AmorePacific: Do business results indicate move away from Korea?
Business results: the company’s perspective
The recently-released sales results indicate that in 2016, the cosmetic giant's sales figures went up 18.3% year-on-year (YoY) to KRW 6.6976 tn (€5.571 bn), with its operating profit up 18.5% from last year to KRW 1.828 tn (€1.520 bn).
AmorePacific puts this positive growth down to its strong brand identities in Korea, distribution success and expansion abroad. However, the company’s emphasis on building its market share in APAC countries other than Korea raises questions over what is driving this focus.
The results highlight the growth of its five ‘Global Champion Brands’: namely Sulwhasoo, Laneige, Mamonde, Innisfree and Etude. Together, these helped boost the leading name overseas. In 2016, the company’s sales abroad increased by 35% to KRW 1.6968 tn (€1.410 tn) and its operating profit by 32% to KRW 210.5 bn (€174.9 mn).
In Asia alone, the company announced it had grown by 38% to KRW 1.5754 tn (€1.309 bn) since the same period a year ago.
Domestic challenges
While the company states in its accompanying press release how “mass business experienced a decrease in sales and operating profit due to the toothpaste recall and a sluggish performance of the oral care segment”, it praises its hair and body care segment for focusing on “premium offerings continued to meet a wider range of customer needs”.
Despite this positive outlook, as the financial results for the fourth quarter of fiscal 2016 were analysed, it was announced in a report by The Korea Herald that the company’s shares had dropped to their lowest price in two years.
It also saw its operating income drop by 17.2% YoY, with increased sales failing to live up to expectations at a 7.4% rise, achieving KRW 1.32 tn (€1.097 bn).
Recent overseas developments
With the growing tension between Korea and China over the planned installation of a missile defence system and domestic slump in Korea, AmorePacific’s strategy may be to expand its brands overseas.
Despite the ongoing political uncertainty with China, AmorePacific’s budget brand, Innisfree, has recently opened its flagship store in Taikoo Li Mall in Chengdu, China. Sales of the brand have shot up by 30% and operating profit by 56%, indicating no slowdown in the Chinese market.
The company is investing in the Thai market, with a new research and innovation lab in Singapore aimed at strengthening its presence in Southeast Asia, specifically Singapore, Malaysia and Thailand.
Etude is expanding into the Middle East market, as it plans to open its first shop in Dubai this year following a 23% hike in sales and 1,153% rise in operating profit last year. The release of 101 Stick and Brow Gel Tint and the introduction of online and duty-free channels are thought to have driven its success.
