Korean beauty giants Amorepacific and LG Household & Health Care reported disappointing Q2 earnings during recent lockdowns in China.
Amorepacific reported its Q2 earnings on July 28, with an overseas revenue of 297.2 billion won ($227 million), down 33.2 percent year-on-year (YoY), and a net loss of 37.2 billion won ($28.6 million).
Asia revenue declined by 39 percent with China sales accounting for more than 50 percent of Asia sales, according to the earnings release. The news saw the share price drop by 9.89 percent.
'Korean Limitation Order'During the so-called “K-wave'', Korean cosmetics exports to China increased 41 percent per year on average between 2013 to 2018.
Kuaidaocaijing published an article via WeChat on March 31 that said Korean beauty brands had lost their popularity in China after Beijing warned Seoul over its July 2016 deployment of the anti-missile defense system THAAD.
Following the THAAD dispute, China's ruling communists placed a “Korean limitation order” which resulted in Korean dramas being banned and cultural events canceled etc.
“This was detrimental to Korean cosmetics firms,” said the article.
In 2018, The Face Shop left China and shut down more than 300 physical stores while Skin Food has also withdrawn from a number of departmental stores, according to the article.
This January, Innisfree closed down 80 percent of its physical branches in China after its annual operating profit fell 90 percent in 2020. The brand will reduce the number of stores to about 140 after a peak of 600, according to media reports.
Hera pulled out from the Chinese market near the end of February, closing down branches and suspending online sales.
Export Market Used to Threaten KoreaCommentator Tianming Lu blamed the Chinese Communist Party (CCP) for the decline of Korean cosmetics in China.
“Lockdowns do have an impact, but it affects all brands, not just Korean specifically. Besides, there are still online sales even when the physical stores are closed, but Korean cosmetics were affected from all aspects while French cosmetics exports experienced a surge in China,” Tianming told The Epoch Times on July 31.
“In recent years, the CCP has been sanctioning Korean enterprises and boycotting Korean products because of the THAAD dispute. Previously, Korean cosmetics had a stellar reputation and were widely accepted by Chinese consumers.”
In July, the Chinese Foreign Ministry demanded the inaugurated Yoon administration continue following a “Three Nos” policy—no additional deployment of THAAD, no involvement in the U.S. missile defense system, and no forming of a trilateral military alliance with the United States and Japan.
But South Korean Foreign Minister Park Jin said: “The Three Nos policy is not something we had promised to China. As far as I know, (the government at the time) had only explained it as its position toward China.”
“(The Three Nos policy) is directly related to our sovereignty, and it should be us making decisions on our security. It would be hard to accept if China tells us to keep to the promise (of the Three Nos Policy),” Park said.