Hello, readers. The year 2020, which began with such hope, is filled with chaos following the outbreak of the coronavirus disease (COVID-19). I hope all my fellow colleagues are staying healthy and spending enjoyable time while still being safe.
The theme of this year’s column is exactly what we all think of every day, K-beauty.
Although I’ve been writing as an in-house columnist for the past 2 years, I’ve written about an area I’m interested in more than others, so it was not so much of a burden. But there are many experts on K-beauty within and outside of our company that,tobe honest, discussing this topic with you is a bit overwhelming. The column will discuss K-beauty’s calmly taken journey, the history of the past 70 years or so, and the challenges we face in order to take the next step into tomorrow.  The topics will range from a changing commerce and channel environment, a social shift towards mobile, aspects and characteristics of the beauty industry to challenges brought on by changes in the global environment and demographics. Before getting into the details, let’s look at the background.

 ‘Feeling great patriotism (or, ‘guk-ppong’, a Korean compound word meaning being intoxicated with nationalism).’ This expression is used among young people these days as a joke. It can be used in the context of when Korea started in the marginal position of an area, not at the center or the origin of the field, and suddenly finds itself in the central position. Examples may include; when BTS (Bangtan Boys) performed their new single 'ON' inside the Grand Central Terminal of New York; when Korea practically now dominates the global memory semiconductor market with Samsung Electronics taking up 43% and SK hynix accounting for 27% of market share; when Son Heungmin (Tottenham) took the home of football by surprise with his ‘70m-sprintwonder goal’ against Burnley December last year; or when Director Bong Joonho’s Parasite swept the Palme d'Or and Oscar Best Picture. K-beauty can be considered among the ranks of these examples. And there stands at the center, Amorepacific, whichbegan as ‘Pacific Chemical’ ¹⁾ and of course, the cushion, which opened a new chapter in the history of global beauty.

 We can think of different places as being the home of cosmetics for different reasons, but the start of the modern cosmetics began in Europe. The steam engine revolution during the First Industrial Revolution led to an exponential increase in productivity in the 1900s. The results were accumulated capital and city laborers, which then led to the invention of capitalists and the middle class. Markets were expanded due to increased purchasing power, which was something exclusive to the upperclass likeroyal families or aristocrats in the past. And in Paris, makeup products much more expensive than the daily pay of workers were sold, signaling the beginning of the modern cosmetics market. Cosmetics were sold in Korea, too, even during the Japanese colonial rule as Japanese companies started building factories in Korea. In this sense, the home of the ‘modern cosmetics’ is Europe. In fact, there are many things that began in the West made available due to mass production enabled bythe IndustrialRevolution, whether they are cars or planes.

 Since Korea’s liberation from Japan in 1945, many cosmetics companies appeared in the country. Korea was a country with GNI per capita of USD85 and a fledgling nation with no foundation for manufacturing or distribution. It was no different fromacountry somewhere far away we sometimes hear about in the news where it just gained independence and continues to struggle with civil wars. Among the several cosmetics companies that appeared during these times, there was also one named ‘PacificChemical’ ¹⁾ . Western style cosmetics came into South Korea along with the American forces and while demand decreased during the war, many were more interested in beauty and men’s demand for pomade continued. Products made in Korea around that time mostly used mineral oil like Vaseline or paraffin and were not of the quality of imported products. There was a gap with imported goods that used plant-derived oil with application of a more advanced technology. Pacific Chemical was the first company in Korea to develop a plant-derived pomade in 1951 and the name of the product was ‘ABC Pomade’. It used high-end fragrance and castor oil.

1) Business began before 1945, while the official date of establishment is September 5, 1945

 Korea is a typical export-led economy. Exports account for 37.5% of GDP and according to the most recent data, Korea was the sixth largest exporter as of 2018. The country may be a large exporter, but its cosmetics industry told a different story. According to the Ministry of Food and Drug Safety, it was only in 2012 when Korea’s cosmetics turned from a chronic trade deficit item to a trade surplus item for the first time. And according to the Korea Customs Service, 2014 was when the cosmetics category recorded a trade surplus for the first time, recording USD 486million in surplus. There are several factors that involve products and method of sales that contributed to Korea moving from a non-core country to a core country in the cosmetics industry. However, the factor that contributed dramatically to this shift would be the birth of a new product category called the cushion foundation. The cushion, which began from the idea of ‘developing a sunscreen product that will supplement theexisting makeupand can be reapplied easily whenever and wherever’, was developed by Amorepacific. And this was a game-changing moment for Korea, which was only a small part of the global beauty industry. Sales contributed by the development of thecushion and itsjourney amounted to KRW 200billion in 2015 in terms of actual output.

 Any AP member would know the story, but the cushion was inspired by the parking stamp idea. It placed the liquid form foundation in a compact. The core technology involved in the cushion foundation is allowing for a consistent touch up of lightandeven application and the key is having the formula applied evenly from the moment the puff touches the sponge. To develop the first-generation cushion item, Amorepacific tested the various elements of sponge, i.e. material, hardness, thicknessand poresize, for more than 3,600 times.

 The birth of the cushion foundation is more than just an increase in or contribution to sales. Before, the norm was that products flew across the world from the West, the home of cosmetics. And product categories were your basic products likeskintoner, lotion, essence, and cream, and your makeup products like sunblock, foundation, and makeup base. The cushion created a new genre of makeup and had an impact on global beauty brands. The success story of the cushion was more than just asuccessstory of one company – it led to the birth of a completely new category for the first time in global beauty history since Cleopatra. It was a new case of singularity (originality), not just ‘doing better than others’. Many Korean manufacturers achieved No. 1 in the world in different areas, for example, in smartphones, memory semiconductors, shipbuilding industry, chemical industry, and oil refining. But there weren’t a lot of cases where Korea became a leader in terms of concept design ²⁾ defined in the book The Path of Accumulation as the core technology based on the Industrial Revolution that began in the Western world. The cushion foundation, however, was an industrial achievement Korea gained based on a concept design inanindustry that could be considered as luxury goods.

 According to Euromonitor, K-beauty grew into the 9th largest market following the US, China, Japan, Brazil, Germany, the UK, France, and India. Its total exports grew by 60 times to USD 6.2billion in 2018 against 2000. It also accounts for 6.5%of total trade balance with a high employment level of 360,000 people working in the industry.

2) Easily put, concept design refers to proposing a new product or service. Many of the companies currently in leading positions in the global market rose to their status by presenting a concept that didn’t exist before. One obvious example is Apple’ssmartphone. Concept design is directly linked to revenue. Apple taking up 79% of operating profits of the world’s smartphone market was possible because it was the pioneer that created a completely new market. - The Path of Accumulation (축적의 길), Lee Jeongdong, Knomad

 The export growth of K-beauty peaked at 55.2% in 2015 and started to decline, recording 43.6% in 2016, 18.3% in 2017, 26.7% in 2018, and 3.6% in 2019 (according to import-export trade statistics by the Korea Customs Service). It is now time to reignite the growth engine with another innovation or concept design to the growth momentum of K-beauty achieved through the innovation and creation of the new cushion category.

 The reason I started this column about K-beauty is to discuss and retrace the footsteps of our industry within the economy we live in and think about the current challenges we face. In this monthly column throughout this year, I’d like to ask for advice or hold short interviews with fellow readers who know the most about beauty in Korea to collect data and check reference. My next column will discuss the story behind the development of the cushion or the various challenges ahead that we must overcome such as changes in channel, millennials perspective of beauty, beauty industry’s response to ecommerce and digital transformation, competition in China and changes in trends. I look forward to sharing many stories with you throughout this year.