We sat down with Mr. Okamoto to discuss his firm’s initatives to explore the potential of rubber and plastics and innovate everyday products.
In your field of advanced materials, specifically the processing technologies for plastic and rubber, how would you evaluate the competitiveness of Japan's industry? What do you believe to be your core strengths and competencies that set you apart from your regional manufacturing rivals?
It is very difficult to generalize the strength of Japanese companies. We may produce similar products as other emerging countries like China, Korea and Taiwan, but we do not consider them to be our rivals. For example, companies in China and Thailand that have a single line with 100 or 200 units of machinery are more cost-effective in terms of mass production. If you have a certain capital, you can achieve this. Our company Okamoto has an extensive history and accumulated technology, especially in the field we operate in, which greatly differentiates us. The rubber and plastic industry has a long-standing history, and we know how to be competitive enough in the market.
On top of that, the creation of a product is an accumulation of small improvements. By combining that with the latest technology and machinery, we can produce one of a kind products that have a high market value. Our business strategy, which we call production technology, sets us apart. We do not just buy off-the-shelf production machinery for our production; rather, we reflect the improvements that we have accumulated over the past years. These slight modifications or improvements give additional value to our products and a higher value in the market. Maybe Japan has lost its innovation capabilities compared to previous generations, new innovations such as iPhone or IT. However, the Japanese still have creativity, especially in the gemba. We take and improve our products, like the film in the condoms that has a high added value.
A big problem facing Japanese firms in the context of this huge social disruption is the aging society. Since much of this expertise is preserved in only a few individuals in each company, there is the fear of losing that expertise and not being able to replicate that technology when they get older or retire. Moreover, with an aging society and shrinking population, there is an associated shrinking of the domestic market and local demand. How are these two factors impacting your business?
The aging population actually poses a great threat to technical inheritance. For now, the current generation of around 60 years old is still very active, but in 20 or 30 years, the situation will change drastically. Currently, our R&D facilities are only confined to Japan, but we are foreseeing the possibility of taking that overseas. It is always a controversy as to what extent we should take these production technologies out, allocate the technological resources to overseas bases and how much overseas expansion we should conduct. In order to compensate for the lack of human labor, we have invested heavily in increasing the efficiency of production through automation and other means for the last two or three years since I became the President. We are reducing the number of people required for production from five people to three or even two. That is how we are trying to overcome it. We can make adjustments for the hardware, but tackling the software is very hard.
Okamoto and sexual health products have a strong connection in the minds of young people in Japan, however they accounts for only 10% of your sales today. How do you feel about that strong association in people's minds? How would you like to be perceived by people in Japan?
We are well known as a condom manufacturer. It is not that we are trying to change our image because we greatly benefit from our brand being known, and we have great profitability through our condom business. Rather than trying to change, I always tell my employees that as a manufacturer, it is very important to be creative and always look into the future to be able to provide new developments and possibilities to society. Leveraging the current existing brand for condoms is essential, but at the same time, being known for our other strengths is also important. I think it is much better than not being known. I am happy that Okamoto is known as a condom manufacturer.
In the West, condoms are seen as a healthcare product that plays an important role in preventing the spread of STIs and unwanted pregnancies. On the other hand, there is a social stigma in Japan we read about, where it is seen more as an adult product, something people may be embarrassed by. There are some serious consequences for public health by having this kind of stigma. For example, the rate of syphilis in Japan reached a high last year since the recording took place in 1999 with more than 12,000 new cases in 2022. Ironically, Japanese condoms are known to be one of the best quality in the world. What do you believe can be done to meaningfully change the perception that people in Japan have about condoms?
I believe Japanese condoms, including ours, are of high quality because it is a very niche industry, unlike the mass industry, like drinks and beverages, confectionary or electronics. We consider condoms as a medical industrial product, and it is more of a B2B industrial product. That is how we have taken our technology that has evolved, and we improved that technology to make the rubber thin enough and convert that to condoms. Especially in Japan, advertising for condoms is restricted by the government, which urged Japanese companies to push their business forward as part of this industrial connotation. With that, Japanese companies have made their unique so-called Galapagos way of growth, focusing on high quality and unique product production. I think Japanese companies are good at creating one-of-a-kind products, and they come up with new ideas and new products that no one has thought of or produced elsewhere. That applies to us in terms of condoms, Toto's Washlet and the Jetstream pen, which are unique to Japan.
I believe it is Japan’s characteristic as a nation that is causing this mentality. Although the mindset of the younger generation is changing, when I went from the northern tip to the southern end of Japan for a visit, I felt the conservatism of the regions. If we give up, that will be the end. We conduct more grass root activities such as visiting middle and high schools and talking to the health teachers about STIs, unwanted pregnancies and the importance of avoiding them. We are also visiting universities' health departments to inform them of the situation. I think that we have to change the mindset of the adults, not the users, in order to transform how the Japanese public views condoms. When we approach conservative people from the perspective that condoms are considered industrial products, they listen to us. Roppongi or Central Tokyo seems like a very free society, but I feel that most of Japanese society is still very conservative.
Your new PVC film, called the Wonder Coat, is an especially fine film that can repair scratches on the surfaces of different films and sheets, which almost seems like a miracle. Could you introduce this new product and explain what core or key applications you had in mind when designing it? How is it received by your clients and customers?
It actually has not been selling well. In Japan, desks usually have a coating or a desk mat, and PVC material is used in fashion items like bags. Because the problem was that it can be easily scratched and damaged, we developed the Wonder Coat that repairs the scratches on surfaces. PVC film is usually used in harsh environments, so we wanted to increase its durability.
This product has high functionality and value, but whenever it is launched in the market, there is a price match issue, which is one of the reasons why it is not moving forward. However, continuing to develop new products like this is very important to show our technological capability. Thanks to this development, we are now able to show our B2B distributors our technologies and our capability for R&D.
How would you describe the focus of your current R&D strategy? How have you built on this? Is there a particular new technology or product you are able to share with us today?
Our R&D focuses on our major product fields: films, car interiors and condoms. The basic technology that we continue to develop is our sheeting technology. We make the material as thin as possible while attaining its optimal sturdiness and strength. Based on these concepts, we continue to do R&D to evolve our company.
In 2020, you established Okamoto Kankyo Kaihatsu, which is focused on using reused materials in your product development process. One of your initiatives is using plant-derived biomass for your sheets. Can you tell us more about these kinds of initiatives? How are you reusing materials and contributing to a sustainable and regenerative society?
As a plastic-related product manufacturer, we feel the growing social requirements for sustainability. Also, we strongly understand that it is our company's duty to contribute to the environment through our business activities. We are looking for ways in which recycled and reused products can be utilized.
Products not only use plastic but a compound of plastic with other materials, so we are trying to find ways to recycle and reuse these types of materials. For example, we use a lot of plastic for production in our Shizuoka factory, and unfortunately, a few percent of the material goes to waste. By establishing Okamoto Kankyo Kaihatsu, we want to reduce waste by finding new applications for the so-called waste material.
How would you describe the progress in the last three years since its establishment? Where are you on the path to meeting your expectations? Are there any particular case studies or examples you would like to share with us?
I cannot disclose the company names, but within these three years, we were able to partner and connect with multiple companies. Furthermore, there will be a new recycled material product to be launched soon. Okamoto Kankyo Kaihatsu would surely be one of the main pillars of our business that sells recycled materials.
Would you say you are currently searching for overseas collaborative partners?
We are constantly looking for new partners. In the field of condoms, it is important that we partner with a local company since we are selling medical equipment. We need to understand the local legislation to enter the market. When entering a new market, language, cultural and legal barriers always exist. Thus, working with local partners is important. However, the obstacles are high when it comes to joint ventures or joint development collaboration. Since we are in a very niche field, it is very hard to find a suitable partner who is taking the same direction. I do not think any company in Japan is willing to go by themselves overseas, and finding partners is essential in overseas expansion. It is on a case-by-case basis.
In terms of your international strategy and global development, are you more focused on the B2B or B2C side? Are there any particular countries or regions where you are looking to strengthen your presence or a new market that you are trying to enter as part of your overseas expansion?
The two driving forces of our overseas business are condoms and automotive interior materials. They account for 80% to 90% of our overseas sales, so we will continue to push forward in these two fields. We are still weak in our target areas, which are in the west of Singapore, mainly India and the Middle East. These areas are important when it comes to condoms and car interior materials, and we understand the necessity to expand in these countries based on the request from our customers to do so.
In our overseas strategy, we are not only looking at the size of the population of the area, but we also consider the balance of the economy and the governmental structure. For example, Europe is considered a saturated market, but it has a good population and economic balance. We still feel that there is a great opportunity to penetrate that market while taking fewer risks. Africa may have the larger population, but the stakes are high when entering that market. Currently, in view of those balances, we are focusing on the western areas of Singapore. Our investors point out the opportunities in Africa due to its population growth, and we want to contribute to African society through our condoms.
On the contrary, we shifted our focus to Europe 10 years ago. It took time, but we recently have had more customers from France and Spain. Usually, Japanese companies in other industries do not go to the saturated European market. However, we still find an opportunity in the European market through this niche market where we play a role.
Your company is celebrating its 89th anniversary this year. Imagine we come back six years from now, on your 95th anniversary, and have this interview all over again. What would you like to tell us? What are your dreams for the company, and what goals as the president would you like to have accomplished in the next six years?
It is very hard to say because it is a very niche market. Although the dominant mainstream of the product may not change, there are some fluctuations that make things hard to foresee. We want to continue to make technological advancements in the sheeting of plastic and rubber, which is our core business, and become the top regional and global niche company. My personal goal is to make the company an enjoyable company for all the employees. Investors and banks always ask me about the financial figures. Although I have the overall picture, I want to focus on the happiness of our employees and technological advancements. As a novice leader, I want to lead the company to make sustainable growth.
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