This transcript delves into the world of Japanese beauty brands, with a focus on Logic Co. Ltd. It highlights their distinctive approach to skincare and cosmetics, their challenges and opportunities in a changing demographic landscape, and their strategies in response to global trends like the COVID-19 pandemic. The interview also discusses their dedication to using natural and organic ingredients and their collaborations with local partners. The conversation concludes with insights into Logic Co. Ltd's future goals and ambitions.
In recent years, Asia's cosmetic field has been dominated by Korea, and this shines thanks to its strong marketing cost efficiency and multistep process. In contrast, Japanese companies believe that less is more. What are the advantages of the J-beauty brands, and how do they compare to regional competitors such as Korea?
The competitiveness of J-beauty brands is rooted in their diligence and dedication to accumulating carefully developed technologies and their relentless pursuit of perfection. We can take pride in the fact that the Japanese people's inherent characteristic of being meticulous and paying keen attention to detail is reflected in their cosmetic products.
In the next 15 years, one in three people is expected to be over the age of 60. This leads to a labor shortage and a shrinking domestic market, but this also creates an opportunity for beauty and cosmetic brands to cater to a new, older customer segment that generally has more financial means. What are some of the challenges and opportunities this demographic shift presents to Logic?
Securing laborers for our factories poses a significant challenge, particularly in the face of a noticeable trend toward an aging population in our region. The recruitment of female workers in their 30s or 40s, especially for large commercial facilities, remains an ongoing struggle. Unlike larger companies such as Nihon Kolmar, which has integrated numerous automated processes, our production facility still relies heavily on manual tasks. However, the current demographic situation makes it difficult to attract an adequate workforce.
One contributing factor to the difficulty in securing female workers is their struggle to sustain employment while juggling responsibilities like raising children and caring for aging parents. In response, we have implemented a support system specifically tailored to these female workers' needs. Remarkably, 90% of our employees are female, and we are committed to cultivating an environment that enables them to work comfortably.
Our comprehensive support extends to helping employees fulfill their family responsibilities, such as picking up children from school, attending school events, and even allowing them to bring their children to the office during commutes. Overcoming the challenges posed by the COVID-19 pandemic was undoubtedly tough for us, but we persevered through those hardships.
In contrast to Europe, where governments strongly support working parents, such support in Japan remains somewhat insufficient at present.
The global cosmetic industry underwent a transformative period during the COVID-19 pandemic. Sales of cosmetic products, such as eyeliners and bases, declined as people were forced to stay home. In contrast, there was a surge in demand for dermatology solutions, particularly skincare products, as individuals sought self-care treatments. The implementation of stay-at-home measures also led to the proliferation of e-commerce platforms, and many brands, particularly smaller companies with a singular product focus, transitioned exclusively to online platforms. How did your company react to these two big trends of the COVID-19 pandemic, which are the increase in skin care solutions and the rise of e-commerce and digital platforms?
Due to the rapid spread of the new coronavirus, there was a significant increase in demand from various industries such as schools, beauty salons, and barber shops, leading to a major challenge in the production of sterilizing solutions. While beauty salons and barber shops continued to operate during the pandemic, they struggled to find appropriate hygiene management systems through traditional channels like pharmacies. Our company had previously manufactured antiseptic solutions for beauty salons, which attracted attention, and we received requests for antiseptic solution production from schools, kindergartens, sports facilities, and almost all public facilities. In order to meet this demand, our factory operated without a break. Although orders for skincare and cosmetics decreased, the production of antiseptic solutions remained strong.
After the pandemic, there has been a noticeable change in women's preferences for beauty. Currently, there is a greater emphasis on skincare over a wide range of makeup. In response to this shift in beauty consciousness, we have once again placed a strong emphasis on collaborative research with Joint research with researchers and specialists in various fields. We are dedicated to discovering the ideal ingredients for our products and exploring their effects on the skin.
We are collaborating with "Rakuho" the operator of the Alley brand, which specializes in organic skincare soaps, and "Hand in Hand," the operator of the Le Bois brand, which specializes in aging care creams. We are dedicated to discovering the ideal ingredients for our products and exploring their effects on the skin.
The market for natural and organic cosmetics is growing steadily. According to the report of Grand View Research, the market size was valued at USD 12.9 billion in 2020, and it’s expected to reach USD 25.1 billion by 2025. Many customers prefer products that are free from synthetic chemicals. Logic is also keeping up with this global trend through its involvement with notable partnerships, including your collaboration with Rakuho, which operates the Alley brand for organic skincare soap, a special aging cream with Le Bois. What solution is your company developing to leverage this trend for organic and natural products?
We have consistently emphasized small lots, high-mix production, and the creation of high-added-value products. To achieve these objectives, we have continuously explored organic and plant-based ingredients, prioritizing materials that genuinely benefit the skin. Our dedication extends to sourcing raw materials with proven efficacy on the skin, and we actively seek originality in terms of ingredients and materials.
In pursuit of this goal, we collect trees from a mountain in Kyoto. These trees undergo meticulous grinding and processing using manual extraction techniques to derive valuable ingredients. Our current focus lies in developing innovative products utilizing these naturally extracted ingredients sourced from trees.
How long does it take you to collect organic raw materials and manually process them?
We are cooperating with local volunteers to harvest trees such as persimmon and cedar in the mountains, as well as gathering tea leaves. This collaborative effort typically takes several days. The entire process, from harvesting to ingredient extraction, is completed in approximately one week.
Transdermal delivery, where the product can directly permeate through the user’s skin pores, is one of the most important factors for efficacy in skincare and dermatology solutions. How do you ensure the efficacy of your products and that these natural ingredients are efficiently transported through the pores?
The critical factor lies in the combination of these various ingredients. For instance, different types of oils possess distinct abilities to permeate or transfer into the skin. Researchers focus on leveraging the structural properties of these diverse ingredients to devise the most optimal formulation. Additionally, our technology allows us to reduce molecules to the nano level using specialized machines, enhancing the efficiency of transferring these ingredients into the skin.
While the market for male cosmetics remains relatively underdeveloped, a few brands offer male-focused products that are different from what women may consume. However, it is still one of the fastest-growing segments in the cosmetic field, specifically in markets such as the European Union and South Korea. Do you have any particular products targeting male customers? Is that something that you have in mind in your strategy?
We proudly present Face On, a revolutionary brand of shaving cream. Traditionally, soap has been the go-to choice for shaving, often resulting in skin problems and irritation. We stand out as the pioneering company that successfully merged shaving with skincare. Our shaving cream has gained recognition without any formal marketing initiatives. The positive reputation has been spread by the researchers who developed it, resulting in consistent monthly orders for this groundbreaking product.
Logic's diverse lineup features a wide range of OEM products. You developed products that capture the essence of Kyoto's four seasons, with hand creams, anti-aging creams, face washes and lip creams. With such a wide selection of beauty products, which one would you reckon to have the most potential for business growth?
Over the past seven to eight years, our primary focus has been on researching a unique ingredient found in certain plants native to Japan. Collaborating with universities and their pharmaceutical departments has been integral to this endeavor. Although this ingredient poses inherent challenges, our research has made significant strides, especially in the past year. The research network has expanded with the involvement of more universities. While I cannot disclose all the details, there are plans to launch a product in the future utilizing this plant-based material. Looking ahead, we anticipate releasing full-fledged products one or two years from now. Some clinics are already selling similar products.
Your original brand, Deep Sleep Pillow Mist, Nen-ne, stands out. It is formulated with super high-grade Kyoto aroma oil and allows us to relax, sleep and prevent the odors from the pillow. How is it superior to similar products offered by competitors?
One of our distinctive features is using Kyoto-produced essential oils. In the future, we plan to further enhance our products by blending our own essential oils in-house. While we have been conducting blending in-house for some time, we aim to evolve by extracting essential oils in-house as well. The ability to perform in-house extraction is rare in the industry and remains a unique characteristic of our products.
Do you have plans to partner with any overseas companies moving forward?
For nearly two decades, we have fostered collaborations and provided OEM production services to overseas clients. Despite occasionally teaming up with larger companies due to our small size, we find immense enjoyment in collaborating with fellow small businesses. A notable example includes our collaboration with a Kyoto-based fiber maker to develop face masks. This innovative product was showcased at an exhibition held in West Africa.
Are you planning to target collaborations for new products in any particular markets?
Our business doesn't limit itself to a specific country or region; instead, we have a broad focus that extends to Southeast Asia and Dubai. This encompasses countries such as Thailand, Vietnam, Singapore, Hong Kong, China, and South Korea.
One of the challenges cosmetic brands face when going abroad is adapting to diverse skin types across populations, varying from oily to less oily. Environmental factors, including shifts from humid to dry climates, further add complexity. Moreover, consumer preferences and beauty standards exhibit notable variations from one country to another. How do you tailor your offerings to these particular geographic demands?
As a small company, we highly prioritize face-to-face communication in specific local markets to gain insights into people's unique skin types and preferences. Internet research also helps us in the formulation of our products. Our commitment is reflected in the numerous trials we conduct. For instance, variations in water types across different countries, compared to Japan, necessitate adjustments to product designs. We spare no effort in thoroughly researching these specific differences to ensure our products meet the unique needs of each market.
Your company combines OEM services, where you act as a contract manufacturer for other companies, with your own brand of products that you have developed and market yourselves. What advantages does having this understanding of the B2B and B2C sides bring to your company? In the context of your international expansion, which of these two strategies, OEM or direct brands, will you be looking to promote?
We have consistently been, and remain, a manufacturing or monozukuri company, catering to both our brands and OEM manufacturing. Our focus has always been elevating our development, manufacturing, and technological capabilities. Our goal for these two business areas has been the advancement of our in-house technology. While our passion lies in monozukuri, we recognize our limitations in product marketing. As a result, we strategically collaborate with companies that excel in marketing to effectively promote and sell our products.
Imagine that we come back in seven years, in 2030, for your 50th anniversary. Are there any goals or ambitions you would like to achieve by then?
I want to create a dining hall and nursing care facility for children within our company.