'Fire your lab chief or we walk': The ultimatum that shaped Cosmax

Cosmax Chairman Lee Kyung-soo poses in front of a factory in 1994, two years after founding the company in 1992. Thirty-four years on, Cosmax has grown into a cosmetics ODM giant with annual sales approaching 3 trillion won. [Cosmax]

A fork in the road one year after founding: Cosmax chose in-house R&D

Road-shop boom of the 2000s sharpened its ODM edge

Sales of 2.4 trillion won last year, 1.48 trillion won in H1 2026 — 3 trillion won in sight

"Fire your research director immediately, or we are cutting ties."

The call came out of nowhere in 1992, landing on the desk of Lee Kyung-soo, a 46-year-old founder who had barely gotten his cosmetics manufacturer, Korea Miroto — now Cosmax — off the ground. On the other end of the line was the president of Miroto, a Japanese cosmetics OEM company that had been providing technology to the Korean firm. Word had reached Japan that Korea Miroto had quietly hired a research director and set up its own laboratory.

The Japanese executive's logic was blunt: his company would handle all R&D, so why was Korea Miroto paying a high salary for a research director of its own? He called for the director's dismissal. For a company less than a year old with minimal proprietary technology, the demand amounted to an existential crisis — keep the lab or keep the lights on.

Lee flew to Japan immediately and spent two days meeting with the Miroto president. He pleaded for time, suggesting the research director — a recent hire — could be let go in two or three years. But the Japanese side would not budge. The choice was binary: continue the technology partnership with Miroto, or build an independent research operation. Not both.

Cosmax is now the world's leading cosmetics ODM company, with consolidated sales approaching 3 trillion won. But in his memoir "I Want to Dream Together," Lee recalled that moment as a crossroads where survival itself was at stake. "I stood at a fork in the road," he wrote, "between delaying R&D a little longer and maintaining the alliance with Miroto, or braving the immediate hardship and building our own strength toward the vision of becoming a company specializing in research, development and production."

After much deliberation, Lee chose to end the partnership. His reasoning came down to one conviction: without the ability to develop its own technology, the company had no future. "Only by building our own strength — even at the cost of immediate hardship — could we have a real future," he believed.

The early bet did not pay off overnight. It took Cosmax years to expand its research staff and accumulate cosmetics formulations. But as the domestic cosmetics retail market began to shift in the 2000s, the value of having an independent R&D organization started to show.

Cosmax was listed in November 2006. Chairman Lee Kyung-soo is seen speaking at an event. [Cosmax]

The rise of road-shop brands — The Face Shop, Missha, Innisfree, Etude and others — in the 2000s created a market where cosmetics labels had to launch multiple new products in rapid succession. Cosmax at one point received a request from a single client to develop 250 items within three months.

The research staff and accumulated formulations Cosmax had built from its earliest days proved a decisive competitive advantage during this period, working alongside its growing production capacity. It was also around this time that the ODM model — developing not just manufacturing but also formulations and textures for clients — began to take off in earnest, moving beyond the simpler OEM approach of producing to specification.

Financial results followed. Cosmax, which had posted annual sales of around 10 billion won ($7.47 million) before the 2000s, surpassed 100 billion won in annual sales in 2008. Expansion of overseas production bases, including in China, and the broader growth of Korean cosmetics brands also contributed to the company's rising scale.

Export milestones accumulated as well. Cosmax received the $50 million export tower award in 2015, the same year Lee was awarded the Silver Tower Order of Industrial Service Merit. The following year, in 2016, the company became the first in the cosmetics ODM sector to receive the $100 million export tower. In 2024, it again led the industry, becoming the first ODM company to receive the $200 million export tower.

The company that once agonized over whether to keep its research lab now measures its revenue in the trillions. Cosmax posted consolidated sales of 2.4 trillion won in 2025, up 10.7 percent from the previous year. Consolidated sales for the first half of this year reached 1.48 trillion won, a 22 percent increase from the same period a year earlier. Based on that first-half growth rate alone, Cosmax appears increasingly likely to approach 3 trillion won in consolidated annual sales for the first time this year.

The recent growth also reflects structural shifts in the popular cosmetics industry. As the customer base has broadened from large established brands to domestic indie labels targeting overseas markets directly, the role of ODM companies capable of developing and producing for multiple clients simultaneously has grown. The Korean subsidiary's quarterly sales topping 500 billion won for the first time in the second quarter of this year was driven in large part by the overseas expansion of those indie brand clients.

Cosmax is now extending its scope beyond R&D and production into OBM — original brand manufacturing — offering support in brand planning as well. The company is also applying AI and big data to its product development and production processes while working to secure local clients through its overseas subsidiaries.

It would be an overstatement to draw a straight line from the 1992 decision to break with the Japanese partner directly to Cosmax's current corporate value. Many factors shaped the company's growth over the decades — its expansion into China, the rise of the domestic cosmetics market, and the surge in popular cosmetics exports among them. Still, the choice Lee made in 1992 — whether to rely on outside technology or build internal capability — was one of the early turning points that set the direction for Cosmax to grow into the ODM company it is today.

hong@heraldcorp.com