China Consumer

Beautiful M&A

Founder to buy back TJoy but can he revive it?

Tjoy w

It was worth $400 million

Silicon Valley loves the story of a comeback. Following in the footsteps of Steve Jobs (Apple), Jerry Yang (Yahoo), Larry Page (Google) and Marc Pincus (Zynga), last month Twitter’s co-founder Jack Dorsey, 38, also announced his return as company chief executive. Twitter shareholders will be hoping his reappearance marks good news after five years of managerial reshuffle and slowing growth. After all, as the New York Times says, “a founder’s return can be stabilising”.

Another Chinese entrepreneur may now be ready for his second act too. Last week, Zhuang Wenyang, founder of the Chinese skincare label TJoy, was reportedly readying to take back the company he founded 20 years ago but sold to global beauty group Coty in 2011. Even though the deal is not yet confirmed, the CBN newspaper reported that an agreement was in place for Zhuang to purchase TJoy for Rmb100 million ($16 million), a fraction of the $400 million Coty paid for it four years ago.

TJoy is hardly a household name outside of China. But before Coty’s takeover, the label not only dominated the country’s sunscreen market, ranking first in the sector, it was also one of the biggest players in men’s skincare.

Coty is among the world’s largest sellers of perfumes. However, the acquisition of a local brand in TJoy failed to create the expected synergies.

According to the Global Times, the Chinese skincare label made more than Rmb800 million in sales in 2011 before Coty took over. A year later TJoy’s revenue had sunk 50% as a result of major personnel turnover and a lukewarm reception to new product launches.

To cut its losses, Coty announced in 2014 that it was discontinuing the TJoy brand from its portfolio to focus on its global brands like Adidas (it sells deodorants using the German firm’s label) and Rimmel.

The inevitable came in March as Coty wrote off $317 million in the value of TJoy – a balance sheet admission that the $400 million acquisition was almost a complete failure.

So what happened? Most industry observers blame TJoy’s disappointing sales on Coty’s management. Yang Zhigang from the China Federation of Industry and Commerce Association says foreign firms like Coty are primarily interested in buying a domestic brand to take advantage of its distribution channels to expand their own share in the China market.

In reality, the acquiror has little motivation to grow the brand. Indeed, CBN says while TJoy products have more or less vanished from the shelves, Coty’s Adidas brand has seen its performance improve markedly after the acquisition, thanks to TJoy’s sales network.

“After the acquisition of local brands, foreign companies usually won’t pour too many resources into developing the brands. They will maintain the status quo at best because the acquisition itself costs a lot of money already,” Yang told China Economic Times. “And besides, more often than not, foreign companies take over local brands to eliminate a competitive opponent and one way to do that is to freeze their development.”

Nevertheless, others say it is not fair to put all the blame on the French firm. Zhang Bingwu, a marketing expert, told National Business Daily that the reason Zhuang sold the company was because he knew TJoy’s best days were over and that the brand wouldn’t be able to retain its leading position in skincare due to heightened competition.

Highlighting as much: in the past year, cosmetics brands like L’Oreal’s Garnier and Revlon have pulled out of the Chinese market because of falling sales.

Assuming Zhuang returns to the helm, can he turn it around? “Zhuang getting TJoy up running again is going to be difficult, partly because things have changed. For a start, TJoy is no longer in the lead position it once was… Secondly, consumers now have more choices than ever and competition is more intense than ever,” an industry observer, told Southern Metropolis Daily.

One thing helping Zhuang is the cash arsenal he’ll be able to invest thanks to the money he got from selling TJoy to Coty four years ago.


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