Chinese, creator of the skincare brand Fuerjia, Zhang Liguo, has recently entered the ranks of billionaires worldwide following the listing of his company in Shenzhen, the country’s tech hub. However, the company’s future success is being clouded by decelerating growth and fierce competition, despite its previous achievements in selling $3 facial masks.
According to estimates, Zhang, aged 59, has accumulated a fortune of $2.8 billion, primarily due to his significant 84% ownership stake in Fuerjia, a skincare brand based in the northeastern city of Harbin. The company recently completed an initial public offering on the Shenzhen Stock Exchange, raising 2.2 billion yuan ($306 million) on Tuesday.
The stock’s trading performance has been quite volatile, with shares soaring up to 44% on the first day before experiencing a 15% plunge and then partially recovering the gains on Wednesday. Despite the fluctuations, Zhang’s substantial shareholding still maintains his status as a multi-billionaire. However, Fuerjia’s declined to comment on Zhang’s exact net worth.
Fuerjia’s prospectus and local media reports suggest that Zhang achieved his wealth by seizing an early opportunity in the emerging market for skincare products. His professional journey began as a pharmacist at a local hospital in Heilongjiang, a province known for its rice production in the far northeast of China. Subsequently, he joined the state-affiliated pharmaceutical firm Hapharm Group, also headquartered in Harbin, before venturing into entrepreneurship in 1996.
Initially, the entrepreneur focused on selling injection-based medical treatments for various infections and alleviating symptoms of diseases like cerebral hemorrhage. However, in 2012, he observed a surging demand for higher-quality skincare products, prompting a strategic shift towards the skincare industry. Two years later, the company introduced its first facial mask, emphasizing its benefits in moisturization and aiding the skin’s healing process.
Fuerjia Growth and Challenges in the Skincare Market
Concurrently, Zhang diligently established an extensive distribution network to supply the facial masks to China’s thriving aesthetic medical sector and private hospitals. Additionally, he ventured into the online market by opening his own stores through platforms like Alibaba‘s T-mall shopping site.
With each facial mask priced at approximately $3, Fuerjia achieved remarkable results, accumulating $246 million in sales last year, with a net profit of $118 million, as mentioned in its prospectus. In 2021, Zhang also introduced a new skincare line called Huihuxi, although the company acknowledged that this line is still in its early stages of development, according to the prospectus.
At the same time, there are impending challenges for Fuerjia. Zhang Yi, the founder of Guangzhou-based data and research firm iiMedia Research (unrelated to Zhang Liguo), warns that the aesthetic medical industry is currently facing increased scrutiny from regulators. Authorities have already taken action against advertisements that are deemed to cause anxiety about one’s appearance.
Moreover, Fuerjia is encountering intense competition from rival brands owned by other billionaires, such as Fan Daidi’s Giant Biogene and Zhao Yan’s Bloomage Biotechnology. These competitors are actively vying for consumers’ attention, particularly through various online platforms, including e-commerce sites and short-video apps.
In its prospectus, Fuerjia openly acknowledged the intense competition in the market, citing it as the primary risk factor. The company also expressed concerns about the increasing challenges in attracting new customers. Additionally, Fuerjia highlighted the possibility of new regulatory guidelines governing production and quality, potentially leading to higher compliance costs.
For the first half of the current year, Fuerjia projects a maximum of $122.5 million in revenues, expecting a growth rate of up to 7.7% compared to the same period last year. This growth rate indicates a significant slowdown compared to the double-digit sales growth experienced just a couple of years ago.
Zhang Liguo’s journey from skincare entrepreneur to billionaire has been extraordinary, but Fuerjia faces challenges with slowing growth and fierce competition. The company’s success relies on its innovative skincare products and extensive distribution network. Despite potential regulatory impacts and increasing difficulty in attracting new customers, Fuerjia remains a significant player in the market. The path ahead may be uncertain, but Zhang’s vision and resolve have proven pivotal in the brand’s rise to success.