Shiseido to Limit New Products in Push to Revive Japan Sales

Shiseido Co., Japan’s biggest cosmetics maker, plans to cut by half the number of products it introduces in the country and spend more on marketing as the company reviews its strategy amid declining domestic sales.

“We’ve relied too much on new products,” President Hisayuki Suekawa said in an interview today at the company’s headquarters in Tokyo. “Our sales have been L-shaped, with a spike after the initial introduction and a plunge after a while. We need to change that.”

The number of new products Shiseido releases every year may fall to as few as 250 from as many as 600, Suekawa said. The cosmetics maker, which gets about 57 percent of sales from Japan, plans to boost spending on marketing in the country by 7 billion yen ($86 million) this fiscal year, which will squeeze operating profit, he said.

The cosmetics maker that’s almost 140 years old aims to rebuild domestic sales that have declined for at least five years as demand in Japan slides amid a shrinking population and weaker spending following the nation’s March 11 earthquake.

Shiseido fell 1.4 percent to 1,331 yen at the 3 p.m. close of trading on the Tokyo Stock Exchange. The stock has declined 25 percent this year, compared with the 5 percent drop in Japan’s benchmark Nikkei 225 Stock Average.

Shiseido “has been to slow to take action in Japan, so Suekawa must speed up to make a change,” said Miyako Shibamoto, a fund manager at Tokyo-based Commons Asset Management Inc., which holds shares in the cosmetics company. “It needs to find ways to lure young customers.”

Reassigning Researchers

Shiseido added colors and improved quality to renovate the Maquillage Rouge Enamel Glamour lipstick it introduced late last year, instead of adding a new line.

“That worked out, as sales of the product recovered,” Suekawa said.

The company is reassigning some researchers to study new technologies and ways to replace animal testing in developing new products, Suekawa said.

Shiseido is also expanding in overseas markets including China and Southeast Asia. The owner of the NARS and Bare Escentuals brands aims to get half of its sales from abroad by 2017 from 43 percent last fiscal year.

The company is preparing to introduce bareMinerals power foundation and other products by Bare Escentuals in China, Suekawa said.

New Hirings

Shiseido hired two executives in April instead of promoting from within to provide more diverse input. Michiko Achilles, previously general manager of human resources at Aozora Bank Ltd., joined Shiseido as corporate officer to oversee areas including corporate culture change and public relations. Shiseido also hired Shigeto Otsuki from Hewlett-Packard Co.’s Japan unit to head its human resources division.

“We need to change this inward-looking culture at the company” to meet the 2017 goal, Achilles said in an interview on May 9.

Operating profit, or sales minus the cost of goods sold and selling, general and administrative expenses, may fall 10 percent to 40 billion yen for the year ending March 31, Shiseido said April 27.

To contact the reporters on this story: Naoko Fujimura in Tokyo at nfujimura@bloomberg.net; 小笹俊一 in Tokyo at sozasa@bloomberg.net

To contact the editor responsible for this story: Frank Longid at flongid@bloomberg.net

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