K-Beauty Companies Struggle with Raw Material Supply Disruptions... Ministry of SMEs and Startups "Mobilizing All Available Measures"

The Ministry of SMEs and Startups and the Ministry of Food and Drug Safety visited domestic cosmetics companies that are struggling due to the Middle East war to assess the extent of the damage.

Hansung Sook, Minister of SMEs and Startups, attended the 'K-Beauty Companies Meeting Related to the Middle East War' held at Audin Futures in Chungju, North Chungcheong Province on the 13th to listen to difficulties (left: Eoyeogung, Commissioner of the Ministry of Food and Drug Safety, right: Hansung Sook, Minister of SMEs and Startups).

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On the 13th, the Ministry of SMEs and Startups announced that it visited Audin Futures, a company specializing in the manufacturing and sales of cosmetics, and held a meeting with executives from K-Beauty related companies.

K-Beauty has been experiencing a global boom, breaking its own export records every year. However, as the Middle East war drags on, difficulties for the industry have intensified, and comprehensive support measures have become essential.

Hansung Sook, Minister of SMEs and Startups, who presided over the meeting, expressed her gratitude to the business leaders who have played a key role in the global growth of K-Beauty despite major adverse events, including last year's U.S. tariff policies and the ongoing crisis in the Middle East. She then listened to the current status of the damage and the challenges faced on the ground.

Most companies cited supply disruptions and rising prices for raw materials and packaging materials caused by the Middle East war as their biggest challenges. Suppliers of raw materials and containers explained that their production is directly affected, while cosmetics ODM companies reported difficulties in delivering to client companies on time due to delayed supplies of containers and other items.

Logistics disruptions were also highlighted as a significant problem. Soaring logistics costs and shipping delays are negatively affecting both the import of raw materials and the export of cosmetics. There are concerns that if the situation is prolonged further, it could significantly undermine the global competitiveness of K-Beauty.

Minister Hansung Sook stated, "We are mobilizing all available government policy tools, including designating naphtha as a crisis item, monitoring whether increased raw material costs are reflected in supply prices, and extending deadlines for policy fund maturities and corporate tax payments." She added, "To ease the logistics burden on affected small and medium-sized enterprises and support export diversification, we have secured an additional budget of 100 billion won for export vouchers and 250 billion won for emergency management stabilization funds, which passed the National Assembly plenary session last Friday. We will swiftly execute these funds to help SMEs overcome the crisis."

Oh Yookyung, Commissioner of the Ministry of Food and Drug Safety, also said, "In light of the difficulties in sourcing packaging materials, we have allowed the use of alternative packaging with sticker labels for required markings for six months." She added, "To support the cosmetics industry's overseas expansion, we are providing domestic and international licensing information, global raw material regulatory updates, and offering online regulatory education by country, among various other support programs."

On-site, a business agreement ceremony was also held to strengthen support for the global expansion of small and medium-sized enterprises among the Ministry of SMEs and Startups, the Ministry of Food and Drug Safety, the Export-Import Bank of Korea, and Korea Technology Finance Corporation. Going forward, these institutions will jointly promote increased financial support and investment for exporting companies, as well as assistance in resolving export-related challenges.

The export volume of cosmetics by domestic small and medium-sized enterprises increased from USD 4.47 billion in 2022 to USD 8.32 billion last year. As of February this year, exports reached approximately USD 1.4 billion, already surpassing the amount recorded in the same period last year.

The contribution of domestic SMEs is also rising. The share of SMEs in K-Beauty exports grew from 56.2% in 2022 to 72.8% last year.

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