Commitment to further growth

February 3, 2021

Today, we have decided to transfer our global Personal Care business to CVC Asia Pacific Limited, a private equity fund, and establish a new company with a 35% stake in ownership to further develop the business. I would like to explain the importance of this decision and convey my thoughts.

First of all, I would like to express my sincere gratitude to those who use our Personal Care brands, and ask for your continued support.

The purpose of this transfer is to further grow the Personal Care business, whose business structure is mass marketing and quite different from the Cosmetic business with beauty consultant counseling, by spinning off and establishing a new joint venture independent of Shiseido.

The Personal Care business includes leading brands such as TSUBAKI, SENKA, uno, Ag DEO24, SUPER MiLD, SEA BREEZE, MACHÉRIE, fino,AQUAIR, and KUYURA, which are sold at drug stores and GMS and favored by a large number of users.

The origin of the Personal Care business dates back to the launch of Shiseido Soap in 1921. In 1959, we spun off this business and established Shiseido Trading Company, Limited, which has since evolved into the current FT Shiseido Company, Limited. With many mega-hit products such as SUPER MiLD launched in 1988, our Personal Care brands have been received and celebrated by many consumers in Japan, China, and other Asian countries and regions. I started my career at a different company but in the same industry, and saw and heard stories about Shiseido’s Personal Care business. Therefore, I firmly understand that these brands have played an essential role at Shiseido.

I know this transfer is not easy for our employees and predecessors who have dedicated themselves to the Personal Care business, its long-beloved brands, and its loyal users worldwide. It is also an exceptionally difficult decision for me.

We are pursuing further growth in Japan and globally with our Group strategy of “Prestige First.” For the first time since our foundation, we have achieved sales exceeding 1 trillion yen and 100 billion yen in operating income with strategic focus on the mid-to-high-priced Cosmetics business, which accounts for more than 70% of Group sales since 2015. I strongly believe that we must maintain this strategy, and that it is the foundation for Shiseido and its nearly 150 years of heritage to thrive for the next 150 years.

Since I became President and CEO in 2014, we have taken various measures to regrow the Personal Care business, such as establishing the Personal Care Division, assigning more marketing experts, renewing TSUBAKI with strong advertising investment, and reinforcing localized marketing in China and Asia. Although we have delivered certain achievements with members’ dedication, the business environment has become more severe due to competition with global companies. Under these circumstances, we must face the harsh reality that we cannot prioritize the Personal Care business or adequately invest in product development and advertising using limited management resources within Shiseido alone.

While I understand this reality as Group CEO, I regret and am sorry for not providing members with a dream for the future. We have discussed among top management the best option in various aspects, including a change in the business model like today’s announcement.

We have therefore concluded that it is best to entrust a partner who highly values our brand's potential, is committed to providing appropriate marketing investment, and will enable the job satisfaction and growth opportunities of employees. In selecting candidates, we have carefully and repeatedly examined and discussed the above points with the highest priority.

CVC operates in 23 offices worldwide and is one of the world’s leading funds, with a record of boosting business growth and corporate value through investment. In addition, CVC has delivered various achievements in Japan with an enthusiastic Japanese leader. CVC has already committed to making this new company successful, and I am highly confident that CVC is the best partner.

Of course, I assure you that our beloved brands will carry on. The new company will maximize investment in product innovations, digital marketing, sales, and human resources for further growth of the brands. Our factory will also continue production to maintain the high quality of products. Simultaneously, Japan Retail Innovation (JRI), a Shiseido Group company which handles Personal Care brands in retail stores, will also support the new company. We will look for M&A opportunities with the new company as a platform to further expand the business. With all those efforts, this new company strives to contribute to the reform and greater development of the personal care industry in Japan. I would like to ask our business partners for their continued support and cooperation going forward.

For employees in the Personal Care business, we will not only maintain employment and working conditions, including compensation, but also provide opportunities for further success and growth in the new company. We expect members to enhance their professional skills in the Personal Care business and proactively participate in building a new company where people can grow and shine in a vibrant atmosphere. Above all, I wish all members to create their own future with their hands and realize their dreams. I promise my personal commitment to make the new company successful.

Significant reform like this does not proceed without difficulty. However, we must face reality and overcome this difficulty to realize sustainable growth and create our future. We will concentrate even more on the Cosmetics business centered on skincare. Cherishing our DNA passed down from the company's first president Shinzo Fukuhara—“Let the product speak itself,” “Everything must have a rich sensibility,” and “Aim for the world”—we will pursue further heights through enriching Japanese technology, quality, brand, and corporate culture. We will strengthen our competitive edge and presence in the global market and strive to “Be a Global Winner with Our Heritage.” And I will commit to leading this journey together with all members, humbly and faithfully.

I sincerely appreciate your understanding and support.

Masahiko UOTANI

Representative Director,

President and CEO