Shiseido Company, Limited hereby notifies that it has launched “SHIFT 2025 and Beyond,” a medium-term strategy centered on the three years from 2023 to 2025. With “SHIFT 2025 and Beyond”, the Company will take the next three years under a new management structure to shift itself from “Defense” to “Offense” and ensure further growth to “Be a Global Winner with Our Heritage.”
Achievements made under WIN 2023 and Beyond
With the medium-to-long-term strategy ”WIN 2023 and Beyond” that launched in 2021, the Company were able to deliver many results despite the severe impact of COVID-19. First, the Company implemented ”selection and concentration” to increase profitability. the Company carried out structural reforms around the world that required extremely tough decisions, such as the divestiture of the Personal Care Business and makeup brands. In addition, we improved profitability in the Americas and EMEA businesses, which had been an ongoing challenge. The Company also steadily increased the sales ratio of Skin beauty products company-wide. Further, the Company also accelerated digital transformation (DX) to respond quickly to the ever-changing market environment, invested in FOCUS, and built new factories and logistics systems equipped with cutting-edge technology to achieve high quality and productivity. By strongly implementing these various initiatives, they were able to establish a solid financial base with high profitability.
Goals and Key Areas of “SHIFT 2025 and Beyond”
”SHIFT 2025 and Beyond” aims to first regain the growth of the Japan business, which is the remaining challenge of ”WIN 2023 and Beyond.” The Company will achieve core operating profit exceeding 50 billion yen in the Japan business by 2025 through fundamental reforms over a three-year period from 2023. During the same period, the Company will implement reforms to improve sustainable sales growth and profitability, aspiring to become a Personal Skin Beauty ＆ Wellness Company. As the Company aim for long-term growth, they are strengthening investment in the three priority areas of brand, innovation, and people, and plan to achieve the core operating margin of 12% by 2025 and 15% in the plan’s final year of 2027.
The Company will continue to aspire to realize a sustainable world where everyone can enjoy a lifetime of happiness through the power of beauty through our corporate mission, BEAUTY INNOVATIONS FOR A BETTER WORLD.
Key Areas for Sustainable Growth
- Enhance Brand Equity
In addition to global brands such as “SHISEIDO” and “Clé de Peau Beauté”, the Company will also focus on brands such as “ELIXIR” expanding in Asia, fragrance brands, men brands, and strategicly developed new brands. The Company will invest an additional 100 billion yen over three years in marketing investment.
- Continuously Invest in Innovation
The Company will further strengthen collaboration between research centers in each region by taking advantage of the global structure. The Company will evolve the R＆D processes, such as expanding research areas and developing consumer benefits. In addition, the Company will combine the knowledge with technologies gained by external joint research, inter-company collaboration, and M＆A to create new products and services. To further accelerate innovation, the Company will invest in R＆D at 3% of sales.
- Strengthen Global Talent and Leadership
Based on the management philosophy ”PEOPLE FIRST”, the Company have been actively invested in talent development. The Company will continue this investment in the people, who are the drivers of the growth. This will include selective programs and voluntary career development support for future leadership candidates, acceleration of global talent allocation, and establishment of compensation structures. Furthermore, to commemorate the 150th anniversary of the founding, the Company will open ”Shiseido Future University” to develop the next leaders. This is based in Ginza, Japan where the company was founded, and Masahiko Uotani, Chairman and CEO, will serve as the first president.
Core Initiatives by Region
Achieve continuous growth and shift to a highly profitable structure through active investment.
1) Japan: Strengthen brands and organization. Rebuild earnings base by bringing back growth
2) China: Expand brand portfolio and develop new areas
3) Asia Pacific: Establish a business foundation in a promising market for the future
4) Travel Retail: Create unique value for travelers
5) Americas: Build a foundation for growth as the next growth pillar
6) EMEA: Achieve profitable growth after past structural reforms
Leveraging the solid financial base the Company has built through the structural reforms, the Company will accelerate strategic growth investments from 2023 onwards to achieve sustainable sales expansion, reduce costs, and strengthen profitability and cash generation in “SHIFT 2025 and Beyond”. The Company aim to achieve a CAGR in net sales of 8% over the three years from 2023 to 2025(compared to 2022) and 6% over the two years from 2026 to 2027(compared to 2025). The Company aim to achieve a core operating margin of 12% in 2025 and 15% in 2027 through both strong sales growth and cost reduction measures. The Company aims to achieve free cash flow of 100 billion yen in 2025, and EBITDA margin of 18% in 2025 and 20% in 2027. For capital efficiency, we will achieve 12% in ROIC and 14% in ROE by 2025.
- Cash Allocation
- The Company will generate cash inflow of more than 400 billion yen over the next three years by investing in (1) Brand marketing, (2) Innovaton and (3) People. To build a virtuous cycle for maximizing corporate value over the medium to long term, we will allocate this cash generated to IT and Digital Transformation (DX) initiatives such as FOCUS and capital investment such as the introduction of energy-saving equipment in factories, and growth investment in M＆A.
- Shareholder Returns
- The total shareholder return policy emphasizes maximizing returns to shareholders through direct means, in addition to generating medium-to-long-term share price gains. Focusing on free cash flow, the Company will achieve long-term stable and continuous returns with a capital dividend-on-equity ratio (DOE) of 2.5% or higher.