The encyclopedia · Strategy & Leadership · Operational decision · 1985–2024
Clay Science's ¥600M natural cosmetics business collapsed when it lost its OEM clients
A Tokyo natural cosmetics maker that peaked at ¥600M filed for self-bankruptcy after COVID cut OEM sales and its biggest customer walked away.
Clay Science Co., Ltd. · 2024-02-19
What happened
Clay Science Co., Ltd. was a Tokyo-based manufacturer and seller of natural clay cosmetics, founded in 1985 with ¥10 million in capital. The company developed and sold its own-brand skincare products using natural clay montmorillonite — including cleansers, creams, and bath salts — and also supplied cosmetics on an OEM basis to other beauty companies.
At its peak in the fiscal year ending April 2020, Clay Science generated approximately ¥600 million in annual revenue. The COVID-19 pandemic caused a sharp decline in OEM orders as cosmetics brands reduced production. Rising raw material costs squeezed margins further. The decisive blow came when a major OEM customer terminated its contract, removing a large portion of the company's manufacturing revenue that could not be replaced.
With continued losses and no prospect of recovering the lost OEM business, Clay Science suspended operations and began preparing for self-bankruptcy proceedings on February 19, 2024.
Why it happened
- Peak revenue was ¥600 million (FY April 2020), but COVID-19 caused a sharp decline in OEM orders from cosmetics brands.
- A major OEM customer terminated its contract — the loss of this single client removed a large portion of manufacturing revenue that could not be replaced.
- Rising raw material costs squeezed margins on both own-brand and OEM products — the company could not pass cost increases to price-sensitive cosmetics customers.
- The company's revenue was split between its own brand and OEM manufacturing — when the OEM side collapsed, the own-brand business alone could not sustain the operation.
- Founded in 1985 with ¥10M capital, Clay Science had a niche in clay cosmetics that limited its market — when OEM orders failed, replacement revenue was scarce.
The lesson
A manufacturer that depends on a few OEM contracts is one lost customer from insolvency — OEM revenue looks permanent until the client leaves, then it is gone with no recourse.
Aftermath
Clay Science Co., Ltd. suspended operations and began preparing for self-bankruptcy proceedings on February 19, 2024. Founded 1985 in Tokyo with ¥10 million capital, the company manufactured and sold natural clay cosmetics under its own brand and supplied OEM products to other cosmetics companies. Peak revenue of ¥600 million (FY April 2020) was driven by OEM orders that collapsed during COVID-19, and a major client contract termination made recovery impossible.
Sources
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