Company history

Nippon Paint begins with import substitution. Moteki Jujiro, trained in chemistry at Kaisei Gakko, learned paint manufacture from the German chemist Gottfried Wagener and in 1879 succeeded in producing zinc oxide domestically; using it as a pigment, he opened the cooperative Komyosha in Mita, Tokyo, in October 1881 and began making pigments and stiff-paste paint — the first Western-style paint made in Japan. His backers were a navy painting foreman and an associate, and the customer was, in practice, the navy alone.

That is the shape of the company at birth, and it recurs. The technology arrived first; the market did not. Paint stayed a narrow industrial good until building demand broadened it in the Taisho years, and in the meantime Nippon Paint held chemistry and capital but no distribution of its own. In 1885 Tasaka Hatsutaro came in as a major investor, the firm became Komyo Goshi Kaisha, and the plant moved from Mita to Shinagawa — the forerunner of the Tokyo works. In March 1898 it was incorporated as Nippon Paint Manufacturing with 150 shareholders and ¥400,000 of capital, and when the Russo-Japanese War of 1904 sent military demand beyond what Tokyo could supply, capital went to ¥500,000 and an Osaka branch plant opened at Urae in 1905. Sites chosen to sit beside naval bases outlived the navy: Shinagawa still runs today as the Tokyo works, more than 120 years on.

The capacity added during the First World War boom became dead weight the moment the war ended in 1919 and paint demand collapsed, and the postwar depression brought the worst crisis since founding. Obata Genzaburo was brought in as senior managing director to rebuild: he closed unprofitable branch plants, cut staff, shifted the centre of gravity from Tokyo to Osaka, and built a nationwide network of exclusive dealers to give the company a sales base it had never had. It was through the crisis in little over a year, and in 1926 Obata became the largest shareholder — the start of some sixty years of family stewardship.

Building demand in the Taisho years finally took paint beyond the navy, and in 1927 the company took the name Nippon Paint. Defeat in 1945 stripped away the companies and plants built in Manchuria and Taiwan, and the Osaka works — reputed the largest in Asia — burned in two air raids; the Tokyo works came through untouched and carried production while Osaka was rebuilt over about four years.

Listing on the Tokyo Stock Exchange in 1949 widened the funding base, and the 1960s surge in Japanese car output opened the market that would define the company at home. New plants at Hiroshima and Aichi secured steady supply to Mazda and Toyota, and together with Kansai Paint the industry settled into a two-supplier structure in automotive coatings. But a duopoly facing customers committed to dual sourcing has little pricing power: the carmakers kept two vendors precisely so that neither could press them, and Nippon Paint held a commanding share of a market whose returns it could not lift. That contradiction — dominant position, thin margin — stayed a management problem for decades.

Obata Genzaburo remained involved in management until 1958, and his eldest son Obata Chiaki would take the presidency in 1965 and lead until retiring as chairman in 1980. Owner management gave the company an unusually long horizon, and it is that horizon — not a quarterly calculation — that explains the decision taken in Singapore in 1962.

In 1962 president Obata Chiaki travelled to Singapore to rebuild sales across Southeast Asia and found the Western majors already in possession of the region. Singapore was signalling high tariffs on imported paint and permission for a single joint venture; the choice was to move first or not at all. Nippon Paint took 30%, the local partner 60%, a Japanese trading house 10%. The ethnic-Chinese entrepreneur Goh Cheng Liang took operational command, and the partner’s position later passed to his Wuthelam group. Where ICI and the other incumbents held the primary cities, Wuthelam rebuilt from second-tier cities outward on a local dealer network.

The division of labour was clean — Nippon Paint supplied technology and production know-how, the partner supplied the market — and it worked. For sixty years the NIPSEA group has followed the same rule of entering ahead of others where competition is thin. But the minority shareholding survived that whole run, until consolidation in 2014, and so however fast NIPSEA compounded across Asia, most of the profit never reached Nippon Paint’s consolidated accounts. Royalties came in steadily; ownership of the growth did not. Value and capital drifted apart for half a century, and the drift is what eventually forced the reversal.

In 1982 Goh Cheng Liang read the maturing of Southeast Asia early and turned toward China; from the early 1990s NIPSEA pushed in seriously, catching urbanisation and the decorative-paint demand that came with it, and China grew into its largest source of both revenue and profit. The parent, meanwhile, stalled. Semiconductor and LCD materials, begun in 1991, never became a business; a net loss of $24.6M (¥3bn) in 1999 forced a 10% cut in group headcount; merging five sales companies into Nippon Paint Sales in 2004 rationalised the domestic side without touching the structural problem. In 2007 a company run by Goh Cheng Liang’s son, Goh Hup Jin, became Nippon Paint’s largest shareholder. From then on the asymmetry — struggle in Japan, compounding in Asia — had a channel through which to act on the company.

In June 2014 Nippon Paint formally resolved on a third-party share allotment to Wuthelam Holdings. Chairman Sakai Kenji drove it, and later corporate histories read the move as a capital design made in anticipation of Wuthelam eventually taking part in management. That December the eight Asian joint ventures were consolidated: of $2.8B (¥297bn) in acquisition cost, $1.4B (¥149bn) was booked as an extraordinary gain on step acquisition — fifty years of unrecognised value surfacing in a single accounting entry. The company became Nippon Paint Holdings in October 2014, and from the year ended March 2016 the Asian revenue came through in full.

What followed shows the same calculation running in both directions. In 2017 Nippon Paint bought the American firm Dunn-Edwards for about $612.5M (¥69bn) to gain a US foothold, while in the same year the board voted down a ¥1 trillion-scale bid for Axalta Coating Systems — the debt such a deal implied would have worsened the terms of the full acquisition by Wuthelam that was by then in view. An attractive target was weighed against the coherence of the capital plan, and the capital plan won. In 2019 the group bought Australia’s Dulux for about $2.8B (¥300bn). Governance moved in step: five independent outside directors in 2018, conversion to a company with a nominating committee in 2020, and the family colouring of the Obata era gone.

In January 2021 a $11.8B (¥1.3tn) allotment to Wuthelam funded the full acquisition of the Asian joint ventures and carried Wuthelam past a majority, to 58.7%. The supplier of technology had become the subsidiary of the partner it had taught — a reversal in which the licensee’s success, not a hostile bid, was the lever. Cromology, Europe’s fourth-largest decorative-paint player, followed in 2022 for $1.1B (¥151bn), giving the group Asia, Oceania, Europe and North America. More than 140 years after Mita, neither the origin of its capital nor the geography of its business resembles the company that started it.