China Consumer

Dental demand

Leading oral healthcare brand readies for a Hong Kong IPO


Weimeizi’s toothpastes

As Cervantes put it in Don Quixote: “Every tooth in a man’s head is more valuable than a diamond.” That often wasn’t always the view in Chinese society, although larger numbers of Chinese are now paying much more attention to their dental hygiene.

More than 30% of 12 year-old children and 36% of adults said they brushed their teeth twice a day in a 2016 survey (up from 28% for 12 year-olds and 32% for adults in 2007), for instance. Millions more children are getting advice from their doctors and dentists about looking after their teeth, as well as examinations and treatments, says China Daily.

Oral care companies have seen a subsequent sparkle in sales. Yunnan Baiyao has become something of a business school case study, for instance, toppling foreign brands like Colgate and Crest to become the market leader in toothpaste sales. The brand, which claims that a blend of proprietary herbal products in its toothpaste prevents bleeding gums, is popular with Chinese consumers, despite being priced at about twice the level of a similar-size tube from Colgate. Yunnan Baiyao now controls as much as 22% of China’s toothpaste market.

Another domestic oral care firm is hoping for similar success. Last week, Weimeizi, a Chinese supplier of oral care products, filed for an initial public offering in Hong Kong. The proceeds of the IPO – the size of which has yet to be specified – will be used to build the brand, boost research and development and accelerate Weimeizi’s digital strategy.

If successful, Weimeizi is going to be the first Chinese toothpaste stock to list in Hong Kong.

Founded in 2014, it owns oral care brands Saky and SakyKids, sell toothpaste, toothbrushes and mouthwash. Most of its sales (43%) are made online, with about a third coming from supermarkets and pharmacies. Sales in the first three quarters of 2021 were Rmb1.2 billion ($189.79 million), with adjusted net profit in the first nine months of 2021 of Rmb129 million (for comparison Yunnan Baiyao, a bigger company, reported full-year sales of Rmb5.4 billion in 2020).

“After Yunnan Baiyao entered the high-end toothpaste market, foreign brands like Colgate and Crest subsequently launched high-end products to combat its rise. Weimeizi saw an opportunity in the domestic low-end market, however, and quickly expanded through a strategy of marketing its offering more like a higher-end product,” one financial blogger noted.

In a further effort to move upmarket, Weimeizi is trying to carve out a niche in toothpaste for children. SakyKids, which targets children between 2 and 12, sells fluoride-free brands and toothpastes blended with probiotics among its array of options. It also works hard on educational campaigns for parents that highlight the importance of dental care for young children.

Previous ad campaigns have tapped celebrities like David Beckham and actress Li Bingbing to endorse its products, as well as investing heavily in product placement on some of China’s favourite TV shows.

The strategy is starting to show some success. Weimeizi is now the market leader for children’s toothpaste, with just over 20% of the retail market. It also has a significant share in whitening toothpaste with 11.3% of that market. Progress has been slower in sales of electric toothbrushes, however, which is a growth segment in China’s dental market.

That’s a problem Weimeizi is going to have to combat in the long run, say analysts. Between 2019 and 2020, its R&D expenditures hovered around Rmb25.4 million and Rmb27.4 million respectively, accounting for less than 2% of its revenues. That has taken a toll on the quality of its product range, critics claim. On Heimao, a website that publishes consumer complaints, there is grumbling about its electric toothbrush, for instance, with customers claiming that the charging port doesn’t work and that many of the devices are defective.

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