Shanghai agreement to help Kao to expand

　　SHANGHAI - The Japanese consumer goods producer Kao Group has said it will accelerate expansion in China and boost its annual sales in the country to about 100 billion yen ($1.29 billion) before 2016.

　　Kao said the sales revenue generated in the Chinese market was some 10 billion yen in 2010 and its sales network covers some 90 cities across China. In 2010, it saw growth of 128 percent in the cosmetic sector and 118 percent in the consumer goods sector.

　　Minoru Tokita, president and chief executive officer of Kao Commercial (Shanghai) Co Ltd, said the company plans to expand its distribution network to more than 650 cities in China, including county-level and prefecture-level cities, in the next five years.

　　To better support growth, the company signed an agreement with the Chinese consumer products manufacturing giant Shanghai Jahwa United Co Ltd on Friday, allowing it to use the company's distribution network.

　　"The Chinese market has taken a prioritized role in our long-term development plan because of its good economic situation and increasing purchasing power. (Shanghai) Jahwa has excellent distribution channels and understands Chinese consumers better. It will help us achieve a win-win situation," said Ozaki Motoki, executive president and representative director of Kao.

　　"Kao has a good R&D (research and development) base and a wide product range, the cooperation will allow us to learn more from this industry leader," said Ge Wenyao, chairman of the board of Shanghai Jahwa.

　　Kao did not provide details about the sales revenue it expects to generate through Shanghai Jahwa's distribution channels.

　　Tokita said Kao China will pay more attention to developing the markets for cleaning and sanitary products and diapers in China. A new factory in Hefei, Anhui province, will begin operations by the end of 2012.

　　Kao entered the Chinese market 18 years ago, but its performance has not been eye-catching, compared with rivals such as Unilever PLC and United States-based Procter & Gamble Co (P&G).

　　Figures from the consultancy Euromonitor suggest that P&G's sales of beauty-care products reached 26 billion yuan ($4 billion) in China last year.

　　Kao admitted that it has been fairly conservative in exploring the Chinese market.

　　"It is relatively hard for us to develop our sales network in China, and we have spent too much time establishing distribution channels," said Tokita.