The country’s skin care category, which has proved to be the biggest and most dynamic, currently comprises approximately 58% domestic players, according to a new report from Research and Markets, but with news in the past week that some of the biggest international competitors are under threat, the landscape looks set for a big shift.
The remaining slice of the market occupied by international players could well shrink significantly in the coming year, particularly after news that direct skin care player Nu Skin is under investigation and major names such as L’Oreal’s Garnier brand and Revlon will soon be exiting the market.
Garnier and Revlon exiting at a time when the market is still growing
But opportunities still exist in the market, with the report, entitled Research and Forecast of China Skin Care Products Market, 2013 – 2017, stating that growth in the country’s skin care market came in at 11%, whereas in the period from January to October 2013 total sales were CNY 47.9bn ($7.9bn) – indicating that the market is continuing to accelerate.
Both Garnier and Revlon, which are also known as color cosmetics brands, had relatively small skin care sales in the country, but presumably with room to grow further, so the question being asked by many in the industry is why would they want to pull out at this point?
Both companies gave different reasons for exiting, with L’Oreal stating that it wanted to concentrate on growing its Maybelline and New York brands, while Revlon pointed to falling sales in the country.
Reasons to be relieved about exiting the China market
However, there are several reasons why these businesses will probably feeling relieved about the decision to pull out. The first is that neither company will have to continue skirting round the issue of animal testing, which is currently still a prerequisite in the country and one that has caused a number of international brands to pull out of the market already.
Another significant point is that, like all international players in the market, both companies have had to contend with rising wages and inflation, something that has been adding to costs and squeezing margins.
Likewise, economic growth has slowed in the country in the past couple of years, although this has still not translated into any significant slowdown in the country’s skin care sales thus far.
Nu Skin likely to be hard hit by current allegations
In the case of Nu Skin, which is one of the biggest international skin care players in the China market, its business is currently under significant threat due to a government investigation into whether or not it is operating an illegal pyramid scheme to sell its products there.
The investigation is likely to damage the company’s sales in the country significantly, which are currently estimated at somewhere in the region of $500 million per annum.
Either way, with the current market conditions in China looking set to prevail, there is a likelihood that more foreign companies will be exiting the market, putting domestic players in a stronger position to take advantage of future opportunities.