Annual Report 1999 ［ PDF：672KB ］ - Shiseido group website

Annual Report 1999 

For the year ended March 31, 1999

Corporate Ideals 

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Contents 

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Corporate Mission 

We aim to identify new, 

richer sources of value and 

use them to create beauty 

in the lives and culture of 

those we serve 

(Statement of Shiseido Corporate Activities) 

With Our Customers 

Through the creation of true value and exceptional quality, we strive to help our customers realize their 

dreams of beauty, well-being and happiness. 

With Our Business Partners 

Joining forces with partners who share our aims, we act in a spirit of sincere cooperation and mutual 

assistance. 

With Our Shareholders 

We aim to win the support of our shareholders by retaining earnings for future investments and paying 

dividends which come from sound business results, and to uphold their trust through transparent 

management practice. 

With Our Employees 

The individuals who make up our work force–in all their diversity and creativity–are our most valuable 

corporate asset. We strive to promote their professional development and to evaluate them fairly. We 

recognize the importance of their personal satisfaction and well-being, and seek to grow together with them. 

With Our Society 

We respect and obey all laws in all regions in which we do business. Safety and preservation of the natural 

environment are our highest priorities. In cooperation with local communities and in harmony with 

international society, we call on our cultural resources in creating a global, beautiful, cultured lifestyle. 

1 Financial Highlights 

2 Message from the Management: 

“Global No. 1” Long-Term Vision for 

the 21st Century 

10 Review of Operations 

Cosmetics 

Toiletries 

Others 

15 Global Network 

16 Research and Development 

17 With Our Society 

Environmental Protection Initiatives 

Social Contribution Activities 

Responding to the Year 2000 Computer Problem 

Criteria for Corporate Activity 

1. We seek to bring joy to our customers. 

2. We are concerned with results, not procedures. 

3. We share frankly with each other our real priorities. 

4. We give free rein to our thoughts and boldly 

challenge conventional wisdom. 

5. We act in the spirit of thankfulness. 

19 Financial Section 

Six-Year Summary/Divisional Sales 

20 Management’s Discussion and Analysis 

22 Consolidated Balance Sheets 

24 Consolidated Statements of Income 

25 Consolidated Statements of Shareholders’ Equity 

26 Consolidated Statements of Cash Flows 

27 Notes to the Consolidated Financial Statements 

36 Report of Independent Certified Public Accountants 

37 Reference: Consolidated Statements of Cash Flows Based on 

the Revised Consolidated Financial Statements Regulations 

38 Directors and Auditors 

Subsidiaries and Affiliates 

39 Shareholder Information

Financial Highlights 

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For the Year: 

Net sales .................................... 

Income from operations .......................... 

Net income .................................. 

Divisional Sales: 

Cosmetics ................................... 

Toiletries .................................... 

Others: salon, food, 

pharmaceuticals and other businesses ............... 

At Year-End: 

Total assets .................................. 

Shareholders’ equity ............................ 

Per Share Data (in yen and U.S. dollars): 

Net income .................................. 

Cash dividends ................................ 

Shareholders’ equity ............................ 

Return on Equity ............................... 

Number of Employees ............................ 

Thousands of 

Millions of yen U.S. dollars 

1999 1998 1997 1999 

Notes: 1. Net income per share is calculated on the average number of shares outstanding in each year. 

2. U.S. dollar amounts are converted from yen, for convenience only, at the rate of ¥115=US$1, the approximate rate of exchange. 

600 

450 

300 

150 

0 

20 

15 

10 

5 

0 

Net Sales 

’95 

(Billions of yen) 

’96 

’97 ’98 ’99 

N e t I n c o m e 

’95 


’96 

’97 ’98 ’99 

¥604,295 

35,362 

10,332 

¥444,495 

98,939 

60,861 

¥613,979 

408,848 

¥024.5 

14.0 

980.0 

2.5% 

23,6888 

¥620,910 

38,113 

16,868 

¥457,333 

99,310 

64,267 

¥626,435 

413,801 

¥040.1 

13.25 

977.4 

4.2% 

22,874 

¥588,572 

42,773 

19,152 

¥436,705 

94,610 

57,257 

¥610,132 

388,145 

¥047.5 

12.5 

941.0 

5.1% 

22,045 

Shareholders’ Equity 

400 

300 

200 

100 

0 

’95 


’96 

’97 ’98 ’99 

Return on Equity 

8 

6 

4 

2 

0 

’95 

’96 

(%) 

’97 ’98 ’99 

$5,254,739 

307,496 

89,843 

$3,865,174 

860,339 

529,226 

$5,338,948 

3,555,200 

$0.213 

0.122 

8.522 


1

Message from the Management 

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“Global No. 1” Long-Term Vision for the 21st Century 

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“Global No. 1“ Basic 

Policy to Raise Corporate 

Value 

Since fiscal 1997, Shiseido has pursued the initiatives outlined 

in its medium-term management plan in line with 

our “Global No. 1” long-term vision. This vision entails 

becoming a truly distinctive company in the eyes of 

customers worldwide, rated highly and supported by 

customers for quality not only of products and services 

but also of employees, marketing and management itself. 

As we realize our corporate vision, we will work 

aggressively to create “customer benefit,” which we interpret 

as meeting the “desire of customers for enhanced beauty.” 

In our quest to raise management quality, in fiscal 1998 

we formulated “ ” as a statement 

of principles guiding our corporate activities. In the year 

under review, we introduced a “stakeholder index” as a 

concrete method of evaluating our progress in 

implementing “ .” 

At Shiseido, we firmly believe that success in raising 

corporate and shareholder value depends directly on our 

ability to realize our “Global No. 1” vision through the 

relentless pursuit of “customer benefit” and self-checks 

of management quality. 


2 

Akira Gemma 

President & CEO 

(Representative Director) 

Fiscal 1999—An Important Year in Our Mission 

to Raise Corporate Value 

◆ Revision of Medium-Term Management Plan 

In fiscal 1999, Shiseido’s financial performance was badly affected by such factors as stagnation in the 

Japanese economy. Consolidated net sales declined for the first time in four years, and net income was 

down for the second consecutive term. Under these operating conditions, we made crucial decisions 

in our renewed desire to raise corporate value. Specifically, we revised our medium-term management 

plan, aimed at ensuring that Shiseido evolves into a company that is renowned worldwide in the 

21st century. The revised plan, which is based on our understanding of the need to accelerate growth 

in overseas markets and raise profitability, focuses on two key areas—reforming our brand strategy 

and further restructuring our core businesses—to reflect changes in markets and economic environments. 

In recognition of the current operating environment, we have restated fiscal 2003 as the target 

year for achieving consolidated net sales of ¥800 billion and overseas sales of at least 25% of net 

Yoshiharu Fukuhara 

Chairman of the Board 

(Representative Director)

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sales, while newly stating our most important goal of a consolidated 

return on equity (ROE) of 7% as the first step in our quest to raise 

corporate value. 

Our greatest strength is the brand, supported by what 

we call “cultural genes in art and science,” which we have carefully 

nurtured throughout our 127-year history at the forefront of fashion 

and culture. Reflecting this, in October 1998 we held our “Shiseido, 

The Meme Exposition—Generations of Art and Science” in Tokyo, following 

on the success of the same exposition in Paris the year before. 

The popularity of this event indicates that many people gained from it a 

deeper understanding of our corporate culture. 

From fiscal 2000, we will focus on maximizing the value of 

the brand. This will involve pursuing growth on a global 

scale by cultivating new brand strategies that integrate domestic and 

overseas components and by actively promoting M&A activities. 

In fiscal 1999, we firmly implemented profit-oriented management 

policies designed to raise profitability, as well as initiated “cost-best 

activities.” 

We also began a full-scale structural reformation of our core businesses. 

In cosmetics, we revised the revenue structure of our Japanese 

sales subsidiary to reflect changes in the system of transactions between 

that subsidiary and the parent company. In our toiletries business, we 

promoted our “megabrand” strategy, withdrew from the market for disposable 

diapers and formed a strategic alliance with Johnson & Johnson of the 

United States. In our salon business, which we intend to nurture into the third 

pillar of our business, we firmly established a substantial revenue base through 

domestic and international M&A activities. 

In fiscal 2000, we will further reform our cosmetics business, which forms the 

heart of our operations, through balanced management policies that promote 

simultaneous improvements in profitability and growth. 

◆ Important Initiatives 

In fiscal 1999, Shiseido embarked on a number of important initiatives designed 

to fuel further corporate progress. 

For example, we established a revolutionary customer service system called 

the Hanatsubaki Club Shiseido Cosmetic Quality Guarantee System. We also carved 

out new markets through the launch of innovative products, such as qiora and 

Shiseido Relaxing Fragrance, in anticipation of the needs of the 21st century, 

which we have dubbed the “century of the heart.” In addition, we began displaying 

all ingredients contained in our cosmetics on some of our domestic product packaging, 

making us an industry leader in this respect. 

“Shiseido, The Meme Exposition–Generations of Art and Science,” 

held over a 23-day period in Tokyo in October 1998, 

attracted some 34,000 visitors. 

Based on the latest research into connections 

among the heart, body and skin, 

we developed qiora, which has added a new 

dimension to cosmetics’ role in people’s lives. 


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Fiscal 2000 Strategies and Action Plan for the 21st Century 

Fiscal 1999 marked an important first step for change at Shiseido. In fiscal 2000, we will pursue two 

central business strategies—our “Global Multibrand Strategy” and structural reform of our cosmetics 

business—while at the same time addressing asset efficiency improvement as we build a firm foundation 

for the 21st century. 

“Global Multibrand Strategy” 

Raising the asset value of the brand is the most crucial factor in increasing the value of 

Shiseido as a corporation. At the same time, however, we recognize that the contribution of a single 

brand to growth in the world cosmetics market will be limited, especially given the increasingly diversified, 

individualized and sophisticated needs of customers. Based on this perspective, in June 1999 

we established the Corporate Value Creation Department under the direct supervision of the Company’s 

president. This represents the formation of a system in which Shiseido Group brand strategies are 

managed in a unified manner, with special emphasis on strengthening the identity of the 

brand. From fiscal 2000, we will fully promote our “Global Multibrand Strategy” aimed at accelerating 

our growth in the global market by establishing diversified brand values. 

Our “Global Multibrand Strategy” comprises four core elements: (1) Strategy for the prestige market 

centering on the brand, (2) Specialization strategy for new-category markets, (3) Growth 

strategy for the middle and mass Asian markets and (4) Establishment of a firm position in the global 

fragrance market. 

Introduced in 1998 in selected 

overseas markets, 

Shiseido Liquid Compact foundation 

is now sold in more than 

50 countries around the world. 

Our prestige-brand Clé de Peau Beauté 

is slated for international sales. 

◆ Prestige Market Centering on the Brand 

Consistent with the concept of Shiseido as a prominent “skin-care house,” 

we will unify our domestic and international brand strategies for the 

brand and globalize that brand’s marketing development 

function. In this way, we aim to further strengthen the position of the 

brand at the prestige end of the world cosmetics market. 

In line with this strategy, we will extensively reform our domestic brand 

strategy in order to clarify ’s position as a prestige brand, 

mainly via counseling activities. 

For self-selection cosmenity products and mass-market toiletries, 

however, we will display “Shiseido Co., Ltd.” on the back of products as 

manufacturer and distributor. We will not use “ ” in the marketing 

of these products; instead, we will promote the distinctive features of 

individual business and product brands. (We call this “by Shiseido Co., 

Ltd.” marketing.) 

Overseas, the brand has already established a top position 

at the prestige end of the market, especially in Europe and Asia, thanks 

to the success of such lines as Shiseido Relaxing Fragrance and Shiseido 

Liquid Compact.

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In fiscal 2000, we will launch our top-of-the-line Clé de Peau 

Beauté brand worldwide and raise our profile in the U.S. market 

with the opening of our New York Beauty Center. We will also 

develop UV White and other leading domestic brands, targeting the 

Asian market in an endeavor to raise our market share in that region. 

◆ Specialization Strategy for New-Category Markets 

Owing to the increasingly diverse, individualized and sophisticated 

needs of customers mainly in industrialized nations, such as Japan, 

the United States and European countries, a strong trend favors 

“makeup artist” and other specialty brands—those that cannot be 

connected with conventional prestige or middle-market niches. In 

this new-category market, we plan to secure growth through similar 

powerful brands. 

These include non-Shiseido brands, notably four existing 

brands—Ipsa, D’ici là, Ettusais and Ayura—as well as a new brand, 

FSP (Free Soul Piccadilly), which we launched in Japan in June 1999. 

Overseas, following the example of Ipsa we will launch other 

existing domestic brands in Taiwan and other Asian countries. We 

have already launched 5S, first introduced in New York in May 1998, 

in Hong Kong and Thailand in March 1999, and we will work to 

Taiwanese sales of the non-Shiseido brand Ipsa began in 

October 1997. 

New UV White is a purifying and beautifying 

addition to brand’s mainstay line of 

complexion-lightening cosmetics. 

FSP (Free Soul Piccadilly) is a new comprehensive 

cosmetics line for young women 

in their teens and 20s. 

Our domestic subsidiary Inter Act Co., Ltd., launched 

the stila brand in Japan as a first step in 

its new marketing campaign. 


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6 

further expand the market area of that line in Asia, North America and Japan. 

In fiscal 1999, we unveiled a U.S. makeup artist brand called stila in the Japanese market through 

a strategic alliance. In the future, we will actively bring new brands to the domestic and overseas 

market through M&A or strategic alliances. 

◆ Growth Strategy for the Middle and Mass Asian Markets 

We predict that the middle and mass markets in Asia will form sources of major growth in the 21st 

century. As well, in Asia the market for products that lighten skin complexion is expanding. To capture 

this market, we will take full advantage of our domestic brand recognition, which spills over into this 

region. These factors represent major business opportunities 

for Shiseido. 

In these markets, we will make steady progress in expanding 

the market share of Za, which we launched in 1997. We will 

also cultivate popular domestic brands in the self-selection and 

toiletries sectors. In addition, we have launched the Super Mild 

line through a tie-up with Johnson & Johnson of the United 

States. In these ways, we are building a position as a leading 

company in middle and mass markets. 

Za is a self-selection brand targeting middle-income consumers in Asia. 

Super Mild Shampoo is sold in 

China (left), Australia (center) 

and Japan (right). 

Aupres, made exclusively for the Chinese market, 

has generated double-digit sales gains 

each year since its launch in 1994. 

In the autumn of 1999, we will start operations at a new 

factory in Shanghai, which will handle local production of the 

Za line. This is our second factory in the rapidly expanding 

Chinese market. We already have sales operations 

in Beijing and Shanghai and opened a new 

operation in Guangdong in the current fiscal 

year. 

China is already our second largest market 

in Asia, after Taiwan. Aupres, a prestige brand, 

is already well established in China. In the 

near future, we will pursue a multibrand strategy 

centering on Aupres, complemented by 

the brand at the highest end of 

the prestige market and the Za brand for the 

middle market. In these ways, we intend to 

widen our lead over other European, North

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8 

Structural Reform of Cosmetics Business 

Structural reform of our cosmetics business is another central theme for fiscal 2000. To this end, in 

June 1999 we implemented dramatic changes in all departments related to cosmetics, including marketing 

development, sales and production. Through our new organization, we will target “consistency 

in creating value for customers, based on global perspectives,” as well as “further improvement in 

cost and asset efficiency.” 

Regarding marketing development, we set up two “Value Creation Divisions” combining our domestic 

and international marketing development functions, in line with our new strategy of separating 

brand and “by Shiseido Co., Ltd.” marketing. 

In each division, we introduced a “product brand unit (product line unit)” system, which facilitates 

line-specific revenue and profit management. 

Owing to the diversification of customer needs and the spread of new types of media, people are 

being inundated with beauty-related information. To create “customer benefit” under these conditions, 

we believe that two-way communication with customers is crucial. With this in mind, we opened 

the Consumer Communications Center, an upgraded version of our existing Consumer Information 

Center. 

We also reformed our sales system by creating an integrated sales structure for domestic sales and 

another for overseas sales. In fiscal 1999, we revised the revenue structure of our Japanese sales 

subsidiary. In April 1999, we unified the inventories of the parent company and its sales subsidiary, 

and consolidated our branch network from 80 branches to 68. We also reorganized the sales subsidiary 

through such actions as the integration of sales targeting department stores. Furthermore, in June 

1999 we unified the sales functions of two subsidiaries—Shiseido Sales Co., Ltd., and Shiseido Cosmenity 

Co., Ltd.—creating a new entity retaining the former company’s name of Shiseido Sales Co., Ltd. (The 

Japanese name of this new company has changed.) This move establishes a foundation from which we 

can strengthen our sales power against channels and improve cost efficiency. 

In overseas activities, we established the new International Operations Division to support the 

promotion of our wide-ranging domestic brands—both and non-Shiseido brands—in 

overseas markets. 

In addition, we established the Production Division, which will undertake the integrated management 

of domestic and overseas production, procurement and distribution. By manufacturing and 

procuring on a global scale in the most suitable locations, this division aims to reduce costs and 

enhance inventory efficiency. 

Addressing Asset Efficiency Improvement 

Inaugurated in fiscal 1999, our “cost-best activities” have already produced better-than-expected 

results. In fiscal 2000, we will set specific quantitative targets, which will be important in raising the 

profitability of each division under the “cost-best activities” program as we strive to improve ROE. At 

the same time, we will foster improved companywide asset efficiency. Specifically, over the next two 

years we will organize business- and company-specific return-on-asset (ROA) management and extensively 

pursue higher asset efficiency targets for each business, including targets for inventories and 

accounts receivable. In these ways, we intend to raise the asset efficiency of the entire Company. 

Over the three-year period from fiscal 1997 to fiscal 1999, Shiseido invested around ¥150 billion in 

upgrading its production facilities and other infrastructure. As a result, capital expenditures in fiscal 

2000 will be comparatively low. On the other hand, the Corporate Business Development Department, 

newly established in June 1999, will supervise and support efforts to maximize the return from our cash 

flows by considering M&A, strategic alliances and other investments as circumstances dictate.

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Improving Shareholder Return 

The portion of “ ” dedicated to shareholders states that the Company will 

“aim to win the support of our shareholders by retaining earnings for future investments and paying 

dividends which come from sound business results, and to uphold their trust through transparent 

management practice.” With this in mind, we are going to maximize returns to shareholders by restoring 

profits to them, in addition to ensuring medium- to long-term share price gains. In line with this 

policy, the Company retired treasury stock in fiscal 1999. In the future as well, we plan to make 

consistent share buybacks. 

Through the initiatives outlined above, we at Shiseido will strive to meet the expectations of shareholders 

and other investors. We look forward to your continued support and cooperation in these 

endeavors. 

June 29, 1999 

Yoshiharu Fukuhara 

Chairman of the Board (Representative Director) 

Akira Gemma 

President & CEO (Representative Director) 


9

Review of Operations 

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Cosmetics 

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In fiscal 1999, consolidated sales of cosmetics amounted to ¥444.5 billion, down 2.8% from the 

preceding year. In the domestic counseling sector, a mainstay business for the Company, over-thecounter 

sales remained at the previous year’s level. However, shipments from our sales subsidiary 

declined as we reduced inventories held by retailers in preparation for our plan to display all 

product ingredients on our packaging after fiscal 2001 in accordance with a new regulation. 

In addition, sales of men’s cosmetics, which have assumed high importance in the self-selection 

category of our cosmetics businesses, declined owing to the severe domestic economic environment. 

On a positive note, non-Shiseido brand products continued to perform steadily. Overseas, we generated 

increased sales of -brand products, especially Shiseido Liquid Compact, Shiseido 

Relaxing Fragrance and fragrances offered by Beauté Prestige International S.A. (BPI). Because of the 

yen’s appreciation during the year under review, however, overseas sales in yen terms grew only 2.5%. 

Shiseido’s comprehensive Elixir line now incorporates a natural ingredient 

that resists oxidation of skin oil. 


10 

The Pieds Nus line is for women who enjoy applying makeup 

freely in a confident display of their beauty. 

DOMESTIC BUSINESS 

Cosmetics—Prestige Market 

In the prestige category, we further strengthened our New Shiseido 

Marketing activities in line with the goal of promoting Shiseido as 

a prominent “skin-care house.” In particular, we focused on 

developing top-quality products targeting the global market, providing 

excellent-quality counseling services and highlighting the 

strengths of individual retail shops. We also strove to raise 

“customer benefit” by introducing the Hanatsubaki Club Shiseido 

Cosmetic Quality Guarantee System, through which we have 

extended our responsibilities to cover not only product quality but 

also after-sales services. 

In the year under review, we comprehensively revamped 

our mainstay Elixir and UV White lines. We also added Rouge 

Suplinic, a new lipstick offering outstanding moisture retention 

properties, to the Pieds Nus line, thereby broadening our customer 

base. In June 1998, encouraged by the strong acceptance of 

Shiseido Relaxing Fragrance in Europe, we launched that line 

domestically, creating a new market for these fragrances. 

Also during the year, sales of qiora, a new brand that combines 

skin-care benefits with subtle aromacological properties, performed 

according to our expectations. This brand was developed based on 

the results of basic research on the “connections among the heart, 

body and skin.”

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Cosmenity—Self-Selection 

Market 

Marketing activities of our cosmenity business, 

which serves the self-selection market, focused 

on originality and innovation. We also endeavored 

to highlight the individual characteristics of our 

product lines, notably Whitea, Ma Chérie, Aspril, 

ff and Uno, to expand our share of this market. 

Specifically, we added a body shampoo to the 

Ma Chérie line, and “fade-protection products” 

to the Aspril line. By focusing on the special characteristics 

of these two lines, we helped raise sales. 

We also added Yakuyo Furorin Live X and 

Yakuyo Furorin Live XG to our hair-growth line. 

Both of these products promote hair growth by 

stimulating the “hair germ.” In this way, we 

worked to secure a strong position in a highly 

competitive market. 

Non-Shiseido Brands— 

New-Category Markets 

In fiscal 1999, we ensured that our four existing 

non-Shiseido-brand lines—Ipsa, D’ici là, 

Ettusais and Ayura—effectively met customers’ 

diversifying needs. Sales expanded accordingly. 

In August 1998, we introduced domestically 

stila, a new cosmetic brand developed by Jeanine 

Lobell, a renowned makeup artist based in Los 

Angeles. This marks our entry into the market for 

brands linked to makeup artists, which are 

becoming fashionable. 

Our ff makeup line was specially 

developed for young women 

in their 20s. 

The non-Shiseido brand D’ici là offers 

special physiological benefits to the skin. 

In fiscal 1999, we upgraded the non-Shiseido brand 

Ettusais to accurately reflect customers’ needs. 

Our Yakuyo Furorin Live XG 

hair-growth stimulant promotes new 

hair growth from the roots. 

The Uno brand of 

cosmetics for men is 

a strong performer. 

Ayura is a strategic non-Shiseido 

brand that we upgraded in the 

year under review. 


11

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12 

Featuring a flaming logo, 

our Le Feu d’Issey line offers a scent 

suited to the 21st century. 

Neuve was launched in Taiwan 

in August 1998. 

5S benefits both the mind and the skin. 

OVERSEAS BUSINESS 

In the overseas prestige market, the Shiseido Liquid Compact line was highly 

rated for its state-of-the-art emulsification properties and package design. 

Shiseido Liquid Compact received the 1998 PRIX D’EXCELLENCE Award in 

the makeup category, presented by the prestigious French fashion magazine 

marie claire. This is recognized as the world’s most authoritative award in 

the cosmetics industry, and Shiseido’s standing has been further enhanced as 

a result of receiving it. 

Shiseido Relaxing Fragrance, featuring aromacological properties, continued 

to generate strong sales and thus contributed greatly to increased 

revenues of -brand products. BPI, our French subsidiary 

that develops and sells designer-brand fragrances, launched a new line called 

Le Feu d’Issey. BPI moved from strength to strength thanks to its aggressive 

ongoing business development initiatives, including the establishment of a 

subsidiary in Spain following the formation of its Italian subsidiary in 

fiscal 1999. 

Targeting growth in new market niches, in May 1998 we launched 5S in 

New York. During the year, we positioned this brand to correspond to the 

image of our flagship store in New York’s Soho district. In our quest to nurture 

this as a global brand, we unveiled 5S in Hong Kong and Thailand in March 

1999. We plan to successively launch this brand in other Asian countries 

including Japan, as well as in North America. 

In the Asia-Pacific region, we expanded sales of Za, first introduced in 

fiscal 1998, to China and New Zealand. To reinforce our production system, 

we commenced operations at a second factory in Taiwan. In addition, in 

anticipation of significant growth in China we are scheduled to start operations 

at a factory in Shanghai in the autumn of 1999. This initiative reflects 

our plan to undertake full-scale marketing activities in China that draw on the 

benefits of local production. 

Taking advantage of the tendency for well-known Japanese brands to become 

popular elsewhere in Asia, we actively promoted our domestic lines in 

other Asian markets. For example, in Taiwan we launched Ipsa in department 

stores in 1997 and introduced the non-Shiseido brand Neuve in 1998, 

which domestically targets teenage women as a line of cosmenity business, in 

convenience stores. Both brands have performed strongly.

Toiletries 

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Consolidated sales of toiletries in fiscal 1999 amounted to ¥98.9 billion, practically unchanged from 

the previous year. During the year, the Company strengthened its “megabrand” strategy, which focuses 

on cultivating brands already enjoying competitive strength. Also, we significantly improved profitability 

by various initiatives such as implementing “cost-best activities” and withdrawing from the 

market for disposable diapers. In addition, we actively undertook innovative measures breaking 

with our conventional business practices. These included the decision to form a strategic alliance 

with Johnson & Johnson of the United States. 

In our toiletries business, we aim to maximize interaction by developing and nurturing 

personal-care products based on our “fine toiletries” concept, which focuses on haircare, 

body-care and skin-care products rather than on household products such as 

detergents, and by establishing broad sales channels. At the same time, we are targeting 

increased profitability through our “megabrand” strategy. This strategy entails taking 

competitive brands that have secured the leading share in their respective categories 

and adding new items in new categories to broaden the scope of the brand. The result is 

higher recognition of the brand itself, as well as more efficient marketing. 

Specifically, we concentrated on cultivating Super Mild, Aquair and Naturgo as 

megabrands. All three reported significant sales gains in fiscal 1999. 

In the 11th year since its launch, for example, Super Mild saw the addition of a body 

soap and a facial cleanser, thus broadening the brand’s appeal from being “gentle to 

hair” to being “gentle to the skin and the entire body.” 

Aquair is the cross-category brand with the concept of maximizing the beneficial 

properties of water and moisture. During the year, we added such new items as Aquair 

Pinto Skin (skin sheet and skin gel), which moisturizes the areas around the eyes and 

mouth using the synergistic benefits of sheet and gel, and Aquair Suibun Hair Pack 

Water Cream. 

In addition, we augmented the Naturgo line, which is based on the concept of naturebased 

beauty treatment, by adding a series incorporating the concept of thalassotherapy 

(treatment using elements found in the ocean). 

In March 1999, we launched Neue, which we intend to position as our fourth 

megabrand. Neue is based on the perspective that healthy hair is determined by the 

state of the hair’s inner protein fibers. Neue offers new value to highly trend-conscious 

women, through shampoos and conditioners dedicated to providing healthy hair from 

within. 

Targeting growth on a global scale, we commenced sales of Tessera, a series of 

perfumed shampoos and conditioners, in Taiwan, and we formed a strategic alliance 

with Johnson & Johnson with a view to selling the Super Mild line in China and Australia. 

Under the agreement, Shiseido will handle domestic marketing and sales of Johnson & 

Johnson’s Neutrogena skin-care line. The alliance will allow both parties to benefit 

from each other’s infrastructure and brand strength. 

Super Mild shampoo and conditioners. 

We have released Super Mild facial 

cleanser for nurturing as a 

megabrand. 

In fiscal 1999, we expanded our Naturgo line 

by adding a thalassotherapy series 

incorporating elements found in the ocean. 

Neue enhances hair quality from the roots up. 


13

Others 

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Consolidated sales from other businesses—including Shiseido’s salon, pharmaceuticals, food and 

other businesses—totaled ¥60.9 billion in fiscal 1999, down 5.3% from the preceding year. Although 

sales of our salon and pharmaceuticals businesses expanded steadily, sales of food and other 

merchandise declined. Nonetheless, the enhanced profitability of our salon business helped reduce 

the overall loss incurred in this category. We also restructured our other merchandise business. 

Through this and other initiatives, we are building a foundation for a return to profitability in fiscal 

2000 and beyond. 

SALON BUSINESS 

Approximately half of the revenues from other businesses are derived from our salon business. We have strengthened our profit 

base in this business through a series of domestic and international M&A activities. As a result, our salon business now 

generates steady profits. 

In Japan, Shiseido Beauty Company, Ltd., acquired the goodwill of Takigawa Co., Ltd., a 

domestic salon products wholesaler, in July 1998. We then established a sales system through 

which Shiseido Beauty Company, Ltd. works directly with dealers, thus expanding our network 

of sales channels. We also upgraded and strengthened some products, centering on 

technical products, such as those used for hair perms. We also launched Zotos Sticky Move, 

a styling agent featuring superb hair-resetting properties. 

During the year, GENIC Corporation, which became a subsidiary in fiscal 1998, broadened 

its dealer network and as a result considerably raised revenues. 

Overseas, U.S. subsidiary Zotos International, Inc., acquired 

The Pure White line of 

beauty-enhancement foods contains 

yeast extract and vitamin C. 

Shiseido’s Ferzea corn treatment 

remains a strong seller. 


14 

New Zotos Sticky Move 

hair-styling agent offers 

superior hair-resetting 

properties. 

the salon division of the Lamaur Corporation, a maker of hair-care products, in July 1998. (Zotos 

previously acquired the North American Hair Salon Division of Helene Curtis Inc. in fiscal 1997.) 

This new acquisition puts Shiseido among the top five salon product suppliers in the United States. 

Taking advantage of this situation, we are enhancing our international competitiveness by upgrading 

our lineup and raising the efficiency of sales, production and related functions. 

FOOD BUSINESS 

In our foodstuffs business, we focused on the enhancement of beauty and health in our product 

development activities. During the year, we launched Pure White , a food that lightens the 

complexion and supports healthy skin. We also strengthened our sales force. 

Although the main outlet of Shiseido Parlour Co., Ltd., is temporarily closed for renovation, 

this company’s food shops, which sell western confectioneries, wines and other products under 

the Shiseido Parlour brand, performed well. 

PHARMACEUTICALS BUSINESS 

Opelead, an eye surgery adjuvant, and Hyalos, a surgical treatment for joint muscles, continued 

to contribute solidly to sales of pharmaceuticals. In the over-the-counter pharmaceuticals sector, 

we concentrated on cultivating Ferzea, a corn treatment, as a mainstay brand. 

OTHER BUSINESSES 

In fiscal 1999, we refocused our lifestyle-related goods toward a basic emphasis on supporting our core cosmetics businesses. 

To this end, we decided to make Shiseido Shoppers Club Co., Ltd., a separate subsidiary in April 1999. We also worked 

to raise the profitability of The Ginza fashion boutiques, an initiative that entailed closing unprofitable stores. 

Also during the year, we endeavored to further penetrate markets for our chromatography business, which sells chemical 

analysis equipment developed in-house. We also cultivated markets for such products as Infinite Color, a photochromic 

titanium dioxide pigment for use in makeup.

Research and Development 

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Since opening the Shiseido Chemistry Research Laboratories in 1939, the Company has demonstrated 

a deep commitment to research and development. Today, our R&D network is global and 

oriented toward providing new levels of “customer benefit.” 

Global R&D System 

Shiseido currently maintains three R&D facilities in Japan and five overseas, covering a broad 

spectrum from basic research to the development of cosmetic products. Reflecting our diversified 

approach and desire to access research from global sources, we are also involved in 

collaborative research projects with various research institutes in Japan and overseas into the 

total range of human sciences. In 1989, we established with the MGH (Massachusetts General 

Hospital)/Harvard Medical School the MGH/Harvard Cutaneous Biology Research Center 

(CBRC), which continues to conduct basic dermatological research. 

We employ approximately 1,000 people globally in R&D-related positions, and annual 

R&D expenditures are planned to total around ¥16 billion. 

Commitment to “Graceful Aging” 

Shiseido is committed to the concept of “graceful aging,” which implies a fulfilling and vibrant 

life of sustained beauty and health, regardless of age or gender. This is a guiding concept in 

our R&D activities. We particularly emphasize four areas that are fundamental to progress in 

cosmetics: anti-aging, complexion-lightening, hair-growth stimulation and ultraviolet-ray protection. 

In fiscal 1999, we pursued a diversity of R&D initiatives. Some noteworthy successes are 

summarized below. 

In complexion-lightening research, we found that an extract from the lempuyang plant, a 

member of the ginger family that is used as a traditional medical treatment in Indonesia, has 

excellent moisture-retention properties and also suppresses the production of tyrosinase, a 

key enzyme for melanin synthesis. During the year, we incorporated this extract into the UV 

White series. 

In hair-growth stimulation, we discovered a way to activate hair buds located at the lower 

end of the roots, which are the genesis of new “hair germ.” We also succeeded in developing 

“tetracosamine,” which is effective in facilitating the penetration of other active ingredients 

into the hair roots. 

In foundations, we were the first in the world to develop a “color-rendering powder.” We 

also pioneered the development of a high-density alkylation technology for use with powdery 

materials, which allows the creation of a skin foundation that promotes smoothness and 

firmness without adding oil, which had been unavoidable in the past. When we applied this 

technology in a lipstick formulation, its color-generation properties improved, thereby permitting 

the creation of more vivid colors. 

In pharmaceuticals, we have developed a number of products based on original Shiseido 

technologies. These include Ferzea, an easy-to-use corn treatment, and Atskin, a series of 

medicated skin-care products for those with fragile skin. Both of these products have been 

well received by the market. In the future, we will take full advantage of our expertise in 

dermatological research, acquired through our work in cosmetics, as well as in pharmaceuticals 

production, toward the ongoing development of products that “contribute to medical 

treatment via the skin.” 


16 

Shiseido prioritizes research and 

development to maintain 

its competitive edge. 

Proudia Aqua In Pact incorporates 

high-density alkylation technologies that 

enhance skin protection.

With Our Society 

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Shiseido considers the preservation of the natural environment to be a top priority when developing 

its business globally. As a responsible corporate citizen, the Company also conducts various activities 

that contribute to the societies in which it operates. 

Environmental Protection Initiatives 

Since 1989, when Shiseido announced its intention to completely eliminate the use of chlorofluorocarbons 

(CFCs), the entire Company has worked extensively to protect the natural 

environment. In 1992, we formulated and publicly announced our “Shiseido Eco Policy,” an 

environmental management policy dedicated to realizing our motto of giving environmental 

issues the highest priority. This document outlines four ongoing objectives: (1) Protect the 

ecosystem and use resources and energy wisely, (2) Promote new technological developments 

and applications that do not have negative effects on the environment, (3) Raise environmental 

protection awareness of every Shiseido member and (4) Foster interaction with 

community and society. 

In an effort to publicize and demonstrate quantifiable progress in our companywide 

environmental initiatives, in January 1998 we released our Environmental Report 1997. A 

brief summary of these initiatives and our progress status is given below. (For more details, 

please refer to Environmental Report 1999, scheduled for publication in autumn 1999.) 

•Eliminate polyvinyl chlorides (PVCs). We have completed a reassessment of specifications 

of all our products and made a list of compound materials that should be discontinued. In the 

first half of fiscal 1999, we will know when it will be technologically feasible to replace all 

such materials. 

•Obtain ISO 14001 certification, an international standard for environmental management, 

at domestic and overseas production facilities. We have already acquired certification at all 

our domestic cosmetics factories and at the Kuki Factory, which makes toiletries. By fiscal 

2001, we aim to acquire certification at all our overseas factories, as well. 

•Reduce industrial wastes. By fiscal 2001, we plan to recycle at least 60% of all industrial 

wastes from our production facilities. This will represent a 50% reduction in unused wastes 

from fiscal 1991 levels. Our ISO 14001 activities are also on target to reach their objectives. 

•Reduce carbon dioxide emissions. By fiscal 2011, we aim to reduce carbon dioxide emissions 

from our factories to 15% on a basic unit scale below fiscal 1991 levels. To this end, we 

continue to make capital investments based on long-term perspectives. 

In addition to the environmental objectives outlined above, since fiscal 1998 we have 

formulated environmental management systems covering each phase of the product life cycle— 

development, procurement and production, distribution, and sales—based on Shiseido Global 

Eco Standards activities. These systems function as effective environmental preservation measures. 

To cite an example of such measures, in fiscal 1999 we replaced sales vehicles owned by 

Shiseido Sales Co., Ltd., with low-emission vehicles. By fiscal 2004, we plan to similarly replace 

all vehicles used throughout the Group. Moreover, in April 1999 we introduced new 

uniforms made from fibers recycled from PET bottles for our beauty consultants. This move 

visibly underscores our commitment to recycling. 

Shiseido’s Environmental Report 

1998 describes the Company’s 

environmental activities 

from April 1997 to March 1998. 


17

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Social Contribution Activities 

In our ongoing quest to create a beautiful global culture, we at Shiseido apply our accumulated 

knowledge and skills to our corporate activities. The scope of our activities is wide, covering such 

areas as welfare and regional social activities, educational support, “graceful aging” activities, and 

artistic and cultural support. 

In fiscal 1999, we energetically undertook social activities related to the aging of society. These 

included beauty-related workshops held at homes for the elderly, as well as instruction in cosmetics 

application techniques for elderly people suffering from senility. In addition, we supplied beautyrelated 

information cassettes and books in braille to libraries for the visually impaired. 

In recognition of our grassroots activities, we received Prominent Company Social Contribution 

awards in 1998 (Special Award) and 1999 (Consumer Awareness Award) from the Asahi Newspaper 

Cultural Foundation. In September 1998, Shiseido received the ninth Award for Companies with 

Excellent Consumer Awareness, bestowed by the Minister of International Trade and Industry. This 

award underscores the widespread recognition we have won for our efforts to make customers and 

society happy. 

Responding to the Year 2000 Computer Problem 

We at Shiseido recognize that the Year 2000 (Y2K) computer problem is a serious issue that has the 

potential to fundamentally affect our operations. The issue must also be treated as a potential problem 

for society in general. This understanding is shared by everyone in the Shiseido Group, from top 

management to employees in Japan and overseas. Accordingly, we have adopted a sense of urgency in 

implementing various countermeasures. 

The products and services offered by Shiseido are unlikely to play a causal role in Y2K-related 

errors. As a manufacturer, however, we are responsible for the steady supply of products, and to 

guarantee this we inaugurated a full-scale Y2K project team in 1997. Aware that the need for swift and 

steady responses increases with each passing day, we recently reinforced our implementation capabilities. 

In March 1999, for example, we established the “Y2K Committee,” chaired by a senior executive 

director of the Company. 

By September 1999, we are scheduled to complete tests and other aspects of Y2K compliance 

enforcement covering information technology (IT) areas related to computer systems; non-IT areas, 

such as microchip-embedded equipment; and tests with our business partners within and outside the 

Company, both in Japan and overseas. We are currently making steady progress, with IT-related compliance 

testing almost completed. In addition, in June 1999 we formulated a basic contingency plan 

covering our core operations, including main production facilities. We plan to develop an action 

manual based on this plan by September 1999. 

We have allocated an expenditure of approximately ¥1 billion for Y2K compliance enforcement 

measures covering the entire Shiseido Group. Of this total, around ¥700 million has already been 

used. Aware that additional unforeseen expenditures may be required, we are prepared to allocate 

extra funds as necessary. It is our policy to cover such expenses in a way that minimizes their effect on 

the Company’s bottom line. 

Even after having completed our Y2K compliance plan, we cannot fully guarantee the uninterrupted 

supply of products if unforeseen circumstances arise. Be that as it may, we are doing our 

utmost to minimize the risks involved. 


18

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