“If you protect yourself from the sun, you will be whiter than others. If not, you will be uglier,” so said a sun hat advertisement last month on Douyin from the multi-billion dollar Chinese sun protection brand, Beneunder.
Beneunder has capitalised on perennial belief across much of Asia that fairer skin is symbolic of a higher social class, away from working in the fields and rural poverty associations. While whitening skin creams are the best known products to support the belief, outrageous claims have come and gone such as coconut juice that whitens your skin.
Nine years ago, Beneunder started selling premium umbrellas which claimed to block 99% of UV rays, soon establishing itself as the ‘Hermès of umbrellas’. The company was quick to capitalise on its reputation and diversify its range, with top selling products now including sun-protection clothing, face masks and sleeve gloves.
Increasing affluence and changing trends are seeing Chinese consumers spend more time in the sun. They’re holidaying more, with a big jump in those camping and in the outdoors. They’re playing more sport and choosing more lifestyle pursuits that are outside. On top of that, the 58% fall in PM2.5 air pollution over the past decade has made China’s sun harsher.
As a result, China’s sun protection industry is booming. Sun Protection notes on RED (Xiaohongshu) grew 56% last year, and 115% in the first four months of 2022. Sales of related products grew an average of 80% across Tmall and JD last year. Sunscreen has been among the fastest growing categories for skincare, yet many consumers are opting to use less of the cream on their skin, choosing ‘less obtrusive’ protection such as Beneunder’s umbrellas and clothing. Sun protection apparel is tracking to grow from ¥61 billion ($9b) last year to ¥96 billion ($14b) in 2026 according to CIC.
So when Beneunder filed for an IPO in April, things should have been promising. But it didn’t quite go that way. In June, the official newspaper of the Chinese Communist Party, the People’s Daily, slammed the company for excessive spending on marketing and underinvesting in research & development. Investors have also been pressuring Beneunder to halve its $3 billion valuation from earlier this year.
Beneunder follows a classic example of many Chinese disrupter brands. When tech companies fell out of favour with Beijing, investors pivoted towards consumer brands which became awash with cash. Much of this cash was spent on marketing – not strategic marketing investments, rather transactional initiatives aimed at quick sales.
Beneunder’s marketing costs grew from ¥37 million ($5.5m) in 2019 to ¥586 million ($86.8m) in 2021 – 9.6% of revenue to 24.4%. During those three years R&D investments dropped from 5.3% of revenue to just 3.0%.
The focus on quick-hit marketing over longer term investments is all-to-common for new, high profile consumer brands in China. In many cases, these brands source products through contract manufacturing, making them easy to replicate for other brands. As a result, brands then try to stand out through their marketing, not their products.
A lot of the marketing by these disrupter consumer brands isn’t overly sophisticated. It typically focuses around transactional spending on KOLs (Key Opinion Leaders) and livestreaming. The big problem with sustaining such a strategy is more and more brands are following a similar path, pushing up the costs. The cost of a KOL on RED grew 50% last year, with increases on Douyin and Kuaishou not far behind.
Former darling of China’s beauty category, Yatsen’s Perfect Diary, ran into challenges utilising a comparable strategy. In 2020, marketing costs equated to two-thirds of revenue. But when the same marketing initiative costs as much as 50% more the next year, you have problems, hence Yatsen’s share price dropping from a high of $24.55 to as low as 51c in less than 18 months.
China Skinny tracks many disrupter and DTC brands in China. Whilst most bedazzle with big-spending marketing campaigns in the early years, less than half are still around after five years. But they haven’t left without making an impact, forcing brands across the board to spend more on marketing to get mindshare.
Most sustainable and profitable brands are those who balance the quick hit and acquisitional marketing with longer-term brand and loyalty building. Sustainable brands also invest in research and development to create products which can be genuinely differentiated – as well as being relevant for Chinese consumers.
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