In China’s cosmetics world, where foreign brands have historically been revered, domestic start-ups are increasingly winning over Gen-Z consumers with cheaper, more localized alternatives. One of the emerging stars is the perfect brand Perfect Diary, which is owned by the five-year-old startup Yatsen.
Yatsen impressed the capital market with one $ 617 million IPO on the NYSE in November. Its flagship brand Perfect Diary is consistently ranked among the best makeup brands through online sales alongside giants like L’Oreal and Shiseido. Now the company is planning another big step when it plans to buy Eve Lom, a 35-year-old skin care brand owned by the British venture capital company Manzanita Capital.
On Wednesday, Yatsen, named after the father of modern China, named Sun Yat-sen, announced it has entered into a final agreement to acquire Eve Lom, who is known for her cleanser. The deal is expected to be completed within the next few weeks and Manzanita will retain a minority stake in the business and act as a strategic partner.
The size of the deal was not revealed without Bloomberg reported in February that Manzanita wanted to sell Eve Lom for as much as $ 200 million.
Perfect Diary emerged in China by collaborating with influencers who reviewed the brand’s lipsticks, eyeshadow palettes, foundation and other products on Chinese social trading platforms such as Xiaohongshu. It took advantage of its proximity to China’s abundant suppliers of cosmetics and packaging, many of whom also work with the best international brands. The strategies have enabled Perfect Diary to offer affordable prices without compromising on quality, earning the “Xiaomi cosmetics moniker.”
Growth has soared in the Yatsen since its inception. Its gross sales more than quadrupled to 3.5 billion yuan ($ 540 million) in 2019 as of 2018 thanks to an effective e-commerce strategy. But losses also ballooned. The company recorded a net loss of 1.16 billion yuan ($ 170 million) in the nine months ended September 2020, compared to a net profit of 29.1 million yuan the year before.
Yatsen has been looking for potential acquisitions to diversify its product portfolio, which it noted in its prospectus. Through the Eve Lom marriage, the company hopes to “enrich our global branding capacity and product offering,” said Jinfeng Huang, founder and CEO of Yatsen in the announcement.
Yatsen has already begun international expansion and landed first in Southeast Asia where it is sold on e-commerce sites such as Shopee. The prospectus stated that it plans to “selectively work with local partners to accelerate our international expansion and locate our product range.” In the competitive and entrenched world of makeup, Yaten’s foreign expedition is definitely a curious one to watch.