Shiseido’s New Three Year Plan

Towards the realization of the medium to long-term strategy «VISION 2020» formulated last year, the first three years of FY2015 to FY2017 are positioned as the «period for reconstruction of the business foundation» to resolve structural issues on domestic and international businesses completely as well as to realize a growth strategy that makes aggressive marketing investments, which hopefully results in the acceleration of a sustained growth during the subsequent three years (FY2018 to FY2020).

In the New Three-Year Plan, we will focus on «building of the foundation for top share in Japan,» «acceleration of global growth,» and «reengineering of the China business» as priority strategies to secure our future sustained growth. The common strategy points to realize these are «Nurture strong brands,» «Bold investment in growth areas,» and «Direct connection between headquarters and the front line.» Simultaneously, we will work with structural reforms across the company to ensure the capital for the realization of these strategies. In this Three-Year Plan, we will aim at 900 billion yen or more consolidated sales, 50 to 60 billion yen operating profits, and 9 to 10% ROE in FY2017, which is the final fiscal year, with Japan business as the revenue base and global business as the growth drivers.

Society and consumption activities have been diversified and «active consumers,» who purchase goods based on their discerning eyes, are increasing their presence. We think that it is important to create brands that meet the needs of such customers, connect with the customers, and continue to be loved by the customers. We will promote the creation of strong brands through lean investments and through a «customer-based» approach while responding to a wide range of customer needs, by arranging and integrating brands overlapping in the portfolio and with low customer needs based on customer demand.

To realize this, we will focus on developing brands that continue to achieve a certain sales scale and profitability through brand life cycle management, including clarification of brand revision and discontinuation rules, etc. In addition, we will consider acquiring brands by M&A in order to meet the customer needs that our current brands cannot cover. Also in the EC domain, which is a growing market, we will try to expand sales reinforcing cooperation with client EC sites and major EC companies mainly using our own site «watashi+.»

In China, which is the top priority market, we have made steady progress in reconstruction of the business by reconstructing the brand portfolio based on customers, reviewing sweeping reform of the business structure, optimizing the inventory in FY2014, etc. We are also proceeding with large-scale reorganization aiming at speedy decision making and responses to severe market competition by localization such as migrating to the China RHQ (regional headquarters) system and increasing the appointment of local employees as executives. In addition, we clarify the positioning of brands to expand and develop products locally launched and localized from the R&D phase in China to focus on working with the enforcement of the local brand power. Moreover, we will innovate toward a region-based sales framework and strengthen the competitive edge by improving the beauty knowledge, and communication skills of the store front BCs, who are contact points with customers. We will also expand the digital business such as EC and promote structural reforms for marketing investments steadily to make the reconstruction of the business and future growth steadier.

In research and development, we will enhance basic/fundamental researches to innovate product development to cooperate with and be fused with marketing. We will increase the R&D investment by 40% by FY2017 compared to FY2014 and the current personnel in the worldwide laboratories from approximately 1,000 to 1,500 by FY2020. In addition, we will establish a regional-based research organization and expand the scale in the laboratories in Japan, China, Southeast Asia (Thailand), Europe (France), and the US in order to accelerate localization in the research and development field, aiming at strengthening cooperation with product development and marketing that grasp customer insights in each country and region.

Information: Shiseido