Executive takes Korea's cosmetics expertise overseas

Cosmax Chairman Lee Kyung-soo smiles as he sprays mist made by the company in his office in Pangyo, Gyeonggi Province. / Korea Times photo by Choi Won-suk

Executive takes Korea’s cosmetics expertise overseas

By Kim Ji-soo

Had his family been better off, Lee Kyung-soo, the tall 69-year-old chairman of Cosmax, said he would have majored in liberal arts or art in college.

“I’ve always liked drawing and writing,” Lee said as he showed his photo album titled “Love Story.” Containing photos he took with his cellphone, and accompanied by writings that are a “love story” to his wife, the album is also about his love of nature and people.

Sitting in front of a pine tree painting by the Korean painter Do Seong-wook in his office in Pangyo, Gyeonggi Province, Lee looks more like a scientist than an artist. But having a long conversation with the Seoul National University’s College of Medicine graduate, or reading about his firm’s growth path, one can glean that his success is a mix of willful fight against odds, and meticulousness. And luck. In just 20 years or so, Lee helms the nation’s No. 1 cosmetics “original design manufacturer (ODM)” and the world’s No. 3 in terms of market sales in 2014. His goal? To be No. 1 by 2017.

Cosmax’s factory in China / Courtesy of Cosmax

After several careers at corporations, Lee aptly seized on cosmetics ODM business in the early 1990s. Back then, the only Korean ODM company, which develops and produces beauty products for other companies following their specifications, was Kolmar. It was years before K-beauty, or Korean cosmetics, became the rage in China and Asia.

Cosmax has grown where it has some 300 companies it supplies, including several L’Oreal affiliate companies such as Shu Uemura, Yves Saint Laurent, Lancome and even well-known Korean brands Tony Moly, Banila Co. and Missha.

The year 2015 was good for Cosmax. In 2015, it performed very well, posting 533.3 billion won in sales, a 37-percent increase over the previous year and the company’s ninth consecutive year-on-year sales increase. It also posted an operating profit of 35.9 billion won, a 25.5-percent year-on-year increase.

This year, it hopes to lock in its sales from a U.S. factory it purchased in 2013.

A range of ODM products which Cosmax supplies to its customers.

“We introduced our products last year to 90 U.S. firms, 40 percent of whom so far have said they will work with us,” Lee said in an interview with The Korea Times in his office at Pangyo Inno Valley. Cosmax acquired and absorbed the factory’s workers, and in the process, integrated the Korean and U.S. organizational cultures. Lee said the timing was good for Cosmax, as the U.S. cosmetics industry does not have a clear leader because of a slowdown in manufacturing in the past decade. “An annual 100 billion won in sales in the U.S. market, the biggest market at present, along with the strong China market, the largest potential market, will heighten our competitiveness,” Lee said. The Chinese cosmetics market posted 200 billion won in sales. Since the executive and his company, which continues to produce innovative products, have the experience, know-how and technology, one might wonder why he doesn’t establish his own cosmetics brand.

Is Lee looking to found his own brand at some point?

“No.” Lee said.

Like a lot of people in his generation, his poor family background led him to a major that he had hoped would land him a stable job. But he did not enjoy his major, and feeling restless, he volunteered to fight in the Vietnam War. Then he flunked the national exam to become a pharmacist. His salaried worker career went smoothly. After entering Dong-A pharmaceuticals in sales, he then worked as a copywriter at Korean advertising and marketing communication agency Oricom for a few years. Then he joined another Korean pharmaceutical company Daewoong, rising to director-general. He excelled as a corporate man.

“I knew marketing was all about people; forming trust between them,” said Lee. His aides said Lee is precise in work. Even as he spends about half of the year traveling, Lee does not have a secretary and manages his own schedule, according to Glenn Seo, Cosmax’s public relations and investor relations team manager.

Lee however found corporate life bit empty, and in 1992 he founds the ODM firm, initially in a partnership with Japanese firm Milott.

He needed technology, and found it in the Japanese partner, also a cosmetics ODM company. In a partnership, Lee set up Korea Milott in 1992. However, it fell apart when Lee hired a chief researcher in Seoul. Japan Milott opined the technology it provided to Lee’s company was sufficient, while Lee was convinced he needed to focus on research to grow the company as an ODM. The partnership fell apart, and the company was renamed Cosmax.

“That was when I learned that a contract means a partnership between two parties who trust and who can contribute to each other,” Lee said. Trust seemed to be something he valued highly, as he used the word throughout the interview.

“We worked until we found a solution, a fundamental solution,” Lee said. “We had to survive.”

The fundamental solution was research and innovation.

A big breakthrough for Cosmax was the global recognition for its powder makeup technology, which passed L’Oreal’s high standards and was also supplied to Shu Uemura for its eye shadow in 2004. Cosmax also manufactures gel eyeliners, which were a massive hit.

Another strategically “lucky” but the long-planned move was Cosmax entering the Chinese market in the early 2000s, when people in China still did not use much cosmetics.

“I remember one Japanese businessman voicing concerns about the Chinese market back then,” Lee said. But Lee saw an opportunity in those no-makeup faces, and studied how to enter the Chinese market where global ODM companies were already in but not manufacturing for global cosmetics companies. Since its first factory in Shanghai, Cosmax China has been posting an annual 40 percent growth in sales. The popularity of Korean pop culture in China also helped firms like Cosmax.

Lee also quelled Korean manufacturers’ concerns that the economic slowdown in China or its moves to impose nontariff barriers on Korean cosmetics would impact the K-beauty sector.

“There are still special taxes levied on cosmetics products in China, but they will disappear,” Lee said, just like when income in Korea was low and tax was imposed on cosmetics, which were considered luxury goods at the time. “The existence of entry barriers means that the industry within the barriers is worth knocking on; that is how I see it,” Lee said.

“We have to remember that Korea’s relative competitiveness is still high,” Lee said.

His firm has advanced to the health supplement industry by purchasing firms such as Iljin Pharmaceuticals, which it renamed Cosmax Bio, in 2012 and Nutribiotech in 2014.

What will be Cosmax’s future? Cosmetics, dietary supplements or medicine?

“Beauty means eating right and applying the right stuff. (In the future,) there won’t be borders between cosmetics, health supplements or medicine, so we are becoming a general health and beauty product manufacturer,” he said.

His two sons work with him. Lee Byeong-man works as marketing executive director at Cosmax China, and Lee Byeong-joo work as finance director in Cosmax USA.

Asked if he likes winning, Lee smiled and said “I am good at go, cards and in particular, the Korean card game go-stop. I think I like playing,” he said.