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Founded in 1947, Koo In-Hwoi (founder of LG Corp) established Lucky Chemical Industrial Corp, and launched "Lucky Cream," the very first cosmetics product in Korea. In 1954, the company also launched Korea's first toothpaste brand, ‘Lucky Toothpaste’. In February 1995, the company changed its name to LG Chemical Ltd. In April 2001, LG Household & Health Care (LG H&H) spun off from LG Chemical, and was listed on the Korean Stock Exchange. Since then, it has grown to be Korean’s largest household goods and cosmetics company with currently a market capitalization of $19 billion.

Starting off with the first domestically-manufactured cosmetics and toothpastes, LG H&H has produced a variety of best-selling products for everyday use, eventually expanding to become Korea’s foremost cosmetics, household goods and non-alcoholic beverage company. The company enjoys strong demand for its high-end cosmetics brands both at home and in China. Worthy of special mention here is the premium cosmetics brand “The History of Whoo”, which is the first Korean cosmetics brand to cross the two trillion won mark in annual sales, recording the sales milestone of 2.6 trillion won ($2.2 billion) in 2019, one that is on par with leading luxury beauty brands such as Lancome, Shiseido and Estee Lauder. Household goods domestic market share held steadily at 33%, with beverage domestic market share increasing healthily to 32%.

The company operates in three divisions: cosmetics (Beautiful), household goods (Healthy) and beverage (Refreshing). As of 2019, cosmetics accounted for 62% of total sales, household goods 19% and beverage 19%. Operating profit contribution was 76% from cosmetic, 11% from household goods and 13% from beverage. In 2019, total sales were 7.7 trillion won ($6.4 billion; up 15% YoY) and operating profit was to 1.2 trillion won ($1 billon; up 13% YoY), delivering 15 consecutive years of growth. Major competitors are Amorepacific, Shiseido, Kao, Kose, L’Oréal, Estee Lauder, Beiersdorf, P&G and Unilever in select categories.

LG H&H has a history of broadening its business portfolio through acquisitions since CEO Cha Suk Yong took charge in 2005. The most recent acquisition made is Avon North America for $125 million in cash as a strategic asset to support the firm’s international growth plans. LG H&H looks to build on Avon’s strong iconic brand, award-winning products and the network of 250,000 sales representatives throughout North America. LG H&H has also signed a deal to acquire Physiogel business rights for the Asian and North American regions from GlaxoSmithKline, in line with the firm’s plan to strength its skin and personal product line-ups. The $160 million deal will be finalized in mid-2020. As of 2019, approximately a quarter of LG H&H’s total sales came from overseas markets with China accounting for 13%, Japan 5%, North America 3% and Others 3%.

CEO Mr. Cha, who previously worked for P&G, is noted for his P&G-style management approach of emphasizing innovation. Beyond the existing industrial barrier of household goods and cosmetic business, the company has come up with innovative products tailored to customers’ needs. The innovative products include fermented cosmetics, stem cell technology, foaming pump, traditional Korean herb medicine, antioxidant ingredients, functional health foods and among others. The company is determined to keep expanding its businesses to better fit the needs of its customers. Through outstanding goods and services differentiated from existing product lines, the company seeks to build a special relationship with customers that is also founded on sustainability. An example of this would be the establishment of sustainable packaging as well as the expansion of products with Eco-Labeling certification.

As a result, LG H&H enjoys favourable segment exposure in the onshore China cosmetic business via high-end / higher-margin luxury brands (including “Whoo”, “su:m”, “O HUI” and “CNP”).  Likewise, the household business continues to enjoy steady growth of premium brand lines such as “Dr. Groot (ReEn)”, “Himalaya Pink Salt (Bamboo Salt)”, “On:The Body Veilment Natural Spa” in daily beauty (Derma, hair, body, oral care) and “AURA (Saffron)” in home care. In addition, the active marketing on major brands such as “Coca-Cola”, energy drink 

“Monster Energy” and global n°1 canned coffee brand “Georgia” continue to drive growth at the beverage business.

Half of its businesses are stable, recurring household and personal care goods and beverages (cash cows), while the other half are fast growing, higher margin cosmetics (stars). This has helped the company increase its sales every quarter since 1Q 2005, with the exception of 2Q 2020 (understandably due to the slow travel retail sales impacted by the Covid-19 crisis). Thanks to its diversified businesses, geographic exposure, strong branding power and strength in digital channels, 2Q 2020 sales declined slightly by 3% year-on-year to 1.8 trillion won and operating profit managed to increase 1% year-on-year to 303 billion won. Operating profit has been increasing for sixty-one quarters since 1Q 2005.

In a nutshell, we like the company’s resilient business model and solid track record. The strategy to focus on luxury cosmetics since 2005 and holding steadfast in its commitment to the brand’s heritage of luxurious and innovative formulations for high performing products has worked. Its leading position in the Korean household goods industry is maintained through product differentiation/premiumisation and category expansion. Additionally there is the continuing strength of its n°2 position in the Korean beverage industry. Similarly, product differentiation/premiumisation and new product launches in beverages help delivering higher growth. At the same time, through the acquisition of Avon and Physiogel, the company is prepared for further global business expansion. The company also exhibits a strong overall ESG rating, signalling best practise and strong accountability to investors and the public.


A revolution in global business is under way. Companies based in emerging markets, boasting ambitious leaders, appealing products or services and state-of-the-art facilities and systems are expanding overseas and transforming industries and markets across the globe. The few emerging markets companies that have captured media attention only represent a small fraction of a larger phenomenon of the many emerging markets companies that are actively expanding beyond their domestic markets, or are planning to do so. As corporate governance has always been a key risk of emerging market investing, Econopolis opened up a Singapore research hub in 2013 to increase proximity to the companies we invest in and observe and listen to the signals you cannot get by just doing desktop research.

Our experienced investment team applies a disciplined, bottom-up fundamental investment approach. We believe in a ‘boots on the ground approach’, visiting and talking to companies. A high-conviction investment approach translates into a willingness to take active positions regardless of benchmarks. This results in a select number of strong franchises with clear competitive advantages and trustworthy management.

The Global Challengers we are looking for, are set to grow into global powerhouses with credible aspirations to build global footprints. The capabilities of these Global Challengers go beyond mere cost advantages. They have been building new capabilities, such as manufacturing higher-quality products, harnessing their cash resources, and investing in R&D. These Global Challengers can be divided into three groups:

  • early movers (that started to globalise early on);
  • fast followers (making rapid progress); and
  • up-and-comers (whose ambitions have until recently been more regional than global).


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About the author

Gino Delaere

Gino Delaere

Gino Delaere is master in Applied Economics (University of Antwerp) and holds an MBA (Xavier Institute of Management in Bhubaneswar, India). For over a decade he has been specializing in emerging markets worldwide and traveling the world looking for interesting investment opportunities. Previously he worked for several large asset managers where he was actively involved in several thematically inspired equity funds. Today, as the head of the Econopolis office in Singapore, he spends a significant amount of his time in Asia and Latin America, and is responsible for the stock selection in the emerging markets funds.

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