Louis Vuitton Loves Dr. Wu
Women care about their looks – that's what makes skin care recession-proof. The Dr. Wu brand has been growing in popularity since it launched more than a decade ago. Now, foreign investors have been knocking on its doors.
Louis Vuitton Loves Dr. WuBy Ming-ling Hsieh
From CommonWealth Magazine (vol. 542 )
In late February, the private equity fund L Capital Taiwan Beauty Ltd., which belongs to the LVMH Group, gained approval from the Taiwanese Ministry of Economic Affairs' Investment Commission to invest the equivalent of NT$750 million in Dr. Wu Skincare Co. Ltd., the maker of medical skincare brand Dr. Wu.
The two parties involved remained tight-lipped about this surprise marriage between an international luxury leader and a homegrown cosmetics brand from Taiwan. They would not reveal how they became bedfellows and how exactly they were going to cooperate. The secrecy surrounding the deal only sparked greater curiosity and expectations.
Yet while the announcement hit the industry like a bombshell, it was not an entirely unforeseen development.
Father-Son Team Creates Novel Medical Skincare Brand
Dr. Wu skincare products have stood out from the crowd for some time now, thanks to well-planned, steady brand development. The products are currently sold through major drugstore chains and department stores in at least seven countries including China, New Zealand, Singapore and the United States.
Last year, the company earned revenue between NT$1 billion to NT$1.5 billion, posting profits for the tenth year in row.
Company founder Wu Ying-chun originally worked as dermatologist at National Taiwan University Hospital. In 1978 he opened his own dermatology clinic on Yongkang Street in central Taipei City.
Having many years of practical experience as a dermatologist, Dr. Wu began to make his own skincare products early on, in part because members of his own family suffered from skin allergies. Twenty-two years ago, he developed his first three-in-one toner.
Yet it was not until 2003 that the Dr. Wu brand moved from word-of-mouth marketing and limited sales venues (only the clinic) to a more standardized, systematic operation.
The key figure driving this strategic reorientation has been Dr. Wu's youngest son, Wu Yi-jui, now 38, who serves as the family company's general manager.
While father and son look very much alike, the younger Wu embarked on a different career path than his dermatologist father. Following initial bioengineering studies at Columbia University in the United States, Wu eventually switched to industrial management.
Upon graduation he joined a Wall Street venture capital firm where he dealt with mergers and acquisitions.
"Our family is very open-minded. We don't necessarily have to become doctors," Wu Yi-jui once remarked in an interview with CommonWealth Magazine.
After returning to Taiwan in 2001, he noticed his father's clinic could use some improvement. Because Dr. Wu was busy seeing patients and doing research, clinical procedures and equipment had not been planned optimally.
When the family founded Dr. Wu Skincare Co. Ltd. in 2003, Wu Yi-jui saw even more opportunities to put his expertise in venture capitalism and industrial management to good use.
First, he convinced his father to mass-market his skincare products, which were originally only intended for the clinic's patients.
Thanks to endorsements from celebrities such as Taiwanese actress Barbie Hsu, the Dr. Wu cosmetic series quickly gained popularity. In 2005, when Taiwan's second largest drugstore chain Cosmed began to sell Dr. Wu products, the average consumer began to take note, and the brand gradually began to grow.
At the same time, Wu Yi-jui overhauled the clinic's standard operating procedures, from customer service to patient consultations. New patients, for instance, will first have a counseling interview to assess their needs before they are sent to a certain physician for consultation and diagnosis.
With his measures implemented over the past two years – changing management methods, setting up systems, broadening sales channels – Wu Yi-jui has demonstrated that his entrepreneurial ambitions are geared toward the international market.
Must-Buy Souvenirs for Chinese Visitors
In mid-February, Dr. Wu opened a 100 square meter concept store on the first floor of the Taipei 101 shopping mall, a fixture on the sightseeing itinerary of all Chinese tourists. At "Dr. Wu Taipei 101," customers can try out a 30-minute express treatment. The company has already set up a subsidiary in Shanghai ahead of the planned opening of Dr. Wu stores in China.
In fact, Dr. Wu is not the only Taiwanese cosmetic brand that is selling well overseas.
Taiwanese customs statistics show that the export value of Taiwan-made cosmetics has continuously increased from NT$5.4 billion in 2006 to NT$11 billion in 2012. Despite dramatic economic ups and downs during that period, cosmetics exports registered a compound annual growth rate of 13 percent.
On the Internet, hordes of cosmetics enthusiasts from Hong Kong and China share impressions of their shopping spree booty from Taiwan. Package tour groups and individual travelers storm cosmetics outlets to scoop up hugely popular bio cellulose facial masks from Taiwan.
A Taiwanese cosmetics industry insider observes that the island boasts a number of quite profitable cosmetics businesses. They are known for down-to-earth management, enjoy high credibility and could even serve as springboards for entrepreneurial forays into the Chinese market. In the past, Taiwan's cosmetics industry has been underestimated. The industry is now well-positioned for win-win relationships with investors and venture capitalists.
"We have the strength. What we lack is guts and capital," the industry insider admits.
Marketers around the world are mesmerized by the burgeoning purchasing power in Asia. Now is the time to push lifestyle brands.
Founded in 2001, L Capital is a Paris-based private equity fund backed by the LVMH Group, as well as Groupe Arnault S.A., the family holding of LVMH chairman Bernard Arnault. In 2009, L Capital joined hands with Malaysia's YTL Group to create L Capital Asia with headquarters in Singapore. The fund provides growth equity to high-end consumer and lifestyle brands in Asia. L Capital Asia closed at US$635 million at year-end 2010.
Asian Craze for Lifestyle Brands
Since its inception the fund has invested in more than a dozen lucrative companies in Australia, China and India, in watches and jewelry, fashion designer labels, movie distribution and gourmet food.
Their most recent Taiwan-related investment dates back to October 2011 when the fund became the second largest equity stakeholder in Xin Hee Co. Ltd., the apparel company of Taiwanese brothers Sun Jui-hung and Sun Jui-chan that sells its high-end fashion labels through its own stores in China. In July last year, the fund zeroed in on cosmetics, investing in Guangdong Marubi Biotechnology Co. Ltd., which started out as a maker of eye contour skincare and now produces the Marubi line of cosmetics.
As Asian market and lifestyle trends are beginning to spill over to the rest of the world, it remains to be seen whether Taiwanese brands can jump on the trend and ride it to reach their full potential.
Translated from the Chinese by Susanne Ganz