中国化妆品：Z一代将如何改变化妆品行业

1、GlobalResearch18 November 2019China CosmeticsUBSEvidenceLabinside:HowwillGenerationZ change the cosmeticsindustry?Fifth UBS Evidence Lab China Beauty Survey shows premium demand is strong The5th UBSEvidenceLabChinaBeautySurveyof1,666Chinesewomenintier1to4 cities and our in-depth study of the Korean

2、cosmetics market support our view that global brands will continue to gain share due to strong trade-up demanddespite concernsofaslowdownduetoweakmacroconditionsandpotentialcompetitionfrom risingChinesebrands.UBSEvidenceLabsurveyshowsnext12Mpurchaseintentishigh (62% for skin-care and 51% for make-up

3、), with the top reason to spend more or to changebrandbeingtotrade-uptopremium.WepreferLOral,EsteLauder,KOSE, Fancl, Kao and LG H&H as beneficiaries of trade-up demand. We are cautious on Shanghai Jahwa (unfavourable channel mix); Amorepacific and Beiersdorf (mass- segmentbrandportfoliofacingtopline

4、vsmargintrade-off);andShiseido(slowdownin sales growth).Can Generation Z consumers provide an opportunity for Chinese brands?As of 2018, 27% of Chinas population is Generation Z (11%) and millennials (16%), and we estimate they account for c.35% of China cosmetics consumption. UBS EvidenceLabsurveys

5、howsthatyoungconsumers:changebrandsmorefrequently;are more influenced by online reviews and friend recommendations; and use relatively more local brands. However, trade-up to premium is the top reason to change the brandthattheyareusing,andforeignbrandsstillrankhigherinbrandusagerates.Case study of

6、Korea market shows building premium brand is not easyInKorea,foreignbrandsenteredinthemid-90sasdepartmentstoresfocusedonluxury merchandising to fend off competition from hypermarkets. Since then, polarisation in consumption to premium or low-end intensified through multiple economic crises. Manymid-

7、rangeKoreancosmeticsbrandslostsharetoforeignorlow-endbrandsand onlyafewKoreanbrandsweresuccessfulinbuildingpremiumbrands.Hence,aslong as trade-up demand remains firm, we would expect foreign brands to gain share in ChinaespeciallygiveneCommerceisfacilitatingeasierandfasterexpansionofglobal brands re

8、ach to a wider consumer group.We continue to prefer companies that can benefit from trade-up demandWepreferLOral,EsteLauder,Fancl,KOSE,KaoandLGH&Haskeybeneficiariesof trade-updemand.WerecentlydowngradedJahwatoNeutralonunfavourablechannel mix.WehaveSellratingsonAmorepacific,ShiseidoandBeiersdorf.Shar

9、e price Share price PricetargetMkt capCompanyRating(LCY)(LCY)(US$m)PE(x)EV/EBITDA(x)EPS growthEPSg yield2018-21EMost favouredLOralBuy261.50287.00160,89233.630.421.419.49.2%10.6%9.3%1.6%Este LauderNeutral190.99200.0070,64531.829.920.519.210.3%6.5%8.3%0.9%FanclBuy3,0453,8003,36433.229.418.115.833.2%13

10、.1%19.3%1.1%KOSEBuy17,09023,0008,97025.022.113.411.91.9%13.5%9.8%1.1%KaoBuy8,50110,00037,61626.424.713.612.62.6%6.8%5.2%1.5%LG H&HBuy1,233,0001,500,00016,53224.021.114.312.617.5%13.7%14.7%0.8%Least favouredAmorepacificSell189,000120,0009,45434.231.514.313.6-2.8%8.5%5.3%0.6%ShiseidoSell7,9056,50029,0

11、5238.837.4%3.9%11.7%0.8%BeiersdorfSell105.7596.0026,50530.828.915.013.55.5%6.4%6.3%0.7%Priced as of 15 November 2019.Source: Company data, UBS estimates HYPERLINK /investmentresearch /investmentresearchCosmeticsChinaEquitiesJenniferHanCosmeticsChinaEquities HYPERLINK mailto:jennifer.han +82-2-370288

12、02Jihyun Associate Analyst HYPERLINK mailto:jihyun.lee +82-2-37028810StevenStrycula HYPERLINK mailto:steven.strycula +1-212-7131428HisaeKawamoto HYPERLINK mailto:hisae.kawamoto +81-3-52086270Carey Sloane HYPERLINK mailto:carey.sloane +1-212-7138695Charles Eden,ACA HYPERLINK mailto:charles.eden +44-2

13、0-75689622CrystalXu HYPERLINK mailto:crystal-zb.xu +86-21-38668800This report has been prepared by UBS Securities Pte. Ltd., Seoul Branch. ANALYST CERTIFICATION AND REQUIRED DISCLOSURES BEGIN ON PAGE 40. UBS does and seeks to do business with companies covered in its research reports. As a result, i

14、nvestors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report.China CosmeticsUBS THESIS MAP a guide to our thinking and whats where inthis reportOURTHESISINPICTURESMOSTFAVOREDLEAST FAVOREDLOral,EsteLauder,Fancl,LGH&H, KOSE,KaoAmorepacific, Sh

15、iseido, BeiersdorfPIVOTALQUESTIONSQ: Will demand for premium cosmeticscontinue?Yes,wethink thedouble-digitgrowthinChinacosmeticssales willcontinuetobedrivenbytrade- updemand,especiallyfromlowertiercityconsumersaseCommerceallowsinternationalbrandsto do more marketing and distribution without opening

16、offline stores. eCommerce share of the total cosmeticsmarketincreasedfrom10%in2012to27%in2018.Q: Can Chinese brands disrupt the cosmetics market?WhileGenerationZconsumersaremorefavourabletolocalbrands,webelievegloballuxurybrands will gain market share given the strong demand to trade-up. We think th

17、e entry barriers to launching a new cosmetics brand have become lower as marketing and distribution can be easily done through eCommerce. However, we think launching a cosmetics brand is different from buildingapremiumbrand,andwethusthinkinternationalbrandswillcontinuetogainthemajority shareofthepre

18、miumcosmeticsmarket.UBSEvidenceLabsurveyshowsthatglobalbrandusage rateishigherat47%forskin-careand66%formake-up.UBSVIEWDespiteconcernsofaslowdowninthecosmeticsmarket,wethinkgrowthwillremainfirmdrivenby demand for premiumisation. We believe global luxury brands will continue to gain market share in C

19、hina as eCommerce helps them capture trade-up demand from lower tier cities without the need toopenofflinestores,butthatcompetitioninthemasssegmentwillintensifyasbrandshaveeasier access to distribution channels.EVIDENCEUBS Evidence Lab surveyed 1,666 women across 16 tier 1-4 cities in China in Augus

20、t 2019. The surveyshowsthat62%ofconsumersarelookingtospendmoreonskin-careand51%formake-up inthenext12months.Thenumberonereasontobuymorecosmeticsortochangethebrandthey use is both to trade-up to a premium product. Looking at the Korea cosmetics market history as a case study, only a few Korean brands

21、 were successful in building a premium brand and foreign brands market share increased from 23% in 2002 to 27% in 2011. Este Lauders CEO recently commented about China that social media allows the company to execute national marketing and distribution whereas previously there was no nationalmarketin

22、g.WHATSPRICEDIN?Global cosmetics companies have generally outperformed Asian companies YTD on the back of strongsalesgrowthinChina.However,sharepriceperformancehasbeenlacklustreduetoconcerns over the sustainability of premium growth and the potential threat from Chinese brands. moreReasons for buyin

23、g more skin-care# of mentions for the brands used the most often0%20%AdditionalstepsinmyroutineIhavemoreneeds Findrightproducts More products availableIhavemoremoneyItseasiertofindproductsIlikeBuysmallquantitiesmoreoftenPricehasgoneup Product becameMore premiumMore premiumSkin-careMake-upSources for

24、 exhibits above: UBS Evidence LabChinaCosmeticsUBSResearchOURTHESISINPICTURESreturn100%90%80%70%60%50%40%30%20%10%-10%Spending intention for the next 12M62%51%Skin-care62%51%SpendmoreAboutthesameSpendlessUBS Evidence Lab survey shows spending intention is strong across all city tiers and age groups

25、in the next 12 monthsReasonstobuymorecosmetics 0%10%20%30%40%MoreMorepremiumAdditionalstepsinmyroutineIhavemoreneeds Findrightproducts More products availableIhavemoremoneyItseasiertofindproductsIlike BuysmallquantitiesmoreoftenPricehasgoneupProduct becamecheapereCommerce exposure in China60%50%40%3

26、0%20%eCommerce is now 27% of total cosmetics consumption and is facilitating easier/faster expansion of foreign brands in China without the need to open offline stores10%0%Este LauderShiseidoAmoreShanghai JahwaLGHH(000ppl)China population by age group12010080604020MillennialsGeneration Z and millenn

27、ials represent about 27% of the total population and we estimate about 35% of China cosmetics consumption; Gen Zers are more favourable to local brands but trade-up to premium brand is still their number one reason to change the brand they are usingGen Z0 - 45 - 9Gen Z0 - 45 - 910 - 1415 - 1920 - 24

28、25 - 2930 -3435 - 3940 - 4445 - 4950 - 5455 - 5960 - 6465 - 6970 - 7475 - 7980 - 8485 - 8990 - 9495 -Sources for exhibits above: UBS Evidence Lab, Company data, CEIC, UBS estimatesChinaCosmeticsUBSResearchOURTHESISINPICTURESreturnBrands used most often for 18-24 age group0%5%10%15%20%Lancome Estee O

29、neLeaf Whoo KansUBS Evidence Lab survey shows Gen Zers use relatively more Chinese brands; however, four of the top five brands they use are foreign brandsKorea cosmetics market breakdown26.3 25.1 26.3 25.1 24.9 25.1 26.727.2 26.823.524.625.480%60%40%Foreign brands entered the Korean cosmetics marke

30、t in the mid-90s and gained market share, while domestic brand market share was flat20%0%2002 2003 2004 2005 2006 2007 2008 2009 2010 2011DomesticForeignOthersKorean brands market share within top 20 dept store brands30%625%520%15%10%5%43 Only a few Korean brands were successful in building premium

31、brands, while foreign brands continue to2 dominate the premium market in Korea10%02002 2003 2004 2005 2006 2007 2008 2009 2010 2011Korean m/s within top 20# of Korean brands within top 20 dept store brands0%20%40%60%0%20%40%60%80%GlobalChina29%47%GlobalChina29%47%Global18%Korea10%Korea8%Japan10%Japa

32、n6%Other4%Skin-careOther4%Make-upUBS Evidence Lab survey shows global brand usage rate is higher; we think that, as long as premium demand remains high, global brands will continue to gain shareSources for exhibits above: UBS Research, UBS Evidence Lab, Euromonitor, BeautyNuryChinaCosmeticsUBSResear

33、chKey Findings from the UBS Evidence Lab ChinaBeautySurvey#51return 62% of consumers plan to spend more on skin-care and 51% for make-up in the next 12 months.Trade-uptopremiumbrandisthe#1tobuymorecosmeticsandtochangethe brandthattheyareusingnow.Regardlessofwhethertheconsumeriscurrently usingapremiu

34、mbrand(eg,Lancme,EsteLauder)oralocalbrand(Chando, Pechoin,andHerborist),thenumberonereasontochangethebrandthatthey are using is to trade-up to premium brandsGeneration Z and millennial consumers change brands morefrequentlyTheyaremoreinfluencedbyonlinereviewsandfriendsrecommendationTheypreferChinese

35、productsandareinterestedinmorenaturalproductsBut four the top five brands used most often are foreign brandsAndtrade-uptopremiumbrandisstillthenumberonereasontochangethe skin-care brand that they areusingFormake-up,globalbrandsaremostoftenusedacrossallcitytiersandincome groups. For skin-care, global

36、 brands are often used in upper-tier cities and by higher-incomegroups,whilelocalbrandsareusedmoreofteninthelower-tier cities and among lower-incomegroups.Among the top five brands used most often, four are global brands for skin- care and all five are global brands formake-up.Figure 1: Skin-care br

37、and usedmostoftenFigure 2: Make-up brand used mostoftenLancome Este OneLeaf CHANELLaneige 0%5%10%15%20%25%Este Lancome CHANEL MACYSLGiorgioLaneige Perfect0%5%10%15%20%25%Source: UBSEvidenceLabSource: UBS EvidenceLabThisyearisthefifthiterationoftheUBSEvidenceLabChinaBeautySurvey.However,wehavereboote

38、dthe survey questionnaire so that it better addresses the key questions in the market albeit limiting the YoY comparisonsthisyear.Forexample,previously,wehadprovidedalistofbrandsandaskedtherespondentsto choosewhichbrandsthattheyuse.However,wethinkthismethodlimitsthepossibilityofnewbrandsthatare risi

39、nginpopularitythrougheCommerce.Thus,inthisyearssurvey,weaskedanopenquestiontolistthetop5 brands that the consumer uses most often; then followed up with a brand list to check any other brands that they use to complement the first question.China Cosmetics 18 November 2019Figure 3: UBS Global Cosmetic

40、s Coverage SummaryChina Cosmetics 18 November 2019RatingUBS viewKey findings from UBS Evidence Lab SurveyAnalystLOrealBuyLOralhasbeenoneofthemostagilefirms:ithasinvestedindigital,acquired&globalisedsuccessfulbrandsandinvestedin leading R&D (eg, 3D skin printing). Its organic sales growth outperforma

41、nce to peers has accelerated and we think the aforementionedinvestmentsshouldcontinuetokeepitsorganicsalesgrowthatthetop-end,justifyingLOralsvaluation premium.Webelieveitsstructurallyfastergrowth,sustainableprofitabilityandbalancesheetoptionalitydeserveapremium.LancmeandLOralbrandsrankedtop4inallage

42、groups.LOralscoredthehighestforbeingapopularbrand.Charles EdenFanclBuyWebelievethecompanysuniquebusinessstructure,encompassingcleansingproductsandAttenir,todriveearningsgrowthfromFY18.ThecompanypaidaspecialdividendinFY16andweexpectanupwardtrendinitsannualdividendsfromFY17.The survey suggests positiv

43、e momentum for Japanese brands with Japan ranking as a preferred country of origin rising in most cities and most age groups.Hisae KawamotoKoseBuyStrongChinasalesgrowthsimilartothatofLOrealasitscustomerbaseisexpandingfromlaunchingAlbionbrandinChina online.Decortes usage is higher in younger age grou

44、p and higher income group.Hisae KawamotoKaoBuyWebelievetheequitystoryforKaoincludes1)volumegrowthintheAsiansanitaryproductsbusiness,2)stableprofitgrowth intheJapanconsumerproductsbusiness,and3)potentialforgrowthandmarginimprovementinthecosmeticsbusiness.The survey suggests positive momentum for Japa

45、nese brands with Japan ranking as a preferred country of origin rising in most cities and most age groups.Hisae KawamotoLG H&HBuyWethinkWhoostillhasgrowthpotentialinChina,aspremiumdemandremainsstrong,andweforecasta24%CAGRforLG H&Hs China sales. We are also positive on its premiumisation strategy.The

46、surveyshowsthathigherincomegroupusesWhoomorewhilelowerincomegroupusesSulwhasoomore.Both SulwhasooandWhooscoredpositivelyforbeingapopularbrandbutnegativelyforbeingtrendyorprestigious.Jennifer HanEste LauderNeutralEste Lauder operates the fastest growing portfolio in our U.S. Personal Care coverage an

47、d structurally, we favour ELs portfolio exposure to growing, high margin distribution channels such as travel retail and online platforms where private label risk is low. However, ELs stock price reflects a near full valuation.EsteLauderscoredthehighestforbeingabrandwithgoodmarketingorcelebrityendor

48、sementandforproduct performance.InSkinCare,EsteLauderbrandrated#1inTier1citiesandwasstillrecognisedasaleadingskincare brandinTier2-4cities,whereasitsLaMerbrandonlyscoredfavourablyinTier1cities.Formakeupproducts,EsteLauder,MACandCliniquebrandswereeachrecognisedasmostpreferredandpopularbrandsacrossTie

49、r1to4cities.Steven StryculaP&GNeutralProcterisenteringyeartwoofitsglobalturnaround,inwhichPGhasexhibitedstrongsalesoutperformanceandcategory sharegainsvspeers.SKIIandOlaybrandshavebeengrowingat,accordingtothecompany,fantasticratesinChinaand strong +DD for several consecutive quarters. Innovation in

50、product and packaging and revamped in store display beauty countershavehelpboostPGspremiumskincaresalesperformance.SKIIscoredthehighestforbeingaprestigious/trendybrandandusinghighqualityingredient.SKIIrankedthehighest forgreatperformance.AmongstskincarebrandssoldinChina,SKIIwasonlyratedasatopbrandin

51、Tier1citiesandby higherincomecustomers.SKIIdidnotrankasatopbrandinTier2-4citiessignifyingopportunityforProcterto increasebrandawarenessandavailabilityacrossEcommerceplatformsandortravelretail.Steven StryculaUnileverNeutralUnileversc60%EMexposuregivesitastructuralgrowthadvantageoveritspeers.However,t

52、hecompanyisyettoturnthis advantageintosuperiororganicsalesgrowth.Inaddition,thewithdrawaloftheBoardsplanstosimplifythecorporate structure reduces optionality on meaningful portfolio change in thenear-term.UnileversChinacosmeticsexposureisrelativelysmall.ThesurveyshowsPondsusagerateishigherinolderage

53、group. AHC,aKoreanbrandacquiredbyUnileverin4Q17,throughitsacquisitionofCarverKorea,waslistedasoneofthe brands often used by low income households in tier 1city.Nik OliverPola OrbisNeutralInFY19,weexpectsales/profiterosionatPoladuetoweaksalesinJapandespitestrongoverseasgrowth.Weassumea declineinmarke

54、tshareofbrandsindevelopmentduetoacontractioninthedomesticmarketforhigh-priceditems.The survey suggests positive momentum for Japanese brands with Japan ranking as a preferred country of origin rising in most cities and most age groups.Hisae KawamotoShanghai JahwaNeutralWhile the launch of star produ

55、cts under Herborist may lead to a pick-up in customer traffic, consolidation of department store/supermarket channels could affect short-term revenue growth. Products under GF are in transition, as the brands adjustment will take time. We expect channel competition to continue in the short run.Herbo

56、ristrankedfirstbasedonavailability/lowpricing/useofnaturalingredients/promotions&discounts.Chinaranking asapreferredcountryoforiginroseinmostcitiesandagegroupsandconsumersanswereddomesticbrandsperform better than international brands.Crystal XuAmorepacificSellAmore is investing (marketing and store

57、expansion) and restructuring (SKU optimisation, Aritaum renovation, and cost cuts) for a recovery, but given increased competition and its mass-segment focused brand portfolio, we think a recovery remainsuncertain.Sulwhasoo scored the highest for being a product with great performance by younger age

58、 group. Both Sulwhasoo and Whoo scored positively for being a popular brand but negatively for being trendy or prestigious.Jennifer HanShiseidoSellWeremainconcernedabout:1)aslowerpaceofsalestoJapanesecustomers;2)slowergrowthinChinasalesthanatLOral and3)highexposuretoHongKong,whichmeansthecompanymayb

59、eaffectedbytheunreststhere.Weattributeslower salesgrowthtocompetitionandtomacroeconomicfactorsandexpectJapansalesgrowthtoslowrelativetoFY17FY18.Shiseido scored the lowest as a brand with good marketing. Shiseido was ranked top 5 across all tier cities.Hisae KawamotoBeiersdorfSellWe think the low sin

60、gle digit growth in Beiersdorfs largest brand Nivea makes the company vulnerable to a slowdown elsewhere. In the long-term, we believe Beiersdorf faces a top-line vs margin trade-off as it lacks the scale in EM/digital that it needs to stay competitive.The survey shows NIVEAs usage rate is higher in