Castro Group Explores Korean Beauty Market Entry with Joint Venture
Israeli fashion group Castro-Hodies is seeking to expand its growth engines beyond traditional fashion by entering the booming Korean beauty (K-Beauty) market. Through its discount brand Urbanica, Castro has signed a memorandum of understanding with Silicon2, a South Korean company specializing in distributing K-Beauty products. Silicon2, which is publicly traded in South Korea and has an annual turnover of approximately $1 billion, distributes hundreds of Korean beauty products through physical stores and online platforms across Asia, the US, and Europe under the Moida K-Beauty brand.
The agreement outlines the potential establishment of a joint venture where Urbanica would hold a 70% stake and Silicon2 the remaining 30%. The venture is projected to require an investment of $20 million, with Urbanica contributing $14 million and Silicon2 $6 million. This new entity, operating under the Moida K-Beauty brand, will focus on marketing and distributing Korean cosmetics sourced from Silicon2, along with related lifestyle products, via physical stores, wholesale channels, and online e-commerce platforms. The memorandum includes provisions for granting the joint venture exclusive rights to market and distribute Silicon2 products in Israel, with an expected launch of operations in the country by 2027.
This strategic move into K-Beauty aligns with the increasing global and Israeli demand for Korean skincare and cosmetic products, particularly among younger consumers who are drawn to their accessibility and price point. Castro's decision to pursue this through Urbanica suggests an intention to target a younger demographic.
However, Castro-Hodies emphasizes that the current agreement is a non-binding memorandum of understanding, reflecting the parties' intentions and serving as a framework for further negotiations. The finalization of any deal is contingent upon signing definitive agreements and obtaining necessary approvals. The company cautioned that there is no certainty the negotiations will result in binding agreements or that the transaction will be completed under the outlined terms.
The venture comes at a time when Castro's existing cosmetics segment, which includes international brands Yves Rocher and Kiko Milano, is underperforming. The group's CEO, Yair Ohayon, has previously announced plans to close unprofitable cosmetic stores. In the second quarter of 2026, the cosmetics sector reported stagnant revenues of approximately 18 million shekels, with an operating loss that nearly doubled year-over-year to 743,000 shekels, despite the opening of four new stores. Same-store sales in the cosmetics division, comprising 22 Kiko Milano and 20 Yves Rocher outlets, decreased by 19% in the same quarter. The segment's revenues have been declining since the first half of 2024, which was also the last period it reported a positive operating profit.
