Will the Chinese cosmetics market be luxury’s “next big thing”?
International cosmetics companies face a tricky situation when it comes to China. While animal testing is frowned upon – or even banned – in many regions, it is mandatory in China. At least, it is mandatory for so-called “special use” cosmetic products, like hair dye, skin lightening creams, and deodorants.
This means that the world’s biggest players have to reassure western consumers that they are not testing their products on animals, while also reassuring Chinese regulators that those very same products are being tested on animals. Why not just ignore China altogether? According to Morgan Stanley, it’s now the world’s biggest, and fastest-growing cosmetics market.
Although companies like L’Oreal have struggled to square these opposed messages, it hasn’t damaged their business too much. Foreign cosmetics firms, although they have lost a little ground to local competitors over the last five years, still make up around 90% of the Chinese market. It is also true that ethical concerns over animal testing haven’t had quite as much impact as some spokespeople would like. Snail slime, for instance, has become a “must have” skin treatment over the last couple of years – despite objections from animal welfare groups.
As recently as 2014, mandatory animal testing regulations applied to more than just “special use” products. The lifting of these requirements on everyday personal care products may well be a sign that the times are changing. Certainly, there have been regulatory developments that hint as much this year. If and when China allows this profitable class of cosmetics to hit the market without animal testing, foreign cosmetics giants will finally be able to send their entire product ranges east, and align their messaging worldwide. That’s when the battle for China’s makeup market will really begin.
Dominion holds a number of cosmetics companies, such as L’Oreal, in its Global Trends Luxury Fund.
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