By Elisabeth King
The global beauty business is infatuated with Korea. The country’s leading beauty player AmorePacific has been dubbed the Estée Lauder of Asia and Seoul has become the Silicon Valley of skincare innovation.
But the definition of K-Beauty is changing. No one talks about French or American beauty simply because brands come from one country. Many insiders believe that the cosmetics industry will drop the national identity tag, as it did when the major Japanese beauty companies started focusing on export opportunities.
Top 10 Global Beauty Market
To understand this metamorphosis, it’s crucial to understand the domestic Korean beauty market. According to Mintel, South Korea ranks among the top 10 global markets, currently valued at US$13 billion. Facial skincare is the dominant sector, accounting for 51 percent of total sales. Two-thirds of skincare launches in Korea are facial products, racking up US$6.5 billion in sales and projected to grow to US$7.2 billion by 2020.
Colour cosmetics are the second largest category in South Korea because Korean women are among the biggest makeup buyers in the world, spending US$45 a year in contrast to US$43 in the UK and US$37 in the US, reports Mintel. Over the next three years, the Korean colour cosmetic market is estimated to reach US$2.8 billion.
According to Jane Jang, senior beauty analyst at Mintel: “The Korean beauty market remains buoyant thanks to fast-paced innovations and highly engaged consumers who don’t hesitate to adopt novel products delivering new beauty experiences. The success of the market has been heavily driven by the boom in facial skincare, but is also highlighted by the impressive per capita spend on colour cosmetics which is more than double the global average”. The Korean domestic beauty market has become so important that Walgreens Boots Alliance have partnered with Korean hypermarket retailer Emart to open Boots-branded health and beauty stores later this year.
Hotbed of Innovation/Torrid Export Sales
Korea has been a hotbed of beauty innovation for decades, with an enviable reputation for research and development. Clinique was one of the first Western brands to incorporate Korean trends and many others have followed suit without acknowledging the inspiration, just as they do with Japanese innovations. What’s changed in the past decade is that South Korea was hard-hit by the GFC in 2008 and the government designated cosmetics as a major export earner. Consumers in other Asian nations, notably China, also decided that their beauty needs are better understood by close neighbours, just as they once looked to Japan. Since 2009, Korea has been on a white-hot international growth trajectory, predominantly to China, Southeast Asia and the US. In spite of a trade row between Beijing and Seoul, beauty export shipments to China in the January/February period this year surged 51.6 per cent to US$270 million, reports the Korean Cosmetics Association. Last year, Korean beauty exports rose 44.3 per cent to US$3.97 billion, says the Korean International Trade Association – double the 2014 figure of US$1.79 billion. China accounts for 36.5 per cent of annual Korean beauty exports.
Anti-Ageing and Natural Positioning To The Fore
Korean skincare and beauty products got a major leg-up in China and the US for another reason – premium quality products at mass price points. But anti-ageing has become a major focus, says Mintel. Last year, 37 per cent of global beauty and personal care launches with anti-ageing claims were released in the Asia/Pacific region. South Korea and Japan are the leading players, with each country responsible for 23 per cent of APAC anti-ageing launches between 2014 and 2016, reports the researcher.
Ageing is a global issue, particularly in South Korea, Japan and China – countries that are most affected by a rapidly greying population, says Sharon Kwek, senior beauty and personal care analyst at Mintel. “It makes sense that these North Asian markets are in the forefront of anti-ageing beauty within the Asia/Pacific area. The region’s growing silver generation is opening up opportunities for beauty and personal care brands looking to capitalise on the ‘grey wave’. And not only in these core markets, but also in Western markets with ageing populations such as the US, Europe and Australia”.
Much has been made of Korea’s rapid-fire pipeline of close to 100,000 unique products, a launch rate that would lead to clutter in markets like the US, the UK and Australia. The cause is easy to trace. Korean beauty lovers have little or no brand loyalty. Korean brands of all sizes have to launch new products or upgrade packaging as often as four to six months just to maintain consumer interest. Not only does this boost innovation for a constant stream of jellies, emulsions and instant essences, it’s also the reason why there are so many concept stores in Korea to showcase the flood of new products and experiences. K-Beauty stalwart, Etude House, opened a new three-storey flaship store in Seoul in May, an interactive beauty destination dubbed the “House of Colour Play” where consumers can be creative to their heart’s content.
Don’t be misled by “would you believe it” headlines about ingredients that, frankly, have limited appeal in Western markets – horse oil, snail slime, shark’s fin, bird’s nest extract and synthetic spider venom. Mainstream Korean skincare is focused on natural ingredients that align with hanbang – traditional Korean medicine based on herbal ingredients which have a lot of resonance globally such as ginseng, green tea and bamboo. At this year’s In-Cosmetics Korea, there was a noticeable ‘greening’ of the products on show to emphasise a natural or organic positioning. AmorePacific, for example, has its own green tea plantation on Jeju Island and is opening a Sulwhasoo concept store in Galeries Lafayette in Paris in September using Korean traditional herbal medicine as a key design motif.
Another hot trend at the exhibition which boasted over 200 exhibitors tapped into the global consumer trend of reading ingredient labels on beauty products – as in labels claiming 30 per cent coconut water to play into the well-being wave. There was also more emphasis on multi-purpose and dual-pouch products which are mixed just before use. A global bio-availability message already in major play with products like Lancôme Genifique Sensitive and Clinique Fresh Pressed Daily Booster with Vitamin C.
Skintertainment/ Beyond Niche
There’s been a lot of talk about elaborate 15-step skincare rituals but many Korean women don’t indulge in them, let alone Americans and Australians. The future of K-Beauty is already here. Only a few years ago, it was a niche market in the US but has now gone mass because of the so-called Skintertainment appeal of Korean beauty products to Millennials on price, fun packaging and camera-ready skin. Target, CVS, Ulta and Walgreens now stock more Korean beauty brands in thousands of stores across the US than department stores and Sephora.
A similar development has happened in Australia to a much more limited degree. For example, Mecca Maxima stocks the Chosungah22, 16 Brand and Mizon brands. Myer introduced Korean brands, including Saturday Skin, earlier this year. Sephora offers Moonshot, 3CE and For Beloved One. Priceline stocks Toly Moly.
AmorePacific – In the Shadow of a Giant
According to Kline Group, K-Beauty sales in the US rose 27 per cent between 2015 and 2016. Skincare accounted for 80 per cent of sales, with 17 per cent of revenues coming from makeup. The American market is expected to grow a further 16 per cent over the next five years. But in spite of the deluge of new brands, reports Kline, over 80 per cent of K-Beauty sales in the US come from only four brands. Korean market leader, AmorePacific, has a 35 per cent market share in the US through its so-called ‘champion’ brands – Sulwhasoo, Laneige and IOPE – and its chain of 70 Aritaum concept boutiques which will rise to 100 stores nationwide.
In fact, any discussion of Korean beauty centres on AmorePacific. The multinational and inventor of cushion compacts – over 100 million sold – spring boarded five places this year to number 7 on Women’s Wear Daily’s Top 100 Global Beauty Firms. The first time a Korean company has ranked in the top 10 with revenues of US$5.58 billion.
AmorePacific owns 30 brands, of which only a handful are available in Western markets. The multinational is launching one of its key skincare brands – Laneige – in 150 Sephora stores in the US in September, following an online release on Sephora.com in June. Building on such initiatives, many analysts believe that the company will meet its growth target of US$12 billion in global sales by 2020 as it accesses more European, South American and Middle Eastern beauty markets.
But if imitation really is the sincerest form of flattery, say industry observers, we will also see more European and American brands creating less expensive alternatives to Korean beauty products by adopting their fun packaging and fast-track product development.