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Business trends

Demand for 'Made in Japan' upends strategies for consumer goods

Cosmetics, diaper and snack makers pour fresh resources into Japanese factories

Clockwise from top left: Calbee potato chips, Shiseido make-up, Unicharm diapers and Kose cosmetics.
Clockwise from top left: Calbee potato chips, Shiseido make-up, Unicharm diapers and Kose cosmetics.

TOKYO -- Japanese consumer goods companies are increasing investment in factories at home, with an eye to exporting to China and other Asian markets where "Made in Japan" products have cachet.

The trend marks a major shift in strategy for household goods producers, whose focus had always been Japanese customers. It also breaks with the textbook approach to overseas expansion, where establishing local production and securing distribution channels were usually the first steps.

Cosmetics maker Shiseido will spend 140 billion yen ($1.23 billion) by 2022 to expand domestic production capacity -- a 45 billion yen increase from previous plans for spending through 2020.

By 2021, the company intends to build an addition to its Kakegawa plant southwest of Tokyo that makes lipsticks and eye shadows, and will cancel the planned closure of an Osaka factory whose products include skin toner.

Shiseido is on course to log its highest-ever operating profit and sales in 2018, thanks in part to purchases by tourists visiting Japan.

The company plans to open new Japanese plants for the first time in over three decades -- one north of Tokyo in 2019 and the other in an Osaka suburb the following year. But production capacity is still expected to fall short of demand, so it is earmarking additional investments which will lift its global capacity by 80%.

Cosmetics rival Kose's skin care unit Albion plans a 10 billion yen upgrade to a Tokyo area plant by 2020. The brand is popular among Chinese tourists -- an estimated one-fifth of Albion's fiscal 2017 sales of 68 billion yen came from visitors to Japan.

The large-scale investments by Shiseido and Kose show how health and beauty items, a domestic-market-focused sector once thought to have little in common with export-driven industries like automobiles, are emerging as a new face of Made in Japan.

Diaper maker Unicharm is gearing up to open a plant near Fukuoka in the spring, marking its first new domestic factory in 26 years. The facility will become a hub for diaper exports to China, given the southwestern region's proximity to the Asian mainland.

The rise of cross-border e-commerce has been a boon to Japanese consumer goods makers, allowing them to reach customers abroad through shopping sites like those operated by China's Alibaba Group Holding. This allows them to penetrate a deep market without having to spend money to establish their own local factories or sales channels.

Visitors to Japan reached a fifth-straight annual record in 2017, climbing 19% on the year to 28.69 million. Cosmetics and daily essentials accounted for 40% of the 1.64 trillion yen they spent shopping.

Tourists tend to continue buying Japanese products online after they return home, a trend that boosts capital spending and employment in Japan.

Snack makers like Calbee and Meiji Holdings are also raising capital spending in Japan with the goal of increasing exports to greater Asia. Meiji will expand its capacity to make products including baby formula.

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