TOKYO — Shiseido Group, which last week announced plans to restructure and strengthen its international business division, projects that 40 percent of its total revenues will come from abroad in the next few years, up from about 31 percent for the first half ended Sept. 30.
A key executive change, as a result of the restructuring, will be the January appointment of Carsten Fischer as corporate executive officer responsible for international business.
“We expect him to bring distinguished management know-how and business- and organization-building ability in the global [arena],” Shinzo Maeda, Shiseido’s president and chief executive officer, said in an interview last week.
Fischer was formerly president of Procter & Gamble’s professional care business. He has also worked as president of Wella Japan Co. Ltd., and as executive vice president of the Asia-Pacific region for Wella Group.
Maeda underscored the importance of developing products at a local level. “Product development that reflects the voice of local consumers is required,” said Maeda. “Under our global management, we need to localize the business, including product development and employee training.”
Shiseido now has five research-and-development centers — in the U.S., Europe, Southeast Asia, China and Japan.
For the six-month period ended in September, Shiseido’s total sales increased 5.1 percent to 347.4 billion yen, or $2.95 billion at average exchange, on a consolidated basis, compared with the same period a year ago. Overseas revenues accounted for 30.7 percent of total sales, or 106.5 billion yen, or nearly $906 million, for the period, compared with 27.6 percent a year ago.
Last year, Shiseido named Seiji Nishimori representative director and vice president in charge of the firm’s business in China. “Nishimori has seen and understands the local situation [in China],” noted Maeda, who contended that the pace of establishing the business in that region should not slow down in light of personnel changes. Shiseido entered China in 1981 when it exported finished goods to China. In 1994, it started retailing at major department stores in China.
Shiseido last month introduced a more upscale version of its Aupres cosmetics collection called Supreme Aupres in China and, “It is selling very well,” said Maeda. Both Aupres ranges are sold in Chinese department stores but Supreme Aupres has higher price points and is positioned separately. “China has been enjoying an increase of 8 to 10 percent in gross domestic product [for the economy] in recent years and that speed will continue for a while. Shiseido’s business [there] is increasing by more than 30 percent.”
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In October, Shiseido launched Urara, a cosmetics brand carried exclusively in China. It is meant to reach consumers in regions where there are no major department stores selling Shiseido’s brands and it’s an example of how, recently, the company has focused on distributing to chain stores throughout China. Shiseido’s initial strategy in China was to sell at big-city department stores.
In 2006, Shiseido has reached 1,700 chain stores in China, an increase of 700 doors since last year. “We will have 5,000 stores in the future,” said Maeda.
For fiscal 2007 — the last year of a three-year plan implemented by Shiseido to improve operating profits — Maeda anticipates operating profits reaching 8 percent of sales.
“The first year was 5 percent and the second year was 6 percent,” he said. “So, we are on plan to achieve that goal. And for the next three years,” he added, “we will see 10 percent.” Maeda maintained Shiseido will make changes to improve the sales and profits of its business in North America. “We will pick up the business in Europe and travel retailing as well,” said Maeda.
In India and Russia, Shiseido partners with distributors. “We have sales points in New Delhi and Mumbai, but also look for chances in other cities, such as Bangalore, when the distribution infrastructure is more developed,” said Maeda, adding, “We want to improve the business structure in Russia, too.”