In the 1980s, Kao Corporation, a Japanese company, started from a bar of soap and, after more than 130 years of development, gradually grew into a chemical and consumer products giant with two major business segments. It also once ranked among the top ten global beauty and cosmetics conglomerates.
In 1993, Shanghai Kao Co., Ltd. was established, marking the beginning of Kao Corporation’s business in China. Over the past 30 years, Kao has invested in manufacturing facilities in China, and its household cleaning, personal care, and beauty brands have successively entered the Chinese market.
In 2023, which coincides with Kao’s 30th anniversary in China, the company is faced with the need for global expansion and the rapid changes in the Chinese market. So, at the beginning of the new decade, how will Kao Corporation position itself in China? In this regard, CHAILEEDO conducted an exclusive interview with Mr. Junichi Tanaka, General Manager of Kao (China) Cosmetics Division, during the China International Import Expo.
New products, new achievements, new technologies are all emerging simultaneously
After six years, the China International Import Expo has always been the stage for international beauty conglomerates to showcase their strength and compete fiercely. In the consumer goods exhibition area of Kao Corporation at this year’s expo, apart from new brands and products, cutting-edge technology, digital devices, and innovative achievements have also formed a beautiful landscape.
As a “regular attendee” for six consecutive years, Kao Corporation’s booth at the expo is themed “Coexistence with Beauty” and showcases the company’s innovative achievements in the three key areas of ecology, life, and lifestyle, fully interpreting Kao’s ESG vision in China. CHAILEEDO observed on-site that keywords for Kao’s exhibition include green, low-carbon, sustainable development, and a better life.
In terms of daily chemical products, Biore unveiled a new water-based sunscreen series that utilizes Kao’s unique water-gel technology, providing both a moisturizing sensation and strong protection. It has already gained a good reputation in overseas markets and is expected to be launched in the Chinese market in January 2024. According to on-site staff, the new Biore Water Gel Sunscreen has an emulsion texture that quickly forms a film on the surface of the skin, allowing for subsequent makeup application without any issues. The refreshing sunscreen water spray is not packaged in a typical aerosol can but instead uses a new water spray texture, offering a powder-free feel and convenient reapplication.
One of the highlights of Kao’s booth is the first mini-program smart application in China, called “Kao Life+,” which has attracted numerous visitors for interactive experiences. It is understood that “Kao Life+” has developed three main functions, including “AI Skin Diagnosis” based on Kao’s imaging skin diagnostic technology, “AR Transformation – Real-time Makeup” that helps users create personalized makeup looks using Kao’s hair care brand Liese and makeup brand Kate, and “Skin Energy Diagnosis” that helps users identify the root causes of skin issues and provides scientific advice.
Junichi Tanaka told CHAILEEDO that through Kao Life+, they hope to bridge the gap between research and development technology and the brand, closely align with consumers’ daily lives, and provide comprehensive professional advice and personalized solutions for skincare, health, and personal growth. They aim to fully enjoy the benefits of smart technology and bring about a better life.
In addition to showcasing a variety of new products and cutting-edge technologies, Kao’s booth has also prepared a 30th-anniversary exhibition, reviewing the development history and investment layout of Kao in China. Takayasu, Chairman of Kao (China), stated, “While establishing a close relationship with Chinese consumers and society, Kao also hopes to continuously challenge new fields and make greater contributions to improving people’s quality of life and addressing social and environmental issues.”
It is evident that as one of the earliest foreign companies to enter the Chinese market, Kao has witnessed and promoted the transformation of the Chinese beauty market. With expanding and deepening investments, the connection between Kao and the Chinese market is becoming increasingly intertwined.
Building the three pillars of brands
Whether from a global perspective or in the context of the Chinese market, 2023 can be seen as a turning point for the beauty industry. Political situations, economic environments, and shifts in consumer behavior have forced beauty giants to reexamine their fundamentals and adjust their strategies. Even traditionally cautious and conservative Japanese beauty companies have embarked on transformations.
This year, Kao Corporation, the second-largest beauty conglomerate in Japan, has also initiated a new round of changes. Earlier this year, the Kao Group announced several personnel changes, with the former Chairman and President of Kao China, Tohru Nishikuchi, being promoted to Executive Director of the Kao Group, and the position of Kao China’s leader being handed over to Takeyasu Kao. At the end of September, Tohru Nishikuchi publicly stated, “Kao must undergo an urgent transformation – this is the most important thing.”
It is reported that streamlining the beauty business is an important part of this reform. Kao is considering a reorganization of its cosmetics brands, actively investing in around 70% of the 30 brands, while considering terminating or integrating the remaining 30% of the brands.
Regarding this transformation, Junichi Tanaka told CHAILEEDO that there is no fundamental change in direction. The company will continue to focus on the strategy of key brands, achieve sales and profit growth through brand selection and concentrated investment.
In the Chinese market, after establishing the two major mass-market brands, Curel and Freeplus, Kao plans to make its high-end brand SENSAI a third pillar of the group in the Chinese market. Junichi Tanaka said, “We will actively strategize and continue to expand investment with the core mass-market brands, Curel and Freeplus, and the high-end brand SENSAI.”
In the mass skincare market, Curel and Freeplus have gained a good reputation among Chinese consumers. However, this is not enough for the vast Chinese market. With the trend of consumer stratification, China’s high-end beauty market has also entered a period of growth, and Kao is still a newcomer in this field.
To meet the high-end and personalized consumption demands of Chinese consumers, Kao’s highest-end beauty brand, SENSAI, opened its first flagship store in Shanghai in October this year. The store design incorporates the brand’s concept of “exquisite and delicate living,” combining modern design with Japanese aesthetics to create an artistic space that engages all five senses for consumers.
According to Junichi Tanaka, for high-end brands, physical stores that provide experiential value are indispensable. In addition to product experiences, it is equally important to offer consumers more sensory experiences that enhance the brand’s value. It is understood that this year, Kao will truly strengthen the overall layout of SENSAI in China and provide high-end beauty consumers in China with high-quality services and valuable new experiences through a series of plans.
Renewal and deep localization
When discussing the plans of various brands in the Chinese market, “localization” is the key term repeatedly mentioned by Junichi Tanaka in an exclusive interview. It is also the core strategy for Kao’s future in the Chinese cosmetics business.
In recent years, environmental issues, the impact of the pandemic, and the popularity of medical aesthetics have led to the continuous expansion of China’s sensitive skincare market. More and more brands are entering this highly competitive field, and the concept of sensitive skin is extending to more product categories and benefits. Junichi Tanaka also acknowledged that the sensitive skincare market in China has shown significant growth, and local Chinese brands have risen and captured a large market share.
In this context, Curel has been continuously strengthening its brand concept of “improving dry and sensitive skin issues through ceramide care” to establish a differentiated brand image from others. After introducing the concept of “Clean Beauty” during last year’s import expo, FANCL officially switched to the “simplified skincare” track in April this year, undergoing packaging upgrades and category expansions.
Junichi Tanaka revealed that in addition to upgrading classic products, FANCL will also enhance other product categories to provide a truly suitable and safe skincare brand for a wider young audience.
During the import expo, FANCL showcased its first new product category after the brand upgrade, the “FANCL Dual-Action Essence Water,” which achieves “water-oil replenishment” with a golden ratio of 8:2. It adopts a compound formula of various oils, with plant-derived squalane as a representative ingredient, offering multiple skincare effects such as moisturizing, nourishing, repairing, and firming. “We hope to revitalize FANCL from the sensitive skincare track to become the number one brand in ‘simplified skincare’ by strengthening its efficacy and optimizing its texture,” Junichi Tanaka anticipated.
Overall, in order to effectively respond to the changing trends in the Chinese market and capture the demands of Chinese consumers, Kao has made adjustments to its cosmetics business in China. First, the leading role in marketing activities has shifted from the headquarters in Japan to the Chinese division. Second, research and development, as well as production of products, will no longer rely solely on Japan, but will further increase brand investment and local R&D efforts in the Chinese market.
Undeniably, faced with more professional and rational Chinese consumers and a rapidly changing Chinese market, simply replicating overseas approaches is no longer viable. Deep localization has become a common choice for international beauty conglomerates. Junichi Tanaka told CHAILEEDO that starting from 2024, Kao will further accelerate the development of localized products for FANCL and Curel, placing the foundation of product research and development in China and continuing to develop products targeting Chinese consumers, especially the younger generation, to enhance the brand’s market competitiveness.
Taking Curel as an example, after launching the Age Defying Firming Anti-Wrinkle Cream exclusively for the Chinese market in 2022, Curel showcased a new product in the same series, the “5G Age Defying Soothing Repair Essence,” at this year’s expo.
Junichi Tanaka also specifically mentioned that Chinese consumers’ awareness and purchasing behavior have undergone significant changes, gradually shifting towards “necessity-driven” and rational consumption. He also admitted, “So far, we have encountered various challenges, including the pandemic. Our management needs to thoroughly grasp these changes, anticipate countermeasures in advance, and implement them decisively. Additionally, it is crucial to effectively utilize our business assets and establish institutionalized systems.”
At a turning point in its 30-year history, Kao China is shedding its “conservative” label, accelerating internal reforms, deepening localization efforts, and aspiring to confront market challenges with a more proactive attitude. A more open image of Kao is gradually becoming clear.
