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Amore Pacific

Exporting Korean Beauty

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Exporting Korean Beauty

Source:Ming-Tang Huang

From Seoul's trendy Myeongdong shopping district to the vanity tables of Europe and America, the brands of South Korean cosmetics giant Amore Pacific are increasingly at home, as beauty becomes the latest Korean craze to sweep the globe.

Exporting Korean Beauty

By Hsiao-Wen Wang
From CommonWealth Magazine (vol. 448 )

In the Myeongdong pedestrian area the click clack of stiletto heels seems to be beating the rhythm of a city that never sleeps. Young, hip South Korean women wear high-heels and full make-up – eye shadow, mascara, foundation and lipstick.

Myeongdong, one of Seoul's main shopping districts, is popular with young people and tourists for its fashion and nightlife. It's the engine that drives the Korean craze that's presently sweeping across Asia and the rest of the world.

Inside Etude House, a store in cotton candy pink, Japanese girls rave over the "cute" cosmetics products on sale. The shopping baskets on their arms are filled with nail polish, compact powder, mascara and other decorative cosmetics. Diagonally opposite of Etude House, the Aritaum store woos Chinese customers with posters in Chinese that advertise discount promotions. As soon as she enters the shop, a hurried Chinese tourist bellows in Chinese to the Mandarin-speaking sales clerk, "Give me six jars of Laneige Water Sleeping Pack."

Behind this royaume of beauty is South Korean cosmetics company Amore Pacific. With a domestic market share of 35.1 percent and annual revenue of almost NT$49 billion, it is a big player in the beauty industry. In Myeongdong, every hundred meters shoppers are bound to happen upon a store selling one or several of Amore Pacific's many brands, which include Innisfree, Etude, Hera, Sulwhasoo, Laneige, and even O'Sulloc green tea from Jeju Island.

The skincare giant is taking Asia by storm, following in the footsteps of Korean TV dramas and South Korean pop stars. Amore Pacific is selling perfume in France and has thirty cosmetics outlets in the United States. Its skincare brand Laneige alone is sold at some 400 department store counters in Asia. Overseas sales account for 16 percent of Amore Pacific's total revenue.

"We bring the Korean brand to the world," says Yang Chang-Soo, executive vice president and chief marketing officer of Amore Pacific, letting his entrepreneurial sense of mission show through.

Beauty Is Good Business

In contrast to the service industry in Taiwan, Amore Pacific built a dense marketing network when South Korea was not yet an affluent country, to be prepared once the economy took off. "The rise of Amore Pacific mirrors the rise of the Korean cosmetics industry," observes Yang, who has worked for the company for 22 years. Even when pursuing beauty, the Koreans display a strong patriotic streak.

Amore Pacific began to hire housewives as door-to-door saleswomen directly after the Korean War, establishing direct marketing channels when the per-capita national income of South Korea stood at just US$67. Today Amore Pacific has more than 37,000 sales personnel. Many of the women who peddled cosmetics back then to support their families are silver-haired ladies today.

While the hardships during the Korean War and in its aftermath have left deep wrinkles in the faces of the war generation, the younger generation impresses with a lustrous, fair-skinned glow.

"Korean women wear full make-up – unlike Taiwanese women, who only put on make-up halfway, applying a little lipstick and calling it good enough," says Avon Cosmetics general manager Karen Wang, who is also in charge of the South Korean market. Wang observes that in South Korea beauty has become an important marker of social class affiliation. For university graduates, meeting people's beauty standards is a ticket to a good position in society. Some girls have plastic surgery in childhood, receiving facial bone contouring or having a tongue-tie surgically corrected, and go on to have rhinoplasty as adults. In South Korea the best gift parents can give their child when he or she enters university is not a motorbike or notebook computer, but plastic surgery.

Tapping the common obsession with beauty and stylish looks, Amore Pacific has created more than 20 skincare and beauty product lines for women of all ages and income ranges. There are inexpensive, medium-priced and high-end products for teenagers, mature women, and grandmothers too.

Thanks to a balanced distribution structure – 32 percent of products are sold via direct marketing, 17 percent in department stores, and 15 percent in specialized cosmetic stores - Amore Pacific has survived the economic downturn unscathed. Last year, the Aritaum chain, which exclusively sells Amore Pacific brands, bucked the recessionary trend with a 30-percent increase in sales. As a result, parent company Amore Pacific chalked up revenue growth of 15 percent.

People in Taiwan, where the high-tech industry dominates the stock market, are perplexed that a cosmetics company can be perceived as more lucrative than a consumer electronics giant. On the Korean stock market, Amore Pacific shares currently trade substantially higher than those of Samsung Electronics. Amore Pacific shares rank among investors' top choices alongside industrial conglomerates like Samsung, Hyundai and Posco.

Knowing Oneself

Unlike Taiwan, where once-popular Star brand eau de toilette has long been a nostalgia item and the cosmetics and skincare market is firmly dominated by Japanese brands, in South Korea Amore Pacific was able to stave off stiff competition from Japanese, European and American cosmetic products. In a "most respected company" survey by Korean Management Association Consulting (KMAC), Amore Pacific ranks higher than multinational P&G among companies in the personal care and beauty industry.

The company's secret to success is that it knows itself.

Yang recalls that he had strong doubts whether Amore Pacific could crack the market when it launched some of its brands in the United States six years ago. To everyone's surprise, American customers were more than willing to accept Korean cosmetics, because they were a novelty.

"The biggest lesson is that you can't just imitate Western cosmetic culture. You need to go back to who you really are," Yang concludes. This year Amore Pacific will launch its skincare line Sulwhasoo in the United States, banking on the fad for Asian aesthetics and beauty.

But while Amore Pacific has successfully turned its Asian heritage into a selling point, the company also devotes 3.5 percent of its revenue to R&D on new cosmetics formulas using ginseng extract, green tea and other herbal ingredients. Amore Pacific's research institute for Korean herbal medicine has already patented the use of lipid nanoparticles in cosmetics.

A bronze bust of Amore Pacific founder Sung-Hwan Suh keeps watch over the company headquarters. The company, in which members of the founder family still hold a 15-percent stake, is ready to seize the right to interpret what "Oriental beauty" embodies. Management has vowed to make it into the top ten of the world's cosmetic brands by 2015.

As it turns out, South Korean competitiveness is most astounding when it comes to the pursuit and interpretation of beauty.

Translated from the Chinese by Susanne Ganz


Amore Pacific at a Glance

Founded: 1945

2009 consolidated revenue: 1.77 trillion won

2009 consolidated net profit: 225.9 billion won; net profit margin 12.8%

Market position: South Korea's No. 1 brand cosmetics maker, brands include Innisfree, Etude House, Laneige, Sulwhasoo.

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