TOKYO — Shiseido Co. Ltd. is expecting to post double-digit sales growth in China as consumers become increasingly demanding and savvy about their beauty regimes.
This story first appeared in the June 14, 2010 issue of WWD. Subscribe Today.
Masaru Miyagawa, chief officer of Shiseido’s China business division, said the company expects to post 2010 sales growth of between 15 and 20 percent in the country, outpacing the overall market growth of 10 percent.
“China is the growth engine,” he said Thursday at a press briefing. “Even if the economic growth does slow down a bit, we believe the cosmetics business has extremely high growth potential and we forecast a stable growth.”
The company estimates that the number of Chinese people buying cosmetics consists of 100 million individuals and will grow to comprise 210 million people in 2015 and 400 million people in 2020.
Shiseido is one of many beauty players targeting China. Just a few weeks ago, L’Oréal executives said the company plans to post sales growth of at least 16.1 percent in China this year.
Miyagawa estimated that Shiseido, L’Oréal and Procter & Gamble, the three largest beauty players in China, each have a market share of slightly less than 10 percent. He added that demand for skin care and makeup is showing strong growth and he thinks hair care will be the next big business opportunity in China.
The executive said Shiseido is planning to introduce Bare Escentuals to the Chinese market once it gets approval from regulators, but it doesn’t expect that to happen this year. Shiseido launched a $1.7 billion friendly takeover bid for the California-based mineral makeup company in January.
Earlier this week, Shiseido updated its forecasts for the fiscal year ending March 31 to take into account the consolidation of Bare Escentuals. The Japanese company said the acquisition brought on added costs related to expanded product inventory, and amortization of sales rights and goodwill, which will erode its profit margins for the year.
The company said it expects net profits to slide 13.9 percent to 29 billion yen, or $316.6 million at current exchange, while sales are seen rising 9.4 percent to 705 billion yen, or $7.7 billion. The acquisition will enhance Shiseido’s international presence — a cornerstone of the Japanese company’s strategy. International sales will account for 41.6 percent of the total compared with 36.9 percent for the year ended March of this year.