Following Suntory’s $16bn acquisition of Beam Inc, an article in Japanese business magazine Diamond by economics professor Akio Makabe, notes that Suntory has a habit of making “once in a lifetime” big bets, and wonders whether this is to do with it still being a majority family owned company. The reasons for overseas expansion – a saturated domestic market – are clear, but the risks of expanding overseas in such a competitive industry are high.
Suntory started in 1899 as the Torii Shoten store in Osaka, founded by Shinjiro Torii, starting with sweet port wine and then in 1923-4 establishing the first whisky distillery in Japan, marketing the product as “Suntory Whisky”. The company name was changed from Kotobukiya to Suntory in 1963, at the same time as the beginning of Suntory beer brewing. At the time the market was completely dominated by Asahi, Kirin and Sapporo but Torii agreed with the then President Keizo Saji to take them on saying “life is a bet. Yatte Minahare! [Osaka dialect for “Go for it!]”. At first the beer division made losses – only finally making a profit in 2008, when apparently the current President, Nobutada Saji, grandson of Keizo, made a pilgrimage to his grandfather’s grave to tell him. As Makabe points out, no American shareholder oriented public company would have tolerated losses for that long.
Nobutada Saji made other major acquisitions before Beam, including the Pepsico bottling company in the USA, Orangina Schweppes and Frucor. As Suntory is still a privately owned company, such decisions can be made quickly. When ownership and management are not separated the necessary “animal spirits” survive to take risks to help the company grow.
Makabe concludes that most Japanese companies have shifted into a risk averse mode since the economic bubble burst in the 1990s, preferring to sit on their assets rather than use them – apparently Saji himself has said that “Japanese people look down at the ground too much”. Makabe hopes that Abenomics will bring about a revival of “animal spirits” and that we might see global success stories reminiscent of the founders of Sony and Honda.
Personally I think it’s going to take more than Abenomics to overcome the embedded risk averseness in the traditional Japanese blue chips – even those Japanese executives who have managed to reach critical mass in order to make the collective decision to expand overseas have either had to fall on their own swords after perceived failures, or have not been able to gather sufficient support amongst their successors to carry on their work. The struggle for the overseas executives of such companies continues to be how to overcome this unwillingness in Japan headquarters to be seen to be responsible for the slightest risk.
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