Shiseido announced it will establish Shiseido Middle East FZCO by the end of 2013. The new company is based in Dubai, the United Arab Emirates (UAE) in partnership with a local company, and it will import and market products under the Shiseido global brand in seven Middle East countries—Bahrain, Jordan, Kuwait, Oman, Saudi Arabia, Qatar and UAE. The joint venture will commence business operations in January 2014. Shiseido International Europe S.A., Shiseido’s wholly owned subsidiary in France, and the local company hold equity shares of 51% and 49%, respectively.
Since 1997, Creation Alexandre Miya Paris Limited (Creation), owned by the Kotovsky family, has been marketing products under the Shiseido global brand as a local distributor in the aforementioned seven countries, promoting marketing of prestige products as they have in Europe and the U.S. While fragrances account for a major portion of the high-end cosmetics market in the Middle East region, Shiseido managed to establish a presence with its signature skin care products, which are now marketed at 140 stores in the region. In light of the region’s high market potential underpinned by its large population that includes many affluent consumers, Shiseido has been examining the possibility of direct investment with the aim of further enhancing its market presence. This has resulted in the establishment of the joint venture with its partner, Creation, which is not only equipped with the expertise for selling skin care-centered, high-end cosmetics products and a good relationship with the retail sector, but is also well versed in Arab business practices.
The seven Middle East countries covered by Shiseido Middle East are home to a population of around 50 million, with an extremely young average age of around 30 years old. With a high GDP per capita, the region is known to have one of the largest affluent consumer bases. The high-end cosmetics market in the seven countries combined boasts a market size of ¥150 billion (2012) on a retail value basis, thus exceeding the market in Russia. Two-digit growth rates are expected to continue, backed by the existing affluent population as well as by expatriates working for foreign businesses, which are also projected to continue to increase.
While European and other fragrance brands already command a strong presence in the market, the Shiseido brand is achieving steady market penetration, mainly with its skin care range. Shiseido began making inroads into the Middle and Near East market in the 1970s. Overcoming inevitable withdrawal and downsizing during certain periods and in various countries, the company began to focus on the region again in the 1990s, launching marketing activities through its distributors in Lebanon in 1993. In 1997, an exclusive distribution agreement was concluded with Creation based in Dubai, UAE, to market Shiseido global brand products in various countries throughout the Middle East. Through Creation, Shiseido has gradually expanded its market coverage in the region, launching sales in the UAE, Kuwait, Bahrain, and Saudi Arabia in 1997, Qatar in 2000, Oman in 2001, and Jordan in 2004.
Business operations in the seven countries will continue to be undertaken by Creation, the current distributor, until December 31, 2013. Then, on January 1, 2014 and beyond, Shiseido Middle East, the new joint venture, will take over.
In the early stages, Shiseido Middle East will focus on disseminating the global brand Shiseido across the region to reinforce the business base, and in the future, the company will examine the feasibility of handling other brands or lines that Shiseido currently carries.