Covid in China and the effects on Beauty’s Biggest players

Big groups like everyone are struggling in China with lockdowns. Most of their brands have Bricks and Mortar stores that have closed due to covid in Shanghai and Beijing.

Q1 was ok for most of the groups although women’s day sales were mainly disappointing as anxiety around covid lockdowns started to take hold.

April and May sales were down significantly more.

Let’s take a closer look at Estee Lauder, L’Oreal and Shiseido groups

Estee Lauder Group

Estee Lauder revised down their full year 2022 sales projections from around 15% to around 8%. This caused stocks to tumble.

The main reasons cited were covid 19 logistical issues in the Shanghai area compounded by their distribution centre. They noted La Mer was still growing well but skincare overall had been slow.

Looking into their portfolio:

Estee lauder has a very heavy premium Skincare focus which has served them well.

The Estee Lauder brand is No1 Skincare and La Mer is No1 Luxury Skincare on Tmall

But Estee Lauder’s dermatology and high-efficacy brands are a bit weak considering trends in China. The Ordinary has been doing quite well but is showing signs of slowing with sales at 38 million USD in 2021.

⭐️Estee Lauder Stars⭐️

Skincare: Estee Lauder, La Mer, The Ordinary

Fragrances: Jo Malone, Tom Ford

Estee Lauder are yet to launch Le Labo and Bumble and Bumble in China. Le Labo has a big following already.

For more information see Estee Lauder’s Q1 2022 financial statement

L’Oreal Group

L’Oreal didn’t break China out in their Q1 results but from other sources they grew around 7% which is significantly higher than the market.

L’Oreal’s Skincare portfolio is also strong.

L’Oreal Paris plays in the mass market and Lancome and Helena Rubinstein do well in the premium space.

Skin Ceuticals is very popular amongst the derma/high efficacy category. 2021 estimated sales on Tmall for Skin Ceuticals on Tmall was 300M USD with a growth rate of over 60%.

⭐️L’Oreal stars for China⭐️

Hair care: Kerastase

Skincare stars: Lancome, Helena Rubinstein, Skin Ceuticals

Niche Fragrances: Atelier Cologne, Maison Margiela

L’Oreal also cited success in Hainan as contributing to their China sales growth.

For more information see L’Oreal’s Q1 2022 financial statement

Shiseido Group

Shisedio’s digitization is slower vs the other two groups and therefore has been harder hit by store closures in lockdown.

Shiseido’s strategy in China has changed dramatically over the years. To start with they focused on brands that were mass market and made for China like Aupres and Pure and Mild.

As premiumization took off the Shiseido brand and Cle de Peau Beute have done very well. However, they struggle with new emerging brands – Drunk Elephant was an important acquisition for the group. Makeup they are also relatively weak with the main success being Nars.

On 19th May 2022 Shiseido Group announced their 1st investment fund in China has been incorporated with $75 million USD registered capital. It will focus on investment in new emerging brands from the beauty & wellbeing category.

⭐️Shiseido current stars in China⭐️

Haircare: Tsubaki (mass brand)

Skincare: Shiseido, Clé de Peau Beauté, Anessa, Elixir, Drunk Elephant (rising star)

Makeup: NARS

Fragrance: Serge Lutens (but just launched in 2021)

For more information see Shiseido’s Q1 2022 financial statement

Conclusion

China is significant for all these groups. For Shiseido it represents around 18% of global sales. L’Oreal 20% and Estee Lauder 36%.

The Covid situation continues to uncertain in China and with these groups heavy reliance on the market they still have a rocky road ahead for the rest of 2022 at least.

You may also read one of our blogs about why brands struggle in China in an interview with Josh Gardner.

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