More than three centuries of experience, proven resilience in the toughest of times, and a thorough understanding of what works in the Japanese food industry have enabled Kokubu Group Corp. to accumulate a budget surplus of over 1 trillion yen ($9.88bn). Representative Director, Executive Vice-President & COO Akira Kokubu discusses the transitions the company has successfully gone through, its recent expansion into China, and why Japan has a unique food culture.
Could you begin by giving us a brief history of Kokubu? How did the company grow from brewing soy sauce to producing beer to ultimately become the successful company it is today?
The Kokubu family originally started its business over 300 years ago in Matsuzaka city in Mie prefecture, which is where the G7 summit was held in May. Today we are the 12th generation of Kokubu running the company. Eventually, Kokubu moved from Matsuzaka to Nihonbashi, and we brought soy sauce brewed in Ibaraki to Tokyo using the river for transportation. We introduced Kokubu’s soy sauce to Edo. For half of our history, we were a soy sauce brewer, but for the other half, Kokubu transitioned into a food distributor, offering a wide variety of foods wholesale.
Throughout our history, we have experienced three big crises. The first one was with the modernization of Japan; the second was the big earthquake that struck in Kanto; and the last one was the loss of the Pacific War in 1945. Our company has survived each of these crises, and after all of these crisis we have examined our business model and looked at ways to make it stronger and better fit our current environment.
Today, I’m proud to say that Kokubu has accumulated a budget surplus of over a trillion Japanese yen, all in only 71 years, as we started from zero after the loss of the war.
As Kokubu is a company with such an amazingly long legacy, what philosophies did your family install, and how have they survived for three centuries in a world that is so fast paced?
Kokubu has a code of conduct that we called Chomoku that governs our business practices. This code was first installed in 1774, but we have continued to allow it to evolve, and we are currently running on our fifth Chobaku. What we have now, the Heisei Chomoku, is the product of many revisions. It contains eight simple, but elegant lines. The most important one is the third one, stating, “We do not engage in business transactions merely for the purpose of gaining profit.” This is important because it ensures that the business decisions we make are responsible ones, driven by forces beyond money.
For Kokubu, the idea of transitioning to a food marketing company is something that’s been talked about over and over. What changes and investments are you putting into place now to support this transition?
In my opinion, Kokubu was a food marketing company from the beginning: it is just that now we have defined our market, and we accumulated huge sales and quality products. We have worked very hard to instill our principles in the company. Kokubu’s company vision is focused on customer satisfaction and seeks to position it as a company that offers the best customer satisfaction. Our marketing strategy has been carefully assembled to ensure that we continue growing. Today, we have different problems – the market is shrinking and the population of Japan is decreasing. Japan is however our main market presently, so we are going back to the basics.
At the beginning of the year, Kokubu went through a big transformation. Kokubu’s sales division is divided into nine sales companies: seven geographic area companies and two product category companies. This move aims to keep our divisions nimble and local. As the needs of customers differ depending on the region, we want to meet their needs, individually. If we stayed in Nihonbashi, for example, we wouldn’t be able to see the different needs that our local customers require. So these seven companies work closer with the people in their respective areas to cater for their needs, while our national holding company manages these seven regional companies.
How has Kokubu increased sales until now?
Kokubu deals essentially with processed food and alcoholic beverages, and is now working at expanding into a number of additional categories such as ice cream, frozen foods, confectionary and fresh foods including fruit, meat and vegetables. We have expanded and diversified the processed food categories we worked with in the past into different varieties of food categories. This I think has been key to increase in our sales.
In addition, we have also expanded and diversified our sales channel: we have spread out from selling at supermarkets to selling at convenience stores, drug stores, department stores, food service and other food sales areas. The Japanese market is shrinking, so we have to work towards increasing our products in this market, and we are looking to work towards more customer-based markets. Until now, we have just been adding more product categories so as to easily increase sales, but new products can only provide so much growth. This is why Kokubu is looking at finding new ways of selling, in addition to proposing new products.
In terms of products and sales channels, where do you believe the most growth will be going forward?
We are now focusing on chilled and frozen products. Kokubu is also focusing on developing in the field of food service, with fresh products like meat and vegetables. We are not strong in this sector, and therefore we have the potential to seek a greater market share in this area going forward. In terms of finding new customers, Kokubu is looking towards the edge of society – we are considering elderly care housing and internet channels.
Can you talk about your recent expansion into China with Samsung Welstory and Yinlong? How will future partnerships like this one with large companies be important to facilitating a more global strategy?
This was a decisive step and important strategy to sustain our national expansion. At present we are running a five-year business plan, which went into effect this year and which articulates around two main strategies: the first one is to focus on the food market in Japan, and the second one is to enhance our international expansion.
Our international strategy runs around three core fundamentals: the expansion into China, to other Asian countries, and trading. These are the three ways we would like to strengthen our international business.
In China, we have three combined subsidiaries, two partly combined and also invested in one local company. Shanghai-Kokubu, one of the combined subsidiary companies, is working with Japanese food distribution for food service. Our seventh business in China is the partnership with Samsung Welstory and Yinlong. There are many factories in China, and each factory has the capacity to feed a lot of employees; they already have customers. That is our target of this business.
How have you communicated these desires to find new partnerships? Do you have a communication strategy in place?
We are very satisfied with our current partners, as they are also spread within Asia. We do not have a strong incentive to find new partners. New partners are very difficult to find, as communication and trust might be difficult.
With the likely passage of the TPP, Japan and the US will see their growing partnership expand even further. What role does the US market play for your company?
The United States is a country with a huge population. This is a very interesting market to us, even though there is also a lot of competition in this market. For the time being, our international expansion strategy focuses more on Asian countries. For the United States, we don’t have any plans to set up a subsidiary there, but we are certainly looking into trading to bring our products to US customers.
Kokubu has already established an amazing reputation for resilience and strength. As the COO and Executive Vice-President, and as a Kokubu family member, what legacy do you hope leave for the next generation?
That’s a very difficult question. Kobuku as I explained has over 300 years of history. This will be my 13th year at the head of the company. From our family’s standpoint, we will focus on transferring the Kokubu company from one generation to the next, including all the company’s assets, plans, philosophy, ways to do business, as well as the positive interaction and relations we have developed with our customers over the years. We are a corporate family. We are interested in continuing this tradition, and not only in making a profit. This is very important to me.
Could you offer our readers a final message?
Japanese food culture is very unique. Please come to Japan, and enjoy not only cities like Tokyo, Kyoto and Osaka, but also each region. All regions are very unique, and each has its own delicious food and traditions, so it is important for visitors to also visit other cities. The reason why Japan has a unique food culture is because we have unique food here. The Japanese food distribution system is also very unique and extremely well organized. It is very good, and supports the wide variety of cultures present here.