Can Estée Lauder and L’Oréal Hold Onto Their Lead in China?

What Happened: According to consulting agency NellyRodi and luxury data company Luxurynsight, China’s beauty market is expected to hit $40 billion this year and grow to $57 billion by 2040. The two firms noted that despite the surging popularity for local brands, international giants such as L’Oréal, Procter & Gamble, and Estée Lauder still command 30 percent of the market. The report offers a more conservative estimate of growth compared to ResearchAndMarkets.com, which recently stated that China’s cosmetics market will balloon to $87.6 billion in 2025 thanks to rapid urbanization, strong brand awareness, and an upswing in organic cosmetics demand.

The Jing Take: While it is impossible to predict what will happen in the next 20 years — planning for these past two years alone was hard enough — the trend for China’s beauty market is clearly upwards. As local consumers become more sophisticated, they are looking beyond skin care and color cosmetics to beef up their routines; the perfume sector, for example, is poised to boom as only 2.5 percent of China’s 1.4 billion people use personal fragrances. Moreover, with health and wellness now a top priority, consumers are also gravitating toward functional ingredients, resulting in intensifying competition for whitening, anti-aging, and acne treatments and emerging categories like edible beauty.

But it’s not just consumer trends that are driving this industry forward; e-commerce platforms and distribution partners are also doing their part to accelerate growth. Last month, Tmall Global announced plans to introduce 1,000 new overseas beauty brands in China and incubate 50 with an annual turnover of over $1.5 million (10 million RMB). Meanwhile, Shanghai-based beauty incubator SuperOrdinary has helped trendy American brands like Drunk Elephant and Farmacy connect to the right consumer base, social platforms, and KOLs in China.

Although global players have an edge due to this increasingly e-commerce support, plus their reputation for high-quality products, they shouldn’t get too comfortable. These brands may thrive in the luxury segment but local rivals have quickly taken over the mass market, with C-beauty unicorns Perfect Diary and Florasis outperforming Estée Lauder in online GMV. Therefore, if Estée Lauder, L’Oréal and others want to remain on top, they will need to bolster their R&D capabilities and keep ahead of trends — because what worked in 2021 certainly won’t apply in 2040.

The Jing Take reports on a piece of the leading news and presents our editorial team’s analysis of the key implications for the luxury industry. In the recurring column, we analyze everything from product drops and mergers to heated debate sprouting on Chinese social media.

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Beauty