Born and based in the middle of the monozukuri area of Tsubame-Sanjo, Twinbird is known for manufacturing high-quality home appliances, but is venturing into new fields. We had the pleasure to meet with Dr. Shigeaki Nomizu, President and CEO of Twinbird Corporation to learn more about their two new product lines “Takumi Premium” and “Kando Simple” as well as their unique Deep Freezer which utilizes Free-Piston Stirling Cooler (FPSC) technology and is now being applied in sophisticated sectors such as biopharmaceutical for transportation and storage of vaccines
In the last 20-30 years Japanese firms have been pushed out of mass production market segments. We see industries such as consumer electronics where companies like Sony are losing market share to Samsung or LG from South Korea. Despite this, Japan remains a leader in niche B2B fields. Can you explain to us why this is the case? Why do you believe Japanese companies are still so successful in these niche B2B fields?
It’s a proven fact that manufacturing of the products which were mass produced and volume sales have been shifted to other regions such as South Korea, Taiwan and China from Japan, because of cost reason. I think this has happened for many reasons; one big reason being the production costs.
Japan is still prominent in the area of manufacturing products requiring precision, for example in the optical sensors and sensors used in the semiconductor manufacturing industry. Products such as these can only be modified, produced and customized by a Japanese company, companies that have a stamp of excellence in their production. These companies are the ones that persist and are still present in the Japanese market.
Some believe that the ideals of Japanese monozukuri are in jeopardy because of the shifting demography of Japan. It’s an aging and declining population that is heading to numbers below 100 million by 2060. For companies here in Japan, that means a smaller domestic market to sell products to and ever smaller pool of talented staff to recruit from. How is Twinbird Corporation reacting to these population changes? What opportunities or challenges do these changes represent for your company?
The situation of declining birthrate and aging population is not a recent one and has been apparent since the 1990s. The population of Japan has been declining since 2008, and accordingly the domestic market has been shrinking. In Japan, electrical appliance penetration rate (usage rate) has reached over 90%, as such the area in which we can now expect demands are replacement/repurchase demand in the domestic market and demand in the overseas market. Japan had called “Japan as number one” back in 1980-90s, but such business model is no longer applicable because of demographic problem along with market situation of electrical appliances in Japan. Our company will strategically strive to explore these two markets: one is to extend our domestic share of the Japanese market, and another is to focus more on the export side of things. We have tried to capture both of these approaches.
A great change has come about too in terms of Sustainable Development Goals (SDGs), Economy, Social and Governance (ESG) and their relations to energy consumption. Our company has taken very keen strategic actions in this regard, to increase the quality of products, thus extending the life cycle of products to the maximum, and that is what the market expects us to do. Products that were purchased 10-20 years ago are still good and functional because of their qualities and we will continue product development in this way for a more discerning customer base, rather than mass production and mass consumption. Our good name in the industry comes from extending the quality and lifespan of products in order to meet the requirements of our customers. We are always looking to make our contributions to sustainability.
We saw in our research that your company has shifted to a customer-driven company, moving away from a function-based company. You’ve reduced your stock keeping unit (SKUs) from 600 down to 350. What does it mean to be a customer-based product development company and how does this reduction in stock help you do that?
I would first like to talk about the history of the company because our history ties into this topic. Our company is already more than 70 years old and was founded by my grandfather in 1951. Twinbird actually started as a plating company for tableware such as cutlery and metal plated trays. Working on daily necessities, we then entered the gift market, to make special plated products that can be presented at events such as wedding and other events. It was good in terms of serving a specialized product that customers may use at reasonable price through the gift market.
Move forward to the 70s and 80s and our operation along with many in Japan saw economic upside. The founder of the company is actually my grandfather, and the company's move to go public on the stock exchange was spearheaded by my father, under the trend of Japan’s tremendous economic growth. Twinbird became a listed company. I took over as the third generation in my family to hold the presidency of the company. I became the president and CEO in 2011. From around 2011 the population of Japan began to shrink, and so as the gift market, and even to this day it continues that downward trend. During the early days of my presidency, I realized that many things needed to change. I adopted the strategy to strengthen our brand and tried to orient us towards more direct marketing. My philosophy revolved more around communication with the customers and branding was a big step in that direction in order for us to survive.
I understood that the gift market was not in good shape and with the shrinking population, obviously, population of people who were getting married has decreased as well, in addition, trend of having wedding ceremonies has also decreased. Our priorities shifted towards more direct marketing to the customers and introducing greater products that fit expectations. The biggest obstacle I feel we have faced was creating brand awareness of Twinbird. Obviously, it is traditional to give gifts in Japan for many occasions; birthdays, family gatherings, new years and marriages are some examples. This gift though often would not have some form of tag or branding and people would be unaware that it was made by Twinbird. Something had to be changed, and the company started adopting new strategies. This is where we have tried to make a U-turn to make more customer-oriented, with lesser volume and more emphasis on quality and one-of-a-kindness. It is a very simple approach, but it’s also very transparent and easy to understand. We really are aiming to get back to the roots of monozukuri and produce better quality products with a bespoke touch.
As you mentioned, we are decreasing the number of SKUs we offer, we had 600 different types of appliances and we have dropped that down to a half. These products we have branded so customers can understand that these are premium products very easily. We are looking for straightforward communication with our customers.
I would say that our strategy is paying off. Customers recognize us as having high quality, fairly priced products that touch the hearts of consumers. By engaging customers more and continuously, we try to optimize lifetime value (LTV) to our products, and slowly but surely, we are generating a fan base.
Fully automatic coffee maker
Many B2C channels have not been able to operate as normal over the past two years due to the ongoing COVID-19 pandemic. China’s zero COVID policy hasn’t helped matters, causing disruptions all across global supply chains. Out of this, we have seen companies use this as an opportunity to develop e-commerce channels, with companies such as Target in the US tripling their e-commerce sales and outperforming Amazon during that period. In the case of Twinbird Corporation, what was the impact of COVID-19 and how is e-commerce helping to create a more direct to consumer approach for your business?
COVID-19 caused a 10% plunge in overall sales for the first half of 2020 in comparison to 2019, because major large scale electrical appliances retail shops were closed tentatively. Basically, we closed the half year account with a deficit. COVID-19 was not good for the company, but nevertheless we tried to adopt policies to protect lives, especially workers. Our sales workers in Tokyo started to work remotely, and we promoted more holidays for our employees during Golden Week (off-and-on holidays from late April to early May in Japan), bumping their days up to 16 for that period. This kind of event was previously thought of as impossible for Japan – 2020 featured a lot of zoom meetings and online work.
People are spending more and more time at home, and obviously, as you spend more time at home, you look to make your lifestyle more convenient and comfortable. We found that our coffee machines began to sell very well during the period when people were not able to go shopping freely. Also, The Ministry of Health, Labor and Welfare of Japan started purchasing our vaccine carrier units for the transportation of the Moderna vaccination in Japan. The Japanese government became interested in our Free Piston Stirling Cooler (FPSC) technology. This was a good milestone and achievement for the company to be able to develop a product to meet this critical public health need, bringing a lot of traction and recognition to the company name. And we believe we have contributed to save Japan in a covid-19 crisis.
Twinbird's FPSC Products (FPSC: Free Piston Stirling Coolers)
Handover Ceremony of Transportation Cooler Box for COVID-19 Vaccine
I think it comes down to how you see things. For obvious reasons, COVID-19 was awful, it was a pandemic that affected so many people, but as a company, we have to keep moving forward and look for positive opportunities. I think we did and exceeded our sales targets for the past year. As a result, we increased our capabilities and introduced Twinbird on a higher scale. We were able to introduce products we never were able to before. This kind of innovation is beginning to be highly recognized and appreciated by our customer base. Additionally, our results are good for the revitalization of the Niigata prefecture where we are based.
Our company now considers itself an R&D oriented company, and a lot of development went into our deep-freezing vaccine transport technology. The unit itself is made up of 150 metal components, and among them, some parts require 10 times more precision work than those of auto-parts. And the freezer itself is an original design by our own engineers. Our coffee machine too has a lot of research and development. It contains a unique milling technology for coffee beans. This technology is very sophisticated and one of a kind. We are no longer just a simple electronic appliance manufacturer, but more of a sophisticated research and development company. After all, in 2020, we increased both sales and profit drastically.
Before the pandemic, I visited Europe and America many times and learnt a lot whilst I was there. When you visit small towns, especially in Europe, you see a lot of the niche players in the markets there. Luxury car manufacturers, jewelers, and bag makers to name a few. They are considered a sort of local gem that have become interwoven with the fabric of the community. They’ve then introduced excellent original design in a way that has become highly valued all across the globe. We are trying to introduce a similar approach here in Niigata.
We know that you’ve been developing your Free Piston Stirling Coolers (FPSC) technology long before COVID-19, way back in late 1990s. As you’ve alluded to, it’s a very precise technology and difficult to execute correctly. Can you explain to us what were the difficulties in developing this technology? What are the advantages of this cooling technology for vaccine applications over conventional transportation cooling devices?
This business may sound very good right now, but there has been a lot of hardship with this project. My father, the previous CEO of the company was the one who decided to invest in this technology. The technology itself is adopted from an American company. We took that technology and paid license fees to the American company, and invested in production facilities, meaning that there has been an immense expenditure line for the company over the past 10-20 years. My father was a visionary and felt that results will come eventually as long as you don’t leave things halfway down. Now, of course, we are seeing the fruits of our labor. In 2013, at the request of JAXA, the Japan Aerospace Exploration Agency, our FPSC was installed in the FROST, a portable refrigerator/freezer unit for use in the Japanese Experiment Module “Kibo” (meaning “hope” in Japanese), a component of the International Space Station (ISS), to store experimental specimens and other substances collected by astronauts. In August of the same year, the FROST was also loaded on the cargo transfer spacecraft “Kounotori” (meaning white stork in Japanese)
I think the compactness of the FPSC is what sets it apart from its competition. It is very easy to handle and carry, especially compared to conventional coolers that rely on a large compressor. It can control temperatures at high precision. Additionally, temperatures can be reached in a much shorter period of time, which is extremely valuable when transporting important vaccinations. The cooling effect itself is created by using helium gas, used as the refrigerant, which is thought to be more environmentally friendly.
The COVID-19 pandemic has really opened the world's eyes to problems associated with a global health crisis, and the chances of a repeat are actually quite high – a 2% chance annually, which equates to a 40% chance in the next 20 years. Could you explain how you are doing with the World Health Organization (WHO) to prepare the world for the next pandemic?
First of all, we are really not sure what shape and severity the next pandemic will take, and we are hoping that it's not soon. But once it happens again, we expect that our FPSC products would help in such situation in the cold chain. We are looking to have the right information and preempt, and thus have the right equipment to face this kind of disaster. We are ready to introduce our best products if and when that day comes. On a personal level, I hope it never comes, but on a business level, we will be ready.
Unfortunately, there are regions around the world where no vaccinations have been administered. We are working hand in hand with the Japanese government on official development assistance (ODA) basis. We are also working on getting vaccinations into other parts of Asia, and some parts of Africa too. We are currently escalating our activity in this sector.
Your freezers have other applications, including regenerative medicines, and Japan is famous for its Sakigake system that allows for the fast development of new therapies. In terms of the future, to what extent are you looking to become a company that caters to the medical field?
Other medical fields such as biologics require cold chain storage, and treatments such as IVF and cell therapies. Gene therapy is cutting edge right now, and many countries across the world are entering this market. We are looking forward and being very optimistic that our equipment can cater to some of the expectations of these kinds of companies.
Vaccines themselves are often thought of as a preventative measure, but now we see a shift in that mindset towards a general treatment philosophy. We are very much looking forward to our cooperation with pharmaceutical manufacturing companies.
Would it be correct to say that you're looking for international partners to expand your operations overseas?
We are very much still in the planning and approach stage. It's very much within the company's vision to see our cooling technology utilized worldwide.
We know that since 2011 you’ve been present in China and have had a partnership with Global Cooling in America for the past 20 years. Could you please expand on your international business strategy? What countries are you targeting and how are you going about entering them?
I should mention our business runs through two channels. First, we have the R&D and manufacturing based here in Niigata, Japan. For electrical appliances, we do manufacture in China too, and we are looking forward to cooperating with local Chinese manufacturing companies to create new products together.
Sales as far as electrical appliances concerned, we are looking mainly for regions that appreciate Japan and Japanese products. These countries tend to be geographically close to us, and most are Asian regions such as Taiwan, Thailand, South Korea, Hong Kong, China, and South East Asia including Singapore. We don’t have a huge presence in these markets yet, so Twinbird is looking forward to establishing itself in these markets and introducing home electronics appliances to a greater extent.
For our FPSC, currently, 70% of all sales of our FPSC units are to foreign countries. We mostly sell to customers in areas such as North America and Europe. Additionally, I would like to add that our FPSC units use less energy and help decrease CO2 emissions. We are trying to make continual efforts to the global goal of decarbonization. Let’s be frank, despite many companies' claims of full commitment to SDGs, many are not reaching 100% of their goals. With that in mind, there is plenty of room for growth and with Twinbird’s efforts in decarbonization and sustainability, we feel there is a perfect match for us. And FPSC can supplement the weak point of compressor, namely inefficiency and running hot.
Imagine that we come back to do this interview all over again on the last day of your presidency. What would you like to tell us then? What are your dreams and goals for the future of Twinbird Corporation?
First, as we are listed on the Tokyo Stock Exchange, the next generation of Twinbird will need to comply and apply with all of the associated governance codes. Fulfilling stakeholders' interests in that respect is a must.
One day I will need to give up the presidency of this company, it's natural. By the time I give up the presidency, I would be happy to see Twinbird as a globally accepted and loved brand. There isn’t a human alive that was gifted with eternal life. For the short time that we live on this earth, we must do our part and keep up the good work. Employees are very important and dear to me, and as a president, it is my responsibility to keep them happy and comfortable.