Japan: Suntory is no stranger to working against the odds

As Suntory Holdings Ltd. figures out how best to take advantage of its $13.6 billion acquisition of U.S. whiskey maker Beam Inc., it’s worth remembering that the tenacious Japanese liquor giant is no stranger to new challenges, The Wall Street Journal reported on February 17.

Over the years, Suntory has made bold moves into whiskey and beer production when other companies in similar positions might have rested on their laurels by relying on established hit products.

The firm started out as a distributor of foreign-made wine in 1899, but soon pushed into wine production. Having secured its position as a major wine player domestically and with demand for its Akadama Port Wine at its height, Suntory then jumped into whiskey distilling.

Once its whiskey business had matured, it took on Japan’s heavyweight brewers, famously taking more than four decades of determination to turn a profit on its beer ops.

“Our whiskey business based on the pillars of our Suntory Old and Torys brands benefited from the tailwind of the postwar whiskey boom,” Keizo Saji, the founder’s second son and second president, recalled in his autobiography. “But we needed to inject vigor into the company’s employees and create an air of tension. So I decided to go ahead and take on the very difficult challenge of the beer-making business.”

That decision was made in 1960 when Japan’s beer market was dominated by three major players: Kirin Brewery, Sapporo Breweries and Asahi Breweries. Suntory’s founder had tried to break into the beer market in 1930s, but failed amid the stiff competition. But Suntory was determined to succeed second time around, though it took 46 years to generate profits from its beer business.

Another illuminating anecdote from the company’s history reveals Suntory’s distinctive corporate spirit. When Suntory’s founder Shinjiro Torii was walking down a street in central Osaka in western Japan soon after the World War II, his close aide suggested the company buy land there. His aide argued that the burned-out property would soar in value once the economy started to recover, generating cash for the company much more quickly than a single malt whiskey slowly aging in a cask.

But Mr. Torii disagreed, insisting that the company was a whiskey distiller not a property developer. The comments show how Mr. Torii drew a line between his corporate goals and the mere pursuit of quick profits.

Asked about Suntory’s latest deal to buy Beam, Kirin President Senji Miyake expressed his surprise.

“My honest reaction is that it is a drastic step,” Mr. Miyake said last week. “But I can sense (Suntory’s) strong enthusiasm for forging ahead with its whiskey business.”

Suntory sought a mega-merger with Kirin in 2010. But the talks ultimately fell through when the two sides couldn’t agree on how much influence the Suntory founding family should have on the planned merged entity.

19 February, 2014