The company will invest HK$5 million (US$641,000) for a 50 per cent share in a joint venture with CJ Corp, giving it the rights to own and operate the Olive Young chain in Korea.
Olive Young, launched in 1999, currently operates five stores in Seoul.
It products range from cosmetics, personal and health care to general merchandise and in-store pharmacy concessions.
Ed Chan, regional director for North Asia at Dairy Farm, said the new company, which will begin operation at year end, had "huge potential" because of high spending South Korean female consumers and no existing health and beauty chains, except independent shops.
Olive Young will be targeted at middle-class female consumers.