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Thursday, Aug 11, 2022
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The packaging professionals leading the pack.

Interview - April 7, 2022

Interview conducted on January 26th, 2021

As the No.1 company in the paper bag industry, The Pack also supports their customers with all sorts of packaging needs through an extensive product lineup and broad-ranging expertise acquired thanks to their network of manufacturing and distribution sites that supports nearly 14,000 companies in Japan. We talked with (former) President Mitsuo Inada who explained to us the process that goes behind the creation of their high-quality packaging solutions and how they are adapting to the changes in the market such as the increase in the demand of corrugated boxes due to the rise of e-commerce during the global pandemic, and how they comply with environmentally friendly manufacturing standards.

MR MITSUO INADA, PRESIDENT OF THE PACK CORPORATION
MR MITSUO INADA | PRESIDENT OF THE PACK CORPORATION

We know that Japanese firms have been taking this competition from Taiwanese, Chinese, and South Korea. Such companies can often replicate Japanese technologies of products and then introduce them at a cheaper price. What do you think Japanese should do in order to overcome this stiff price competition?

First, allow me to share that we do have a sales office in Shanghai, a factory in Changshu, and what I can say is the standards of quality that are stipulated in China are completely different from those in Japan. I believe that any of the clients that we hold here were to replace our work with those from China, it would just not meet up to their quality standards. Over the past seventy years, we have really been able to grasp the specific needs and requirements of our Japanese clientele and we are able to really meet the high-quality standards that they demand. In fact, we ensure that such high levels of Japanese quality standards are maintained in our international factories overseas as well.

What I consider to be the basic principle of our business, and what I share with my employees, is the philosophy of "Following process is your internal customer. This is the idea that in the manufacturing process, if everyone passes on the best quality in their own process to the next process, we will be able to maintain high quality until the final stage. Even in the initial stages of design and printing, we must take responsibility for the quality of our work as it directly reaches the customer. This philosophy, which we share, permeates the entire process of "monozukuri" in Japan.

 

You mentioned that in the Japanese market of course you have been able to understand the standards and in the packaging industry, through our interviews, we have come to understand that the Japanese packaging market is very special. Certain bags you only find in Japan and people are extremely demanding. As you expand it abroad that must have given you a technological edge because you are used to a very high standard level. What are the advantages and disadvantages of being a packaging company that started in Japan?

I don't know if this is a direct answer to your question, but our products’ price may be a little higher than the average price. We are focused on responsibly meeting the demands of our customers in a market where our products and service standards are justifiably accepted, rather than in a highly price-competitive market that requires a war of attrition. In addition to quality control, we are able to meet the various demands of our customers and solve their packaging problems so that they can find value in our company. This approach to business is what makes us unique.

 

We know that your paper tote bag here in Japan is the number one by market share, but you are much more than just a paper bag maker. You also have the CC pack* as you showed us earlier and the biodegradable plastic packaging. Could you tell us an insight into the synergies you have been able to create between your various products?


CC Pack: The soft paper-based eco-alternative to plastic bubble mailers is shock-absorbent offering full protection while fitting items of any shape.


The market size of paper bags in Japan is about 80 billion yen. We cover a market share of about 30 billion yen, which accounts for less than 40% of that. We understand that it will be difficult to expand further in this market. On the other hand, the market for paper containers is more than 10 times larger than that for paper bags, yet our market share is not even 2%. There is great potential in this field for our growth strategy. Therefore, several years ago, we introduced a plant and facilities with thorough hygiene and quality control that can manufacture food containers. We have incorporated a high level of hygiene management system while utilizing our experience in manufacturing paper bags.

Our paper containers have already been adopted by major fast-food chains as food containers and by convenience stores as hot snack containers. Since we handle a wide range of items from paper containers that come in contact with food to shipping packages, our customers can consult us for almost any kind of packaging. In addition, our experience in each sector can be used to develop new products, such as CC-PACK.

Currently, we are in the process of focusing on the food delivery and take-out market, which has been growing rapidly recently, as we believe that our products can be useful in this market.



I’m very interested in your company’s tailor-made service that caters to the market and customer needs. We know as a company you are like a one-stop service from design to the technical aspects whether it is waterproof or oilproof, etc. and then production and distribution. Could you give us an insight, please, into your tailor-made service what makes you the go-to partner for packaging?

One thing is that we have eighteen hundred employees in our group, three hundred of them are in sales. Besides those three hundred in sales, other sixty employees just focus on art graphics and designing. Whenever we create a product for a customer, we always create this team that is comprised of a salesperson as well as a designer, and a consultant, four to five people come together, and they go to interview the client and get a detailed understanding of the needs. We not only listen to the needs of the clients but also offer several different proposals and suggestions.  For example, if they are looking to be more sustainable in their packaging and contribute to lightening their ecological footprint then we provide proposals that would enable them to do so. And to be honest, these kinds of services we provide are how we can avoid getting tangled up in the price competition and the price scheme where we are able to distinguish ourselves.

 

Since Covid, e-commerce has become huge, and this is set to continue even after it subsides. For example, by 2023, in the US they estimate that there will be three hundred million online shoppers which is 90% of the population. Could you tell us how you as a packaging company are adapting to this trend? What products are you offering the e-commerce businesses?

To be honest, e-commerce is a big challenge for us, because our core product is the paper shopping bags that are provided to customers when they buy products in stores to take home. In Japan, plastic bags will be charged from July 2020, and if you need a bag in a store, you will have to buy one. Along with this trend, some companies have started to charge for paper bags as well. Personally, I think growth in the paper bag industry will slow. In terms of a growth strategy to succeed paper bags, we’re currently focusing on transitioning to the paper carton market, which promises significant growth, and gaining a foothold in the flexible film packaging market.Our particular focus will be on packaging for the food industry, which uses both folding cartons and flexible film packages.



The rapid growth of e-commerce is a challenge for us, but we see a huge potential demand for corrugated boxes. We also feel that our solutions and ideas can contribute to the success of our customers in the e-commerce market. One of our clients is one of the largest apparel companies in Japan, and they asked us to help them improve the efficiency of their e-commerce shipping center. We proposed to introduce the corrugated packaging assembly machines and work lines that require less manpower. As a result, the shipping operations that used to be carried out by 30 people can now be handled by 6 people. As shown in this episode, we are not only a paper bag manufacturer, but we are also transforming ourselves into a total packaging solution company. In this way, we are adapting to change.



Given that paper is something sourced from the forest and a huge amount of hectors are cut every year, many citizens are concerned about this. we know that you have your BAGASSE material which is extracted from sugar cane. What alternatives can we use besides the wood in order to ensure sustainability?

I do not know much about what is going on in other areas. What I can tell you, however, is that most Japanese paper bags are made of Japanese materials. There are many different types of wood, and Japanese paper bags are made of long fiber wood. Under a specific process of Japan's Ministry of Land, Infrastructure, Transport, and Tourism, a certain amount of this type of wood need to be cut down to prevent landslides and soil erosion in the mountains. Of these harvested trees, Some 30% of the lumber resulting from tree-thinning is reportedly used as raw material for paper bags.Paper bags can be said to be an item that contributes to a sustainable society.

If customers are interested in the environment, non-wood paper such as "bagasse" is available. We can also propose "recycled materials" made from waste materials, "biodegradable materials" that decompose in the soil or sea, and "biomass materials" made from vegetable materials. Even if we do not incorporate such environmentally friendly materials, we may propose other approaches to environmental friendliness. For example, we can reduce the amount of plastic cushioning material by devising a structural design. We try to make appropriate proposals from a wide range of options for our customers.



As a company, Sustainable Development Goals are obviously very important as a packaging manufacturer, and helping your clients reach their sustainable development goals must be a huge part of your business strategy. Could you just give us an insight into how you are helping your clients to reach their sustainable development goals?

Our customers are addressing the global challenge of reducing the use of plastic. We are helping them in their efforts to shift from plastic bags to paper bags, and from plastic trays to paper containers. However, this is not our only effort to support the SDGs.

One important thing is FSC certification,which is given to paper and paper products that use appropriately managed forest resources for the purpose of forest conservation.

In 2007, we obtained FSC CoC (FSC® C020517) certification for some of our plants, and now all of our plants in Japan are FSC certified. We are aggressively marketing these environmentally friendly packaging products. Customers can contribute to the SDGs by purchasing these products. Also, by printing the logo mark on the package, we can appeal to end-users about the contribution.

The other is The Pack Forest Environment Fund. We established this unique fund in 2000 in collaboration with the non-profit Eco Future Fund. We have also created our own original The Pack Forest Mark for printing on packages. If our eco-friendly materials are used for packaging, a portion of our sales will be contributed to the fund. The employees of the company use the funds to volunteer in forest conservation and tree-planting activities in eight locations nationwide. Customers are also invited to participate in these CSR activities. We will continue to contribute to society together with our customers.



I want to ask you one thing about marketing because we know that since last year, Japan has outlawed the handing out of free plastic bags. Now reusable bags have become more invoked. A company needs to have a physical presence in the world, when you see those bags you instantly know that story gives more credibility. Could you tell us how you are adapting to this trend of reusable bags and helping the company meets their marketing needs?

Not only do we have recycled paper bags that they can take up, but in Japan, maybe elsewhere as well, there is the trend towards using their own bags and taking your own bag with you to shopping. The reusable bags are used over and over again. So utilizing reusable bags actually damages our business. But there are trends that we need to follow in society. In fact, we have sold reusable bags for more than fifteen years. And also we have been developing unique reusable bags. For example, we developed handkerchief-based reusable bags with unique construction, and they had a good reputation. We try to have many packaging options to meet clients’ needs.



I just have a couple more questions and it is related to the international aspect of your business. As we know as far back as 1987, you established in the US, and that you have manufacturing abilities in China, Vietnam, Indonesia, and of course here in Japan. Can you tell us the benefit of this integrated overseas production and what benefit it brings to your business?

Our products are categorized as daily necessities that are used in the daily lives of consumers. And our products are needed according to the standard of living. We see business potential in Southeast Asian countries, which have been growing rapidly in recent years. For example, when I used to visit the Asian market, when I bought something, I was given the product wrapped in newspaper. However, when the average annual income rises to 3500-5000USD, we expect that people will be provided with paper bags when they shop.

As our business and the business of our clients continue to expand, we are diversifying our manufacturing footprint. This expansion of our production space into China and ASEAN allows us to service the needs of our clients based on budget, scheduling, and construction. By exporting our Japanese production standards to our other Asian facilities, we can continue to maintain the high-quality standards our clients both need and deserve. This manufacturing expansion is with the goal of further increasing our local business in Asia. The Pack Corporation continues to be committed to growing as a true global packaging supplier.

                                                          

Could you tell us what other regions or markets, for example, China or Europe, are you looking to expand?

We already have a factory in China, and we want to continue to expand that factory. The reason for that is because we believe, and we are seeing that there is going to be a huge shift of foreign-based companies going into China from the US or Europe. Many of those companies do not necessarily want to outsource or rely on Chinese companies because of the standards of quality. There are a lot of requests to work with us that we start to see because we are the kind of company that could really cater to the standards of quality that they require. There is a very famous European company that is planning to expand on a mass level, opening many chain stores all across China. We have been chosen to work with them to provide their packaging. A large part of our business in China has been providing packages for these foreign companies to do business in the Chinese market.

 

You become president of The Pack in 2018 and of course, you are today heading a company that is more than a hundred years old. So you are in a long line of executives and 2021 is going to be the fourth year that you are the president. Eventually, in the distant future, you will leave the presidency and there will be a new generation that will come and fill in your seat. When that happens, what would you like to leave to them?

The Pack became a public company in 1952, 69 years ago, and was listed on the stock exchange in 1991. Our corporate motto is “Respect each other”. I believe that this is the core spirit that resonates throughout the company. And I think this is the spirit behind how we develop our relationships. Since 1957, the very beginning of our company, we've always celebrated the birthdays of our employees. As our company has continued to grow and more employees join our corporate family, we continue to carry on this tradition of celebrating birthdays. This has allowed our corporate culture to be more like a family and this is something I want the new generation of workers to carry on into the future.


COMPANY DATABASESee all Database >

SHIRAI TECH LIMITED

Manufacturing, Japan

KAWASAKI KIKO CO., LTD.

Manufacturing, Japan
LEADER DATABASESee all Database >

Yosuke Kawasaki

President
KAWASAKI KIKO CO., LTD.

Yasuhiro Tochimoto

President and CEO
Kawasaki Geological Engineering Co., Ltd.

NAOTO KOMATSU

President
KOMATSU KAIHATSU Corp.

Toshikazu YAGUCHI

President
ATOX Co., Ltd.

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