Price hikes ahead: Kao’s consumer product price increases likely to continue in 2023 ‘and beyond’

This year, the Japanese major has moved forward with the implementation of strategic price increases in a few categories across its consumer products business, mainly in fabric care and baby diapers.

Kao’s consumer products business accounts for a wide range of brands and categories, including skin and hair care, as well as luxury beauty.

During the firm’s third quarter (Q3) earnings conference, the company highlighted that currency translations would be the “main factor in worsening the negative impact of raw material price hikes”.​

“With the addition of the currency translation of about JPY3bn (USD20.4m), the annual raw material price impact is expected to increase to JPY40bn (USD272m) to JPY43bn (USD411.2m),” ​said managing executive officer Masakazu Negoro.

According to the firm, the negative impact of raw material price hikes on the health and beauty care category was JPY3bn (USD20.4m).

The company is now setting plans in place to expand it across its consumer product categories, including skin care, hair care, and other categories in Q4 and will likely continue to do so next year.

“Now we would expand this into other categories and promote highly added value products and increase the number of the items with higher prices. And price increase activities are expected to continue in 2023 and beyond. We are currently making preparations,” ​Negoro said.

The company’s procedures include adding higher value to its products, reducing product content, streamlining sale promotion expenses, and making simple price increases.

According to Negoro, the company has been successful with its price increases so far, highlighting the positivity it has had with the laundry detergent category.

“For laundry detergent, as I said earlier, we promoted high value-added and compact-sized products and we have expanded the market share steadily.”​

While the firm is expecting challenges related to price hikes, Negoro highlighted some positives: “One thing is that excluding the currency impact, the raw material prices probably have peaked out.”​

Net sales grew by 10.5% year-on-year. Like-for-like growth was 4.9%. Operating income was JPY76.9bn (US735.2m), down 29.4% year-on-year.

For the health and beauty care business, the firm recorded operating income declined by JPY6bn (USD40.8m). It was impacted by the negative skin care business in the US in addition to the raw material price hikes.

In the cosmetics business, operating income increased by JPY3.3bn (US22.4m) to JPY3.4bn (US23.1m). Sales increased by 5.8%, driven by the strong performances of Kanebo and Kate. Like other firms, the company was impacted by the economic slowdown in China.

Moving forward, Negoro said cosmetics would be one of the firm’s “major keys”​ in the coming quarter and highlighted the significance of brands Kate and Curél.

“As for growth driver in cosmetics, right now, the Kate brand is drawing a lot of attention, and we will continue to offer new Kate products and also focus on the cross-border e-commerce and to ramp up the local production of Curél, products in China.”​