Spinning off the drug business to build the two-storey model (1964)

On separating the business that earns from the business you are growing

To read the 1964 spin-off as mere tax-driven tinkering with the corporate structure is to stay on the surface. It is true that the group had swollen for tax reasons — but the heart of the decision is that Masahito gave this one company alone the weight of being “the eldest son of the group,” and entrusted it with the in-house development capability that would break the habit of copying others. And he put in charge of it his son Akihiko, kept away from sales and set to walk the development path only. Cutting a development-only company loose from the infusion business that paid the bills looks like an arrangement that chose the power to make the next product over near-term revenue.

That said, the arrangement did not bear fruit quickly. The imitative habit did not change easily, and it took a quarter of a century for Arkin, the company’s first drug of its own, to reach the market. Ironically what bore fruit first was on the other side — Oronamin C and Pocari Sweat, made by turning infusion technology to new uses — and the pharmaceutical industry jeered at “the juice shop from Tokushima.” Even so, the two-storey structure of earning from medicine while taking daily cash from consumer goods underwrote the international expansion that came later. This company’s character shows clearly in that deliberate separation of the business that earns from the business being grown.