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EA-TOKYO SEMINAR SUMMARIES

"Environmental Edge Powering Towel Company Turnaround"
Mr. Motoi Tsubouchi, Ikeuchi Towel Co Ltd.

March 2005

IkeuchiTowel

Change or die.
This was the daunting challenge faced by Ikeuchi Towel Co., Ltd in the early 1990s as depicted by the company's Director Planning Manager Mr. Motoi Tsubouchi at the March 1 st , 2005 EA-Tokyo seminar.

Mirroring the plight of many Japanese companies in this recent era of rapid globalization, the Imabari, Shikoku-based towel manufacturer was confronted with a shrinking market at home and increased competition from abroad and needed tough decisions and firm management to stave off closure.

Staying Competitive, Staying Alive
Ever since the towel industry was introduced to Japan from England 150 years ago, the city of Imabari, the world's largest towel manufacturing center, has been the “Towel Capital Eof Japan. After president Mr. Keishi Ikeuchi's father founded the business in 1953, Ikeuchi Towel enjoyed a wild ride of postwar industry growth that in the early 1990s encompassed some 500 companies in the region. However, halfway through that decade, the brakes started going on the industry as increasing numbers of Imabari companies began shifting their manufacturing operations to China in an effort to slash costs.

Since then, more than 300 firms have gone to the wall. While the remaining 160 are struggling to survive in this highly competitive environment, many companies are being forced to reengineer production and revamp strategy to not only stay competitive, but simply to stay alive.

To paint a vivid picture of just how dramatically the industry has been turned on its head, it is worth noting that during the industry's peak period, 65% of towels used in Japan were manufactured in Imabari. Now, 70% of towels used in Japan are imported and the share of domestically-made towels is down to only 30% of which 20% are manufactured in Imabari.

Ikeuchi Towel's turnaround strategy is clearly unique and the proof is not only hidden in the radical product, but in the way the company has transformed manufacturing and sales operations.

So, what was Ikeuchi Towel's turnaround plan?
•  In 1993, while his competitors were cutting costs to stay competitive, Ikeuchi embarked on a high risk undertaking and invested E30 million to build one of the world's most advanced towel factories to manufacture product of the highest quality. The company then -
•  Began producing towels that met strict environmental standards, and acquired ISO certifications.
•  Scrutinized every aspect of towel production to minimize environmental impact and improve quality.
•  Switched the factory over to wind energy saving 20% in power costs.
•  Introduced I.T. systems and slashed the manufacturing cycle from 45 days to 28, saving on inventory costs.
•  Began direct marketing and opened direct sales channels to cut middlemen who were taking up to 75% of the profit.
•  Expanded into the American market.
•  Injected life, color and vitality into what was traditionally a staid and boring product.

“People have this idea that organic towels should be white and boring. Ebr> Many of the measures Ikeuchi Towels has taken go beyond the competitions' efforts and underscore the president's determination to raise the business to new heights.

“White used to be the only choice of color for organic towels, ETsubouchi says. “People have this idea that organic towels should be white and boring, but Ikeuchi thinks they should be fun, colorful and beautiful, so we now offer a range of 24 colors and make towels from organic cotton, silk, or Kamiiru (fiber made from Japanese paper). E

“We make available all the data about the chemicals used so customers can see they are safe and can feel secure that while having nice towels, they are also not harming the environment, Ehe says. “In addition, we ensure the dyes are the safest available. Even a child can put these towels in their mouths and it will be safe. E

To slash distribution costs and boost profitability, the 20-person company opened a store in Tokyo's upmarket Ginza district to enable them to sell directly to customers without having to go through a middle layer of distribution.

Not only that, but Ikeuchi Towels have attained world standards of certifications and were among the first towel companies in Imabari to do so. “It's easy to talk about doing environmentally good things and say ‘It's organic, so it's good,' but we go a step further and release all the data about our towels and obtain certification to prove they are organic, ETsubouchi says. “So we use numbers and data to sell what we are doing, rather than just impart fuzzy images. E

Going Global
In 2001, Ikeuchi became interested in taking on the global market and began exhibiting at trade shows in the U.S. and in particular, a large trade show called the New York Home Textiles Show in 2002.

“At the show, we thought maybe Americans might not like our towels and that our product may not be well received, ETsubouchi recalls. “When we visited America, I thought that doing business there would be very difficult. The issues of pricing, money and receiving checks and other issues made it all seem very formidable. So we were amazed when we won the Grand Prize Best in Show among all the other products - it was like winning the lottery! This was the first time a Japanese company has ever won this award. E

The publicity paid off and within only 24 months, Ikeuchi towels were on sale in 50 specialty stores in the U.S., 20 in Paris and London, and they even had a mention in the New York Times .

“Our image of the American market is that it is a very mature market containing many high-end stores serving specialized niches and high-end needs and within that market we are happy to have found a niche for ourselves in that space, ETsubouchi says.

Now, Ikeuchi Towels' improving business prospects and financial results demonstrate that the future for the turnaround towel company is no doubt far brighter ∁Eand comes in more colors - than it was a decade ago, thanks in no small part to Ikeuchi's gutsy entrepreneurial flair and environmental edge.

www.ikeuchitowel.com

Text: Jonathon Walsh

Jonathon Walsh is a professional Editor and Writer, and Director of Business Grow, an innovative company specializing in providing a wide range of top quality Editorial and Advertising services to Japanese and foreign organizations. He has written & self-published four books and had almost 200 articles published in nine different media in Japan.

For information about Corporate & Publicity Writing and Editing, Corporate Newsletters, Seminar Summaries, Translation and other valuable services, please contact: info@businessgrow.net

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