Discretion pays for Japanese brands in China amid territorial dispute

Wed May 21, 2014 5:30pm EDT
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By Kazunori Takada

SHANGHAI (Reuters) - When a dispute over the East China Sea flared up between China and Japan two years ago, graduate student Wei Hanyu ditched her Shiseido Co Ltd (4911.T: Quote) beauty products in protest, joining scores of Chinese consumers in a boycott of Japanese brands.

Wei, now 23, said she currently uses a face cream from Aupres, a brand she thought was Chinese or Korean, but which she recently found out is actually Japanese. Aupres is one of Shiseido's China-specific brands and the packages carry the parent company's name only in small print.

"Its advertisements left an impression on me that it's a brand designed for young people in cities, similar to some Korean brands," said Wei.

Several executives at Japanese firms operating in China say there is little they can do to counter the geopolitical fallout, but companies with products that Chinese consumers don't immediately identify as being Japanese have fared better.

Shiseido says it does not intentionally hide it name, but the discreet branding of its China-only cosmetics appears to be the way to go for Japanese companies seeking to win over consumers in the world's second-largest economy.

Shiseido spokesman Shotaro Nagai said sales of Aupres and its other China-specific brand Urara have grown faster than its premium own-brand line. He did not disclose sales figures.

"What's important in the eyes of the consumer is whether the brand image is that of high-quality and trust," said Toru Furuya, a Tokyo-based executive strategy director at brand consultancy Interbrand.

Ties between Japan and China have been strained by a territorial row over a group of islands, known as the Senkaku islands in Japan and the Diaoyu islands in China. Every time tensions flare, Japanese manufacturers of everything from cars to electronics see slowing sales in China.   Continued...

Customers walk out of a UNIQLO store at Taikoo Li Sanlitun shopping centre in Beijing May 12, 2014. REUTERS/Petar Kujundzic