In South Korea, coronavirus has slowed K-beauty’s billionaire boom

Social distancing and remote work have lessened demand for make-up and led to store closures

Travel restrictions have also cut off the flow of big-spending Chinese tourists and individual merchants who buy tax-free goods

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A customer looks at various products at the Korea Beauty and Cosmetic Expo in Goyang, north of Seoul. Photo: AFP

Published: 9:00am, 29 Dec 2020Updated: 9:00am, 29 Dec 2020

Three years ago, Suh Kyung-bae was the second-richest person in South Korea. Today he’s barely top 10, a stark reversal in a K-beauty boom known for minting billionaires, not breaking them.

Suh’s US$3.6 billion fortune – down from roughly US$8 billion in 2017 – is largely comprised of shares in his family’s cosmetics conglomerate, Amorepacific Group, which have fallen more than 40 per cent from a mid-January high. The parent of brands like Innisfree, Laniege and Sulwhasoo, Amorepacific was struggling even before Covid-19, and the pandemic has ushered in a series of lifestyle changes that have made cosmetics less central to women’s daily routines.

That’s brought a halt to the wealth created by the rapid rise in popularity of Korean beauty products and the deal-making frenzy that followed. From 2010 to 2014, foreign companies spent at least US$215 million to acquire cosmetics firms there, according to a September report by Samjong KPMG. In the five years that followed, the country became the world’s fourth-largest exporter of beauty products, and the deal volume ballooned to US$5 billion, not including transactions for undisclosed sums.

Estee Lauder made Have & Be, widely known for its Dr. Jart+ line, its first acquisition of an Asian beauty brand in November 2019. That deal, worth US$1.1 billion, turned founder ChinWook Lee into a billionaire. Goldman Sachs bought a minority stake in GP Club, best known for face masks, making founder Kim Jung-woong one of the country’s richest people. Unilever, L’Oreal and other multinational companies also got stakes in Korean cosmetics firms, creating massive windfalls for their founders.

But the pandemic has taken a double hit on K-beauty. Social distancing and remote work have lessened demand for make-up and led to store closures. Beauty retail sales in the US, the No. 3 market for Korean exports, will be down more than 7 per cent in 2020, according to market research firm Mintel.

For Korea, coronavirus travel restrictions have also cut off the flow of big-spending Chinese tourists and individual merchants who buy tax-free goods in bulk and sell them back home. Meanwhile, China’s customers have more access to global brands and are increasingly interested in products made locally.