The Japanese beauty and personal care company recently unveiled Milestone 2030, its medium- to long-term strategy for its “fourth growth phase”.
As part of these plans, the firm will transition to a pure holding company structure by 2026, which will coincide with its 80th anniversary.
This was needed to “realise our beauty consortium concept in order to develop a more diverse business model globally and achieve sustainable growth by expanding the value we offer,” said president and chief executive Kazutoshi Kobayashi.
Kobayashi highlighted the importance of the global south – which encompasses the South East Asian region and India.
He said the firm would “place the highest priority on capturing the global south market” as it shifts its reliance away from China and travel retail.
“The most important point for growth on a regional basis is the shift from a high reliance on the Greater China market to the Global South market as the next growth area,” he said.
Southern ambitions
According to the firm, China and overseas duty-free markets used to contribute approximately 25% of total sales.
However, this percentage has declined significantly over the past few years and currently stands at around 15%.
“In the future, we intend not only to increase this composition of greater China and overseas duty-free but also to achieve growth in the global south, including through M&A and alliances, to increase the composition of such sales, resulting in an overseas sales ratio of more than 50%,” said Kobayashi.
The company plans to focus on its mass brands, which include several skin care, makeup and hair care brand.
“We will focus on the cosmetaries business, especially in the area of premium mass products that are low-priced but have added value, in order to capture the global south market, which is a growth area in the future,” Kobayashi sai
Going local
The company also outlined how it will shift its operations in the global south to optimise cost, comply with local regulations and improve market penetration.
This will include the use of original design manufacturing (ODM) firms.
“Our stance is to no longer use the approach of doing everything on our own. In the global south, we will use local resources for optimising the value of Japanese brands. Until now, we have been selling products developed and sold in Japan to customers in the global south with no modifications. The result was a high cost of sales ratio.
“From now on, we will use ODM for the sale of brands and products with a lower cost of sales ratio, reduced exposure to forex movements, and compliance with local pharmaceutical affairs law and other regulations.”
Additionally, the firm will also look into acquisition opportunities.
“To offset lower greater China sales, our goal is to use alliances and M&A quickly that involve brands that can capture market share in the ASEAN region, India and other areas of the global south. Our priority is M&A. We want to make investments in relatively new local brands and add these brands to the brands of the Kosé Group,” said Kobayashi.
