Core Viewpoint - Japanese cosmetics companies are facing significant challenges in the Chinese market, with declining sales and profits, prompting a need for strategic transformation to regain market share and adapt to local consumer demands [2][3][14]. Group 1: Market Performance - Shiseido's sales in China fell by 10% in the first half of 2025, while Kose's business declined by 7.3%, and POLA's net profit dropped by 38% due to market weakness [3][10][13]. - The overall sales of Japanese cosmetics in China have been adversely affected by the rise of local brands and external factors such as the nuclear wastewater incident [3][4]. - In the first half of 2025, Shiseido's global sales were 469.83 billion yen (approximately 22.86 billion RMB), down 7.6% year-on-year, but core operating profit increased by 21.3% to 23.37 billion yen (approximately 1.14 billion RMB) [7][8]. Group 2: Strategic Adjustments - Japanese companies are focusing on high-end markets and localizing their operations to better meet consumer needs in China [16][22]. - Shiseido plans to integrate its China and travel retail operations into an independent profit center to enhance brand synergy and respond to the trend of high-end market penetration [16][32]. - Kose is implementing a strategy of channel optimization and brand restructuring, emphasizing high-end and mass-market segments while enhancing local R&D and marketing efforts [24][31]. Group 3: Future Outlook - Despite current challenges, Japanese companies remain optimistic about the long-term growth potential in the Chinese market and are accelerating their transformation efforts [16][32]. - The focus on high-quality growth rather than short-term sales boosts is evident in Shiseido's strategy, which includes significant investments in core brands and new product launches [18][32]. - The ability to adapt to local consumer preferences and integrate local insights into product development will be crucial for Japanese brands to maintain competitiveness in the evolving Chinese beauty market [27][32].

Core Insights - The beauty industry is facing a significant price war, with over 70% of brands expected to engage in price reductions between 2024 and 2025, including international brands initiating over 200 official discount promotions in 2024, with some products seeing discounts as high as 50% [2][5] - Kao Group emphasizes a strategy of providing high-value products at reasonable prices to meet the needs of young consumers, aiming to avoid the pitfalls of price wars [2][5] - The company is focusing on localizing product development in China, with plans to transfer production lines for mid-range products to China and launch unique products tailored to Chinese consumers [5][6] Industry Dynamics - The cosmetics market is currently in a "mixed battle" era, with online sales dominating at 64.23%, while offline channels are under pressure, leading many international giants to close stores and shift to a model focused on flagship stores and online sales [6][7] - Kao Group is implementing a "slimming" strategy by closing inefficient brands and reducing distribution inventory, while also increasing its budget for the European market by 20% in 2025 [6][7] - The company recognizes the importance of balancing online and offline channels, as offline stores provide unique customer touchpoints and service experiences that cannot be replaced [6][7]