Cosmetics. Essential sourcing intelligence for buyers

Transcription

1 Essential sourcing intelligence for buyers China manufacturer profiles Detailed profiles of 32 suppliers, including findings from in-person tours of 13 factories Zhejiang Product & price trends Prices and specifications of 125 top-selling export products July 2007 US$395 Guangdong Cosmetics supply centers Supply centers & market trends Coverage of leading and emerging supply centers, plus insight into capacity, output and R&D

2

3 EXECUTIVE SUMMARY COSMETICS Supplier capability in China Executive Summary China s cosmetic exports are on the rise as demand from major and emerging markets continues to grow and makers enhance the quality of their products. Overseas shipments in the line are expected to increase at least 10 percent to about $722 million in At $188 million, exports in the first four months of the year have already risen 25 percent compared with the previous corresponding period in China s main export market for cosmetics is North America with overseas revenue reaching $269 million in The region accounted for about 41 percent of total shipments. The EU is China s second-largest export destination, importing close to 16 million kilograms of cosmetics worth $145 million in Although low-end products still dominate output and exports, intense competition in this industry is pushing many large suppliers to midrange and high-end production. The following are some of the key trends we see in China s cosmetics industry: Many suppliers will increase export prices by a minimum of 5 percent through 2007 as raw material costs, particularly for packaging, continue to escalate. Export sales will rise by at least 10 percent in the next 12 months as more suppliers focus on producing upscale models. In an effort to produce higher-end cosmetics, more suppliers will be using natural and renewable alternatives to synthetic formulations. The production share of mineral makeup is expected to increase to meet demand for natural and organic cosmetics. R&D will also be directed toward unique and more attractive packaging and presentation designs. Paper, including recycled versions, and other renewable and biodegradable sources are emerging as material alternatives. This report covers the five major cosmetic categories produced in China: lip makeup, eye makeup, nail polish, face and cheek makeup, and facial skin care products. For the purposes of this report, the first four categories are referred to as color cosmetics. Most suppliers focus on just color cosmetics or skin care products, although there are some that offer a range of products across both categories. Companies concentrating on color cosmetics often subcontract the production of nail polish to manufacturers specializing in the product. Suppliers that offer all types of cosmetics are usually large, foreigninvested enterprises. The Products & Prices section in this report details the features and price ranges of cosmetics made in China. The latest trends in packaging and formulations are discussed in the R&D/Design section. The Manufacturing section explains the processes involved in the production of different types of cosmetics and how these differ in small and large companies. The Industry Overview elaborates on the industry composition, highlighting key characteristics of the different types of suppliers. The majority of cosmetic suppliers in China are privately owned and a few are foreign-invested. Reflecting the industry structure, 76 percent of suppliers featured in this report are China-owned while the rest are foreign-invested. Production is concentrated in Shanghai and the provinces of Guangdong, Zhejiang and Jiangsu, which together account for 93 percent of all cosmetics exported from China. To represent the industry accurately, the majority of companies interviewed for this report are from these main production centers, with 57 percent of featured suppliers from Zhejiang and 28 percent from Guangdong. In this report 13 in-depth company profiles 19 short company profiles 125 top-selling export products Supplier demographics Supplier survey Industry statistics and charts METHODOLOGY To produce this report, Global Sources surveyed a wide range of suppliers. Rather than focus simply on high-profile makers, we compiled a representative sample of large, midsize and emerging manufacturers. The selection of suppliers is designed to reflect closely the composition of the industry in China in terms of geographic spread, business type and company ownership. For in-depth profiles, our research teams visited the manufacturing facilities of each company and interviewed senior executives who discussed their recent performance and provided forecasts for the next 12 months. All other companies in this report were either visited or contacted by phone. In each case, companies were required to answer specific questions designed to verify their manufacturing and export credentials, including a breakdown of exports by product type and market. Our production checklist details the product-specific manufacturing capabilities of each supplier. All suppliers participated in a survey designed to provide insight into product and price trends, and challenges facing the industry in the next 12 months. The survey was carried out during phone interviews and in-person factory visits. All survey questions are single choice. Results were calculated based on the actual number of valid responses to each question.

4 CONTENTS CONTENTS INDUSTRY OVERVIEW... 6 Supplier summary OEM/ODM partners Export statistics Main production centers Suppliers by location PRODUCTS & PRICES Production & exports Price guides Top exporters MANUFACTURING Capacity utilization R&D spending by location SUPPLIER SURVEY Export prices, export sales, major challenges, target markets, capacity expansion plans, product trends, capability SUPPLIER PROFILES Supplier locations Industry composition Top 20 exporters Supplier matrix Production checklist Supplier profiles PRODUCT GALLERY Top-selling export products SUPPLIER CONTACT DETAILS Copyright 2007 Trade Media Limited. All rights reserved. Reproduction in whole or in part in any form or medium without express written permission of Trade Media Holdings Limited and Trade Media Limited is prohibited. Published by Publishers Representatives Limited (on behalf of Trade Media Limited) P.O. Box 219 GT, Strathvale House, North Church Street, George Town, Grand Cayman, Cayman Islands c/o 22/F Vita Tower, 29 Wong Chuk Hang Road, Aberdeen, Hong Kong Printed in Singapore ISBN Disclaimer: Any recommendation contained in this report may not be suitable for all investors or businesses. Moreover, although the information contained in this report is obtained from sources believed to be reasonably reliable, the accuracy or completeness of such information cannot be guaranteed. The author and the publisher of this report (and the publisher s affiliates, agents, sales representatives and service contractors) do not make any representation or warranty whatsoever (whether express or implied) in relation to any of the contents of this report (including any information, opinion, recommendation or conclusion contained in this report) (collectively, Contents ), whether as to the accuracy, completeness, quality, fitness, suitability or reliability of such Contents (or any portion thereof ) or otherwise, and shall not be liable under any circumstances whatsoever for any error, omission, defect or deficiency in, or for any use of or reliance on, such Contents (or any portion thereof). China Sourcing Reports

5 InDUSTRY Overview INDUSTRY OVERVIEW Keen price competition amid rising material and labor costs is pushing many cosmetic companies in China to shift to upscale manufacture. The cost of ingredients and packaging materials increased by 10 to 20 percent in To keep at bay the labor shortage problem that has affected nearly all industries in China, companies paid their skilled workers at least 10 percent more than they used to in This year, salaries of skilled workers are expected to increase by another 10 percent. But with thousands of suppliers in the line, most of which offer low-end and midrange products with little differentiation, companies cannot afford to raise prices too much due to the risk of losing competitiveness. Intensified price competition and saturation in the low-end market are now prompting some suppliers offering mainly inexpensive cosmetics to move upmarket. At present, a number of makers have already started following GMP standards when refurbishing, building and operating factories and workshops. In this report, Fairdale, Hangzhou Xinyue, JV, Ludanmei and Yee Chem carry out manufacturing processes in adherence to GMP standards using state-of-the-art imported production facilities. Most products made by these makers meet FDA, EN71, ASTM, FHSA, USP, BP, EP and EEC standards. Some suppliers are using more expensive but environment-friendly ingredients in their formulations. Natural sesame and palm oils are used in lieu of synthetic mineral oils. Brazil palm tree and candelilla wax, which are recyclable and come from renewable sources, are incorporated as well, instead of whale wax. Even so, low-end and midrange models will continue to dominate China s cosmetic exports for the next few years. In terms of R&D capability, management systems and manufacturing technology, suppliers are years behind cosmetic companies in France and Italy. In addition, China makers still lack advanced packaging design capability and technology. Nonetheless, the move toward more upscale production is expected to raise export volume and value between 10 and 20 percent in China exported more than 97 million kilograms of cosmetics worth $656 million in The country currently produces about 5 percent of global cosmetics output. More than 90 percent of China s exports are OEM and ODM orders. In most cases, buyers specify their requirements for the type of product, colors or shades, functions, features, packaging materials and desired price range. Companies then work on the formulations and packaging designs. About 10 percent of exports are shipped with buyers brands. Larger makers are usually the ones with a higher percentage of OBM. There are two general cases where companies export mostly under OBM. The first instance is when an established international brand manufactures in China for export to neighboring countries. The other is when a company caters mainly to the Middle East and Africa. Unlike in the EU, the US and Japan, most buyers in those markets consider reasonable price and not quality or international brand names as the main factor OEM/ODM/OBM partners Company Hangzhou Xinyue Jinhua Garland JV Yangzhou Zhonghui Zhejiang Enchant Data: All surveyed suppliers Major customers Supplier summary Suppliers surveyed 32 Export sales $204.1mn Export ratio 78% OEM business 72% Capacity utilized 79% Annual R&D spending $5.9mn Full-time employees 9,015 Data: All surveyed suppliers influencing purchasing decisions. For this reason, China companies can afford to export low-end cosmetics with their brand names to these markets. Zhejiang Enchant one of the companies interviewed for this report, has OBM sales offices in Madrid, Dubai and Los Angeles to market its Enchant, Needme and Eve color brands. The company is one of China s top five cosmetic manufacturers. Christian Dior (Shanghai), Maybelline (Suzhou), L Oreal (Suzhou), Avon (Guangzhou), Shiseido (Beijing) and Procter & Gamble (Guangzhou) are among the established international brands that have set up factories in China. Moreover, L Oreal has acquired two existing local brands, Mininurse and Yue-sai, which have factories in Yichang, Hubei province and Shanghai, respectively. The majority of Christian Dior s output in Shanghai is for export to France. L Oreal manufactures for both the domestic market and for export to Japan, South Korea and Southeast Asia. A large portion of output from Maybelline, Avon and Procter & Kose, Tayoi (Japan); Debon (South Korea); L Oreal, Mary Kay (US) Disney (US) L Oreal (France), Elizabeth Arden (US) Procter & Gamble, Family Dollar (US) Procter & Gamble (US), Unilever (UK) 6 China Sourcing Reports

6 Supplier profiles Elegant Rose Cosmetic Co. Ltd Elegant Rose is a supplier of midrange and high-end lipstick, lip gloss, mascara, eye shadow, liquid eyeliner, compact powder and makeup sets. The company is based in Yiwu, Zhejiang province. Another factory in Jinhua, also in Zhejiang, is under construction and will be operational by September this year. The plant will have 500 workers and a total area of 50,000sqm. Elegant Rose sends representatives to industry trade shows in mainland China, Hong Kong and Germany to reach overseas clients and upgrade R&D capability. Trade show participation and online product promotion were responsible for tripling sales revenue in Products Makeup for the eyes and face usually has the same ingredients. These include mica, silicon oil and powder, pearl powder, stearic and color powder. The company sources mica in Japan and imports color powder from the UK, the US and Germany. Lip products use similar color powder plus stearic wax, squalene, shea butter oil, and vitamins E, A and C. All of these ingredients meet EEC and FDA standards. In addition, they are tested in-house before being used in production. Makeup prices depend mainly on the packaging and special features. For example, lip gloss with glitter and pearls, and mascara that lifts and extends lashes are priced higher than ordinary models. In general, eye makeup is between $0.10 and $1.05, lip products are $0.063 to $0.63, while facial makeup ranges from $0.105 to $1.05. The six-member R&D team focuses on using new ingredients that result in products with special properties. It takes 15 days to develop a new product, with an average of 200 models released annually. Lip gloss sets and Capability Production checklist Assembly lines 6 R&D/design staff 6 QC staff 4 Mixing/blending machines 3 Powder-pressing machines 4 Filling machines 42 In-house material testing Yes Makes cosmetic packaging in-house Yes Exports by product Lip makeup 50% Eye makeup 40% Face and cheek makeup 10% Nail polish Facial skin care products Exports by market United States 40% European Union 40% Europe (non-eu) Middle East/Africa Asia Other 20% Profile Outlook Export prices Stay the same Export sales Increase 10-20% Production capacity Increase 20-50% Expansion plan Move to new factory Main target market European Union Hot product trend New/improved packaging Major challenge Labor shortage Efficiency improvement Automate production Company facts Year established 2003 Head office location Jinhua (Zhejiang) Business type Manufacturer: Direct exporter Ownership Mainland China-owned Factory location(s) Jinhua (Zhejiang) Total factory area 11,278sqm Full-time employees 120 Total annual sales (all products) $4.5mn Annual R&D spending $0.05mn ISO certified Yes Sales & output: Cosmetics Annual sales $4.5mn Share of total sales 100% Annual export sales $4.5mn Total monthly capacity 1,500,000 pieces Average monthly output 1,250,000 pieces Capacity utilized 83% Average monthly exports 1,250,000 pieces Export ratio 100% OEM % of exports 90% ODM % of exports 10% OBM % of exports Capability improvement Shorten design & development lead time 28 China Sourcing Reports

7 Supplier profiles dual-colored lipstick are among the latest models. Manufacturing There are two buildings at the company s production facility. The ingredients preparation room has three 150kg mixing machines. The disinfection area has more than 60 germicidal lamps. The filling workshop has two big filling machines and 40 small ones. There are grinding, sieving and four powder-pressing machines in the powder production area. The packaging workshop has a 16m-long conveyor belt and four automatic high-speed sealing machines. The facility also has a warehouse for storing incoming raw materials and finished products. There is a laboratory for R&D and QC as well, which is equipped with a refrigerator, a constant temperature oven and a Fluko brand homogenizer from Germany. In addition, it has a temperature control electric warming plate, an electric weighing scale with precision of 0.01g, an imported grinding machine and a microbe detector. The QC team checks finished products to ensure uniform appearance and texture. Product packaging, logos and barcodes are also checked for clarity. Contact details Business contact GU Gavin Phone (86-579) Fax (86-579) sales@rosecosmetics.com, 888@e-rose.cn URL Address 5 Beiyuan Road, Beiyuan Industrial Zone, Yiwu, Jinhua, Zhejiang, China Popular export models Image file name LP8865-LP8666 Lip makeup Model Minimum order Packaging type Delivery time Indicated price LP8865-LP ,000 tubes 50 pieces in white box, 20 boxes in carton 35 days $0.08 (3.5g), $0.09 (5g) Description: Lip balm; 1.5-year shelf life; 3.5 or 5g plastic tube with mushroom cap; in various single colors Image file name LP8031 Lip makeup Model LP8031 Minimum order 12,000 tubes Packaging type 12/24 pieces in white box, 72 boxes in carton Delivery time 35 days Indicated price $0.26 Description: Lipstick; 1.5-year shelf life; 4g; in various single colors Image file name PR002-B Cosmetic set Model PR002-B Minimum order 8,000 sets Packaging type Delivery time 35 days Indicated price $0.66 Description: Set of blush, pressed powder, eye shadow, brush, sponge tip applicator; 1.5-year shelf life; plastic tray with cardboard cover Information not disclosed 29

8 PRODUCT GALLERY PRODUCT GALLERY Lip makeup Image file name: P6023.jpg Image file name: C3023.jpg Image file name: C3005.jpg Cheerflor (profile page 54) Model: P6023 Minimum order: 12,000 tubes Packaging type: PP bag Delivery time: 35 days Indicated price: $0.19 Description: Lipstick in aluminum tube; 2-year shelf life; 3.8g; in various colors Cheerflor (profile page 54) Model: C3023 Minimum order: 12,000 tubes Packaging type: PP bag Delivery time: 35 days Indicated price: $0.11 Description: Lip gloss; 2-year shelf life; 2.3g Cheerflor (profile page 54) Model: C3005 Minimum order: 12,000 tubes Packaging type: PP bag Delivery time: 35 days Indicated price: $0.15 Description: Lip gloss; 2-year shelf life; 2.6g Image file name: GZCC-018.jpg Image file name: GZCC-028.jpg Image file name: HZCC-252.jpg Colorco (profile page 55) Model: GZCC-018 Minimum order: 36,000 tubes Packaging type: OPP bag Delivery time: 30 days Indicated price: $0.10 Description: Lip gloss in squeeze tube; 2-year shelf life; 19x75mm Colorco (profile page 55) Model: GZCC-028 Minimum order: 36,000 tubes Packaging type: OPP bag Delivery time: 30 days Indicated price: $0.12 Description: Lip gloss; 2-year shelf life Colorco (profile page 55) Model: HZCC-252 Minimum order: 36,000 pieces Packaging type: OPP bag Delivery time: 30 days Indicated price: $0.15 Description: Lip color compact; 2-year shelf life; 51x13.5mm 64 China Sourcing Reports

9 Yes! I d like to order the full version of the following China Sourcing Reports For faster service, order online at A Please send me Report Title: US$ 1) 2) 3) 4) 5) Total amount US$ B Please send my reports by D My payment method (PDF format) Air courier (printed copy) US$ check/bank draft payable to GLOBAL SOURCES, drawn on a US bank located in the USA Please debit my credit card C My contact details a c Mr Mrs Ms Family Name Given Name b d Job Title Company Name Address Amount (US$) Card No. Expiry Date City State/Province Signature Date Country Tel Mobile/Cell Phone Postal/Zip Code Fax For faster service, order online at For other inquiries service@globalsources.com Telephone Hotline: (65) E Return this form by Fax North and South America (1-480) Europe, Africa and Middle East (31-20) Asia Pacific (65) Mail Global Sources, c/o Media Data Systems Pte Ltd Raffles City PO Box 0199, Singapore Thank you for your order. Form: MOM621 Project: 102CEB