TOKYO — Despite a large business with many successful brands in its home market of Japan, cosmetics company Kosé Corp. has until now had very limited international experience, particularly outside of Asia. But since it bought a 93.5 percent stake in Tarte Cosmetics in April of this year for $135 million, that is slowly beginning to change.
This story first appeared in the December 12, 2014 issue of WWD. Subscribe Today.
Kazutoshi Kobayashi, president and chief executive officer of Kosé, said that the investment in Tarte has given the company an insight into the U.S. market. In the future, Kosé may seek to further expand its footprint there.
“Tarte has a very interesting business model, selling through channels such as QVC and Sephora. We are learning a lot about the U.S. market through Tarte,” Kobayashi said.
Moving forward, Kosé will use what it learns to determine which of its other brands or products may be suitable to introduce to the market, and what changes may need to be made to their Japanese versions before this is possible. Kobayashi said that American consumers seem to be interested in Japanese products and that he believes there are many brands and items in Kosé’s portfolio that have potential in the market.
But there are still fairly large differences in consumer preferences between the two countries. One of these, Kobayashi said, has to do with how the products are packaged and presented to customers. Japanese women often carry makeup and skincare products with them in their handbags, so they prefer smaller bottles and sleek compacts.
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“There’s more of an emphasis on value for money [in the U.S.],” Kobayashi said. “On QVC you often see [presenters] holding up products in large boxes. It’s important to people that they’re getting a good deal.”
While Kosé is going through a learning process via Tarte, Kobayashi says that the brand’s founder, Maureen Kelly, is also benefitting from the relationship with the new parent company.
“She’s interested in many of Kosé’s unique formulations,” the executive said. “So we are currently considering how those might be applied to Tarte and possible new products for the brand. But those probably won’t be realized until about 2016.”
Tarte posted sales of $68 million in 2013, and Kobayashi said that he expects to see about 30 percent growth this year. Since Kosé invested in the brand, its distribution has gone from 1,500 to 1,800 sales points. While it does have a presence in some department stores, it mainly sells through Sephora and QVC. Outside the U.S., it is available in countries including Canada, Singapore, Hong Kong, Thailand, Malaysia and the U.K. It will also be available in Australia from Friday, when Sephora opens its first store in the country.
For the moment, however, Kosé does not plan on introducing Tarte to Japan, as Kobayashi says he prefers to concentrate on organic growth within the markets where the brand already has a presence. He said if the opportunity arose, he would also be interested in taking it into new markets where he thinks it has potential, such as Europe and Latin America.
But just as Kobayashi is learning why some of Kosé’s products may be difficult to market in the U.S., he also said that Tarte is currently not well suited to the Japanese market.
“The products are very unique, and there is nothing else like [Tarte] in the Kosé group. We don’t have anything else with the concept of ‘high performance natural’,” Kobayashi said, describing the brand that has been described as “eco-chic” in its positioning. That is one reason why he was interested in investing in the brand. “But Japanese customers wouldn’t understand or be drawn to the packaging.”
Kobayashi thinks Tarte’s brand identity is one of its strengths, and therefore wouldn’t want to bring it into the Japanese market unless it was feasible to do so without making any changes to the products or their fun, kitschy packaging. Another aspect that makes Tarte unique is its strict no-animal-testing policy. And since Kobayashi also doesn’t want to make any changes to that, he and Kelly have agreed not to introduce the brand to China, where animal testing is required on cosmetics products.
While Kobayashi and his team continue to consider which existing Kosé product lines may be suitable for the U.S. market, the executive is still interested in further M&A activities, if an opportunity should arise.
“I don’t want to spend large amounts on acquisitions, in the style of L’Oréal or Estée Lauder. I would prefer brands that are not yet that big; ones that have unique products and lots of potential, but are still fairly small,” he said. “If we find something that is unlike any of our other brands and if the products are good, we would consider it.”