LG H&H Targeting Chinese Market with High-end Products

In 2015, LG Household and Healthcare (H&H), the nation's second-largest cosmetics maker, delivered the highest sales, operating profits and net profits of all time. The company reported 5.3 trillion won in sales (13.9 percent growth year-on-year) and 684 billion won in operating profits (33 percent growth year-on-year), LG H&H announced on Jan. 26.

The company said, “Despite unexpected difficulties such as Middle East Respiratory Syndrome, total company sales exceeded 5 trillion won for the first time, largely due to the high growth of cosmetics. Beauty & Personal Care sales increased 21 percent year-on-year to 3.3 trillion won, and operating profits increased 33 percent year-on-year to 503 billion won. In particular, LG H&H’s flagship product, Whoo, delivers sales exceeding 800 billion won in the local Chinese market as it did last year.”

Sales of Korean cosmetics are soaring on the back of the rising popularity Korean dramas, TV shows and K-Pop in China. Thanks to the sweeping popularity of Korean cultural content in China, South Korean cosmetics exports to China more than tripled last year and ranked second following France in the Chinese cosmetics market.

According to industry watchers, LG H&H’s 2015’s record-setting performance is derived from the company’s shrewd marketing strategy focusing on VIP customers in China. What drives the brisk sales of Korean cosmetics in China is the growing size of well-heeled Chinese middle-class consumers and their penchant for mimicking the makeup and fashion styles of Korean celebrities who have appeared in popular dramas and TV shows.

LG H&H has stepped up its efforts to bolster the high-end product line and company’s marketing, specifically targeting deep-pocketed Chinese customers.

LG H&H introduced Whoo as cosmetics that use traditional imperial herbal prescriptions and launched it at high-end department stores like Babaiban, Jiuguang and Yan Sha. Whoo saw its annual sales following a steady growth trajectory, recording 30 percent growth in 2011 and 2012, 88 percent in 2013 and 143 percent in 2014.

Ja Saeng Essence is another high-end hit product in China. Nicknamed as Lee Young-ae’s Essence, Ja Saeng Essence has a brand image associated with traditional Korean imperial life. Ja Saeng Essence gained much traction in the Chinese cosmetics market thanks to the popularity of Korean TV dramas that feature Lee Young-ae and traditional Korean imperial life.

As part of a marketing strategy focusing on the top 5 percent of consumers, LG H&H is launching makeup events in major department stores in major cities like Hangzhou, Nanjing, Beijing, and Chongqing. For these events, the company sent out invitations to VIP customers. The company also provided beauty classes.

On the heels of the sensational hit of Whoo, the “Sooryehan” cosmetic line is gaining much traction in China. In 2014, “Sooryehan” recorded 17 percent year-on-year growth.

While the high-end cosmetics business of LG H&H has grown fast with hit products like Whoo, some mid-to-low-end brands like The Face Shop are also gaining some traction in the Chinese market. The Face Shop, the number one brand shop in Korea, has so far launched about 300 operations in China, and its sales mark steady growth, recording 16.1 billion won in 2011, 32.6 billion won in 2012, 44.1 billion won in 2013 and 61.5 billion won in 2014.