LG Household & Health Care will beat AmorePacific soon in cosmetics sector
A clerk explains a product from LG Household & Health Care's luxury brand “The History of Whoo” to customers at a department store in Shanghai, China, in Jan. 2019. / Courtesy of LG Household & Health Care
By Kim Jae-heun
LG Household & Health Care has become a “serious competitor” with AmorePacific as a whopping sales increase of its signature products significantly helped it narrow the gap in sales here.
LG's two luxury cosmetics labels ― “The History of Whoo” and “SU:M37” ― were the “right contributors” in helping the LG affiliate continue its bullish run in Chinese sales, according to officials and analysts, Thursday.
Right after China's apparent retaliatory measure against South Korea banning Chinese tourist groups from visiting the country in 2016, the LG affiliate made a swift decision to keep its business momentum alive by beginning the sale of its products in Chinese department stores. In the third quarter of 2019, LG Household & Health Care's sales in China increased by 35 percent, year-on-year.
A source in the cosmetic industry said the company's focus was on how to appeal to customers with high purchasing power in China. Chinese President Xi Jinping's wife Peng Liyuan also bought Whoo items when she visited Seoul in July 2014. The Chinese first lady has reportedly been recommending Whoo cosmetics at social parties there since then.
LG Household & Health Care launched its popular high-end brand in China in 2006 as a follow-up to “Sulwhasoo,” another Korean luxury label by the country's No.1 cosmetics maker AmorePacific.
The brand opened shops in major department stores in Beijing and Shanghai to grow as a global firm and it owns 206 stores now. In 2018, it became the first Korean brand to reach sales over 2 trillion won ($16.8 billion). Last year it marked a new record, achieving annual sales over 2.58 trillion won.
LG Household & Health Care's total sales have already beat its rival AmorePacific, but LG's cosmetics sector only contributes to 57 percent of the firm's profits.
However, it seems it will only be a matter of time until LG Household & Health Care's cosmetics sector alone outperforms AmorePacific given the continued sales increase of its two flagship brands, officials and analysts said.
Whoo, in particular, saw a 208 percent sales growth during Singles' Day, or the Chinese version of America's Black Friday, last year compared to that in 2018. It now ranks fourth in the luxury cosmetics sales in China after Estee Lauder, Lancome and SK-II.
Heavy dependence on China is cited as the biggest challenging factor for the LG affiliate as rival AmorePacific is on track to expand its product lineups to the United States, Europe and countries in Southeast Asia.
Park Hyun-jin of DB Financial Investment said both LG Household & Health Care and AmorePacific will now need to come up with the next luxury brand to succeed Whoo and Sulwhasoo.
“It is hard to compare two brands directly in how much they are contributing to the success of their mother companies in the cosmetics sector. Luxury cosmetics lines are definitely the main businesses that contribute to both beauty firms' sales but they own different channels. What is important is that both LG Household & Health Care and AmorePacific need new luxury brands as growth engines,” Park said.