Self-innovation needed: Shiseido’s Japan business ‘at risk’ without major reforms – COO

Kentaro Fujiwara, Shiseido president and COO, noted the importance of nurturing its business in Japan at the firm’s first-half earnings conference on August 8.

“The biggest key to reform is to rebuild earnings based by bringing back growth in Japan.”​

He announced that the theme of Shiseido Japan’s plans for reform was self-innovation.

“I believe that self-innovation is what creates lasting growth and development. If we do not change now, the existence of the Japanese business is at risk. That is how strong my sense of urgency is to the current situation,” ​said Fujiwara.

Fujiwara said he spent his first six months as COO understanding the strengths and weaknesses of the Japanese business.

“This process was very important to understand the core issues and to understand what is really effective, and what in fact are the truly necessary actions.”​

He pointed out that the COVID-19 pandemic exposed Shiseido Japan’s weaknesses when inbound demand faltered without tourist traffic.

“The COVID-19 pandemic was, in fact, a good turning point. We did not have inbound sales and experienced negative growth, exposing that we cannot raise profit with our existing business model.”​

He concluded that Japan was not a high-growth market and needed to take a more consumer-centric approach in order to succeed.

“Therefore, we need to grow by taking share from other players in the market. In order to do so, we need an organisational structure where we can be agile to react quickly to further meet the needs of consumers with more sensitivity to consumer behaviours.​

“I believe that the Japanese business model must start from the needs of the changing market and purchase behaviours of the consumers. And in order to do so, Japan needs to redesign the business model, breakaway from the existing business practices and internal rules to implement fundamental business model changes.”​

A sizable challenge

Fujiwara said he would spearhead this transformation personally as the firm aims to achieve its to achieve its 2025 core operating profit target of JPY50bn (USD345m).

“I have decided that I have to do this and should do this based on the level of reform needed, the size of challenges and the necessity of speed.”​

From September 1, Fujiwara will assume the role of representative director and chairman of Shiseido Japan while concurrently serving as president and COO of the Shiseido Company.

He recently assumed the role as president and COO on January 1 after Shiseido CEO Masahiko Uotani announced plans to retire within the next two years in November 2022.

In the first half, Shiseido Japan recorded net sales of JPY125.2bn (USD869m), up 8.2%. Core operating loss was JPY3.4bn (USD23.6m), an improvement of JPY4bn (USD27.8m) year on year.

Shiseido CFO Takayuki Yokota said Shiseido Japan’s results were “steadily improving”.​

“In terms of the local market, the low- and high-priced range drove the market growth, showing continued recovery with low single-digit growth. On the other hand, mid-price ranges stayed flat year on year… Slowly, but surely, the market is steadily recovering.”​