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White spot affliction still a black mark for Kanebo

Publication Date : 07-07-2014

 

The problem of white spots afflicting the skin of some users of Kanebo Cosmetics Inc.’s products continues to have a negative impact on the company. Friday marked one year to the day since the Tokyo-based firm announced the existence of the damage to people’s health.

Kanebo has admitted the possibility that people suffering from the white blotches after using the company’s skin-whitening cosmetic products may continue to suffer from aftereffects, and has decided to pay damages for the suffering caused.

There is a possibility that the damages will exceed 10 billion yen (US$98 million).

There are about 19,000 suffers. Of them, the company also admitted the possibility that about 4,000 sufferers may not completely heal as large white spots remain on their hands and faces.

Thus, the company decided to pay damages for the aftereffects at the current stage.

“We will interview them by the end of August,” a Kanebo public relations spokesperson said. “For sufferers whose condition has shown no sign of improvement, our company will propose paying damages.”

Using cases in which remnants of injuries remain on the faces of traffic accident victims for reference, the company will likely pay 2.5 million yen to 10 million yen per person.

If the company pays 2.5 million yen each to the 4,000 people, the amount will reach 10 billion yen.

The amount accounts for 15 percent of the projected after-tax profit of Kanebo’s parent company, Kao Corp., in its 2014 business year. Through December 31 this year, Kao projects 75 billion yen in after-tax profit.

Toyonobu Kawa, a Kanebo executive responsible for measures for the sufferers, said, “We had predicted that the symptoms would be relieved in six months to a year.”

Though medical expert groups, including the Japanese Dermatological Association, are studying the cause of the white spots, no treatment method has been found.

Kanebo has decided to pay damages for both physical and mental suffering to all of the sufferers.

About 4,000 victims whose symptoms have been completely relieved have received the money, but payments to the remaining about 15,000 people will be made from now on. Thus, the amount of the payment will surely balloon.

It is likely that negative impacts on Kanebo’s business will last for a long time. The company’s annual sales in the 2013 business year that ended December 31 fell about 10 billion yen from the previous year to about 180 billion yen.

Also in this business year, the company has reduced the number of TV commercials and other advertisements for its products in general and voluntarily refrained from sales campaigns.

The company has suspended the selling of skin-whitening products, except those that do not contain substances suspected to be the cause of the white spots.

The company has no idea when or whether its market share in the field will recover.

Kao earmarked a 12.1 billion yen loss in its 2013 business year that ended December 31 for the subsidiary’s costs of recalling the skin-whitening products and payment of medical expenses to the sufferers.

Kanebo’s payment of the damages will begin negatively impacting the company’s business performance from earnings results in this business year ending December 31.

Popular product

Skin-whitening products mainly sell well in summer. The annual sales of such products are estimated at about 200 billion yen. Nowadays, along with anti-aging products, skin-whitening products are pillars of sales for cosmetics makers.

Because of the long-lasting problem of Kanebo’s product-induced white spots on customers’ skin, rival companies are more strongly emphasizing the safety of their products in their own sales promotions.

Kose Corp. has its sales clerks in stores offer detailed explanation about substances contained in skin-whitening products. Ahead of the summer sales season, Kose employees in research and development departments serve as instructors for sales clerks and explain the safety of the company’s products to them.

Other cosmetics makers have taken steps to ease consumers’ anxiety by, for example, distributing free samples in stores and then selling the products later.

At its booths in department stores, Rohto Pharmaceutical Co. recommends consumers receive patch tests if their skin is especially sensitive. The tests check whether putting on beauty serums will cause any abnormal effects.

The size of the market for skin-whitening products is almost unchanged since the Kanebo problem arose one year ago.

“The popularity of such products has not waned,” an industry source said. “Other companies are competing for Kanebo’s market share.”

US$1 = 102 yen

 

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