Three Japanese and Korean Beauty Rebuilt Brands in Q1

After experiencing the impact of general environment in recent years, Japanese and Korean brands are seeking to "innovate".

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Recently, CHAILEEDO found that in the first quarter of 2023, three well-known Japanese and Korean beauty brands, Innisfree, AHC and Freeplus, have updated their brand positioning. It may indicate that Japanese and Korean brands are finding their correct positioning and gaining growth.

In March 2023, Innisfree announced the launch of a new brand logo. In response to this logo update, the official head of Innisfree publicly stated, "Innisfree will continue to meet new challenges with vigour and lead the way to create a global naturalistic beauty brand."

(Left: before Right: now)

Another Korean beauty brand, AHC, also changed its brand positioning in the start of 2023. Its slogan is "From the hospital, one bottle for renewal". And its customer is targeted at women aged 18-34, aiming to add a hospital-grade care experience to the products.

Freeplus at Kao Group has also renewed its brand logo in 2023. The brand strategy is streamlining skincare routine. Following the launch of the Clean Beauty skincare concept for the Chinese market at the 2022 China International Import Expo, the Kao Group and Freeplus said that in 2023, the audience for Freeplus will mainly be Generation Z.

Once “in the ascendant”

All three brands were performing well.

Innisfree was one of the first Korean cosmetics brands to enter China. It expanded the single-brand shop model in the Chinese market and once become the "No. 1 beauty single-brand shop in China". CHAILEEDO found that in 2015 and 2016, when it was popular, Innisfree performance grew rapidly, with annual net profit increasing by more than 50%. Since 2017, Innisfree performance began to gradually decline. In 2021, for the first time, there was negative net profit growth. It is worth noting that in 2022, Innisfree results began to turn around with net profit reaching $24.8 million.

The above-mentioned Freeplus, which also had a respectable performance before the epidemic. Kao was specifically mentioned in the 2018 financial report released as driving growth in Asia to 36.6% in overseas markets outside of Japan due to the popularity of Freeplus.

In this year, there was news that Freeplus' beauty collection shops in Japan were being significantly liquidated and discounted. Some users even questioned whether Freeplus was facing discontinuation in Japan. The head of Freeplus said that the brand's sales strategy deployment for the global market had been adjusted due to the impact of the pandemic in recent years, as well as changing consumer shopping habits.

AHC, which was acquired by Unilever for €2.27 billion ($2.5 billion) in 2017, was also responsible for the performance of AHC, formerly part of Carver Korea, a subsidiary of Bain Capital and Goldman Sachs. It achieved sales of €321 million ($355 million) and pre-tax financial profit of €137 million ($151.5 millioin) in 2016. According to Unilever, AHC contributed 91.5% of the group's results.

Japanese and Korean brands VS Chinese brands

In the last two years, Chinese brands with the same advantages as Korean makeup such as good looking, high cost performance and fast product updates have sprung up. As one import brand agent said, with local Chinese brands making explosive products, the freshness and core competitiveness of Korean makeup brands become missing and consumers' demand for Korean makeup also starts to decrease a lot.

The price of specific products, for example, Korean makeup such as the above-mentioned products Innisfree Green set was sold at the price of 194.4 yuan ($28.4)/set in its flagship shop on Taobao. The same positioning of CHANDO Super Nutrient Set is sold for 236 yuan ($34) / set onwards. The price gap is not large.

Plus, after THAAD, the market share of Korean cosmetics in China has been decreasing year by year. According to public data, in the first five years of 2017, the annual average export rate of Korean beauty products in China exceeded 60%. In 2014, China became the largest cosmetic exporter of Korea. While in 2018, Korean cosmetics exports to China fell to 20%, and only 14% by 2019.

Japanese cosmetics also have the same problems as Korean cosmetics. There are more and more cleansers with the same efficacy at the same price point in the Chinese market as Freeplus amino acid cleanser. For example, Zhiben Soothing Cleanser was sold at the price of 55 yuan ($8)/120g, which is cheaper than the Freeplus amino acid cleanser, which is priced at 68 yuan ($10)/100g.

At the 2022 (5th) China Cosmetic Trends Conference held by CHAILEEDO, Xie Yong, Chairman of Beijing Dr Plant Biotechnology Co Ltd, said, "Innisfree was once particularly brilliant. After THAAD, it was a huge hit to them. While the fall in Japanese and Korean cosmetics was taken up by Chinese cosmetics companies.Both parties have similar target audiences and share the same philosophy of oriental skincare."

In fact, Chinese beauty products are also gaining a degree of recognition from local consumers. According to Tencent's Chinese Beauty Insight Report, "Chinese makeup brands already account for 56% of the market share. In terms of consumers' willingness to buy, 42% of consumers prefer Chinese beauty brands, and 90% of consumers say they will buy Chinese beauty products again in the future."

In China, "brands need to try to regain consumers"

After all the difficulties in the past, three brands made the "coincidental" renewal of the brand positioning.

CHAILEEDO noticed that all three brands have expressed the importance they attach to the Chinese market after updating their brand positioning.

According to the 2023 China Sensitive Skin Anti-Aging Trends White Paper, the sensitive skin care market is on the rise, with the market size reaching 8.35 billion yuan ($1.2 billion) in 2022, outpacing the overall skincare market.

With this in mind, AHC has introduced its new positioning of "Products with Affordable Aesthetic Medicine". Recently, AHC launched the B5 Pro Series and the Triple Anti-Aging Series, targeting Chinese consumers' needs for sensitive care and anti-aging respectively.

As for the update of Innisfree, a senior industry figure has also previously pointed out to CHAILEEDO that "this logo makeover by Innisfree is not only for rebranding, but also for repositioning the brand in an attempt to regain consumers."

Kao Group, the parent company of Freeplus, also made it clear at the conference on Freeplus launch last week that "China is one of the most important overseas markets for the Kao Group, and the Freeplus has always considered China as the most important overseas market. The brand will further increase its investment and research and development in the Chinese market, with a strategic focus on the Chinese market. We will continue to provide quality products and services to more consumers in the future."

It is worth mentioning that at the brand launch, Senior Director, Brand Marketing, Freeplus, Li Wenji also said that Freeplus hopes to become the first Kao skincare brand to be the Group's NO.1 with a localisation strategy in China. Starting from the skin problems and substantial needs of Chinese girls, the localization strategy is tailored to expand the user population.

As the times are fast moving, it is important to keep up with the times and quickly find the right path for your brand in order to stay alive in the Chinese market. It remains to be seen whether the collective "transformation" of Japanese and Korean beauty brands can reinvent their brand momentum.