Korea's VIG buys The Skin Factory

The size of the transaction is in the range of KRW150-200 billion ($132-177 million), according to a source close to the situation. It includes an approximately KRW100 billion equity commitment from VIG, plus debt financing and an LP co-investment.

This is the third investment from VIG’s fourth fund, which closed at $810 million last year. It follows the acquisitions of online-offline English language tutor D.Share and funeral services provider Preed, which was rolled up with Joun, a similar company in Fund II.

“The additional firepower from co-investment definitely gives us greater flexibility and opens up a greater number of potential targets,” Jason Shin, a managing partner at VIG, told AVCJ after Fund IV’s final close. “We are currently looking at a few opportunities that are up to $500 million valuation mark, which is now easily in our comfort zone.”

Launched in 2016, Kundal distinguishes itself as the only sizeable online-native home and personal care (HPC) brand in Korea. It markets about 170 products with a focus on haircare and skincare. Sales are more than 95% online, leveraging partnerships with channels such as Coupang, Naver, and 11Street in Korea, as well as Dairy Farm, Shopee, and Lazada overseas.

Revenue from the core product range is said to have grown 100% a year since inception, reaching KRW60 billion in 2020. However, total revenue for 2020 was KRW120 million due to an anomalous surge in global hand sanitizer demand during the pandemic. International sales accounted for KRW10 billion of revenue in 2020, excluding hand sanitizer, across Asia, Europe, and North America.

The Skin Factory was founded by merchandizers at local e-commerce business WeMakePrice, who had learned from experience that many HPC products use the same ingredients and are therefore hard to differentiate. The company addressed this issue with a strong focus on unique scents and sleeker packaging than the industry’s offline-focused incumbents.

Growth plans include further the development of new products, especially in homecare areas such as toothpaste, pet care, and detergent. The Skin Factory launched its homecare line last year and claims to have the second-bestselling fragrance diffuser on Coupang. Efforts will also be made to further globalize the sales base and leverage the Korean wave marketing phenomenon.

“Kundal is a unique, groundbreaking brand that shifts the dynamics of a low-growth offline HPC market, which was controlled by a few chaebol-affiliated brands,” Chulmin Lee, a managing partner at VIG, said in a statement. “We are strongly convinced that Kundal is set to evolve into a leading K-personal care brand that provides customers with distinctive values through product and sales channel differentiation.”

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• Topics
• North Asia
• Consumer
• Buyouts
• South Korea
• VIG Partners