AmorePacific, LG H&H struggle to lessen reliance on China

The Korea Times

The Korea Times

Business

Tue, September 26, 2023 | 04:12

Companies

AmorePacific, LG H&H struggle to lessen reliance on China

Posted : 2023-05-25 08:26

Updated : 2023-05-25 15:11

Foreign tourists look around at a duty free shop in downtown Seoul, April 15, 2022. Yonhap

By Kim Jae-heun

The country's top two cosmetics firms ― AmorePacific and LG Household & Health Care (LG H&H) ― are struggling to reduce their reliance on China as their sales in other regions including North America are not enough to offset falling sales in the world's second-largest economy, according to company officials Wednesday.

The two companies have been striving to spread out their global sales, which had been concentrated mainly in the Chinese market until 2021.

AmorePacific's sales in China had accounted for nearly 70 percent of its total revenue until 2021. The cosmetics giant's sales skyrocketed when the two countries had better relations. However, due to geopolitical issues and the COVID-19 pandemic, AmorePacific's sales in China plunged, leading it to start expanding its business in the U.S. so as to cut its reliance on China as of last year.

"AmorePacific is not choosing the U.S. market over China. The Chinese market is still important for us and all other cosmetics firms in the world," an AmorePacific official said. "China is the second-largest cosmetics market in the world after the U.S. and it has narrowed the gap very much recently. We are targeting both as well as other markets such as Japan and ASEAN."

AmorePacific's sales in the first quarter of this year reached 913.6 billion won ($693.1 million), down 21.6 percent year-on-year. Its operating profit also plunged 59.3 percent from 157.9 billion won to 64.3 billion won in the same period.

As the company's business deteriorated in China, its sales in Asia also fell 24.7 percent year-on-year to 275.2 billion won in the first quarter of this year. Its skyrocketing sales in North America, which soared 80.4 percent in the same period to 62.8 billion from 34.8 billion won, was not enough help.

The situation is no different for LG H&H.

LG H&H's sales between January and March increased year-on-year by 0.3 percent to 701.5 billion won from 699.6 billion won, but its operating profit decreased 11.6 percent to 61.2 billion won from 69 billion won.

The company's sales and operating profit in China declined by 17.4 percent and 11.6 percent, respectively.

"The answer is to focus on making cosmetics brands that global consumers patronize, regardless of political issues or economic slumps. We will strengthen our business competitiveness in the U.S., Japan and Southeast Asia while continuing to improve our performance in China," an LG H&H official said.

jhkim@koreatimes.co.kr