House Foods Group - Company History

From wholesaling to making curry powder, until the war cut it off

In November 1913 Urakami Seisuke (浦上靖介) opened Urakami Shoten (浦上商店), a dealer in medicinal and chemical raw materials, on Matsuyamachi-suji in Osaka[1]. A drug wholesaler of that era traded in spices alongside Chinese herbal medicine, and the shop's shelves carried pepper and chilli[2]. Urakami Shoten supplied curry ingredients to sauce makers — Shiratama Sauce (白玉ソース), Chuo Sauce (中央ソース), Haguruma Sauce (羽車ソース)[3] — standing not as a maker of curry but as the party that handed materials to those who made it. The market for finished goods already had its first movers: in Kansai Metal Curry, Hachi Curry (蜂カレー) and Tsukibijin Curry (月美人カレー) were on sale, and in Kanto the known names were Noble Shokai (ノーブル商会) and Azumaya (東屋), maker of S&B Curry[4].

In 1926 Urakami Shoten absorbed Home Foods (ホーム食品), a sole proprietorship[5], put up a plant in the city of Fuse (today part of Higashi-Osaka) and began manufacturing and selling curry, pepper, chilli and other spices[6]. The brand it entered under was Home Curry, but Kotobukiya (today Suntory) objected that the name infringed its own, and it was changed to House Curry[7]. The registered trademark was a drawing of a house with the words In Every House inside it[8], and the House that survives in the company name today comes from that renaming. In 1930 the firm was reorganised as an unlimited partnership and its trade name changed to Urakami Seisuke Shoten[9].

In 1934 it launched hayashi rice (ハヤシライス)[10], widening from the manufacture of a single curry powder into instant foods for the home. The gap with the first movers did not close quickly, however, and Urakami Ikuo (浦上郁夫), later the second president, recalled that the company in its founding years seemed to have struggled a great deal[11]. Sales spread from a Kansai base into the Chugoku, Shikoku and Kyushu regions[12], building roots in western Japanese households rather than in the Tokyo market, where the old houses were strong. As the Second World War advanced, curry ingredients became controlled goods and male employees were taken for military service, leaving the company short of hands, and production ceased altogether[13]. In 1945 its premises burnt down in an air raid and it moved into the Fuse plant[14].

Incorporation, and the choice to avoid pure curry powder for instant curry

Operations had been suspended through the war and the years after it for want of raw materials[15], and the conversion into a joint-stock company was the fresh start from that point. In June 1947 Urakami Ryoshoku Kogyosho Co., Ltd. was established with capital of ¥197,500[16], and in January 1949 the pre-war brand was taken into the trade name, which became House Curry Urakami Shoten Co., Ltd.[17] In May 1950 it absorbed House Foods Co., Ltd.[18] Yet when the controls were lifted around 1952 and it resumed making and selling instant curry, S&B Foods had already started production ahead of it[19], and Urakami Ikuo said the domestic market felt as though it had been painted over entirely in S&B Curry[20].

On resuming after decontrol, the company put its strength not into pure curry — curry powder — but into instant curry[21]. Urakami Ikuo explained that it had been able to reach the head of the industry precisely because S&B Foods' ground in pure curry was so solid that House turned early to a different field[22]. The launch of a fried-rice seasoning mix (炒飯の素) in 1958 opened the way into assorted instant foods[23], and in November 1959 a curry factory was completed at the Higashi-Osaka plant[24]. In 1960 it launched Indo Curry (印度カレー)[25], and that November the trade name changed to House Foods Industrial Co., Ltd.[26] As a result of this choice, demand in the instant curry sector reached roughly $63.9M (¥23bn) a year by 1971, of which the company held 47 to 48 per cent[27].

Vermont Curry, launched in September 1963[28], sold $20.8M (¥8bn) as a single product in the year to November 1970 and became the company's mainstay[29]. Instant foods for the home followed almost yearly: Purin Mix (プリンミクス) in April 1964[30], stew in 1966, Shavic (シャービック) in 1967, Java Curry in 1968, and a milk-shake mix and gratin in 1969[31]. In June 1970 it set up the joint venture Sun House Foods and launched the retort-pouch product Kukure Stew (ククレシチュー)[32], adding Kukure Curry (ククレカレー) in April 1971[33]. That March it had launched Blend Special Curry as a premium line[34].

Distributors and registered dealers, television advertising, and the listing

Distribution ran through 167 contracted wholesalers (305 accounts) and, beyond them, the secondary agents the company called registered dealers, reaching supermarkets and small retailers nationwide[35]. For sales promotion it combined television-led advertising with shelf-round calling on wholesale and retail storefronts, live demonstration selling by demonstrators, and a rebate policy[36]. Some 200 female sales-promotion staff were assigned to branches and sales offices as demonstrators[37] and put to running cookery classes in stores. Until the first half of the Showa 30s (the early 1960s) S&B Foods and Oriental Co., Ltd. held larger market shares than House, but from the second half of that decade these measures took hold and the order was reversed[38].

In the year to November 1970 the company's market shares reached 47.7 per cent in instant curry, 93.7 per cent in instant stew and 71.4 per cent in instant pudding[39]. Sales of $54.7M (¥20bn) and after-tax profit of $3.3M (¥1bn) in that year were 11.6 times and 23.2 times the figures of the year to November 1960[40]. Against S&B Foods, House's sales over the previous five years had grown 3.4 times to S&B's 1.6, and its profit 5.6 times to 2.7[41]. The Kanto region came to account for 29.0 per cent of sales[42], shifting the weight of a business that had leant on western Japan towards the east.

In June 1966 Urakami Ikuo, eldest son of Urakami Seisuke, became the second president at the age of 28[43], and that same month the Nara plant at Yamatokoriyama in Nara Prefecture was completed[44]. A research laboratory followed in Higashi-Osaka, Osaka Prefecture in March 1970, the Kanto plant at Sano in Tochigi Prefecture in May, the joint venture House Haiso in August, and the Ideac Center (イデアックセンター) in November — production, logistics and training sites in quick succession[45]. In July 1971 the shares were listed on the second sections of the Tokyo Stock Exchange and the Osaka Securities Exchange[46]. The public offering was 4 million shares at an offer price of ¥480, and at listing the largest shareholders were House Kosan with 34.6 per cent and Urakami Ikuo with 22.6 per cent[47].

The 1970s, when thirty new products a year widened the range

At the time of listing the workforce was 1,353 — 673 salaried staff and 680 factory workers — with three plants at Higashi-Osaka, Koriyama and Kanto and eight branches and sales offices around the country[48]. The main raw materials — refined beef tallow, milk powder, wheat flour, sugar and spices — were heavily dependent on imports and volatile in price, so the company secured them under long-term contracts with trading houses such as Tomen and Toshoku and specialist traders such as Kobayashi Katsura (小林桂), Kyokuto Foods and Snow Brand Shoji[49]. At the interim results of May 1972 it held shares of 52.7 per cent in curry, 67.4 per cent in pudding and 93.4 per cent in stew, with half-year sales of $43.8M (¥13bn)[50]. In April 1973 its shares were transferred to the first sections of both exchanges[51].

Between the 1971 listing and 1978 the company put 70 new products into the world, and it recorded rising ordinary profit for seventeen consecutive years through the year to November 1977[52]. The fields it entered were wide: paste spices in March 1973, instant noodles that June, snack foods in June 1977, with the Fukuoka plant at Koga in Fukuoka Prefecture completed in April 1976 and the Shizuoka plant at Fukuroi in Shizuoka Prefecture in December 1982[53]. As of May 1978 its market shares were 62 per cent in curry, 82 per cent in stew and 80 per cent in pudding, followed by 46 per cent in prepared curry, 25 per cent in potato crisps and 17 per cent in instant ramen[54]. President Urakami Ikuo said at the time that his company, being of Kansai origin, faced a narrower market than Tokyo firms and could not make a living by specialising in a single product[55].

The expansion carried costs. Advertising expenditure in the year to November 1977 was $34.9M (¥9bn), or 10.5 per cent of sales[56]. Selling, general and administrative expenses came to 36.4 per cent of sales that year, up 5.7 points in the two years from the year to November 1975[57]. The range of entries widened further: into chilled foods in 1980[58], and into beverages in 1983 with the mineral water Rokko no Oishii Mizu (六甲のおいしい水), which opened up the domestic market for household mineral water. In December 1983 it set up the joint venture House Foods & Yamauchi in California in the United States and went into local production of tofu[59].

The sudden death of the founder's son, and new products losing their force

The 1983 financial year, coinciding with construction of the large Shizuoka plant, brought the first fall in both sales and profit since listing, and in November 1984 extortion letters from the case designated No. 114 by the police (警視庁指定114号事件) arrived and results worsened further[60]. On 12 August 1985 President Urakami Ikuo died at 47 in the crash of Japan Airlines Flight 123, and that September Otsuka Kunihiko (大塚邦彦), the executive vice-president, became president[61]. Otsuka described his state of mind at the time as that of a caddie who had been going round the course with a professional and was suddenly told to play[62]. Born in 1933, he had joined the company in 1955 and become representative vice-president in 1979[63].

In the years after the handover new products lost their force: the contribution of new products in the year to March 1989 was 4.5 per cent, down from a little over 7 per cent before[64]. Over those three years the company put out about seventeen new products a year, fewer than in the period when the number had exceeded thirty[65]. Sales in the year to March 1989 were about $1.1B (¥150bn) and operating profit about $79.7M (¥11bn), up 2.4 per cent year on year[66]; by division, curry roux at $339.2M (¥47bn) was flat with a rise of 1.2 per cent, snack confectionery at $77.5M (¥11bn) fell 8.0 per cent and ramen at $130.5M (¥18bn) fell 5.0 per cent[67]. Advertising as a share of sales kept climbing, from 9.47 per cent in 1984 to 10.2 per cent in 1989[68], so that the method of heavy selling through heavy advertising was still in place.

The test for leaving a business it could not run with the leaders

In 1988 President Otsuka reworked the product manager system introduced in 1969[69]. Until then a unit reporting directly to the president had carried end-to-end responsibility for a product from development through to sales and had decided both launches and discontinuations, but its effort had tilted towards immediate sales promotion and distinctive products had stopped appearing[70]. He created the post of marketing manager inside the sales headquarters, giving it the nurturing and promotion of new products, and left the product managers to concentrate on development one step ahead[71]. Screening too was rebuilt in two layers: a new-product development committee examining taste, packaging and price from the consumer's side, and an executive-level new-product review meeting examining investment and profitability from the company's side[72].

At the end of 1991 President Otsuka decided to withdraw from the chilled-food business[73]. It had been entered in 1980, and against a background of demand for foods closer to fresh the market had been growing at close to double digits every year; but the company had no delivery network of its own, and sales in the last two or three years had stayed at around $14.9M (¥2bn)[74]. The reason given for the withdrawal was the judgement that a business in tune with the times means nothing if there is no prospect of running in the top group of its field[75]. Few voices supported the proposal, and Otsuka went about explaining that when starting something new one must hear everyone out, but that when withdrawing the top must be allowed to have his way[76]. New businesses were given five years as a standard term, and the company pulled out of two in 1990 and one in 1991[77].

The policy reached down to the level of individual products: of roughly 750 items excluding food-service lines, 55 were discontinued in the 1989 financial year and 76 in 1990[78]. The internal rules for launching new products were narrowed to three — be first to market even at some risk, take only products with distinctiveness, and aim at premium quality rather than a low price — and anything that did not fit would not be launched[79]. The narrowing was not accepted at once: the industry murmured that House had gone strange lately, criticism came from trading partners, and the stagnation lasted four or five years[80]. Even so, the returns rate fell from close to 7 per cent to 0.47 per cent[81], and Rokko no Oishii Mizu grew by 1991 into sales of $66.9M (¥9bn) and a leading household share of nearly 50 per cent[82].