Kao CEO stresses need for ‘radical’ change to reinvigorate hair care industry

Kao’s hair care market share, across shampoo, conditioner, styling and color categories, fell an average of 0.1% from the previous quarter.

In the six months to June, Kao said hair care sales declined. This was attributed to the competitiveness of the consumer hair care segment.

In contrast, sales of its salon products in America and Europe remained strong, with luxury brand Oribe performing well thanks to support from its e-commerce business.

At the company’s first-half earnings conference on Aug. 3, Chairman and CEO Yoshihiro Hasebe said the company should “round [the hair care] business around immediately”.

“The hair care business used to be a high-margin, high-share business. Kao’s regeneration cannot happen without the turnover of this business, so we will drastically change the existing strategy,”Hasebe pointed out.

Kao has a broad portfolio of hair care brands, including Essential, John Frieda and Liese. It also offers a range of salon brands including KMS, Goldwell and Oribe.

Hasebe highlighted Essential, Merit and Segreta, as brands the company wants to position as science-backed brands in their respective segments.

“For these types of businesses, we will fight it on the basis of technology value and position these are science-based general purpose products, we will not raise prices for this category.”

Hasebe acknowledged that the company faces fierce competition in this industry as many brands, even those from small businesses, flood the market.

As such, he said the company would take “unprecedented initiatives”,​ such as the introduction of the global brands in its portfolio to the domestic market.

“We will introduce unique global brands to the Japanese market worldwide, and we will introduce unique cosmetics. And in the global cosmetics field, Kao has a lot of assets – 50% of the hair care business is overseas. We will introduce powerful and unique products to Japan. Currently we are suffering in the premium category, but I want to carry out reforms and radically change the situation.

Additionally, the company intends to focus on e-commerce and direct-to-consumer (DTC) models.

“We will use digital technology to improve our business in this area and improve our business in the premium genre with different tactics. With our retailers we will make a special contract and focus on [e-commerce] and DTCs. These will be the areas in which we are going to be competitive. We have had many discussions about how to be competitive in this area. Some of our retailers are already on board for the near future.

Besides hair care, skin care sales also declined. This translated into a like-for-like sales decline of 2.9% in the health and beauty care division.

Combined with the impact of higher raw material prices and other factors, the division suffered a decline in operating income from 8.1 billion JPY (60.7 USD) to 18.2 billion JPY (136 .5 million USD).

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