TOKYO -- Kao will spend around 10 billion yen ($85.1 million) to build a factory in Indonesia to produce raw materials for such items as shampoo, as it prepares to meet rising demand for high-quality Japanese consumables in Southeast Asia.
The consumer products maker plans to court Southeast Asia's growing middle-class market by producing goods with the same quality standards as in Japan. The new factory in Sumatra will have an annual production capacity of 100,000 tons. Kao will produce fatty acids using palm oil from Apical Group, a local producer and distributor of oils, to create such consumer products as detergent, shampoo and face wash.
Kao domestically produces fatty acids in Wakayama Prefecture, and once the Indonesian plant comes online in 2019, its global output capacity will increase by 130%. The company will raise the proportion of self-procured fatty acids to 60% from its current less than half.
The fatty acids produced will be supplied to Kao factories creating the final goods in such countries as Thailand, Indonesia and Vietnam. Although the company currently procures fatty acids locally, it decided to make its own to better cope with rising demand. The company expects sales of consumables to grow in Southeast Asian countries like Indonesia and the Philippines as middle-class incomes rise.
Major competitors including U.S. consumer goods giant Procter & Gamble and Anglo-Dutch conglomerate Unilever are expanding sales in Southeast Asia. Kao is positioning itself to snap up market share by offering high-quality goods made locally.