Kao is a very large Japanese toiletry, cosmetics and chemical business listed on the Tokyo stock exchange. Many of its brands are household favourites, think Attack (laundry detergent) Kirei Kirei, Merries, Magiclean, Bioré or Kanebo cosmetics.
Kao has recently been going through some house cleaning of its own.
Many years ago it developed and entered the functional tea business with a brand named Healthya (ヘルシア）. Healthya’s USP is that it contains tea catechins helping loss of internal body fats. Kao spent millions of dollars on R&D getting the brand Tokuho (Foshu) certified.
Healthya was not a fly-by-night in the competitive beverage sector. It survived and grew in a category where the average life span is measured in weeks never mind months.
Cumulative sales of Healthya exceeded 3 billion bottles. At one point there was even a Healthya RTD coffee offer.
Management even developed a special category in Kao’s financial reports to cover Healthya. Its name? Lifecare.
I once visited Kao’s R&D centre in Tokyo with some clients and received a full low down on the brand story. It was impressive.
This February Kao announced it is exiting Lifecare and selling the Healthya brand to semi-rival Kirin. (Kao is also exiting its pet litter business too incidentally)
I say semi-rival as Kirin and Kao have been cooperating since 2022, according to news reports.
Kao’s life care division profits have fallen four years in a row. Against a backdrop of rising ingredient prices for its mainstay laundry business plus declining volumes in nappies (diapers), management decided that focus is required.
I am not against focus. It is something we often to say to clients. Kao is much stronger in drug stores, supermarkets and home centres than CVS, which is the most important channel for on-the-go beverages. Kao also lacks vending machines, unlike Kirin.
What is surprising is there is no mention of Healthya’s sales price. Note both Kao and Kirin are publicly listed companies.
Was there a competitive bidding process? The lifecare division sales were JPY 56 billion or US$373m, so we are not talking small change.
Personally I think Healthya could be sold outside Japan. Can Kirin do that? Not really their success internationally is patchy to say the least.
Whilst Kirin’s credentials in beverages are strong, it is not the most powerful player in tea. Itoen is bigger for example and Coca Cola is very aggressive in this category too.
According to news reports, Kirin will relaunch Healthya this August.
Will they stick with the catechin USP?
This jury is out.