PCHI Series Interview- Chen Shaojun

It is a great honor for us to participate in the 4th PCHI Industry Leaders Summit to experience and learn the latest developments in personal care and cosmetics. This time I have the opportunity to invite Chen Shaojun, chairman of the China Fragrance, Flavor and Cosmetic Industry Association. The ECHEMI platform is the world's leading B2B e-commerce information platform in the chemical industry. It is serving more than 5,000 suppliers and more than 60,000 overseas buyers worldwide.

Q: Chairman Chen, could you introduce our China Fragrance, Fragrance and Cosmetics Industry Association to more than 60,000 buyers on the ECHEMI platform?

A: Our association was established in 1984, and it is directly and closely related to the reform of the state ministries and commissions in the China-based era. Our association was born out of the Daily Chemical Bureau of the Ministry of Light Industry. The association was originally mainly engaged in work related to standards, technology, and production licenses. The TC257 of the National Standards Committee is in the association. I am the director of the National Fragrance, Flavor and Cosmetics Standardization Committee. The association currently has more than 1,400 member units, which mainly include two industries: one is fragrance and essence, and the other is cosmetics. The association mainly focuses on policies, regulations and technical aspects, and relatively few market aspects. In fact, this characteristic is also reflected in the members of the association. Our member units basically include large enterprises across the country, especially cosmetics enterprises, and relatively few small and medium-sized enterprises. The reason may have a lot to do with the content of our work. For example, small and medium-sized enterprises pay more attention to sales and do not pay enough attention to regulations. Anti-foreign-funded enterprises and large companies attach great importance to regulations. Foreign capital such as Estee Lauder, Shiseido, L'Oreal, domestic companies such as Garan, Shangmei, and Pechoin are well-known Enterprises are members of the association.

The association is currently in close contact with the international community. We are a full member of IFRA and IOFI, two associations of fragrances and fragrances. At the same time, we maintain close contact with PCPC in the United States, KCA in South Korea, JFFMA and JCIA in Japan. Secondly, it has established close ties with dozens of other associations, including Australia, New Zealand and other places. The association also has an international department that is responsible for communication and contacts with these international organizations.

Q: 2020 is a special year. In the first half of the epidemic, everyone had to face masks when they went out. There were endless reports about the sharp decline in sales of cosmetics, especially color cosmetics. What are the effects of these on Chinese cosmetics companies?

A: For the cosmetics industry, it should be said that the third quarter was generally impacted, except for disinfection and online sales. But the rebound in this industry is also quite optimistic, which can be said to be better than the rebound in other domestic industries. Not only has it exceeded the GDP growth rate of the national economy, it is also significantly better than other industries such as textiles, automobiles, catering, etc. Many cosmetics companies such as L'Oreal have a positive growth of more than 30, so the vitality and resilience of this industry are relatively strong. There are more reports of lipstick in many product categories, and the decline in cosmetics sales is also inevitable. The original consumption tax for cosmetics was 30%. In October 2016, after ten years of hard work by our association, this consumption tax was finally reduced. The consumption tax on ordinary make-up products was reduced to zero, and only the very high-end products were taxed. This finally ushered in the explosive growth of make-up products. It is conceivable that the 30% consumption tax in the past was unaffordable by any company. In fact, L'Oréal has been making a loss and insisting on this category, and some other companies have admitted that they cannot afford such a high tax. Speaking of the decline in cosmetics sales in this epidemic, it is totally understandable. This is also an objective situation. Wearing masks when going out will inevitably cut off consumption on the consumer side, thus ushering in a cliff-like decline. But with the epidemic under control, sales have also rebounded significantly, which is also a manifestation of people's spending power. Therefore, as long as China's economy does not undergo a major reversal, the cosmetics category is expected to rebound faster than the skin care category.

Q: As consumers around the world pay more attention to their own health, including the psychological and physiological double pressure faced by modern life is increasing. What are the characteristics of the Chinese cosmetics industry in terms of production technology? Whether to introduce GMP standards? Or other standards in the cosmetics industry?

A: It can be summarized as follows: China's cosmetics regulations are the strictest in the world. The problem we are facing now is not that laws and regulations are not strict, but that some companies do not follow the law. The GMP standard is now a recommended standard, and it is the same all over the world. For example, the Dead Sea mud factory of AHAVA in Israel. In fact, their factory standards are not up to the standard for domestic testing, but they are still very good in the world. , Consumer feedback is also good. However, their ingredients have not been toxicologically tested and safety data have not been provided. Up to now, our association has prohibited the import of their products. After the new domestic regulations were issued, the requirements in this regard have become stricter.

One is whitening as an example. Now it is stipulated that there must be functional whitening factors, and corresponding security inspection reports and toxicological test reports can be provided to focus on the selling points of whitening. This is a big challenge for national enterprises, and our national enterprises basically do not have this ability in this respect. But from another aspect, it also shows that our country is paying more and more attention to the safety of cosmetics.

The second is to increase penalties. The current penalties not only punish companies, but also directly punish corporate legal persons five to ten times the sales, which increases the deterrent force. So many people now think that the concept of national cosmetics is actually wrong. However, it cannot be ruled out that some small companies fail to comply with laws and regulations due to survival issues. At present, there are more than 5,300 companies with production licenses in the country. Guangdong accounts for 2,300, and Baiyun District has 1,358. From this number, we can see that there are many small companies. These companies are not capable of ensuring complete regulations and security inspections. department. So this time the regulations will inevitably deal a huge blow to these small companies, so China's current industry concentration is far from enough. Now everyone's lack of confidence in national companies is actually caused by some small companies. Some large companies, such as Osman and Proya, have had no problems with listed companies in recent years. At this point, I think it is necessary to build confidence in national enterprises.

Q: Nowadays, the marketing method of live broadcasting is extremely popular, and all major fast-selling brands, especially the cosmetics industry, have basically tried this method. Do you have any views on online live marketing, or the expansion of online drainage marketing? Are you optimistic about the future industry prospects of this model?

A: If you look at the entire process from cosmetics production to marketing, I am a firm technical school. I believe that product quality is the core competitiveness. But if we talk about marketing issues aside from technical issues and production issues, I have always said that the cosmetics industry has a characteristic, its rigidity index is relatively weak. The cosmetics industry needs "storytelling". Need to do publicity. The cost of production in the cosmetics industry is not high, but the cost of sales is high, relying on brand accumulation. The reason why foreign-funded enterprises occupy the high end of the choices of domestic consumers, although I admit that their technology and various aspects have many places beyond ours, but more importantly, it is the brand effect. This effect depends on brand accumulation and marketing. Marketing plays an important role in the cosmetics industry, and it also changes with the times.

First, marketing was originally offline. With the rise of the Internet, more than half of online distribution has gone. My opinion is that online and offline will still coexist in the future, because offline can also bring people a sense of experience and pleasure. The second is that many consumers will choose to go online to experience the color test, write down the model and switch to online discount purchases. Therefore, the Internet's erosion of physical stores is inevitable, and the form of the Internet is also constantly changing, including the current Internet celebrity marketing. The new generation of consumer concepts has given birth to Internet celebrities and they are also targeted at such specific groups. Internet celebrity marketing is a new way to bring goods, but I don't think it will last for a long time. Its emergence is related to the epidemic situation and the consumption philosophy of young people. In the future, other new forms may also emerge. For example, VR technology and AI technology may bring us a new trend of personalized customization, and the development of new technologies will bring about more profound changes in marketing methods. This is because: the essence of the former is what others are buying? The essence of the latter is what do I need to buy?

Thanks to Chairman Chen for his wonderful answers. The summit was guided and supported by the China Fragrance Industry Association. We also look forward to you and the association continue to provide more guidance and suggestions to the industry and related companies in the future. Finally, thank you again for receiving the interview with ECHEMI!