Message from the COO
happiness and enriches lives through the power of beauty.
We will hone our value proposition and evolve into a company
where our people can find purpose and continue to grow
President and COO
happiness and enriches lives through the power of beauty.
We will hone our value proposition and evolve into a company
where our people can find purpose and continue to grow
On My Appointment as President
I am proud of Shiseido’s unique role as a Japanese company that brings joy and inspiration to people’s lives.
It is my great pleasure and honor to be appointed President and COO of Shiseido.
Since joining Shiseido in 1991, I have been mainly involved in overseas business in EMEA, Travel Retail, Korea, and China. When I joined, the overseas sales ratio was less than 10%, and even though I couldn't have imagined that we would become so international, the drive and aspiration to be global has always been part of Shiseido since its founding 150 years ago. As we look back at the company's first entry into the beauty business in 1897, our founders wished to spread unique Japanese values and bring happiness to people around the world. It is inspiring to see that this dream is now becoming a reality.
I see Shiseido as a unique Japanese company that brings joy and inspiration to the lives of people around the world through the power of beauty. Being able to work for such a company has always been a source of pride and joy for me.
Throughout its long history, Shiseido has continued to pioneer and spread the unique culture and value of Japanese beauty, and through our advanced skin research expertise and absolute quality and safety, we have gained the trust of people around the world. For example, many employees who join Shiseido overseas do so because of their high expectations for the company's culture, technology, and quality. This means that we should be able to drive growth by communicating our strengths clearly and concretely and differentiating ourselves from global competitors.
Upon being appointed as president, I made two promises to our internal and external stakeholders—first, that I would always pursue new growth engines in the ever-changing market, and second, that I would not leave challenges that we face today to the next generation. We must establish a foundation that allows us to keep growing globally for the next 150 years.
To achieve this, I will prioritize One Team management and a pragmatic, bottom-up approach. Since everything we do starts with delighting the consumers, it is crucial for the people closest to them in each region and brand to show their creativity and enjoy their work proactively. This is also something I experienced firsthand when restructuring our business in Korea, which was a formative experience for me as a manager. By being open about challenges with employees who were initially passive, and by talking through possible solutions that each person brought to the table, we were able to act proactively, with a sense of purpose, and carry out reforms that required tough decisions. Going forward, I want to take a similar approach to our company-wide management structure to build an integrated management team that drives the strategy while sharing ideas about value creation, challenges, and risks.
Since becoming President in January, I began visiting each region in turn, starting with Japan—our focus market—to promote face-to-face meetings with customers and direct dialogue with employees. When speaking with employees in Japan, I heard both about their struggles with the challenging market conditions due to the pandemic as well as their desire to work towards new breakthroughs because of their love for Shiseido. They were also eager to share their suggestions for improvements in the workplace. Moving forward, I will create more chances for direct dialogue with regional CEOs and employees to build an organization where growth is driven from the bottom up.
Shiseido’s Goal for 2030
We will strengthen our ability to create and communicate our values and grow to become a Personal Beauty Wellness Company.
Shiseido aims to become a Personal Beauty Wellness Company by 2030 under its corporate mission, BEAUTY INNOVATIONS FOR A BETTER WORLD.
As consumer values and sources of happiness become increasingly diverse, the values that Shiseido provides, such as joy and enrichment, will become all the more important. Therefore, it is crucial to engage with consumers through digital and offer a diverse range of beauty solutions tailored to each individual.
How can we grow ourselves to create value? Shiseido is currently the fifth-largest beauty company in the world by sales, but there is still plenty of room for growth. To this end, we will first concentrate on enhancing our ability to create and communicate our value. We will allocate management resources to individual brands that deliver value and invest in innovations and people as the drivers that will hone our ability to create value. At the same time, we will refine the unique aspects of our brands, products, and services and communicate the value of our innovations to consumers. Two successful examples of value creation and communication are the renewal of ELIXIR lotions and emulsions, which led to the recovery of the mid-price range in the Japan business in 2022, and NARS Light Reflecting Foundation, which applied the value of skin beauty technology to makeup.
To repeat such success, we will concentrate our investment in core brands over the next three years, defining desired outcomes for each brand and working backwards to develop and implement measures that will allow us to achieve them. One of my missions as President is to establish a successful model for growth.
Our Reform Goals Under Medium-Term Strategy SHIFT 2025 and Beyond
Shifting from defense to offense, we will enhance brand equity, rebuild a profitable foundation through the re-growth of our Japan business, and globally transform our cost structure.
SHIFT 2025 and Beyond is a value creation strategy based on the above thinking, our reforms to date, and environmental market analysis.
Under SHIFT 2025 and Beyond, our management strategy will shift from defense to offense as we establish a growth trajectory through investment to achieve sustainable growth as a Japan-based global beauty company. As a key indicator, we have set a target for a core operating profit margin of 15%, with a 2025 milestone of 12%. This target is essential to be a global leader and if we achieve it, we will be able to invest further in new growth opportunities.
Just as important as achieving our goals, is the path we take to get there. Our reforms are centered around three main themes: brand value, Japanese business, and cost structure.
Strengthened Brand Value
We will focus on establishing a “value-added management model" that ensures our investment result in creating value. We will invest 100 billion yen into marketing over a three-year period as well as strengthen our investments in innovations and people. This model will allow us to create a business structure with premium pricing and high gross margin by pursuing unique and innovative aspects of our brands and firmly visualizing and establishing their added value.
To build this model, we believe it is necessary to once again break down and reanalyze our added value. For each business and brand, we will analyze the value of each component and verify KPIs and non-financial indicators that contribute to medium-to-long-term growth. Indicators include the number of loyal users, employee engagement, and brand equity. By making these KPIs a common language within the company, we will be able to effectively work together across our businesses and brands. I also want our employees to be motivated in working toward these clear KPI targets.
These KPIs are also important for our accountability to our shareholders and investors. Investments for brand businesses will not always result in immediate returns and may show up in different timeframes. As we strengthen our investments, it is necessary to review and share the successes and failures of those investments; whether it contributed to medium-term growth and refer to them in our dialogues.
Re-growth of the Japan Business
The first step toward revitalizing our Japan business—the biggest remaining outstanding points to be tackled from WIN 2023—will be focusing on building growth momentum. In 2023, the market is expected to expand in the high-price range, which is Shiseido's main market segment, while the mid-price range and inbound tourisms are also showing signs of recovery. By capturing these opportunities in a timely manner, actively investing in skin beauty, and continuously developing innovative products, we will expand our user base and achieve growth in net sales and market share. In the medium term, in addition to the growth of these core businesses, we will also expand to new areas of growth, such as derma and inner beauty, establish a system for Personal Beauty Partners to provide wellness proposals, and build a digital platform to accommodate these activities.
To enhance profitability, we will increase our gross margin by focusing on skin beauty and improving our brand and channel mix. On the other hand, fundamental reforms are inevitable in light of the situation where the Company has been unprofitable for three years, even though there was a significant impact from the sluggish market. We will envision the optimal cost structure to realize growth momentum and work to achieve the goal through reviewing business processes, reducing product returns and slow-moving inventories, and promoting efficiency by introducing FOCUS, our global IT platform, and aim for an SG&A ratio of low 60% by 2025.
Cost Structure Reforms
We will promote cost structure reforms to transition to a high-profit structure that will allow us to make continuous investments.
To promote efficiency throughout the company, we have kicked off a project to optimize our cost structure with regional CEOs and executive officers working together as a unified team, not only focusing on their respective areas of responsibility but also determining global-level initiatives.
We expect strengthened digital transformation (DX) and FOCUS to play significant roles in improving our cost structure. DX will drive the evolution of our consumer data strategy and beauty tech while also contributing significantly to the improvement of marketing ROI through building digital platforms. Furthermore, by successfully implementing FOCUS, we will standardize data, processes, and systems globally, enabling higher gross profit, cost reduction, and the optimization of working capital in the areas of finance, supply network, and marketing.
Regional Business Strategies
Apart from the Japan business reforms, we will also prioritize improving market share in the massive Chinese market, which includes our China business, Travel Retail business, and inbound tourism business in Japan.
The mainland China market is expected to continue experiencing drastic changes such as price competition, the rise of local brands, and the diversification of consumer needs and online platforms. However, Shiseido will flexibly respond to these changes and focus on marketing reforms that emphasize quality over quantity. The company will shift from seeking short-term ROI to more medium-term returns, focusing on expanding brand loyalty through enhanced brand experiences, China-specific product development, and strengthening our CRM capabilities. Regarding profitability, in addition to the brand mix effect, we will work to enhance marketing ROI, efficiency through FOCUS, and optimization of facilities and stores, aiming to improve the core operating profit margin by 5 points from 2022 to 2025.
At the same time, we will also focus on expanding the Americas and the EMEA businesses, where we worked on structural reforms and created a profitable business foundation. Asia Pacific region also presents exciting and promising business opportunities. We are dedicated to nurturing these business foundations and growth engines to ensure full-scale expansion from 2025.
For Future Reforms
By quantifying indexes I value in management, we will be able to share strategies and decisions easily to internal and external stakeholders and evolve dialogue with them.
To promote above reforms, we expect each of the regional businesses to create innovations unique to the region based on their respective business models. Our sustainability initiatives will also be more effective by implementing activities tailored to the culture and behaviors of each region. I believe integrating sustainability into business activities and making it part of the business will create value and new business opportunities.
Regional CEOs are also expected not only to grow and develop their respective businesses but also to possess a global view of the business as a whole. We aim to become an organization that can discover untapped value in each region, and then adapt them globally. This includes in the U.S., where many new values and innovations are born, as well as Travel Retail, with its unique business model that spans across countries and regions.
Moreover, it is vital that we gain internal and external consensus in promoting reforms, and active dialogue is essential for that. To engage in such effective dialogue, I believe we need to develop a system where my own values can be quantified and measured, in addition to setting KPIs for our value-added management model. In this way, we can allow our employees, shareholders, and investors to easily understand the strategies and the decisions we make. I am committed to meeting our goals for medium-to-long-term growth while transforming our approach to engaging in meaningful dialogue. I ask our shareholders and investors for their continued understanding and support.
