[Edaily Marketin Reporter Hur Jieun ] Domestic and international investment in Korean beauty distribution platforms continues to flow. While global private equity fund (PEF) manager CVC Capital has invested 300 billion won in SILICON 2 Co.,Ltd.(257720), the operator of StyleKorean, Gudai Global—which is preparing for an IPO—also acquired Hansung USA earlier this year to strengthen its distribution network. This move is interpreted as a strategy to reduce the risk of investing in a single brand in the fast-changing beauty market while securing a foothold for global expansion.
According to investment banking (IB) industry sources on the 19th, CVC Capital has made a 300 billion won investment in SILICON 2 Co.,Ltd. and entered into a strategic partnership. This investment takes the form of a third-party private placement in which SILICON 2 Co.,Ltd. is issuing a total of 6,666,666 shares to CVC Capital. The price per share is 45,000 won, and the shares acquired by CVC Capital will be subject to a one-year lock-up period.
This is not CVC Capital’s first investment in a beauty distribution network. In 2015, CVC acquired Douglas, Europe’s largest brick-and-mortar beauty platform. In South Korea, it has invested in PharmaResearch—known for its Rejuran brand—and Starvision, the operator of Orens, and has been steadily increasing its investments in K-Beauty, including pursuing the acquisition of SeouLinBioscience CO., LTD., the operator of Round Lab.
Domestic companies are also increasing their direct investments in beauty distribution networks. Gudai Global, considered a leading player in K-Beauty, acquired Hanseong USA, a U.S.-based beauty distribution platform, for approximately 100 billion won in February of this year and rebranded it as Gudai Global USA in July. The company is effectively aiming for vertical integration by directly integrating its brand IP (intellectual property), such as Chosun Beauty and Tirtir, into its local distribution network.
The volatility of beauty brand trends is cited as a key reason for the rise in investment in beauty distribution platforms. In the beauty market, individual hit products have short lifespans, and as their rise accelerates, their decline is equally steep. In contrast, distribution platforms are structured to benefit as the K-Beauty market grows, regardless of the rise and fall of individual brands. This is similar to how Netflix, as a platform, is more stable in the face of market changes than individual content producers.
The high barriers to entry for distribution platforms are also an attractive factor. Dealing with country-specific customs clearance and licensing regulations overseas, as well as establishing global logistics hubs and B2B sales networks, are considered infrastructure assets that new players find difficult to match with capital in the short term. Big data accumulated from consumer responses by country and region also tends to be recognized as an intangible asset.
From a private equity fund’s perspective, there is also the advantage of easier exits (recovery of investment) and scaling up. For individual cosmetics brands or manufacturers, determining a valuation is relatively difficult due to high earnings volatility at the time of an initial public offering (IPO) or sale. In contrast, platform companies that manage hundreds of brands offer high revenue sustainability and predictability, making it easier to secure large-scale funding.
An industry insider explained, “As K-Beauty expands its presence in the global market, the value of the distribution networks through which these products are sold will also increase,” adding, “Through this investment, CVC Capital will build a global cosmetics distribution value chain portfolio that spans both online and offline channels, as well as DONGSUH.”
