TOKYO—Kao Corp., a leading name in Japan’s health and beauty industry, is taking a bold step to revitalize its hair care division by introducing a premium product line. Faced with increasing competition from emerging brands, the company is shifting its focus from its well-known mass-market offerings to high-end products.
Kao announced Thursday that its new luxury hair care brand, The Answer, will hit stores on November 2. The shampoo and conditioner, each priced at 1,760 yen ($12), will cost nearly double the company’s standard hair care products.
“This brand represents the ‘answer’ to over 100 years of hair care research,” said Satoshi Nohara, Kao’s hair care division brand manager, during a press conference in Tokyo.
The company claims a breakthrough in its technology, which allows high concentrations of five key ingredients to be combined in a way that enhances moisture and manageability. The resulting product reportedly mimics the texture of a beauty serum but works into a lather, aimed at repairing damaged hair. The Answer will be available both in stores and online, primarily targeting consumers in their 30s and 40s.
A Shift in Japan’s Hair Care Market
The premium hair care segment—products priced at 1,400 yen or more—has been steadily growing in Japan. In 2023, this “high premium” segment accounted for 41% of the market for bath-time hair care products, such as shampoos and conditioners, a significant jump from just 16% in 2017.
New players have emerged, notably I-ne, whose Yolu hair care line sold over 10 million units in its first year following its 2021 debut. I-ne’s success was fueled by its innovative focus on night-time hair care and positive reviews on social media.
Despite these changes, premium hair care still represents only a small portion of Kao’s overall sales. The company’s flagship mass-market brand, Merit, saw its market share fall from 5.5% in 2016 to 4.9% in 2023, while I-ne’s Botanist line jumped from 1.8% to 4.8% over the same period, according to Euromonitor.
Kao’s Strategic Pivot
To regain market share, Kao made its first significant foray into the high-end segment in April. The company’s first premium product, melt, saw sales 2.7 times higher than forecast through September. The Answer marks the second installment in this premium line, with a third product scheduled for summer 2025.
Kao has set an ambitious goal of increasing premium hair care products to 30% of its total bath-time hair care sales by 2027. In parallel, the company will rebrand its mass-market lines, including Merit, to better compete with newer competitors.
Internally, Kao has restructured its operations to streamline the development of new products. Previously, brand creation took up to four years, but The Answer was developed in just 18 months under the new system, which brings together marketing, sales, design, and research departments in joint decision-making.
Challenges Ahead
Despite the growth in the high-end market, the segment is starting to show signs of slowing. “Consumers are becoming more critical about the effectiveness of each product as more brands enter the market,” said Mitsuko Miyasako, senior analyst at Mizuho Securities. She added that while the market is expected to continue expanding, “the number of consumers highly focused on hair care is reaching a saturation point.”
According to Miyasako, it will not be enough to rely on product quality alone. Brands will also need to effectively cultivate their image to stand out in an increasingly competitive market.
Broader Corporate Restructuring
Kao’s move into the premium market comes amid wider structural reforms. The company invested 54.7 billion yen in 2023 in various initiatives, including closing a diaper factory in China. Additionally, under pressure from activist shareholder Oasis Management, Kao has discontinued several cosmetic lines. As a result, the company expects to post its first net profit increase in six years for the fiscal year ending December.
Kao has also announced that it will narrow its domestic hair care offerings, reducing its product range from 11 to six by 2025.
With annual domestic hair care sales of roughly 50 billion yen, the company’s operating profit margin, which peaked at over 20%, has dipped to the high teens in recent years. Kao’s ability to succeed in the premium hair care market will be critical to reversing this trend and solidifying its position in the evolving landscape.
