Rohto Pharmaceutical
Corporate History & Strategy

Rohto Pharmaceutical, founded in 1899 as Shintendo Yamada Yasutami Yakubo, had long been operated as a sole proprietorship by the Yamada family. Before the war, the company had expanded its business, including establishing factories not only domestically but also on the Chinese mainland, centering on household medicines, but was severely affected by wartime disruption and the controlled economy.

After the war, the Japanese economy entered a recovery phase, and demand for pharmaceuticals also recovered rapidly. Meanwhile, capital investment, raw material procurement, and distribution expansion required greater financial capacity and creditworthiness than before, and the limitations of the sole proprietorship framework for accommodating business expansion became apparent.

In response to these environmental changes, in September 1949, Rohto Pharmaceutical converted from a sole proprietorship to a corporation, establishing Rohto Pharmaceutical Co., Ltd. with capital of 10 million yen. Teruo Yamada, a member of the founding family, assumed the presidency, and the management structure continued to be controlled by the Yamada family.

Even after incorporation, capital increases were primarily conducted centered on the founding family, and dilution of management control through acceptance of external capital was deliberately avoided. Incorporation was not a change in management entity but a decision to establish an institutional framework for growth.

Through incorporation, Rohto Pharmaceutical was able to pursue capital procurement and capital investment in earnest, expanding its production system and distribution network throughout the 1950s. Having a corporate entity also stabilized relationships with financial institutions and business partners, greatly increasing operational flexibility.

As an extension of this, the company listed on the Second Section of the Osaka Securities Exchange in 1961, gaining public credibility. Even after listing, the Yamada family occupied most of the major shareholder positions, and the management style of Rohto Pharmaceutical—growing while maintaining family management—was institutionally established at this point.

Gastrointestinal medicine, Rohto Pharmaceutical's founding business, had seen demand recover along with the improvement of postwar food conditions, but the flagship product 'Ikatsu' had been on the market for an extended period and its commercial appeal was becoming obsolete. As postwar reconstruction progressed, the dietary habits of the Japanese changed both quantitatively and qualitatively, and the role expected of gastrointestinal medicines was beginning to shift.

Entering the 1950s, addressing symptoms closely tied to daily life—such as indigestion caused by overeating and increased dining out—became increasingly important, and conventional stomach medicines could no longer adequately respond. In the OTC drug market, launching new products that combined breadth of symptom coverage with ease of use was becoming a prerequisite for growth.

In response to these market changes, in 1954, Rohto Pharmaceutical launched a new gastrointestinal medicine called 'Shiron.' Adopting sodium bicarbonate as the antacid, it was positioned as a comprehensive gastrointestinal medicine addressing a wide range of digestive complaints including overeating and stomach heaviness, rather than being limited to specific symptoms.

The company adopted a policy of concentrating management resources on the single product 'Shiron' rather than simultaneously developing multiple new products. On the production side, cost reduction was pursued through low-variety, high-volume manufacturing, and on the sales side, advertising spending was concentrated on a single product to simultaneously achieve brand awareness expansion and market penetration. This decision was exceptional in the OTC drug industry at the time, where multi-product strategies were common.

Shiron rapidly expanded sales after launch and grew into Rohto Pharmaceutical's flagship product by the late 1950s. By the early 1960s, it had reached a scale accounting for the majority of the company's revenue, and the company succeeded in maintaining high profit margins while aggressively investing in advertising.

As a result, Rohto Pharmaceutical established a high-turnover profitability model based on few-product concentration and mass sales. The success of Shiron completed the business structure centered on gastrointestinal medicine and eye drops, and this business model strongly influenced the company's decision-making as the fundamental philosophy behind subsequent brand strategy and promotional investment.

In the early 1970s in Japan, demand for household medicines expanded alongside rising living standards, and the ointment market was also in a growth phase. In this segment, Otsuka Pharmaceutical's Oronine had established high brand recognition through advertising investment and distribution network expansion, effectively leading the market.

Meanwhile, Omi Brotherhood, which had long manufactured and sold Mentholatum, went bankrupt due to management deterioration and disappeared from the domestic market. As a result, the Mentholatum brand, with its long history, was left in limbo, and uncertainty arose regarding its ownership and future development.

Rohto Pharmaceutical recognized the need to break away from its business structure dependent on gastrointestinal medicines and eye drops, and was seeking to develop a third revenue pillar. In August 1975, the company acquired the domestic trademark license from The Mentholatum Company of the United States and decided to make a full-scale entry into the ointment market.

The contract period was 10 years with a royalty rate of 7.5% of net sales. Rather than entering through proprietary development, the company chose to leverage an already recognized brand, designing an approach to reduce time-to-market and investment risk. This was selected as a pragmatic means of entering an established market.

Mentholatum became established as a major brand for Rohto Pharmaceutical after launch, contributing to sales growth in the topical drug and quasi-drug segments through the 1980s. This reduced the company's relative dependence on internal medicines and eye drops, advancing the diversification of revenue sources.

However, competition intensified as Omi Brotherhood returned to the market with the 'Menturm' brand, establishing a three-way competitive structure including Oronine. While Rohto did not achieve a dominant market position, the Mentholatum business came to occupy a stable component of the company's revenue base, serving as a practical foothold for advancing its subsequent diversification strategy.

By the late 1970s, the Japanese gastrointestinal drug market had passed the stage of quantitative expansion and entered a maturity phase. Household drug penetration had largely run its course, and growth from new demand was limited, while companies faced a battle for existing demand.

In this phase, advertising appeal, brand recall, and distribution strength—rather than product efficacy itself—became the factors determining competitiveness. In the OTC drug market, increasing TV commercial investment and increasingly sophisticated promotional methods led to an environment where differences in capital and marketing capabilities directly translated into market share.

Rohto Pharmaceutical continued to position gastrointestinal drugs as one of its core businesses, adopting a basic policy of maintaining and strengthening its existing brands centered on Pansiron. Rather than pursuing a major product overhaul or pricing strategy shift, the company chose to continue addressing the market by leveraging its established formulations and brand assets.

Meanwhile, the company was also concurrently advancing investment into other categories such as eye drops and topical drugs. Decision-making during this period was characterized by an intention to avoid excessive concentration on a single gastrointestinal drug category and to prioritize the stability of the overall business portfolio.

In 1983, Rohto Pharmaceutical ceded its position as the domestic market share leader in gastrointestinal drugs to competitors. As competition intensified in a maturing market, companies with superior advertising spend and promotional capabilities gained share, while legacy flagship brands saw their relative presence diminish.

This loss of the top position was not a single-year event but a turning point that solidified the subsequent market structure. However, because Rohto Pharmaceutical had avoided excessive dependence on gastrointestinal drugs, the impact on overall business performance was limited. As a result, gastrointestinal drugs remained a component of the company's core business but retreated from their position as the absolute growth driver.

Since acquiring the trademark license in the mid-1970s, Mentholatum had become established as Rohto Pharmaceutical's core brand in the topical drug segment. However, this business foundation was dependent on a license agreement with The Mentholatum Company of the United States, creating a structure vulnerable to contract renewals and changes in terms.

By the 1980s, the domestic market had entered a mature phase, and growth opportunities were increasingly sought in overseas markets. However, with brand rights fragmented, there were constraints on product development and overseas expansion flexibility, and the challenge of being unable to chart a long-term growth strategy became increasingly apparent.

To resolve these structural constraints, Rohto Pharmaceutical made the decision in July 1988 to acquire The Mentholatum Company of the United States and make it a wholly owned subsidiary. This gave the company unified control over manufacturing, sales, and trademark rights related to the Mentholatum brand.

The decision to acquire the originating company itself, rather than merely extending the license, entailed increased short-term costs but was aimed at securing future business flexibility and strategic discretion. It was a clear decision to internalize the brand as a company asset.

Through the acquisition, Rohto Pharmaceutical established the framework to pursue full-scale global expansion centered on the Mentholatum brand. With the ability to design product development and promotional strategies both domestically and internationally on a unified basis, the topical drug business was clearly positioned as a growth area for the company.

This acquisition was Rohto Pharmaceutical's first major overseas corporate acquisition and became the starting point for subsequent overseas expansion and M&A strategy. As a result, Mentholatum was transformed from a domestic brand into a core asset supporting the company's international business.

By the late 1980s, Japan's domestic OTC drug market had matured significantly, making growth through population increase or demand expansion difficult to envision. Meanwhile, Rohto Pharmaceutical had acquired The Mentholatum Company of the United States in 1988, incorporating brand sovereignty and business discretion, and had established a framework to seriously consider overseas expansion.

During the same period, China's reform and opening-up policies were progressing, gradually expanding room for foreign companies to enter the market. Rising living standards, particularly in urban areas, were generating visible demand for pharmaceuticals and hygiene-related products. However, numerous constraints in regulations and business practices made sole foreign entry difficult, and joint ventures with local companies were considered the practical option.

Based on this environmental assessment, Rohto Pharmaceutical decided in 1991 to establish a joint venture in China together with The Mentholatum Company. The aim was to reduce barriers to market entry by combining the brand power of Mentholatum with the local partner's distribution network and regulatory expertise.

The choice of a joint venture rather than sole entry was driven by prioritizing adaptation to the regulatory environment and certainty in business launch. This was a decision that emphasized long-term market establishment over short-term profit maximization, and served as a clear statement of intent to position China as a future growth base.

The establishment of the joint venture allowed Rohto Pharmaceutical to build a business foundation in the Chinese market and gradually advance the local deployment of the Mentholatum brand. Recognition of topical drugs and hygiene products grew, centered on urban areas, and the company steadily increased its presence in the Chinese market.

This joint venture establishment became the starting point for Rohto Pharmaceutical's China business, serving as an important stepping stone for subsequent investment expansion and business diversification. As a result, China came to be positioned as a long-term growth market for the company, following Japan and the United States.

By the late 1990s, Rohto Pharmaceutical's core businesses—gastrointestinal drugs, eye drops, and topical drugs—faced limited growth potential as the domestic OTC drug market matured. Price competition and promotional competition intensified, and the growth model based on volume expansion was becoming increasingly dysfunctional.

Meanwhile, the cosmetics market, particularly skincare, was trending upward against the backdrop of growing health consciousness and beauty awareness among consumers. In the dermatological science field, closely related to pharmaceuticals, there was room to leverage R&D capabilities and quality control expertise, and the restructuring of the business portfolio emerged as a key management issue.

Based on this environmental assessment, Rohto Pharmaceutical began full-scale investment in the skincare field from 2001. The company strengthened its R&D framework and adopted a clear policy of developing products emphasizing functionality by applying dermatological knowledge cultivated through pharmaceutical development.

Simultaneously, the company repositioned its cosmetics business from a supplementary role to a strategic business expected to drive future growth, gradually expanding resource allocation to development, production, and promotion. This was a decision that prioritized building a medium-to-long-term business foundation over short-term profit contribution.

The full-scale investment in skincare enabled Rohto Pharmaceutical to advance the transformation away from a pharmaceutical-dependent business structure. Functional cosmetics and dermatology-related products were gradually incorporated into the business portfolio, and their development as new revenue sources began.

While the investment during this period did not yield immediate results, it laid the foundation for subsequent skincare brand development and global business expansion. As a result, Rohto Pharmaceutical reached a critical turning point in its evolution toward a business structure with pharmaceuticals and cosmetics as twin pillars.

In the early 2000s, while advancing full-scale investment in the skincare field, Rohto Pharmaceutical faced the challenge of where to find sources of differentiation in pharmaceuticals and functional products. The OTC drug market was maturing, and sustained growth was difficult to envision through product improvements and promotional enhancements of existing offerings alone.

Meanwhile, growing health consciousness was driving increased interest in functional ingredients and formulation technologies, and movements to differentiate products based on 'ingredients' and 'technology' were gaining momentum. In this environment, Rohto Pharmaceutical recognized the need to enhance competitiveness by incorporating external technologies and knowledge rather than expanding its research domains independently.

Based on this recognition, Rohto Pharmaceutical concluded a strategic business alliance with Morishita Jintan, which possessed proprietary formulation technology, in September 2003. The aim was to leverage the encapsulation and ingredient stabilization technologies that Morishita Jintan had cultivated over many years to enhance development capabilities for pharmaceuticals and health-related products.

This was not a simple product supply agreement but an alliance premised on collaboration from the R&D stage, intended to create new added value by bringing together the strengths of both companies. For Rohto Pharmaceutical, it was a decision that clearly demonstrated a stance of strategically incorporating external technologies.

Through this alliance, Rohto Pharmaceutical was able to broaden the range of formulation design and ingredient utilization that would have been difficult to address with its own technology alone. The number of options in R&D increased, laying the groundwork for advancing product planning that emphasized functionality.

While the alliance did not generate significant short-term revenue, the experience of flexibly utilizing external resources through technology partnerships influenced subsequent business development and alliance strategy. As a result, this business alliance served as an important stepping stone that reinforced Rohto Pharmaceutical's R&D framework and broadened future growth domains.

By the late 2000s, Japan's domestic pharmaceutical and skincare markets had matured significantly, and growth through volume expansion was increasingly difficult to envision amid demographic structural changes. While Rohto Pharmaceutical had been advancing investment in skincare and overseas expansion, the business structure premised on domestic production was gradually revealing constraints in terms of costs and supply.

Meanwhile, economic growth and the expansion of the middle-income population in Southeast Asian countries were driving rapidly increasing demand for pharmaceutical and skincare products. Due to differences in climate and living environments, there was high demand for eye drops, topical drugs, and skincare products, and the region was recognized by Rohto Pharmaceutical as a promising growth market.

Based on this environmental assessment, Rohto Pharmaceutical accelerated its production investment in Southeast Asia from around 2010. Rather than merely expanding sales offices, the company adopted a clear policy of establishing manufacturing facilities locally to build a supply structure close to demand centers.

The decision to pursue local production was motivated not only by reducing transportation costs and foreign exchange risk, but also by the aim to rapidly develop products suited to each country's regulations and consumer preferences. This was a strategic decision to shift the overseas business from quantitative expansion to sustainable growth by establishing a structure not dependent on domestic production.

Through production investment in Southeast Asia, Rohto Pharmaceutical enhanced its supply capacity to local markets and built a framework capable of supporting sales expansion. Local production contributed not only to improved cost competitiveness but also to shorter lead times for product launches, enhancing the company's responsiveness to competitive conditions.

Through these efforts, Rohto Pharmaceutical came to position Southeast Asia not merely as an export destination but as an integral part of its business foundation. As a result, the region developed into a key base supporting the company's overseas growth, becoming a core area for advancing subsequent global expansion.