Takagi has continued to pursue its mission of making clean water accessible to all, through unwavering commitment to technology improvement and incremental innovation.
We would like to use your words and your company to challenge the misperception from the West that Japan has lost its innovative and quality edge. With that in mind, can you please briefly introduce your firm and what you believe to be your core strengths or competencies that set you apart from your regional manufacturing competitors?
We certainly believe that Japan continues to be a major driver of innovation and quality on a global level. The challenge has been on the commercialization and marketing front. And we, at Takagi, have been fortunate to have enjoyed success on both fronts. Our firm, Takagi, was founded by Toshio Takagi in 1979 in Kitakyushu, Fukuoka. Through our mold and engineering heritage and novel product innovation over the past 60 years, we are proud to have evolved to become the leading player in Japan for in-faucet water purifiers with over a 40% domestic market share. All of this was possible through market leading innovation at the product level, excellent manufacturing skills and bold sales and marketing initiatives targeting consumers directly.
Many are surprised to learn that Japan as a nation continues to be a global leader in innovation as measured by the number of patent filings per year. Over the past decade Japan has consistently ranked third in patent filings, with over 300,000 patents filed each year. Where Japan may have lagged its global peers is in the successful commercialization of these innovations which require the ability to manufacture the products on a cost efficient basis as well as strong go-to-market capabilities.
As I mentioned, Takagi’s success is a direct result of its market leading product innovation, blow molding skills and manufacturing excellence and marketing. At Takagi, we file numerous patents per year, much greater than the national average for an SME. And this culture of innovation (our firm wide commitment to R&D) that drives our patent filings, represents the backbone of Takagi’s business. In Japan we refer to manufacturing processes that encompasses technological expertise coupled with pride, skill and dedication to innovation and perfection as “monozukuri”. This concept of monozukuri is alive and well in Japan. It typically starts from the basic research that created the patent, on to the further work in the R&D labs to drive development of the patent into a commercially viable product.
At Takagi, we took a kitchen faucet that was a delivery vehicle for water into homes and developed a small removable cartridge that would be built-in to the faucet that had the function to improve the quality of the water dramatically. In doing so, we were able to provide a low cost, environmentally more favorable alternative to bottled water. All this started from the idea embedded in the patent, which then led to R&D enhancements, working in the factory to develop prototypes and securing market demand to ensure manufacturing scale. Today, we have an installed more than 4.8 million of these cartridges throughout Japan!
Takagi’s entire 60-year history can be divided into three different eras. The first 20 years can be described as the period where we developed expertise in mold and die manufacturing. The second 20 years is when we positioned ourselves as leaders in the water business in the home and the irrigation products we produce for households and gardeners. The last 20 years has seen our entry into the water purifying business. Who we are today is a direct result of the accumulated wealth of experience over the past 60 years with each period enabling the next and hence the solid platform that took six decades to develop.
For me, personally, I started my career in the water purifying business and at the time, it was a new business initiative that I launched based on introducing novel and innovative products into the market. The first step was to incorporate water purification into hand shower devices and faucets. This was something that had never been done before in the industry. The business model was different from other water purifying companies that were offering somewhat conventional water purifying products. We introduced the idea of cartridges which could be changed by the customers themselves. In this way, we developed a subscription model sale direct to customers where we would send them a new cartridge every three months directly to their homes, with easy self-installation, versus competitor products. This subscription based model resulted is a very profitable business model which has enabled Takagi to continue to reinvest in innovation, manufacturing excellence, product quality and service.
Simply having quality products is not enough without the correct attitude toward customers and users. We are a company that is committed to implementing the ideas and philosophies of our founding fathers so our mission is to contribute to society wherever we can and try to make peoples’ lives more comfortable. We achieve this through our products and our employee commitment to our mission with a focus on our role in society as a whole. This is, no doubt, another core strength of the company.
You’ve mentioned there that a core strength comes from combining R&D with integrated end-to-end production systems. This responsibility you feel as a company to facilitate the safe and responsible use of clean water is interesting. Could you tell us more about how some of your latest products and technologies embody that corporate philosophy, specifically the Kireist, which has an enhanced cleaning effect due to your ultrafine bubble (UFB) technology, that can help both save water from being wasted and increase the actual effects of the cleaning?
To answer your question, let’s take a look at the principles of SDGs, one of which is providing pure, clean water to humanity. This is, in a nutshell, one of the core objectives of our company and what we do.
Some of the products we manufacture, unfortunately, cannot be produced without plastics. It is a big problem and many industries are now facing this issue. To decrease the usage of plastics to a minimum is something that we strive for in our product design. And enabling the recycling and reuse of components is important contributors to a sustainable product strategy.
Conserving water and reducing water waste are key contributions of our products. Our UFB technology enables environmentally optimal outcomes. Saving the amount of water we use in our daily lives can lead to a cleaner environment overall and contribute to people around us. In addition, our built-in filters for faucets help receive the consumption of bottled water. With less bottled water, there are lower amounts of polyethylene terephthalate (PET) bottles required. People who use purified water at home have less need for bottled water and that leads to less plastic and pollution.
Another product to mention is garden hoses and household items. It used to be that you could cut a hose along its edge and then dispose of it, but that clearly pollutes the environment. We worked hard to find more environmentally friendly solutions and came up with a solution that any Takagi hose can be recycled. Building in reuse and recycling qualities in our product design process have proved to be very important for us at Takagi.
Despite all of our advances to help create a more sustainable world, we still are users of plastics for certain of our products. Unfortunately, the world has yet to find a replacement for plastics at this time. But we are committed to continue our efforts to reduce plastics use and to emphasize reuse and recycling at all times. We continue to dedicate resources to our R&D team to find solutions and new materials to replace plastic products.
Filters are an inherently disposable product so of course it becomes a challenge trying to future our how they fit into a circular economy. The quality is so closely tied with durability and recyclability is vital. Earlier in your answer about the strengths of Japanese manufacturing you talked about the tendency of regional competitors to produce copycat products; cheaper and often counterfeit copycat products that flood the market. We know that this is an issue that has directly affected your company. There are manufacturers out there that are directly copying Takagi disposable filters. Could you tell us your policies or strategies to combat this issue?
Yes, as you said, our cartridges were copied by another company overseas. This fact was observed through online sales, and we saw that a website was reselling products as if these products were our own, stating that they were genuine products, thus misleading the customers. One of the measures we adopt in our company to combat this problematic point of copycat products being created here domestically and overseas is the number of patents we hold, bringing us back to the answer to your first question. The reason we have a huge amount of patents is to fight against the creation of copycat products. We must be legally equipped to fight against this problem. Even a small change on the function side requires the filling of new patents and in our opinion, this is the only legal way to fight back against counterfeiting.
The upside of being a product innovator is that with a strong in-house manufacturing capability and broad marketing base, one can build a strong attractive business and secure industry leading market positions. The negative is that “copycat” players come into the scene. At Takagi, we are pleased to report that we have been able to successfully counterattack third parties that copy our products, through legal action and the active support of the Japanese legal systems to protect and defend IP rights. As a result, we spend a significant amount of time and resources to file and update our patents while monitoring market activity to catch “copy cats” early. Low quality copy cats not only take revenue away, but can hurt our reputation through poor product quality. So far, we have been successful in preventing any material negative impact and our organized for prevention.
Another key driver for defending our market position and IP rights is through “offense”. By this I mean our continued commitment to innovating and upgrading our product portfolio. In doing so, we increase the complexity for patent infringers while solidifying the loyalty base of our customers. It is a lifetime product that we provide so we want to make sure our customers are always satisfied with their Takagi products.
Next, let's talk about a new product that came out last month; the BOXYNEXT. It seems that the design concept of BOXYNEXT addresses all of the common complaints that individuals have about outdoor garden hoses. Whether that is preventing rainwater from building up in the tray or twisting of the hose. Can you tell us a little more about this new product, how it improves on your previous garden hoses, and whether is this something you are looking to offer or expand to overseas markets?
Conventional types of hoses usually have traditional covering and many companies in the market product essentially the same generic product. That is why our BOXYNEXT hoses have garnered significant market share due to the fact that it prolongs the life and quality of the hose through protection from the sun and elements, has a reel mechanism that is easy to use so that customers don’t have the tangling of the hose, has an in-case reel system so the lightweight BOXYNEXT unit is easy to carry, store and transport. And not to mention the fact that we have three different product offerings catering to different power applications and requirements in addition to customer demand-driven color variations.
This is certainly a product that has global market potential. But we need to develop a local market manufacturing strategy or find lower cost supply chain solutions to enable us to offer the BOXYNEXT product to global customers at an attractive price. We have no immediate plans to take this to foreign countries, but that isn’t to say that we won’t consider exporting overseas at some point in the future. The product also complies with Japanese standardized faucet sizes so we will need to design country specific attachments or adaptors for the export market.
Additionally, we need to worry about copy cats. Our strong domestic presence has led to several companies in China producing similarly designed products. The problem is that many of these profits are made of low quality plastics and designs that tend to be less durable and the plastic housing often break. This leads to environmental issues as well a negative reputation issue. The silver lining, however, is that our products are in demand and getting traction overseas. Given our proven track record of delivering sustainable and very easy to use, one-of-a-kind Takagi product, we will need to find ways to offer our products globally in the future.
While not exporting the BOXYNEXT, you’ve made some efforts in Australia with your Taqua brand of water faucets and filters. Australia is a great example of a very arid climate that often goes through droughts and has a very strong public consciousness about the importance of preserving water. Can you tell us more about how your products can fulfill a need and help countries with a strong awareness of water conservation?
Attempts to go global are not new to our company, and we successfully opened a subsidiary in Australia under the name Taqua back in 2018, while also launching in Vietnam as well recently. Having said that, our short term strategy is to further penetrate the growing and profitable Japan market first. In fact we just launched a major capital expenditure program in Japan where we are expanding capacity in our Kyushu manufacturing facility while opening up a new factory in Eastern Japan as well. With our new shareholder partners, Nippon Sangyo Suishin Kiko (NSSK), we are looking to significantly grow our business in Japan.
That isn’t to say we are not open to foreign markets as well, and Australia, as well as Vietnam, have been excellent examples of this. Our plan will be to work with like-minded business partners in overseas markets and we will explore new market entry strategies over the next several years with the assistance of NSSK that has a long history of successfully investing in Japan based businesses and assisting in the global market strategies.
There is no doubt that many global markets can use Takagi products that are designed and built to deliver high quality water to customers while being environmentally conscious with sustainable strategies at its core. We welcome new business alliances to help facilitate new market entry.
Could you elaborate more on what you see as being the next key steps in your international development?
As I mentioned earlier, despite our high market share in Japan, our relevant market is growing by almost 2x over the next decade and experts believe that almost 80% of all new homes in Japan will have some form of built-in water purifier faucets. This is a tremendous opportunity for Takagi. As we continue to build our presence and broaden our product offering in Japan, we will develop a systematic long-term plan to globalize over the next decade. With the assistance of NSSK and other outside experts, we are conducting a landscape of the various opportunities globally and will select key targets to execute market entry strategies over the next several years. The criteria for market entry will range from market size, competitive environment, supply chain access, cost of product delivery, price points and overall market growth. In addition, identifying the right business partners with shared corporate values will be critical. Ultimately, the ROI will need to be attractive for us to commit these resources overseas when the local market is growing and highly attractive.
And partnering with a global Japanese firm (like TOTO), an international kitchen and bath company that wants to add our products to their product offering or a local country partner that has a competitive advantage in local distribution are all possibilities. We want to approach our globalization strategy cautiously and thoughtfully. It is a question of when not if.
Do you have any particular countries or regions on your radar?
As I mentioned earlier, we are in the process of surveying the business opportunities that might exist in the various countries and regions around the world. The only thing that is certain is that global consumers are always looking for innovative products at an attractive price that meet their needs. And as clear innovators in the water segment, we look forward to meeting the needs of global customers in the future.
Imagine that we come back on the very last day of your presidency and have this interview all over again. What goals or dreams would you like to achieve by the time you are ready to pass the baton onto the next generation of Takagi executives?
My personal goal and dream are inevitably intertwined with the corporate goals of the company. At the end of the day, my hope is that we will be a company that has successfully delivered the purest quality water to households that have historically had limited access. Communities that are less fortunate, have less income or living in poverty should have the right to the best water possible. Through my work at Takagi, I hope that we will be a significant player in creating greater equity in this regard.
We are lucky in the developed world to live in an era of abundance, but many places in the world still lack access to clean water. Providing access to clean, pure water in such places is a personal goal of mine. I want to produce products that solve societal issues and make real contributions to the health and happiness of people all across the globe.