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    Default Shiseido, Kao Beat Recession With Creams Priced as Much as Gold

    Shiseido, Kao Beat Recession With Creams Priced as Much as Gold



    By Maki Shiraki and Frank Longid

    Feb. 23 (Bloomberg) -- As Miwako Taniuchi’s income slumped 30 percent last year, out went the expensive dinners and new Gucci and Louis Vuitton handbags. One purchase that didn’t get axed: a skin cream worth its weight in gold.
    “I’ll cut back spending on other things, but not on my skin,” said the 34-year-old fashion stylist in Tokyo, who buys Shiseido Co.’s Creme Synergique, a moisturizing skin whitener costing 126,000 yen ($1,350) for a 40-gram (1.4-ounce) jar, or about as much as the cost of the precious metal.
    Shiseido Co., Japan’s biggest cosmetics maker, said sales of the cream are better than forecasts, a reflection of how top-end skin-care products are gaining in recession-hit Japan. Rivals Kao Corp. and Kose Corp. said their most expensive lotions are also beating projections. Department-store cosmetics sales climbed for 23 straight months to November, even as consumer confidence dropped.
    “Demand for luxury cosmetics remains firm, defying the economic slump,” said Rika Matsumura, a retail analyst at Okasan Securities Co. in Tokyo. “Over the past 10 years or so, women have shown an increased interest in skin care and anti-aging goods.”
    Shiseido, Kao and Kose are expanding their ranges of high-priced cosmetics even as overall department-store sales fell 9.4 percent in December, the biggest decline since March 1998.
    The confidence index, meanwhile, dropped to 26.2 in December, the lowest since the government began compiling the figures in 1982. The index rose to 26.4 last month.
    Resisting the Slump
    “High-priced cosmetics are resisting the economic downturn,” Shiseido president Shinzo Maeda said earlier this month at the Foreign Correspondents Club of Japan. Sales of its skin-care products priced at more than 20,000 yen gained 24 percent in Japan from 2004 to 2007.
    Kao, Japan’s second-biggest cosmetics maker, said its est Eternal Flow products, including lotion at 10,500 yen per 140 milliliter bottle and massage cream at 12,600 yen per 150 gram jar, sold 20 percent better than expected in the three months to December.
    Cosmetics costing more than 5,000 yen and budget products costing less than 2,000 yen are “doing well, while those priced in between are slumping,” Kao President Motoki Ozaki said Jan. 28. “High-priced products won’t stop selling.”
    Sales of Kose’s Cosme Decorte Moisture Liposome brand, which includes a 40 milliliter bottle of moisturizer priced at about 10,500 yen, continue to grow in “double digits,” said spokeswoman Mika Hashimoto. The producers declined to provide a breakdown of sales figures.
    ‘First Priority’
    Japan’s $17 billion cosmetics industry is tempering the effects of the recession thanks to the growing number of women in the country who have the money and the inclination to buy expensive skin-care products.
    Noriko Sato, who works for a financial services company, said she may cut spending on clothes, but her skin-care purchases will stay the same.
    “My first priority for spending is skin care,” said Sato, while buying a 50-gram jar of night cream made by Clarins SA for 18,800 yen at a Tokyo department store. “I can buy cheaper clothes, but I always make sure I buy quality cosmetics.”
    Japanese women now in their late thirties and early forties have greater disposable incomes to spend on cosmetics than previous generations, said Toshihiro Nagahama, chief economist at Dai-Ichi Life Research Institute in Tokyo.
    More Money
    “Many women in this age group are working and single,” he said. “They’re one section of the Japanese population that has more money to spend.”
    About 15 percent of Japanese women from 35 to 44 years old are single, triple the percentage in 1988, he said. Employment prospects for women of this age group benefited because of Japanese equal opportunity laws enacted in 1986, Nagahama said.
    Still, the cosmetics industry is not immune to Japan’s slump in consumer spending. Department-store cosmetics sales in December fell 1.7 percent from the previous month, the first such decline in two years.
    Shiseido and Kao both fell more than 8 percent on Jan. 30 when Kao cut its profit forecast 13 percent for the year ending March, citing a drop in markets for consumer products and chemicals, a stronger yen and rising materials costs. Shiseido has fallen 23 percent this year, while Kao has dropped 29 percent and Kose 6.5 percent.
    “Cosmetics aren’t generally affected by economic ups and downs but it’s difficult for them to avoid the recession and the impact of the strong yen,” said Hiroyuki Suzuki, a consumer analyst at Mizuho Investors Securities Co.
    Rising Yen
    The yen surged 23 percent last year, the best performer of the 16 major currencies tracked by Bloomberg. Sales overseas comprise 38 percent of Shiseido’s revenue and 28 percent for Kao.
    “Compared with exporters, earnings at Japanese companies relying on domestic demand and consumer goods aren’t that bad,” said Naoki Fujiwara, chief fund manager at Shinkin Asset Management Co. in Tokyo, which oversees about $6.1 billion. “If the economy were to worsen, cosmetics and food would feel the effects.” He wouldn’t say if Shinkin holds Japanese cosmetic companies.
    Taniuchi started using Shiseido’s Synergique on her sister’s recommendation. She prepares her own lunches and reads magazines at libraries so she can continue to buy the cream. She said she’s also stopped splurging on handbags made by PPR SA’s Gucci Group or LVMH Moet Hennessy Louis Vuitton SA.
    “My appearance is a good investment even when times are very tough,” she said. “People who take care of themselves daily will be ahead of those who don’t.”



    http://www.bloomberg.com/apps/news?p...w80&refer=home
    "There's one way to find out if a man is honest-ask him. If he says 'yes,' you know he is a crook." Groucho Marx


 

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