Kikkoman — Company History

Merging the family businesses into a joint-stock company

Soy-sauce brewing at Noda in Chiba began in the Eiroku years of the Muromachi period, started by Iida Ichirobei (飯田市郎兵衛), and in 1661, during the Kanbun era, the ancestors of the Mogi and Takanashi families set up soy-sauce businesses of their own. In December 1917 the eight brewing houses of those two family lines combined their businesses, converting individual family firms into a corporate organisation, and established Noda Shoyu Co., Ltd. with capital of ¥7 million, fully paid up. Mogi Shichirouemon (茂木七郎右衛門) became its first president. From immediately after the merger the company worked to sweep away the old habits that individual family management tends to carry, pushing through reforms on every front: an Osaka branch office in February 1918, a barrel-making works in March 1921, and its own water supply in April of the same year. In May 1949 its shares were listed on the Tokyo Stock Exchange.

From about 1921 the company mechanised its operations and stacked its processes vertically, and began building large plants aimed at volume production. Plant No. 17, completed in March 1926, was the pioneer of modern mass production in the Japanese soy-sauce industry. It set off a rush among the leading brewers to expand their own capacity, the industry fell into overproduction and the market seized up, so the major firms adopted a co-ordinated policy intended to hold shipment volumes and prices to the Tokyo market steady. Alongside the expansion of output the company widened its range of products: in April 1925 it absorbed Manjo Mirin of Nagareyama, Chiba, taking over its sake-brewing business, and the merger with Nihon Shoyu of Inchon in Korea, together with branch offices opened in Korea and Manchuria, laid the groundwork for expansion onto the Asian mainland. In August of that year capital was raised to ¥30 million.

Labour disputes, the building-out of plant, and expansion onto the mainland

The move to volume production came with collisions between management and labour. General strikes broke out in January 1919 and March 1923, and from September 1927 a great strike ran for 217 days. Around the time of the ceremony marking the completion of the new plant in April 1926, the police could not keep pace with the labour movement across the Noda district, and for a period the area was effectively without policing. With the damage of the Great Kanto Earthquake on top of that, these were years of considerable hardship for Noda Shoyu. Even in the midst of the disputes the building of facilities continued: a new head-office annexe was completed in February 1927, a Tokyo branch office opened in April of that year, the brewing research laboratory was rebuilt in September 1929, and a bottling plant was put up in September 1930. To serve rising demand in the Kansai region and to spread production across the country, the company built its Kansai plant at Arai village in Kako district, Hyogo prefecture, in September 1931 and began shipping from it.

From about the time the Kansai plant was going up, the industry tipped into overproduction, and with the downturn on top of it competition sharpened. In March 1931 the leading brewers concluded a production-and-sales agreement and shipment restrictions were put into effect. As the Manchurian Incident developed, however, the soy-sauce market slumped, and extreme selling with free gifts attached threw the sales war into confusion, so the production-and-sales agreement was dissolved in 1933. The number of soy-sauce manufacturers fell from around 15,000 nationwide in 1923 to 8,500 by 1929, and the battle for the Tokyo market stood, as the 読売新聞 put it on 29 August 1929, at six parts to the Noda side, four parts to the Choshi side. At the national soy-sauce federation's convention in November 1936 the abolition of gift-attached selling was resolved, and with the outbreak of the war with China this bout of price-cutting came to an end for the time being.

Expansion onto the Asian mainland began in earnest with the establishment of Manchuria Noda Shoyu in December 1936. The Mukden branch office was expanded into a local company; in May 1937 a capital tie-up with Choshi Shoyu was concluded; and in 1938 a Tianjin branch office and a Beijing plant were built. In January 1939 soy-sauce prices were pegged, and under wartime controls official prices, restrictions on product grades, allocation of raw materials and rationing of consumption followed one after another. In 1942 the company opened a branch office and a plant at Syonan — wartime Singapore — and plants at Medan and Kuala Lumpur. On the technical side it succeeded in industrialising a new soy-sauce brewing method, and in January 1944 released the technique publicly, spreading it through the industry.

Free competition once controls were lifted, and first place made permanent

The wartime squeeze on raw materials cut output, quality grades were lowered, and consumption per head was regulated down to half the pre-war level. National soy-sauce production in 1947 hit its postwar low, and Noda Shoyu's own output recorded the lowest figure since the company was founded. From 1948 economic conditions improved, and with controls lifted in July 1950 the industry returned to free competition. From the second half of 1951, however, output reached saturation and competition intensified; special sales with free gifts attached reappeared, and in April 1952 these were banned as unfair competition. Through these years Noda Shoyu built up its stocks of moromi mash, improved and expanded its production plant, raised its brewing technique and yields, put up a new Tokyo branch office and opened a Kyushu branch, setting its sales organisation in order.

Of the 5.15 million koku of soy sauce produced nationwide in 1954, Noda Shoyu accounted for 709,000. Second-placed Yamasa Shoyu had 202,000 koku, Higeta Shoyu 131,000 and Marukin Shoyu 117,000; against the four majors' combined 1.16 million koku, some 6,000 other brewers divided 3.99 million between them. Exports went mainly to North America, Hawaii and Okinawa, and of the 9,300 koku exported nationally that year Noda Shoyu accounted for 84 per cent. Around the core of Kikkoman soy sauce the range had widened — Manjo-brand mirin, chochu and shochu from April 1925, Kikkoman sauce from 1936, and the new-style sake Yomo no Haru from September 1952. Shipments in 1954 came to 18,000 koku of sauce and 48,000 koku of alcoholic drinks, and total sales for the year were $25.4M (¥9bn).

That oligopolistic position drew the discipline of the anti-monopoly law as well. In December 1955 the Fair Trade Commission ruled that Noda Shoyu's conduct obstructs free competition, ordering that the company must not interfere in any way with distributors as regards the wholesale or retail price of soy sauce (読売新聞, 28 December 1955). In the stock market the previous year it had been assessed in these terms: Among food shares it invites comparison with Ajinomoto on various counts. Its quality is beyond question, and its sales are roughly the same (読売新聞, 20 November 1954). Capital rose to ¥80 million in October 1948, to $555,556 (¥200m) in December 1950, to $1.1M (¥400m) through a one-for-one bonus issue in 1952, and to $2.2M (¥800m) in July 1955 through a doubling of capital, half paid and half free.

A sales company in the United States, and the first steps into diversification

In June 1957 the company established Kikkoman International Inc. in the United States. At home, as the 読売新聞 described it on 13 November 1957, from the four big makers down to tiny cottage-industry producers, fully five thousand soy-sauce companies are fighting it out in this narrow country, and sales competition — including the mass distribution of free samples — was driving selling and advertising costs up. In America soy sauce had remained a speciality seasoning for Japanese food, but the company obtained shelf space in supermarkets across most of the major cities of the western United States and, through repeated cooking demonstrations, sold it into ordinary households. By 1961 it was drawing attention as an international product on a par with Ajinomoto.

At home the company widened its business around soy sauce, establishing Yoshiko Shokuhin Kogyo in July 1961; that firm was renamed Kikko Shokuhin Kogyo in January 1963 and Nihon Del Monte in July 1991. In February 1962 it set up Tone Inryo, renamed Tone Coca-Cola Bottling the following year, and in October of the same year it established Katsunuma Yoshu, which became Manns Wine in March 1964. In October 1964 the company changed its name from Noda Shoyu to Kikkoman Shoyu. Sales for the year to December 1967 were $92.5M (¥33bn) with after-tax profit of $2.6M (¥938m), and soy sauce accounted for 82 per cent of turnover. In soy sauce exported to the United States it held 90 per cent of the trade as of 1968, and set out a policy of strengthening its export organisation to become Kikkoman soy sauce of the world.

Its American distribution would not widen on the strength of its own sales company alone. Soy sauce was a supporting player that required patient, ground-level cultivation of demand, and judging that the selling power of a wholly owned sales arm had its limits, the company chose instead to go to market alongside Japanese foodstuffs as a set. In June 1969 it took a management stake in the Japanese-American food wholesaler Japan Food Corporation, which changed its name to JFC International Inc. in June 1978, and in March 1970 it took a management stake in Taiheiyo Boeki as well. After the Vietnam War ended in 1975, Koreans and Filipinos who had been granted green cards in return for their countries' participation in the war, along with refugees from Cambodia and Vietnam, crossed to the United States, and demand for Asian foods expanded with the Asian population.

The Walworth plant: an investment without precedent

In 1971 Kikkoman Shoyu put local manufacture of soy sauce in the United States on the agenda of its board as a formal item. Three things underpinned the judgement: demand for soy sauce was growing steadily and approaching the volume that would support a plant of minimum economic scale; ocean freight rates were rising year by year, so that building a plant would save not only the freight on finished product but, indirectly, the freight on raw materials too; and Japanese labour costs were climbing sharply, narrowing the gap with the United States. On these three points the decision was taken — let us build a plant in America (日本醸造協会雑誌, December 1972). In the boardroom it was believed that each soy-sauce brewery had its own microbes living in it, and there was a deep-seated unease about whether so delicate a taste could be produced in a foreign land.

In March 1972 the company established Kikkoman Foods, Inc. in the United States. It sought its site in farming country at Walworth, Wisconsin, acquiring a plot large enough to allow for later expansion: we bought 200 acres of land — too big at the outset, but we bought something large in expectation of future growth (日本醸造協会雑誌, December 1972). Local farmers and environmental campaigners opposed the construction, and voices were raised saying we will absolutely not let them build a plant (日本醸造協会雑誌, 1976). Mogi Yuzaburo (茂木友三郎) went almost as if standing for election — turning up at farmers' gatherings, visiting people at home and shaking hands (日本経済新聞, 17 July 2006), winning consent one household at a time.

The plant began operating in June 1973. In his remarks at the opening, Mogi Keizaburo (茂木啓三郎) said: This plant is not Kikkoman's American plant; it is America's Kikkoman plant. The equipment was modernised without hesitation, and after trials that ran ahead of anything in Japan the company was able to make the same product locally as it did at home. By 1978 Kikkoman Shoyu held 35 per cent of the American market on its own, in a market where, as 日経ビジネス reported on 24 April 1978, soy sauce was called an all-purpose seasoning — not just for steak, but poured over salad, or two or three drops into soup, with new uses spreading all the time. Mogi Keizaburo put the reason it travelled in these terms: Food has to be the real thing, and it is enormously important that it taste good (日経ビジネス, 24 April 1978).

Three lines: scale, diversification and internationalisation

As of 1974 Kikkoman Shoyu was the industry's largest firm, holding a little over 30 per cent of the soy-sauce market, yet demand for soy sauce itself was growing by only two or three per cent a year. What it set out in response were three basic lines: scale, built on further cultivation of soy-sauce demand and an increase in share; diversification, seen in such moves as the establishment of Nihon Calpak, a joint venture with Del Monte of the United States; and internationalisation, soy sauce having been produced in America since the previous year. Nihon Calpak made tomato ketchup and tomato juice. Wine reached a full ten years since production had begun in 1964, and both shipments and imports of wine in Japan rose sharply from 1972 onwards.

The move into restaurants became the place where all three lines could be tested in a single shop. In June 1973 the company formed a joint venture with the restaurant operator Sun Daitokai in Düsseldorf, West Germany, to set up Kikkoman Daitokai Europe, and set about spreading soy sauce in Europe. At home it opened its first outlet, Roppongi Corza, at the end of May 1974 in Roppongi, Tokyo, serving beef and pork seasoned with a soy-sauce-based marinade and arranged so that diners would drink the company's own wine alongside. It was an experimental shop meant to draw out a new eating habit of soy sauce, meat and wine together, and a plan was laid to build it into a chain centred on Tokyo and the surrounding area. Mogi Saheiji (茂木佐平治) said he had great hopes for the echo demand in which demand calls forth further demand.

Acquiring the Del Monte trademark, and the search beyond soy sauce

In October 1980 the company changed its name from Kikkoman Shoyu to Kikkoman Corporation. Its overseas production spread beyond North America with the establishment of Kikkoman (S) Pte. Ltd. in Singapore in June 1983, and at home it built a new plant at Chitose in August 1986. Its relationship with Del Monte was an old one: since 1963 it had held a licence to manufacture and sell Del Monte products in Japan. Around December 1988 KKR, the investment firm that had bought the large American tobacco and food group RJR Nabisco, raised the prospect of selling the Del Monte business. Terms shifted repeatedly and it proved a difficult deal in which no buyer was settled on.

In January 1990 Kikkoman acquired the perpetual exclusive right to use the Del Monte trademark in Japan and the Asia-Pacific region. The total committed was US$150 million, equivalent at ¥140 to the dollar to roughly $145M (¥21bn). Of that, US$50 million was an equity stake and the remaining US$100 million was consideration for the Far East trademark and sales rights, which brought with them the Japanese import and distribution rights that had been held by Mitsui & Co. Against forecast sales of $1.1B (¥145bn) and recurring profit of $29.7M (¥4bn) for the year to December 1989 this was no small investment, and the deal had been worked on with the Long-Term Credit Bank of Japan for more than two years. Fukushima Danji (福島男児), who led the acquisition, said: It depends on how the Del Monte business develops from here, but we have done our own calculations properly. It is by no means a dear purchase.

The prospect of recovering the money was not one to be optimistic about. Divided simply over the ten-year statutory amortisation period, $145M (¥21bn) came to a burden of $14.5M (¥2bn) a year. Against that, brand fees and import margins from the Far East ran to ¥200–300 million, the royalties and similar payments it had previously been making to Del Monte came to ¥400–500 million, and annual dividends were of the order of ¥700 million: added together they amounted to no more than ¥1.3–1.5 billion. In the domestic ketchup market that would be the main battleground Kikkoman held 20 per cent, a wide gap behind Kagome's 60 per cent. Even so, strengthening the food business was a road that could not be avoided if the company was to move beyond soy sauce, and it had already learned from experience: an earlier attempt to sell dressings under the Kikkoman brand had failed, hurt by the Japanese-style image the name carried.

The private-label price offensive and a change of president

In the spring of 1993 a private-label soy sauce appeared at ¥158. Kikkoman's biggest seller, one-litre dark soy sauce, had a recommended retail price of ¥330 and went for ¥250–260 even on special offer, so the gap against a private label under ¥200 was wide. The domestic business had barely grown for a decade, and the response to private-label soy sauce came late. While the home soy-sauce market had been shrinking without pause since the early 1970s, processed seasonings made with soy sauce — noodle broths, marinades and the like — were expanding, catching the demand of consumers who wanted to save themselves trouble in the kitchen. Consolidated sales for the year to December 1994 were $2.0B (¥201bn), with recurring profit of $81.2M (¥8bn) and net profit of $64.6M (¥7bn); the period was expected to be the third consecutive year of falling sales and earnings.

In February 1995, following the sudden death of the previous president, Nakano Kozaburo, Mogi Yuzaburo became president. A member of one of the eight founding families, he had taken an MBA at Columbia University in the United States, had been responsible for new departures such as long-range planning and the introduction of information systems, and had been a leading figure in the move into America. He favoured American-style top-down management, and the organisation he held up as an ideal was the opposite of his predecessor's. Immediately on taking office he named managers responsible for individual products, expanded the president's office, and built a structure in which information came to him and instructions went out directly; every instruction to a subordinate carried a deadline. One executive described the difference from the previous president as a difference of an order of magnitude in the volume of raw information reaching the president — by telephone, by letter, and a mid-ranking employee said that in a company that had been a stranger to speed a sense of tension filled the place all at once.

The product-manager system, and more capacity in America and Europe

In April 1995, at Mogi Yuzaburo's initiative, a product managers' office was created and placed under the president's direct control. Seven product managers were appointed to look across each product from production through to sales and act as co-ordinators, each carrying full responsibility from manufacture to selling. In April 1996, under the watchword of deepening demand for soy sauce, the company turned from defence to attack in both pricing and product development. A year into the job, Mogi Yuzaburo said: I have come to understand where to push, and how, to make the organisation move. Consolidated sales for the year to December 1995 were $2.2B (¥203bn), with recurring profit of $90.4M (¥9bn) and net profit of $46.8M (¥4bn).

During 1995 the company decided to add two overseas production sites, a second American plant — planned at the time for Wisconsin — and a Dutch plant serving Europe, both expected to come on stream during 1998. Kikkoman Foods Europe B.V. was established in the Netherlands in April 1996, and in October 1998 the second American plant was built as Kikkoman Foods, Inc.'s California facility. At home the effects of the reforms remained hard to see. In May 1997 Mogi Yuzaburo said: Regrettably, we have not yet built the shape of an attacking company, and towards the company's 80th anniversary in October of that year he set out challenge and change as its themes. Even in 1999 the position persisted, as 日経金融新聞 put it on 15 April: Even Kikkoman, in first place, has barely 30 per cent, and the five big makers together do not reach half, while the limits of patient selling built on advertising have also come into view.

A president from outside the founding families, and the rise of the US food wholesaler

In March 2004 the company took a capital stake in Higeta Shoyu and concluded a capital and business alliance with the Kibun Foods group. In June of that year Ushiku Takashi (牛久崇司) became representative director, president and COO — the eleventh head of the company in the 87 years since its founding, and the first from outside the founding families. In the ranking of directors he was nearer the bottom than the top, and he had not come up through marketing, sales or the overseas division, the mainstream routes. He had spent almost his whole career in accounting, and had led the drive to improve earnings as chairman of the budget management committee, a cross-departmental body set up to hit budget targets. The immediate management task was to improve the parent company's own results: consolidated recurring profit stood at $142.4M (¥15bn) while non-consolidated recurring profit was only $43.5M (¥5bn).

In 2004 the subsidiary Japan Food Corporation became a category adviser to Wal-Mart of the United States, taking sole charge of managing the Asian food sections of 2,500 stores across the country. JFC was the only Japanese company entrusted with a Wal-Mart category advisership; the items it handled reached 10,000, and it had grown to the point where its parent's soy sauce was merely one line among them. It had 18 distribution sites across the United States, and in June 2008 completed a four-temperature-zone distribution centre in Los Angeles. Kikkoman at that time sold soy sauce in more than 100 countries; the combined capacity of its six overseas plants was 200,000 kilolitres a year, against 240,000 kilolitres at home where demand had plateaued. In the year to March 2008 the overseas soy-sauce business had sales of about $483.9M (¥50bn) and operating profit of close to $87.1M (¥9bn), exceeding the little over $38.7M (¥4bn) earned by Kikkoman's own soy-sauce operations. The food-wholesale business, with an operating margin of 5 per cent, did not reach soy sauce's 18 per cent, but in sheer scale of turnover it dwarfed it.

The businesses that diversification had brought in were let go one after another: the shochu business and others were transferred to Sapporo Breweries in April 2006, and in March 2009 part of the holding in Tone Coca-Cola Bottling was sold. At the same time, in June 2008 the company entered a capital and business alliance with Riken Vitamin, and in August of that year acquired the whole of Kibun Food Chemifa, which was renamed Food Chemifa in April 2009 and Kikkoman Soyfoods in April 2011. Soy-milk drink sales, $135.5M (¥14bn) at the time of the acquisition, grew on the back of health consciousness to $374.4M (¥41bn) in the year to March 2021. In October 2009 the company moved to a holding-company structure.

The shift to higher-value products and a rising overseas share

At home the company found its opening not in price but in packaging, launching the Itsudemo Shinsen Shiboritate Nama Shoyu pouch of unpasteurised soy sauce in 2010, a 200-millilitre table bottle in 2011 and a 450-millilitre size in 2012. Because unpasteurised soy sauce is not heat-sterilised it oxidises quickly and needs a sealed container, so the bottle was made double-walled with a soy-sauce pouch inside it and a non-return valve fitted at the spout to keep air out. Pressing the outer body forces the sauce out under the pressure of the air trapped between the inner pouch and the outer bottle: a light press gives a single drop, a long press a measured pour. The period over which freshness could be held extended to 90 days, three times the previous figure. At ¥280 it was 30 per cent dearer than an ordinary 500-millilitre bottle, yet sales were running 80 per cent ahead of the previous year and nine in ten purchasers said they would buy it again.

In June 2013 Horikiri Noriaki (堀切功章) became president and CEO. By the year to March 2016 seven-tenths of operating profit was earned overseas, the overseas food business running at an operating margin of 19 per cent against 4 per cent at home. Horikiri put the difference down to the fact that soy sauce in Japan is a mature product taken for granted in every household, with many makers and price competition, whereas abroad it is still a new product holding an overwhelming share in a growing market — close to 60 per cent, he said, of the American household soy-sauce market. Even so he added: Seventy per cent of operating profit coming from overseas means we are leaning on overseas too heavily. I think the healthy figure would be about 60 per cent, the same as the sales ratio, acknowledging the need to restore the power to earn at home. Soy milk accounted for a little under a fifth of domestic sales, with a share above 50 per cent.

An earnings structure led by overseas, and governance by the founding families

In 2018 Kikkoman set out its Global Vision 2030, aiming to enter a growth stage in South America in the 2020s and in Africa and India from 2030 onwards, on top of North America and the still-developing markets of Europe and Australia. For the year to March 2019 it forecast sales of $4.1B (¥442bn) and operating profit of $344.9M (¥38bn), with the overseas business accounting for six-tenths of sales and more than seven-tenths of operating profit. The North American operating margin exceeded 20 per cent, against the low-6-per-cent range for the domestic food manufacturing and sales segment. In the United States competitors numbered only a few firms, among them San-J International, a subsidiary of Yamasa Shoyu, and Shimada Masanao (島田政直) of the local sales company said: What we sell on is that ours is naturally brewed and free of additives. We have no intention of competing on price. With the US Food and Drug Administration recommending reduced salt content as a measure against high blood pressure, reduced-salt soy sauce, though only a fifth of the sales mix, was growing at double-digit rates.

In food wholesaling competition grew fiercer. JFC's sales across the United States came to about $1.2B (¥130bn) with operating profit of $53.2M (¥6bn), making it the largest wholesaler of Japanese foodstuffs on the ground, but Mutual Trading under Takara Holdings and Nishimoto Wismettac Holdings were growing in the same market, and Nishimoto's 23 North American sites exceeded JFC's. In Europe, Takara Holdings had moved first, buying local food wholesalers in France and Britain. Mogi Osamu (茂木修) said: The wholesale business is growing fastest in Europe. We will press the case with our American record while adding sites within Europe and opening up new customers. In June 2021 Nakano Shozaburo (中野祥三郎) became president and COO, with Horikiri Noriaki continuing as CEO in the role of chairman. Over the eight years Horikiri led the company, sales rose from $3.1B (¥300bn) in the year to March 2013 to $4.3B (¥468bn) in the year to March 2021, and net profit from $112.7M (¥11bn) to $262.3M (¥29bn), setting a record profit for eight consecutive years.

In June 2023 Nakano Shozaburo took over as CEO from chairman Horikiri Noriaki, the first change of chief executive in ten years. The overseas share of sales exceeded 70 per cent in the 2022 financial year, and business profit from the North American operations reached $274.7M (¥39bn). Of the North American market Nakano said: Seasonings are a matter of accumulated proposals. It does not increase all at once, but it settles in gradually, and after that it does not fall back. North America, having grown at 6.1 per cent a year over the previous decade, would keep growing at around 5 per cent a year, he said, and Europe, at roughly a quarter of the North American scale, had the potential to grow at much the same rate. In governance, an unwritten rule holds that only one member of the founding families joins the company per generation, and where there is no suitable candidate the president is named from outside those families. Of the seven members of the nomination committee established in 2002, four are outside directors. In July 2023 the company transferred Country Life, LLC of the United States, and in February 2024 dissolved its capital and business alliance with Riken Vitamin.