|Na Jung-kyun, head of AmorePacific's ASEAN Regional Headquarters in Singapore / Courtesy of AmorePacific|
Korea's cosmetics giant targets L'Oreal, Estee Lauder
By Kim Jae-kyoung
SINGAPORE ─ Most Korean exporters have been hit hard by China's trade curbs over Korea's deployment of the U.S. missile defense system.
Like many others, AmorePacific, Korea's cosmetics giant, is the victim of the trade conflict because it has huge exposure to the world's second-largest economy.
However, the company seems to be less anxious than other Korean players as it has already diversified its export markets by developing Southeast Asia as its new growth engine.
AmorePacific has been rapidly growing in the Association of Southeast Asian Nations (ASEAN) over the past few years. It is now targeting leading global brands, including L'Oreal, Estee Lauder, LVMH and Shiseido.
"Since competition is so fierce in this region, some global brands are suffering negative growth," Na Jung-kyun, head of AmorePacific's ASEAN Regional Headquarters in Singapore, said during a recent interview.
"In contrast, we have enjoyed an average annual growth of 70 percent over the past five years," he added. "We aim to top ASEAN's premium market in the region by garnering market share of 15.8 percent with sales of 500 billion won by 2020."
In 2016, the firm posted sales of 150 billion won in the ASEAN's premium cosmetics market, with a market share of 7 percent. Its ASEAN sales stood at 17 billion won in 2012.
The ASEAN cosmetics market is estimated at around 7.5 trillion won, which breaks down into two segments ─ the premium market worth 2.5 trillion won sold at high-end department stores and the mass market worth 5 trillion won sold at drugstores.
Na stressed that for cosmetics companies, ASEAN is an important market with a huge consumer base and growth potential.
"Over 45 percent of the ASEAN population are members of the millennial generation," he said. "The economy has great growth potential and the region has a beauty trend of copying others."
"The market is particularly important in that it is a gateway to India and the Middle East because ASEAN consists of multiple ethnic groups, including Indian, and is closely related to those markets," he added.
Currently, AmorePacific has corporate bodies in five ASEAN nations ─ Thailand, Singapore, Malaysia, Indonesia and Vietnam, and representative offices in Myanmar and the Philippines. It also has offices in Dubai in the United Arab Emirates and Mumbai in India.
"This year, we plan to start a corporate entity in the Philippines and are reviewing a plan to enter Cambodia and Laos," he said.
Leadership and localization
Na said that the group chairman Suh Kyung-bae's leadership is behind the firm's success in ASEAN.
According to him, even when AmorePacific enjoyed handsome growth in China and Korea, Suh had a sense of urgency believing that it needs a new market to cut its reliance on China and become a truly global player.
"For the first two or three years, we lost a lot of money and there have been growing calls from within to close ASEAN operations," he said.
"Despite strong backlash, Chairman Suh pushed for the ASEAN expansion with strong determination and patience, and made unwavering efforts over the past several years," he added. "Such efforts are now bearing fruit and ASEAN has become a foundation for our globalization."
Its revenue in the ASEAN market accounts for around 10 percent of its total global revenue. Currently, the company has 90 shops in Malaysia, 75 in Indonesia, 67 in Thailand, 66 in Singapore, 44 in the Philippines, 18 in Vietnam and six in Myanmar.
Along with Suh's leadership, the firm's localization strategy has driven its solid growth in the 10-member economic bloc.
"In order to penetrate the ASEAN market, we have pursued a localization strategy using differentiated brands," Na said.
"To that end, we have offered ‘cushion compacts' tailored for ASEAN customers through top performing brands, such as Sulwhasoo, Laneige, Mamonde, Etude and Innisfree," he added.
Cushion is a new type of compact case first introduced by AmorePacific in 2008 through its IOPE brand. It encases a sponge soaked in liquid formula that is a combination of sunscreen, foundation and skincare ingredients.
"At first, global brands were reluctant to release cushion products but they started introducing their own cushion lines beginning last year," he said. "With global brands following us in the cushion category, I think the market is going in our favor."
So far AmorePacific has sold a total of 650,000 units cushion compacts in ASEAN countries, and the cumulative number is expected to hit the 1 million mark this year.
To solidify its foothold in ASEAN, the company has strengthened its research and production capabilities in the region.
In January, the company began a research and innovation (R&I) lab in Singapore. With the aim of developing ASEAN-tailored products and addressing regulatory issues, the firm plans to develop the lab as its ASEAN research hub.
At the same time, it is building its new production base in Nusajaya, Malaysia, and is scheduled to complete it by 2020. It is its third overseas factory, following production lines in France and China.