9. Kao

Japan

www.kao.com

Corporate Sales: $11.7 billion

Beauty Sales: $5.1 billion

Key Personnel: Michitaka Sawada, president and chief executive officer; Masumi Natsusaka, managing executive officer, beauty; Naohisa Kure, vice president, research & development, beauty research, global.

Major Products: Prestige cosmetics and skin care and hair care brands including Bioré, Goldwell, Jergens, Curél, John Frieda, Kanebo, Molton Brown, Aube, Coffret d’Or and Kate.

New Products: Jergens Natural Glow sunless tanner, Goldwell Nectaya hair color, Bioré U body cleanser, John Frieda Fine to Full Blow Out Spray.

Kao’s portfolio of beauty brands includes John Frieda and Molton Brown, among many others.

Comments: Kao changed its fiscal year dates in 2012, reporting results in Japan for the nine months from April 1 to December 31, 2012 and results outside Japan for the 12 months ended Dec. 31, 2012. With tough economic situations in Japan as well as the rest of the world, and stiff competition, Kao’s restated net sales for the year were $11.7 billion up 0.4%, which president and chief executive officer, Michitaka Sawada, referred to as “reasonable results.”

He said the company had worked hard to launch products that held high added value. Sawada added that it had been the company’s third consecutive period of increases in sales and operating income, which he believes sets the tone for future growth.

In Beauty, sales of prestige cosmetics and premium skin care products performed well, accounting for 43.9% of company sales, about $5.1 billion. Premium hair care, however, proved weak in Japan, as well as in the Americas and Europe. So, total sales in Beauty remained pretty much flat to 2011, in the restated 2012 period. Sales of prestige cosmetics increased 0.1%. Japanese consumers seemed to show a preference for lower-priced products, so Kao responded by boosting focal brands such as Aube, Coffret d’Or and Kate. Cosmetics sales outside Japan decreased based on the restated fiscal year. However, sales of premium skin care increased in Japan and Asia, particularly behind Bioré products. In the Americas, sales of Jergens body lotions increased, as did sales of John Frieda foam hair color.

Sawada said the company’s overall goal is to become “a global presence.” To achieve that, he said they must enrich people’s lives as well as contribute to the sustainability of the world. In addition to an ambitious plan to increase revenues, Kao also has targeted an overseas sales ratio of at least 30%, which Sawada concedes, “will not be easy to reach.” Strengthening the company’s prestige cosmetics business is part of the plan. Innovation will be central to growth.

As part of its global expansion, Kao sees promise in Vietnam, where it is looking to double the size of its business, particularly in bath and shower products.

In March, Kao was named one of the World’s Most Ethical Companies 2013, announced by Ethisphere Institute, a U.S. think tank. Since the list’s first publication in 2007, Kao has received this recognition for seven straight years, and is the only Japanese company included.

But in Kao’s rush toward global expansion, it may have made an error. Just last month, one of its cosmetics holdings, Kanebo, came under fire for shipping cosmetics following a recall decision. The recall involved more than 4.5 million products on retail shelves. The 54 skin-whitening products named—sold in Japan, the UK, and parts of Asia—were blamed for causing skin blotches.

Masumi Natsusaka, managing executive officer, beauty, offered a public apology, vowing to overhaul safety controls and additionally, cutting his salary by 50% for six months to atone for the scandal. He said other executives would also take temporary pay cuts.