It was the Americas that first inspired Shiseido Cosmetics, with its founder Arinobu Fukuhara opening a Western-style pharmacy in Japan in 1872 after studying pharmacological techniques developed in the U.S.
And 150 years later, the market is still a driving force for the company. Despite a backdrop of record-high inflation and recession fears, the Americas was one of the main engines of growth for Shiseido, alongside the resurgence of travel retail, in the first six months of the fiscal year 2022 and its Americas president and chief executive officer Ron Gee is confident this trend will continue.
“We’re definitely going to be a growth driver,” he said from his Midtown office. “We’re an entrepreneurial spirit and the U.S. market in particular is very innovative. That’s where a lot of indie brands start, there’s a lot of innovation that we do in formulation here, a lot of consumer trends start here. We are going to be at the forefront of piloting, testing and implementing some of these trends.
“We feel like we’re going to be at the forefront of a lot of activity for Shiseido,” he declared.
At the core of that framework is innovation in skin beauty, covering both skin care and color cosmetics. “We have strong assets in both skin care and makeup and our makeup brands, particularly Nars, is super strong on complexion. But clearly also on our brands like Drunk Elephant, and even the brand Shiseido, the efficacy of what we bring to our consumers stands out, and we bring that unique perspective of our technology, science and the way we engage with our consumer,” said Gee, who has been in his role for about two years.
One of the standout products of 2022 so far has been Nars’ Light Reflecting foundation, launched earlier this year and comprised of 70 percent skin care ingredients. Barbara Calcagni, president of global brands, Nars, Drunk Elephant and Tory Burch Beauty, said that it was the brand’s biggest launch ever, smashing records across the globe.
“We broke large records at T-mall in China when we launched and we became the number-one makeup launch in the U.S. year to date June, according to NPD,” she said, noting Nars has seen significant share gains, driven by growth in e-commerce supported by digital marketing enhancements.
Then there’s Drunk Elephant, the clean beauty brand founded in 2012 by Tiffany Masterson, which Shiseido acquired in 2019 for $845 million as part of its push to become a bigger player with a more global footprint. Some of its hero products include T.L.C. Sukari Babyfacial and Protini Polypeptide Cream.
Since the acquisition, Shiseido has been focusing on making the brand a strong international presence, expanding into 25 new markets with a current focus on Asia, while the U.S. also remains a key priority. Drunk Elephant launched in Ulta Beauty around a year ago, after years of exclusivity with Sephora and industry sources think the brand could do $100 million in sales at Ulta in 2022.
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“We are very pleased with our performance in our freshman year at Ulta. In 2022, we have seen steady growth as we have amplified awareness and acquired a new customer for the brand. We feel there is continued opportunity for growth, and we are focused on building brand awareness within Ulta’s consumer base,” said Calcagni, who declined to comment on the figures.
Of its partnership with Sephora, she added that it “remains important and special, as we respect the history of building the Drunk Elephant brand together,” and that the company’s ambition is to remain a top skin care brand at the LVMH Moët Hennessy Louis Vuitton-owned retailer.
Shiseido’s other prized asset when it comes to Americas’ brands is Tory Burch Beauty, of which Shiseido acquired the license for in 2019 for an undisclosed sum (previously Burch had a fragrance deal with the Estée Lauder Cos.). In August of this year, the brand got back into fragrance with a new collection called Essence of Dreams. The collection consists of five scents, ranging in price from $90 for 50 milliliters to $125 for 90 milliliters.
The products, each based on emotions, including love, freedom, joy, magic and peace, launched exclusively at Tory Burch boutiques and with Nordstrom and could roll out to key markets internationally as soon as the fourth quarter of 2022.
“It’s a lifestyle brand with great history and a great future and with Tory’s partnership with us, we couldn’t be more excited about someone who is really a modern luxury designer that we know that we have a great partner,” said Gee, who remained tight-lipped on what the next category launch could be after the fragrance launch.
For now, the strategy is to reaffirm Burch as a presence in the beauty sector via scent, before expanding on a broader basis. “We think at this point right now that it’s critical for us to reestablish it based on what it’s gone through from COVID[-19] especially just like many of the brands, but it’s a great opportunity for us to take it to another level. See where their journey is going to take us.”
According to Moody’s Investor Service, Burch’s fashion business reached $1.6 billion in sales in 2021 and industry sources expect the five fragrances to reach $15 million globally in their first year on the market.
As for the enduring popularity of the Japanese brands Shiseido and Clé de Peau Beauté in the U.S., Gee believes it is attributed to their unique position in the market. “There is an aspect of the quality and the innovation, but Japanese beauty is another thing that we can bring uniquely to this marketplace.”
In particular, the financial results showed that sales of Clé de Peau Beauté were strong thanks to an on-trend digital marketing strategy that includes the appointment of new U.S. skin care ambassadors Diana Silvers, Dakota Fanning and Ella Balinska and tapping Martha Stewart to front the brand’s debut TikTok campaign. It was an instant sensation.
Gee also heads up global M&A for Shiseido, assessing new opportunities across all geographies. “In my M&A role, my job is to look at everything. I think one of the things that makes Tory Burch relevant for us is that it’s an iconic lifestyle brand and so for us, we look for things that have that type of power and so we would have to measure those on an asset-by-asset basis.”
Expanding further on M&A opportunities in the current market, he said: “I think if you look at our portfolio, we got a little smaller. That creates further white space opportunity.”
Last year, private equity firm Advent International signed a deal to buy BareMinerals, Laura Mercier and Buxom from Shiseido Americas for $700 million as the company shed assets to focus on core categories, including skin care. It also sold its personal care assets to CVC.
For now, while Gee said the math is in its favor as the U.S. is such a huge beauty market, he is also eyeing opportunities around the globe, especially in untapped markets. Brazil, for example, holds great potential. “We probably can do more in Brazil,” he said. “We’re studying that very much. We have fantastic rankings and branches of Shiseido and Nars already. We’re top-ranked at Sephora and we have a great partnership there. Prestige is a bit of a smaller segment and the way they define it, I think there’s certainly ways of looking at how to capture consumers in a market like that that aren’t necessarily accessible to a Sephora or accessible to other brick-and-mortar opportunities.”
As for the challenges that lie ahead, Gee concluded that when you’re constrained due to external factors, whether they’re geopolitical or not, what drives the company at the end of the day is it still wants to deliver for consumers and has a purpose as an organization.
“There’s some economic challenges going on that are external factors. Inflation being one, the global supply chain having an impact on many and I would say the fight for talent. I think that’s very common not only in our sector, but across all sectors,” he said. “What really becomes important is to have a purpose as an organization to keep people bound together. And for me, there’s this great opportunity to really strengthen that even further. One of the great things about Shiseido is that we’re a people first organization and that’s not just a local market level. That’s at a global level, from Tokyo to New York to Paris, to Singapore. That to me, means something.
“And as long as we continue to live it, even in difficult times,” he continued, “that’s where you have the opportunity to demonstrate it most.”