Shiseido cuts product numbers to increase profits

By Katie Bird

- Last updated on GMT

Related tags: Brand, Marketing, Shiseido

Japan-based cosmetics company Shiseido will significantly reduce
its product portfolio and continue its focus on the Asian markets
in order to increase operating profit margin.

The company has announced aims to increase operating profit margin to more than 10 per cent by 2010, according to Reuters. Currently the company is working towards an estimated operating profit margin of 8.3. per cent for the fiscal year ending March 31. In addition, Shiseido announced plans to reach the 1 trillion yen mark within the next ten years, with more than half of the sales coming from overseas markets. The company's consolidated net sales for the period ending December 31 2007 were reported at ¥536.7bn (estimates for the full year stand at ¥725bn), with total overseas cosmetics accounting for ¥190.9bn. Reduced product portfolio ​ In order to realise the planned increase in profit margin the company will cut the number of products in its portfolio by 30 per cent and decrease the number of domestic brands from 27 to 21 over the next few years. "The fewer products we have to sell, the more it improves our marketing efficiency. It also makes it easier to invest and easier to use our research resources,"​ CEO Shinzo Maeda said in a news conference, according to Reuters. The company has already significantly reduced its product portfolio in an attempt to strengthen key brands and gain consumer recognition and loyalty. Throughout 2007 it implemented a programme of brand strategy renovation, revamping a number of key brands and concentrating resources on fewer products such as the Tsubaki shampoo line. "The brand strategy innovation is bearing fruit, with marketing cost efficiency improving through brand/line concentration,"​ according to the company's annual report. Focus on the Asian market for future growth ​ In addition to alterations to the product inventory, the company plans to increase the proportion of its revenue made up by international sales. Third quarter results ending December 31 were significantly boosted by international figures, with positive performances in China and Europe helping to offset stagnant domestic sales. Plans to concentrate further on the Asian market have recently been put into practice with the announcement last week that the company will be opening a $38m (€24.4m) plant in Vietnam to serve the fast growing South East Asian markets. Last week also saw press reports suggesting the company plans to close its plant in New Zealand in a further effort at geographical consolidation.

Related topics: Business & Financial

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