K-beauty brands may be having a rough time with Chinese consumers, but major global investors still find them attractive.
L’Oréal Group jumped on the K-beauty investment bandwagon this week, announcing that it has won a bid to buy a 70% stake in Korean fashion and beauty company Nanda, which produces the beauty brand 3CE. The development is part of a wave of European beauty conglomerates’ investment in Korean cosmetics: Unilever bought a 60% stake in Carver in September 2017, LVMH’s L Capital invested $50 million in CLIO in July 2016, and Estée Lauder took a stake in Dr. Jart+ in 2015.
L’Oréal’s investment comes even as K-beauty faces challenges in one of its most important markets: China. L2 found in its recent Beauty China report that K-beauty brands have been struggling with online buzz on Chinese platforms in the wake of a Chinese ban on tour groups to South Korea over the two countries’ THAAD anti-missile system dispute. On Chinese cross-border shopping and social platform RED, users have turned their attention toward Japanese brands instead as visitor numbers from China to Japan have skyrocketed while South Korea’s numbers have plummeted. Searches for Korean beauty brands also declined on Baidu.
Korean cosmetics companies’ sales have been hit as well: K-beauty giant AmorePacific reported a 32% year-on-year decrease in profit.
L’Oréal is likely looking at the long game with its K-beauty investment, however, as Chinese boycotts don’t last forever. While J-beauty is having its moment of glory with Chinese consumers now, it was Japanese brands feeling the wrath of Chinese consumers in 2012 over a geopolitical dispute. As Chinese consumer tastes can quickly shift, L’Oréal has diversified its range of brands with Japanese label Shu Uemura, Chinese brand Yue Sai, and Chinese mask brand MG.