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‘Our products have great performance unmatched by our competitors’

Interview - March 13, 2018

Mr. Norio Okubo, president of packaging company Ohishi Sangyo discusses his company’s expansion to South East Asia, as well as business at home in Japan



In recent years, Japan has been touched by structural issues caused by its aging demographic. How would you explain the impact of Japan’s ageing population on Japanese manufacturers?

In the general packaging business, most of our products and technologies are rather common and can be easily replicated. If demand for our products is decreasing, it is because our aging population negatively combines with our negative demographic line. At Ohishi Sangyo, we have already relocated our factories to South East Asian countries, where the labor force is more cost effective. Japanese corporations know that domestic demand is declining, and that applies to every business line. Therefore, our customers have moved from Japan to Asian countries. Our clients’ facilities have moved to China, Indonesia, Thailand, and other cheaper nations.

Firstly, it was the automobile manufacturers who moved. Soon after, chemical manufacturers followed. Consequently, we decided to follow our clients and move to them, otherwise our users would have sharply decreased. That is why we built our Malaysian factory in 1990. Before that, we had a joint venture with Singaporean investors (1985) an experience which lasted for 5 years. Because it is not easy to negotiate with partners on strategical decisions, we decided to independently install our Malaysian factory. Luckily, we were able to attract many Japanese users and consumers as we relocated. Receiving orders from customers was easier than expected. For our clients, it is more convenient to purchase packaging material nearby their factories. Firstly, we attracted Japanese customers. Secondly, we aimed for American and European clients, such as Dupont or BASF. The majority of our customers operate in the chemical field. Later on, we started receiving orders from local manufacturers. Local enterprises require our products for their export activities. They need our high technology packaging to sell their products abroad.


How do you ensure that the Ohishi Sangyo quality is respected in your overseas factories?

While many of our Japanese peers make high-quality packaging products, we do not have competitors in the other Asian nations. Most of our competitors sell their products to cement manufacturers, and the quality requirements for the cement industry are not so high. For the food and chemical businesses, high quality, performance and reliability are required, leading to an increase in orders. Since we are the only one in our field, we do not suffer from price competition. Korean and Chinese manufacturers compete against Japanese organizations based on cost reduction. However, this does not concern us for we only deal with complex industries.


How do you explain to your clients why they should pay the extra dollar to buy your products?

We always ask our clients: ‘Which is most important for you? Quality, safety, price or performance?’ That is all. Customers that purchase cheaper products encounter many problems. We therefore ask them if they are ok with the issues they face. We specialize in creating stable, high-quality and technological products. We provide to our clients the stability required to attain a safe level of productivity. Of course, even our materials sometimes give trouble to customers, but that is rare. When an issue occurs, we honestly recover all the deficient products and recall what we sold.


What is your analysis of the recent Kobe Steel scandal?

Unfortunately, these scandals were widely covered on TV and on the news. I suspect that they are facing these problems because of slow company performance. All manufacturers have a “to-do list” for quality checking. However, people sometimes get lazy; even Japanese people who are hard workers sometimes slack off on their job. The problem faced by Kobe Steel and Mitsubishi Materials needs to be segregated and treated differently. Nissan and Mitsubishi’s problems are variations to the actual scandal. In their case, they simply didn't conduct the final product inspection as enforced by governmental regulations. For their defense, Japanese regulations are not in line with modern standards. 20 years ago, our regulations were effective. Today however, they simply aren’t anymore. Even if it failed to match the illogical standard proposed, the quality of these company’s products is still high. There are many unreasonable and illogical standards remaining in Japan.


What are the main trends of the packaging industry and how is your company answering them?

In South East Asia, the packaging material business is developing similarly to the USA and to the EU. Many consumer-packaging players, such as Dai-Nippon, have therefore moved to these areas. Previously, we used newspapers and basic materials for wrapping and packaging. Today, consumers require aesthetic and high-performance products.

Besides for certain egg-containers and sashimi plates, Ohishi Sangyo produces industrial-usage packaging materials. Other than that, we are a completely B2B company, and we win by the high performance of our products. From leakage to air release, our products have great performance unmatched by our competitors. We successfully expanded into the overseas market because of the uniqueness of our products. Our unique characteristics positively appeal to the customers found in these regions. We work hand-in-hand with our customers and local suppliers in order to create solutions tailored to the delicate and sensitive products they manufacture.


How is your company enforcing sustainable business practices?

In Japan, we promote recyclable materials. At Ohishi Sangyo, we put a great emphasis on sustainability, and all of our papers (except plastic) fit in that category. For example, we manufacture molded pulp products that are made from recycled materials such as paperboard and newsprint. Our plastics can also be recycled and turned into plastic resin.


How does your company help to “optimize logistics?”

Our motto is “no trouble for the logistics of our clients.” In very few cases, a bag has been broken or a case has leaked. If the product it is carrying is a dangerous item, such as chemicals or poison, we pay an acute attention to details and to production processes. Our commercial message is the following: “no matter what you are carrying, we have the perfect technology for you.”


Could you tell us more about your R&D activities?

While our specialty products have a special price, our common products have a common price. We developed specialty products as we strived to expand our portfolio. In our company policy, 80% of our production is common material, leaving the remaining 20% to specialty products. This combination is suitable for us and it allows Ohishi Sangyo to enjoy sustainable growth.

From a macro-economic level, the Japanese industry is composed of many small companies. Around 95% of Japanese corporations are small-sized. This observation also applies to our business sector, as our competitors are smaller than us. In the paper-bag industry, we have around 60 competitors. Even though demand has declined by 20% in comparison to 30 years ago, we still compete against 60 other organizations. For the future of the Japanese industry, SMEs must collaborate and work together towards a common future; towards achieving higher productivity. However, it is difficult to get all Presidents to embrace that fact. To create a win-win situation for suppliers and users, SMEs need to merge and collaborate, and that is particularly relevant to the packaging material sector. SMEs cannot achieve high productivity if they work alone. SMEs cannot compete against the productivity of foreigners if we remain of small scales, with small production volumes. The private and public sectors need to change their mindset to promote higher productivity, more benefits and higher salaries.


Your objective is to achieve a 30 billion JPY turnover by 2025. Can you run us through your mid-term strategy?

To achieve 30 billion JPY in sales, we must increase our overseas business selling volume in Malaysia, Singapore, Thailand and all countries we have business in. It is also possible to establish a company in Australia, and as a matter of fact, we are currently considering that option. For the domestic business, we must merge with a similar organization. I have already started to negotiate something with a private entity. We are doing this to create a win-win situation for our customers. Without the merger, we will not be capable to cater for the needs of our customers.


What makes your company a partner of choice for massive enterprises such as Dupont and BASF?

As I mentioned it, we acquire our clients following a clear strategy. First, we attract Japanese customers. Second, we get overseas clients by submitting our samples and allowing them to test our products. Once they have assessed the performance and quality of our products, we enter into business. We have a 30 years’ business history with Dow - Dupont, BASF and EXXON. Because their products are very sensitive, it is hard for our customers to change their packaging material supplier. We cater to the specifications they need to.

Third, we attract local customers, especially for our paper bag business. Our local partners export their products to the USA, Japan and to the EU. They selected our products for the safety and performance we provide.


Can you run us through the history of Ohishi Sangyo?

We were established in 1947 as a very small company. Our owners came from the Kyushu countryside. We first moved here to make a deal with Nippon Steel, making “jute bags” for their operations. In 1985, we started a Joint-Venture in Singapore for paper bags. Before that, we established a paper bag factory in Hong Kong. However, the building of our factory suddenly stopped because of Hong Kong’s soft ground. We couldn't build our factory in Hong Kong because of the characteristics of the terrain we had purchased. In 1990, we therefore founded our Malaysian factory and we have kept expanding it ever since. We also established a company in China, which was closed last year after 16 years of operations, because the Chinese business was slow.


How would you define the philosophy of Ohishi Sangyo?

Our philosophy was given by our predecessor, Mr. Ohishi. Our motto is to “constantly try new things.” From products to businesses, my predecessor encouraged trial and error. He used to “say that failure is acceptable because the most important feature to success is to try new things.” At Ohishi Sangyo, we believe in challenging new markets and products; we believe in trying and always trying, while keeping in mind that failure is allowed. That is our philosophy. While I cannot reveal it in details, I can tell you that before the end of the year, we will try a new, greatly important business.


What new products will you market in the future, and what ameliorations will they bring about?

We are focusing on creating new packaging materials not only for our former products, but also to expand our portfolio across all sectors of the industrial packaging industry. For example, we are currently developing new corrugated boxes with different characteristics to the ones of the market leaders. Because the corrugated box business is saturated by the big players in South East Asia, we will focus our efforts on the demand of local manufacturers here in Kyushu. For every product, we apply a different marketing strategy. In the plastic business for Sashimi plates, we have met great success due to the lack of competition. We are the biggest suppliers of polystyrene film here in Japan, and we will continue to expand this business domestically.


What products will allow you to acquire international market share?

In the global market, we are currently limited to Asia because we do not have enough manpower to tackle the markets of the EU and the USA simultaneously. Therefore, the first step to our globalization is to penetrate the South East Asian market. While the Chinese market is sharply increasing, we do not have enough manpower and market data to compete. Furthermore, Chinese regulation have recently been altered and they directly target Japanese corporations. Therefore, we will tackle the Chinese market through our South East Asian entities that will collaborate with Chinese distributors.