In the early evenings after work, the locker room of Beijing’s Powerhouse gym is full of women of varying ages chatting, showering, and lathering on facial masks. One of my gym buddies, Athena Yang, an administrative assistant for Air China (753:HK), swears by various creams and gels sold by Magic Holdings (1633:HK), China’s largest facial-mask company. Her favorite is the Magic Snail Cream Firming Hydrating Mask, which she says helps restore moisture during Beijing’s long dry winters. Sometimes she uses the Berry Brightening Facial Mask, which is supposed to lighten her skin tone to achieve the porcelain-doll complexion favored in parts of northern China.
Athena’s fondness for skin-care products is hardly unique. Although she’s never revealed her brand loyalties, the 32-year-old megastar actress Fan Bingbing has said in multiple interviews that she applies two facial masks a day—that’s 700 a year—and often comes to the set of her movies or modeling shoots wearing a facial mask to maintain her snowy, unlined complexion.
On Monday, China’s Ministry of Commerce announced its approval for Paris-based L’Oréal (OR:FP), the world’s leading cosmetics company, to acquire Magic Holdings for HK$6.54 billion ($840 million). L’Oréal said in news release, “Facial masks are one of China’s beauty market’s fastest-growing areas, with very promising development prospects.”
Building on Magic’s massive sales network of 288 distributors in 32 Chinese provinces and regions, the French company “intends to develop this Chinese brand by contributing its science-based expertise” to beauty formulas. L’Oréal already has a research center in Shanghai and two manufacturing facilities in Suzhou and Yichang, as well as 3,500 employees in China.
My gym buddy Athena finished two years of college and secured a steady desk job in Beijing, and consumers like her are expected to power the growth in China’s $34 billion beauty and personal care market. As Norman Chan, the Hong Kong-based head of investment at Calibre Asset Management, told Bloomberg News, “The faster-growing markets are the low- to mid-end, which the domestic companies would have a better foothold in” than foreign brands such as L’Oreal, which have previously focused largely on China’s most affluent shoppers.
Anecdotally, it seems L’Oréal is onto something. Athena gave up her chance to be a flight attendant—still considered a glamorous job in China—in part because an administrative job looked more stable, but also because the flight attendants she knew seemed to age prematurely. “The air in airplanes is so dry and bad for your skin,” she told me.