Michitaka Sawada, Kao’s president and chief executive officer, answers Beauty Packaging’s questions about Kao’s position in goals in areas from global growth to making ‘a meaningful contribution to people’s everyday lives.’

Beauty Packaging: Please provide a brief description of Kao.

Michitaka Sawada: With a rich 131-year heritage, Kao is Japan’s No. 1 maker of household & personal care products. Fueled by a track record of B2C growth in Asia and recent B2B growth in the U.S., Kao aims to become one of the top 5 companies globally in the household and personal care category by 2030. Kao is an R&D powerhouse and pioneer in developing innovative products that minimize waste.

BP: How long have you served as president/CEO?

MS: I became CEO of Kao six years ago. After I first joined the company in 1981, I spent more than 30 years in R&D, including both fundamental research and product development research. I became vice president of the Sanitary Products Research Laboratories in 2003, where I helped develop the polymer materials used in Bioré pore strips and led the re-engineering of Merries baby diapers. In 2006, I assumed responsibility for the entire R&D Division, and I was the first leader of the Human Health Care R&D Center following its establishment in 2007.

BP: What is your ultimate goal in leading the company?

MS: Under our Mid-Term Management Plan, "Transforming Ourselves to Drive Change”, Kao aims to expand and deepen our global footprint. One key way we are transforming ourselves is by establishing a new business group dedicated to reshaping our business model around Environmental Social and corporate Governance (ESG) goals.

BP: Why is expansion into the U.S. a current goal? What is the long-term strategy?

MS: While our M&A activity has tended to be concentrated in the U.S. market in the last couple of years, the U.S. is not the only focus for our growth strategy. Our goal is to expand our business in Asia, the Americas, and Europe.

Kao offers 10 brands in the U.S., including Jergens, John Frieda, Bioré, and Oribe for salon professionals. Moving forward, we will leverage our Japanese research operations to continue to refine and strengthen these established brands as well as deepen our sustainability offering to position Kao as an industry leader in this area.

BP: Why the focus on sustainable packaging? Is this a critical part of U.S. expansion? What has the success been in Japan? Is it in response to consumer demand?

MS: Firstly, we are not focused only on packaging. At Kao, our quest for sustainability encompasses the entire product lifecycle. Since our foundation more than 130 years ago, Kao has purposed our business to contribute to the enrichment of people’s lives. We believe that continuing that pursuit constitutes sustainability for us.

Kao issued its Environmental Statement in 2009, making us one of the pioneers in the industry in adopting the LCA life-cycle assessment which aims to reduce environmental impact across a product’s entire lifecycle. LCA is impactful because it involves taking action beyond the production stage encompassing the end use by consumers. This is a far-reaching approach and involves working in close cooperation with a wide range of stakeholders over the long-term.

Now, Kao wants to take our commitment to sustainability one step further. This year, I made a public pledge to adapt and reshape Kao’s business model by benchmarking our performance against a set of non-financial priorities, our ESG (Environmental, Social and Governance) targets. To achieve these ESG targets, Kao will bring together a range of ongoing sustainability initiatives to reduce greenhouse gas emissions and water use across the lifecycles of our products. 

In Japan, about 80% of Kao’s personal care & household offerings are refillable products designed to minimize the amount of packaging waste. As a result, we have succeeded in reducing plastic waste from these products by 74%. But people will not continue to use a product just for its environmentally-friendly packaging unless it also offers optimal ease-of-use. In 2016, Kao launched the “Raku raku eco pack,” which revolutionized refill packs. The packs are compact, stand upright for easy storage, and fit snugly and securely into bottle openings to eliminate spillage, providing excellent usability. We have also developed a novel “Smart Holder” option for refill packs to be used as-is.

While these refill packs have taken root in Japan, we have not yet introduced them in Western markets, so we see major opportunities in these markets. One approach could be to leverage Kao operations that serve salon professionals, and we are now exploring various opportunities to roll out these refill products globally.

BP: Please provide a few examples of eco-responsible packaging in Japan—and in the U.S.? What features make these packages stand out?

MS: In Japan, in addition to the refill packs mentioned previously, we have reduced the amount of plastic used in containers and switched to renewable raw materials.

For example, our ultra-concentrated laundry liquid Ultra Attack Neo offers greater performance in a more compact form, enabling us to reduce the amount of plastic  by around 60% per bottle and around 42% per refill pack, compared to a conventional Attack Biogel detergent.

The modified dispenser of Blauné Foam Hair Color not only makes it easier to use, but also reduces plastic by roughly 34%, resulting in a 35% reduction in CO2 emissions from the packaging process.

Full-sized bottles of Merit shampoo and conditioner are now made with around 30% plant-derived bio-polyethylene. For Essential, Asience, and Segreta shampoos and conditioner, that figure is around 20% for pump-dispenser bottles. Merit Pyuan shampoo and conditioner bottles also contain approximately 10% recycled plastic.

BP: In addition to expanding brands such as Jergens, Biore, John Frieda—and the recent purchase of Oribe—does Kao plan to expand/introduce other brands in the U.S.? Is sustainable packaging a key feature of all these brands?

MS: Our first priority is to continue to develop our established stable of brands, and our strategy is to focus and grow our skincare business. But we are always open to considering M&A opportunities. At present, we are focused on B2B opportunities in areas such as chemicals and salon products, where we think leveraging Kao’s research capabilities can have the greatest impact, and synergies are easy to generate.

BP: Does Kao plan to increase its holdings in beauty through acquisitions? Increase its company share as far as annual net sales from approximately 1/3 beauty to a higher percentage?

MS: As mentioned, our first priority is to develop our established brands. While beauty is a key category for us, we plan to generate growth in all categories. For our business in North America, we will focus on growing our skincare business.

BP: Will products/packaging be produced in the U.S.?

Michitaka Sawada: Kao products sold in the U.S. are almost entirely produced in the U.S., and we expect that to continue.

BP: Please tell us something about Kao that our readers may not be aware of.

MS: Since our founding more than 130 years ago, Kao has aimed to enrich and inspire the daily lives of people around the world. This is clearly spelled out in the “Kao Way,” and is the guiding star for every Kao employee. This mission is why we place so much emphasis on research. Kao annually reinvests about 4% of sales in research and development, with about half of that going to fundamental research, and we have always been intensely focused on the underlying science. While investments in fundamental research may not produce instant results, we are acutely aware that the knowledge accumulated through research lies at the heart of innovative, inspiring, and groundbreaking products. By listening to consumers and steadily refining our products after launch, we continue to innovate and create products that move and inspire consumers and society at large.

BP:  Anything else of note?

MS: Fueled by a track record of B2C growth in Asia and recent B2B growth in the U.S., Kao aims to become one of the top 5 companies globally in the household and personal care category by 2030. We want to do this not only by developing products that are environmentally friendly, but which also positively impact society and individuals. If we can enhance our product development capabilities to focus on helping people connect with others and with society, we believe we can enrich their lives in a more profound way.

For example, several years of research into foam resulted in a dishwashing soap that rinses away dirt quickly and easily by simply spraying on the foam and leaving it for a few minutes. We have received many letters of thanks from elderly people in Japan who have lost mobility in their hands and were no longer able to help out with household chores. But with Kao’s new product, they were able to proudly help out around the house again. This is one of the countless small ways Kao is able to make a meaningful contribution to people’s everyday lives. 

More About Kao 

Kao ranks at No. 11 on our list of Top 20 Global Beauty Companies 2018—with $5.2 billion in beauty sales.

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