Amore predicts rising sales in China

AmorePacific Group expects sales in China to jump 30 percent this year as the Korean cosmetics maker opens more outlets to capture a wealthier Chinese middle class keen to splurge to look more like their Korean idols.

“China is geographically close and it has a very big population,” Suh Kyung-bae, the billionaire chairman of the Seoul-based holding company of AmorePacific, said in an interview. The company recognized the importance of Asia’s rising middle class 15 years ago, and this is still one of its main drivers, Suh said at the cosmetics maker’s factory in Osan.

AmorePacific, Korea’s largest cosmetics maker, joins companies such as Hotel Shilla and casino operator Paradise in benefiting from the rising popularity of Korean entertainment and culture, especially in China. The maker of facial creams and ginseng serums plans to increase the number of Laneige and Sulwhasoo sales outlets in China and work with more online retailers to sell its products, Suh said.

AmorePacific Group, whose brands also include Etude and Mamonde, competes with Procter & Gamble and L’Oreal in selling products such as the 270 yuan ($43) Laneige and 188 yuan Innisfree-brand facial creams in China.

AmorePacific rose 0.3 percent to 2.8 million won ($2,500) in Seoul trading on Monday, while Korea’s benchmark Kospi index fell 0.44 percent.

The company, which has 2,335 stores in mainland China, plans to raise that by 15 percent this year, it said in an emailed reply to a query.

AmorePacific Group had 2.1 percent of China’s 131.4 billion-yuan skin care market in 2013, the 12th-biggest share, according to the latest data available from Euromonitor International.

L’Oreal has the largest market share with 11.4 percent, according to data from the industry researcher.

Suh, a graduate of the Cornell University School of Management, took over AmorePacific in 1997. The 52-year-old is now Korea’s third-richest man with a net worth of $6.8 billion, according to the Bloomberg Billionaires index.

AmorePacific’s shares jumped 19 percent in January, making it the best-performing stock in the beauty and personal care sector globally, according to data from Bloomberg Industries.

China and Southeast Asia will be the biggest growth drivers for the group, said Kim Bo-young, a Seoul-based analyst at BNP Paribas Securities Korea.

“The Southeast Asia market has become almost half the size of China,” said Kim, who has a buy recommendation on AmorePacific. “It is also enjoying faster growth, and there is a meaningful number of middle class looking to buy affordable luxury brands.”

AmorePacific Group said Feb. 3 sales grew 21 percent to 4.7 trillion won in 2014. China is its biggest market outside South Korea and accounted for 8.6 percent of sales in 2013.

China may make up 30 percent of AmorePacific Group’s total sales by 2020, Chief Strategy Officer Kim Seung-hwan said last year. The group expects to more than double sales to 12 trillion won by 2020, with half of that coming from overseas, it said last October.

AmorePacific Group’s sales may rise about 18 percent this year, driven by China and Southeast Asia, where the number of middle-class consumers is increasing, Suh said. It also aims to expand in the U.S. and Europe, he said.

Bloomberg