Hyaluronic acid can be used in everything.
Editor’s note: This article is from the public micro-channel number “20 Club” (ID: quancaijing_20she), Author: Dong Zhifei, Editor: Yang Jia.
Injecting, smearing, and eating, may the ambition of the “king of hyaluronic acid” have no boundaries? Huaxi Biology and Nongfu Spring’s parent company, Yangshengtang, compete directly or indirectly in a multi-dimensional health industry.
“If there is no hyaluronic acid, I can’t live a day.” Big S Xu Xiyuan once said.
Hyaluronic acid molecules have lubricating, moisturizing, and polymerizing effects. After more than ten years, this ingredient has not been out of date, but has penetrated into more aspects of our lives. According to CBNDATA data, hyaluronic acid is the most popular cosmetic and skin care ingredient in 2020. It is found in daily skin care products and in various medical beauty items. Now it is also added to food and beverages…
Under the background of “hyaluronic acid can be used in everything”, as the world’s largest supplier of hyaluronic acid raw materials, Huaxi Bio will undoubtedly win a super bonus. Huaxi Biotech’s domestic market share is 70%, and its global market share exceeds 47%.
Huaxi Biological’s 2020 operating income is 2.633 billion yuan, a year-on-year increase of 39.63%; net profit is 646 million yuan, a year-on-year increase of 10.29%.
However, it is worth noting that its revenue from “functional skin care” (1.346 billion yuan) surpassed the revenue of product raw materials (703 million yuan) and medical terminal products (576 million yuan) for the first time.
Drawing: Dong Zhifei
This leading company of hyaluronic acid raw materials has almost turned into a “cosmetics company” in 2020. In addition, what has recently brought this company to the news are various types of functional gums and drinking water added with hyaluronic acid. This has been questioned by consumers about the “IQ tax.”
Huaxi’s sense of urgency to break the circle and cross the border is coming. According to its recently disclosed financial report, its business model also changed last year., From the toB providing raw materials to the toBtoC for terminal medical and aesthetic institutions, and the direct toC, and this change is directly reflected in the financial data-the proportion of sales expenses to total revenue increased from 15.3% in 2017 to 2019 27.7% of the total, and then 41.8% in 2020.
Why does this global leader in the field of hyaluronic acid make consumer goods? Are Huaxi Bio’s competitors only those companies on the hyaluronic acid circuit?
The second growth curve?
Huaxi Biology is working hard to become a cosmetics company.
Actually, Huaxi Biotech only started to enter this field in 2014 and launched products aimed at consumers. The first product was the “Honeycomb Hyaluronic Acid Moisturizer” of Runbaiyan. It may have seen the rise of party consumers in the skincare market. As a company with raw material research and development and production capabilities, Huaxi Biology has its own advantages and can get a share of the pie.
In addition to following the trend, making skin care products may be one of Zhao Yan’s original intentions when he entered Shandong Freda (the predecessor of Huaxi Biology). Around 2000, Zhao Yan’s main business was in commercial real estate. During the EMBA of Peking University, she met Guo Xueping, the founder of Freda. At that time, Guo Xueping, who was still struggling to commercialize his research, used a key sentence to attract Zhao Yan’s investment: “One hyaluronic acid molecule can lock a thousand water molecules.”
“I will remember after listening. I think that many skin problems are not due to the imbalance of water and oil. If I can expand this product to the cosmetics field and use it on the skin, then the market will be Big.” Guo Yan said in an interview with the media.
Zhao Yan, Chairman of Huaxi Biology (picture source: Huaxi Biology official website)
At present, Huaxi skin care products adopt a brand matrix strategy.
In 2020, “functional skin care” including Runbaiyan, Quandi, Miebel, BM Muscle Life and other brands will contribute more thanHalf of the revenue has doubled compared with last year’s sales of 634 million yuan. Among them, Runbaiyan contributed 565 million yuan in revenue, a year-on-year increase of more than 60%. The revenue of the Quadi brand increased by more than five times, reaching 391 million yuan.
As of the end of 2020, Huaxi Biologics has 31 “explosive” products with a revenue of more than 10 million yuan in skin care products, and 153 products with a revenue of more than 1 million yuan. Soochow Securities believes that the online sales of Runbaiyan and Kuadi in 2020 are already comparable to many more mature skin care brands.
Huaxi Biotech obviously has thoroughly studied some of the fast-growing skin care product methodology in recent years. It not only promotes sales growth in public domain traffic such as Tmall, Douyin, and Xiaohongshu, but also starts to do private domain traffic and channels. Shen. According to the minutes of exchanges between Huaxi Biotechnology and investors, e-commerce live broadcast channels will all rely on third-party TP operations in 2019, and their own TP operations team will be established in 2020.
From the perspective of scale, Huaxi Biology is already equivalent to a unicorn company in the field of skin care products. Comparable to its revenue are Huaxizi (with revenue of 1.8 billion in 2020) and HomeFacialPro (with sales exceeding 1 billion in 2018). But in this Red Sea market, Huaxi Biological, endorsed by the “raw material supplier”, faces many powerful enemies. This includes not only overseas brands such as Avène, La Roche-Posay (under L’Oreal), but also domestic products such as Yuze (under Shanghai Jahwa) or Winona, which are growing fiercely.
There is one more thing worth paying attention to. When Huaxi Biology promotes the brand matrix, whether it is in Xiaohongshu or Li Jiaqi and Wei Ya’s live broadcast room, it is very clear that the products are bound to the parent brand of “Huaxi Biology”. This strategy is actually conducive to Huaxi’s establishment of a unified brand awareness in the skin care industry, and in turn, this brand effect can feed back the medical and aesthetic institutions and help them expand the market.
Products of Runbaiyan (picture source: Runbaiyan Tmall flagship store)
The bigger ambition is food
In order to connectNearly a wider range of consumers, Huaxi Biotech has also entered the food field, only waiting for the country’s “an order.”
In January 2021, the National Health Commission issued an announcement stating that in accordance with the provisions of the Food Safety Law, the review agency organized experts to review and pass the safety assessment materials of new varieties of food-related products such as sodium hyaluronate. In the same month, Huaxi Biotechnology launched the hyaluronic acid (also known as hyaluronic acid) snack “Black Zero”, including chewable tablets, soft candy, American ginseng drink, water light drink, bird’s nest drink and potato chips.
On March 22, it launched the Hyaluronic Acid Drinking Water Brand “Shuijiquan”. The product ingredients consist of only water and 66mg hyaluronic acid, but the price is 3-4 times that of ordinary drinking water, even more than drinks such as Genki Forest. The e-commerce platform price of this product is 45.9 yuan for 6 bottles, which is equivalent to 7.6 yuan per bottle.
It is worth noting that Huaxi Biotech is not only making consumer products by itself, but also doing its own business: selling hyaluronic acid to manufacturers. The hyaluronic acid sparkling water “Hashui” of Hankou No. 2 Factory and the hyaluronic acid gum of Wonderlab (a famous brand for meal replacement) are all raw materials provided by Huaxi Biotechnology. From a certain perspective, Huaxi Biology has a competitive relationship with its customers.
Obviously, Huaxi Biological is optimistic about the prospects of functional foods. From the perspective of the mature market of functional foods, 161 foods in Japan contain hyaluronic acid (2020). In Japan’s marathon, the Athletics Association requires athletes to drink with hyaluronic acid.
This path of Huaxi Biotech can find similar ideas in some Japanese beauty brands, such as FANCL. FANCL currently has seven major business segments, including beauty products, nutritional supplements, germinated rice, green juice, underwear, beauty brand Attenir and skin care brand boscia. In fiscal year 2019, after the cosmetics business, which accounted for more than 50% of revenue, functional foods accounted for 36%.
Although there has been controversy over whether hyaluronic acid is an IQ tax or true health and beauty as a drink, the application of hyaluronic acid in food seems to be the general trend. After the development and popularity of hyaluronic acid as a food ingredient in Japan, it has gradually been allowed to be added to food or dietary supplements in the United States, Europe, Australia, New Zealand, South Korea and other countries and regions.
Image source: Huaxi Biotech’s 2020 financial summary
At least from the industry data point of view. According to market research firm Frost & Sullivan, the globalThe compound annual growth rate of food hyaluronic acid is 24.4%, which is the fastest among the three categories, far exceeding that used in medicine and cosmetics. Benefiting from the continued openness of hyaluronic acid food regulatory policies around the world, this trend will continue. The compound annual growth rate of food-grade hyaluronic acid sales will reach 20.4% from 2020 to 2024.
Not only that, Huaxi Biotech may have more functional foods in addition to hyaluronic acid in the future, such as Zhao Yan’s “Focus on functional sugars and amino acids, two major types of bioactive substances.” Its 2020 financial report shows that Huaxi Bio is still developing probiotic chewable tablets, GABA sleep drink and other products.
The boss of diversified hyaluronic acid needs to play a “label”
Amico, Huaxi Biotech, and Haohai Biotech, which are regarded as the “Hyaluronic Acid” Three Musketeers, have all landed in the capital market. Compared with competitors, Huaxi Biology has the most diversified layout.
Amic focuses on the field of medical beauty, 98% of its revenue comes from medical devices (ie injection products), and the sales of medical beauty hyaluronic acid terminal products rank first among domestic brands. Amic is benchmarking Huaxi Bio’s medical beauty business. However, it has recently followed the pace of Huaxi and launched cosmetics. Both Amic and Huaxi have also deployed Botox. It can be said that these two companies will directly compete in multiple dimensions.
Haohaishengke focuses on ophthalmology and orthopedics. Haohai Biotech is benchmarking Huaxi Biology’s “medicine and medical device terminal”, and it also purchases some raw materials for hyaluronic acid from the latter. In fact, hyaluronic acid is only one of the medical biomaterials produced by Haohaishengke, and its largest product is intraocular lens.
No matter from the scale or the layout, Huaxi Biotechnology is still the “big brother” of the three, the world’s largest hyaluronic acid research and development, production and sales company.
It not only provides hyaluronic acid raw materials for cosmetic giants and medical companies, but also sells hyaluronic acid fillers and injections to medical aesthetics and plastic surgery customers. As mentioned above, it is also expanding its products for individual consumers: starting from skin care products, it has recently ventured into food. It can be said that Huaxi Biology is a company in the entire industry chain.
Although the gross profit margin of skin care products is not as high as that of medical end products, it is actually improving gradually. The gross profit margin of Huaxi Bio-functional skin care products will increase from 61.4% in 2016 to 81.89% in 2020. This may be due to the fact that Huaxi Run Baiyan’s sub-spot liquid series of skin care products have been widely recognized by the market, which makes Huaxi Biological more confident in pricing.The original liquid is priced at around 17 yuan/ml, slightly lower than the price of 20 yuan/ml for overseas brands, and much higher than the average price of 8 yuan/ml for local brands.
The skin care product business has gradually seen economies of scale. The current 55% gross profit margin of Huaxi Bio-food products may also improve as its food product scale increases.
The raw material of hyaluronic acid is called “Moutai among female consumer products” because its gross profit margin exceeds 90%. Judging from past industry data, whether it is skin care products or food and beverages, although the gross profit margins of leading companies in the industry are high, they are all lower than those in the business of hyaluronic acid raw materials. It can be referenced that the gross profit margin of Winona’s parent company Betteni is around 80%, and the gross profit margin of Nongfu Spring and Coca-Cola is around 60%.
Why does Huaxi Biotechnology not focus on the profitable B-side business of hyaluronic acid, but infiltrate the C-side consumer products?
This is mainly because the medical beauty hyaluronic acid industry is gradually becoming crowded, and this is not a technology with absolute barriers. “Caixin” analysis of the article on the medical beauty hyaluronic acid believes that with the influx of competitors, the huge profits of the medical beauty hyaluronic acid will not be sustainable. Although it is difficult to establish a brand, it can build a wider and deeper moat.
In fact, according to the 2020 financial report of Huaxi Biology, the gross profit of functional skin care products is already higher than that of the traditional raw material business. The gross profit margins of medical terminal products, functional skin care products, and raw material products for the whole year are 84.55% and 81.89% respectively. , 78.09%.
Zhao Yan, the chairman of Huaxi Biotechnology, is a manager who knows how to diversify business risks. When Huaxi was in full swing in the Beijing real estate market around 2000, she realized the need to “combine industrial capital and financial capital.” Zhao Yan’s plan for Huaxi Biology is to “make at least two national brands and at least one national product.” This is obviously a need to do consumer-oriented business.
Huaxi Bio’s ultimate competitor is Nongfu Spring’s parent company?
If you look at the “hyaluronic acid” raw materials, from the perspective of the entire health industry, Huaxi Biology is actually very similar to the layout of the major shareholder “Yangshengtang” of Nongfu Spring. Both are involved in medical, food and skin care products. Broadly speaking, there are certain similarities, and they may be competitors.
The beverage industry of Yangshengtang is probably the most well-known business for consumers, which is Nongfu Spring. In the high-end beverage market, there may be a competitive relationship between the two. However, Huaxi Biology is obviously unable to compete with Nongfushan in its distribution system.Spring contends. Nongfu Spring has 4280 distributors and covers more than 2.37 million terminal retail outlets across the country. While Huaxi Bio’s hyaluronic acid water is currently sold in e-commerce, the future distribution strategy is still unknown.
Yangshengtang started from health foods and beauty products for oral administration. In the 1990s, it launched the “Turtle Pill” and the “Duoer Capsule” for women. After more than ten years, the product line of Yangshengtang gradually expanded to protein powder and various vitamins. And Huaxi Biotech also has oral beauty brands Plumoon (including hyaluronic acid oral liquid, “explosive water pills” and other products) and Xianli Aofu (mainly GABA plant drink and hyaluronic acid capsules).
YOSEIDO (Image source: Yangshengtang)
In addition, Yangshengtang is also doing cosmetics business. In 2017, it launched YOSEIDO, a birch juice series of skin care products, and got Huachenyu’s endorsement, and it also entered the Japanese market. Birch sap and hyaluronic acid are also the main “hydration” functions, which may be the business that has the most direct competition relationship with Huaxi Biological. Yangshengtang is a non-listed company and has never announced the performance of its cosmetics business. However, from the perspective of momentum, Huaxi Biotech’s Runbaiyan and Kuadi are even better.
Although the specific fields involved are not the same as Huaxi Biology, Yangshengtang has Wantai Biology, which is listed on the A-share market. This is a company that develops and produces biological diagnostic reagents and vaccines. It has no direct competition with Huaxi Biology’s medical and medical aesthetics because of its different products.
How Huaxi Biology will compete with Yangshengtang in the future, and whether the two will become consumer giants in the big health field is quite worth looking forward to.