Within the domestic cosmetics market of Japan, growth has plateaued for several years (Fig. 1). A major cause of this is the declining sales of middle-priced cosmetics products due to deflation in Japan.
However, according to an estimate by Yano Research Institute, the manufacture of cosmetics on assignment reached 200 billion yen in 2011 (Fig. 2). There is no data on the exact number of contract cosmetics manufacturers in Japan, but it will likely be around 2,000, with about 1,000 members of the Japan Cosmetic Industry Association plus 1,000 which are not members of the association. Even though they are all cosmetics manufacturers, they vary in size and business style. For example, there are big enterprises that employ more than 1,000 people to manufacture all kinds of cosmetics, such as Ninon Kolmar, and on the other side there are one-man companies that receive orders via mobile phone calls and undertake preparation of formulations.
Growth in a slowing market
The growth of the cosmetics industry in Japan seems to be slowing down, but the contract manufacturing market continues expanding. There are two reasons. Firstly, increasingly many companies possessing no production facilities have entered into the cosmetics market. Companies from different industrial fields started to engage in cosmetics production, such as Fujifilm Corporation and other pharmaceutical, food, and apparel manufacturers. Moreover, demands for outsourcing have increased due to growing internet sales, which require only virtual stores. Marketing companies, which only draw up plans, have also entered into and activated the market. Another reason is the revision of the Pharmaceutical Affairs Law in 2005. The clause that demanded both the names of the manufacturer and seller to be stated was abandoned. Thanks to this, big name manufacturers are now more happy to outsource production of some of their products. Today consumers are not able to know who actually produced the product because only the name of the seller is stated. Unlike in the case of pharmaceutical products, a license is not needed to sell cosmetic products. Contract manufacturers also need to change themselves. The price of cosmetic products in Japan has dropped, forcing contract manufacturers to lower production costs. Some companies have moved their production bases abroad to reduce costs.
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