As China’s double-digital growth gives way to a “new normal” slower growth environment, China’s cosmetic brands face the need – and opportunity to cultivate “inner strength”, or increased productivity that allow them to make big gains in product strength.
Product strength means “product power”. “In the current Chinese market, the biggest weakness among local brands is product power. With no product power, how can you have brand power?” commented Intercos Group’s China General Manager, Wang Yihua. He elaborated, “Chinese consumers are not fools, and they now have access to a wealth of product information. With a growing number of available channels, Chinese consumers are becoming much more informed buyers and are making more independent decisions. Purely pushing a brand with product strength isn’t a sustainable solution.” So, in this changing market, how does a local brand cultivate this “inner strength” in order to gain its needed product power?
“Product Power” Comes from Professional Credibility
Intercos provides an example of company that has put product power at the center of their strategy. Based in Milan and founded in 1972, Intercos has created one of the world’s largest cosmetic OEM suppliers by bringing together deep experience in product innovation, R&D, and production. From make-up to pens to skin care products, Intercos has built its strength on three pillars of expertise: strong marketing, patented R&D technology, and exclusive active formulae. The company reportedly can list 26 of the world’s top 30 cosmetic brands as its long-term clients and collaborators.
Innovation:Core of Intercos DNA
Serving the cosmetics industry for more than 40 years, Intercos has put innovation at the core of the company’s DNA. According to Wang, Intercos invests and average of 15% of sales in R&D. Wang noted that Intercos approaches innovation in three ways: steering trends in innovation, driving raw materials innovation, and proactive R&D.
In the make-up category, for example, Intercos started with raw materials research. Not only did the company focus on strict selection of raw materials, but it also internally developed proprietary raw materials. Intercos’ Milan headquarters created a special R&D laboratory focused on development of advanced powders, polymers and similar materials. This year, the company will feature a large number of its biomedical innovations in its new raw materials.
In skin care, Intercos’ own R&D center, Vitalab, specializes in using plant stem cells and microalgae in its active materials R&D. Each product involves sophisticated cytological analysis and more than 100 tests for active ingredient effectiveness. As a result, only 0.5% of Intercos active materials usually suffice when 5% levels are generally the industry standard for utility.
“We don’t just lead the trends – we create them”
Intercos stands out with its “pull” strategies for driving the market. According to Wang, “Basically, we start with trends and then use a trend to guide the development of the entire product.” He explained that by seeding these trends, Intercos is able to guide broader consumer trends. Each year, Intercos will have two make-up launches and three new concepts for skin care products and formulations. In skin care alone, Intercos will introduce two or three product lines, each with an independent positioning. “So far, we have more than 2,000 product lines and a huge library of skin care formulations which allow us to drive overall skin care market trends,” explained Wang.
Intercos works closely with its international brand partners to craft their new product launches. Each March, Intercos holds its exclusive Open House event at its Milan headquarters – an invitation-only opportunity for its top international brand partners to review its latest product releases. In May, 2017, Intercos will release its global trend report for the first time in China at the 22nd edition of the China Beauty Expo. As top sponsor of the Expo’s "China Good Brand & Industry Chain Summit Forum", Intercos will bring the discussion of innovation, technology, and leading brand partnerships in the cosmetics supply chain to China.
“Product Power” Starts on the Ground
Intercos' Wang stressed the importance of local market understanding, local innovation, and a strong local marketing team to creating “product power”. After 10 years in China, Intercos has localized its R&D capabilities and begun helping brands build local “product power”. He pointed to the recent example of its “Porcelain Skin” series make-up launched at an RMB 49 price-point – completely undermining the common perception of high-priced cosmetic quality. Just one example of reinforces the interdependence of “product power” and “brand power” in China’s fast-changing beauty landscape.