Over the last five years the market has continued to grow at 10.3 percent CAGR, giving the market an estimated value of $15.2bn, making it one of the biggest markets in the world and the second biggest in Asia, after Japan, according to market researcher IBISWorld.
However, the evolution of the market of the market has followed quite specific lines, which have followed the fast-growing consumer spending patterns in the country, as well as government regulation of the industry.
Tough government regulation shapes products
Likewise, this evolution has also been impacted by tough government regulations that were introduced by the State Food and Drug Administration in 2011, which restricted the used of ingredients and additives, forcing many products to be either reformualted or discontinued.
The expendable income of consumers in China has grown enourmously over the period the research considers, but that growth has evolved from an extremely low base, which means that a significant amount of domestic manufacturers continue to compete in the lower-end of the market.
Many of these players are specialised, marketing basic skin and hair care products, often only distirubing in certain provinces or key cities. Likiewse, many of these manufacturers target consumers in the smaller tier two and three cities.
From the top end to the bottom
At the top end of the market, there are very few China companies that target wealthier consumers. With the exception of a very few domestic brands, such as Herborist, this part of the the market has remained the stronghold of larger Western companies such as Estee Laueder and L'Oreal's luxury brands.
All of this means that the China market remains far more fragrmented than many of the larger and more developed international markets, with no one company having a dominant position.
Underlining this, the market researcher points out that the top four companies currently operating in the market will only account for around one third of the total revenue for the industry in 2013.
Merger and acquisition activity continues to be quiet
Larger companies have been investing in smaller companies, including the 2011 acquisition of Beijing Dabao Cosmetics by Johnson & Johnson, but because the country's regulatory authorities continue to exert significant influence over merger and acquisitions, activity has been limited.
However, as the spending power of China consumers continues to grow, manufacturers are responding by launching increasingly sophisticated products, as well as exploring new categories.
This has led to a big increase in the number of products launched on the market that are targeting groups such as children and males, as well as products that target the professional, sports and natural and organc categories.