A hairy situation: Kao CEO highlights need for ‘dramatic’ change to invigorate hair care business
Kao’s market share in hair care, across shampoo, conditioner, styling and colour categories, dipped by an average of 0.1% from the previous quarter.
In the six months ending June, Kao said sales of hair care decreased. This was attributed to the competitiveness in the mass-market hair care segment.
On the other hand, sales of its salon products in the Americas and Europe remained strong, with luxury brand Oribe performing well thanks to the support of its e-commerce business.
During the firm’s first-half earnings conference held on August 3, president and CEO Yoshihiro Hasebe said the company needed to “turn [the hair care] business around immediately”.
“The haircare business used to be a high margin high share business. Kao’s regeneration cannot be achieved without the turnover of this business. So, we are going to change the existing strategy dramatically,” Hasebe emphasised.
Kao has a wide portfolio of hair care brands, including Essential, John Frieda, and Liese. It also has a line-up of salon brands including KMS, Goldwell, and Oribe.
Hasebe highlighted Essential, Merit, and Segreta, as brands the firm wants to position as science-backed brands in their respective segments.
“For these types of businesses, we will fight it based on technological value and position these are science-based general purpose products, we will not increase prices for this category.”
Hasebe acknowledged that the firm faces stiff competition in this sector as there are many brands, even ones from smaller companies, flooding the market.
As such, he expressed that the firm would take “unprecedented initiatives”, such as introducing the global brands in its portfolio into the domestic market.
“We will introduce global brands all over the world that is unique into the Japanese market, and we will introduce unique cosmetics products. And in the global in cosmetics area Kao has a lot of assets – 50% of the hair care business is overseas. We will introduce powerful and unique products into Japan. Currently, we are suffering in the premium category, but I want to conduct reforms and change the situation dramatically.”
In addition, the firm intends to focus on e-commerce and direct-to-consumer (DTC) models.
“We will utilise digital technology to enhance our business in this area and enhance our business in the premium genre with different tactics. With our retailers, we will conclude a special contract and focus on [e-commerce] and DTC. These will be the areas that we're going to compete in. We have conducted a lot of discussions as to how to compete in this area. Some of our retailers are already on board for the near future.”
Aside from hair care, sales of skin care also decreased. This resulted in a like-for-like sales decrease of 2.9% in the health and beauty care division.
Combined with the impact of price hikes of raw materials and other factors, the division suffered an operating income decline of JPY8.1bn (USD60.7) to JPY18.2bn (USD136.5m).