Good News on Listing | Frost & Sullivan Assists Jitong Trading Co., Ltd. in Successfully Going Public on the NASDAQ (NASDAQ: TKLF)

Jitong Trading Co., Ltd. (hereinafter referred to as 'Jitong Trading') successfully went public on January 18, 2022, issuing 6.25 million American Depository Receipts (ADS). Calculated based on the maximum issue price of $4, the raised funds amounted to approximately $25 million.

During the process of listing in the US, Frost & Sullivan mainly undertook the following tasks: helping the company accurately and objectively understand its positioning in the target market, using objective market data to discover, support, and highlight the company's competitive advantages, assisting the company, investment banks, and other intermediaries in completing the relevant parts of the prospectus (such as overview, competitive advantages and strategy, industry overview, business, and other important sections), facilitating communication with NASDAQ and investors, helping investors quickly understand the market ecosystem and competitive landscape, and assisting the company in completing various feedbacks from NASDAQ regarding industry issues.

Introduction

Beauty and health products refer to a category of products used for caring for the face and body. Beauty products include cosmetics, skin care, personal care, and perfumes. Health products include pharmaceuticals, over-the-counter medical products, medical supplies and equipment, as well as health foods. Japan is one of the leading markets for beauty and health products, driven by a rapidly aging population, consumers' demand for diverse and high-quality products, and the growth of the tourism industry.

The distribution channels for beauty and health products can be roughly divided into offline and online channels. In recent years, the share of online channels has been continuously increasing, mainly supported by the growth in the number of internet users. Many market participants have been expanding into the online domain to reach more consumers and increase sales. Offline channels include a variety of sales points such as department stores and supermarkets, specialty stores, pharmacies, and convenience stores. In Japan, drugstores are the main sales channel for beauty and health products. Given that the prices of such products are competitive on this channel, the quality is good, and the product categories are diverse.

Industrial chain

Market participants in the beauty and health products sector include raw material suppliers, brand owners and manufacturers, distributors and wholesalers, as well as retailers. Brand owners and/or manufacturers of beauty and health products can sell their products directly or through exclusive agents and/or authorized agents, or in a direct sales model, including business-to-business sales, online retail, and self-operated physical stores.

In 2014, the Japan Shopping Tourism Association (JSTO) announced a plan to expand the duty-free benefits allocated to foreign tourists from general merchandise to further include consumer goods such as groceries, beverages, medicines, and cosmetics. This move effectively stimulated foreign tourists' sales of beauty and health products. According to data from the Japanese Ministry of Economy, Trade and Industry (METI), Japan's beauty and health product market grew from $88.6 billion in 2015 to $136.8 billion in 2020, with a compound annual growth rate of about 9.1%. The growth was attributed to strong demand for health products during the COVID-19 pandemic, coupled with an increase in the elderly population and the number of early arrivals. Looking ahead, Japan's beauty and health product sales will rise from $142.6 billion in 2021 to $166 billion in 2025, with a compound annual growth rate of about 3.9%.

Currently, the sales of beauty and health products in Japan are still dominated by offline channels. Starting from 2020, due to strong consumer demand for health products and the rise in consumers' preference for online shopping amidst the COVID-19 outbreak, the online sales value of beauty and health products in Japan increased by 43.7% year-on-year. Overall, online sales channels have shown significant growth, increasing from $5.4 billion in 2015 to $10.8 billion in 2020, with a compound annual growth rate of about 14.8%. Looking ahead, by the end of 2025, the online sales value of beauty and health products in Japan will reach $146 billion, with a compound annual growth rate of about 6.0% from 2021 to 2025.

Population aging and increased healthcare awareness:According to data from the Japanese National Bureau of Statistics, the population aged 65 and above increased from 34 million in 2015 to 36.2 million in 2020, with a compound annual growth rate of about 1.3%. In 2020, the elderly population aged 65 and above accounted for 28.8% of Japan's total population, creating a huge demand for medical resources and healthcare products. The growing awareness of health has made consumers willing to spend more on healthcare products, including nutritional supplements, healthy foods, medical supplies, and equipment. With the increase in Japan's total healthcare expenditure, Japan's beauty and healthcare product markets have been continuously expanding over the past few years.

Expanding consumer spending for tourists:The number of tourists visiting Japan has increased significantly, rising from 19.7 million in 2015 to 31.9 million in 2019, with a compound annual growth rate of about 12.7%. More and more stores in Japan are offering duty-free shopping to meet the needs of foreign tourists, driving sales growth in Japanese beauty and health products. However, due to the outbreak of COVID-19, some countries and regions have announced travel restrictions and quarantine measures, leading to a substantial decline in the number of tourists visiting Japan. As of November 2020, the total number of tourists arriving in Japan decreased by 86.2%, reaching 4.1 million.

The beauty and health product market in North America rose from $315.3 billion in 2015 to $364.8 billion in 2020, with a compound annual growth rate of about 3.0%. The aging population in North America has led to strong demand for anti-aging beauty products and health care products. In addition, the improvement in income levels and purchasing power among North American residents has also promoted consumption of beauty and health products.

Interest in natural, organic, and environmentally friendly products is growing:Due to consumers' increased awareness of personal care brands and their growing preference for natural and organic products, these products are becoming increasingly popular in North America. In addition, with the enhancement of social and environmental responsibility consciousness, consumers are paying more attention to environmentally friendly and safe products. For example, consumers tend to choose products labeled 'pollution-free,' meaning that no animals were harmed during testing. As beauty and health products from Japan are known worldwide for their natural and high-quality ingredients and safety assurance image, such products are becoming increasingly popular in North America and are expected to promote growth in the North American beauty and health product market.

Expenditures on anti-aging and multifunctional products continue to grow:The demand for anti-aging products in North America is accelerating, which is expected to drive the development of the beauty and health product markets. This growth is attributed to population aging, the increasing prevalence of age-related skin and health problems, and a growing awareness of personal health and appearance. In addition, the emergence of digital marketing, the expansion and commercialization of social media are expected to stimulate the needs of the younger generation. Advanced technologies in age control and elderly care will bring new business opportunities to the beauty and health product markets in North America.

The Chinese economy is strong, and the market scale of beauty and health products has risen rapidly from $59 billion in 2015 to $90 billion in 2020, with a compound annual growth rate of about 8.8%. The skincare and cosmetics segment accounts for the largest proportion of the total Chinese beauty and health product market, achieving rapid growth from 2015 to 2020. By the end of 2025, the sales value of beauty and health products in China will reach $137.7 billion, with a compound annual growth rate of about 7.0% from 2021 to 2025.

Increase in disposable income:According to data from the National Bureau of Statistics of China, disposable income in China has risen significantly from 21,966.0 yuan in 2015 to 32,189.0 yuan in 2020, with an annual compound growth rate of about 7.9%. The increase in disposable income has prompted people to invest more resources in their appearance and health. In addition, people's awareness of skin and body care is constantly improving, and consumers tend to prefer value-added beauty and health products with specific functions, which helps to create new business opportunities and further drive the growth of the beauty and health product market in China.

Rapid growth of e-commerce:According to the '45th Statistical Report on the Development of Internet in China' released by the China Internet Network Information Center, the number of internet users in China increased from 688 million in December 2015 to 989 million in December 2020, with the internet penetration rate rising from 50.3% in December 2015 to 70.4% in December 2020. The rise in internet adoption and the progress of digital technology have stimulated the development of e-commerce, providing convenience for consumers and enabling them to obtain rapidly growing products. In the next five years, online sales of beauty and health products will experience rapid growth across all distribution channels.

Frost & Sullivan has extensive research experience in the consumer goods marketing industry and has assisted well-known enterprises in successfully accessing capital markets. Successful listings include: Zherli Holdings (2209.HK), Youpin 360 (2360.HK), New Oxygen Technology (NASDAQ:SY), Liangqing Holdings (8604.HK), Bingshi International (1705.HK), Seco (NASDAQ:SECO), VIPS (NYSE:VIPS), and others.

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