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Shiseido focuses on quality products made in Japan

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Cosmetics giant Shiseido Co. is relocating its production facilities to Japan in a bid to win customers with a “made in Japan” brand.

“What’s important for businesses are brand values,” said Shiseido Chairman Masahiko Uotani. “We are convinced that we should manage our production bases in Japan.”

Three factories were established in three years, doubling the company’s factories in Japan.

Supported by the weaker yen, Shiseido is looking to boost its exports from Japan to various parts of the world as fewer foreign visitors can travel to Japan to buy their products.

Shiseido unveiled its Fukuoka Kurume factory to reporters on May 26, which began operations in April in Kurume, Fukuoka Prefecture. The factory can manufacture 140 million units of skincare products from its main Elixir line and other lines per year.

Products produced there are sent not only to Japanese consumers, but also to those in China and other Asian countries from the nearby port of Hakata. Factory-related profits are expected to increase due to the recent decline in the yen.

Shiseido opened its Nasu factory in Otawara, Tochigi Prefecture in December 2019, its first new factory in Japan in 36 years. The Osaka Ibaraki factory was then established in Ibaraki, Osaka Prefecture in December 2020, before the opening of the last factory in Fukuoka Kurume.

There are now six domestic production facilities. Shiseido had three. Investments in facilities totaled 140 billion yen ($1.1 billion).

Almost all flagship skincare products from the company’s main lines, including Shiseido and Elixir, will now be made in Japan. Shiseido products are available in 120 countries and regions.

Plans to erect new factories were proposed around 2015, when Tokyo saw a massive influx of foreign visitors who bought Japanese-made goods in bulk, according to Uotani.

Shiseido’s sales surpassed a record 1 trillion yen in 2017 and failed to meet growing demand. A succession of products went out of stock, putting the company under pressure to increase manufacturing capacity.

The novel coronavirus pandemic ended the boom soon after the Nasu plant began operations, sending Shiseido into the red as it posted a net loss of 11.6 billion yen for the fiscal year. ending in December 2020.

Shiseido, however, has decided to continue moving forward with its factory setup project as originally planned, as it believes manufacturing products in Japan is its “brand value”.

The company’s focus on the safety and quality of cosmetics applied directly to the skin is considered particularly important. Products made in Japan enjoy a much better reputation and popularity around the world after many foreign visitors have tried them.

The shift to domestic production contrasts sharply with Shiseido’s past policy of transferring production capabilities overseas.

Domestic factories were halved to three between the years 2000 and 2010. A Vietnamese counterpart was introduced in 2010 to create cheaper products targeting customers in other Asian countries.

Finding that the reform did not work to improve its profitability, however, with a net loss of 14.6 billion yen reported for the fiscal year ending March 2013, Shiseido appointed Uotani as chairman in 2014 to rebuild the society.

Uotani set his sights on making Shiseido a “global brand” and began to weed out low-profit sections. Daily-use product lines, such as Tsubaki and Uno, were sold in 2021 with an American cosmetics company.

This clearly showed Shiseido’s stance of focusing on mid- to high-priced skincare products, in which the company has specialized expertise.

Although relocating factories to Japan involves a higher risk of fluctuating exchange rates and high delivery costs, Uotani stressed that he has no intention of hesitating.

“Despite the exchange rate fluctuation, the basic course of action (to have domestic production) will not change,” he said.

(This article was written by Takuro Chiba and Kanako Tanaka.)