Shiseido Is Giving Itself A Whole New Look

Under pressure at home, the cosmetics giant pushes abroad

In the newly chic circles of China's cosmopolitan cities, Chinese women with money to spend are buying beauty. As one might expect, they prefer French for fashionable clothing and Italian for stylish shoes. But for cosmetics, their choice, surprisingly, is Japanese. "It's better for sensitive skin and suits Asian skin more than the European brands do," says a freckled 33-year-old civil servant purchasing makeup at the Shiseido counter inside the China World Trade Center in Beijing.

That's the kind of customer Shiseido Co. is counting on for its global makeover. The 125-year-old Japanese cosmetics giant has started a worldwide beauty blitz of new lipsticks, moisturizers, and perfumes. In China alone--where the cosmetics market is growing 35% annually--Shiseido's joint venture with a Beijing company has 131 outlets in 31 cities. And it's not intending to stop there. Already the world's fourth-largest cosmetics group, Shiseido is targeting women from France to Vietnam to the U.S. The goal is to triple overseas sales to $1.7 billion by 2001, or a quarter of the company's expected revenues of $6.9 billion that year.

Shiseido hopes its three-year, $1.7 billion program will make a big splash both at home and abroad. It has also gone on an overseas shopping spree, spending $12.5 million on factories in Taiwan and the U.S. The commotion has its usually stagnant stock price up from around $12 last December to $14.80 in mid-May.

Behind the push is Shiseido's President and CEO Yoshiharu Fukuhara, 66, whose pharmacist grandfather founded the company. In 1990, Fukuhara stole perfume expert Chantal Roos from Yves Saint Laurent to start a Paris perfumery, which developed L'Eau d'Issey for Issey Miyake and another called Jean Paul Gaultier for the designer. "We had a dream to become a global company, but Fukuhara has made it a reality," says Hisako Nagashima, Shiseido's sole female director. "Before, we just took our products abroad and tried to sell them. Now we have a strategy."

That strategy is to concentrate on products for specific markets. In Europe, it's perfume. But in the U.S., Shiseido will supply makeup and skin-care products for about 50 other brands. "The trend in the U.S. is to outsource," says Yasutaka Mori, a director of international operations. "Americans are better at marketing; we are better at production." In Asia, Shiseido joint ventures concentrate on mass-market formulas, such as Aupres in China, for Asian skin tones and warm climates.

The motivation behind Shiseido's aggressive charge is simple: Japan's recession has rocked the company's comfortable dominance over a market where lax antitrust enforcement kept retail prices high and import regulations insulated it from cheap foreign competition. "There was a feeling that business was going so well that we did not have to become a global company," says Mori. But sluggish domestic sales and the relaxation of restrictions on discounting cosmetics made Shiseido change its mind.

"FUN WITH MAKEUP." Still, Shiseido's big bucks continue to come from home. Some 89% of its annual sales of $5 billion are in Japan, where it is the market leader. To protect its home market, the company has launched new products for people in every age and income bracket. It also started a new craze--black lipstick, psychedelic eye shadow, whitening skin lotion, and glittery gels for the temple or neckline. The product line, called Pieds Nus, or "bare feet" in French, is what Shiseido calls an attempt to get women to abandon the natural look and wear more makeup. "Our message is that we should have fun with makeup," explains Nobuyuki Yamashita, a product planning manager. Next, Shiseido plans new products that will cross the cosmetic with the cosmic: holographic lipstick and nail polish. The color changes depending on the angle from which it is seen.

Despite the flurry of launches, new investments, and planned acquisitions, "Shiseido remains a careful, prudent, steady company," says Shigeo Shimizu, a senior executive director. "We will not buy movie companies or baseball teams." Instead, it will count on the solid growth that has propelled it from a small pharmacy on the Ginza in 1872 to a beauty giant with global ambitions.

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