Shanghai Shangmei Cosmetics Co., Ltd. (hereinafter referred to as “Shangmei group”), the parent company of Han Shu, Yiye and red elephant, is preparing to list in Hong Kong.
In the domestic skin care industry, the listing plan of Shangmei group can be described as “getting up early and arriving late”. As an old domestic product, Guangdong Marubi Biotechnology Co.Ltd(603983) (603983. SH), yunifang parent company Syoung Group Co.Ltd(300740) (300740. SZ), Proya Cosmetics Co.Ltd(603605) (603605. SH) in the same period as Shangmei group have landed in a shares; Winona’s parent company Yunnan Botanee Bio-Technology Group Co.Ltd(300957) (300957. SZ) was established late and has been listed at present.
From the initial stage of brand establishment, Shangmei group has paid great attention to marketing, which also brings some hidden dangers to the company.
the former “first wechat business”
impact on “the first domestic beauty stock in Hong Kong stocks”
On January 17, 2022, Shangmei Group officially submitted a prospectus to the Hong Kong stock exchange, impacting the “first share of Hong Kong stocks and domestic cosmetics”.
According to the prospectus, in 2019, 2020 and the first three quarters of 2021 (reporting period), Shangmei group achieved revenue of RMB 2.874 billion, RMB 3.382 billion and RMB 2.596 billion respectively; The adjusted profits were 114 million yuan, 265 million yuan and 285 million yuan respectively.
At present, the company implements multi brand strategy, and the main brands supporting the company’s performance are Han Shu, Yiye and red elephant. during the reporting period, these three brands contributed 86.6%, 91.8% and 91.1% of the company’s total revenue. Among them, Han Shu has the highest proportion, which has increased to 43.8% in the first three quarters of 2021.
The listing of Shangmei group is quite bumpy. In 2002, the company was established; Han Shu, a cosmetics brand, was founded in 2003, Yiye, a skin care brand, was launched in 2014, and the mother baby brand red elephant was launched in 2015.
In October 2015, LV Yixiong, the founder and CEO of Shangmei group (the company was called “Shanghai Hanshu Cosmetics Co., Ltd.”) sent a document in the circle of friends that the company will officially change its name to Shanghai Shangmei Cosmetics Co., Ltd. from November 1, and plans to complete its listing in 2018. Obviously, this wish has not been realized.
In February 2021, the company signed a listing guidance agreement with Citic Securities Company Limited(600030) to start the process of A-share listing, but there was no result.
For a long time, Shangmei group has paid great attention to marketing.
20 years ago, the “Korean wave” prevailed in China. In order to enhance the publicity effect, many companies labeled their products with Korean labels, and Shangmei group is one of them.
In 2012, in order to fully build the “Hanshu” brand, Shangmei group set a star single product strategy, hired Lin Zhiling as the image spokesman and invested 150 million yuan in TV advertising.
In 2013, Shangmei group spent 240 million yuan to name “if you are the one”. In 2014, it again spent 500 million yuan to renew the contract with “if you are the one”, which set a new record of Chinese TV advertising at that time.
Similarly, in 2014, “wechat business” rose, and Han Shu established a wechat business division. Chen Yuxin, then CEO of Han Shu wechat business, claimed that since becoming a wechat business in September 2014, Han Shu has “sold 100 million in 40 days” in the wechat channel. This data makes Han Shu known as “the first wechat business”.
In 2015, Han Shu claimed to have a wechat agent team of 100000 people, and the rapid expansion caused many problems. Agents distributed at all levels, and even questioned “MLM”.
Today, e-commerce has become a competitive place for consumer goods, and Shangmei group also focuses on online layout. During the reporting period, its online channel revenue accounted for 52.4%, 75.2% and 72.9% of the total revenue respectively
emphasizing marketing and neglecting R & D
frequent product quality problems
The marketing oriented style of Shangmei group has been continued. The prospectus shows that during the reporting period, the company’s sales and distribution expenses mainly include: marketing and promotion expenses related to channel costs and advertising, employee welfare expenses related to sales and distribution employees, transportation expenses, sales and distribution expenses accounted for 46.1%, 45.4% and 43.1% of the total revenue respectively. In other words, Shangmei group takes nearly half of its revenue as sales expenses every year.
Among them, marketing and promotion expenses accounted for the highest proportion. During the reporting period, the company’s marketing expenses were 803 million yuan, 1.07 billion yuan and 735 million yuan respectively, accounting for 60.6%, 69.6% and 65.7% of sales and distribution expenses respectively.
In contrast, the “China Japan dual scientific research system” repeatedly emphasized by Shangmei group is much thinner. During the reporting period, the company’s R & D costs were 82.9 million yuan, 77.4 million yuan and 71.7 million yuan respectively, which is only one tenth of the marketing and publicity expenses, accounting for 2.9%, 2.3% and 2.8% of the revenue.
Shangmei group pays more attention to sales than research and development. Compared with products, marketing is its “flash point”.
After the Wu Yifan incident broke out in 2021, Han Shu, as the first brand to terminate the contract with Wu Yifan, earned a wave of goodwill. However, it is worth noting that the spokesman cycle of Han Shu is generally updated every two years, including Lin Zhiling in 2012, Guo Caijie in 2014, gulina Zha in 2016, Jing Tian in 2017 and Tong Liya in 2020. The cooperation between Han Shu and Wu Yifan began in 2019. By 2021, the publicity effect brought by Wu Yifan has been released to a considerable extent. It is a very successful self publicity to terminate the contract decisively at this time node.
the incident also exposed many hidden dangers. The first is the problem of star endorsement. If the spokesperson has an accident, it will cause great harm to the brand, and the probability of termination is not high.
After Wu Yifan’s incident, Zhang zhehan, a popular flow Xiaosheng, also set up a collapse, and Yiye was Zhang zhehan’s first endorsement after his explosion, which was not publicly announced until March 2021. After Zhang zhehan “overturned”, the termination speed of one leaf was a step slower, and the direction of public opinion changed rapidly. At present, a microblog announcing the termination of the contract has closed its comments.
The second is the publicity conversion rate of Shangmei group.
At present, domestic beauty and skin care products generally focus on marketing. In the first half of 2021, Proya Cosmetics Co.Ltd(603605) sales expense rate exceeds 42%, Guangdong Marubi Biotechnology Co.Ltd(603983) sales expense rate exceeds 36%, Yunnan Botanee Bio-Technology Group Co.Ltd(300957) sales expense rate exceeds 45%. however, in the top 10 list of tmall’s double 11 skin care products, Han Shu and Yi ye, once on the list, have gradually disappeared and have not been on the list for four consecutive years.
Finally, it is also the most concerned point by consumers – product quality.
In 2016, Shanghai Hanshu Cosmetics Co., Ltd. commissioned three batches of Hanshu sunscreen and other products produced by Lizi Cosmetics Co., Ltd. in Suzhou Industrial Park. The actual detected ingredients were inconsistent with the product approval and identification.
In 2017, Han Shu was found to be unqualified in the item of Voidage in the package of whitening special care set in the special supervision and random inspection of cosmetics commodity packaging in Shanghai.
In 2019, the market supervision and Administration Bureau of Xiamen issued the third phase of cosmetics inspection sampling information in 2019, showing that the quality of a group of Han Shu Bu Shui repair mask was not qualified. The preservative (phenoxy ethanol) outside the label was detected in the batch product, which was inconsistent with the product label identification.
In June 2021, Shanghai market supervision and administration randomly inspected 1184 batches of commodities sold and produced by 509 enterprises, of which 119 batches of commodities were unqualified, and one leaf brand was listed on the list.
