Shared factories fuel K-beauty growth

Global brands struggle to match the industry's development speed.

South Korea's original design manufacturing ecosystem is helping independent K-beauty brands compete with bigger multinational beauty companies by shortening product development cycles.

"Established brands cannot close that gap by simply moving faster; the system needs to change," Shin Thant Aung, a strategy consultant and founder of Sagasia Consulting Ltd., told Retail Asia.

He said Korean indie brands move quickly because several labels share the same factories and research and development, letting them develop and launch products within months.

He added that multinational companies are unlikely to replicate that speed across their entire portfolios because they rely on scale for profits.

“It is more realistic to run two tracks: Keep the big, proven products where the money is made, and build a smaller, faster local line through shared manufacturing, with regional teams given the authority to launch without waiting on headquarters,” he said.

Aung said established brands still have the edge in quality and safety across multiple markets. “Combining that trust with faster, local launches is how they need to compete on both fronts,” he added.

Korean cosmetics exports rose 19% year on year in the first quarter before accelerating to 24% in May, Shikhara Investment Management LP said in a July white paper, citing Morgan Stanley Research data.

Europe posted the strongest growth at 71% in the first quarter and 83% in May, whilst shipments to the US rose 40% and 32%, respectively.

Shikhara attributed the growth to independent beauty brands supported by South Korea's original design manufacturing ecosystem.

It cited Cosmecca Korea Co., Ltd. as an example of a manufacturer producing products for multiple brands, helping shorten development timelines and respond more quickly to changing demand.

Amna Abbas, a senior consultant at Euromonitor International Ltd., said K-beauty brands are expanding globally through South Korea's mature original design manufacturing ecosystem, digital marketing, and products that deliver visible results.

LF Beauty Holding Ltd., better known as Meiyume, also identified rapid innovation as a key driver of K-beauty growth in a May report.

It said barrier-repair skincare, vegan formulations, advanced textures, and precision makeup applicators are driving innovation amongst Korean brands.

Abbas said brands are responding more quickly to trends in skincare, dermocosmetics, and ingredient-led beauty, whilst leveraging e-commerce, social commerce, influencer partnerships, and retail tie-ups to expand beyond Asia.

Consumer preferences continue to vary by market. Meiyume said UK consumers favor efficacy-focused skincare, US shoppers prefer convenient, multifunctional products, whilst Indonesian consumers are increasingly seeking biotechnology-inspired skincare and high-performance haircare.

McKinsey & Company, Inc. in a June report projected the global beauty market to grow 5% annually through 2030, with Southeast and Central Asia amongst the fastest-growing regions.

Consumers are placing greater emphasis on product performance over price, benefiting brands that deliver visible results and clinical credibility, it added.