M&A Analysis on Cosmetic Industry in China 20081. The background analysis over status quo and M&A in cosmetic industry of China.
Cosmetic industry has been evolving into full-fledged market in which flourishing brands emerged. Among 300 brands, 20 of them have taken the leading position and joint venture took 80% of market share. The preponderant manufacturers in China are located along the Eastern Costal line and inland cities. It shares 90% as nation while sales value is above 60%. In respect of types, skin-care products is topping the list sharing 35%, hair-care products sharing 28%, make-up products sharing 29%, others being perfumes. According to insiders, total sales will reach to RMB 80 billion and level up at 12.9% annually. Proportion of output of Chinese cosmetics Following decade of years' development, China has emerged as the eighth cosmetic market in the world and second in Asia . The competition within the sector has been pushing the cosmetic industry into the combination of industrialization, market and internationalization. In 2005, the market scale has reached to RMB 46 billion. Retail sector has been RMB 33.05 billion above the limit growing 19.1%. 2. M&A trend of cosmetic industry in China The personal spending on cosmetic is lower than the industrialized nation which is US$35-70. In that sense, the potential in China 's market is large. With economy expanding and mass livelihood improving, spending power in this product will grow. The golden opportunity is introduced with consumption tax. The new tax policy laid out by the State Administration of Taxation painted a rosy picture for less competitive brands while upscale product was not mentioned in this policy. Especially in rural market, domestic ones stood a bargaining position with foreign ones based on advantage in price. Upon the analysis of us ., this has offered momentum and opportunity for capable domestic companies to develop. With the purpose of staking out more territory and lowering cost in marketing channel, foreign capital will gear in M&A to domestic ones and production line as well so as to push forward a broad portfolio of products. In 20 years to come, the market capacity shot at RMB50 million at least which means more room is there to be scooped out and conducive to development among domestic brand. The outlook in this sector remains clouded though, one thing is certain that domestic companies need to sharpen their edge as facing eroded market eaten out by foreign counterparts. 