Proya Upgrades Brand: 15 Years of Dedication Makes it the Chinese Classic

HANGZHOU,China,Dec. 13,2018 -- China's beauty and makeup market was valued 361.6 billion yuan (approx. US$52.3 billion) in 2017,with a compound annual growth rate averaging 9.5% over the last ten years. The same rate for retail sales of cosmetics at firms above a designated size,for which the mass market component accounted for 79%,grew at the much faster rate of 18%. The Chinese cosmeticsbrands had built mass market skin care brands,establishing Cosmetics Store-focused networks,backed by integrated marketing campaigns and rapid product innovation.

CosmeticscompanyProya Cosmetics Co.,Ltd.(SHA: 603605) has gone through several iterations of the brand during its existence,starting 15 years ago when the firm launched its first bottle of lotion to today,having grown into company with more than 1,000 products under seven brands,much in line with a growth pattern that is quite typical for the sector. In the first stage of development,from 2003-2007,the company set up a network of franchise counters in shopping malls throughout China in a move to get the new personal care product line off the ground,then,from 2008 to 2012 quickly raised the visibility of the brand through intensive marketing and advertisement campaigns,achieving retail sales of 4 billion yuan (approx. US$580 million) in 2012,on the heels of an average annual growth rate of 69% during the period. From 2013-2017,Proya adjusted the pace of growth in preparation for a public listing,succeeding with its launch on China's A-share market in November 2017. Between today and 2022,the now 15-year-old Proya is once again looking at a comprehensive upgrade of the brand that will touch every aspect of the firm's operations.

With a focus on excellence in R&D,the skin care firm is using science and technology to drive the next round of product upgrades

The structure of the research and development unit has always been the most important part of Proya's roadmap,with a focus on meeting all requirements for eventual entry into the international arena,most notably in five areas: modern formula (emulsification) technology,plant research technology,packaging design,product development and evaluation technology. At present,the company has designed products and preparation methods for anti-black eye ring,composite whitening and skin anti-aging lipid nanoparticles emulsions in addition to other core technologies. As of June 2018,the company owned 267 authorized patents,including 38 for inventions,28 for utility models and 199 for design.

Based on shifts in market demand,the company focused the product upgrades on the addition of new functionalities,higher levels of efficiency,as well as new and improved,higher-priced high-value items as well as a better appearance. In November 2018,Proya debuted Proya Marine Recovery Proteoglycan Ampoule Serum,a new product combining the most prominent anti-premature aging functionalities with the most popular ampoules model,attracting young shoppers with thetagline,which,when translated from the Chinese,means "keeping your cells empowered preserves your youthful appearance". In 2019,the company plans to launch additional high-end products with functional and technological advantages that will serve as a cornerstone of a comprehensive product and brand upgrade.

Proya Marine Recovery Proteoglycan Ampoule Serum

During the recent brand launch conference held by Proya in celebration of its 15th anniversary,the company announced strategic cooperation agreements with Ifremer (French Research Institute for Exploitation of the Sea) and CEVA (Center for Study and Promotion of Algae,France). CEVA owns resources for the harvesting and farming of over 800 species of algae and has successfully extracted several of their active ingredients,which are then widely used by international cosmetics brands in the production of their anti-aging products. According to the agreement,CEVA and Proya will co-develop exclusive patented high-efficacy products.

Upgrading the organizational structure and optimizing the incentive mechanism with the aim of creating an enterprise partner platform

In 2018,Proya launched a restricted equity incentive program for the firm's top executives and key employees,based on a payout conditional on the company achieving a compound growth of at least 32.5% in revenue and 32.4% in net profit from 2018 to 2020.

As part of its efforts to make new breakthroughs,the company successfully brought on board some of the best,most experienced and entrepreneurial talents across the sector,motivating them through the adoption of a partnership system. The recruited newcomers contribute a small sum of money and acquire a minority interest,while the company contributes additional capital in order to maintain the controlling interest. Built on a shared vision of being a part of the thriving culture,the enterprise partnership platform aims to promote the sustainable growth of the company by allowing new businesses to run independently,supported by Proya's supply chain,channels,funding,marketing efforts as well as a strong mid-level and back-office management team.

Via a three-pronged effort,continuously optimizing the channel structure and achieving observable success through the integration of resources

Since the beginning of 2018,Proya has been driving sales growth across its Cosmetics Store-focused network by improving its incentive programs,providing more resources to employees,and setting up an environment that encourages employees to embrace change and continuously enhance skillsets,as it is becoming increasingly obvious that only those employees who do so will survive the transformation that is taking place across every industry. In the first half of 2018,the company's offline channels realized revenue growth of 9.6%,largely driven by the revitalization of its activities in the CS channel,while the e-commerce platform achieved revenue of 412 million yuan (approx. US$59.6 million),up 58.5% year-on-year and constituting 39.6% of the company's total revenue during the period. In 2019,Proya's e-commerce business is expected to maintain a moderated pace of growth,yet at a faster pace than the industry overall.

At the end of 2017,the company announced its strategy for the next stage of growth: the integration of three units,the core Proya brand,the e-commerce business and the Uzero brand.

In the first half of 2018,Proya achieved remarkable results on the heels of the implementation of the strategy:

The core brand Proya realized revenue growth of 28% and represented 89% of the company's total revenue for the period;

The e-commerce platform achieved sales growth of 58%,constituting 40% of the company's total revenue for the period;

Uzero accelerated the pace at which it was opening single-brand outlets modeled as smart stores,with each outlet offering over 400 makeup and healthcare items across 13 categories,among them,skin care,color cosmetics,facial masks,personal care,whole body,men's personal care,skin care tools,daily necessities,damaged skin regeneration and healthcare products. Within one year,Uzero had signed agreements with over 1,000 locations. By the end of 2018,Uzero expects to have more than 500 single-brand outlets in its network. In 2019,the brand aims to further speed up the pace at which outlets are added to the network,creating a new and growing revenue stream in the offline sales channel.

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