Beauty giants buy in to China

13 December 2010

BEIJING: Beauty and cosmetics companies like Coty, L'Oréal and Beiersdorf are enhancing their status in China by buying prominent local brands.

Coty, the fragrances group, recently purchased a majority holding in Chinese skincare specialist TJoy, in a deal that cost around $400m (€302m; £253m) overall.

TJoy's retail reach incorporates 20,000 stores, and it had previously worked with Coty on a new launch, Pure Planet Extract.

However, having posted a 10% decline in sales last year, the Chinese operator is hoping the know-how of an established parent could prove beneficial.

"With the international network and marketing expertise of Coty, TJoy will be in a much stronger position to grow its market share," Zhuang Wenyang, TJoy's chairman, told the China Daily.

This marks a return to China for Coty, which paid $4bn for Yue-Sai in 1996, but sold it to L'Oréal in 2004.

Fu Ye, Coty's PR manager, said the aim was to leverage the TJoy name, affording this latest addition to its portfolio the same focus as in-house ranges.

"The TJoy brand will be retained and we will pay equal attention to the development of each brand," Fu stated.

Beiersdorf took an 85% stake in haircare manufacturer C-Bons in 2007, a move it described as a "good quality" decision in a "difficult and very busy" sector.

"China is a huge market and with a huge potential," said ceo Thomas Quaas in November.

"The brands from C-BONS that we bought, both Slek and Maestro, are still performing well in their categories."

L'Oréal secured access to 800 outlets in 240 Chinese cities upon taking over of Yue-Sai, and took 4% of the domestic beauty and personal care segment in 2009, per Euromonitor International.

"The acquisition was an outstanding opportunity to speed up our growth in the Chinese market," said Lindsay Owen-Jones, L'Oréal's chief executive in China.

Clarins entered China in 2000, and predicts sales should hit 400m yuan ($60.1m), an improvement on 300m from 2009.

Alan Zhong, brand manager, Clarins China, suggested the appeal of indigenous brands was obvious, given the distinctive tastes of Chinese consumers.

"For a family business such as Clarins, we still have much to learn with regard to explore the market here," he said.

"In Europe, people frequently go to pharmacies for cosmetics while in China a department store is the first choice when it comes to buying cosmetics.

"Therefore, European companies have to adapt to this consumption habit when they want to build a strong brand image and better understand the customers here."

Zhong also warned that firms simply adding Western flourishes to Chinese products must proceed carefully.

"After these Chinese cosmetics undergo repacking and reformulation, they may seem more attractive to us," he said.

"But it would be better if they do not raise their prices once they merge with the international brands."

Data sourced from China Daily, Seeking Alpha; additional content by Warc staff