The firm’s health and beauty division saw sales decrease 4.8% on a like-for-like basis to JPY261.2bn (U$2,29bn) in the third quarter of its financial year while operating profit dropped JPY6.1bn (U$53.6m) to JPY41.3bn (U$490m) in the nine months ending September 30.
It attributed the slump to the falling demand for hygiene-related products.
Sales of hygiene products grew tremendously last year due to the heightened awareness of hygiene triggered by the COVID-19 pandemic.
In 2020, the personal care major boosted the production of hand soaps and sanitisers as demand continued to exceed supply well into the middle of the year.
However, Kao reported seeing a “substantial shrinkage” of demand for hand hygiene products, which negatively affected skin care sales, which also suffered from low sales of sun care products as consumers refrained from going outdoors.
“Last year, there was a shortage of hand soaps and hand sanitisers in the market where our strong supply capability was demonstrated. However, this year, competitors have sufficient supply competing for market share. Our sales dropped because the situation turned out to be slightly different than what we anticipated,” said Tomoharu Matsuda, representative director, managing executive officer president, consumer products.
Despite the slump, Kao managed to increase its market share of hand soaps and sanitisers from the pre-pandemic days.
According to the firm, Bioré now holds the largest share in the market for hand soaps and hand sanitisers combined.
To revitalise this segment, Kao said it would be launching new hand hygiene products under the Bioré brand in the next quarter.
Hair care saw a decrease in demand for mass-market products while the professional hair care division started to recover gradually in Europe with the ease of pandemic restrictions.
In America, hair care sales were robust due to the popularity of Oribe hair care products and its strong e-commerce sales.
Kao’s cosmetics arm, which consists of beauty brands including SENSAI and Kanebo recorded a sales increase of 0.8% on a like-for-like basis to JPY165.9bn (U$1.45bn). Operating profit increased by JPY7.4bn (U$65.1m)
The increase was credited to the launch of new product innovations catered to mask wearers, such as the Curél Moisture Repair Sheet Mask developed to combat dry and sensitive skin that has been aggravated by frequent mask-wearing.
In the fourth quarter, the company will be launching more of such products, including after-mask skin care from DEW and a new KATE mascara developed for mask-wearers.
In Asia, sales increased by 35% thanks to strong e-commerce sales of Curél and freeplus in China.
To capitalise on the strong e-commerce growth in China, Kao will be launching the Kao Mall on an e-commerce platform in November.
Similarly, it also saw increased e-commerce sales in Europe as a result of the firm’s digital investments. Coupled with the ease of lockdowns and restrictions, Europe saw sales increase by 6.6% overall this quarter.
Next year, the company is planning to launch its own e-commerce site, My Kirei by Kao, specifically to strengthen the position of its mass-market products in the European and American markets.
However, the growth in Asia and Europe could not offset the slump in Japan, where the firm saw a decrease in sales as the prolonged state of emergency present tough conditions for make-up products in particular.
Amid these conditions, the company’s net sales decreased 0.4% to JPY1.021bn (U$8.98bn) on a like-for-like basis. Operating income decreased JPY11.1bn (U$97.6m) to JPY109bn (U$958m).