Korean Beauty Trends & Industry News: 23-11-15

Gyeonggi Province, South Korea, Initiates Extensive Crackdown on Illegal Activities in Cosmetic Companies

Gyeonggi Province's Special Judicial Police Force is set to conduct an intensive crackdown on illegal activities within the cosmetic industry. From November 20th to December 8th, a total of 90 cosmetic manufacturing and sales companies, including those responsible for custom-made cosmetic products, will be under scrutiny. The key focus of this crackdown is to identify and penalize unregistered or unreported manufacturing and sales companies, the unauthorized use of certification marks or similar labels on uncertified cosmetics, improper labeling or advertising of products as pharmaceuticals or certified goods, and violations of business compliance regulations.

According to the current Cosmetic Act, strict penalties are in place for such violations. Companies engaged in the manufacture and sale of cosmetics without proper registration or notification, or those labeling uncertified cosmetics with certification marks or similar labels, can face up to 3 years in prison or fines up to 30 million KRW (approximately $25,000). Additionally, falsely labeling or advertising products as pharmaceuticals or certified goods can lead to 1 year in prison or fines up to 10 million KRW (about $8,400), and violating business compliance regulations can result in fines up to 2 million KRW (around $1,700).

Hong Eun-ki, the head of the Gyeonggi Province Special Judicial Police Force, stated that with the normalization of daily life post-COVID-19 and an anticipated increase in cosmetic consumption, the crackdown aims to ensure the safety of cosmetics and prevent consumer harm. He also mentioned that the Gyeonggi Province Special Judicial Police Force is accepting reports from citizens regarding illegal activities through their website and the Gyeonggi Province call center.

Kolmar Korea and Cosmax Achieve Impressive Results Amid Global Expansion

Kolmar Korea and Cosmax, leading entities in the Original Design Manufacturing (ODM) sector of the cosmetics industry, have recently garnered attention for their strong performance. Their success is linked to the rising popularity of mid-to-low-priced independent (indie) brands and expansion in the global market, contrasting with the performance decline of larger corporations. Significant factors in this success include an increase in orders for their Chinese subsidiaries and expansion into the U.S. and Japanese markets.

Cosmax reported a 68.7% increase in operating profit and a 15.5% rise in sales for the third quarter, compared to the same period last year. The domestic (South Korean) market saw a 39.3% increase in sales, with the Indonesian market also showing a 26% growth. Similarly, Kolmar Korea's third-quarter operating profit surged by 71.51%, demonstrating steady growth in both domestic and international markets. Particularly, the resumption of group tourism in China has led to increased demand for indie brands.

However, while Kolmar Korea successfully turned a profit in China, Cosmax experienced a 7.5% decrease in sales in the Chinese market. Both companies continued to face losses in the North American market, but Cosmax achieved positive results in its Indonesian subsidiary.

This growth trend reflects the global expansion of indie brands and active initiatives in the Asian region, leading to a positive outlook for the ODM cosmetics sector. Securities analysts are now viewing the cosmetics ODM industry as entering a phase of structural growth, with expectations of even greater expansion in the future.

Natura Sells The Body Shop for 340 Billion Won Amid Declining Performance

Brazil's cosmetics giant Natura is selling its subsidiary, The Body Shop, a UK-based natural cosmetics brand, to European private equity fund Aurelius. The sale price is 270 million pounds (approximately 340 billion won), which is about one-third of the purchase price of 1 billion euros (870 million pounds) in 2017. This sale is part of Natura's efforts to reduce debt, following the sale of its subsidiary Aesop to France's L'Oréal for 2.53 billion dollars in April.

Natura, the largest cosmetics company in Brazil with a presence in over 100 countries, rapidly grew to become the fourth-largest cosmetics group in the world through aggressive mergers and acquisitions. However, it recently turned to restructuring due to persistent operational difficulties and declining performance. The Body Shop faced challenges in establishing non-face-to-face sales channels post-COVID-19 and struggled to adapt to the polarization of the cosmetics market, leading to a sharp decline in sales. In the third quarter of this year, its sales fell by 13.2% to 830 million reals compared to the same period last year.

Natura's CEO, Fabio Barbosa, stated that the sale of The Body Shop will help reduce the company's debt and focus on growing other businesses, including Avon. The Body Shop, established in 1976, is a specialized brand in skin and body care and fragrances, with approximately 2,500 stores in over 70 countries worldwide.

Cosmetic and Healthcare Industries Show Strong Growth in the Third Quarter

Major South Korean cosmetics and healthcare companies such as Huons Group, NFC, A.P.R., Sunjin Beauty Science, and Able C&C have demonstrated significant growth in the third quarter of 2023. These companies have driven growth through diverse product lines and strategies in both domestic and international markets.

Huons Global, the holding company of Huons Group, recorded a 13.8% increase in sales and a 75% increase in operating profit compared to the previous year. Its subsidiaries, Huons, Huemedics, and Huem&C, have shown balanced growth in their respective sectors of pharmaceuticals, beauty, and wellness.

NFC reported standalone sales of 11.5 billion won and an operating profit of 1.1 billion won, marking increases of 35.7% and 49.3% respectively from the previous year. Growth was driven by new customer acquisitions and an expansion of orders in the finished product business sector.

A.P.R. achieved sales of 1,219 billion won and an operating profit of 219 billion won, showing increases of 37.9% and 277.6% respectively compared to the same period last year. The growth was primarily driven by Mediqube AGE-R beauty devices and Mediqube cosmetics.

Sunjin Beauty Science benefited from the positive trend in the domestic cosmetics market, with a 73% increase in operating profit. A 21% increase in sales of cosmetic ingredients was a key factor in this growth.

Able C&C saw its operating profit double from the same period last year, with sales growing by double digits. The continued growth in overseas channel sales and an increase in domestic offline channel sales contributed to this success.

These strong performances are attributed to expanded global market presence, innovative product development, and effective marketing strategies. The industry anticipates continued growth in the future.