"From Cosmetics to Convenience Stores"... K-Distribution Embracing the Endemic, Going Global

K-Pop and Content Popularity Drive
Cosmetics Aim for 3rd Place Globally
Food Accelerates Global Expansion
Exports Grow 15% with Gains in Gim and Ramyeon
Convenience Store Network Expands
CU Targets 300 Stores in Mongolia by Early Next Year
Duty-Free Business Revitalized by Endemic Overseas Operations
Lotte Duty-Free Opens New Store After 683 Days

K-distribution, entering the endemic era (periodic outbreaks of infectious diseases), has taken a leap forward to target overseas markets. Not only food, alcohol, and convenience store brands riding the global popularity of K-content, but also duty-free shops targeting international travelers?who had almost stopped due to COVID-19 over the past two years?are reorganizing their lineup by opening new overseas stores.

◇ Cosmetics, Food, and Alcohol Soar Riding on K-Pop and K-Drama

According to the distribution industry on the 22nd, the domestic cosmetics market, which had a higher import ratio than export until 2011, is growing with the goal of becoming the world's third-largest market, fueled by the global popularity of K-content. 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 (approximately 2.09 trillion KRW). 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 KRW 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."

K-food also continues to expand its global territory, surpassing $10 billion in export value for the first time last year. K-food, which has permeated overseas consumers through K-content, is accelerating local market penetration using familiarity as a weapon. According to the Ministry of Agriculture, Food and Rural Affairs and the Ministry of Oceans and Fisheries, thanks to the progress of products such as gim (seaweed), ramen, kimchi, and ginseng, K-food exports last year increased by 15.1% from the previous year to $11.36 billion (approximately 14.7 trillion KRW). It was the first time that agricultural and food exports exceeded $10 billion.

According to Korea Customs Service export-import statistics, the total volume of alcoholic beverages exported from Korea last year was 320,166 tons, with export value reaching about $320 million. Compared to the previous year (343,108 tons), export volume decreased by 6.7%, but export value increased by 0.2%. By type of alcohol, soju had the highest export value last year at approximately $82 million, followed by liqueur ($81.2 million), beer ($59.98 million), ethanol ($38.06 million), and other alcoholic beverages ($36.19 million).

Employees at CU in Malaysia are selling instant cooked foods such as tteokbokki and eomuk.

◇ ‘Endemic’ Era Spurs Expansion of Convenience Stores and Duty-Free Shops

With the full onset of the endemic era, channels such as convenience stores and duty-free shops have begun full-scale overseas territorial expansion. Convenience store chains, which have gained popularity among locals by prominently featuring K-food and private brand (PB) products in Mongolia, Vietnam, Malaysia, and other countries, plan to actively increase the number of stores this year. CU, operating 213 stores in Mongolia in partnership with Central Express as of last month, aims to open 300 stores by the first half of next year. GS25 currently operates 65 stores and aims to open 500 stores by 2025. Emart24, operating 17 stores in Malaysia, plans to expand to 30 stores by the end of this year and 300 stores within five years.

As operations at major overseas airports resume one after another, the domestic duty-free industry’s overseas store operations are also gaining momentum. Lotte Duty Free reopened its overseas new store openings after 683 days by opening a downtown Sydney store in Australia last month. From the beginning of this year until the 14th, Lotte Duty Free’s overseas store sales increased by 240% compared to the same period last year. The sales target for overseas stores this year is 250 billion KRW. Currently operating 12 overseas stores, Lotte Duty Free is preparing to open downtown stores in Da Nang, Vietnam, in the second half of this year and Hanoi in the first half of next year. Shilla Duty Free is also gradually expanding operations at Changi, Macau, and Hong Kong airport stores. Chicken franchises such as Kyochon, Genesis BBQ, and Goobne Chicken plan to accelerate their overseas market penetration this year, leveraging Korean-style chicken, which has become the "most frequently eaten food by foreigners."

◇ Research and Development Support Needed... Government-Level Assistance Crucial

However, there are challenges. The cosmetics industry is struggling as patriotic consumption trends rise in China, its primary market, and the Chinese government enforces stricter standards on imported cosmetic ingredients, promoting domestic product consumption. Amorepacific and LG Household & Health Care, the two major players in the domestic cosmetics industry, recorded Chinese sales in Q1 this year down 9.7% to 266 billion KRW and down 32% to 185 billion KRW, respectively, compared to the same period last year. Professor Kim Judeok of Sungshin Women’s University’s Department of Cosmetic Industry said, "The cosmetics industry has the smallest R&D budget. Steady government support must precede global expansion."

Regarding alcoholic beverages, it was suggested that investments should be made to enhance export competitiveness by developing beyond simple consumer goods into hobbies, collectibles, and even financial investment purposes. Myung Wook, adjunct professor at Sejong Cyber University’s Barista & Sommelier Department, advised, "Creating a philosophy and clear identity embedded in alcohol is more important than short-term performance."

[Reporting by Distribution Economy Department, Compiled by Yuri Kim]