A customer tries a natural essential oil product at a store franchised by Herb-tale, a producer of skin care products in Kunming, the capital of Yunnan.[Photo provided to China Daily]

Risks worth taking

For Baiyao, which has annual revenue of nearly 20 billion yuan, the small slice of the cosmetics-market cake currently available is not attractive enough to warrant a larger investment. However, in the eyes of small- and medium-sized fragrance companies, the risks associated with establishing a successful local brand are worth taking.

Having cooperated with a number of domestic and foreign cosmetics and health food brands for nearly 10 years, SeedShare Development, a herbal company in Yunnan, started its own skin care brand, called Herb-tale, in 2008.

"The big overseas brands are recognized not only for the good quality of their products, but much more as icons of higher social status and a luxurious lifestyle," said Ding Rui, Herb-tale's president.

"It's very difficult for a Chinese company to survive under such circumstances," she added. "The profits are good, but extremely difficult to make. To compete with the big brands, we have to maintain the same quality as them, while looking for something unique."

Ding said local perfume brands are not competitive because the world's top perfumers mostly work for French brands. That means the trump card for Yunnan companies is essential oils and the skin care products made from them.

"It's a safe bet because China now has world-leading oil-extraction technology," she said. As the country of origin, China enjoys low-cost raw materials, which means the products have strong price competitiveness.

Herb-tale's star product - essential rose oil - sells at about 300 yuan for 10 milliliters, about a quarter of the price of the same oil produced by Jurlique, an Australian brand known for natural essential oils and related skin care products.

"Consumers are much more familiar with Rosa Damascene, more commonly known as damask rose," Ding said. "But few know that the reputation of damask rose is mainly based on its unique fragrance.

"However, Yunnan's native roses are extremely effective in skin care because of the thick petals, which are rich in polysaccharides - chemicals that aid the skin's natural ability to hydrate and retain water," she said.

'Secret' formulas

In recent years, Ding and her team have traveled around Yunnan, visiting many of the 25 local ethnic groups, the largest number in any province, to collect little-known skin care formulas and special herbs.

"China is the only country in the world that produces truly herbal drugs," she said. "We are experienced in extracting the herbs' active ingredients, and the secret formulas from different ethnic groups will be a unique selling point."

In the Lijiang Naxi autonomous prefecture, Ding and her team found Prinsepia Utilis Royle, a rare member of the rose family. The cherry-like bloom can be used to treat acute inflammation and relieve pain, and is also used by the locals as a treatment for burns. Herb-tale has now included the herb in its sunscreen products.

Ding's team also explored the properties of Matsutake - an expensive mushroom that originated in Japan, but grows extensively in Yunnan. Believed to be one of the world's most-expensive fungi, Matsutake contains many vitamins and minerals, and also has a unique chemical that helps boost the body's immune system. Herb-tale has incorporated it in its anti-aging skin care products.