Korean Cosmetics Firms Shift Focus to North America From China


Korean cosmetics companies are stepping up efforts to expand their presence in North America, where a growing number of young consumers have become fans of Korean music, movies and other cultural contents, while reducing their dependence on China, according to company officials.

Over the past decade, the cosmetics firms saw their sales grow at an explosive rate thanks to Chinese consumers who used to be big buyers of made-in-Korea beauty products. But this has become a thing of the past as more and more Chinese now prefer either high-priced European brands or affordable local ones.

Now, AMOREPACIFIC, LG Household & Health Care (LG H&H) and other domestic beauty product manufacturers have hired new models or rebranded their products to appeal to millennials and Gen Z consumers in the United States, Canada and Mexico.

AMOREPACIFIC, Korea’s largest cosmetics company, recently changed the brand logo of its premium product line, “Sulwhasoo,” from Chinese characters to English. This is the first time that AMOREPACIFIC dumped the Chinese characters that the company had been using since 1997.

“We can say that AMOREPACIFIC has completely changed the basic identity of Sulwhasoo that it had been promoting since the beginning of the brand’s establishment,” a local cosmetics firm official said.”

The company hired K-pop musician Rose as its global ambassador in January and also featured models from diverse ethnic groups in its new Sulwhasoo advertisement.

“This is a symbolic moment demonstrating that the main target market for K-beauty is shifting to North America,” the official added.

However, AMOREPACIFIC said the Chinese market is still important and its renewal efforts only aim to diversify global customer demographics.

“The reason why we changed our brand logo in English is to focus on the heritage of Sulwhasoo in the global market. We wanted to show the history and philosophy of the brand,” an AMOREPACIFIC official said. “We hired Rose as a global ambassador to utilize her fame in North America.”

LG H&H also refreshed its leading cosmetics brand, “The history of Whoo.” It ditched the gold package design and herbal scents that suited Chinese customers’ tastes.

The company shifted its sales and marketing strategies focusing on China to North America. In January, it appointed new CEO Moon Hye-young to lead LG H&H Americas, who built her career at Starbucks and Amazon in the United States.

Declining sales in China have prompted the two companies to shift their focus to the North American market.

After the outbreak of COVID-19, China locked down a number of its major cities to contain the spread of infections. As a result, many Korean cosmetic brands had to shut down their shops in China.

China also banned its people from traveling abroad and the sales of Korean cosmetics products at duty-free shops plunged as a result.

Sales of LG H&H’s “The History of Whoo” and “Sum 37” decreased 38 percent and 16 percent, respectively, year-on-year in 2022.

AMOREPACIFIC’s revenues in Asia fell 24 percent amid a 17 percent drop in overseas sales during the same period.

Their revenues from the Chinese market account for more than half of total overseas sales.

The rapid growth of local cosmetics brands in China is another big threat that is hurting Korean cosmetics firms. According to a survey by global consulting firm PWC in June of last year, 45 percent of Chinese respondents preferred homegrown brands.

AmoreaPacific and LG H&H are also striving to make their cosmetics brands appeal to younger consumers.

Sulwhasoo is often referred as a premium beauty brand for middle-age customers here. However, the company recently came up with a “young anti-aging” concept for its products to not only target consumers in their 40s, but also young customers in their 20s and 30s.

AMOREPACIFIC’s low-cost brand Innisfree has deviated from its “Jeju Island” concept. Innisfree has strongly advocated Jeju Island’s nature-friendly image in its products until now, using Jeju green tea and volcanic ash as raw materials in its products.

However, the brand has created a new virtual island called “New Isle” as a marketing strategy targeting Gen Z consumers.

“We broke the stereotype of cosmetics brand advertising by adopting a new virtual island in our marketing concept and we aim to capture the attention of young consumers,” an Innisfree official said.

LG H&H’s “O HUI” brand hired actor Son Suk-ku as its new main model, replacing Kim Tae-hee and Shin Min-ah.

“We hired Son to appeal to young customers and make O HUI a younger brand,” an LG H&H official said. “Gen Z is our future consumer group and targeting them now will help us to establish a new paradigm in the K-beauty industry.”

Kolmar Korea is also focusing on its research and development and production capabilities in North America. It aims to become a global cosmetics original design manufacturing (ODM) firm by lowering its dependence on China and expanding its business scope to the United States and Canada.

The company acquired the “Kolmar” trademark rights from Kolmar USA in May of last year and secured exclusive rights to the brand in the global market.

It is currently constructing North American technology and sales center in New Jersey. The facility will be responsible for adjusting technologies developed in Korea to local policies and serve as a base to expand sales networks in the U.S. market.

“We will expand our business in the North American market with our acquisition of global trademark rights for ‘Kolmar’ and opening the technology sales center,” a company official said.

The firm is also considering building its second production facility in Olyphant, Pennsylvania.

Source : Koreatimes