Resumption of Chinese Group Tourism Boosts Hopes in Cosmetic and Retail Industries
Following the Chinese government's decision to fully allow group tourism to South Korea for the first time in six years, the cosmetics and retail industries are brimming with anticipation.Group tourism, which had been halted since the 2017 THAAD (Terminal High Altitude Area Defense) retaliation incident, is now resuming, and Chinese travel agencies have already begun selling various travel packages.
The cosmetics sector, in particular, is gearing up for a positive response. Major companies are implementing diverse promotional and marketing strategies targeting Chinese tourists. LG Household & Health Care is preparing Chinese language pamphlets and deploying consultants, while AmorePacific Group is planning to increase Chinese promotional materials and sales linked to group tourists.
Duty-free shops are also stepping up their game. Lotte Duty-Free is preparing promotions like the resumption of roadshows in Beijing and Shanghai, and giving out prepaid cards. Meanwhile, Shinsegae Duty-Free and Shilla Duty-Free are planning to collaborate with Chinese payment companies, expand product lines, and revamp their online duty-free shops.
The influx of tourists is expected to begin in earnest from October, and sales recovery is anticipated in at least 2-3 months. In 2016, around 8 million Chinese tourists visited Korea, and similar or even higher numbers are expected with this decision.
Kolmar Korea reported a Q2 consolidated operating profit of 55.7 billion KRW, sales of 599.7 billion KRW, and a net profit of 42.6 billion KRW, highlighting the growth of sunblock products. Notably, its Chinese subsidiary saw a 96.5% sales increase at 56.4 billion KRW, and its North American branch reported a 35.3% increase, with sales of 22.6 billion KRW.
Cosmax recorded its highest-ever Q2 sales at 479.3 billion KRW and an operating profit of 46 billion KRW. This was attributed to the reopening effect, increased sales towards Japan, and growth in basic and color cosmetics categories. Although the Chinese cosmetics market is slowing, it's expected to rebound due to government policies. The company also plans to expand its new brands in the Western U.S.
AmorePacific reported Q2 sales of 945.4 billion KRW and turned its operating profit around. It also recorded overseas sales of 372.3 billion KRW, driven by the growth of key brands in North America and Europe, and its entry into European luxury beauty shops.
LG Household & Health Care reported Q2 sales of 1.8 trillion KRW and an operating profit of 157.8 billion KRW, with overseas sales reaching 525.6 billion KRW. The company is pushing a strategy to market luxury brands and expand its customer age demographic in China.
Aekyung Industrial reported Q2 sales of 162.1 billion KRW and an operating profit of 16.6 billion KRW. Its cosmetics division posted sales of 61.1 billion KRW and an operating profit of 9.7 billion KRW.
All these corporations plan to strengthen their performance in other countries while also enhancing their digital channels, without abandoning the Chinese market.
There was significant attention on harmful incidents related to products for infants and toddlers, mainly due to their sensitive skin reactions. In some cases, children accidentally ingested the cosmetics, prompting the prohibition of cosmetics that mimic food.
In hair products, symptoms included scalp itching, scalp irritation, and hair damage. Potential causes were identified as irritative ingredients in the products or insufficient rinsing after use. The ministry emphasized the importance of patch tests before use and thorough rinsing afterward. Consumers were also cautioned against products that might irritate the eyes and to be careful when bathing or shampooing.
Based on these findings, the Ministry of Food and Drug Safety announced plans for educational and promotional activities for the safe use of products for infants, toddlers, and hair products.
The cosmetics sector, in particular, is gearing up for a positive response. Major companies are implementing diverse promotional and marketing strategies targeting Chinese tourists. LG Household & Health Care is preparing Chinese language pamphlets and deploying consultants, while AmorePacific Group is planning to increase Chinese promotional materials and sales linked to group tourists.
Duty-free shops are also stepping up their game. Lotte Duty-Free is preparing promotions like the resumption of roadshows in Beijing and Shanghai, and giving out prepaid cards. Meanwhile, Shinsegae Duty-Free and Shilla Duty-Free are planning to collaborate with Chinese payment companies, expand product lines, and revamp their online duty-free shops.
The influx of tourists is expected to begin in earnest from October, and sales recovery is anticipated in at least 2-3 months. In 2016, around 8 million Chinese tourists visited Korea, and similar or even higher numbers are expected with this decision.
Strong Q2 for Major Korean Beauty Corporations; Expansion Strategies Beyond China in Play
After the slowdown due to COVID-19, major South Korean beauty corporations witnessed growth in the second quarter, thanks to the reopening effect. With the recovery of the consumer market in China, the K-beauty market is expected to thrive. However, companies are not solely relying on China and are strategizing expansions into other global markets.Kolmar Korea reported a Q2 consolidated operating profit of 55.7 billion KRW, sales of 599.7 billion KRW, and a net profit of 42.6 billion KRW, highlighting the growth of sunblock products. Notably, its Chinese subsidiary saw a 96.5% sales increase at 56.4 billion KRW, and its North American branch reported a 35.3% increase, with sales of 22.6 billion KRW.
Cosmax recorded its highest-ever Q2 sales at 479.3 billion KRW and an operating profit of 46 billion KRW. This was attributed to the reopening effect, increased sales towards Japan, and growth in basic and color cosmetics categories. Although the Chinese cosmetics market is slowing, it's expected to rebound due to government policies. The company also plans to expand its new brands in the Western U.S.
AmorePacific reported Q2 sales of 945.4 billion KRW and turned its operating profit around. It also recorded overseas sales of 372.3 billion KRW, driven by the growth of key brands in North America and Europe, and its entry into European luxury beauty shops.
LG Household & Health Care reported Q2 sales of 1.8 trillion KRW and an operating profit of 157.8 billion KRW, with overseas sales reaching 525.6 billion KRW. The company is pushing a strategy to market luxury brands and expand its customer age demographic in China.
Aekyung Industrial reported Q2 sales of 162.1 billion KRW and an operating profit of 16.6 billion KRW. Its cosmetics division posted sales of 61.1 billion KRW and an operating profit of 9.7 billion KRW.
All these corporations plan to strengthen their performance in other countries while also enhancing their digital channels, without abandoning the Chinese market.
Increase in Cosmetic Harm Cases, Mostly Mild Symptoms; Numerous Reports from Products for Infants and Toddlers
A recent investigation into harmful cases from cosmetics over the past three years (2020 to 2022) revealed that the majority of symptoms were mild, like red spots, hives, and itching. No serious cases were identified, according to the Ministry of Food and Drug Safety. Of the 3,061 reported harmful incidents, they were categorized as follows: basic makeup products 1,397 cases (51%), products for infants and toddlers 679 cases (24.8%), and hair products 247 cases (9%).There was significant attention on harmful incidents related to products for infants and toddlers, mainly due to their sensitive skin reactions. In some cases, children accidentally ingested the cosmetics, prompting the prohibition of cosmetics that mimic food.
In hair products, symptoms included scalp itching, scalp irritation, and hair damage. Potential causes were identified as irritative ingredients in the products or insufficient rinsing after use. The ministry emphasized the importance of patch tests before use and thorough rinsing afterward. Consumers were also cautioned against products that might irritate the eyes and to be careful when bathing or shampooing.
Based on these findings, the Ministry of Food and Drug Safety announced plans for educational and promotional activities for the safe use of products for infants, toddlers, and hair products.
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