Ranked as the 11th largest cosmetics company in terms of sales worldwide, South Korea’s Amorepacific booked $4.8 billion in sales for 2016, all accumulated from 25 brands under its umbrella, including Sulwhasoo, Laneige, Innisfree, and Etude.
The company is known for its low to mid-range prices but high-quality products targeted towards the masses, especially young females.
By establishing Korea’s first cosmetics research lab in 1954, less than a decade after being founded in 1945, the company pioneered popular skincare trends such as boosting essences, sleeping masks, cushion foundations, and two-tone lip bars.
Forbes placed Amorepacific at No. 16 on its 2016 list of the world’s most innovative companies, and No. 7 in all of Asia.
Riding the ‘Hallyu Wave’ or South Korea’s pop culture phenomenon, the company has been largely credited to enhancing the Asian-ification multi-step beauty regime around the world.
The company reported a drop in its net profit by nearly 60% in Q2 2017 as geo-political tension between South Korea and China worsened due to the implementation of the THAAD anti-missile system earlier this year.
China was the company’s biggest overseas market, accounting for approximately 20% of total sales.
The tensions impacted a 22.5% drop in domestic sales and nearly 40%less Chinese tourists traveled to the country after travel agencies stopped selling packages to South Korea as insisted by the Chinese government.
With its two top markets performing poorly, Amorepacific had to look to other markets in order to grow and lessen its dependability on China.
While the long-term focus was on typically homogenous markets in East Asia, the company’s ambition to tap into the global market was accompanied by a commitment to creating attractive products for new markets.
“Our growth strategy remains firmly focused on creating innovative, singular brands, and products that appeal to consumers in target markets, and we will continue to work towards becoming a great company delivering new beauty values to customers around the world,” said Amorepacific Chairman & CEO Suh Kyung Bae.
Amorepacific globalization plans seemed to start with Southeast Asia, as the company began dedicating more resources to efforts in the region.
“The market (ASEAN) 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,” said Na Jung Kyun, Head of Amorepacific ASEAN Regional Headquarters.
To penetrate the market, Amorepacific reformulated its products to compensate for the region’s humidity, darker skin tones, and the needs of Muslim women (“Muslimah”).
Examples include a lighter washable makeup that can be easily removed and applied for Muslimah that conducts daily prayers, which require a light washing of the face.
The company also developed darker shades of foundation for Laneige and Innisfree specifically sold in the region and aptly named “ASEAN Cushion Shades”.
In addition to localizing its product lines, the company also opened its first research and innovation lab earlier this year in Singapore. The aim is to develop highly tailored products for the ASEAN market and address regulatory issues.
Malaysia, in particular, has caught the cosmetic giant’s fancy as it invested 110 billion won ($95.7 million) to build its third overseas factory in the Nusajaya area – completion scheduled for 2020 – and opened an Etude flagship store in Kuala Lumpur early this month.
“I believe among ASEAN member countries, the Malaysian market has the highest growth potential. In fact, it has been our goal to open a flagship store in Kuala Lumpur, and introduce the new core values of Etude House to a wider range of customers,” said Etude House CEO Geum Joo Kwon.
Not only has the company focused on traditional brick and mortar stores, Amorepacific has also taken its brands online with Innisfree launching an official brand.com web store, to offer its products worldwide.
Laneige has also opened an official store on popular Southeast Asian marketplace Lazada Indonesia and Thailand.
Often the other way around – first developed then developing markets – the company is eyeing North America for further expansion.
“Our company is operating in the Korean market, the Chinese market, and the ASEAN market. The US market will be our fourth pillar for our business, so we are very much committed to developing the US market,” revealed Amorepacific Chairman and CEO Suh Kyung Bae.
Through Innisfree, the company made its official introduction to the US market earlier this month with a grand opening of its first store in NYC, where it currently offers 900 different items from skincare, makeup, and home scents.
It also expanded to 14 different shades in its cushion foundation to serve a wider range of skin colors.
The company’s decision to place a bet in Southeast Asia has reaped fruitful results as it overtook competitor brand Estee Lauder and doubled its market share in Asia Pacific to 6% in 2016.
It has lagged behind L’Oreal and Shiseido, two companies with the strong digital presence in Southeast Asia.
But the experience and knowledge it picked up in this region are expected to be helpful for its venture into other new markets.
“If we can achieve success in Southeast Asia with this much diversity, it can also be a very good experience for us to enter different countries with great diversity as well,” commented Na Jung Kyun, Head of Amorepacific ASEAN Regional Headquarters.