "teach people to make makeup", but mainly to sell skin care makeup products to make a profit, and the production of its cosmetics mainly relies on outsourcing processing. At the same time, its profitability is heavily dependent on a single brand, and the investment in research and development is too low, which has become the main question of its competitiveness in the industry.
In the first wave of "Double Eleven" pre-sale war that just passed, domestic cosmetics representative brand Perfect Diary and Huaxizi won more than 500 million yuan and 400 million yuan of turnover respectively. In the case of the "inner volume" of the beauty brand, how much room does Mao Geping have to grow in the sprint listing?
Image source: Mao Geping beauty official website
<h1 class="pgc-h-arrow-right" data-track="20" > "makeup master" sells not craftsmanship, but makeup</h1>
Mao Geping shares have previously experienced a 5-year long IPO run. In December 2016, Mao Geping submitted a prospectus to the Shanghai Stock Exchange with the intention of listing on the A-share market. In 2017, Mao Geping resubmitted the prospectus, but later suspended the review. Since then, Mao Geping shares have been in the state of "pre-disclosure update", and its prospectus has not been updated, and the disclosed data is only up to the first half of 2017.
Although Mao Geping's shares have passed, the company's prospectus has not been updated. AI Finance and Economics asked Mao Geping when to announce the latest financial situation, and the reply was that "the company's financial data has been updated, but the CSRC has not disclosed it to the outside world." The other party also said that further details could be communicated by email, but there was no reply as of press time.
However, from this disclosed prospectus, we can still see the main operation of Mao Geping shares.
According to the prospectus, the main business of Mao Geping co., Ltd. includes three parts: makeup and skin care product sales, makeup training and others. Among them, the sales of makeup and skin care products are the majority of the company's revenue. Mao Geping owns two major brands, MGPIN and Zhi'ai Life. Among them, the former contributed the most to sales.
In the first half of 2017, Mao Geping achieved revenue of 201 million yuan and net profit of 35.6197 million yuan. Among them, the revenue of MGPIN brand sales is about 142 million yuan, accounting for 72.8% of the company's total revenue from its main business.
Source: Mao Geping shares prospectus
MGPIN is named after founder Mao Geping, positioned as a light luxury high-end brand, the average price of products in 300-450 yuan, of which the most expensive "black gold rejuvenation repair serum" priced at 1880 yuan. Another brand, "Beloved Life", was founded in 2008, focusing on the low-end market, mainly for female consumer groups in second- and third-tier cities, with an average price of 150-260 yuan.
Mao Geping has a high-profile personal IP, and the MGPIN brand was once called "the light of domestic products" on social media. However, MGPIN brand sales revenue accounts for more than 70% of the company's revenue, and the company's dependence on this single brand is relatively high.
In the first half of 2017, The revenue of Mao Geping from the makeup training business was 26.61 million yuan, accounting for only 13.64% of the total revenue, less than 20%.
Image source: Visual China
According to the customer service of Mao Geping Training School, the company currently has nine campuses in Hangzhou, Shanghai, Chengdu, Beijing, Chongqing, Zhengzhou, Wuhan, Shenzhen and Qingdao. From the official website, Mao Geping Training School has a wealth of teaching content, and the permanent courses include "Classic Style Image Design Creative Course", "Makeup Styling General Course", "Fashion Life Course", etc., and the training direction includes image consultant, image guidance, image training, image designer and other occupations. The training school also offers short-term courses such as "Professional Nail Art Class", "PS Portrait Retouching Special Training Class", "Bridal Overall Styling Advanced Training Class", etc., and the training period is 4 days to 1 month.
In 2019, Mao Geping and fashion blogger "Late Night Teacher Xu" cooperated to launch a makeup video, showing the process of "how to change a person through makeup", which quickly became popular on platforms such as Weibo, B Station, and Xiaohongshu. What makes many investors curious is that since Mao Geping's influence and makeup ability are so "out of the circle", why has the training business of Mao Geping shares not developed and grown?
The director of the M+ video "CaizhiZhizhi" of Sina Finance, "Jinzhi Taotao", analyzed the reasons to AI Finance and Economics. She believes that the replicability of makeup training business is low, makeup techniques, skills, etc. are different from person to person, it is precisely because of Mao Geping's own extremely high brand effect, consumers prefer him to teach courses, so the development of training courses has been limited; secondly, with the rapid development of Internet communication capabilities and "red economy", a large number of makeup technology is spread through the internet, a lot of content is still free, Mao Geping shares training content If there is no major technological breakthrough and the cultivation of professional talents, On the contrary, it is difficult to expand the business.
<h1 class="pgc-h-arrow-right" data-track="113" > "quasi-listed company" from the OEM</h1>
The MGPIN brand is quite well-known, but few consumers will notice that the cosmetics they buy, in fact, from research and development to production, are likely not to have passed through the hands of Mao Geping shares.
The prospectus revealed that the company has not built its own cosmetics production facilities, and the production of its products is mainly carried out through the outsourcing processing model. The general process of the model is that the company first purchases raw materials from suppliers, reprocesses them by processors, and finally makes them into a finished product that can be sold. The level of sales is completely determined by the "carrying" ability of the Mao Geping brand. In the first half of 2017, the amount of money purchased by the two major brands of Mao Geping shares from suppliers accounted for nearly 50% of the company's total procurement costs.
Sun Yan, director of the formula development department of the Asian Natural Skin Care Research Center, told AI Finance and Economics that in the makeup industry, the current "net red" brand is prevalent, and the outsourcing processing model is very common. The advantage of the brand adopting the OEM processing model is that it can hand over the production links of heavy assets to "professional people" to do, so that people who are good at brand marketing and channels can only concentrate on doing brands.
However, it is understood that at present, there are as many as 100,000 makeup brands with recorded products in China, while there are only a few thousand processing plants with formal qualifications in China, and some group companies will produce multiple brands through a factory.
At the same time, in terms of product research and development investment, Mao Geping shares "do not want to forge ahead".
According to the prospectus, in the first half of 2017, of the 1321 employees of Mao Geping Shares, there were only 15 R&D personnel, and the investment in R&D expenses accounted for only 0.78% of the total revenue. In 2016, Mao Geping invested 3.4227 million yuan in research and development expenses, accounting for 1%. According to Tianyan, the number of patents of Mao Geping is currently only 14 patents, and all of them are appearance patents.
According to the report of the Prospective Industry Research Institute, in 2017, the R&D expense rate of Shanghai Jahwa, Yujiahui, Marumei, Polaria and Lafang Jahwa all exceeded 2%. Among them, the R&D expense ratio of LafangJiahua reached 3.5%. In 2017, Shanghai Jahwa's R&D expenditure reached 161 million yuan.
This also means that Mao Geping has not vigorously carried out technical and product research and development, and at the same time, he has not built his own production line to produce cosmetics.
However, this "light asset" model has also invisibly helped Mao Geping to improve the gross profit margin level. According to the prospectus, from 2014 to the first half of 2017, the comprehensive gross profit margin of Mao Geping's main business was 81.50%, 79.70%, 78.22% and 78.88% respectively.
This data also exceeds the gross profit margin of about 70% of foreign beauty giants L'Oréal and Shiseido. Therefore, it has also triggered inquiries from regulators: in the case of research and development capabilities and brand awareness are not as good as first-line brands, the reasons and rationality of Mao Geping's gross profit margin being higher than that of first-line brands, and whether there is significant uncertainty about its sustained profitability.
In this regard, Mao Geping co., Ltd. explained that the strict quality control system can reduce the quality risk of outsourcing processing; in addition, its higher gross profit margin is mainly caused by the difference in product structure (mainly high-end) and production mode (all outsourced processing methods).
In fact, another beauty brand, Perfect Diary, has similar problems with Mao Geping shares. In order to complete this homework, in March 2020, Perfect Diary announced that it will cooperate with the world's largest cosmetics OEM company to build a research and development and production base, with a planned investment of 700 million yuan, which is expected to be put into operation in 2022. In the prospectus, Mao Geping also mentioned that of the more than 500 million yuan raised for the listing, more than 70 million yuan will also be used for research center construction projects.
<h1 class="pgc-h-arrow-right" data-track="114" > what to deal with the "inner roll tide" of domestic beauty? </h1>
During the reporting period of the prospectus, compared with other domestic beauty brands that are good at "burning money" through advertising, the marketing expenses of Mao Geping shares are not high, and the marketing methods are more traditional.
From 2014 to the first half of 2017, The advertising expenses and business publicity expenses of Mao Geping shares were 11.3271 million yuan, 11.4296 million yuan, 14.4125 million yuan and 7.9451 million yuan, respectively. In 2016, The annual revenue of Mao Geping shares was 234 million yuan, and its advertising accounted for only about 4% of the total revenue. Compared with the revenue of Mao Geping shares in the same period, its marketing investment is not high.
In terms of sales channels, during the reporting period, Mao Geping shares also mainly relied on offline department store channel sales, specifically, the company set up MGPIN brand direct counters for sales through cooperation with department stores. As of the first half of 2017, the company has a total of 135 department stores nationwide. From 2014 to the first half of 2017, the company's sales revenue through this channel was 165 million yuan, 184 million yuan, 213 million yuan and 122 million yuan, accounting for 69.35%, 69.37%, 75.04% and 74.07% of the total revenue, respectively. On the contrary, the proportion of sales revenue from its e-commerce channels has long been only about 2%.
According to CBNData, as of March 2020, Mao Geping has increased to 224 counters nationwide, which can bring 70%-80% of the company's revenue.
"Jinzhi Peach" said that Mao Geping shares mainly sell goods at offline counters because many star products have to be personally felt and tried by consumers; in addition, their products are professional makeup and require certain professional techniques to show the effect.
However, today, when e-commerce and new media channels are popular in new consumption, if Mao Geping continues to adhere to offline sales, it is tantamount to cutting off the source of traffic. "Jin Zhi Tao Tao" said that she also found that in the past two years, Mao Geping himself has actively disseminated the celebrity makeup products of Mao Geping's shares through various programs and cooperation with Internet celebrities such as "Late Night Teacher Xu".
At the same time, Mao Geping shares have also begun to layout on live broadcast platforms such as Douyin and Taobao. Its products have also entered the live broadcast room of head anchors such as Wei Ya.
The young Generation Z has become the object that Mao Geping wants to "get closer to". The company not only promotes the concept of "national style", but also actively enters the platform where young consumer groups gather such as Xiaohongshu and Station B. In 2020, Mao Geping entered Station B and took the theme of "Talking About Chinese Makeup" as the first video after opening an account, and the video has received more than 1.13 million views and more than 800,000 fans.
As the founder, Mao Geping himself has repeatedly "shown his face" while also cooperating with the Forbidden City IP. In 2019, Mao Geping and the Forbidden City jointly launched the "Qi Yun Dongfang" series of makeup, which includes 32 SKUs such as foundation, eyeshadow, lipstick, and blush. MGPIN brand of a Forbidden City joint wool brush, the price reached 1680 yuan. As of this year, the joint cooperation between Mao Geping and the Forbidden City has been carried out to the fourth season.
According to the "2021 May-June 2021 China Cosmetics Industry Operation Data Monitoring Bimonthly Report" released by Ai Media Consulting, during the "618" activity from June 1 to June 18, Mao Geping's product turnover increased by 263% year-on-year, of which Mao Geping's brand foundation liquid products performed brilliantly, with a cumulative turnover of 125% year-on-year growth in 18 days. AI Finance and Economics found that Mao Geping also actively participated in this year's "Double Eleven" promotion, MGPIN's many products were sold in the Via live broadcast room, and as of press time, one of its star products, the number of bookings for high-gloss powder paste exceeded 14,000.
In recent years, despite the continuous rise of "new domestic" makeup brands, Mao Geping's industry status is still not "top-notch".
According to the relevant report of Soochow Securities, in the domestic beauty and personal care industry in 2020, overseas cosmetics groups still occupy the main position, L'Oréal, Procter & Gamble, Estée Lauder occupy 11.3%, 9.3% and 5.0% of the market share respectively; in the same period, among the top ten enterprises in the industry, there are 4 "domestic" beauty companies entering, namely Baijiling, Galan Group, Shanghai Jahwa and Shanghai Shangmei.
In the high-end beauty market, international cosmetics groups L'Oréal, Estée Lauder, LVMH, Shiseido, etc. still firmly occupy the forefront of the market, with a total market share of 47.7%; among domestic brands, only the high-end fragrance care brand Guangzhou Adolf and the parent company of sensitive skin repair expert Winona, Bethany, ranked in the top ten.
Whether it is a big beauty market or a high-end segment track, Mao Geping shares are difficult to enter the forefront. In the fierce competition, relying on a single brand of Mao Geping, how to win the future living space for himself?
"Mao Geping's biggest advantage is that 'peach and plum are all over the world'. How high Mao Geping's status in the makeup artist world is, how competitive his makeup company is in the professional line. Sun Yan said.
But for Mao Geping shares, it also means that it is more dependent on eating the "old capital" of Mao Geping's own IP. "Jinzhi Peach" believes that China's beauty industry is still in its infancy, the basic research of the industry is relatively weak, and Mao Geping's domestic brand must break through more patented technology bottlenecks if it wants to confront international strong brands in the future.
Once the listing is successful, the pressure on Mao Geping shares will also be greater.
This article is originally produced by AI Finance and Economics, an account of Caijing Tianxia Weekly, without permission, please do not reprint it on any channel or platform. Violators will be prosecuted.