China cosmetics market improves in 1Q26, with premium, efficacy skincare and online channels continuing to lead

Overview

This report compiles 1QCY26 earnings from major global cosmetics multinationals and maps their performance to the China cosmetics market and travel retail. The core conclusion is that the China domestic market is stabilizing and recovering modestly, but the growth structure is clearly bifurcated: premium beauty, efficacy skincare, dermatological beauty, and online channels are stronger; travel retail has improved from prior lows, especially in Hainan, but remains affected by geopolitics, shifts in tourist flows, and the decline of daigou activity; raw materials, oil, and logistics costs are creating short-term pressure, although companies generally believe these can be managed through supply-chain improvements, formulation changes, product mix optimization, and selective pricing.

Core views

First, the recovery in the China domestic market is being driven mainly by premium and efficacy skincare segments. L'Oréal's domestic China growth reached the mid-single-digit to high-single-digit range, Estée Lauder's mainland China sales grew about 6% year over year, P&G's organic sales in Greater China rose 3%, and Beiersdorf's Eucerin and NIVEA also performed strongly. Second, online channels have become the main growth driver. L'Oréal noted that more than half of its China business is online, and Douyin has helped brands expand into tier-three to tier-five cities; P&G, Beiersdorf, and Estée Lauder also emphasized contributions from Douyin and other online platforms. Third, industry competition remains intense, but multinationals are placing greater emphasis on brand equity, margins, inventory normalization, and pricing discipline, which should support a healthier promotional environment. Fourth, travel retail has improved from a low base, with Hainan standing out, but the return of demand to the domestic market in China, conflict in the Middle East, and weak inbound spending in Japan continue to weigh on the region.

Analysis framework

The report uses a cross-company earnings read-across framework, mapping 1Q26 revenue, regional performance, channel trends, management guidance, and cost sensitivity from L'Oréal, Estée Lauder, P&G, Shiseido, Kose, Pola Orbis, and Beiersdorf to the demand, competition, channel, and margin outlook for China cosmetics coverage names.

Methodology notes

• industry read-across analysisGlobal MNC earnings read-across

  Infer China cosmetics industry trends from multinational companies' regional and category performance

  The report compares China domestic, travel retail, U.S. market, and cost commentary from global beauty companies to assess the quality of the China recovery, the intensity of online competition, and opportunities for local brands.

• channel analysisSplit between online and travel retail

  Differentiate domestic online growth, offline experiential demand, and travel retail recovery

  The report emphasizes that growth in China is mainly coming from e-commerce and Douyin, while assessing Hainan, China DFS, Japan, and Middle East travel retail separately to avoid misreading tourist-flow changes as domestic-demand changes.

• margin analysisAssessment of cost pressure and pricing discipline

  Evaluate the impact of oil prices, logistics, petrochemical inputs, and promotional discipline on margins

  The report compares how P&G, L'Oréal, Shiseido, and Beiersdorf quantify raw material cost shocks, and focuses on whether companies can offset the pressure through supply-chain efficiency, formulation changes, product mix, and selective pricing.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Giant Biogene

  One of the China cosmetics coverage names, influenced by trends in efficacy skincare and R&D capability

  Strengths

  The report believes distinctive brand stories, a loyal user base, and strong R&D can help it compete in a demanding market.

  Weaknesses

  Competition is intensifying as MNCs such as L'Oréal and Estée Lauder continue to invest in premium and online channels.

  Comparison

  Compared with global MNCs, local brands are closer to Chinese consumers and the content-commerce ecosystem, but brand equity and global channels still need to be built out.

  Risks

  Lower-than-expected category expansion, rising online traffic costs, and renewed promotional intensity.

• Mao Geping

  A Chinese premium beauty brand, influenced by premiumization and online channel trends

  Strengths

  Its premium positioning and brand story align with the current recovery in China, where premiumization, selectivity, and beauty upgrading are favored.

  Weaknesses

  If MNC premium brands continue to expand on Douyin and in offline experiential channels, customer acquisition and brand competition could intensify.

  Comparison

  Compared with international brands such as Estée Lauder and L'Oréal Luxe, Mao Geping has advantages in local culture and consumer recognition, but still needs to prove scale and profitability.

  Risks

  Volatility in premium beauty demand, rising channel expenses, and competition from international brands' promotions or new product cycles.

• Forest Cabin

  A domestic Chinese cosmetics brand influenced by the stabilization of the local market and brand differentiation trends

  Strengths

  The report notes that it has a distinctive brand story and a loyal fan base, which should support brand value if the promotional environment becomes more rational.

  Weaknesses

  The overall market remains highly competitive, and online growth is being driven mainly by platforms such as Douyin, which raises the bar for channel operations.

  Comparison

  Relative to MNCs, Forest Cabin relies more on domestic consumer mindshare and differentiated positioning; relative to other local brands, it needs to keep strengthening R&D and omnichannel efficiency.

  Risks

  Traffic acquisition costs, fluctuations in brand awareness, and slower-than-expected category expansion.

• L'Oréal

  A global MNC benchmark that reflects trends in China premium and dermatological beauty

  Strengths

  China domestic growth outpaced the market, Luxury and Dermatological Beauty were strong, and online penetration and reach into tier-three to tier-five cities improved.

  Weaknesses

  China travel retail remains negative, and Middle East travel retail is affected by geopolitical conflict.

  Comparison

  It provides an important benchmark for local companies in brand portfolio management, online-offline balance, and margin control.

  Risks

  Oil and logistics costs continuing to rise, and travel retail recovery being slower than expected.

• Estée Lauder

  A global premium beauty benchmark that reflects improvements in China premium beauty and Hainan travel retail

  Strengths

  Mainland China growth was about 6%, Hainan retail sales grew more than 30%, and La Mer, TOM FORD, Le Labo, and The Ordinary performed well.

  Weaknesses

  Disruptions in the Americas from department stores and retailer bankruptcies are still weighing on reported performance.

  Comparison

  Its premium brands and travel retail recovery provide a positive signal for demand in China's premium beauty segment.

  Risks

  Middle East conflict created about a two-percentage-point drag on FQ4 sales, and offline channel pressure remains.

Key data

• L'Oréal 1Q26 organic sales growth+7.6% LFLAll divisions grew, with Professional Products and Dermatological Beauty up 15.5% and 10.8%, respectively.
• L'Oréal domestic China growthmid-single-digit to high-single-digit YoY growthBetter than the broader China market's roughly 1-2% YoY growth, supported by premium brands such as SkinCeuticals, Aesop, Kérastase, and Helena Rubinstein.
• Estée Lauder mainland China growth+6% yoyOutperformed premium beauty for the third consecutive quarter, with La Mer, TOM FORD, Le Labo, and The Ordinary standing out.
• Estée Lauder Hainan travel retailretail sales growth above 30%Supported by Lunar New Year activity, with Hainan recovering faster than average.
• P&G Greater China organic sales growth+3%SK-II grew 18%, and both Pampers and SK-II achieved double-digit growth.
• P&G FY26 cost impactabout US$150mn after-tax impactMainly from commodity-related inflation, petrochemical inputs, and logistics disruptions; Brent at about US$100/barrel implies an annualized pre-tax impact of about US$1.3bn.
• L'Oréal oil-price scenario cost impactEUR90-100mnAt an oil price scenario of about US$90-100/barrel, the impact on 2026E sales and EBIT is about 0.2% and 1.1%, respectively.
• Shiseido China/travel retail performance-1% LFLMainland China consumer purchases fell by low-single digits, e-commerce declined by high-single digits, while offline sales grew by low-single digits.
• U.S. market demandoverall resilience remains strongL'Oréal's U.S. sell-out was stronger than sell-in, P&G's North America organic sales grew 4%, and Shiseido's Americas recovered to +5% LFL.

Impact & implications

For China cosmetics investors, MNC earnings show that the industry is not experiencing a broad-based recovery, but rather a structural one: premium beauty, efficacy skincare, dermatological beauty, fragrance, and online channels are stronger, while lower-end and traditional channels remain under pressure. MNC success on Douyin and e-commerce will intensify online competition for local brands, but their pricing discipline, inventory normalization, and margin improvement also suggest a more rational promotional environment. For local brands, companies with a clear brand story, loyal user base, R&D capability, and omnichannel execution are more likely to gain share during the recovery period.

Risks

• The China cosmetics market recovery is still modest; if consumer confidence improves more slowly than expected, industry growth could slow again.
• Continued investment by MNCs in Douyin, e-commerce, and premium categories could squeeze local brands' online share and profit pools.
• Travel retail remains affected by the return of China demand to the domestic market, geopolitical tensions, weak inbound spending in Japan, and the decline of daigou activity.
• If oil, petrochemical inputs, logistics, and supply-chain costs continue to rise, gross margins could be eroded and selective price increases may be necessary.
• If promotional competition intensifies again, the industry profit improvement from pricing discipline and inventory normalization may be weaker than expected.

What to watch

• China cosmetics online sales growth, Douyin penetration, and traffic cost changes around 618.
• Whether premium beauty, efficacy skincare, dermatological beauty, and fragrance continue to outperform mass beauty.
• Whether monthly sales at Hainan DFS and China travel retail sustain the post-Lunar New Year improvement trend.
• Whether MNCs continue to maintain pricing discipline and promotion control, and whether inventory normalizes further.
• Brent oil prices, logistics costs, petrochemical input prices, and companies' selective pricing actions.
• Progress by local brands such as Forest Cabin, MGP, and Giant in new launches, R&D, repeat purchases, and omnichannel execution.