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Smaller K-beauty brands win big abroad as premium labels falter

Published: 30 Apr. 2025, 11:01

Cosmetics are on display at the Seoul Indie Beauty Show on March 13 in Coex, southern Seoul. [YONHAP]

It's a victory for the little guys as Korean beauty products from indie brands enjoy unprecedented success overseas, but not so much for mid- to high-end brands.

Korea's cosmetics exports in the first quarter of this year reached $2.6 billion, a 13 percent increase from the same period last year, according to the Ministry of Food and Drug Safety. This follows a record-breaking $10.2 billion in annual exports last year, extending the sector’s upward trajectory.

Although Korean beauty products are gaining popularity in major markets such as the United States, Japan and China, mid- to high-end brands are facing difficulties.

Shinsegae International’s ultra premium brand Poiret, launched in 2021, has suspended production of some products, including a 130,000 won ($91) foundation, and is undergoing a full product line overhaul. Despite the use of expensive, high-quality ingredients, sales have been disappointing.

“Even if the cost is high, it can be absorbed with sufficient sales volume. But at this stage, they’re incurring only losses,” said a cosmetics industry official, speaking on condition of anonymity.

Another high-end brand, Shihyo, which Hotel Shilla launched in 2022 through a joint venture with L’Oréal, began liquidation proceedings in January. The brand had targeted high-income consumers in Asia, including China, but failed to escape the red.

Cosmetics on display at a Lotte Department Store [LOTTE DEPARTMENT STORE]

One of Hyundai Department Store Group’s ventures, Oera, launched in 2021 with creams priced as high as 1.2 million won, failed to reach 10 billion won in annual revenue.

Even Korea’s leading cosmetics companies are facing headwinds. Aekyung Industrial posted an operating profit of 6 billion won in the first quarter of 2025, down 63 percent from a year earlier. LG Household & Health Care saw its operating profit drop 5.7 percent year-on-year in the first quarter of this year to 142.4 billion won.

K-beauty seems to be a unique market where indie brands excel. The number of cosmetics brands registered as licensed sellers rose from 15,707 in 2019 to 27,932 last year.

“The driving force behind the global beauty market is the growth of indie brands,” said Cosmax Chairman Lee Kyung-soo at a beauty event held in March. “Cosmax alone is growing alongside 24 indie brands with annual sales of over 100 billion won.”

A major contributor to this growth is Korea’s world-class original design manufacturing (ODM) system. Korean ODM firms like Kolmar Korea and Cosmax offer complete product packages using proprietary moisturizing or antiaging formulations, allowing startups to enter the market with just a brand and packaging. Industry insiders say that with an investment of around 40 million won, even individuals with only an idea can start a one-person beauty business.

Cosmetics on display at a Hyundai Department Store [HYUNDAI DEPARTMENT STORE]

“K-beauty is well received thanks to a combination of satisfying quality, reasonable pricing, attractive design and entertaining marketing,” said Koo Ja-hyun, CEO of eBay Japan.

However, the ease of entry has also led to high closure rates. According to the Ministry of Food and Drug Safety, 8,831 cosmetics brands closed last year.

“The number appears large because previously unaccounted closures were reflected all at once,” a ministry official said. “Despite the high closure rate, new brand registrations are higher, leading to net growth overall.”

Another looming variable is the Trump administration’s tariff policy. Korean beauty products have enjoyed duty-free access to the U.S. market under the Korea-U.S. FTA, gaining a competitive edge by offering high quality at low prices.

Cosmetics on display at a Daiso store in central Seoul on Nov. 18, 2024 [YONHAP]

But as of early April, a base tariff of 10 percent has been imposed, and an additional reciprocal tariff of 25 percent could follow.

“If reciprocal tariffs are implemented, the industry will have no choice but to raise prices,” said an official at the Korea Cosmetics Association. “This will place a burden on small and mid-sized companies and could weaken their competitiveness.”

Still, some analysts say Korean brands could benefit from Washington’s plan to impose a 54 percent tariff on Chinese cosmetics.

“K-beauty products sell for an average of $20,” said Kwon Woo-jung, senior researcher at Kyobo Securities. “A price hike of around $3 could help minimize profitability losses.”

Translated from the JoongAng Ilbo using generative AI and edited by Korea JoongAng Daily staff.
BY CHOI HYUN-JU, HWANG SOO-YEON [[email protected]]