More companies turn to make beauty products　

More and more businessmen are rushing to cosmetics businesses, which are considered some of the very few cash cows in the stale domestic market.

Mostly targeting Chinese and other Southeast Asian consumers who reportedly embrace “Made in Korea” beauty products and beauty regimes, from entertainment agencies to online retail outlets, pharmaceutical firms and even ceramics and tech companies are turning their heads to what they believe is the new El Dorado.

According to the Ministry of Food and Drug Safety, the number of state-registered cosmetics maker is 1,938, a leap of about 34 percent from 1,438 in 2012. 

The new entrants have different backgrounds, with some having no prior experience making facial cream or lipstick. 

The 73-year-old high-end ceramics maker Haengnam Chinaware signed a memorandum of understanding with Hong Kong-based Emperor Entertainment Korea on Nov. 26 and announced its advancement into the cosmetics market. Haengnam, which saw 4.3 billion won ($3.68 million) in losses last year, stated that “the partnership will support the company’s business venture into the unknown territories.”

Retail giant E-Land launched beauty products to be sold at its “Ebline” lingerie shop, while e-commerce operator Interpark has introduced “Laplandia,” a skin care brand inspired by the Nordic environment that uses birch extracts as the main ingredient. “The launch of the cosmetics brand will help us expand our presence to a lifestyle brand from fashion,” an E-Land spokesman said.

Some of the most unlikely firms are set to join the cosmetics craze. Wireless Internet solutions company Point I and urban mining company Gumsung Tech in October announced their advancement into the cosmetics market by purchasing cosmetics companies, IOK and Skincare, respectively. Information technology company IDN has recently changed its name to BotaBio and is seeking to make inroads into the bio and skin care industries.  

“This is part of our business diversification. In order to adopt professional touches we have decided to acquire beauty makers,” said a worker at one of the aforementioned companies, who declined to be named.

Their reason is simple: The market is hot.

The Korean cosmetics market is estimated at around 7.6 trillion won as of 2013 and has grown by 8.3 percent a year since 2008.

And there is more. Thanks to the Korean pop culture fever, Korea’s beauty regimes and products have been popular across Southeast Asia and, most of all, China.

According to a report by the Korea Trade-Investment Promotion Agency, Korean products have the second-largest share (22.4 percent) in China’s imported beauty product market with $489.2 million worth of items exported between January and September this year. 

 

AmorePacific‘s cushion foundation (above) and Leaders’ facial mask pack manufactured by Sansung L&S are widely popular among Asian consumers.

Amid the lingering global recession, the country’s largest cosmetics maker AmorePacific reported 4.7 trillion won in sales in 2014, a rise of about 21 percent over the previous year.

Paper box maker Sansung L&S became an overnight sensation when the company merged with local Leaders Cosmetics, which found potential in Sansung’s nine years of facial mask pack manufacturing techniques in 2011. After winning the hearts of Chinese consumers, Sansung’s shares skyrocketed by 800 percent in 2014.

And thanks to the K-Beauty boom, many of the companies have successfully listed their operations to the local bourse. Apart from existing players such as LG Household and Health Care and AmorePacific, local brands such as Able CNC and TonyMoly held an initial public offering this year, and more makers such as Nature Republic are planning an IPO for next year.

The boom also owes to the fact that making beauty products have become extremely easy.

“Thanks to some of the best and most popular original design manufacturers, such as Kolmar, Coxmax and Cosmecca Korea, all an ordinary entrant needs is good marketing and promotion strategies to sell while the ODM takes over the development and manufacturing,” a market insider said, claiming that more than 80 percent of listed cosmetics makers are hiring original design manufacturers instead of having their own production systems.

But things aren’t all rosy.

The Chinese government’s tightening regulations on homologation is hindering new players’ advancement into the Chinese market. Hankyun.com assumed less than 100 companies are admitted to operate in China every year.

“For example, YG Entertainment’s ambitious makeup brand Moonshot’s planned launch in China this year was pushed back to next year, and we are not even sure whether that would be possible,” Kim Chang-kwon, an analyst at Daewoo Securities, said.

“Moreover, the Chinese authorities are also conducting crackdowns on small-scale shuttle traders as smugglers. This isn’t a good sign for small-sized companies who have been dependent on such traders who visit Korea on a regular basis, return with a huge bundle of Korean goods to sell at a higher price,” said Chang Jun-ki, executive at Korea Cosmetics Association, in an interview. “So like any other business, this is also full of risks and downside.”

By Bae Ji-sook (baejisook@heraldcorp.com)