LG H&H replaced its chief executive officer (CEO) with an outside hire on the 29th, two months earlier than its regular executive appointment schedule. The new CEO is President Lee Sun-joo, 55, who has built a career of more than 30 years in the cosmetics industry at L'Oréal, Mediheal, and AHC. It is the first time in 20 years that LG H&H has tapped an outside professional executive as CEO since recruiting former Vice Chairman Cha Suk-yong in 2005. In the industry, there is analysis that LG H&H is seeking to refresh the mood through a "one-point personnel change."
According to related industries on the 30th, LG H&H will replace its CEO after an extraordinary shareholders meeting and a board meeting in Nov. The company, which operates cosmetics, household goods, and beverage businesses, has been suffering weak earnings, with its core cosmetics business posting a loss in the second quarter for the first time in 20 years. Its share price, which was in the 1.6 million won range in Dec. 2020, fell to 286,000 won at the close that day. Its market capitalization has become smaller than that of the new beauty-tech corporations APR. In response, the company is carrying out management efficiency measures, including pushing to sell Haitai htb (formerly Haitai Beverage).
LG H&H's second-quarter operating profit on a consolidation basis this year was 54.8 billion won, down 65% from a year earlier. During the same period, sales fell 8.8% to 1.6049 trillion won. In particular, cosmetics sales, the mainstay, fell 19%, and the company swung to an operating loss of 16.3 billion won. It has been 20 years and six months since the cosmetics institutional sector posted a loss, last seen in the fourth quarter of 2004.
Industry analysis says "structural limitations" held it back, with 35% of cosmetics sales tied to traditional channels such as duty free and door-to-door sales, and 80% of China-bound sales concentrated in The History of Whoo brand. LG H&H pushed into China with The History of Whoo at the forefront, but demand has declined as preference for luxury beauty products waned after COVID-19 and China's domestic market contracted.
While Amorepacific, which also had high dependence on the Chinese market, responded by reducing sales outlets and the number of brands in China and lowering its China dependence to the 20% range, LG H&H's share of sales from China remained 45% last year, indicating it failed to find growth drivers in other regions in the view of the industry.
Accordingly, LG H&H, which declared a restructuring of its cosmetics business in the third quarter of this year, recruited President Lee Sun-joo, who has extensive global brand experience, and gave full authority over the restructuring. Lee began in public relations and corporate communications at L'Oréal Korea, grew Kiehl's Korea into the No. 2 country by global sales, and served as senior vice president of international business development at headquarters. She also served as president of the global strategy division at L&P Cosmetic and as head of Carver Korea, a subsidiary of Unilever, handling overseas expansion for Mediheal and AHC. Last year, she also took the helm as CEO of Terarosa Coffee.
An LG H&H official said, "Based on diverse global experience at L'Oréal and a keen marketing sense, she is the right person to lead cosmetics business innovation and global market rebalancing."
The core of the cosmetics business restructuring is to secure growth drivers in non-China markets and strengthen brand competitiveness. Previously, LG H&H sought to improve its brand portfolio by targeting a North American expansion through acquiring the U.S. cosmetics brand "Avon" (2019), securing Asia and North America business rights for "Physiogel" (2020), securing global business rights for "U:zimall" (2020), and making an equity investment in "The Crème Shop" (2022). However, the industry evaluates these as missteps far removed from the global beauty demand expansion trend for K-beauty brands.
In particular, there is criticism that there is no next-generation brand to succeed The History of Whoo. The History of Whoo grew large enough to surpass 2 trillion won in sales in 2018, but its growth was limited to Greater China. "Belif and CNP" are gaining traction in North America and Japan, and the K-beauty brand "Hince," over which it acquired management control in 2023, is receiving a response in Japan, but the impact on results is minimal. Accordingly, there is analysis that it needs to secure a wider range of globally oriented brands through mergers and acquisitions (M&A) of K-beauty brands.
Whether the beauty device brand "LG Pra.L," acquired from LG Electronics, can generate synergy with the cosmetics business is also of interest. While APR's "Medicube," launched in 2021, became an industry leader by inducing repeat purchases of cosmetics used in tandem with beauty devices, LG Pra.L, launched in 2017, is widely assessed to have limited growth because it sold beauty devices from the perspective of home appliances.
Improving profitability in the household goods and beverage businesses, where growth has slowed, is also a task. LG H&H, which has launched a restructuring of its beverage business, is considering selling its subsidiary Haitai htb, which manufactures "Bong Bong" and "Cocopalm."
Industry assessments are conservative. A person in the retail industry said, "It feels like the timing for renewal was missed," adding, "The recent cosmetics market requires a high-level branding strategy, not the sales approaches of the past. It is expected to take considerable time to improve the fundamental structure of corporations."
Jung Ji-yoon, an analyst at NH Investment & Securities, said, "A meaningful rebound in the share price is likely when improvements in profitability in the household goods and beverage institutional sector after the first quarter next year and the results of channel reorganization in the cosmetics institutional sector are confirmed."