Korea’s two largest cosmetics ODMs—Kolmar Korea and Cosmax—are competing for supremacy by achieving record sales and joining the 2 trillion won ($1.37 billion) club. Experts attribute this growth to intensifying customer demand for leading ODMs.

Kolmar Korea posted sales exceeding 2 trillion won for the second consecutive year in 2024. Last year, the company’s annual revenue reached 2.45 trillion won, up 13.8 percent year-on-year. Operating profit marked 195.6 billion won and net profit, 123.7 billion won, up 43.6 percent and 427.8 percent, respectively. Consolidated revenue for the fourth quarter was 595.5 billion won, up 7 percent year-on-year. Operating profit decreased 2 percent to 36.8 billion won and net profit increased 219 percent to 51.8 billion won.

The robust growth was driven by strong domestic demand and sun care sales. In the fourth quarter, the Korean office generated sales of 241.3 billion won, up 13 percent year-on-year. Sales growth was driven by domestic indie brands with strong exports. The U.S. business grew 76 percent to 20 billion won in sales. By category, revenue from sun care rose 35 percent, basic skincare increased 12 percent, and color makeup grew 18 percent.

“Although profitability was a bit disappointing, the company's fourth-quarter results were characterized by a solid sales environment for export-led brands and North American performance that grew quarter over quarter,” said Park Eun-jeong, a researcher at Hana Securities. Park cited the following reasons for the lower-than-expected operating profit: the performance of HK Inno.N’s HK Yonwoo/China office, additional incentives due to strong domestic performance (2.5 billion won), and provisions for product warranties (1.8 billion won).

This year, Kolmar Korea is set to open its second plant in the U.S. The facility, currently under construction in Pennsylvania, is scheduled for completion in March and will begin operations in April. It will specialize in producing basic skincare and sun care products, which are among Kolmar Korea’s key export items. The addition of this second plant, along with the first plant’s successful shift to profitability, is expected to further strengthen the company’s earnings in North America.

Jeong Han-sol, a researcher at Daeshin Securities, said, “Kolmar's domestic annual production capacity grew from 370 million units in 2023 to 530 million units by the end of 2024. With this expanded capacity, we anticipate solid growth for the domestic subsidiary in 2025, driven by high-margin skincare and sun care products.”

Park said K-beauty's global expansion and the concentration of orders to top players are expected to drive strong performance in 2025. Kolmar’s sales are projected to reach 2.7 trillion won (12 percent year-on-year), while operating profit is anticipated to reach 270 billion won (36 percent), the highest ever.

Cosmax officially entered the 2 trillion won club last year. Consolidated revenue increased 21.9 percent year-on-year to 2.16 trillion won while operating profit rose 51.6 percent to 175.4 billion won. Net income grew 133.9 percent to 88.4 billion won. In the fourth quarter, consolidated revenue reached 558 billion won, and operating income totaled 39.8 billion won, marking increases of 28 percent and 77 percent, respectively, compared to the previous year. Revenue met market expectations while operating profit exceeded them.

The growth was driven by the strong performance of Cosmax’s Korean and Southeast Asian subsidiaries, which led to the company’s overall results. In the fourth quarter, the Korean subsidiary saw significant growth, with revenue of 346.3 billion won (40 percent year-on-year) and operating profit of 34.6 billion won (98 percent). The product mix of color makeup and basic skincare is balanced at 50:50, with 51 percent of revenue coming from the top 10 customers. Growth and diversification were well-balanced across the board. In Southeast Asia, sales grew 49 percent year-on-year to 44 billion won, with Indonesia up 40 percent and Thailand up 78 percent.

The surprise came from China, where fourth-quarter revenue reached 155 billion won, up 5 percent year-on-year. The company attributed this turnaround to the influx of new customers and the transfer of volume from the Yatsen Group.

Bae Song-yi, a researcher at Mirae Asset Securities, said, “We believe that China's performance, which has been in a period of uncertainty, has passed the trough amidst strong domestic and Southeast Asian performance.” 

The U.S. performance was weaker than expected, with weak customer orders, lower factory utilization, and one-time costs impacting the deficit, she said.

The key to this year's results will be a turnaround in China and the U.S. Cosmax plans to transfer some of the volumes of brands with a high proportion of exports to China to its Chinese factory in Shanghai to improve the health of its Chinese subsidiary. Experts expect this strategy to sustain growth in China. The US is also expected to gradually improve, driven by the influx of new customers.

Park from Hana Securities stated that the concentration of orders to top ODMs is increasing, as domestic export-led brands driving sales are growing and the demand for R&D capabilities is rising. She projected that Cosmax will achieve consolidated sales of 2.6 trillion won (20 percent year-on-year) and operating profit of 250 billion won (40 percent year-on-year) this year, which would mark the highest figures ever, alongside Kolmar.

This article is a collaboration between Korea Biomedical Review and Beautynury, a Korean cosmetics industry news media (beautynury.com). -- Ed.