---
title: "Yunnan Baiyao, the 'Second Place', Aims for the Top Spot in the Toothpaste Market in 2019?"
description: "Yunnan Baiyao toothpaste has differentiated itself from other brands, breaking the low-price market deadlock and proving the potential of high-end functional toothpaste. By moving beyond pharmacy channels and adopting a deep distribution strategy, it has achieved top rankings across multiple channels. Now holding the No.2 market share in China's toothpaste market, will it overtake Darlie, the current leader?"
author: "张明"
publisher: "New Distribution"
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published: "2019-05-30"
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original_source: "https://mp.weixin.qq.com/s/725WrZd-fRQHhEeHOChUrQ"
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# Yunnan Baiyao, the 'Second Place', Aims for the Top Spot in the Toothpaste Market in 2019?

> Yunnan Baiyao toothpaste has differentiated itself from other brands, breaking the low-price market deadlock and proving the potential of high-end functional toothpaste. By moving beyond pharmacy channels and adopting a deep distribution strategy, it has achieved top rankings across multiple channels. Now holding the No.2 market share in China's toothpaste market, will it overtake Darlie, the current leader?

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**Differentiating itself from other brands, breaking the low-price market deadlock, and proving the potential of high-end functional toothpaste; moving beyond pharmacy channels and adopting a deep distribution strategy to broadly expand in circulation, KA, and e-commerce, ranking among the top in multiple channels. Now firmly holding the No.2 market share in China's toothpaste market, will it overtake Darlie, the current leader?**
In the annual report disclosed by Yunnan Baiyao Group in March, one piece of information deserves attention: In 2018, the revenue of Yunnan Baiyao's Health Business Division was approximately 4.467 billion yuan, a year-on-year increase of 4.54%; the subsidiary Yunnan Baiyao Group Health Products Co., Ltd., which primarily produces and sells oral care products, achieved revenue of 4.407 billion yuan and net profit of 1.524 billion yuan. Despite being accused of adding Western medicine hemostatic ingredients and falling into controversy, Yunnan Baiyao toothpaste maintained certain growth, with its market share ranking No.2 nationwide.
**Entering the toothpaste market in 2005, Yunnan Baiyao surpassed Crest in just 10 years.** Data disclosed by the China Oral Care Industry Association shows that in 2016, Yunnan Baiyao toothpaste's market share reached 17.8%, second only to Darlie. In the following two years, Yunnan Baiyao toothpaste's market share continued to rise. The group's 2018 interim report disclosed that as of May 2018, Yunnan Baiyao toothpaste's market share in China had reached 18.1%, a year-on-year increase of 11%. This figure is already close to Darlie's.
Entering the market from a different industry, with a spirit of "drawing the sword," it continuously overcame challenges and broke the monopoly of foreign brands in China's toothpaste market. What did Yunnan Baiyao toothpaste do right? Can it reach the top of China's toothpaste market?
**Off-Center Competition**
"The launch of Baiyao toothpaste was the result of a 'cross-border trial' in the daily chemical field. At that time, some consumers sprinkled Yunnan Baiyao powder on their toothpaste to alleviate oral ulcers and gum bleeding—this was the inspiration for Baiyao toothpaste. The positioning of 'professional oral care' allowed us to avoid general competitors and open up a 'blue ocean' in the market," said Qin Wanmin, General Manager of Yunnan Baiyao Group Health Products Co., Ltd., in a media interview. He said that Baiyao's success is essentially a story of corporate innovation.
If we rewind to 2005, the entire Chinese toothpaste market was a different scene. At that time, 10 yuan was a psychological price threshold; toothpaste below 10 yuan was most easily accepted by consumers. Penetrating the mid-to-low-end market, especially the mid-end, had become a clear market plan for Colgate and Crest, while domestic toothpaste brands were also competing fiercely in the low-end market.
Instead of adopting a low-price competitive strategy, Yunnan Baiyao took a "maverick" approach, entering the high-end market with a toothpaste priced at 22 yuan per tube, clearly conveying its repair effects on the three core symptoms of "gum bleeding, oral ulcers, and gum swelling." "The reason Yunnan Baiyao toothpaste was able to quickly enter the market is the success of category research and brand positioning. Solving oral problems became its unique category value in the industry," said Chen Haichao, a strategic marketing consultant for FMCG. He believes that the high-end niche market became the best opportunity for Yunnan Baiyao to enter.
"Yunnan Baiyao, extending from a pharmaceutical company to the daily chemical field, clearly defined its core selling point upon entering the market: preventing gum bleeding or stopping bleeding, making the core benefit of herbal toothpaste land on the product and capturing consumers' pain points," said Hua Changping, General Manager of Urumqi Baisheng Trading Co., Ltd., a Yunnan Baiyao distributor. He also said that the niche market made Yunnan Baiyao successful.
One detail is that to successfully occupy the high-end market, Yunnan Baiyao early on sent a large number of personnel to KA stores, distributed trial packs in large supermarkets, and invested resources to increase consumer education about the category. In terms of products, Yunnan Baiyao successively launched the Jin Kou Jian series targeting the mid-end toothpaste market and the Lang Jian series for the high-end market.
After continuously cultivating the market, during the period from 2011 to 2015, which was the national "12th Five-Year Plan" period, Yunnan Baiyao welcomed its "golden five years" of development, maintaining double-digit growth every year. By March-April 2015, its product market share reached 16%, rising to No.2.
Yunnan Baiyao's rapid overtaking of Crest also made other brands realize that toothpaste could be played this way!
As a result, P&G, Unilever, and local toothpaste companies all began to focus on the high-end market. In early 2016, a Nielsen survey showed that in terms of market share by price point, the growth of high-end oral care products was far higher than the industry average. In the most competitive toothpaste market, more and more high-end and ultra-high-end new products appeared, with their combined sales accounting for 20% of the market share and annual sales growth exceeding 40%.
In the past two years, brands have begun to compete in high-end niche areas such as whitening, herbal, anti-cavity, fresh breath, multi-function, and anti-sensitivity. Yunnan Baiyao also launched some high-end product series accordingly. In 2018, the global launch of Yunnan Baiyao Probiotic Children's Toothpaste marked the brand's extension from solving a single gum bleeding problem to comprehensive oral care for all ages.
**Horizontal Expansion and Vertical Territory Grabbing**
The success of positioning allowed Yunnan Baiyao toothpaste to take its first step, and flexible channel strategies helped Yunnan Baiyao expand rapidly. As is well known, many pharmaceutical companies that cross over into the daily chemical field often end up failing because they are not good at operating daily chemical channels. Initially, Yunnan Baiyao set up a special project team, entering through pharmacy channels, and tried promotions in communities and parks, but sales were limited.
After realizing this problem, in 2006, Yunnan Baiyao Group established the Health Products Division to be responsible for toothpaste sales and to promote operations in supermarkets, pharmacies, and circulation channels.
"Similar to the approach of P&G and Unilever, Yunnan Baiyao toothpaste also borrowed the deep distribution strategy offline," said a Yunnan Baiyao distributor in Yunnan. "Except for direct-operated systems, Yunnan Baiyao usually divides distributors by county-level market or system. In the largest Yunnan market, Yunnan Baiyao has distributors in some larger township markets to ensure product coverage in lower-tier markets."
In Hua Changping's view, high brand awareness, sufficient gross profit space, and stable price system are key factors for agents to be willing to promote Yunnan Baiyao toothpaste. "Yunnan Baiyao has strict control over the price system, and early on ensured agents could get more than 10 points of gross profit."
Additionally, Jiang Changming, General Manager of Ezhou Mingsheng Trading Co., Ltd., said in an interview with our reporter that the manufacturer provides strong terminal support for the Yunnan Baiyao brand. Besides support for entry fees, stacking fees, promotion plans, and materials, when agents achieve a certain number of outlets and payment amounts for Yunnan Baiyao, the company will send a certain number of BAs to stay in stores long-term to help agents sell products.
Therefore, our reporter found in visits to Hubei, Henan, Sichuan, and other provinces that in the oral care field, Yunnan Baiyao and Darlie are evenly matched.
In addition to offline channels, online channels are the direction of Yunnan Baiyao's vertical expansion. Yunnan Baiyao is one of the earlier brands to enter e-commerce channels. In 2017, Yunnan Baiyao actively embraced the internet. On the basis of entering major e-commerce platforms in the form of flagship stores, it followed its product characteristics and kept pace with the new retail era, establishing an internet marketing center in Hangzhou to gradually open up a new pattern for the internet development of health products. In 2018, in addition to deeply cultivating mainstream e-commerce channels such as Tmall, Tmall Supermarket, and JD.com self-operated, Yunnan Baiyao selectively expanded high-quality channels such as Vipshop and Suning.com, and also conducted cooperation negotiations with multiple high-quality channels.
Data from OTC Consulting shows that in 2018, Yunnan Baiyao toothpaste's retail sales on 15 e-commerce platforms including Tmall and JD.com reached 728 million yuan, accounting for 8.32%; retail volume was 15.295 million pieces, accounting for 3.03%. In online channels, Yunnan Baiyao has firmly ranked No.1 in the oral care market.
From offline to online, Yunnan Baiyao achieved rapid expansion through horizontal expansion and vertical territory grabbing strategies. Additionally, a Yunnan Baiyao distributor in Xinjiang revealed that at this stage, Yunnan Baiyao may also launch pharmacy-channel-exclusive toothpaste to further explore this channel.
**Declining Growth Rate and Multi-Category Dilemma**
The stable performance of Yunnan Baiyao toothpaste once led distributors to speculate that its market share might surpass Darlie in 2018 and occupy the No.1 position in China's toothpaste market. However, according to the latest financial report disclosed by Yunnan, this goal has still not been achieved.
"In the functional toothpaste segment, Yunnan Baiyao toothpaste is already the leader. But in the overall ranking, there is still a significant gap with Darlie, because the two have different paths and approaches," Chen Haichao believes that Yunnan Baiyao toothpaste still has a long way to go.
A Yunnan Baiyao distributor in Sichuan said that at this stage, the overall toothpaste market structure is relatively stable, and the industry has entered a period of low-speed growth. Yunnan Baiyao toothpaste's attempts to break through through category expansion and find new growth points have not been very successful. "The toothbrush category developed early on has become a gift for many distributors. The children's toothpaste category, which they want to focus on, has not been recognized by many stores," the distributor worried that consumers still equate Yunnan Baiyao with toothpaste.
The distributor also told reporters that the profit space for Yunnan Baiyao toothpaste distributors is being compressed. "Early on, distributors had a gross profit of more than 10 points. Now, distributors' gross profit is only maintained at around 10 points. After deducting personnel expenses, some distributors only have 5-6 points of gross profit, and some even break even, affecting the brand's development." Therefore, the reporter learned that some Yunnan Baiyao agents have begun to focus on other high-margin toothpaste products.
In addition, some distributors told reporters that as consumers become more mature, the functions claimed by Yunnan Baiyao may be questioned by consumers. For example, after being accused of adding Western medicine hemostatic ingredients last year, Yunnan Baiyao toothpaste was once at the center of a storm.
The problems Yunnan Baiyao faces are also common problems encountered by many brands that have reached a certain scale. "Yunnan Baiyao toothpaste should build core competitiveness in the functional toothpaste segment; there is no need to catch up with Darlie." Perhaps as Chen Haichao said, Yunnan Baiyao toothpaste, which has inherent advantages in R&D and innovation, might achieve better results by focusing on its existing strengths.
Source: Cosmetics News (ID: huazhuangpinbao)


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