Summary of Key Points from the Conference Call on China Cosmetics Industry Industry Overview - The conference focused on the cosmetics industry in China, particularly the upcoming Double 11 Shopping Festival, which runs from October 9 to November 14, 2025. This event is expected to account for over 60% of the fourth quarter's online Gross Merchandise Value (GMV) and approximately 20% of the full year's GMV based on historical averages [1][2]. Growth Expectations - **GMV Growth Targets**: - Taobao/Tmall and Douyin are targeting year-over-year GMV growth of 20-25% and over 40%, respectively. The cosmetics segment is expected to grow at a slower rate of around 20% for Taobao/Tmall and approximately 30% for Douyin [2][12]. - Actual sales growth may exceed expectations due to a decline in return rates, with Tmall's return rate expected to drop from 15-20% last year to below 15%, and Douyin's from 35-40% to about 25% [2][15]. Promotional Strategies - **Extended Promotion Period**: - The Double 11 event will be the longest ever, lasting 31-57 days compared to 29-35 days last year. Douyin, JD, and Tmall have extended their promotion periods by 22, 8, and 2 days, respectively [3][14]. - **Discount Mechanisms**: - Platforms will focus on instant discounts (e.g., 15% off for all products) rather than spend-based discounts, leading to lower final purchase prices [3][15]. Brand Performance Insights - **Local Brands**: - Local brands such as KANS and Shanghai Jahwa are expected to outperform, with Jahwa's Herborist brand potentially achieving triple-digit growth off a low base [5][17]. - MAOGEPING is projected to deliver 40-50% growth, supported by a strong product matrix and omni-channel strategy [17]. - **MNC Brands**: - Premium multinational brands like Lancome and Estee Lauder are expected to maintain solid growth of 10-30%, while mass brands such as L'Oreal Paris and Olay may struggle with growth rates below 10% [5][17]. Market Dynamics - **KOL Influence**: - Top-tier Key Opinion Leaders (KOLs) are losing market share to mid and lower-tier KOLs, who are offering better terms to brands. The expert noted that top-tier KOLs are setting lower targets for livestreaming [7][15]. - **Merchant Support**: - Tmall/Taobao is expected to favor multinational corporations (MNCs) due to its focus on 88VIP users, while Douyin allocates traffic based on brands demonstrating high incremental growth [6][15]. Conclusion - The upcoming Double 11 Shopping Festival is poised to be a significant event for the cosmetics industry in China, with expectations of strong growth driven by extended promotional periods, aggressive pricing strategies, and a shift in KOL dynamics. Local brands are likely to outperform their multinational counterparts, reflecting changing consumer preferences and market conditions [1][5][17].

Summary of China Cosmetics Monthly Tracker - August 2025 Industry Overview - The report focuses on the China cosmetics industry, specifically analyzing the performance of online sales on platforms such as Tmall, Taobao, and Douyin for both local and multinational companies. Key Highlights GMV Performance - In August, the online GMV (Gross Merchandise Value) growth for cosmetics decelerated to **11% year-over-year (yoy)**, down from **14% yoy** in July. This was influenced by a **20% yoy** growth on Douyin (compared to **32% in July**), while Tmall/Taobao experienced a **1% yoy decline** (improved from **-9% in July**) [1][2] - The combined GMV growth for July and August was **13% yoy**, an acceleration from **8% in Q2 2025** due to an easier comparison base [1] Brand Performance - Local brands regained market share from multinational corporations (MNCs) post the 618 shopping festival. Notable growth figures include: - **Marubi**: **91% yoy** - **Mao Geping**: **79% yoy** - **Shanghai Jahwa**: **59% yoy** - **KANS**: **55% yoy** - **Proya**: **9% yoy** [2][16] - In contrast, **Giant** experienced a **7% decline** due to the absence of top-tier KOLs (Key Opinion Leaders), which are expected to return in September-October [2][17] - MNCs generally saw larger yoy declines in August compared to July, attributed to a tougher comparison base and likely order front-loading to the last 618. Notable declines include: - **Estee Lauder**: **-6% yoy** (with La Mer down **-19% yoy**) - **L'Oreal**: **-8% yoy** (L'Oreal Paris down **-24% yoy**) - **Shiseido**: **-19% yoy** [2][18] Market Share Dynamics - Tmall/Taobao lost **4% market share** to Douyin in August compared to July, with most brands shifting their focus to Douyin [15] - The average GMV contribution for MNCs was **54% from Tmall/Taobao** and **46% from Douyin**, while local brands had a more balanced contribution [15] Livestreaming and KOL Impact - Giant Biogene's management expressed confidence in the resumption of KOL activities ahead of the Double 11 shopping festival. A notable event included top-tier KOL **Jia Nailiang** generating over **RMB 25 million** in GMV within two hours during a livestream on September 8, boosting Comfy's Douyin GMV growth to **119% yoy** [3][7] Other Observations - The overall GMV decrease of **1%** in August was primarily driven by a **20% yoy** decline in volume, although this was partially offset by a **23% yoy** increase in average selling price (ASP) [10][12] - Local brands showed resilience with strong growth figures, while MNCs struggled to maintain their market positions amidst increasing competition from local players [16][19] This summary encapsulates the key insights from the August 2025 tracker, highlighting the competitive landscape and performance trends within the China cosmetics industry.

Investment Rating - The report maintains a consistent sector preference, favoring sports brands, diversified retailers, dairy, beverages, and restaurants, while being less favorable towards apparel/footwear OEM, furniture, projectors, discretionary small kitchen appliances, jewelry, and non-super-premium spirits [11]. Core Insights - Consumption in China has shown signs of recovery, with retail sales growth improving to +4.6% year-over-year in 1Q25, and companies in the coverage reporting an average growth of 14% compared to 12% in 4Q24 [1]. - Despite the positive growth, companies remain cautious about the outlook due to ongoing volatility and external factors such as US-China tariff developments impacting consumer confidence [2][1]. - Margin performance in 1Q25 was mixed, with some companies benefiting from favorable raw material prices and cost control, while others faced risks from marketing investments and competition [1]. - Companies are generally maintaining disciplined pricing strategies and healthier inventory levels, although some categories like spirits and sportswear are experiencing challenges due to demand pressures [1]. - The impact of tariffs on earnings and consumer sentiment is significant, with companies cautious about the second half of 2025 amid uncertainties [2]. Summary by Sections Key Findings from 1Q25 Results - Retail sales growth improved to +4.6% year-over-year, with coverage companies reporting an average growth of 14% [1]. - Labor Day consumption growth accelerated, indicating a potential rebound in consumer spending [1]. Expectations for 2Q25 - Companies are cautious about the outlook for 2H25 due to tariff uncertainties, although those with market share gain opportunities may be more resilient [2]. Sector/Stock Preferences - Preferred sectors include sports brands, diversified retailers, dairy, beverages, and restaurants, while least preferred sectors include apparel/footwear OEM and furniture [11]. Macro Data Points - The report notes that macroeconomic data points are solid, but ongoing tariff developments and policy support need to be monitored [11]. Valuation Methodology - The report emphasizes the importance of understanding the valuation methodology and the potential risks associated with it [11].