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Mon, December 28, 2020 – 1:31 PM
Suh’s $ 3.6 billion fortune, up from $ 8 billion in 2017, is largely made up of shares in his family’s cosmetics conglomerate, Amorepacific Group, which have fallen more than 40% from a mid-peak. from January. Amorepacific, parent of brands like Innisfree, Laniege and Sulwhasoo, was battling even before Covid-19, and the pandemic has ushered in a series of lifestyle changes that have made cosmetics less important to routines. women’s daily.
That halted the wealth created by the rapidly increasing popularity of Korean beauty products and the deal frenzy that followed. From 2010 to 2014, foreign companies spent at least $ 215 million to acquire cosmetic firms there, according to a September report by Samjong KPMG. In the next five years, the country became the world’s fourth largest exporter of beauty products, and the volume of transactions soared to $ 5 billion, excluding transactions for undisclosed amounts.
Estee Lauder made Have & Be, widely known for its Dr. Jart + line, her first acquisition of an Asian beauty brand in November 2019. That deal, valued at $ 1.1 billion, made founder ChinWook Lee a billionaire. Goldman Sachs Group bought a minority stake in GP Club Co, best known for face masks, making founder Kim Jung-woong one of the richest people in the country. Unilever, L’Oreal, and other multinational companies also earned stakes in Korean cosmetic firms, generating huge profits for their founders.
But the pandemic has had a double impact on K-beauty. Social distancing and remote working have reduced the demand for makeup and led to stores closing. Retail sales of beauty products in the United States, the third largest market for Korean exports, will decline more than 7% in 2020, according to market research firm Mintel.
For Korea, coronavirus travel restrictions have also cut off the flow of high-spending Chinese tourists and individual merchants who buy duty-free goods in bulk and sell them at home. Meanwhile, customers in China have more access to global brands and are increasingly interested in locally made products.
“Now it’s naive to think that cosmetic products with Korean-made labels would just win over Chinese customers,” said Lina Oh, an analyst at Seoul-based Ebest Investment & Securities Co.
Neither Have & Be nor GP Club have released financial information for 2020; GP Club’s plan for an initial public offering in 2019 has not been rescheduled.
For Amorepacific, consolidated revenue for the first nine months of the year fell 23 percent to 3.7 trillion won (S $ 4.48 billion) compared to the same period in 2019, according to a company document. For the first time in its history, the group last month announced a plan to offer voluntary retirement targeting employees who have worked for more than 15 years. The company declined to comment on its plans or Suh’s personal fortune.
At the same time, the pandemic has accelerated the shift to the Internet in the beauty industry. Amorepacific’s revenues for the segment have seen substantial growth, leading it to prioritize that part of the business. Cosmetics giant L’Oreal, whose sales fell 12 percent in the first half of 2020, launched 300 digital services this year, including live beauty tutorials.
Amorepacific plans to reduce the number of Innisfree stores in China, but anticipates that overall, digital sales will account for half of its business there next year, according to Yuanta Securities Korea. In the domestic market, the company expects the share of online revenue to increase from 20% to 30%.
“Spending on cosmetics was already down before Covid,” said Hye-mi Kim, an analyst at Cape Investment & Securities in Seoul. “Covid made it even less necessary. Only essential items, such as skin care products or for facial problems, work well.” Meanwhile, South Korea has new billionaires on the rise, like Seo Jung-jin, founder of the pharmaceutical firm Celltrion, which is developing a Covid-19 antibody treatment. Seo’s wealth has nearly tripled this year to $ 14.6 billion, making him the second-richest man in the country.
BLOOMBERG
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