Little-known K-beauty duo behind YSL, Dior cosmetics

Industry

Published: 29 Jun. 2024, 07:00

Little-known K-beauty duo behind YSL, Dior cosmetics

Beauty YouTubers are using Pure Rice Sun Cream produced by Hansae and the Tirtir Mask Fit Red Cushion produced by Cosmax. [SCREEN CAPTURE]

The names Kolmar and Cosmax might sound unfamiliar to many consumers, but their clout has grown quietly but substantially as go-to manufacturers of cosmetic items not only for local brands but those by luxury fashion houses like Yves Saint Laurent(YSL) and Christian Dior.

The surge in sales of Korean beauty products on Amazon has thrust the companies into the spotlight, as they contract manufacture top-selling products like Beauty of Joseon Sunscreens and Tirtir cushions.

The growing influence of K-pop and Korean culture and the power of social media like YouTube and TikTok has propelled the growth, with items featured on social media becoming instant hits, such as the sunscreens and cushions as well as I'm from's toners often selling out during Amazon’s sales periods.

Kolmar Korea, which introduced the original design manufacturing (ODM) concept to the domestic cosmetics industry, and Cosmax, which develops and produces products for 18 of the world’s top 20 cosmetics brands, are currently considered the two pillars of K-beauty.

Globally, the companies became known in the early 2010s as big name brands like YSL, Dior and Lancome tapped the duo for the contract-manufacturing of cushion foundation, a relatively new form factor first introduced by Korean cosmetic players.

Only a few large companies like LG Household & Health Care, Amorepacific and Aekyung Industrial can handle all steps from product development to production and distribution.

Small- and medium-sized brands without their own production facilities focus on product planning and marketing, while outsourcing product development and production to contract manufacturers like Kolmar and Coxmax.

Unlike original equipment manufacturers (OEMs) that only manage production, ODM companies develop products and propose them to clients, leveraging their competitive edge. Their patented technologies and experiential knowledge of beauty trends help the ideas materialize.

The two companies, pioneers of the K-beauty ODM market, share many things in common, including their growth stories.

Both founders — Yoon Dong-han, chairman of Kolmar Holdings, and Lee Kyung-soo, chairman of the Cosmax Group — once worked at Daewoong Pharmaceutical.

Yoon joined Daewoong in 1974 and served as vice president until 1990, the year he founded Kolmar Korea. Lee, who joined Daewoong in 1981, left his position as executive director of the marketing department in 1992 to establish Korea Mirrorto, the precursor to Cosmax.

Both companies' research methods and quality control standards are similar to those in the pharmaceutical industry.

Kolmar Korea adapted the pharmaceutical industry's goods manufacturing practice standards to introduce the cosmetic goods manufacturing practice to the cosmetics industry in 1994, and Cosmax followed in the same footsteps and received the same certification in 1998. Investing 5 to 7 percent of sales in R&D is another example of applying experiential knowledge and practices gained in the pharmaceutical industry to their cosmetic businesses.

Both companies also started with partnerships with Japanese firms.

At the time, the U.S. ODM company Kolmar partnered with local companies in other countries for technology and brand licensing, and Yoon established Kolmar Korea through a joint venture with Kolmar Japan.

The Korean unit quickly established itself by producing skin toners, which were the main products of Kolmar Japan. In 2022, 32 years after its founding, Kolmar Korea acquired the brand entirely from its headquarters, making it the only company worldwide using the Kolmar name.

Cosmax’s Lee began with a technical partnership with Japan's Mirrorto and launched Korea Mirrorto, but ended the partnership in 1994 and changed the company’s name to Cosmax. Cosmax developed and reinforced its capabilities in producing color cosmetics, which has had high global OEM demand since.

Betting on low-cost brands

Entering the 2000s, right after the Asian financial crisis, the stand-alone store market for low-cost cosmetics brands like Missha and The Face Shop started to swell, targeting budget-conscious consumers.

At the time, large OEM companies thought the popularity of budget brands was temporary and were reluctant to give them access to their production lines.

Cosmax, however, whose sales had plummeted by more than 50 percent due to the economic slump, saw the trend as an opportunity and fully transitioned to the ODM business.

After partnering with global ODM company Intercos to develop color cosmetics in 2003, Cosmax grew by over 20 percent annually. Kolmar Korea seized an opportunity in 2012, when Missha's Time Revolution The First Essence took off. Partnering with Missha, the company developed and produced a “me-too” product mimicking the successful SK-II Pitera Essence. This drove Kolmar Korea’s operating profit margin from 5 percent in 2012 to 11 percent in 2015.

Recently, the paths of these companies began to diverge. In February 2018, Kolmar Korea acquired what was then called CJ Healthcare, now named HK Inno.N, from CJ Group for 1.31 trillion won ($950 million), aiming to grow into a comprehensive healthcare company based on cosmetics, pharmaceuticals and biotech.

Yoon Sang-hyun, vice chairman and eldest son of the founder, declared a goal of expanding its R&D capabilities to succeed in developing a new drug within 10 years. In the same year, Cosmax also acquired what was then called Twoin Pharma and is now Cosmax Pharma, which produces pharmaceutical and cosmetic raw materials, but still focuses primarily on cosmetics.

Losing the upper hand to Cosmax in the 2000s, Kolmar Korea underwent changes through business diversification. The acquisition of CJ Healthcare laid the foundation for the pharmaceutical and biotech business and gave a boost to the health functional food business.

HK Inno.N expanded the market for the hangover relief drink Condition and the beverage Hutgae Soo that it manufactured, recording sales of 828.9 billion won last year.

This figure accounted for about 40 percent of Kolmar Holdings’s entire sales of 2.16 trillion won. HK Inno.N saw 50 percent growth in sales from the pre-acquisition sales of 536.8 billion won in 2017.

Targeting dietary health

Kolmar Korea is also actively pursuing inorganic measures for vertical integration in the cosmetics business. Notably, it acquired cosmetic container manufacturer Yonwoo in 2022. The company makes containers for products of major domestic brands like Amorepacific’s Sulwhasoo and LG Household & Health Care’s The History of Whoo, and also supplies over 50 global companies.

With increasing orders from independent U.S. brands that have become famous on social media, such as Drunk Elephant and the Gen Z-favored Bubble Skincare, Yonwoo’s exports in the first quarter of this year surged 44 percent on year.

Cosmax’s growth was bolstered in 2004 when it won a L'Oréal contract. The world’s top cosmetics company conducted two years of inspections covering production facilities and quality control before entrusting the Korean firm with manufacturing.

That year, Cosmax also entered the Chinese market. Amid an abundance of low-quality, low-cost local brands, it emerged as a credible manufacturing partner capable of developing and producing small quantities of high-quality products at affordable prices.

In 2013, it expanded its global presence by acquiring L'Oréal factories in Indonesia and the United States, extending its reach from North America and Southeast Asia to Mexico and Brazil in South America.

Would ODM companies, capable of managing everything from product development to manufacturing and beauty trends, succeed if they launched their own cosmetics brands? Officially, Cosmax and Kolmar Korea claim they have no plans to develop their own brands.

However, experts have a different view. "Although they may not be able to actively promote it now due to their current clients, there is a possibility they might aggressively pursue their own brands at the right time," said Kim Joo-deok, a professor of beauty science at Sungshin Women’s University.

KIM KYUNG-MI, CHOI HAE-JIN [choi.haejin@joongang.co.kr]