LG Household & Health Care (LG H&H), led by Suk Cha, its CEO, has revealed that its affiliate, Ginza Stefany, has entered into an agreement to acquire 100% of Avon’s Japanese arm for a total of 10.5 bn yen (€79 mn).
The 'Made in Japan' business model carries considerable weight as domestic products and national brands have strength and increased popularity compared to overseas companies and goods.
Avon Japan was set up in 1968, with this year marking 50 years of experience in the cosmetics business. The company is ranked number 21 by retail sales amount in Japan, superseding both Lancôme (ranked number 27) and Estee Lauder (number 41). In 2017, Avon Japan achieved recorded sales of approximately 100 bn won (€77 mn).
Through its Ginza Stefany brand in 2012 and Everlife in 2013, LG H&H has been developing its business presence in Japan. For foreign brands entering the country, this comes with a distinct number of challenges as most notably, consumers expect high standards from beauty and personal care brands in Japan. In addition, marketing channels, routes to market and OEM/ODM companies place considerable focus on existing relationships in the market.
The launch of its recent cushion foundation encouraged LG H&H to first enter the Japanese market through telemarketing. This channel enables the brand to directly communicate with consumers. Through this homeshopping channel, LG H&H is the number one brand on QVC.
Utilising its research and development efforts and diversified product portfolio, LG H&H aims to increase synergy to encourage business expansion.
Market research provider, Euromonitor International, reveals that in 2017, Japan represented the third largest beauty and personal care market, reaching $36.1 bn (€29.9 bn). This figure is expected to reach $38.5 bn (€31.9 bn) in 2022.
In 2017, Avon slightly reduced its share in Japanese beauty and personal care market from 0.7% in 2012 to 0.6% in 2017. On the other hand, LG H&H upped its share in the South Korean marketplace from 20.5% in 2012 to 23.3% in 2017.
Sharing insights on the relationship between Korea and Japan in the cosmetics industry, Sachi Kimura, Analyst at Euromonitor International, highlighted: “Korean Cosmetics in Japan had not shown significant growth in Japan given the popularity and availability of products sold by local Japanese manufactures. However, Korean expansion is gradually starting to show momentum with brands such as Amorepacific’s skin care brand Innisfree entering the Japan market and launching their first store in early 2018.”
Focusing on the partnership between the two beauty giants, Kimura added: “Avon Products is highly recognised in Japan and has been in the Japanese beauty market for 50 years. Furthermore, while current Avon Products sales channel mainly consists of direct selling and internet, the company has expanded their sales channel to growing channels such as drugstores in 2017.”
“The cosmetic market in Japan is expected to show positive growth supported by the increasing number of inbound tourists and the stable domestic demand. Although it may be challenging to enter a market where local brands are favoured, LG Household and Health Care is looking to expand their presence in the growing market utilising a well-established Japanese brand."