Interview with Kentaro Fujiwara, President and COO, Shiseido Co.

Syukan Syogyo Publishing January 1, 2024, page 6

January 15, 2024 11:00

Syukan Syogyo Publishing Institutional Cosmetics Interviews

In short

Shift to aggressive marketing from "sei-katsu-sha, frontline-driven
Achieve strong positive growth through investments to expand customer contact points
Decisive business transformation in 2024 and launch of new growth model from 2025
Full-scale launch of inner beauty business as the first step in developing the wellness domain

Interview with Kentaro Fujiwara, President and COO, Shiseido Co.

Shiseido will celebrate the 100th anniversary of its chain store system in 2023. The company has positioned this as a "year of leap forward" and shifted to an aggressive marketing stance at once, launching a series of major new products, including inoui and Bénéfique's symbolic beauty essence. The recovery trend in the cosmetics market has been a tailwind for the company, and it has been steadily producing results.

　At the same time, the biggest key to achieving the shift to a highly profitable structure and stable growth targeted in the medium-term management plan is "rebuilding the earnings base through growth in Japan," and Shiseido is working on a business transformation of its Japan business under the leadership of Kentaro Fujiwara, President COO and Chairman of Shiseido Japan.

　In this New Year's interview, Mr. Fujiwara, newly appointed President & CEO of Shiseido Japan from 2024, reviews the results of Shiseido Japan's aggressive marketing initiatives in 2023 and his enthusiasm to tackle business transformation for the future through "self-innovation" for the company's permanent development. We interviewed Mr. Fujiwara about the results of Shiseido Japan's aggressive marketing initiatives in 2023, his enthusiasm for tackling the business transformation for the future through "self-innovation" for permanent development, and business policies for fiscal 2024.

Investment to Expand Customer Contact Points

Achieving Strong Positive Growth

　--This is your first appearance as President and CEO of Shiseido Japan.

　 Fujiwara: The year 2023, which marks the 100th anniversary of the chain store system, is positioned as a "year of leap forward," and Shiseido Japan, together with our specialty stores, is committed to providing attractive experiences at specialty stores, in addition to groundbreaking product innovation, with the desire to fill stores with the bright smiles of customers, and the world. Shiseido has been actively communicating the attractive experience of specialty stores to many consumers and promoting initiatives to encourage them to visit our stores, with a desire to fill the stores with the bright smiles of our customers and the world.

　In its medium-term management plan, Shiseido aims to become a "Personal Beauty Wellness Company" that helps each and every one of its customers achieve their own personal health and beauty throughout their lives.

　This is precisely the value we have been pursuing together with our specialty stores, which have been making proposals to customers by personally dealing with their skin, body, and mind through the power of human beings.

　I would like to contribute to the development of the cosmetics industry as a whole, together with specialty stores, in order to continue to be supported by our customers by keeping abreast of the rapid changes in customer values and the market after the Corona Disaster.

　--President Fujiwara, you have a wealth of experience in overseas business, but I understand that you started your career in specialty store sales in Hiroshima.

　 Fujiwara: I joined the Hiroshima Branch at that time and started my career as a sales representative for cosmetics specialty stores. I learned the manners and business etiquette of a working member of society from the ground up through sales activities for specialty stores. In addition to working with me on measures to increase sales, the specialty stores provided me with a lot of support, not only in terms of work, but also in establishing a foundation for my life in my first new assignment, for example, by sharing an evening drink with the managers and by taking care of me when I could not return home due to heavy snow.

　When I was transferred from Hiroshima, the specialist who had been in charge of my work came all the way to Hiroshima Station to see me off. I consider the specialty stores to be my "second home," as they are rooted in the local community and conduct business by placing importance on people-to-people relationships.

　--How did you develop your cosmetics specialty store business overseas?

　 Fujiwara: Overseas, we have cosmetics specialty store channels in Europe and China. In Europe, "Perfumery" is deeply rooted in the local communities where they do business, holding local events and campaigns.

　In China, following the example of Japan's chain store system, we have been operating cosmetics specialty stores since 2003, and our network has spread throughout the country. Some managers respect Japanese specialty stores and are eager to learn from them. I believe that the fact that they are rooted in the local community and value human relationships in their business development is common to all regions globally.

　--Then, please look back on 2023 and tell us about the cosmetics market and Shiseido's trends.

　 Fujiwara: In May, the new coronavirus was moved to category 5, and as a year of transition to growth, we have been actively investing in expanding points of contact with customers based on the concept of "sei-katsu-sha, frontline-driven.

　The situation is such that both our sales and market share are expanding, driven by "rising demand for cosmetics" and "market recovery" as well as increased opportunities to go out due to the easing of restrictions on the Corona Disaster.

　--Please tell us about the results of your initiatives in 2023.

　 Fujiwara Starting with a newspaper advertisement on April 3, we have been communicating our belief in the power of beauty and our desire to energize Japan as a whole with the message, "Everyone has a good face." The message communication was developed. The message movie was also aired as a TV commercial, and we received positive feedback from customers and clients, such as, "It was a good commercial with signs of a bright future.

　We also conducted a campaign to support "good faces" throughout Japan in our in-store promotion and counseling referral activities at specialty stores and other locations throughout Japan. The seed of the company-wide "Everyone has a good face" project was planted in the Prestige Brand Business Division, which is in charge of specialty stores, around the time the government issued a notice concerning the reduction of the new type of coronavirus to category 5.

　The idea of "taking this opportunity to bring smiles to the faces of consumers, customers, customers' customers, and employees who had suffered from the coronavirus," which was shared by many people, transcended the boundaries of the business divisions and Japan, and was sublimated into action by Shiseido as a company. We have received many sympathetic and complimentary comments from customers and clients, and we believe that this has led to a sense of unity and increased motivation among employees.

　In terms of brands, we focused on Clé de Peau Beauté, SHISEIDO, and ELIXIR, and achieved strong positive growth in prestige and mid-priced brands. Clé de Peau Beauté achieved double-digit growth, continuing on from the year before last, as we made our largest-ever investment in the brand. SHISEIDO launched a series of new value-added products such as Eudermine, skincare foundation, and the new Ultimune, which were well received by word of mouth and social networking services, resulting in double-digit growth for the brand overall. Elixir" also performed well through innovations such as the renewal of its hero product, Wrinkle Cream, and achieved results that exceeded those of the year before last.

　In addition, with the easing of the Corona disaster and increased opportunities to go out, customers have been asking us to tell them what colors suit them, and our unique method of "Personal B Color Diagnosis" has become a very popular content. The event was so successful that there was a long line of customers waiting up to 90 minutes for a color diagnosis.

We decisively carried out business transformation in 2024,

Launching a new growth model from 2025.

　--In the year of the 100th anniversary of the chain store system, you launched a series of major new products and developed aggressive marketing in specialty stores.

　 Fujiwara: We positioned the 100th anniversary of the chain store system as a "year of breakthrough," and in our specialty store business, we have been aggressively marketing, launching major new products and strengthening collaborative efforts with specialty stores.

　In the area of brands, we began to strengthen the makeup category, which has long been requested by specialty stores and for which demand is expected to grow in the after-corona market, and in September we launched "inoui," our flagship makeup brand, as a new brand exclusively for cosmetics specialty stores. The brand will serve as a new point of contact for customers visiting cosmetics specialty stores.

　In addition to new members who came to our stores with the brand as a new point of contact, the brand has been purchased by existing members who have been familiar with the brand for some time and have been waiting for the launch with anticipation. Our mission is to make the brand a point of contact between specialty stores and new customers.

　In 2024, we plan to launch a point makeup product that customers and specialty stores have been waiting for. We will continue our efforts to raise brand awareness and achieve in-store customer traffic through the brand.

　Bénéfique has repositioned itself as a brand that embodies "personal beauty wellness," the health and beauty of each individual, and launched the brand's iconic product, Bénéfique Serum, in October. With the aim of attracting new Bénéfique loyalists triggered by the serum, we worked to expand awareness of the target customers and increase the number of customers sent to stores by launching TV commercials and newspaper flyers for the first time in six years, and the results exceeded our plan.

　In July, some specialty stores began to carry Effectim, a new challenge to sell beauty equipment priced at over 100,000 yen, but it provided an opportunity to meet new customers, and the newly launched equipment and serum are selling well.

　In the area of in-store activities, we took on many challenges, including the "Cosmetics Specialty Store WOW Experience," a promotion to make customers aware of the appeal of in-store experiences that only specialty stores can offer, and the full-scale introduction of the "Beauty DNA Program" to provide customers with more personalized proposals. Shiseido has taken on a number of challenges.

　--In 2024, I will lead the reform of the Japanese business as President and CEO from my previous position as Chairman of Shiseido Japan. How do you view the current challenges and how will you proceed with the reforms?

　Fujiwara: This year is a year of reform to achieve sustainable growth for Shiseido Japan. Sales and market share are steadily recovering thanks to the recovery from the Corona disaster, groundbreaking new product launches, and successful marketing investments, but we have yet to achieve a drastic improvement in profitability.

　Shiseido's medium-term management strategy, "SHIFT 2025 and Beyond," aims to achieve stable growth by shifting to a highly profitable structure through aggressive investment and structural reforms. To achieve this goal, we see "rebuilding our earnings base through growth in Japan" as the most important key.

　Since last year, we have been working to strengthen our management structure by sorting out what is necessary for further global growth and organizational issues. As a company of Japanese origin, we believe that our Japanese business must become the pioneer and lead the way in realizing our global vision the fastest. In order to ensure the reform of our Japanese business, I have talked with many people, from Shiseido Japan employees to our customers. From these conversations, I have identified issues myself and further deepened communication and understanding of the current situation through individual sessions.

　In the course of visiting business sites across Japan and engaging in knee-to-knee dialogue with employees, I was pleased to confirm that many employees have a sense of crisis about the current situation, expectations for change, and a passion for growth, and at the same time, I was able to sense Japan's strengths. On the other hand, we also found some organizational issues, such as a culture of following precedents and lack of a clear strategy.

　Through the series of sessions, I realized that the first premise that we need to consider is how to gain the support of the market and customers in the mature market of Japan, and to do so, we need to become more sensitive to market needs and customer trends and establish a system that can respond quickly to them. The Corona disaster was a very difficult time for the cosmetics industry, but it was also a turning point for me to rethink my own business. I felt that the essential task was to once again redesign the business model of our Japanese operations, starting from the changing needs of the market and the purchasing behavior of our customers. To achieve sustainable growth, we are proceeding with a business transformation of our entire business that can generate profits.

　The theme of the reform is "self-innovation. Looking back on Shiseido's history, we have been innovating in response to changes in the market and customers. This has not been a complete renewal, but rather a repetition of challenges to the traditional "Shiseido style" against the backdrop of changes in the times and consumers, while maintaining the principles that should be upheld.

　Now that the cosmetics market is recovering from the Corona disaster, we are building an organization that can strengthen our brand and win from the consumer and market perspective. It is my belief that self-innovation is what creates lasting development. We are working with a strong sense of urgency that if we do not change now, even our very existence as a Japanese business will be in jeopardy. We will implement the reform together with the employees of Japan who have strong solidarity and passion.

　Business transformation is a means, not an end, for Shiseido Japan to achieve sustainable growth and shine in the future, and I am determined to carry out the business transformation by the end of fiscal 2024 and start a new growth model from 2025.

As the first step in developing the wellness domain

Full-scale launch of inner beauty business

　--What is your business direction for fiscal 2024?

　 Fujiwara: Our first focus should be on the market and our customers, and we will change our business model to one that always approaches activities from the consumer's perspective. We need resources to strengthen our brands and products and to take on new challenges in the market, and we will rebuild the framework for generating such resources. We will use these resources to continuously provide new value to our customers, which will lead to profits for our customers who share our initiatives and work together with us, and ultimately to growth for Shiseido.

　We intend to evolve our business model for institutionalized products without changing our existing "three-way win-win" approach for customers, customers, and manufacturers.

　We will engage in brand management reforms to create "sellable" products and brands that become the talk of the town among customers, and promote investment and communication in focused brands and products.

　We will decisively implement the organizational reforms necessary for renewed growth in Japan, where population decline and other changes are predicted, and build an organizational culture that celebrates challenges. At the same time, we will enhance the capability of each and every employee and evolve into an organization capable of providing better value to customers and making proposals tailored to individual clients.

　In addition, this year we will launch our inner beauty business in earnest as the first step toward expanding into the wellness field. In February, we will launch "SHISEIDO BEAUTY WELLNESS" ("SBW"), an inner beauty brand that helps each individual achieve their own personalized healthy beauty.

　As a first step, SBW will co-create with Tsumura Corporation and Kagome Co., Ltd. and launch jointly researched and developed products in Japan, with plans to expand into China and other Asian countries after 2025. SBW, together with its partners who are professionals in their respective fields, will create new solutions to achieve beauty through the harmony of skin, body, and mind. We will also work to create new markets by communicating this new healthy beauty habit globally as "J-Beauty Wellness.

　--Lastly, please give us a message to specialty stores.

　 Fujiwara When we introduced the "chain store system" in 1923, the cosmetics industry was in a heated competition of overselling and discounting, and retailers, wholesalers, and manufacturers were forced to face difficult business conditions. Noboru Matsumoto, the manager at that time, introduced a system that he learned from his study in the U.S. in order to strongly promote the securing of appropriate profits for retailers and wholesalers.

　Inheriting the spirit of Matsumoto, who had a broad view of the world and fearlessly and boldly adopted new systems to achieve a business transformation that would affect the entire industry, we are determined to reform our Japanese operations so that we can contribute to the development of our customers, including specialty stores, and ultimately, the cosmetics industry.

　We will not regard the achievements of 2023, when we shifted to aggressive marketing, as temporary, but will make further strides in 2024, which we hope will mark the beginning of the next 100 years of growth for the chain store system.

　The major axis of the value that only specialty stores can provide is the deepening of "personal beauty wellness". As a personal beauty wellness company, we hope that you will provide customers with new experiences by combining our technology, including our knowledge of skin and customer data, with the relationships of trust and human communication with local customers that our specialty stores have built. We hope to provide new experiences to our customers together.

　We intend to contribute to the development of the cosmetics industry as a whole by working together with specialty stores to change what needs to be changed and what should be changed by each other in order to continue to gain the support of our customers and the market as it changes in the future.

　All of us at Shiseido Japan will work together to do our utmost, and I would like to ask for the continued support and cooperation of our specialty stores in 2024.

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This article appeared in Syukan Syogyo Publishing January 1, 2024, page 6

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