Korea's cosmetics brands expanding foothold in Thailand
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By Kim Jae-kyoung
SINGAPORE _ At a time of uncertainty in the global environment, a growing number of Korean companies are looking to develop new markets in Southeast Asia.
Their moves came as Chinese economy is losing growth momentum and United States President Donald Trump is employing an America first policy on trade scaring away key trading partners.
In particular, with China’s restrictions on K-pop and K-drama over Seoul’s decision to deploy an advanced U.S. missile defense system, Korea’s consumer goods manufacturers are speeding up their forays into ASEAN markets.
Among them, Thailand is considered one of the attractive markets for Korean players both in its economic size and geographical location.
With GDP of $409.7 billion and population of 68.98 million, Thailand is ASEAN’s second-largest economy behind Indonesia. The middle class has been on the steady rise, accounting for 25.6 percent of its total population.
Thailand is a production hub of automobiles and electronics goods in the region. It takes up around 50 percent of automobile production in Southeast Asia.
In August, POSCO opened an automotive steel plate plant in Thailand with annual production capacity of 450,000 tons. It will provide plates for automakers, such as Toyota and Ford, operating there.
In addition, the country is the epicenter of popularity of hallyu or the Korean Wave in the region, with K-pop and K-drama continuing to gain popularity among Thai people.
Capitalizing on the popularity of hallyu, more and more Korean food companies and cosmetics manufacturers, such as AmorePacific, are exapanding foothold in Thailand.
Exports of food, cosmetics and clothing to Thailand have posted an annual average growth of 10.6 percent from 2013 to 2015, which is in stark contrast to the fact that overall exports to Thailand declined 6 percent during the same period.
Korea’s leading cosmetics conglomerate AmorePacific is trying to strengthen its foothold in Thailand and other neighboring countries. It recently opened a research and innovation laboratory in Singapore.
With the new facility, the company aims to expand its presence in the high-end cosmetics market in Thailand, Singapore and Malaysia
In order to turn the popularity of hallyu into business opportunities, the Korean government has joined hands with the private sector to host a series of events to promote Korean brands, particularly high-end consumer goods.
It plans to host the K-Beauty Expo Bangkok, Korea’s cosmetics trade show, in September to promote the country’s beauty brands in Thailand. The event will invite buyers from 10 ASEAN countries to hold one on one matching export consultation.
KOTRA, Korea's trade-investment promotion agency, plans to host the Hallyu Exhibition in Bangkok in the second half of the year by inviting over 60 Korean consumer goods manufacturers from various areas.
“Taking advantage of hallyu’s popularity, Korean players should focus more on the rising middle class to strengthen their foothold in high-end consumer markets, such as cosmetics and food,” KOTRA said in its 2017 strategy report.
“Also, they have to join hands with large e-commerce companies to capitalize on the rapid growth of Thailand’s online market,” it added.
Korean players will also have to seek ways to form a business alliance with Thai companies to enter other ASEAN markets because the establishment of the AEC requires large-scale construction of transportation and electric power facilities.
“With the launch of the AEC, Korean firms need to use Thailand as a bridgehead to enter other ASEAN countries using the country’s geographical advantage,” KOTRA said.
Thailand itself will also offer a huge opportunity for Korean builders and manufacturers as the government plans to expand infrastructure in the coming years in order to bolster its economy.
Based on its long-term state investment plan, the country will invest a total of $70 billion in four infrastructure sectors by 2022.
Also, the country plans to build new energy facilities able to generate 57,459 megawatts by 2036 as part of its effort to renew its energy infrastructure.
According to BMI research, the nation’s construction sector is forecast to post an annual average growth of over 3 percent between 2017 and 2020.