Kao Corporation Accelerates Strategic Transformation and Emerging Market Expansion Under K27 Mid Term Plan
Date : 2026-02-10
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Kao Corporation, a global leader in consumer goods and chemicals, is currently undergoing a fundamental strategic shift under its mid-term management plan, K27. The plan marks a departure from traditional mass-scale expansion toward a high-value growth model powered by original technology and structural agility. This transformation is most visible in its tactical rebalancing within emerging markets and its focus on the Global Sharp Top strategy.
Figure Kao Integrated Report 2025 Strategic Momentum & The Path to K27
Structural Adjustment in the China Market
For years, China served as a major engine for Kao consumer business. However, shifting market dynamics, including slowing consumption and intense local competition, have prompted a significant structural pivot. Kao has moved away from a heavy-asset manufacturing model in China, specifically ending its internal production of Merries diapers to focus on light-asset operations.
The group is now concentrating resources on high-growth segments such as the derma-care market with its Curél brand and targeted marketing for the Laurier brand. By focusing on six core brands and moving toward high-loyalty marketing rather than mass-reach, Kao aims to protect its margins against local price competition. Furthermore, its chemical division has found a niche in the Chinese agricultural sector, utilizing precision interface control technology to develop adjuvants for drone-based pesticide spraying, addressing local labor shortages.
Expansion via Co-Creation in Brazil and Thailand
In markets where Kao lacks established distribution networks, the company has abandoned its traditional self-sufficiency model in favor of co-creation. In Brazil, Kao partnered with Mitsui and Co. to leverage local logistics and management expertise, successfully introducing Bioré UV protection products.
In Southeast Asia, particularly Thailand, Kao has formed a strategic alliance with the CP Group. This collaboration combines Kao product innovation with the vast retail and supply chain network of the CP Group to develop environmentally friendly consumer products. This Scrum-style organizational approach is supported by over 2,000 internal citizen developers who use digital tools to speed up e-commerce operations, allowing Kao to launch products on platforms like TikTok at unprecedented speeds.
Precision Science and Social Contribution
The core driver of Kao competitiveness remains its precision interface science. This technology is being applied across diverse sectors to solve global social issues:
1. Environmental Protection: The development of PFAS-free fire extinguishing agents using interface control technology.
2. Sustainability: Bio IOS technology, which increases the utilization rate of palm fruit solids for surfactants by threefold, reducing the pressure on forest resources.
3. Health and Safety: Mos Block technology, which alters skin surface properties to prevent mosquitoes from landing, thereby reducing the risk of infectious diseases like dengue fever.
4. Infrastructure: NEWTRACK 5000, a road modifier made from waste PET plastic that can increase road durability by up to five times.
Financial Performance and K27 Targets
Kao financial health saw a significant rebound in FY2024. Operating profit reached 146.6 billion JPY, a 144 percent increase year-on-year. The Return on Invested Capital (ROIC) improved from 4.1 percent to 9.2 percent, positioning the company to meet its target of over 11 percent by 2027. This recovery was largely attributed to the successful implementation of structural reforms, SKU reductions, and the ability to maintain premium pricing through technical differentiation.
Table Key Financial and Strategic Metrics Overview
Expert Outlook
Market analysts observe that Kao is successfully sacrificing low-efficiency scale for long-term profit leadership. By divesting from traditional, high-competition manufacturing in China and focusing on technology-heavy functional products and chemicals, Kao is evolving into a science-driven enterprise with high entry barriers. While macro headwinds in China persist, the group expansion in Southeast Asia, Brazil, and Europe provides a diversified buffer for future valuation growth.
About HDIN Research
Profile: HDIN Research focuses on providing market consulting services. As an independent third-party consulting firm, it is committed to providing in-depth market research and analysis reports.
Website: www.hdinresearch.com
E-mail: sales@hdinresearch.com
Figure Kao Integrated Report 2025 Strategic Momentum & The Path to K27
Structural Adjustment in the China MarketFor years, China served as a major engine for Kao consumer business. However, shifting market dynamics, including slowing consumption and intense local competition, have prompted a significant structural pivot. Kao has moved away from a heavy-asset manufacturing model in China, specifically ending its internal production of Merries diapers to focus on light-asset operations.
The group is now concentrating resources on high-growth segments such as the derma-care market with its Curél brand and targeted marketing for the Laurier brand. By focusing on six core brands and moving toward high-loyalty marketing rather than mass-reach, Kao aims to protect its margins against local price competition. Furthermore, its chemical division has found a niche in the Chinese agricultural sector, utilizing precision interface control technology to develop adjuvants for drone-based pesticide spraying, addressing local labor shortages.
Expansion via Co-Creation in Brazil and Thailand
In markets where Kao lacks established distribution networks, the company has abandoned its traditional self-sufficiency model in favor of co-creation. In Brazil, Kao partnered with Mitsui and Co. to leverage local logistics and management expertise, successfully introducing Bioré UV protection products.
In Southeast Asia, particularly Thailand, Kao has formed a strategic alliance with the CP Group. This collaboration combines Kao product innovation with the vast retail and supply chain network of the CP Group to develop environmentally friendly consumer products. This Scrum-style organizational approach is supported by over 2,000 internal citizen developers who use digital tools to speed up e-commerce operations, allowing Kao to launch products on platforms like TikTok at unprecedented speeds.
Precision Science and Social Contribution
The core driver of Kao competitiveness remains its precision interface science. This technology is being applied across diverse sectors to solve global social issues:
1. Environmental Protection: The development of PFAS-free fire extinguishing agents using interface control technology.
2. Sustainability: Bio IOS technology, which increases the utilization rate of palm fruit solids for surfactants by threefold, reducing the pressure on forest resources.
3. Health and Safety: Mos Block technology, which alters skin surface properties to prevent mosquitoes from landing, thereby reducing the risk of infectious diseases like dengue fever.
4. Infrastructure: NEWTRACK 5000, a road modifier made from waste PET plastic that can increase road durability by up to five times.
Financial Performance and K27 Targets
Kao financial health saw a significant rebound in FY2024. Operating profit reached 146.6 billion JPY, a 144 percent increase year-on-year. The Return on Invested Capital (ROIC) improved from 4.1 percent to 9.2 percent, positioning the company to meet its target of over 11 percent by 2027. This recovery was largely attributed to the successful implementation of structural reforms, SKU reductions, and the ability to maintain premium pricing through technical differentiation.
Table Key Financial and Strategic Metrics Overview
| Metric | FY2024 Achievement | 2027 Target / Strategic Goal |
|---|---|---|
| ROIC (Return on Invested Capital) | 9.2% | Above 11.0% |
| Operating Profit | 146.6 billion JPY | Record high (Exceeding 211.7 billion JPY) |
| SKU Reduction | Approximately 13.0% reduction | Inventory and capital optimization |
| Digital Transformation (DX) | 2,000+ citizen developers trained | 3,000 citizen developers by 2027 |
| Overseas Sales Target | Positive growth trend | Above 800 billion JPY |
Market analysts observe that Kao is successfully sacrificing low-efficiency scale for long-term profit leadership. By divesting from traditional, high-competition manufacturing in China and focusing on technology-heavy functional products and chemicals, Kao is evolving into a science-driven enterprise with high entry barriers. While macro headwinds in China persist, the group expansion in Southeast Asia, Brazil, and Europe provides a diversified buffer for future valuation growth.
About HDIN Research
Profile: HDIN Research focuses on providing market consulting services. As an independent third-party consulting firm, it is committed to providing in-depth market research and analysis reports.
Website: www.hdinresearch.com
E-mail: sales@hdinresearch.com