The Korean cosmetics market is experiencing an increase in sophisticated cosmetics sourced from the United States and other countries. The Korean cosmetics market is estimated to be worth US$6.3 billion in 2011 and is forecast to expand by approximately 10 percent each year over the next three years. According to the Korea Pharmaceutical Traders Association (KPTA) and Korea Cosmetic Association (KCA), the total market for cosmetics in Korea was valued at US$5.6 billion in 2010 with imported cosmetics accounting for US$851 million or 15 percent of market demand. The largest importer of cosmetics into Korea was the European Union followed by the United States and then Japan.

Foreign suppliers of cosmetics products in Korea are subject to premarket approval or pre-market notification whereby suppliers must submit documentation required by the Korea Food & Drug Administration (KFDA) through their importers or subsidiaries based in Korea. The documentation is submitted to the KFDA or the Korea Pharmaceutical Traders Association (KPTA) to obtain pre-market licenses to enter into the Korean market. In early 2012, the United States and Korea are expected to implement a Free Trade Agreement (KORUS FTA) which was ratified by the two countries late 2011. Once this Free Trade Agreement has been implemented, tariffs on imported cosmetics will phase out over a period of 10 years.

Market Demand

Since 2000, women in Korea have been become more receptive to Western products, especially in regards to foreign health and beauty products. More Korean women are entering the labour force and in association with this, are experiencing rising incomes and are using more imported cosmetics. The demand for functional cosmetics has increased rapidly in recent years. Products which help whiten the skin tone, minimise the appearance of lines in the body and face, protect the skin from UVA and UVB rays, stop hair loss are all seeing increased sales recently.

Korean men are also becoming significant consumers of cosmetics providing opportunities for cosmetics companies that feature men focused product lines. The cosmetics products in Korea are polarised either focused on the premium end of lower-priced, mass market end. Consumers are placed in two distinct groups; either purchasing low-cost cosmetics from franchise stores or very expensive items from department stores.

Market Trends

The Korean cosmetics market reported a 15 percent increase in 2009 to total US$5.6 billion in 2010. This growth market is forecast to continue expanding at approximately 10 percent annually over the next few years. Approximately, 85 percent of the market is supplied by Korean production with the remaining 15 percent being sourced overseas. Overseas cosmetics products are perceived to be of high-quality.

According to the Korea Cosmetic Industry Institute (KCII), the leading cosmetics market segments are skincare products, perfumes and some make-up products. The United States is the largest source of imports after the European Union accounting for 26.5% of the market and a value of US$226 million in 2010.

Key Suppliers

In 2010, a total of 773 firms were licensed to the Korea Food and Drug Administration which included OEM manufacturers. A total of 1,105 firms were listed as importers of cosmetics according to the statistics of the Korea Cosmetic Association. Out of these companies listed, it is estimated that 50 Korean manufacturers and fewer than 50 importers are active in the cosmetics market. Amore Pacific and LG Household & Healthcare dominate the Korean cosmetics market attaining a 50% market share in total. The next largest cosmetics companies in Korea are Estee Lauder (US) and L'Oreal (France).