text | Qingzhao
In early April 2024, the local beauty brand "Mao Geping" evolved from the personal IP of "Makeup Master", transferred to the Hong Kong Stock Exchange and submitted its application form again. Since its first submission in 2016, this is its ninth year of pursuing an IPO. Adjusting the ownership structure and changing the listing location are a series of actions that describe Mao Geping's "obsession" to enter the capital market.
Judging from market performance alone, Mao Geping, a local beauty brand, is not short of money: on the one hand, its performance is still growing steadily, with revenue in the past three years of 1.577 billion yuan, 1.829 billion yuan and 2.886 billion yuan respectively - especially It is against the backdrop of continued involution in the industry that net interest rates can still maintain a slight upward trend; on the other hand, as of the end of 2023, Mao Geping holds 1.14 billion yuan in cash, which is comparable to listed companies such as Fuljia and Marumi with the same revenue scale company.
But the other side of the coin is that in order to go public, Mao Geping acted very eagerly. In January this year, Mao Geping and his wife made three attempts to acquire all the equity of Mao Geping Company held by the Jiuding Group. After the transaction, the Jiuding Group left the company with a return of 10 times its investment in eight years. In order to distance themselves from the shareholders of the "collapsed house", Mao Geping and his wife paid a price of 730 million yuan, which was quickly submitted to the Hong Kong Stock Exchange a month later.
In this article, we will cover the following topics:
●What is the background of Mao Geping’s rise?
●What kind of company is this?
●Why is it so obsessed with the capital market?
Background: Three rounds of success for domestic beauty products Profits
Before 2017, domestic beauty products experienced three major development bonus periods.
The first one is represented by the entry of international beauty brands into the market, a period of market education dividends. In the 1890s, my country shifted from a planned economy to a market economy, and the intensity of reform and opening up also increased from coastal cities to the inland. The rapid economic development trend and open communication attitude attracted L'Oreal, Estee Lauder, Procter & Gamble, Shiseido, and Amore. Pacific Group and others entered the Chinese market. Around the turn of the millennium, the commercial atmosphere of Chinese beauty began to materialize. High-end shopping malls such as New World Department Store, Parkson and Pacific Department Store were filled with fashionable ladies wearing flaming red lips. At this time, Chinese beauty practitioners with a keen sense of smell embarked on the journey of commercialization. In the three years from 1999 to 2002, brands such as Meifubao, Xiangyi Herbal, Zhitang, Kazilan, and Hanshu were launched one after another.
The second one is represented by the alternate rise of live broadcast rooms on different channels, a period of channel transformation and dividends. In 2016, the first year of live broadcast, the first brother and the first sister of the live broadcast competed with Gao Jie for the first time. The huge transaction volume leveraged by the limited-time live broadcast room indicates the huge commercialization space of the live broadcast format. Since then, Taobao, Dou, and Kuai have successively made efforts in the live broadcast business. New brands that have found the corresponding tone in a timely manner and entered the live broadcast room have grown rapidly, and old brands have taken on new life.
’s third dividend period was around 2016. The entry of capital has allowed many beauty companies to enter the fast lane of scale expansion. Under the binary growth rule of obtaining financing and expanding channels, beauty companies in different situations began to gradually stratify, such as Youcui Biotechnology and hedone, which received investment from Sequoia Capital, Perfect Diary, which received investment from Zhen Fund, and Qingsong Fund. The beauty artist and Junpei the Great Demon King are still active in major sales lists. The other side of the beauty feast is cruel enough. Many brands that have not received financing have long been forgotten by the market. According to Tianyancha, more than 25,000 cosmetics companies established in Zhejiang in 2016 have been cancelled, and most of them have not received financing.
Now it seems that Mao Geping, as the leader of domestic beauty products, has accurately captured the dividends of domestic beauty products every time. At the same time that international beauty products entered China, makeup artist Mao Geping became famous for his makeup work on Liu Xiaoqing, the protagonist of the 1994 version of "Wu Zetian". He achieved the initial accumulation of fans and laid the foundation for subsequent commercialization.
In 1998, Mao Geping opened a makeup school; in 2000, Mao Geping launched his own beauty brand and products. In 2016, the founder Mao Gepin, who has strong personal IP attributes, successfully obtained investment from the Jiuding Group under the channel’s emphasis on KOL, and embarked on the journey of capitalization in the same year.However, Mao Geping's smooth and upward development trend also encountered many obstacles at this time. The most intuitive thing is that from 2016 to the present, Mao Geping has experienced initial submissions and then failures. Jiuding, the largest external shareholder, suffered a thunderstorm and failed to wait for the listing approval after the first meeting.
In the end, Mao Geping withdrew his application, rearranged his shareholding structure, and started anew on the Hong Kong Stock Exchange. At the same time, Perfect Diary, which was founded 17 years later, overtook the company in a corner in 2020 and was successfully listed on the New York Stock Exchange. Drawing on the cruel competition rules of elimination at the end of the capital bonus period, it is not difficult to understand why Mao Geping is so obsessed with obtaining larger amounts of financial support.
Inside View: The Makeup Master’s Uneasiness
From the perspective of business model, Mao Geping adopts a model that emphasizes production but emphasizes channels. In terms of
production, Mao Geping currently adopts the production model of entrusting ODM/OEM suppliers. This asset-light production model makes Mao Geping's gross profit margin (83.8% in 2022) leading a number of A-share cosmetics brands. If the sales cost is further refined, taking the intellectual product Mao Geping Foundation (priced at 380 yuan) as an example, it can reduce the ex-factory price to 47 yuan, which is almost comparable to Fuljia, which has super strong money-attracting power.
In terms of channels, it may break your stereotypes. Mao Geping's sales channels are mainly through direct counters in offline shopping malls, not online. As of the end of 2023, Mao Geping has 357 self-operated counters across the country. From 2021 to 2023, the sales achieved through this channel were 859 million yuan, 979 million yuan and 1.438 billion yuan respectively, accounting for the proportion of Mao Geping's total sales in each period. More than half is the biggest growth driver.
The integration of the above two models has allowed Mao Geping to achieve a small step from 1 to 10. In the past three years, the compound growth rate of revenue has reached 35.3%, and he has taken advantage of the opportunity to climb up the beauty power rankings of major channels and become a domestic beauty brand. Top-notch makeup. However, looking calmly, Mao Geping's brand effect is very obscure.
First of all, Mao Geping’s lead is relatively weak. In the prospectus, Mao Geping described his positioning as follows: Based on retail sales in 2022, Mao Geping is the eighth largest high-end beauty group in China and the only Chinese beauty group among the top ten high-end beauty brands. At a time when domestic beauty products are under pricing scrutiny, Mao Geping's price range of 200 yuan to 500 yuan for makeup and 400 yuan to 800 yuan for skin care products is one of the few that can be described as "high-end."
If you refer to the method proposed by Peter Thiel to judge the actual market position of a company - observe whether they exaggerate their uniqueness by defining the market as the intersection of various small markets, which can be glimpsed from the slightly tendentious attributions. Mao Geping's uneasiness.
Picture: China’s high-end beauty group sales ranking, source: Mao Geping prospectus
The data also confirms this, making Mao Geping one of the top ten high-end beauty groups in the Chinese market, with a market share of only 1.2%. Secondly, in order to support this high-end image and pricing range, Mao Geping chose a model of combining online channel marketing and offline channel sales. Obviously, this is a difficult road that tests financial resources and endurance. In the attention economy in the era of excess information on the Internet, penetration is a prerequisite for the success of online marketing. Whether it is Proya, which broke out of the industry early with early C and late A, or the giant biotech, which recently incorporated recombinant collagen, you can see from their marketing context the perfect combination of celebrity endorsements, head, waist, and tail KOLs. Mao Geping with his It may be difficult to match the penetration of the makeup master’s personal IP. Mao Geping's management may also be aware of this. According to the available information, it can be seen that it began to strengthen cooperation with KOL after 2018. In 2023, Mao Geping spent 1.412 billion yuan on marketing, accounting for 48.9% of total revenue. If the differences in offline channels are excluded, this marketing rate is at the mid-range level among domestic beauty products. But we speculate that Mao Geping’s marketing expenses will gradually rise in the future. These expenses include rent, labor, etc. for building offline channels, as well as marketing expenses for expanding marketing penetration. This may be one of the reasons why Mao Geping is obsessed with financing.
Ambition: China’s “Shu Uemura”
Back to the question at the beginning of the article, why is Mao Geping so obsessed with the capital market? In our opinion, the answer resonates deeply with the underlying logic of the beauty industry: a new round of opportunities for domestically produced beauty products has emerged. The next wave of industry upsurge will directly determine whether companies will rise with the wave or be beaten down. On the shore, facing the battle of life and death, domestic beauty products need to grow rapidly.
On the one hand, during the next round of economic recovery, a number of outstanding domestic beauty brands will surely rise rapidly. Whether it is the history of beauty development in Europe, America, Japan, or China, there is enough data to show that the sensitivity of beauty category consumption to economic recession is weaker than the market average (lipstick effect), while the sensitivity to economic recovery is stronger than Market average. This article will not discuss the economic cycle, but it is clear that the domestic cosmetics market has sufficient growth potential.
On the other hand, cultural confidence guides the rapid development of the beauty industry. Hollywood in the United States, Japanese animation, Korean romance dramas, and Hong Kong movies, as the cultural industries of these different countries and regions rise, they also guide the audience's aesthetics to a certain extent. Looking back at the present, the Chinese dramas and short videos that were the first to go overseas have had enough influence to support the export of Chinese aesthetics. Li Ziqi, Hanfu, and horse-faced skirts are all strong evidence.
In summary, branding and overseas expansion will be the main theme of the development of domestic beauty products in the future. Whoever cultivates internal skills first and captures the consumer mind of a larger market share will be more likely to obtain excess value exchange. An example for reference is Shu Uemura, the Japanese makeup artist’s brand of the same name. As the first Japanese male makeup artist to enter Hollywood, he first opened a makeup school and then established a beauty brand (in 1967). Mao Geping’s entrepreneurial experience is very similar. It can be seen that after the branding of Shu Uemura, it gradually entered the markets of Paris, South Korea, Taiwan, and Mainland China. By 2000, Shu Uemura's turnover increased by more than 50 times, reaching 13.5 billion yen.
What supports Shu Uemura's high-growth performance is its continuous in-depth research and development capabilities and product iteration capabilities. According to statistics, in the 1970s and 1980s, Shu Uemura launched more than 80 colors of eye shadow, 60 kinds of makeup products alone. Blush colours, 120 lipsticks and 100 makeup brushes. It can be seen that makeup masters cannot escape the iron law that the long-term development of makeup brands depends on products. Therefore, Mao Geping, who has 104 SKUs (Tmall stores), really needs to grow quickly in exchange for chips in the next round of competition.
