Lion Corporation

1891–1973

Lion Corporation is Japan's biggest seller of toothpastes and a major producer of other toiletries and consumer items for household use. Three-quarters of its sales come from its health and beauty lines, including toothpaste, toothbrushes, mouthwash, and other oral care items, hair products such as shampoos and conditioners, laundry detergents and bleaches, household cleansers, and cooking aids such as plastic wrap and baking parchment. Lion's pharmaceutical division markets the aspirin brand Bufferin in Japan through a licensing agreement with drugmaker Bristol-Myers Squibb. The division also makes so-called "medical toiletries" designed to alleviate minor ailments. These products include foot compresses, a cooling compress for fevers, and a brand of eye drops, among others. Lion operates in several Asian countries outside of Japan, marketing unified brands throughout the region. Some of the company's manufacturing operations are based abroad, and the company also runs joint ventures with other firms in Asia. Lion also runs a joint venture with the German firm Henkel. Operated by the same family, the Kobayashis, throughout its entire history, the company has earned a prominent place in its domestic market, while maintaining successful overseas ventures.

19th-Century Roots

Kobayashi Tomijiro Shoten was founded in 1891 by Tomijiro Kobayashi, to produce soap. In 1902 Japan concluded an alliance with Great Britain, and just three years later, in 1905, Kobayashi first exported its products to the United Kingdom and the United States. In 1919 Kobayashi split into two entities. Lion Soap Co., Ltd. consisted of Kobayashi's soap division and T. Kobayashi & Co., Ltd. consisted of the remainder of Kobayashi Tomijiro Shoten, which at the time made tooth powders. The Kobayashi family retained control of both companies. In 1940 Lion Soap Company became Lion Fat & Oil Co., Ltd., reflecting a shift in its activities in conjunction with Japan's military buildup. T. Kobayashi became the Lion Dentifrice Co., Ltd. in 1949. During the first part of its history, both portions of the Kobayashi enterprise flourished. Starting in the 1960s, however, substantial changes were made in the operations of the companies.

Postwar Changes

In the mid-1960s Lion Fat & Oil found itself in heated competition with the Kao Soap Company, which, in Japan, held the lead in sales of synthetic detergents. With the generous use of public relations and advertising, Lion challenged that lead, accomplishing a strong rise in sales in the first half of 1968. Later that year, the company aggressively confronted Kao in its area of greatest strength, western Japan, by building a new plant in Sakai, Osaka. This new factory, capable of producing both powder and liquid detergents, increased Lion's production capacity by about 30 percent, from 14,500 tons to 19,000 tons monthly. Lion benefited from its substitution of petrochemical products for agricultural oils. The use of alcohol-rich petrochemicals enabled the company to cut production costs.

Lion's growth during this period was based on the development of new technology and the expansion of its foreign connections. By 1972 sales reached $27 million. In 1973 Lion Fat & Oil entered into a cooperative arrangement with Akzo, a Dutch chemical company, with the expectation of benefiting its chemical and household products operations.

19th-Century Roots Kobayashi Tomijiro Shoten was founded in 1891 by Tomijiro Kobayashi, to produce soap.

1976–1989

By the mid-1970s Lion Dentifrice was running second to Kao in the field of toiletries, but the forecast was for sinking profits for the next term as a consequence of rising costs for raw materials and stiff competition, from Japanese companies and from U.S. giant Procter & Gamble, which had recently entered the market in a joint venture with another Japanese firm. Lion Dentrifice sales began to grow, however, in the first half of 1976, increasing 12 percent over the same period a year earlier. Demand for its traditional dental products increased, and sales of new lines, such as products for the eye and for hair, grew as well. Throughout this period, both Lion companies enjoyed strong financial positions and relative lack of debt.

Reorganization in the 1980s

By this time it was clear that separate corporate structures for Lion Fat & Oil and Lion Dentrifice were inefficient. Both companies faced intense competition, and they needed to control costs for high-volume, low-priced products. The similarity in the companies' names caused confusion among wholesalers and business partners. In late 1977 Lion executives announced that the two companies would merge into one, on an equal basis, with the aim of creating one sales force to market all Lion products. Facing a stagnant market and subject to cutthroat competition, Lion leaders expected the reunited company, with a solidified corporate image, to expand in old areas, initiate new products, and enter into new markets.

In 1978 Lion Products Co., Ltd. was created, and in 1980 this sales organization joined with the two older Lion companies to form Lion Corporation. The newly unified company moved to increase the efficiency of its product distribution by implementing a retail information system for its wholesalers, which in turn led to the 1985 creation of a management company for the entire toiletries industry.

Throughout the 1980s Lion continued its research-and-development activities, leading to new products that were keyed to new niches in a crowded market. Responding to environmental concerns, the company marketed Top, a nonphosphorous detergent, in 1980. In 1981 the company introduced Clinica, a plaque-fighting toothpaste that used enzymes to clean the teeth. Other new products, such as Look bathroom cleaner and Soft in 1, a combination shampoo and rinse, made strong contributions to the company's sales for the late 1980s.

In 1983 Lion laid out its goals for the next eight years, in a program designed to coincide with the arrival of the company's centennial. The campaign involved strengthening existing fields, improving global business, and exploiting new business sectors. To facilitate the plan, a companywide restructuring was implemented. In an attempt to meet these goals, Lion developed new techniques in production and distribution. In conjunction with Akzo the company had finished construction of a plant for the refinement of raw materials in 1981 that used a new, low-pressure process to produce ingredients for household detergents. In 1983 in an effort to reduce production costs, essential in an industry where retail price-slashing was rampant and profit margins were low, Lion installed computer surveillance of the manufacturing process in its Kawasaki plant as a test, and ultimately scheduled controlled production to be implemented in all seven of the company's plants by 1989.

1986–1990

Expanding Markets and Product Lines: Late 1980s and Early 1990s

Throughout the 1980s the company continued to work with foreign partners. In conjunction with Henkel, of Düsseldorf, Lion operated joint ventures in Taiwan, Hong Kong, and Germany as well as in Japan. In 1987 the company entered into a joint venture with the U.S. firm S.C. Johnson & Son to buy the previously unprofitable line of plaque-fighting dental products, Check-Up. S.C. Johnson already was marketing Lion's Zact toothpaste for smokers in the United States. In June 1989 the company bought out S.C. Johnson's 50 percent interest in Rydelle-Lion to form a wholly owned subsidiary, Lion Corporation (America), in an effort to establish a base for further entries into the U.S. oral-care and hair-care markets. Lion subsequently turned over the marketing of its Zact and Check-Up products to Schering-Plough, another U.S. firm, under a licensing agreement.

In July 1989 Lion announced a joint venture with Akzo and two other entities to build a plant for the production of silica in Map Ta Phud, Thailand. Lion further expanded its Thai operations later that year, when it announced plans to build another plant in Rayong, Thailand, with five other partners for the production of a chemical used to make detergents. Construction of the plant, with economic incentives granted by the Thai government, began in May 1990. This overseas expansion, though aggressive, was not enough to prevent a 1988 decline in Lion's sales and profits. Although by this time 10 percent of the company's sales came from outside Japan, "we are a little bit behind our main competitors in Japan in globalizing our operations," a Lion representative admitted to Advertising Age on October 2, 1989.

Lion lagged behind its competitors in introducing a compact, highly concentrated detergent, a big market-winner in crowded Japan, where smaller is inevitably better. It was not until 1989 that Lion introduced Hi-Top, its compact product with fat-dissolving enzymes, in answer to Kao's Attack. Attack had enabled Kao to grab better than half the detergent market when it hit the stores in 1987. In 1990 compact detergents made up 70 percent of the Japanese detergent market, with Lion's overall share rising to around 25 percent after the introduction of its compact product.

Lion's development of new products was not without problems, however. In mid-1989 the Health and Welfare Ministry of Japan closed a Lion factory after discovering that the company in 1986 had misrepresented certain qualities of its Pentadecan hair-growth product while attempting to get it approved. As a penalty, the company was forced to withdraw Pentadecan, the market leader, from Japanese and Southeast Asian distribution and to cease the manufacture for 20 days of all products made by the same division, a move that cost Lion $14 million. More important, the resulting negative publicity damaged the company's reputation, leading to fears about its overall image and sales.

Given these factors, it became clear by the end of 1989 that the company would not meet its goals on schedule. Shaken by its failure to beat Kao to market with an innovative compact detergent and facing a detergent price war and an overall lower market share, Lion set out to shore up profits by the end of 1989 by holding prices firm on its other products. In addition, the company planned to open a new fat-and-oil plant in Kagawa Prefecture, enabling it to launch a new product to vanquish Kao's lead.

1990–2002

Faced with a very competitive and maturing market for household products in Japan, Lion increasingly turned to overseas sales. The company's nondomestic sales grew 7 percent over 1990, while sales at home dipped slightly. Lion emphasized this good news, and worked on reorganizing its overseas marketing, dividing its main Asian market into three regions. Lion set up new joint ventures in Thailand, Indonesia, and Malaysia that year, and entered what it termed a "technological collaboration" with a Korean firm as well. Yet market conditions remained difficult, particularly in Japan itself. In 1991 Lion embarked on another three-year plan, this time to make its management structure more efficient. The company reduced its number of products from almost 500 to 422, and scheduled fewer new products for introduction. Although the company had a vast array of goods on store shelves, it had a core list of 37 longstanding products that accounted for about 70 percent of sales. Lion hoped to hold on to its lead with these well-known items and reduce inventory in its more marginal product lines.

Difficult Conditions in the Late 1990s and After

By the mid-1990s, Lion Corporation's sales were still flat. Japan's economy was in a long slump, and recovery always seemed just around the corner. Health and beauty products accounted for 77 percent of the company's sales by 1995, and the slowdown in Japanese consumer spending made growth quite difficult for Lion. The company posted a small uptick in domestic sales over 1995, only .4 percent, but the company's foreign subsidiaries and various joint ventures did better, with overall sales up more than 20 percent. Lion braced for continuing declines in its home market if the economy did not come back to life. The company made investments in information technology to make its operations more efficient, looked for other ways to cut costs, and concentrated on bringing out new products that would capture consumer attention. Lion ceased its operations in the United States in the mid-1990s, while continuing to build its relationship with the German firm Henkel. Henkel developed a highly concentrated tablet form laundry detergent for Lion, and the two companies cooperated in research and development, marketing, contract manufacturing, and other areas in their respective countries. But the Japanese economy continued to stagnate over the 1990s, and the Japanese consumer products market became locked in competition for what little growth remained. Lion had worked with more than 1,100 wholesalers to distribute its health and beauty products in the 1980s. By 1999, Lion's network had dropped to only 834. Domestic sales drooped, and rival companies cut away at Lion's hold. Lion had a longstanding agreement with U.S. drugmaker Bristol-Myers Squibb Company to sell Bufferin in Japan. The brand had held sway as the leading over-the-counter painkiller in Japan. But in 2000 Takeda Chemical Industries made an arrangement with another U.S. drug company, Johnson & Johnson, for the right to market its pain reliever Tylenol. Tylenol was the most widely used pain reliever in the world, and Takeda hoped to take the lead in the Japanese market within five years.

In 2001, the company reported another poor year, with sales falling more than 7 percent and Lion taking a loss. All of its main household product lines had flat or shrinking sales. Shampoos, toothpaste, laundry soap, and toothbrushes all did slightly worse or only held steady with figures from the year previous. Although Lion had some individual products that did well, the outlook was still poor. The company sold its tampon business in 2002 and shut down the Japanese plant that had manufactured this product. Lion predicted moderate sales growth of less than half of one percent for the following year. The company's long-term plan called for focusing renewed efforts on core brands and shedding areas in which it did not excel.