Karen Frank joined Kao in 2009 and has since held many positions of increasing responsibility on her general management-track journey. Most recently, she acquired a second position in addition to her role as General Manager (Mass Sector), President of Kao USA, taking on the added geographical responsibilities for the Mass Sector across the Americas and Europe. She now oversees the entire portfolio of skin care, hair care, and mass brands, estimated at more than $750 million in revenue. Brands in her portfolio include Ban, Biore, Curel, Guhl, Jergens, John Frieda Hair Care, Wakati hair care and MyKirei by KAO. Karen also serves on the Board of Directors for Kao Australia PTY Ltd., Kao New Zealand Ltd., Kao (UK) Ltd., and Guhl Ikebana GmbH. She is the first woman President at Kao. Here, Karen talks to CEW Beauty News about the first half of the year.
When you’ve been in the industry as long I have you, think you’ve gone through almost every kind of business crisis. But not [a pandemic].
In December, Kao underwent a major reorganization to implement a sector-led structure rather than one that’s regionally led. Across Kao, we have a salon sector, a specialty sector and a mass sector. I oversee the mass sector across the Americas and Europe, so all Mass Brands and countries now directly report into me. I’ve had various international experience, but this is the broadest and most direct international business responsibility I’ve ever had. The U.S. is our largest market, followed by Germany and the U.K.
Prior to COVID-19, I had developed a strategy called Beyond, which is all about moving beyond where we are today. That includes creating variety in our portfolio outside of the categories we play, which are limited, especially in Europe, where we are primarily a hair care business. Additionally, we had developed several new brand offerings, including the launch of a new Environment Society Governance [ESG]-centered personal care brand, MyKirei by KAO; the launch of Sol by Jergens, a new sunless tanning line; Wakati, a line for kinky/coily hair, which is currently sold direct to consumer. So, we had all these new things that we were planning on. But consumers love to try new products when things are more certain in their world. Now that things are more uncertain, we saw a return to our trusted and true legacy brands. This required many pivots, as all of a sudden our hand and body lotion brands, as well as Biore, started to really take off. It was a little bit of a pivot from focusing on new, to focusing on core – or at least more of a balance, but it definitely flipped in terms of importance.
Two categories that did particularly well – even though they were not part of our strategic priorities at the time – were hair color and hand wash. We hadn’t put a lot of emphasis on our hair coloring business, but all of a sudden with salons closed, there was a lot of demand for our John Frieda Precision Foam Colour. Honestly, it skyrocketed. And also our hand wash, for obvious reasons. Those weren’t businesses we really focused on. But all of a sudden, the consumer demand was there.
One of our more strategic categories that did very well was hand and body lotion, so Jergens, Curel and Bio Oil, all did amazing. I think with people washing their hands so much they were just drying their hands out, so our lotion business really helped meet this need. One that was a little bit of a surprise for us was Biore. The Face Care category had been in a small decline, but all of a sudden we did some advertising on Biore Pore Strips, where we went back to our roots of showing our products in unexpected ways, and the strips have been on fire. But it makes sense because consumers have more time for self-care. So we had some really good surprises on products consumers considered essential, like hand wash, lotions and hair color, and also on things like self-care, from Biore.
I would say we probably struggled with a lot of the same things our competitors did. We are fortunate that we have such a big business, so for our hand and body lotions that may have needed components, we were able to use pumps from our hand washes. You just have to get creative, be flexible and figure things out. We did other small pivots that allowed us, for the most part, to stay pretty well in stock. Of course it hasn’t been perfect, but our teams are managing it very well, considering.
Challenges came from unexpected consumer changes – like having spring break and summer vacations canceled, that impacted our Natural Glow business, which had been doing really well in January and February. The same with travel sizes, they’re not selling because no one’s traveling. Stylers also aren’t doing well, as fewer people are styling their hair since they are home more, so we definitely had brand challenges there.
For e-commerce we have done a lot of work in the past couple of years to grow our business, especially with Amazon, walmart.com and target.com. We were in great shape to be able to capitalize on consumers’ pivots to e-commerce and our business is up, it’s doing great. Challenges come with that because it’s a different supply chain process, and there’s added cost. It may not be quite as profitable as some of the other businesses, but as far as consumption, and as far as our business, I’m very happy with the trends we’ve been able to realize.
Kao USA is owned by a Japanese company, so conversations around Black Lives Matter have enabled new types of dialogue and training opportunities with them, which I think has been super eye opening and encouraging. But here in the U.S., operating as a diverse company is not anything new for us; we’ve had a diversity and inclusion taskforce for many years and continue to focus on these efforts. My counterpart, Jesse Grissom, is Black; he is President of Operations. You can say or do all the right things externally, but internally if you’re not doing the right thing—it all starts there.
We are still figuring out the rest of 2020 but we think it’s going to be more of the same. We think hand and body lotion is going to continue to do well, as will Biore. We will be positioning our John Frieda Hair Care products, as well as our color lines, to get more attention. And, we’re also looking at doing some more things in the hygiene area because we think that will be an ongoing consumer concern.
We will be launching new things in the back half. You’ll see new things from Biore, Jergens and John Frieda. By and large the things that we were planning to launch are still on track.
At least at this time, Europe seems to be doing a better job than the U.S. at recovering from the pandemic, but as far as my business, most of it is in drugstores. In the U.K., Boots is my largest customer; in Germany it’s DM and Rossmann. Shoppers are slowly coming back to high street but foot traffic is still down. E-commerce is a big business for us in the U.K.; it’s picking up in Germany where it’s a smaller part of the total retail industry. In Germany, since there is a drugstore on almost every corner, the e-commerce channels have not grown as fast. In the U.S. there is definitely more of a move to e-commerce. And I think overall you’re seeing more of a one-stop shopping trend. For example, in Europe, grocery stores are becoming a more popular place to buy personal care products.
My guess is about 30 percent to 50 percent of consumers who are now shopping online because of the pandemic will stick with it, and the rest will resume shopping in stores when that normalizes. People do get into new habits, because shopping online is so easy. But then you’ve got people who love to browse ‘live’. I do think you’re going to get some of those people to return to that, but shopping has to become fun again. One of the things we’re seeing in Europe is that our new products aren’t doing as well because consumers aren’t browsing, they’re not discovering new things. With masks and other restrictions, they just want to be in and out quickly. So that’s been challenging. What I should also mention is that dollar stores in the U.S. are doing really well because of their unique value.
Obviously, it’s such a challenging and strange year for so many. Whether it’s COVID or the social unrest or not being able to be with family members. I think the message I’d leave with is that I feel pretty good, from a business standpoint, about our employees who have been great about responding to challenges and being agile. And even though we’re tied to this massive company, we are smaller here in the U.S. and we’ve been able to respond to what our consumers need from us. I just hope people stay safe and that we’re able to get this thing under control soon.