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)[1], and in 1661, during the Kanbun era, the ancestors of the Mogi and Takanashi families set up soy-sauce businesses of their own[2][3]. In December 1917 the eight brewing houses of those two family lines combined their businesses, converting individual family firms into a corporate organisation[4], and established Noda Shoyu Co., Ltd.[5] with capital of ¥7 million, fully paid up[6]. Mogi Shichirouemon (茂木七郎右衛門) became its first president[7]. 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[8]: 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[9]. In May 1949 its shares were listed on the Tokyo Stock Exchange[10].

From about 1921 the company mechanised its operations and stacked its processes vertically, and began building large plants aimed at volume production[11]. Plant No. 17, completed in March 1926, was the pioneer of modern mass production in the Japanese soy-sauce industry[12]. 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[13]. 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[14][15], 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[16].

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

The move to volume production came with collisions between management and labour[17]. General strikes broke out in January 1919 and March 1923, and from September 1927 a great strike ran for 217 days[18]. 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[19]. With the damage of the Great Kanto Earthquake on top of that, these were years of considerable hardship for Noda Shoyu[20]. 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[21]. 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[22][23].

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[24]. In March 1931 the leading brewers concluded a production-and-sales agreement and shipment restrictions were put into effect[25]. 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[26]. The number of soy-sauce manufacturers fell from around 15,000 nationwide in 1923 to 8,500 by 1929[27], and the battle for the Tokyo market stood at six parts to the Noda side, four parts to the Choshi side[28]. 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[29].

Expansion onto the Asian mainland began in earnest with the establishment of Manchuria Noda Shoyu in December 1936[30]. The Mukden branch office was expanded into a local company[31]; 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[32]. 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[33]. In 1942 the company opened a branch office and a plant at Syonan — wartime Singapore — and plants at Medan and Kuala Lumpur[34]. 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[35].

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[36]. 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[37]. From 1948 economic conditions improved, and with controls lifted in July 1950 the industry returned to free competition[38]. 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[39]. 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[40][41].

Of the 5.15 million koku of soy sauce produced nationwide in 1954, Noda Shoyu accounted for 709,000[42]. 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[43]. 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[44]. 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[45]. 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)[46].

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[47], ordering that the company must not interfere in any way with distributors as regards the wholesale or retail price of soy sauce[48]. 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[49]. 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[50].

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[51]. At home, 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[52], and sales competition — including the mass distribution of free samples — was driving selling and advertising costs up[53]. 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[54] and, through repeated cooking demonstrations, sold it into ordinary households[55]. By 1961 it was drawing attention as an international product on a par with Ajinomoto[56].

At home the company widened its business around soy sauce, establishing Yoshiko Shokuhin Kogyo in July 1961[57]; that firm was renamed Kikko Shokuhin Kogyo in January 1963 and Nihon Del Monte in July 1991[58]. In February 1962 it set up Tone Inryo, renamed Tone Coca-Cola Bottling the following year[59], and in October of the same year it established Katsunuma Yoshu, which became Manns Wine in March 1964[60]. In October 1964 the company changed its name from Noda Shoyu to Kikkoman Shoyu[61][62]. 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[63]. 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[64].

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[65], which changed its name to JFC International Inc. in June 1978[66], and in March 1970 it took a management stake in Taiheiyo Boeki as well[67]. 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[68]. 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[69]; 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[70]; and Japanese labour costs were climbing sharply, narrowing the gap with the United States[71]. On these three points the decision was taken — let us build a plant in America[72]. 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[73].

In March 1972 the company established Kikkoman Foods, Inc. in the United States[74]. 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[75]. Local farmers and environmental campaigners opposed the construction, and voices were raised saying we will absolutely not let them build a plant[76]. 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[77], winning consent one household at a time.

The plant began operating in June 1973[78]. 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.[79] 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[80]. By 1978 Kikkoman Shoyu held 35 per cent of the American market on its own[81], in a market where 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[82]. 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[83].

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[84], yet demand for soy sauce itself was growing by only two or three per cent a year[85]. 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[86]. Nihon Calpak made tomato ketchup and tomato juice[87]. Wine reached a full ten years since production had begun in 1964[88], and both shipments and imports of wine in Japan rose sharply from 1972 onwards[89].

The move into restaurants became the place where all three lines could be tested in a single shop[90]. 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[91]. At home it opened its first outlet, Roppongi Corza, at the end of May 1974 in Roppongi, Tokyo[92], serving beef and pork seasoned with a soy-sauce-based marinade and arranged so that diners would drink the company's own wine alongside[93]. 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[94]. Mogi Saheiji (茂木佐平治) said he had great hopes for the echo demand in which demand calls forth further demand[95].