As a hotel amenities and cosmetics trader and manufacturer, Sanyo Bussan has left its mark by developing innovative products. These include the Biomass Series, the hotel industry’s first biomass-based product line, such as toothbrushes and hairbrushes made from rice resin (inedible rice). President Eiji Takeuchi tells us how the company has responded to the shock of the Covid-19 pandemic for the hotel industry by innovating and diversifying its business, and how it aims to expand its reach by providing premium Japanese amenities to hotels around the world.
Since January 2020, we have seen changes around the world brought about by the Covid-19 pandemic. There is a closing of borders and grounding of commercial flights, and pressure on economies. On the positive side, we have seen an increase in e-commerce platforms and digital technologies are transforming businesses. What has been the impact of the coronavirus in your sector and on your company? What long-term changes were brought about by the pandemic to your firm?
Our company produces hotel amenities, so our work volume was reduced by 80-90%. Sometimes we needed to give days off for about 100 employees, but the good thing about being a Japanese company is that we receive grants to keep our employees even though they have to take days off because of the decreased work volume. We are grateful to the Japanese government for that.
In February 2020, we participated in the Tokyo Hotel Restaurant Show with an Eco theme which was not common in the hotel industry at the time, but we pushed for it anyway. The coronavirus hit us just as our new plant was completed in March 2020 in the lead up to the Tokyo Olympics. We were not quite sure what to do and I had a lot of sleepless nights. Our plant did not open until six months later in October and in November 2020, we started the production of face masks and then, later on, the sale of alcohol products. The advice we gave our employees was to let the pandemic make us even stronger. When the pandemic is over, we will become a bigger company with extra products apart from our original hotel amenity lines.
Mask manufacturing at the factory
We started focusing on e-commerce, including online businesses such as Rakuten. We started working on digital transformation and digitalized our processes for streamlining. Without the corona pandemic, we would not have produced masks, introduced new systems or have been committed to implementing digital transformation. The pandemic allowed us to assess our situation. We are saddened by the deaths caused by the pandemic and we would never say it was a good thing, but dealing with it has allowed us to be stronger. In the past, we only focused on B2B (business-to-business) products. With the pandemic, we started to develop B2C (business-to-consumer) products. We just started the sales of these and we plan to increase our production of B2C items and make them one of our strengths.
Face masks with local mascots
Has the diversification to face masks, alcohol products, and stronger B2C business made up for your loss in the hotel amenities business? Has the diversification allowed you to maintain or even increase your sales?
The production line for hotel amenities has been closed for a while now. Employees who were working in that segment were transferred to other product lines like face masks. The plant was not used so it was easy for us to install mask producing machines. Instead of having the machines producing hotel amenities, the machines to produce masks were installed in the plant.
Japan is now the oldest society in the world with a decreasing demographic line. This is creating two problems for businesses. First is the shrinking domestic market. There are fewer consumers and older consumers, leading brands to change the appeal and characteristics of their products. Second, from a manufacturing standpoint, there is a problem in the labor force. There are fewer and fewer graduates joining firms. What has been the impact of Japan's demographic change on your company and how are you dealing with these two challenges?
In the last 20-30 years, the Japanese population was 126.1 million and 30-40 years ago was about 118.5 million. This decline is simply the population level returning to how it was 30-40 years ago. I am not so pessimistic about it. With the declining population, the competition will get stiffer in the hotel amenities industry. Some companies will survive and some will not. If we want to survive, we have to think of a strategy. The Eco is one of our strategies to tackle this challenge. If we have a competitive edge and come up with great ideas, we can definitely survive.
In all sorts of packaging in the plastic industry around the world, there are big questions on how to use less plastic and how to switch to biodegradable alternatives. The hotel amenities sector is no different. In our research, we saw that you created a biomass series including a “Rice-Resin” (Japanese biomass plastic derived from rice) toothbrush and a Rice-Resin hairbrush that is made of approximately 20% of old or broken rice that is not considered suitable use for commercial food products. Can you tell us more about these products and about your commitment to facing environmental issues in the hotel amenities industry?
Rice-Resin toothbrush for hotels (Left) | Rice- Resin toothbrush “Killa-Glint” for the retail market (Right)
We started producing the ECO products mixed with inedible rice when we learned about the Kyoto Protocol 15 years ago. We needed to take action and we tried many different things as a result. One of the successful products we created was the Rice-Resin toothbrush. However, it did not sell at all about 5-10 years ago as people were not interested in environmental issues at the time. In 2019, which was a year before the Tokyo Olympics, the hot topic in Japan was SDGs (Sustainable Development Goals). Our main product is toothbrushes for hotels and we know that European hotels do not provide toothbrushes for their customers. We always had the sense of pricing right when it came to selling a lot of toothbrushes tackling environmental issues. In 2019, when SDGs became a hot topic, we were faced with a dilemma. We needed to move fast and produce something new for our company to survive. As a result, we started rice-grain Rice-Regin based products. This product weighs 5.2 grams, and 35% of it is made of rice. Eco-products did not sell well 5-10 years ago, and even though some Japanese hotels at the time expressed the desire to use eco products, they were unwilling to pay for a more expensive product. Rice costs twice as much as traditional materials, so we reduced the weight of the toothbrush, allowing us to sell them at the same price as traditional toothbrushes.
Regarding your international partnerships, in 2008, you signed an agreement with GM Group, which is an international seller of amenities products in about 70 countries around the world. What can you say about the more than 10 years of partnership with them and what synergies were you able to create between GM and Sanyo Bussan?
Groupe GM cosmetic factory in France
Our partnership with GM is very good and we are able to handle the GM Group Products. In 2008, we just dealt with the Japanese and Chinese markets at the time because we had no idea and capability when it came to working with other markets. We thought it was impossible for us, but because of our collaboration with GM, we were able to enter the international market. GM was producing bottle containers in China which were delivered to France in order to be filled and then transported to Japan. Working with GM allowed us to have a wider perspective and taught us how to enter the international market. We started to feel that we could do business globally and we are grateful to GM for that. We also learned that the Japanese mentality is not the standard in the international market. All of us here probably struggled to work with different cultures because sometimes misunderstandings arise. We needed to learn how to communicate and express ourselves clearly. Our dealings in the international market allowed us to have an awareness of our Japanese mentality too.
Your company created the biomass series. One of the issues about the sustainability of products is designing the products. Is sustainability ingrained in the design process or are existing products taken and slightly modified to make them more sustainable? Your approach with the biomass series seems to be a good sustainable design at its core. What do you think are the competitive advantages of Sanyo Bussan and are you looking to leverage these competitive advantages to have a broader market outside Japan?
Our advantages are in our designs and mentality. For example, when our company was founded, the first thing we did was to sell hairbrushes to Japanese companies instead of flat combs which were provided as a standard amenity in hotels at the time. Once we started selling hairbrushes to hotels, our competitors followed suit. Thanks to our competitors replicating our products, hairbrushes became the standard in Japanese hotels and ryokans instead of flat combs. This change was triggered by our innovative idea and our product.
Looking towards the future, are you looking for partnerships with international firms similar to what you had with GM? If so, what kind of partners is Sanyo Bussan looking for?
If we have the opportunity, we would be happy to work more in the international market. As for the criteria for those partners, we do not have that much for now. We understand that the mentality and business practices would vary from country to country. Through our partnership with GM, we learned that different nationalities mean working with different kinds of people. French, Italian, and Portuguese are all different. We have learned and understood this working with GM because they have many different projects in many countries. Our interactions vary depending on the personality of the people we work with.
Throughout its history, Sanyo Bussan has opened plants, offices, and facilities overseas in China, Vietnam, and Myanmar. Looking towards the future, what key markets are you considering for your international strategy and what regions are you prioritizing for your expansion?
Our focus for expansion is on Asia. We are hoping to build a manufacturing plant in Asia. If our plant is based near the Indian Ocean, it is close to the Middle East, Africa, and Europe. The delivery costs will be cheaper compared to transporting it all the way from Japan.
How do you want to expand your presence in the Asian market? We know that Europe is a receptive market when it comes to sustainable products. Consumers and businesses are ready to pay more for sustainable products, but countries in Asia are different. What business would you like to target specifically in terms of your Asian expansion?
Our core business is hotel amenities. Many European hotels do not necessarily provide this, but a lot of Asian hotels actually do. We think that this trend will continue for a while, so we want to keep working on the hotel hair brushes. You probably noticed that the quality of amenities in Asian hotels is quite low. We want to provide Japanese quality hotel amenities to these hotels at a lower price. SDGs are trending now and it's the same in the Asian markets. It will not be long until our products and our ideas would be accepted in the Asian market.
If we come back at the end of your presidency, what goals and dreams would you like to have achieved for Sanyo Bussan by then?
It would be the happiness of my employees.
A challenge for the dream!