Shiseido’s earnings results for 2023 turned out to be a great disappointment, substantially falling short of our initial expectations as the business was severely affected by the rapidly changing external environment. In particular, the reluctance of Chinese consumers to purchase Japanese products in retaliation for the release of treated water into ocean from the Fukushima nuclear plant in the latter half of the year had a substantial impact on our results of operations. Currently, we are all united in our efforts to bring us back on a growth trajectory, with a strong commitment to rebuilding trust with our stakeholders by delivering a strong earnings recovery as the earliest possible.

Our medium-term strategy, “SHIFT 2025 and Beyond,” will continue to evolve in response to these changes in the external environment as we strive to achieve long-term sustainable growth which will allow us to further reinforce investments in the three key focus areas: Brands, Innovation, and People.

In a world facing numerous challenges amid growing instability arising from infectious diseases, natural disasters, and geopolitical risks, Shiseido has always been focused on what we can accomplish through the power of beauty, which has always been at the core of our business.

The term “cosmetics” is believed to be originated from the Greek word kosmos, meaning “universe” or “harmony.” Since the dawn of time, humanity has always found joy in decorating their face and heads, pursuing beauty as an innate desire. While cosmetics may not be essential like foods, they fulfill a fundamental human desire and offer profound value through beauty, which can impact our well-being, health, and social interactions. The daily practice of applying cosmetics is more than a routine; it is a ritual that lies at the very center of our lives. Even in times of disaster, we have repeatedly seen people pursuing emotional fulfillment through the power of beauty on their way back to normality to live a peaceful and energetic life again, and cosmetics certainly play a significant role in such process. This has proven the power of beauty to make us all believe that cosmetics not only enhance our appearances but also replenish our souls, unlocking eternal potential for a better world.

To realize our mission, Shiseido realizes a sustainable world where everyone can enjoy a lifetime of happiness through the power of beauty towards 2030. We are dedicated to fostering diversity and inclusion in our society where every individual is respected and can thrive—a world where people can fully enjoy beauty in harmony with a flourishing natural environment. We take particular pride in our focus on diversity, equity and inclusion (DE&I). Beauty is founded on individuality, thrives on diversity, is free from discrimination, and has the power to unite people. This principle is one of Shiseido‘s core values, which is why we believe the Company should not only cultivate diversity within our organization, but also take the lead in promoting greater diversity in Japanese society as a whole. As of January 2024, women hold 40% of management positions within Shiseido Group in Japan. As of April 2024, women comprise 45% of the board of directors, and over 30% of the leadership team comprised of executive officers and regional CEOs are foreign nationals. In this way, our diverse and dynamic workforce is one of our greatest assets, attracting world-class talent seeking new careers.

Moreover, we are actively involved in collecting and researching cases where implementing DE&I leads to improve corporate performance, and we aim to disseminate the findings through our activities of the Shiseido DE&I Lab. We will disseminate these internal insights obtained through our activities throughout society while taking proactive approaches to other companies. I will play a critical role in such process as the Chairman of the Diversity Promotion Committee in the Japan Business Federation (Keidanren) and as the Chair of the 30% Club Japan in order to contribute to the transformation of the Japanese society.

Furthermore, it is also our mission to lead the industry in environmental initiatives aiming to realize a sustainable society. In April 2023, we launched the circular model BeauRing Project to collect and recycle plastic containers and began a pilot test with POLA ORBIS HOLDINGS INC.

This is just one example of how we are advancing sustainability through the power of beauty, as we aim to become the most trusted beauty company in the world.

Just as every individual is unique, there are various perspectives on beauty. Beauty comes in different forms and is being shaped by different values. Guided by this philosophy, Shiseido set its target on becoming a “Personal Beauty Wellness Company” by 2030, integrating skin beauty with wellness to make enduring contributions to the genuine health and beauty of individuals over their lifetime.

To achieve our vision, we have shifted our focus from defense against the pandemic to offense for new growth under our medium-term strategy “SHIFT 2025 and Beyond,” and have been engaging in proactive investments. In light of the changes in market environment during the last year, we have reset our goals but remain committed to long-term investments in areas that drive value creation to ensure sustainable growth in the future. Our strategic investments focus on R&D, quality of our products, digital marketing, innovation, and people, who are the driving force of the shift towards growth. In 2016, we built and launched a global matrix management structure integrated by regions and brand categories based on our “Think Global, Act Local” concept, delegating broad responsibility and authority to each regional headquarters to further promote localized value creation. While maintaining Japan’s aesthetic values, we understand that the values and experiences people seek vary from one region to another. In the Americas, cosmetics are often seen as a form of self-expression, while in Europe, fragrance is closely linked to beauty, catering to the unique beauty needs of each of our consumers requires region-specific innovation. In Europe, we launched the prestige skincare brand Ulé, and in 2023, for the first time, a researcher from our Europe Innovation Center received accolades at the world’s largest cosmetic technology conference, the IFSCC. In the Americas, our US M&A team successfully led the acquisition of the dermatology-based prestige skincare brand Dr. Dennis Gross Skincare.

In order to strengthen these brands and accelerate innovation, we will enhance investments in our people furthermore. I deeply value our PEOPLE FIRST principle, which is at the heart of my own philosophy of management. I firmly believe that the creation of new value depends on the well-being and motivation of our people, who are the driving force behind innovation. When our employees take their futures into their own hands to build a business for a better society and bring value to both consumers and the wider community, the company can generate the revenue and cash needed to reinvest in innovation. This creates a virtuous cycle of value creation by returning these benefits to our shareholders. In November 2023, we opened the Shiseido Future University in Ginza, Tokyo, where Shiseido was originally founded, with the aim of training the leaders who will drive Shiseido’s future. As its founding dean, I will personally help lead the development of talents with a sensitivity attuned to beauty, emotional depth, and cutting-edge global business insights.

To ensure future growth, it is necessary for us to fundamentally reassess the reality of the challenging business environment. The delay in the recovery of Japan’s cosmetics market, changing market landscape in China, and the release of treated water have all adversely affected the Company’s business performance. However, the business environment is always evolving. Global geopolitical risks demand vigilant attention, and emerging technologies such as generative AI are reshaping market scenarios. It is crucial for us to deeply understand and delve into the ever-changing market conditions to always stay ahead of the trends. Adapting to these shifts involves a comprehensive review of our business domains and portfolio while executing strategic selection and concentration.

Following the completion of our global business restructuring in response to the COVID-19, a further structural transformation is necessary. To address this, I have established and led the “Global Transformation Committee” in 2024.

With nine task force teams, the committee is designed to clarify responsibilities across regions and categories more than ever before, ensuring effective execution. To avoid stagnation, we will continue to invest in value creation drivers. We will also promote further company-wide cost reductions to achieve sustainable, stable growth. For our Americas and EMEA Businesses, which achieved an improved profitability through business divestitures, will further accelerate growth through brand equity enhancement, improved R&D capabilities at regional research centers as well as mergers and acquisitions.

As a global company, we aim to reach a crucial benchmark of 15% in core operating profit margin to maintain a cycle of growth and investment to remain globally competitive.

In order to ensure and expedite the implementation of our initiatives for growth, we have changed our corporate governance structure by transitioning to a “Company with Three Statutory Committees.” Shiseido has been committed to advancing governance reforms aligned with the “monitoring board-type system” where the board is placing more focus on management oversight to ensure transparency and fairness in governance, while implementing effective strategic planning and timely execution of the business. This change in governance structure is intended to further the progress towards our goals by allowing the board of directors to focus on long-term vision and strategic planning and management oversight, while delegating corporate executive officers a significant authority for execution of the Company’s business to ensure greater flexibility and accelerated decision-making processes. I believe this framework will bolster effectiveness of our strategies amidst growing uncertainty in the business environment, while enhancing transparency of business for our shareholders and investors.

Ten years ago, when I became president of Shiseido, I recall holding KAKUGO (strong commitment) in two key management policies as an expression of my resolve: one, to grow this magnificent company, often referred to as “Japan’s treasure,” into a global powerhouse, elevating its presence worldwide; and, two, to strengthen its foundations from a long-term perspective, ensuring Shiseido continues to shine for the next hundred years and beyond.

This year marks my final year as CEO. I will continue collaborating with President and COO Fujiwara, my successor, to achieve our management strategy and restore healthy growth. In addition, I would like to spend time visiting our retail locations, sales offices, research centers, factories, and locations worldwide to directly meet with our dedicated employees. I want to talk with them, listen to their insights, provide inspiration, and devote as much time as I can to nurture the people who will shape Shiseido’s future.

Through these endeavors, we are committed to unlocking Shiseido’s intrinsic resilience—our innovative R&D, the power of our brands, and the expertise of our people—to ensure growth and exceed the expectations of all stakeholders. I am deeply grateful for your unwavering support and invite you to join us with excitement as we embark on the next chapter of Shiseido’s journey.

April 2024