Investors to accuse Shiseido Vietnam of making loss on purpose

After more than 10 years of intense material and labor contribution in bringing Shiseido to women in Vietnam, the 15 investors now believe that the new owner of the trademark in Vietnam is deliberately making a loss, which is a hard blow to their stores in the system.

Prior to 2010, Thuy Loc Company was the importer cum distributor of Shiseido cosmetic products, which originate in Japan, for the Vietnam market. Together with this company, 15 other investors joined their capital under a business cooperation contract. Of Shiseido’s 25 stores nationwide, 15 enjoyed 30 – 60 percent capital contribution of these investors.

Thuy Loc used to take up a management role, while stake holders, apart from receiving periodic interest, helped to promote the products and seek for clients.

At the beginning of 2010, Thuy Loc transferred the management of Shiseido in Vietnam to Shiseido Cosmetics Vietnam Ltd. (SCV), and all troubles have emerged since.

In the interview with VnExpress, Le Hoai Anh, general director of Thuy Loc Company, said: “Thuy Loc suggested SCV to acquire the stakes of shareholders in our stores. However, the offer was turned down as SCV just acquired Thuy Loc’s rights of imports and distribution while keeping the status quo of the investors.”

Without revealing what they actually bought from Thuy Loc and at the presence of the decade-long 15 investors, SCV’s general director Tatsuki Nagao said that the contents of the management transfer contract with Thuy Loc has direct relationship to mutual business activities, and is a “confidentiality objective of the confidentiality agreement.”

However, SCV’s point of view is clearly expressed in the meeting minute on the 1st of November between this company and the investors, “These partners only have relationship with Thuy Loc under the business cooperation contract. On the legal basis, Shiseido does not bear any tie with Thuy Loc’s partners. Shiseido does not manage business activities in stores operating under the business cooperation contract with Thuy Loc.”

As for their part, the 15 investors insist that they should be regarded as business partners of Shiseido trademark via the bridge Thuy Loc, which is currently under the management of SCV. As they suggest, there has recently been discrimination in treatment between shareholder-funded stores and SCV-funded ones.

For a good example, SCV’s stores at shopping centers (i.e. Vincom, Parkson, Diamond, ect.) have a monthly revenue of several billion VND, but the cost for trial products at these stores just falls in the range of VND4 – 5 million ($200-220). At the same time, retail stores funded partly by the investors bring about VND400 – 500 million in revenue, and yet, they are subject to more than VND10 million of trial product cost. High business account has reduced shareholders-funded stores’ business efficiency.

Besides, promotion programs are not applicable to the whole system but just limited to some SCV-funded stores. “Many of our regular customers have switched to stores offering promotion, reduction, and gifts”, said one investor. SCV’s stores keep raising their revenues while the ones funded by shareholders are experiencing a reduction in revenue, even making loss, which is in contrast with the time they cooperated with Thuy Loc when all enjoyed stable high revenues.

It is a fact that leads the investor group to the belief that “SCV has created an unfair competition environment”, causing business loss to their stores, which would make it easier for SCV to take over them. “Previously the stores funded by us enjoyed an annual growth rate of 15 – 20 percent. However, since SCV held the management role, these stores have reduced their revenues while the overall business activities of SCV in Vietnam have been on the rise”, a representative of the investor group said.

Nguyen Thu Son, one of the 15 shareholders to establish Shiseido chain, cited that the store at Dong Khoi resulted in a loss of 377 VND million over the first 6 months of the year, while this time in 2008 (under Thuy Loc’s management) it gained a profit of more than 492 VND million. Also at the first half of the year shareholders at the Thuan Kieu store just received 12 VND million in profit; the same figure in 2008 was 719 VND million. The reasons she received from SCV include increases in location rental fees, input costs and reduction in revenues. Despite that, Ms. Son believes that the additional costs are just not enough to reduce her stores’ revenues to such a remarkable degree.

“Those stores used to have Thuy Loc’s capital contribution (which is now transferred to SCV), and when they made loss, both they themselves and us would suffer. However, this only causes damage to shareholders, because SCV gains profits when they distribute products to our stores.”

Another cause of anger for the investors is that SCV has shown their disregard to them by relocating stores funded by them without seeking their approval, increasing costs in an unreasonable manner, delaying interest payment for them, etc. Given such facts, the investors demand compensation. In case their demand is not met, they would submit the case to the court.

Tatsuki Nagao denies compensation requirement as he suggests that the requirement “does not have convincing ground. SCV does not intend to gain profit by sacrificing others’ benefits.”

Hoai Anh believes that Thuy Loc still holds associate responsibility with the investors, which is just limited to raising their voice and reflecting shareholders’ concerns to SCV. The reason for this constrained authority is that SCV has taken over the management role of the chain. The investor group submitted earlier this month a letter to Japan’s embassy asking this body to “review the case in a thorough way.” – VNE

Tags: Shiseido Vietnam