South Korea’s cosmetic industry is witnessing a remarkable surge in profitability, primarily driven by the success of smaller beauty brands in niche markets. Leading cosmetics suppliers, Kolmar Korea Co. and Cosmax Inc., are reaping the benefits of this trend, supplying to global giants like L’Oréal S.A.
Kolmar Korea, known for its expertise in cosmetics original design manufacturing (ODM), has reported a substantial jump in its operating profit for the last quarter of 2023. According to FnGuide Inc., the company’s profit soared by 377% year-on-year to 41.1 billion won ($30.6 million), with an anticipated annual profit of 140.5 billion won, marking a 91% increase from the previous year.
Similarly, Cosmax, another major player in the cosmetics ODM space, is expected to post a fourth-quarter operating profit of 35.9 billion won, a remarkable 14-fold increase from the previous year. The annual profit for 2023 is forecasted to grow by 1.4 times to 128.7 billion won. These impressive figures underscore the significant impact of smaller beauty brands like Beauty of Joseon and Skin1004, particularly their success in the U.S. market with products such as rice-derived sunscreens and watery essence-like formulations.
The rise of these companies contrasts with the performance of established Korean beauty giants such as LG H&H Co. and Amorepacific Corp. These traditional market leaders have faced challenges in China, with LG H&H and Amorepacific reporting operating profits down 31% and 42% respectively from the previous year.
Kolmar and Cosmax’s expansion strategies have been crucial in this growth trajectory. Kolmar, catering to brands like L’Oréal and The Estée Lauder Companies Inc., began diversifying its client base to include smaller brands about 20 years ago. Cosmax, ranking among the world’s top cosmetics ODMs by sales, added 119 small and mid-sized firms to its client roster last year, now serving approximately 1,300 companies.
This trend indicates a shift in the cosmetics industry, where smaller, niche brands are increasingly driving growth and innovation. The success of companies like Kolmar and Cosmax highlights the evolving landscape of the beauty market, where adaptability and responsiveness to emerging brands and trends are key to staying ahead.
