First it was Zhonghua toothpaste, then Mininurse skincare products, Yue-Sai cosmetics, and Dabao creams.

 

Now it's C-Bons' turn.

 

According to market grapevine, German personal care and cosmetics giant Beiersdorf AG plans to spend 2 billion yuan to acquire Chinese firm C-Bons' four major hair care brands - Slek, Maestro, S-Dew and Hair Song.

 

According to C-Bons, the two sides "are still looking at different possibilities".

 

The two parties have only reached a letter of intent, and there has been no further movement so far, said Zhang Jihong, spokesman of C-Bons Holding (International) Limited, registered in Hong Kong and headquartered in Central China's Hubei Province.

 

Zhang told China Daily it's a strategic cooperation to complement each other, or more specifically, collaborate in hair care business in terms of sales, marketing, brand management, research and development.

 

"Both parties are still exploring collaboration options. No agreement has been reached yet. The (letter of) intent is only based on the company level. C-Bons' products and brands are not involved yet," he said, scotching the rumor that the deal can amount to 2 billion yuan.

 

A statement from Beiersdorf AG said both companies have agreed to further discuss, on an exclusive basis, a potential equity investment in an appropriate form by Beiersdorf in C-Bons hair care.

 

The German firm, which is famous for its major brands Nivea and Eucerin in China, has not expanded to the hair care sector in the country.

 

The 18-year-old C-Bons is the only local firm that competes head-to-head with foreign giants such as P&G and Unilever.

 

Take Slek for example. The brand, launched in 1996, has products ranging from shampoo to hair conditioner and body wash and has become one of the country's leading brands for toiletries.

 

Another hair styling brand, Maestro, has occupied the largest market share by value for five years in a row, according to statistics from AC Nielsen. Maestro is about twice as large as the second player, Guangzhou-based Houdy, in the sector.

 

"The two parties complement each other in terms of business scope and advantages. Plus we share similar corporate cultures and business vision," Zhang said.

 

For Beiersdorf, the initiative is part of its consumer business strategy to accelerate regional growth in China, which is one of its four priority countries across the world.

 

Li Shunlai, researcher with Social Survey Institute of China, said the hair care sector will be restructured if the collaboration is successful.

 

"With Beiersdorf's strength in R&D and branding, C-Bons product competitiveness will definitely be largely enhanced," he said.

 

Statistics from the Social Survey Institute of China indicate China's hair care market volume stands at about 20 billion yuan each year, 70 percent of which is occupied by P&G, C-Bons and Unilever.

 

Earlier in 2003, Mininurse, the medium-end skincare brand, was acquired by French-based L'Oreal. The world's largest cosmetics provider later on took over Yue-Sai, the makeup brand founded by Chinese-American TV celebrity Yue-Sai Kan.

 

In March, US firm Johnson & Johnson was reported to have taken over Beijing-based Dabao Cosmetics Co, China's biggest skincare company.

 

The latest market buzz is that Unilever is planning to buy Zhonghua - owned by Shanghai Whitecat Shareholding Co Ltd, which licenses the brand to Unilever - or even acquire Whitecat itself.

 

So what road will Chinese personal care and cosmetics brands take in the future: growing by themselves; competing head-to-head with foreign brands; or acquisition and control by international rivals?

 

Li said foreign capital will inevitably flood the domestic cosmetics and consumer goods sector, which is a huge market due to the country's population. He said local firms, compared with their international counterparts, have shorter history of development, and lag behind in R&D capability, brand management and channel maintenance.

 

Li also pointed out there is still room for domestic brands to grow. "The market needs varieties of products and brands. Domestic brands should have a clear and unique market position."

 

(China Daily August 30, 2007)