A Shanghai Jahwa's Herborist counter in Beijing.[China Daily]

For Shanghai Jahwa, the country's largest manufacturer of cosmetics and personal healthcare products, carving out a share of the Western market always seemed like an impossible mission. But when the listed company, with annual sales of 2.26 billion yuan, decided to give it a try last September, it did it with aplomb in Paris, the fashion capital of the world.

The success is particularly sweet for the company after its first overseas foray in Hong Kong met with failure due to poor reception for its products.

Although the 110-year-old company is selling only its herbal skin care products - Herborist - through Sephora, a retail chain owned by cosmetic conglomerate LVMH, it said it has been encouraged by the initial sales amounting to more than 300,000 euros. "It's not so bad, isn't it?" said Wang Zhuo, deputy general manager, Jahwa.

"We are satisfied with our performance in the highly competitive French market and the limited impact on sales from the current economic downturn," said Wang.

The company's sales in France, have so far remained miniscule given the size of the market. To further develop the market it would need to spend more money on advertising and promotional activities.

Industry experts, however, feel that the initial results reflect the potential for Chinese herbal healthcare products in one of the most discriminating marketplaces in the world. "Natural and oriental concepts are the new trend in skincare products globally," said Michelle Huang, an analyst with research agency Euromonitor International.

In France, Jahwa sells its products at 230 Sephora outlets. Although the average price of its products in that market is three to four times higher than that at home, it is still at a mid-market price point.

Shanghai Jahwa is also one of the few major Chinese cosmetic and personal healthcare product makers that have not been acquired by international companies. L'Oreal acquired Mininurse in 2003 while Johnson & Johnson took over Dabao in 2008.

Jahwa's share in the overall cosmetics and toiletries market on the mainland increased steadily from 0.9 percent in 2002 to 1.1 percent in 2007, according to figures from Euromonitor. "Without 'breakthrough' products, Jahwa has developed its presence through existing brands and continuous distribution network expansion," Euromonitor said in a report.

Industry experts and stock analysts agree that the company's strength lies not so much in innovation but more in the growing appeal of China's vast heritage in herbal medicine. This heritage, experts said, can help distinguish the brand from many and more powerful foreign competitors.

Such distinction may have given Jahwa's Chairman Ge Wenyao the confidence about his company's growth prospect at a time when even the biggest names in the industry are taking a severe dent from the global economic downturn.

"We expect our cosmetics business to grow 25 percent in 2008 from 15 percent a year ago," said Ge.

The State-owned firm posted a profit of 185 million yuan for the first three quarters of 2008, up 49.49 percent from a year earlier period.

"When multinationals are cutting jobs and other costs to offset the sales slump, Jahwa is banking on its ample cash flow to fund expansion," said Ge.

"We're actively seeking mergers and acquisitions within China to complement our existing product lines," said Wang.

In March 2008, Jahwa acquired a 51 percent share in domestic skincare brand Sichuan Cortry, for 65.22 million yuan, giving the company an access to the eye mask market.

Wang noted that the company still has enough room to expand into other sectors where it does not have a presence, like hair care.

(China Daily January 13, 2009)