Functional skin care refers to the skin care behavior of using specific skin care products according to your own skin condition and needs. At present, my country's functional skin care products can be roughly divided into three categories, namely dermatology-grade skin care products for people with specific skin types such as sensitive skin and acne-prone skin, functional skin care products for specific skin appeals such as moisturizing whitening, and medical beauty-grade skin care products commonly used for repair after medical art.
1, development environment
Development stage: China's functional skin care industry has entered an explosive period, with the rise of domestic brands
In 1998, international brands such as Vichy and Avène entered the country one after another and opened up sales channels such as pharmacies and pharmacies, opening up the blue ocean market for functional skin care in China. In the following ten years, China's functional skin care industry grew steadily, and the brand marketing methods were mainly television, soft article marketing . The period from 2009 to 2014 was the bottleneck period for the industry. The sales growth of various brands slowed down and they began to transform their channels. Since 2014, with the diversification of mobile Internet and forms, China's functional skin care industry has ushered in a breakthrough and entered an explosive period. During this period, in addition to traditional TV advertising marketing, various brands paid more attention to the acquisition of online traffic, actively participated in various marketing methods such as social media marketing and live streaming, and deployed Xiaohongshu, , Douyin, and other platforms, promoting the rapid development of the industry. During this process, domestic brands have emerged strongly, seizing the market with their high-quality products and diversified retail channels, and achieving brands out of the circle. Data from Toubao Research Institute shows that since 2014, the market share of domestic functional skin care brands has increased from 10.7% to 27.3%. At present, although the share of China's functional skin care products in the cosmetics market continues to increase, the overall penetration is still at a low level. Benefiting from trends such as the upgrading of consumer skin care needs and changes in skin care concepts, the market status of my country's functional skin care products will gradually improve in the future and is expected to become a golden sub-track for skin care products.
Policy escort: Regulatory policies are frequently introduced to promote the standardized development of the industry
In an environment where the state encourages the development of private brands, innovation in cosmetic raw materials is also supported by the state. From 2010 to 2019, only four cosmetic raw materials including samara oil were approved by the State Food and Drug Administration. In 2020, the Food and Drug Administration announced four new raw materials that can be used in cosmetics production. This move will undoubtedly have a positive effect on China's cosmetic raw material innovation. At the same time, the state has also tightened its supervision of functional skin care products to more comprehensively protect the rights and interests of consumers. On January 1, 2021, the " Cosmetics Supervision and Management Regulations " was officially implemented; in May of the same year, the " Cosmetics Registration and Filing Management Measures " also came into effect, emphasizing the implementation of a three-year safety monitoring system for new cosmetic raw materials that have been registered and completed, and starting from January 1, 2022, cosmetics should upload efficacy test reports when registering and filing in accordance with relevant requirements.
2, development status
industry chain status quo: Brand owners focus on high value-added businesses such as product research and development, occupying the core position of the industry chain
(1) Upstream of the industry chain. The upstream of the industry chain is mainly raw material suppliers and foundries. Among them, raw material suppliers are responsible for providing basic raw materials for skin care products or supplier patented raw materials, including active substances, moisturizers, oils, etc. At present, domestic raw material suppliers mainly focus on the production of basic raw materials. Since core raw materials such as high-end active substances have high requirements on R&D technology and manufacturing processes, my country mostly relies on foreign raw material suppliers. Foundries are divided into two models: OEM and ODM. They are responsible for large-scale processing and production of early products for brand owners, which is a low value-added link.
(2) Midstream of the industry chain. The middle reaches of the industry chain are mainly functional skin care brands. Brand owners are at the core of the industry chain by virtue of their advantages in production models, product research and development, and high market concentration. At present, functional skin care brands in my country mostly adopt the outsourced processing model, entrusting large-scale production links with low profit margins to foundries, while brand owners focus on high value-added businesses such as product research and development.Because functional skin care products pay more attention to product quality and efficacy, the research and development cycle and R&D investment are higher than that of ordinary skin care products. The high threshold established in the industry has increased consumers' trust and also improved the subsequent profit margins of brand owners.
is based on the fact that the functional skin care industry has high technical barriers and R&D barriers, and it is an emerging track, so the current industry concentration is relatively high. According to data from the Huajing Industrial Research Institute, the CR4 of my country's functional skin care industry will be 34% in 2021, and the leading brands in the industry occupy a larger market share. In this environment, major brands rely on unique product functions, ingredients, and marketing methods to compete differentiatedly. For example, Winona focuses on soothing and moisturizing, with the original intention of solving common skin problems. Yuze is committed to repairing the skin barrier, focusing on dermatology-grade products.
(3) Downstream of the industry chain. The downstream of the industry chain is mainly marketing channels and consumers. Marketing is one of the core elements of the skin care industry. Against the background of the downturn in the economic cycle and various companies reducing costs and controlling expenses, my country's leading functional skin care companies are still increasing their marketing efforts, trying to increase brand awareness and create brand memory points through diversified marketing methods. In the first half of 2022, Huaxi Biotechnology's publicity expenses increased by 134% year-on-year, Proya's and Bethany's marketing investments increased by more than 40%, and channel expansion and promotion service fees also increased accordingly.
At present, the marketing channels of functional skin care companies are divided into two modes: online and offline. Benefiting from the rapid development of my country's e-commerce industry, online channels have become the mainstream channels for the functional skin care industry. Brand owners market directly to consumers through online channels such as Douyin, Tmall , WeChat mini-programs, etc., with gross profit margins reaching 60%-80%. In addition, while companies are extensively deploying online channels, they are also developing offline channels through direct sales, distribution and other methods. In addition to their own brand counters, traditional sales channels such as Watsons and Walmart are also the focus of brand owners. At present, my country's layout of offline specialized channels such as pharmacies and clinics is relatively backward. With the development of the big health industry, this channel may become the focus of leading brands in the future.
As far as consumer groups are concerned, my country's functional skin care consumer groups are younger and have increasingly diversified product demands. According to Winona user survey data, the post-90s generation is the main force in my country’s functional skin care market, and this group is more receptive to functional skin care products. In addition, factors such as high life pressure and long-term wearing of masks have led to an increase in the number of people with skin problems such as sensitive skin and acne-prone skin. People pay more attention to the efficacy of skin care products, and the potential consumer base continues to increase, driving the development of the functional skin care market. At the same time, with the development of my country's medical aesthetics industry and the improvement of social acceptance, medical aesthetics skin care products have gradually become a necessity for postoperative repair. Driven by demand, "mechanical brand" skin care products have a certain market growth potential.
3, development trend
The market size is growing steadily, and the industry has broad room for development
At present, the market penetration rate of functional skin care in my country is low. Due to the demand driven and the advantages of domestic brands in products, channels, etc., there is broad room for improvement of penetration rate in the future, and the market development potential is huge. As consumers' concepts of skin care change and the purchasing power of young consumer groups increases, the market demand for functional skin care will continue to be released. Compared with foreign brands, local brands have a better understanding of consumers' skin problems and skin care needs, and can provide more targeted products. In addition, the marketing model of domestic brands focusing on online channels not only strengthens consumers' brand awareness , but also breaks the brand's regional restrictions, promotes its in-depth development of core consumer markets and explores sinking markets. Against this background, consumers' recognition of functional skin care products will effectively increase, driving the growth of their penetration rate in the skin care industry. Based on accelerated penetration and enhanced consumption power, the market size is expected to maintain rapid growth in the short term. According to data from the Toubao Research Institute, China's functional skin care market will reach 84.14 billion yuan in 2025, with a CAGR of 22.2% from 2020 to 2025.
Policy supervision is becoming stricter, and leading companies will rely on product quality to stabilize their industry position.
my country's leading brands rely on their differences in product ingredients, product efficacy and other aspects to carry out differentiated competition. With the maturity of corporate channels, professional development and the introduction of policies and regulations, my country's functional skin care industry will show a competitive situation in which the strong will always be strong in the future. On the one hand, leading brands have high-quality R&D foundations and technological innovation capabilities, and their products are more likely to be certified by professional institutions, thereby improving the professional channel layout. For example, Winona has gradually expanded its presence in offline professional channels such as pharmacies and beauty salons to help it enhance the professional image of its products and gain consumer recognition; on the other hand, since 2021, the State Food and Drug Administration and other agencies have introduced a number of cosmetic efficacy supervision policies to continuously standardize the production quality management of cosmetics and skin care products. In an environment of tightening industry supervision, inferior products that focus on marketing but not on quality will have no place to stay. Leading compliance companies with good R&D foundations and channel advantages still have great growth potential.
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