Kanebo Launching Its Top Luxury Brand SENSAI In China--CBO-在这里，交互全球美妆新商业价值

Kanebo Launching Its Top Luxury Brand SENSAI In China

CBO Liu Ying 2021/05/31

GuideKao still has high hopes in the much anticipated Chinese market, although they have not been performing that well. Six years after its disappearance from China's high-end cosmetics market the company officially announced that it would stage a comeback along with its super-premium

It was 10:00 a.m. on May 7, 2021. At the red-and-white Kao booth in the bustling Exhibition Hall 5 of the 1^st China International Consumer Products Expo, both visitors and professionals were packing into the cue, and a line was meandering around far enough to stretch to the outside of the booth, as they were eager to try the black technology of est Veil–a product which is known to protect as a "second skin".

△ Kao booth at the 1^st China International Consumer Products Expo

Dressed in a suit and tie Tanaka Junichi, who took office just one month ago as head of Kao Group's Cosmetics Division and Vice Chairman and General Manager of Kanebo China, was sitting squarely in the transparent live broadcast room in the center of the booth. After working at Kanebo as a salesperson for 30 years, Tanaka Junichi felt more excited about his new identity than he felt pressured.

That was because the new GM was clearly aware that the year 2021 would be crucial to the business development of Kao Group's Cosmetics Division.

△ Tanaka Junichi, head of Kao Group's Cosmetics Division and Vice Chairman and General Manager of Kanebo China

High-End Cosmetics Put in the Limelight of Kao Group's New Strategy

"Chinese consumers, no matter whether of their preferences for cosmetics or purchase demands, are a far cry from a decade ago!" From 2010 to 2013 Tanaka Junichi, who was then working at the corporate planning division of the headquarters, made many trips to Shanghai on business. At the difficult times when the prospects of Kanebo were hanging in the balance in the wake of the incident involving the recall of whitening products in Japan, Tanaka Junichi paid visits to many department stores to keep himself in the picture about how things went and developed an in-depth insight into Chinese consumers along the way.

In Tanaka Junichi's view, compared with recent decade, Chinese women now have been strengthening their awareness and knowledge of cosmetics, as a result of which there will be a growing demand among consumers for individuality, diversification and high quality (high added value). Introducing more high-end brands into the Chinese market is his top priority after he officially took office as the new GM.

△ Kao's super-premium brand SENSAI

This move was regarded as part of a major shuffle of the strategic framework by the headquarters.

Prior to this, Kao Group was operating dozens of brands, with each engaged in their own business operations. Gradually, the Group was beginning to be aware of the problems existing in its operations. For this reason in 2018 the Group realigned its organizational structure and unveiled a new cosmetics strategy in a bid to build "a brand with an overwhelming influence" as early as possible.

In terms of brand management and operation, Tanaka Junichi told the CBO reporter that Kao Group has combined its five business entities (Kanebo Cosmetics, Curel, Sofina, e'quipe and MOLTON BROWN) into three segments: Sofina Division, Curel Division and Kanebo Cosmetics Co., Ltd.

As a move to increase investment in high-end cosmetics, the new strategy has trimmed down the original 50 brands by a considerable proportion of 40%. At the same time business focus has been shifted on 11 global brands (G11) and 8 local brands (R8).

Positioned as a global strategic matrix, the first echelon "G11" includes SENSAI, est, SUQQU, RMK, KANEBO, athletia, MOLTONBROWN, Freeplus, Curel, SOFINA iP and KATE. Kao will continue to endow G11 with more complete individualities to give an impetus to their development in Asia and Europe.

Positioned as a brand matrix with Japan as its center, the second echelon "R8" commits itself to pooling forces and making investment in a decentralized way to promote its business development and achieve faster growth for these brands, including ALLIE, Primavista, TWANY, LISSAGE, COFFRET D'OR, EVITA, media, and LUNASOL (which was quite a hit at one time in the Chinese market).

However, the shuffle did not pay off immediately. According to its 2020 Financial Statements Kao Group's sales dropped by 8% year on year to 1.382 trillion yen (equivalent to about RMB 81.3 billion) and the net profit attributable to the parent company plummeted by 14.9% year on year to 126.1 billion yen (equivalent to about RMB 7.4 billion). The situation was hardly optimistic.

In January 2021 Kao Group re-integrated its cosmetics division and put brand cultivation, administration and operation under the unified management in order to better focus on improving the comprehensive competitiveness of its cosmetics business and to keep up with the diversified needs of consumers. At the same time, based on the vision of "Celebration of Individuality", Kao Beauty Brands came into being as an independent system. Putting the cosmetics division under the unified management helped the Group consolidate the image and value of its brand and expand the loyalty and diversification of its customer base.

In fact, on the strategy of increasing investment in high-end cosmetics with high added value, Kao Group sees eye to eye with its industry peer Shiseido, which is also a leader in Japan's beauty cosmetics industry. To cope with the impact of the epidemic, according to its announcement in Q1 2021, Shiseido kicked off its medium and long term business strategy "WIN2023 and Beyond" transferred the business of its 10 major personal care brands and embarked on a massive programme of reform focused on high-end skin care & beauty services and digital business. Over the past years high end brands such as CPB, IPSA and SHISEIDO have remained as the engine of Shiseido's performance growth. According to the latest financial statements, Shiseido China is staying ahead of the curve in the entire overseas market for delivering strong growth of 46.8%.

Taking Advantage of Favorable Policies, Kao is Making Its Way Back to Department Stores after Establishing Tentative Presence in Hainan Province

As the first to recover from the COVID-19, the Chinese market has become more attractive than ever before to international companies that are desperate to survive and move on despite the severe impact of the global epidemic. Hainan, thanks to its advantages in the availability of favorable policies, has become a hot spot for eagle-eyed business owners.

A number of beauty cosmetics companies, including L’Oréal and Johnson & Johnson, made their debut at the 1st China International Consumer Products Expo and exhibited a dazzling array of brands and products. Shiseido even put THE GINZA (sold at a price of as high as RMB 10,000/piece) for sale as its first move towards overseas markets.

Taking advantage of the opportunity of participating in this state-level expo, Kao Group accelerated its pace of establishing its presence overseas. Focusing on cross-border e-commerce and tourism retail, the Group has opened a duty-free shop in the island province of Hainan in an effort to vigorously promote its business in China's duty-free market, introduce more high-end cosmetics brands to Chinese consumers, raise its profile in the market and fill the market vacancies in the post-epidemic era.

"Chinese women have been becoming more makeup-conscious and have been building up massive knowledge in this area. We believe that this is a golden opportunity for us to showcase our high-end brands anew developed with Kao's unique technology." Tanaka Junichi said when asked why he attended the expo.

To keep pace with the current trend in China, other than Freeplus and Curel which mainly focus on the general public, Kao has decided to gradually bring in high-end brands of global strategic significance. As the representative brands of the Group, SENSAI and est will be the first two to be introduced into China's high-end market.

Themed "Beauty from Japan, going global and connecting with the future" and "High-end brands that Kao takes pride in", the Kao booth at the Expo showcased the ingenuity of SENSAI, the low-key style in the beauty of est and the advanced ultra-fine fiber technology applied in Veil series products.

△ On-site demonstration of Veil

Founded in 1983, SENSAI has taken a distinctive path in its development. Since its inception SENSAI, endowed with the genes of international brands, had been selling in the European market until 2019 when its first brand store was opened in Japan. As a super-premium cosmetics brand, SENSAI is committed to presenting Japanese-style craftsmanship and quality to the world. Made out of Japan's original and rare "Koishimaru Silk", its products are sold at an average price of about RMB 1,000/piece. So far the brand has set up some 4,000 sales points in department stores and beauty shops in Japan, Europe, the Middle East, etc.

Founded in 2000, est has benefitted from more than 40 years of Kao's research and development in technology as well as Kao's sights in the field of beauty cosmetics. Its products are known to help bring out the best in your skin. The brand concept stems from an "eco-imagination of beauty".

△ est, a high-end brand of Kao

Since April 1, 2021 SENSAI and est have been offered for sale in the HTDF duty-free shop, officially re-activating the high-end business sector in the Chinese market. Kao was satisfied with the first month sales of the duty-free shop in Hainan, commenting that its performance was even better than expected. According to a source SENSAI has brought in a dozen types of products so far and will be increase the speed of introduction of more products.

On the whole, Kao adopts a "three-step" strategy for its high-end brands to establish presence in China. "In the post-epidemic era we will focus our work on duty-free business, e-commerce and the establishment of strategic presence in key cities." Tanaka Junichi told the CBO reporter "The aforesaid two brands have planned to open online flagship stores in September and gradually set up counters in department stores in key cities."

The Year 2023 Becomes an Important Year for Kao to Step up the Game

After two years of careful preparation and development Kao has planned to introduce SUQQU, KANEBO and other global high-end brands in its first echelon into different channels in the Chinese market in 2023. By then, with the participation of "Kanebo", a brand known for its unique technology, China's high-end skin care market will usher in a new landscape of competition.

In the eyes of industry insiders the return of Kao's high-end brands to the Chinese market is indeed long-anticipated. As early as 2017 Kanebo China released a signal at a press conference that the company would accelerate its pace of bringing in the brand Kanebo. However, the plan has been delayed for various reasons, including the impact of the epidemic.

On this issue, a cosmetics director at a high-end department store in Central China said the "comeback" of Kao's high-end line is an exciting piece of news for department stores in urgent need of quality high-end skin care brands. Both SENSAI and SUQQU are "rising stock" that she is optimistic about, but given the slow marketing pace of Japanese brands she is starting to worry about the prospect of the newcomers.

In the era of fan economy, and after 34 long years of presence in the Chinese market Kanebo has begun to be aware of problems, like taking a conservative approach to marketing. Tanaka Junichi admits that such "slow pace" does hinder the shaping of brand power in the rapidly changing market environment. They will be ready to step up the game to better meet the individual needs of Chinese consumers, including the selection of spokespersons and digitalization.

It is, so to speak, a top-down change in the way of thinking. "Besides the cosmetics division, the whole Group has put the Chinese market on the top of its global business agenda" said Tanaka Junichi.

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