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Jun
2015

Cosmetics sector focus

China represents one of the world’s largest potential markets for cosmetics. According to the Chinese National Bureau of Statistics, in 1980 at the beginning of reform and opening up, the cosmetics sector sales were only 350 million RMB, in 2006 Chinese cosmetics sales broke through 100 Billion RMB for the first time. Thereafter, there was a rapid growth in the industry, which then reached 120 Billion in 2007 and over 140 Billion in 2009, 400 times that of 1980. In 2011, the total sales volume of cosmetics market reached 180 Billion RMB.

According to customs statistics, the imports of perfume and cosmetics products in China have been growing significantly. From 2001 to 2011, the average growth rate of imported perfume and cosmetics products was 40%, and in 2011, the imports of perfume and cosmetics products is estimated at US $1.15 Billion, a year-on-year growth of 30% or 23 times that of 2001.

The high-end cosmetics market

According to the retail monitoring data from the research institute CMM, high-end cosmetics sales in first and second tier city department stores was 5.6 Billion RMB in 2009 representing 44.5% of the market, where as middle ranged products only represent 34.5%. In 2010, the market share of high-end cosmetics increased by 2% with total sales of 6.6 Billion RMB, the mid-ranged cosmetic market share decreased by 2.6%. However 2011 was very successful, the high-end market growing dramatically to 49.3% or 7.9 Billion RMB in annual sales.

The top 10 high end imported cosmetics brands in 2011 were Estee Lauder, Lancome, Dior, Chanel, Shiseido, SK-11, Guerlain, Sisley, Clarins and La Mer. Estee Lauder was market leader with 19% market share and 20% growth, Lancome was second with 17% and Dior third with 11%.

A 2012 study of Chinese luxury consumption forecast that high-end cosmetics and footwear products are the most attractive luxury items for China’s burgeoning luxury consumers to purchase, while watches, handbags and jewellery follow behind. Among 1,135 consumers interviewed in the study, 43% said they would like to increase spending on high-end cosmetics.

Market research firm ASKCI predicts that the high-end cosmetics market in China will exceed 30 Billion RMB this year, and could be close to 45 Billion RMB in 2016. It is also predicted that the annual compound growth rate of the market in China will be approximately 12% year-on-year during 2012 to 2016, far greater than the average in the overall cosmetics industry.

 

The consumer market

In recent years the major consumer demographic has moved from the middle-aged and elderly to the younger generation between 26 to 38 years old, as more and more younger people try to maintain a youthful appearance, as they get older. According to TNS in 2010, 68% of Chinese consumers believe that spending time and money to create and improve a personal image is essential to maintain a positive attitude to life. In practice, however, the average expenditure on beauty and cosmetic products each year per capita in China is only $5, equivalent to only 3% of that spent in Japan and 6% in the United States. The cosmetics sector is still very much in its infancy.

 

Popular products

Facial moisturizing cream is very popular in China, accounting for approximately 69% of the total market sales, while cleansing products account for only 14%. Skin whitening cream is also very popular in China amongst consumers of all ages. The Japanese economist Keniche Ohmae is quoted as saying that China’s aging population is currently 143 Million, but by 2015, this figure will double. In 2009, anti-aging product sales reached US $100 Billion globally and Ohmae considered that the figure is expected to be US $176 Billion by 2015, the Chinese consumers contributing to this sales growth. Given traditional cultural behaviours in China, women have always been worried about getting and looking old. From their middle twenties, young woman have been consciously aware of the necessity to use firming or anti-aging cream.

With the rapid development of the Chinese economy, the demand for skin and health care products has expanded unprecedentedly. Knowledge amongst the Chinese people of the importance of skin care has existed for some time however; many of them still lack a basic understanding of the actual potential benefits of skin care. One important issue that manufactures have to consider is that consumers’ psychological expectation of cosmetics is considerably greater than the level of existing technology and they consider that anything is possible. Consumers do need professional guidance from experts when they buy cosmetics and skin care products, and cannot easily make decisions for themselves.

 

Bringing cosmetic products into China

The following list details how a cosmetics product can officially enter the Chinese market

  • Entry into China – submit a customs declaration application to the Customs authorities. Then get examined and approved by the State Food and Drug Administration (SFDA) to gain ‘sanitation permit for imported cosmetics’. No product can be sold without a sanitation permit. Once in possession of the sanitation permit, a foreign manufacturer or its agent can make an application for the import approval that typically takes 8 to 12 months to complete following the process below.
  • Authority test – the approved cosmetics must be tested by the National Commodity Inspection Authorities as detailed below. According to the regulations, imported cosmetics sold in China must have the Chinese inspection and Quarantine (CIQ) anti-counterfeit identification and a Chinese label (the Chinese label should include: product name, manufacturer’s name, country of origin, manufacture’s address, country, net content, production code, expiry date, import code, dealer and their address).
  • Selling the product – looking for an agent and dealer. The cosmetic manufacturer may apply for approval from the authorities prior to finding a distributor or identify the distributor and have them apply for approval. In fact both can run in parallel

 

The process of examination and approval

(1) For the first imported cosmetic product(s), the foreign manufacturer or their agent must complete the application for the sanitation permit and apply directly to the State Department of Sanitation Administration with the following information and samples:

  • The product name and type;
  • The product ingredients and restricted substances;
  • The product quality standards and test methods with a Chinese translation;
  • Documentary evidence related to the production and sales approval in country or region of manufacture;
  • Documentary evidence of registration and sales approval in other countries or regions;
  • Evaluation report of examination and approval of the product in terms of production, registration and sales in the manufacturing country or region and other countries;
  • Health and safety evaluation materials or hygienic quality inspection reports for the product;
  • The product label, instruction manual, along with a Chinese translation;
  • Product samples with complete packaging;

(2) After receipt of all the materials above, the Sanitation Administration Department of the State Council will review them within six months, and make a decision in terms of approval within two months thereafter.

Tax on Cosmetics

 

Chinese agents for imported cosmetics brands

Some of the largest cosmetics agencies in China are listed below.


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