Beauty company Shiseido, which counts several high-end luxury brands within its fragrance and cosmetics portfolio, reports results that are well above market trends, particularly in the travel retail Americas channel.
The Miami-based division of the giant Japanese company, which recently moved into its stunning new office space in the heart of Miami’s Brickell Avenue, delivered enviable business growth in 2018, reports Vincent Baland, General Manager of Travel Retail Americas & Local Markets Latin America, Shiseido Travel Retail.
“According to the Generation figures, Shiseido’s group sales in travel retail Americas grew +5% versus 2017 on a market that was down -2% in the Americas. On top of that, we grew our market share to 6.2% and we were one of the fastest growing groups within the top 8 companies in the Americas,” Baland tells TMI.
Baland credits the Dolce&Gabbana brand for driving the Shiseido business. The brand grew +11% in Travel Retail Americas in 2018, while the market was down -5% for the fragrance category.
“The brand also gained three ranks compared to 2017,” he added.
The company’s Cosmetics business was exceptionally positive. Not only did the namesake SHISEIDO brand grow by +4%, but Clé de Peau Beauté, Shiseido’s luxury skincare that combines “Japan’s cutting-edge science and aesthetics with modern French elegance,” grew 39% compared to the cosmetics market that grew 4% in the Americas.
“This is almost 10 times the growth of the market and it was organic growth— there were no new openings. We also gained three rankings in the Americas compared to 2017,” confirmed Baland.
“We foresee the growth of our company in the Americas definitely through our cosmetics brands, more than from fragrances (the fragrance market was negative in 2018). I anticipate a tense market in the year to come for fragrances, whereas we see a real opportunity for growth in cosmetics,” he says.
Admittedly, results have slowed somewhat in 2019—in the first quarter of 2019, Generation reported the beauty market in the Americas travel retail was -3%, while Shiseido’s results were close to flat, said Baland.
“LATAM is very challenging and it has impacted our business, especially in fragrances. The cosmetics business grew stronger because we are more exposed to North America and the Chinese traveler, which benefited our brands that have great awareness in Asia.”
Top selling brand in Brazil
The SHISEIDO brand has been strong for many years in Brazil, where it is also a top 5 brand in the local market.
When asked if the performance of Shiseido has to do with the fact that Sao Paulo has a significant Japanese population, Antonio Andrade, Marketing Director for the Americas Travel Retail, answered:
“The attraction of SHISEIDO goes beyond the fact that it has Japanese origins, and that Sao Paulo has a high proportion of Japanese descendants. The wider appeal has a lot to do with the quality of the products, the science behind those products and their textures,” commented Andrade.
“SHISEIDO is also #1 in sun care in Brazil. Both the protection products and the sun compacts sell well. So the appeal goes well beyond the Japanese customers.”
In addition to SHISEIDO, the Group’s makeup brands are also growing in the local market in Brazil, says Baland.
“Our subsidiary is doing an amazing job, especially with NARS and Laura Mercier makeup. We are exclusive to Sephora in Brazil and to date, NARS is the second most popular color brand, with Laura Mercier just entering the top 10 rankings,” says Baland.
“This is very promising for us because it opens the door to travel retail, and to other markets in LATAM. These two brands are also present in the Mexico local market, and we are in discussions with some travel retail operators in the region,” he confirms.
In travel retail, NARS will be opening at Los Angeles International Airport with DFS by the end of this year (SHISEIDO, Dolce&Gabbana, and Clé de Peau Beauté are already available at LAX).
“We will also open NARS and Laura Mercier with DFS in Hawaii. NARS, especially, is a very hot brand and we are in discussions to launch it in other airports. We see amazing potential for the makeup segment in Americas travel retail,” says Baland.
The Luxury Factor
Baland reiterates that Shiseido sees the future of the business in travel retail Americas through the eye of cosmetics, given that the category is still under-developed in the region. In addition, he sees growth coming from the company’s most luxurious brands.
“As of now, fragrances weigh heavily in the Americas travel retail, but in terms of growth and dynamic, when you look at the figures of 2018, you see very interesting growth coming from skincare. For us, we are well positioned to profit from it with our brands SHISEIDO and Clé de Peau Beauté. We have even more potential in makeup with NARS and Laura Mercier since our presence in this segment is still under-developed today. … Our growth in the coming years should be driven by these brands, reinforcing our presence in the luxury segment.
“When we meet with retailers, of course we speak about fragrances. It is a big part of our business. But retailers, especially in North America, are paying more and more attention to cosmetics. They are really interested in our plan of expansion for all of our cosmetics brands in North America.”
Quality + experience = luxury
“To me, luxury is an encompassing experience. We are targeting consumers that appreciate the high quality of our products, in all its aspects, from the packaging, to the quality of textures and the effectiveness of formula. But even further, it is the quality of the experience that consumers or travelers encounter when they visit our counters in the airports of North America that really defines luxury to me. And this is what people experience when they try one of our products,” says Baland.
Shiseido has the added appeal of being the top tier of Japanese beauty.
“We have this strength at Shiseido to be a leading group in Asia, so all Asians traveling to North America from China, Korea or other Asian countries, know and appreciate our brands. In addition, we have the aspirational concept of the brand, which is more subjective and goes beyond the product itself. Shiseido personifies Japanese Beauty, the quality and the experience go hand-in-hand, bringing together beauty aesthetics, innovation and tradition.”
This idea of authenticity as being integral to luxury is particularly attractive to millennials, he says. As a result, the company is seeing Chinese millennials buying Clé de Peau Beauté; but also NARS, which is such a trendy and aspirational makeup artist brand that is very appealing to millennials.
Adding fashion power house Tory Burch
Do not be surprised to see the Tory Burch brand added to this luxury line-up.
In August, Shiseido and American lifestyle brand Tory Buch announced a long-term beauty license.
“Tory Burch is indisputably a fashion power, a $1 billion fashion house with an extensive global footprint. We think it offers great potential in travel retail. We are still exploring how we can best leverage this brand in the channel but for sure we are very excited about all the possibilities that the brand has, especially in the Americas. The biggest market for Tory Burch is the North American market,” says Baland.
Meanwhile, looking ahead at the challenging macro-economic environment throughout the Americas, especially in Mexico, Brazil and Argentina, Baland says that his group will have to make good choices in terms of brand management and investments.
“We need to keep investing behind our pillars, to make sure that we keep growing our market share. We did this last year and we very much plan to continue that this year. We have this wide portfolio of brands, and with the market changing for fragrances, it is the perfect moment for us to keep investing behind our pillars and surprising our customers and recruiting new ones with true innovative projects, like K by Dolce&Gabbana, a new masculine fragrance that we are launching this September. And as said before, we will also focus on seeking new growth opportunities with our cosmetic brands.”