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150 Years and Counting

July 15, 2013

For a century-and-a-half, Kao has been a leader in the global household and personal products industry.

James Zilenziger
Assistant Editor

All the great soap-making companies, Procter & Gamble, Unilever and Henkel, have humble beginnings. Kao Corp., a leading detergent and toiletry manufacturer for more than 100 years, has a similar story.
The company was founded in 1887 by the Nagase family as Kao (face) Soap Company, Ltd. In 1890, Tomiro Nagase launched the company’s first soap product with the motto, “A Clean Nation Prospers.” That same year, Kao rolled out a moon and stars logo that mirrored P&G’s crest and underscored the rivalry between the two. Throughout the ensuing decades, Kao has evolved into a worldwide beauty care leader.
By 1902, Kao constructed its first directly managed manufacturing plant that handled the entire process of toiletry production, from the preparation of the raw material to the final packaging. Unfortunately, Nagase only had 20 years with his domestic toiletry and soap manufacturing company before passing away, thus missing out on much of Kao’s most significant growth throughout the 20th Century.
Today, with more than 20 leading brands such as Asience, Attack, Bioré, Goldwell, Jergens, John Frieda, Kanebo, Laurier, Merries and Molton Brown, Kao continues to release an abundance of successful, new products. Some of the most recent products introduced by Kao in the past three years include Healthya Coffee, which enhances the use of body fat as energy; Attack Neo, a laundry detergent that uses a much smaller amount of product to clean; and Bioré Skin Care Facial Foam, a foaming skin cleanser that allows for the washing away dirt with the least damage to skin.
In the past year, the Beauty Care Business remains at the top in net sales with $5.133 billion. Following the Beauty Care Business comes the Fabric and Home Care Business ($2.734 billion) and the Human Health Care Business ($1.755 billion), which brings the total Consumer Products Business to $9.622 billion. The final $2.403 billion in net sales comes from the Chemical Business.

Branching Out

In the early 1960s the company persuaded its wholesalers to establish jointly owned companies, calledhansha, which would exclusively distribute Kao products. This system greatly simplified the usually complicated way that products moved from manufacturers to consumers in Japan, and provided Kao with competitive advantages, such as getting products onto store shelves faster and maintaining lighter inventories.
During this period, Kao looked to expand overseas, and in 1964 Kao Industrial (Thailand) Co., Ltd. became Kao’s first company outside of Japan. As other branches arrived overseas in the coming years, Kao continued expanding and soon acquired High Point Chemical Corporation (US) in 1987 and the Andrew Jergens Company (US) in 1988. Today, Kao is comprised of three major consumer products businesses: Beauty Care, Human Health Care and Fabric and Home Care. These consumer products that are used by millions worldwide resulted in global sales of $11.7 billion.

Key to Kao’s success is its persistent expansion into new markets. Prior to Kao’s international growth in the 1960s, Kao primarily focused on soap production. However, with the construction of the Housework Science Laboratory in 1934, Kao examined the household as a means of R&D. The laboratory tackled and analyzed housework in a scientific manner as Kao sought to become more than just a soap production company. R&D has always been a strength of Kao. From its earliest days, the company employed at least 25% of its workers in research, particularly in the field of surface technology. Early research in the properties of oils and fats, the basic elements in soap, allowed Kao to expand its product line quickly to include finishing products, polishing agents, waxes, insecticides, antiseptics, fungicides and deodorants.
Soon enough with the establishment of the Taiwan-Kao Company, Ltd. in 1964—later renamed Kao (Taiwan) in 1991—Kao broke into the household market and hence grew its revenue base to cover household, laundry and industrial products. While Kao became a major player in these new markets, Kao continued to principally grow internationally in other Asian countries and some North American and European countries. By 1975, new enterprises included Kao Industrial (Thailand) Co., Malaysia Kao Company Ltd. (Singapore), Kao Hong Kong, Sinor-Kao S.A. (Spain), Nivea-Kao Co., Ltd. (West Germany) and Kao-Quaker Co., Ltd. (US).  

Cosmetic Changes

Throughout the 1970s and 1980s Kao also made its way into the cosmetics industry through several joint ventures with cosmetic companies like Nivea. Such an expansion ultimately led Kao Soap Co., Ltd. to rename itself Kao Corporation in order to reflect the increasingly extensive span of its business. One of its largest acquirements came in 1988 with the purchase of the Andrew Jergens Company (US). The 1990s and 2000s Kao made further expansion into food products with Econa and Healthya. During this time Kao also continued to procure businesses such as John Frieda, a brand of leading hair care products in and operations in the UK and France, and Molton Brown, a specialist retailer in prestige and cosmetics in the UK.
By means of continually expanding their markets, Kao Corporation became a technology leader in personal care and specialty chemicals industries with over 300 health, beauty, household and food products in 2000. Some of the most successful products included the cosmetic line Sofina, Merries diapers and Attack powder detergent. Overall, sales reached $8 billion globally in 27 different countries.

Kao Today

New to Kao’s Corporate Social Responsibility vision is the Kao Environmental Statement and the company’s approach to sustainability. Added in June 2009, the Kao Environmental Statement maintains that Kao “utilize[s] original Kao-developed technologies to minimize the impact they have on the environment, not just in the manufacturing process, but in the daily life of the customers who use them.”
To achieve these goals Kao has outlined a “Medium-term Objectives” that tackle conservation by 2020 in four main areas: CO2, water, chemical substances and biodiversity. In relation to CO2 emissions, Kao’s goal is a 35% reduction during the product’s lifecycle. Already since 2005, which saw CO2 emissions per fiscal sales reach ten million tons, the emissions now hover closer to 7.9 million tons (a 21% reduction).
Similarly, Kao’s objective for water consumption reduction is a 30% reduction of water consumption during product use. Back in 2005, water consumption during product use numbered five billion tons but today has been reduced by 20% to four billion tons. 
Other efforts that have been made in terms of chemical substances and implementation to protect biodiversity through responsible raw materials such as the purchase of 100% certified palm oil and palm kernel oil by 2015. This certified palm oil comes through the Roundtable on Sustainable Palm Oil (RSPO), an international organization that aims to harvest palm oil while reducing ecosystem destruction of tropical rainforests and improving poor plantation labor conditions.
Kao’s ecofriendly approach has also spilled into the design of eco-friendly products. For several years now Kao’s products are designed to be compatible with recycling guidelines, demonstrate a longer lifespan and reduce the use of environmental pollutants in the product.

An Environmental Leader

Some of the most recent awards Kao has received include the Environmental Technology Award at the 41st Technology Awards in 2009 (held by the Japan Chemical Industry Association (JCIA)), and the “World’s Most Ethical Companies” award for the seventh year in row from the Ethisphere Institute, a U.S. think tank.
The Environmental Technology Award “recognize[s] technology that drastically curtails environmental burden” and went to Kao for Kao’s EG Runner, which utilizes recyclable used newspaper and the paper to mold and process metals for shaping. Molding typically generates large amounts of waste but Kao’s EG Runner cuts the waste drastically and is now primarily sold in Asian and European countries.
The Ethisphere Institute evaluates companies in five categories: Ethics and Compliance Program; Reputation, Leadership and Innovation; Corporate Citizenship and Responsibility; Governance; and Culture of Ethics. Kao is the only Japanese company that has been recognized for seven consecutive years.
Expect many more innovations ahead.