zHello.
I’m Shinzo Maeda, President of
　April 3, 2008
Three -Year Plan
Three-Year
(April 2008 – March 2011)
Shiseido Co., Ltd.
Shinzo Maeda
President & CEO
Shiseido Co., Ltd.
zFirst, we will look back briefly at Shiseido’s
path up to three years ago.
Shiseido: The Path to the Present
Shiseido.
zFirst of all, I would like to thank you all
for making time in your busy schedules
to attend today’s presentation.
zThree years ago, we made the
declaration to “break down and rebuild
the company.” Since then, Shiseido’s
employees have responded well to a
series of tough reforms.
zI sense that Shiseido has made a huge
transformation into an effective company
with enormous sustainable growth
“potential” as a global corporation.
However, this is only the starting line.
We have now reached the next stage,
which will test the “true value” of the
reforms as we realize this “potential.”
 zUntil the 1970s, Shiseido’s performance
in the domestic market improved year by
year as it rode the wave of Japan’s rapid
economic growth. Greatly contributing to
such growth was a network of “voluntary
Domestic Cosmetics Business: Sales Trends chain stores” contracted to sell Shiseido
products. The network was established in
(Billions of yen) the 1950s and based on the “resale system.”
500
This period up to the 1970s was
Shiseido’s first growth phase.
First growth phase
⇒Domestic growth zFrom the early 1980s, there was a
pronounced diversification in consumer
preferences and buying patterns. In
response, we wasted no time in
diversifying our sales channels and prices.
We also entered a long period of
stagnation when the economic downturn
occurred.
0
71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 （FY） zThe Japanese market had already entered
*Domestic Cosmetics Business: Sum of counseling cosmetics, self-selection cosmetics, and toiletries
a mature phase, and the Company fell into
a huge “negative spiral ”due to attempts to
overcome difficulties while patching up
antiquated systems.

Negative Spiral: Problem of Resale System

zIn order to overcome the slump in sales,
Sales stagnate we launched new brands and products in
rapid succession, and thinly spread our
Generate sales Shelf space investments and sales capabilities. The
from new products declines
Vicious cycle result was a decline in brand power, which
causes total led to worsening sales.
attrition
zIn fact, systems created during the age of
Develop and launch Core lines the “resale system” caused a vicious circle,
many new products Marketing spending lose power which was responsible for the Company’s
disperses total attrition.
Sales power
disperses
 Positioning of Previous Three-Year Plan
zShiseido decided it must eliminate this
Early 1980s Late 1980s－2004 2005－2007
problem and be reborn.
Invasion of 1997: Total abolition
foreign brands of resale system
zUnder the previous three-year plan, we
Accelerated change
worked hard to build a business
in channel structure
Specialty stores struggle foundation for Shiseido’s rebirth as a
Emergence of Sales counter reforms

Protected by resale
structured retailers
Arrival of new channels
Streamlined non-performing
assets (inventories, etc.)
global player. Our aim was to achieve a
(mail order, Internet) Previous Three-Year
system: Tailwind of Concentrated lines
economic growth Price diversification Introduced POS and OTC Plan sustainable growth phase, similar to that
sales-oriented system
Diversification of
Early retirement program of the 1970s.
consumer tastes and
purchasing patterns

First growth phase: Breaking the resale problem;

Stagnation; Problem of old system
Domestic player Preparation for second
growth phase as global player

zThis is a summary of Shiseido’s

successes during that period.

zIn Japan, we established a new business

Results of Previous Three-Year Plan model. We did this by modifying and
updating the Company’s functions and
Discarded
Discardedold
olddomestically
domesticallyoriented
orientedbusiness
businessmodel;
model;Emerged
Emergedas
asaaglobal
globalplayer
player systems in all areas, from marketing to
Overseas
Japan New business model for post-resale era markets Wellspring for business expansion retail operations, product development,
(1)Brand/line
(1)Brand/line portfolio consolidation
　Limited brands/lines under mega-line concept Established business (1)Expanded
(1)Expanded sales, driven by China
and production. Overseas, we improved
　Discontinued unprofitable brands
Marketing

(2)Reform of business trade system foundation China: 30%+year-on-year sales growth for 4 profitability considerably by ensuring
(discard uniformity) consecutive years
　Performance-based incentive
　　 → Activity-based incentives
Growth of cosmetics specialty stores as No.2
business pillar
double-digit growth in sales, primarily in
　Uniformity
→ Linked to marketing techniques Overseas in total: 10%+year-on-year sales
growth for 3 consecutive years
China, and discarding unprofitable
(3)Reorganized sales system (1)Personnel
(1)Personnel
(1)
(1)Personnel system
Personnel reforms
　　 businesses. The overseas sales ratio,
OTC, sales

Integrated cosmetics and toiletries businesses (2)Organizational

reforms
Established channel-specific sales system reforms (2)Streamlined non-
non-profitable businesses:
(2)Organizational
(4)Innovated the activities of Beauty
Consultants (3)Governance
reforms
From 9 loss-making companies to 1 which was under 10% over a decade ago,
Abolished sales-based evaluation reforms
→ Priority on customer satisfaction (3)Corporate (3)Restructured North American operations has risen to 36%.
governance reforms 　Created inter-business synergies through
(5)Rearranged value creation system
Product development;

functional centralization and integration

Introduced category-specific brand manager
system Overcame loss-making status (regional operating zAs a result, the Company achieved an
Production

(6)Raised efficiency of production/ margin: 6%+)

distribution system
Japan: 6 factories to 4 factories
　　 operating margin in excess of 8% and
Sold logistics subsidiary and its facilities
→ Those functions now outsourced made a solid return to shareholders, with
Established business foundation
Optimally allocated (centralized) resources
Established well-balanced earnings structure conducive to full-scale growth a total return ratio of above 90%. The
market value of Shiseido stock, which
Commitment:
Commitment:8%+operating
8%+operatingmargin;
margin;35%+overseas
35%+overseassales
salesratio;
ratio;90%+total
90%+totalshareholder
shareholderreturn
returnratio
ratio had slumped to around ¥500 billion at
one stage, has since almost doubled,
surpassing the ¥1 trillion mark.
 zThe time ahead is a decisive stage that will
assure Shiseido’s second growth phase as a
global player.

Shiseido Going Forward

Our Vision of a Global Player

zOur vision is to become a global player that
will represent Asia on the world stage with
its origins in Japan.

Shiseido
Shiseido

Previous
Previousthree-year
three-yearplan:
plan:Established
Establishedfoundation
foundationfor
forbecoming
becomingglobal
globalplayer
player

Become
Become aa global
global player
player representing
representing Asia
Asia
with its origins in Japan
with its origins in Japan
 Challenges to Becoming a Global Player
Raise growth potential in markets throughout the world;
Achieve higher growth rate than global cosmetics
market (at very least)
Transform into a business structure capable of
continually generating ROE and operating margin
at levels comparable to those of global competitors
Shiseido’s Raison d’Etre
zWe must tackle two challenges if we are
to realize this vision.
zOne is to raise our growth potential in
markets throughout the world, so that we
can achieve a higher growth rate than the
global cosmetics market, at the very least.
zThe second is to transform into a
business structure capable of continually
generating ROE and operating margin at
levels comparable to those of global
competitors.
zI would like to make one more important
point.
zWe are committed to strengthening
Shiseido’s “raison d’ètre.” In other words,
we want to create a clear identity unique
to Shiseido that is different from those of
our global competitors. And we will
single-mindedly aspire to that identity.
zWe imagine Shiseido’s raison d’ètre as
follows.
 What is Shiseido’s Raison d’ Etre?
zWe will not merely sell products. We will
realize the beauty of customers. We will
also enrich their hearts to complement their
outer beauty.
Realize the beauty of customers and
enrich their hearts

zShiseido’s three strengths that will

sustain its raison d’ètre are encapsulated
Shiseido’s Raison d’ Etre: Three Strengths in the following concepts.

zThe first is “richness.” Richness may be

defined as being thoroughly meticulous
Richness about ensuring high quality and services.
Being thoroughly meticulous about the high quality
of products and services
zThe next is “human science.” This is not
only making the skin beautiful, but also
pursuing benefits that reach all the way
Ｈｕｍａｎ　Ｓｃｉｅｎｃｅ Spirit of Omotenashi
to people’s minds within the R&D field.
Pursuing benefits that reach all Enriching people’s hearts
the way to people’s minds through interactions between
customers and products zLastly, there is the Japanese spirit of
Omotenashi (hospitality). This is
enriching people’s hearts through
interaction between customers and
products.
 zThese concepts are embodied in
Shiseido’s corporate message: “This
Moment. This Life. Beautifully.”

zBeauty is not only momentary, but life

itself is made beautiful when we are
made to feel beautiful inside time and

This moment. This life. Beautifully. again.

zOur raison d’ètre is not merely to sell

products. It extends much further to the
provision of beauty and inner enrichment
for each and every customer. We will
continue to uphold this philosophy.

zI will now outline our strategy for the next

10 years as Shiseido demonstrates its raison
d’ètre to become a necessary part of
customers’ lives worldwide.

Roadmap for the Coming Decade

 zOver the next 10 years, Shiseido will
take a three-phased approach.

Roadmap for the Coming Decade zIn the first three-year phase, we will
shift our focus to improve quality across
the board. In Phase 2, we will establish
Become a global player representing
Asia with its origins in Japan an undisputed presence in Asia sustained
by the foundation created in Phase 1. In
Phase 3, we will continue to accelerate
Phase 3
　New three-year plan
Make a leap growth on a global scale and improve
　Previous three-year plan
forward
Phase 2 profitability.
Phase 1 Get into growth
Establish foundation Improve quality
trajectory
zWithin 10 years, Shiseido is aiming to
as a global player across the board
Become a surpass net sales of ¥1 trillion, more than
Establish foundation Establish an undisputed presence in Asia global player
half of which will be derived from
overseas. We will be able to consistently
FY２００５
FY２００５ FY２００８
FY２００８ FY２０１１
FY２０１１ FY２０１４
FY２０１４ FY２０１７
FY２０１７ achieve an ROE of at least 15% and an
operating margin of at least 12%, putting
Ten
Tenyears
yearsfrom
fromnow:
now:Net
Netsales
salesin
inexcess
excessof
of¥1
¥1trillion
trillion(over
(over50%
50%overseas
overseassales)
sales) us on a level comparable to our global
Achieve
AchieveROE
ROEcomparable
comparableto tothat
thatof
ofglobal
globalcompetitors
competitors(15%
(15%ororhigher)
higher)
Continually
competitors. We will move forward with
Continuallygenerate
generate solid
solidoperating
operatingmargin
margin(12%
(12%ororhigher)
higher)
the aim of realizing this scenario.

zI will now present an outline of Shiseido’s

new three-year plan, which marks Phase 1.

New Three-Year Plan

 “Three Declarations” of New Three-Year Plan
zWe will pursue three declarations over
Become
Become aa global
global player
player representing
representing Asia
Asia the next three years while aiming to
with its origins in Japan
with its origins in Japan become a global player representing Asia
with its origins in Japan.
Create a brand loved by customers
Declaration z1. Create a brand loved by customers
1 throughout the world
throughout the world;

Declaration Establish unsurpassed, world-class z2. Establish unsurpassed, world-class

2
quality of business management quality of business management; and

z3. Strengthen the solidarity of the

Declaration Strengthen the Shiseido Group’s solidarity,
3
across countries and organizations Shiseido Group across countries and
organizations.

Keywords for Building Specific Strategies

zWe have several general strategies for
Balancing
Balancing expansion
expansion of
of growth
growth potential
potential and
and realizing these declarations. One is to
improving profitability
improving profitability expand growth potential and improve
profitability. We will continue
＋ implementing this strategy, as we have
done over the past three years.
Globalization
Globalization
zIn addition, over the next three years we
will leave no stone unturned in pursuing
Distinction
Distinction and
and concentration
concentration three initiatives: “globalization,”
“distinction and concentration,” and
Utilize
Utilize external
external knowledge
knowledge and
and resources
resources “utilization of external knowledge and
resources.”
 Overall View of New Three-Year Plan (FY2008-FY2010)
Become
Become aa global
global player
player representing
representing Asia
Asia with
with its
its origins
origins in
in Japan;
Japan; zThis chart shows Shiseido’s specific
Raise
Raise quality
quality of
of all
all activities
activities across
across the
the board
board
strategies.
Expand
Expand growth
growth potential
potential and
and improve
improve profitability
profitability
Keywords

Distinction
Distinction and
and concentration
concentration Utilize
Utilize external
external knowledge
Globalization
Globalization and
knowledge
and resources
resources

Create solid brands Improve quality of business management

Strengthen cultivation of
the global SHISEIDO brand Nurture human resources on global basis
Strategic direction

Establish an undisputed presence in Asia

Raise organizational capabilities
Full-scale rollout of “mass prestige” marketing
Further expand business in China
Solidify No.1 position in Japan
Advance governance system
Strengthen foundation for raising
SHISEIDO Group’
Group’s corporate value Pursue structural reforms
Accelerate reforms of Beauty Consultant activities
Reinforce value creation power Target proactive CSR initiatives
Establish global production systems

Strengthen global solidarity

Numerical
targets

Operating
Operating margin:
margin: 10%+;
10%+; ROE:
ROE: Operating
Operating margin+1-2
margin+1-2 points;
points; Overseas
Overseas sales
sales ratio:
ratio: 40%+
40%+

Declaration 1: Create a brand loved by

customers throughout the world zOur first declaration is to “Create a brand
loved by customers throughout the world.”

1.
1. Strengthen
Strengthen cultivation
cultivation of of
the
the global SHISEIDO
global SHISEIDO brandbrand
2. Aim to establish an undisputed
2. Aim to establish an undisputed
presence
presence in
in Asia
Asia
3.
3. Strengthen foundation for enhancing the value
Strengthen foundation for enhancing the value
of the SHISEIDO
of the SHISEIDO Group Group

1. Strengthen Cultivation of
the Global SHISEIDO Brand
zWe sell the global SHISEIDO brand at
department stores in Japan and around the
world that embrace the “Shiseido” name.
Going forward, we will strongly nurture
this brand as a symbol of Shiseido’s
presence as a global player.

1. Strengthen Cultivation of the Global SHISEIDO Brand

zIn order to demonstrate the consistent

strength of the global SHISEIDO brand,
Integrateライン集約、商品体系刷新
Integrate lines;
lines; Renew
Renew product
ライン集約、商品体系刷新 product portfolio
portfolio we will target the gradual integration of
product lines and the renewal of
Roll シティーコンセプト戦略の展開
Roll out the
the ““City
City Concept
シティーコンセプト戦略の展開
out Concept”” strategy
strategy Shiseido’s product portfolio.

zThen, we will roll out a detailed

Expand
Expand into
into emerging
emerging markets
markets marketing strategy called the “City
Concept.”

Harness
Harness Groupwide
Groupwide power
power to
to expand
expand market
market share
share
 City Concept
zUnder the City Concept, we will
Consider consider aspects of the market as city-
Consider aspects
aspects of
of the
the market
market as
as city-
city-based
city-based
units
units not
not as
as country-
country -based units,
country-based units, based units, not as country-based units as
then
then concentrate
concentrate resources
resources to to ensure
ensure aggressive
aggressive marketing
marketing has been the case until now. We will roll
out aggressive marketing strategies
supported by the concentrated allocation
of resources in each city.
City Intensive： Focused
City Intensive：
Intensive： Focused cultivation
cultivation of
of
SHISEIDO brand
SHISEIDO brand zWe have identified two types of city
marketing strategies, and will roll out
City Cultivation： Multiple
City Cultivation：
Cultivation： Multiple brand
brand rollouts
rollouts marketing strategies suited to their
respective market environments.

City Concept
City zOne is the “City Intensive” marketing
City Intensive:
Intensive: Focused
Focused cultivation
cultivation of
of SHISEIDO
SHISEIDO brand
brand
strategy. Despite the current weakness of
the SHISEIDO brand in these cities,
market characteristics suggest that the
injection of concentrated resources will
generate rapid growth.

zFor example, under this strategy we will

Example:
expand our presence in Moscow and St.
・PR activities closely geared to local areas, targeting press
Petersburg, the two consumer centers of
and opinion-leaders
Russia.
・Strengthen promotions such as selective distribution of
sample kits aimed at attracting new customers
・Form alliances with makeup artists; step up in-store events
 zWe will apply the “City Cultivation”
marketing strategy to markets one step
City Concept further developed, such as Bangkok in
Thailand. In these cities, where the
City
City Cultivation：
Cultivation： Multiple
Multiple brand
brand rollouts
rollouts SHISEIDO brand retains a certain
presence, we will harness Group
synergies to roll out multiple brands.
Beauty Expo例

zKey elements of our multiple brand

Example: Hold in-store multiple
brand events and workshops for
customers
rollout strategy are the designer
fragrances of French subsidiary Beauté
Prestige International and the makeup
line of U.S. subsidiary NARS.
Fragrances are a particularly important
product category that account for around
20% of the cosmetics markets of Europe
and North America. Over the next three
years, therefore, we will step up efforts
to nurture these businesses.

zUnder the third strategy, we will

develop cross-lateral promotions linking
several cities simultaneously. One
City Concept example was last fall’s promotion of the
SHISEIDO brand fragrance Zen in
Develop
Develop cross-lateral
cross-lateral promotions
promotions linking
linking cities
cities Europe ahead of other markets. In this
highly successful campaign, we
promoted Zen through street and airport
billboards, in-flight magazines, and in-
store events in duty-free stores and
department stores in major European
cities.
ベルリン、ミュンヘン、デゥッセルドルフ、　　　
マドリッド、バルセロナでビルボード展開
zOver the next three years, we will
continue intensively developing
Shiseido’s travel retail business as a
highly profitable growth area. In
Example: Zen City Jack promotion in Europe conjunction with this effort, we will
strengthen cross-lateral promotions
linking multiple cities with our travel
retail business.
Strengthen Cultivation of the Global SHISEIDO Brand
zWe will also build a business model for
markets in which we conduct our business
Integrate
Integrate lines;
lines; Renew
Renew product
product portfolio
portfolio
via distributors. These include up-and-
coming markets, such as the Middle East
Roll
Roll out
out the
the ““City
City Concept”
Concept” strategy
Concept” strategy and India, which are expected to follow the
lead of China and Russia.

Expand新興市場へ拡大
Expand into
into emerging
emerging markets
新興市場へ拡大 markets

Harness
Harness Groupwide
Groupwide power
power to
to expand
expand market
market share
share

zNext, we will aim to establish an undisputed

2. Aim to Establish presence in Asia.
an Undisputed Presence in Asia
 zHere we face three main challenges.
2. Aim to Establish
an Undisputed Presence in Asia zThe first is to pursue full-scale
marketing that targets “masstige”
markets in Asia in parallel with our
prestige business. The second is to
(1)
(1) Roll
Roll out
out ““Masstige*”
Masstige*
Masstige*” marketing
marketing across
across all
all of
of Asia
Asia further expand Shiseido’s business in
China, continuing from the previous
(2)
(2) Further
Further expand
expand business
business in
in China
China three-year plan. And the third is to firmly
secure Shiseido’s No. 1 position in its
home market of Japan.
(3)
(3) Firmly
Firmly secure
secure the
the No.1
No.1 position
position in
in Japan
Japan
* Coined word from “mass” and “prestige”, and positioned as “more expensive than mass-
produced products, but more moderately priced compared with prestige products.”

zThe term “masstige” refers to products

that are more expensive than regular
mass-produced items but are more
moderately priced than typical prestige
products. Deploying our intimate
knowledge of the skin types and tastes of
(1) Full-Scale Rollout of “Masstige” Marketing Asian people, together with our business
expertise in Japan, we will expand our
“masstige” business to cover all of Asia.
Broaden
Broaden mega-lines
mega-lines rollouts
rollouts in
in Asia
Asia zThe full rollout of our “masstige”
business will take place in the three-year
period from 2011. In the ensuing three-
Create
Create“Masstige”
“Masstige”business model→　Full-scale
businessmodel →　Full-scaleimplementation
implementation year period, meanwhile, we will use our
in
inthe
thenext
nextthree-year
three-yearplan
plan “top runner” status to successively roll
out our Japanese mega-lines across Asia.
Set
Setup
upproduction system→
productionsystem →Establish
Establishaanew
newfactory
factoryin
inVietnam
Vietnam Our aim here is to transform our
“Japanese mega-lines” into “Asian mega-
lines.” During this time, we will build a
robust and unique earnings model for our
“masstige” business in preparation for a
full-scale rollout.

Aim
Aim to
to establish
establish an
an undisputed
undisputed presence
presence in
in Asia
Asia zRecently, we announced the
construction of a new factory in Vietnam.
This facility will become the main
production base to supply our “masstige”
business in Asia. The factory will begin
operations during the next three years.
 zNext, we will further expand our business
in China.
zLast month, we announced an overview of
our business expansion plans for China, in
conjunction with our announcement of the
renewal of the Auprès cosmetics brand for
(2) Further Expand Business in China the first time in 14 years.
zTo reiterate, Shiseido will innovate the
Auprès brand and strengthen the global
Department
Departmentstores:
stores:Innovation
Innovationof
ofAuprès
Auprèsbrand
brand(first
(firstin
in14
14years)
years) SHISEIDO brand sold through the
Strongly
Stronglynurture
nurtureprestige
prestigeSHISEIDO
SHISEIDObrand
brand department stores. For cosmetics specialty
stores, we have augmented traditional
Cosmetics
Cosmeticsspecialty
specialtystores:
stores:Set
Setup
upnew
newstore
storecontracts
contractsexclusively
exclusively agreements with a new contractual format
for
forPure
Pure&&Mild
Mildbrand
brand for stores that handle only the Pure &
Improve quality and expand number: 5,000+ store contracts
Improve quality and expand number: 5,000+ store contracts Mild brand. Here, our aim is to expand
Shiseido’s sales base and raise quality. By
Proactively the final year of the plan, we hope to have
Proactively cultivate
cultivate new
new sales
sales channels
channels either traditional or Pure & Mild
agreements with at least 5,000 stores in
China. In addition, we plan to establish a
third sales channel to complement our
existing current department store and
specialty store channels.
Maintain
Maintainannual
annualaverage
averagegrowth
growth20%+
20%+
Maintain zThrough the above measures, we will seek
Maintainoperating
operatingmargin
marginat
atsame
samelevel
levelof
ofprevious
previousthree-year
three-yearplan
plan to maintain a high annual growth rate of at
least 20%, double that of the projected
annual average growth rate of 10% for the
overall market. We will also target an
operating margin at around the same level
of our previous three-year plan.

(3) Firmly Secure the No.1 Position in Japan

zIn order to become a global player
representing Asia with its origins in
Relationship
Relationship building
building brand
brand strategy
strategy Japan, at the very least we must solidify
our No. 1 position in our home market.
Consolidate
Consolidate lines
lines into
into 21
21 from
from 27
27 Then we must build a track record of
success in rolling out product categories
Phase
Phase22sales
salesreform:
reform:Become
Become100%
100%customer-
customer-oriented company
customer-oriented company on a global basis.

zThis consists of three initiatives. I will

begin with Shiseido’s brand strategy.
Increase
Increase high-
high-quality sales
high-quality sales conducive
conducive to
to sustained
sustained growth
growth
 zThe key element of our brand strategy in
the previous three-year plan was the
launch of mega-lines. We established six
mainstay lines—one for each major
category of the Japanese cosmetic
Relationship Building Brand Strategy market. The success of mega-lines
through extensive promotional
campaigns is vital for advancing the
Promotional driven

Previous plan (FY2005-2007) New plan (FY2008-2010)

powerful perception that Shiseido has
Maximize customer
changed and that Shiseido products are
Launch mega-lines Sustained reinforcement interactions attractive.
of promotional driven
Launch: FY2005-2006 category zHaving successfully met this challenge,
Foster: FY2007　　 ⇒Foster mega-lines we will now focus on areas in which we
can harness Shiseido’s strengths. In other

Generate
synergies
words, we will work expand brands/lines
Reinforce relationship building category
by building strong relationships with our
Exclusive brands/lines Reinforce Bénéfique and customers.
by channel &FACE
Relationship building

Reinforce Clé de Peau Beauté

and d program
Beauty Consultant (BC)
activity reforms
Phase 1
zIn addition to nurturing existing
brands/lines, including Bénéfique,
&Face, and d program, we are planning
Launch new brands Strengthen
customers
to add a high-end line to the Clé de Peau
relationships Beauté brand and launch a new brand in
BC activity reforms the second half of the current fiscal year.
Phase 2 We will continue making full use of
Shiseido’s strengths in this area. We will
Sales reforms
Phase 2
also at last be able to capitalize on the
success of innovative activities of beauty
consultants and sales reforms already
implemented during the previous three-
year plan.

zIn the next three-years, we will

concentrate marketing and human
Consolidate Lines into 21 from 27 resources on 21 brands/lines. In addition
to continued development of our six
New 前 3ヵ年の育成ブランド27
ヵ年の育成ブランド
前3ヵ年の育成ブランド27
NewThree-Year
Three-Year Plan:
Plan:21 27 Lines
21Nurturing
Nurturing Lines mega-lines, we will develop five
relationship building brands/lines and 10
other brands/lines. In the previous three-
5 relationship building
6 mega-lines 2ﾘﾚｰｼｮﾅﾙﾌﾞﾗﾝﾄﾞ
lines year plan, we focused on 27 brands/lines.
Now, however, our aim is to enhance
marketing efficiency through increased
distinction and concentration.

New brand zTo enhance the quality of sales in this

way, in the current three-year plan we
will focus on sales reforms. On top of the
reforms affecting beauty consultants, we
will pursue a similar direction for sales.
21２7育成ブランド
nurturing lines
In other words, we will develop a system
of “100% customer-oriented” sales.
 Phase 2 sales reform: Become 100% zSpecifically, we will remove the
customer-oriented company constraint of sales quotas, which have
proved an impediment to creating a sense
of unity between sales and beauty
Activity process for achieving final targets Final target
consultants. We will establish new
Activities based on opinions of
Sometimes evaluation targets to replace sales quotas,
To date customers are Sales
Sales quota
quota
each sales manager
disregarded such as the number of customers, the
Evaluation ratio of repeat customer visits, and store
target
accomplishment ratios.
Meeting as many customers as possible
・Increase customer numbers 　　 zAccording to our experience so far,
・Broaden sales locations, etc.
Going Customer
forward Help customers remain beautiful satisfaction 　Sales
　Sales target
target these new evaluation targets clearly lead
・Convey beauty techniques
・Increase number of repeat customer visits, etc.
to higher sales and that they are
Evaluation compatible with the efforts of beauty
target
consultants, whose primary aim is to
Definition
Definition
Sales
raise customer satisfaction.
Salestarget:
target:AAgoal
goaltotostrive
strivefor,
for,but
butnot
notan
anevaluation
evaluationbenchmark
benchmark

Phase 2 sales reform: Become 100%

customer-oriented company
Conduct client surveys zJust as with beauty consultants, we
consider evaluation from our clients to
Specialty stores Drugstores
■
■Client survey (specialty stores)
Name of sales Name of Name/title
ご記入者の of
■Client survey (specialty stores)
Name of sales Name of Name/title of
be very important. Our clients take part
営業担当者名 企業・店舗名 questionnaire questionnaire
manager company/store お名前・役職
respondent manager company/store respondent

Item
ご質問項目
Activities
活動の有無
undertaken?
Level of activity (for “Yes” respondents)
Item
Activities
undertaken?
Level of activity (for “Yes” respondents) in twice-yearly surveys, like those shown
Sufficient
Mostly どちらとも Mostly
Neither やや不充分
Mostly Mostly
Insufficient
充分 まあ充分
sufficient 不充分
Insufficient Sufficient sufficient Neither
いえない insufficient insufficient
コミュニケーション

here.
Communication

Communication

1. Yes
１．実施している 1. Yes
Business
打合せ meeting Business meeting 2. No
2. No
２．実施していない

従業員様とのwith
Communication 1. Yes
１．実施している Communication with 1. Yes
コミュニケーション
employees 2. No
２．実施していない employees 2. No

Suggested activities to

zThese evaluations will help us discard

お客さまづくり活動の
attract customers 1. Yes
１．実施している Suggested semiannual 1. Yes
ご提案（絆を深める）
(deepen ties) 2. No
Suggested activities

２．実施していない plan 2. No
（オンリーワン連動）
(“only one” link)
Suggested activities to
ご提案活動

お客さまづくり活動の
Suggested activities

attract customers 1. Yes

１．実施している 1. Yes
ご提案（出会いの拡大）
(increase interactions) 2. No Suggested monthly plan
2. No
（オンリーワン連動）
(“only one” link) ２．実施していない
お客さまづくり活動と
Suggested sales locations
連動した売場づくりの
linked to customer
ご提案
attraction activities
(“only one” link)
（オンリーワン連動）
1. Yes
１．実施している
2. No
２．実施していない
Suggested for noncore
sales counters
1. Yes
2. No the simplistic notion of being concerned
お客さまづくり活動と
Suggested sales promotion
連動した販促・施策の
activities linked to 1. Yes
１．実施している
Confirmation of head 1. Yes
enhancement

customer attraction 2. No
Sales counter

ご提案 ２．実施していない
activities (“only one” link)
（オンリーワン連動） office decisions 2. No

only with higher sales. Rather than use

活動マネジメント

Confirm progress of
management

お客さまづくり活動 １．実施している
1. Yes Maintenance of 1. Yes
customer attraction
Activity

実績の確認 ２．実施していない
2. No core sales counters 2. No
activities

stopgap figures, we will then be able to

Sharing beauty information

Sales counter 1. Yes

１．実施している Introduction to
売場メンテナンス
maintenance 1. Yes
2. No
２．実施していない beauty-related
2. No
information
美容情報共有

Introduction to Introduction to
Sharing beauty

美容関連情報の 1. Yes
１．実施している 1. Yes
beauty-related seminars or beauty-
information

ご案内 2. No
２．実施していない 2. No
information
Introduction
セミナーまたは
seminars
美容講座受講の
to
or beauty-
1. Yes
１．実施している
2. No
２．実施していない
related lectures

Use of medical charts

1. Yes
2. No
generate higher-quality sales linked to
related
ご案内lectures

■ Please write further comments about your company’s sales activities here. ■ Please write further comments about your company’s sales activities here.
steady future growth.

Thank you for your time. Thank you for your time.
 3. Strengthen Foundation for zThe third challenge in creating solid brands
is to strengthen the foundation for
Enhancing the value of enhancing the value of the Shiseido Group.
the SHISEIDO Group

3. Strengthen Foundation for zThis will require the following three actions.

Enhancing the Value of

the SHISEIDO Group

(1)
(1) Accelerate
Accelerate Reforms
Reforms of
of Beauty
Beauty Consultant
Consultant Activities
Activities

(2)
(2) Reinforce
Reinforce Value
Value Creation
Creation Power
Power

(3)
(3) Establish
Establish Global
Global Production
Production Systems
Systems
 zThe first is to accelerate reforms to the
(1) Accelerate Reforms of Beauty Consultant Activities activities of beauty consultants.

zEarlier, I cited the Japanese concept of

Omotenashi as one of Shiseido’s three
strengths.
“Shiseido
“ShiseidoBeauty
BeautyWay”:
Way”:Spirit
Spiritof
ofOMOTENASHI
OMOTENASHI(hospitality)
(hospitality)
zThe “Shiseido Beauty Way” embodies
Shiseido’s unspoken expertise in
Globalization
Globalization of
of BC
BC activity
activity reforms
reforms Omotenashi cultivated over its 136-year
history. We will apply Omotenashi and
“customer relations software,” which has
been so successful in Japan under the
previous three-year plan on a global
Achieve scale. At the same time, we will energize
Achieve and
and solidify
solidify world
world position
position
the activities of beauty consultants
as No.1 in customer satisfaction
as No.1 in customer satisfaction through extended overseas business trips,
on-the-job training, and reciprocal
exchanges. Our aim is to raise the status
of the profession of beauty consultants
and become the world leader in
providing genuine customer service.

zNext is the reinforcement of our value

creation power. This also relates to
enhancing Shiseido’s “human science”
capabilities, which is its third strength.
(2) Reinforce Value Creation Power zIn the skincare business, where we are
best placed to maximize our strengths,
we will boost research into improving
Reinforce
Reinforce skincare
skincare research
research into
into ““skin
skin reparation”
reparation”
reparation” skin quality. This will include measures
and “ sense of efficacy” ” for treating rough, dry, and porous skin
efficacy
and “sense of efficacy” and acne in addition to the existing
research areas of skin lightening and
Strengthen
Strengthen H&BC
H&BC research;
research; Focus
Focus on
on new
new domains
domains anti-aging. We will also extend research
to find ways that customers can perceive
the effectiveness of a product, such as
Actively through a product’s feel, as a means of
Actively promote
promote strategic
strategic alliances
alliances and
and ““open
open innovation”
innovation ”
innovation” creating items with natural appeal.
zIn order to provide a total solution, we
will channel our energies into new
businesses, such as health and beauty
Harness care, cosmetic dermatology
Harnessinternal
internaland
andexternal
externalknowledge
knowledgetotoreinforce
reinforceour
our treatments/apparatus, and therapeutic
unrivalled
unrivalledR&D
R&Dprowess
prowess
Step makeup. By actively promoting strategic
StepupupR&D
R&Daimed
aimedatatenriching
enrichingpeople’
people’s hearts
people’s hearts alliances and “open innovation”—rather
than adhering to the principle of self-
sufficiency—we will harness internal
and external knowledge to strengthen
research not only in beautiful skin, but
also inner enrichment.
 (3) Establish Global Production Systems
zWe will also adopt a global perspective
Production facilities when establishing our production system.
(15 locations)
（ Professional products）
zIn the previous three-year plan, we
R&D facilities
Build new plants in Vietnam (5 locations) reduced the number of domestic
production facilities from six to four. In
the next three-year period, we will open
Close factory in New Zealand
a new factory in Vietnam and close our
Build
Buildnew
newplants
plantsin
inVietnam
Vietnam++Close
Closefactory
factoryin
inNew
NewZealand
Zealand facility in New Zealand. In these ways,
we will target focused reinforcement of
Stronger
Strongerfocus
focuson
oncore
coredomains;
domains;Promote
Promotestrategic
strategicoutsourcing
outsourcing
our core domains while strategically
outsourcing certain functions, in an
effort to build an optimal production
Build
Buildoptimal
optimalproduction/supply
production/supplysystem
systemconducive
conduciveto
toglobalization
globalizatio n
globalization
system for business globalization.

Declaration2: Establish unsurpassed, world-class quality

of business management
zNext, I will explain the second
declaration of the new three-year plan:
“Establish unsurpassed, world-class
quality of business management
1. recognized worldwide.”
1. Cultivate
Cultivate global
global human
human resources
resources
2. Raise organizational capabilities
2. Raise organizational capabilities zThis consists of the following five
3.
3. Advance
Advance corporate
corporate governance
governance structure
structure initiatives:
4.
4. Continuously
Continuously pursue
pursue structural
structural reforms
reforms z“Cultivate human resources,” “Raise
5.
5. Actively
Actively promote
promote CSR
CSR organizational capabilities,” “Advance
corporate governance structure,”
“Continuously pursue structural reforms,”
and “Actively promote CSR.”
 1. Cultivate Global Human Resources
zWith respect to cultivating global human
Foster
Foster next-
next-generation top
next-generation top management
management team
team resources, we will equip top management
with global-level skills by sending
Buildグローバル人事制度の構築
Build global
global human
human resource
グローバル人事制度の構築 resource system
system candidates for executive positions to the
IMD Business School in Lausanne,
現地社員育成：中国研修センター設立
Nurture local
local employees:
employees: Establish
現地社員育成：中国研修センター設立
Nurture Establish China
China training
training center
center Switzerland. We will also build a global
human resource system that removes
distinctions between domestic and foreign
employees, and we will foster global
employees by rotating personnel across
Foster
Foster human
human resources
resources more
more strongly
strongly at
at aa global
global level
level
regions.

Shiseido China Training Center

zWe broke new ground in China last
Train Shiseido employee, clients, and sales specialists in China
Expand use of employee training bases to promote future-oriented
Asia intellectual growth
month with the establishment of the
Shiseido China Training Center. This is
the first training center to be established
by a Japanese company in China, and is
Shiseido’s first such center outside Japan.
We plan to use the Center to train
employees not only from China, but also
from other Asian countries.
 2. Raise organizational capabilities
zTo raise our organizational capabilities,
we will reassess the functions and
Reform
Reform head
head office
office corporate
corporate departments
departments processes of corporate departments at its
head office and strengthen support for
Standardize/reform
Standardize/reform business
business processes
processes through
through strategic planning functions and the
introduction
introduction of
of SAP
SAP
business departments. We will improve
expertise and productivity by
standardizing processes and utilizing
external resources. To this end, we will
Build
Build company
company framework
framework toto back
back up
up globalization
globalization introduce an SAP system in the first year
Raise
Raise efficiency
efficiency by
by cutting
cutting indirect
indirect cost
cost of the plan. Under the new three-year plan,
and
and boosting
boosting productivity
productivity we will transform Shiseido’s head office
into a robust strategic headquarters
befitting a global corporation, while
reducing indirect costs through improved
productivity.

zNext, we will advance the Company’s

corporate governance structure.

zPrior to the start of the previous three-

year plan, Shiseido had 32 corporate
3. Advance Corporate Governance Structure officers. By fiscal 2008, we had reduced
this number to an elite body of 19. We
also rejuvenated these positions by
reducing the average age from over 60 to
Rejuvenate 56. We now have three executive officers
Rejuvenate and
and adopt
adopt “small
“small elite”
elite” teams
teams of
of officers
officers
aged in their 40s, compared with none
before the plan’s implementation. We
Clarify
Clarify and
and emphasize
emphasize functional
functional responsibilities
responsibilities also have two external directors who
have participated in meetings over the
past two years. Recently, they were
joined by our first foreign director, Mr.
Carsten Fischer. The appointment of Ms.
Kimie Iwata as Vice President further
Further
Further strengthen
strengthen corporate
corporate governance
governance system
system reflects the increasing diversity within
as a global corporation
as a global corporation Shiseido’s top management. As a global
company, we will continue to strengthen
our corporate governance system by
introducing various measures, such as
increased clarification of the
responsibilities of our corporate
executive officers.
 zWe will continue to pursue structural reforms
commenced under the previous three-year
plan.
zWe completed the restructuring of our
operations in North America and intend to
translate its success across other regions.
4. Pursue Structural Reforms zWe are resolved to streamline or withdraw
from any business or brand that performs
poorly, or has little prospect of future growth
Complete
Complete reforms
reforms in
in North
North America;
America; or offering synergies to the wider Group.
Translate
Translate success
success across
across other
other regions
regions
zUnder the new three-year plan, we will focus
on reducing product categories. Under the
Streamline/withdraw previous plan, we reduced to 27 the number
Streamline/withdraw from
from unprofitable
unprofitable businesses/brands
businesses/brands of nurtured brands/lines in the domestic
cosmetics business, which accounted for more
than 80% of total sales. However, due to the
Reduce
Reduce number
number of
of product
product categories:
categories: large number of product categories
30% responsible for the remaining 20%, we have
30% reduction between FY 2007
reduction between FY 2007 and
and FY2010
FY2010 no hesitation in cutting the total number of
product categories in conjunction with the
reduction of nurtured brands/lines. To be
more precise, we will gradually stop
production of around 30% of all domestic and
Enhance
Enhance efficiency
efficiency to
to raise
raise profitability;
profitability; overseas product categories. Combined with
Shift actions taken in the previous three-year plan,
Shift investments to growth fields
investments to growth fields this will result in a 40% reduction of product
categories compared with fiscal 2005. When
considering products to discontinue, we will
first endeavor to raise functionality to a
similar or greater level for existing nurtured
products, in an effort to reflect customer tastes
while reducing costs.

5. Actively Promote CSR

zLastly, we will actively promote CSR
initiatives.
Expand
Expand social
social beauty
beauty care
care activities
activities
zUnder the new three-year plan, we will
focus on two areas,
Address
Address environmental
environmental issues
issues

Actively
Actively promote
promote CSR
CSR
 zThe first is social beauty care activities.

zWe will increase visits to facilities for the

elderly and expand the use of cosmetics to
help women with troubling skin problems,
“Social Beauty Care” Activities such as bruises, white spots, and
birthmarks, for which medical treatment is
Increase
Increase domestic
domestic locations
locations handling
handling dedicated
dedicated products
products not yet available. Such activities enhance
Global product roll-outs → Starting in China
Global product roll-outs → Starting in China women’s quality of life and make them
Establish
Establish Social
Social Beauty
Beauty Care
Care Center
Center feel happier. The year before last, we
opened the Social Beauty Care Center in
our head office building in Ginza as a
facility to coordinate such activities. In the
past 18 months, more than 700 males and
females, aged from five to their 70s, have
received services at the center. Moreover,
stores handling specialized cosmetics are
spreading throughout Japan.

Specialized cosmetics developed zUnder the new three-year plan, we will

　Social Beauty Care Center
(within Ginza head office)
by Shiseido (Perfect Cover)
expand these activities to cover all of
Japan. In a first for Shiseido, we will also
start offering such services in China, in
December 2008.

Reinforce Environmental Measures

Activities
Activitiesto
todate:
date:Attached
Attachedrooftop
rooftopsolar
solarpanel
panelatatEast
EastWindsor
WindsorPlant
Plant
zIn the area of environmental issues, we
Tree-
Tree-planting in
Tree-planting inChina
China are fully aware of the serious
▼
▼ responsibilities we must shoulder as a
Company-
Company -wide movements,
Company-wide movements,such
suchas
assolicitation
solicitationof
of““eco
eco ideas”
ideas”
ideas”
global company, and also as a global
citizen. Previous environmental initiatives
include installing rooftop solar panels at
our East Windsor plant in the United
States to conserve electricity, and planting
trees in China. We intend to expand these
initiatives, and also invite suggestions for
“eco ideas” as part of a company-wide
Rooftop solar panels Tree-planting campaign in Lanzhou
(East Windsor Plant) City, Gansu Province movement to addresses issues confronting
individual employees.
 zBefore proceeding to the third declaration
concerning “solidarity,” I would like to
outline our financial targets for the next
three years based on the specific strategies
Numerical Targets described so far.

zFirst, by fiscal 2010, the final year of the

plan, we aim to achieve an operating
margin of 10% or higher, and an ROE that
Targets for FY2010: Net Sales and Operating Margin is one to two points higher than that.

　　Net zWe project annual average net sales

　　Netsales:
sales:Average
Averageannual
annualgrowth
growthrate
rateof
of4-5%
4-5%
　　　(1-2%
　　　(1-2%in
inJapan;
Japan;10%
10%overseas;
overseas;40%+
40%+overseas
overseassales
salesratio)
ratio)
growth of 4–5% over the three years, with
　　Operating
　　Operatingmargin:
margin:10%+;
10%+;ROE:
ROE:Operating
Operatingmargin
margin+1-2
+1-2points
points domestic sales increasing by 1–2%,
slightly higher than the domestic market
overall. We expect average annual
Consolidated
net sales
overseas growth to exceed 10% on a local
¥725 billion
10%
currency basis.
Operating income
or higher
8.3% zIn the final year of the plan, we expect net
sales to exceed ¥800 billion, based on
exchange rates of ¥100 to the U.S. dollar,
¥155 to the euro, and ¥14.5 to the yuan.
Overseas sales will account for more than
40% of net sales. Specific targets for each
year of the plan, including fiscal 2008, will
be outlined at the annual financial results
FY2007(estimate) FY2008(target) FY2009(target) FY2010(target) briefings. As shown in the chart, the
growth rate for fiscal 2008, the first year
of the plan, is slightly low in yen terms, in
light of our projection of ¥100 to the U.S.
dollar.
 Cost Structure
＜FY2007 Estimate＞ ＜FY2010 Target＞ zThis slide shows changes to the cost
Around one point structure.
improvement
around Cost of around
Cost of
sales 26 sales 25
zThe cost of sales will fall by around 1%
Slight increase
around investment compared with fiscal 2007 when the effect
Marketing Marketing 24-25
cost 24 cost of reducing product categories and other
Slight increase
around improvement measures are included. SG&A expenses
Personnel Personnel 20-21
expenses 21 expenses will fall about one point, reflecting
Around one point increased productivity and more efficient
Other around improvement Other around
SG&A 21 SG&A 20 allocation of other SG&A expense items.
expenses expenses
Around two points Consistent investment in marketing of
improvement
Operating 8.3 Operating 10 around 24–25% will contribute to sales
income income or higher
growth.
Share of net sales (%)

Shareholder Return
Flexibly
zWith regard to shareholder return, we
Flexiblybuy
buyback
backand
andretire
retiretreasury
treasurystock,
stock,
with
withemphasis
emphasisononcash
cashdividend
dividend will continue our basic policy targeting a
⇒
⇒Total
Totalconsolidated
consolidatedshareholder
shareholderreturn
returnratio:
ratio:60%
60%(medium-term)
(medium-term) total consolidated shareholder return ratio
(Yen) 6th consecutive annual increase of 60% in the medium term, stated in the
Previous three-
three-year plan: Total return ratio of 93%;
40 　　Payout
　　Payout ratio of 55% previous plan. We will continue to buy
35 back and retire treasury stock while
30
taking account of changes in the stock
25
market with an emphasis on cash
20
15
dividends.
10
5
0
FY2001 FY2002 FY2003 FY2004 FY2005 FY2006 FY2007
(plan)
Interim Year-end
 zLastly, I would like to address the third
declaration: “Strengthen the solidarity of
the Shiseido Group across countries and
organizations.”

zLast year, Shiseido was one of the

Declaration3: Strengthen the Shiseido
Group’s solidarity,
across countries and organizations
companies that participated in an
employee satisfaction survey conducted in
Japan, in which employees of various
companies responded to the same set of
questions. Since multiple companies took
part, we were able to gain an objective
insight into Shiseido’s unique features,
strengths, and weaknesses.

zI was most delighted, and encouraged, by

the ratings given to Shiseido by its
employees when asked about “Pride in
your company,” “Affection for your
company,” and “Dreams you have for your
company’s future.” Our ratings were far
higher than those of other companies.

zMaybe these results reflect the wishes of

the long line of predecessors who have
worked at Shiseido since its foundation.
Or perhaps they highlight the confidence
we have gained from overcoming the
major obstacles to our reforms over the
past three years.

zWhatever the case, I believe that the

strong solidarity and “spirit of Shiseido
people” will be our biggest strengths as we
build a unique identity in the highly
competitive global marketplace and move
forward.

zToday, we are taking our first steps as a

global player representing Asia. Our goal
is for our customers to recognize, cherish,
and trust the Shiseido’s unique value and
appeal, which are not found in other global
corporations. In short, we want to be
“needed by society.”

zI look forward to your ongoing guidance

and cooperation. Thank you very much for
your kind attention today.