Dai Yuefeng, founder, chairman and CEO of Hunan Yujiahui Cosmetics Co., Ltd. (L)
Koh Tuck Lye, founding partner and CEO of ShunWei Capital (R)
Yujiahui, “top e-commerce IPO”, lists publicly
Yujiahui Holdings Co., Ltd., parent company of Unifon, was listed on ChiNext on February 8.
Lei Jun, founding partner and chairman of ShunWei Capital (an investor in Yujiahui) promptly extended his congratulations to Yujiahui via Weibo:
Congratulations to Yujiahui Holdings Co., Ltd. (300740) – a company that ShunWei Capital has invested in – on its listing today on the ChiNext board of the Shenzhen Stock Exchange. This listing is the top e-commerce IPO in China!
Yujiahui is helmed by a young team that mostly comprises individuals born in the 1980s and 1990s. The company has come up with a number of well-known skincare brands such as Yunifang, Xiaomihu, Huayaohua, Shiyijia and Wellfon. I believe that with the aid of capital Yujiahui will be able to help write a new chapter in the history of the Chinese beauty industry!
Said Koh Tuck Lye, founding partner and CEO of ShunWei Capital:
Yujiahui, the parent company of Unifon, was successfully listed on ChiNext on February 8. This was the first skincare company that ShunWei Capital had invested in, and our first company with an A-share listing. The listing also makes Yujiahui the no. 1 e-commerce IPO in China!
As a Taobao brand, Yujiahui has grown strongly over 12, 13 years on the back of the Taobao/Tmall dividend. In 2014, the company began to develop its overseas channels, and in 2015 it began working on a comprehensive array of brick-and-mortar channels. With this powerful combination of online and offline channels, Yujiahui has been able to transform itself from a popular online brand to a robust brand, period.
Since then, Yujiahui has continued to explore its way forward, moving from a single product offering (the mud mask) in its earliest days to a large, multi-brand skincare product offering. In fact, a number of us here at ShunWei Capital are loyal users of Unifon and Xiao Mi Hu products.
ShunWei Capital has been on this path with Unifon since 2015. Today’s IPO is but another milestone in the Unifon story. We believe that with the leadership of the capable Unifon team the company will go even further.
Image: Scene at the public listing of Yujiahui, Shenzhen Stock Exchange, Feb 8
Yujiahui stock rises 43.99% in value since listing
Strategy of diversification aimed at breaking into top ten of global beauty industry
A team of young entrepreneurs born in the 1980s and 1990s are making history in China’s beauty industry with the aid of the “Internet+” model. On February 8, Yujiahui Holdings Co., Ltd., was officially listed on the ChiNext board of the Shenzhen Stock Exchange. The occasion marked the birth of the “no. 1 e-commerce IPO”.
Yujiahui is an “internet + beauty” enterprise that owes its founding to the internet and which has developed over time with its own stable of diverse skincare brands, including Unifon, Xiaomihu, Huayaohua, Shiyijia, and Wellfon. The company, which is headquartered in the Xincheng Science and Technology Park within the Changsha High-Tech Industrial Development Zone, currently employs over 1,000 staff with an average age of 29. Yujiahui has established strong working relationships with a number of major e-commerce marketplaces such as Tmall, Taobao, Vipshop, JD.com, Yunji, Jumei, Suning, Mogujie, and Xiaohongshu. Yujiahui’s products are also sold through brick-and-mortar channels, including through Watsons and Wal-mart stores.
In fact, the capital market appears to have been waiting for the Yujiahui IPO: the time taken between the issue of the IPO prospectus to the eventual listing was less than seven months! On the day of the event, members of Yujiahui’s senior management team, senior local government officials, representatives of various investors, the chief strategy officer of the Alibaba group, Hupan University head of education Zeng Ming, Johnson & Johnson China vice-president and GM for the Dr.Ci:Labo brand Deng Xu, and representatives from various marketplace platforms (e.g., Vipshop, JD.com, Jumei, Mogujie, and Chuchujie) were on hand to witness the moment of the listing.
ShunWei Capital has been working hand-in-hand with Unifon since 2015. Yujiahui is the first skincare company that ShunWei Capital has invested in. It is also the first company for ShunWei to achieve an A-share listing.
A diverse product offering and robust R&D capabilities
According to publicly-available data, in the year 2016 China’s facial mask market was valued at CNY18.072 billion or 10.68% of the general skincare market. Further, between 2011 and 2016 the facial market has grown, on average, at an annual compound rate of 15.5%. At the same time, Euromonitor has estimated that by the year 2021 China’s facial mask market will be worth some CNY28.007 billion.
Clearly, this is a prospering industry. Yujiahui’s success is first and foremost due to its correct product positioning. Since its establishment in November 2012, Yujiahui has focused on the development of its very own skincare brands. It is an “Internet + Skincare” enterprise with sales conducted by means of e-commerce. Over the course of Yujiahui’s development, the company’s stable of products and brands have become increasingly diverse.
Unifon was the company’s very first brand, and the company’s most-recognized as well. The brand enjoys the support of a loyal customer base, and in 2017 the brand raked in more than CNY1 billion in operating income. Furthermore, the company has also employed a diverse array of brand strategies, and established distinct market positioning for Unifon as well as other key brands such as Xiao Mi Hu, Hua Yao Hua, Shi Yi Jia, and Wellfon. This approach, which has seen the formation of an early brand architecture, has helped Yujiahui to cater to different market segments. For instance, the Xiao Mi Hu brand — the second Yujiahui brand to achieve sales of over CNY100 million and currently helmed by a director born in the 1990s – has achieved more than 100% growth to bring in over CNY200 million in operating income in the year 2017.
The second reason for Yujiahui’s success is that the company has managed to harness the opportunities offered by the internet wave.
The internet has developed quickly, and the online market for beauty products continues to grow. Some analysts have noted that e-commerce platforms have become the fastest-growing sales channel in the last five years for the beauty industry, and that in the future the online market for beauty products will continue to grow at a rapid clip. Yujiahui’s core brand, Unifon, is already an “old hand” on platforms such as Tmall, Vipshop and JD.com. According to publicly-available data, Yujiahui has a membership base of over 20 million members spread over key e-commerce platforms. However, just hitting upon the right market and time does not guarantee that the company would make its mark in a rapidly-changing internet market and advance step-by-step towards the capital market. Yujiahui has a young workforce that is catering to a similar consumer demographic (mainly those born in the 1980s and 1990s). It is necessary for the company to have strong research and development competencies so that it may retain customers with the right products.
To date, Yujiahui has established a research team comprising more than 90 researchers working in the areas of basic research, product development, process development, performance assessment, and the testing of packaging materials. The team has come up with a number of product formulas and proprietary ingredients, and its work has led to over 30 patents. It is worth noting that Yujiahui’s R&D vice-president hails from Singapore and has many years of R&D experience at multinational beauty companies. In addition, Yujiahui has also received a Red Dot Design Award for its product packaging. Clearly, the company pays an extraordinary amount of attention to its products.
A highly competent team that
is deeply committed to its values
We have talked about the various reasons (environmental, platform, and product) for Yujiahui’s success. However, behind all these is Yujiahui’s young team that has an average age of only 29. In the last three years, this team has managed to achieved compound growth rate of over 50% for its sales. This has been due to both the professionalism of the team as well as the company’s unique corporate culture.
Yujiahui has a young and creative team, and now employs more than 1,000 individuals with an average age of 29. Its workforce primarily consists of employees born after 1985 and who are highly educated: over 50% of employees hold a bachelor’s degree or higher qualification. The company’s core management team is made up of individuals who have been educated at schools like Harvard and the University of Illinois as well as industry professionals. The average age of the management team is under 40.
Although the team is fairly young, the company’s internal culture is very mature and even full of wisdom.
For examples, in terms of performance assessment, to ensure that the company provides good customer service, becomes more efficient and creates social value, Yujiahui has implemented a “values-first” principle and consistently seeks to influence employees with its values in the areas of hiring/selection, development, deployment, and retention. A values-based assessment is required in processes from job interviews to employee performance assessments and promotion reviews. Especially impressive is the fact that Yujiahui’s “50% business performance + 50% values” approach to day-to-day performance assessment makes the company a rarity among companies that engage primarily in product sales.The direct linking of values with employee remuneration and incentives and thus putting action to the defense of one’s values is also reflective of Yujiahui’s determination to adhere to its values.
In terms of its management culture, Yujiahui has a flat management structure where “the job comes first” is emphasized. Office politics simply do not exist. For instance, if you like to eat pears, you are free to call yourself “Pear”; if you are a fan of animated content, you are perfectly free to call yourself “Simba”. Members of the company’s senior management team and rank-and-file employees alike call each other by these nicknames. The company atmosphere is relaxed, without little sense of hierarchy. Moreover, Yujiahui is also committed to the corporate philosophy of “Work happy, live life 100%”. The company offers nearly 30 types of employee benefits, thereby offering with a comprehensive set of assurances for their lives. A few years ago, the company introduced a stock options plan aimed at members of the core management team and the founding team. According to the company’s IPO prospectus, the company’s listing will lead to nearly 100 individuals holding stocks worth more than CNY10 million each. At Yujiahui, employees truly participate and share in the growth and advancement of the company.
Thanks to this corporate culture Yujiahui has grown from a team of less than 10 persons working in a tiny Changsha office to a large enterprise with over a thousand employees today. The company’s operating income has grown from less than CNY1 million in its first year to more than CNY1.6 billion in 2017, and its tax bill stands at more than CNY170 million. The company’s e-commerce operations team is nearly 600-strong. Years of operational experience and experimentation have given Yujiahui a unique and highly-efficient operations management system with their very own operations manual and mantras. This system has become an industry model.
Diversification in e-commerce and
the embrace of new technologies by a young team
While continuing to keep a close eye on its core business, Yujiahui has also begun to diversify its business in order to fully harness its strengths in e-commerce operations. To this end, the company has established an e-commerce division as well as engaged in the distribution of international brands.In particular, the company’s strategic partnership with global Top 500 enterprise Johnson & Johnson is the most representative. Through this partnership, Yujiahui has also established a more proactive position for its future development.
In January 2017, Yujiahui signed an agreement with Johnson & Johnson and became “the sole authorized e-commerce partner in mainland China” for the Dr. Ci:Labo brand. In February, Dr. Ci:Labo debuted on the Tmall Global platform, achieving sales of CNY1 million in its first month and more than CNY10 million through a single store in its third month. This performance (an 866% market growth) made Dr. Ci:Labo the fastest-growing brand on Tmall Global. Operating income for the brand was close to CNY200 million in 2017, which exceeded the sales target that had been agreed upon with Johnson & Johnson.
Johnson & Johnson executive vice-president and chairman of Johnson & Johnson Consumer Companies Jorge Mesquita visited Yujiahui on August 28, 2017. He said: “You have pleasantly surprised us in so many ways in such a short time, and there are many areas where we can learn from you.” Apart from Johnson & Johnson, representatives from other internationally-renowned names such as L’Óreal have also visited Yujiahui’s office in the Changsha High-Tech Industrial Development Zone in recent years.
At the same time, Yujiahui is working actively to go international and venture into overseas markets. To this end, it has added more globalized brands like Wellfon, Leaders, and Dr. Ci:Labo to its brand stable and at the same time also increased its investment in overseas brands.
Apart from fostering diversification and internationalization, a youthful Yujiahui (which already enjoys good access to the “new economy”) is also embracing the use of new technologies in the face of changing consumption in China. For instance, the company has developed its very own sales and management information system that has in turn made business operations more standardized. The company has also worked continuously to improve its logistics system and has achieved seamless tracking beginning from product arrival to quality control, putaway, delivery, and shipping. Currently, the system can generally handle more than 400,000 orders a day.
At the same time, in the future the company will further enhance its members system and work to amass more user data through its IT and mobile-internet mall upgrading project, which is expected to wean Yujiahui off its dependence on third-party platforms for data management and analysis and put core user data squarely in the company’s hands. For the future, Yujiahui will employ Big Data analysis with user demographics, lifestyle traits, and fashion leanings, etc., to aid its R&D, planning and supply-chain management operations so that it will be able to continue to produce products that are even more popular with consumers.
According to Yujiahui’s IPO prospectus, the company’s operating income in 2016 stood at CNY1.171 billion, while its net profit stood at CNY72.5958 million; in 2017, the company’s operating income totaled CNY1.65 billion and its net profit, CNY158 million. Company profits have risen at a compound rate of greater than 50%. Based on the growth rate shown, this company will certainly look towards an even brighter future.
An eye on a top ten position in the global beauty industry
Following its debut as the “no. 1 e-commerce IPO listing”, highly-energetic Yujiahui has established its next goal: to become one of the top ten players in the global beauty industry.
Today, China is home to the world’s biggest and strongest consumer market, and undoubtedly domestic beauty concern Yujiahui is closest to, and best understands, the Chinese consumer. As such, the company is well-positioned to achieve its vision of becoming a global top ten player. At a time when consumption pattens are changing and when the consumer market is growing in China, Yujiahui will certainly be able to achieve its goal of becoming a global top ten player with its young management team and ceaseless pursuit of new technological applications.
Following its successful market listing, Yujiahui will continue to move forward with its mission of “helping mankind enjoy the beauty of the skin”. Further, with the aid of the capital market, the company is expected to reach new heights, achieve its dream of becoming a brand that the people of China can be proud of and an enterprise that China take pride in.
Here’s to a more beautiful China made possible by domestic products!
