CITIC Construction Investment: China's beauty industry has completed rapid expansion and officially entered a new stage of high-quality development
The Zhitong Finance App learned that CITIC Construction Investment Securities released a research report stating that China's beauty industry has officially entered a new stage of high-quality development. The market share of domestic brands has increased to 57%, and consumer decisions have shifted to focusing on the efficacy of ingredients rather than brands. Regulatory policies continue to be upgraded to raise the industry compliance threshold, and high online traffic costs are squeezing merchant profits; brand concentration has surpassed developed countries, but there is still room for improvement in group concentration. After the restructuring of supply and demand, beauty industry operators still have four growth paths: industrial chain integration, brand expansion, integration between the two US, and AI reshaping. It is recommended to focus on the breaking moment after leading beauty companies seize the new dividends.
The main views of CITIC Construction Investment Securities are as follows:
Demand side: China's beauty industry has completed rapid expansion, officially entered a new stage of high-quality development, and the share of domestic brands continues to increase. ① The market size returned to growth: In 2025, the industry regained growth to 822.5 billion yuan, an increase of 6.18% over the previous year, and demand resilience is beginning to show. ② Consumer decision-making mechanism: Consumer decisions are becoming more rational, and the focus on ingredients and efficacy has surpassed that of brands. ③ Domestic alternative narrative: The domestic market share increased from 40.4% in 2021 to 57.0% in 2025, and more than 90% of young consumers under 30 often buy domestic products, laying a solid foundation for the growth of local brands. ④ Penetration rate improvement logic: Currently, the anti-aging penetration rate of household skincare products is close to 90%. The industry says goodbye to the dividends of increasing penetration rates, and future growth depends on consumer confidence recovery and structural upgrading.
Supply side: Regulatory policies continue to be upgraded to restructure the distribution of industry benefits. Online traffic trends are putting pressure on brand players. Brand concentration has reached the level of the US, Japan, and South Korea, and there is still room for group development. ① From the perspective of market players, since the official implementation of the “Regulations on the Supervision and Administration of Cosmetics” in 2021, the supervision system has continued to be improved. From the management of new ingredients and verification of efficacy claims to labeling of all ingredients, relevant regulations have been continuously implemented. The number of players in the compliant business market is growing steadily. However, the number of cosmetics registrations and filings has gone through a process of rising first and then falling. ② From a traffic perspective, the share of online channels has exceeded 50%. Douyin and Taotian have formed an equal share pattern. Douyin advertising revenue has maintained a rapid growth rate of more than 20%. High traffic costs have become the biggest challenge for e-commerce merchants, and the industry has moved from extensive traffic competition to refined operation. ③ In terms of concentration, China's brand caliber CR10 reached 20.8% in 2025, which is already higher than the US, Japan, and South Korea, but the group's CR10 is only 41.9%, which is still lower than mature markets. There is still room for leading groups to integrate through multi-brand matrices in the future.
Investment advice: We believe that after the restructuring of supply and demand, beauty operators still have four growth paths: industrial chain integration, overseas brand integration, and AI reshaping. It is recommended to focus on “breaking the game” moments when leading beauty companies seize the new dividends.
