Aekyung Industrial’s K-beauty market share at risk amid potential sale

Aekyung Industrial's beauty product brand Luna hosts a pop-up store at MODI in Tokyo's Shibuya District, October 2024. Courtesy of Aekyung Industrial

Aekyung Industrial, once among Korea’s top three beauty product makers, is likely to be put up for sale.

Aekyung Industrial announced Thursday that Aekyung Group is considering selling its 63.38 percent stake in the company, currently held by its holding company, AK Holdings.

The country’s beauty product industry, currently dominated by Amorepacific, LG H&H and APR, is expected to see a shake-up if Aekyung Industrial finds a new owner. Depending on who buys the company, Aekyung could focus on either market expansion through brand renewal or raising profitability by downsizing brands.

Aekyung Industrial CEO Kim Sang-joon said Tuesday the sale is “one of the most feasible options the group has come up to improve its financial condition.”

The anticipated sale comes after the group experienced underperformance by its subsidiaries last year. Aekyung Industrial registered sales of 679 billion won ($463 million), a 1.5 percent increase from the previous year, but operating profit dropped by 24.4 percent to 46.8 billion won.

Department store AK Plaza posted sales of 295 billion won ($201 million), marking a decline from the previous year and remaining unprofitable for the fifth consecutive year. Aekyung Chemical reported an 8.4 percent drop in sales and a 66 percent decline in operating profit compared to the previous year. Meanwhile, Jeju Air saw a 12 percent increase in sales but experienced a 52.9 percent decrease in operating profit.

The subsidiaries’ performances worsened the group’s market liquidity. AK Holdings’ total debts last year were approximately 4 trillion won. The debt ratio by the end of last year was 328.7 percent, a steep rise from 233.9 percent in 2020.

Meanwhile, other beauty product makers are soaring.

APR, which dethroned Aekyung as one of Korea’s top three beauty product makers, recorded 723 billion won in sales last year, up 38 percent from the previous year, with an operating profit of 123 billion won, a 17.8 percent increase. Its foreign subsidiaries in 11 countries, including the United States, Malaysia and Japan, contributed to the overall sales growth.

Goodai Global acquired Tirtir last August, expanding the markets for small- and medium-size companies here.

Industry experts said Aekyung Industrial, with key beauty brands like Luna and AGE20’s, has been excessively reliant on its brick-and-mortar stores, home-shopping platforms and exports to China. They said the company failed to cater to young consumers who are more inclined to use e-commerce.

Experts said that if a Korean company acquires Aekyung Industrial, its marketing strategy will likely focus on expanding brands and increasing market share. However, if a foreign company or private equity fund takes over, the emphasis may shift toward boosting profitability through brand closures and organizational restructuring.