Substantial Decrease of AMORE PACIFIC's Performance in 2022 H1
- Chaileedo Press
- Jul 30, 2022
- 3 min read
Abstract: On July 28, AMORE PACIFIC announced that its sales volume in the first half of 2022 was US$1.623 billion, a year-on-year decrease of 14.9%, and its operating profit was US$0.123 billion, a year-on-year decrease of 46.9%.
According to CHAILEEDO, AMORE PACIFIC recently disclosed its performance for the first half of 2022. Due to the lockdown of major cities in China to stop the spread of Covid-19, AMORE PACIFIC’s overall performance declined as a result of poor performance in the second quarter. Operating profit in the first half of the year fell by 46.9% year-on-year.
In January this year, Innisfree, a subsidiary of AMORE PACIFIC, was reported to have“lots of shops closed”in the Chinese market. There were more than 600 stores closed, with over 80% ofshopswereshutdown. In February, HERA, another Korean makeup brand under AMORE PACIFIC, announced that it has closed offline counters in China successively and planned to close its online WeChat store in mid-March this year. According to the financial report of AMORE PACIFIC, the revenue of Hera’s offline stores dropped by 29.4% in 2021. At the same time, AMORE PACIFIC raised the prices of its products after a large-scale closure of its makeup brand Innisfree.
In addition, the epidemic blockade and the strong occupation of European and American brands in the Chinese market are a big blow to AMORE. In recent years, the market share of Korean skin care products is not large in China, and the European and American skin care products have occupied the main market of China's skincare products industry. According to the Tmall list, the top five sales rankings of 618 beauty stores in 2022 are L'Oreal, Estee Lauder, Lancome, OLAY, and ULIKE. Korean brands are not even shown in the top 20 list. At present, South Korean companies that mainly occupy the Chinese skincare market are LG Group and AMORE PACIFIC. However, compared with European and American skincare companies such as L'Oreal, Estee Lauder, and Procter & Gamble, there is still a certain gap.
It seems that in the mid-to-low-end market, the rise of Chinese beauty brands has also affected the performance of LG Group and AMORE PACIFIC. In the past, Korean beauty brands dominated the mid-end market, and consumers generally believed that Korean brands were higher-end than local brands while the quality was often more affordable than imported products from Japan, Europe, or the United States. For example, Chinese cosmetic brands such as Huaxizi adn Perfect Diary were all unveiled around 2018. Through the fast product updates and low prices, they became famous among the post-95-generation consumers. The Domestic Product Insight Report shows that Chinese brands occupy 56% of the market share, and 42% of consumers are more willing to choose Chinese beauty brands. In addition, 90% of consumers who have purchased Chinese brand cosmetics said they would buy them in the future. According to Magic Mirror data, from May 26 to June 10 on Tmall, domestic skin care brands ranked 5th, 7th, and 10th in sales, with year-on-year growth of 121%, 36%, and 166% respectively; domestic make-up brands ranked respectively 3rd, 6th and 9th in sales.
The dilemma faced by AMORE PACIFIC is also something that a considerable number of overseas companies need to face. The vital problem behind the decline of beauty brands is that whether the brands are "expensive" or "cheap", Korean brands or European and American niche brands, those beauty brands that long-term rely too much on marketing, ignore functionality, devoid of good brands stories and lack of updates cannot survive this round of market reshuffle. The Chinese market just responds faster to new changes.
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