Japan’s Kose to halt manufacturing in China amid fierce competition

The strategic shift of Japanese cosmetics maker and seller Kose Corp to end production in China and return to domestic manufacturing for middle- and high- level products mainly refl ects the company’s underperformance in the mass market in China, experts said on Thursday.

The Tokyo- based company has signed an agreement with Nihon Kolmar Holdings Co, Japan’s leading cosmetics con- tract manufacturing company, to transfer all the equity interest of Kose Cosmetics Co, its wholly owned subsidiary in Hangzhou, capital of East China’s Zhejiang Province, to the latter, Kose said on its offi cial website on Tuesday.

The sale, which may occur as early as the end of 2017, is expected to raise about 1 billion yen ($ 8.8 million). The roughly 200 workers employed by the subsidiary will mostly transfer to the new owner, Japanese business publication Nikkei reported on Tuesday.

Established in 1987, the Chinese subsidiary sells brands exclusively for the local mass market and has a plant that went into operation in 2000, Kose’s sole Chinese production facility.

Its middle- end products like Sekkisei and high- end lines such as Cosme Decorte and Albion must be imported from Japan. These lines have become popular among Chinese consumers in recent years.

An individual purchasing agent ( daigou) surnamed Gao told the Global Times on Thursday that the Albion lotion, usually priced at 588 yuan, sells very well and Japan- made high- end cosmetics are very popular with her domestic customers.

In comparison, the inexpen- sive Kose products made by the Hangzhou facility for the Chinese mass market have witnessed sales dwindle to about 10 percent of the total in China, compared with 60 percent a decade ago, according to the Nikkei report.

Kose’s locally produced skincare products do not possess any definite or obvious advantage in the Chinese mass market, where competition is quite fi erce. The quick rise of China’s domestic brand cosmetics in the past few years has given their producers a major market share, experts noted.

Chen Min, editor- in- chief of C2CC, a media company focused on the cosmetics industry, told the Global Times on Thursday that with better technology and quality controls, domestic brands have taken up more than 60 percent of the mass market.

Chen said Chinese brands should step up their research and development activity, and shift away from the marketing- based model.

“Concentrating on the highend segment is likely to enhance a company’s profits, yet it is diffi - cult to retain or increase sales [ in this segment]. Sales are highly reliant on the mass market,” a cosmetics industry insider surnamed Wang told the Global Times on Thursday.

Wang said Kose might resume output in China in the future in the way of fi nding an original equipment manufacturer.