Will China’s beauty sector lose its glow as growth slows to 30-year low?

When US beauty and personal care retailer and manufacturer Estée Lauder crossed US$1 billion in sales and French personal care company L’Oréal reported a 25 per cent growth in sales in Asia-Pacific in the quarter ending in December, their efforts in the region – especially mainland China – appeared to have paid off.

Some analysts, however, said, with China’s economy slowing down further, growth in the sector could taper off too. “Overall, China’s beauty and personal care market has showed slower growth, which indicates strong growth in the segment since 2017 has entered into its last stages,” said Sherri He, global partner and head of Greater China consumer and retail industry at US management consulting firm AT Kearney.

Growth in China’s beauty and personal care sector was down by 1.9 per cent in December 2018, its slowest rate in 30 years. “This is partially driven by slower economic growth, or expectations of [in mainland China], and caused by very strong growth in the last one to two years, which need some time adjustment. As such, I expect growth at L’Oréal and Estée Lauder will slow down as well,” said He.

L’Oréal’s Asia-Pacific sales exceeded €7 billion (US$8 billion), driven mainly by China, overtaking its North America business, in the quarter ending in December. “Singles' Day” boosted sales in China.

Estée Lauder’s China sales recorded double-digit growth in all product categories, led by growth in the make-up category, which now represents about a third of its business in the country.

Global players will also face increased competition from emerging local, Chinese rivals, such as HomeFacialPro (HFP), Perfect Diary and Meiking. Alice Li, senior research analyst at market research company Mintel China, said: “As the quality of domestic brands has continued to improve, they have begun to account for a larger market share of mass beauty products.”