[K-Distribution Expanding Overseas] K-Beauty Going Global: Deregulation and Support as Challenges

The Ministry of Culture, Sports and Tourism, together with the Korea Tourism Organization, will hold the "2022 Korea Grand Sale" from the 13th of this month until the 28th of next month. The Korea Grand Sale is a shopping and cultural tourism festival held annually since 2011 to attract foreign tourists during Korea's low tourism season in winter. Considering the difficulty of foreign visitors traveling to Korea due to COVID-19, this year's event will be conducted mainly online. The photo shows foreign tourists experiencing "K-Beauty (Korean beauty)" at Beauty Play in Jung-gu, Seoul, on the opening day, the 13th. Photo by Hyunmin Kim kimhyun81@

[Asia Economy Reporter Jeon Jinyoung] Riding the Korean Wave fueled by Korean idols and dramas, Korean cosmetics are expanding overseas under the banner of ‘K-Beauty.’ However, with the market situation deteriorating due to increased export barriers in China, the largest market, there is a need for breakthrough measures. Industry insiders and experts unanimously agree that the government should take the lead in seeking improvements in export conditions and supporting research and development.

According to the cosmetics industry on the 20th, the domestic cosmetics market, which had a higher import ratio than exports until 2011, is now growing with the goal of becoming the world’s third-largest market. This steep growth is thanks to the Korean Wave. As makeup styles of actors appearing in Korean dramas began to trend overseas, K-Beauty also started to grow. Korean cosmetics attract overseas fans’ attention with product designs collaborated with popular idols, and their excellent absorption and texture have spread by word of mouth among consumers.

According to the Korea Cosmetic Industry Institute, as of May 2022, the country with the highest export volume is China, with exports totaling $1,619,067,000. This is followed by the United States ($373,479,000), Japan ($373,479,000), Hong Kong ($174,711,000), Vietnam ($130,938,000), and Russia ($105,093,000).

An industry insider said, "The Korean cosmetics industry surpassed 1 trillion won in exports to Japan last year," adding, "It is encouraging to see rapid growth by entering the Japanese market, which was once known as a cosmetics powerhouse."

In fact, the Korean cosmetics industry targets markets with different brand strategies by country. In the Chinese market, where high-end luxury product lines sell well, AmorePacific focuses on Sulwhasoo, and LG Household & Health Care centers its sales activities around Su:m37. In North America, color cosmetics such as Laneige Air Cushion have been launched, and in Southeast Asia, including Thailand, sunscreens with ‘tone-up’ functions are targeted.

However, there have been ups and downs. China, which accounts for over 40% of demand in the Korean cosmetics industry and is the number one market, has recently cooled rapidly. Since the THAAD (Terminal High Altitude Area Defense) incident, a guochao (patriotic consumption) trend has swept China, raising export barriers. China is implementing policies to promote domestic product consumption, such as tightening ingredient standards for imported cosmetics. As a result, AmorePacific and LG Household & Health Care, the two major players in the domestic cosmetics industry, recorded first-quarter sales in China of 266 billion won and 185 billion won, down 9.7% and 32% year-on-year, respectively.

In response, the cosmetics industry is seeking new overseas markets and activating online channels to find new opportunities. In particular, AmorePacific and LG Household & Health Care have recently been focusing on the North American market. Since March, AmorePacific has launched major brands such as Laneige and Sulwhasoo on Amazon, and LG Household & Health Care acquired a 65% stake in ‘The Cr?me Shop,’ a cosmetics company targeting the U.S. MZ generation (Millennials + Generation Z).

Experts and industry insiders have raised their voices that, along with diversifying these new channels, negotiations and regulatory easing with China must proceed as soon as possible. An industry insider emphasized, "China has raised export entry barriers by strengthening cosmetic ingredient regulations amid the patriotic consumption trend," adding, "Since it is the largest export market, the government must step in and engage in dialogue."

Professor Kim Judeok of the Department of Cosmetic Industry at Sungshin Women’s University advised, "Domestically, there are regulations that tie cosmetic development to the Ministry of Health and Welfare and the Ministry of Food and Drug Safety, such as the advertising verification system for cosmetics. These need to be loosened to enable more active development." He also noted, "The cosmetics industry has the smallest research and development budget. Steady government support must precede to advance globally."