Matsui Shikiso Chemical was founded in Kyoto, Japan in 1923 by Kenji Matsui. Since then, his family paint business has passed from generation to generation, creating revolutionary inventions with colors along the way, always in characteristic harmony with Japanese excellence. COVID-19 has had a major impact on Japanese firms like Matsui Shikiso Chemical. In light of the pandemic, Matsui has aimed to turn this unprecedented challenge into a new opportunity, particularly by growing its new digital ink business, as president Yoshiyuki Yasuda explains in this interview.
In the last few decades, Japan has seen the rise of regional manufacturers such as China, Korea, and if we are discussing semiconductors, Taiwan, who have managed to replicate the Japanese monozukuri process, but at a cheaper labour cost. Yet we still see Japanese firms dominating niche fields and maintaining their global market leadership. In your opinion, why have Japanese companies been able to maintain their leadership in these niche fields, despite regional competition?
If we are to fight in the field of mass production, then Japanese companies would definitely lose to other competitors. If any company in Japan follows the ‘traditional route’ and mass produces and sells on a large scale at a cheap price while also trying to reap the rewards, that company will not be able to survive. So Japanese companies need to focus on rare and niche fields, as well as products that have inherent value. That’s why I think Japanese companies have maintained their leadership in niche fields.
In the next fifteen years, one in three Japanese people are expected to be over the age of 65. This presents various challenges, two of which standout: the first being a labour crisis, with fewer new recruits coming out of universities every year to replace seasoned workers. The second is a shrinking of the domestic market, meaning few consumers and fewer businesses. Can you tell us what impact the demographic decline has had on Matsui Shikiso and how you are overcoming this challenge?
We haven’t seen a large impact due to the declining population yet, rather, we are seeing a larger impact from COVID-19. Once the pandemic is over, it will be time for us to address the issue of the declining population.
In terms of the declining labour force, we have to advance the automation of our production lines by introducing a lot of automated machines. We are also thinking about how we can retain the know-how and experience of seasoned workers, like raising the retirement age for our workers, which gives time to these employees to help succeed their skills to the incoming generations. Once we advance in the automation of the production line and operate them with less human resources, we would like to re-deploy our talented people to newer areas, so they can utilise their talents and skillsets.
In terms of declining consumers and markets, we have no choice but to turn our attention to other markets with larger populations, such as the US or China. We are also looking for markets that we have not penetrated yet. In some other markets, we only sell a small selection of our products, not the full range, giving us room to sell more within those specific areas. We still have a lot of potential in overseas markets, which will be our next challenge.
In recent years, we have started seeing the rise of various new digital technologies that contribute to automation, but also to greater design. For example, in the printing business, augmented reality offers designers new possibilities. How are you integrating these new digital technologies into your product portfolio and production?
Rather than installing digitized machines in our production line, we are more focused on developing and selling digital ink because our clients are business partners who are also trying to digitize their production lines. Of course we have installed some digital technologies for our production line, but for us, it is more about capitalizing on the digitization of society as a whole. We are tailor making the inks and products for a digitized society now.
Can you tell us more about your digital ink? What applications will they be used for?
T-shirts are the biggest application.
COVID-19 has been terrible for the global economy in general, there have been some silver linings, such as digital adoption and proliferation of e-commerce channels for many businesses, especially in Japan. Can you tell us some of the positive impacts that the pandemic has had on Matsui Shikiso?
Obviously, due to COVID-19, our sales volume dropped significantly, especially in May 2020. Just in one month, we could only achieve a quarter of our target sales, so 75% down from our overall objective. What we realised was that we were still selling products that we knew were not profitable. In the past, we couldn’t simply stop selling them because some of the consumer base still had a demand for it, but COVID-19 forced us to revisit our product portfolio. When I worked in the banking sector, we used to say “it’s better than nothing. It's better than zero” which is sometimes true, but the pandemic made us realise that 0 is even better, so when we revised our product portfolio, we focused only on the products that were profitable. That was one good thing that we gained from COVID.
Regarding the sales volume, it has been recovering recently, however the trend is quite volatile at the moment. We have several business divisions and the sales volume varies among the different businesses. For example, one month, division A is achieving their goals, but division B is not, and then the next month, the roles are reversed. It’s not a smooth trend. In the last five years, the number of our employees halved, mainly because they held uncertainties about the future and pursued opportunities elsewhere. We are allowing our plants to increase staff, but they currently don’t do that and instead, they are exchanging staff within different divisions. In the past, one person would stay in one division, but recently, we are trying to exchange resources among the different divisions so that people can be more versatile and gain more skill sets to work on any kind of job. We are seeing the benefits of this, so that’s something positive brought on by COVID. We tell our employees that we don’t want to go back to a pre-COVID situation, rather, we are trying to be something new. Even though COVID-19 has many negatives, it did offer us opportunities for change.
You have four main business divisions: water-based inks, pigments, colour changing inks and plastics and ARTJET. Could you detail what kind of synergies you are able to perform between these different business lines and what benefits they bring?
That’s a tough question. In the past, our business model was ink sales-based, but it was very volatile. When customers wanted it, they bought it and when they didn’t want it, they didn’t buy it. Recently, we are trying to change this business model slightly so that we can sell machines for printing and also create a necessity among clients for these machines. We are more focused on creating that sales framework in this market and I think this will create synergies between our divisions. ARTJET is about the printing of heat transfer marks and once that division does a good job in the sales of the printing machines, then the ink division is going to have a good time selling the ink for those machines. We are trying to simplify the process for our sales now.
ARTJET was announced in March this past year and went on sale in July, with it being a next generation heat-transfer printer for textiles. Typically, conventional textile prints are very complicated. They require fine-tuning in many complex processes currently being handled only by experienced skilled workers. Can you tell us the advantages of ARTJET compared to other textile printers and how you managed to overcome the typical complexities seen in textile printers?
We used to mass produce the transfer printing marks. But as you mentioned, there has been some fierce competition in the Asian region, so we are not able to make profits out of mass production and it is much better from a cost perspective to produce in overseas markets. Even though we try to compete with the regional competitors, they don’t see us as a rival anymore. That’s when we realised that mass production won’t grow this company and so we turned our eyes to new technology which utilize digital inks.
We also developed the heat transfer print and conventionally, operating this kind of printer requires a lot of skill sets, with many saying that you needed to be trained for at least three years to operate these kinds of machines. That requires a lot of human work to make small adjustments for the prints too, but this machine uses inkjet, and it's digitally controlled, so you don’t need the frame for the printing. You just press a button and the production starts. You can also produce a lot of different marks on one sheet, meaning you can produce in a small load and can also create a lot of different types of marks. In addition, you do not need the required skill sets of an expert or engineer. Our clients, who have purchased this machine, are able to operate it themselves and we are trying to create a niche within this market. In the past, people used to say ‘if you are producing in small loads, you cannot get profits’, but we are challenging this notion with our new technology.
When you began developing this technology, what was the reasoning behind it?
Nothing in particular comes to mind when we were originally developing this, but our company has always been focusing on the development of pigments and colours. We thought it would be interesting if the colour was able to change through heat or by some other means.
You mentioned searching for new markets and others where you’ve only sold a limited range of products. You also have operations in China, the US, Hong Kong, Vietnam, and more recently, Honduras. Looking to the future, what new markets are you making a priority and what is your expansion strategy?
We have affiliate companies in China, Hong Kong and Vietnam, and of course, the operations in the other nations you mentioned, but actually, we are trading with many other countries. In Asia, we are trading with India, Bangladesh, Pakistan, Indonesia, the Philippines, Thailand and Turkey. We are also trying to expand our footprint in Europe too, as we have a strong desire to expand our business further overseas into different markets. Speaking about the US, we have a subsidiary called Matsui International, so we are working to grow the companies together. As for China, we have the base of operations in Shenzhen. In Vietnam, we have a subsidiary of Matsui International and we are trying to localise the production there. Our policy is to grow together as a group, rather than trying to get profits individually. This is a strategy we have adopted only recently, and therefore, for our US subsidiary, we used to produce in Japan and have that subsidiary sell to the US market, but as long as the US subsidiary can make profits from their own production, we allow them to do the production over there. We don’t want to be competing with each other, amongst the group. Once the pandemic is over, we will be able to make more decisive action when it comes to the overseas markets.
You mentioned that you come from a banking background and you only became the president just recently, so we have two questions for you: The first is what advantages does your banking background bring as you move into a company based in colours and inks. The second; are there any objectives that you have set for yourself for your new presidency?
Regarding the advantages of my banking background, my experience in that sector is the pressure associated with it. There were many difficulties, but without those hardships and experiences, I would have never been able to survive long enough to become president. In the bank, you need to be well connected and have a strong network, even within the different branches of the bank. Every three years, workers were transferred to different branches, meaning you had to engage with a wide variety of people during your tenure. Before I left the banking sector, I was manager for three different branches and that’s where I learned how to connect with my staff. I also learned a lot from being in a large organisation and from time to time, I would have to push my workers to work harder, which was a good experience for me.
Regarding the second question, my objectives for my presidency. It’s been almost 100 years since this company was founded and during parts of its history, the president was the top-down instructor: the management mandates, the direction of the business, etc. They would decide. But if you had 100 employees at a company, that’s 100 different sources of wisdom, so my mission is to make this company where 100 different sources of wisdom can be utilised effectively.