Suntory Ltd.

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Suntory Ltd.

Dojimahama 2-1-40, Kita-Ku
Osaka 530-8203
Japan
Telephone: +81 6 6346 1131
Fax: +81 6 6345 1169
Web site: http://www.suntory.co.jp

Private Company
Incorporated: 1907 as Kotobukiya Liquor Shop
Employees: 18,059
Sales: ¥1.32 trillion ($12.19 billion) (2003)
NAIC: 312140 Distilleries; 111421 Nursery and Tree Production; 312111 Soft Drink Manufacturing; 312120 Breweries; 312130 Wineries; 325131 Inorganic Dye and Pigment Manufacturing; 325412 Pharmaceutical Preparation Manufacturing; 424810 Beer and Ale Merchant Wholesalers; 424920 Book, Periodical and Newspaper Merchant Wholesalers; 484121 General Freight Trucking, Long-Distance, Truckload; 493110 General Warehousing and Storage Facilities; 721110 Hotels (Except Casino Hotels) and Motels; 722110 Full-Service Restaurants

Suntory Ltd. is Japan's leading alcoholic and nonalcoholic beverage company, with a leading position in that country's whiskey market, and strong positions in the beer, wine, and soft drink and other beverage segments as well. The company's sales of more than ¥1.3 trillion (US$12.19 billion) also places it among the world's top drinks companies. Whiskey remains the company's strongest product area—Suntory is credited with introducing Scotch-style whiskey to Japan—and production of the group's 18 different bottled blends and single malts are concentrated at its Yamazaki Valley and Hakushu distilleries. The company also produces a number of other alcohol varieties, such as the melon-flavored liqueur Midori, and the distilled alcohol, Shochu. Suntory also acts as distributor for a long list of international brands in Japan, including Beefeater, Courvoisier, Jack Daniels, Campari, and Drambuie among nearly 150 brands. In addition to its Japanese operations, Suntory manages Scotland's Morrison Bowmore Distillers, France's Chateau Lagrange and Chateau Beychevelle, and Germany's Weingut Robert Weil. In the United States, Suntory operates Pepsi Bottling Ventures LLC, and is that country's third largest mineral water distributor through subsidiary Suntory Water and brands including Hinckley & Schmidt. Other operations in the diversified group, which counts nearly 180 subsidiaries, include restaurants, health food, publishing, and botany—in 2004, the company flower development division debuted the world's first successful blue rose. Suntory remains controlled by the founding Saji family, and is led by President Nobutada Saji.

Wine and Whiskey Pioneer in the Early 20th Century

Into the beginning of the 20th century, Japan's alcoholic beverage market remained dominated by two traditional Japanese recipes, sake, a fermented rice-based alcohol, and shochu, a distilled variation of sake. The opening of the company to Western influences in the early part of the 20th century, however, introduced a number of Japanese drinkers to Western-style alcoholic beverages, including wine and whiskey. For the most part, however, these beverages remained unsuitable to the Japanese palate.

The revolution in Japan's drinking habits that occurred during the century—giving rise to the famous image of the whiskey-drinking "salaryman"—began through the efforts of Shinjiro Torii. Born to an Osaka money-changer in 1879, Torii originally apprenticed to a drug wholesaler at the age of 13, and later worked for a paint and dye wholesaler as well. By the turn of the century, however, Torii had discovered Western alcoholic beverages, and especially wine. Torii started studying Western wine-making techniques. His first professional effort, however, was to start up his own wine wholesaling business in 1899, importing wines from Spain. The company's original name was Kotobukiya Liquor Shop.

The Spanish wines did not, however, appeal to Japanese tastes, and Torii's first business failed. Instead, Torii recognized that he would have to develop his own wine adapted to Japanese preferences, and he began experimenting with recipes and blends of Spanish wines with flavorings and sweeteners. By 1907, Torii had perfected his recipe and launched the first Japanese-style wine, which he called Akadama Port Wine.

Torii began contracting with wholesalers to distribute his wine. He also exhibited a flair for marketing, becoming one of the first in Japan to employ Western advertising and marketing techniques. In another skillful move, Torii adopted wine marketing techniques from France as well, such as transforming the decasking of the year's wine into a media event. In 1910, Torii began touting the Kotobukiya company's wines for their medicinal virtues as well.

The success of Akadama led Torii to guide Kotobukiya into a wider array of products, such as black tea, curry powder and other spices, soy sauce, and even toothpaste. The company also began brewing beer. By the 1920s, however, Torii had found a new target for his ambitions: the production of Japan's first whiskey.

While Torii himself had developed a taste for Scotch whiskey, he remained a rarity among Japanese consumers. Torii's interest in establishing his own distillery—and developing a whiskey that would be acceptable for Japanese drinkers—came in 1920. In that year, Masataka Taketsuru, who had been sent to Scotland by one of Torii's competitors to study Scotch whiskey-making techniques, returned to Japan after a two-year stay. Taketsuru initially intended to build his own distillery but was unable to do so due to the poor economic climate of the time. Instead, Taketsuru went to work for the Kotobukiya company, applying his technical knowledge to Torii's plans to build a distillery.

Taketsuru initially proposed building the distillery in Hokkaido, which had a terrain and climate similar to that of Scotland. Torii, however, saw more potential in establishing the distillery in Yamazaki, situated between the major Kyoto and Osaka markets. The Yamazaki site nonetheless benefited from its extremely pure well water.

The Yamazaki distillery started production in 1923 and Torii and Taketsuru began work on perfecting a whiskey blend suitable to Japanese drinking habits. Among other features, the pair sought a whiskey capable of maintaining its flavor when mixed with water, satisfying the Japanese preference for drinking during meals. This style of whiskey became known as Mizuwari, literally "water cut" whiskey.

Kotobukiya's first whiskey debuted in 1929. Known as Suntory Shirofuda, the whiskey initiated the Suntory brand. The whiskey, considered Japan's first domestic-produced whiskey, later became known as Suntory White. Yet the first whiskey was reputedly more akin to "firewater" than the Scotch whiskies it sought to emulate. Torii and Taketsuru continued work, seeking a flavor closer to their Scotch inspiration.

Building the Postwar Whiskey Culture

Taketsuru left Kotobukiya in 1934 in order to found his own distillery, in the town of Yoichi, on the island of Hokkaido, considered by Taketsuru to resemble more closely the climate of the Scottish Highlands. Taketsuru's company, which later became known as the Nikka Whiskey Company (and still later became part of the Asahi Brewing empire), developed into a major Japanese whiskey maker in its own right.

In the meantime, Torii persevered with developing a new blended whiskey through the 1930s. During that decade, Torii decided to focus the company's efforts solely on its alcoholic beverage production, shutting down its general foods business. The difficulty in obtaining foreign wine imports during the Depression Era and the Spanish Civil War in the 1930s encouraged Torii to branch out into a new area, however: that of the production of a domestic Japanese wine. Torii began planting a vineyard in Yamanashi, near Mt. Fuji, founding the Suntory Tomi-no-Oka Winery in 1936. Using French grape varieties such as Cabernet Sauvignon and Chardonnay, Torii developed a domestic version of the Akadama sweet wine, as well as a number of other wine varieties.

The year 1937, however, marked what many consider as the beginning of the great Japanese whiskey culture—destined to become the world's second largest whiskey market. In that year, Kotobukiya released a new whiskey blend, dubbed Kakubin. Considered Japan's first authentic "Scotch" whiskey, the blend was highly successful and launched the Suntory brand as the country's leader.

Torii continued developing new blends, launching "Old" in 1940. Production became more difficult during World War II, especially as Torii refused to use substitute ingredients, such as artificial sweeteners for the company's sweetened wine. Torii's commitment to quality also was evident in the company's research and development efforts. Through the 1930s and into the 1940s, the company installed onsite laboratories, which grew into a dedicated research and development center in 1943.

Rebuilding the company and its market following World War II, Torii was joined by son Keizo Saji. Born in 1919, Saji had studied chemistry at Osaka University before joining Kotobukiya in 1945, where he became the chief architect of the group's later diversification and growth into Japan's dominant whiskey group.

Through the reconstruction effort of the 1950s, Kotobukiya developed strongly, in part because of the presence of U.S. troops in Japan. The company also continued to develop unique advertising campaigns, such as the début of a "literary" campaign featuring texts from known Japanese writers.

Company Perspectives:

The Corporate Mark "Hibiki" (i.e., resonance) symbolizes our three aspirations: To have resonance and affinity with our customers around the world; For every Suntory employee to show individuality while resonating with each other; For our businesses to shine and resonate in the global expansion.

An important factor in the company's continued growth was the rise of the so-called "salaryman" group. Shouldering the burden of rebuilding the country's economy and dedicated to raising Japan into the top ranks of the world's economy, the salaryman became synonymous with whiskey drinking. Suntory whiskey quickly became the salaryman's whiskey of choice. This was in large part because of the launch of a new bar concept, devised by Keizo Saji, called Torys. Launched in the 1950s, the Torys chain became a national phenomenon, with more than 1,500 bars in operation at its peak.

Global Group in the New Century

Keizo Saji took over as president of the company, renamed as Suntory Ltd., in 1961. At that time, the company's sales represented the equivalent of some $100 million. The company by then had become interested in extending its operations into other beverage categories, a move begun in 1963 with a return to beer brewing for the first time since the 1930s.

Suntory initially brewed heat-treated beer, which then commanded the largest share of the Japanese beer-drinking market. In 1968, however, the company launched its first draft beer, a style of beer that soon imposed itself as a major part of the domestic beer market. The company's Penguin Boy and other beer brands ultimately enabled it to capture a 10 percent share of the Japanese beer market.

Suntory continued to develop and diversify its portfolio during the 1970s. The company began acting as a distributor for foreign brands into the heavily restricted Japanese market in the early 1970s, starting with an agreement to import the whiskey portfolio of the United States' Brown-Forman in 1970. In this way, Suntory was able to capture a still larger share of the domestic whiskey market. Nonetheless, Suntory's own brands remained dominant—in part because of the high tariffs placed on whiskey imports.

The growth in demand for Suntory's whiskey led the company to build a new distillery in Hakushu in 1973. To these the company added a third distillery, also located in Hakushu but called Hakushu Higashi ("West"), which began developing its own distinctive single-malt and blended whiskeys. Hakushu Higashi originally operated as a separate entity. During the 1990s, however, the company combined the two distilleries into a single operation.

In the meantime, Suntory had begun to make inroads on the global market. Part of the group's efforts was inspired by a slowdown in the domestic whiskey market, as the salaryman culture began to be hit by the country's growing economic difficulties. Suntory's globalization effort was coupled with continued diversification. In the United States, for example, the company launched Pepcom Industries, which, later replaced by the joint venture Pepsi Bottling Ventures, grew into one of PepsiCo's major bottling partners.

In 1984, Suntory entered China, forming the joint venture China Jiangsu Suntory Foods Co. Ltd. to produce beer for that market. That company soon captured a major share of the Jiangsu market. In 1995, the company moved into Shanghai, forming Suntory Brewing (Shanghai) Co. Ltd. The company's Suntory Beer became that market's top-selling beer brand by the end of the decade.

Suntory's expansion effort—the privately held company returned as much as one-third of its profits to new investments each year—took it to France, where it bought up Medoc-region's Chateau Lagrange, and entered partnerships to manage a number of other wine chateaus, including Bordeaux's Chateau Beychevelle. The company also bought a California vineyard, Chateau St. Jean, in 1984, and later turned to Germany, buying Weingut Robert Weil, based in Rheingau.

Suntory's diversification continued through the 1990s. The company launched its own international chain of Japanese restaurants, opening restaurants throughout the Asian region. In 1992, the company formed a joint venture to introduce the Subway fast-food chain into Japan. In that year, also, Suntory created its Consumer Health Products division, which was supplemented by the group's Health Food Division in 1999, and the Suntory Institute for Health Care Science in 2001.

Other diversified company interests included the launch of a publishing business, starting with a Japanese version of the Encyclopedia Britannica in 1986, followed by Japanese-language versions of Newsweek and France's Figaro ; Tipness, a 32-branch chain of health clubs, launched in 1987; the MacGregor Golf Japan manufacturing franchise; and the launch of a biotechnology division concentrated on the development of new flower varieties. Among the company's successes in that field are the Surfinia petunia, introduced in 1989, and, backed by its acquisition of Australia's Florigene Pty. Ltd. starting in 1990, the début of the world's first successful blue rose. These diversified operations nonetheless remained a small part of the group's sales, dominated by its drinks operations.

Key Dates:

1899:: Shinjiro Torii founds a wine import business in Osaka, then begins developing a sweetened wine for the Japanese market.
1907:: The popular Akadama sweetened wine debuts.
1923:: The company builds a distillery in Yamazaki and begins developing a whiskey blend.
1929:: The company launches its first whiskey, Suntory Shirofuda.
1937:: The company launches the successful Suntory Kakubin, considered the first authentic Japanese whiskey.
1945:: Son Keizo Saji joins the company.
1950s:: The company develops the Torys bar chain, which grows into more than 1,500 bars.
1963:: The first Suntory beer is launched.
1968:: The first Suntory draft beer is launched.
1970:: The company enters into a distribution agreement to import Brown-Forman whiskey brands into Japan.
1973:: The company builds a second distillery in Hakushu.
1980:: The company forms the Pepcom bottler for PepsiCo in the United States.
1981:: The company builds a third distillery, also in Hakushu.
1984:: The company enters China, brewing beer through the China Jiangsu Suntory Foods Co. Ltd. joint venture.
1990:: The company begins acquisition of Florigene in Australia and begins development of "blue rose."
1995:: The company enters the Shanghai beer market with subsidiary Suntory Brewing (Shanghai) Co. Ltd.
2003:: Yamazaki 12-year-old single malt wins top prize at the International Spirits Challenge in London.
2004:: Suntory introduces the world's first successful blue rose.

Keizo Saji died in 1999, leaving his son Nobutada Saji in charge of the family-held company. Saji had built Suntory into one of the world's largest drinks companies, with sales of more than $12 billion at the end of 2003, and Japan's leading drinks group. The efforts of Keizo Saji and father Shinjiro Torii were crowned in 2003 when the company's 12-year-old Yamazaki single malt won the top prize at the International Spirits Challenge in London. Backed by this success, Suntory's thirst for growth remained strong as it moved into the new century.

Principal Subsidiaries

Cerebos Australia Ltd. (Australia); Cerebos Gregg's Ltd. (New Zealand); Cerebos Pacific Ltd. (Singapore); China Jiangsu Suntory Foods Co., Ltd.; Chiyoda Kogyo Co., Ltd.; Chugoku Pepsi-Cola Bottling K.K.; Country House., Inc. (Taiwan); Eastern Viva Co., Ltd.; Gold Knoll Ltd. (Hong Kong); Hokkaido Pepsi-Cola Bottling Co., Ltd.; Iwanohara Vineyard Co., Ltd.; Kanbaku Co., Ltd.; Kinki Pepsi-Cola Bottling K.K.; Minami Kyushu Pepsi-Cola Bottling K.K.; Morrison Bowmore Distillers, Ltd. (U.K.); Nihon Pepsi-Cola Bottling K.K.; Okinawa Pepsi-Cola Beverage K.K.; Princeville Corporation (U.S.A.); Shanghai Suntory-Maling Foods Co., Ltd. (China); Suncafé Ltd.; Sungrain, Ltd.; Sunlive, Ltd.; Suntory (AUST) Pty. Ltd. (Australia); Suntory (China) Holding Co., Ltd.; Suntory (Shanghai) Marketing Co., Ltd. (China); Suntory (Thailand) Ltd. (Thailand); Suntory Allied, Ltd.; Suntory Brewing (Kunshan) Co., Ltd. (China); Suntory Brewing (Shanghai) Co., Ltd. (China); Suntory Europe PLC (U.K.); Suntory Food Manufacturing Co., Ltd.; Suntory Foods, Ltd.; Suntory France S.A.S. (France); Suntory Guangzhou Foods LTD. (China); Suntory International Corp. (U.S.A.); Suntory Ltd. (France); Suntory Ltd. (Italy); Suntory Ltd. (China); Suntory Ltd. (Spain); Suntory Ltd. (Taiwan); Suntory Mexicana, S.A.De C.V. (México); Suntory Pharmaceutical, Inc. (U.S.A.); Suntory Water Group, Inc. (U.S.A.); Tokaj Hetszölö R.T. (Hungary); Touhoku Pepsi-Cola Bottling K.K.; Weingut Robert Weil (Germany).