Along the way towards "beauty", the beauty economy leverages the 300 billion dollar market. In 2018, the retail sales of cosmetics above the designated size in China were 261.9 billion yuan (we expect the overall sales scale of cosmetics to exceed 360 billion yuan), a year-on-year increase of 9.6%. Benefiting from the rise of the beauty economy and the "lipstick effect" in recent years, cosmetics have certain growth resilience. Data shows that in the previous economic downturn cycles, the sales of lipstick products in China and Japan have shown a certain trend of growth.
In addition, referring to mature markets such as the United States and Japan, we estimate that the per capita consumption of cosmetics in China has 6-7 times the growth potential, and we are optimistic about the medium to long-term growth prospects of the cosmetics industry in China:
1. Category extension: With the extension of cosmetics and skin care steps and the enhancement of "beauty" awareness of consumers, the demand for cosmetics of Chinese consumers has become increasingly diversified. In recent years, cosmetics, facial mask, perfume and other categories have grown rapidly;
2. Volume and price analysis: We found that the growth of mature categories is increasingly dependent on price increases (high end), while emerging categories are mainly driven by an increase in purchase volume. In 2017, the retail sales growth of the beauty and personal care market, the contribution of volume and price was 22%/78%, respectively;
3. Growth momentum: The expansion of skincare population drives demand growth; The increase in skincare steps drives the increasingly diverse category structure; Upgraded cosmetics consumption drives high-end market growth; The national tax reduction measures guide the return of overseas cosmetics consumption.
From raw materials to consumers, cosmetics advance layer by layer along the industry chain
Starting from upstream raw materials, cosmetics often go through multiple industrial chain operations in order to reach consumers. Behind the gradual price increase in each link lies the profit distribution pattern of the cosmetics industry chain, which is worthy of in-depth exploration by investors.
After sorting out the entire cosmetics industry chain and dividing the profit distribution pattern of each link, it can be found that brand merchants are undoubtedly the links with core barriers.