Shiseido positioning itself as global mega-brand, focusing on Asia, expanding in emerging markets, strongly advancing in premium skincare and serum segments that are exceeding targets

Michelle Rivera

TOKYO , September 14, 2011 (press release) – Shiseido is committed to achieving comprehensive growth by drawing on the strategic assets and talents of its strategic portfolio. Guided by the four growth strategies announced as part of the current Three-Year Plan, Shiseido is positioning itself as a Global Mega-Brand with an acute focus on Asia and expanding in emerging markets.

China is a standing example of how the group can proactively capitalize on its resources with the entry of Bare Escentuals into Asia and launch of e-commerce business in September. For more detailed coverage of recent China growth activities, please see attached release.

Amid recent M&A movement in beauty and luxury markets, Shiseido has surfaced as a brand growth accelerator. With a priority on nurturing endorsers including Leslie Blodgett of Bare Escentuals and Francois Nars of NARS, Shiseido has achieved authentic brand growth by offering access to a global logistic and production network as well as world-leading R&D capabilities. While respecting original brand and corporate identities, the respective skills and assets of all partners are integrated on a global scale.

Global brand SHISEIDO

With the highest visibility and reach of the group, the global brand SHISEIDO is strongly advancing in two segments that are overachieving targets and broadly disseminating the brand’s values, capability and identity: premium skincare and serum. In the US and Asia, the premium skincare market maintains double digit growth, reaching 30% in China alone, while serums remain a key first-purchase item that can communicate brand’s unmatched technology.

¾ Shiseido Future Solution LX leads the charge for growing market share with further potential for

SKU expansion.

¾ Shiseido Future Solution Ultimate LX Regenerating Serum marked the culmination of nearly a decade of research and skincare innovation with strong performance projections. Supported by the world-leading capability and achievements of Shiseido R&D, the line is viewed as a key driver of brand values and advanced technology.

¾ Bio-Performance Super Corrective Serum and Shiseido White Lucent Intensive Spot Targeting Serum W rose to top 10 sales rankings in the Shiseido lineup within one year. These star items are key in recruiting new customers, who elevate into repeat purchasers and then loyal customers.

Bare Escentuals

With bareMinerals from Bare Escentuals, Shiseido reaches a market segment not covered by other brands – entry prestige, natural makeup and skincare with a unique business model that fosters high brand loyalty and relationship building expertise. Acquired in March 2010, Bare Escentuals has achieved increased sales and revenue as well as boosted Shiseido’s share in the global market in just 18 months. The acquisition deepens Shiseido’s reach to a new

customer segment in the US and under the shared value of “Customer-First Strategy” helped develop a more diverse corporate culture receptive to different values and approaches. Global Multi Brand synergy has integrated the values and heritage of the two brands in various ways.

As executive chairman and brand ambassador, Leslie Blodgett is the a creative force behind product development and inspiration in securing customer relationships, and this role has remained untouched since Shiseido first considered the partnership.

¾ Leveraging Shiseido’s global positioning, Bare Escentuals entry into the Hong Kong market this autumn is a symbolic first step onto the global stage with Shiseido (see China release).

¾ The first global campaign and beauty platform “Be a Force of Beauty” has launched and created broad media impact and buzz for the brand. Confirming the reputation for authenticity among women and strong customer trust, the campaign advocates the power of natural beauty. This accompanies the new makeup line “Ready,” which introduces advanced color technology.

¾ Bare Escentuals skincare line drew on Shiseido R&D resources to formulate the brand extension, designed to help expand appeal in existing and new markets.

¾ Overall cost structure has also been improved by consolidating warehouse and supply chain systems.

NARS

Approaching 10 years since joining Shiseido, NARS is steadily increasing share and has maintained a strong identity throughout the partnership. The iconic brand is wholly identified by the vision of Francois Nars, who remains the driving creative force of the brand’s identity and future direction.

Shiseido has been able to maximize the benefits of its R&D network to bolster the NARS brand over the last decade, including supporting the launch of the NARS skincare line. Equally, Shiseido was able to make use of NARS’ best in class digital marketing capability, launching e-commerce in the US and expanding digital marketing initiatives. The brand’s cutting edge image and exclusive distribution give the group prime placement and visibility in retail and cache with beauty insiders.

¾ US growth outperformed the market in the 1H 2011 and achieved the highest top 10 prestige makeup brand growth in the country.

¾ 2012 will see a major collaborative product launch with a 20th century icon, which will reset the

standard of artistic creativity.

¾ The flagship boutique on Bleecker St. has drawn significant media attention and New York

will see two more doors open within the next six months with plans for further regional expansion over the next two years.

¾ Entering Korea in 2010 was a measurable success, confirming the brand’s confidence to go forward conquering one country at a time.

Beauté Prestige International (BPI)

Securing a strong presence in the prestige fragrance segment, BPI is a creative house that deftly evolves fashion identities to fragrances. The diverse brand portfolio is regularly energized by strategically releasing flank lines to excite sales and nurture the franchise, as seen with the impact of l’eau d’Issey florale on the Issey Miyake brand. Recent launches are reigniting g the momentum of the house.

¾ ELIE SAAB’s Le Parfum is the first fragrance launch after BPI signed with fashion house in 2009.

Regionally tactical, the Elie Saab brand has a long reach into the Middle East and US markets, which have been growth opportunities for BPI.

¾ The launch of Jean Paul Gaultier’s Kokoriko comes with ambitious expectations for the new major fragrance. Kokoriko debuts in France this autumn and will roll out in Europe in 1Q 2012 and a global release is to follow in 2013. Aiming to reach strong market position without disturbing the current ranking of Le Male, which has secured second rank in Europe and continues to grow in the US.

As a global multi-brand organization, Shiseido will continue to invest in established and new channels, including

China, to build on the current growth momentum.[Reference]Shiseido Develops New Businesses in China

Shiseido is developing new businesses in China, which is positioned to serve as a main growth engine under its current Three-Year Plan (April 2011 - March 2014) that began this fiscal year. In line with four growth strategies announced—Global Mega-Brand, Asian Breakthrough, New Frontier and Customer-First (see page 3 for further details)—Shiseido is working to facilitate new growth and achieve sustained double-digit growth in sales, exceeding the rate at which the Chinese cosmetics market is growing by strengthening the foundations of its businesses through such means as launching a new e-commerce service.

The information included in this news release was originally announced at the Shiseido China Business Strategy

Conference held in Shanghai at 3:30 pm (4:30 JST) on September 14.

Introduction of E-Commerce Initiatives

As the number of Internet users continues to grow worldwide, Shiseido will commence full-fledged efforts to introduce e-commerce initiatives for the Chinese market to realize its New Frontier Strategy. The aim is to expand points of contact with new customers in addition to existing sales channels in China, which surpassed the United States as the country with the most Internet users in 2010. On September 15, Shiseido will launch a website for PURE&MILD Soi, a new series of products developed specifically for the Chinese mail-order market under its PURE&MILD brand, which is currently offered primarily at supermarkets, hypermarkets and cosmetics specialty stores. The new line of products (14 skincare products, 14 items, price range: RMB90 - RMB230), with environment-friendly features that include packaging (cases) made from bagasse paper*, targets young, post-80s consumers who prefer natural products and lead consumption in China.

The mail-order business goes beyond a shopping website, incorporating a new call center that will field customer inquiries, and an online counseling service that will allow professionally trained call center staff to propose products and beauty techniques that are optimized for the skin types and needs of individual customers. By accumulating information in a customer database for later analysis, Shiseido seeks to boost customer satisfaction.

*Bagasse paper: Non-wood paper made from fiber remaining after sugarcane is crushed in the production of sugar.

Developing the Bare Escentuals Brand in Hong Kong

The Global Mega-Brand Strategy is one of four growth strategies that seek to transform Shiseido into a Global Multiple Brands Company. It aims to have individual brands generating from ¥50 billion to ¥100 billion in sales by focusing on developing three brands in the prestige category: global brand SHISEIDO, Clé de Peau Beauté and bareMinerals from Bare Escentuals, Inc.

bareMinerals products will be sold through a Shiseido sales company (Shiseido Hong Kong Ltd.) for the first time as a synergy effect resulting from Shiseido’s acquisition of the company in March 2010. Shiseido will hold an event to announce the products in Hong Kong on September 28 prior to launch at two department stores in the territory in October.

Introducing the TSUBAKI Global Mega-Brand in China

In the masstige category of its Global Mega-Brand Strategy, Shiseido is currently offering two brands: Za, a total skincare and makeup brand, and SENKA, a skincare brand. Shiseido will introduce the TSUBAKI hair care brand in December 2011 in an effort to expand a new product category in the masstige domain. Products currently being sold in Japan under the brand will be locally adapted to better meet the needs of Chinese women and made available at about 10,000 hypermarkets and drugstores. Shiseido will build a fourth production facility at Shanghai Zotos Citic Cosmetics Co., Ltd. to boost production of these TSUBAKI products.

Trialing a Collagen Drink

With the Chinese health food market experiencing dramatic growth, Shiseido is working toward the release of a collagen drink in the healthcare business as a new business domain. Recognizing that there is also high demand for such products in Japan, Shiseido is planning to conduct a trial with a beauty beverage formulated with collagen under its PURE&MILD brand for individuals seeking beautiful and resilient skin. The move is part of Shiseido’s Asian Breakthrough Strategy, which seeks to enhance its presence and achieve future growth. Of the 8,000 stores that carry PURE&MILD brand products, the initiative will be implemented at 1,600 high-end shops able to offer customers counseling.

Shiseido will boost the presence of new and existing brands in China by prioritizing investment in these new initiatives. In the department store channel, Shiseido will increase the competitive edge and prestige of global brand SHISEIDO, Clé de Peau Beauté and AUPRES. In the cosmetics specialty store channel, which includes more than

5,000 retailers, Shiseido will seek to increase same-store sales by promoting the URARA brand and introducing

d’icilà, a prestige brand designed for cosmetics specialty stores in Japan, at stores with leading sales figures.

In addition to these business development initiatives, Shiseido will proactively fulfill its role as a corporate citizen in Chinese society by continuing the CSR activities realized up until the present. These include the Shiseido Future Beauty Project, which was launched on the 30th anniversary of the start of its business in China; SHISEIDO LIFE QUALITY MAKEUP, which is directed toward individuals with significant skin concerns such as birthmarks and vitiligo through collaboration with Chinese dermatologists; and tree-planting activities.

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