Toru Yoshimura, director of the board and senior executive officer of health science strategy at Kirin highlighted the above during Kirin Investor Day 2024 held earlier today (December 18).
In a video presentation, he listed three key goals that the company hopes to achieve for the health science business.
First, Kirin hopes to generate a revenue of 300bn yen (US$1.95m) for its health science business by 2030.
Another key target is to hit 10 per cent normalised operating profit margin or more by year 2030. The longer-term goal is to achieve a margin of 15 per cent.
Third, the company is targeting a growth rate that is one to two per cent higher than the market rate.
To do so, the company will focus on achieving steady growth in its core markets, including Japan, Australia, and China, through Kirin itself as well as its subsidiaries FANCL and Blackmores.
“First, the most important thing going forward is steady growth in the core markets.
“Although the status of our brands differs from country to country, we will continue to enhance our brand power by accurately identifying the needs in each country, increasing consumer trust, and making aggressive brands investments.
“In this way, we will further solidly our position as a market leader in each brand and cultivate markets where we are less well known,” said Yoshimura.
Kirin’s core strength in the health science business lies in its functional food and beverages containing the postbiotic LC-Plasma or Lactococcus lactis strain Plasma.
The postbiotic has been used for supporting immune health by activating the plasmacytoid dendritic cells (pDC) – known as the “leader” of immune cells.
Yoshimura said that the company would continue to centre its health science business strategy around “natural health”, which includes immune care and holistic health management such as adequate nutrition, exercise, and rest.
This is because the company believes that individual health challenges, such as lifestyle-related diseases, brain function, and skin health can be effectively addressed by improving natural health.
Launching LC-Plasma in new markets
As such, Kirin is planning to launch LC-Plasma products in markets outside of Japan, including Australia and South East Asia where its subsidiaries such as Blackmores already enjoys a strong retail presence.
For example, it plans to launch LC-plasma products into Taiwan in FY2025, and into Australia and South East Asia including Thailand, Vietnam, and Malaysia from FY2026.
“The product will first launch in Taiwan in 2025 and aim to gradually roll out the products in other areas from 2026 onward. It would have been difficult for Kirin to achieve this timeline on our own.
“The speedy achievement is due to Blackmores' accumulated capability to respond to regulatory authorities, and this capability can also be effectively utilized when launching new ingredients and products other than LC-Plasma,” said Yoshimura.
In Australia specifically, it is also aiming to generate new demand by developing new health claims to expand product sales.
“In order to create added value among the Group, Blackmores is working closely with Kirin’s product development team and will shorten the lead time for launching new products, such as those containing LC-Plasma, by promoting collaboration and integration of functions, thereby accelerating the growth cycle.”
There are even plans to develop LC-Plasma into a vaccine as part of the “Strategic Center of Biomedical Advanced Vaccine Research and Development for Preparedness and Response” (SCARDA) project run by Japan’s Cabinet Office.
Synergies for consumer understanding
Kirin is also planning to tap on synergies across FANCL and Blackmores to deepen consumer understanding and grow its sales channels.
For instance, it will tap on FANCL’s point-of-sales data from both external platforms and sales data from its direct online platform to understand consumer purchase patterns.
Blackmores, on the other hand, regularly conducts consumer surveys consisting of 3,000 consumers in various countries.
“In addition to Kirin’s market research capabilities accumulated in the mass market, we will combine FANCL’s data analysis capabilities from their complex purchasing data from direct store and online platform, and Blackmores' consumer research know-how in major APAC countries,” said Yoshimura.
He said that Blackmores has also been using artificial intelligence (AI) for consumer analysis and has started to see positive results, such as a faster cycle from market research to new product development.
“The Kirin Group will continue to apply these best practices throughout APAC.”
There may also be plans in utilising the multi-packs technology used by FANCL in its “Age bracket-based supplements” for Blackmores, he added.
Synergies for sales expansion
Across APAC, there may be plans in the medium to long term in leveraging Blackmores' sales channels to expand the FANCL brand.
In China, on the other hand, there are plans to sell Blackmores and FANCL via local channels.
Currently, both brands are mainly sold into China via cross-border e-commerce.
He added that there were plans to achieve cost efficiencies through channel and back-office function collaboration.
“For example, we are considering utilising local OEMs contracted by Blackmores for FANCL products (in China).”
In Japan, the company hopes to tap on FANCL’s expertise in selling Kirin’s products.
Currently, Kirin’s supplement business is highly focused on its own online channels to drive sales and is facing profitability challenges.
As such, the company will tap on FANCL’s knowledge to expand its presence on external online platforms and increase revenue and profitability.
“In addition, by utilising FIT, FANCL’s proprietary IT system, we will leverage its customer relationship management (CRM) strengths to not only increase the loan-to-value (LTV) of our owned online and catalogue platforms consumers, but also to work toward achieving a high regular consumer retention rate.
“By combining these brands and channels, we aim to achieve growth far exceeding the average growth rate of the domestic market and bring FANCL and Kirin’s supplement business to the top-class scale in Japan,” said Yoshimura.
SEA – Thailand focus
In South East Asia, Kirin plans to centre its health science business around Thailand, which it says has a high demand for women’s health and beauty products. This is also a relatively larger market in the region.
“We also believe that FANCL’s skincare brands and technologies can be utilised in Thailand, where women’s health and beauty categories are in high demand.”
In Thailand, Blackmores is also said to enjoy the number one market share in the VDS space, with a brand awareness of 77 per cent.
Partial business transfer of Kyowa Hakko Bio
Kirin is also transferring part of its Kyowa Hakko Bio business - namely amino acid and human milk oligosaccharides (HMO) portfolio - to Chinese biotech firm Meihua by next year as part of its restructuring.
Kyowa Hakko Bio will then focus on proprietary functional ingredients.
“The structural reform of Kyowa Hakko Bio, a deficit business that had been a cause of concern, has been our top priority since the quality issues in 2019, and we were able to sign an agreement to transfer our amino acid and HMO businesses to MEIHUA, a leading Chinese biotech, within the next year,” representative director of the board, president and COO Takeshi Minakata.
“We promised everyone that a direction would be provided by February of next year, and I am relieved that we were able to do so ahead of schedule,” he added.
In its latest financial results published last month, Kirin reported that Kyowa Hakko Bio’s revenue for Q3 had decreased slightly by 0.6 per cent to 37.9bn yen (US$246.49m).
Normalised operating profit for Kyowa Hakko Bio, on the other hand, went up from a loss of 5.1bn yen (US$33.16m) to a loss of 4.3bn yen (US$27.96m).
