Three years ago, Soh Kyung Bae was the second richest person in South Korea. Today, it hardly ranks among the top ten, a stark reflection of the Korean beauty boom known for making billionaires, not breaking them.
Soh’s fortune has fallen to $ 3.6 billion, from about $ 8 billion in 2017, and is largely made up of shares in his family’s cosmetics group, the Amore Pacific Group, which is down more than 40% from its mid-January high.
Amore Pacific, the parent company of brands like Innisfree, Lanig and Sulwaso, was struggling even before the Covid-19 pandemic, and the epidemic led to a slew of lifestyle changes that made cosmetics less important in a woman’s daily routine.
Popular beauty products
This halted the wealth generated by the rapid rise in popularity of Korean beauty products and the deal-making frenzy that followed. Foreign companies spent at least $ 215 million acquiring cosmetics companies there from 2010 to 2014, according to Samjung KPMG’s September report.
In the five years that followed, the country became the fourth largest exporter of beauty products in the world, and deals swelled to $ 5 billion, without including transactions for undisclosed amounts.
Half and B was famous for its production line Dr. Jart + became Estee Lauder Cosmetics’ first acquisition of an Asian beauty brand in November 2019. The $ 1.1 billion deal turned its founder Chen Wook Lee into a billionaire. Goldman Sachs bought a minority stake in GB Club, famous for its face masks, making its founder Kim Jong Wong one of the richest people in the country.
Unilever, L’Oréal, and other multinationals have also taken stakes in Korean cosmetic companies, leading to unexpected gains for their founders.
But the epidemic has caused a double whammy of the Korean beauty industry. Social distancing and telecommuting reduced the demand for makeup and led to store closures. Retail sales of cosmetics in the United States, the No. 3 market for Korean exports, will be about 7% lower in 2020, according to market research firm Mintel.
Switching to the Internet
Meanwhile, the epidemic has accelerated the shift to the internet in the beauty industry. Amore Pacific revenue has seen significant growth in this segment, prompting it to prioritize this segment of the business.
Cosmetic giant L’Oréal, whose sales fell 12% in the first half of 2020, launched 300 digital services including live beauty tutorials.
Amore Pacific is planning to reduce the number of innisfree stores in China, but it expects digital sales in general to make up half of its business there next year, according to Yanta Securities Korea. In the domestic market, the company sees that the share of online revenue will grow to 30% after it was 20%.
“Spending on cosmetics was already low before the Covid epidemic made it less necessary. Only indispensable items such as skin care products or those for facial problems work well,” said Hae Mi Kim, an analyst at Cape Investment and Securities in Seoul. .
Meanwhile, the number of new billionaires in South Korea has risen, such as Seo Jang Jin, founder of the pharmaceutical company Celterion, which is developing an anti-cure for Covid-19. Seo’s fortune has nearly tripled this year to $ 14.6 billion, making him the second richest man in the country.