SEOUL, Sept. 23 (Korea Bizwire) – South Korea’s small-scale cosmetics firms are targeting niche markets by launching made-to-order manufacturing for other firms, a way of expanding their businesses without the cost of having to develop their own brands and marketing them, industry officials said Friday.
K-beauty has caught on globally, allowing these companies to gain the trust of foreign cosmetics brands, the officials said. They are seeking business on an original equipment manufacturing (OEM) and original development manufacturing (ODM) basis, providing subparts for end products or making products according to ordered specifications.
“The manufacturing business is aimed at the overseas market rather than the domestic market,” an official said. “Latecomers in the industry cannot compete with the big names in brand power or marketing costs, so their preference has turned to the OEM and ODM business.”
Claire’s Korea, whose sales last year totaled 180 billion won (US$163.49 million), recently announced it’s going into the manufacturing business for its own brand and foreign ones at a factory operated by its affiliate Cos Nine.
“The local cosmetics market is growing big from good results overseas,” Kim Hyoung-tae, head of Cos Nine, said. “We are making contacts to get customers not only from the domestic market but from China and other parts of the world.”
Tony Moly has also jumped into the business through its affiliate Megacos. The firm is scheduled to complete construction of an OEM/ODM factory in Pinghu, Zhejiang Province of China, next year that can churn out 500 million products a year, providing complete service from start to end to cover planning, manufacturing and distribution.
Shinsegae International, the fashion and beauty firm connected to Shinsegae Department Store, formed a joint venture late last year with Italian cosmetics firm Intercos, and are together building a manufacturing plant that will go into operation as early as the start of next year. The factory will make products ordered by the Italian company.
Coreana’s subsidiary Biocos is already in the business. After opening a locally incorporated company in China early this year, it is looking at a wider Asian market to enlarge its OEM/ODM business.