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Contents About KOSÉ Statement of Purpose 2 Our History Th e Path of Value Creation 4 Our Vision 2026 Our Philosophy Create a culture and values 6 Our Business embodying a distinctive beauty through Unique Brands with Value 8 Our Value a sophisticated fusion of Value Creation Process Wisdom and Beauty sensuousness and intelligence. 10 CSR Activities 12 Financial Highlights and for People and the Earth Non-Financial Highlights Behavioral Charter Strategies for Sustainable Growth Since its foundation in 1946, KOSÉ has focused on the creation of beauty, 14 Interview with the President mainly through cosmetics. KOSÉ combines wisdom, a unique tradition and innovation to Mind to Follow the Right Path 20 Special Feature/KOSÉ Group’s Overseas Strategy create a driving force for people and for the future of our precious Earth. Cornerstone of Value Creation 24 Brand Marketing 26 Research and Development 28 Commitment to Quality 30 Create an Environment that Allows People to Realize Th eir Full Potential 32 SAVE the BLUE Project 33 Eff orts to Promote Sports 34 Measures to Address Climate Change and Reduce Environmental Load 35 Activities with Suppliers and Retailers 36 CSR Activity Targets List Corporate Governance 38 Directors and Audit & Supervisory Board Members 40 Corporate Governance Financial Information 45 Six-Year Summary 46 Management’s Discussion and Analysis 52 Consolidated Financial Statements 60 Principal Subsidiaries 61 Corporate Information/Stock Information Editorial policy Forward-looking statements The report aims to provide stakeholders with a deeper understanding of our activities This report contains forward-looking statements about KOSÉ Corporation’s future plans, strategies, and performance that are not historical facts. Risks and by reporting not only financial information, but also non-financial information including uncertainties resulting from changes in the business environment may have a significant effect on the actual business results. Please also note that we shall not be held responsible for any omissions or errors in data and content in this document. our management policies, strategies and our approaches behind the scenes. Please refer to our website for information related to IR and CSR. 1 The Path of Value Creation Th e KOSÉ Corporation was founded in March 2, 1946. We have earned trust from our customers and partners since our founding during the chaos after the war by providing high-quality products at the right price. Even in a rapidly changing generation, the spirit of our roots continues to live on to this day as the foundation which shapes our company. VISION2020 VISION2026 Becoming a company with a global presence 1946–19691970–19901991–2006 2007–2010 2011–2014 2015–2017 2018– Foundation Growth Maturity Defensive Reforms Off ensive Reforms Toward a New Growth Stage KOBAYASHI UNLIMITED Continued introduction of innovative Introduction of CI, IPO, and PARTNERSHIP founded, delivering products, growth into a general strengthening of management Implementation V-Shaped Building and Upgrade Global high-quality cosmetics to market cosmetics manufacturer foundation of Management Turnaround Strengthening Brands and Reinforce Reforms Global Brands Customer Points of 1946.3.2 1970 1991 Contact Improved management effi ciency While continuing our “defensive Building on the results of our We will work to build and Kozaburo COSME Corporate Identity (CI) was introduced. by eliminating all waste through reforms” for improved reforms to date, we have been strengthen global brands, enhance Kobayashi founded DECORTE, a Th e corporate name was changed to the measures including the selection management effi ciency and a further accelerating growth to product competitiveness and KOBAYASHI dedicated luxury KOSÉ Corporation and the corporate of stores that sell KOSÉ products, corporate structure resilient become a company with a global increase profi tability as we raise UNLIMITED brand, was released logo was renewed. reducing product returns and to change, we conducted presence based on two new basic the presence and brand value of PARTNERSHIP to deliver the highest outsourcing logistics to strengthen “off ensive reforms” that improved strategies. our products in the markets of in Oji, Kitaku, quality of cosmetics management foundations. profi tability by refi ning the Asia, North America and Europe. Tokyo (restructured with the best service. strengths of existing brands. as KOBAYASHI KOSÉ COMPANY Raising the appeal of stores Strengthen mass-market Promote flagship global LIMITED in 1948). that sell KOSÉ products and businesses brands reducing product returns Maintain a brand 1975 1998 Streamlining the brand management structure portfolio and minimizing Launched industry’s fi rst beauty serum, ALPHARD Th e Gunma Factory acquired ISO9002 1963 stock keeping units R.C LIQUID. FIT ON released the following year. Th e (quality) certifi cation. A technological categories of “beauty serum” and “powder foundation” alliance was were launched. established with 2009 2014 2016 L’Orèal of France to start our salon 2000 Th e SAVE the BLUE environmental Tarte, Inc., a cosmetics company Sales of DECORTÉ began in North conservation project started. in the United States, became a America. business (the joint- KOSÉ became listed on the first subsidiary of KOSÉ. venture contract section of the Tokyo Stock Exchange ended in 2001). one year after its initial public 2017 offering. A new manufacturing facility was 1980 opened in Gunma Factory and 1964 Our production started operation as a mother factory. headquarters received Opened research center France Th e Sayama Factory the fi rst Deming Prize branch in Lyon, fi rst research facility opened in Sayama Net Sales in the industry for in Europe. City, Saitama. for fiscal 2017 the introduction of Th e premises was modern quality 109,091m2, which ¥303.3 billion management boasted the largest methods. cosmetics factory in Asia. 2004 Established a research laboratory in Kita- 1985 ku, Tokyo, and developed new research structure. 1968 SEKKISEI, which combined Japanese Sales began in Hong and Chinese herbal Kong, which is 2006 extracts, was released. our fi rst entry into More than 56 million KOSÉ entered into offi cial partner overseas markets, and units have been sold agreements with the Japan Skating expanded with focus up until now. Federation and the Japan Artistic on Southeast Asia Swimming Team. thereafter. Our History 2 3 A company that creates a diverse array of brands and human resources that can succeed worldwide Research and Development KOSÉ is pursuing the enhancement of R&D A company dedicated to being capabilities backed by leading-edge science to a source of beauty for everyone produce many innovative new products. Th e driving force is the creation of a self-suffi cient organization unique to KOSÉ that draws on its employees’ pioneering eff orts and ideas. Our Vision Our 2026 Strength BBecomeecome a CCompanyompany wwithith a GGloballobal PPresenceresence Three Strengths to UnUnderdder VIVVISION2026,SION20202626, itsiitts medium-medid umm- to long-termlong-term vision,vision, KOSÉKOSÉ aims toto becomebecome Create the KOSÉ of Tomorrow a cocompanyompmpanny thtthatat ccreatesreeata es a ddiverseiverrses aarrayrray of brands and human resourcresourceses that cacann sussucceeducceed wowworldwide;rllddwidi e;; a pplacellace wwherehere ppeopleeople araree prproudoud to wwork;ork; aandnd a comcompanypany thtthathata uusesses foforesightresiighght foforr cocconstantnstantn crecreation.ation. Commitment to Quality A company that constantly attracts more customers and Since its founding, KOSÉ has been passionate is a place where people are about creating the fi nest cosmetics, with proud to work stringent quality control from raw material procurement to manufacturing. As a result of factors including its activities to improve quality Unique Brand Marketing from the customer’s point of view and its quality A company that uses assurance system, KOSÉ is recognized worldwide foresight for the constant KOSÉ’s viewpoint extends beyond the short term for the quality it off ers. creation of innovative value to embrace brand development with a long-term perspective that includes bold innovations. As a result, it has many long-selling brands despite being in the cosmetics market, which is constantly undergoing drastic changes. 4 5 Unique Brands with Value “Sensuousness” and “intelligence” are the two key words that drive the creation of attractive, valuable brands at KOSÉ. We take our research—based on leading scientifi c discoveries—and develop cosmetics that meet our customers’ wants and needs. To anticipate the diverse needs of customers and to build brands, KOSÉ focuses on not only products, but also distribution and communication. Our brands are divided into two major categories: the KOSÉ brand, a brand that has the company’s name on Our Business it; and the individual brands, which represent a wide variety of highly original brands. IGH-PRESTIGE Individual Brands H Brands ALBION CO., LTD. The Highest Levels of Cosmetics Business Quality and Service High Added Value A group of top-quality brands developed by integrating all of KOSÉ’s cutting-edge technologies. They are sold mainly at specialty cosmetics stores and department stores that distribute exclusive brands. KOSÉ’s specially trained beauty staff offer meticulous counseling, including skin diagnosis, to help each customer select the most suited products. CRIE Dr. PHIL KOSÉ CO., LTD. COSMETICS PROVISION RESTIGE INC. CO., LTD. P Brands