‘Unstable market conditions’: China’s zero-COVID policy drives down LG H&H beauty business in 2022

The company announced on January 31 that its beauty business, which consists of brands such as the History of Whoo, O HUI, Su:m 37, CNP, and Belif, suffered from a 27.7% sales decline over the past year to KRW3.2tn (USD2.6bn)

Meanwhile, its operating profile fell by 64.7% to KRW309bn (USD251m).

The beauty business accounted for 45% of the firm’s total sales and 43% of operating profits in 2022.

Sales and profits were affected by a dismal fourth quarter (Q4), which saw sales fall by 23.7% to KRW870bn (USD708m), while operating profits declined by 57.7% to KRW309bn (USD251m).

The fast-moving consumer goods company, which operates in the beauty and personal care, household goods, and beverages sectors, attributed the decline to its performance in China.

The company said the “unstable market conditions” ​brought about by Beijing’s zero-COIVD policy ultimately dragged down the beauty business in China​, including online and in travel retail.

“In the beauty business, sales at duty-free shops and in China were sluggish due to deteriorating market conditions in China and consequent slowdown in consumption.”​

Performance in China fell in spite of the company’s Singles’ Day campaigns​, which saw History of Whoo top the rankings on social commerce platforms of Douyin and Kuaishou.

At home, the company made many attempts to “enrich brand assets for long-term performance” ​against the backdrop of uncertainty.

O HUI launched a virtual exhibition and Belif offline pop-up events that featured the belief Universe and its characters.

However, these were not enough to boost beauty sales.

Personal care persevering

The company’s home care and daily beauty division, which consists of personal care brands such as Physiogel, Dr Groot, and Euthymol, was slightly hampered in an “unfavourable” business environment.

The company observed that consumers were becoming more price sensitive due to inflation, which slowed consumption overall.

While sales increased by 7.4% year on year to KRW2.2tn (USD1.80bn), operated profit fell by 9.1% to KRW190bn (USD154m).

“Improving profitability was difficult due to high price levels, high exchange rates and high wages, but HDB continued to invest in premium brand marketing,” ​said the firm.

This division accounted for 31% of the firm’s total sales and 27% of operating profits in 2022.

It highlighted the successful marketing drives of Dr. Groot and Physiogel, which helped to increase consumer engagement and increase brand loyalty.

Furthermore, the company was focused on capitalising on new opportunities.

For instance, it launched the Physiogel Dailimune Defense Cushion, which proved to be a winner on home shopping channels. The brand’s sales increased by 17% year on year.

Oral care brand Euthymol also introduced teeth-whitening products, including whitening toothpaste, as the company was expecting an increase in demand for such products when South Korea lifted its indoor mask-wearing mandate.

Overall, year-on-year sales decreased by 11.2% to KRW7.2tn (USD5.84bn) won and operating profit decreased 44.9% to KRW711bn (USD578bn).