Kao's new research and innovation center

TOKYO—Kao Group, corporate parent of Kanebo, has unveiled a new research and innovation center at the site of its main cosmetics factory, with the goal of integrating the research and development and production divisions for its core Kanebo and Sofina brands, thereby increasing efficiency and strengthening its beauty business.

The new facility is located at Kao’s Odawara complex, approximately 50 miles southwest of central Tokyo. The site manufactures all of the group’s beauty products. In July 2015, it increased production capacity by constructing an additional factory building. This latest development brings the company’s R&D functions to the same site as its production. Since last year, Kao has invested a total of 13 billion yen, or about $126 million at current exchange rates, in the Odawara complex.

Masumi Natsusaka, managing executive officer of Kao and president and chief executive officer of Kanebo Cosmetics, said the new innovation center will be primarily used to improve and strengthen its existing products, rather than creating new brands or lines. Kanebo is still working to rebuild its reputation after a skincare product recall back in 2013.

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“We already have too many brands, so we don’t want to bring new brands at this moment. Only the Kanebo brand, which we introduced this year, is our only new brand in these few years,” said Natsusaka, who oversees Shiseido‘s number one rival in the Japanese market. “We want to focus more on the improvement and renewal of the existing products, existing brands.”

In addition to the new Kanebo brand, which launches in Japan on Sept. 15, the company just recently renewed its Sofina brand. Next year, Natsusaka said it will work on strengthening its masstige segment, by either relaunching or replacing an existing brand. In the first 12 months of sales of the Kanebo brand, the company is targeting sales of 5 billion yen, or $48.5 million, of which 75 percent is expected to come from within Japan.

The new research center in Odawara uses innovative technologies to enable researchers to develop cosmetics that are attractive to the various senses, including sight, touch and smell. It is the first facility by a Japanese company to use a functional magnetic resonance imaging (FMRI) machine, which analyses the brain’s responses to various stimuli. In addition, a laboratory dubbed Cocolab gives researchers a space to interact with and learn from various sensory experiences.

Natsusaka admitted that one of Kanebo’s weaknesses until now has been overseas business development. He said the company could learn a thing or two from its Korean competitors, like AmorePacific, which have been more aggressive in terms of their international expansion plans.

“We have to learn their mindset,” the executive said. “But because the Asian consumers love Japanese cosmetics, we really have a chance to globalize.”

Natsusaka said he hopes sales outside of Japan will make up over 20 percent of the company’s total sales by 2020. By that same time he is hoping to achieve yearly sales of over 300 billion yen, or $2.9 billion. But to have a chance at achieving these targets, the company has had to change the way it develops products.

“In the past we were looking only at the domestic market, and after developing products we started to think about bringing those products outside Japan. That was the problem. And nowadays, now we are developing products looking at the overseas market… So the speed will be much quicker,” he said.

Kao’s longterm goal is to become the top cosmetics company in Asia, although Natsusaka said there is no exact timeline for when this might happen. He did say, however, that its priorities at the moment are to strengthen the Sofina, Kanebo and Molton Brown brands in both existing and new markets. He said there are no current plans for any kind of mergers or acquisitions.

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