Beiersdorf encountered challenges in the travel retail sector and mainland China market in 2023, affecting the performance of its luxury and selective brands, La Prairie and Chantecaille. As a result, both brands experienced a decline in organic sales during the fiscal year, with La Prairie falling by 15.4% and Chantecaille decreasing by 18.4%.
The beauty business sales have surpassed Shiseido
Beiersdorf’s strong growth in 2023 further solidified its position in the global beauty market.
According to the 2022 ranking of the 2022’s Top 100 Global Beauty Manufacturers by WWD, Shiseido ranked fifth, while Beiersdorf ranked seventh. In 2023, due to the Japanese government’s decision to release Fukushima nuclear wastewater, Chinese consumers boycotted Japanese cosmetics, resulting in a decrease in Shiseido’s net sales by 8.8% to ¥973 billion (€60.02 billion). Core operating profit decreased by 22.4% to ¥39.8 billion, and net profit attributable to shareholders of the parent company decreased by 36.4% to ¥21.7 billion.
Meanwhile, Beiersdorf achieved a record revenue growth driven by NIVEA in 2023, with sales in the beauty business (consumer business) reaching €7.78 billion, a 12.5% year-on-year increase. This resulted in a €1.8 billion difference compared to Shiseido, while LVMH’s beauty business revenue in 2023 was €8.271 billion, narrowing the gap between Beiersdorf and LVMH.
Regarding Shiseido’s performance decline in China, the company stated that in the first half of 2023, the decrease in net sales in the Chinese region was attributed to reduced purchases of Japanese products by consumers following the nuclear wastewater discharge incident. During China’s largest e-commerce event, “Double 11,” Shiseido noted that its online sales were significantly affected by the above-mentioned factors, performing worse than the overall market and experiencing a decrease in sales compared to the previous year. However, the Japanese market was the only market where Shiseido achieved growth in 2023, indicating that the overall performance decline was not solely due to Chinese consumer boycotts.
In reality, the decline of Japanese cosmetics in China, or the overall downturn, had already begun to manifest in recent years, and the Japanese government’s discharge of nuclear wastewater accelerated this decline. The decline of Japanese cosmetics in China can be attributed to factors such as product and marketing strategies not resonating with Chinese consumers.
The popularity of Japanese cosmetics in China was once fueled by the popularity of Japanese culture in the country and significant tourism and cross-border consumption. During peak periods, reportedly millions of Chinese tourists traveled to Japan, enthusiastically purchasing and stocking up on Japanese cosmetics at duty-free stores.
However, in recent years, these characteristics that once attracted Chinese consumers have faded away as Chinese domestic brands have risen, erasing the advantages that Japanese cosmetics once held. More importantly, Japanese cosmetics have failed to keep up with the times both in terms of product innovation and marketing strategies.
The resurgence of national confidence in the Chinese market has led to the rise of domestic brands like Florasis and Maogeping in the cosmetics industry. Consumers are no longer blindly idolizing foreign brands but are paying more attention to the quality of the products themselves. Beauty products tailored to Chinese skin types are increasingly favored. The discharge of nuclear wastewater by Japan has further prompted Chinese consumers to abandon Japanese cosmetics such as Shiseido.
Furthermore, amidst a backdrop of consumer upgrading, consumers also emphasize finding emotional resonance and shared values from beauty brands. International beauty brands often fail to fully connect with consumers’ minds due to their high prices or cultural differences, lagging in the Chinese market. Domestic products are more in line with Chinese consumers’ needs in terms of price, product efficacy, and marketing strategies. Additionally, with the rapid influx of European and American brands, Japanese cosmetics are no longer the preferred choice for Chinese consumers but have become optional brands.
The challenges faced by Shiseido in China due to the overall decline of Japanese cosmetics may also be inevitable.
Two different options for the Chinese market
Faced with challenges in the Chinese market, Shiseido shifted its focus towards markets like North America and India, as the impact of the nuclear wastewater incident cannot be resolved in the short term. In October 2019, Shiseido acquired the U.S. brand Drunk Elephant for $845 million. In December of last year, Shiseido announced the acquisition of the U.S. dermatological skincare brand Dr. Dennis Gross Skincare, with the acquisition price reported to be $450 million by Kyodo News. Shiseido stated that these acquisitions would drive growth and profitability in key markets in the Americas.
Additionally, Shiseido has ventured into the Indian market. In mid-October last year, Shiseido launched its first cosmetics brand in India in nearly a decade, introducing the popular NARS cosmetics series to local beauty stores. Furthermore, Shiseido announced plans to open its first offline boutique for the Shiseido Ginza Tokyo brand in Mumbai, India.
Meanwhile, Beiersdorf is still betting on the Chinese market.
In its financial report, Beiersdorf stated that the group is “Getting future-ready to become the best skin care company.” Driven by the achievements of the preceding year and to ensure their continuity in the future, Beiersdorf made substantial investments in 2023 as part of its efforts to position itself for the future and ultimately become the leading skincare company globally.
In 2023, Beiersdorf made significant investments in its global supply chain and digital infrastructure. The new factory in Leipzig, Germany, involved an investment of nearly €300 million, marking Beiersdorf’s largest investment in production facilities to date and meeting the highest environmental and technological standards. With an annual capacity of up to 450 million units, production commenced in September 2023.
Beiersdorf noted that the global digital infrastructure was aimed at seamlessly transitioning all global subsidiaries to the latest SAP technology, enhancing the company’s efficient digital transformation. The implementation of cutting-edge SAP S/4HANA systems facilitated faster, more standardized, and automated global business processes.
In 2023, Beiersdorf made substantial investments in its global supply chain and digital infrastructure. The new facility in Leipzig, Germany, which cost nearly €300 million, represents Beiersdorf’s largest investment in a production site to date, meeting the highest environmental and technological standards. With a production capacity of up to 450 million products per year, operations commenced in September 2023.
In addition, the expansion and modernization of facilities in Poznań, Poland, and Silao, Mexico, are also scheduled for completion by the end of 2024. A significant advancement in the global digital infrastructure was the seamless transition to the latest SAP technology for all global subsidiaries, enhancing Beiersdorf’s efficient digital transformation. The implementation of the state-of-the-art SAP S/4HANA system enables faster, more standardized, and automated global business processes.
In Beiersdorf’s supply chain and digitalization efforts, China has consistently been a key component.
In July 2020, Beiersdorf inaugurated its Shanghai Innovation Research Center in Shanghai, marking the company’s largest innovation center outside of its headquarters in Germany, with a total investment of approximately €10 million. Leveraging rigorous scientific experimentation and the support of cutting-edge German research capabilities, NIVEA (Shanghai) Limited continues to lead the development of advanced technologies in the Chinese cosmetics industry. In recent years, NIVEA has been gradually transitioning towards technological advancement, youthfulness, and high-end positioning. By leveraging advanced research technologies from Germany, the company focuses on local digital innovation and co-creation with consumers to build an ecosystem.
In an interview with People’s Daily Online in March last year, Xue Wei, General Manager of Northeast Asia at Beiersdorf Group, stated, “China boasts one of the world’s most sophisticated supply chains and is also home to the world’s leading e-commerce market and digital infrastructure. This provides a better platform for further consumer upgrading in China. China has always been one of Beiersdorf’s most important strategic markets, and our confidence in the Chinese market has never wavered. Currently, we have established three major centers in Shanghai, including an innovation center, a marketing center, and a manufacturing center. This constitutes a resilient supply chain, and we have been actively promoting the digital transformation of the entire value chain to achieve faster decision-making and enhance production efficiency and decision-making processes across the entire chain.”
Faced with the Chinese market, Shiseido and Beiersdorf have adopted different approaches, which may widen the gap between them in the future.
