Shiseido will step up skincare brand acquisitions to diversify its presence beyond China following a radical restructuring of its assets during the Covid-19 crisis, its chief executive told the Financial Times.
Masahiko Uotani said in an interview that Japan’s largest cosmetics group was preparing to boost the long-awaited return of Chinese tourists to Japan next summer. But he added that Shiseido would step up acquisition efforts in the US and Europe, and was also ready to explore markets like India and Africa once the pandemic was under control.
The company remains optimistic that rising consumption and middle-class growth will continue to drive sales in China, its largest market, where it generated 30 percent of its revenue in the first six months of 2021.
Uotani said the resumption of Chinese tourism would boost sales in the local Shiseido market, as he predicted easing of border restrictions in the months after the Winter Olympics in Beijing in February.
But analysts have pointed out that the Japanese group’s heavy reliance on China posed a risk amid growing concerns about the impact of Beijing’s “common prosperity” campaign and the crackdown on the technology, education, gaming and property sectors. , among others.
“We believe that the long-term potential is extremely high in China and we will firmly seize this opportunity,” said Uotani. “But as our dependency increases, questions about contingency and portfolio management will arise, so we want to further strengthen our efforts in the United States and Europe.”
The diversification strategy comes as Uotani has declared the “near completion” of the Shiseido restructuring wave, which followed a sharp drop in demand due to Covid shutdowns and travel restrictions.
In August, Shiseido agreed to a $ 700 million sale of bareMinerals and two other US cosmetic brands to private equity firm Advent. He also transferred his personal care business to CVC for $ 1.5 billion in February.
Asset sales supported Uotani’s plan to focus on higher-margin skincare products, where Shiseido hopes to become a global leader by 2030.
“We are exploring mergers and acquisitions to be able to respond to all kinds of skin care needs,” said Uotani. He added that the group would expand investments in digital technology and data analytics in response to consumers’ growing focus on wellness brought on by the pandemic.
After reducing its product offering, Shiseido expects to return to a net profit of 35.5 billion yen ($ 310.5 million) this year, after suffering losses of 11.7 billion yen in 2020.
Shiseido has historically struggled to establish a presence in the US, highlighted by its disappointing $ 1.9 billion acquisition of Bare Escentuals, the New York-based natural makeup company, in 2010. It struggled with the integration of the brand and was forced to take a write-off of 623 million dollars in 2017.
But the Japanese group plans to build on the success of the Nars cosmetics brand and the Drunk Elephant skincare line to expand its international presence beyond Asia, where it generates more than 60 percent of its revenue.
As part of those efforts, Uotani has vigorously recruited local talent in the group’s target markets and adopted English as the company’s official language in 2018.
“We now have a pretty strong lineup of local talent to address the European, Middle Eastern, US and Latin American markets,” Uotani said. “We had a brief hiatus with corona, but once it is over, the regions that we are going to enter will become a critical strategy going forward.”