A series of recalls following reports of the products causing skin blotches has cost Kanebo’s parent company Kao approximately $61 million of operating profit, according to news reports.
“This is a very touchy issue especially when it concerns someone’s health and life,” said Kaz Maezawa, founder and CEO of Naked Communications, who believes that many consumers may stop buying skin whiteners altogether. “No matter what Kanebo does, its credibility has gone down significantly, and this could affect equivalent products from other companies,” he added.
Last month, Kanebo issued a recall for as many as 54 products that caused blotchy skin, and in many cases dermatologists predict permanent damage. As of 25 July the company said it had received more than 8,600 complaints. And on 28 July, Kanebo said it had received 138,485 enquiries from concerned consumers on its toll-free service line, while 65,192 people had queued up at its retail outlets.
The US Food and Drug Administration (FDA) has also ordered a recall of Kanebo’s products that contain Rhododenol, Kanebo’s patented chemical.
Experts predict that it’s going to be an uphill task to regain consumer trust. “Consumers will now be more concerned about the potential risks of using skin lighteners as a whole following these revelations,” said Euromonitor’s Mariko Takemura. It is clear that despite Japan’s love for skin-whitening products, the need to elevate consumers concerns will be of paramount importance to manufacturers across the segment. “Manufacturers of other skin-whitening brands will need to effectively communicate to consumers the safety of their products following such a scandal,” Takemura added.
For its part, Kanebo hasn’t specified brand-recovery plans. Its officials have issued an apology and have promised affected customers that it would compensate their medical costs. But it may be too little too late.
A local news report has alleged that Kanebo ignored a complaint from a consumer two years ago. Worse, as consumer cries got louder in mid-May, the company allegedly didn’t launch an investigation until June, following which, it took Kanebo another month to recall its products. “They’ve been getting complaints for a while but didn’t make it public," Naked's Maezawa said. "They should have done their research when the first complaint came out."
Japan is Asia’s largest market for skin whiteners, and the fondness for such products is long established. According to a Wall Street Journal report, the Japanese government has approved a staggering 20 skin-brightening substances since 1988.
According to Euromonitor, skin-whitening products account for 41.4 per cent of overall sales in the facial moisturizers category and 9.3 per cent of sales in the skincare face mask category. Such products contribute 4.2 per cent of retail value sales in the facial cleansers segment, 12.9 per cent in the anti-aging sector and 24.8 per cent amongst toners. In each category sales have either remained stagnant or gone up a few percentage points over 2011.
Kanebo was until this incident a popular whitening brand, and is present in almost every household. Euromonitor reveals that Kanebo is one amongst the top three skincare brands in the country, with a market share of 7.6 per cent. It is behind Shiseido and Kose, which have market share of 12.8 per cent and 8.2 per cent, respectively. Kanebo’s Blanchir Superior, the affected brand, accounts for about 1.2 per cent of skincare sales in Japan.
In December 2012, Kanebo announced a new growth strategy up to 2015. It is believed that Kanebo saw Rhododenol as its trump card to drive growth in Japan. The company had said it was prioritising five brands including Sensai, Kanebo, Lunsol, Kate and Freshel as its main engines for growth.
The recalled products are sold across 10 countries in Asia: Taiwan, Hong Kong, South Korea, Thailand, Singapore, Malaysia, Indonesia, Myanmar, the Philippines and Vietnam. Rumours of blotches are now beginning to emerge from Taiwan as well.
The company's annual domestic turnover for the affected products is about ¥5 billion (US$50.2 million at today's rates), with Taiwan and Thailand accounting for ¥1 billion (US$10 million), said a Japan Times report.