On July 4, Shiseido Group's two blockbuster news attracted the attention of the industry.
First, BAUM, which has been in China for three years, is rumored to be discontinued in the Chinese market, and the brand's Tmall flagship store will no longer accept new orders from July 10, 2024, while offline counters will also be withdrawn at the end of June.
Second, Shiseido Group announced that it has established a long-term perfume business cooperation with Italian luxury fashion brand Max Mara, and will obtain an exclusive global license from Max Mara to be responsible for the development, production, promotion and distribution of its perfume products.
Behind the two major news that broke out on the same day is the in-depth strategic layout of Shiseido to better adapt to market changes and consumer needs. Under the guidance of the medium-term strategy of "SHIFT 2025 and Beyond", Shiseido is constantly adjusting and updating to respond to market developments with a more flexible brand portfolio.
01
Shiseido's "New Blood"
In recent years, the global perfume market has grown steadily, and perfume has become one of the growth engines of Shiseido's business in Europe, and it is also the focus of its business. In 2023, Shiseido's perfume business in the EMEA region will account for 43%, surpassing the 34% share of skincare.
On a commercial level, the development, production and sales of Max Mara fragrances will further strengthen Shiseido's fragrance brand portfolio and drive further growth in Shiseido's global fragrance business. At present, Shiseido and Max Mara have reached a basic agreement on the signing of a license agreement.
"This partnership will not only enable further growth of our fragrance business, but will also create more value through synergies." Shiseido Group Chairman and CEO Masahiko Uotani emphasized.
Luigi Maramotti, Chairman of the Max Mara Group, said: "It is a great opportunity for Max Mara to have such a visionary collaboration with Shiseido on the fragrance business. ”
In his opinion, Max Mara and Shiseido share a similar corporate culture – people-oriented, highly respectful of the company's roots, and determined to push the boundaries of products. "I have been in contact with the Shiseido management team several times and I have been impressed by their pioneering spirit and professionalism. I am pleased to share the core values with Mr. Masahiko Uotani, Chairman of the Shiseido Group, which are essential for the success of our partnership. ”
Founded in 1951, Max Mara is one of the world's leading fashion giants and is recognized as a pioneer in the development of modern ready-to-wear concepts in the world and was the first Italian garment company. Max Mara represents a classic heritage of Italian quality and craftsmanship, renowned for its exquisite Italian craftsmanship and refined fabrics that transcend the passage of time and trends.
● Source: Max Mara's official blog
Founded in 1872, the Shiseido Group has demonstrated strong scientific research, development and innovation capabilities over the past 100 years.
Both Shiseido and Max Mara are committed to high standards of quality, innovation and customer satisfaction. The partnership will expand both companies' global product lines and leverage their respective expertise to deliver innovative products to consumers around the world.
02
Bets of the giants
In the highly active perfume market, the beauty giants are constantly "moving".
At the beginning of 2024, L'Occitane acquired the Italian fragrance brand Dr. Vranjes Firenze； Following its investment in Wenxian and Guanxia, and obtaining the license of miu miu (Miu Miu) fragrance, L'Oréal's latest move is to consider acquiring Amouage, a royal fragrance in the Middle East; Coty has successively won the beauty licenses of two major Italian luxury brands, Etro and Marni; Kering plans to launch its first fragrance for Bottega Veneta in the second half of this year, following the revocation of the fragrance licenses of Bottega Veneta, Balenciaga and Alexander McQueen from Coty, and Balenciaga and Alexander McQueen will also launch high-end fragrance collections, betting on high-end fragrances to be included in the group's strategic objectives.
As a personalized and emotionally connected product, fragrance has more stories to tell and more room for premium than skincare, which can quickly support the brand façade, and is a key category for major groups to expand their portfolios. The expansion of the fragrance category will also further increase the revenue of the Beauty segment.
It is intuitive that the excellent performance of the fragrance business has been written into the financial reports of major groups. For example, in fiscal 2023, L'Oréal Group's perfume category sales increased by approximately 17% and has become a growth engine for the Luxury Products division; Estée Lauder's fragrance business accounted for 18% in Q1 FY2024, achieving 11 consecutive quarters of organic sales growth.
At present, the competition in the global perfume market is becoming more and more fierce, but Shiseido is not a novice in "playing with fragrance". As early as 1919, Shiseido released its own line of perfumes, which included two very well-known fragrances, plum blossom and wisteria.
Previously, Shiseido also put forward the goal of "becoming the world's top 5 perfume manufacturers" and expanding the perfume business through marketing and acquisitions, and in recent years, the Shiseido Group's efforts in the perfume market have become more and more obvious. According to the 2023 data disclosed by Shiseido, the Group's fragrance business has achieved significant growth for four consecutive years, an increase of 25% compared to 2019.
● Shiseido perfume brand matrix
目前，资生堂旗下核心的香氛品牌包括三宅一生（Issey Miyake）、纳西索·罗德里格斯香水（Narciso Rodriguez）、芦丹氏（Serge Lutens）、ZADIG&VOLTAIRE等。
Among them, the most distinctive is Serge Lutens, who is considered the pioneer of high-end niche fragrances. Founded in Paris in 1992 with the capital injection of the Shiseido Group, Serge Lutens released a fragrance called Feminite du Bois (Charming Forest), which broke the boundaries between men and women with cedar wood as the base, and set off a wave of woody women's fragrances. To this day, Feminite du Bois remains one of the most iconic fragrances of the Reutan family.
In 2015, Serge Lutens was officially acquired by Shiseido. After joining Shiseido, the brand has set up about 2,000 points of sale in 35 countries and regions around the world, including the United States, Japan, and Hong Kong. In China, the market layout is carried out through the opening of Tmall Global overseas flagship stores.
● Serge Lutens Offline Exhibition in Mainland China
In addition, Issey Miyake and Narciso Rodriguez will land in the Chinese market in 2021 and open fragrance flagship stores on Tmall. THE DESIGNER FRAGRANCE ZADIG & VOLTAIRE, WHICH JOINED THE SHISEIDO GROUP IN 2016, CURRENTLY SELLS 3 BOTTLES PER MINUTE WORLDWIDE (DATA FROM SHISEIDO EMEA 2023).
Not long ago, Shiseido China announced that it will provide Toyota's exclusive implanted in-car fragrance "Osmanthus Tsubaki" with anti-fatigue effect for the Chinese market, which has become another milestone in Shiseido's continuous expansion of fragrance value.
03
The attack of a hundred years of oriental beauty
Structural reform has been the main theme of the Shiseido Group's development in recent years, and in terms of brand equity, it has improved profitability through a strategy of "selection and concentration".
Since 2015, Shiseido has established a Prestige First strategy in its mid- to long-term strategy "Vision 2020". Relevant data shows that by adjusting the brand portfolio and increasing brand marketing investment, the proportion of high-end beauty sales increased from 34% in 2014 to 42% in 2017.
In 2021, Shiseido formulated its medium-term strategy "WIN 2023" to start a business transformation centered on high-end skin beauty. From 2020 to 2023, the proportion of Shiseido Group's high-end beauty sales increased from 47% to 61%.
In its latest medium-term strategy, "SHIFT 2025 and Beyond", Shiseido once again emphasizes strengthening its investment in the three priority areas of brand, innovation and talent, and premiumization remains the focus of the Group.
In terms of the strategy of "winning in China", Shiseido also emphasizes high-end, mentioning that it will expand its portfolio including cosmetics and fragrances. In addition, operational reforms were undertaken, including focusing on high-end luxury brands and moving brands into Tier 3 to 5 cities, targeting the growing middle class of consumers.
From these perspectives, the high-end fragrance category with strong brand effect and large market space is obviously an important position for Shiseido to accelerate revenue growth in the next stage, especially to help the group achieve a core operating margin of 12% and 15% by 2025 and 2027, respectively.
According to Euromonitor data, the current global perfume fragrance market size is between US$57 billion and US$61 billion, and it is expected to exceed US$79.296 billion in 2027. Specific to the Chinese market, its growth rate is higher than that of the global market, and it is expected that the compound annual growth rate of Chinese perfumes from 2023 to 2027 will be about 14.73%. The perfume market is ushering in a blowout period, and Shiseido's bet is timely. The latest data for the first quarter of fiscal 2024 shows that Shiseido Group's fragrance business jumped by 21%.
At this stage, Shiseido is continuously optimizing its product portfolio and reshaping its market competitiveness. On the same day that the official announcement of the cooperation with Max Mara, the market rumored that Benseido's BAUM brand had decided to stop selling products in the Chinese market due to strategic adjustments. The Group's high-end beauty brand Drunk Elephant entered the Chinese mainland market through Sephora's exclusive omni-channel network in April this year.
● Drunken elephant settles in Sephora
According to industry analysts, Shiseido's current strategic focus has shifted to focus on profitability and cash flow. Previously, Shiseido also emphasized in its financial report that even though the market growth was moderate, the group's reform has been underway. Achieve stable growth and profit generation by identifying growth areas and market priorities for investment.
就目前的品牌资产看，资生堂已拥有高端矩阵：葆木（BAUM）、BENEFIQUE、Dr. Dennis Gross 、Gallinee、三宅一生（Issey Miyake）、芦丹氏（Serge Lutens）、Tory Burch、醉象（Drunk Elephant）、inoui、NARS、SHISEIDO、肌肤之钥（Clé de Peau Beauté）、Ule、茵芙莎（IPSA）、玑妍之光（EFFECTIM）、纳西索·罗德里格斯（Narciso Rodriguez）、The Ginza、ZADIG&VOLTAIRE；
Popular Line: ANESSA, D program, INTEGRATE, PRIOR, ELIXIR, URARA, REVITAL, AUPRES, HAKU, MAOUiIAGE, SIDEKICK;
Oral Beauty: INRYU, SHISEIDO BEAUTY WELLNESS.
It can be seen that Shiseido has built a rich and balanced portfolio of beauty brands, covering high-end, anti-aging, sunscreen, makeup, men's, sustainable, pure skincare, oral beauty and other fields, and further investment in the new brand will help the group gain more cards in the fierce market competition.
In the first quarter of fiscal 2024, the Shiseido Group's core operating profit totaled 11.3 billion yen, a decrease of 1.2 billion yen year-on-year, but exceeding the Shiseido Group's quarterly target, marking a solid start to the year. For Shiseido, which is in a period of strategic adjustment, it is a good result.
In the direction of the strategy and the details of the decision-making, you can see Shiseido's determination to focus on medium- to long-term growth. As a "pioneer of 100 years of oriental beauty", Shiseido is steadily changing.