Takayama Kasei takes sustainable solutions amidst global challenges

I would say, first off, that the weak JPY is not exactly a positive thing for many Japanese firms. In most cases, SMEs do not sell their produce overseas; rather, their dealings with overseas tend to stick to just procurement. The same goes for us, and in most cases, we import products and use them for manufacturing. Given the weak JPY, it means that our procurement costs are higher than before.

Many international firms are now revising their supply chains that have been based in China for several years now. In the short term, it is true that they are looking at Japan as a source of procurement, but they used to procure from other countries because of the price, meaning they are looking at Japan as a way to procure much cheaper components. Although we are getting some orders for components, I do not think the opportunity for expanded business is that great. This is my short-term view of things, so if we look at the longer term, there might be some positive aspects to this economic environment, but at the moment I am finding it hard to see any.

Your products are utilized in a variety of different applications. You have automobiles, home appliances, housing architecture, and even interior design. Is there a specific application that your company is currently focusing on, or are there any new applications or industries that you would like to introduce your products to?

At the moment, we place a lot of focus on housing materials and interior tiles. Rather than thinking about new applications, I think the focus for us right now is expanding the existing products we have and deepening the client relationships we have established. We are even looking overseas for possible expansion with the current product lineup we have.

When it comes to building materials, we know that there are flooring tiles and sound insulation sheets. In the market, however, there are a lot of other brands for customers to choose from. How are your soundproofing materials products superior to more conventional ones?

A big factor in our materials is that we use recycled materials, meaning we have created a circular economy. Another aspect is that Japan is currently witnessing a population decline, and to add to that, the population is aging rapidly. Operators and construction workers are getting older. In order to address this situation, we have facilitated our products so that even non-skilled workers can do the installation. I think this is another big advantage of our products.

Japan really has two problems: the decreasing population and the aging population. The construction field more than any other is being hampered by this; it is expected that one-third of construction workers are over the age of 65. This is creating a few key issues; fewer people means a shrinking domestic market and a labor crisis. How is your company facing these demographic issues?

It is true that the domestic market is shrinking, and in order to address this situation, we are looking to overseas markets. Another aspect we are trying to tackle is the difficulty of hiring people domestically. It is especially true that SMEs and factories are struggling to find new recruits. We too are struggling so we cannot do anything other than rely on non-Japanese workers to address the situation. Actually, more than one-third of our employees are from overseas, making us a very international company.

Additionally, to address the current situation, we are also working on labor-saving solutions. This is done through automated systems. Also, we are working towards enhancements in our productivity efficiency. This shows you that we are making a lot of investments in order to achieve our goals. However, one big drawback is that our industry is so niche that there are not really any standard automated machines that can be installed into our production lines, meaning all of our automated solutions need to be custom-made.

Could you tell us more about the role that partnerships play in your business model and are you currently looking for any partnerships in overseas markets?

We have constantly been looking for new partners; however, being an SME makes it difficult for us to travel to other countries. We are open to finding new partners, new key players that are well versed with PVC materials, mainly vinyl tiles and sound insulation products.

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What would a partner of choice look like?

To us, a partner is more like family; to all of our existing clients, we value our relationships and always put them first. We have been in search of an appropriate partner for a long time, but we have not yet been able to find one. We have made some recent hires in order to expedite the process of expanding to overseas markets, and we are also trying to increase our sales activities overseas. Progress, however, was definitely stalled due to the onset of the COVID-19 pandemic. In the past, we used to export our products to the United States, but we felt a negative kickback due to the strong JPY of the time.

One product that caught our eye was your D-Mat, a high-density PVC sound and vibration control mat. One of its unique features is the diamond shape-like emboss on the surface. Could you let us know some of the merits and features of this product?

By using a high-density material, the D-mat is able to cut off sound. The diamond shape-like emboss reduces the contact area between the mat and the floor, which contributes to its soundproofing attributes. I think the structure is very simple, yet very interesting. The D-Mat itself is mainly designed for wooden buildings, where you would install it between the first and second floors. It can cut out sound produced by weight, so using it with concrete really doesn’t bring out the best features of the material.

When we did our research, we saw that your company produces sound-absorbing and insulating products for the automotive field. We saw that it is mainly through co-development with your clients and customers. As you know, today the automotive industry is going through a rapid transformation with the switch to EVs. One of the consequences of this transformation is that the cars we drive are becoming a lot more silent. How is this change in the automotive industry impacting your business? Do you see it as more of a challenge or an opportunity?

For us, it is a challenge. We supply soundproofing materials for the automotive sector, and by weight, we stop or insulate the sound. But with the current transition, vehicles are getting lighter and more silent, which works counter-intuitively against our products. Another drawback is that our products are heavy because of their properties. This is less efficient for modern vehicles because the industry trend is moving towards all components being lighter. Also, you have a trend of miniaturization, which means that we also need to decrease the size of our products. That is working against our total sales. At some point in the future, there may no longer be a need for our products.

Japan is a nation that has a strong vision for its recycling, with goals set for carbon neutrality and environmental consciousness. Yet, we have heard many frustrations about the lack of a solid framework between the government and manufacturing companies. As a firm that does use recycled materials in your products, what is your analysis of Japan’s recycling sector and what are the main obstacles to its improvement?

We actually have a long history of plastic recycling in this country, and as a company, we have been recycling plastic ever since the company was founded, but the key problem is with the license for processing industrial waste. When you want to carry or transport industrial waste from Tokyo to Osaka, for example, you need permission to enter and exit every prefecture along the way. You also have to get a license for processing in every prefecture. The legal framework has a lot of red tape and itself is an obstacle for the recycling sector as a whole. The idea is that if you generate any waste then it should be processed in the local area it is generated in, so for our company, there are obstacles in place that hamper our ability to transport recycled material to our factory. Additionally, that means that we also cannot receive any subsidies from the government for processing this material.

We have conducted a series of interviews with recycling companies and companies that utilize recycled materials, and one of the challenges they always tell us is that in the eyes of the clients, recycled materials do not necessarily have the best reputation, and there are certain sectors where they have to explain that despite it being recycled material that the quality is still good. Have you faced this sort of challenge before and what quality assurances can you give your clients when they come up with these sorts of questions?

There is Japan Industrial Standards (JIS) in place with certifications acquired by companies like ourselves. JIS was originally developed as a standard for virgin materials, not for recycled materials. JIS is decided upon by large makers and it tends to lean in their favor. What we have done is explain to clients that our recycled materials surpass the standards of JIS. This is a key point of focus when explaining our products to potential clients. We are the only company in Japan utilizing recycled materials for tiles.

Could you tell us more about your R&D strategy and are there any products or technologies that you are currently working on that you would like to showcase for us today?

For our tiles, we use recycled plastics and a filler that consists of powdered stones. This filler is a virgin material that we obtain from mountains, but we are now trying to use recycled filler for tiles as well. One example might be coffee grounds which can be used to make recycled filler material. Finding waste material that can be used as recycled filler is the current focus of our R&D, and right now it is almost complete.

If we can replace the filler produced by powdered stones with filler produced from coffee husks or wood waste then we can also reduce the weight of the tiles themselves, which will in turn reduce the costs of transporting the products. The existing tiles are actually quite heavy, around 50 kg per square meter, but with recycled filler, we can reduce the weight by around 30%, which will make the jobs of workers in our factory easier.

Moving forward, which countries or regions have you identified as key for the future growth of your company and what strategies will you employ in order to achieve that?

As for the specific country, we have not identified any. We happen to have working partners in China, Taiwan, and Hong Kong. We intend to focus on a niche market with a sense of Japanese modern living and a need for soundproofing. To find a right full partner is very important as we intend to expand to overseas markets. We also believe that local production and local consumption is very important so in the future, we would like to establish a factory somewhere else in the world besides Japan.

Imagine that we come back in five years and have this interview all over again. What goals do you hope to achieve by the time we come back for that new interview?

I think the key is creating a circular economy. To that end, the recycling of products and materials is very important to the operations of our company. By the time you come back, I would like to be able to present to you the fact that all of our products are produced from recycled materials