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Market Trends and Outlook of the Cosmetic Industry in Korea

Market size of the cosmetic business in Korea

With an estimated worth of over KRW 14 trillion in sales as of 2019, Korea’s cosmetic industry is the top 9 in the global market, following India. The market size is reported to be even larger than that of Italy or Russia, and comparable to France. China’s remarkable economic growth and the worldwide spread of K-pop since 2010 have helped the industry take a grand leap forward to being part of the major export income sources in Korea.

□ Global market share of the cosmetic industry and country ranking

(Unit: USD 1 million, %)

Global market share of the cosmetic industry and country ranking
Rank Country 2016 2017 2018 2019
Sales Share Sales Share Sales Share Sales Share
1 USA 72,703 18.8 74,132 18.9 76,110 18.9 77,901 18.8
2 China 44,304 11.4 47,899 12.2 51,154 12.7 54,297 13.1
3 Japan 32,209 8.3 32,763 8.4 33,224 8.3 33,675 8.1
4 Brazil 28,500 7.4 28,199 7.2 29,271 7.3 30,636 7.4
5 Germany 15,902 4.1 15,879 4.1 16,039 4.0 16,184 3.9
6 UK 14,265 3.7 14,268 3.6 14,556 3.6 14,858 3.6
7 France 12,900 3.3 12,662 3.2 12,619 3.1 12,626 3.1
8 India 10,494 2.7 11,148 2.8 11,743 2.9 12,365 3.0
9 S.Korea 11,784 3.0 11,646 3.0 11,648 2.9 11,668 2.8
10 Italy 9,376 2.4 9,371 2.4 9,405 2.3 9,453 2.3
Global market 387,640 391,755 402,474 413,517

* Source : Beauty & Personal Care Euromonitor(2019), Korea Health Industry Development Institute, KHIDI (2019)

Along with the sales volume, the market share has constantly kept growing. In 2020, for instance, the number of individuals and businesses officially licensed to provide cosmetic products and services is forecast to exceed 16,000.

Export trends in Korea’s cosmetic market

Starting from the market entry into China, cosmetic brands in Korea have witnessed a surge in exports since 2010, broadening up the territorial sales networks such as South East Asia, Japan, USA and the EU.
Korean content—pop music, dramas, etc.-which has swelled for years, now helps attract young fans even in non-Asian regions, who want to emulate the edgy look and style of many Korean artists they’re watching.
Beauty cosmetics and skincare exports in 2018 totaled USD 6.28 billion, a threefold jump in a five year period starting in 2014, making Seoul one the four main cosmetics exporters in the global market. The figures reported are even greater than that of Italy or Japan, long considered the symbols of the beauty business around the world.
Korea’s recent export sales have jumped as much as 34.7 percent over the past five years, showing a steep growth rate among all major exporters along with Japan.

□ Korea’s import-export performance

(Unit : USD 1 million, %)

Korea’s import-export performance
Year Export Import Balance of Trade (BOT)
Export sales YOY
Import sales YOY
2015 2,910 55.3 1,397 0.8 1,513
2016 4,183 43.7 1,433 2.6 2,750
2017 4,952 18.4 1,523 6.3 3,429
2018 6,263 26.7 1,615 5.5 4,648
2019 6,486 3.6 1,607 △4.9 4,879
*Source : Korea Customs Service, Foundation of Korea Cosmetic Industry Institute (2020)

※ CAGR over the past five years (2015-2019) Export : 22.2% / Import: 3.6%

Cosmetics export earnings in 2019 marked nearly KRW 6.49 billion, hovering above KRW 6.26 billion last year, whereas the total import revenue has slightly dropped, breaking another all-time high trade surplus record again from last year.

Major issues and industrial outlook of the cosmetic industry in Korea (K-beauty)

The Korean beauty business, known as “K-beauty” for short, has already been one of the hottest trends in the world’s cosmetic industry, being encountered with numerous challenges: In the midst of competition with Japan’s high-end brands that could offer a superior level of service, some of the burgeoning enterprises in China and Thailand who have adopted a strategy of low-cost, mass markets are daring the K-brands. Exploring new markets, new technologies and K-content propagated throughout the world have helped K-beauty brands stretch out to the non-Chinese sphere. The strong K-brand power looks formidable for a while in the coming years. This report lists up the current cosmetic market trends and outlook, which goes as in the following.

First, there has been a significant change in the market portfolio to be targeted. The Sinosphere (or East Asian cultural sphere) which encompasses mainland China, Hong Kong and Taiwan, used to be the main export markets over the past decades. But in recent years, they’ve begun to give way to other places such as South East Asian communities, Japan, Russia or CIS states. The “Third Korean Wave,” which has settled across Japan particularly among teenagers, has jacked up the total export volume and market share. With skyrocketing export sales figures, the same goes for Russia, highly expected to become the 6th largest export market, over-striding Vietnam in 2020 if the trend continues. The upswing mood in nontraditional economies such as Vietnam, Indonesia and the group of CIS countries appears to push cosmetic businesses in Korea to find more export channels across the world for the next decades to come.

A growing tendency to consume “K-beauty vegan products” is the second issue to lead the trend. Korean cosmetics had been well known for ingredients derived from animals, catching on with customers in China in early 2010. But soon after, people started to wake up to fresh, natural substances, becoming more knowledgeable to what things are made from. It has become the official word for many U.S. consumers that K-beauty represents cosmetics that contain natural extracts and non-artificial ingredients. A worldwide ban on animal testing has created extra demand for non-animal skincare products in the industry.

Thirdly, authorities in many parts of the world have begun to legally ensure sustainability for future growth. Being defined by some products mindfully manufactured without any toxic ingredients in a limited sense, the concept of “clean beauty,” which has swept across the world since 2017, originated in the EU and the U.S. Since then, markets have started to tout eco-consciousness on top of health benefits, further diversifying product portfolios. Seoul recently approved a regulatory guideline, which will come into force in September 2020, for the use of recyclable or biodegradable packaging, while curtailing unsafe, toxic chemicals contained in products.

In this regard, it may seem obvious that businesses have few options but to change their growth strategy to reduce plastic waste. It makes sense, commercially, to develop new product lines and containers that are evolving into a category that reflects these needs. To be in line with the latest trend, global giants such as L’oreal or Amorepacific are working with those looking for sustainable packaging innovations. This, too, could heat up the market competition to produce greener alternatives.

Fourthly, the market for facial masks are becoming better, exclusive and more diverse. This phenomenon probably stems from an ever-intensifying race to develop the next big thing both in the domestic and overseas markets.

The fifth keyword is the segmentation of the product categories. K-beauty has recently showcased a multipurpose, advanced version of peeling pads, used to cleanse or remove layers of dead skin so far. Hydrating mists and face spray are now developing into new cosmetic science with innovative, more functional properties that are assessed to properly represent innovation of K-beauty and consistent efforts to pave the way for entrance into niche markets.

The last one is about the regulation on personalized cosmetics, which will come into effect from March 2020 in Korea, officially announcing that customers from now on can add or blend different type of ingredients they want to apply and select specific formulas depending on their skin conditions at stores. The tailor-made products require professional pharmacists who can formulate such products, safety measure guidelines and a licensing system targeting stores offering customization options.

Once it’s commercially well appealing to customers, the bespoke service seems to be more than just a fad both in Korea and other places throughout the world. Plus, the world’s first custom-made solution in the cosmetic industry, which will soon be adopted in China, is predicted to reshape the future business trends, drawing attention to market response and regulatory frameworks.

A year-on-year decrease in export sales for the first half of the year 2019 and weaker growth in some parts of the world would be a clear sign of a tougher survival match that K- beauty is faced with. Avoiding time-wasting cutthroat competition, K-beauty is anticipated to revolutionize the industry once again by bringing new innovation to the marketplace this year.

Seongmin(Mike) Sohn, Assistant Researcher
Foundation of Korea Cosmetic Industry Institute (KCII)

*The opinions expressed in this article are the author’s own and do not reflect the views of KOTRA.

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