MONTHLY FOCUS NO 5 - 2013

Anti-aging as a New Growth Engine

By KANG Chan-Koo, CHUN Sang-In, Ahn Shin-Hyun

I. Introduction

1. Emergence of Anti-aging as a Consumer Social issue

Anti-aging is an increasingly important part of consumer products and services. The number
of anti-aging related news items, limited to 7 in the 1990s has skyrocketed to 2,944 since
2000. The number of patents for anti-aging related items has also soared from four to 248
over the same time period. This indicates that there has been an explosive increase in interest
in anti-aging in many sectors. In a recent SERICEO poll conducted by Samsung Economic
Research Institute, 84.5% of corporate executives expected that the anti-aging market will
only grow stronger in the future.

Figure 1. Trends in Anti-aging Related News, Papers and Patents

(News stories) (Papers, patents news stories)

1000 958 300

News Papers Patents
뉴스 논문 특허 840

750
200
500 191

100
250
29 50
0
0 0
1990 1993 1996 1999 2002 2005 2008 2011 (Year)
Source: KINDS, Integrated search for news articles; Elsevier, Research papers search; and Korea Intellectual Property Office,
Korea Intellectual Property Rights Information Service

2. Anti-aging as a Concept of Aging Management

Despite increasing social interest in anti-aging, the term itself has no unitary definition. This
not only because there is no clear-cut definition of “aging,” but also because anti-aging is not
a scientific term but a new word with a strongly commercial nature. In the academic world,
anti-aging is usually associated with novel technologies that can delay the aging process,
while the medical community uses the term in the context of diagnosis and treatment of
geriatric diseases. In industry, anti-aging refers to a wide array of products and services that
claim to make people look younger. This study focuses on the commercial understanding of
anti-aging. Anti-aging is thus defined here as a purpose-oriented concept for technologies,
products and businesses purporting to “delay physical aging, or ameliorate and manage the
symptoms of aging.”

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Figure 2. Anti-aging Concepts

High

Accelerated aging
Normal aging
Anti-aging

Physical
f unctions

Anti-aging technologies
Low and products

Younger Age Older

Source: Redrafted by SERI, on the basis of Kohrt, W. M. et al. (2006). Anti-Aging Strategies: Science or Hype? Menopause
Management, 15(3).

3. Industry Analysis: Skin Aging

Cosmetics and medical beauty services are leading the anti-aging industry. As skin is subject
to external environmental conditions like UV radiation, pollution, temperature and humidity,
skin care is an obvious choice to tackle compared to other anti-aging treatments. The current
social atmosphere that judges people’s health and age by skin appearance has also played a
large part in the industry’s growth. Patents related to skin aging and cosmetic products
accounted for 50-80% of all anti-aging-related patent applications filed over the past 10 years.

Accordingly, this study attempts to analyze the anti-aging industry in terms of skin care in the
medical, consumer goods and services sectors. Along with this sectoral analysis, this paper
covers the industry’s competition paradigms, convergence in products and services, and
government policies.

II. Background for the Emergence of the Anti-aging Industry

1. Socio-demographic Factors

The share for older people in the population is growing as a result of declining fertility rates
and increasing life expectancies. In Korea, share for people 65 and over rose from 7.2% in
2000 to 10.9% in 2010. The elderly share of the population is expected to surge to 15.7% by
2020. Major developed countries also face similar situations, with the share for the elderly in
2020 at 16.2% in the United States, 20.2% in France and 20.6% in Japan.

Figure 3. Projected Changes in Korea’s Elderly Population

(Unit: thousand, %)
Year Aged over 65 Aged over 70 Aged over 80

Number Share Number Share Number Share

2000 3,395 7.2 2,014 4.3 483 1.0

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2005 4,383 9.1 2,686 5.6 678 1.4

2010 5,354 10.9 3,557 7.2 969 2.0

2015 6,445 12.9 4,344 8.7 1,390 2.8

2020 7,821 15.7 5,231 10.5 1.877 3.8

Source: Statistics Korea (2005), “Results of Special Population Projections.” Reported from the Ministry of Health and Welfare
(2011), “The Third National Health Promotion Master Plan (2011-2020)”

Along with aging, the cohort of “active seniors” investing in health and youth is emerging as
a key consumer group. A leading example is the rapid increase in visits to the dermatologist
for the 50-plus generation. A greater emphasis on a more sophisticated and youthful
appearance is also prevailing in the culture, to such an extent that appearance is being
conflated with ability. There has, for example, been massive growth in the number of men
who lavish money on fashion and beauty care, the so-called “grooming tribe.”

2. Economic and Policy Factors

The anti-aging industry’s growth has tracked improvements in income levels. Regardless of
regional, cultural and ethnic characteristics, per capita spending on personal care 1 has
increased proportionally with per capita GDP. Income growth in effect acts as a mechanism
to increase the use of anti-aging products and spurs interest in products with greater
functionality.

Figure 4. Per Capita Personal Care Spending Relative to Per Capita GDP by Country (2011)

Per capita spending on personal care (dollars)

Australia
800
US

600 Britain France

Canada
Korea
400 Japan
Brazil
200
China Russia
Per capita GDP
0 (dollars)

0 10,000 20,000 30,000 40,000 50,000 60,000 70,000

Source: Redrawn based on Euromonitor International (2012), Euromonitor C&C

According to the results of a time series analysis for major countries, expansion in anti-aging
demand occurs when the ranks of the middle class swell. The proportion of spending on
personal care appears particularly high (relative to per capita consumer expenditure) when
per capita GDP reaches about $5,000 to $15,000. For these reasons, future growth potential in
the anti-aging market is expected to be greater in emerging countries, including China, Russia
and Brazil, than in developed countries.

1
Products or services necessary for comfort or beautification, such as cosmetics, toiletries, and non-medical
massage and hair care services
3
 Figure 5. Share for Spending on Personal Care vs. Per Capita Consumer Expenditures (1992-
2011)

Share for personal care (%)

4%
4  China  Japan Korea × Brazil ᛡ US

● France + UK + Britain — Australia Russia  Canada

3%
3

2%
2

1%
1

GDP per capita (dollars)

0%
0

00 10,000
10,000 20,000
20,000 30,000
30,000 40,000
40,000 50,000
50,000 60,000
60,000 70,000
70,000

Source: Redrawn based on Euromonitor International (2012), Euromonitor C&C

From a policy perspective, the future of the anti-aging industry looks bright, and accordingly,
some governments have been trying to nurture the industry. Major developed countries have
expanded health policy from disease treatment to health management and aging prevention,
while governments in emerging countries like Korea, China and Brazil have strengthened
support for the cosmetics industry through rationalization of regulations and expansion of
related R&D budgets.

3. Technological and Industrial Factors

Technological convergence has been gaining speed in the anti-aging industry. IT technology
in particular is generating new business opportunities in daily life care. Remote life care
consulting, smartphone beauty apps and smartphone-linked skin diagnostic devices are some
of the new products coming online. Omnidirectional bio-tech and medical technology
innovations like stem cells, longevity genes and brain science are also contributing to the
anti-aging industry, flooding the market with stem-cell activating cosmetic products, gene-
activated cosmetics and peptide-based skin care products. Alternative medicine,2 including
oriental herbal tonics, yoga and herbology, is also coming into increasing use in the
development of anti-aging products like oriental medicine cosmetics.

III. Trends in the Anti-aging Industry

As of 2011, Korea’s anti-aging market is approximately 11.9 trillion won and growing at an
average annual rate of 10.1%. The cosmetics sector leads growth at 75% market share, while
the medical and services sectors account for 18% and 7% respectively. This growth tendency
is all the more impressive considering sluggish domestic economic growth, and weak private
consumption.

2
WHO defines “alternative medicine” as the sum total of knowledge and experience of therapies that existed
before the birth and spread of modern medicine, and which are still being used at present.
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Figure 6. Current Status of Korea’s Anti-aging Market (2011)

Source: Calculated by the Samsung Economic Research Institute on the basis of each sector’s market information and
prospects in 2011

With the anti-aging industry emerging as a future growth industry, its competition paradigm
is also changing. In the customer and technology aspects, the medical and consumer goods
sectors are overlapping, heating up competition for the same consumer groups. Likewise,
aesthetic services are seeking continuous improvement and change by use of exclusive
cosmetics and introduction of consulting relationships with dermatologists.

Figure 7. Matrix Analysis of the Anti-aging Industry

Note: Included in the category of patients other than dermatological patients are people taking keen interest in aging signs like
wrinkles and age spots.

1. Medical Sector

Dermatology is expanding its business from treatment of skin diseases to anti-aging skin care.
This is because a number of new technologies like Botox, filler procedures, micro-needles,

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laser treatments and ablative modalities have been developed to attenuate the symptoms of
aging. With anti-aging care becoming a key source of revenues for dermatologists,
specialized business models like three-month courses, life consulting and membership
schemes, all of which are distinct from existing hospitals and clinics, are growing rapidly.
Dermatology departments have also established their own cosmetic research centers and
jumped into direct development and sale of cosmetic products on the basis of their clinical
expertise.

Home-use aesthetic devices that claim to replicate professional treatments are set to emerge
as a new business area, and will become a new growth engine for both medical equipment
manufacturers and electronics companies. Teamed up with the maker of Fraxel3 medical
laser technology, Philips has already developed and marketed an anti-aging home laser device
that is effective for reducing fine lines and improving skin texture.

2. Consumer Goods Sector

The cosmetic industry is seeking anti-aging remedies while accelerating product innovations.
L’Oreal and P&G for example, have established their own unique approach on the basis of
clinical studies tracking skin aging over 10 to 20 years, resulting in a slew of functional
cosmetic products like wrinkle improvement essence. In the case of Korea, after the
institutionalization of functional cosmetics in 2000, production performance has shown a 5.6-
fold increase from 270 billion won in 2001 to 1.5187 trillion won in 2010, capturing almost
25% of the nation’s total cosmetics market.

In consumer goods, beauty home appliances and beauty foods will be revitalized in the future.
Home appliance manufacturers, have recently launched humidifiers and ionizers that provide
additional anti-aging benefits. Both food and pharmaceutical companies are vigorously
pursuing beauty food development, based on “inner beauty” concepts.

3. Services

Market polarization in aesthetic services is emerging, between the mass and premium
markets, led by franchise skin care shops and luxury spas. Diversification is also taking place
through convergence with other industries like medical care, fitness centers, and tourism.
Food and cosmetic manufacturers are making aggressive forays into the sector of aesthetic
services.

In the services sector, wellness resorts are most likely to draw wide attention as mental health
has been proven to have anti-aging effects. In developed countries, wellness resorts are
increasingly gaining popularity by offering package services that combine modern medicine,
like physician diagnosis, ergotherapy and dietary lifestyle consulting, with alternative
treatments like spas, meditation and yoga. Such wellness resorts are expected to appeal to a
new generation of affluent active seniors who put high value on sympathetic emotions.

3
The Fraxel laser is a technology that delivers the potency of microscopic ablative treatments for skin
resurfacing and rejuvenation by using 1000 to 2000 laser pulses in each square centimeter.
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IV. Implications

Anti-aging has already created a large market in recent years, but when considering
worldwide aging, economic growth in emerging countries and technological innovations, it
has great potential to grow further. If the targets of anti-aging are expanded from the skin to
the nervous, circulatory and musculoskeletal system, the anti-aging market can be ten times
greater than it is today. In consumer markets, anti-aging functions are also emerging as key
elements of differentiation, leading to convergence with other industries like IT, clothing food
and construction. Korea’s anti-aging industry however, has focused on the domestic market
and thus lacks global competitiveness in terms of scale and brand power. Both the
government and companies should thus make active responses to effectively enter the global
anti-aging market.

Figure 8. Corporate and Government Strategies for the Anti-aging Industry

Companies in the medical and cosmetics industries as well as in non-anti-aging industries

should explore new business opportunities from the perspective of combining health and
beauty. Manufacturers of consumer goods like electronics, automobiles, food and clothing
should build differentiation through anti-aging convergence products that combine
knowledge of skin science and related materials technologies. Fast fashion brand UNIQLO
and outdoor sportswear company Millet have recently added anti-aging effects to outerwear
by using UV-blocking fabric materials. With increasing need for anti-aging functional
materials, a number of new business opportunities will occur for fine chemical and materials
companies. A good example is set by global chemical companies that make investments in
earnest in the anti-aging materials business. Through the purchase of Cognis for 3.1 billion
euro, BASF achieved the top ranking in cosmetics and household items. Merck opened its
new CTC (Cosmetic Technology Center) to spur development of anti-aging active ingredients.

In carrying out anti-aging business, it is critically important to formulate and implement a

business strategy of balancing between technology and marketing. Although the greater
importance lies in technological prowess due to business attributes, there is also a risk that
companies could miss out on both customers and markets if their preoccupation with
technological completeness might delay their entry into market formation and growth stages
in a timely fashion. Priority in setting global market entry strategies must be given to Asia’s
emerging markets where consumers have similar skin characteristics.

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The government should also nurture the anti-aging industry along the lines of traditional key
industries like IT, automobiles, shipbuilding and chemicals. The anti-aging industry is a
powerful engine for employment creation, and its low energy consumption and high added
value can make significant positive impact on society. Though Korea’s anti-aging industry
still falls short of desired levels, it has great potential to grow into a key industry through
institutional cooperation and R&D investment. The export environment can be improved
through enhancement of Korea’s nation brand and overseas PR activities. One such
possibility has already been well demonstrated by the medical beauty sector which dominates
medical tourism. Robust performance by Korean cosmetics represents another example. It is
also desirable to cultivate anti-aging industry clusters by benchmarking France’s Cosmetic
Valley, a hub composed of six universities, 200 research laboratories, 550 companies and
7,780 researchers.

With respect to the field of basic research, there is a need to create a nationwide research
institute with a mission of systematically conducting basic research on overall physical anti-
aging. Basic aging research, including studies on the mechanisms of aging and the genetics of
longevity, have strong ripple effects, but should be taken up at the government level, as they
have high costs over a long period of time. With the establishment of the NIA (National
Institute on Aging) as part of the NIH (National Institute of Health), the United States has led
the way on aging research around the world. In the case of Japan, the NILS (National
Institute for Longevity Science) has played a central role in geriatric disease research as well
as in related policy research. Through such basic research, Korea also will be able to
strengthen anti-aging technological prowess and eventually boost overall competitiveness
across the nation’s industries.

NIA: The central headquarters of US anti-aging research

▶ The NIA provides leadership in systematic aging research and health information
dissemination at the federal government level

- Established in 1974 by Congress as a research organization exclusively dedicated to the study

of aging
- 940 employees, with an annual budget of $1.1 billion
- Four areas of research concentration: Prevention and treatment of Alzheimer’s disease;
etiology and prevention of seven geriatric diseases (arthritis, high blood pressure, heart
disease, diabetes, respiratory disease, stroke and cancer); molecular biomechanisms of aging;
and lifestyle habits and social institutions, including pension schemes and medical care
systems)

(Source: NIA Homepage www.nia.nih.org)