Korea’s Cosmetic Industry to Emerge as a New Growth Engine for the Korean Economy

 

Korea’s cosmetics market on a constant rise
Korea’s cosmetics industry has seen an unprecedented boom since 2008. According to the Korea Food and Drug Administration (KFDA), the size of the cosmetics market in Korea surpassed 13 trillion won as of 2010, an increase of 12.9% over the previous year, ranking 12thin the global market.

The nation’s cosmetics output grew by 10 percent every year for the past three years, exceeding 6 trillion won in 2010, a year-on-year rise of 16.4%. This record-high growth reflects the brisk rise in exports to China which recorded an increase of 31.2% over the previous year.

By product, basic cosmetics (41.7%) and hair products (15.4%) took up the large segment, totaling 57.1%,
followed by functional cosmetics (25.3%). In terms of the year-on-year growth rate, the output of body cleaning products climbed 37.3%, followed by bathing products (35.3%) and shaving products (33.8%).

The industry experts linked the recent growth of the functional cosmetics segment to the well-being trend
sweeping diverse industries in the nation and accounting for 25.3% market share in Korea in 2011. This translates into one trillion 51 million won, up 22.5 % over the previous year.

In addition, the demand for balding treatments made by using herbal ingredients is increasing as well, as more people are experiencing hair loss due to stress and air pollution.

Korea’s cosmetics exports & imports surge
Korea’s cosmetics industry saw a surge both in exports and imports. The industry’s exports reached $597 million (5.65 billion won) in 2010, up 43.5% from 2009 and imports came to $851 million, up 21.2%, from 2009, according to the recent data from KFDA.

Last year’s industry growth marked its best performance, backed by exports to China, Japan, and Hong Kong
which totaled $597 million, up 43.52% from 2009. This is just the latest development in the continued expansion of Korea’s cosmetics industry into global markets. The cosmetics industry has made inroads into nearby emerging markets such as China and Vietnam, and Korean cosmetics have begun to penetrate markets such as the Mideast and South America as well.

Market diversification with China as a new growth engine
The Chinese cosmetics market has an impressive size and attractive growth potential. Although China’s growth momentum does not automatically translate into growth for the Korean cosmetics industry, Korea’s leading cosmetics firms succeed in finding a breakthrough in China by pursuing successful positioning strategies with quality products and competitive pricing and make timely responses to the changing market.

Among the largest beneficiaries of rising China, AmorePacific has broadened its channels for business expansion. Others like LG Household & Health Care and Able C&C that want to gain a firm foothold in China’s cosmetics market are revamping their strategies, sales networks and brand images.

Cosmax and Kolmar Korea have added production capacity in the expectation that Chinese demand for OEM/ODM will increase thanks to the expansion of the mid to low-end cosmetics market.

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