[Why&Next] Hidden Players of 'K-Beauty' Kolmar vs Cosmax... Overseas Subsidiaries as 'Dark Horses'

Cosmetics Drive SME Export Boom...
ODM Companies See Soaring Domestic Sales
China’s Economic Downturn Impacts Performance...
Kolmar and Cosmax Both Face Struggles
Cosmax’s U.S. Subsidiary Contracts...
Kolmar Hit by Trump Tariffs, Operating Loss in Canada

Korean indie brand cosmetics caused a sensation in the global market last year, quietly benefiting ODM (Original Design Manufacturing) companies involved in product development and production. These indie brands entrusted most of their export volumes to ODM companies. Korea’s top two ODM firms, Kolmar Korea and Cosmax, both surpassed annual sales of 2 trillion won last year, showing rapid growth in performance.

This year, with K-Beauty continuing to gain popularity worldwide, it is expected that the order volumes for ODM companies will increase further. However, the sluggish Chinese market amid the economic downturn and the continued poor performance of their U.S. local subsidiaries are likely to pose variables for these ODM companies’ performance this year.

Cosmetics Lead SME Exports... ODM Companies’ Domestic Sales Soar

According to the cosmetics industry on the 28th, Kolmar Korea and Cosmax, which both exceeded 2 trillion won in annual sales last year, earned most of their profits through their Korean subsidiaries. Kolmar Korea recorded sales of 2.452 trillion won last year, achieving 2 trillion won in sales for two consecutive years, with its Korean subsidiary’s sales increasing by 24% year-on-year to 1.0597 trillion won. Operating profit reached 195.5 billion won, up 44% from the previous year.

During the same period, Cosmax posted sales of 2.166 trillion won and operating profit of 175.4 billion won, growing 22% and 52%, respectively. Particularly, the Korean subsidiary, which reflects both domestic and export performance, saw sales surge 28% year-on-year to 1.3577 trillion won. Operating profit jumped about 60% to 138.7 billion won. A Cosmax official analyzed, “Our domestic indie brand clients performed well in the global market, increasing both domestic and export volumes significantly, enabling double-digit growth. The expansion of orders from top clients and the addition of smaller clients have strengthened the stability of our business structure.”

The performance of these ODM companies was driven by Korean small and medium-sized cosmetics companies (indie brands). As indie brand products made in Korea sold like wildfire overseas, ODM order volumes exploded.

According to the Ministry of SMEs and Startups’ “2024 SME Export Trends” data, last year, the export scale of small and medium-sized cosmetics companies reached $6.8 billion (9.736 trillion won, based on an exchange rate of 1,431.80 won), a 27.7% increase from the previous year ($5.32 billion). This was a record-high export amount, ranking first among all export items in terms of export scale. Notably, the growth rate of small and medium-sized cosmetics companies far outpaced the export growth rates of large and mid-sized companies.

The global interest in K-Beauty increased exports mainly to the U.S., Japan, Vietnam, and Hong Kong. In the U.S., $1.34 billion (1.9188 trillion won) worth of cosmetics were exported last year, a roughly 46% increase compared to the previous year. Exports to Japan ($750 million), Vietnam ($450 million), and Hong Kong ($400 million) also grew significantly. China ranked second after the U.S. with $1.07 billion in exports, but this was about a 5% decrease compared to the previous year.

Impact of China’s Economic Downturn... Kolmar and Cosmax Both Struggle

With cost-effective indie brand cosmetics exports increasing this year as well, ODM companies’ growth is expected to continue. However, it remains to be seen whether they will record the same significant sales growth as last year. While demand for “Made in Korea” cosmetics continues in the global market, overseas production plants remain stuck in a slump.

Looking at last year’s overseas subsidiary performance of Kolmar Korea and Cosmax, both struggled in China and the U.S. In China, orders from clients sharply declined due to the economic downturn. Kolmar Korea’s Wuxi subsidiary in China posted sales of 153.7 billion won last year, down 3% from 158.2 billion won the previous year. Operating profit plunged about 37% to 8 billion won.

Cosmax’s China subsidiary recorded sales of 574.3 billion won, growing only 4.9% year-on-year. This marked a significant slowdown from the 8% growth rate in 2023. China (Shanghai, Guangzhou) accounts for about 27% of Cosmax’s total sales, making it an important market. However, sales in Shanghai were 95.3 billion won with a net loss of 2.1 billion won, dragging down China sales.

China’s economic growth rate barely reached the 5% range last year. Even during the U.S.-China trade war, it maintained growth above 6%, but the Chinese economy, depressed since COVID-19, shows no signs of recovery.

Cosmax’s U.S. Subsidiary Shrinks... Kolmar Hit by Trump Tariffs, Operating Loss in Canada

Cosmax also struggled in the U.S. market. Sales fell 2% year-on-year due to decreased client orders and delayed revenue from new clients. While new product launches in Korea typically take 2-3 months from development to commercialization, U.S. clients have relatively longer product launch periods, so deferred sales are expected to be reflected in the first quarter of this year.

Kolmar Korea’s Canadian subsidiary showed the weakest performance, with sales of 39.5 billion won and an operating loss of 6.9 billion won. In Canada, the “onshore phenomenon,” where global brands relocate overseas production bases back to their home countries, has led to a significant drop in production volumes. It is analyzed that the reduction in orders produced in Canada, in preparation for tariff impacts even before Donald Trump’s presidency, affected sales. A cosmetics manufacturer official said, “As domestic small brands stand out, the domestic segment’s performance will drive overall growth. However, for total sales to increase significantly, overseas performance must follow.”

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