L'Oreal and Louis Vuitton Anxiously Waiting for the Results of the Xi-Macron Meeting
L'Oreal and Louis Vuitton need certainty about the fate of cosmetic imports to China. Millions of cosmetics users are waiting for Xi and Macron.
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The meeting between French President Emmanuel Macron and Chinese President Xi Jinping in Paris, Monday (6/5/2024), is eagerly awaited by many parties. French global cosmetics companies, including L'Oreal, Louis Vuitton, and Coty Inc, were also nervous as they waited for the results of the meeting.
The beauty product giants wanted to know if Macron and Xi discussed their concerns. These companies have been troubled by China's regulations on imported cosmetics. French lipsticks and perfumes are also affected by these regulations.
Also read: Without skin care products, children feel wilted and not beautiful
In a report on September 18 2023, The New York Times wrote about the obligation to share product formulas. This obligation also applies to imported cosmetic products. Imported cosmetic manufacturers must disclose the formula and quality of their product ingredients.
The list of suppliers and locations of raw material production must also be reported to Beijing. All of this data must be entered into China's data center. And that isn't all. French cosmetic companies must also accept oversight from China in their factories.
Announced in 2021, the regulation will be implemented starting from May 2025. French cosmetic producers are of course objecting to the regulation. They are concerned that if such detailed information is disclosed, it could be replicated by low-cost Chinese producers. If that happens, French producers may lose control over their intellectual property.
France and China have been negotiating this issue since 2023. Paris is trying to convince Beijing that France is responsible for the safety of its products without the need for inspection from China. "We guarantee the highest safety standards for Chinese consumers," said Secretary-General of the French Beauty Federation (FEBEA), Emmanuel Guichard.
Enter the discussion
The French Presidential Office states that the issue of cosmetics is one of the topics discussed in the Macron-Xi meeting. Macron will seek to find a solution that will protect the interests of French companies.
Xi's visit to France is his first visit to Europe in the last five years. This visit comes amid tension in the trade relations between China and the European Union. The EU is threatening electric vehicles from China and environmentally friendly energy industries with high tariffs.
France is a leading exporter of cosmetics in the world. In 2023, France is sending makeup and skincare products worth up to 2.15 billion US dollars to China.
Also read: Right Care for Healthy Skin
Cosmetic products occupy the second most important commodity position after aeronautical products. The Chinese news agency, Xinhua, stated on February 9, 2021, that beauty products related to skin care and makeup are very popular in the Chinese market. The FEBEA export report in 2020 mentioned that China is the main market for French cosmetics.
Amidst the health and economic crisis at that time, French cosmetics were still able to export products worth 19 billion US dollars. Although the number decreased by 11.8 percent compared to 2019, the decline was more moderate compared to other sectors which contributed positively 10.6 billion euros to the French economy. "France remains a leader in the cosmetics industry," said FEBEA.
Chinese media outlet, CGTN, reported on April 6, 2023, on the increased investment of French cosmetic companies in China. The French company association in China, CCI France Chine, found that 305 French companies will expand their investments.
Those companies will also expand their sales outlets in China. "For many French companies, the Chinese market is enormous and 30-35% of their total revenue comes from China," said French Finance Minister Bruno Le Maire.
Animal testing
There is another issue being questioned regarding the import regulations on cosmetics in China. This is because the practice that is being requested has long been discontinued by companies in various countries. The regulation concerns beauty products that must be tested on live animals first.
The test must be carried out before being marketed. This provision applies, among other things, to sunscreen or antiperspirant, hair dye and skin lightener. The problem is, China removed this provision for Chinese cosmetic products at least 10 years ago, while for imported cosmetics this obligation still applies.
PETA Asia Vice President Jason Baker stated that animal testing includes forcing them to ingest or inhale test substances or applying them on their skin or eyes. According to the animal rights organization, the most commonly used animals are rabbits, guinea pigs, and rats.
Also read: Failing to be beautiful due to choosing the wrong cosmetics
Executive Director of Cruelty Free International, Michelle Thew, added that China is at the top of the list of countries using animals in testing and research for various purposes, with around 20 million animals used each year.
The international beauty and personal care industry is supporting efforts to reduce animal testing for products sold in China, both for domestic and foreign manufacturers. Unilever, the manufacturer of Dove and Vaseline and the owner of skincare brand Dermalogica, has collaborated with academics and Chinese authorities to eliminate the need for imported cosmetics to undergo animal testing.
Local product
The latest statistics show how quickly foreign cosmetic companies are losing their market share to domestic competitors in China. Retail sales of cosmetics in China in the first half of 2023 rose 8.7 percent from the first half of 2022. However, total imports decreased by 13.7 percent.
Local Chinese beauty brands are becoming increasingly popular. According to Euromonitor International, a market research company, Chinese beauty brands have grown significantly in the past three years.
They contribute 27 percent of the retail sales of cosmetics from the top 10 brands. The consulting firm McKinsey estimated that China will account for about one-sixth of the total global beauty retail sales in 2027.
Also read: The Cosmetics Export Market Is Not Affected by the Global Geopolitical Situation
The difference between the increase in sales and the decrease in imports reflects the benefit for factories in China, which are mostly owned by Chinese companies. Proya Cosmetics, based in Hangzhou, reported a 35 percent increase in sales in the first semester of 2023 compared to 2022. "There is an increase in acceptance of domestic brands," said Chris Gao, a cosmetics analyst for CLSA, a brokerage and investment firm in Hong Kong.
Customs data from China showed that the import of cosmetics, bath supplies, and perfume from France to China reached 5.4 billion US dollars in 2022. The value decreased by 6.2 percent in the first half of 2023 compared to 2022. The import of cosmetics from South Korea and the United States each decreased by 22.2 percent and 19.8 percent.
The authorities' strict actions against traders in the Hainan duty-free center have also had a negative impact on the sales of international beauty products. This impact is felt by La Prairie and Shiseido, among others. (REUTERS)