Nisha Gopalan is a Bloomberg Gadfly columnist covering deals and banking. She previously worked for the Wall Street Journal and Dow Jones as an editor and a reporter.

(Updated )

Creams made of snail slime and sea-kelp face masks might not seem big money-spinners but they're exactly the kinds of products that have made South Korean cosmetics makers some of the nation's hottest investments.

The issue is that it's going to take more than cool packaging and heavy discounting to keep Chinese shoppers, their biggest customers, happy.

Over the past few years, stock prices of Korea's top cosmetics producers have soared as consumers snapped up lotions made famous by hugely popular K-Pop artists. Amorepacific, whose shares are up 144 percent since July 2014, has 33 analyst buy recommendations, largely on the back of sales to Chinese tourists and rising exports.

More Than Skin Deep
Shares in South Korean cosmetics makers have outperformed the benchmark index
Source: Bloomberg

The two biggest players -- Amorepacific, whose brands include Innisfree and Sulwhasoo, and LG Household, which owns The Face Shop -- control about 60 percent of the domestic market, but there's no shortage of other smaller companies, like privately held Nature Republic or recently listed It's Skin, nipping at their heels. Outside of Koreans, Chinese consumers represent the biggest buyers, and have turned away from Japanese cosmetics as the yen climbs.

Dual Track
China's currency has fallen versus the yen this year but stayed relatively stable against the won
Source: Bloomberg

Policy changes in Beijing can present a risk to growth, however. In April, authorities began imposing strict regulations on cross-border e-commerce, only to backtrack when sales plunged. That's given many of the brands currently sold on Alibaba's Taobao and Tmall some reprieve, for the time being.

Political tensions can interrupt, too. On Friday, stock in LG Household fell as much as 7.5 percent amid concern that China's opposition to Korea's missile defense system deployment may hurt relations between the two nations. Amorepacific slumped as much as 5.8 percent in interday trade.

Korea's cosmetics makers are also still small fry versus larger players such as Procter & Gamble, which owns Olay, and even Japan's Shiseido. According to Euromonitor, Amorepacific ranks 12th among beauty-product providers in China, even though its share of the market has gone from 0.7 percent in 2010 to 1.9 percent last year.

Oriental Beauty
Amorepacific's share of the Chinese market is growing but still small overall
Source: Euromonitor

A bigger challenge for South Korea's bevy of lovelies will be winning loyalty in North America, or building a truly global following. Amorepacific's Laneige, for example, has a tiny 0.3 percent share of the market worldwide even though according to Euromonitor it's the most popular South Korean brand in China. Korea's top-ranked Face Shop range commands 0.4 percent globally.

As the old adage goes, beauty can be fleeting. Keeping it, let alone enhancing it, is hard.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

(Corrects brand name in fourth paragraph.)

To contact the author of this story:
Nisha Gopalan in Hong Kong at

To contact the editor responsible for this story:
Katrina Nicholas at