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Unlocking Radiance: Dermafirm's unique touch in P4 for the worlwide skincare scene

Interview - March 7, 2024

Building on the success of the Cica A.C product line in ASEAN, Dermafirm is leveraging its in-house R&D and manufacturing structure, a distinctive feature among Korean cosmetic brands, to develop the Biotoc product line. With the integration of peptide technologies into P4, Dermafirm offers an eco-friendly solution to enhance the skin texture and condition of women worldwide.

YOONJAE HAN, CEO OF DERMAFIRM INC.
YOONJAE HAN | CEO OF DERMAFIRM INC.

In recent years, Korean cosmetics exports have achieved a remarkable milestone, reaching 10 trillion KRW for two consecutive years. This accomplishment has positioned Korea as the fourth-largest cosmetics exporter globally, following France, the United States, and Germany. This growth can be attributed to the proliferation of numerous innovative brands, particularly in the field of skincare products. To gain a deeper understanding of K-beauty's position in the global cosmetics market, what are the key strengths and weaknesses of the K-beauty industry? How do K-beauty products differentiate themselves from their international competitors, such as J-beauty (Japanese beauty) and French brands?

K-beauty has undeniably been buoyed by the Korean wave, with K-culture garnering significant attention. The captivating allure of Korean celebrities' beautiful skin has contributed to the growing global interest in Korean cosmetics products. This cultural background is pivotal to K-beauty's prominence.

To delve into the fundamental competitiveness of Korean beauty products, the Korean market's competitiveness and the active involvement of consumers in the beauty industry set a high standard for product quality. In the Korean cosmetics market, there is a diverse landscape with not only major players but also small and medium-sized enterprises (SMEs) contributing to the industry. The strong presence of Original Equipment Manufacturers (OEMs) and Original Design Manufacturers (ODMs) in Korea allows for the production of high-quality beauty products priced at rational levels.

Secondly, unlike French cosmetics, which are dominated by a few major players, K-beauty boasts a plethora of small and medium-sized brands, each offering a unique product range to cater to diverse customer needs.

Third, Korea's well-established infrastructure in the beauty and bio industry positions it as a leader in these markets. The active development of new materials and technologies related to cosmetics, coupled with high manufacturing capabilities, enables the creation and launch of innovative products such as Cica products, vitamin C, retinol cosmetics, and various skincare lines. Korea has also introduced groundbreaking products like cushions, foundations, BB creams, and mask sheets.

Finally, the global rise of the e-commerce industry aligns with South Korea's longstanding strength in online sales and distribution. The country has a robust system in place, allowing consumers to access information, make purchases, and have products delivered to their homes through an online ecosystem with well-established infrastructure. Additionally, the accessibility of K-beauty products to a global audience has been enhanced through social media platforms such as YouTube and Instagram. This strategic online presence has played a crucial role in the success of Korean products, especially during challenging times like the COVID-19 pandemic and economic recessions.

 

The Korean cosmetic industry has placed significant emphasis towards China and Southeast Asia, with China representing a major share of cosmetic product exports. Meanwhile, in Western markets, Korean brands are grappling with the challenge of aligning with customer expectations and competing against well-established historical brands. How important is it for Korean brands to increase exports to EU and U.S. markets? How does your company tailor its offering to different geographic markets and consumers? What will be the key drivers to reach these customers in Western markets?

Leveraging our Korean cosmetics-related technology and innovative products, accessing the Asian market, particularly China, was relatively easier due to the higher quality and reasonably priced nature of Korean products compared to the local offerings. The cosmetics industry in China was also not as developed at that time. In Southeast Asian countries, economic growth has empowered consumers, making it relatively easier for Korean products to penetrate these markets.

As the next strategic step, we aspire to enter advanced countries such as the U.S., Japan, and Europe. This poses a significant challenge for K-beauty products, as these markets already have well-established historical brands with high-quality and advanced technologies, creating higher entry barriers.

The entry barrier is high for these advanced countries, but we believe that the four fundamental strengths of Korean companies, as previously explained, can be utilized alongside the popularity of the Korean Wave. Continuous exposure of our products in the European and American markets is crucial. Although entering these advanced markets may be more difficult, Korean products' reasonable pricing and high quality provide an opportunity to leverage the growing wave of online markets in these regions. However, Korean SMEs, especially in the cosmetics field, face challenges in terms of sales channels and marketing. Addressing these challenges requires significant capital and investment. Despite these hurdles, we believe there is potential for success in the mid to longer term by continually making efforts to improve sales channels and marketing strategies.

 

For Korean cosmetics companies, there are two internationalization strategies. On one extreme, companies sell products directly to customers through social media channels and e-commerce platforms. On the other extreme, companies work more on the B2B level using local distributors in different states and nations to market the product and also distribute the product within the country. When it comes to the internationalization process of your company, which is the kind of strategy that you are currently looking for when it comes to Western markets?

We aim to target both channels, including major e-commerce platforms of each country such as Amazon, Shopee, and Q10. We have our own flagship stores on these platforms to directly distribute our products to consumers. However, even if we desire to use other channels, it's a bit challenging due to resource constraints. Therefore, we are actively reaching out to reputable local distributors for B2B distribution simultaneously.


Derma Science Lab in Seoul, South Korea


In the cosmetic industry, many brands utilize OEMs and ODMs to formulate and manufacture their products. DERMAFIRM, however, owns its own laboratory and production plant in Wonju. What advantages does this focus on in-house development and production offer?

I consider our greatest strength to be the fact that we have our own labs, and we are not dependent on OEM or ODM. This sets us apart from other Korean cosmetics brands. The Korean cosmetics market is saturated with numerous players, most of whom rely on OEMs for production and R&D. This dependency makes it challenging to guarantee a specific quality or certain active ingredients within these cosmetics. However, by not relying on OEMs and conducting our own R&D, we can incorporate exclusive ingredients and technologies to enhance our products. Additionally, in the realm of basic skincare products, differentiation is often difficult. Yet, our commitment to in-house research and development allows us to stand out, and our products are clinically proven to have high efficacy.

 

Men around the world are increasingly using cosmetic products; this is especially true in Korea, where man spend more on grooming that in any other country. Dermafirm has developed skincare products not only for women but also for men. What are the differences between products for women and products for men in terms of quality or benefits, and what is the focus in developing these specific products for each gender?

As you mentioned, we have already launched various products for male consumers, and we have some products in the pipeline as well. It all began with the idea that female and male skin conditions are very different. Our vision at DermaFirm is to provide solutions for all skin types, which is crucial. If we specifically look at male consumers across different age groups, they exhibit distinct characteristics. Young males in Korea are even embracing the use of makeup. Our target demographic is males in their 30s and 40s, and what we aim to provide them with is multifunctional all-in-one cosmetic products to ensure that the application of cosmetics is speedy and convenient, meeting their specific needs.

Furthermore, male skin is typically thicker and oilier. So, even though males may not perceive their skin as dry, it is, in fact, dry. They might not realize it because their skin is oily. Therefore, our goal is to ensure that our cosmetic products can be absorbed quickly with a less oily formulation.

 

You recently launched the CICA A.C line, implementing more ingredients and different technologies. How do we differentiate it from the previous brands? How will the Western audience understand the difference between this new product and the rest of the products?

Recently, we launched the CICA A.C line, targeting a specific region, namely the audience in Southeast Asian countries. When developing this line, we considered the climate and racial characteristics of the region. The texture is very light, and we focused on addressing troubles or skin irritations, which are among their main skin concerns. The CICA line contains a high amount of a calming ingredient with soothing effects called Centella Asiatica.

To elaborate, while most cosmetic products focus on addressing troubles or skin irritations, aligning with the basic motto of our brand to provide skin solutions, we engage in extensive research and development, combining our technologies to offer highly functional skincare solutions. For the CICA line, we don't just incorporate Cica ingredients similar to other Korean products. Beyond that, we leverage our unique technology called plant exosomes—one of our five core and exclusive technologies—to facilitate the quick and deep penetration of active ingredients into the skin. Additionally, the formulation is well-suited for the hot and humid weather in the Southeast Asian region. These are some of the distinctive features of the CICA line products.



With a presence in more than 30 countries worldwide, DERMAFIRM International can be regarded as a compelling example of the efficiency and quality of Korean skincare products. How do you envision your international expansion over the next 5 years? And what will be the key markets for growth? In the U.S., you launched a consumer version of BIOTOC, what is your expectation for this product?

Over the past five years, our growth has been around 50 to 60%. Despite being a small company with some challenges in marketing and sales, our differentiated technology, in-house manufacturing capability, and high-quality products allowed us to achieve significant growth. Word of mouth played a crucial role in establishing our products in the market. Now, we stand at a critical juncture to enter a new stage. Leveraging our accumulated brand awareness and capital, we aim to target advanced markets. The United States, Japan, and Southeast Asia have been our primary focus for expansion, and we are already in the process of doing so. With a strong online presence on various e-commerce platforms, we are also in talks with major distributors to launch our products overseas from next year.

Speaking about BIOTOC, while most of our existing cosmetic products are competitively priced for the mass market, this line targets the premium market in the U.S. Initially distributed through U.S. aesthetics, dermatology hospitals, and beauty clinics, we have now decided, in consultation with our U.S. distributors, to expand the distribution of these premium products to the mass market as well. BIOTOC products incorporate advanced technologies such as microbiome technology and liposomes peptide technology. With these high-quality technologies, we plan to make a significant impact in the premium markets in the U.S.

 

It's a significant challenge because typically, when you enhance quality and price, brand recognition becomes essential for consumers to choose and purchase a product. What do you think consumers will choose if faced with two different products offering the same functions, one from a historical brand and one from your brand?

I acknowledge that it's a substantial challenge, and we can't expect to enter the premium market in a short period. Established players usually possess well-established and proven technologies, whereas Korean products, including ours, need to compete by embracing new technologies developed in the Korean bio industry with scientifically proven efficacy. Our strategy is to target early adopters in the market—consumers who are eager to try new technologies.

There's no alternative; we have to make our products highly innovative compared to existing players. Our focus is on using novel ingredients and cutting-edge technology in our products proactively. This approach is crucial for us to differentiate ourselves in the market and attract consumers who value innovation.

 

Within the professional and premium market segments, your company's branding strongly emphasizes the efficacy of the product. In discussing price ranges and efficacy levels, you not only compete with brands in similar positions, but you also compete against other types of cosmetics, such as cosmetic injectables through minimally invasive surgeries. We observed in our research that some of your products have a similar efficacy level to certain injectable cosmetic treatments. What are the advantages of this, and how do you achieve such a level of efficacy with even less invasion?

In cosmetics R&D, three main categories are materials, delivery and stabilization, and final formulation. Dermafirm's R&D emphasizes delivery and stabilization, which is our strength. For instance, we conduct extensive research on flexible nano liposomes, characterized by smaller particles that are very soft. Additionally, Dermafirm is the only Korean company that produces peptides. We delve into research to enable deeper and better absorption of peptides into people’s skin. We have also developed the “cell-penetrating peptide,” which I believe is less invasive compared to other injectables, yet still highly effective.

 

Dermafirm is engaged in several cross-industry collaboration projects with biomaterial firms and medical and therapeutic companies, such as ABIO Materials and SCAI Therapeutics, specializing in delivery systems. Could you elaborate on the importance of these cross-industry collaborations and the synergies you've been able to create with these two companies?

South Korea is a biotechnologically advanced country with a lot of technological innovations. SCAI Therapeutics is our open collaboration partner, providing some of the raw materials exclusive to Dermafirm. The company possesses a unique technology called Moasis, specialized in chemical delivery. Utilizing this technology, we can successfully deliver substances that are challenging to deliver to the skin. Our collaboration with SCAI Therapeutics focuses on enhancing the penetration of peptides and other new substances into the skin. Regarding ABIO Materials, we have established a partnership through shared investment. We collaborate on plant exosomes technology and LMP technology. By joining forces with a biotech company, we can acquire advanced technology not specifically intended for the cosmetics industry. In addition to these two companies, we are engaged in collaborations with more companies, including universities, clinics, and hospitals.


For more details, explore their website at https://dermafirmshop.com/

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