Recently, Kao Group announced on its official website that it has started the transformation of its hair care business. As the beginning of the transformation work, Kao will officially launch a new hair care brand melt on April 20 this year, aiming at the high-end market. The Melt brand, which advocates "beauty pampering relaxing moments", takes care of hair while relaxing, and from the beginning of March, the brand will be sold in phases in stores and online platforms across the country.
Kao mentioned that more new brands will be launched in the future, and existing brands will be reshaped to rebuild the brand landscape of the entire hair care business. At the same time, Kao will use this transformation to build the hair care business into a new growth engine.
In the current era of social changes and information overload, more and more consumers have begun to pay attention to the healthy development of "body and mind". According to a 2023 survey of people between the ages of 20 and 59 by Kao, consumers who are willing to accept "high-quality" hair care products tend to use bath time for home grooming.
Based on this insight, the new brand melt is based on the brand concept of "beauty and relaxation moments", which stimulates the senses through sound, bubbles, texture and aroma while relaxing to create shiny and soft hair. According to reports, Melt series products all use the aroma of geranium and lily of the valley. The aroma is a blend of high-quality natural essential oils, with a clear fruity and sweet floral aroma with a hint of musky finish. The scent is designed to allow the user to relax during a beauty treatment.
It is reported that Melt's products include Melt Moisture Shampoo (moisturizing shampoo), Melt Moisture Treatment (moisturizing moisturizer), Melt Creamy Melt Foam (cream foam) and so on. Among them, the Hydrating Shampoo and Pomade feature a hybrid repair formula that repairs both the outer and inner layers of the hair. Melt also contains the Melty Beauty Extracts formula to provide moisture to the inner layers of the hair for shiny, soft hair.
Whereas, Melt Creamy Melt Foam is a refreshing carbonated shampoo with a dense lather designed for the head spa experience. When the foam is massaged and penetrates into the scalp, it takes away dirt and oil around the hair follicles, leaving the scalp feeling refreshed and clean. At the same time, the product also enhances the penetration of the product that is subsequently repaired.
Kao began researching hair care in the 1920s, and in 1932 developed "shampoo" through soap technology, becoming the first company in Japan to launch "shampoo". Subsequently, shampoo quickly became popular and became a shampoo habit. In the years since, Kao has continued to meet consumer needs by developing new products.
After 100 years of R&D, Kao began its hair care transformation with a new business vision, "Hair: the Power of Life".
Based on the sales of pump shampoo conditioner**, Kao divides the local shampoo market into "high premiums (more than 1,400 yen, or 67 yuan.).1 yuan or more)" and "mass market (under 1399 yen, that is, 67 yuanless than 1 yuan). A 2023 market survey by Kao shows that the premium segment is showing particularly strong growth. Outside of product functionality, consumers are starting to pay more attention to emotional design such as worldview, concept, and packaging.
Based on this, Kao began to fully enter the growing high-premium market. The launch of the new brand melt is just the first step in the transformation, with more brands to be launched in the future.
At present, the average price of Merit products under Kao's cleaning and care brand on Tmall Global is between 50-60 yuan, the essential set shampoo is 65 yuan, and the essential oil is 79 yuan. The above ** is in line with Kao's positioning for the mass brand. The existing mass-market brands Merit, Essential and Segreta will be rebranded to strengthen their brand power.
In fiscal year 2023, Kao Group's net sales will be 1,532.6 billion yen (about 733.5 billion yuan).800 million yuan), down 1 from the same period last year2%: Operating income of 60 billion yen (about 28 yuan.)700 million yuan), down 45 from the same period last year5%；The net profit was 43.9 billion yen (about 21 yuan.)0 billion yuan), down 49% from the same period last year.
This is the fifth consecutive year of declining profits for Kao. Although Kao's earnings report specifically named the impact of the decline in the Chinese market on its overall performance, Kao had already begun to decline for many years before that. Some voices pointed out that in addition to external factors, Kao Group's slow response to the market is also an important internal factor, including product quality and channel layout, which cannot keep up with the market. For example, Kao's high-end brand "Sensai Brilliant Color" will participate in the CIIE in 2021, and will only open offline in China in 2023*** In contrast, Shiseido's CPB and The Ginza have already had a lot of momentum in China.
Faced with performance difficulties, Kao launched the "K25" medium-term plan as early as 2021, covering the five-year period from 2021 to 2025. During this period, the Kao Group will further strengthen its total cost reduction (TRC) activities, shift to high value-added products, and carry out a radical portfolio reform to achieve a highly profitable core business by innovating existing categories.
In its latest financial report, Kao went on to propose the "K27" plan, which is based on the "Global Sharp Top" strategy (i.e., becoming the world's No. 1 through leading solutions that address the critical needs of customers) to promote the development of human resources and business to maintain a strong and high-quality business around the world.
The "K27" plan includes: a thorough strategic review and restructuring of inefficient companies, streamlining the business and brand lineup, and completing the structural reform of the cosmetics business; Promote the reform of the human capital structure to maximize the potential of employees; Profitability reform, the pursuit of high added value, with the most cost-effective design to improve cost competitiveness.
The Kao Group has high expectations for this plan. In the future, the Group will accelerate the launch of sunscreen products in Europe, Australia, Brazil, China and other regions, revitalize the hair care business, and launch a new generation of high-end brands. It is worth mentioning that Kao spent 4500 million US dollars (about 32400 million yuan) acquired Australian sunscreen brand Bondi Sands.
In its financial report, Kao divides its brands into four categories based on growth rate and return on capital. Among them, scalp care is seen as a high-growth, high-return business.
For the layout of the high-end cleaning and care market, Kao has already begun to prepare. In 2017, Kao acquired Oribe Hair Care, a high-end hair care brand, from Luxury Brand Partners. At that time, Cory Couts, the global president of Kao's salon division, said that ORIBE, which focuses on high-end products, is a good complement to Kao's salon portfolio, and that Kao's extensive global distribution network will drive ORIBE's expansion in the international market.
In September 2021, Kao Salon announced that Dominic Pratt, former Vice President of R&D for Skincare Research, will succeed Cory Couts, Global President of Kao Salon Division, to lead the global Goldwell, KMS, Oribe and Varis brands. Satoru Tanaka, President of Consumer Products, said, "With our in-depth knowledge of the salon industry, we believe that Dominic Pratt is the ideal person to further shape the future of Kao's global salon business." It is reported that in May 2021, the brand officially laid out the Chinese mainland market and opened an online store. In the earnings report, Kao mentioned that the brand has achieved good growth in the Americas.
In the "K27" plan, Kao has repeatedly mentioned that it will shut down or ** some brands with poor performance, emphasizing the goal of promoting ROIC (return on capital investment) throughout the company to build high value-added brands. In November last year, Kao announced that it would close three brands of its subsidiary, Kanebo, Freshel, Blanchir Superior and Sala, by the end of the year. Earlier this year, Kao Group announced that it would stop selling its 30-year-old affordable makeup brand, AUBE. At the same time, Kao also shut down its diaper production operations in China.
It is worth noting that on February 1, Henkel announced that it had signed an agreement with Procter & Gamble to acquire the Sassoon vs Sassoon brand and related hair care businesses in Greater China. L'Oréal's brand ViChy has also begun to deepen the layout of scalp care, seeking transformation. Similarly, Estee Lauder also introduced its high-end refinement brand **eda to China and began a more global layout.
The high-end shampoo and hair care market is surging, and it is not easy for Kao to gain a foothold in the market at this time.