South Korea's exports of major consumer goods, including K-Beauty and K-Food, have recently achieved record levels, marking a strong performance that extends beyond the semiconductor sector, as indicated by the Ministry of Trade, Industry and Energy's 'August Export and Import Trends' report. To maintain this growth trajectory, experts stress the necessity of tailored export strategies and support systems for small and medium enterprises (SMEs).
A report published by the Korea Chamber of Commerce and Industry (KCCI) highlights that the export value of seven representative categories—including food, beauty, and bio—reached $15.59 billion from January to August this year. This figure represents a significant increase of 4.2 times compared to $3.74 billion during the same period in 2016, nearly double the overall export growth rate of 2.2 over the same timeframe.
Regionally, exports to the United States have seen an increase from $230 million to $2.74 billion, a remarkable growth of 11.9 times, while exports to Europe rose from $490 million to $5.36 billion, an increase of 11.0 times. Exports to ASEAN and Japan followed with increases of 3.4 times and 3.0 times respectively, while exports to China and Hong Kong grew only by 1.2 times.
The K-Beauty sector, in particular, has undergone a notable shift. In 2016, 74.2% of K-Beauty exports were directed to China and Hong Kong; however, with the substantial growth of exports to the United States (15.3 times) and Europe (43.9 times), the shares of exports to these regions have become more balanced, each representing approximately 20% of total exports this year.
This trend is further reflected in the concentration index of export markets. After peaking at 0.327 in 2021, the concentration index for K-Beauty has decreased to 0.152 in 2023 and 0.075 for the first eight months of this year, indicating a broader diversification of export markets that surpasses K-Food (0.110) and K-Bio (0.079). This change signifies a significant evolution for a sector that was once heavily reliant on a few markets.
For K-Food, major market changes have also occurred. The concentration index dropped from 0.139 in 2016 to 0.110 this year, with the United States remaining a leading export market. Notably, since 2020, the U.S. has surpassed China to become the largest market for key products like ramen and snacks, indicating a significant shift in consumer preferences.
In the K-Bio sector, exports have increasingly focused on Europe, as the supply of biosimilars has expanded significantly. The share of exports to Europe increased from 32.3% in 2016 to 57.1% this year. However, the market remains diversified across multiple countries, resulting in a lower concentration index of 0.079 compared to K-Food.
In terms of corporate involvement, small and medium enterprises drive the growth of K-Food and K-Beauty, with SMEs accounting for 93.1% and 91.3% of exports respectively from January to August this year. In contrast, K-Bio relies significantly on large enterprises, which represent 72.8% of exports due to their need for substantial investment in production facilities and international approvals.
Over the past decade, K-Beauty has seen the most significant increase in SME participation. While exports from large corporations peaked at $2.06 billion in 2021, they are projected to contract to approximately $600 million by 2025, comparable to levels from 2016. Meanwhile, SME exports of cosmetics grew from $1.38 billion in 2016 to $6.18 billion this year, a remarkable increase of 4.5 times, with mid-sized companies significantly boosting their share from 3.5% to 19.1%.
The rise of mid-sized manufacturers is also evident in K-Food, where they now account for 61.8% of exports, up from 40.1%. This growth has been primarily driven by their notable contribution to ramen exports.
The landscape for exporting companies has broadened as well. The number of SMEs exporting basic cosmetic products has risen from 2,808 in 2016 to an expected 6,019 by 2025, an increase of 2.1 times; mid-sized firms have grown from 41 to 119.
Professor Jeong Jae-wook of Sogang University points out that while growth paths differ by category, the commonality lies in a focus on competitive strength beyond pricing. He notes that while exports are typically dominated by a few large corporations, these specific sectors have been led by numerous SMEs. He further emphasizes that the expansion of K-consumer goods across Asia, North America, and Europe over the past decade showcases the ability of Korean products to meet the quality standards and demands of sophisticated international markets.
According to the KCCI, as K-consumer goods have grown their market presence over the last decade in regions like North America and Europe, there is a continuous need to explore new markets while maintaining existing ones. They stress the importance of customized support tailored to national and regional conditions, including certification, labeling, distribution networks, and trade environments.
Moreover, there’s a strong call for enhancing support mechanisms to ensure that promising SMEs do not exit the market prematurely, and that businesses established in the market receive ongoing support as they transition to mid-sized firms. Strategies need to be developed to nurture the export foundations established by thousands of SMEs into sustained growth engines.
Lee Si-wook of KCCI emphasizes that K-consumer goods have broadened both the export markets and the scope of participating companies, adding that because the growth dynamics vary by category, customized strategies considering regional and company characteristics are crucial in leveraging the growth potential of the many SMEs involved. He cautions, however, that the slowdown in K-Food and K-Beauty exports to China—one of the world’s largest consumer markets—continues to be a concern, necessitating a thorough understanding of the underlying causes and the development of revitalization strategies.
