Sales: $5.3 billion
Note: $5.3 billion for household and personal care products. Corporate sales: $6.6 billion
Suk Yong Cha, chairman and chief executive officer; Hong Ki Kim, executive vice president and chief financial officer
Cosmetics: The History of Whoo, O Hui, SU:M37, Belif, Beyond, Dermalift, CNP, CNP Rx, VDL, Isa Knox, Sooryehan, Code Glokolor, Vonin, Carezone, The Saga of Xiu, Nature Collection, TheFaceShop, FMGT, Dr. Belmeur, Yehwadam. Health: Hair care Elastine, Organist, Reen, Silk Therapy; Oral care: Perioe, Bamboo Salt. Cleaning: Homestar, Safe, Jayeonpong, PongPong. Skin care: Veilment, Gentology. Laundry: Saffron, Hanip, Tech, Super Ti, Fiji, Oxygen Clean
Comments: In 2019, LG Household & Healthcare (LGH&H) posted its 15th consecutive year of record sales, as sales and profits both rose 13.9%. Those gains came despite a slowdown in South Korea’s economy, the US-China trade war, China’s introduction of an e-commerce law and protests in Hong Kong. Through it all, LGH&H managed to post 10% in every quarter last year. Key included the Whoo, su:m and O Hui brands.
International sales jumped 48% thanks to gains in China and Japan. But even with those gains, Korea still accounted for 76% of corporate sales. China represented 13%, followed by Japan, 5%; North America, 3% and other, 3%.
The big news of 2019, of course, was the $125 million acquisition of New Avon, which enabled LGH&H to penetrate the North American market and prepare for global expansion.
Within the beauty business, sales increased more than 21%, led by luxury cosmetics, which posted gains in duty-free and China. Whoo’s sales topped 2.6 trillion won. Su:m and O Hui focused on their most high-end offerings and grew 9% and 12%, respectively. Sales of the CNP brand topped 100 billion won, a 29% increase over 2018. Internationally, sales rose 54%, led by a 52% increase in China, where consumers were hungry for luxury cosmetics.
Home and personal care sales increased just 1.8%. LGH&H executives admitted that the business environment remained challenging, but said improved business fundamentals enabled the company to become more agile to changing market conditions. Notably, premium brands such as Propolithera, Himalaya Pink Salt, Dr. Groot and On:The Body Veilment Natural Spa all had strong years. International sales increased 8.5%, led by China and Japan.
And, of course, LGH&H expanded its presence in North America with the purchase of Avon. At the time the deal was announced, the company said Avon North America would benefit from LG H&H’s world-class R&D capabilities in cosmetics, personal care, fragrance, packaging and design. The first collaboration was The Avon x The Face Shop, LGH&H’s flagship beauty brand and retailer. The skin care and makeup collection included new shades, new ingredients and new-to-Avon formats such as Korean cushion formulations of foundation, highlighter and blush. The second collaboration is a partnership with Chi, featuring three hair care products that utilize a blend of certified organic botanicals including aloe vera, pomegranate and hibiscus.
“We recognize Avon North America’s strong brand, leading market position in the region, and talented employees and Representatives,” said Chairman and CEO Suk Yong Cha. “Avon North America’s innovative social selling model builds deep connections with customers and we are excited to leverage this as we continue to expand. We look forward to building on Avon North America’s success to drive customer engagement and long-term growth in this market.”
The LGH&H/Avon combination seems to be working. The number of new Avon representatives jumped 375% in April. What’s more, Avon appears to be appealing to younger women. The average age of an Avon representative is over 40, but 60% of new reps are under 35, according to the company.
While other companies were impacted by the COVID-19 pandemic, there was no slowing down at LGH&H. In Q1 2020, sales rose 1.2%; it was the 58th quarter in a row for topline growth. More impressive, operating profit has increased for 60 quarters in a row. LGH&H noted that beauty minimized the impact of COVID-19 on sales and profits thanks to solid demand for luxury.
According to CEO and Vice Chairman Cha, LG Household and Healthcare follows three business policies in order to ensure fundamental competitiveness:
- Aim for clear differentiation. To accomplish that goal LHH&H will make it a part of its daily routine to continue to innovate (innovation), always anticipate the needs of customers (speed) and aim for a higher goal (stretch).
- Seek to secure a solid competitive advantage. To cement consumer loyalty, products and marketing programs must be superior to competitors’ programs. LGH&H seeks to improve its products and the customer experience and ensure that every product has a unique selling proposition.
- Build a special bond with customers. By ensuring internal integrity and creating unique products with competitive advantage, LGH&H will establish strong brand loyalty among its consumer base.