[This Week's Insight] High Growth of 'Manyeogongjang' in Korea and Abroad

"Hallyu Boost... Cosmetics Export Expected to Hit Record High"
Manyo Factory Rapidly Growing in the US... "Q2 Forecasts Record High Performance"

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This year, the export value of cosmetics is expected to surpass its highest record. According to customs trade statistics, the export value of cosmetics in the first half of the year reached $4.82 billion (approximately 6.7 trillion KRW), an 18.1% increase compared to the same period last year, marking the highest half-year figure. This surpassed the previous record of $4.63 billion in the first half of 2021 after three years. If this trend continues, it is expected that the annual maximum export value will also be broken. The previous annual record was $9.22 billion in 2021.

The increase in cosmetics exports is attributed to the global popularity of the Korean Wave (Hallyu), which has heightened interest in Korean cosmetics. Last year, Korean cosmetics were exported to 195 countries. Riding the Korean cosmetics boom, Manyeogongjang (Witch Factory) is also expected to see significant performance growth this year. There is optimism that it will expand its market share and grow both domestically and overseas.

‘Manyeogongjang’ Popular Not Only Domestically but Also Overseas

Manyeogongjang was established in 2012. It is a cosmetics company known for its popular cleansing oil products. Centered around its flagship brand 'Manyeogongjang,' it also owns basic skincare brands like 'Our Vegan,' fragrance-specialized brand 'Vanilla Boutique,' and color cosmetics brand 'No Mercy.'

Domestically, it supplies products directly through its own website, online open markets (Naver Store, 11st), comprehensive malls (SSG, CJ, GS Home Shopping), closed malls (Brandy, Ably, Musinsa, etc.), as well as major H&B and large offline retail channels such as Olive Young, E-Mart Traders, and Costco.

Overseas, it supplies products through major global B2C platforms such as Amazon, Shopee, Lazada, Qoo10, and Rakuten. In other countries and channels, it conducts sales and marketing activities through leading local vendor companies across online and offline channels.

Sales have been growing annually. Revenue increased from 62.62 billion KRW in 2021 to 105 billion KRW last year. However, operating profit slightly decreased from 17.7 billion KRW to 15.9 billion KRW during the same period. In the first quarter of this year, sales and operating profit were 31 billion KRW and 4.1 billion KRW, respectively, up 39.6% and 1.7% compared to the same period last year. By product category, cleansing accounted for the largest share with 16.469 billion KRW (53.11%), followed by skincare at 7.248 billion KRW (23.37%), ampoules & serums at 5.42 billion KRW (17.48%), and others at 1.58 billion KRW (4.86%).

Notably, Manyeogongjang generates more sales overseas than domestically. Overseas sales in the first quarter reached 15.975 billion KRW. Japan accounted for the largest share at 7.592 billion KRW (47.5%), followed by China (5.3%), the United States (13.2%), Asia (7.6%), and Europe (6.3%).

Continued Growth Domestically and Overseas This Year

The financial investment industry expects Manyeogongjang’s performance improvement trend to continue this year. According to FnGuide, securities firms forecast Manyeogongjang’s sales and operating profit for this year to be 133.6 billion KRW and 21.8 billion KRW, respectively, representing improvements of 27.24% and 37.11% compared to the previous year. The second quarter outlook is similar, with expected sales and operating profit of 37.8 billion KRW and 6.5 billion KRW, up 51.22% and 101.55% year-over-year. Eunjeong Park, a researcher at Hana Securities, said, "We expect the highest quarterly performance," adding, "Balanced growth both domestically and overseas is accompanied by improved profitability, which is expected to exceed market expectations."

Particularly, overseas performance is anticipated in the second half of the year. Manyeogongjang entered China and the United States in 2022 and is expanding into markets such as India, the Middle East, and Europe this year. Growth in the U.S. market is highly anticipated. Sales in the U.S. in the first quarter reached 2.13 billion KRW, a 208.4% increase compared to the same period last year. Additionally, sales to Costco in the U.S. are expected to be reflected in the second quarter. Researcher Park evaluated, "Both online and offline channels are strong," noting, "The brand’s recognition is strengthening as it ranks among bestsellers in Amazon’s cleansing category, and new offline channel entries are accelerating."

She also emphasized, "Domestically, category expansion is underway in H&B stores, and channel expansion is progressing in e-commerce. Overseas, the focus is on expanding market share centered on the U.S., with offline expansion effects expected to accelerate."

This Year’s Investment Will Yield Next Year’s Results

Manyeogongjang has recently been focusing on expanding overseas markets, which has led to increased marketing expenses. Consequently, selling and administrative expenses have risen, causing operating profit margins to decline. Last year’s operating profit margin was 15.1%, but it dropped by 2 percentage points to 13.1% in the first quarter of this year. However, it improved by 0.7 percentage points compared to the previous quarter. A detailed look shows that selling and administrative expenses in the first quarter were 18.9 billion KRW, a 43.30% increase year-over-year. Of this, 5.6 billion KRW was advertising expenses, which rose 113.83% compared to the same period last year.

Especially, since growth in Japan, a major sales region, has slowed, marketing will be strengthened. Sales in Japan in the first quarter decreased by 27.4% compared to the previous quarter. Sales and profitability in online channels are deteriorating, mainly due to price declines caused by intensified competition. To overcome this, Manyeogongjang plans to strengthen marketing in the second half by changing advertising models and increasing the share of digital advertising. Researcher Park advised, "In Japan, online efficiency is being improved, while offline is at the early stage of channel expansion, improving momentum. Offline sales per store are increasing, with about 1,000 channels penetrated, and new channel entries are planned for the second half."

However, the increase in marketing expenses this year is largely seen as an investment for future performance improvement. Jaemo Lee, a researcher at Growth Research, said, "The reason operating profit margin decreases despite sales growth is because marketing activities are being intensified to increase market share as the market expands," adding, "The effects of marketing expenses incurred this year are expected to be realized as increased sales in 2025 and 2026."

In the cosmetics sector, since sales can be checked monthly, stock price volatility may increase depending on performance. Researcher Lee emphasized, "Recently, the cosmetics sector’s stock price momentum is stronger for companies with increasing U.S. sales, and corporate value varies according to growth from a mid- to long-term perspective," adding, "Since U.S. sales are rapidly increasing, it is important to monitor monthly and quarterly performance growth trends." He further noted, "Japan is considered a variable factor in overseas sales performance, so it is important to monitor the investment period according to the market atmosphere in Japan."