[NEWS IN FOCUS] K-beauty brands re-brand in pivot away from China

Industry

Published: 26 Jun. 2023, 19:17 Updated: 26 Jun. 2023, 19:30

[NEWS IN FOCUS] K-beauty brands re-brand in pivot away from China

Visitors explore booths of Korean cosmetics and lifestyle products during the 'Korea-Vietnam Business Week' held by the Korea Trade-Investment Promotion Agency in Ho Chi Minh City, Vietnam, on Oct. 30, 2022. [YONHAP]

Korean high-end cosmetics brands — including Sulwhasoo and The History of Whoo — used to include Chinese characters in their packaging in an effort to appeal to Chinese consumers and present an ancient royal aesthetic.

But they are increasingly taking out these characters and replacing them with English to boost their market share in North America and other Asian countries, as Korean beauty companies are losing momentum in China.

The downbeat performance was evident during the recent pre-sales for the annual 618 Shopping Festival, the second-largest event of its kind in China, which once served as an important revenue source for Korean players.

According to beauty insiders and Chinese media reports, global brands like L'Oréal, NARS, Lancôme, and MAC claimed the top sales positions in the overall cosmetics category — including beauty, skincare and makeup — during 618, which took place from May 30 to June 1 on Alibaba's e-commerce marketplace Tmall.

While a few Chinese brands, such as Proya, managed to secure high rankings backed by the "guochao" movement, or a consumer trend in China encouraging the consumption of domestic goods, exports of popular Korean cosmetics, such as LG Household & Health Care's The History of Whoo and Amorepacific's Sulwhasoo, failed to make it to the top 20 in these categories.

The 618 event holds significance as a major e-commerce event in China during the first half of the year. Tmall, known for its substantial cosmetic sales, serves as an important barometer for the Chinese cosmetics market.

The decreasing popularity of Korean brands can be attributed to polarization between the dominance of high-end European brands and more affordable Chinese local brands, coupled with increasingly patriotic consumption among China's young generation.

Against this backdrop, Amorepacific's Sulwhasoo unveiled its latest skincare offering, "First Care Activating Serum VI", in February 2023. The product debuted a new orange English logo that replaces the previous Chinese character logo on its packaging.

Innisfree, another brand in the Amorepacific family, significantly changed its logo for the first time in five years. The previous environmentally-friendly logo gave way to a modern graffiti-style design.

LG Household & Health Care's The History of Whoo took a similar path by launching its new anti-aging line, "Royal Regina," after a comprehensive re-brand in June.

Whoo had traditionally incorporated Chinese characters and drawn inspiration from royal ceramics and lotus flowers, with a golden color scheme symbolizing luxury.

With the introduction of Royal Regina, however, the Chinese characters and palace design were removed from the product packaging, leaving only the English name "Whoo." The decision is believed to have been influenced by the company's efforts to address challenges in the Chinese market and refocus on global expansion.

"The new product line aims to target consumers not only in North America but also globally," an LG Household & Health Care spokesperson told the Korea JoongAng Daily.

A photo of LG Household & Health Care's new anti-aging line, Royal Regina. In a first for the brand, the packaging removed Chinese characters and palace-inspired designs, opting for only the English label "Whoo." [LG H&H]

Amid the pressing need for market diversification, Vietnam is emerging as a promising destination for these companies alongside North America and Japan. Although the market size is currently moderate, it is seen as having significant growth potential.

Recent data from the Korea Cosmetic Association showed that Korean cosmetics exports to Vietnam hit $187.59 million between January and May of this year, ranking fifth after China, the United States, Japan, and Hong Kong. While the ranking remains unchanged from last year, there is a noticeable and rapid growth trend, with a 43.4 percent growth rate in cosmetic exports to Vietnam during this period, the highest among major countries.

Korean cosmetics have already established a dominant position in the Vietnamese beauty market.

According to statistics from the U.S. Department of Commerce, Korea's market share in the imported cosmetics market in Vietnam surpassed that of the European Union, Japan, Thailand, and the United States, reaching 30 percent in 2022. This market share is significant considering that approximately 90 percent of cosmetics consumed in Vietnam are imported.

The attention towards the Vietnamese beauty market stems from its population size of nearly 100 million, representing one of the world's youngest demographics. With almost half of Vietnam's total population under 30 years old and a median age of 32.5 years, over 10 years younger than Korea's median age of 45 years, there is significant growth potential in the cosmetics market.

Global market research firm Statista also recognizes the growth potential of the Vietnamese market, projecting that the local beauty and personal care market, valued at $1.5 billion in 2012, will expand to $2.7 billion by 2024.

"We saw a decline of over 20 percent in Asean sales during the first quarter, primarily due to China's influence," a spokesperson from Amorepacific said. "However, within this decline, sales in Asean countries, including Vietnam, bucked the trend and experienced growth.

"Vietnam stands out among Southeast Asian nations for the remarkable popularity of Hallyu, with a strong interest in K-pop, K-dramas, and Korean makeup trends," the official said. "While Vietnam may be challenging to compare with China in terms of population and the size of the cosmetics market, it does hold significant importance in our global strategic landscape."

BY SEO JI-EUN [seo.jieun1@joongang.co.kr]