Two days of ice and fire.
While making a lot of money, while calling out cost pressures, why are cosmetic companies so "contradictory" in the first three quarters?
It is worth noting that although the performance of the first three quarters of this year has risen sharply, the sales decline, net profit loss, and product price increase of the cosmetics giants in the third quarter have also made their performance in the last quarter "confusing."
The cosmetics giant achieved significant performance gains in the first three quarters of this year, and still stated in its financial report that it had raised product prices due to excessive pressure..
1.The performance of foreign and domestic cosmetics brands has improved
"In the first three quarters of this year, the domestic cosmetics market has the fiercest competition and the heaviest pressure." A head of a domestic cosmetics company wrote on a social media platform that cosmetics companies seem to be riding a roller coaster.
Both the foreign-funded cosmetics giants and the domestically-produced cosmetics leaders have delivered beautiful transcripts in the first three quarters. According to the financial reports of seven domestic cosmetics listed companies and eight foreign-funded cosmetics listed companies in the first three quarters compiled by the reporter, French cosmetics giant L'Oréal leads the performance list with operating revenue of 23.19 billion euros (about 172.42 billion yuan), which is higher than the new crown pneumonia. In 2019 before the outbreak, it also increased by 9.3%. Although P&G and Unilever's cosmetics business revenue in the third quarter was higher than that of L'Oreal, the overall revenue was still slightly inferior.
The domestic market is still a "competitive place" for foreign cosmetics giants. The operating income of the L'Oréal Group in the domestic market in the third quarter increased by 42.8% year-on-year in 2019; in the first three quarters, the domestic market share reached 23.7% of the Shiseido Group's overall proportion, and Shiseido's retail sales in Mainland China achieved a year-on-year increase of 8% in the third quarter , The overall retail sales of high-end cosmetics increased by more than 35% year-on-year, of which e-commerce channels for high-end cosmetics increased by more than 40%; L`Occitane also stated in the financial report that the domestic market contributed the most to overall sales, thanks to active online and physical Sales.
It is worth noting that in the first three quarters of this year, the competition for the top spot among domestic A-share cosmetics companies was extremely fierce. Shanghai Jahwa became the company with the highest revenue from selling cosmetics in China with an operating income of 5.8 billion yuan. According to incomplete statistics from reporters, in the first three quarters of this year, there were seven domestic cosmetics listed companies with operating revenues of more than 2 billion yuan. Excluding household cleaning products, the income of Shanghai Jahwa cosmetics and Betteni, Proya, Shuiyang, Huaxi Biological, and Qingsong are all very small.
Is the cosmetics industry really as prosperous as the "transcript" shows? The person in charge of the aforementioned cosmetics company told reporters that although the first three quarters performed well, it is still difficult for cosmetics companies this year. Especially in the third quarter, cosmetics companies had to worry about their profitability.
2.Why do cosmetic companies "contradict themselves"
While celebrating the surge in performance, while worrying about shrinking profits, cosmetics companies are somewhat "contradictory" this year.
"Since this year, the price of cosmetic raw materials has been rising." The person in charge of the above-mentioned cosmetics company told reporters that after the National Day, the price of some raw materials has risen by more than 2,000 yuan per ton, which makes it difficult for many companies to accept.
According to the raw material quotations provided to reporters by the person in charge of the aforementioned cosmetics companies, major raw material suppliers such as BASF, Dow, and DuPont have all raised the price of raw materials per ton by RMB 500-6500/ton. According to him, the latest price increase of raw materials was in mid-October, and the prices of raw materials have increased many times this year.
The pressure on raw materials is reflected in the third-quarter financial reports of the giants. In the third quarter, Nosbel's parent company Qingsong shares lost 61.98 million yuan in net profit, down 147% year-on-year; Bao Clean's profit fell 4% year-on-year, which it said was due to a 13% increase in sales costs.
Faced with pressure, the cosmetic giants unanimously chose to increase prices. Procter & Gamble expects that from July 2021 to June 2022, the company will be adversely affected by the increase in raw materials and freight to US$2.1 billion (approximately 13.565 billion yuan) and US$200 million (approximately 1.292 billion yuan), which is higher than the previous one. A total of 1.9 billion US dollars (approximately 12.273 billion yuan) is expected for the quarter. The company will increase the prices of some household daily necessities, including beauty products, oral products and shaving care products. In the third quarter, Unilever achieved sales growth despite the decline in sales. Its financial report showed that it was because the product sales price increased by 4.1% year-on-year.
"How can domestic brands dare to raise prices easily before they know the market conditions." The person in charge of the aforementioned cosmetics company told reporters that the third quarter also caught up with the "Double 11" promotion and relied on low prices to attract consumers. If an increase in product prices is announced, it will inevitably affect sales.
3.Where does the fourth quarter performance go?
It is worth noting that the third quarter of this year may have become the "coldest consumption season" in the past ten years that the domestic cosmetics industry has encountered so far. According to data from the National Bureau of Statistics, in September this year, my country's total retail sales of cosmetics grew by 3.9%; in July, the year-on-year growth rate was 2.8%; in August, the growth rate was zero. When the new crown pneumonia epidemic was severe last year, the growth rate in September also reached 13.7%.
Where will the cosmetics giants' performance in the fourth quarter go from here? A pharmaceutical industry analyst at Sequoia Capital said that most of the e-commerce festivals are in the fourth quarter. There will be many promotional activities in the cosmetics industry in the fourth quarter, and the profit of the entire industry in the fourth quarter of each year accounts for almost half of the entire year. The fourth quarter profit of the cosmetics industry can still be expected.
An investor who has been observing listed A-share cosmetics companies for a long time told reporters: [In the third quarter, the overall sales growth of the cosmetics industry continued to slow down. The high growth of the upper channel is driven. At present, media changes and the development of online channels have entered a bottleneck period. I think the bonus period of the cosmetics industry`s phased growth is coming to an end."
It is worth noting that industry insiders believe that domestic cosmetics companies, especially cutting-edge cosmetics brands, may not be able to get rid of the profit haze in the short term. Luo Wenqin, CEO of Tianqin Brand Consulting, said that consumers in the cosmetics category have low consumer loyalty, and consumers are relatively price-sensitive. With high marketing investment, these brands often fall into a low-profit or even no-profit situation. Excluding the strategic loss factor in the initial stage of brand creation, this kind of unresolved profit haze situation in the short term may continue.