Nissui
Corporate History & Strategy

In the late Meiji period, Japanese fishing was primarily conducted through manual labor and small sailing vessels in coastal waters, with fishing grounds limited to nearby seas. Catch volumes were susceptible to weather and seasonal conditions, and there were structural constraints on improving productivity. In Europe, meanwhile, commercial powered-vessel fishing using steam trawlers had already been established, achieving a level of production far surpassing coastal fishing in both catch volume and operational stability. Although the effectiveness of powered vessels was becoming known in Japan, the scale of initial capital investment required—including ships, fishing gear, and fuel—meant that few entities could enter the business.

Ichiro Tamura was born in 1866 in Yamaguchi Prefecture. Born as the son of Shozaburo Kuhara, who had built a business foundation in mining, Tamura inherited the family business on his mother's side, Tamura Shoten. At Tamura Shoten, he was engaged in the oil extraction business from Alaska pollock, and had practical understanding of the procurement of marine products as raw materials and the revenue structure of processing operations. This experience provided the foundation for him to look beyond mere fishing activities toward fishing as an enterprise built on scale and systems backed by capital investment.

In the domestic fishing industry, individual operations with a small number of vessels were the norm, and virtually no operators conducted organized fleet management. To extract the profitability of powered-vessel fishing, it was essential to secure operational efficiency through simultaneous operation of multiple vessels and to establish systems for processing and selling the catch. Meeting these conditions required not only fishing expertise but also management judgment premised on large-scale capital procurement and long-term investment recovery, making the barriers to entry effectively high.

What Ichiro Tamura chose was not a small-scale trial but entry premised on multi-vessel fleet operation from the founding stage. Judging that domestic vessels would have limited production efficiency, he ordered trawlers from Smith's Dock Company in the UK at the time of founding in 1911. This decision represented excessive initial investment by the standards of domestic fishing practices and required a long period to recover the invested capital, but the intent was to secure operational capability from the outset by introducing European-built vessels that were technologically ahead.

In March 1911, he personally founded the Tamura Steamship Fishing Division in Shimonoseki, Yamaguchi Prefecture. At this time, Ichiro Tamura received approximately ¥1 million in financial support from his father, Shozaburo Kuhara. Capital accumulated through the mining business was invested into the modernization of fishing, and these funds were not premised on short-term recovery. The fact that the capital provider did not impose constraints on the recovery timeline ensured freedom of decision-making and made long-term capital investment possible.

Backed by this capital strength, the Tamura Steamship Fishing Division built an operational structure premised on simultaneous operation of multiple vessels rather than single-vessel management. In fishing, the efficiency from fishing ground exploration through catch processing and transport differs fundamentally between single-vessel operations and coordinated multi-vessel operations. Ichiro Tamura established from the founding stage a policy of creating an advantage through scale, and proceeded to build a business foundation that would not easily be replicated by later entrants.

After founding, the Tamura Steamship Fishing Division expanded its fleet size in trawl fishing, increasing its presence in both catch volume and operational efficiency. The fleet centered on British-built powered trawlers achieved stable operations, widening the gap with competitors in securing fishing grounds and expanding catch volumes. Within six years of founding, the Tamura Steamship Fishing Division had grown into an operator with seven vessels.

In 1917, the Tamura Steamship Fishing Division merged with Kyodo Gyogyo, which owned 18 vessels. Although Kyodo Gyogyo was nominally the surviving entity, the Tamura side effectively led management. Kyodo Gyogyo had already fallen into financial difficulty, compounded by the sudden death of a key management figure. The integration took the form of a rescue by the Tamura Steamship Fishing Division, but the decision was made to retain the Kyodo Gyogyo name to leverage its market recognition.

The merger created an entity with a combined fleet of 25 trawlers, establishing its position as the largest force in Japanese trawl fishing. The industry consolidation achieved just six years after founding was a case where the entry strategy premised on scale directly led to the building of competitive advantage. The prototype of what would later develop into Nippon Suisan was formed at this stage, and the decision-making pattern of building business foundations through scale expansion and industry consolidation became established.

In the late 1950s, rising income levels and advancing urbanization in Japan were transforming household dietary habits. Demand was growing for processed foods that offered high preservability and required less cooking effort, and fish-based processed products and frozen foods were gaining consumer acceptance on both nutritional and price fronts. As the structure of the food market was shifting, processed foods represented a realistic option for fisheries companies as a stable revenue source less susceptible to fluctuations in catch volumes.

Nippon Suisan had begun full-scale production of fish sausage in 1952 and frozen foods in 1958. Both areas had strong affinity with seafood processing and cold storage facilities, enabling the repurposing of existing equipment and technology. Although processed foods were a new business, they were not an entirely different field, and for a fisheries company with an integrated system from catch to processing, they were positioned as a business extension leveraging existing assets.

Meanwhile, the maritime division during the same period was beginning to see the instability of its earnings materialize, with fluctuating catch volumes and rising fuel costs. Antarctic whaling and North Pacific fisheries still generated substantial revenue, but the strengthening of international fishing regulations was gradually becoming a concern. Expanded investment in processed foods was recognized by management as a rational direction to complement the earnings volatility of the maritime division.

In April 1959, Nippon Suisan formulated its 'Structural Improvement Five-Year Plan' under President Kuhei Suzuki. The plan outlined a policy of investing ¥11 billion in the onshore division, centered on food factories and cold storage warehouses. However, the plan also included ¥23.3 billion for the maritime division and ¥6.3 billion for subsidiaries, making it a framework for expanding and strengthening the entire business rather than concentrating solely on the onshore division.

Behind the expanded investment in processed foods was the recognition that changes in household dining represented a business opportunity. According to testimony, there was awareness of lifestyle changes 'liberating housewives from the kitchen,' and canned goods, sausages, and frozen foods were positioned as growth areas. The decision was to accelerate through concentrated capital investment the onshore processing initiatives that had been advanced incrementally since fiscal year 1957.

This plan made explicit the direction of adding processed foods as a second pillar to the fishing-centered business structure, expanding the business portfolio. The intent was to capture growth in the processed food market while mitigating the earnings volatility risk inherent to the fisheries industry. The concept was to deepen involvement in higher-value-added processes by strengthening vertical integration from catch to processing and sales.

Investment in the onshore division yielded tangible results. In 1962, a new factory was established in Hachioji to expand production capacity in the consumer market of the greater Tokyo area. By around 1963, the onshore division including processed foods and cold storage had reached approximately ¥30 billion in revenue and ¥500-600 million in profit, reaching the stage of an established profitable business. Fish sausage and frozen foods were forming the structure that drove onshore division earnings.

On the other hand, during the 1960s Nippon Suisan also entered fields with low affinity to seafood processing, such as mayonnaise and instant noodles. However, in mayonnaise, Kewpie and Ajinomoto, and in instant noodles, Nissin Food Products and Toyo Suisan had already advanced cost reduction through single-product focus and secured distribution channels, making it difficult for the latecomer Nippon Suisan to gain advantages in pricing or distribution.

As a result, Nippon Suisan decided to withdraw from these areas, and the processed food business converged around fish sausage and frozen foods. While the Structural Improvement Five-Year Plan built the foundation for the onshore division, it simultaneously demonstrated the limits of diversified investment in areas without competitive advantage. The processed food business would subsequently move toward selection of areas with high affinity to seafood.

By the mid-1960s, Nippon Suisan was at the stage of reassessing its overall business earnings structure after completing a round of investment in processed foods. In the onshore division, fish sausage and frozen foods were generating steady profits, but the underperformance of entries into mayonnaise and instant noodles had raised awareness of intensifying competition in processed food markets. Meanwhile, in the maritime division, it was confirmed that improvements in production efficiency through the introduction of larger vessels and operational technology enhancements could directly translate into profit improvement.

During the same period, the globalization of fishing grounds was advancing in the world fisheries industry, and deep-sea fishing premised on previously unexploited waters such as those off Africa was becoming a realistic option. Haruo Nakai, while recognizing the strengthening of international regulations on marine resources, judged that rationalization investment premised on larger vessels and broader fishing grounds would deliver earnings improvement in the short to medium term. It was considered that there remained room to concentrate resources on strengthening the competitiveness of fishing, the company's founding business, rather than diversification through processed foods.

In April 1965, Nippon Suisan formulated its 'Five-Year Plan' under President Haruo Nakai. The plan envisioned cumulative capital expenditure of ¥25 billion, but actual investment ultimately reached ¥31.6 billion. Investment allocation was approximately 90% to the maritime division and approximately 10% to the onshore division, with a policy of concentrating management resources on fishing vessel maintenance and operations clearly articulated.

Investment in the onshore division was not halted entirely but was limited to processing and cold storage related to fish. This plan meant distancing from the path of making processed foods the main growth axis and choosing expansion as a fisheries company premised on international fishing grounds. Haruo Nakai declared, 'We want to have capabilities that no company in the world can match when it comes to fish,' indicating an intent to enhance competitiveness through specialization of the business domain.

The concentrated investment in the maritime division advanced the commissioning of large trawlers and modernization of the fleet. In 1970, the large trawler 'Yamato Maru' was commissioned, among other expansions of operational capability. In the short term, increased catch volumes and improved operational efficiency were achieved, and the maritime division delivered solid earnings.

However, this investment decision also had the aspect of locking the overall business direction into fishing. By suppressing investment in the onshore division, strengthening competitiveness in processed food markets was deferred. And when the 200-nautical-mile regulations were introduced by various nations in 1977, the growth model premised on deep-sea fishing came under structural constraint. The weighted investment in the maritime division was rational under the premise of a stable regulatory environment, but it was also a choice that harbored vulnerability to changes in that premise.

In the 1970s, marine resources came to be internationally positioned as subjects of management, and nations strengthened their stance of prioritizing resource security in their surrounding waters. In 1977, the United States and the Soviet Union successively established 200-nautical-mile exclusive economic zones, severely constraining the deep-sea fishing grounds where Japanese companies had freely operated. This regulatory change shook the very foundation of the business model premised on access to fishing grounds.

For Nippon Suisan, deep-sea fishing was the core business since founding, supporting both revenue and organizational scale. Mother-ship operations for whaling, Alaska pollock, salmon, and crab were the sources of the company's competitive strength, but the 200-nautical-mile regulations constrained all of these operations at once. The vessels, equipment, and personnel deployments built up on the premise of deep-sea fishing all saw the recoverability of invested capital severely shaken by the regulatory change.

Furthermore, Nippon Suisan had allocated 90% of investment to the maritime division in its 1965 Five-Year Plan, leaving the business structure heavily weighted toward fishing. This investment decision amplified the shock of the 200-nautical-mile regulations. During the period when investment in processed foods had been suppressed, competitors had established their positions in onshore businesses, making it difficult to immediately compensate for the retreat of deep-sea fishing with other businesses.

Nippon Suisan did not immediately decide on full withdrawal from deep-sea fishing in the face of 200-nautical-mile regulations. It conducted its final mother-ship king crab expedition in 1973 and its final Antarctic whaling expedition in 1975, then in June 1976 transferred the mother-ship whaling business to Nippon Kyodo Hogei. The withdrawal from the founding business proceeded gradually, with adjustments to avoid abrupt separation of equipment and personnel.

Simultaneously, Nippon Suisan explored expansion into regions where the impact of regulations was relatively limited. Focusing on Chile and Argentina, where operations by foreign capital were permitted, it established local subsidiaries in Chile in 1978 and Argentina in 1981 to build fishing bases. The decision sought to avoid rapid contraction of the fisheries division by finding areas where fishing could continue under the 200-nautical-mile framework.

This response was a choice to not abandon fishing itself even while accepting the end of deep-sea fishing—instead maintaining business continuity by relocating fishing grounds. It was also a decision that took into account maintaining organizational scale and securing employment, prioritizing gradual adjustment over rapid business transformation.

Despite the gradual reduction and geographic diversification, continued investment in the fishing division did not yield the expected returns. The withdrawal from mother-ship operations weakened economies of scale, and operations at overseas bases in South America failed to establish cost advantages. Recovering the profit levels of the deep-sea fishing era proved difficult, and this approach was one factor in the company's fall into operating losses in the fiscal year ending March 1990.

Meanwhile, Nippon Suisan progressively shifted toward processing and aquaculture to compensate for the retreat of deep-sea fishing. In 1985, it acquired Unisea in the United States, entering the onshore processing business for Bering Sea Alaska pollock. In 1988, it invested in Salmones Antartica in Chile, entering the salmon aquaculture business. The movement to shift revenue opportunities from fishing to processing and aquaculture was a realistic option after losing deep-sea fishing.

While these transitions did not immediately improve the earnings structure, they set the direction of the business domain shift from fishing to processing and aquaculture. The gradual withdrawal from deep-sea fishing had the effect of avoiding abrupt business discontinuity, but it was accompanied by the consequence of requiring extended time to establish a new business foundation. The balance between speed and depth of business transformation would continue as a management challenge for the company going forward.

In the 2000s, Nippon Suisan was expanding overseas operations in response to the maturation of the domestic market. In North America, it had acquired frozen food brands and purchased commercial seafood processing companies, while in South America it had built aquaculture and fishing bases in Chile and Brazil. Overseas revenue was on an upward trend, but each business was dispersed across regions and product categories, with limited synergies between operations.

Overseas expansion in the fisheries industry came with structural constraints. In fisheries, where resource-holding nations hold the initiative, the roles Japanese companies could assume tended to be skewed toward low-margin processes such as raw material processing and distribution. Additionally, aquaculture was susceptible to disease risk and environmental fluctuations, and seafood processing had an earnings structure subject to raw material price volatility. The expansion of overseas operations had driven revenue growth, but earnings stability was not high.

From 2008 onward, the slowdown of the global economy further intensified the challenging environment surrounding overseas operations. Raw material price surges followed by abrupt market changes directly hit the performance of small overseas subsidiaries. Companies with broader global footprints were more exposed to headwinds, and Nippon Suisan's overseas operations entered a phase of exposing their vulnerabilities.

In October 2008, Nippon Suisan undertook large-scale special loss recognition against the backdrop of poor performance at overseas subsidiaries. In the consolidated results for the fiscal year ending March 2009, revenue fell to ¥505.2 billion, operating profit shrank to ¥3.1 billion, and the company recorded an operating loss of ¥1.2 billion. After booking ¥16.4 billion in special losses and foreign exchange losses, the final loss reached ¥16.2 billion—the first net loss in seven fiscal years.

The core of the special losses was in overseas operations. At the North American frozen food subsidiary King & Prince, a ¥6.7 billion goodwill impairment was recorded due to poor performance, while at Salmones Antartica in Chile, aquaculture fish had been damaged by disease. Nippon Suisan chose not to defer these losses but to process them collectively in the current period, bringing financial uncertainties to the surface at once.

This decision prioritized bringing the book value of assets closer to reality, even at the cost of accepting a loss-making fiscal year. While loss recognition was a painful choice for management, early recognition and processing was chosen over the risk of losses growing if the problems were deferred.

The special loss recognition in 2008 did not end as a one-time event. Over approximately 14 years from the fiscal year ending March 2008 to the fiscal year ending March 2022, Nippon Suisan continued to record special losses. While 2011 included ¥4.9 billion in disaster losses from the Great East Japan Earthquake, the main drivers were the reorganization and withdrawal of overseas operations. Losses of ¥2.2 billion were recorded for withdrawal from the Argentina fishing business and ¥8.3 billion for withdrawal from Netuno in Brazil.

Nippon Suisan's overseas operations were dispersed across fishing, processing, frozen foods, and aquaculture in various locations, forming a collection of small-scale businesses. Few individual operations held clear competitive advantages over rivals, and the fisheries segment profit margin remained around 5% of revenue. With overseas operations dispersed in scale, it was structurally difficult to consistently secure returns commensurate with invested capital.

The 2008 special loss recognition became a turning point that confirmed in financial terms the reality that overseas expansion could not serve as a growth driver. Subsequently, Nippon Suisan would progressively review its overseas business portfolio, advancing selection and concentration on competitive areas. This process also connected to the direction of business restructuring in the 2022 long-term vision 'Good Foods 2030.'

Nissui (formerly Nippon Suisan) had formed a business structure centered on seafood and food. Meanwhile, its listed subsidiary Nissui Pharmaceutical operated a pharmaceutical-related business centered on in-vitro diagnostics, and its customer base, sales channels, and R&D time horizons differed significantly from the seafood and food businesses. Technology collaboration and mutual utilization of sales channels within the group were limited, and while connected through capital, the state of thin business synergies had persisted.

Under the long-term vision 'Good Foods 2030' looking toward 2030, Nissui had designated aquaculture, overseas seafood and food, and fine chemicals as priority investment areas. These areas required concentrated capital investment in facilities and R&D, and reviewing capital allocation with ROIC as the axis had become a management priority. While Nissui Pharmaceutical maintained stable revenue and profits, its alignment with the group's growth scenario was relatively low.

Nissui decided to sell Nissui Pharmaceutical as a listed subsidiary with limited group synergies. This decision was based not on the individual business's performance but on the efficiency of invested capital across the entire business portfolio and future capital requirements. The priority was chosen to concentrate investment on priority areas centered on seafood and food, rather than additional investment in the pharmaceutical field.

In May 2022, Nissui Pharmaceutical was sold to Shimadzu Corporation. The sale allowed Nissui to curb the dispersion of management resources and simplify growth investment decision-making. For Nissui Pharmaceutical, it provided an environment where business decisions specialized in the pharmaceutical and diagnostics field could be made, enabling the advancement of specialization under a parent company with high alignment to its business domain.

The sale of Nissui Pharmaceutical marked a turning point in Nissui's history of diversification. The company had historically responded to environmental changes by adding businesses. Even after deep-sea fishing constraints intensified, it sequentially expanded business areas into processed foods, overseas seafood, and aquaculture, seeking to maintain revenue scale and organizational size. In a context where the prevailing choice had been to add rather than relinquish businesses, the significance of this case lies in the decision to voluntarily shrink through the lens of capital allocation.

It is also notable that the subject of the sale was a pharmaceutical business generating stable profits. This was not the liquidation of a loss-making or struggling business, but a construct of releasing a profitable business to gain growth investment funding and clarity of decision-making. This sale is positioned as a decision indicating that Nissui is shifting the center of gravity of its management from maintaining scale to improving capital efficiency.