Success of KBeauty's Focus on the US, Though Can't Fully Give Up China

 

 

[THE KOREA HERALD] I talked about the differing China strategies between AmorePacific and LG in a previous post - the gist of it being AmorePacific was focusing more on the North American and European market while LG was still going to maintain a strong presence in China. But it looks like AmorePacific is not fully ready to quit China yet:

Korean beauty companies have begun implementing new tactics to boost sales in markets outside China, while emphasizing that they are "not dropping the Chinese market."

"We are preparing for the launch of the sixth-generation Sulwhasoo products in China. Laneige and Innisfree are also scheduled to release brand new products later in the year," said an Amorepacific official.

Another industry official said China’s growth potential is still too big to ditch.

"Korean beauty companies call for lessening dependence on China, but, no matter how they scale down their business, China will always play a crucial role in the K-beauty business because of the sheer amount of sales they make," the official said on condition of anonymity.

AmorePacific's and LG's strategies have been different in the western market. Whereas AmorePacific seemed to be pivoting their entire packaging and marketing to be a more global brand, LG just bought a bunch of brands including Avon (gag).

In recent years, the company invested a total of about 606.1 billion won in four M&As in North America alone. In 2019, the company acquired US beauty firm the Avon Co. for 145 billion won, as well as the Asian and North American business rights for US skincare brand Physiogel for 191 billion won in 2020. In 2021, it acquired a 56 percent stake in US hair care brand Boinca for 116 billion won, along with a 65 percent stake in US cosmetics brand the Creme Shop a year later for 152 billion won.

I mentioned in the previous post that the shift was mostly due to unpredictability of the Chinese market (geopolitical), BUT this article brought up the good point that KBeauty's decline in China roughly correlated to China's own push to strengthen their domestic beauty industry.

“Starting in 2010, China’s state-run cosmetics research institutions scouted many Korean cosmetics engineers to nurture their own industry,” said Kim Joo-jeok, a professor of the beauty industry department at Sungshin Women’s University.

“With the rise in quality, coupled with a lot cheaper pricing, China’s beauty industry soared, while Korean products started losing their competitive edge.”

MUSINGS

The AmorePacific & LG moves has been my favorite one to watch because it bisects so many areas. 

• Signals what products might be more easily accessible to me
• AP and LG moves will predict what the popular-on-social-media SMEs will do
• US-Korea-China political and business relationships (impacted heavily by the China-Taiwan relationship)
  
• And now, the influence of CBeauty on the success of KBeauty both in China and abroad

I mentioned in my first blog post that KOTRA helps their companies quite a bit internationally (or rather, Odile did), and I'm wondering if or when they'll change their strategy.

Experts say Korean beauty companies should pivot away from mainly selling low- to mid-priced goods in overseas markets in order for its business to grow.

"Korean beauty companies need to change their tactics to mainly sell high-end cosmetics, or products with creative, high-quality health functions in the overseas market," he said.

"In the past, K-beauty itself was very popular, but now, rather than focusing on the title 'K-beauty,' Korean beauty firms need to increase the function and effectiveness of the products."

I have thinking that with the sheer number of new KBeauty brands that flood social media, people are going to get fatigued soon. Even I confuse brands at times, and I'm an AB enthusiast. People who are less into the in's and out's of KBeauty are even more likely to mix them up or generalize that an SME KBeauty brand is the same as a luxe KBeauty brand. Korea is no stranger to brands that come and go, but I think KOTRA probably needs to think about a more long term strategy that won't hurt their chaebol major brands.

One thing I don't see mentioned is how brands are working with China's new rule that went into effect in April; where international companies are required to basically give up their secret tech and ingredients. There are some companies that already have different regional versions, so I've been speculating that their way of complying may be to produce Chinese versions that are slightly different (possibly even "older") versions than their home country's. That way, on the chance this info is leaked out from the government, their cutting edge tech isn't leaked. This part makes me think it is, because the Gen6 FCAS came out in March so how much gearing up is necessary?

"We are preparing for the launch of the sixth-generation Sulwhasoo products in China. Laneige and Innisfree are also scheduled to release brand new products later in the year," said an Amorepacific official.

I don't know if brands will actually say outright that's happening though, since telling consumers they're getting a "lesser" version of a product is bound to piss them off.

Also, unrelated to any of the above, but I just found out Tilda Swinton is the global ambassador for Sulwhasoo and I audibly laughed.

I had been kind of kidding that AmorePacific's moves in the NA market has been confusing because they want to be seen as equals to Shiseido in the west, without putting in the time it took Shiseido to be Shiseido. Not quite Shiseido, but Cate Blanchett is the face of SK-II. The blonde, badass, beautiful, talented actress who absolutely slays male and female roles? Yeah, that one.