Kao raises spending to catch up with Unilever

ZURICH: Kao Corp, the Japanese maker of Molton Brown shower gel and luxury soap, will boost annual investments by two thirds to catch up with Unilever and Procter & Gamble Co in emerging markets, chief executive officer Michitaka Sawada said.

Japan’s largest maker of toiletries wants to flesh out its international business in countries such as China, Indonesia and Thailand before pushing deeper into Europe and North America.

Kao would boost total capital expenditure to as much as 100 billion yen (US$915mil) a year eventually from about 60 billion yen now as the company accelerated expansion of factories outside Japan and evaluated buying new technologies, he said.

Kao, which also makes detergents, diapers and sanitary towels, extended a foothold in Europe about a decade ago with the purchases of Molton Brown and John Frieda shampoos.

While Kao, with a market value of about US$20bil, is within the top 10 companies in the world for beauty products, it had to accelerate investments to catch up with bigger rivals, Sawada said.

He also plans acquisitions expansion plans.

“P&G and Unilever have extraordinarily large presences” in Asian countries, Sawada said in an interview in Geneva. “We are the challenger in a number of these markets.”

Sawada, a 33-year veteran at Kao, which also makes chemicals, wants to tap the middle class across Asia as consumer-goods companies jockey for position in countries such as China, the world’s most populous nation.

While it was later to the game than larger global rivals, the Japanese company could carve out market share with higher-value-

as part

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his added products and by leveraging Kao’s brand recognition in Asia, Sawada said.

Acquisitions were part of expansion plans, and the Tokyo-based company had a preference for new chemical technologies rather than brands, Sawada said.

Technologies which addressed health, aging populations, the environment and hygiene issues were most desirable, Sawada said.

“If you acquire a technology successfully, it can be applied in the chemical business or in the consumer products business,” he said.

After Asia, the next step in expansion will include introducing some of Kao’s Japanese health products to Europe and North America, such as steam masks for the eyes, designed to help promote blood circulation, and Healthya coffee, which Kao said helps consumers burn fat and was introduced in Japan last year.

Kao began business in Japan as a maker of soap in 1887, and that country was the source of 69% of the 1.3 trillion yen of revenue the company had in 2013. — Bloomberg