The Ministry of Small and Medium Enterprises and Startups (SMBA), led by Minister Han Seung-sook, stated on the 13th that it held a meeting with K-beauty companies at the headquarters of Aoudin Futures, a cosmetics manufacturing and sales firm. The session aimed to address the adverse impacts of the ongoing conflict in the Middle East, which has intensified supply chain disruptions for the industry.

K-beauty continues to experience exceptional growth, breaking export records each year, fueled by the relentless efforts of small and medium-sized enterprises. However, the protracted regional conflict has escalated challenges across the sector, necessitating comprehensive support measures to monitor damage and facilitate recovery.

During the meeting, Minister Han expressed gratitude to the businesses that serve as hidden contributors to K-beauty’s global success, despite facing significant difficulties from geopolitical tensions and rising tariffs in the U.S. Most companies present highlighted supply chain issues, particularly concerning raw materials and packaging materials, attributing these disruptions to the ongoing conflict. ODM firms also reported delays that compromised delivery timeliness to their clients.

Logistical challenges were prominent in discussions, with participants pointing to soaring transportation costs and delays affecting both the import of raw materials and the export of cosmetics. Concerns were raised that persistent disruptions could jeopardize K-beauty’s global competitiveness, underscoring the urgency for effective remedial actions.

In response to these challenges, Minister Han announced that the government is mobilizing all available policy tools to alleviate hardships faced by affected SMEs. This includes monitoring the price adjustments of raw materials and the designation of critical items under a crisis framework. Additionally, the government has secured supplementary budgets, passing a legislative proposal that allocates 100 billion KRW for export vouchers and 250 billion KRW for emergency management stabilization support, which will be quickly implemented to aid SMEs.

Moreover, Oh Yu-kyung, the head of the Food and Drug Administration, noted that as of April 3, a temporary allowance has been established for companies to use alternative packaging materials and affix necessary labeling via stickers for six months. This initiative aims to mitigate supply challenges while providing companies with essential regulatory information to support their international market entry efforts through extensive online training and resource sharing.

Additionally, a memorandum of understanding was signed among the SMBA, the Food and Drug Administration, Korea Eximbank, and the Korea Technology Finance Corporation to bolster global market access for SMEs. The agreement facilitates cooperative systems for financial support and expanded investment aimed at alleviating challenges faced by export firms.

The export scale of small and medium-sized enterprises in the cosmetics sector is projected to reach $4.47 billion in 2022, with estimates of $5.32 billion in 2023 and $6.85 billion in 2024, rising to $8.32 billion by 2025. This translates to an average annual growth rate of nearly 23%. As of February this year, exports already reached approximately $1.4 billion, surpassing the same period from the previous year, indicating a continued upward trajectory.

Notably, the proportion of K-beauty exports represented by small and medium-sized enterprises significantly increased from 56.2% in 2022 to 72.8% last year, demonstrating their vital role in K-beauty's globalization. The number of exporting SMEs has also surged, surpassing 10,000 for the first time last year, marking a substantial growth in new entrants over the past three years.

An important trend is the diversification of countries into which SMEs are exporting, gradually reducing reliance on previously dominant markets. The focus has shifted toward penetrating emerging markets in the Middle East and CIS, with the number of export destinations exceeding 200 for the first time last year. This diversification is particularly relevant as the proportion of exports to China and Hong Kong decreases, while double-digit growth rates are observed in North American and EU markets, indicating strategic repositioning and successful market adjustments.