Shiseido Expands Into Middle East with Joint Venture

Shiseido is branching into the Middle East with the establishment of Shiseido Middle East FZCO, which is expected to be complete by the end of 2013. The new company is based in Dubai, the United Arab Emirates (UAE) in partnership with Creation Alexandre Miya Paris Ltd. (Creation) and will import and market Shiseido products in seven Middle East countries—Bahrain, Jordan, Kuwait, Oman, Saudi Arabia, Qatar, and UAE. The joint venture will commence business operations in January 2014.

Since 1997, Creation, owned by the Kotovsky family, has been marketing Shiseido prodcuts as a local distributor in the aforementioned seven countries, promoting marketing of prestige products as they have in Europe and the United States. While fragrances account for a major portion of the high-end cosmetics market in the Middle East region, Shiseido managed to establish a presence with its signature skin care products, which are now marketed at 140 stores in the region.

In light of the region’s high market potential underpinned by its large population that includes many affluent consumers, Shiseido has been examining the possibility of direct investment with the aim of further enhancing its market presence. This has resulted in the establishment of the joint venture with Creation, which is not only equipped with the expertise for selling skin care-centered, high-end cosmetics products and a good relationship with the retail sector, but is also well versed in Arab business practices.

The seven Middle East countries covered by Shiseido Middle East are home to a population of around 50 million, with an extremely young average age of around 30 years old. With a high gross domestic product (GDP) per capita, the region is known to have one of the largest affluent consumer bases. Although the region’s economy slowed immediately following the Lehman Brothers’ collapse in September 2008, an almost complete recovery was achieved by 2010, underpinned by rising oil prices. The region’s growth trend recovered in 2011 and stable growth is projected to continue. On the political and social front, the Arab Spring in 2011 triggered concerns over political stability. However, the situation had an unexpectedly positive effect for the UAE. As a leading player of the Gulf Cooperation Council (GCC) with a stable political base, the UAE was regarded as a safe haven for foreign and human capital, which has resulted in an ongoing increase in foreign direct investment on a value basis.

The high-end cosmetics market in the seven countries combined boasts a market size of 150 billion yen (2012) on a retail value basis, thus exceeding the market in Russia. Two-digit growth rates are expected to continue, backed by the existing affluent population as well as by expatriates working for foreign businesses, which are also projected to continue to increase.

Business operations in the seven countries will continue to be undertaken by Creation, the current distributor, until Dec. 31, 2013. After Jan. 1, 2014, Shiseido Middle East, will take over the reigns.

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