2013-11-15 | Yahoo Finance
Thirty years ago, Chinese women had few choices for eye shadows, lip colors and foundations. But thanks mostly to one woman, the Chinese cosmetic industry was born and has grown to become second only to the U.S. in beauty-product sales in the world.
Yue-Sai Kan, a 1980s Emmy-award winning Chinese-American lifestyle host on China Central Television and PBS, used her celebrity status and fashion sense to introduce Chinese women to the world of makeup and skin care. In 1992, she took the opportunity one step further by launching her own brand, Yue Sai, the first global Chinese brand of products designed specifically for Asian women. She's become so renowned in China People magazine dubbed her "the most famous woman in China."
“When we came in it was an amazing thing,” she says. “We had real girls at counters, teaching you how to use makeup and how to use skincare and how to correct your facial features with makeup techniques.”
Her products were not only unique to Chinese women’s skin tones, but they integrated many herbs indigenous to the country. At the same time, they promoted the Chinese holistic approach to beauty, linking inner beauty to external beauty. Yue-Sai Kan rose to such an icon level that fans soon adopted her signature Dutch bob hairstyle and took to calling her the “cosmetics queen of China.” The nation even has a postage stamp bearing her image.
It was a revolution that quickly evolved into a multi-million dollar enterprise. By 2003, Yue Sai cosmetics was ringing up nearly $50 million in annual revenue. A year later, L’Oreal, the giant in the global cosmetics industry, snapped the company up at an undisclosed price.
Today L’Oreal still dominates the world’s cosmetics industry and is a leader in China with L’Oreal Paris, Maybelline, Yue Sai and another 17 other brand names. Along with American skin-care lines Olay and Mary Kay, the three represent 12.5% of cosmetic sales in China, according to market-research company ResearchMoz. Also competing for market share are U.S.-based Estee Lauder and Japan’s Shiseido.
As part of L’Oreal’s luxury-products division, Yue Sai went deeper into researching active ingredients found in traditional Chinese medicines beneficial to the skin. This back-to-nature approach has become a common practice across the beauty industry.
“These products use extremely interesting Chinese herbs,” Yue-Sai Kan says. “If I say I’m putting chrysanthemum into a cleansing liquid, the Chinese don’t need me to tell them it helps to clean your skin because chrysanthemum is a cleanser. We drink it, we wash with it.
“For the Chinese, using Chinese herbs in a Chinese name brand is a very natural thing to do,” she says.
The Ganoderma Vital Essential, introduced in 2007, quickly became the flagship of the brand, according to the company. The skin cream contains a unique extraction of Ganoderma, a rare fungus known for its stimulating properties and even used to treat cancer in China.
“We found that Ganoderma, this very special mushroom, when extracted in a very precise way, can bring powerful vitality and youthful vitalizing benefits to the skin,” says Stephane Wilmet, Yue Sai brand manager.
Ganoderma is now found in other Yue Sai products, such as the Youth Preserving Moisturizer. At roughly $35 a jar, that and other herb-based products drove Yue Sai line’s sales 20% higher last year. L’Oreal is banking on those and revolutionary products such as a custom-made moisturizer created out of ginseng, Cordyceps and white fungus to power double-digit growth again this year.
But Yue Sai cosmetics, long a market leader in China, faces new challenges in the millennium as it keeps its products modern and staves off competition.
“The name of the game in China today is reaching out and connecting to the younger consumers,” Wilmet says. “And they’re much more sophisticated and more savvy. They’ve travelled, their expectation in beauty and retail is much higher than that of the previous generations.”
Though China’s economy has suffered in recent years, the so-called “lipstick effect” is still very much in favor as Chinese women continue to prioritize their skin and makeup needs. Brands like Yue Sai, however, will have to continue to distinguish themselves from the growing crowd of cosmetic players.