Asia’s Next Big Export?

Why These Industry Experts Think a C-Beauty Wave Is Coming

Erica  La Sala: 10/20/2021

In the 1980’s Japanese beauty came ashore in the U.S. By the early 2010’s, Korean beauty hit big, spawning a decade-long fascination with BB creams, sheet masks, and snail mucin. Asia has long been considered the seat of beauty innovation and inspiration, so as markets become increasingly globalized, where will the next big wave of imports come from? Some industry insiders believe that Chinese beauty brands (C-beauty) are primed to globally expand within the next five years. With the second-largest beauty market in the world – projected to reach $87.6 billion by 2025 – China’s digital acuity, speed-to-market capability, and forward-thinking marketing strategies may turbo-charge U.S. market penetration in the years to come.

This is PART ONE in a two-part series. In part one, we’ll discuss why Chinese beauty is primed to expand globally, and how our experts believe C-beauty brands will position themselves in the U.S. market. Part two will cover predictions on which sales and/or distribution channels C-beauty will utilize to penetrate the U.S. market, marketing tactics for success, and overcoming reputational handicaps.

C-BEAUTY IS IN A UNIQUE POSITION TO EXPAND

China has nurtured its domestic beauty market – and in turn, readied itself for international expansion – through a couple of strategic measures. Most foreign brands have long been excluded from the Chinese market due to strict animal testing mandates for imported cosmetics, thus giving domestic brands and their products a home-field advantage. This pushed many Western conglomerates like L’Oreal and Estee Lauder to establish manufacturing operations in big Tier 1 cities like Shanghai, bringing business, jobs, and education to the local population of R&D specialists, formulators, and entrepreneurs.

“You combine the Chinese drive and initiative with the knowledge and training provided by the Western companies, and all of sudden you have Chinese companies developing products on their own, just as sophisticated as the U.S. and Korea, with state funding,” explains Ken Marenus, President of the IBA. “In the last five years, there’s a new generation of homegrown cosmetic chemists developing products there for newer brands.”

“A lot of the people running these brands in China were educated in the West,” explains Kelly Kovack, CEO, and Founder of BeautyMatter. “We can’t assume that they don’t know our market. Some of them probably know our market better than people already working here.”

Modern C-beauty brands are relatively young – most have been on the market no more than five or six years – but are fueled by huge amounts of capital, often from foreign investors, and a growing sense of national pride and interest in homegrown brands amongst Gen Z shoppers. Perfect Diary, the mass-market Gen Z color brand that launched in 2017, has already achieved massive success and is currently valued at $4 billion, with major American backers like Warburg Pincus and The Carlyle Group. In November 2020 its parent company, Yatsen Holding, went public and became the first Chinese cosmetics company to list on the New York Stock Exchange. With a portfolio of seven beauty brands, including two recent international acquisitions, Yatsen is quickly transitioning from startup to cosmetics conglomerate set on global expansion.

“Japan was a very insular country but when the economy declined, they started exporting. The K-beauty wave was financed by the Korean government. If the Chinese government gets behind this, C-beauty will happen so fast in the U.S. that our heads will spin,” believes Kovack.

POSSIBLE U.S. MARKET POSITIONING STRATEGIES

K-beauty brands like Amorepacific and Dr. Jart were wildly successful in marketing their distinctly Korean philosophies and rituals to U.S. shoppers. As a result, more than a decade after K-beauty’s arrival in America, Korean beauty standards like the 10-step skincare routine and glass skin have become all but mainstream here. Will C-beauty be able to take a similar path?

“There’s nothing to grab onto in the same way from a product perspective or a routine perspective like with K-beauty, except if you look at TCM {traditional Chinese medicine},” says Allie Rooke, Brand Strategist at Clean Beauty Asia. “Some Chinese brands are innovating in the skincare space when it comes to TCM, like Herborist, for example. They’ve expanded into Europe and done well there, but it’s not a ‘trendy’ brand per se. I think it’s possible for an opportunity to arise in the future around wellness and TCM. If a Chinese brand leverages that angle there could be a lot of potential in the U.S.

“But my gut feeling is that a lot of the C-beauty brands that will come over to the West – particularly color brands – will not play up the fact that they’re Chinese. Florasis and Perfect Diary can’t do that. Their brand DNA is inherently Chinese, but I still think they’ll likely come here first since they’re so big. They’ll pave the way and see what the reaction is like,” Rooke continues.

“There’s no question that C-beauty will have to localize to the U.S. market, but to what degree will depend on the brand,” says Elizabeth Kopelman, Founder of Frisson Beauty. “For instance, with Perfect Diary, there’s very little heritage there so there’s not much to unpack. What it is is incredibly on-trend with that versatility of innovation. The innovation will tell the story. But this is all segment-specific. It’s a very different story when you’re talking about skincare.”

Despite its size and its superior positioning, Kovack believes that Perfect Diary – and other affordable trend-driven, speed-to-market color brands like Zeesea, for example – may have difficulty translating seamlessly into the U.S. market from a product fit perspective. “The trends aren’t the same here. They happen differently, and the timing is different. I think the luxury consumer in China is a more international consumer, so we may see C-beauty brands that are positioned more on the luxury end launch here. Yumee is a perfect example of this. Investor Wendy Yu launched it in early 2021, and they’ve already made their intentions clear that they want to expand into the UK, France, and the U.S. very soon.”

Mass-market or luxury, C-beauty brands will undoubtedly need to be mindful of the clean beauty category when formulating their U.S. entry strategies. “Free from” blacklists and ingredient claims as well as calls for greater transparency and sustainability efforts have become the new industry standard in the U.S. within the past five to eight years. “If C-beauty brands need to make clean claims to compete in the U.S., they’ll simply make them the same way that domestic brands here do. There are a lot of brands making claims that they can’t substantiate since the idea of “clean” is nebulous and the term is unregulated,” says Kovack.

“U.S. Gen Z consumers may be more demanding when it comes to clean, sustainability and supply chain transparency but the Chinese will do their market research and get out in front of it. They have incredibly savvy investors. They know what it takes to launch a brand,” says Kopelman.

Erica La Sala is a beauty writer and reporter who specializes in covering the business behind beauty. Her work has been featured in several digital publications and newsletters serving both the professional and consumer communities, including Beauty Independent, Glossy, CEW Beauty News, BeautyMatter, and Allure Magazine. She graduated from Fordham University’s Gabelli School of Business with an MBA in Management Systems.