Shiseido joins wave of firms tapping Kyushu as Asia export gateway

Despite setbacks due to the coronavirus pandemic, Shiseido has completed construction of a new plant in Kurume, Fukuoka Prefecture, as its sixth plant in Japan and the first in Kyushu.

With the start of full-scale operations set for June, the company aims to expand its domestic production capacity in response to growing demand for "Made in Japan" cosmetics overseas.

The new plant will become one of the company's export bases for China and other Asian markets, with an initial staff of about 250 employees who will mostly be hired locally. Shiseido plans to eventually grow the workforce to between 800 and 900 employees.

The new plant was built in an industrial park that straddles the cities of Kurume and Ukiha in the prefecture. The ¥45 billion four-story plant, which sits on a 97,000-square-meter site, will produce high-quality products using state-of-the-art Internet of Things technology.

At the plant, the company will manufacture midpriced lotions and other products under the Elixir brand as well as another brand. It aims to produce up to 140 million units per year from 2026 or later.

Since 2019, Shiseido has been strengthening its domestic production capacity by establishing new factories in Tochigi and Osaka prefectures. “We’re very happy to establish our first production base in Kyushu on the occasion of our 150th anniversary,” President Masahiko Uotani said during a preview of the Kurume plant held on May 26.

Uotani pointed out that Kyushu's proximity to Asian markets will make it a major base for exports. “We will expand our business to China, Vietnam and Thailand, and we are also considering India," he said.

With the expansion of overseas demand, Shiseido’s sales had grown by double digits year-on-year since 2017. To ensure growth, the company made a plan to build three new domestic factories, and in February 2019, it concluded a location agreement for the Kurume plant with municipal and prefectural governments.

The following year, however, inbound demand for cosmetics disappeared after Japan closed its borders to tourists due to the spread of COVID-19 infections. Domestic demand was also sluggish as people refrained from going out.

According to an industry ministry survey, domestic shipments of cosmetics fell 16.1% in 2020 from the previous year to about ¥1.47 trillion.

Shiseido was no exception, with its group sales falling below the ¥1 trillion mark for the first time in four years in the business year that ended Dec. 31, 2020. It posted a group net deficit of ¥11.66 billion in that year, but the company still finished building the three plants as planned.

"With an eye on the post-COVID economy over the long term, we judged that we should never stop investing,” Uotani said.

While the Kurume plant will be an export base, taking advantage of its location near Asian markets to meet growing overseas demand, it will also boost supply capacity for the domestic market, which is expected to recover from the pandemic lull.

The company plans to expand its workforce and production capacity in stages. The key to success will be to train human resources at the plant, where the majority of workers will be new hires, and to maintain and improve product quality to gain customer satisfaction and trust. "The most important thing is to enhance human capital,” Uotani said.

The recent wave of businesses expanding to Kyushu is not limited to Shiseido. A number of other companies are also making their way to the region, with a view to exporting to Asia.

Sendai-based Iris Ohyama has decided to build a new production line for packaged rice and other products at its plant in Tosu, Saga Prefecture, investing ¥12 billion. The company plans to make the plant a base for expanding overseas sales channels.

Unicharm, a Tokyo-based manufacturer of disposable diapers, built a new plant in Kanda, Fukuoka Prefecture, in 2019 as its first new domestic production base in 26 years. A company official said Kyushu was chosen because of its favorable location “as a gateway to Asia.”

Capital investment in Kyushu, particularly in industries related to semiconductors, has also been active, as is evidenced by Taiwan Semiconductor Manufacturing Corp.’s decision to build a plant in Kumamoto Prefecture together with a subsidiary of Sony Group.

According to a business confidence survey in March by the Bank of Japan's Fukuoka Branch, manufacturers’ capital investment in the Kyushu and Okinawa regions in fiscal 2021 was up 25.3% from the previous year, much higher than the nationwide increase of 7.6%. The investment is projected to grow further, by 4.1%, in the current fiscal year.

Takayuki Honma, chief economist at Sumitomo Corp. Global Research, says the yen has weakened while the gap in production costs has narrowed due to rising labor costs overseas. “The trend of returning to domestic manufacturing bases is likely to continue for some time” Honma said.

In some industries, however, securing human resources is likely to become an issue. "Quite a few companies in the industry are expected to find it difficult to acquire human resources,” said one semiconductor industry official.

Shinji Koyanagi, chief researcher at Kyushu Economic Research Center, points out that despite its abundant and inexpensive labor force, Kyushu is gradually losing its ability to attract companies.

“It is now competing with the rest of the country for skilled workers and engineers with high-level digital capabilities,” he said, stressing the importance of human resource development in the region.

This section features topics and issues from the Kyushu region covered by the Nishinippon Shimbun, the largest daily newspaper in Kyushu. The original articles were published May 27.