This report addresses the market for finished cosmetic products in Korea. The current “well-being” trend has led to increased opportunities for sophisticated cosmetics from the United States and other countries. Korean market demand in 2011 is estimated to be at about US$6.3 billion and is expected to grow by approximately 10 percent annually over the next three years. According to the statistics of the Korea Pharmaceutical Traders Association (KPTA) and the Korea Cosmetic Association (KCA), the total market demand for cosmetics in 2010 was US$5.6 billion. Of this, imported cosmetics accounted for US$851 million, or 15 percent of market demand. The European Union was the largest source of imports, followed by the U.S and Japan. Under Korea’s Cosmetics Act, foreign cosmetics are subject to “premarket approval” or “pre-market notification”. Foreign suppliers must submit documentation required by the Korea Food & Drug Administration (KFDA) through their importers or subsidiaries based in Korea. The documentation is submitted to the KFDA or the Korea Pharmaceutical Traders Association (KPTA) to obtain pre-market licenses to enter into the Korean market.
The U.S.–Korea Free Trade Agreement (KORUS FTA) was ratified in the US and in Korea in late 2011 and is expected to be implemented in early 2012. Once the FTA has been implemented, tariffs on imported cosmetics will phase out over 10 years.
Since early 2000, Korean women have become more receptive to Western products, especially in regards to foreign health and beauty items. As more Korean women enter the labor force and experience rising incomes, they have become avid users of imported cosmetics. As Koreans tend to be more health-conscious and are following the ‘well-being’ trend, they prefer natural and ‘green’ cosmetics. In particular, demand for functional cosmetics has been increasing rapidly in recent years. These include products which help whiten the skin tone, minimize the appearance of lines in the face and body, protect the skin from UVA and UVB rays, stop hair loss, and so forth.
Korean men are also becoming significant consumers of cosmetics, providing opportunities for cosmetics companies that feature men’s lines (e.g. skincare products, including after shave balm). As the Korean cosmetics market continues to be polarized, with products either focused on the premium end or on the lower-priced, mass-market end, two distinct groups of consumers are becoming target audiences: those shopping at low-cost cosmetics franchise stores and those shopping for very expensive and luxurious cosmetics at department stores.
The U.S.- Korea Free Trade Agreement (KORUS FTA) ratified in by both nations recently will bring further advantages to U.S. exporters upon implementation, as Korean tariffs on imported U.S. cosmetics are eliminated over three to ten years. These market trends portend good opportunities for U.S. companies in the years ahead.
In 2010, the Korean market for cosmetics was US$5.6 billion, approximately a 15 percent increase over 2009. Industry sources forecast that local production will be increasing and the total market will grow around 10 percent annually over the next several years.
Currently, local production meets the majority of the demand for cosmetic products. Approximately 85 percent of the total market is supplied by Korean production, while imports that provide variety and have perceived high-quality capture the remaining 15 percent. However, although Korean production exceeds imports greatly in total sales, premium cosmetics still depend on imports. According to statistics from the Korea Cosmetic Industry Institute (KCII), leading segments among imported cosmetics were skincare products, perfumes, and some make-up products. The United States was the second largest source of imports after the EU, accounting for 26.5 percent of the market and a value of US$226 million in 2010.
Best Sales Prospects
_ Natural cosmetics (e.g., eco skincare products)
_ Functional cosmetics for both woman and men (e.g., anti-aging skincare products)
_ Hair care cosmetics with special functions (e.g., to protect against hair loss)
_ Body care products (current market is small, but growing, e.g., body lotion)
As of 2010, the Korea Food and Drug Administration had licensed 773 firms as manufacturers (including OEM manufacturers) and 1,105 firms as importers of cosmetics, according to the statistics of the Korea Cosmetic Association. Among them, approximately 50 Korean manufacturers and fewer than 50 importers are active, according to industry sources.
Two Korean companies, Amore Pacific and LG Household & Healthcare, dominate the Korean cosmetics market with approximately 50% market share, followed by Estee Lauder (U.S.) and L’Oreal (France).