Amorepacific, LG H&H, and other major domestic K-beauty conglomerates are sharply increasing the share of advertising and promotion in recent sales, putting more weight behind marketing. As emerging K-beauty brands such as APR and d'Alba Global establish a winning formula by rapidly scaling overseas through social media (SNS), short-form content, and exposure on global platforms, large companies are also expanding related investment and focusing on strengthening consumer touchpoints. The industry says the axis of competition in the K-beauty market is shifting to online visibility and securing consumer response, and that big companies are actively absorbing indie brand-style marketing strategies.
According to the Financial Supervisory Service's Data Analysis, Retrieval and Transfer System (DART) on the 2nd, Amorepacific's advertising and promotion expenses in the first quarter of this year were 147.6 billion won, up 19.7% from a year earlier. During the same period, sales were 1.1358 trillion won, a 6.4% increase from 1.0675 trillion won a year earlier. With the growth rate of advertising and promotion outpacing the sales growth rate by three times, the ratio of advertising and promotion to sales rose 1.4 percentage points, from 11.6% in the first quarter last year to 13.0% in the first quarter this year.
LG H&H also spent 114.8 billion won on advertising and promotion in the first quarter of this year, up 11.7% from a year earlier. By contrast, sales during the same period fell 6.8% to 1.5766 trillion won from 1.6918 trillion won a year earlier. Even as sales declined, the company increased ad spending, lifting the ratio of advertising and promotion to sales by 1.2 percentage points, from 6.1% to 7.3%.
The backdrop for cosmetics giants increasing advertising and promotion is the new growth formula forged by indie beauty brands. In the past, Amorepacific and LG H&H generated steady sales in traditional channels such as department stores, duty-free shops, and door-to-door sales, centered on long-standing brands like Sulwhasoo, Hera, Laneige, The History of Whoo, and OHUI. But as the K-beauty market has diversified from a China focus to North America, Japan, and Southeast Asia, analysts say the need for marketing to newly imprint brands on overseas consumers has grown.
According to a report recently published by Samil PwC, the K-beauty market is shifting from a structure in which sales expanded after brand awareness was formed to one in which demand is first created through distribution channels and platforms. In the past, the main approach was to broaden the sales network based on brand awareness. Recently, however, products are first gaining consumer traction on TikTok, e-commerce, and global multi-brand platforms, then spreading to offline channels.
In practice, indie brands have actively used a "high marketing spend" strategy as a growth formula. APR's advertising and promotion expenses in the first quarter of this year were 116.7 billion won, a sharp 147.1% increase from a year earlier. During the same period, the ratio of advertising and promotion to sales also rose from 17.8% to 19.7%.
d'Alba Global also spent 22.9 billion won on advertising and promotion in the first quarter of this year, up 33.8% from the same period a year earlier. As sales during the same period increased 50.5%, from 113.8 billion won to 171.2 billion won, the ratio of advertising and promotion to sales edged down from 15.0% to 13.3%. However, d'Alba Global has continued aggressive marketing, spending about 23% of total sales on advertising and promotion over the past two years.
Large companies are also expanding online- and short-form-based marketing. Amorepacific ran a global campaign, "SHINE YOUR SCENE," in Nov. last year, fronted by the Mise-en-scène brand's "Perfect Serum." The approach involves TikTok challenges in the United States, Thailand, Indonesia, and elsewhere, backed by participation from influencers including the girl group aespa. LG H&H, for its part, is strengthening content collaborations with local creators on TikTok and Instagram, spurred by the recent Sephora entry of its brand Dr. Groot.
Shim Yang-gyu, a partner at Samil PwC, said, "In the recent K-beauty market landscape, product competitiveness and consumer response have become the key factors that determine performance, more so than brand awareness," and added, "It is no longer a structure relying on individual brands' overseas expansion; the industry has transformed into one that absorbs global demand around channels, with online and offline working complementarily."