AmorePacific Corp., South Korea’s leading cosmetics company, is shifting its focus from China to the U.S. and Europe as it seeks to rebalance its global business and adapt to changing market dynamics. This pivot is a response to declining sales in China, where duty-free sales heavily dependent on Chinese tourists to South Korea have sharply decreased.
The group said for years, AmorePacific relied heavily on China, with the country making up nearly half of its Asian revenue in 2023. However, the ongoing impact of import restrictions, China’s group travel ban to South Korea in 2017, and recent COVID-19 lockdowns have intensified challenges for the company in this market. The rise of local Chinese brands has also intensified competition, placing additional pressure on premium Korean brands.
In an Investor Day presentation, AmorePacific co-CEO Kim Seung-hwan outlined the new strategy, revealing plans to increase focus on Western markets and acquire new brands to expand globally. Key regions for this expansion include the U.S., Japan, Europe, India, and the Middle East. The U.S. and Europe have already become increasingly important, with Western sales growing to 40% of AmorePacific’s total revenue in the first nine months of 2024, compared to 24% in 2023.
To support its Western expansion, AmorePacific will strengthen its relationship with French beauty retailer Sephora, which will help it tap into broader consumer bases in the U.S., Europe, and Japan. The company is aiming for an annual sales growth rate of 10% from 2024 to 2027, with a target operating profit margin of 12% by the end of that period, up from 2.9% in 2023. Additionally, AmorePacific aims to achieve an average return on equity of 7-8% during this time, marking an improvement from the current 3.7%.
In the third quarter of 2024, AmorePacific’s revenue rose by 10% year-over-year to 977.2 billion won, while operating profit nearly quadrupled, reaching 65.2 billion won. Despite this recent growth, the company’s total annual sales have fallen significantly since 2016, from 6.7 trillion won to 4.0 trillion won in 2023. This strategic shift represents a significant effort by AmorePacific to restore its growth and profitability by diversifying away from China and tapping into markets with strong long-term potential.
