American hair products purveyor Farouk Systems Inc. and South Korean skin-care powerhouse LG Household and Health Care Ltd. have partnered on a joint venture projected to generate $1 billion in retail sales in its initial year in operation.
Ownership of the joint venture, called LG Farouk Co., is split evenly between Farouk Systems and LG Household and Health Care. LG Farouk Co. will establish a manufacturing facility in South Korea to produce and spread Farouk Systems’ products across Asia, and Farouk Systems will be charged with bringing LG’s merchandise to salons in the U.S.
“The strength of our name together with the LG name is very powerful,” said Farouk Shami, who returned to the Houston-based company that bears his name as chief executive officer earlier this year and sits on the board of the joint venture. “I couldn’t get into the Asian market, and they couldn’t much get into the American market, but, with a new company, we can help strengthen each other.”
Shami traced the origins of the joint venture back to a deal struck about four years ago for LG Household and Health Care to take more than 80 percent of Farouk Systems’ distributorship in South Korea. With that deal netting returns for LG, he divulged the South Korean firm offered to acquire Farouk Systems. He rebuffed the offer in favor of a combined company.
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“[BioSilk] is very big there, and that is really what brought them [LG] to buy into Farouk Systems in [South] Korea. It alone was over $50 million a year. Now, [launching BioSilk] in China, they predict it will be $500 million in the first year,” Shami said. Discussing total retail sales, Shami was confident LG Farouk Co. would swiftly be a billion-dollar enterprise. News reports have pegged Farouk Systems’ revenues at more than $1 billion.
Tapping into the innovation wells at both companies, Shami pointed to hair color as a priority. “We are looking at improvement in hair tools, but my focus is a new way of coloring hair and how to distribute color,” he said, noting Farouk Systems is already harnessing LG’s scientific know-how to secure patents. Shami has obtained 25 patents to date.
LG Household and Health Care, which WWD Beauty Inc estimated registered $2.25 billion in 2015 beauty sales, introduced the skin-care brand Belif to Sephora’s American arm last year and lists 35 U.S. locations of its beauty chain The Face Shop on the retail concept’s international web site. In addition, it’s skin-care brand Su:m37 is available online at mass-market retailers in the U.S. such as Wal-Mart and Jet.com.
LG controls numerous skin-care, makeup, fragrance, hair-care and body-care lines that it hasn’t launched in the U.S. Among the brands WWD Beauty Inc has identified in its wide-ranging portfolio are O Hui, Whoo, The Saga of Xiu, Isa Knox, LacVert, Vonin, CathyCat, Sooryehan, Elastine, Reen, Organist, Curair and VDL.
Shami said Farouk Systems would likely start to disperse LG’s products through its network of salons early next year. He stressed, “There is so much demand for South Korean skin care in the United States.”