Beauty contest: China make-up brands rein in South Korea rivals

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SEOUL/SHANGHAI(Reuters) – As a diplomatic spat between Beijing and Seoul raged this yr, many South Koreans felt decidedly unwelcome in China. South Korean companies had been shunned, Okay-pop live shows had been canceled and vacationer commerce dried up.

A lady walks previous the window show of a beauty at a shopping center in Shanghai, China December 1, 2017. REUTERS/Aly Track

However one group of South Koreans have been very a lot in demand: the executives and workers of South Korea’s cosmetics firms, who’re being lured by Chinese language rivals as a battle for China’s big magnificence market heats up.

Chinese language make-up manufacturers together with Jala, Proya (603605.SS) and Suhu – which have lengthy trailed Korean rivals by way of high quality – are hiring South Korean executives in addition to spending up on analysis and shopping for abroad corporations, trade executives and headhunters say.

The strikes appear to be serving to.

Chinese language manufacturers, which compete with Korea names from top-rated Amorepacific (002790.KS) to nimble funds makers comparable to Clio (237880.KQ), are gaining market share within the mid-range and premium cosmetics sector the place South Korea has historically had energy in China.

Whereas Chinese language firms have been gaining floor for a while, the development seems to have accelerated this yr after Seoul’s choice to put in a U.S. anti-missile system in opposition to Beijing’s needs sparked a backlash in opposition to Korean firms.

At stake is a much bigger chunk of China’s $50.2 billion magnificence and private care market, which analysis agency Euromonitor tasks will develop to $61.9 billion by 2020.

Jason Yu, Shanghai-based Basic Supervisor of market analysis agency Kantar Worldpanel, mentioned mid-tier or “masstige” Korean manufacturers had been most uncovered to Chinese language manufacturers enhancing their providing. Excessive-end manufacturers from France’s L‘Oreal (OREP.PA) and Japan’s Shiseido (4911.T) tended to draw wealthier consumers.

“When it comes to the value place, they are going to be extra in direct competitors with the rising Chinese language manufacturers who’re transferring up the value ladder,” mentioned Yu, including Chinese language corporations had been “catching up very quick”.

HIRING SPREE

There are indicators that latest diplomatic tensions have performed into the palms of native Chinese language manufacturers of their battle with Korean rivals.

Amorepacific’s gross sales fell eight p.c within the January to September interval from a yr earlier, whereas working revenue skidded 30 p.c. Smaller, funds makers had been hit tougher, with Clio’s working revenue falling almost 70 p.c.

Whereas some Chinese language make-up manufacturers use South Korean stars or spotlight Korean hyperlinks, others are enjoying up Chinese language parts comparable to utilizing conventional medication substances or use slogans about suiting Chinese language pores and skin.

Zoe Zhuang, 24, an engineer in Nanjing, mentioned she used to make use of cushion foundations and eye pencils from South Korea’s Etude model. She now makes use of extra Chinese language to “assist native manufacturers”, she mentioned, with out referring to the dispute over the THAAD missile system.

Folks stroll previous the window show of a beauty at a shopping center in Shanghai, China December 1, 2017. REUTERS/Aly Track

“I really don’t suppose Chinese language make-up is that good but, there’s loads of room for enchancment,” she mentioned.

Chinese language cosmetics corporations have been making an attempt to shut the standard hole by aggressively concentrating on South Korean executives.

“(Chinese language cosmetics manufacturers) are recruiting Koreans in nearly all areas, together with model managers, packaging design, retailer interiors, buying and advertising and marketing,” Choi Solar-hee, head of South Korean recruiting agency HR Biz Korea, instructed Reuters.

Some Chinese language manufacturers are keen to supply 50 p.c greater wages, assist with rents and flights residence to woo Korean employees, Choi added.

Guangzhou-based Suhu plans to double the variety of its South Korean workers to 40, Choi mentioned. It just lately employed an government from Korea’s Nature Republic to supervise the latest launch of its Rojank model, he added. Suhu declined to remark.

Folks stroll previous an promoting billboard for a beauty in Shanghai, China December 1, 2017. REUTERS/Aly Track

Chinese language model Proya, which owns the Uzero and Cats & Roses manufacturers, employed South Korean Kim Hoi-joon from Clio in 2014 to launch its Hapsode model, Kim instructed Reuters.

One other former Amorepacific official mentioned Kim had lured him to Proya final yr with a wage hike of about 50 p.c. He mentioned he was considered one of over 10 Korean workers employed by Proya.

Proya declined to remark.

In the meantime, Jala, considered one of China’s main cosmetics corporations, employed a Korean government earlier this yr to revamp its mainstay Chando model, two folks conversant in the matter instructed Reuters.

Jala additionally employed the previous head of Amorepacific’s Etude model, Kim Dong-young, they added. Kim, reached by telephone, confirmed he had been working at Jala for a few yr, however declined to remark additional.

Jala’s press workplace was not obtainable for remark.

The method shouldn’t be restricted to cosmetics. Chinese language corporations from carmakers to flatscreen producers to smartphone distributors have just lately opened up extra to hiring international expertise to assist them acquire a aggressive edge, usually taking market share from South Korean rivals as they transfer up the worth chain and their industries mature.

However Korean manufacturers aren’t taking place with no combat.

Amorepacific mentioned it was working with specialists in seven Chinese language cities to review native pores and skin traits and develop merchandise for the native market.

“It isn’t that we aren’t fearful about Chinese language competitors,” Rho Jee-hye, an Amorepacific senior vice chairman instructed Reuters. “As there’s Estee Lauder (EL.N) in america, L‘Oreal in France and Amorepacific in Korea, an progressive Chinese language firm may emerge.”

Reporting by Hyunjoo Jin in SEOUL and Adam Jourdan in SHANGHAI; Further reporting by Joyce Lee in SEOUL, Enhancing by Soyoung Kim and Lincoln Feast

Our Requirements:The Thomson Reuters Belief Rules.



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