Johnson & Johnson boosts Asia Pacific interest with Dabao buy

Johnson & Johnson has wrapped up a deal to buy Chinese cosmetics firm Beijing Dabao. According to Chinese state media, the US giant will pay an estimated 2.3bn yuan ($337m) for Dabao, following a bidding war with Avon and Unilever.

The Asia Pacific market offers good growth prospects for western companies in the skin care sector, according to Euromonitor company analyst Oru Mohiuddin. “Skin care is one of Johnson & Johnson’s leading portfolios, but the company is strongly based in saturated markets, 41% of its skin care is based in North America, while 27% is based in Western Europe. Both these markets have growth projections lower than that of the market in skin care,” Mohiuddin explains.

“On the other hand, Asia Pacific offers high growth prospect, projected to add over $8bn in absolute terms in the next five years. The growth will be led by China. It is here Dabao presents a good opportunity.”

L’Oréal noted the market’s attraction when it bought the Mini Nurse and Yue Sai brands in 2004, and Procter & Gamble is also considering acquisitions in China.

Dabao, owned by the Beijing Sanlu Factory, produces self-branded herbal cosmetics and exports to more than 30 countries. “Dabao markets its product as high quality but oriented towards the working class, keeping the price low in comparison to that of the foreign competitors,” said Mohiuddin. “However, Dabao has lacked the financial means to exploit the market opportunity. A boost from Johnson & Johnson should allow it to market more profoundly and can be expected to get a good reception given the product is designed for the general mass and Dabao has the understanding of the distribution channels, an important factor in China.”