Pandemic just hit a bit harder to the K-beauty industry. Three years ago, Suh Kyung-bae was known as the second-richest person in South Korea. Today he’s barely in the Top 10, in a stark reversal of a K-beauty boom known for minting billionaires, not breaking them.
Suh’s $3.6 billion fortune coming down from roughly $8 billion in 2017 which is largely comprised of shares in his family’s cosmetics conglomerate, Amorepacific Group, which have fallen more than 40% from a mid-January 2020 which turned out that they we struggling before pandemic, lockdown and social distancing actually hit everyone. But the COVID-19 and remote work has ushered in lifestyle changes that have made cosmetics less central to women’s daily routines, which have lessened demand for makeup and led to retail store closures.
It has transported a halt to the wealth that was generated by a rapid rise in popularity of Korean beauty products and the deal-making frenzy that followed. According to a September report by Samjong KPMG, foreign companies spent at least $215 million to acquire cosmetics firms in the country from past 5 years to 2010 to 2014.
In the following five years, South Korea became the fourth-largest exporter of beauty products of the world. Treaty volume ballooned to $5 billion, not including transactions for undisclosed sums. Later on, In November 2019, Estee Lauder Companies Inc. made Have & Be Co., that are widely and best known for its Dr. Jart+ line, its first achievement of an Asian beauty brand. That deal turned the founder ChinWook Lee into a billionaire with worth $1.1 billion.
Goldman Sachs Group Inc. bought a minority stake in GP Club Co., which is best known for face masks, making founder Kim Jung-woong one of the country’s richest people. In addition, Unilever PLC, L’Oreal SA and other multinational companies also secured stakes in South Korean cosmetics firms, creating massive windfalls for their founders.
Pandemic has inflicted a double hit on K-beauty.
South Korea beauty industry is counted as one of those that were hit hard by the pandemic. According to market research firm Mintel, the beauty retail sales in the United States that the No. 3 market for South Korean exports, will be down more than 7% in future.
China’s customers have more access to global brands and are increasingly interested in products that are made locally because of the COVID-19 travel restrictions that cause a cut off in South Korea’s flow of big-spending Chinese tourists and individual merchants who buy tax-free makeup and beauty goods in bulk and sell them back home. Lina Oh, a Seoul-based analyst at Ebest Investment & Securities Co. reacted to the cut off in k-beauty’s flow of big spending,
“Now it’s naive to think that cosmetic products with made-in-Korea tags would simply win over Chinese customers,”
According to a company filling for Amorepacific, associated revenue for the first nine months of the year fell 23% to 3.7 trillion won when Neither Have & Be nor GP Club have released their financial information with an announcement to offer voluntary retirement targeting staff who have been employed for more than 15 years. The company declined to comment on its plans or on Suh’s personal fortune.
The pandemic has speeded up at the same time and shift to online in the beauty industry. Amorepacific’s revenue for the segment has seen substantial growth, pushing it to prioritize that part of the business. Then the Cosmetics giant L’Oreal, whose sales dropped 12% in the first half of 2020, launched 300 digital services this year including live beauty tutorials.
In the domestic market, Amorepacific sees the share of online revenue growing from 20% to 30%. Hye-mi Kim, an analyst at Cape Investment & Securities Co. in Seoul talked about this growth during pandemic that,
“Spending on cosmetics was already down before COVID,” moreover he added to his statement that, “ COVID made it even less necessary. Only must-have items like skincare products or those for facial problems are doing okay.”
Looks like there’s an addition of another rising billionaire in the gang of South Korea’s rising billionaires. Seo’s wealth has almost tripled this year, to $14.6 billion, making him the country’s new second-richest man.
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