Korean cosmetics companies branch out as China's demand shrinks

Industry

Published: 05 Sep. 2022, 16:58

Korean cosmetics companies branch out as China's demand shrinks

A Faces branch selling Dear Dahlia products. [DEAR DAHLIA]

As Korean cosmetics struggle in China, brands are branching out to find smaller but promising countries to replace the once reliable market.

China used to be a booming market for Korean cosmetics makers, with lipsticks and cushion foundations featured on Korean dramas flying off shelves as customers raved about Korean celebrities and beauty trends. But the tables have turned, and the young Chinese nowadays tend to prefer products from local brands.

“Korean cosmetics exports used to be focused on China […] but it is now shifting to non-Chinese countries,” said Park Jong-dae, analyst at Hana Securities. “Factors like the lockdown in China is one of the reasons for this, but, overall, it’s now very hard for Korean companies to enhance the popularity of their brands in China.”

The guochao trend, a Chinese word referring to a national wave or the tendency of Chinese consumers to prefer local products, has been slowing the growth of Korean cosmetics makers. According to the Korea Health Industry Development Institute, cosmetics exports to China in the first half of 2022 fell 20 percent on year to $1.89 billion, the first time in 10 years the figure showed a drop.

Forced to reduce their dependency on China, Korean companies are searching for new markets. Although small, the Middle East is one such example where Korean cosmetics makers are seeing growth.

Cosmetics exports to the United Arab Emirates (UAE) between January and April rose 24.2 percent on year to $16 million, and those to Turkey rose 22.2 percent on year to $9.2 million.

Those are two of the few countries where cosmetics exports grew, with Korea’s overall exports of cosmetics products in the first half of 2022 falling 11.7 percent on year to $4.07 billion.

Various countries in the Middle East prefer halal and vegan products of all sorts for religious reasons, and local cosmetics makers with a wide variety of vegan products have been branching out successfully. In the niche market, smaller brands have been coming to the front.

Cosrx's aloe sun cream [COSRX]

Cosrx’s aloe sun cream, a vegan product, has been popular from under the scorching sun rays in the UAE, ranking as the fourth best-selling product on Amazon UAE in March and third in April. Founded in 2013, Cosrx is well known for its skincare products, mostly selling through health and beauty stores such as Olive Young.

The company’s acne pimple master patch, or small stickers that can be stuck on to breakouts, ranked as the second best-selling product on Amazon UAE in March and fifth in April.

Dear Dahlia, a brand found in 2017 that only sells vegan products, also looks to be promising.

The brand has been selling its products in the Middle East at health and beauty store Faces since this year, and the company was ranked the best-selling brand in Faces Qatar’s online shopping mall in January and April.

Its products are offered at 36 Faces stores in the UAE, Qatar and Saudi Arabia as of the first half of this year. The company said it is currently working on getting into Faces branches in Egypt, Kuwait and Bahrain by end of this year.

“The Middle East is a market where customers have set religious beliefs and thus requires difficult production procedures, which makes it hard for companies to tap into,” said a spokesperson for Dear Dahlia. “But we are showing significant achievements, and we plan to become a vegan cosmetics brand that can represent Korea in the Middle East.”

In the rush to target the Middle Eastern market, various Korean companies are acting fast to get halal certifications.

Kolmar Korea — a cosmetics manufacturer that makes products for companies like Amorepacific and LG Household & Healthcare — has been renovating its plants in Sejong and Bucheon, Gyeonggi, since February to get halal certification.

To get the certification, the company says, certain production lines in the factory will be designated for only halal products, and will be separated from other production facilities.

Russia used to be another market with big potential, until the Russia-Ukraine war broke out in February. According to the Korea International Trade Association, cosmetics imports to Russia rose 19.2 percent on year in 2021 to $290 million and those to Ukraine rose 52.7 percent to $48 million. Exports to Russia fell 17.5 percent on year to $130 million in the first half of 2022 as the war hindered shipments.

Although exports are temporarily slowing down, many still see Central Asia as a valuable market.

“A lot of global brands have withdrawn themselves from Russia, and smaller brands from Belarus, Kazakstan, China and Turkey are replacing them,” said a spokesperson from the Korea Cosmetic Industry Institute. “We are expecting demand for Korean cosmetics to also grow since Korean cosmetics are considered to be high quality and affordable in the country and because there are a lot of people fond of Korean products because they are interested in K-pop and Korean culture.”

d'Alba's truffle serum [D'ALBA]

Kazakhstan is another Central Asian country that Korean brands are doing well in. On WildBerries, a health and beauty store in Kazakhstan, ranked Skincare’s face masks the third best-selling item in May, and d’Alba’s truffle serum ranked seventh place in June.

“Korean products are popular in Kazakhstan, and face masks are one of the most popular items,” added the institute’s spokesperson. “It’s very easy to use and not as expensive, so there is a lot of demand for those products from Kazakhstan women.”

BY LEE TAE-HEE [lee.taehee2@joongang.co.kr]