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Kao Reports Financial Results From Nine Months Ending December 31

Posted: January 30, 2012

page 2 of 3

In the company's North American consumer products business sector, sales decreased 2% to ¥38.3 billion. Excluding the effect of currency translation, sales would have increased 8.6%. The market recovered, albeit gradually, and new products contributed to sales, but currency translation exerted an impact on results.

In consumer products business in Europe, sales increase 4.4% to ¥45.8 billion. Excluding the effect of currency translation, sales would have increased 7.9%. In a market that remained flat, new products launched in 2010 performed well.

For the company's beauty care business, sales increased 0.3% compared to the same period a year earlier to ¥410.7 billion. Excluding the effect of currency translation, sales would have increased 1.9%. Sales of prestige cosmetics, which consist of self-selection and counseling cosmetics, increased 0.4% to ¥197.2 billion with the launch of new products, although the downtrend continued in Japan's cosmetics market with the impact of the earthquake in addition to the shift in consumer preference toward lower-priced products. In Japan, the Kao Group enhanced in-store merchandising for self-selection brands such as Kate makeup and Evita total cosmetics. in counseling cosmetics, the company nurtured and strengthened its mega brands with annual sales of more than ¥10 billion, including making improvements to the Blanchir Superior whitening skin care and Sofina Beaute skin care brands, and adding a new product line for Sofina Primavista base makeup. In addition, the Kao Group carried out a reform of sales methods, including optimization of counseling in response to changes in consumer needs and increased its share in a contracting market. Sales outside Japan also increase steadily.

Sales of premium skin care products grew in Japan as the company launched products that use new cleansing technology to wash away dirt with the least possible damage to the skin from the Biore facial cleanser and Biore U body cleanser brands, and continued to make proposals for dry and sensitive skin with the Curel brand. Sales in Asia increased, with strong performances by Biore in Hong Kong, Taiwan and Indonesia. In North America, Jergens performed well in the hand and body lotion category.

Sales of premium hair care products decreased in Japan. Sales of Merit shampoo and conditioner were steady, but sales of hair coloring products were weak due to market contraction and intensifying competition. Sales in Asia increased, with strong performances by hair color products in markets where Liese foam hair color is sold, including Taiwan and Thailand. In North America and Europe, strong sales of foam hair color, hair styling products and other new John Frieda products drove substantial sales growth.