Marubeni — Company History

The 1918 fork that split one Omi merchant family into two trading houses

The root Marubeni shares with Itochu Corporation is the itinerant linen trade that the first Ito Chubei (伊藤忠兵衛) began in Osaka in 1858. The 1968 corporate history Kigyo no Rekishi: Meiji Hyakunen (企業の歴史 明治百年) records that this family business arose in the Ito household of Toyosato village, Inukami district, Shiga prefecture, and started with the peddling of Omi linen around the upheaval of the Meiji Restoration. Benichu (紅忠), opened in 1872 at Hommachi in Osaka, was a wholesaler of kimono silks and cotton cloth with premises in Hommachi 2-chome, Higashi ward; it dealt in Kanto kimono fabrics, Owari-Mino textiles and Omi linen while extending into Western goods such as rasha woollen broadcloth and velvet, and the family business took on the role of connecting Omi-merchant commerce to modern commerce. In 1918, under the second Ito Chubei, Itochu Corporation and Marubeni Shoten were separated, and a single house name of common origin became two. The recollections of Ichikawa Shinobu (市川忍) have it that the separation was not hostility but a choice about how to pass the family business on — a reorganisation that transferred an Omi merchant house onto the joint-stock company system. The outline of Marubeni as a trading company built around textile wholesaling, walking a road of its own, was fixed at the moment of that separation.

Marubeni Shoten, split off in 1918, was according to Kigyo no Rekishi: Meiji Hyakunen incorporated in March 1921 as Marubeni Shoten Ltd.; it added textile sundries, hardware, pharmaceuticals and foodstuffs to yarn and cloth, extended its branches into Korea, Manchuria and China, and grew to a scale that included directly owned factories. Under wartime controls in 1941, Marubeni Shoten merged with Kishimoto Shoten and Itochu Corporation to form Sanko Ltd., and in 1944 a further merger bringing in Kureha Boseki and Daido Boeki reorganised the group into Daiken Sangyo, whose controlled subsidiaries at home and abroad reached forty-five companies. Autonomy as a textile trading house was lost in the mobilisation of the wartime economy, and the continuity of the enterprise was severed from the continuity of the house name. The outline of the wartime giant then became the framework that defined what would be broken up under the postwar Act for the Elimination of Excessive Concentration of Economic Power. The mismatch between the succession of a house name and the continuity of a managing entity set the starting point for the postwar re-independence negotiations, and produced the strange round trip by which a family business once gathered into one was divided all over again. The textile-centred structure the postwar Marubeni carried took its shape in the course of this reorganisation.

The bargaining table over property and goodwill, and re-independence

Under the 1949 Act for the Elimination of Excessive Concentration of Economic Power, Daiken Sangyo was split into four companies — Marubeni, Itochu Corporation, Kureha Boseki and Amagasaki Seibyosho — and in December of that year Marubeni Ltd. started afresh. The substance of the split negotiations survives in the memories of the executives of the day. Ichikawa Shinobu recalled that Kosuge (小菅) of Itochu and I ended up sitting down directly at the negotiating table over the division of the trading division's property. The greatest point of contention, above all else, was the division of the real estate (Nihon Keizai Shimbun, 私の履歴書 My Personal History, Jan 1970), and wrote of how the real estate deriving from the old Marubeni was halved. On goodwill he disclosed that it settled on the cotton goodwill going to Itochu, and the rest — silk, wool, hemp and synthetics — to Marubeni (Nihon Keizai Shimbun, 私の履歴書, Jan 1970); in an age when cotton was the most profitable textile commodity of all, Marubeni took on the condition of starting again with everything except cotton.

In April 1950 it listed on the Tokyo Stock Exchange, and the early years of re-independence were spent facing a collapse in cotton yarn prices. In November 1952 the Yomiuri Shimbun wrote that the textile market has at last fallen into a state of panic, mirroring the worldwide crash in raw cotton; on the 21st heavy selling poured in from the opening and trading continued in the disorder of the previous day (Yomiuri Shimbun, 21 Nov 1952). Ichikawa Shinobu wrote of this post-Korean War cotton slump: Marubeni was no exception. It was a huge crisis. I ran round the banks and the spinning companies, pleading with them to shelve our debts (Nihon Keizai Shimbun, 私の履歴書, Jan 1970). The terms of the split that left Marubeni everything but cotton could also, ironically, be read as having softened the direct blow of the cotton crash. Marubeni recovered a little of the disadvantage of being kept off the cotton mainstream in the form of lighter damage when cotton collapsed.

1955: the Takashimaya Iida absorption and the germ of a general trading house

In February 1955 Marubeni absorbed Takashimaya Iida. The Yomiuri Shimbun wrote that Marubeni's turnover will reach $38.9M (¥14bn) to $41.7M (¥15bn), and in wool, adding Marubeni's 4 per cent of trade to Takashimaya's 12 per cent puts it above Kanematsu (estimated monthly turnover $8.3M (¥3bn)), said to be first in the industry; together with the machinery and metals divisions, the base for a general trading house has been established ahead of every other textile trader (Yomiuri Shimbun, 19 Feb 1955). It also recorded that with this merger as the occasion, the Kansai big five cotton traders and the six Semba houses are expected to press on with studies of fresh mergers; Marubeni will be the test case, and rapid development towards general trading houses should be seen (Yomiuri Shimbun, 19 Feb 1955), setting down in real time the fact that Marubeni had fired the opening shot of the postwar reorganisation of the trading houses. As the reverse side of having conceded the cotton goodwill at the negotiating table, Marubeni was hurrying to expand its trade in everything else, and Takashimaya Iida's wool, machinery and metals lay on the extension of that same managerial calculation — filling in for the absence of cotton.

The aim of the merger survives in Ichikawa Shinobu's words of 1956. At present two-thirds of our sales are accounted for by textiles, but from here on I think we must put real strength into other goods and grow them. We must not merely seek development as a strong trading company, but at the same time never stagnate there — always reading the trend of the times and pursuing the growth of the business from a wide and elevated vantage (Keizai Tenbo, Oct 1956). The will to change an earnings structure two-thirds of which was textile took concrete form as an expansion of non-cotton trade built on the machinery and metals divisions inherited from Takashimaya Iida. Marubeni's course through the second half of the 1950s reads as a record of reversal, filling in with machinery and wool the starting point at which it had lost cotton.

The ¥40bn non-textile gap that was called a complete victory for Marubeni

In September 1961 Diamond summed up the ten-year race between Marubeni and Itochu. At the time of the separation Itochu was on a rising tide. Marubeni ran it down on the back of the merger with Takashimaya Iida and finally overturned it; today it is $111.1M (¥40bn) ahead over the half year. That gap is the gap in the non-textile divisions. Marubeni's non-textile sales are $472.2M (¥170bn), Itochu's $362.8M (¥131bn). That difference is precisely the difference in total sales (Diamond, 10 Sep 1961). The lead in machinery and metals trade won through the Takashimaya Iida absorption surfaced as a ¥40bn non-textile gap, and turned into the source of the difference that lifted Marubeni clear of the level ranks of textile wholesalers. The picture in which a Marubeni saddled at the negotiating table with the unfavourable non-cotton side dug out a numerical lead first, through accumulated absorptions, defined the shape of trading-house competition in the early 1960s.

In 1966 it merged with Totsu to strengthen its steel business, and in July 1972 it changed its name back to Marubeni Corporation. Through this period Ichikawa Shinobu argued head-on against the thesis that the trading houses were in decline. I do not understand what is meant by a distribution revolution. It is not distribution alone that changes; industrial structure and industrial machinery change, and the mechanism of distribution changes along with them. In Japan I rather think there is a tendency for critics and academics to make a subject of it conceptually, through talk of trading houses in decline or trading houses as useless, or through the phrase distribution revolution (Noda Keizai, Sep 1963). Against the contemporary argument that a distribution revolution would weed out the trading houses, Ichikawa retorted that only a trading house can operate straddling the world. The officials will not do it for you. The manufacturers have no staff and that we have several thousand people in each of whom $13,889 (¥5m) has been invested (Noda Keizai, Sep 1963), placing language skills and international networks as the general trading house's own distinctive resource.

The speculation backlash and the price of the 1976 Lockheed scandal

In May 1973 the Yomiuri Shimbun wrote that while the speculative trading of the big trading houses is drawing public criticism, Marubeni and Nissho Iwai announced their March results on the 8th, and on timber alone Marubeni booked $19.7M (¥5bn) and Nissho Iwai $10.2M (¥3bn) of operating profit, adding that Marubeni also recorded just under $7.7M (¥2bn) of gains on share sales and bought a further $83.9M (¥23bn) of securities on top, conducting business worthy of the name of a new major securities house (Yomiuri Shimbun, 9 May 1973). As the goods handled in the course of becoming a general trading house spread into physical markets, public attention turned to the trading houses' sources of earnings themselves. In a period when the strategy of widening from textiles into machinery, metals and timber was reinterpreted from outside as dependence on speculative income, a trading house's financial power and information network turned into the very object of the criticism.

In the Lockheed scandal of 1976 Marubeni became the stage of bribery over an aircraft purchase, and the governance of trading houses was called into question as a political matter. Tsuda Hisashi (津田久), then vice-president, left the record that the greatest wave to strike the company was the agitation among its employees. Repeated compulsory searches by the prosecutors halted day-to-day business several times over. The social criticism of Marubeni seen in the demonstrations reached even into employees' private lives (Osaka Boekikan-ho, Jan 1976), and set down the swing of public opinion: it is the Japanese national character, one might say — far too governed by mood, with too wide a swing of the pendulum, so that opinion is formed extremely easily according to the size of the type in the press (Osaka Boekikan-ho, Jan 1976). Reflecting the fall in the company's industry standing after the affair, Nikkei Business wrote in 1985 that Marubeni's tragedy today is that, thrown about by the Lockheed affair and unable even to frame a hypothesis, it has gone on with a voyage without a chart. The result is its decline in standing within the industry (Nikkei Business, 15 Apr 1985).

Late into oil, and the delay in clearing bad assets exposed by the 1998 accounts

The structural weakness Marubeni carried through its transformation into a general trading house was its late start in energy. In December 1979 Nikkei Business reported that its crude oil throughput is a third of Mitsubishi Corporation's and only half of Itochu's. The biggest cause is that we were greatly delayed in moving into oil compared with the others, says Hiroe Isao (広江勲), managing director and head of the energy division. Catching up with the others looks likely to take considerable time, and will be one fetter on internationalisation (Nikkei Business, 31 Dec 1979). Marubeni, which had widened from textiles into machinery and metals, allowed its two rivals a lead in oil, the next axis of earnings. The non-textile bulk gained through accumulated mergers did not come back as an advantage in energy trading volume.

Haruna Kazuo (春名和雄), who became president in 1987, reflected on the distortion in the earnings constitution of the general trading house. It goes back to the oil shock. Crude prices shot up and people began asking who was number one in sales. But because a bigger volume of sales leads to profit, in that sense we will make every effort to increase sales (Nikkei Business, 2 Mar 1987), he said, while admitting the weakness of the domestic business: in our case the domestic trade is weak. We grew out of textiles to begin with, so the home market used to be our strength, but frankly the way we went about it was poor. We divided our people into home-market men and trade men (Nikkei Business, 2 Mar 1987). On the vertical silos he added that right after joining, if you were put on steel you stayed in steel for good — a vertically divided organisation, and this invited real harm (Nikkei Business, 2 Mar 1987), taking issue with the personnel divisions that had hardened in the course of becoming a general trading house.

The delay in disposing of bad assets surfaced as a gap with rivals from 1998 onwards. In March 2002 Nikkei Business wrote that the evaluation of Itochu and of Marubeni changed with the results for the year to March 1998. Itochu booked $1.3B (¥170bn) of extraordinary losses in its parent accounts at the time. For the year to March 2000 the extraordinary loss was $4.2B (¥453bn). Marubeni, late in disposing of its bad assets and exposed to fears over its creditworthiness, is a miniature of the Japanese economy's lost decade (Nikkei Business, 25 Mar 2002). In the period when Itochu moved first to take its losses, Marubeni needed time to recognise its bad debts and fix its write-downs. The picture in which the Itochu that had won the favourable cotton goodwill at the split also led on early loss-taking, while the Marubeni left with everything but cotton carried the delay as figures, remains in the contrast of these accounts.

From US GAAP to IFRS: results swinging with the commodity cycle

Marubeni reported consolidated accounts under US accounting standards from an early date, posting sales of $71.6B (¥8.97tn) for the year to March 2002. In the year to March 2008, with resource prices rising, it recorded sales of $102.9B (¥10.63tn) and net profit of $1.4B (¥147bn), its highest level to that point, and in the following year to March 2009, under the Lehman crisis, it still posted net profit of $1.2B (¥111bn). The accumulation of trading volume absorbed part of the swing of the commodity cycle and showed the underlying resilience of a general trading house. It was a period in which the structure of supporting profit and loss with the throughput of other goods, while still carrying the late start in energy, showed through in the figures. The biggest cause of which managing director Hiroe had spoken in 1979 remained in place, while a diversified product mix taking in machinery, metals and food supported Marubeni's earnings in fields other than oil.

From fiscal 2012 it moved to IFRS, and the year to March 2013 showed operating profit of $5.1B (¥500bn) and net profit of $2.1B (¥206bn), a presentational jump accompanying the change of accounting standard. In the resources boom Marubeni was pushed up from the middle of the pack towards the top, and a resource-dependent earnings structure hardened on the evidence of the numbers. The recasting of accounting standards brought a different angle of visibility to a trading house's profit and loss, and accelerated the emergence of valuation differences on resource interests as a driver of consolidated earnings volatility. Set against the late start in oil of the later 1970s, the resources business of the 2000s had reached the point of working as a pillar of earnings. At the same time the constitution by which Marubeni's consolidated result took the downturns of the commodity cycle full on hardened too, and this two-sidedness ran underground towards the coming Gavilon and Chile copper impairments.

The grain-price fall right after the Gavilon deal, and the difficulty of trading-house M&A

In June 2006 the presidency passed from Katsumata Nobuo (勝俣宣夫) to Asada Teruo (朝田照男), and in 2013 Kokubu Fumiya (國分文也) took over. Through this period Marubeni set resource interests and grain distribution as its two mainstays and widened investment into infrastructure, power and food as non-resource earnings sources. A twin-track strategy — riding the tailwind of the resources boom while cultivating the non-resource fields in parallel — sat at the centre of management from the late 2000s into the early 2010s. The investment discipline that Kakinoki Masumi (柿木真澄) would later call necessary was not yet operating in any clear form. Marubeni's managerial thinking, grown through mergers and investment, leaned towards accelerating the offensive, and risk management for a period of falling prices was left untouched, carried over as a task for the next president.

In fiscal 2013 it completed the acquisition of the American grain major Gavilon and built a structure that ranked among the world's largest by grain volume. The roughly US$2.7bn deal was the centrepiece of the drive to strengthen non-resource earnings; grain prices fell immediately afterwards, and net profit for the year to March 2016 dropped to $571.5M (¥62bn). A resources downcycle and a price fall right after the acquisition coincided, and the difficulty of trading-house M&A was driven home in figures. The mismatch between the timing of the acquisition and the market became the occasion for a review of investment screening and of the method for assessing impairment risk, and was placed at the origin of the rebuilding of investment governance that would proceed under Kakinoki. Within a Marubeni history of widening through absorption, it was also the first case in which the successful experience of absorbing surfaced as a clear failure.

The Chile copper write-down, the pandemic, and the V-shaped recovery under Kakinoki

Soon after Kakinoki Masumi became president in June 2019, Marubeni faced impairments including those on its Chilean copper business. It sank to a net loss of $1.8B (¥197bn) for the year to March 2020, its first bottom-line loss in eighteen years, and the resource-weighted earnings structure was tested once more. The Kakinoki regime shifted the weight of the power business away from owning generating plant and towards value-added activity, and raised the share of earnings coming from non-resource fields. The turn from the heavy asset of a power station towards operating and service income was pursued as a qualitative rearrangement of the power business in the light of the impairment. The tightening of investment screening that followed the grain-price fall after the Gavilon deal advanced at the same time, laying the groundwork for procedures that price a project's asset valuation and impairment risk in before an acquisition is made.

The year to March 2021 recovered in a V shape to operating profit of $1.3B (¥146bn) and net profit of $2.0B (¥223bn), and from the year to March 2022 rising resource prices combined with profit contributions from the non-resource businesses to produce a run of record highs. The year to March 2023 recorded revenue of $65.4B (¥9.19tn) and net profit of $3.9B (¥543bn), the highest in the company's history, and shareholders' equity had built up to $24.3B (¥3.63tn) by March 2025. Kakinoki himself expressed as a management policy the attempt at two opposed postures, prudence and boldness, feeling his way towards running the investment governance shaped by the impairments alongside growth investment. On renewables too he said that Marubeni's strength lies in taking on a challenge and going half a step ahead of the world, indicating a direction in which earnings come from ingenuity in operating a business rather than from owning the equipment. Cases in which the rebuilding after an impairment and the setting of an all-time profit record both fall within the tenure of the same president are rare.