GTHT has released a research report indicating that the cumulative year-on-year growth for cosmetics retail sales in 2025 reached +5.1%, outperforming the broader retail sales index by 1.4 percentage points and showing a marked recovery compared to 2024. Specifically, growth rates were 2.9% in the first half of 2025 and 7.3% in the second half, with a clear acceleration in the latter part of the year. Looking ahead to 2026, the overall beauty market is expected to maintain steady growth. The sector demonstrates strong growth characteristics due to abundant product innovation and the ongoing development phase of domestic brands. The report recommends a bottom-up approach to select companies with robust product and brand momentum for high growth, while also paying attention to leading players showing signs of recovery from their lows. Key viewpoints from GTHT are as follows:
Investment Recommendations suggest an overweight position in: 1) High-growth companies with strong brand momentum: Ruoyuchen, Maogeping, Linqingxuan, and Beijiajie; 2) Leading companies in the sector showing marginal improvement from cyclical lows, offering potential elasticity: Shangmei Co., Ltd., Beteni, Proya, Shanghai Jahwa, Dengkang Oral Care, and Qingsong Co., Ltd.; 3) Companies where expectations have bottomed out, warranting attention for potential inflection points: Jinbo Biotechnology, Juzi Biotechnology, Imeik Technology, Runben Co., Ltd., Wanmei Biosciences, Shu Yang Co., Ltd., Lafang Home Products, Beauty Farm Medical Health, Freda, and Bloomage BioTechnology.
Regarding the industry: Demand for beauty products has recovered, while the medical aesthetics market shows volume growth but price declines. Cosmetics retail sales in 2025 grew cumulatively by 5.1% year-on-year, outperforming the general retail sales index by 1.4 percentage points and marking a significant recovery from 2024. In terms of channels, Douyin's growth slowed starting from Q3 2025, while Tmall showed a slight rebound, leading to a convergence in growth rates between the two platforms. By product category, color cosmetics and personal care categories grew 10% and 14% online respectively in 2025, outperforming skincare's 7% growth. The medical aesthetics market experienced volume growth alongside price reductions, with an acceleration in new product approvals. Upstream manufacturers are shifting their competitive strategies from relying on single blockbuster products to offering comprehensive product portfolios.
Market dynamics: International beauty brands have recovered, with high-end and budget segments gaining advantage. The trend of domestic substitution has slowed. In Q3 2025, Estée Lauder, L'Oréal, and Shiseido reported year-on-year growth in their China/North Asia regions of 9%, 4.7%, and 8% respectively, all turning positive from previous declines, a trend that continued into Q4 2025. Domestic brands are experiencing increased divergence, with those in an upward product cycle maintaining rapid growth. In terms of price segments, the high-end market recovered while the value-for-money trend persisted. Brands in the mid-price segment, which benefited from product innovation in the previous two years, are facing some pressure. Concurrently, mature ingredients from the cosmetics sector are being extended into personal care and health supplement products, creating new opportunities for innovation.
Risk warnings include: 1) A slowdown in economic growth potentially dampening discretionary consumption; 2) Intensifying brand competition; 3) New product launches performing below expectations; 4) The incubation of new brands failing to meet expectations.