Shiseido

Shiseido sells prestige skincare and makeup through its own counters, department stores, Sephora-style specialists, duty-free shops and, increasingly, Chinese e-commerce platforms. Skincare is the centre of gravity — the flagship Shiseido brand's Ultimune serum, Clé de Peau Beauté at the top of the price ladder, Elixir in Japanese drugstores, Anessa sun care — and colour sits beside it through NARS and the Japanese lines. Net sales were roughly ¥990.6 billion in calendar 2024, around $6.5 billion, which makes it the largest beauty company in Asia and roughly a sixth the size of L'Oréal.

The model was built around the counter. In 1923 Shiseido created a voluntary chain-store system that put its products, its training and its magazine into independent cosmetics shops across Japan, so the shop owner became a Shiseido consultant. That system, and the beauty consultants who staff department-store counters today, is why the company's economics look more like a service business than a packaged-goods one: an unusually high share of selling cost goes to people rather than to media. It also explains the company's strength in skincare, which is sold through advice, and its relative weakness in the sort of fast, video-led colour launch that Fenty and Charlotte Tilbury run.

The last decade rewrote the geography. Under Masahiko Uotani, the first outside chief executive in the company's history, Shiseido bet on Chinese demand, on travel retail and on American prestige acquisitions, and the bet worked until 2020: sales passed ¥1 trillion in 2017 and operating profit peaked above ¥100 billion in 2018. Then the pandemic closed the airports, China's consumers slowed, and in August 2023 Japan began releasing treated water from the Fukushima plant into the sea, prompting a boycott of Japanese cosmetics in China that hit Shiseido harder than anyone. In 2021 the company sold its Japanese mass brands — Tsubaki, Senka, uno — to CVC to concentrate on prestige, which is a coherent strategy with a single flaw: it removed the one part of the portfolio that did not depend on a Chinese tourist.

Shiseido has three real assets, and each is weaker than it was in 2019.

The first is heritage as a brand. A hundred and fifty years, a camellia logo drawn in 1915, and a reputation in Japan and across Asia for skincare science that is earned rather than claimed — the company spends around 3% of sales on research, has a large innovation centre in Yokohama, and Clé de Peau sells a ¥30,000 cream to customers who believe the laboratory. The second is distribution: the counter network, the consultants, and a hundred years of chain-store relationships in Japan that no entrant can replicate. The third is process — formulation and manufacturing scale that is why NARS never needed a factory.

What the moat does not cover is the part of the business that grew. Chinese prestige skincare is a market where Estée Lauder, L'Oréal and a rising set of domestic brands compete on the same shelf, on Tmall, with the same influencers, and where a Japanese company carries a specific political exposure that a French one does not. Travel retail is a channel, not a moat, and it can be shut by a government. And American prestige acquisitions — Drunk Elephant above all — bought Shiseido revenue but not process: the brand's fall in 2024 shows that owning a trend is not the same as owning a customer. The honest call is contested: wide in Japan, narrow everywhere the last decade's growth came from.

Shiseido's allocation record over the last decade is the clearest lesson in the library about the difference between a coherent strategy and a good one.

The strategy was coherent. Uotani inherited a company that was Japanese, slow and everywhere, and made it prestige, global and concentrated: buy American brands that gave it a position in the world's most profitable beauty market (NARS was already there; Laura Mercier and Drunk Elephant were added), take a fragrance licence from Dolce & Gabbana to learn the category, build factories and a research centre, and sell the drugstore brands that diluted the margin and the story. Each decision follows from the one before it. Together they turned a ¥760 billion company into a ¥1.1 trillion one in six years.

The execution was uneven and the timing was unlucky in a way that was partly chosen. Drunk Elephant at $845 million in 2019 was a top-of-trend price for a brand with no founder anchor, and it has been written down. The Dolce & Gabbana licence was handed back in 2021, having taught the lesson that licences are rented. The CVC sale in 2021 at around ¥160 billion was a fair price for slow brands, but it happened in the same year the group's exposure to China peaked, so the ballast left the ship just before the storm. And the dividend was held through a loss-making year, which says more about Japanese governance norms than about capital discipline.

The honest scorecard: the group knew what it wanted to be and paid to become it. It did not price the risk that the thing it wanted to be would stop growing.