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.

South Korea's cosmetic brands may find that beauty isn't skin deep after all.

Amorepacific Corp. and LG Household & Health Care Ltd. shares have had a tough year. They've trailed the broader market's gains, hurt particularly when South Korea implemented the THAAD anti-missile system that intensified tensions with China.

They're now off their year-lows, but don't expect there to be much of a catch up. Korea's cosmetics companies have a bigger challenge -- changing Chinese tastes.

Missile Attack
Shares in Amorepacific and LG Household have failed to keep pace with the broader market

China's consumers, traditionally big buyers of skin care but not necessarily makeup, are dabbling in color. That's especially evident in sales at South Korean duty-free outlets: Where tourists once flocked for their favorite snail cream or mask used by a K-pop starlet, they're now snapping up Dior and Givenchy lipsticks and eye shadows.

Color-makeup sales at duty-free stores increased at a compound annual growth rate of 10.8 percent over the past five years, versus 8.7 percent for skin care. In April and May last year, the top 10 products sold at Lotte and SM duty-free counters were all Korean brands, most of them skin-care, according to Macquarie Group Ltd. By May this year, not a single Korean name made the top five, and color makeup dominated.

No longer condemned as decadent capitalism, makeup is becoming a big trend on the mainland. Amorepacific, whose Dual Eye Cream has won it fans in Hollywood, and LG Household stand to miss out, because both are focused heavily on skin care. Macquarie has an underperform rating on the duo.

China is an important market, however, and can't be ignored. Amorepacific made almost a fifth of its sales there last year, while 7 percent of LG Household's revenue comes from Asia's largest economy. Chinese consumers were behind a 68 percent rise in LG Household's cosmetics sales in South Korea last year, according to Bloomberg Intelligence analyst Catherine Lim. That growth is likely to have taken a hit after China banned groups of holiday makers from going to South Korea, where mainlanders account for about half of all visitors.

No Amore Visitors
During the first quarter, Chinese tourists to South Korea fell 9.2 percent, the biggest drop among mainlanders' top five destinations
Source: Bloomberg Intelligence
Note: Data shows year-on-year growth of Chinese tourists in their top five visited destinations .

This seismic shift in Chinese beauty trends hasn't been reflected by the sell-side.

There are 19 buy ratings on Amorepacific, 18 holds and one sell, data compiled by Bloomberg show. Goldman Sachs Group Inc. recently added the company to its GS Sustain 50 list of global stocks it feels can adapt to a more challenging environment. LG Household is an even bigger hit, with 27 buys, nine holds and one sell.

To be sure, both brands are increasing their exposure to makeup, and no-one's suggesting face creams will die an ignominious death. But Korea's cosmetics giants will need to diversify quickly lest their appeal fade.

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

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Nisha Gopalan in Hong Kong at

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Katrina Nicholas at