Japan – The heat is on

24-Jun-2010

Japanese cosmetics companies have no choice but to innovate and adopt new initiatives if they are to survive in this tough economic environment and take on new competition. Julian Ryall reports from Tokyo

Japanese cosmetics companies have no choice but to innovate and adopt new initiatives if they are to survive in this tough economic environment and take on new competition. Julian Ryall reports from Tokyo

Japanese industries in general have had a tough couple of years and the cosmetics sector is no exception. That said, manufacturers here have largely stressed the positive and developed a range of innovative new products that meet the needs of ever-more demanding consumers and opened up new product areas.

According to statistics provided by Japan’s ministry of economy, trade and industry, shipments of cosmetics stood at 91.9% of their 2008 value in 2009, with the value of those shipments falling to Japanese ¥13.854bn (US$148m). The hardest hit market segments were make-up and skin care. Imports also fell, from ¥1.785bn ($19m) in 2008 to ¥1.716bn ($18m) last year, although there was better news for Japanese exporters as shipments overseas came to Y1.109bn ($11.8m), up from ¥1.022bn ($10.9m).

“It has been a tough time, but overall sales in January of this year were slightly better than they were in the same month a year ago,” says Masayuki Sakaguchi, executive director of the Japan Cosmetic Industry Association (JCIA). “For the forseeable future, we believe things will remain a little flat, but we’re hoping for a gradual but steady recovery over the longer term.”

Shinji Yamada, manager of the international PR department at Kanebo Cosmetics agrees that 2009 was a difficult year. “We have never seen a decrease of 8.1% in [the value of] shipments before and our figures show that the hardest hit sector was products in the mid-price range,” he tells SPC Asia. However, he points out that the decline in shipment quantity was a far more manageable 0.5% contraction, indicating that the fall in shipment value was largely due to lower average product prices.

And this means that while Japanese women remain keen to look their best, they are having to shift to lower priced items. As soon as the economic recession has run its course, however, manufacturers expect to see a rebound in the mid-priced products.

Japan remains the second largest national market for cosmetics in the world, although a declining birth rate here is likely to be one of the reasons why other nations are expected to overtake Japan as larger personal care product markets in the next decade or so. It also has some traits that are not seen elsewhere in the world, notably a very modest fragrance sector. Scents only account for 0.3% of sales in Japan, as opposed to more than 39% in western Europe, while skin care products are similarly important here, accounting for more than 39% of sales, in comparison with 32% in Europe and a mere 20% in north America.

Table 1: Market sizes, retail value RSP, €m, fixed 2009 exchange rates, value at current prices
2009%2008-09
Asia Pacific
Beauty & personal care65601.53.2
Japan
Beauty & personal care29035.6-2.1
Colour cosmetics4932.3-3.7
Hair care4855.6-1.9
Male grooming1385.0-2.1
Skin care12025.7-2.3
Premium cosmetics11768.3-4.4
Source: Euromonitor International

Domestic Performers

Shiseido remains the biggest domestic player in Japan, accounting for 23.6% of the market in 2008, although that figure was down 1.7% on the previous year. Kanebo Cosmetics has a 16.9% share, down a marginal 0.3%, while Kose, Pola and Kao make up the rest of the key names in the industry here. Confronted by the dire economic climate, each of them has been actively looking for ways of improving their bottom line.

“We have been trying to keep our marketing expenses down and ensure that we make the most effective use of our costs,” says Kanebo’s Yamada. Kanebo actually became part of the Kao group in January 2006 and the two companies have actively shared the strongest parts of their businesses, particularly in the areas of research and development and marketing, while there have been clear benefits on sharing costs, with Kao able to significantly reduce delivery, storage and advertising costs. Both companies say this was achieved without any job losses. “We have also noticed the positive impact of our efforts at synergy with the Kao Group since 2007 and we hope that will continue into the future,” continues Yamada. But, he points out, the most effective way to ride an economic storm is with innovative products.

One of these is BB creams [BB stands for blemish balm], which have sold well in east Asia, with Kanebo’s latest product selling twice the company’s annual target in the space of just four months.

BB creams initially caught on in South Korea, where actresses who had undergone laser surgery discovered that they served as a cover-up treatment at the same time as foundation for make-up. Cosmetics companies quickly saw the advantage of a single cream that acts as a moisturiser, has an SPF of up to 25 to protect from the sun, includes anti-ageing properties, serves as a concealer and acts as a light foundation.

<i>Japanese women who are busy juggling families and careers have fuelled the boom in sales of blemish balms, which combine sun protection, moisturisation and anti-ageing properties plus concealer and foundation</i>

Japanese women who are busy juggling families and careers have fuelled the boom in sales of blemish balms, which combine sun protection, moisturisation and anti-ageing properties plus concealer and foundation

“Even in this difficult economic time and with the Japanese cosmetics market saturated, our BB Cream has been selling well,” said Kikue Eguchi, a spokeswoman for Kanebo Cosmetics Inc.

Up against brands such as South Korean manufacturer Skin79’s BB cream and a similar product released by South Korea’s Hanskin Co, Kanebo’s Freshel Moist Life W Cream has far outstripped sales predictions since its release in September. “We targeted women in their 30s and 40s because they are very busy combining their jobs, raising the children and keeping the home – and we refer to this age group as the women who always put themselves last,” says Eguchi. “They never have any time for themselves, which makes a convenient five-in-one cream that is easy to apply and has no fragrance such a popular item.” The cream contains adhesive collagen – a hugely popular cosmetics ingredient in its own right - extract of citrus peel and a fruit acid mixture.

“Japanese women are very conscious of how they are seen in society and many are still averse to leaving home without make-up, even women who are not particularly interested in make-up to begin with,” says Sakae Nonomura, director of Kanebo’s Beauty Research Institute. “So the attraction of a simple make-up, one that goes on in a thin coat in a few moments, is overwhelming.

“Another recent trend, especially among younger women, is natural make-up for natural looking skin,” says Nonomura, adding that this is why products with a casual, light finish are driving new trends rather than traditional foundations.

And while collagen products have been available in Japan for the last decade, makers here have seen a sudden surge in their popularity. In 1996, Shiseido was the first to launch the Collagen EX beauty brand in Japan and now incorporates collagen into nearly all of its ageing care products in order to enhance skin resilience and increase firmness, according to spokeswoman Megumi Kinukawa. The Elixir Prior and Revital Granas skin care lines – which range from washes to lotions, emulsions and creams – all contain collagen, which has become widely accepted as a staple ingredient in Japan.

Table 2: Japan brand share ranking (by umbrella brand name) – retail value RSP, 2009 prices
BrandCompany name (GBO)
Beauty & personal care
ShiseidoShiseido Co Ltd
KaneboKao Corp
KoséKosé Corp
DHCDHC Corp
SofinaKao Corp
Colour cosmetics
ShiseidoShiseido Co Ltd
KaneboKao Corp
SofinaKao Corp
KoséKosé Corp
Gemey/Maybelline/JadeL\'Oréal Groupe
Hair care
ShiseidoShiseido Co Ltd
LuxUnilever Group
AsienceKao Corp
BigenHoyu Co Ltd
Male grooming
Schick – Wilkinson SwordEnergizer Holdings Inc
ShiseidoShiseido Co Ltd
GatsbyMandom Corp
GilletteProcter & Gamble Co, The
LúcidoMandom Corp
Skin care
ShiseidoShiseido Co Ltd
KaneboKao Corp
DHCDHC Corp
KoséKosé Corp
SofinaKao Corp
Source: Euromonitor International

Competition & Initiatives

Meanwhile, the value of the Japanese cosmetics market has been recognised by companies that have not been traditional participants, with Fujifilm making the most of its photographic film technology to produce cosmetics with antioxidant properties, and chocolate maker Lotte Co and Ajinomoto Co, most famous for producing food seasonings, releasing crossover beauty and health products. Suntory Ltd – more famous for whisky – has also announced that it plans to fully enter the cosmetics market and has already launched a range of skin care products under the FAGE brand through its subsidiary, Suntory Wellness Ltd.

Shiseido has implemented measures to keep it ahead of the domestic pack, including efforts to raise its profile overseas.

“Facing continued economic stagnation, the Shiseido Group is seeking to become a global player representing Asia and with its origins in Japan,” says Kinukawa. “We are also implementing a three-year plan, the aims of which are to create a brand that is loved by customers throughout the world and to establish unsurpassed, world class quality in our business management.”

<i>Shiseido is implementing measures to boost sales abroad</i>

Shiseido is implementing measures to boost sales abroad

Those efforts are already coming to fruition, with Shiseido investing US$42m in a new factory in Vietnam in February, its first in southeast Asia and an effort to reach out to the growing middle class in the region. Similarly, the company announced on 10 March its acquisition of Bare Escentuals, paying ¥1.46bn for the California-based company as it seeks to expand its business in North America. Other plans are in motion for elsewhere in Asia, Kinukawa confirms. “In our ten-year roadmap to 2017, we are aiming at net sales in excess of ¥1 trillion ($10.7bn) and more than 50% from overseas sales,” she says. “We are seeking to become an Asian giant and we recognise the Chinese market as the ‘growth engine’ for Shiseido.” underlining this the company has just announced it proposes to buy the remaining 50% of its Hong Kong based joint venture company Shiseido Dah Chong Hong Cosmetics.

The company’s latest releases are linked to the promotion worldwide of the Shiseido brand, which is available in 73 nations and regions, and a new line of make-up was released in January 2009, followed in the autumn by Shiseido Future Solution LX premium skin care line. In March of this year, Shiseido also launched a newly reformulated whitening skin care line for Asian women.

Pola Corp has also instituted a dramatic change in its approach to business since the start of the downturn. Previously it was sold door-to-door, but the firm has now chosen to set up its own brand of salons, named Pola The Beauty, according to spokeswoman Maiko Kikuchi. The firm has also set its sights on increasing its name in the Chinese and Russian markets, releasing the Aglaira line and bringing out its first ever selection of perfume items, as well as collagen products designed to promote “beauty from the inside and the outside,” says Kikuchi.

Kanebo’s Yamada agrees that a holistic approach is the way forward for the industry. “We are seeing changes in consumers’ behaviour on how they want to stay beautiful,” he says. “It used to be purely cosmetics-driven, but now it is becoming more holistic and women are simultaneously trying to improve their beauty from the inside as well. I believe this new trend for complete ‘wellness’ comes from the realisation that beauty starts within and that will become a growing global trend.”

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