Superbag: Bagging Solutions for a Greener Future

Japanese companies are facing some macro challenges, including supply chain bottlenecks and rising input costs. Still, if we look at Japanese firms on a global scale, they have a reputation for quality and innovation. Now, with the weak JPY vs. the USD, it’s never been more cost-effective to buy Japanese products. Do you believe that is the case, and how can Japanese firms leverage these current conditions?

Our packaging business is mainly a B2B domestic business, but with the depreciation of the JPY, the environment for exports, especially for high-quality packaging solutions, is in focus. Although the number of our overseas transactions is still low, we hope to expand our overseas presence through active exporting.

One major challenge for Japan is the declining population, which means a shrinking domestic market and difficulty in hiring staff. Some estimates say the country will need more than 10 million workers by 2040. How is your company reacting to this, and to what extent do you think Japanese firms need to look overseas to secure new talent and new markets?

To be honest, we haven’t been focusing on overseas until recently. With the population decline, a shortage of manpower and a shrinking market are inevitable, so to compensate, we need to focus more on overseas, both for human resources and the market. Our core business of paper bag manufacturing is not a segment that we expect significant growth in the future, so shrinking domestic and overseas markets is actually a threat to us. Our biggest issue at Superbag is to enlarge our presence overseas to diversify the product portfolio and find a new pillar of business. While our core business is paper bag manufacturing, we also need to strengthen our paper containers, paper plates, and flexible packaging business.

When we talk about basic types of packaging, companies have two strategies to compete. On the one hand, you have a pure price-based competition that is about offering the lowest cost possible as it’s a product that has only a limited number of innovations. On the other hand, there are companies that try to add as much value as possible, using their packaging expertise as a way for their customers to brand themselves, have a better image, or increase their marketing. As you analyze the markets, are you leaning more toward a price-driven strategy or a value-added one?

It is the latter. Our focus for growth is adding new value to our packaging. In fact, our strategy is to elevate our environmental index value through our packaging solutions. Packaging could be seen as an unnecessary thing, but, its function lies in its protection and transportation of goods, so finding the best means to balance the environmental impact with functionality is important. Our clients are in a dilemma because they need to be more environmentally friendly while also keeping the packaging for branding and other functional reasons, so we want to provide the most appropriate solutions to each client’s needs.

Sustainability is important across the industry, and the Sustainable Development Goals (SDGs) are pushing manufacturers to look for ways to improve their environmental performance. You mentioned you want to raise your environmental index value, and you have already undertaken some initiatives, such as using FSC-certified paper and biomass ink. What other steps are you taking?

We are working to develop environmentally friendly products and realize a circular economy, for example by upcycling discarded stretch film into trash bags and recycling things like catalogs and brochures into recycled paper bags. However, until now, these were individual efforts and the Superbag vision was unclear, but in April 2024, we established an environmental department that will act as a control tower to lead the company to become greener. In order to achieve both economic and social responsibility, we made it an organization on the same level as the corporate planning department.

When you look at sustainability in the packaging sector, specifically either the utilization of novel materials such as paper-based alternatives or LIMEX or the use of recycled paper and recycled products, there are certain challenges. One big one is the cost because sustainable alternatives are often more expensive than their traditional counterparts, and it’s difficult to ask your clients to pass the cost to consumers. Another challenge is the need for quality. Specifically, for recycled paper, there’s only so much you can recycle before losing the overall quality of the product. In your sustainable initiatives, how are you balancing these two big issues?

It is true that balancing costs and quality is very challenging, and in the Japanese domestic market, customers have yet to fully appreciate the importance of converting to environmentally friendly products and still consider it as simply an additional cost. Having said that, the appreciation of environmental sustainability is growing among Japanese companies, and I foresee that in the next five years, they may prioritize value that considers the environment rather than just the cost.

In our mid-term plan, we have a goal to strengthen our environmental response capabilities, and many of our customers are very supportive, with some saying that in three to five years, if the new era of environmental prioritization really happens, then we will choose suppliers based on their environmental response capabilities, not cost. Therefore, by having an early start, we plan to continue doing business with them.

You just mentioned your new management plan, which runs through 2027, and this plan also fits within your wider vision for Superbag in 2030. We’ve already touched on the environmental aspect of that, but you also have goals to strengthen your management base through digital transformation (DX) and supply chain management. Could you share with us this vision for 2030, and what sort of strategies you will use to achieve these goals?

As you have mentioned, there will be a shrinkage of the labor force in Japan, so automation and DX are an integral part of advancing our business in a more efficient manner. The production of paper bags still relies heavily on human labor. After the paper bags have been produced by machinery, inspection and piling are done by people. Automation may be a more precise word than DX, but we are trying to automate more of the production processes. As for production planning, we still use paper and pencil to plan and schedule production, so introducing DX, AI, and automation will be the next step in elevating efficiency and productivity.

Your stock price went up over 60% over the past year, with a price of around JPY 1,700 in July of last year and today it has surpassed the JPY 2,700 mark. Other packaging companies have had growth as well, but yours has outperformed them. Why do you think that investors and the investment markets are betting so highly on Superbag?

We think we are evaluated by the market for our ability to be profitable after the “two crises,” which were COVID-19 and the requirement that started in July 2020 in Japan to pay for plastic bags.

You have streamlined your logistics services with two proprietary systems, the Superbag Vendor System (SVS) and the S-Web system. What sort of benefits have you seen from this, and what were some challenges that you found in developing these proprietary systems?

We introduced SVS in 1981. It began with the purpose of providing a more comprehensive service to our customers to increase loyalty by providing not only paper and plastic bags but also other related materials. The idea is to have closer relationships and provide all the customer needs in a way our competitors don’t. On the other hand, providing all the needs of the customers means we must have a wide portfolio, so maintaining inventory has been a challenge. Another issue is the physical handling of items, which cannot be automated because the shapes vary. We are experiencing some challenges, and we are now contemplating the direction we should take.

To return to sustainability, one of the main challenges that companies face with printing is volatile organic compounds (VOCs), which can be harmful for workers in the factory and also to the environment. You have moved to water-based ink using a flexographic printing method across all of your products. Have you noticed any improvements in the environment for your workers, and what challenges have you faced in switching from more conventional printing to a water-based ink system?

The advantage of converting from chemical ink to water-based flexographic ink is that it is more environmentally friendly and it provides more friendly working conditions for the workers in the factory.

We started off as a flexographic printing company, so that has always been our standard.

Flexographic printing is a method usually used for simple printing, for example, on corrugated boxes. Our strength is our long history of using flexographic printing, not only for simple print jobs but also for sophisticated and detailed printing needs. For example, we receive many compliments on seasonal bags.

Also, every year, we enter a US competition on flexographic printing. There are gold, silver, and bronze medals and every year we receive an award. This year, we were awarded the gold prize. In this way, we continue to make efforts to improve our flexographic printing technology. As part of this effort, we have produced the paper bags in collaboration with "mame", the popular illustrator in Japan.

You mentioned partnerships for developing new products. You also mentioned looking to increase your overseas markets, and of course, partnerships can be helpful for this as well. Are you currently seeking any partnerships, especially in overseas markets, to try to achieve the goals that you mentioned?

We are looking for both domestic and overseas partners. Our core business currently is making paper bags, and we have two production sites, one in Saitama and one in Hokkaido, but we need to think carefully about whether that is enough. We can expand our paper container business, and flexible packaging is also an option for partnerships. As for overseas expansion, we’ve been importing materials, but we haven’t actually exported our products. Our core customers are domestic, but since it’s important that we expand overseas, finding new partners may be a valuable channel for us.

We noticed that you have overseas offices. Is there any particular country or region that you are targeting or that you see eventually having a benefit for your business?

The purpose of our overseas offices is to provide local support to our Nikkei customers. We are in Shanghai, Taiwan, and Thailand, and we have let each subsidiary or branch take care of itself, but in foreseeing future overseas expansion, it’s important that we establish a strong network within our group companies and our partners to grow together. In terms of target markets, Asia, with its growing population and growing economy, is attractive to us.

I think Japanese people appreciate quality packaging and the products you have shown us are great examples. As you are currently planning your overseas expansion strategy, will you tailor your approach to the sensibilities of each country, or will you be targeting certain applications such as high-end brands where there is a demand for such high-quality packaging?

If we adapt ourselves to the local quality, there is no purpose for us to expand overseas. We want to fully leverage the high-quality monozukuri that we are pursuing, and finding local markets that balance quality and quantity is important for us.

Superbag is a company that’s over 100 years old, so there have been many generations of executives in your seat. During your time as president, is there an ultimate goal, ambition, or objective that you would like to achieve during your tenure?

Tracing back history, until July 2020, our sales had 40% plastic bags, and the material cost variations greatly affected our business sales. It is important for the company to have stable profitability and steady, gradual growth. Such long-term, stable profitability is important to compensate both the employees and the shareholders while retaining capital for future investment and, of course, to pay taxes. As president, I want to create a structure where the company can have stable profitability and grow steadily.

For more information, visit their website at: https://www.superbag.co.jp/en/