As the popularity of South Korean cosmetics continues to soar in the US, the world’s largest beauty market, personal care startups in the East Asian nation are experiencing a surge in dealmaking activity, according to a report by Bloomberg.
Seoul, which has long been a hub for beauty services, became the top exporter of cosmetics to the US last year, surpassing France, according to the US International Trade Commission. During the same period, South Korea’s total cosmetics exports reached a record $10.2bn, up from $7.5bn in 2020, according to the Korean Ministry of Food and Drug Safety.
This rapid growth has attracted major interest from global players, including L’Oréal SA and Archimed SAS, in South Korea’s personal care assets. The industry saw a record 18 transactions totaling KRW2.3tn ($1.6bn) in 2024. Despite the overall deal value trailing previous years, the high pace of activity has convinced at least one advisory firm that momentum will persist.
The boom in dealmaking is largely attributed to the global rise of K-culture, with the cosmetics sector benefiting alongside South Korea’s food and culinary industries. With K-pop and K-drama gaining global traction, brands have capitalised on product placements to promote everything from $22.99 balms to $2,350 LED face masks, primarily targeting the US market.
Notable transactions include Archimed’s acquisition of aesthetic skincare technology firm Jeisys Medical, a business promoted by Korean actress Lee Young Ae. Reports indicate that local private equity firm KL & Partners is exploring a takeover of Manyo Factory, the maker of a popular serum featured in the hit drama Crash Landing on You.
South Korean cosmetics brands now account for around 22% of foreign beauty products sold in the US and about 40% in Japan, according to Eun-jung Park, an analyst at Seoul-based Hana Securities.
COSRX, acquired by Amorepacific in October 2023, is expected to have generated nearly 60% of its revenue from the US and Europe, driven by the popularity of its snail essence, which is ranked as Amazon’s No. 1 facial serum.
The growing interest in Korean startups has prompted major players like MMP to scout for big deals this year, including the potential sale of Classys, a beauty-device and cosmetics manufacturer owned by Bain Capital. Bain purchased the company for approximately KRW670 billion in 2022.
Bain has a strong history of profitable exits in the Korean beauty sector, having sold stakes in botulinum toxin maker Hugel for $1.5bnin 2021 and cosmetics firm Carver Korea for $2.7bn.
The appeal of Korean products in the US is evident, with Tirtir’s foundation product, which garnered 61 million views in an African American-focused social media review, highlighting the strong demand for these brands.
Korean brands’ shift towards the US came amid a slowdown in Chinese consumption. Cosmetics startups have leveraged social media platforms like TikTok and Reddit to amplify their presence in the US, while also securing partnerships with major retailers like Costco Wholesale and Amazon.com.
A joint TikTok and Kantar report last year projected that global spending on Korean cultural products could nearly double to $143bn by 2030.
The optimistic outlook for South Korean cosmetics firms stands in stark contrast to the challenges faced by global brands such as Estée Lauder, which has forecast a decline in net sales for the current quarter, and Shiseido, which is grappling with weak demand in China.
South Korean personal care manufacturer Kolmar Korea is planning to open its second US plant to meet the growing demand in North America, while CJ Olive Young, South Korea’s answer to Sephora, is offering marketing advice to local startups looking to enter the US market. CJ is also set to launch its first US outlet following a 140% increase in sales to foreign travellers in 2024.
