Good News on Listing | Frost & Sullivan Assists Cogee Group Holdings Limited in Successful Hong Kong Listing (2593.HK)

Caohji Group Holdings Limited (hereinafter referred to as 'Caohji Group') successfully listed on December 19, 2024. The company plans to issue 3,333,360 shares globally, with 10% for public offering in Hong Kong and 90% for international placement. The issue price per share is HK$3.75 - 4.15, with 800 shares per lot.

During the process of listing in Hong Kong this time, Frost & Sullivan mainly undertook the following tasks: helping the issuer accurately and objectively understand its positioning in the target market, using objective market data to discover, support, and highlight the issuer's competitive advantages, assisting the issuer, investment banks, and other intermediaries in completing the relevant parts of the prospectus (such as the overview, competitive advantages and strategy, industry overview, business, and other important chapters), helping the issuer complete communication with the Hong Kong Stock Exchange and investors, assisting investors in quickly understanding the market ecosystem and competitive landscape, and assisting the issuer in completing feedback on various industry-related issues from the Hong Kong Stock Exchange.

• The company has been operating in the Hong Kong health supplement market for about 25 years, with a well-known brand image;

   

• The company has established a comprehensive sales network through diversified channels, thereby expanding the coverage of end customers and enhancing its own brand image;

   

• The company adopts a consumer-led product development strategy and possesses product control capabilities to quickly respond to health trends and consumer demands, creating a rich and diverse portfolio of high-quality products to meet diverse customer needs.

   

• The company adopts a multi-faceted marketing strategy, utilizing various promotional channels including online advertising, offline advertising, and hiring artists (such as actors and singers) and KOLs;

   

• The company has an experienced and visionary management team.

According to the Frost & Sullivan report, the company:

• Ranked tenth among all health product suppliers and fifth among local health product suppliers, based on the retail sales of health products in Hong Kong in 2023;

   

• Ranked fifth among all health product suppliers and fourth among local health product suppliers, based on the retail sales of Hong Kong's immune system health products in 2023.

●Definition and Classification of Health Supplements in Hong Kong

According to the Hong Kong Health Food Association, health products refer to oral products that are recommended for consumption and claim health benefits, including pills, capsules, tablets, granules, powders, liquids, or semi-solid preparations, but do not include traditional foods, Western medicines, or Chinese patent medicines.

Health supplements contain nutrients or other health components that can supplement the deficiencies of daily dietary intake or regulate bodily functions, but are not intended for treating diseases. Based on product function, health supplements can be divided into immune system health supplements, anti-aging health supplements, anti-four highs (high blood pressure, high cholesterol, high blood sugar, and high blood lipid) health supplements, cardiovascular health supplements, liver and kidney health supplements, bone health supplements, weight management health supplements, etc. According to target end customers, health supplements can be categorized into men's health supplements, women's health supplements, and general health supplements.

●Hong Kong health product market industrial chain

The industrial chain of the Hong Kong health product market includes upstream raw material supply, midstream manufacturing, import and distribution, as well as downstream customers.

During the manufacturing process, health supplements typically adopt OEM (Original Equipment Manufacturer) and ODM (Original Design Manufacturer) models.

Brands may outsource production to selected third-party manufacturers according to OEM and ODM arrangements, allowing suppliers to concentrate resources on R&D, product planning and design, brand promotion and marketing, as well as sales and distribution. For health product suppliers, independent R&D of formulas is quite important because it ensures control over quality, efficacy, and differentiation in a highly competitive market, ultimately helping to promote trust and satisfaction among end customers. Importers and distributors, as agents, also play a role in importing health products into the local Hong Kong market.

Offline distribution channels include multi-brand specialty retailers, department stores, branded stores, pharmacies, drugstores, large comprehensive supermarkets, and hypermarkets. Online distribution channels include self-operated e-commerce platforms, specialized e-commerce platforms, and comprehensive e-commerce platforms. These channels include chain retailers and non-chain retailers. Customer A and consignee A are one of the largest health product chain retailers in Hong Kong, with approximately 300 and 170 stores respectively in Hong Kong on December 31, 2023.

Source: Frost & Sullivan report

●Market scale of the health supplement market in Hong Kong

Despite the challenges brought about by the outbreak of the novel coronavirus, retail sales in Hong Kong's health product market continued to rise, increasing from HK$9 billion in 2019 to HK$10 billion in 2023, with a compound annual growth rate of 2.7%. This growth highlights that (even in the context of the pandemic disrupting the overall retail market) demand for health products continues to grow. Multiple factors have contributed to this market's growth, including increased consumer health awareness, growing concern about strengthening the immune system, and the shift towards preventive healthcare.

Frost & Sullivan estimates that the total retail sales of health products in Hong Kong are expected to reach HK$127 billion in 2028, with a compound annual growth rate of 4.9% starting from 2023. As end-customers prioritize health and seek proactive measures to maintain it, the demand for health products is expected to continue on an upward trend.

In the past few years, the online health product market in Hong Kong has experienced significant growth. From 2019 to 2023, the market size increased from HK$1 billion to HK$1.4 billion, with a compound annual growth rate of 9.0%. It is expected that by 2028, the market size will reach HK$2 billion, with a compound annual growth rate of 7.9% starting from 2023.

In addition, the penetration rate of online sales has also increased significantly. From 2019 to 2023, the penetration rate rose from 11.0% to 14.0%, reflecting the growing acceptance and adoption rate of online health products by end customers. It is expected that this trend will continue, with the penetration rate reaching 16.1% by 2028.

The surge in online health product sales can be attributed to several factors, including the convenience and accessibility provided by online platforms, especially during the outbreak of the COVID-19 pandemic. In addition, end-customers are increasingly valuing various products offered online, as well as comparing prices and referring to other user reviews. As end-customers' online shopping habits continue to strengthen, the online health product market in Hong Kong is expected to continue expanding in the coming years.

Retail sales of health products by sales channel (Hong Kong) from 2019 to 2028

Note: The online penetration rate is calculated as the percentage of online retail sales to total retail sales.

Source: Frost & Sullivan report

● >The main drivers of the Hong Kong health supplement market

Health awareness is constantly improving

Consumers' awareness of health and wellness continues to improve, reflecting their proactive attitude towards maintaining health and preventing diseases. This has stimulated interest in health products to enhance overall health levels. In addition, the outbreak of the COVID-19 pandemic has also accelerated health awareness, especially among the younger population. The enhancement of health awareness has promoted a surge in demand for health products and immune-boosting products among different age groups. Therefore, health product companies face strategic opportunities to expand market share and meet the growing demand for health-centered products. The health product market in Hong Kong focuses on long-term health and preventive measures, and with the promotion of a generation that values health, it is expected to achieve sustained growth.

aging population

In recent years, the aging population in Hong Kong has been steadily increasing, with people aged 65 or above being more susceptible to health problems. The number of such individuals rose from 14 million in 2019 to 17 million in 2023, with a compound annual growth rate of 5.4%. It is estimated that by 2028, the population will increase to 2.1 million. The shift in population structure towards an elderly population is the main catalyst driving the development of the health product market in Hong Kong. With the continuous increase in the elderly population, there is a demand for health products specifically designed to meet age-related health needs, especially those related to bone health, joint support, and cognitive function.

The recovery of the tourism industry

The recovery of Hong Kong's tourism industry is one of the main drivers of growth in the local health supplement market. After experiencing a downturn brought about by the pandemic, the industry has seen significant recovery. The total number of inbound tourists increased from just 6 million in 2022 to 340 million in 2023. This sharp rise, especially from mainland China, has driven demand for health supplements. Hong Kong's health supplements are known for their variety, quality, and price advantages, attracting tourists seeking healthy and wellness solutions.

●Development Trend of Hong Kong Health Product Market

Diversified product supply

The future trend of the Hong Kong health supplement market will revolve around diversified product supply. With the rapid development of the market, the health supplement market will go beyond general generic solutions and adopt a series of customized health supplements to meet individual needs and lifestyles. From sports-specific formulas to nutritional supplements for specific ages, the industry is preparing to precisely cater to consumers' different preferences. This personalized trend reflects a deeper understanding of the multifaceted nature of health and wellness, positioning the Hong Kong health supplement market at the forefront of innovation, providing people with comprehensive and customized health solutions.

The online penetration rate continues to rise

In the future, the Hong Kong health supplement market is expected to gradually develop towards digitization and e-commerce. With the popularization of the internet and changes in consumers' shopping habits, online purchasing of health supplements will become increasingly popular. It is estimated that the online penetration rate of the market will rise from 14.0% in 2023 to 16.1% in 2028. This transformation will provide end-customers with a more convenient shopping experience, allowing them to purchase the health supplements they need anytime and anywhere. In addition, e-commerce platforms will become an important channel for health supplement brands to market and sell their products.

The pet health product market is constantly expanding.

The health product market in Hong Kong is about to expand significantly, as health issues now include not only human health but also pet health. Recognizing the important role of pets, pet owners are increasingly using specialized health products to protect their pets' health. This emerging trend indicates untapped potential and foreshadows a diversified market landscape for companies that can provide safe and effective solutions for this niche market. With the growing demand for pet health solutions, it is expected that the market will change, and the health product industry will adjust to meet the different needs of each important member of the family.

●The competitive landscape of the Hong Kong health supplement market

The Hong Kong health supplement market is a dynamic and competitive industry characterized by a concentration of international and local operators. Local health supplement suppliers have headquarters in the Chinese mainland, Hong Kong, and the Macao Special Administrative Region. The market has about 200-300 participants, offering a wide variety of products and brands tailored specifically for Hong Kong's health-conscious end consumers, thus driving the market to thrive.

The Hong Kong health supplement market is relatively concentrated, with the top ten health supplement suppliers accounting for a combined market share of 68.7% based on retail sales in 2023. Local suppliers have penetrated the Hong Kong market, customizing products to meet the specific health needs and preferences of local residents. Over time, these methods have significantly enhanced their local reputation and made them stand out among international competitors. In 2023, based on Hong Kong health supplement retail sales, our company ranked tenth among all health supplement suppliers and fifth among local health supplement suppliers, with a market share of 3.6%.

Top 10 Health Supplements Suppliers by Retail Sales in 2023 (Hong Kong) and Market Share

Source: Frost & Sullivan report

Immune system health products are specially formulated products used to strengthen or improve the body's innate defense mechanisms against diseases and infections. They typically include health supplements that use ingredients extracted from traditional herbs to enhance immune responses or promote overall immune health, such as Ganoderma lucidum, Cordyceps sinensis, Ganoderma ensiforme, ginseng, etc., but do not include daily health products such as vitamins or probiotics.

The Hong Kong immunological health supplement market is relatively concentrated. In terms of retail sales in 2023, the aggregate market share of the top five local health supplement suppliers was 50.5%. There are about 50 to 100 brands providing immunological health supplements in Hong Kong, most of which are local manufacturers.

In 2023, ranked by retail sales of Hong Kong's immune system health products, the company ranked fifth among all health product suppliers and fourth among local health product suppliers, with a market share of 4.9%.

Ranking and Market Share of the Top Five Health Supplements Suppliers by Retail Sales of Immunological Health Supplements in 2023 (Hong Kong)

Source: Frost & Sullivan report

●Hong Kong definitions and classifications of beauty and skincare products

The beauty and skincare market includes skincare products, cosmetics, and perfumes; however, it does not include personal care products, haircare products, beauty equipment, etc. Skincare products are used to improve the appearance and condition of the skin. Skincare products are mainly divided into facial care, body care, hand care, and sun protection care products. Cosmetics refer to coloring products used to change an individual's appearance. Cosmetics are mainly divided into facial cosmetics, eye makeup, lip products, nail products, etc.

●Market scale of the beauty and skincare products market in Hong Kong

In the Hong Kong beauty and skincare market, tourists are an important consumer group. Retail sales in the industry plummeted from HK$429 billion in 2019 to HK$81 billion in 2021, significantly affected by a decrease in inbound tourists due to the COVID-19 pandemic. However, since the market fully reopened, there are signs of recovery, with sales increasing to HK$289 billion by 2023. To cope with the outbreak of the COVID-19 pandemic, the Hong Kong government implemented strategic measures to stimulate inbound tourists and consumer spending.

For example, in order to attract tourists, the Hong Kong government launched the 'Hello, Hong Kong' global promotion campaign in February 2023. The campaign invited tourists from around the world to visit, distributed consumption vouchers, and the Hong Kong Tourism Development Council also cooperated with social platforms in mainland China to increase the exposure of Hong Kong tourism.

These measures are expected to play a key role in revitalizing the retail landscape (including the beauty and skincare industry). The expected outcomes of these efforts include a projected retail sales increase of HK$583 billion from HK$289 billion in 2023 to 2028, with a compound annual growth rate of 15.1%.

Retail sales (Hong Kong) of beauty and skincare products from 2019 to 2028

Source: Frost & Sullivan report

●The main driving forces of the Hong Kong beauty and skincare market

Tourism recovery

The recovery of Hong Kong's tourism industry has revitalized its beauty and skincare market. Hong Kong is renowned as a global shopping destination, thanks to the strengthening of transportation connections such as high-speed railways and the Hong Kong-Zhuhai-Macao Bridge, which has increased international tourist flow, especially from mainland China. With the relaxation of travel restrictions and the rebound in tourist numbers, the demand for internationally renowned local brands at duty-free shops and boutiques continues to surge, thus stimulating market growth.

The rise of diversified e-commerce channels

The development of e-commerce has significantly changed the retail landscape of the beauty and skincare market in Hong Kong. The surge in international and regional platform giants has broadened sales channels for such products. Innovations such as live sales and social commerce have further enriched consumer experiences and expanded market coverage. The expansion of e-commerce channels has not only enriched shopping choices but also improved product discovery and participation, becoming the core driving force for market growth.

Technological Progress and Innovation

The beauty and skincare market is dynamic due to product formula innovation and technological integration. Brands offering advanced skincare solutions, including anti-aging treatments, skin-lightening serums, and personalized products tailored through genetic testing or AI diagnosis, are receiving increasing attention. Such innovations meet consumers' demand for complex and cutting-edge skincare solutions, enhancing market attractiveness and promoting market growth.

Generation Z consumption

The Z generation (born between 1995 and 2009) has had a profound impact on the Hong Kong beauty and skincare market because they were exposed to the industry earlier, have fluent digital skills, and possess strong moral and environmental values. This group prioritizes sustainable development, pollution-free products, and those that meet inclusive beauty standards. Their refined preferences for product ingredients and performance, coupled with their attention to visually attractive packaging, have prompted brands to continuously innovate and adjust their product supply. Attracting this group through targeted social media campaigns and partnerships with influencers is crucial for tapping into their huge purchasing power and shaping future market trends.

●Future Trends of the Hong Kong Beauty and Skin Care Market

The integration of beauty and health care

The integration of beauty and health care continues to accelerate as more products offer comprehensive benefits, enhancing both external appearance and overall health levels. This trend includes the rise of skin health products and stress-relieving skincare products to cater to consumers who place more emphasis on health.

Digital and augmented reality ("AR") experiences

Digital innovation and AR technology are changing the customer experience in the beauty and skincare industry. These technologies provide virtual try-ons, detailed skin analysis, and personalized product recommendations, enabling a customized informed shopping experience that minimizes the need for physical product trials.

Scientific, targeted and professional products

The Hong Kong beauty and skincare market is increasingly driven by scientific progress and consumers' demand for personalized and specialized products. Dermatological research has promoted the development of formulas for specific skin problems and types, utilizing technologies such as artificial intelligence and genetic testing to customize skincare plans. At the same time, the awareness of consumers has also promoted the development of products for specific environmental conditions and lifestyle factors (including pollution protection and blue light protection). These specialized trends are further reflected in the rise of multifunctional beauty and related precision instruments, thereby enhancing the efficacy and user experience of skincare applications.

Expansion of men's, infant and children's beauty and skincare products

The beauty and skincare market is moving towards diversification to cover a wider range of people including men, infants, and children. For instance, the beauty market for men is rapidly expanding due to the marketing of products and brands specifically tailored to men's skin characteristics, reflecting changes in social norms and an increased self-awareness of all genders and age groups about their appearance.