China cosmetics demand is resilient but clearly divergent, with premium and functional skincare benefiting more prominently
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China cosmetics demand is resilient but clearly divergent, with premium and functional skincare benefiting more prominently
Based on its survey of 3,000 Chinese consumers in May-June 2026, Citi believes beauty consumption is still growing, but growth is increasingly driven by Tier 1 cities, mature consumers, and high-spending groups, benefiting companies positioned in premium, skincare, and functional skincare segments.
- Over the past 12 months, 48% of respondents increased beauty spending, 43% maintained spending, and only 9% reduced spending.
- Consumption is polarized: Tier 1 cities and high-spending consumers continue to trade up, while younger consumers and lower-tier city consumers have weaker sentiment and place greater emphasis on price.
- Skincare demonstrates greater resilience and premiumization potential than categories such as color cosmetics, hair care, and fragrance.
- Foreign brands are expanding their customer base through discounts, viewed positively by 65% of consumers; leading domestic brands are also moving into higher price bands.
- Consumers are placing greater emphasis on the product itself: 24% ranked key ingredients as the most important purchase driver, ahead of brand reputation and price.
- Demand for functional skincare is strong, with 51% of consumers preferring functional skincare products; collagen/recombinant collagen is attracting the most attention.
Report interpretation
Overview
This report presents Citi's survey of Chinese cosmetics consumption and its impact analysis of globally covered cosmetics companies. The survey covered 3,000 Chinese consumers in May-June 2026, with a sample skewed toward younger, female, and higher-income consumers and therefore close to the core customer base of beauty companies. The report's core conclusion is that Chinese beauty demand remains resilient, but divergence across age groups, city tiers, and spending power is intensifying; skincare, premiumization, and functional skincare are relatively more attractive directions.
Core views
Citi believes Chinese cosmetics consumption is still growing, but this does not represent a broad-based recovery. Tier 1 cities, consumers aged 40-49 and 50+, and high-spending groups are the primary sources of growth; younger groups and lower-tier city consumers are more cautious and price-sensitive. The competitive landscape is also changing: foreign brands are lowering entry barriers through discounts, while leading domestic brands are upgrading, and the two are not in completely direct competition but meet different consumer needs for quality, suitability, and price. Consumer purchase decisions are shifting from brand reputation toward ingredients, efficacy, and product innovation, resulting in more frequent brand switching and raising the requirements for R&D and product capabilities.
Analysis framework
The report combines consumer questionnaire research with fundamental mapping of covered companies. It first analyzes changes in spending, future consumption intentions, category preferences, price tiers, preferences by brand origin, brand switching, demand for functional skincare, and the impact of social media, and then maps these results to AmorePacific, Beiersdorf, Botanee, Cosmax, Estée Lauder, Giant Bio, L’Oréal, LG H&H, Mao Geping, Kolmar Korea, Procter & Gamble, Proya, Shanghai Jahwa, and other companies.
Methodology notes
Sample of 3,000 consumers
Citi surveyed 3,000 Chinese consumers in May-June 2026 to assess beauty spending, category preferences, price sensitivity, brand switching, and channel impact.
Mapping from consumer behavior to company fundamentals
The report maps survey conclusions to globally and domestically covered cosmetics companies, distinguishing companies benefiting from premiumization, skincare, functional ingredients, channel structure, or brand positioning from those facing price competition, customer-segment mismatch, or category mismatch.
Asset mapping & comparison
Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).
- Mao GepingPositive beneficiary
- Strengths
- Premium positioning, core customer base aged 30-50, presence in Tier 2-3 cities, offline store experience, and strong membership repurchase capabilities.
- Weaknesses
- Premium positioning may face price competition from discounted foreign premium brands.
- Comparison
- Ranked Mao Geping > Giant > Proya among China's cosmetics stocks rated Buy by Citi.
- Risks
- KOL-related public-opinion risk, improved price accessibility of foreign brands, and consumer brand switching.
- Giant BioPositive beneficiary
- Strengths
- Its recombinant collagen ingredients are highly aligned with the functional skincare direction attracting the most consumer attention; Comfy/Collgene 618 GMV recovery is strong.
- Weaknesses
- Relatively small scale; weaker sentiment among younger consumers may affect customer acquisition.
- Comparison
- Ranks after Mao Geping and ahead of Proya in the China Buy-rated ranking.
- Risks
- Low loyalty in functional skincare, intense competition, and rising customer-acquisition costs.
- ProyaModerately positive
- Strengths
- The flagship brand is moving toward higher-tier cities and mature consumers, online rankings are strong, and a rising share of self-operated livestreaming reduces KOL risk.
- Weaknesses
- Weak offline exposure, repurchase rate slightly below acquisition rate, and risk of product aging.
- Comparison
- Still benefits from resilient demand, but ranks below Mao Geping and Giant.
- Risks
- Discounts from foreign premium brands, Tier 1 consumer preference for foreign brands, and declining product appeal.
- BotaneePositive beneficiary
- Strengths
- Winona's affordable-premium positioning, botanical-extract story, and functional skincare positioning match demand; its repurchase rate exceeds its acquisition rate.
- Weaknesses
- Its target customers skew young, while sentiment among younger consumers is weak.
- Comparison
- Botanee's skin suitability and efficacy positioning differentiate it amid price competition from foreign brands.
- Risks
- Brand switching, fluctuations in younger consumers' demand, and ranking pressure from a recovery in international brands.
- Estée LauderPositive beneficiary
- Strengths
- Improving category growth and market share in mainland China, strong performance from brands such as La Mer, and improving travel-retail inventory and traffic.
- Weaknesses
- Execution of the Beauty Reimagined strategy and medium-term margin recovery still need to be validated.
- Comparison
- Compared with some global peers, EL benefits more directly from China's premium skincare and improving travel retail.
- Risks
- Fluctuations in Chinese demand, weaker-than-expected travel-retail recovery, and uncertainty over valuation recovery.
- L’OréalPositive beneficiary
- Strengths
- Historically strong performance in China's premium beauty market; the report confirms that high-spending consumers continue to trade up.
- Weaknesses
- The growth algorithm depends on the ramp-up of Kering beauty and regional support.
- Comparison
- Offers strong supply-driven growth and geographic diversification within global beauty.
- Risks
- Fluctuations in China's premium demand, intensifying competition, and uneven regional growth.
- AmorePacificMixed and cautious
- Strengths
- Skincare accounts for the majority of its cosmetics revenue in China; strong growth in Western markets and attractive valuation.
- Weaknesses
- The core customers of most Chinese brands are not consumers aged 40 and above, who represent the strongest growth segment; discounts from foreign brands intensify price competition.
- Comparison
- Despite maintaining a Buy rating, China's market offers relatively weaker appeal and earnings support.
- Risks
- Brand switching raises the cost of retaining users, while China's contribution to growth remains limited.
- CosmaxNegative
- Strengths
- Skincare outperforming color cosmetics in K-beauty exports may provide some external support.
- Weaknesses
- Its China business is skewed toward mass-market brands and color cosmetics, exposing it to weak demand from younger consumers and lower-tier cities.
- Comparison
- Compared with premium skincare brands, Cosmax's customer and category structure is mismatched with the strong directions identified in the survey.
- Risks
- Rising fixed costs in China, ASEAN business challenges, and color cosmetics underperforming skincare.
- Kolmar KoreaNear-term challenges but Buy maintained
- Strengths
- Operating leverage in Korea, attractive valuation, and relative benefits from K-beauty skincare exports.
- Weaknesses
- Its China business is skewed toward mass-market brands and color cosmetics and is affected by weak demand from younger consumers and lower-tier cities.
- Comparison
- Similar to Cosmax, it faces a mismatch in Chinese customer segments and categories, but its overall investment rating is supported more by its Korean business and valuation.
- Risks
- Weak Chinese mass-market color cosmetics demand, insufficient growth in lower-tier cities, and fixed-cost pressure.
- LG H&HFundamentals positive but Neutral rating
- Strengths
- Whoo targets mature consumers, skincare accounts for the bulk of cosmetics revenue in China, and the company benefits from growth among older consumers and Tier 1 cities.
- Weaknesses
- Western markets are unlikely to become an earnings growth driver in the near term; the home-care and beverage businesses are drags.
- Comparison
- The China cosmetics survey is relatively positive for Whoo, but other businesses at the group level constrain the rating.
- Risks
- Drag from non-cosmetics businesses and a negative impact on beverages from rising health awareness.
- Procter & GamblePositive
- Strengths
- China is PG's second-largest global market; SK-II still has growth opportunities in China's beauty market, supported by improved execution.
- Weaknesses
- It still faces oil-cost volatility and FY27 guidance risk.
- Comparison
- The report considers it one of the preferred companies in the global cosmetics space.
- Risks
- Cost pressures, fluctuations in China's premium skincare demand, foreign exchange, and commodity prices.
- Shanghai JahwaCautiously positive
- Strengths
- Improving execution under new management, Dr. Yu's entry into skin-barrier repair, and relatively fast online-channel growth.
- Weaknesses
- The sustainability of growth from a low base remains unclear; mass-market positioning faces price competition, while offline channels are a drag.
- Comparison
- Compared with leading premium or functional-skincare companies, Shanghai Jahwa has weaker visibility and brand loyalty.
- Risks
- Declining offline traffic, KOL strategy execution, and low loyalty in functional skincare.
Key data
- Share reporting increased beauty spending over the past 12 months48%43% maintained spending, while 9% reduced spending.
- Share planning to increase skincare/color cosmetics spending over the next 12 months48%/41%Expectations are stronger for skincare than for color cosmetics.
- Share of Tier 1 city consumers reporting increased skincare/color cosmetics spending over the past year63%/66%Tier 1 cities are leading growth.
- Share of Tier 3-5 city consumers reporting increased spending over the past year38%54% of respondents maintained spending, indicating greater caution in lower-tier cities.
- Share purchasing more expensive skincare/color cosmetics products over the past year48%/46%The proportions reached 66%/67% in Tier 1 cities, indicating more pronounced trading up among high-spending groups.
- Primary reason for increased skincare spending52% selected “perceived improvement in skin condition”This indicates that spending growth is increasingly supported by product efficacy.
- Brand-switching rate58%58% of consumers had switched skincare brands, with a significant impact from social media.
- Most important purchase driver24% selected key ingredientsThis was higher than brand reputation at 13% and price at 8%.
- Preference for functional skincare51%Consumers prefer functional skincare because of perceived efficacy, with collagen/recombinant collagen attracting the most attention.
- Acceptance of foreign-brand discounts65%65% of consumers view foreign brands' use of discounts to improve price accessibility positively.
Impact & implications
From an investment perspective, the report favors brands or companies positioned to capture premiumization, mature customer groups, skincare resilience, and demand for functional ingredients. Mao Geping benefits from its premium positioning, mature consumers, and offline experience and membership repurchase capabilities; Giant Bio benefits from demand for recombinant collagen and the functional skincare trend; Botanee benefits from functional skincare and Winona's product efficacy positioning; Estée Lauder, L’Oréal, and PG also benefit from China's premium consumption, skincare demand, and brand strength. However, ODMs and companies focused on mass-market color cosmetics, lower-tier cities, and younger customers face greater challenges, including Cosmax and certain Kolmar China businesses.
Risks
- Increasing consumer divergence, with weaker demand among younger consumers and lower-tier cities.
- Rising price competition as discounts from foreign brands narrow the gap with affordable-premium and mass-market premium brands.
- Frequent brand switching, raising the costs of customer acquisition and retention.
- Intense competition and low brand loyalty in functional skincare.
- Negative KOL-related public opinion may rapidly affect brand reputation and sales.
- Price sensitivity among lower-spending consumers creates a risk of migration to lower-priced substitutes.
- Some companies face mismatches between their customer segments, city-tier exposure, or category structures and the directions of growth.
What to watch
- Whether planned skincare and color cosmetics spending over the next 12 months is realized, particularly the divergence between Tier 1 and lower-tier cities.
- Whether discounts from foreign brands continue to compress the pricing space for domestic premium and affordable-premium brands.
- New-product conversion and repurchase performance for collagen/recombinant collagen ingredients in functional skincare.
- The intensity of Douyin and Little Red Book's influence on beauty consumption decisions.
- Whether the brand-switching rate continues to rise and the differences in repurchase and acquisition rates across brands.
- Whether 2026E online and offline growth is delivered by Mao Geping, Giant Bio, Proya, Botanee, and other companies.
- Changes in the market shares of Estée Lauder, L’Oréal, PG, and other multinationals in China's premium skincare and travel-retail channels.