A serious bet on skincare: a drug maker creates Hada Labo (2001)

Turning an unrelated field into an extension of strength

The heart of this decision was that Rohto found its way out of dependence on pharmaceuticals not in a wholly unrelated field but in an extension of its own strength — skin science. Examples of drug makers succeeding in cosmetics were scarce, yet Rohto entered by focusing on how well an ingredient works and offering high function at a low price, which also fit the growing drugstore channel. It recast the knowledge of skin and ingredients accumulated in eye drops and topical medicines directly into the appeal of a cosmetic — more accurately seen as a decision to shift its position sideways than as an adventure.

The Rohto-style model, though — narrow the range, spend heavily on advertising and take the market — is exposed to the pressure of commoditisation once a market matures. Indeed, Hada Labo’s domestic growth eventually ran its course, leaving the task of raising the next lead product. That the shift from pharmaceuticals to cosmetics was a success is beyond doubt; but the cosmetics business too will one day have to give way to the next pillar. Onto which business to project a strength next — this decade-long diversification is a case in which a mature company answered, once and well, in the form of cosmetics, that question it is asked again and again.