P&G, Shiseido, Coty: A recap at their digital resilience in the first half of 2020
We’ve compiled details on the digital strategies and business developments of the six cosmetics companies that made the most sales in the first half of 2020*. During this period, many consumer goods companies were hard hit by the coronavirus pandemic. Even top cosmetics giants Shiseido and Coty were not spared. While Coty is trying to grow through Kylie Cosmetics and KKW Beauty, Shiseido is being scrutinized by the market as to how well it can overcome these circumstances.
* This ranking is from Beauty Packaging’s Top 20 Global Beauty Companies.
In contrast to the top three companies, the companies in positions four, five, and six have had stock market evaluations that were either flat or in the negative. P&G in fourth place has actively rolled out marketing campaigns even during the pandemic and has maintained rising profits in beauty. Shiseido not only saw considerable sales drops in its home country of Japan, they fumbled in the Chinese market in March even when the country was recovering through a rebound in demand, and their restrained marketing activity, the opposite to P&G’s strategy, has reflected in their sales.
In the latter half of 2019, Coty announced a plan for sweeping revitalization and has since centralized their brands. However, due to the coronavirus pandemic, their struggles have continued. Through their renewal plan, they’ve sold their Professional Beauty businesses, including Wella and OPI, to KKR, and they plan to try and grow further with the help of Kylie Cosmetics, which they acquired, and KKW Beauty, with which they entered into a strategic partnership in June 2020. However, the issue of how they can rebuild their consumer brands such as CoverGirl remains.
4th place: Procter & Gamble (P&G)
Proactively pushing their marketing forward and aiming for a more mentally-available brand
While many companies during the pandemic grappled with whether they should cut down on marketing or not, P&G actively propelled their marketing activities forward. Their marketing expenses during this period increased by 1.9% from the previous year. Increasing physical availability (aka shopping opportunities) has been difficult as customers have experienced less access to brands through store closures. Due to this, P&G has instead been pursuing mental availability (aka increased recollection of a brand among consumers), which is advocated by marketing researcher Byron Sharp.
In continuation from 2019, they’ve demonstrated their active stance in helping to address societal issues in relation to gender equality and transgender people and, as a result of building up a more mentally available brand, their sales for the period of 2020 (from July 2019 to June 2020) achieved 71 billion dollars, a 5% increase from the previous period. Also, their cosmetics division, previously feared to be in trouble, increased by 4%. On the other hand, their grooming division, which continues to see a slump in sales, saw a decrease of 2%.
Their results for the third quarter of 2020 (January to March 2020) showed their sales reach 17.2 billion dollars with a 5% increase, with their cosmetics division increasing by 1% and grooming division decreasing by 1%. At the same time, they announced they would be putting their China businesses into “full operation”.
Also, looking at their fourth quarter 2020 results (April to June 2020), which were announced on July 30, they achieved sales of 17.7 billion dollars — a 4% increase from the previous years’ period. Their cosmetics division increased by 3%. In their skincare and personal care division, while their premium brand SK-II fell by double-digits due to the pandemic, this was offset by factors including increased demand for personal cleansing products. As for grooming, the decreased frequency of shaving due to lockdowns resulted in a 4% decrease.
5th place: Shiseido
Achieved the highest profits in FY2019, but reliance on China remains an issue
According to their first-quarter results of 2020 (calendar year-end fiscal year), which were announced on May 12, Shiseido’s sales were 17.1% down from the previous year at 226.9 billion yen (2.1 billion dollars), and their operating profit was down by 83.3% at 6.5 billion yen (620 million dollars). Geographically speaking, their Japanes business decreased by 21%, with both local and inbound decreasing substantially. Other regions each saw reductions — their China business decreased by 12% despite the country experiencing a rebound in demand and recovery of consumption since March, and their US business decreased by 9% due to the impact of lockdowns. Nevertheless, the impact on their native Japan was considerable.
The question now is how can Shiseido better resonate with Japanese customers to build up consumption domestically through both online and offline channels.
In the Chinese market, where consumption is fast picking up, the competition is intensifying. While major global companies mainly returned to normality by mid-April, the current goal is to increase presence and establish position. We touched on Shiseido’s high reliance on China in an article that covered the latter half of 2019. At the moment, positive signs are coming from the setting up of their Beauty Innovation Hub, which they announced will progress strategic partnerships with targeted companies that mainly include startups and the fact that they established a research and development base in China.
6th place: Coty
Aiming for growth through Kylie Cosmetics and Kim Kardashian brands
While the market environment worsens under the pandemic, Coty is quietly developing their businesses in accordance with their plan for renewal. They’ve been searching for a way to grow with their Kylie Cosmetics and Kim Kardashian brands and at the same time have been moving forward with their previously-announced selling off of their Professional Beauty business.
Their sales in the third quarter of 2020 (January to March 2020) were 1.52 billion dollars, a 23.2% decrease from the previous year, and their profit was 910.9 million dollars, a 27% decrease. Geographically speaking, each region saw decreases, with the Asia-Pacific region dropping by 34.8%, Europe, the Middle East, and Africa by 20.1%, and the US by 18.8%. Their Professional Beauty business dropped by 11.9%.
In the US, due to widespread store closures in March, sales of their high-end brands decreased by over 30%, and sales of their mass-market brands decreased by around 15%. Demand partially shifted to e-commerce channels, although while online sales of their mass-market and high-end brands grew well, it wasn’t enough to offset the amount lost from store closures.
In the meantime, their partnership with Kylie Cosmetics, which they entered into in the first quarter, has contributed greatly to both sales and profits, with the Kylie Skin line, particularly in good shape. From April, with citywide lockdowns in China being lifted, signs of improving sales for Coty were seen, particularly with skincare brand Lancaster, however, the fragrance has still continued to see hard times.
Since purchasing 41 brands from P&G in 2016, Coty has seen continuously worse results and has been through severe changes in top management. Sue Y. Nabi, founder of Orveda and sixth to become Coty CEO since the CEO who oversaw the purchase of the P&G brands stepped down, was inaugurated into the position on September 1st. Will the company be able to realize radical performance improvements under its new leader? Amongst a whirlwind of expectations and discontent, the capabilities of this new CEO will be closely watched.
Text: Ching Li Tor
Original text (Japanese): Yukari Akiyama
