Kao Corp. (4452.T), the biggest maker of toiletries in Japan, has been laid far behind by US consumer goods giant Procter & Gamble (P&G) in the Chinese mainland.
It entered the market in August 1993, but always suffered a loss-making operation there. In line with people in the circle, it sold products in first-tier Chinese cities only and to be definite, it knew little about operation of the non-modern circulation channels there. And because of this, it once saw annual sales reach USD 10.4 billion globally, but only 2.9 percent of the total was from the market. P&G also has stepped into the market for 20 years, but witnessed annual sales there hit about USD 6 billion.
It still carries out a career-long employment mechanism and in line with some industry observers, this is a feature of its culture, but should be largely responsible for its poor performance in the market. The mechanism helps it much in R&D, but little in decision making. In addition, there is a severe disjunction between its corporate brand and product brands. It has a list of products, with target consumers covering people at almost all ages. Under such an environment, a large part of its marketing resources is wasted at the end. Notably, it always keeps a conservative attitude towards launching advertising. In the opinion of it, advertising will be launched as long as the distribution rate reaches a standard. However, this directly causes its brand awareness to be low and because of this, dealers there are not willing to cooperate with it in a large scale. Of course, the distribution rate will not be high.
Actually, it has made some changes and for instance, it signed a sales cooperative agreement with Shanghai Jahwa United Co., Ltd. (SHSE: 600315), a leading homegrown Chinese daily chemical maker, in November 2011. And under terms of the agreement, the Shanghai-listed firm became the sole agent of it in the market. Both sides mainly cooperated in east China, including Jiangsu Province and Zhejiang Province, later and driven by this, it had forayed into 150 cities there by the end of last year.
Chairman of Kao (China) Holding Co., Ltd. said that it planned to raise the sales from household goods in the market to about CNY 3 billion in 2015 from currently about CNY 900 million. This was actually a part of a three-year goal of it and according to the goal, it would see sales globally rise to JPY 1.4 trillion by the end of 2015.
