Since the Edo Period, has been a constant in the lives of millions of Japanese people, especially those dealing with throat discomfort. Current president, Ryuta Fujii, rebuilt a failing business when he took over almost three decades ago and explains some of the issues facing the company today.
Japan has the oldest society in the world, and many other advanced nations are looking to Japan as an example of how to handle the problems of an aging population. Can you tell us what impact Japan’s aging society is having on your business? What are some of the challenges and opportunities it presents?
Although Japan is the oldest nation in the world, it has a public insurance system. Only a few countries other than Japan have such a comprehensive system. I have attended the government-sponsored social welfare committee of the Medical Insurance Subcommittee of the Social Security Council of the Ministry of Health, Labor and Welfare for nine years now, so I fully understand the social challenges that Japan is currently facing. The biggest challenge right now is the rapidly declining birthrate and aging society. There is also an increasing cost of medical expenses due to advancements in medical technology, which cannot be covered by our budget. We have to find a way to compensate for the continually growing government deficit.
One of the reasons for this deficit is the high ratio of medical-purpose medicines compared to OTC (over-the-counter) medicines. These prescriptions, or so called “medical” medicine, account for 90% and OTC only 10% of drugs consumed in Japan. Most advanced nations have a ratio of 50/50. “Medical” medicines are covered by insurance, which leads to a budget deficit. There are three types of social welfare assistance. One is self-medication, the other is mutual aid, which is a public insurance system, and public assistance, which is financed by taxes. In Japan, public assistance and mutual aid account for a very high percentage of treatment. The proportion of self-medication needs to be increased. It is more difficult to cure and manage serious diseases. The treatment cost is also high for serious diseases. Therefore, it is extremely important to prevent disease and to prevent serious illness when it does occur. It is easier and cheaper for patients to manage milder symptoms. Cutting-edge technologies in medicine and medical devices are crucial because they can save the lives of patients with serious diseases, but there is an imbalance in terms of paying for medical services provided. Many of these treatments are covered by public funds. We need to focus more on preventive care instead of advanced medical technologies.
I come from a family of eight generations, all the way to the Edo period. My family originally came from a family of doctors and was responsible for community medicine in Akita. A long time ago, there were no medicines and advanced medical devices. People took care of themselves to prevent diseases. This is the basis of our products and medical care.
As a president of a major OTC maker in Japan and a member of the government-sponsored social welfare committee of the Medical Insurance Subcommittee of the Social Security Council of the Ministry of Health, Labor and Welfare, what do you think is the key challenge that is preventing medical self-sufficiency or the preventive medical model from becoming more mainstream in Japan?
A part of it is the Japanese people's mentality. Most Japanese rely on government support. Perhaps because Japan is a stable society by global standards, we lack a sense of crisis management. Forgetting to put forth efforts to stay healthy can lead to a critical situation. We cannot blame anybody for this. It is difficult for governments and politicians to publicly state that they will "save money on health care" because it affects elections and government approval ratings. But on the other hand, it is no longer enough to say that we should rely on generic medications. It is no longer feasible to manufacture generic medicines in Japan because it simply would not be profitable. We rely on overseas production, which is difficult to sustain. We used to manufacture generic drugs and had the top share in Japan for certain items because we had the technology to make tablets smaller. However, medical prices at the time were very low. They were even cheaper than throat lozenges, so we stopped manufacturing generic drugs.
Ryukakusan, your flagship product, differs from ordinary oral pharmaceuticals in that it acts directly on the mucous membranes of the throat. Typical oral drugs are absorbed in the gastrointestinal tract and transferred to the liver, then from the liver into the bloodstream and through the heart to the affected area. Your product has a different delivery method. Can you briefly tell us more about your drug activation method and how it is different from conventional OTC treatment for the throat?
Common oral medications are absorbed in the gastrointestinal tract and travel throughout the body from the liver to the bloodstream, where some of them are transported to the affected area. Not all of the medication taken reaches the affected area, but some reaches unrelated tissues, which can cause unexpected side effects. On the other hand, Ryukakusan is made from finely powdered herbal medicines and acts directly on the throat mucosa to relieve symptoms. As a result, the risk of side effects is low, and the drug can be taken by pregnant women and those taking multiple medications. The challenge for us is determining how fine the herbal medicines in the medicine should be. If they are too big, it will affect the rate of absorption, but if they are too fine, it will be inhaled to the lungs and be ineffective.
Ryukakusan requires a mixture of various types of herbal medicines, and is characterized by advanced techniques for making herbal medicines into a fine powder. Other manufacturers do not want to develop such products because the fine powder scatters everywhere and can get on other products. It is difficult to manage the quality and prevent cross-contamination. We have unique technology to prevent cross-contamination. This powder is very difficult to handle, but we have taken advantage of this technology to knead Ryukakusan herbal powder into other Ryukakusan products such as candies and tablets. It is quite difficult to imitate a similar product.
You mentioned eight generations of your family being involved in medicine. During that time, you’ve had several innovations. You created Japan’s first lozenge and you pioneered swallowing aid jelly. Can you share what you are currently developing using your core technology?
The Ryukakusan Direct is a new granule formulation that is taken without water and dissolves like light snow. Each serving is individually packaged, making it easy to take anywhere and anytime without water. This basic technology was developed during my father’s generation, but it did not sell well, partly because it was under a separate brand called "Clara", so we improved the product and unified the brands. There are other products for sore throats or removing phlegm, but they are oral medications, and many have side effects. Our R&D is not seeking innovative technologies and products. We should not be developing new drugs like large-capital companies, but we are constantly evolving by further advancing and maturing our core technologies and proposing new needs for the same product in response to the market environment.
You entered into a strategic partnership in March of last year with China Resources Sanjiu Medical & Pharmaceutical Co., Ltd, a major OTC drug manufacturer in China. Can you tell us your motivation for entering into this alliance?
We have successfully appointed authorized distributors in Taiwan and Korea almost 60 years ago. The same is true for Hong Kong and the United States. The business with the old authorized distributors abroad was started in the days of the previous generation and the previous generation. In terms of China, it is a very tough market to enter and doing business there is a challenge. We tried to enter the Chinese market before, but we gave up due to several reasons.
On the one hand, instead of expanding into China, I have collaborated with various household medicine manufacturers since then. We had joint promotions in Taiwan and Hong Kong and participated in exhibitions there. In Taiwan, we put shelves in the stores. The most symbolic example is the promotion on Kinmen Island in Taiwan, where footage of our visit to the pharmacy was broadcast on the news to Xiamen on the opposite shore, and many Chinese who saw it on TV came by boat to buy. We have been successfully implementing the now commonplace inbound strategy overseas for more than a decade. The Japanese government tourism agency saw this and asked if a similar project could be organized in Japan. As a result, I placed an ad jointly with a household medicine manufacturer in a free newspaper distributed at travel agencies that Chinese who wish to visit Japan must visit to apply for a visa. This approach has been very effective.
We are also using SNS. We put all the information on WeChat and social network sites. Even though there are many challenges, such as market disruptions due to covid-19, our products are still selling very well. However, we anticipate encountering problems in the future. The previous generations had their ups and downs, so we know that it would be the same for us. We would like to be prepared for overcoming those challenges in the future. Before covid-19, the market was booming with inbound tourists, and even after covid-19, cross-border e-commerce sales with China have grown significantly. This is our new business model.
We participated in local exhibitions and have done live streams of our overseas activities. We have collaborated with a very famous influencer in China, and our products are highly praised. We appeal to Chinese consumers on our homepage. Many copy our products and if we keep selling our products on cross-border e-commerce, it will be difficult to control counterfeit products. We have to sell directly to stores in China. We did test marketing and a company approached us for a partnership. They wanted to sell our products because it is very famous and well-received in the Chinese market. We did not have to go there and promote our products. They came to us. We negotiated with very good conditions. Our partner is selling very well and working very hard to place our products. Our sales promotion activities include setting up a booth in an exhibition in China last year as well as communicating with real stores. We also have local e-commerce marketing. Since we are very successful, other brands followed suit and tried to do the same campaigns. Other presidents who are my friends come and ask me how I did it. We are not competitors so we share product marketing tips.
You have had a very successful partnership in China and success in the Chinese market. Do you have any plans to replicate this model – whether it is cross-border e-commerce or establishing physical locations to sell your products directly in any other foreign markets such as Southeast Asia or Korea?
We are currently focused on China, but the success in China had a ripple effect. Other neighboring countries want to sell our products as well. Since border controls have been eased, there are more tourists coming into Japan to buy Japanese products. ASEAN countries also want to buy our products. We do not have to promote other countries because people come to us. Japanese products are highly valued around the world because Japanese consumers pay close attention to details and demand high-quality products. If Japanese consumers accept a product, it will also get accepted by global consumers. Our biggest strength is that we are not a profit-seeking company. We focus on our social contribution. As the 8th generation owner of the company, it is not my desire to grow the company or become listed on the stock exchange to make more profit. The foundation of medical service is not to make a profit. My ancestors had the same mentality. They were doctors in Akita prefecture, and they focused on treating patients. As a company, though, we have to generate enough profit to survive. Nevertheless, we do not have to make more profit than necessary. The reason for our existence is to help people be healthy.
As an example, our swallowing aid jelly product has only JPY 1 billion in revenue. During the big earthquake in Tohoku, there were victims who did not have water to take their medicine. We donated our swallowing aid jelly to 30,000 people. They really appreciated our donation. In addition, kids do not want to take medicine when it is difficult to swallow, but it is easier for them to take with our swallowing aid jelly. Our product is helpful for parents who are raising children. Our biggest competitive advantage is our social contribution. People appreciate our products. The key to success is not the great and unique technologies or big profits, but it is the company's social contribution throughout the generations.
Your company is celebrating its 151st year anniversary this year. If we come back in four years and have this interview over again, what dreams or goals would you like to have accomplished?
Since our company has been around for a long time, the length of our history is taken for granted and anniversaries are not very important to us. The founder, the first generation, is the hardest and most important, but from the second to the eighth generation, everyone's the same. I have been president for 28 years, but in comparison to the company's history, it is a very short period. Despite that, I can say that I have fulfilled my responsibility as a president. What I mean by that is when I assumed the presidency, our revenue was lower and we were in debt. The major products were not selling well at the time. During my presidency, I increased our revenue five times, we had the top share in the market, and we modernized our factory.
If you come back in a few years' time, I don't know if I would be in the position I am now. That is because I know my limitations. It is said that people's lifestyles change every 30 years. Moreover, the generation gap widens as people get older, and I don't understand how TikTok promotion can help business, given my sensibilities. It is unimaginable that young people spend hours watching TikTok, but it is true that it sells products.
I became president at the age of 35 and turned the business around. But I don't know what will happen in the future. My business and management style was to take the initiative myself with limited resources. It is true that I rebuilt and strengthened a well-established company that was destined to collapse. I may have succeeded as a manager, but I do not think that I should impose my way of doing things on the next generation in the future. And if the next generation of managers anticipate changes in the global situation and seek management innovation, it is my role to give them enough time to consider it fully, and I have done that.