‘Prestige first’: Shiseido sells off personal care division for $1.5bn to focus on high-end skin care

By Amanda Lim contact

- Last updated on GMT

Shiseido has announced the decision to sell its low-cost personal care business for $1.5bn. [Shiseido/Senka]
Shiseido has announced the decision to sell its low-cost personal care business for $1.5bn. [Shiseido/Senka]

Related tags: Shiseido, Finance, Japan, Personal care, Toiletries market

Japanese cosmetic giant Shiseido Company has announced the decision to sell its low-cost personal care business to CVC Capital Partners in a deal worth 160 billion yen ($1.5bn) in order to focus on its more high-end cosmetic brands.

According to published documents, Shiseido will establish a new company with a 35% stake in ownership and CVC will acquire 65% as a joint venture. The transfer date is set for July 2021.

The business unit in question consists of well-known global drugstore brands including Senka skin care and Tsubaki hair care products, as well as other brands such as SUPER MiLD that are primarily available in Japan.

However, Shiseido said that in order to maximise the growth potential of the brands in today’s competitive market, it would require ‘enhanced’ marketing investment. 

It believes that this transfer will help maximize the potential of the personal care business and further grow the brands in the current competitive market.

In a statement, CEO Masahiko Uotani expressed that the decision was not made lightly and was ultimately a necessary course of action.

“Under these circumstances, we must face the harsh reality that we cannot prioritise the personal care business or adequately invest in product development and advertising using limited management resources within Shiseido alone.”

In its own press statement, CVC said that it believed that the portfolio of brands it will inherit held strong potential for growth.

"Using our global network and experience, CVC is committed to making these strong brands even better. Specifically, we see significant potential for growth by investing further in employees, brands, and R&D, as well as by driving digitalization and accelerating overseas expansion, with the possibility of going public in the future,"​ said Yukinori Sugiyama, Partner and Co-Head of CVC Japan.

Uotani assured that the brands under the personal care unit will continue to be available to consumers and will continue to be produce by Shiseido’s factories ‘to maintain the high-quality’.

“We will look for M&A opportunities with the new company as a platform to further expand the business. With all those efforts, this new company strives to contribute to the reform and greater development of the personal care industry in Japan.”

Furthermore, employees under the business unit will continue to retain their jobs.

“We will not only maintain employment and working conditions, including compensation, but also provide opportunities for further success and growth in the new company. We expect members to enhance their professional skills in the Personal Care business and proactively participate in building a new company where people can grow and shine in a vibrant atmosphere,” ​said Uotani.

The right course of action

After dealing blows with the COVID-19 pandemic, the company outlined​ its revamped strategy in August 2020 to focus on ‘skin beauty’ as its core business under its medium-term strategy to return to profitability by 2023.

According to Shiseido, it has shifted its priorities from top-line growth to profitability and cash-flow management. Its goal is to achieve an operating margin of 15% in 2023 through a reduction of cost of goods and selling, general and administrative expenses.

In order to pursue further growth at home and overseas, Uotani stressed it was crucial for the firm to double down on making and selling high-end skin care products.

“For the first time since our foundation, we have achieved sales exceeding 1 trillion yen and 100 billion yen in operating income with strategic focus on the mid-to-high-priced cosmetics business, which accounts for more than 70% of group sales since 2015. I strongly believe that we must maintain this strategy and that it is the foundation for Shiseido and its nearly 150 years of heritage to thrive for the next 150 years.”

Uotani concluded: “Significant reform like this does not proceed without difficulty. However, we must face reality and overcome this difficulty to realise sustainable growth and create our future. We will concentrate even more on the cosmetics business centred on skin care.

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