Top Companies Report

5. Kao

July 30, 2010

Japan
www.kao.co.jp
Sales: $8.8 billion


Key Personnel:
Motoki Ozaki, representative director, president and chief executive officer; Takuo Goto, representative director, senior executive vice president, global production and engineering, global logistics; Hiroshi Kanda, representative director, senior executive vice president, global consumer products business, chairman, Kanebo Cosmetics Inc.; Shunichi Nakagawa, executive vice president, global legal and compliance, global corporate communications, risk management, global information systems; Tatsuo Takahashi, executive vice president, representative director, president and chief executive officer, Kao Customer Marketing Co., Ltd.; Toshiharu Numata, executive vice president, global R&D; Toshihide Saito, senior vice president, corporate strategy; Shinichi Mita, vice president, global accounting and finance; Masato Hirota, vice president, global media planning; Shinichiro Hiramine, chairman and chief executive officer, Kao (China) Holding Co., Ltd.; Ken Hashimoto, vice president, global procurement; Michitaka Sawada, vice president, global R&D (human health care)

Major Products:
Beauty care brands include Sofina, Kanebo and Molton Brown cosmetics, Bioré and Jergens skin care and Asience, John Frieda and Goldwell hair care; household care brands include Attack and Haiter laundry detergents and Magiclean cleaners

New Products:
Beauty care—Sofina Beauté Day Protector, Asience Customized Treatment, Medicated Pyuora Nano-bright toothpaste. To be launched: Sofina Jenne (September). Household care—Attack Neo

Comments:
Corporate sales declined 7.2% last year. By category, beauty care sales fell 6.9% to $5.9 billion. However, fabric and home care sales rose 1% to $2.9 billion. Kao credited the increase to the launch of new products such as Attack Neo. Based on Kao’s proprietary technology, the product can reduce environmental impact by conserving water and electricity and also shorten washing time. Solid sales of Humming Flair fabric softener and Haiter fabric bleach also contributed to the sales increase. In Asia and Oceania, sales grew on a local-currency basis as Attack Easy laundry detergent continued to perform well in Thailand and Indonesia. While consumers in Japan continued to be cost-conscious, sales of home care products increased due to the addition of new items to CuCute dishwashing detergent and efforts to strengthen the Haiter household cleaner brand with the launch of new products including drain cleaner and washing machine cleaner.

But in the beauty care business, prestige cosmetics sales were weak due to the impact of changes in the market structure in Japan. In prestige cosmetics, the Kao Group conducted aggressive initiatives to strengthen and increase its cosmetics megabrands with annual sales of more than 10 billion yen,
Fast Fact:
In September, Kao recalled its Econa cooking oil products after it was revealed in the media that one of its ingredients becomes carcinogenic after digestion. According to the media reports, Econa contained from 10 to 182 times the amount of glycidol fatty acid esters found in regular cooking oils.
including the launch of a new line from the Suisai counseling skin care brand and the addition of items to counseling cosmetics such as the Coffret D’Or makeup and Sofina beauté skin care brands in Japan. However, sales in Japan decreased due to a consumer preference for lower priced products and inventory reductions by retailers. In China, sales increased with aggressive initiatives that included the introduction of new brands. In Russia, the Kao Group strengthened its business operations with the establishment of a Kanebo Cosmetics Inc. subsidiary.

Sales of premium skin care products grew in Japan due to strong sales of the Curél and Bioré U brands. In Asia, Bioré performed well and sales grew on a local-currency basis. In North America and Europe, despite a recovery trend, sales decreased due to the weak markets and the effect of currency translation, the company said.

In premium hair care products, the market in Japan contracted on a value basis, with structural changes such as an increase in the proportion of shampoo and conditioner refill products. However, the Kao Group maintained sales at the previous year’s level and increased its market share due primarily to the improved Segreta premium hair care brand and growth in sales of foam-type hair color. Sales in Asia increased substantially on a local-currency basis, with expanded rollouts of the Asience and Essential Damage Care premium hair care brands in the region and the contribution of Liese hair styling and hair coloring products. Sales in North America and Europe decreased due to the weak markets and the effect of currency translation.

For the current year, Kao expects beauty sales to grow less than 1%. To stay one step ahead of the weak recovery, Kao’s beauty business will work to revitalize the market by adding greater value to products. In Japan, a weak cosmetics market is forecast to continue, but the Kao Group said it will promote the creation of strong brands through initiatives such as launching distinctive new products tailored to changes in consumer needs and reforming sales methods to meet changes in consumer purchasing behavior. Meanwhile, in the household care sector, Kao expects sales to grow 1.1%. Management is determined to build on the launch of Attack Neo ultra-concentrated liquid laundry detergent, by creating products with reduced environmental impact throughout the entire product lifecycle from raw material procurement to use and disposal.