China's Perfect Diary gives cosmetics world a makeover

Beijing

WITH chat groups, video streams and low prices for foundation, China's Perfect Diary has emerged from nowhere four years ago to become a cosmetics giant for the digital age, trailing only L'Oreal and LVMH in the world's No 2 market for make-up.

The Guangzhou-based beauty unicorn is now setting its sights on a Hong Kong initial public offering (IPO).

Before that, it is driving into South-east Asia, targeting more millennial social media users. Although still a global minnow compared with powerhouse L'Oreal, Perfect Diary now has 4 per cent of the Chinese market for colour cosmetics, according to Euromonitor 2019 data.

That ranks it joint-third with Estee Lauder's MAC, beaten only by luxury giant LVMH's Christian Dior and three L'Oreal brands that stack up to more than 20 per cent.

The research firm estimates that the overall market more than doubled from 2015 to nearly US$8 billion in 2019 - and will mushroom to almost US$15 billion in 2024 as China's middle class expands.

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Perfect Diary's rise has been fuelled by blending low prices and social media platforms such as Douyin - TikTok for China - and WeChat, collecting customer data it can use to design and roll out new products rapidly, helped by charismatic influencers with huge online followings, such as "Lipstick King" Li Jiaqi. Yelling his catchphrase "All girls, buy it!", Mr Li has given Perfect Diary products rave reviews in popular live streams on giant e-commerce retailer Alibaba's Taobao platform.

Analysts said Perfect Diary's rise has been boosted by younger, Generation Z consumers' willingness to embrace homegrown products. "Gen Z is growing up in a prosperous China," said Mei Xin, analyst at Huatai Securities.

Founded by entrepreneur Huang Jinfeng's Yatsen E-Commerce in 2017 as an online, China-focused operation, the company now also has more than 150 stores in China - with a target of 200 this year - as well as international aspirations.

"Yatsen E-Commerce has always had a vision of creating a domestic beauty brand with true international influence," said Mr Huang.

In recent months, it has opened its own online store for South-east Asian countries including the Philippines, Singapore and Malaysia. It also has an official store on Lazada, Alibaba's South-east Asian arm.

"We listen to users and we immediately carry out research on products they want," said Mr Huang, citing the example of data gathered during the Covid-19 pandemic that resulted in a new pressed face powder. "Consumers need to fix their makeup more often as the face mask takes off makeup," he said.

Perfect Diary currently uses contract manufacturers including Milan-headquartered Intercos, which has a factory in China that supplies L'Oreal and others. Since March it been building its own plant in Guangdong, due on line by end-2021.

Perfect Diary does not disclose financial performance or liabilities, nor say whether it is profitable.

Already backed by investors like Hillhouse Capital, Sequoia Capital, Tiger Global Management, Boyu Capital and Chinese Culture Group, Yatsen is currently raising a pre-IPO round that values it at around US$4 billion, according to two people with direct knowledge of the matter.

It has also appointed Goldman Sachs and Morgan Stanley to lead a Hong Kong IPO that aims to raise up to US$500 million by the end of 2020.

The IPO valuation could likely reach US$5 billion - big, yet dwarfed by L'Oreal's market value of over US$180 billion. REUTERS