LG Saenggeon and Amore Struggle Amid China Lockdown Measures... Accelerate Growth in North American Market

Q2 Sales and Operating Profit Decline This Year
Impact of Heavy Dependence on Chinese Market
Seeking Market Diversification in North America and Europe

[Asia Economy Reporter Moon Hyewon] LG Household & Health Care and Amorepacific, the two giants of the domestic cosmetics industry, both posted poor results in the second quarter of this year due to renewed COVID-19 lockdown measures in China. Their dependence on the Chinese market accounts for over 50% of their sales, but local consumer sentiment has weakened, and the number of Daigou (Chinese personal shoppers) entering Korea has decreased, leading to sluggish performance even in duty-free channels. However, as they are seeking countermeasures such as reducing dependence on China and expanding their presence in overseas markets like North America and Europe, there is potential for improved performance in the second half of the year.

According to the cosmetics industry on the 29th, LG Household & Health Care recorded sales of 1.8627 trillion KRW in the second quarter of this year, down 7.9% from the same period last year, and operating profit fell 35.5% to 216.6 billion KRW. Net profit also decreased by 44.3% to 126 billion KRW.

Amorepacific’s second-quarter sales also dropped 21.3% year-on-year to 1.0264 trillion KRW, and operating profit turned to a loss of 10.9 billion KRW.

The biggest cause of the deficit is China. Overseas sales in the second quarter fell 33.2% to 297.2 billion KRW, and operating loss turned to a deficit of 42.5 billion KRW. Amorepacific explained that stores such as Innisfree were closed one after another, and duty-free store sales in Hainan Province, where Chinese sales are concentrated, plummeted. Domestic business sales in the second quarter (627.8 billion KRW) also decreased by 15.4% compared to the same period last year, which is analyzed to be influenced by sluggish duty-free channels due to the lockdown in China.

As the impact on the Chinese market continues, both companies are rushing to diversify their markets to North America, Europe, and other regions. The North American market holds a very large share of the global beauty market. Although the proportion of total sales from these markets is still small for both companies, they are gradually showing meaningful results in the U.S. market as well.

LG Household & Health Care has been increasing its presence by acquiring the U.S. cosmetics company New Avon in 2019, followed by acquisitions of Physiogel, Arctic Fox, and The Cr?me Shop. A representative from LG Household & Health Care said, "Although the Chinese market will remain difficult in the second half of the year, we will strengthen the premium line of the ‘Whoo’ brand and diversify channels centered on the companies we acquired to target the North American market."

In the case of Amorepacific, sales in the North American market, where Laneige and Sulwhasoo have expanded their brand power following the first quarter, increased sharply by 66%, continuing a steep growth trend. In particular, Laneige raised its recognition among local customers by sponsoring BTS’s U.S. concert last year and recently attracted industry attention by launching the Water Bank campaign in collaboration with Sydney Sweeney.

This content was produced with the assistance of AI translation services.