Korean cosmetics makers' profits soar as niche brands grow

Kolmar Korea Co. and Cosmax Inc., South Korea’s leading cosmetics suppliers to multinational conglomerates like L'Oréal S.A., are enjoying skyrocketing profits thanks to fast-growing smaller beauty brands that target niche markets.

Financial data firm FnGuide Inc. on Wednesday said that based on consensus estimates, Kolmar Korea’s operating profit for the last fourth quarter jumped 377% on-year to 41.1 billion won ($30.6 million). The cosmetics original design manufacturer (ODM) is forecast to log 140.5 billion won profit for 2023, soaring 91% from a year prior.

Cosmax is expected to post 35.9 billion won in operating profit for the fourth quarter of last year, increasing by 14 times from the year previous, FnGuide said. The ODM's annual profit for 2023 is forecast to grow by 1.4 times on-year to 128.7 billion won, the data firm added.

“Suncare products from smaller brands in Korea like Beauty of Joseon and Skin1004 were very successful in the US market last year,” a Kolmar Korea official said. Sunscreen items of Beauty of Joseon and Skin1004 are well-known for rice-derived ingredients and a hydrating formula, respectively.

Skin1004’s sales in the US for the first 10 months last year were 11.3 billion won, compared with 3.9 billion won in the full year of 2022.

RISE AND FALL IN CHINA

Kolmar Korea, which supplies to L'Oréal and The Estée Lauder Companies Inc., has greatly expanded its client base of smaller beauty brands in the last two decades. 

Cosmax, one of the world’s top cosmetics ODMs by sales, added 119 small and mid-sized firms to its client list last year. The company provides beauty products to around 1,300 corporates.

In 2004, it became the first Korean cosmetics ODM to enter China. The company first focused on Korean beauty brand products manufacturing in China and increased Chinese big and mid-sized clients such as Peilai, Florasis and Colorkey.

C&C International Co. and Cosmecca Korea Co., which also manufacture beauty products, are increasing the number of small and mid-sized clients and enjoying earnings growth.

C&C’s operating profit for the last year was 33.1 billion won, doubling the profit a year earlier. Cosmecca achieved a 48.1 billion won profit last year, nearly five times the year prior, FnGuide said.  

In comparison, Korean beauty giants such as LG H&H Co. and Amorepacific Corp., which reaped handsome profits in China before the pandemic, are lagging behind local and global players in China.

LG H&H’s operating profit for the last year was 486.1 billion won, down 31% on-year, while Amorepacific’s profit for the last year was 123.1 billion won, 42% less than a year earlier, FnGuide said.

Write to Hyung-Joo Oh at ohj@hankyung.com

Jihyun Kim edited this article.