South Korean budget makeup brands The Face Shop and Innisfree are establishing a solid foothold in the low-cost cosmetics market, shrugging off competition from the once-dominant Missha.

The Face Shop, acquired by LG Household and Healthcare in 2009, held on to the top spot by posting 610.1 billion won ($554.4 million) in sales and 69 billion won in operating profit last year. Cosmetics giant AmorePacific’s Innisfree followed next, recording 456.7 billion won in sales and 76.5 billion won in operating profit.

Missha, meanwhile, saw its operating profit drop a whopping 48.8 percent to 6.7 billion won, with net profit dipping 79.6 percent to 2.5 billion won and sales falling 0.9 percent to 438.3 billion won.

Able C&C, the mother company of Missha, attributed the poor figures to large-scale restructuring efforts last year, including the shut down of 29 loss-making stores.

“We expect our sales performance to improve in the near future when the restructuring efforts begin to show results,” an official from Missha told reporters.

But it seems a rather tough journey for Missha to reclaim the No. 1 title.

Innisfree has been successfully expanding its overseas business, leveraging AmorePacific’s brand power and wide distribution channels. The company said previously it aims to reach 1 trillion won sales by 2020.

Also, it will be difficult for Missha to rely on its low-cost strategy, as both The Face Shop and Innisfree are finding their own ways to reduce costs.

The Face Shop said it will raise the self-production rate up to 75 percent by producing goods from its own R&D facilities.

“The Face Shop has increased its sales through frequent sales promotions. The company’s own production facilities will further improve its profit figures,” an industry source said.

“Missha’s solo march is nearly over and The Faceshop and Innisfree’s tight competition is expected to continue for a while,” he said.

By Suk Gee-hyun (monicasuk@heraldcorp.com)