Travel Retail and Duty Free Business Intelligence    Wednesday 23 April 2014

COSMETICS

Amore Pacific ramps up Asian focus as duty free business expands

Published: 17/01/12

Source: ©The Moodie Report

By Melody Ng, Asia Bureau Chief

Leading Korean cosmetics powerhouse Amore Pacific has been seeing strong growth in travel retail since it entered the channel in February 2008 with its premium Laneige brand. And the channel is set to underpin its continued growth ambitions.

Driven by Singapore-based company Jonathan Holland & Associates (JH&A), Amore Pacific’s managing agent in Asian travel retail, Laneige made its debut outside its native South Korea at Nuance-Watson (Singapore)’s Terminal 3 mega-store in Changi Airport in 2008. The brand quickly went on to secure a listing onboard Singapore Airlines in December of the same year.

Today Laneige is available on 34 airport counters and 17 airlines, with new counters opening this month in the Philippines and Indonesia. Its ground shop presence spans Singapore, Malaysia, Thailand, Taiwan, Hong Kong and China, with leading travel retailers such as Nuance-Watson, Ever Rich, Eraman, Colours & Fragrances, Free Duty and China Duty Free Group.

Two years later, another one of Amore Pacific’s star brands made its foray into travel retail: Sulwhasoo, a Korean herbal medicine cosmetics line, was launched again in Changi Airport with Nuance-Watson (Singapore).

Amore Pacific has carved a presence in China Duty Free Group’s downtown duty free store in Sanya
Sulwhasoo’s duty free footprint soon spread across Asia: it was listed with Lotte Duty Free at Jakarta Soekarno-Hatta International Airport, with Duty Free Shop KAB at Kansai International Airport and with China Duty Free Group in Sanya. Airline listings have included Dragonair (January-June 2010), Eva Air (September-October 2010) and Singapore Airlines (since December 2010).

Amore Pacific’s stronghold in South Korea has benefited its position in Korean travel retail – both Laneige and Sulwhasoo are present in leading duty free stores Lotte Duty Free, Shilla Duty Free, Walkerhill Duty Free, Paradise Duty Free, and Dongwha Duty Free. Sulwhasoo is also available onboard Korean carriers Korean Air and Asiana Airlines.

JH&A Managing Director Jonathan Holland commented: “Laneige is an exciting, well-priced and youthful skincare brand with massive potential for global development particularly due to the Asia diaspora. We have had huge success in the growth of the brand in travel retail since our first counter opened in Changi Airport T3 four years ago. Our team has now opened and we currently operate 34 airport and downtown duty free counters across the region. This is a fantastic opportunity to grow the brand much further in the travel retail world and we will be working hard to capitalise on this positive outlook in the coming year.”

He added: “Sulwhasoo is a fascinating brand – very oriental, very sophisticated and is inspired by traditional Korean philosophy and the medicinal qualities of Korean red ginseng. Whilst highly successful in Korea, the brand is developing gradually internationally. We have now launched it in Singapore, Jakarta and Kansai airports and in China Duty Free Group’s Sanya downtown duty free during the past year and we hope to expand on this in 2012.”

Spotlight on Asia as duty free business gains traction

Amore Pacific has cited the boom in its duty free business as a key factor behind its revenues growth, which topped the market growth rate in 2010. Revenues from its cosmetics business grew +16% to 1,709 billion Korean Won (KRW) in 2010 from the previous year.

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In the latest quarterly results released by Amore Pacific, the company reported sales of 76.1 billion KRW (+12%) for its Overseas Cosmetics division in the third quarter of 2011. China was a key contributor to this figure (61% of overseas cosmetics sales), with a growth of +27% to KRW46.3 billion. Major ASEAN markets such as Singapore and Malaysia also saw continued sales growth in the quarter. Laneige, in particular, saw expanded sales of star products such as ‘Water Bank’ and ‘Water Sleeping Pack’.

The Domestic Cosmetics division saw sales of KRW428.9 billion (+9%) in 3Q2011. Growth in the Luxury segment (+8% to KRW282.3 billion) was strongly driven by solid sales performances in the duty free channel and robust sales growth of Sulwhasoo (+12%).

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The Asian market, especially China, is a key focus for Amore Pacific. “We are looking at China as the most important overseas market for the foreseeable future, and have made pre-emptive investments to establish customer management systems and improve sales force competencies with training provided by the Korean head office,” the company stated in its 2010 Annual Report.

The company’s strategy for Laneige is to strengthen brand recognition, establishing it as a young, premium brand for the Chinese and Asian market. In 2010 this was done via marketing programmes targeting the general public, mainly through the use of television and magazine ads.

Amore Pacific’s thrust into the China market in 2010 was aided by the acquisition of a license for door-to-door sales of Sulwhasoo in Shanghai, kicking off the company’s business in China. In Hong Kong Sulwhasoo gained a presence in seven shops in the city centre, including a spa – a coup that paved the way for the brand’s full launch into the Chinese market in 2011. Efforts were also made to enhance the brand image in other areas, with focus on key Asian cities such as Singapore and Hong Kong, by expanding the duty free business.

In July 2010 Sulwhasoo sales counters have also been installed at luxury department store retailer Bergdorf Goodman in the US, creating marketing buzz and raising brand awareness. “We have high expectations for Sulwhasoo to become a global brand in the US for its unique ability to deliver the very essence of Asian beauty,” Amore Pacific said.

Laneige and Sulwhasoo are already well-established in their native South Korea, and the company is hoping that its duty free business will not only increase penetration into domestic markets but also improve their competitive advantage worldwide, Amore Pacific International Travel Retail’s David Park told The Moodie Report.

Both brands saw combined travel retail sales growth of +155% in the period January-November 2011, according to figures provided by JH&A Executive Director Sales Angeline Goh. “The growth is phenomenal at +155%. The opening of some new travel retail accounts attributed to the very high sales growth,” she commented.

Jonathan Holland concluded: “We at Jonathan Holland & Associates are very honoured to be associated with such a formidable organisation as Amore Pacific, especially as we enjoy their brands so much. This company has ambition and immense potential to grow into a serious global powerhouse and it is a joy to assist them on this interesting journey.”

About Laneige

Laneige, which means ‘snow’ in French, incorporates the art of science in the form of water science technology which is applied to skincare products to create a “highly moisturised and snow-white clear skin”.

Targeted at Asian women in their 20s and early 30s, the line is based on four steps of clarity-moisture care, which is said to help skin to have “snow-like luminosity”.

The YouTube video for Laneige’s bestselling Water Sleeping Pack EX features Korean celebrity and Laneige ambassador Song Hye Kyo
Laneige was created in 1994 before expanding overseas into Hong Kong and China in 2002. In 2007 Laneige launched the Laneige Premium Makeup Line, and in 2010 it Laneige established itself as a professional skincare brand with Laneige Advanced Water Science.

Laneige is especially known for its ‘Water Science’ skincare line and ‘Snow Crystal’ makeup line that are said to give skin a snowy transparency.

Laneige products available in travel retail include Water Sleeping Pack EX (the brand’s bestseller in the channel), Water Sleeping Pack EX duo set, Water Bank Essence, Basic Balancing Water and Emulsion, and the BB Cream duo set (on airlines).

Laneige’s bestsellers in duty free: Water Sleeping Pack EX (left) and Water Bank Essence
About Sulwhasoo

Sulwhasoo’s history dates back to 1967 when Amore Pacific founder Sung-whan Suh began research on Korean medicinal skincare methods, inspired by his hometown of Gaeseong, which produced high quality ginseng.

Sulwhasoo is guided by the traditional philosophy of ‘Sang-Seng’ – the belief that all things exist in relation to one another and optimal vitality is achieved when these objects are in harmony and balance. Thus skin troubles are tackled by first identifying the root cause and fortifying the skin with natural ingredients; the effects of each herbal medicinal ingredient are then enhanced by applying appropriate treatment methods.

Clockwise from top left: Sulwhasoo's First Care Serum, Overnight Vitalizing Treatment and Concentrated Ginseng Cream
Created as “a meeting point of ancient Oriental skin care therapies and modern clinical science”, Sulwhasoo is made up of carefully selected herbal essences. Out of 20,000 herbal ingredients, only 30 are chosen in the development of Sulwhasoo products. The main ingredient is ginseng, decocted for 18 hours to provide best components for skin therapy.

The Korean herbs and medicine are extracted by fermentation method – known as ‘POJE’ – using an original formula that is said to supplement the energy and keep the skin refined and beautiful.

The line’s overseas sales are growing steadily, thanks to rising international demand for naturally-derived cosmetic products, according to the company.

Sulwhasoo products available in travel retail include Overnight Vitalizing Treatment, First Care Serum, Concentrated Ginseng Cream, and Balancing Water/Emulsion.

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