Sanjiu unit in cosmetics-sale venture

Kanebo Cosmetics Inc., the cosmetics-operations entity spun off from Japan's ailing Kanebo Ltd., said Tuesday it would set up a joint venture with a unit of China's largest drugmaker, Sanjiu Enterprise Group, to sell cosmetics in drug stores on the Chinese mainland, reported Shenzhen Daily on Wednesday.

Kanebo Cosmetics would own 67 percent of the new entity while Sanjiu Enterprise's Tokyo-based Sanjiuhonsoubou Medical & Pharmaceutical Co. would hold the remainder, Kanebo Cosmetics said.

The new joint venture, whose office location has not yet been determined, will start selling Kanebo's cosmetics from April 2005 at drug stores in Shanghai, Beijing and Guangzhou using Sanjiu's retail network. The joint venture aimed to post annual sales of US$65.99 million on a retail basis in the year ending March 2008 in a total of 500 drug stores, Kanebo Cosmetics said.

It is the latest Japanese company to seek a bigger slice of the vast Chinese market, where companies from carmakers to advertising agencies are looking to expand their presence.

But with annual sales in its China's department stores totalling roughly US$18.84 million last fiscal year, Kanebo Cosmetics is well behind its rivals.

Japan's biggest cosmetics maker, Shiseido Co., posted sales of about US$188.40 million in China on a retail basis last fiscal year. It aims to boost its annual sales in the country fivefold to US$941.80 million for the fiscal year through March 2009.

But a Kanebo spokesman said its plan for sales in drug stores had potential for future growth as the retail network in China broadened and deregulation in China progressed. Kanebo said the Chinese cosmetics market had grown rapidly in recent years to reach US$6.12 billion last year and was expected to eventually rival Japan's US$13.47 billion cosmetics market.

(Shenzhen Daily/Agencies)