Kao Announces Integration of Research and Production Divisions

To fortify the company's cosmetics business, Kao Corporation announced it will integrate its research and production divisions that support cosmetics business operations. With this effort, Kao aims to offer enhanced beauty to women worldwide by anticipating new changes, as well as providing a thorough assurance of safety and reliability.

Recently, drastic changes in the environment associated with beauty and cosmetics have occurred, including the public's rising health consciousness and an increase in active middle-aged and elderly people. These trends, together with growing interest in beauty and the expansion of the middle-income bracket in emerging countries, has caused the need for change. Acting quickly to meet these changes, Kao decided to integrate its research and production divisions that support its Sofina and Kanebo brands to make maximum utilization of the company's assets, and to strengthen its beauty and cosmetics business.

Since its acquisition of Kanebo Cosmetics Inc. in February 2006, Kao has promoted mutual utilization of the two companies' competencies, mainly in terms of their respective functional capabilities, which sustain the Sofina and Kanebo brands. Specifically included are inter-operation of research assets and production facilities, integration of distribution and sales bases, cooperative operations in distribution, joint procurement, and human resource exchanges. These efforts have achieved results, including generating synergistic effects of cost reduction in the amount of over ¥10 billion in total.

However, to attain greater dynamic growth of the company's beauty and cosmetics business, Kao has recognized it necessary to advance further transformation in organizational and operational areas, and thus decided to unify research and production divisions for these brands at this time. The company will also work on organizational integration in sales divisions in the near future. As a result of this integration process, Kanebo Cosmetics will ultimately become the company that manages the Kanebo brand business.

Starting in January 2014, the Kao's beauty and cosmetics research organizations will be integrated, and, in July 2014, Kao will implement full-scale beauty cosmetics research at its laboratories in Odawara, which will serve as the base of the company's beauty and cosmetics research and development.

Then, in January 2014, the production divisions of the company's beauty cosmetic business will be integrated, and, starting in July 2014, the Kanebo Cosmetics Odawara factory will be operated as a core plant manufacturing for the Kao Group's beauty care products, which will take the form of a new production company to be established as a wholly owned subsidiary of Kao.

Organizational integration of quality assurance and consumer divisions, which conduct and manage safety and reliability, was completed effective August 12, 2013. Moreover, research sections for safety and analysis were integrated in September prior to research divisional integration.

By unifying its research and production divisions involved in the product development process at this time, Kao Group will further pursue efforts for safety and reliability, as well as offer enhanced beauty and strive for Yoki-Monozukuri, the value of the company, while advancing reforms in employees' awareness and organizational culture.

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