Shiseido's Fall and Did You Know China Has an Industrial Policy for Lipstick?
2 months ago
- #Global Business Strategy
- #Cosmetics Market
- #China Industrial Policy
- Shiseido faced a ¥52 billion loss in 2023, its largest in 153 years, due to China market exposure and failed acquisitions like Drunk Elephant.
- China's industrial policy for cosmetics includes strict regulations (CSAR), subsidies for local brands, and R&D investments to boost domestic competition.
- Shiseido's aggressive China expansion lacked downside protection, while Kao's cautious approach preserved flexibility amid market collapse.
- Chinese brands like PROYA are investing heavily in R&D (3.5% of revenue), surpassing foreign competitors (1.5-3.5%), signaling a shift to innovation-driven growth.
- Geopolitical risks (Fukushima water release) and macroeconomic downturns (property crisis, youth unemployment) accelerated foreign brands' decline in China.
- UNIQLO and Toyota also saw declining China sales, proving no industry is immune to China's nationalist and industrial policy pressures.
- Shiseido's acquisition failures (Bare Escentuals, Laura Mercier) compounded losses, highlighting poor M&A strategy separate from China risks.
- Key lessons: Domestic markets are strategic fallbacks, national branding matters, organic expansion beats acquisitions, and China targets all industries—even lipstick.