Posted by Laura Fitch on November 24, 2009 05:46 PM
When it comes to cosmetics in China, the proof is in the packaging.
Domestic Chinese companies are increasing their prices to compete with foreign brands, but are not upgrading their products -- just beautifying the packaging. The beauty business is booming in China's urban centers, where cosmetics are considered an affordable luxury item by both male and female white collar workers.
Luxury brands such as L'Oreal, Chanel, Clinique, and Shiseido have effectively billed themselves as passports to beauty for millions of young urbanites with money to spend and a taste for fashion. The market has traditionally been dominated by foreign brands. However, now Chinese companies are catching on to the power of packaging. Yutaka Matsui, executive vice president of Inoac Packaging, told Plastics News:
"One year ago a lot of Chinese companies came to my booth and said ‘We like the packaging but it is too expensive. (But now) they see the foreign brands selling for a lot more in China… (and) they want to sell for higher prices. One easy thing is more gorgeous packaging.”
Matsui noted that all of his company's business previously came from foreign cosmetics companies, but now one third of his business comes from mainland China. If domestic companies prove adept at creating eye-catching packages that rival those of foreign brands, the next challenge will be to create commercials and advertisements that appeal to their target markets in China.
It appears that the dominant foreign brands are in for a new and significant challenge from the hometown beauty brands. Let the packaging pageant begin!