Edible Cosmetics
The author is an analyst of NH Investment & Securities. He can be reached at jack.baek@nhqv.com. -- Ed.
Traditionally referring to the beauty found within a person’s character, ‘inner beauty’ is now increasingly used as a domestically-coined generic term for edible cosmetics and cosmetic functional foods (nutricosmetics) in Korea. On the back of surging interest in epidermal regeneration, wrinkle improvement, and skin lightening, greater attention is now being paid to edible cosmetics rather than topical cosmetics. With this in mind, we take a look at the domestic nutricosmetics market and small/medium-sized brands within.
Domestic nutricosmetics market sized at about W500bn
According to the Korea Health Supplements Association, the domestic nutricosmetics market was sized at around W500bn in 2019. Meanwhile, Newtree, a leading domestic nutricosmetics play, estimates that the domestic market will come in at around W500bn in 2021. We forecast that the domestic market will expand by about 25~30% y-y in 2021, led by rollouts of new nutricosmetics brands.
Two representative nutricosmetics ingredients: Collagen and hyaluronic acid
We point out that, thus far, most of the representative nutricosmetics products in Korea have been produced using well-known ingredients such as collagen, hyaluronic acid, and pomegranate concentrate. And, as new product trends in this arena revolve around such conventional ingredients, it is challenging for new brands to successfully enter the market. In particular, for companies intending to develop beauty foods or drinks using product-specific heath functional ingredients, entry into the market is challenging due to the lengthy periods required for product development and registration. Meanwhile, with a marketing war now intensifying, we point out that effective marketing holds the key to a product’s success.
Promising nutricosmetics stocks
Considering the growth of the nutricosmetics market, we herein present promising nutricosmetics stocks after screening appropriate small/mid-sized companies based on whether: 1) they have mega-hit brands; 2) they are able to invest actively in R&D for individually-approved health functional food ingredients, backed by stable cash flows; or 3) they boast products capable of establishing themselves as new trends. Given the high entry barrier of the nutricosmetics market, we advise paying attention to companies that have already entered the market and boast product competitiveness. Our top pick for the sector is Newtree, which has successfully reduced its single-brand reliance via the launch of a new brand. In addition to boasting valuation merit and a mega-hit brand, the company is enjoying sound sales for its new brand as well. We also like HLscience, which is expected to rebound on the launch of a pomegranate extract product, and Hyungkuk F&B, which recently took over Taylor Farms, a famous prune product maker.