As exports hit a record, Korea’s beauty industry faces rising strain from ODM reliance, fragile indie startups and the absence of a globally dominant brand.
People shop at a Musinsa Megastore branch in Seoul.KIM JONG-HO
It may seem like K-beauty is in its golden era, but an overreliance on contract manufacturers and a flood of inexperienced indie brands are exposing cracks beneath the industry's rapid growth.
Inside Cosmax's manufacturing plant in Pyeongtaek, Gyeonggi, conveyor belts moved rapidly as the faint scent of cosmetics filled the air. One conveyor belt alone was manufacturing 55 products every minute.
Cosmax, an original development manufacturing (ODM) company, operates 27 production lines at the plant and manufactures between 25,000 and 30,000 products a day on average.
"Orders for skincare products have increased by 20 percent to 30 percent over the past two to three years," a Cosmax official said. "We've expanded our workforce by 20 percent and introduced additional automated equipment, including tube-filling systems."
But for Park Gyu-beom, a cosmetics company CEO who launched a K-beauty brand in August last year, the reality is less glamorous.
Park previously worked in retail before launching a cosmetics company during the K-beauty boom. He invested 30 million won ($19,680) to develop products through an ODM company.
But sales have fallen short of expectations. Marketing and advertising expenses have mounted and production costs per unit have increased as order volumes declined.
Face masks are being made at Cosmax's manufacturing plant in Pyeongtaek, Gyeonggi.NOH YU-RIM
"Seven or eight out of 10 beauty company owners I know shut down within six months of launching," Park said. "Anyone unfamiliar with the beauty industry should think carefully before starting a business."
On the surface, K-beauty appears to be thriving.
Korea's cosmetics exports reached a record $11.43 billion last year, overtaking the United States to become the world's second-largest cosmetics exporter. France topped the list, exporting $24.2 billion worth of cosmetics.
But a closer look into the industry shows that K-beauty is heavily dependent on ODM manufacturers.
There were 27,932 cosmetics companies registered with the Ministry of Food and Drug Safety in 2024, but only 13,976 reported actual production activity. In other words, one out of every two registered companies is effectively inactive.
Of the companies with production records, 70 percent are small businesses that employ fewer than four people.
"There's a widespread perception that anyone can start a cosmetics company through an ODM manufacturer with just tens of millions of won, even without technical expertise," said a cosmetics industry source who requested anonymity. "Many people simply think they should give it a try since K-beauty is so popular these days."
The lack of a globally dominant Korean cosmetics brand remains another challenge.
France is home to traditional big names like Lancôme, and Japan has the SK-II brand. However, Korea has yet to produce a beauty brand with comparable global recognition.
"The K-beauty industry still lacks research and development capabilities, and only a handful of companies are capable of conducting research at a world-class level," said Shim Jong-won, a professor in the Department of Cosmetic Science at Dongduk Women's University.
"There will be a point when K-beauty no longer feels new and exciting to global consumers. When that happens, the industry will have to compete on technological capabilities, and it needs to prepare for that now."
This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.
