2019 LG HOUSEHOLD & HEALTH CARE CSR REPORT 031

China

In China, one of LG H&H’s major target markets for global business, we launched the Royal Privilege (Yeheonbo) line to boost the continuous growth of The History of Whoo’s Cheonyuldan and Cheongidan lines and increase the value as a premium brand, thereby solidifying the position as a global premium brand. Su:m37° set its position as a premium brand by promoting the royal fermentation line Losec Summa as its main line. O HUI is focused on communication with target markets with The First Geniture line. In terms of the home and personal care business, we are positioning our products includ-ing Himalaya Pink Salt Toothpaste and Veilment Spa Body Wash as premium ones through online and H&B channels.

As the expansion of overseas sales channels is emerging as a crucial element in the growth of enterprises due to the domestic economic slump, it is impor-tant to constantly pioneer overseas markets to increase the values of global brands for continuous growth. In addition, amid the growing attention focused on digital transformation that applies digital technologies across the entire in-dustrial sector to innovate conventional structures, companies should achieve competitiveness through strategic changes based on digital technologies.

Major Activities in Overseas Business

Goals

��〮�Continuous Expansion of Overseas BusinessBy stepping into overseas markets, LG H&H aims to expand the target markets and bolster its business structure further so that we can operate stably even with changes in business conditions. Regard-ing digital transformation, we will also apply digital technologies throughout all sectors to increase customer values and obtain competitiveness by organizing the exclusive taskforce and professional human resources, developing generic technolo-gies, and building adequate capabilities.

Global Business Sales (Unit: KRW 100 million)

11,454

18,459

25,088

2017

2018

2019

ChinaJapan

Japan

In order to strengthen competitiveness in the cosmetic business in Japan, LG H&H acquired Avon Japan and Evermere through our subsidiary Ginza Stefany. We achieved higher diversity in the product portfolio while expanding distri-bution channels and the customer base by creating synergy with the existing business.

Major Brands

Major Brands

Home and personal care

Home and personal care

Cosmetics

Cosmetics

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I Overview I Sustainability Commitments I Sustainability Management I Governance I Appendix I 032

Major Brands

Major Brands in Europe

Major Brands in the United States

Major Brands in Canada

Home and personal careCosmetics

Cosmetics Cosmetics Cosmetics

Southeast Asia

LG H&H operates subsidiaries in Southeast Asian countries with high growth potential, including Taiwan, Vietnam, Singapore, Malay-sia, and Thailand. We have The History of Whoo shops at local fancy department stores to target the premium brand market. We are also expanding the stores of Nature Collection, a nature-oriented cosmetic select shop, to spread K-Beauty with brands such as THE-FACESHOP, Yehwadam, and Dr. Belmeur.

North America and Europe

LG H&H’s true herb cosmetic brand Belif, which has constantly been consolidating its position in North America, expanded its business through Sephora stores in the United States, including 415 stores in major cities in the eastern and western parts of the country, such as New York City, Boston, San Francisco and Los Angeles. In particular, we are expanding the business of Belif by confirming entry into Ulta Beauty in 2020, one of the largest beauty distribution channels in the United States with over 1,200 stores across the country. We are also preparing to boost our premium brand business including The His-tory of Whoo, Su:m37° and O HUI, which have already been success-ful in Asia. In August 2019, LG H&H acquired NewAvon, a company with over 130 years of experience in the cosmetic business in North America. We will begin expanding our cosmetics and personal care business by leveraging the distribution network and business infra-structure of NewAvon with approximately 250,000 employees across the United States, Canada and Puerto Rico. We will also focus on nurturing the brands of LG H&H and NewAvon in close cooperation with our local subsidiaries in the US. Moreover, our business will grow to Latin America and Europe, continuing the success in Asia in major global markets. LG H&H will make the most of its R&D and product development capacity to upgrade the product portfolio of NewAvon, which is mostly comprised of low-priced items. We will also strength-en the product portfolio by introducing innovative Korean cosmetic and personal care products that are optimized for local consumers, thereby expanding the business category.

Vietnam

Taiwan

ThailandMalaysia

Singapore

Canada

The United States

Spain

Morocco

FranceLuxembourg

DenmarkGermany

Czech RepublicSwitzerland

Sweden

Portugal Italy Greece

SerbiaBulgaria

Turkey

RussiaPoland

Romania

Hong Kong

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Digital Transformation

Digital Transformation Task Force

The CDO1) performs the role of the control tower in digital transformation, and under their lead, five working groups for data and machine learning, open in-novation, digital contents, digital marketing, and DT project operate. Any other digital transformation activities conducted by the informatization department, DX project department, and work innovation department are also reported to the CDO. Any agenda that is considered important enough to be shared at the division level is directly reported to the Board of Directors.

Digital Transformation Training

LG H&H provides employees with various training programs for digital trans-formation. We conduct the Innovation Workshop for executive directors with themes related to digital transformation, in which participants can understand the need of digital transformation and challenges for the company. For em-ployees, we carry out the AI Study for basic understanding of digital trans-formation and the R Course for enhancing their capacity to analyze a large volume of data. We also provide employees with opportunities to participate in the digital tech college course at our training center, LG Leadership Academy, to enhance their digital capacity. These activities offer practical help to our em-ployees in terms of handling their work efficiently with an improved capacity for digital transformation.

Data and machine learning

Digital marketing DT Project Open

innovationDigital

contents

Service partnership with Perfect Corp

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1) CDO: Chief Digital Officer

I Overview I Sustainability Commitments I Sustainability Management I Governance I Appendix I 034

Digital Transformation Activities

Digital Catalogue

LG H&H will use digital catalogues to provide customers with a wide range of product information. A digital catalogue represents a system illustrating product features, includ-ing names and barcodes. Now catalogues that used to be on paper in the past have in-creasingly been digitized and utilized across a variety of marketing channels, including online malls, offline stores, and home shop-ping channels. For the active use of digital catalogues, LG H&H set up an in-house photoshoot studio in 2019. We reduced the cost, while enhancing the quality of product information with many photos. We plan to make a digital catalogue for NewAvon first and expand the use of digital catalogues in the domestic premium brand market.

Development of Customized Platform Based on Bio Big Data

We see a growing demand in the beauty mar-ket for customized solutions with consideration of various innate and environmental factors that affect human skin. To meet this demand, we need to accumulate and analyze enormous bio data about the skin characteristics of customers and skin aging factors. LG H&H is collecting a wide range of skin-related bio big data, with a focus on developing customized platform technology through data analysis technology based on machine learning and bio informatics, efficient customer consulting, and optimized efficacy solutions. Through these efforts, we will provide distinctive customized products and services by considering both the inborn characteristics of your skin as well as environmental factors.

Open Innovation

Open innovation is part of our business man-agement strategies, aimed at sharing technolo-gies and knowledge with external stakeholders to facilitate technological innovation to expand the market. Removing boundaries is crucial to ease the sharing of knowledge between inter-nal and external stakeholders of the company. To be specific, open innovation includes licens-ing (purchase of technology), joint research, establishing joint ventures, investment in or acquisition of a venture company, subsidiariza-tion, technology solution contests, and the use of open sources. LG H&H also achieved performance in the fields of licensing and joint research by proactively conducting OI (open innovation) activities. In particular, we entered into a service partnership with Perfect Corp., a company specialized in video editing technol-ogy and face recognition security. Through this cooperative relationship, we applied API1) in our global digital catalogues. We also expand-ed licensing, which used to be limited in Korea, abroad in cooperation with SmartStudy. In 2020, we will boost innovation and expand the market using a wide range of methods, includ-ing licensing, joint research and technological solution contests.

In-house studio Use of contents made in the studio

1) API (Application Programming Interface): Language or message formats used in communication between the operating system and application programs.