During the firm’s first-half earnings conference held on August 10, Shiseido president and CEO Masahiko Uotani reflected upon the tough decisions the firm has made against the turbulence wrought by COVID-19.
Some of the decisions included selling off its personal care division, as well as several brands such as Laura Mercier and bareMinerals.
“We have undertaken transformation globally in earnest that required tough decisions and thoroughly reviewed poor and unprofitable businesses. At the same time, to defend and secure profits for every fiscal year while sales were on a declining trend, we implemented agile cost management including marketing cost reductions in line with sales decline,” said Uotani.
However, he expressed that the firm has to shift its stance and push itself to take a more “offensive” approach to ensure growth moving forward.
“However, after three years of this situation, further continuation of this approach I think will lead to a downward trend. I strongly feel a sense of crisis. Therefore, I think it's necessary to stop that trend and transform our management to be offensive by increasing strategic investment.”
Strengthening a brand and its people
Uotani said it was imperative for the firm to strengthen its brand equity, therefore, the firm is set to invest an additional JPY5bn (USD37.8m) this year to do so.
“Top priority in our strategy… is to strengthen brand equity which serves as a basis for our bond with consumers and for continuous purchases of our products by consumers,” Uotani said.
He elaborated that the firm would leverage its strengths in research and development, which is becoming increasingly important for the post-pandemic consumer.
“After experiencing COVID-19, there is a growing awareness among consumers in the world toward health and immunity, efficacy and functions of cosmetics, science, and formulation technologies to support product development. We will proactively communicate such information like benefits and brand equity through advertising and the like, as important factors backing credibility of brand equity.”
The company will also reel back on price-orientated promotions, which can dilute brand equity.
“We need to shift our investment to strengthen brand equity and shift away from over-emphasis on promotions,” said Uotani.
Another JPY5bn (USD37.8m) will be invested in its people, Shiseido’s “biggest assets”, said Uotani.
“There is a sense of stagnation in the society and also a cooped up feeling among our people due to COVID-19 pandemic as the industry has been impacted quite seriously. To overcome this situation, strengthening investment into people capital and improving employee engagement are very important strategies.”
This would involve its digital academy, which re-trains and re-skills its employees to adapt to today’s digital landscape. Furthermore, the firm plans to build a global training centre in Tokyo.
The initial JYP10bn (USD75.5m) investment will not be a one-off, Uotani assured and will continue beyond 2022.
“We will make efforts companywide and review our business in response to changes in the market environment to achieve reduction targets for COGS and SG&A ratios, aiming at achieving an operating profit margin of 15%.”
