- Environmentally friendly household goods with improved fragrance and design launched

- Enhanced competitiveness in cosmetic markets targeting women over 40

On April 19th, LG Household & Health announced its performance in the first quarter. Sales totaled 302.9 billion won and operating profit amounted to 40.5 billion won, a 12.2 percent growth and a 30.1 percent growth year-on-year, respectively. The performance, which far exceeded the external forecast, set a new record high in the company’s history.

LG H&H officials explained that business & brand restructuring, which was initiated under the “select and focus” policy over the past two years since CEO Suk Cha took office in 2005, has been completed successfully. Based on the outcome of restructuring efforts, the company plans to drive growth at full scale beginning this year. The outstanding performance in the first quarter is significant proof that this strategy is becoming tangible.

In phase two, an innovation process that will continue till 2008, “value innovation” focusing on cost-savings and customer value capturing will be pursued. The company forecasts that profitability will rise further as it creates new business, customers and markets differentiated from competitors while still maintaining full-speed growth in sales.

◆ Launch of environmentally friendly household goods with improved fragrance and design

In the past, consumption patterns in household goods were driven by low price promotion and price competition. Today, however, consumers increasingly prefer environmentally friendly products and personalized fragrance and designs.

Therefore, new products such as ReEn Oriental Medicine-based Shampoo, which uses natural substances and an Oriental medicine concept, and Safe Germinated Unmilled Rice, a naturally sourced dishwashing detergent, have been launched. In addition, premium products have been introduced by upgrading the fragrance and design of Beyond, a naturalism-based bath & body product brand.

In addition, growing sales of premium products in toothpastes, shampoos and sanitary napkins and reduction of discount rates have resulted in significant improvement in profitability. This consumption pattern is likely to expand further.

◆ Competition enhancement in cosmetics market targeting women over 40 A

s a result of an aging population and a growing share of women working, women in their 40s and older have emerged as an important consumer segment in the cosmetic market.

Therefore, LG Household & Health has introduced a number of high-end products that address skin problems middle-aged women experience, such as reduction of female hormone. In particular, Whoo Jinyul, which uses a female hormone, and OHUI The First, which is applied with bio-engineering, are gaining popularity among middle-aged women active as opinion leaders.

In the future, the company plans to launch high-end cosmetics targeting silver group as well in prestige brands, including OHUI and Whoo, and promote cosmetics targeting women aged over 40 as a core product group driving the growth of cosmetics business.

◆ Chinese cosmetics market shifts to premium products

Since entering the Chinese market in 1996, LG Household & Health has focused on tapping the mid/low-priced product segment. Beginning last year, however, just as in the Korean market, the company has shifted its focus to premium products and initiated differentiated marketing.

OHUI/Whoo and ISA KNOX were launched in high-end local department stores last year and won a positive response from local consumers despite competition against leading multi-national brands. The number of these brand’s stores opened in department stores has increased rapidly in a short period of time.

The number of OHUI/Whoo shops at department stores reached 35 and that of ISA KNOX totaled 148 at the end of first quarter this year. Going forward, they are likely to have greater presence in department stores. Based on this, in its first quarter, LG H&H achieved a 34.1 percent year-on-year sales growth in its overseas business. Profitability also improved sharply, taking the company beyond its break-even point.

◆ Entry into health functional food and green tea markets

Cheongyunjin is a health improvement food brand differentiated from conventional products by applying the formulas of western medicine to the base of Oriental medicine. Achieving a two-digit growth rate each month this year, it is very likely to reach over 30 billion won in sales and position as a new hit product.

Lu:, an organically grown green tea, was sold at limited stores only in the beginning of its launch. However, thanks to strong response from repeat buyers, it is now available at about 200 large outlets and its presence will continue to increase.