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Shiseido is doubling down on its UK expansion for 2024. Now, five years after hiring Charles De Montalivet as managing director for the UK and Ireland (UKI), the Japanese conglomerate is currently the ninth largest beauty group in the UKI, up against companies like L’Oréal and Estée Lauder, with ambitions to become the fifth largest in the next five years.
The region is a microcosm of the company’s bigger ambitions. Globally, Shiseido is growing at a rate of 6 per cent annually, aiming to become the world’s largest skincare company by 2030 by regaining growth in Asia as the markets continue to recover from Covid and expanding its geographical footprint in Europe and the US.
Shiseido set the wheels in motion for this through its Win 2023 strategy, designed to reinforce its positioning as a skin beauty company by implementing structural reforms to improve productivity and enhance profitability. And despite reporting a 40 per cent slide in annual earnings in China last month, Shiseido’s UK market is seeing record success, growing faster than the market average across all key categories under the management of De Montalivet and his unified global e-commerce strategy, providing insights that are able to be integrated into the global ecosystem.
“By having a strong presence in the UKI market, we’re able to win worldwide,” explains De Montalivet. “The UK is a fabulous platform for observation, from the US brands landing here, to the amount of indie and trendsetter brands and the diversity of retailers, from department stores to pure players — it’s a place where you can acknowledge future trends, and you can gauge [which brands] are going to make it.”
With 11 brands in its portfolio — including social media favourite Drunk Elephant, self-expression-centric makeup brand Nars and its namesake skincare innovator Shiseido — the group has seen double-digit revenue growth year-on-year in the UKI for the last three years, with over £150 million in retail sales in 2023 and a global plan to double net sales to RMB 2 trillion ($13.6 billion) by 2030.
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De Montalivet’s approach to transforming the UKI market has been multi-pronged: streamline internal operations; foster positive company culture; shake off underperforming brands; future-proof Shiseido’s brand portfolio by investing in upstart brands and research innovation; and make client experience the number one priority.
In doing so, De Montalivet is aiming to solidify Shiseido’s reputation as a skin beauty leader, to strengthen and expand Shiseido’s brand portfolio in areas such as microbiome and supplementary beauty and skin health, where strong market growth is expected, and to increase the group’s investment in innovation and strengthen the product offering of individual brands. With this strategy in place, Shiseido is aiming to re-target its global operating profit margin of 6 per cent in 2023 to 15 per cent by 2027.
One Shiseido
When De Montalivet joined Shiseido, the company operated as three divisions under one roof, a conglomerate of various brand acquisitions that were not yet integrated. As part of a unifying approach, which he refers to as “One Shiseido”, he was charged with streamlining the business and tightening internal operations.
“By forcing the organisation into two [divisions], we were able to take people out of their comfort zones and to teach them new skills. I m a big believer that people grow when they are exposed to different situations and challenges, so I wanted people who had worked on makeup brands to come to skincare, and so on,” he says.
Shiseido sold or terminated licences for a number of brands including Laura Mercier, Bareminerals, Buxom and its personal care business, which was sold to CVC Capital Partners for $1.5 billion — all part of a decision to shake the company’s ageing image and focus on globally relevant brands, particularly those appealing to a younger audience — in an increasingly competitive beauty industry.
According to De Montalivet, with the One Shiseido model — built around collaboration and communication — “everybody’s rowing in the same direction” with one main interest: the consumer. By uniting teams across the portfolio, De Montalivet is confident that everyone is working towards the same goal, which is to grow the entire portfolio.
Shiseido’s digital footprint has also been a big focus for the group since De Montalivet joined, with 35 per cent of sales online pre-Covid jumping to 55 per cent post-Covid. Shiseido’s retail model has completely shifted, bolstered by a new warehouse that opened in 2020 and a number of digitally savvy brands that sell direct-to-consumer (DTC) via their own channels with an emphasis on social listening. But what remains paramount across both is a highly personalised shopping experience, whether that’s via in-store education or advice from chatbots, virtual try-on technology or skin-diagnosis tools online.
Despite the shift, De Montalivet points out that in-store shopping is picking up momentum, as many multi-brand retailers (Shiseido is stocked by 30 in the UKI) are updating their spaces to allow brands to have more control over their own storytelling. “People still want face-to-face [interaction],” notes De Montalivet. “So it’s a challenge for our brands, and we need to respond to this. We need to really put ourselves in the shoes of the customer.”
And with the consumer in mind, Shiseido has made some moves in diversifying its offering, investing in new brands to fill the gaps in its portfolio and to align with changing consumer interests. In 2019, the group acquired buzzy upstart skincare brand Drunk Elephant for $845 million in a bid to widen its reach with Gen Z and millennial consumers and to compete with rival conglomerates, including Coty, who have social-first brands like Skkn By Kim and Kylie Skin. Drunk Elephant is a brand renowned for its digital positioning and its engaged social fan base of customers who have actively participated in the brand’s growth journey by reviewing formulas and suggesting new products.
Acquisitions moving the needle
Most recently, Shiseido acquired science and technology-based brand Dr Dennis Gross Skincare for $450 million, and London-based microbiome focussed skincare line Gallinée in 2022 for an undisclosed sum. The company is also betting big on ingestible beauty with the acquisition of French skincare and supplement brand Ulé. Both microbiome and ingestible beauty are relatively new phenomena that De Montalivet considers to be the future of the industry.
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“This is not a trend, it’s a proper revolution in the way we can look at the way we live — from what we eat, to how we sleep, to our energy levels and what we put into our skin. We’re only just scratching the surface, so owning one of the leading microbiome skincare brands is very promising. Now the question is, ‘how do we make it known?’”
De Montalivet believes that many of Gallinée’s products, such as its Face Vinegar, have the potential to achieve viral success on social media — “and we’re going to work on that!” This relationship between the skin, the body and the mind is something that’s being investigated extensively in Shiseido’s five research centres globally, along with the way that fragrance can trigger hormonal responses. As De Montalivet points out, “No other company is doing this because no one has the research capabilities we do to study these things.”
Shiseido currently holds 31 awards for its research with the IFSCC, the world’s largest prestigious research conference for cosmetics technology, a number higher than any other beauty group.
Educating customers on Shiseido’s new brands and increasing brand awareness of its portfolio are the top priorities for the year ahead, says De Montalivet. And despite all brands slotting into the One Shiseido ecosystem, he’s quick to point out that there’s no one-size-fits-all approach. Instead, he tells his teams to focus on the “basics”: brand awareness and clear KPIs. He’s feeling optimistic and energised for the future, “To put it bluntly, I think we are still a challenger. Lots of our brands are still at the infancy stage, so there’s so much room to grow.”
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