With a presence spanning Asia and South-East Asia, Saisan leads the industry in providing gas services to a range of customers in residential, medical, and industrial buildings. During a time in which we are seeing the world go carbon neutral, Saisan is providing the means for its customer to switch to renewable energy. In this interview, president & CEO, Takehiko Kawamoto, explains Saisan’s long-standing success, stemming from the company’s adherence to high-quality standards, in addition to its unwavering long-term approach.
Fifteen years from now, one out of three people in Japan will be 65 years or older and this creates two problems: labor shortage for not having enough people to do the jobs; and the domestic market becoming smaller. What efforts does your company make to respond to these changes?
The Japanese government is introducing a system that increases the retirement age from 60 to 65 and also preparing a system where people over 65 can continue to work. Here in our company, we are making efforts to allow the elderly to work for shorter hours and we also provide work for the handicapped, in response to the need to promote diversity. We also have a system that our employees introduce us to their friends who want to work with us. We have almost a hundred new employees who joined our company already through this system. Furthermore, because our labor conditions are employee friendly, there are cases that people who are working at our competitors desire to come and work for us. Therefore, we are able to secure enough employees to work for us despite the declining working population here in Japan. In terms of the second problem, the Japanese LPG market is mature and one of our concerns is that the number of customers has recently been declining in accordance with the shrinking population. Rural areas use LPG but since people in these areas tend to move into urban areas, so our LPG sales is negatively affected.
In the last five to seven years, Japan’s gas and energy markets have been deregulated. About 3.43 million retail customers in Japan have applied to switch their city-gas providers as of the end of March 2020, increasing by 63.3% or 1.33 million customers in one year. In the electricity market, over 7.6 million customers have switched their provider in Kanto alone. How has Saisan adapted to the deregulation of Japan’s power industry and this increase in competition?
When I became the president about twenty years ago, I mentioned in my first speech that our business would be eventually deregulated and such circumstance would become our business chance. We entered into the electricity business and have succeeded in securing many customers. Previously, LPG comprised around 70% of our total sales, but today it is only about 40%, the remaining being from our electricity and other gas related business. In total, our sales are increasing.
Compared to other developed nations, Japan is falling behind when it comes to digitization in government and major industries. Last year, Prime Minister Suga had a two-trillion-yen fund to help companies that are invested in environmental sustainability and DX transformation. What efforts does your company make for digitization?
Last September, we established a DX section in our company and we have been striving to implement digitalization within our organization. We are enhancing our sales by introducing an online chat platform and using the internet for more efficiency, especially for communication with our customers. We have decreased our total costs by utilizing such technology since we no longer need to hire extra staff as contact points or open shops in designated places to address the needs of our customers.
In 1945, your grandfather started selling oxygen and welding materials. Can you tell us about the key moments in the history of Saisan and how this moment sits in the evolution of the company?
After he started selling oxygen, my grandfather, Jiro Kawamoto, realized that the US Army was using LPG in similar cylinders and he decided to commence selling LPG as well. Then my father Yoshihiko Kawamoto, the second president, visited the US and came to know the presence of LPG cars and bulk storage/supply system. Then, he brought back such valuable experiences to Japan and developed the LPG business here. As the third president, I have expanded our business through M&A. We also introduced the so-called two-tier LPG pricing system. The basic charge for the maintenance of safety and security plus a charge by the meter consumption rate.
You have three main business lines for supplying your gas: residential, medical, and for industrial customers. Can you elaborate on the synergy you have been able to create among these three lines of business?
In 1945 when it was established, Saisan was just handling oxygen in cylinders. Then some hospitals contacted our company and told us that they would like to use gas, and so we started our business relationship with the medical field. It just happened naturally - they came to us. When people wanted to build houses, we requested them to use our gas, and when we talked with the construction people, they suggested we start building houses, and we became a sort of home construction company as well. We also started selling some instruments as an agent of Tokyo Gas. By the time Omiya Station had built the new station building, Saisan was handling various merchandise within that building, as a trade company.
Saisan has an international reputation, as you are working with local companies in Bangladesh, Vietnam, Indonesia, and other parts of Southeast Asia. Co-creation is very important to understand the local market. When you were looking for local partners in these countries that were mentioned, what were the key indicators for companies you wanted to co-create with? What role does co-creation play in your business?
It is very important to win trust in each market that you plan to penetrate into. In terms of having local partners, it is extremely important to look at their track records. I am supervising the projects myself in order to see other business opportunities that we could enter, other than our core businesses. I have a very sharp eye; I can see right away what possible business paths we could pursue, aside from our gas business.
A gas company in China started importing technologies and gas from Japan. They were the first one to take the initiative and asked whether or not they could switch to LPG, then we introduced our technology to that company. Thereafter, our activities spread to nearby countries such as Mongolia and Vietnam. Our major business is selling energy and this kind of business requires us to comply with a variety of laws and regulations, so for that reason, securing a trustworthy and loyal partner is essential. Companies that have a trusting relationship with local partners are recording significant profits. Without such trust, we would not be able to create a sustainable business. Another aspect is our purpose - whether to focus on making money or to make a social contribution. Of course the answer is, helping people who need gas and energy is more important. In the medium to long term, we need to develop our business by sharing our philosophy with local partners.
What markets are you targeting and what areas are you looking to move into and further build new relationships?
There are a lot of countries where we could introduce our technology. Let’s talk more about what Exceptional Gas Energy really means. In many countries, LPG is not widely used, that is, people are still cutting trees and using wood in stoves for cooking. We describe LPG as “exceptional” because it shortens the time for cooking. Another reason is the preservation of nature. There is no need to go out and cut trees. Finally, it is actually better for the overall health of people, as people will no longer have to suffer from breathing in smoke and soot caused by indoor cooking with wood. There is a huge market for us due to the fact that roughly 3 billion people around the globe still do not have access to LPG, including India and Southeast Asian countries. We are also targeting African countries. Recently, we stationed an employee in Kenya in order to research this market. Many people have some kind of fear about using LPG because of its past accidents; however, we introduce technology that makes our LPG safe. Recently, we are taking some initiatives to make our LPG become more affordable to those who are financially challenged.
In November last year, Prime Minister Suga declared that Japan will try to be a carbon-neutral society by 2050. We are seeing big investments from the energy sector in lowering their carbon footprint and at the heart of that is the use of renewable energy. Today in Japan, our renewable energy is still very expensive, and we also know that your company has made investments. Looking towards the future, what role will renewable energy play in your company?
We know that it is important for us to be contributing to renewable energy, aside from the fact that we have to follow the regulations from the government. In fact, we set a target to become a carbon-neutral company by 2045. Many companies here in Japan are now gradually shifting to renewable sources of energy by using solar panels, wind turbines, and biomass. Saisan is also moving in this direction. Our goal is to have our customers switch to renewable energy and we are preparing for that.
In the distant future, you will eventually retire and you will hand over the company to the next generation of executives. When that happens, what vision would you like to have achieved? What kind of legacy would you like to leave?
Speaking of the 100 years anniversary of this company’s establishment, which will be on October 21, 2045, it will be a big day for Saisan, although I will no longer be the president. I would like to build the new business approaches which will put us in a strong position by then. Our goal is to be a leading company, especially in the Asian Pacific Region, for LPG and other businesses. We already occupy a leading position in some nations, such as Mongolia and Vietnam. The one to whom I shall pass on the reigns of the company will be someone who has a deep understanding about energy, the market, and developing areas of the world and he also must have a strong academic background related to our business. I hope that this company will further proceed with M&As that bring us high value, because this has been the way we have successfully expanded our business up to this point. One of this company’s core strategies is to continue our business expansion. In the energy sector, it takes many years for projects to be fully accomplished and realized.