In 2014, when we formulated the VISION 2020 medium-to-long-term strategy, Shiseido's growth potential had deteriorated, sales growth was flat and operating profit was in continued gradual decline. So, first, we looked at the current situation and identified issues to be resolved at the fundamentaly.

What became clear, from listening to various voices regarding issues faced by Shiseido, was the harsh reality that we were not keeping up with consumers and market changes.

In order to overcome this situation, we set two essential resolutions. First, regain the growth of the Japan business. The Japan business, which previously represented about half of sales, declined in sales and lost market share for many years. As a result, even if overseas business sales expanded, the company as a whole could not grow. Recovering growth in the home market of Japan was a matter of urgency.
Second, improve overseas profitability. In the overseas business, low profits continued while investment to expand sales was moving ahead. To raise profitability throughout the company, it was necessary to both grow the overseas business while simultaneously enhancing profitability.

The main reason behind the decline in growth potential had been a reduced investment in marketing and R&D necessary for strengthening brands and businesses. As a result, brand equity became weaker, store sales declined due to a decrease in consumer purchasing, and our company’s shipments slowed down accordingly, feeding a vicious cycle of deteriorating profitability.

To tackle this situation, Shiseido launched its VISION 2020 medium-to-long-term strategy, in order to regain growth and ensure that the company remains vital for the next 100 years.

1. Further Selection and Concentration of Brands and Businesses

Under the Prestige First strategy, we place the highest priority on prestige brands, which are our strength and can be expected to drive our growth and profitability. Accordingly, we will strive to achieve growth by concentrating investment in SHISEIDO, Clé de Peau Beauté, NARS, bareMinerals, IPSA, LAURA MERCIER, and Dolce&Gabbana. In addition, in the Asian region, beginning with China, we will focus on developing made-in-Japan brands such as ELIXIR, ANESSA and SENKA among cosmetics and personal care brands.
We will further enhance our brand equity by strengthening localized marketing that caters to the needs of consumers in each region, and through collaboration with distributors and retailers.

3. New Value Creation through Innovation

We will realize further synergies by combining the knowledge we have cultivated, the new brands and technologies that we have acquired through mergers and acquisitions, and human resources who offer high levels of expertise. As a result, we will create new value not only in cosmetics but also in new frontiers such as artificial skin, hair and skin regeneration, and advanced beauty care, and build innovative business models. In addition, we will bolster research and innovation investment, and by 2020 we will realize a research and innovation-to-sales ratio of 3% (4% in the future) and the number of research and innovation personnel will be increased to 1,500.
In April 2019, the Shiseido Global Innovation Center (referred to as "S/PARK"), our Yokohama-based center for global research and innovation, began full operation. We will continue to provide new value for consumers around the world by integrating diverse knowledge, information, and technology aggregated from state-of-the-art research institutes in Japan and overseas as well as from other industries.
Click here for the Global Innovation Center

Results of 2019 and forecast for 2020

In 2019, in line with the Three-Year Plan, we focused on investment in prestige and made-in-Japan core brands. As a result, we were able to achieve high growth with net sales of 1,131.5 billion yen, which is a 5.7% increase year-on-year on a local currency basis and 6.8% like-for-like growth excluding such factors as business transfers, the application of U.S. GAAP (ASC 606), and the acquisition of the U.S. skincare brand Drunk Elephant in the previous year. Operating profit was 113.8 billion yen, a 5.1% increase from the previous year, with an operating profit margin of 10.1%, mainly driven by an improvement in the product mix stemming from increased sales of prestige brands.

A new forecast was disclosed on November 10, 2020, at the time of the third quarter results announcement. Please refer to the link below for details. Latest 2020 Full-Year Outlook

The forecast for 2020 excluding the effect of the novel coronavirus is net sales of 1,220 billion yen, operating profit of 117 billion yen, and an operating profit margin of 9.6%. We will continue to focus investment on prestige and made-in-Japan cosmetics and personal care brands which are driving growth. In terms of business segments, we will further strengthen investment mainly in China and Travel Retail. At the same time, we will respond more efficiently to the changing needs of consumers in our home market, Japan.
The current forecast does not take into account the effect of the novel coronavirus which has been spreading particularly in Wuhan City, Hubei Province, China, since January 2020 , due to a number of uncertainties it entails. We are currently evaluating the impact on our business. We plan to more carefully assess this impact and reflect it in our business forecasts as appropriate.

2020 Sales Forecast (vs. 2019)

2020 Operating Profit Forecast (vs. 2019)

New Brand: Drunk Elephant

In 2019, we acquired the U.S. prestige skincare brand Drunk Elephant.
The brand has a top-class presence in the U.S. “clean” market^* and enjoys strong support from a wide range of consumers. As the clean market is expected to continue growing worldwide, we will leverage our management resources to expand the brand’s presence in Asia and other global markets. With this new addition, we will strengthen our brand portfolio in the highly profitable prestige skincare category in order to increase sales and improve profitability in the Americas. In addition, we will scale up Drunk Elephant's digital marketing expertise and know-how to the entire Shiseido Group.

*A worldwide demand for products that are clean to both the human body and the environment, centering on the younger generations.

Profit structure in the Americas and EMEA

To improve the profitability of the Americas and EMEA, we have promoted various initiatives such as organizational reforms, integration of offices and systems, and withdrawal from unprofitable businesses. Currently in the Americas, we are also working on closing unprofitable bareMinerals boutiques. The results of these efforts are starting to appear.
Going forward, we will enhance profitability by cultivating and strengthening the brands of each region.
The figure below shows the current profit structure in the Americas and EMEA.
Related to the Americas and EMEA, commercial-based profits are positive (1). Meanwhile, there is a large burden of brand holder costs related to NARS, bareMinerals and LAURA MERCIER in the Americas, and Dolce&Gabbana and other designer fragrance brands in EMEA (2). Profitability in the Americas has grown steadily in 2019, while EMEA almost broke even. In 2020, we will continue our efforts to improve profitability through the growth of our brands.
In addition, the Americas and EMEA are bearing the operating expenses for the Centers of Excellence, which contribute to global value creation. There are three Centers of Excellence in the Americas, which is a factor that reduces statutory-based profit. In the medium to long term, we aim to improve profit by expanding sales growth in each region.

VISION 2020 is a medium-to-long-term strategy that sets our targets until 2020 as one point in time.
However, as a company, we need to continue beyond that point and realize sustainable growth.
Going forward, we will grow to be a global winner and aim for long-term net sales of 2 trillion yen and operating profit of 300 billion yen.