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The Yomiuri Shimbun A sales area for Japanese cosmetics brands is seen in Beijing in December.
By Miyu Okada / Yomiuri Shimbun Staff Writer
12:39 JST, January 4, 2025
Japanese cosmetics giants are struggling in the Chinese market and are making moves to develop new markets in the Global South and other regions.
In the past, China was seen as an area with high growth potential, but the market has seen a decline in sales due to a slowdown in consumption caused by the worsening real estate market as well as the rise in local cosmetics manufacturers.
In late November, Shiseido Co. presented a two-year action plan to run through 2026. Regarding the sluggish growth of the company’s Chinese business, Shiseido President Kentaro Fujiwara said, “We cannot expect to grow as fast as we have in the past.”
Shiseido’s consolidated financial results for the January-September period of 2024, based on international financial reporting standards, show that sales from its Chinese business fell by 2.4% compared with the same period the previous year. In particular, sales fell by more than 30% on the resort island of Hainan, a major area for the cosmetics market where Chinese nationals can buy goods duty-free.
As a result, the company has revised its consolidated net profit forecast for the fiscal year ending December 2024, to ¥6 billion, ¥16 billion less than its previous forecast.
“China is a huge consumer market from the medium- to long-term perspective,” said Fujiwara. “We can still offer many more new value products.” He did not mention any specific measures to deal with the problem.
Exports halved in 3 years
Shiseido has long positioned its China business as a “growth engine.” The company began selling products at Chinese state-run department stores and other outlets in 1981. The company is widely recognized in the country, with its China-exclusive brand Aupres having been designated as the official cosmetics for the Chinese national team at the Olympics in the past. Sales for the fiscal year ending in December 2017 exceeded ¥1 trillion.
However, consumption started to slow down from around 2022 because of the deteriorating real estate market in China. In addition, Chinese brands, such as Florasis and Zeesea, have become more popular.
“There is a growing trend, especially among younger consumers, to use products made in their own country,” an executive of a major cosmetics company explained. “This has resulted in a double whammy of sluggish consumption in China and increased competition with Chinese brands.”
Other major cosmetics companies are having a similar problem to Shiseido’s. In the January-September period of 2024, Kose Corp. and Kao Corp. saw sales decline in Asia, including China, by more than 20% compared with the same period the previous year. Pola Orbis Holdings Inc. also saw overseas sales drop by 10% in the July-September quarter, affected by poor performance in China.
According to trade statistics released by the Finance Ministry, cosmetics exports from Japan to China increased sharply, reaching a value of ¥370.9 billion in 2021. However, exports have since started to fall, recording ¥281.3 billion in 2023, and only ¥188.3 billion in the January-October period of 2024.
Looking to Global South
With no effective measures being taken to rebuild their businesses in China, some companies are looking to enter other markets, such as Southeast Asia and India.
Kose is set to acquire Puri Co., a Thai cosmetics company, for about ¥13 billion. The Thai company, which will become a subsidiary, is successful with its high-end brands, such as body cream and hair care products.
Kose President Kazutoshi Kobayashi said at a press conference on Dec. 10: “We’ll strengthen our sales in the Global South. We’ll continue to aggressively seek business alliances and acquisitions.”
Mandom Corp. aims to expand its business into India, the Middle East and elsewhere in the future. The firm’s President Ken Nishimura said: “We haven’t even considered expanding to regions with [people having] different skin and hair textures. Now, we need to make our next move.”
Naoto Saito, head of the Economic Research Department of Daiwa Institute of Research, said: “There is a big business risk in focusing only on China. It’s necessary to develop new markets such as India and Africa.”
