Kyobo Securities Report
[Asia Economy Reporter Lee Myunghwan] As COVID-19 quarantine measures are eased and reopening (resumption of economic activities) is in full swing, securities firms have analyzed that the domestic cosmetics industry is expected to benefit.
On the 11th, Kyobo Securities analyzed that with the full-scale shift to a domestic and international with-COVID-19 policy, demand for cosmetics consumption, centered on color cosmetics, is increasing.
In the first quarter of this year, excluding China, South Korea's cosmetics exports decreased by 4.5% compared to the same period last year. However, combined exports in April and May recently increased by 1.9% compared to the same period last year, showing an upward trend. Looking at the items, color cosmetics exports increased by 18.8% in the first quarter despite the overall export decline. In April and May, they grew further by 24.9%. Basic skincare products, which decreased by 19.4% in the first quarter, reduced their decline to 7.8% in April and May.
Total cosmetics exports including China decreased by 17.9% in the first quarter and by 5% in April and May. However, the color cosmetics category showed favorable performance with increases of 10.1% in the first quarter and 14.5% in April and May. Examining color cosmetics exports by region, growth was seen in Japan (10% in Q1, 32.5% in April-May) and the United States (60.2% in Q1, 32.5% in April-May).
Kyobo Securities analyzed that the 618 Shopping Festival, which started after the lifting of Shanghai's lockdown measures, is an opportunity to gauge sales growth. The 618 Shopping Festival is the largest event in the first half of the year, with total transaction volume reaching 875.48 billion yuan (approximately 101 trillion KRW) last year, and beauty-related transactions alone amounting to 51.2 billion yuan (approximately 9 trillion KRW), providing a chance to understand brand preferences for cosmetics within China.
However, the results so far are weaker than expected. According to pre-sale results from Chinese online shopping malls from May 28 to June 3, global luxury brands such as the L'Or?al Group maintained top rankings, while major domestic brands failed to enter the rankings.
Researcher Jeong Soyeon of Kyobo Securities stated, "Since these rankings are based on pre-sale performance, we need to observe until the event ends, but if the current trend continues, the recovery of second-quarter sales to China for individual companies is expected to be weaker than anticipated." She also noted, "Since 3CE is positioned in the top ranks, preference for K-makeup still appears to be excellent."
Kyobo Securities forecasted that companies expected to benefit include iFamilySC, a Japanese color cosmetics brand company in major consumer countries; C&CI International, a color cosmetics manufacturer with a large U.S. market share; and Cosmax, a manufacturer serving C-beauty (China beauty) brand companies.
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