Korean beauty giants Amorepacific and LG Household & Health Care reported disappointing second-quarter results during recent lockdowns in China.
Amorepacific released its second-quarter results on July 28, with overseas revenue of 297.2 billion won ($227 million), down 33.2% year-on-year and a net loss of 37.2 billion won ($28.6 million).
Revenue in Asia fell 39%, with sales in China accounting for more than 50% of sales in Asia, according to the earnings release. The news saw the share price drop 9.89%.
LG Household & Health Care also faced losses in China with sales down 7.9% year-on-year to 1.86 trillion won ($1.43 billion) and operating profit down. up 35.5% to 217 billion won ($165 million) in the second quarter of this year.
“Korean Limitation Order”
During the so-called “K wave”, Korean cosmetics exports to China increased by 41% per year on average between 2013 and 2018.
Kuaidaocaijing posted via WeChat on March 31 that Korean beauty brands lost popularity in China after Beijing warned Seoul about its July 2016 deployment of the THAAD missile defense system.
As a result of the THAAD dispute, China’s ruling Communists imposed a “Korean Limitation Order” which resulted in the banning of Korean dramas and the cancellation of cultural events, etc.
“This has been detrimental to Korean cosmetic companies,” the article said.
In 2018, The Face Shop exited China and closed more than 300 brick-and-mortar stores while Skin Food also pulled out of a number of department stores, according to the report.
In January, Innisfree closed 80% of its physical branches in China after its annual operating profit fell 90% in 2020. The brand will reduce the number of stores to around 140 from a peak of 600, according to media reports.
Hera withdrew from the Chinese market at the end of February, closing branches and suspending online sales.
In March, Etude House closed all of its offline stores in mainland China.
Export market used to threaten Korea
Commentator Tianming Lu blamed the Chinese Communist Party (CCP) for the decline of Korean cosmetics in China.
“Lockdowns have an impact, but they affect all brands, not just Koreans in particular. Also, there are still online sales even when physical stores are closed, but Korean cosmetics have been affected in all ways. sides while French cosmetics exports have seen a surge in China,” Tianming told The Epoch Times on July 31.
“In recent years, the CCP has sanctioned Korean companies and boycotted Korean products due to the THAAD dispute. Previously, Korean cosmetics had an excellent reputation and were widely accepted by Chinese consumers.
In July, China’s Foreign Ministry instructed the inaugurated Yoon administration to continue to follow a “three no’s” policy: no further deployment of THAAD, no involvement in the US missile defense system, and no formation of a trilateral military alliance with the United States and Japan. .
But South Korean Foreign Minister Park Jin said: “The policy of three noes is not something we promised China. As far as I know, (the government at the time) only explained it as its position towards China.
“(The three nos policy) is directly linked to our sovereignty, and it is up to us to make the decisions regarding our security. It would be hard to accept China telling us to keep the (three no’s) promise,” Park said.