Packaged and sold Pomei and ZA, Shiseido's strategic transformation focused on the high-end

The first financial reporter learned from Shiseido China today that the company has decided to sell its Za Jirui and Pomei brands to the beauty brand management group URUOI, but the specific transaction price has not been disclosed, and the transaction is expected to be completed in March this year.

For the sale, Shiseido explained that as the Group is implementing the win 2023 medium- and long-term business strategy, it is gradually focusing on the business structure with beauty as the core. The company promotes business transformation and focuses on the development of leading brands to strengthen its business roots and develop into a global beauty group. Based on this, Shiseido believes that the Za Ji Rui and Po Mei brands need external resources to promote their further development. "We believe URUOI is the ideal partner to support both brands to reach new heights." The company said.

Volkswagen brand "exit"

The two brands of Za JiRui and Bomei, which were divested this time, are not strangers to Chinese consumers.

Bomei is a skincare brand launched by the Shiseido Group in 2001 for the Chinese market, and it is also the first localized brand launched by the Japanese company in China.

As a stepping stone to break through China's CS channel, Shiseido has positioned Bomei as a democrat, and its subsequent performance has also proved that Bomei has played an active role in Shiseido's CS channel development in China. In 2006, PoMei entered Watsons and department stores; in 2012, Pomei has signed more than 8,000 cosmetics franchise stores in China. From 2008 to 2012, Pomei has maintained a performance growth of more than 20% in the franchise channel.

However, in the past decade, the development of Bomei has been somewhat unsatisfactory. The reporter learned from some insiders that with the impact of Korean makeup and the rise of China's local beauty brands, the domestic low-end market competition is becoming increasingly fierce, and the advantages of Japanese mass brands such as Bomei are no longer there, especially in the CS channel, and its high supply discount is no longer attractive to the channel provider.

Although in order to adapt to the changes in the Chinese market, Bomei has also adjusted its market strategy, such as the Renewal of the Bomei brand in 2016, and the reduction of the supply discount of Bomei from the original 7.2% to 5.2% in July 2017, this "concession" strategy still has little effect.

In April 2020, Bomei announced the termination of offline sales channels and retained online sales channels such as Tmall flagship store and Jingdong flagship store.

Za Jirui, who is in the same camp as Bomei, is also in almost the same situation. Founded in 1997, the Shiseido Group's affordable makeup for young women. A dealer told reporters that for a long time in the past, Za's barrier cream was a sales explosion in many cosmetics stores and Watsons. However, in recent years, the subdivision of isolation has continued to have emerging brands entering the game, on the other hand, in addition to the isolation cream, Za has not been able to cultivate other competitive products, and the overall image of the brand is somewhat aging and lagging behind.

The interviewee said that more than 20 years ago, foreign companies such as Shiseido chose to incubate local brands to open up the Chinese market, and now it seems to be successful, while other foreign companies chose to spend a lot of money to acquire local brands or have also incubated "Chinese brands", many of which have folded. "It can only be said that time has changed, and today's market update iteration is too fast."

A high-end battle between beauty groups

The package sale of its brands is not the first time for the Shiseido Group.

Based on public information, the reporter found that in the past year, Shiseido Group has sold more than a dozen brands, mainly public products and makeup.

In April 2021, the Shiseido Group announced that it had phased out its licensing agreement with Dolce & Gabbana for the development, manufacture and distribution of perfumes, makeup and skincare products worldwide.

In July 2021, the Shiseido Group transferred its global personal care business, which includes 10 major brands including TSUBAKI, SENKA, UNO, and Mizunomi for CNY 9.8 billion.

In August 2021, the Shiseido Group officially announced the sale of its three major makeup products, including BareMerals, Laura Mercier and Buxom, for a transfer price of US$700 million (about 4.5 billion yuan).

Shiseido said that these sale transactions are aimed at transforming the high-yield business structure, improving revenue and enhancing cost competitiveness through business structure reform, while the Group is gradually reducing its Volkswagen brand, it is also gradually strengthening its layout in the field of high-value-added skin beautification.

The reporter noted that after the outbreak of the epidemic, due to the rise in commodity costs and freight rates, major beauty giants have increased additional costs after tax, such as Procter & Gamble, Estée Lauder and other beauty giants have raised prices to cope.

Looking back over the past year, high-end acquisitions have almost become the mainstream trend of M&A by beauty groups. The first is the acquisition of Japanese skincare brand Takami by L'Oréal Group in early 2021; the acquisition of Paula Zhenxuan by L'Orewa in June 2021; the acquisition of Natural Aromatherapy Skincare Brand By the end of the year, by the end of the year, The Avène parent company, the French Pierfar Group, has acquired the natural aromatherapy skincare brand Ladr me; Germany's Beiersdorf announced the acquisition of the lady-class beauty brand Shantika...

The Chinese market plays an important role in this and is also the object of competition among giants. In the case of Takami, its hottest product is the essence known as "Little Blue Bottle", which has a good sales performance in the Chinese market long before it was acquired. At that time, many people in the industry believed that after L'Oréal's acquisition of Takami, it would have one more explosive model to catch consumers in the Chinese market.

Similarly, over the past two years, Shiseido has been constantly adjusting its strategy to introduce high-end products. In 2020, Shiseido Group and Yameng launched the technology anti-aging brand EFFECTIM Jiyan Light, and the average unit price of this beauty instrument is about 7,000 yuan. In 2021, Shiseido introduced high-end brands THE GINZA Goginza and BAUM Bom to the Chinese market, while at the 2021 Expo, it introduced its high-end skincare brand DRUNKEN ELEPHANT and the new oral beauty brand Flow Law.

The market view is that high-end brands that have higher premium space and are conducive to maintaining a noble image will gradually become the direction targeted by major beauty giants.