Below is the transcript of a CNBC interview with Masahiko Uotani, CEO, Shiseido. The interview was first broadcast on CNBC's Squawk Box Asia on 14 September 2018.
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Interviewed by CNBC's Amanda Drury
Amanda Drury (Mandy): As I mentioned before, it is a 1,046 year old company but it certainly has been getting a facelift under their CEO Masahiko Uotani who is sitting here with me in the Singapore Summit. Great to have you with us, Uotani-san.
Masahiko Uotani (Uotani): Very nice to meet you.
Mandy: Thank you.
Uotani: Thank you.
Mandy: Let's talk first of all about your 6 year plan, your Vision 2020 plan. How are you ahead of target on that? What are you doing right?
Uotani: When we set up Vision 2020 6 year plan, we had an almost 10 billion sales and operating profit goal, which we already achieved a few years ahead of plan. Our operating profit target of nearly 1 billion dollars is going to be achieved this year, two years ahead of the plan.
Mandy: One of the things about your Vision 2020 plan is the changing face of the consumer. In the olden days, you would walk into a department store, sit down and someone would come up and try some makeup on you. Young people, like myself even, shop online. They don't want to do that. So you're trying to customize and also go online, how do you do that?
Uotani: In order to get there, you need a new system, I would say, marketing system. Hence, we have been acquiring new technologies. These are technologies that can maybe get us connected to consumers faster. We have to build a new brand with new services that offer more personalization. What you are talking about is a more mass approach. So we are changing our marketing to be focused on personalization. So new technology, product development and the speed of development is completely different because young consumers look for something quickly and the way they communicate is completely different. They use social networks like Instagram and all other new ways of communication. And also, consumers are now talking to each other, that is the difference. It's not between company and consumer, it is companies who provide them with some information and they are the ones who are going to talk about it, they are the ones who are going to decide which appeals to them.
Mandy: You've invested in three startups that focus on new technologies such as artificial skin, A.I. All kinds of things. So essentially, in a virtual world, you can try on the make up before you buy it. How much did you spend on those three startups and when do you feel those investments will pay off?
Uotani: Well, it is not a huge investment because we acquired startup companies compared to a big existing brand. What we want are patents and the people, the entrepreneurs, not people working for big corporations. So by bringing them into our organization, we create a new culture. We are really learning a lot from them as we work together so it is a win-win. The company we bought in Silicon Valley is getting us new ways to look at consumers and providing them with new services. It is still under-development. It will take some time, we understand that. We don't expect a short term return.
Mandy: But you're not the only makeup company that is out there scouring the globe for opportunities, R&D staff, people who have expertise in A.I. and data mining, and for startups like the one you bought. There are big companies like L'Oreal and Estee lauder who are also competing in this space. Is it getting pricier and pricier to be able to acquire the staff with the expertise and to be able to acquire the targets as well?
Uotani: Oh yes certainly. Everybody is looking at new fronts. So, we are in competition. But new companies startup companies usually do not come with values. What is important is to combine what they have with our expertise, which we have built for many years, and create new synergies. Therefore, we have sent our people from Tokyo to work with them in San Francisco and Boston.
Mandy: I want to talk about China in a moment but I can't flip over the artificial skin technology. When will that be commercialized and what other applications they have beyond the beauty industry?
Uotani: I see that the market now is emerging from a traditional cosmetic market going into a more surgery or plastic surgery. We are trying to create a new category in between. So it's a solution for people who suffer from spots and wrinkles that don't require any surgery, only simple application of products, serums on your skin. It will take some time but we hope it is going to be commercialized soon.
Mandy: You are selling on like Tmall, you're investing big in China, you're putting staff on the ground there in Hangzhou, the HQ of Alibaba. So you're really hoping that Chinese consumers will latch on to J brands, made in Japan cosmetics. Have you at all been impacted negatively by the U.S.-China trade tensions?
Uotani: No, so far no. The increase of tariffs on trade doesn't really impact us negatively.
Mandy: And lastly, manufacturing in Japan. What's the sentiment on the ground there?
Uotani: Well I think made in Japan is part of the brand value for the consumers. It stands for safety, innovation and attention to details. So consumers, particularly in China, Asia, even now in the U.S. and Europe, know quality coming out of Japan and that is something they are preferring. So we see that as a competitive advantage.
Mandy: Masahiko Uotani, thank you very much for joining us.
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