Recall in Japan Blemishes Skin-Whitening Industry; Booming Business in Asia Is Shaken After Women Using Kao’s Kanebo Products Develop Splotches

July 28, 2013, 2:25 p.m. ET

Recall in Japan Blemishes Skin-Whitening Industry

Booming Business in Asia Is Shaken After Women Using Kanebo Products Develop Splotches


TOKYO—Under the glare of the sun, 27-year-old Ria Ko holds a parasol, wears long gloves and applies a new layer of SPF 50 sunscreen every couple of hours. Her pale complexion is hard won—acquired through a decade of effort to stay clear of the sun—and each freckle that appears causes her a moment of distress. From Tokyo to Mumbai to Shanghai, the skin-whitening industry is booming and projected to grow into a $20 billion business globally by 2018, according to Global Industry Analysts. In Asia, a fair complexion is synonymous with beauty, higher social position and wealth. Companies are scrambling to develop the next hot product in a culture that for centuries has identified light skin as a status symbol—because it proved that a woman was exempt from field work. But the industry has been shaken after Japan’s second-biggest cosmetics company, Kanebo Cosmetics Inc. said last week that it has confirmed the appearance of white stains—some bigger than 2 inches in diameter—on the faces, necks, and hands of thousands of women who had used its skin-lightening products.The reports emerged after the company earlier this month recalled millions of products containing its Rhododenol brightening ingredient.

Kanebo, a unit of Kao Corp., 4452.TO -3.04% said it has received reports of skin conditions from 6,800 women, of whom 2,250 reported either splotches on multiple parts of the body, clearly visible splotches on the face, or large splotches. More than a hundred reports of similar cases have come in from Taiwan, Kanebo said.

Some of the unevenness faded after the women stopped using the Kanebo products, according to doctors and company spokesman Shinji Yamada. Doctors also said use of steroid-containing creams has helped some women.

The blow to Kanebo’s brand is likely to lower its sales in the fiscal second half by about 10%, some analysts said. Others, including Daiwa Securities analyst Katsuro Hirozumi, said that the impact could be bigger, if damage to the Kanebo brand is such that consumers stop using all Kanebo cosmetics.

“This will leave an impact on consumers’ perceptions of safety in skin-lightener products,” said Euromonitor International analyst Mariko Takemura. The brand that triggered the recall, Kanebo Blanchir, is a popular skin whitener, and all cosmetics makers will need to address those concerns, she said.

Possible causes raised by dermatologists include allergic reactions following prolonged use of the products and sun exposure, but Kanebo’s Mr. Yamada said that it could be months before the company understands why Rhododenol—which it developed over eight years followed by a three-year trial on 1,000 women—could cause skin disorders.

The company, which has promised to cover all related medical bills in women who show symptoms and is preparing to pay compensation, has enlisted Japan’s dermatologist association for help.

In Japan, Asia’s biggest market for skin whiteners, the fascination with pale skin dates back to at least the sixth century. Bihaku—or “beautiful white” in Japanese—came back into vogue in the 1990s amid a flurry of development of anti-aging and whitening substances by cosmetics firms.

Some 20 substances deemed effective in skin brightening have been approved by the Japanese government since 1988.

In some cases, it is hard to avoid substances added to skin-care products to lighten skin tones. More than 41% of facial moisturizers sold in Japan last year contained skin lighteners, on a retail value basis, according to Euromonitor. Skin lighteners made up roughly 20% of all skin-care products sold, says market-research firm Fuji Keizai.

On July 4, Kanebo recalled 4.36 million items containing its patented Rhododenol, or 4HPB, a synthetic version of a compound found in the bark of white birch trees. The recall covered all 54 of the company’s products containing the substance and extended to Taiwan, Hong Kong, South Korea, Thailand, Singapore, Malaysia, Indonesia, Myanmar, Vietnam, the Philippines and the U.K.

The Japanese government, which had approved the substance in 2008, is warning consumers to stay away from products with Rhododenol. The U.S. Food and Drug Administration has issued an advisory on the Kanebo brands that contain the substance.

While Japan spends the most money on whiter skin, making it the world’s biggest market for skin lighteners on a revenue basis, China and India are catching up fast, and will drive the global market to grow by 13% a year, according to Global Industry Analysts. Already, China and India have outstripped Japan in the use of skin-lightener materials in terms of volume. China used 422.7 tons of skin-lightener materials in skin-care products in 2012, almost five times as much as it used five years ago, while India’s consumption grew more than four times in the same period to 233.6 tons, according to Euromonitor. That compares with 199.9 tons of skin lighteners used in Japan, the market-research firm said.

Kanebo, which was betting on Rhododenol to drive growth in a saturated Japanese market, has kept a tight hold on the substance, and it said it hasn’t licensed its use outside the Kanebo group.

Shotaro Nagai, a spokesman at Shiseido Co., Japan’s biggest cosmetics firm, said Shiseido’s sales of skin lighteners have risen slightly since Kanebo announced its recall. He didn’t know if the two events were related, he said.

The Indian market for skin-whitening products is likely to grow by more than 8% in two years to about $428 million in 2013, or about half of an estimated $855 million market for facial-care products, according to Mintel, a market-research firm. “Fairness” is synonymous with beauty in much of India. In the matrimonial sections of the Sunday papers, prospective spouses regularly advertise their “fairness.”

The large number of consumer complaints about skin stains in the past few weeks suggests that the skin problems have been festering for some time before they came to light. The scandal also casts doubt on the thoroughness of product-safety tests for mass-market skin-care products—especially of those that promise dramatic results, such as lighter skin color.

But the obsession with white skin continues, and some industry watchers are skeptical that consumers will stop buying whitening products.

“Whiter skin just looks better on Japanese women, as it brings out the fineness in skin texture,” said Tokyo resident Yasumi Kawami, 33, who uses lightening products from Guerlain, a brand owned by LVMH Moët Hennessy Louis Vuitton SA. “People are not going to stop using bihaku products.”

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (, the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: