Recently, the official website of the Ministry of Foreign Affairs released the “China and Japan Reach Agreement on Ocean Discharge of Fukushima Nuclear-Contaminated Water” (hereinafter referred to as the “Agreement”), which specifically mentioned that the import of Japanese water products that meet the standards will gradually resume. Many voices believe that this may become a turning point for Japanese cosmetics in the Chinese market.
It is worth mentioning that since the beginning of this year, the overall import value of Japanese cosmetics into our country has been declining, and the four major Japanese cosmetic companies have all expressed difficulties in the Chinese market in their first-half financial reports. So, what is the current operating status of Japanese cosmetics in the Chinese market? Will the issuance of this “Agreement” become a “catalyst” for the recovery of Japanese cosmetics?
Recently, with the consensus reached between China and Japan, is there a turning point for Japanese cosmetics?
In August last year, after the Fukushima Daiichi Nuclear Power Plant in Japan officially started discharging contaminated water into the sea, China announced a comprehensive suspension of imports of water products (including aquatic products for consumption) originating from Japan. This move marked the biggest crisis in recent years for Japanese cosmetics in the Chinese market.
A year later, “Japanese cosmetics” and “nuclear contaminated water” are still closely linked, and consumer resistance to Japanese cosmetics persists. On the Xiaohongshu platform, when searching for “Japanese cosmetics,” it automatically associates with search terms like “List of Japanese cosmetics with nuclear radiation” and “Can Japanese cosmetics still be used,” among which, notes related to the search term “Can Japanese cosmetics still be used nuclear contamination” have reached 180,000.
The release of the “Consensus” is a significant development at the national level following the “discharge of nuclear contaminated water into the sea” incident. Some industry insiders have expressed to CHAILEEDO that “(for the cosmetics industry) this may be the beginning of a new era.”
In fact, the reason some believe that the “Consensus” could be a turning point for Japanese cosmetics lies in several key messages it conveys: Firstly, the Japanese side is making maximum efforts to avoid the negative impact of discharging nuclear contaminated water into the sea and will continue to conduct assessments of the marine environment and ecological impacts. Secondly, Japan welcomes the establishment of an international monitoring arrangement under the framework of the International Atomic Energy Agency to ensure independent sampling and monitoring by countries like China. Thirdly, China will gradually resume the import of Japanese water products based on scientific attitudes after independent testing.
“This is the first time in human history that an international multilateral regulatory system has been formed around such a major nuclear safety incident.” Xiang Haoyu, a special researcher at the Institute of Asia-Pacific Studies of the China Institute of International Studies, stated in a public interview: “In the future, all monitoring processes, from sampling to monitoring, we can participate independently, greatly improving the accuracy and reliability of the data. If anomalies are found, necessary measures can be taken, so it is very meaningful.”
It is important to note that the Ministry of Foreign Affairs also stated that the consensus reached between China and Japan does not mean that China will immediately resume the comprehensive import of Japanese water products. China will initiate technical consultations with Japan, and under the premise of fully meeting China’s requirements, will gradually resume the import of Japanese water products that meet the standards.
In summary, after the release of the “Consensus,” China can independently conduct investigations and decide on specific measures based on the results of independent investigations. This not only enhances the credibility of relevant monitoring results to a certain extent but also provides a breakthrough for the growth of Japanese cosmetics in China from a national policy perspective.
“Our product line covers thickeners, moisturizers, surfactants, and cosmetic powders. We have also sold cosmetic raw materials from Japanese water sources in China. Unfortunately, due to market influences, we had to stop selling, but such materials account for a low proportion of overall sales.” Okazaki Shunji, General Manager of Cosfarg International Trade (Guangzhou) Co., Ltd., told CHAILEEDO. “If we can restart the sale of these materials for new formula development proposals and sales promotion activities, it can enrich the product lines of numerous cosmetic manufacturers and add value to product development. In addition, if customs can further reduce the items requiring inspection, it can indirectly alleviate the inspection costs borne by Chinese end customers.
However, some industry insiders in the imported cosmetics wholesale industry frankly told CHAILEEDO that the overall market sales growth is slow at present, and from the wholesale sales perspective, the release of the “Consensus” does not have a significant impact on the market demand for Japanese brands. The profound specific impact may depend on long-term development.
The Four Major Japanese Cosmetics Companies Are Slowing Down in China
Although policies have loosened, from the perspective of public opinion, Chinese domestic consumers still have doubts about Japanese cosmetics, especially those using Japanese raw materials, due to “nuclear contaminated water.” Some domestic brands continue to regularly disclose the results of radioactive substance tests on their products. Shiseido also explicitly mentioned in its latest financial report, “Due to the impact of the discharge of nuclear contaminated water into the sea, Chinese consumers’ willingness to purchase Japanese products has decreased.”
This consumer sentiment is directly reflected in the import data of cosmetics. According to publicly available data from the General Administration of Customs, the overall import value of Japanese cosmetics in China is on a downward trend, reaching its lowest point since 2023 in February of this year. From January to August this year, China’s imports of Japanese cosmetics decreased from 19.874 billion yuan in the same period in 2023 to 14.03 billion yuan, a year-on-year decrease of 29.4%.
Correspondingly, from the publicly available financial data, the performance of Japanese cosmetics companies in the Chinese market in the first half of this year is indeed not satisfactory. Among the four major leading Japanese cosmetics groups, only Shiseido China achieved a year-on-year increase in sales, while Kao’s Asian market, Kose’s Asian market, and POLA’s revenue in China all declined year-on-year. In particular, Kose’s decline in the Asian region even reached 27%.
Specifically, Kose lowered its performance expectations for China in the first half of the year in its financial report, stating that consumer spending in mainland China was weak, offline sales slowed significantly, market inventory accumulated, and sales during the “618” promotion period were far below the previous year’s results. China also became the only market where Kose declined globally. In April of this year, Kose also closed its official flagship store for Kose cosmetics on Tmall.
At the same time, Kose also stated, “The weak domestic demand in China has indirectly affected the recovery of the tourism retail industry in surrounding countries like South Korea, leading to greater uncertainty in Kose’s global tourism retail market layout.”
Not only Kose, but the Asian region is also the worst-performing market for Kao. Kao mentioned in its financial report that its makeup brand KATE once experienced weak growth in the Chinese market, and the sales of its main brand, Curél, also declined. Additionally, Kao has closed its two major makeup brands, AUBE and COFFRET D’OR, since the beginning of this year, and these two brands were once the introduction to makeup for many Chinese consumers.
Similarly, POLA stated in its financial report that the “continuously challenging business environment in mainland China” persists, and its brands POLA, ORBIS, and Jurlique in the Chinese market are not performing optimally, with Jurlique’s sales even declining by more than 13.7%.
Even Shiseido, the only one with positive growth, closed its Tmall and Douyin flagship stores for its high-end skincare brand, BAUM, this year. This brand only officially entered the Chinese market in 2021.
It can be said that in the current Chinese cosmetics market, the influence of Japanese cosmetics is indeed not as strong as before, and a market reshuffle regarding Japanese cosmetics is currently underway.
Accelerating “Seeking Change,” The Revival Has Begun
Meanwhile, especially in the past two years, the views of “cooling of Japanese cosmetics” and “Japanese cosmetics are on the way out” have become frequent topics of discussion on social platforms. Qian Qi, Executive Deputy General Manager of Hangzhou Meiyitian Brand Management Co., Ltd., told CHAILEEDO, “The impression Japanese beauty companies give to the new generation of domestic consumers is that the products are not changing enough. But this is not necessarily a bad thing.”
Qian Qi further stated that Japanese cosmetics companies have a longer reflex arc and are good at introspection and accumulation. “Faced with changes in the external environment, Japanese cosmetic brands may not make immediate adjustments in design, content, and promotion. Instead, they will have a period of accumulation. After this, they will start to exert efforts.”
The above-mentioned industry insiders in the import cosmetics wholesale sector also indicated that from the wholesale end, the impact of “nuclear-contaminated water” mostly concentrated on a small period immediately after the discharge into the sea. “In terms of product quality, Japanese cosmetics are better in quality and control than most imported products, so the demand has always been there. The decline of Japanese brands is more due to the overall softness of the market environment,” he admitted.
Currently, “nuclear-contaminated water” is just a “catalyst” for the decline of Japanese cosmetics. Market softness, the rise of domestic brands, changes in consumer trends, and more are the challenges that Japanese cosmetics are currently facing. CHAILEEDO also noted that the four major Japanese cosmetics companies have begun adjusting their strategies in the Chinese market.
For example, the POLA Group released two important announcements last November: setting up a new subsidiary, POLA ORBIS (Shanghai) Enterprise Management Co., Ltd., to strengthen operational management in the Chinese market, and announcing organizational and personnel adjustments in the POLA ORBIS Holding Company and its subsidiaries to meet the development needs in the Chinese market. In their financial report, POLA also listed China as a “key market” equal in importance to the domestic market.
Moreover, at the first-half financial report meeting, the term “China” was mentioned 18 times by the Kose Group. The group stated that since the operating profit margin of the tourism retail sector in the Chinese market is high, the prospects of this market heavily rely on sales performance. Therefore, they will continue to observe this market and revise development strategies in the second half of the year, while increasing the value of their high-end skincare brand Decorte in the Chinese market.
Shiseido, currently undergoing a new round of mid-term planning, announced in April this year the official entry of its Zotos brand into the mainland Chinese market, covering areas such as Beijing, Shanghai, Guangzhou, and Chengdu, with plans to have 300 stores by the second half of 2024. According to first-half financial report data this year, the Zotos brand grew by 11% year-on-year, surpassing all brands under Shiseido.
Simultaneously, the Kao Group is actively implementing brand reforms in the Chinese market. In August this year, Curél officially entered the children’s skincare sector in the Chinese market, and in September, Kao mentioned in their “hair care strategic plan” that they will further accelerate the expansion of their hair care brand Liese in the Asian market.
“For Japanese brands, the previous phase was also a process of pause and reflection,” Qian Qi told CHAILEEDO. “Brand transformation takes time, and after a period of pause and adjustment, Japanese brands may see significant recovery in performance next year.”
It is worth mentioning that according to CHAILEEDO data, from January to August 2024, the GMV of Japanese cosmetics through online channels (Taobao, JD.com, Douyin, Kuaishou) grew by 22.2% year-on-year. Looking at online performance, the revival of Japanese cosmetics has begun.
It is evident that since the “nuclear-contaminated water discharge into the sea” incident, Japanese cosmetics companies have faced challenges in their development in China, but they are continually adjusting their response strategies and development strategies. Currently, as China gradually resumes the import of Japanese aquatic products, whether Japanese cosmetics companies can find a stable growth pace in China will require further time for verification.
