Chinese beauty brands explore foreign M&A to spur growth
SHANGHAI, June 10 (Reuters) - Some of China's top beauty brands such as Proya and S'Young are exploring acquisitions of smaller foreign rivals to expand their portfolios and replicate the success of global leaders like L'Oreal or Estée Lauder amid slowing growth at home.
While still relatively unknown internationally, these Chinese brands have found significant domestic success, even capturing market share from global players. But a prolonged property crisis and concerns about wage growth and employment security have dampened consumer spending in China - posing new challenges to their continued growth.
Proya Cosmetics' (603605.SS), opens new tab founder, Hou Juncheng, said last month that the company's 10-year plan aims to position the firm among the top ten globally, a goal that would require an annual revenue of at least 50 billion yuan ($7 billion).
To do so, the Hangzhou-based Proya plans "to acquire some European brands with history and technology", local media reports cited Hou as telling shareholders at a meeting.
Proya, which specialises in science-backed skincare at mass market price points, became the first Chinese beauty player to surpass 10 billion yuan in annual revenue in 2024.
In comparison, Japan's Shiseido (4911.T), opens new tab, currently ranked tenth globally, raked in $6.9 billion and market leader L'Oreal (OREP.PA), opens new tab generated over $45 billion in revenue last year.
S'Young and Ushopal, two prominent Chinese beauty groups, have already made strides in international acquisitions.
S'Young owns French skincare brand Evidens de Beaute and U.S.-brand ReVive, while Ushopal added French brand Payot to a portfolio that includes British skincare label ARgENTUM and French fragrance Juliette has a gun.
William Lau, a partner at Ushopal, said the company plans to acquire one to two new brands annually.
Analysts say buying foreign brands can help Chinese beauty firms diversify revenue streams and reduce reliance on the domestic market, but they also note that some similar efforts by Chinese fashion groups had missed expectations in the past.
The beauty and personal care market is projected to generate a revenue of $677.19 billion globally in 2025, versus $41.78 billion in China, German data provider Statista estimates.
Chinese brands are likely to target premium-positioned European skincare, fragrance or haircare brands with valuations under $500 million, said Gregoire Grandchamp, co-founder of Next Beauty China, who has advised Chinese groups on global deals.
"In coming years, there will be a big Chinese company that will be the Chinese L'Oreal, Estée Lauder, Shiseido, or Amorepacific," Grandchamp predicted.
Acquisitions have long been a growth strategy for beauty giants. L'Oreal's $2.5 billion purchase of Australian brand Aesop in 2023 added a premium, natural cosmetics brand to its portfolio, while Estee Lauder's (EL.N), opens new tab $2.8 billion acquisition of Tom Ford in 2022 helped boost its array of high-end perfumes.
Chinese beauty brands aim to borrow from this M&A playbook, but there are concerns about their ability to operate brands outside their home turf.
In the fashion space, state-owned textile giant Ruyi once made headlines for snapping up foreign brands and touting its ambition to become "China's LVMH" only to see those international deals unwound by creditors in a few short years.
But Ushopal's Lau says these challenges are not unique to Chinese groups, citing examples like Shiseido's buyout of Drunk Elephant to L'Oreal's purchase of some Chinese brands that struggled to meet expectations.
"Global acquisitions are very difficult" in general and part of the problem is that companies often try to localise brands too quickly after a deal, he said.
"One of the reasons you buy a brand is because it's an amazing brand, so if you then redo the entire DNA of the brand, what's the point of buying it?" he added.
Mark Tanner, founder and managing director of Shanghai-based marketing and research agency China Skinny, said: "Opening doors to the Chinese market and capital injections, rather than a wholesale management takeover" are more likely to succeed.
($1 = 7.1862 Chinese yuan)
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
The Guardian
39 minutes ago
- The Guardian
US-China trade talks: ‘framework' deal amid dispute over rare earths
Officials from the US and China have agreed on a 'framework' to move forward on trade after two days of talks in London stemming from their confrontation over tariffs. The US commerce secretary, Howard Lutnick, expressed optimism on Tuesday that concerns about critical or 'rare earth' minerals and magnets 'will be resolved' as the deal is implemented. Lutnick told reporters that the framework puts 'meat on the bones' of a deal reached last month in Geneva to ease retaliatory tariffs. Its implementation had faltered over China's curbs on critical mineral exports. The deal also would remove some US export restrictions that were recently put in place, Lutnick said. 'We have reached a framework to implement the Geneva consensus and the call between the two presidents,' Lutnick said. 'The idea is we're going to go back and speak to President Trump and make sure he approves it. They're going to go back and speak to President Xi and make sure he approves it, and if that is approved, we will then implement the framework.' In a separate briefing, China's vice commerce minister Li Chenggang said a trade framework had been reached that would be taken back to US and Chinese leaders. 'The two sides have, in principle, reached a framework for implementing the consensus reached by the two heads of state during the phone call on June 5th and the consensus reached at the Geneva meeting,' Li told reporters. Lutnick said China's restrictions on exports of critical minerals and magnets to the US would be resolved as a 'fundamental' part of the framework agreement. 'Also, there were a number of measures the United States of America put on when those rare earths were not coming,' Lutnick said. 'You should expect those to come off, sort of as President Trump said, in a balanced way.' Li said: 'Our communication has been very professional, rational, in-depth and candid.' All eyes were on the outcomes of negotiations as both sides were at an impasse over export restrictions, with US officials earlier accusing Beijing of slow-walking approvals for shipments of critical minerals. The world's two biggest economies were also seeking a longer-lasting truce in their escalating tariffs war, with levies reduced temporarily. 'We're moving as quickly as we can,' US trade representative Jamieson Greer told reporters. 'We feel positive about engaging with the Chinese.' With Reuters and Agence France-Presse
Reuters
an hour ago
- Reuters
Oil prices down, markets assess US-China trade talks outcome
TOKYO, June 11 (Reuters) - Oil prices fell in early trade on Wednesday as markets were assessing the outcome of U.S.-China trade talks, yet to be reviewed by President Donald Trump, with weak oil demand from China and OPEC+ production increases weighing on the market. Brent crude futures lost 24 cents, or 0.36%, to trade at $66.63 a barrel, while U.S. West Texas Intermediate crude fell 21 cents, or 0.32%, to $64.77 at 0119 GMT. U.S. and Chinese officials agreed on a framework to put their trade truce back on track and resolve China's export restrictions on rare earth minerals and magnets, U.S. Commerce Secretary Howard Lutnick said on Tuesday at the conclusion of two days of intense negotiations in London. Trump will be briefed on the outcome before approving it, Lutnick added. "In terms of what it means for crude oil, I think it removes some downside risks, particularly to the Chinese economy and steadies the ship for the U.S. economy - both of which should be supportive for crude oil demand and the price," said Tony Sycamore, a market analyst for IG. Oil import data from China earlier this week and ongoing production increases from OPEC+, which includes the Organization of the Petroleum Exporting Countries and allies such as Russia, were adding to the downside. OPEC+ plans to increase oil production by 411,000 barrels per day for July as it looks to unwind production cuts for a fourth straight month. Meanwhile, China's customs data showed this week the country, the world's biggest oil importer, brought in 46.60 million tonnes of crude oil in May, down 3% from the previous month, with imports of oil products falling by 12.9%. Later on Wednesday, markets will be focusing on the weekly U.S. oil inventories report from the Energy Information Administration, the statistical arm of the U.S. Department of Energy. Analysts polled by Reuters expect U.S. crude oil stockpiles fell by 2 million barrels in the week to June 6, while distillate and gasoline inventories likely rose. Their estimates are for a bigger decline in crude stocks than figures from American Petroleum Institute showed. The API reported on Tuesday that crude stocks fell by 370,000 barrels last week, sources said on condition of anonymity.
Reuters
an hour ago
- Reuters
Dollar holds steady after US, China reach framework deal to ease export curbs
June 11 (Reuters) - The dollar was steady against its major peers on Wednesday, after U.S. and China agreed on a framework for a trade agreement that investors hoped could potentially pave the way to resolving a damaging trade war between the world's two largest economies. In early Asia trading, the dollar was down 0.14% against the Japanese yen at 144.770, and slipped 0.13% against the Swiss franc to last change hands at 0.8218. The euro was flat at $1.1427, while China's offshore yuan was little changed at 7.1881 per dollar. An index that measures the greenback against six other currencies was little changed and was last at 99.068. U.S. Commerce Secretary Howard Lutnick said that U.S. and Chinese officials concluded keenly watched talks in London that lasted for two days and agreed to put their trade truce reached last month in Geneva back on track. The framework included resolving China's export restrictions on rare earth minerals and magnets, and will also remove some U.S. export restrictions that were recently put in place. "The devil is going to be in the details and importantly whether this can help to reestablish trust between President Xi and President Trump, which has clearly been broken since the Geneva Agreement was published," said Ray Attrill, head of FX strategy at National Australia Bank. "But it's way too early to say that we know we're in the midst of establishing a cast iron, new U.S.-China trade agreement." Much of the year has been dominated by investors fretting over the likelihood that U.S. President Donald Trump's erratic policies could tip the U.S. economy into a recession, and in turn hurt global growth. The erosion of investor confidence in U.S. assets has severely undermined the dollar, which is down more than 8% so far this year. Later in the day, investors will closely parse a U.S. consumer inflation report that could reflect the economic impact of tariffs on prices, potentially determining the trajectory of the Federal Reserve's monetary policy for the rest of the year. The Fed is expected to hold rates steady next week, with traders pricing in nearly two 25-basis-point cuts by the end of the year. UK's sterling was marginally higher at $1.35 as markets awaited British finance minister Rachel Reeves' public spending plans. The currency came under pressure overnight after data pointed to a weak labour market.
