Chinese Cosmetics Entrepreneur Becomes Billionaire As Shares Surge 75% On Trading Debut

Cosmetics entrepreneur Huang Jinfeng joined the world’s billionaires ranks after his beauty and e-commerce startup Yatsen Holding went public in the U.S.

The Guangzhou-based company, which operates the Perfect Diary, Little Ondine and Abby’s Choice beauty brands, saw its shares surge as much as 75% in its trading debut on the New York Stock Exchange. The company, which raised $617 million through its initial public offering, now has a market value of $7.8 billion. Cofounder and CEO Huang, 37, has a net worth of $3 billion that’s derived from his 25% ownership in the company, according to Forbes estimates.

Founded just four years ago, Yatsen managed to stand out in China’s beauty market through competitive pricing and a savvy social media strategy. It cuts out distributors to sell products like eye shadow for $4.5 and eyeliners directly to young consumers. The company works with celebrities and influencers to market them on social media platforms such as the short video app Douyin and China’s twitter-equivalent Sina Weibo.

While such digital marketing isn’t new, Yatsen has become a leader and a “worthy competitor” to more established western brands like L’Oreal, says Sofya Bakhta, an analyst at Shanghai-based research firm Daxue Consulting.

“It quickly built brand awareness and reputation in the local market,” she says. “The brand offers very affordable prices, does strong marketing, and on top of that, it is a Chinese domestic brand, which evokes pride and patriotic feelings among the Chinese customers.”

Last year, Yatsen’s revenues surged almost five times to $446 million from 2018, according to its prospectus. But the company isn’t immune to the pandemic. Its 200 brick-and-mortar stores were once forced to close amid strict quarantine rules, and it still faces weaker consumer sentiment and spending as the Chinese economy gradually recovers.

MORE FOR YOU

What’s more, as Huang seeks to engage shoppers better by stepping up marketing spending, Yatsen reported a loss of $170 million for the nine months ending on September 30, 2020–compared with a profit of $4.4 million in the same period a year ago. Revenues grew 73% to $482 million, a slower-than-expected rate that the company attributed to the negative impact of Covid-19 , according to its prospectus.

But Huang appears to have the experience to weather unfavorable market conditions. After graduating with a bachelor’s degree in international commerce and graduating from Sun Yat-sen University in 2007, he worked as a market research manager at P&G in Guangzhou for four years. After leaving P&G, Huang worked as the vice president of Hunan Yujiahui Cosmetics, which is best known for the Unifon skincare brand, for five years until 2016, the company’s prospectus shows.

It was also in 2016 when the entrepreneur decided to set up Yatsen Holding, which was named after his alma mater Sun Yat-sen University. The other two cofounders, chief operating officer Chen Yuwen and chief sales officer Lyu Jianhua, are Huang’s college friends, according to local media reports. Both also amassed considerable amounts of fortune: Chen’s 7.6% stake is now worth $929 million and Lyu’s 3.5% stake $425 million, according to Forbes estimates.

Leave a Reply