Lately, you can't read any sort of beauty related publication without reading some article about Korea, Korea, Korea. Yes, Korean beauty is hot...but why exactly?
From a consumer standpoint, Korean beauty offers the following: 1) interesting and new products 2) terrific packaging 3) great price points and value.
From an industry standpoint, Korean beauty offers the key to innovation and growth.
In a previous life, having worked in brand management at Kraft Foods , I realized that there aren't *that* many levers you can pull to achieve topline revenue growth. Basically, if revenue growth is a function of price and quantity (P x Q = $) you can do one or all of the following to increase sales volume:
1) Increase price
2) Expand and increase distribution (sell in more places, open new stores, get your product into new markets, etc)
3) Increase velocity (increase the frequency with which your product is purchased, ie, from once a month to twice a month)
4) Innovate new products
The last point is why people in the beauty industry are paying so much attention to Korea. As has been noted in many other places, Korea innovates products at what seems like light years ahead of other places. A variety of factors contribute to this, like, population density, the cultural pressure to always look good, the historic importance of having perfect skin to be associated with the nobility, higher R&D dollars invested in innovation, and super demanding (super demanding) consumers.
But I personally think Korean beauty innovation is so interesting because they basically create and invent entirely new beauty categories that contribute to growing the entire pie of the beauty world.
As mentioned in my previous post, BB Creams were first launched in Korea in 2006 and when it became a "thing" it made its way to US shores in 2011. Upon their arrival in this market, sales were very strong and anecdotally I heard that some of the first BB Creams by L'Oreal and Estee Lauder were so popular companies faced stock outs upon launch. With this kind of popularity it's not surprising that the "other face makeup" category to which BB creams belonged really drove a lot of incremental growth as this Euromonitor blog mentions. During 2007-2012, BB Creams helped drive a 12% CAGR compared to 3.4% for foundation/concealer over the same period. So interesting!.
Sheet masks are another beauty category that was created by the clever Koreans and showing red hot growth. The facial mask category in the US is +60% yoy ending June 2014 which helped drive 2% increases in overall facial skincare sales, according to this report by NPD. And this is still a relatively new trend so we'll see how the numbers look in a year or two.
Next up is the cushion compact which Amore Pacific launched through their IOPE brand in 2008. It's in the makeup bag of what seems like every girl in Seoul and finally made its way to the US via Lancome's Miracle Cushion which just recently debuted as part of their Spring 2015 launch. It'll be interesting to see how these perform and whether we see the kind of growth that we did with BB creams and sheet masks. I personally love mine and think it's a must-have item for every makeup bag out there.
Given all these hits from Korea, I guess the question that everyone is asking is, what's next? Anyone out there have a good guess or hypothesis? If so, please share!