Kao wants to become a global player but the big question is how?

If you live in Japan, you almost certainly know Kao 花王

It’s one of the country’s largest FMCG manufacturers marketing a plethora of brands in Cosmetics, Skin & Hair care, Health beverages, Fabric and Home care as well as a Chemicals division.

The problem for Kao is that 70% of its revenues come from Japan, a market that has a falling birth rate and one of the heaviest proportion of seniors worldwide.

Last year Kao’s revenues declined 8%

Kao’s management have been talking up their K25 vision, accelerating global sales, growing digital and establishing a medical business. It’s fine talk but the question that lingers is ‘how?’

Kao K25: source company website

Besides Japan, Kao’s biggest international presence is in SE Asia, especially Thailand and Indonesia. To really make a big presence internationally it needs to grow dramatically in North America and/or Europe, where its presence is weak.

Like many Japanese corporates, Kao has eschewed M&A. It has only acquired 2 businesses in the last 5 years and its largest acquisition was Moulton Brown, for $262m in 2005.

Compare that to Unilever which has acquired 21 companies in the last 5 years or P&G whose biggest acquisition was Gillette for $57bn.

Kao’s investors might want to start by looking at the Board of Directors. They’re almost all male and I can only see one non-Japanese.

Investors do not seem convinced by Kao’s efforts so far. The stock price has declined by 27% over the last year. There have been problems rolling out its D2C ecommerce platforms; cost of goods are also rising in its home market and the company is not accustomed to making price increases.

Perhaps Management could start by drawing on one of their own brands for inspiration? Attack!

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