FANCL Group Financial Results Briefing
For the period April 1, 2016 to March 31, 2017
April 27, 2017
Financial Highlights
Results by segment
Change YoY
FY to March 2016
FY to March 2017
90,850
96,305
＋6.0％
Cosmetics
55,016
56,926
＋3.5％
Nutritional supplements
28,612
32,085
＋12.1％
7,221
7,294
＋1.0％
Hatsuga
Genmai
2,604
2,490
(4.4％)
Kale Juice
2,757
2,711
(1.7%)
Operating income
1,204
2,244
+86.3％
Ordinary income
1,421
2,385
＋67.8％
522
5,146
＋884.4％
(Millions of yen)
Sales
Other
Net income
Sales breakdown
Results by
cosmetics
brand
FANCL
ATTENIR
boscia
Nutritional supplements
Inbound sales(estimated)
44,992
8,869
2,258
32,085
+1.6% (Domestic: +2.4%, Overseas: -4.8%)
(Unit: 100 million yen)
14
+16.2%
+4.7% (+16.6% on local currency basis)
4
5
6
9
10 10 11 11 10 11
14
+12.1% (Domestic: +12.1%, Overseas: +13.5%）
15/Q1
15/Q3
16/Q1
16/Q3
17/Q1
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17/3Q
3
Analysis of change in Operating income
Results
Positive factors
Negative factors
(Millions of yen)
Variable costs
96
726
Fixed costs
Opening of directlymanaged stores
Reinforcement of R&D
structure
1,377
3,835
Cosmetics: +1,976
Supplements: +98
Other: -1,349
391
396
2,244
1,204
-440
Increase in
gross profit
Operating income
due to
growth in
sales
FY2016
Improvement in
cost-of-sales
ratio
Marketing
costs
Other
variable
costs
Personnel
costs
Other
fixed costs
FY2017
Operating income
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Full Year Outlook
Full-year outlook to March 2018
Change YoY
FY to March 2017
FY to March 2018
96,305
105,000
＋9.0％
Cosmetics
56,926
62,040
＋9.0％
Nutritional supplements
32,085
35,520
＋10.7％
7,294
7,440
＋2.0％
Hatsuga
Genmai
2,490
2,490
(0.0％)
Kale Juice
2,711
2,710
(0.1％)
Operating income
2,244
6,000
+167.3％
Ordinary income
2,385
6,100
＋155.7％
Net income
5,146
4,000
(22.3％)
(Millions of yen)
Sales
Other
Sales breakdown
Results by
cosmetics brand
FANCL
47,250
＋5.0％（Domestic:+5.7％、Overseas:-1.4％）
ATTENIR
10,960
＋23.6％
boscia
Nutritional supplements
2,800
35,520
＋24.0％（＋22％ on local currency basis）
＋10.7％（Domestic:＋10.6％、Overseas:＋12.8％）
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Full-year outlook: Analysis of change in operating income
Plan
Positive factors
Negative factors
(Millions of yen)
Variable costs
549
608
Fixed costs
Opening of directlymanaged stores etc
1,696
Cosmetics: +592
Supplements: -16
Other: -26
6,000
1,058
6,121
330
2,244
Increase in
gross profit
Operating income due to
growth in
sales
FY2017
Improvement in
cost-of-sales
ratio
Marketing
costs
Other
variable
costs
Personnel
costs
Other
fixed costs
FY2018
Operating income
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(Ref.) Medium-term Management Plan
Comparison with initial plan (estimated)
(Units: Millions of yen)
Sales
Medium-term management plan: Initial plan
(announced 2015)
Cross-selling targets not reached
Review of store plan （End of FY18: 350→215 stores)
Review of Hatsuga Genmai and Kale Juice business strategy
ATTENIR strong
FANCL Cosmetics Wholesale channel expansion
Full launch of intra-organizational sales
Improvement to cost efficiency
Total
① Plan for final year of Medium term
Management Plan (FY18) (annnounced this time)
② Prior to start of medium term plan (FY15) results
Difference（①－②）
Operating
income
1,250
100
-105
-90
-45
＋ 20
＋ 10
＋ 10
-200
-44
-20
0
＋10
＋5
＋5
＋4
-40
1,050
60
776
＋ 274
40
＋ 20
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Summary of second year of Medium-term Management plan,
Overview of new management structure
Year two of Medium-term Plan – summary
Although growing sales through advertising remains the right approach,
the impact of the advertisements was below expectations, making for a challenging year
■Achievements and issues
〈Achievements〉
① FANCL Cosmetics
Record-high sales for two consecutive periods
② ATTENIR
Returned to record-high customer levels of 2008
③ Supplements
Positive results in new customer acquisitions. Mail-order customers at record-high level
〈Issues〉
① Unable to leverage effect of advertisements enough
A mismatch in mass-advertising focused approach
② Insufficient cross-selling
③ Issues with ability to attract customers to stores
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New management structure, organizational change
(from April 1)
New management structure
・Chairman, Representative Director, Founder
Kenji Ikemori
・Director, Vice Chairman
Kazuyoshi Miyajima
・President & CEO, Representative Director
Kazuyuki Shimada
Organizational change
① Establishment of new Marketing Division (concurrently headed by CEO Shimada)
・ Consolidating the business strategy planning, product planning/development, and advertising
functions that were previously separated by each business, and aiming to achieve greater collaboration
across cosmetics and health businesses and the respective channels.
② Establishment of Mail-Order Sales Division, combining catalog and online sales
③Establishment of new Corporate Sales Division
・Offering a variety of health solutions to companies with strong interest in healthy company management
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Creating new value from innovation
Cosmetics
Maintain safety, trust of Mutenka,
while developing new products and brands that are clearly differentiated from
conventional low volume items
Supplements
Price range (visual impression)
・ Create a mid-price market through
development of new products with innovative
functions
Grow these products into personal
supplements of the future
・ Develop new sales channels, such as
dispensary pharmacies
High
New
products
Mid
Existing
products
Low
Company A
FANCL
Company B
This will be a year in which FANCL achieves significant change.
Breaking out of its current shell to create a new market
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FY2018 Strategy
Overall policy
ALL-FANCL ONE-FANCL
Combining FANCL’s research, manufacturing,
business, and sales functions
to strengthen its ability to generate profit
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Advertising Strategy
Advertising strategy
■Corporate stance advertising
■Shift to online advertising
<Breakdown of advertising
expenses (Cosmetics)>
Online
Offline
Offline
Previous
fiscal period
Communicate “Honest Quality” stance.
Enhance brand trust and loyalty
Online
This fiscal
period
Awareness, understanding of products
Purchase
Online (direct response advertising)
Mail
order
Mass advertising channels
including TV
×
Directlymanaged
Stores
Wholesale
Incorporating corporate stance into product
advertising, communicating a consistent
message
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Cosmetics Business
FANCL Cosmetics: Expansion of customer base
Mail order customer numbers (existing)
+6%
Expansion of wholesale channel
Millions of
yen
5,000
Trends in wholesale
channel sales
+35%
4,000
+60%
3,000
FY2013
FY2014
FY2015
FY2016
FY2017
2,000
3.3
times
*Existing customers who have made a purchase in the past four months (12-month moving average)
1,000
Base product
(facial lotion, emulsion)
skincare users
FY2014
+24%
FY2013
FY2014
FY2015
FY2016
0
No. of drugstores
offering FANCL
Cosmetics
FY2017
FY2015
7,700
FY2016
8,500
FY2017
11,100
Available at 18,000 FamilyMart and
Circle K Sunkus stores from April this
year
*Existing customers who have made a purchase in the past four months
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FANCL Cosmetics - Enhancement of target-based approach
Strengthen core base
Strengthen offerings to current
main target demographic
NEW
Customer age groups
Japan’s female
population
Base skincare
Cleansing,
(Area graph)
facial wash
Increase contact points Deepen relationships
NEW
New initiatives
Approach new target demographic
＋
Cross-selling of
products high in
originality
20-24
25-29
30-34
35-39
40-44
45-49
50-54
55-59
New market development
Improve acquisition of younger
age group customers with Active
Conditioning Basic, Acne Care
Consider new products and brands that
are clearly differentiated from
conventional low volume
60-64
65-69
70-74
75-79
New brand targeting
60+ age group
Full launch via mail
order, Retail store
and wholesale
channels
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Beauty BOUQUET: Start of full launch
FY2017 H2
Mail order
Test launch
Full launch
Stores
Six stores only
Nationwide
Drugstores
Test marketing
compared
Non-FANCL
users
70%
Testing in Shizuoka area Area expansion
Key theme: Improving rate of repeated purchases
New customer numbers: 118% to plan
Customer
breakdown
FY2018
Age groups
Aged 60+
70％
Launch of periodic purchasing service
Beauty BOUQUET Club
~Customers continue periodic delivery
due to their fondness for the brand~
Special services for periodic purchase members:
Limited edition
presents
Support from
specialist staff
Events,
campaigns
etc.
¥1.0 billion in sales forecast in current period (previous period: ¥0.2 billion)
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ATTENIR: Successive releases of innovative products
Innovative new products
New DAY EMULSION
morning beauty
maintenance emulsion
On sale April 17, 2017
×
Unique communication model utilizing
the web
ATTENIR Fan
Community
Emulsion = functions
greater than just a cover for
facial lotion. Making a
difference to the face in the
afternoon
facebook
Using highlights to retouch
imperfections in the skin.
Creating fresh, high
definition skin.
Twitter
Skin quality retouch base
layer, SKIN RETOUCHER
On sale May 17, 2017
LINE
Successive releases of new products this fiscal period.
Working to expand customer base and sales
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Health Business
Supplements: Expanding the customer base
Mail order supplements: New customer acquisitions
2-year consecutive growth to
3.5 times
record high
Expansion of wholesale channels
(Million yen)
Trends in wholesale channel sales
10,000
+40%
8,000
6,000
FY '15
FY '16
FY '17
4,000
Mail order supplements: Customer numbers (existing)
2,000
Previous
peak
Record
level
Bottom
FY '09
FY '11
FY '13
Before Medium-term
Management Plan
FY2015
FY '06
Store
deployments
+50%
-40%
FY '15
FY '17
*Existing customers who made a purchase in the past four months (yearly average)
FY '15
47,000
FY '17
FY2017
→
54,700
Expanded number of store deployments, and
implemented enhancements including improved shelf
positioning and multiple placements
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Supplements: Strengthening cross-selling
Cross-selling trends (spend per purchase)
YoY spend per purchase
(mail order supplements)
115%
Essential Nutrient Pack (launching May 19, 2017)
All the essential nutrients for a healthy body
in a single simple pack
Average (existing customers)
Light users (5-9 purchases)
110%
Vitamins B & C
105%
100%
95%
DHA & EPA
Triple mineral,
Vitamin D,
& Lactobacillus
CoQ10, Vitamin E,
& Carotene
90%
16/04
16/07
16/10
17/01
Promoted targeted cross-selling tailored to
specific customer segments
Increased follow-up educating initiatives to
double that of the previous year
Costs reduced to 93% YoY as a result of
increased efficiency
Strong cross-selling
85%
Quantity: 30 packs
Price: ¥1,399 (incl. tax)
Sales channel: mail order, retail stores
Products addressing customers’
varying latent needs
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Food with functional claims labeling
Food with functional claims labeling
Wholesale sales ranking (Jan 2017)
1
2
3
Food with functional claims labeling line-up
Calolimit 30 doses
Enkin 30 days supply
Calorie Limit for the Mature
Aged – Hatomugi Blend Tea
Labeling approved for all 14
products.
Applications planned for 10 or more
products in FY2018
Develop star products into series
(Distributor: DyDo DRINCO INC.)
4
Major sweets producer (chocolate)
5
Major food producer (vegetable juice)
Survey by TRUE DATA
Customer Communications, Ltd.
Sponsored by Health & Beauty Retail Monthly
Sumaho Enkin
Launched March 2017
Calorie Limit for the Mature Aged
Set to launch June 20, 2017
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Sumaho Enkin (for smart Phone, PC users)
Comparison with Enkin
Education
al
Sumaho
Enkin
Enkin
Functionality
Eye fatigue relief
Anti-aging eye
care
Target
People under 45
People 45
years and over
Proportion of Enkin users and non-users
among Sumaho Enkin customers
Enkin users
20%
Non-Enkin users
80%
Online ad campaign
Low market
cannibalization, with only
20% of Sumaho Enkin
customers being Enkin
users.
Media tie-up
Mutual customer development
campaign with JINS
LINE
au JACK
New sales channels
Convenience and drug
stores, SM, GMS
Eyeglass chain
stores
Bookstores
Plan to achieve ¥6.8 billion in sales of Enkin products (+27% YoY) this fiscal period.
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Channel Strategy
Mail order - Shift to internet as main channel
■Reforming mail order model to reflect customer lifestyle changes
（1）Shift from catalogue mail order to internet shopping
（2）Develop information appropriate to every age group, and disseminate via
optimum medium
（3）Improve profitability of mail-order channel
Catalogue logistical costs, leveraging automatic mail marketing
■Mail order channel communication reform
20s
30s
40s
50s～
Reduction of
catalogue costs
Currently
Catalogue
All age groups receive the same information
Reconsider communication
methods to customers in
Catalogue
Going
forward
Focus on smartphone,
Re-do content taking
PC and digital medium
core target market into
consideration
20s to 40s
Refine sending target
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Retails stores - Customer growth initiatives
FY2017 new acquisitions (YoY)
FANCL beauty & health
A new style of store targeting young people
125%
Stores in Marronnier Gate Ginza 2 and Shinjuku
Marui main building opened in
March 2017
120%
115%
110%
105%
100%
95%
90%
1Q
2Q
3Q
4Q
・New products,
campaigns,
information
・ Coupons limited
to app
・Personalised
recommendations
Seasonal cherry blossom display Mobile app for members
The stores centre around an internal and external beauty
philosophy, and aim to be a place where customers can
have a relaxing experience and consult with staff
Establish successful model stores and continue
to roll out stores in urban commercial facilities
with predominantly younger customers
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Overseas: FANCL brand
■ Enhance a closer relationship with the distributor by developing territory products
Number of territory products developed
29
products
25
products
FY’18
H2
FY’18
H1
17
products
FY’17
H1
Channel strategy
Stores
・Accelerate store openings in China, to reach 190store
・New expansion into Malaysia
E-commerce
・Start E-commerce business in Hong Kong in H1
・Followed by expansion into China and other Asian
countries
YOGURT FACIAL
TREATMENT
T ZONE MASK
ESSENCE Q10
（Number of Stores）
End of
2016
End of 2017
(plan)
Hong Kong
39
Approx. 40
China
173
Approx. 190
Taiwan
8
Approx. 10
Singapore
5
Approx. 10
Malaysia
-
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Overseas – boscia brand
BOtanical SCIence
with
Advanced technology
■Introducing innovative products, achieving growth, via cosmetics specialty store Sephora
（Thousands
of dollars）
30,000
Sales
25,000
20,000
15,000
BLACK series
10,000
5,000
0
2010
2011
2012
2013
2014
2015
2016
2017
(plan)
Aiming to achieve wholesale-base sales of
¥4.0 billion within a few years
TSUBAKI series
SAKE series
Responding to further anticipated sales growth with expansion of contract manufacturing this period.
Also increasing speed of new product development and focusing on reducing manufacturing costs
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Measures to address rising delivering costs
■Strengthening Designated Delivery Place service
A unique FANCL service first launched in 1997 to support women’s
empowerment.
The service allows prior designation of a delivery location without need for inperson package receipt.
Example delivery places
Gas meter box
Stepping up notifications on website from May
Bicycle basket
*Sample screenshot
Promoting the use of Designated Delivery Place service as part of
social responsibility, and to further reduce delivery costs.
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Capital policy, Medium-term policy
Capital policy, looking to the next Medium-term Plan
■Capital policy
Basic policy
・Current period: Base - improve capital efficiency by improving profit ratio
・Fast development of structure capable of ROE 8%+
・Aware that shareholder returns are an important management issue
<Continuation of special dividend>
Usual performance-based dividend payments
(dividend pay-out ratio of at least 40%,
minimum ¥34)
＋
Special dividend ¥24
＝ ¥58 per share
■ Looking towards formulation of next Medium-term Management Plan
◆Focus firmly on profitability, not only increasing profits from sales growth
・ Efficient use of promotional and advertising expenses
・ Develop a logistics system to handle anticipated future distribution increase
・ Redevelop IT foundations, utilizing latest technology, e.g. AI
◆Further promote reforms to employee work styles
◆ Consider current capital policy based on management stage and growth investment
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