Molton Brown Maker Steps Up Spending to Catch Unilever

Kao Corp., the Japanese maker of Molton Brown shower gel and luxury soap, will boost annual investments by two thirds to catch up with Unilever and Procter & Gamble Co. in emerging markets, Chief Executive Officer Michitaka Sawada said.

Japan’s largest maker of toiletries wants to flesh out its international business in countries such as China, Indonesia and Thailand before pushing deeper into Europe and North America. Kao will boost total capital expenditure to as much as 100 billion yen ($915 million) a year eventually from about 60 billion yen now as the company accelerates expansion of factories outside Japan and evaluates buying new technologies, he said.

Kao, which also makes detergents, diapers and sanitary towels, extended a foothold in Europe about a decade ago with the purchases of Molton Brown and John Frieda shampoos. While Kao, with a market value of about $20 billion, is within the top 10 companies in the world for beauty products, it has to accelerate investments to catch up with bigger rivals, Sawada said. He also plans acquisitions as part of his expansion plans.

“P&G and Unilever have extraordinarily large presences” in Asian countries, Sawada said yesterday in an interview in Geneva. “We are the challenger in a number of these markets.”

Middle Class

Sawada, a 33-year veteran at Kao, which also makes chemicals, wants to tap the middle class across Asia as consumer-goods companies jockey for position in countries such as China, the world’s most populous nation. While it’s later to the game than larger global rivals, the Japanese company can carve out market share with higher-value-added products and by leveraging Kao’s brand recognition in Asia, Sawada said.

Kao shares fell 1.2 percent to 4,252.5 yen in Tokyo trading today. The stock has gained 28 percent this year, compared with a 3.1 percent decline in the Nikkei 225 Stock Average.

Acquisitions are part of expansion plans, and the Tokyo-based company has a preference for new chemical technologies rather than brands, Sawada said. Technologies which address health, aging populations, the environment and hygiene issues are most desirable, Sawada said.

“If you acquire a technology successfully, it can be applied in the chemical business or in the consumer products business,” he said.

Fat-Burning

After Asia, the next step in expansion will include introducing some of Kao’s Japanese health products to Europe and North America, such as steam masks for the eyes, designed to help promote blood circulation, and Healthya coffee, which Kao said helps consumers burn fat and was introduced in Japan last year.

Kao began business in Japan as a maker of soap in 1887, and that country was the source of 69 percent of the 1.3 trillion yen of revenue the company had in 2013. Sawada, who has an engineering masters degree specialized in applied chemistry, has previously pledged to achieve 50 percent of sales outside of Japan by 2020.

The company has been in markets such as Thailand and Taiwan for 50 years.

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