Korea's Cosmetic Support Now Reaches Ingredients, Packaging and Exports

What is the signal?

On 20 August the National Assembly passed the Act on the Promotion of and Support for the Cosmetics Industry (committee alternative) in plenary session, and the law was promulgated on 15 September. A separate statute now exists for the state to develop and support the cosmetics industry systematically, from research and development through to overseas expansion.

What the law contains falls into three strands. First, the Minister of Health and Welfare is to draw up a 'comprehensive plan for the promotion of and support for the cosmetics industry' every five years. Second, companies with research and development investment and the capability to enter overseas markets can be certified as 'innovative cosmetics companies' and given preference in national and local government support programmes and research and development projects. Third, the law establishes a legal basis for cosmetics industry clusters and for support covering overseas market entry and specialist personnel.

The scope of who can be supported moved with it. Where the focus was previously on finished-goods manufacturers and sellers, research and development, ingredient and container manufacturing, distribution and exports now all fall inside the industry. Separately, the government is running a 'K-Beauty Global No.1 Leap TF' centred on the Beauty Industry Special Committee of the National Bio Innovation Committee, with relevant ministries and private-sector experts taking part. The task force is divided into three working groups — infrastructure and ecosystem, export support, and regulatory support and intellectual property protection — and plans to announce its programme within the year. From 2028, a large-scale research and development project aimed at next-generation cosmetic technology is also to be pursued.

It is worth separating, though, what is actually settled at this point. What was promulgated is a statute, and a statute is mostly a document that creates a basis. What the certification criteria for an innovative cosmetics company will be, what form the preference takes in practice, how much budget attaches to it — none of that has been published. Those are matters to be read in the strategy promised for later this year and in the implementing documents that follow. So what can be read now is not 'what we will receive' but 'how far across the industry the state has redrawn the boundary of who it supports'.

1. When the definition changes, so does who may apply

Most companies connected to cosmetics have skimmed a support programme notice and set it aside as 'not applicable to us'. Firms that make ingredients, that handle containers and components, that do distribution or export agency work in particular tended to sit outside cosmetics support. Cosmetics support, as a phrase, meant companies that make or sell the finished product.

This law redraws that boundary. Research and development, ingredient and container manufacturing, distribution and exports have all come inside the industry's scope. Less that something has changed today, and more that the programme notices written from here on will be designed against this scope.

So the thing to do now is to write down, in a sentence, which box your company sits in. Plenty of companies have a registered business category that differs from the work they actually do, and that gap costs time at the application stage. A single page setting out whether you are a brand or a manufacturer, whether you handle ingredients or components, whether you export directly or through an agent, makes the judgement faster when a notice appears.

• Which of finished goods, ingredients, containers, distribution or exports your company falls under
• Whether the actual scope of work matches the registered business category
• Whether you can state last year's research and development spending as a figure
• Whether export performance exists in documented form

2. The 'innovative' certification favours whoever stacked the paperwork early

The innovative cosmetics company certification is understood to target companies with research and development investment and the capability to enter overseas markets. The detail of the criteria has not been published, but the two axes are already visible: research and development, and overseas expansion.

What decides this kind of certification is usually not the capability itself but the evidence. A company may genuinely have improved formulations and traded with overseas buyers, yet if that is not left in its accounts and documents it cannot be manufactured at the moment of application. A company doing the same activities while keeping records, by contrast, finishes the paperwork in days.

So there is work to do while waiting for the criteria. Check where spending that could be classified as research and development is scattered across your accounts, and gather in one place the development history you built with your manufacturer or laboratory. Even if the certification does not come, that tidy-up carries straight over into other support programmes and into investment due diligence.

3. A five-year plan tells you the rhythm of the budget

The law has the Minister of Health and Welfare draw up a comprehensive plan on a five-year cycle. A plan with a cycle means support programmes with a cycle. New programmes clustering right after a plan is announced, and the later years leaning toward extensions of existing ones, is a shape that has repeated in other industries' promotion plans.

On top of that, a large-scale research and development project aimed at next-generation cosmetic technology is signalled from 2028. That the date is stated in advance also means the two years in between are the preparation period.

For a brand, where this rhythm touches practice is the development schedule. Separating the development you will fund yourself from the development you might attach to a support programme means that, when a notice appears, you pull out an item already prepared instead of inventing a project in a hurry. Projects invented in a hurry usually diverge from what the company meant to do anyway.

4. What the young companies named as hard was not the technology

Jeong Eun-kyeong, Minister of Health and Welfare, held a meeting with young cosmetics companies on 18 September at Beauty Play Myeongdong under the title 'K-Beauty Global No.1 Leap'. The session was arranged on the occasion of the law's promulgation, and the participants included Lalaclara, Makecos, Mimetics, Verize, Starstech, Almond&Co, AEAC Bio, NGTin, Cherry XX and Colorful Solution.

The policy tasks the companies put forward were: expanding research and development support and connecting it to commercialization, strengthening the protection of technology such as trademarks and patents, improving regulation and rules so that recent converging technologies can be adopted, expanding domestic and overseas sales channels and export support, and opening specialist export training.

Read the list again and there are more items about protecting and selling what has been made than about making it. Trademarks and patents, sales channels and exports, and training. The companies have in effect said for themselves where the bottleneck sits for a small firm, and the list works as a self-check sheet as it stands. Counting how many of the five apply to you is enough.

• Whether technology you developed has stalled at the commercialization stage
• Whether rights over the brand name and the core technology are secured
• Which is more blocked, the domestic channel or the overseas one
• Whether anyone inside the company knows export practice

5. Ranking second in the world does not change the brief

Behind this discussion is a recognition that K-beauty has risen to second place in the world for exports, and the government has said it will produce a strategy within the year aimed at reaching first. The industry's overall position has indeed moved, but that number does not change the conditions facing an individual brand.

If anything, what is felt in practice may run the other way. The better known Korean cosmetics become, the more Korean brands enter the same market, and the more items a buyer is comparing. A national ranking and the competitive intensity around an individual product do not move in the same direction.

So the useful question when reading this law and the coming strategy is not 'should we export too' but 'what is it that we could do better with support'. Support wastes less when used to raise the speed of something you were already doing than when used to start something you were not.

The first question for the brief

Rather than beginning with 'we will look into government support programmes', try one sentence: which box of the industry does our company sit in, and what performance can we evidence in that box? Then add one more line beneath it. If we were asked today to set out research and development spending and export performance on one page each, how many days would it take?