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Japan Set for Recovery

By: Briony Davies
Posted: August 7, 2006, from the August 2006 issue of GCI Magazine.

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Japan’s population is aging rapidly, and will be significantly older than most other countries in the Asia-Pacific region by 2020. The country has the longest life expectancy among the world’s major economies. Japan’s median age was 32.5 in 1980, but had risen to 41.5 by 2000. The pace of this upward trend should slow in the future, but the median age will nonetheless reach 45.8 by 2020—compared with just 32 for the entire region. Although this dynamic is a cause for individual and government concern, it presents an opportunity for manufacturers to target products designed to protect against aging.

In a hectic and aging society, products designed to offer convenience enable manufacturers to push up unit prices. Packaging, especially that of shampoo and conditioner, was redesigned in smaller sizes to cater to both frequent travelers and with larger openings for aging consumers. Deodorant wipes displayed strong growth of 3% due to their ability to serve consumers on the move. They also are seen as more environmentally friendly by consumers because they can easily biodegrade. Players in Japan could exploit this trend further by observing innovations in format and packing of facial cleansing wipes, body wipes and portable color cosmetics—all of which are commanding higher prices in Western regions.

Japan’s growing commitment to the environment has arisen from an increased awareness of the long-term economic benefits of environmental protection. In the past, Japan considered environmental protection a diversion of resources from economic development; the cost of ignoring environmental problems is now considered unacceptably high. The Japanese government is focused on reducing total resource inputs such as energy and water, reducing output of harmful substances and waste, and increasing the ratio of recycled resources. As in the case of deodorant wipes, increased consumer awareness of the environment is filtering down to influence purchasing decisions in cosmetics and toiletries, and could be leveraged more effectively than it is currently.

Local Players Lead the Way at Home and Abroad

The cosmetics and toiletries market in Japan remains dominated by local household names, although changes are afoot in terms of market leadership. Once Japan’s cosmetic queen, Shiseido has been bumped into second place by the Kao/Kanebo alliance, formed and finalized in early 2006. Together, the two firms have more than a 17% share of the Japanese cosmetics and toiletries market. This union allows the combined company to leapfrog Shiseido, Procter & Gamble and Unilever to take a narrow 0.2% percentage point lead in Asia-Pacific.

Shiseido’s attitude to the merger is telling. The beauty giant now views L’Oréal as its largest competitor, indicating its reluctance to rely on its home ground—which, although large and currently in recovery, is sluggish in comparison with more dynamic markets in Asia Pacific and Western Europe. China, in particular, is the object of Shiseido’s desire, and the company hopes to double the number of its retail outlets. Such a strategy of decreasing dependence on the Japanese market is not restricted to large players. Yuskin Pharmaceutical Company, with its one-formula skin care brand Yu-Be, is set to conquer Europe in 2006. Following successful debuts in France and the U.K., the brand is slated to roll out to Portugal, Spain and Italy via Sephora—indicating that it is possible for a Japanese brand to make grounds in Western Europe. Its approach could well be echoed by other players in the not too distant future.

Juggling Obstacles in Japan