Potential for Palm Oil in Korean Cosmetic Industry

Background

In 2020, the market value of the global cosmetic industry dropped by 8% to USD460 billion compared to USD500 billion in 2019 due to the COVID-19 pandemic. Asia Pacific region is the leader of the cosmetic market in the world. China and Japan hold about 14.2% and 7.8% global share respectively. The primary product categories for the cosmetic industry are personal care, skincare, cosmetics and fragrances. Personal care hold the major share in the cosmetic industry with a share of 48.5% or USD223 billion followed by skincare products at 26.7%, cosmetics products at 14.6% and fragrances at 10.2% in 2020.

Source: Statista

The cosmetics and personal care sector is expected to grow in all segments in the next years. Sun protection and anti-ageing goods are likely to see particularly high growth as customers are becoming more aware of the dangers of sun exposure and are also more concerned about maintaining a young appearance. Emerging middle-class consumers and rising disposable income levels are the main factors in the growth of the cosmetic industry in the Asia Pacific region.

Palm Oil Used in the Cosmetics

The versatility of palm oil has made it one of the world’s most important vegetable oils, primarily in food but also as the dominant source of vegetable fat and oil in beauty and chemical products. Palm oil and palm kernel oil are used directly in certain products, but they are primarily used as raw materials for numerous industries and the cosmetic industry.

Although the usage of palm oil in the cosmetics industry is only 2% of global palm oil production, it can be found in as many as 70% of all beauty products. This demonstrates that manufacturers favour palm-derived compounds because of their functional benefits. Palm oil and its derivatives are considered as essential in the cosmetics industry not only because of its competitive price and sustainable supply, but also due to its multiple benefits such as skin hydration, foaming, softening and texturizing actions in products.

Palm oil usage in the cosmetic industry is expected to continue in the future. Even though in 2020 the cosmetic industry experienced a slight decline in its global sales, the industry is expected to recapture its momentum in the coming years. Referring to the forecast by Statista, the industry is forecasted to reach value of USD 758 billion by 2025.  Leading brands such as L’Oréal, Gilette, Nivea, Estée Lauder, and Clinique have become the driving force in this lucrative industry.

Source: Statista

Society has become more health cautious particularly in cleansing and health products. The demand for hand sanitiser, face wash and other health-related cosmetic products is expected to increase. The progress will give a window of opportunity for palm oil and its derivatives to grow their market share in the industry.   

K-Beauty Market

South Korea is the 10th largest cosmetic market in the world worth at USD11.4 billion in 2020 and is expected to reach $14.3 billion by 2025, rising at a 4.6% CAGR from 2021 to 2025. Asia-Pacific was one of the most important regions in the business, accounting for over 70% of the entire K-beauty market share. Skincare products accounted for more than half of overall cosmetics production in the domestic Korean beauty market. Lotion and cream were the most popular items in South Korea because consumers consider hydration to be the most important function of skincare cosmetics.

Source: Korea Cosmetic Association (KCA)

South Korea is known for its high beauty standards which have resulted in the country’s ever-evolving beauty market. Therefore, the beauty market in South Korea is continuously innovating and developing new products. The influence of social media is also one of the most important factors in the global success of K-beauty products. The growth of the K-Beauty was mainly influenced by the Korean wave (Hallyu). The phrase “Hallyu” refers to the export of Korean content to other countries, including film, music, cosmetics, and fashion. Due to its high product margins, the K-beauty market is becoming a more successful business for cosmetic businesses, making it even more beneficial for them.

Source: Korea International Trade Association

The Korean export of skincare products has steadily grown since the last decade with a CAGR of 27.2% from 2011 to 2020. The main destinations for Korean skincare products are China, Hong Kong and the USA with the share of 54%, 14% and 7% respectively in 2020.

Malaysian Palm Oil & Oil Palm Products Export to South Korea

Palm oil is a natural emollient. Palm oil derivatives such as glycerol, fatty acids and fatty alcohols are ingredients used in the cosmetic product for emollient or foaming properties. The function of emollient in the cosmetics for moisturizing and texturizing which acts as a barrier to protect the skin. Palm oil and its derivatives give multiple benefits such as skin hydration, foaming, softening and texturizing actions in cosmetic and personal care products.

Below are the data of Malaysian palm oil products and their derivatives export to South Korea:

1. Palm Oil

Palm Oil  (MT) 2016 2017 2018 2019 2020
RBD Palm Oil 116,060 148,866 151,528 137,350 187,073
Palm Fatty Acid Distillate 57,196 64,961 66,893 111,923 120,045
RBD Palm Stearin 117,246 89,890 43,952 98,650 61,869
RBD Palm Olein 47,449 60,018 56,040 57,154 53,830
Palm Acid Oil 42,934 30,753 40,927 16,070 26,324
Others 5,464 9,861 5,603 1,959 4,137
Grand Total 386,348 404,350 364,942 423,105 453,278

Source: MPOB

Most of the palm oil products export to South Korea are used for the food sector such as RBD palm oil, PFAD, RBD palm stearin and RBD palm olein. While palm acid oil (PAO) is used in the non-food sector for making laundry soaps and detergent and also for producing calcium soaps for animal feed formulations.

2. Palm-based Oleochemical

Palm-based Oleochemical (MT) 2016 2017 2018 2019 2020
Oleic Acid 14,791 13,441 17,050 20,100 18,070
Purified / Refined / Distill Glycerine / Grd Glycerine 18,553 17,513 23,702 17,090 16,745
Mixed Palm Fatty Acid 32,422 25,033 36,283 28,388 14,762
Lauryl-Myristyl Alcohol 7,060 6,027 10,007 9,309 12,580
Soap Noodles / Stock / Blend 20,028 23,533 21,440 19,309 12,439
Stearic Acid / Stearic Acid Flakes 9,525 16,595 13,644 12,866 11,956
Others 32,195 38,395 46,765 51,517 53,076
Grand Total 134,573 140,536 168,891 158,579 139,628

Source: MPOB

For the past five years, the export of Malaysian palm oil and its derivative to South Korea shows a significant increase, especially for palm oil products. Despite the COVID-19 outbreak in 2020, the Malaysian palm oil export to South Korea recorded an increase of 7.1% to 453,278 MT due to the high demand for palm oil in food manufacturing sectors, particularly in instant noodle production. However, the demand for palm oil and its derivatives for non-food sectors shows a decline caused by the COVID-19 pandemic outbreak. This is expected to be a temporary glitch and the industry will be back into a positive growth this year due to strong demand in the cosmetic industry.

Conclusion

Over the last 4 decades, South Korea has engineered its way to becoming a major player in multiple industries such as Automotive, Machinery, Telecommunication, Home Appliances and Information Technologies to name a few. Their innovation and trendsetter pace has helped them become a respectable producer in the cosmetic industry. The overwhelming popularity of K-POP sensation and the Korean film industry on the international stage has given the K-Beauty a marketing boost. It will not be long for K-Beauty to get a strong foothold in the Americas and European markets. This positive vibe should be taken seriously by Malaysian palm oil producers. They need to continue serving the market and expanding their market penetration, particularly in the K-Beauty industry. In other words, Malaysian palm oil producers need to grab these opportunities to ensure that Malaysian palm oil holds its number one position in the Korean market.

Prepared by Rina Mariati  and Muhammad Kharibi 

*Disclaimer: This document has been prepared based on information from sources believed to be reliable but we do not make any representations as to its accuracy. This document is for information only and opinion expressed may be subject to change without notice and we will not accept any responsibility and shall not be held responsible for any loss or damage arising from or in respect of any use or misuse or reliance on the contents. We reserve our right to delete or edit any information on this site at any time at our absolute discretion without giving any prior notice.

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