The Japanese beauty giant attributed its poor performance in the Americas in the fourth quarter to the “delayed recovery” of Drunk Elephant.
Kentaro Fujiwara, Shiseido Company president and chief executive elaborated on Drunk Elephant’s struggles by highlighting the changes in the market, particularly in the Americas region.
“The [Americas] market is really accelerating in diversification… The consumers are diversifying, but not only that, there’s a lot of emerging brands. That’s stimulating further diversification, making it even more competitive… The challenge here is the even fiercer, competitive market.”
In 2019, Shiseido signed a deal to acquire a 100% stake in Drunk Elephant for USD845m.
Founded in 2012 by Tiffany Masterson, Drunk Elephant was known for avoiding what it deemed the “suspicious six” – essential oils, drying alcohols, silicones, chemical sunscreens, fragrance and dyes, and Sodium lauryl sulfate (SLS).
The brand helped to pioneer the clean beauty movement, especially among millennial beauty consumers, which helped to propel the growth of the brand.
Former president and CEO of Shiseido, Masahiko Uotani, had called it “one of the fastest-growing prestige skincare brands in history,” during its acquisition.
Overall, the Americas market declined by 7% in fiscal year ending December 2024 to JPY8.25bn (USD53.7m).
Fujiwara noted that Drunk Elephant encountered some production challenges, but in the second half of 2024, it was not able to “capture or realise all the growth”.
While he expects the challenges to ease up in 2025, he admitted: “We’re not that optimistic. We don’t see this brand that optimistically.”
In light of this, Fujiwara outlined what the brand needed to do to get back on track.
“We want to rebuild the brand engagement and the brand philosophy. What is this brand about? What does it do? For me, that’s something that we need to recommunicate with our consumers, otherwise, recovery will not be easy. We see that as a challenge.”
He also reaffirmed the company’s commitment to further investing in the brand to recover its position in the market.
“We want to put a lot of efforts into this brand to rebuild and to recover.”
Conversely, another American brand Shiseido has acquired more recently, Dr. Dennis Gross, is progressing well and “as planned”.
Fujiwara highlighted that Dr. Dennis Gross has really capitalised on the medical beauty trend, which focuses on high-performance and proven efficacy.
“Dr Dennis Gross is really at the centre of this growing category.”
Shiseido’s biggest troubles for 2024 was still its China business.
The drop in consumer spending the key market led to a 73.1% decline in operating profits to JPY7.6bn down from JPY28.1bn the previous year.
Sales were up 1.8% in reported terms but was down 1.3% on a like-for-like basis.
