Yakult Honsha - Company History

The business began in 1935, when the medical researcher Shirota Minoru cultivated a reinforced lactic-acid bacterium — the Shirota strain — and put a drink called Yakult on sale in Fukuoka. The science was proprietary; the commerce was not. Trademarks were registered piecemeal by distributors across the country, and by the postwar recovery more than 600 companies held rights to make or sell Yakult. There was a product, and there were owners, but there was no company.

To end that disorder, Yakult Honsha was incorporated in Tokyo in April 1955 with capital of $5,556 (¥2m). Its design was not to make a drink but to hold the rights to one: head office took sole control of the trademarks and industrial property, granted concentrate-manufacturing and sales rights to the regional operators, and collected royalties on their turnover — a franchise system in which what is governed is the licence, not the goods. Even so the new head office had almost no authority, and its own board split whenever interests collided.

Authority was won in the field. Matsuzono Hisami, who had paid $5,556 (¥2m) in 1953 for the Nagasaki sales territory, moved on the Tokyo region and answered his sales troubles with something no one in the industry had tried: selling through housewives who delivered door to door. It was brutal work — eight in ten households turned an agent away at the door, and a hundred calls might yield one customer — but within five years his company led all 150 regional operators in sales. That network became the Yakult Ladies, and in 1963 it carried Matsuzono into the executive vice-presidency of head office.

In 1968 Matsuzono proposed what he called a revolution in delivery: replace the glass bottle with plastic, cut production and distribution costs, and double what a Yakult Lady earned. The proposal attacked an entrenched interest, because the regional operators owned the bottling plants — 160 of them, which plastic would reduce to about 60 — and they costed the change at some $133.3M (¥48bn) in scrapping and new machinery. A director hostile to Matsuzono moved an emergency resolution and had him voted out of head office on the spot.

He got the switch through anyway, and paid for it: a quarter of all the franchised operators left the group. Derided as the man who stirred up Yakult, he completed the conversion and became president in 1970. In 1973 he finished buying the eight regional concentrate plants, ending eighteen years in which manufacturing had belonged to the franchisees — a step Yakult itself calls the taisei hōkan, the restoration of power to the centre. Along the way he bought a professional baseball club, the Sankei Atoms, in 1969; the Yakult Swallows would become the brand’s most visible asset.

The centralisation was complete just as the reason for it ran out. By 1973 the trade press was already noting that unit sales of the founding product were flattening and that diversification was imperative; Yakult moved into cosmetics in 1971 and pharmaceuticals in 1975. The other outlet was geography. Yakult Taiwan opened in 1964, Singapore followed in 1978, and the pattern was set: the logic used to consolidate Japan’s regions would be re-applied abroad, transplanting the same door-to-door model wherever the domestic ceiling pressed harder.

Yakult listed on the Tokyo Stock Exchange’s Second Section in January 1980 and moved to the First Section in 1981, twenty-five years after head office was created to tidy up the franchise. It then set out to build three pillars — dairy, pharmaceuticals and cosmetics — absorbing Yakult Pharmaceutical Industry in 1984 and opening production and distribution plants at Fuji-Susono.

The most ambitious move was Lipson, a catalogue-retail joint venture with Mitsubishi Corporation founded in 1984 (Yakult 51%). The premise was that the 60,000 Yakult Ladies would hand out catalogues and take orders, Mitsubishi would supply the goods and Nippon Express would deliver them; sales were planned at $311.2M (¥45bn) by fiscal 1987 and $724.7M (¥100bn) by 1989. It was wound up in 1988 with cumulative losses of $39.5M (¥5bn). The executive who ran it was unusually candid in defeat: the upmarket imported goods clashed with the homely image of the “Yakult lady”; most saleswomen met their customers only once a month, when collecting payment, so the intimate selling the plan assumed was never available. The business concept itself, he concluded, had been wrong.

The core business did not recover the slack. By 1997 daily unit sales of the dairy drinks had been flat at around eleven million for a decade, and commentators were asking whether a thirty-year-old sales method could carry the company alone. Management looked for earnings elsewhere and found catastrophe: in 1998 Yakult booked an extraordinary loss of $821.3M (¥108bn) on financial speculation, and the vice-president who had run both Lipson and the trading book resigned, later to be arrested for tax evasion. Behind these domestic failures, however, the overseas transplant continued on schedule — Indonesia in 1990, Australia in 1992, a European holding company in 1996.

In March 2004 Yakult signed a strategic alliance with Groupe Danone, which had been buying its shares since 2000 and had become the largest shareholder in 2003; a standstill capped Danone at 20.181%. The alliance bought European distribution and probiotics research, and produced a China holding company and a 50:50 Indian joint venture in 2005. It also changed the shape of the overseas business: where the 1990s had been one-off local subsidiaries, the 2000s combined regional holding companies with alliance ventures. Danone downgraded the pact to a memorandum in 2013 and sold out in two steps in 2018 and 2020 — leaving Yakult neither absorbed nor merged, but independent again.

The economics abroad turned out better than at home. Indonesia and China led an Asian expansion in which local women, recruited as Yakult Ladies, carried the same argument about gut health that had worked in Japan — and because those operations were directly owned rather than franchised, their margins ran above the domestic business, which stayed flat. What head office could not achieve in 1950s Japan was designed in from the start overseas.

At home the answer came from the laboratory. A new central research campus of seven buildings opened in 2016, and Yakult moved early on Japan’s 2015 functional-claims regime with high-value probiotics — Yakult 1000 and Y1000, sold on stress relief and sleep quality. The resulting boom ran from 2018 to 2022 with the products in chronic short supply, lifting revenue from $3.7B (¥407bn) in fiscal 2018 to $3.6B (¥503bn) in fiscal 2023. The reaction followed: fiscal 2024 revenue of $3.3B (¥500bn) with operating profit down from $503.2M (¥66bn) to $365.7M (¥55bn). Under Narita Yutaka, president since 2021 and a career international-division executive, the company is pursuing a “healthcare company” repositioning ahead of its centenary in 2035 — while facing the same two-front problem as ever: rebuilding a mature home channel, and extending the Yakult Lady network across Asia.