Editor’s Note
**Editor’s Note:** This article examines the growing tension between government ambitions for K-beauty and market realities, as retail giants leverage ODM partnerships to enter the cosmetics sector. The shift from technological competition to planning and marketing raises questions about regulatory alignment and industry sustainability.
As competition in the K-beauty industry shifts from technology to planning and marketing, the gap between government policy and market reality is widening.
According to the government on the 20th, efforts are accelerating to foster K-beauty as a future growth engine alongside biotechnology, including expanded R&D investment, regulatory rationalization, building a beauty tech ecosystem, and establishing a global K-beauty tourism and export hub. The goal is to elevate K-beauty into a world-leading industry that sets global beauty trends.
The Ministry of SMEs and Startups has expanded support for the K-beauty sector in its first-half SME technology innovation development projects. The scope now includes beauty devices and dermacosmetics, beyond the previous focus on functional ingredients and eco-friendly packaging.
Meanwhile, in the market, the growth of the cosmetics ODM (Original Design Manufacturing) industry has lowered manufacturing entry barriers. Business models centered on brand awareness, social media marketing, and distribution networks are rapidly spreading, rather than technological competition.
According to the Ministry of Food and Drug Safety, 638 new cosmetics responsible sales companies registered this year, a 50.8% increase from the same period last year. Annual new registrations have more than doubled from 2,047 in 2021 to 4,472 last year.
This shift is driven by the ODM industry’s growth. Even without own production facilities or R&D capabilities, companies can enter the cosmetics market through product planning and marketing alone. This has led to an influx of non-cosmetics industries such as food, fashion, and retail companies.
Market expansion is a boon for ODM companies. The industry expects that as new brands increase, production volumes will rise, further strengthening ODM companies’ influence.
However, competition among brands is being reorganized around advertising, promotions, and securing distribution channels. As more players enter the market, marketing costs and competition for store placements intensify. The spread of ‘fast follower’ strategies—quickly productizing already proven ingredients and concepts—may weaken incentives for long-term R&D investment.
Concerns are growing that this structure could become a limitation in overseas markets. Since foreign companies can also use Korean ODMs to produce similar quality products, the technological differentiation of Korean brands may be diluted.
Experts warn that if the industry leans too heavily on brand and marketing competition rather than independent technology accumulation, price competition will intensify and K-beauty’s sustainable competitiveness could weaken.
Even if the government expands R&D support, if not enough companies translate this into actual brand technological competitiveness, the policy effects will remain limited.