Kao Overvie the potential of empathetic digital marketing. Digital marketing that sharpens understanding of consumers In an initiative supported by a major logistics company, Kao’s

Kao Overview

We put our heart into our products.They’re our way to make your day better, brighter, and more beautiful.

Kao Overview 2017 1

Towards a Global Presence

CEO Message

The Kao Group has made the Kao Way, the

Group’s corporate philosophy, the foundation

of all our corporate activities. Our mission is to

enrich the lives of people globally and contribute

to the sustainability of the world.

Since the company’s founding in 1887, Kao

has been delivering unmistakable value to people

everywhere. Our consumer products promote

cleanliness, beauty and health, while our

chemical products contribute to the development

of diverse industries.

In 2009, we unveiled the Kao Environmental

Statement. By striving to reduce environmental

impact across every aspect of business, and

by constantly searching for sustainable raw

materials, we are helping to conserve the

natural environment and contribute to social

sustainability.

Fiscal 2017 is the first year of K20, the Kao

Group Mid-term Plan for 2017–2020. Targeting

even greater future growth, K20 is built around

three commitments: to foster a distinctive

corporate image; to maintain profitable growth;

and to provide returns to all stakeholders.

The environment, health, aging and hygiene

are all key challenges, and Kao is tackling them

by creating new value that leverages the Group’s

collective strengths.

As we transform ourselves to drive change,

Kao will remain attentive to people’s needs and

work to become a company that enjoys global

support.

Michitaka SawadaPresident and Chief Executive Officer

The Kao Way

Kao Overview 2017 3

Creating new value through a consumer driven approachKao’s Consumer driven approach is expressed as Yoki-Monozukuri*, a fundamental commitment

to user satisfaction. Yoki-Monozukuri results from painstaking quality assurance by all employees.

This stance, which dates all the way back to our founding, enables us to offer products of unique

value that bring a breath of fresh air to everyday life.

Yoki-Monozukuri at Kao

*We define Yoki-Monozukuri as “a strong commitment by all members to provide

products and brands of excellent value for consumer satisfaction”.

Kao Overview 2017 5Kao Overview 20174

Yoki-MonozukuriConsumer Driven

Principle

Interactive Communication

Improved Products

Res

earc

h a

nd D

evel

opment

Production and Sales

Marketing and Product Developm

ent

Yoki-Monozukuri

Kao Group’s cosmetics research facility, the Beauty Research &

Innovation Center, was the first place in Japan to deploy functional

MRI (fMRI), which can analyze brain activity such as emotions. Then,

with the installation of COCOLAB, a research space for exploring

emotional value, Kao broke new ground in beauty R&D by achieving

integrated access to science and kansei: emotion linked to perception.

R&D harnessing sensory and scientific approaches offers a deeper understanding of beauty

The new Data Science Laboratory is a key facility for deepening

our understanding of an increasingly diverse customer base.

From a vast sea of data, we can now precisely identify consumer

preferences and needs. The Data Science Laboratory will facilitate

collaboration both inside and outside the company, enabling Kao to

explore the potential of empathetic digital marketing.

Digital marketing that sharpensunderstanding of consumers

In an initiative supported by a major logistics company, Kao’s

new trailer relay transportation system lets truck drivers exchange

trailers at a relay point. This enables them to make short-haul,

same-day runs, reducing their working hours while improving

operational efficiency, as well as significantly lowering costs and

CO2 emissions.

Japan’s first cross-industry, cross-company trailer relay transportation system

Careful exploration of consumer needs leads to products that surpass expectationsWe create products that feature innovative technologies and reflect a careful exploration of

consumer needs. We then ensure that each product has clear benefits and is easy to choose at

the point of purchase. The entire Kao Group works together to advance Yoki-Monozukuri, and

approach the goal of true consumer satisfaction.



Consumer feedback generates products thattruly resonate

Consumer Driven Principle

The Genba is where the action is, on the front line of everyday business life. Kao is committed to

understanding every aspect of how people actually live: their lifestyle Genba. To offer people an

even better, more satisfying lifestyle, we must listen to those who use our products, and identify

exactly what they want, their fundamental needs. By using this information in the development

process, we can deliver products that both delight and surprise.


The Raku-raku Eco Pack Refill was developed in response

to consumer calls for a refill product for viscous liquids like

shampoos and conditioners. The pack is easy to open and helps

to reduce waste. You simply set it upside-down on top of the

bottle for a quick refill with no spills and no liquid wasted.

The Raku-raku Eco Pack Refill, so easy to use

“I wish you could make it easier to tell the shampoo from the

conditioner when I’m washing my hair with my eyes closed.”

Taking that kind of comment into consideration, along with the

needs of the visually impaired, in 1991 Kao begin to add tactile

indicator notches to the side of all shampoo bottles.

Indented notches on shampoo bottles for fingertip identification


Canada

USA

Mexico

Brazil

South Africa

Sweden

Finland

Russia

Denmark

Norway

Germany

The Netherlands

UnitedKingdom

Spain

France

Belgium

Switzerland

Italy

Austria

Czech Republic

Korea

China

Hong Kong

Vietnam

Thailand

Malaysia

Singapore

Indonesia

Australia

New Zealand

Japan

Taiwan

The Philippines

Providing high-value products andservices in some 100 countries and areasA satisfying, enriching life for people everywhere. Kao’s business is expanding globally across two

fields in particular: the Consumer Products Business, which is designed to enhance cleanliness, beauty,

and health; and the Chemical Business, which contributes across the board to industrial development.

Global Expansion

Asia

Europe

Americas

* Please visit our website for a list of Kao Group companies. http://www.kao.com/group/en/group/gateway.html

Kao Corporation S.A.Kao Germany GmbH Kao USA Inc. Quimi-Kao, S.A. de C.V.

Kao Industrial (Thailand) Co., Ltd.

PT Kao Indonesia

Kao (China) Holding Co., Ltd.Kao Corporation


Beauty Care Business

Human Health Care Business

Fabric and Home Care Business

Chemical Business

Principal Locations and Business Development

601.6billion yen

345.2billion yen

2016 Segment

Net Sales

2016 Segment

Net Sales

We believe in the beauty of everyday living

Consumer Products Business

The Fabric and Home Care Business

provides products that boost

cleanliness and comfort in everyday

life. Fabric care brands include Attack

laundry detergent and Humming fabric

softener, while home care products

include Cucute dishwashing detergent

and Magiclean household cleaner.

From cosmetics lines such as Sofina and

Kanebo, each offering its own distinct

brand impact, to skin care and hair care

products, the Beauty Care Business

responds to beauty aspirations the world

over with technologically advanced

products.

The Human Health Care Business offers

a broad selection of products such as

Healthya, a functional health beverage

developed through many years of research.

Designed to contribute to a comfortable

and healthy life, products range from,

Laurier sanitary napkins and Merries baby

diapers to oral care items such as Pure Oral.

Beauty Care Business

273.1billion yen

2016 Segment

Net Sales

Human Health Care Business Fabric and Home Care Business


Innovative technology that contributes to industrial development

Chemical Business

2016 Segment

Net SalesThe Chemical Business offers an array of products

including oleo chemicals and derivatives, surfactants,

high-performance polymers, and fragrances. It

continues to grow by developing and supplying

industrial products to a wide range of businesses

both globally and within the Kao Group. Paper and

pulp, food, pharmaceuticals, civil engineering and

construction, information materials, and electronics

are among the many industries our products support.

Chemical Business

273.8billion yen

*Includes internal sales between businesses.


Plastics and Rubbers

CivilEngineering and

Construction

Information Materials

LubricantsDetergents, Perfumes, Cosmetics

FragranceMetal CastingColorantsPaper and Pulp

Pharmaceuticals

PolyurethanePrecision

Industries andElectronics

Agrochemicals

Food Products

BRIDGESTONE

REGNO GR-Leggera

Mighty is a high-performance water-reducing

additive that makes possible high-quality

concrete featuring superior usability. This

product responds to requirements in the civil

engineering and construction industries for

high-strength, high-durability concrete.

Mighty,for high-strength,

high-durability concrete

Kao’s new silica dispersion

improver contributes to CO2

reduction by balancing both

the fuel-efficient and wet-grip

performance of tires to the

highest possible standards,

using Kao’s interface control

technology.

Kao was the world’s first manufacturer

to succeed in developing toner binder with

polyester resin. This made possible

a significant reduction in the

temperature at which toner fuses

to paper, thus reducing

environmental impact.

New silica dispersion

improver essential for

fuel-efficient tires

Toner and toner binder that

boost environmental

performance through low-

temperature fusing

To a brighter future, for youand the world

Sustainability


Kao works with diverse stakeholders to reduce environmental

impact throughout the product lifecycle, from procurement of

raw materials to production, distribution, use, and disposal.

Reducing environmental impact across the entire product lifecycle

The Environment

In 2009, Kao began visiting schools with the goal of helping

children develop their “skills for living.” For children, guidance on

correct hand-washing techniques is not just instructive but also

enjoyable.

Lessons for the young

Hygiene

Using health-related research findings, along with visceral fat

measuring devices and other tools, Kao supports the promotion

of health and fitness.

Working side by side with localcommunities, Kao promotes educationin beneficial lifestyle habits

Health and Aging

Kao Sustainability Statement

In 2013, Kao Group formulated the Kao Sustainability

Statement, clarifying our commitment to contribute to the

resolution of global issues through our business activities.

A number of key challenges were identified, including the

environment, health, aging, and hygiene. The Kao Group as a

whole continues to focus on these themes.

Global Commitment

4-0024-07-100-00

RSPO

The Roundtable on Sustainable Palm

Oil (RSPO) is an international non-profit

organization working to address issues

associated with palm oil production,

including ecosystem destruction in tropical

forests, and harsh labor conditions on palm

oil plantations. Kao has been a member of the

Roundtable since 2007.

The United Nations Global Compact

Participation in the United Nations Global

Compact represents a commitment by

corporations around the world to support

and act in accordance with ten key

principles relating to human rights, labor,

the environment, and the prevention of

corruption. Kao has been engaged in the

Global Compact since 2005.

Network JapanWE SUPPORT

Consolidated Number of Employees

16,618

Number of Patents Held

PATENTED

Shareholder Dividends

27No.1 among Japan’s public companies

consecutive fiscal years of increase

History

20171887

130years

Products Sold

100countries and

regions

in about

R&D Expenses

54.6billion yen

(As of December 31, 2016)

33,195

Con

sum

er P

roduct

s B

usi

nes

s

Chem

ical B

usiness

Beauty Care B

usin

ess

¥601.6 billion 41.3

%

Human Health Care Business¥273.1 billion 18.7%

Fabr

ic an

d Ho

me

Care

Bus

ines

s

¥345

.2 b

illio

n 2

3.7

%

Chemica

l Business

¥273

.8 billion 16.3%

Fiscal year ended December 31, 2016

¥1,457.6billion

Consolidated Net Sales

Consolidated Operating Income ¥185.6 billion

Kao Group by the Numbers

Net Sales by Segment

2016 Highlights

December

December

November

Kao Customer Marketing Co., Ltd. wins the

Environment Minister’s Prize for Corporate

Activities to Prevent Global Warming.

SeptemberBeauty Research & Innovation Center established

at the Odawara Complex.

September

Kao selected for the Dow Jones

Sustainability World Index

(DSJI World).

August

Kao included in the FTSE4Good Global

Index, one of the world’s leading SRI

indices, for the ninth consecutive year.

JuneKao agrees to acquire a U.S. manufacturer of

inkjet inks and a European ink company.

March

For the fifth year running, Kao joins

the State Environmental Protection

Administration (SEPA) of China in

promoting Nationwide Cleanliness and

Water-saving Initiatives.

March

Kao selected for inclusion in the

World’s Most Ethical Companies

for the 10th consecutive year.

Kao selected as a CDP 2016

Water A List company.

Kao announces K20, the Kao

Group Mid-term Plan 2020.

Since the fiscal year ending December, 2016, Kao has

subscribed to International Financial Reporting

Standards (IFRS). The composition of net sales shown

on the graph is calculated based on net sales to

external customers. Net sales for the Chemical

Business includes internal sales between segments.


Kao’s Yoki-Monozukuri began in 1890, with the introduction of Kao Sekken, a quality facial soap

made in Japan. In the 130 years since then, Kao has continued to generate dozens of innovative

products that have transformed everyday life.

Kao Products that Changed Everyday Life


Kao Kona Sentaku (Wonderful)

1951Significantly reduced the time needed

for doing laundry by hand, and the

burden of housekeeping chores.

Sofina

1982Born of a desire to provide more women

with dermatologically tested, high-

quality cosmetics.

Raku-raku Eco Pack Refill

2016Combining universal design and care

for the environment, this heralded a new

age in refills.

By popularizing the word “shampoo,” Kao changed

hair-washing habits in Japan.

Kao Shampoo

1932With quality to rival imported soaps of the time,

Kao Sekken, won fans nationwide.

Kao Sekken(Kao Soap)

1890

Quickle Wiper

1994A new floor cleaner for modern lifestyles.

Quiet, easy cleaning for all, whenever it was

needed.

Laurier

1978Changed life for women by offering

constant peace of mind and comfort.

Providing thorough cleaning with savings

in time and water usage, Attack Neo

offered an environmentally friendly way

to do laundry.

Attack Neo

2009A flagship product among the government-

certificated FOSHU (Foods for Specified

Health Uses), Healthya was readily

incorporated into everyday life.

Healthya Green Tea

2003

1887

Kao Industrial (Thailand) Co., Ltd.

established as Kao’s first company

outside Japan.

1964 1985

Kao Group acquires

Kanebo Cosmetics, Inc.

2006

Kao announces Kao

Environmental Statement and

unveils new corporate identity.

2009

1960s 1980s 2000s1900sKao predecessor

Nagase Shoten founded

Kao Soap Co., Ltd.

renamed Kao

Corporation.

2004

Launch of the Kao Way, a

statement of the Kao Group's

corporate philosophy.

Merries

1984Baby diapers that offered absorbency,

leak prevention and a sensation of

dryness not found in cloth diapers.

Attack

1987Providing surprising whiteness with just

one scoop of detergent. The compact

size made shopping more convenient.

*References to “Kao” in this report refer to the Kao Group. Any other Kao company is referred to specifically in full.

14-10, Nihonbashi Kayabacho 1-chome, Chuo-ku, Tokyo 103-8210, JapanCorporate Communications

Published May 2017

Documents

Kao Overvie the potential of empathetic digital marketing. Digital marketing that sharpens understanding of consumers In an initiative supported by a major logistics company, Kao’s