A deep-dive into the thriving world of J-Beauty, exploring how Picaso Cosmetic Laboratory has leveraged its ODM prowess to counter regional competitors and aims to become a global phenomenon.
In the last 30 years, Japan has seen the rise of regional competitors who have been able to replicate the Japanese model of success. This is especially true in cosmetics. The biggest rival to J-Beauty is K-Beauty from Korea, which has gained momentum in recent years due to the increased popularity of Korean culture. Despite this, Japanese firms are still leaders in the cosmetics field. How have Japanese cosmetic firms been able to maintain leadership despite the stiff regional competition? What strengths do you think best define Picaso Cosmetic Laboratory?
Our ODM business accounts for 90% of the total business. At this moment, we have about 300 clients in the cosmetics industry who have their own brands and sell their own products to both the domestic and overseas markets. Speaking on how OEM makers were able to grow in the past 20-30 years, I think it comes down to the diversified needs of users in the cosmetics market. They have so many different ideas, concepts, and preferences for cosmetic products and services. I personally have worked for the ODM and OEM business for cosmetics for more than 40 years now.
Looking back 40 years ago, the cosmetic industry had high brands like Shiseido and other foreign brands that had strong positions in this industry. But around that time, there was a lawsuit in Osaka about cosmetics; I believe it was a person that had skin trouble and they were claiming it was due to the use of cosmetics. That lawsuit had a big impact on the industry as a whole. We supply skincare products that are supposed to clean your skin, but in fact, some were causing trouble for some customers’ skin instead. Consumers then started stating their rights to know every ingredient used for cosmetic products, and manufacturers were forced to list every ingredient thanks to this mounting pressure as well as pressure from foreign markets. This event caused makers to start marketing their products based on the ingredients contained within rather than the actual brands. Users also started choosing cosmetics products by the ingredients and textures rather than the brands. Basically, the standards that consumers used to choose their products changed.
One example can be seen with FANCL, a cosmetics maker that started marketing its products based on the idea that its cosmetics were free from additives. They grew very fast and started diversifying their business into health care as well as nutritional supplements.
The mandates for cosmetic products are safety and a sense of security when users use them. Additionally, you have importance on texture and functionality. Out of our 300 clients, more than half of them use a mail order system. Others have different channels like a variety of shops, pharmacies, and beauty salons, with these B2B customers having distribution channels. In terms of B2B, we are trying to listen to the needs of the clients and target customers. We propose products and services that are aligned with the particular channels for these target customers.
For mail orders, many customers are now requesting anti-wrinkle types of skin care products and these customers tend to be in their late 50s all the way up to their 70s. On the other hand, cleansing balms are also booming and this kind of product is designed for those that want to care for the pores on their skin. This target population is in their 30s to 40s. For skin care products, it is important that we understand the customer’s needs as well as the target population. We must find the functionality that works for those targeted customers and then find the best channel to sell to them. That is the main focus of our ODM business.
Speaking about the functionality and the texture of our products, we sometimes collaborate with cosmetic ingredient makers or purchase chemicals from them so that we can meet the specific needs of cosmetics products that could make your skin brighter or have anti-aging properties. We are essentially trying to bring about the best solution for the market. With the mail order system, they do not just order basic products, with many being tailored to specific problems. Our mission is to find the best functionality for hair, skin, and breath care so that we can help our clients grow even further with the high-value-added products they sell.
We constantly participate in exhibitions both domestically and overseas, and at these exhibitions recently we have been advertising our new proposals for new skincare products like natural emulsion through a pamphlet that we give out. The population of Japan is declining and that means that the domestic market is shrinking, and for this exact reason, we have shifted our focus to the overseas markets. China in particular is a big focus for our company.
In China, the market size is huge, but it is rather difficult to get certification to sell products through official routes. To launch any product in China, you have to have approval from the authorities and the only way to get this is through disclosing ingredients, formulation, and product intent. China is seen as an attractive market in the cosmetic industry, so around the globe, companies are paying attention. However, when you look into the current Chinese market, we do see the rise of domestic brands, with Chinese companies gaining a lot of technology and know-how. That means that products that are made in Japan or Korea are not easily sold there. Unless we meet local demands for quality, texture, and functionality, we cannot sell products in the Chinese market very well. In our headquarters, we have an R&D team that is specialized in the Chinese market and we also have an R&D team in Shanghai too. In the Chinese market, we have overcome a high hurdle and proposed products that can sell well, and through this endeavour, we have acquired Chinese customers.
In China, not only do luxury products sell well, but there is also an expansion of the middle-class population, meaning there is room for growth. As for North America, we believe there is a market to tackle there. We have had a business relationship with a major global cosmetic company for some time now and this year we will participate in an exhibition in Las Vegas so that we can showcase our products. We have had B2B discussions with our clients at exhibitions like this before and we are able to provide those clients with evidence of safe products that can meet their preferences in terms of texture and functionality. Through these discussions, we can find the most optimal channel for sales of products. Our R&D team as well as our engineering and sales representatives are working as hard as they can with the clients to make all of this happen.
You mentioned your plans to exhibit your products in Las Vegas this year. When will this exhibition take place and is there a specific product that you plan to highlight at the event?
It starts July 10th, 2023, and we would like to showcase highly functional skincare products and base makeup products to the American market.
Cosmetic companies have to put out a range of products to cater to different skin types. You have talked about how you are catering your products to Asian skin, but how are you adapting your products to suit American skin?
Basically, Japan has very advanced technology for producing skincare products. Take for example a company that manufactures mixers for emulsions. They produce equipment for making moisturizers, which can be very diverse based on the type of moisturizer you want to produce. We found that people in the American market really care about sensitive skincare products such as creams that work against UV light. The products for UV care are mostly over-the-counter (OTC) products, but when you propose any skincare products for UV, it is important to combine them with the functionality of anti-aging.
We have been providing cleansing oil for a major brand globally for a long time now, and recently we have also proposed a foundation for that brand too. Speaking about moisturizers, I think that the technology in Japan is quite advanced so I believe that some moisturizers produced in Japan can be proposed for the American market, as well as amino acid-based moisturizers.
One trend we are seeing when it comes to the development of cosmetics today is the advent of cell programming; firms are programming cells to produce innovative and sustainable beauty ingredients through fermentation. As a company that is experienced in the cosmetic field, what are your thoughts on cell programming in the cosmetics industry, and in the future, do you believe it will play a key role in beauty manufacturing?
I am not quite familiar with cell programming, but I think speaking about the logic of aging, there is a part of our bodies called Keratinocytes and the DNA is in it. Once that DNA is damaged by UVs or something else, the DNA makes an error and aging occurs. We are trying to find an ingredient to repair that error and incorporate it into our cosmetic products to stop aging. We are currently researching those ingredients in Europe and we have also started conducting clinical tests both in Japan and overseas so that we may attach proven evidence to our products.
When you talk about cell programming my mind goes to stem cells and we are already using those in some of our products. We are producing some products with stem cells but not cultured in our lab.
Imagine that we come back and have this interview all over again in 5 years' time. What goals do you hope to have achieved by then?
We simply want to be a more global company, and part of achieving that lies in the exhibition I mentioned that is happening in Las Vegas. Taking advantage of this event will allow us to permeate America as well as China. Currently, we are an Asian ODM maker but really, we want to be a global ODM maker, that is the goal.
Interview conducted by Karune Walker & Ana Ruiz