The Rise of Ok-Magnificence: Korea’s Cosmetics Business Achieves Document Progress and World Recognition

Cosmetics have emerged as a key export merchandise for Korea. Because of the recognition of Ok-pop, it has lately expanded to america, Japan and Europe. Prior to now, China was the most important marketplace for cosmetics firms, however with the COVID-19 incident and the deployment of THAAD (Terminal Excessive Altitude Space Protection System deployment), ‘leaving China’ has develop into an important technique. As Ok-beauty turns into identified within the world market, cosmetics firms are additionally setting new efficiency information. It’s assessed that the Korean cosmetics business has escaped its lengthy hunch and entered a interval of structural change.

/Photograph supplied by tvN

Make-up spring has begun

Medicube Yoo Jae-seok All main cosmetics firms posted good efficiency within the first quarter of this 12 months. Amorepacific’s first quarter working revenue was KRW 72.7 billion, a rise of 12.9% in comparison with the identical interval final 12 months. It fully missed the inventory market consensus predicting a decline in efficiency. LG Family & Well being Care’s working revenue additionally elevated by 3.1% throughout the identical interval. That is the primary time in 10 quarters that working revenue has elevated for the reason that third quarter of 2021.

Producer improvement and manufacturing (ODM) firms that develop and produce cosmetics present a extra pronounced enchancment in efficiency. The working revenue of Korea’s main ODM firms, Cosmax and Kolmar Korea, elevated by 229.1% and 168.9%, respectively, in comparison with the identical interval final 12 months. Each are greater than ever for the quarter.

What they’ve in frequent is that abroad efficiency, together with in North America and Japan, has grown evenly. Amore Pacific gross sales within the Americas jumped 40% within the first quarter, and Cosmax gross sales within the US additionally elevated 43% within the first quarter.

How did it enhance? In accordance with American funding financial institution Piper Sandler, American youngsters spend most of their pocket cash on cosmetics. ‘Uncommon Magnificence’, which got here second amongst their favourite magnificence manufacturers, is a model created by singer Selena Gomez, which recorded gross sales of $300 million (about 410.7 billion gained) final 12 months.

The corporate that makes this Uncommon Magnificence colour make-up is C&C Worldwide, a home firm. It’s a producer improvement and manufacturing (ODM) firm that handles every thing from product improvement to manufacturing Final 12 months, it recorded the best gross sales ever (KRW 63.1 billion). There have reportedly been numerous love calls from Korean ODM firms within the US and Europe lately.

Korea turns into a world cosmetics exporter

Export diversification is going on all through the cosmetics business. In accordance with the Korea Customs Service, cosmetics exports within the first quarter reached a file excessive of $2.3 billion (about 3.2 trillion gained). The variety of beauty export locations was a file 175, of which 110 achieved the best efficiency. Exports to China, which accounted for greater than half (53%) of complete cosmetics exports in 2021, fell to 26.6% within the first quarter.

We take a look at every nation. The share of Korean merchandise amongst cosmetics imported in america, Japan and France is rising. At the moment, our nation is the second largest vendor of cosmetics in america. It’s #1 in Japan. That is proof that Ok-beauty has lastly managed to interrupt out of China.

Inventory costs of cosmetics firms are additionally typically on the rise. The inventory value of Amore Pacific rose 30.5% and the inventory value of LG Family & Well being Care rose 28.5% till the twenty fourth of this 12 months. Cosmax jumped 36.9%. It is a important achievement contemplating that KOSPI is flat at 0.7% thus far this 12 months.

APR, which had its first preliminary public providing (IPO) on KOSPI this 12 months, is an organization that owns Medicube, which broadcaster Yoo Jae-seok advertises. The competitors price for the general public inventory subscription providing was 1,111 to 1, with a margin of about 14 trillion gained. Medicube can be among the best promoting manufacturers on Amazon lately.

Beauty shares that cry and snicker in China

Home cosmetics firms have been consultant Chinese language-related shares. Within the 2000s, when China was experiencing financial development, Korea’s exports to China started to extend, and cosmetics have been standard for his or her cost-effectiveness. We marketed oriental drugs and ginseng, standard in China, whereas less expensive than merchandise from Europe, house of cosmetics. LG Family & Well being Care’s Sulwhasoo Amore Pacific and The Who additionally gained reputation as natural cosmetics.

The Korean Wave, which began with the drama ‘My Love from the Star’, was ignited right here. Because the drama turned standard in China, the recognition of Korean make-up additionally grew quickly. Amore Pacific and LG Family & Well being Care recorded a record-breaking efficiency in 2015, surpassing the 5 trillion gained in gross sales.

Nonetheless, with the choice to deploy THAAD in Korea in 2016, the state of affairs modified with the beginning of China’s ‘Korea-Korea-Lyric’. Chinese language group vacationers disappeared from Korea, and it turned tough for Korean firms that had entered China, resembling Hyundai Motor Firm and Lotte E-Mart, to do enterprise.

The truth that cosmetics are a Chinese language client inventory has since develop into a double-edged sword. Inventory costs have been influenced by political and diplomatic points involving China. When China’s economic system is unhealthy, inventory costs fall, and when relations between North Korea and america enhance, they rise. The autumn in cosmetics shares throughout COVID-19 was additionally largely as a consequence of their grouping with Chinese language-related shares. The present craze for patriotic consumption (guoqiao) and choice for home-produced merchandise in China is one other impediment.

Export/home demand ‘double hook‘ Anticipate a great efficiency

The primary precedence for home cosmetics firms which have been so influenced by China is ‘diversification’. In actual fact, the main nation within the world cosmetics market is america. China is in second place and Japan in third place.

In contrast to China, america, Europe and Japan are developed nations in cosmetics. L’Oréal, the world’s largest cosmetics firm, is a French firm, and colour cosmetics are developed in america, the nation of Estee Lauder. Japan is a rustic with world manufacturers resembling Shiseido and SK-II.

Ok-pop turned the pitcher of reduction. As idol teams like Blackpink and Ive gained worldwide reputation, the curiosity in Ok’s magnificence naturally elevated. Amore Pacific elevated its world consciousness by utilizing Blackpink Rosé as its mannequin Sulwhasoo and Jenny as its mannequin Hera.

SNS like Instagram and TikTok have made the success of Korean indie manufacturers attainable. As American influencers add movies pitching their merchandise, merchandise from small and medium-sized firms typically promote greatest on Amazon, the world’s largest e-commerce website.

A virtuous cycle happens, with good efficiency abroad resulting in home gross sales. The variety of international vacationers who visited Korea within the first quarter was round 3.4 million, the best quarter since COVID-19. There have been fewer Chinese language vacationers than earlier than COVID-19, however there have been extra guests from america, Taiwan, and Hong Kong than earlier than COVID-19.

Cosmetics can’t be left on their purchasing listing. At CJ Olive Younger, Korea’s No. 1 well being and sweetness (H&B) retailer, gross sales to foreigners elevated by 660%, or greater than seven occasions, in only one 12 months final 12 months. In comparison with 2019 earlier than Corona, it’s greater than 4 occasions. Olive Younger is taking this chance to announce its entry into the worldwide market and is making ready to enter Japan. We plan to ascertain a neighborhood company and open an workplace within the first half of the 12 months.

Planning and progress Reporter Noh Yoo-jeong yjroh@hankyung.com
filming Lee Jong-seok and So Jae-tak PD design Jiyoung Lee, Hayoung Park
enhancing Producer Lee Jong-seok