Company history

Snow Brand began as an act of refusal. Hokkaido dairy farmers sold raw milk to condensed-milk companies that set the price, so producing more did not mean earning more; when the slump that followed the 1923 Great Kanto Earthquake broke the market, those companies simply capped their intake and left the farmers with milk and nowhere to send it. The only way out of that dependence was to pull processing and selling onto the producers’ side of the ledger. In May 1925 Utsunomiya Sentaro, who had studied dairying in the United States, and Kurosawa Torizo, who led the farm movement he had trained, gathered 629 farmers from Sapporo and a dozen surrounding towns and founded a limited-liability dairy processing and marketing co-operative on ¥5,450 of subscribed capital. Two months later butter production started in a makeshift plant borrowed from a farmyard at Nopporo, run single-handed — installation, production, cleaning, four or five turns of the hand-cranked churn a day — by Sato Mitsugu, Ohio State educated and the son of one of the founders.

What turned a co-operative into a brand was a decision to compete on quality when the market rewarded nothing of the kind. Kurosawa’s selling trips across Japan found Hokkaido butter being repackaged under other names and spoiled by poor wrapping and no refrigeration — enormous in volume, worthless in reputation. In December 1926 the newly federated co-operatives fixed a single trademark, Yukijirushi (“Snow Brand”), and rebuilt the product from four directions at once: American equipment installed in a central Sapporo plant, refrigerated rail transport packed with ice from about 1930, refined salt in place of crude, and a prefectural butter inspection ordinance in 1929 that let buyers choose on grade.

That flag was tested immediately. When the 1930 gold-standard return and the depression collapsed butter prices from 95 sen to 40 sen a pound, rivals dumped stock; Kurosawa refused to follow, carried 800,000 pounds of unsold butter on interest-bearing money, quoted low without delivering to move the market, and had Sato Mitsugu clear most of 70,000 pounds through a US Navy tender in Shanghai. By 1932 prices — and the price paid to farmers — had recovered, Snow Brand held about 75% of Japanese butter output, and a tasting staged from American cartons finally broke the Tokyo and Kobe wholesalers’ prejudice against domestic butter, pushing imports out of the market altogether. War then took the enterprise out of the farmers’ hands: in 1941 the federation and the Hokkaido plants of Morinaga, Meiji and Kyokuto were consolidated by the state into Hokkaido Kono Kosha, and in 1948 the successor company was designated under the Occupation’s Deconcentration Law — a fight Kurosawa waged with petitions and appeals to GHQ, refusing offered bribes, and reduced from a three-way split to two.

In June 1950 the company was cut in two by antitrust order. The second company, Snow Brand Milk Products, was capitalized at ¥360m and kept the Yukijirushi mark; the surviving company was renamed Hokkaido Butter and took the older “Clover” mark. Kurosawa and seven other directors were purged from public office, and Sato Mitsugu became president. Two months later the new company listed on the Tokyo and Sapporo exchanges. Sato used the break to redefine what the company was: meat and seed were spun out as Snow Brand Foods and Snow Brand Seed in December 1950, leather and pharmaceuticals followed, and the parent was narrowed to dairy — a discipline extended in 1963, when the food business was moved out to Snow Brand Foods entirely.

Rebuilding scale meant leaving Hokkaido. Five plants opened around Hanamaki in 1952, a Tokyo city-milk plant in 1953, then Tohoku, Kyushu, Kansai, Tokai and Shikoku; by fiscal 1954 sales reached ¥9.0bn across 58 plants and 314 collection and processing stations. Vitamilk (1951) and 6P Cheese (1954) were followed by sliced and canned camembert cheese in 1962, Tetra Pak coffee milk in 1963 and Neo Soft margarine in 1968. And once the Occupation ended and the policy that forced the split expired, the split itself was undone: in November 1958 Snow Brand absorbed Clover Dairy and put the pre-war production base back together. Capital rose from ¥1.5bn at the merger to ¥7.5bn by 1968.

The flag it had raised in 1926 was betrayed for the first time in March 1955, when skim milk powder from the Yakumo plant — left too long as raw milk after a machine failure and a power cut, and colonized by Staphylococcus aureus — poisoned Tokyo schoolchildren: 1,579 cases among 7,638 who ate the lunch (1,936 by the city’s own count). Sato circulated a letter titled “To all employees” demanding the company start over on quality, and it was handed down as the origin of Snow Brand’s quality control. It did not prevent the same bacterium from striking again forty-five years later. By the year to March 1968 the company held 69.9% of national butter output, 62.9% of cheese, 37.3% of powdered milk and 25.3% of all raw milk collected, on sales of ¥105.6bn — first in the industry by milk intake, by revenue and by capital, with 10,281 employees.

From the 1970s the centre of the business moved from butter and cheese to drinking milk and daily chilled goods. Snow Brand set up a co-operative-linked milk distributor in 1972, launched Japan’s first unadjusted milk in the Tokyo region the same year, and added Natsure plain yoghurt (1979) and string cheese (1980). Its real advantage was distribution: it adapted to the rise of mass retailers earlier than anyone, and its group wholesaler, Snow Brand Access, accounted for more than half of consolidated sales of nearly ¥1.3 trillion. In dairy products it held 40–50% of the market, and the brand was strong enough that its butter could outsell a rival’s two to one at a premium of several tens of yen.

The trouble was that the product it had moved toward could not be differentiated. Milk cannot be adjusted, so it became the supermarket loss leader: a one-litre carton cost roughly ¥160 to make against a ¥150 shelf price, a loss of ¥10 a carton. Every dairy answered with value-added milk drinks, and Snow Brand’s calcium-fortified line grew past ¥60bn a year in the late 1990s — yet the strongest brand in the sector earned no better an operating margin than its rivals, and gross profit per employee lagged both Meiji and Morinaga. The plant and depot rationalization that would have fixed the cost base was not carried out while there was still time to do it calmly.

Two other lines of the period point at the same underlying question. Pharmaceuticals: a biological science laboratory opened in Tochigi in 1983, staffed largely by outside hires into a field the company had never worked in, and the man who took it over on his predecessor’s sudden death, Katayama Sumio, rose from it to the presidency in June 1993, just as the Uruguay Round brought dairy liberalization within sight. And branding: the 1989 Snow Brand Dole joint venture sold juice under the Dole name with Snow Brand’s own name in fine print and absent from television advertising — sales of ¥6.5bn in year one, 38% above target, and the first product worth ¥10bn a year the company had ever built under a name that was not its own. Every earlier attempt at a foreign brand had failed, killed inside the company by what its own people called Snow Brand brand supremacy.

On 27 June 2000 the Osaka health office logged the first report of food poisoning from Snow Brand low-fat milk. The chain ran back to March, when a three-hour power failure at the Taiki plant in Hokkaido stopped the cooling and the raw milk left at room temperature was dried into skim milk powder that Osaka then used as an ingredient. Staphylococcal enterotoxin sickened 13,420 people — the largest mass food poisoning in postwar Japan, caused by the same organism as Yakumo forty-five years earlier. The handling made it worse: cases climbed from 145 to 3,572 in three days, the plant manager admitted the production lines had been inadequately cleaned, and President Ishikawa Tetsuro cut short the late-night briefing of 4 July with “I haven’t slept” — footage replayed until it became the company’s public face. He resigned on 6 July; Nishi Kohei, due to take over in September, was brought forward. Eight plants closed, 1,000 jobs — 15% of the workforce — went, and the year to March 2001 carried a consolidated net loss of ¥47.5bn.

Recovery had reached the point where sales were down 30% rather than 80% when, on 23 January 2002, the subsidiary Snow Brand Foods was found to have relabelled cheap imported beef as domestic to claim subsidies under the BSE buy-back scheme. The second failure in eighteen months was not an accident but a fraud, and the subsidiary was dissolved at the end of April. Nishi concluded that there would be no official safety declaration to reverse the collapse this time, and ten days after the report he announced that outside capital would be taken in. Nestlé as lead shareholder was blocked by the agriculture ministry and its political allies, who would not have a foreign firm inside Japanese dairy; the national farm federation Zen-Noh took the role instead, alongside Itochu and a ¥30bn capital increase. The rest of the plan was a dismantling by business line — infant formula to Nestlé, pharmaceuticals to the Otsuka group, ice cream to Lotte — leaving the parent as a cheese and butter maker. The financial damage matched: on consolidated sales of ¥1,164.7bn for the year to March 2002, an ordinary loss of ¥35.3bn and a net loss of ¥71.7bn, met with a 98% capital reduction, ¥30bn of debt forgiveness and a ¥20bn debt-for-equity swap. All eight incumbent directors left at the June 2002 meeting.

Drinking milk, the largest remaining business, was spun out in January 2003 into Nippon Milk Community — merged with two co-operative distributors, 40% owned by Zen-Noh, selling under the new Megmilk name, and immediately first in Japan by milk share. What was left of Snow Brand shrank from ¥1,164.7bn to ¥318.1bn in sales by the year to March 2004, but it returned to profit and settled into a stable ¥280–290bn business earning ¥6.7–12.6bn in ordinary profit. The logic of the split then reversed itself: two companies fighting over a shrinking domestic milk supply could not rebuild the integrated dairy that ran from raw milk to cheese, and the specialist parent bought all its milk from a single Hokkaido federation while the milk company dealt with nine producer groups. In October 2009 the two combined under a joint holding company, Megmilk Snow Brand, and Snow Brand Milk Products was delisted; in April 2011 the holding company absorbed both, and the company listed in 1950 was dissolved.