The global rise of K-Beauty has driven continuous growth in the cosmetics industry. Between 2011 and 2016, the number of cosmetics manufacturers and distributors in South Korea grew exponentially from 829 to 4,961. With low barriers to entry, such as the ability to launch operations with minimal equipment and capital, many individuals from the sector have ventured into entrepreneurship. Among various cosmetic products, the mask sheet category has shown exceptional growth, with market size increasing from KRW 250 billion in 2011 to over KRW 1 trillion in 2016. Within this expanding market, our client, a leading domestic supplier of mask sheets to OEM manufacturers, commands over 55% of the market share. While the 2017 THAAD issue temporarily affected sales, the company resumed its growth trajectory in 2018.
The client’s competitive edge lies in two core strengths:
- Dominance in Raw Material Sourcing: The company secures materials through multiple trading firms and has exclusive agreements with manufacturers for specialty materials such as Tencel, Cupra, Sontara, Omigenshi, and Baeksan microfiber.
- Exceptional Delivery Capabilities: Equipped with 31 automated and manual punching machines and over 800 tons of raw material inventory, the company ensures next-day delivery for clients. Additionally, its network of 800–1,000 subcontractors across Gyeonggi-do enables seamless handling of the labor-intensive sheet insertion process, providing both cost efficiency and reliability.
With over 100 customers and a robust credit management system, the company has demonstrated consistent growth and resilience, even amidst market fluctuations. The following outlines the diagnostic findings and strategic initiatives undertaken to support the client’s next phase of growth.
1. Diagnosing Growth Opportunities with a Value-Up Framework
To identify improvement opportunities and constraints for sustainable growth, we conducted diagnostics across three key areas:
Revenue Growth
- Strong market position with a 55–60% share in a growing domestic market.
- Client base of 330+ active accounts, with potential to expand to 500+ accounts (brands and OEMs).
- Tenfold market size in China compared to Korea, with many existing customers establishing operations in China.
- Superior expertise and capacity in sourcing nonwoven fabrics.
Production and Procurement Optimization
- Operations spanning 3,239 pyeong (10,710 m²) across five factories and 31 sheet insertion sites.
- Established networks with fabric and yarn suppliers in China and Japan.
- Annual material purchases totaling KRW 40 billion, with a loss rate of 28.7%, indicating room for improvement.
Operational Systems
- Complex inventory management involving 13 warehouses.
- 53% of 193 raw material types (478 tons) classified as long-term inventory.
- Manual processes, including transaction management via Excel, messaging apps, and handwritten notes.
From this analysis, 19 improvement initiatives were identified, with five prioritized for immediate execution.
2. Executing Value-Up Initiatives
A. Factory Optimization (New Facility Development)
The company’s rapid growth, from KRW 16.7 billion in revenue in 2013 to KRW 91.9 billion in 2016, led to the ad hoc establishment of five separate factories and reliance on 13 warehouses, creating inefficiencies in inventory and logistics management. Recognizing the need for a centralized facility to support further growth to KRW 200 billion in revenue, the client initiated plans for a new factory.
Despite challenges in securing a suitable site within an industrial complex in Osan due to regulatory misalignment, the company successfully navigated regulatory hurdles with support from the Gyeonggi Provincial Office. The new factory, scheduled for completion in early 2019, will span 4,800 pyeong (15,850 m²), accommodate 1,500 tons of material inventory, and provide the capacity to support revenue growth to KRW 200 billion.
B. Establishing a Manufacturing Subsidiary in China
China, the world’s second-largest cosmetics market, is expected to sustain its rapid growth, with a market size of CNY 336 billion (approximately KRW 57 trillion) in 2016. To capitalize on this opportunity, the client sought to establish a manufacturing subsidiary to complement its existing sales operations in China.
The project involved a CAPEX investment of KRW 1–2 billion for automated sheet punching and insertion processes. With the subsidiary scheduled to begin operations in September 2018, the client aims to achieve profitability by 2019 while leveraging the subsidiary as a strategic base for raw material sourcing and local customer support.
C. Automation and Global Sourcing Initiatives
- Introduced 16 semi-automated insertion machines, covering 5% of insertion tasks, with plans to scale further.
- Expanded global sourcing networks by identifying new suppliers and building a comprehensive vendor pool.
- Conducted due diligence on three acquisition targets to strengthen vertical integration, signing agreements for two during the project period.
3. Conclusion
The client’s recent achievements, including establishing a centralized factory and entering the Chinese market, represent critical steps toward sustained growth and enhanced enterprise value. The new factory not only addresses current inefficiencies but also provides a foundation for improved profitability through yield optimization and systemized management. Its location within Osan’s cosmetics-focused industrial complex further positions the company as an attractive investment opportunity for strategic and financial investors.
The Chinese manufacturing subsidiary serves as a strategic hub for supplying competitive raw materials and responding to local demand, contributing significantly to international sales. With continued progress in automation, global sourcing, and vertical integration, the client is poised to achieve both operational excellence and long-term growth.
The global rise of K-Beauty has driven continuous growth in the cosmetics industry. Between 2011 and 2016, the number of cosmetics manufacturers and distributors in South Korea grew exponentially from 829 to 4,961. With low barriers to entry, such as the ability to launch operations with minimal equipment and capital, many individuals from the sector have ventured into entrepreneurship. Among various cosmetic products, the mask sheet category has shown exceptional growth, with market size increasing from KRW 250 billion in 2011 to over KRW 1 trillion in 2016. Within this expanding market, our client, a leading domestic supplier of mask sheets to OEM manufacturers, commands over 55% of the market share. While the 2017 THAAD issue temporarily affected sales, the company resumed its growth trajectory in 2018.
The client’s competitive edge lies in two core strengths:
With over 100 customers and a robust credit management system, the company has demonstrated consistent growth and resilience, even amidst market fluctuations. The following outlines the diagnostic findings and strategic initiatives undertaken to support the client’s next phase of growth.
1. Diagnosing Growth Opportunities with a Value-Up Framework
To identify improvement opportunities and constraints for sustainable growth, we conducted diagnostics across three key areas:
Revenue Growth
Production and Procurement Optimization
Operational Systems
From this analysis, 19 improvement initiatives were identified, with five prioritized for immediate execution.
2. Executing Value-Up Initiatives
A. Factory Optimization (New Facility Development)
The company’s rapid growth, from KRW 16.7 billion in revenue in 2013 to KRW 91.9 billion in 2016, led to the ad hoc establishment of five separate factories and reliance on 13 warehouses, creating inefficiencies in inventory and logistics management. Recognizing the need for a centralized facility to support further growth to KRW 200 billion in revenue, the client initiated plans for a new factory.
Despite challenges in securing a suitable site within an industrial complex in Osan due to regulatory misalignment, the company successfully navigated regulatory hurdles with support from the Gyeonggi Provincial Office. The new factory, scheduled for completion in early 2019, will span 4,800 pyeong (15,850 m²), accommodate 1,500 tons of material inventory, and provide the capacity to support revenue growth to KRW 200 billion.
B. Establishing a Manufacturing Subsidiary in China
China, the world’s second-largest cosmetics market, is expected to sustain its rapid growth, with a market size of CNY 336 billion (approximately KRW 57 trillion) in 2016. To capitalize on this opportunity, the client sought to establish a manufacturing subsidiary to complement its existing sales operations in China.
The project involved a CAPEX investment of KRW 1–2 billion for automated sheet punching and insertion processes. With the subsidiary scheduled to begin operations in September 2018, the client aims to achieve profitability by 2019 while leveraging the subsidiary as a strategic base for raw material sourcing and local customer support.
C. Automation and Global Sourcing Initiatives
3. Conclusion
The client’s recent achievements, including establishing a centralized factory and entering the Chinese market, represent critical steps toward sustained growth and enhanced enterprise value. The new factory not only addresses current inefficiencies but also provides a foundation for improved profitability through yield optimization and systemized management. Its location within Osan’s cosmetics-focused industrial complex further positions the company as an attractive investment opportunity for strategic and financial investors.
The Chinese manufacturing subsidiary serves as a strategic hub for supplying competitive raw materials and responding to local demand, contributing significantly to international sales. With continued progress in automation, global sourcing, and vertical integration, the client is poised to achieve both operational excellence and long-term growth.