LG Household & Health Care acquires VOV Cosmetics

 

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October 27, 2011 – LG Household & Health Care, Ltd. (CEO: Suk Cha) executed a share purchase agreement on October 27, 2011 to acquire cosmetics business of VOV Corp. for 55.0 billion won.

 

In 2010, VOV generated 44.7 bn won in revenue with 4.4 bn won in operating profit. VOV is one of the top 3 brands, along with Etude and MAC, in domestic color cosmetics market with 3.0% market share.

 

According to Euromonitor International, the global cosmetics market consists of 65% skin care and 35% color cosmetics in 2010. In the past five years, growth in the skin care segment was exceeded that of color cosmetics. Going forward, however, this trend is expected to reverse. In the next five years, between 2010 and 2015, growth is expected to be 16% for color cosmetics and 15% for skin care cosmetics. In the domestic cosmetics market, the breakdown of skin care cosmetics to color cosmetics is 75:25. Compared to the global market, sales portion from color cosmetics is much smaller, but is expected to expand very fast in the future. LG H&H cosmetics sales is skewed towards skin care, with a breakdown of 85:15. LG H&H has been focused on building brand and competitiveness in the bigger market, skin care, and is starting to gear up strengthen its position in color cosmetics.

 

With the VOV acquisition, LG H&H? competitiveness in color cosmetics market will be strengthened with: (1) consolidation of existing color brands and products ?instant economies of scale ?to one single Color Cosmetics Division, (2) addition of more new color cosmetics brands, and (3) involvement of professional make-up artists. In general, the barrier to entry for color cosmetics is lower than skin care, and the segment is fragmented. So, building competitiveness in this category requires the consolidation of scattered color cosmetics brands and products.

 

Going forward, the Color Cosmetics Division will: (1) brand and develop LG H&H and TheFaceShop color cosmetics brands and products, (2) explore color-oriented brand shop opportunities, and (3) provide color cosmetics products for overseas expansion.

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