Seoul, 27 October 2014 – AMOREPACIFIC Corporation, the Seoul-based global beauty and personal care manufacturer, announced its mid/long-term strategy for the China business with the inauguration of its ‘Beauty Campus Shanghai’ located in Jiading District, Shanghai.

Completed in October 2014, the AMOREPACIFIC Beauty Campus Shanghai will be the hub of the company’s production, research, and distribution in China. The site spans 92,788㎡ which is 12 times the size of a soccer field with a building area of 41,001㎡. Beauty Campus Shanghai boasts a variety of environment-friendly facilities that are best in class in China. With world-class manufacturing facilities in compliance with Good Manufacturing Practice (GMP) - AMOREPACIFIC Beauty Campus Shanghai follows GMP Standards, a higher level of standards outlined by China FDA. It has one of the highest GMP standards in China. - and a strong logistics foothold, AMOREPACIFIC will be able to deliver quality products more efficiently and quickly to customers in China. The new hub will play a central role in achieving one of the company’s mid-term goals of accelerating business growth in China.

• - Expanded production capacity reflect increasing demand from Chinese consumers
• - Aims for sustainable business development through the production of superior-quality products, enhanced logistics competitiveness, and strengthened research & innovation capability

AMOREPACIFIC Beauty Campus Shanghai has production capacity of 13,000 tons, which amounts to 100 million products, representing a ten-fold increase compared to the previous production capacity. The production site will be organized into both cell production methods suited for small-quantity production and mass production methods prepared for rapidly growing demand in China market.

AMOREPACIFIC’s Shanghai plant focuses its production on Mamonde products and China-specific products for Innisfree and Etude. The site is in compliance with Good Manufacturing Practice (GMP) to ensure quality and safety of products and adopts Warehouse Management System (WMS) to manage stocks more efficiently. The new plant also features Reverse Osmosis Electrodeionization (RO/EDI) ultrapure water treatment system for supply of highly purified water, and hydrothermal system which helps prevent risks of microbial contamination.

Beauty Campus Shanghai will be processing orders and delivery from all over China. In particular, Beauty Campus Shanghai will be connected with local logistics centers in Shenyang and Chengdu, greatly improving the company’s logistics system. Well-connected logistics centers will shorten the product delivery times to an average of 3-4 days, which in the past used to take over 7 days.

Moreover, AMOREPACIFIC will continue to strengthen its China-base research and innovation capability through Beauty Campus Shanghai. The AMOREPACIFIC Research & Innovation Center, first opened in 2004 and established into Shanghai Research & Innovation Center Co., Ltd., in 2012, has been in charge of researching about consumers, cosmetics and healthy food, handling legal issues and permissions, and conducting open innovations. The Shanghai Research & Innovation, now located within AMOREPAICFIC Beauty Campus Shanghai, will strengthen cooperation with local universities, hospitals and institutions for studying Chinese customers’ skin and hair conditions, product effectiveness and safety in the future. Also, committed to developing and providing products and services tailored to the needs of Chinese customers, AMOREPACIFIC will continually conduct consumer research analysis and surveys in China to gain insights on local market trends, consumer characteristics and preferences.

AMOREPACIFIC Beauty Campus Shanghai is a four-story building comprised of manufacturing and storage facilities on the 1st and 2nd floors, rest areas on the 3rd floor, and office area and research center on 4th floor. Each area of the building is efficiently connected through passageways, providing comfortable work space for employees.

The new site also represents AMOREPACIFIC’s commitment to environmental sustainability. A new LNG gas system will reduce CO2 emissions by 146 tons and save up to RMB 970,000 yearly. The company predicts that chilled water storage system, using off-peak electricity, will cut electricity usage by 307MWh, which is equivalent to saving 150,000 RMB every year. Furthermore, the company plans to consistently monitor and improve its environmental management performances through renewed water purifying system and regular check-ups.

- 2020 Goal: to be No. 1 Asian Beauty Company and a Great Global Brand Company

With a vision to become a great global brand company by 2020, AMOREPACIFIC Group aims to achieve 12 trillion KRW in revenue, 15% rate of return, and 50% of total business volume coming from outside of Korea. In the first half of 2014, AMOREPACIFIC Corp.’s overseas business posted a growth of 38% like-for-like, with sales of 382.7 billion KRW which is equivalent to 20.2% of entire revenue for the period (Based on K-IFRS). The company expects overseas sales to reach 700 billion KRW in 2014, signaling more global business expansion in the coming years.

Chinese market has been the key driving factor behind strong growth of AMOREPACIFIC’s overseas business. AMOREPACIFIC recorded sales of 219.2 billion KRW in the first half of 2014, achieving growth of 25.5% from the same period last year. AMOREPACIFIC expects to bring in more than 450 billion KRW from China in 2014, which takes up 10% of the company’s total revenue. The company’s China subsidiary aims to achieve CAGR of 41% until 2020, acquiring over 3 trillion KRW in revenue, 28% of AMOREPACIFIC’s global sales.

To achieve this goal, AMOREPACIFIC will make following efforts in the China market focusing on the 5 global champion brands— Sulwhasoo, LANEIGE, Mamonde, Innisfree and Etude. In particular, AMOREPACIFIC will continue to develop Mamonde and Innisfree in response to the rapid expansion of the massitge market. Also, considering the fast growth of digital and roadshop channels in China, AMOREPACIFIC will reinforce the multi-channel strategies.

Furthermore, AMOREPACIFIC seeks to grow consistently in the Chinese market through localization of products and people, as well as CSR activities. Mamonde, which produces 70% of sales from China, will further expand the number of China-exclusive products that already fill up 50% of the shelves in the country. Local talents, taking up 89% of the company’s manpower in the China subsidiary, will continue to play core roles in implementing AMOREPACIFIC’s localization strategy. Also, the company will continue to contribute to the Chinese community through various CSR activities like Make Up Your Life Campaign for helping female cancer patients to regain confidence through makeup lessons, and Innisfree Green Life Campaign for planting trees to prevent desertification of Inner Mongolia.

Suh Kyung-bae, Chairman and CEO of AMOREPACIFIC Group, said “We have established the AMOREPACIFIC Beauty Campus here in Shanghai to proactively respond to the fast growing Chinese beauty market and to set a stepping stone for becoming a Great Global Brand Company by 2020. We will leverage innovation in research, production and logistics to provide our Chinese customers with top-quality products and to gain competitive edge in the Chinese cosmetics market. We will also work with the Chinese community in various areas, continuing to grow as a ‘great company’ transforming the lives of our customers.”

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About AMOREPACIFIC
Since 1945, AMOREPACIFIC has had a single, clear mission: to present its unique perception of beauty – namely what it calls the ‘Asian Beauty’ – to the world. As Korea’s leading beauty company, AMOREPACIFIC draws from its deep understanding of both nature and human to pursue harmony between inner and outer beauty. With its portfolio of nearly 30 cosmetics, personal care, and health care brands, AMOREPACIFIC is devoted to meeting the various lifestyles and needs of global consumers around the world: Asia, North America, and Europe. AMOREPACIFIC’s research centers located in Korea, China, and France are dedicated to sustainable R&D that combine the best of natural Asian ingredients and advanced bio-technology. With its world-class products, AMOREPACIFIC is acclaimed globally for the innovative ways in which it is transforming global beauty trends.

[Appendix 1] History of AMOREPACIFIC’s Business in China

• - 1992 Opened branch office in China
• - 1993 Established AMOREPACIFIC Cosmetics (Shenyang) Co., Ltd.
• - 1994 Completed construction of the Shenyang Plan
• - 1998 Opened AMOREPACIFIC Shenyang Beauty Plex
• - 2000 Established AMOREPACIFIC China
• - 2002 Inaugurated Shanghai plant; LANEIGE entered local department stores
• - 2004 Opened Shanghai R&I Center
• - 2005 Launched Mamonde in China
• - 2011 Launched Sulwhasoo in China
• - 2011 Expanded the ‘Makeup Your Life’ Campaign to China
• - 2012 Launched Innisfree in China
• - 2013 Launched Etude in China
• - 2014 Inaugurated Beauty Campus Shanghai

AMOREPACIFIC first entered the Chinese market with the establishment of its branch office in 1992. After a series of market researches in China, the company decided to start its business in Shenyang, establishing AMOREPACIFIC Cosmetics (Shenyang) CO., Ltd in 1993 and completing the construction of the Shenyang Plant in the following year. AMOREPACIFIC China first launched the business in Northeastern region leveraging its strength in skincare products to target customers living in a dry, continental climate. In 2000, AMOREPACIFIC established AMOREPACIFIC China in Shanghai, and launched full-scale business. With the launch of LANEIGE in 2002, it entered the premium market and targeted diverse customer range with launch of Mamonde in 2005, Sulwhasoo in 2011, Innisfree in 2012, and Etude in 2013. AMOREPACIFIC’s business in China has shown annual growth of nearly 50% after the initial establishment. The company has received love from the Chinese customers through various CSR activities. The completion of Beauty Campus Shanghai in 2014 will set a foundation for sustainable business and quick delivery of high quality products for China customers.

[Appendix 2] AMOREPACIFIC Beauty Campus Shanghai, where ‘Asian Beauty’ is created

AMOREPACIFIC’s China business began with the establishment of a manufacturing plant in Shenyang in 1994. With the completion of Shanghai plant in July 2002, the company rapidly expanded its China business. Starting October 2014, AMOREPACIFIC’s newly integrated complex with production, research and innovation and logistics centers in Shanghai will respond to the dramatically growing needs in the China market. The Beauty Campus Shanghai is a four-story building comprised of manufacturing and storage facilities on the 1st and 2nd floors, rest area with cafeteria and gym on the 3rd floor, and office area and research center on the 4th floor. By dividing manufacturing/storage facilities on the lower floors and research/management facilities in the upper floors, the building was planned under a co-integrated structure linked by a single organic system which facilitated space division by GMP (Good Manufacturing Practice) levels, hence, maximizing production efficiency.

Overview

• - Date of Completion: October 2014
• - Construction Period: December 2011 ~ February 2014 (Test Operation in April)
• - Location: Maluzhen, Jiading District, Shanghai, P.R.C. (上海市 嘉定区 马陆镇)
• - Purpose: Cosmetics production, logistics center, research & development
• - Compound Size: Lot area 92,788㎡, Gross area 73,871㎡
• - Production Capacity: (Based on current facility) Production 13,000t, Packaging 100 million products, Logistics 10,000 PLT
• - Number of employees: approximately 300

Major functions of Beauty Campus Shanghai

- Production

AMOREPACIFIC’s Beauty Campus Shanghai has the production capacity of 13,000 tons and 100 million products annually. Designed with future expansion in mind, the site enables an efficient layout of production equipments so that the company can respond with flexibility to rapidly growing and changing Chinese market. The new plant also adopts automated control system. All processes are calibrated for efficiency with a one-way flow from production to logistics parts.

To ensure quality and safety of products manufactured in the Beauty Campus Shanghai, AMOREPACIFIC has adopted Good Manufacturing Practice (GMP). The center categorizes entrance and sanitary suits according to GMP levels. Also, in order to prevent contamination from outside and storing materials, the company received sanitation and ISO22716 certification from China Food and Drug Administration. Moreover, the new plant features Reverse Osmosis Electrodeionization (RO/EDI) ultrapure water treatment system that generates highly purified water for products. Hydrothermal system helps prevent risks of microbial contamination. The company also enhanced quality control standards with a new production management system, while adopting Warehouse Management System (WMS) for a more efficient management of stocks.

As the foothold of AMOREPACIFIC’s production in China, Beauty Campus Shanghai will gradually extend its production capacity in the future to reflect increasing local market demands. The plant currently possesses a production capacity worth 1 trillion KRW (2014). The capacity will be expanded to 1.9 trillion KRW by 2019 through increasing production equipments, and to 2.8 trillion KRW by 2020 through expansion in remaining lands.

- Logistics

Beauty Campus Shanghai will be processing orders and delivery from all over China. It will be connected with local logistics centers in Shenyang and Chengdu, greatly improving the company’s logistics system which used to take over 7 days to ship products in China. Well-connected logistics centers will shorten the product delivery times to an average of 3-4 days, which in the past used to take over 7 days. As the logistics center of continental China, AMOREPACIFIC is putting in consistent efforts in improving its competitiveness in logistics.

- R&I Center

Since 2004, AMOREPACIFIC Shanghai R&I Center has been carrying out various projects on consumer and market research, cosmetics and healthcare product development, administration works regarding regulations and permissions, open innovation, etc. In line with the company’s commitment to strengthen communication with Chinese customers and enhance R&I competitiveness, AMOREPACIFIC launched ‘AMOREPACIFIC China Dermatologist Advisory Committee’ together with renowned skin specialists in China and is conducting proactive local research. The company also signed MOUs with a number of local institutions like Kunming Institute of Botany and China Pharmaceutical University to study various ingredients and their efficacies. At the 30th anniversary of China Association of Fragrance Flavour and Cosmetics Industries Award ceremonies held in September, AMOREPACIFIC received Technology Innovation Award, Best Company Contribution Award, Best Legal Service Award for Groups Award, and Leader in Legal Service Award for its technology embedded in products such as BB Cushion, various efforts in institutionalization of regulations and law for cosmetic products, and CSR activities across all parts of the society.

AMOREPACIFIC Beauty Campus Shanghai in Detail

- Organic Connection and Optimization

The Beauty Campus Shanghai consists of production facilities in lower levels and management facilities in upper levels, which are vertically inter-connected to one another. The 1^st floor houses the manufacturing plant, along with logistics facilities storing all raw materials and end products. Manufacturing lines on the 1^st and 2^nd floor are connected through passageways. The 3^rd floor has leisure and welfare areas which provide open spaces for employees to freely communicate. The Beauty Campus Shanghai building is mapped out in a way that can easily differentiate work spaces according to GMP levels and maximize production efficiency.

- Eco-friendly System

Committed to fulfilling social responsibility and while improving operation efficiency, AMOREPACIFIC adopted various environmental-friendly facilities, such as chilled water storage system, LNG gas system, air quality control facilities, etc. Moreover, the building is constructed with eco-friendly supplies and lightings.

- Welfare Facilities

The new building provides improved office environment for employees. The new building has a cafeteria, fitness center, rest areas and multi-purpose facilities where all employees across production, logistics and R&D departments can come together and communicate freely.

- Versatile Gallery

A multi-purpose gallery in the lobby area of Beauty Campus Shanghai provides both unique cultural experience and rest areas for its occupants and visitors. At the front part of the gallery lies a large-scale installation titled ‘Meteorites’ by young Chinese artist Li Hui. Illustrating falling meteors and their fragments with stainless steel, Li’s art piece blends well with the surrounding areas making the space more inviting.