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A tectonic shift in the cosmetics industry... The end of the Big 2 and the beginning of the era of indie brands

'23 cosmetics report card has been released. The cosmetics industry was shaken as the monopoly structure of the existing Big 2 collapsed and new indie brands that stood out in domestic and export markets emerged. 

According to the '23-year production, import, and export performance' announced by the Ministry of Food and Drug Safety on the 20th, the number of companies reporting production performance was 11,861, increasing by 17% even after exceeding 10,000 last year, increasing the overall pie. The number of produced items also slightly increased to 128,000. The size of individual companies also expanded, and the number of companies with production exceeding KRW 100 billion increased from 7 ('22) to 12 ('23). For reference, the number of companies with a production amount of more than KRW 1 billion was confirmed to be 773, and the number of companies with a production amount of less than KRW 1 billion was confirmed to be 11,088.

In the corporate rankings, LG Household & Health Care Co., Ltd. was ahead of Amore Pacific Co., Ltd., which ranked first in 2022, by 200 billion won. The Big 2's market share fell from 61.6% ('21) → 50.9% ('22) → 46.4% ('23), giving leadership to emerging indie brands. 

COSRX, which was acquired by Amore Pacific, entered the top 12 groups for the first time with KRW 158.4 billion and ranked 6th. Likewise, iFamily SC Co., Ltd. also ranked 11th with 110.4 billion won. Instead, two companies, including GP Club Co., Ltd. and Have & Be Co., Ltd., were eliminated. 

Distribution powerhouse CJ Olive Young Co., Ltd. and manufacturing powerhouse Cosmax Co., Ltd. ranked 7th and 8th with KRW 137.7 billion and KRW 116.4 billion, respectively. 

The tectonic shift in the industry can be sensed in the fact that the production amount of the top 10 companies and the production amount of the top 10 items decreased by 4.0% (KRW 24.9 billion) and 3.4% (KRW 401.1 billion), respectively, compared to last year. 

The market share of the top 10 companies is 69.3% ('21) → 59.5% ('22) → 55.5% ('23), and the production share of the top 10 products is 15.6% ('21) → 9.7% ('22) → 6.3%. ('23), showing a steady decline. 

The product with the No. 1 production performance in 2023 was Sulwhasoo Jasoo (Amore Pacific), with KRW 120.7 billion. The top 10 items showed a distribution of Amore Pacific 4 vs. LG Household & Health Care 6, but sales decreased significantly. It appears that Sulwhasoo and Whoo alone are struggling to boost sales of the Big 2. 

The number of cosmetics operators was 31,524 responsible sales companies (+12.5%) and 4,567 manufacturers (+0.4%) . The increase in responsible sales companies symbolizes the dynamism of the cosmetics industry, but its small scale is pointed out as a challenge. Nevertheless, cosmetics are the number one export item for small and medium-sized enterprises and have a significant effect on national wealth and job creation. In fact, it is difficult to talk about the growth of cosmetics exports in countries such as Europe, the United States, and Japan, where large companies have been unable to surpass the growth of indie brands for decades. 

▲ In 2023, cosmetics exports were ranked 4th in the world, and the trade balance was in surplus of $7.1 billion, contributing to the creation of national wealth.

Meanwhile, cosmetics exports in 2023 showed “a decrease in China and an increase in the United States, Europe, and Japan, and the export amount remained 4th in the world at $8.5 billion (+6.4%) .” Imports were $1.3 billion (-1.5%), and the trade balance was $7.1 billion (KRW 9,332.3 billion). The analysis is that export recovery is clear and the trend of diversification has become clear. 

First, China (USD 2.78 billion, -23.1%) maintained the top exporting country, but exports continued to decline. Instead, the United States (USD 1.21 billion, +44.7%) and Japan (USD 800 million, +7.5%) followed, and exports to the top 20 countries accounted for 90.3% of total cosmetics exports. Export countries expanded to 165 countries. Export performance by continent is △ Asia (USD 5.8 billion, -5.5%), △ North America (USD 1.3 billion, +44.0%) △ Europe (USD 1.1 billion, +49.7%), △ Middle East (USD 160 million, +39.9%) ), △ Oceania (USD 0.8 billion, +39.2%), and △ Central and South America (USD 0.5 billion, +28.7%). 

Cosmetic production performance amounted to KRW 14.5102 trillion (+6.8%), an increase of KRW 1 trillion from the previous year. This was largely due to the base effect and the increase in exports of indie brands in emerging markets. The production amount (proportion) by category is ▲ Basic cosmetics (KRW 7.9455 trillion, 54.8%) ▲ Color cosmetics (KRW 2.1328 trillion, 14.7%) ▲ Body cleansing (KRW 1.8902 trillion, 13%) ▲ Hair cosmetics (KRW 1.8902 trillion, 13%) There was an overall increase, including 1.5467 trillion won (10.7%). 

Color cosmetics showed the largest production increase (+28.2%, +468.9 billion won), mainly lip products. It showed good performance, ranking second in production amount after basic cosmetics. Among color cosmetics, lipstick and lip gloss production increased by 60%. [(22) 409.3 billion won → (23) 654 billion won]

The production amount of products for body cleansing increased by 3.9% (+71.8 billion won) compared to 2022 as the use of foam cleansers and cosmetic soaps to remove makeup increased due to the increase in makeup. [Production amount of foam cleanser and toilet soap among body cleansing products: (22 years) KRW 618.7 billion → (23 years) KRW 690.5 billion]

Production of eye makeup products such as eye shadow and hair dye products increased by 9.9% (+31.4 billion won) and 11.2% (+33.4 billion won), respectively, compared to 2022 with the start of full-fledged external activities. [Eye shadow production among eye makeup products: KRW 137.2 billion in 2022 → KRW 165.3 billion in 2023]

The production amount of functional cosmetics was KRW 5,439.1 billion (+18.2%), accounting for 37.5% of the total production amount . Looking at the production amount and proportion by product, the order was △ multifunctional (+453.5 billion won, +24.2%) △ wrinkle improvement (+325.9 billion won, +27.8%) △ sunscreen products (+81.1 billion won, +19.3%). Multifunctionality continues to increase in line with consumer demand for using various functions at once and technological advancements. [(20 years) 1,756 billion won → (21 years) 1,847.5 billion won → (22 years) 1,877.8 billion won → (23 years) 2,331.3 billion won ]

The Ministry of Food and Drug Safety announced that it is actively promoting regulatory diplomacy with major exporting countries such as the United States and China to help domestic cosmetics advance overseas. In addition, he explained that in line with the diversification of export countries, seminars are being held to provide customized information to quickly identify overseas regulatory trends in various countries. 

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