LG H&H is falling behind indie brands in the global K-beauty market. Recently, it lost its market capitalization to APR, which operates the indie brand "Medicuve," giving up its position as the second-largest company in the industry after Amorepacific Corporation. Experts cite sluggish performance in the North American market and weakened brand presence as the main reasons.
According to related industries on the 18th, as of the closing price on the 16th, LG H&H's market capitalization was 5.1462 trillion won, while APR's market capitalization was 6.3267 trillion won. With the rankings of the two companies reversed, APR has ascended to the second place in market capitalization in the cosmetics industry, following Amorepacific Corporation, whose market cap is about 8 trillion won.
Some industry insiders view this market capitalization reversal as not a temporary phenomenon, but a structural shift resulting from the development of the K-beauty industry. While established companies like LG H&H and Amorepacific Corporation enjoyed a boom based on their popularity in China, North America has now emerged as the main export target.
APR is rapidly increasing its brand awareness in the North American market. As of May, the number of searches for APR's representative brand, Medicuve, in the beauty category on Amazon U.S. was 404,749, surpassing the second-place "L'Occitane" with 300,598 searches. This level is comparable to the combined totals of existing K-beauty brands such as Anua (120,000), Laneige (170,000), and Beauty of Joseon (100,000).
APR is showing strengths in social networking services (SNS) and search-based marketing, being evaluated as having established itself as a popular brand in North America beyond the confines of "low-cost K-beauty." Last year, overseas sales accounted for nearly half of APR's total revenue. In the first quarter of this year, overseas sales reached 190 billion won, nearly tripling compared to the same period last year.
In contrast, LG H&H remains heavily reliant on the Chinese market and is struggling in North America due to the absence of hit brands. Last year, LG H&H's North American sales were 566.2 billion won, a decrease of 11.8% from the previous year, while the North American market's share of total sales dropped from 9.4% to 8.3%.
Brands such as Avon and The Cream Shop, acquired by LG H&H, are also failing to generate a significant response locally. Some have reacted that instead of K-beauty brands, the acquisition of local U.S. brands is not benefiting from the popularity of K-beauty in North America. This stands in contrast to Amorepacific Corporation, which is establishing a presence in the North American market through Laneige.
Indie brands leading the K-beauty boom are praised for their solid product quality and SNS-based content, optimized for "discovery shopping" targeting the MZ generation. There are also challenges for the relatively larger LG H&H to respond quickly. Lee Ga-young, a researcher at Samsung Securities, noted in a report, "It seems that a strategy capable of surpassing the marketing know-how that has driven the rapid growth of indie brands in Western countries has not yet been established," and added, "Without a strategic turnaround, a reversal will not be easy for the time being."
Improvements in business portfolios are also stagnant. LG H&H's performance in China is expected to recover slowly. According to securities analysts, cosmetics sales are expected to decline by 15% year-on-year in the second quarter this year, accounting for more than 40% of sales. In particular, the duty-free channel is projected to shrink by 27% due to a reduction in inventory from Chinese daigou (personal shoppers). This is a strategy aimed at increasing price control, but the recovery trend in domestic consumption in China is not offsetting this.
An industry source stated, "LG H&H is attempting to expand in the North American market, but its brand strength is still weak, making it unable to showcase its presence," and added, "It is known that attempts were made last year to acquire popular K-indie brands several times, but the deals fell through due to price differences. They have not made bold investment decisions."