Kao Drops on Consumer Complaints on Skin Products: Tokyo Mover

Kao Corp. (4452), Japan’s biggest maker of toiletries, had its biggest two-day drop in two years in Tokyo trading after more than 2,000 consumers reported skin blotches from using some of its whitening products.

Kao fell 3.4 percent percent to 3,120 yen, extending yesterday’s 6.2 percent decline for its biggest two-day loss since March 2011.

Kao’s Kanebo Cosmetics unit began recalling products containing a skin-whitening ingredient called “Rhododenol” earlier this month after customers complained about a loss of pigmentation. The stock has fallen for the past two days after Kaneobo said that 2,250 people reported the “depigmentation” and its consumer center had received more than 100,000 inquiries about the recall.

“Their brand image was hurt, and that’s the biggest thing; it’s not clear how big the damage will be,” said Mitsushige Akino, executive director at Ichiyoshi Asset Management Co. in Tokyo. “The company is trying to expand overseas, but it would turn off consumers where they really wanted to grow bigger.”

Employees have started to pay visits to every customer who has either experienced symptoms or has expressed worries about them, the company said in a July 23 statement, when it provided an update on the recall.

Rhododenol in the products may have caused the symptoms, while the company hasn’t identified what exactly caused the damage, Shinji Yamada, a spokesman, said by phone today. The company is paying cost of care to the people who have symptoms and will set up standards for compensation, he said. The company is still calculating the cost for the damage, he said.

The recall involves 54 types of products including face lotions and creams, the spokesman said. They all have Rhododenol, a component that was approved by the health ministry in 2008, he said. Most of the goods were introduced in the last two years, Yamada said.

Rhododenol is derived from a substance Kanebo found in abundance in a search for natural chemical compounds in the bark of the white birch tree, the company said on its website. It discovered that one of these compounds confers strong brightening effects by suppressing the production of melanin in several stages, according to the website.

The visiting employees apologized and gave advice on treatment, according to its statement.

Kao bought Kanebo Cosmetics Inc. for 279 billion yen, or $2.4 billion at that time, from a government bailout agency in 2006.

To contact the reporter on this story: Yuki Yamaguchi in Tokyo at yyamaguchi10@bloomberg.net

To contact the editor responsible for this story: Stephanie Wong at swong139@bloomberg.net

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