Innovation and Entrepreneurship

Case Study: Liang Baby: Developing a Botanical Baby Skin Care Cream

The Oxford-Zhejiang 10,000 Women Entrepreneurship Certificate program, run by Saïd Business School, University of Oxford and the Global Entrepreneurship Research Centre, School of Management at Zhejiang University, launched with its first class of 100 students in June 2009.

Wang Fang was a scholar in the first cohort of the Oxford-Zhejiang 10,000 Women Entrepreneurship Certificate program in Hangzhou, China in 2009 and 2010. She was a Chinese medicine practitioner who had worked in hospitals since 1989. During those years, Wang had lots of ideas for new products, but turning these ideas into reality seemed like an unachievable dream. In 1990, she came up with an idea for a non-woven facemask. She went to the patent office to apply for a patent, but was told it was a ridiculous product and no one would use it. When she saw an imported version of the product on the market in 2000, she decided that she wouldn't listen to other people and would follow her dreams instead.

In 2007, Wang quit her job to start Hangzhou Yin-Tong Bio-Technology Co. Ltd. In Hangzhou. In 2009, she won the Oxford-Zhejiang 10,000 Women Entrepreneurship Certificate Program Business Plan Competition.

Hangzhou Yin-Tong Bio-Technology Co. develops medical cosmetic products and medicines based on the special effects of natural botanical elements. The initial focus of the company is on medical cosmetics, but the longer-term objective is to develop medicines. The company identifies new applications for botanical medicines and builds on work conducted by Wang's father, who was also a Chinese medicine practitioner. It creates new formulas based on theoretical conclusions, creates samples and conducts experiments. The company has five people and a total investment to date of 200,000 RMB (US$30,858). The company has been profitable since 2009.

The company's original product was a cream to repair splits in the skin and reduce itching. The cream is very effective and can repair splits in two to three days. The product was developed by Wang's father over a 20-year period, and more than 200,000 people have used it. For example, it has been provided to workers on the railways and in the construction industry.

A Botanical Baby Skin Care Cream

In 2008, Wang wanted to develop a new product. Initially, she developed three products for women, men and babies, but decided that the baby market was the most attractive. Liang Baby is a botanical skin care cream for babies. It repairs sunburned skin and also clears up the toxin from mosquito bites to stop itching and swelling. The product is more effective than other products that do not clear up the toxin and reduce the itch only for a day or two.

Liang Baby sells for around 35 RMB, which is higher than other Chinese brands that typically sell for around 25 RMB. Wang had originally hoped that the retail price of the product would be 30 RMB, but a higher price was necessary due to the mark-up required by supermarkets and pharmacies. The product is about two-thirds of the price of Japanese brands, which are very popular in China and typically sell for around 50 RMB.

Launching Liang Baby presented Wang with two important challenges: selling to a new market (baby vs. adult); and selling through new channels (supermarkets and drugstores vs. companies and hospitals).

China's high economic growth has spurred the rapidly rising consumption of baby care products. Because most families only have one child, they can spend more time and money on baby care products. It has been forecast that consumption will increase rapidly over the next five years with the development of the Chinese economy and an improvement in people's living conditions. China's demand for baby care products will most likely continue to outstrip supply (for some products). In 2004, the demand for baby skincare and toiletries was 1.16 billion RMB and was expected to grow at 9.7% per annum to 1.85 billion RMB in 2009. In 2004, China imported 39.7 million RMB of baby skincare and toiletries, mainly high quality products, and exported 69 million RMB.

The drugstore industry in China is intensely competitive, rapidly evolving and highly fragmented. Continued consolidation and new store openings by chain operators will further increase competitive pressure. Local regulations in some cities, such as Beijing and Shanghai, prohibit opening new drugstores within a certain distance of existing stores. Significant differences exist between regions in China due to demographics, local regulations and shopping habits. Retail drugstore chains increasingly face competition from discount stores, convenience stores and supermarkets. Retail drugstores compete for customers on the basis of store location, merchandise selection, private label offerings, prices, services offered and brand name.