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South Korean Cosmetic Market: increased local competition
According to statistics from the Korea Cosmetic Industry Association (KCIA), the cosmetics market in South Korea grew by 9.8% year on year in 2002. Skincare generated 53% of the total, followed by hair care (14%) and makeup (12%). After China, this is the fastest growing Asiatic market.
For 2003, the KCIA is projecting a 6.6% rise in beauty sales. According to other estimates, the market should reach 3.1 billion euro this year, which would represent a growth of 5.4%.
Observers estimate that the share of the three largest local producers (Pacific, Coreana and LG Household & Healthcare) in the domestic market should exceeded 55.1% in 2002 and may reach 57% in 2005.
However, prestige foreign brands still lead the segment of top-end beauty products. They accounted for 83% of the sales turnover achieved in 2001 in department stores. Consumers still perceived foreign brands as of better quality and as carrying more personal prestige.
For the last decade, Korean groups have been heavily investing in R&D and marketing campaigns aimed at entering the prestige segment. In 2002, two brands marketed by Pacific, Sulwhasoo and Hera, recorded the best growth and performed above Sisley, Estee Lauder and Chanel. The Amore Pacific group attribute these results to a very active marketing policy targeting 20 year old girls for Hera, and 40 year old affluent women for Sulwhasoo.
The expansion of distribution networks (cosmetic corners, door-to-door, Internet...) and their entry into international markets also contributed to the success of these brands. For example, Amore Pacific is planning to open outlets in more than 30 department stores in Shanghai, Beijing, Hong-Kong and Singapore by the end of this year. "Our business target next year is Taiwan. We established a local venture last month to supervise our Taiwanese business," a company spokesman told the Korea Herald.
LG Household & Health Care Ltd, an LG-affiliated leading consumer goods and cosmetics maker, is also upgrading its product lines sold in China. "Our Chinese plant in Hangzhou recently started producing Hercyna products, our flagship brand, in addition to other mass-market items," an LG official said.
Although sometimes forgotten, owing to the fact that it is located between China and Japan, the Korean market has sophisticated customers and a healthy economy, which is in fact an ideal test market where quality products have every chance of success.