Chapter 10. I Christen Thee Mercian Inc.

Chapter 10. I Christen Thee Mercian Inc.

New Digs and New PCs

Suzuki’s takeover and corporate make-over included moving offices to a newly constructed building located in the center of the Ginza district within walking distance of Japan’s flagship department stores, premier restaurants and hotels. By spring, staff was comfortably settled in the new environment and along with management from Ajinomoto and the press we attended the lavish inaugural reception. A larger-than-life color photograph of a starlet holding a glass of Mercian wine was draped over one side of the building.

Although the configuration of the office was altered, all of the divisions remained in the same room. Thankfully, employees were required to smoke in a separate tea room and I was no longer enveloped in a smoky haze. The meeting and reception rooms were well designed. The new wine tasting room proved to be a sound investment. Equipped with individual spittoons, the wine division assessed the quality of the wine samples sent by foreign producers, who approached Mercian for sales and distribution in Japan, and estimated the number of years the wine could be laid down before release within five years.

New IBM computers replaced the NEC computers. Evidently, the director of HR, without consulting Suzuki, had decided to replace all NEC with IBM. I learned several years later that the replacement signified that in the 1980s IBM, along with other subsidiaries of foreign multinationals, had placed large numbers of retired bureaucrats on their boards. IBM hired officials from MITI, MOF, the BOJ and the Science and Technology Agency. IBM Japan employed more retired senior bureaucrats than any domestic firm in order to ease entry into the information service business sector and to compete with MITI’s baby Fujitsu for a larger market share. The meeting and reception rooms were well-appointed.

No sooner had Sanraku moved office when I experienced a third earthquake, a sharp tremor which lasted an interminable two minutes. Everyone in the office dove for cover under their desks. To my colleagues’ dismay, in an attempt to calm everyone, I remained standing and jokingly declared “If we must die let’s die together!”


Name-change

Although Mercian was the second largest wine producer in Japan, consumers still regarded Suntory as the premier wine maker whose wine was considered to be superior. Suzuki was determined to hammer a new corporate name into the minds of consumers. In conjunction with moving corporate headquarters he initiated a corporate name-change.

In the spring of 1990 surveys were conducted throughout Japan on Mercian’s name recognition and Mercian’s corporate image. Ninety-nine percent of the 358 people surveyed recognized Sanraku as an old and traditional Japanese liquor producer and Suntory as the wine producer. Fifty-eight percent of 210 respondents were unaware that Sanraku produced wine and that Mercian was a part of Sanraku. Suzuki felt that because Mercian already had name recognition, creating an entirely new name would confuse consumers and was convinced that if the Mercian brand was to vie for top position in the wine market, the Sanraku corporate name would have to be Mercian. In June, Suzuki announced at a press conference that Sanraku would henceforth be known as Mercian Inc.

Nevertheless, the survey sample was not large enough to allow a solid assessment of the name-change and senior executives were concerned that the name “Mercian” would have a negative connotation among wine consumers (due to the name-change Sanraku will henceforth be referred to as Mercian).


All that Glitters is Not Gold

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I spent the weekends wandering around Tokyo and environs to observe with wonder at a nouveau riche society. During the twelve years I had been away Tokyo had become a capital of opulence, reminiscent of the Roaring Twenties and the 1929 stock market crash. There were new office buildings and four star hotels operated by large Japanese retailers and real estate developers, a telling sign that the economy was overheated.

Tokyo and the large metropoles did not represent the economic conditions in other cities, especially those in regions that were distant from the capital and in the agricultural prefectures. Foreigners who visited the larger cities and towns either on business or on holiday saw the glitter and assumed that the Japanese had achieved astounding success economically and that the Japan Inc. model was infallible. The general consensus among the Japanese who were receiving large year-end bonuses was that they were enveloped in an era of prosperity.

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Shoppers waited patiently in long queues at the Fouchant Bakery in Takashimaya to buy one loaf of French bread. Although I knew that taking photos in department stores was taboo, I used my foreign face to quickly snap photos of the phenomenon before being cautioned by security guards.

Japanese designers to promote their brands as synonymous with imported luxury brands priced their apparel at approximately the same level as their foreign competitors. Michelin Star French restaurants and Italian bistros suggested an economy that was vibrant and expanding. Maxim’s was a place to be seen with corporate clients. The streets were dotted with foreign fashion and jewellery boutiques, elegant Japanese stationery shops, home-ware shops and Japanese traditional cake shops which also sold selections of French and German freshly baked goods to compete with the French and German patisseries. Some of the stores sported marble floors and pillared interiors and Japanese queued in front of the counters of famous Japanese bakeries to purchase newly released pastries, which could be equally as expensive.

My forays to the large department store food halls to observe consumer buying patterns proved to be a gastronomic adventure as well because each stall served samples of their foods, which invited serial grazing from Japanese shoppers, including myself. I soon dismissed lunch in the commissary to enjoy the samples of cakes, traditional sweets and the regional foods. It was a welcomed hour’s break.

Supermarket shelves displayed almost everything that a Japanese housewife could wish for, including domestic cheeses and butter from Hokkaido produced by Trappist monks. There was Kobe beef for a price, New Zealand and Australian lamb and a bit of US beef. Domestic companies were also copying foreign brands but these products were also sold at premium prices.

New products displayed on shelves for only three months were removed if sales were slow and replaced with new products. I was interviewed for the first issue of a youth- oriented magazine Hey Tom! It appeared on newsstands only once to be discontinued because the number of subscriptions and sales were considered to be too low.

The Toto corporate showroom located in Omotesando an exclusive shopping district in Tokyo was illustrative of the bubble economy. Toto had developed from a manufacturer of utilitarian toilets to a designer-manufacturer of toilets and bathrooms that were fit for emperors and Sultans. The showroom was a display of decadence, providing visitors a brief respite from the tedium of the workplace. The toilets were covered with gold and silver-leaf.  Some of the toilet lids were embossed with semi-precious stones and the baths were inlaid with intricate ceramic tiles.


Over-kill: the beer boom

The research and development of new products and marketing strategies by the domestic food and beverage industries were indicative of the economic environment during the 1980s. There was intense competition between domestic producers for a piece of the domestic market and producers, sparing no expense, went to extremes to carve out a niche in the already crowded arena.

Besides sake, beer has been the beverage of choice among the majority of Japanese males since German beer brewers entered Japan during the Meiji Restoration to teach the Japanese beer brewing. Traditionally, a meal commenced with a glass of beer.

The big four beer brewers, Kirin, Asahi, Sapporo and Suntory were engaged in an ongoing struggle to dominate the beer market. Their strategies encompassed not only a wide range of promotional activities but also the continuous launch of new brands. Due to low interest rates competition became more heated in the late 1980s and early 1990s. In 1982, costs for advertising and promotion had been approximately $350 million. By 1991, these expenditures had jumped to $1 billion.

In 1987 when Asahi Beer launched its smash hit “Super Dry” Kirin, Sapporo and Suntory countered by courting both male and female consumers through newly constructed beer halls. Sapporo’s Bavarian style Sapporo Lion had been a popular after-hours gathering place for many years. Sapporo’s new establishments were giant beer hall/restaurants which were creative versions of the traditional beer hall and where patrons could escape from the pressures of the workplace, eat reasonably priced food, and drink Sapporo Black Label. While promoting the producers’ beers, the halls simultaneously promoted beer as a perennial beverage.

Kirin and Suntory opened beer halls near Osaka’s main train station. The Kirin Lager Jungle-da was a cavernous 21,000 square feet and seated 600 patrons who could meander through a tropical rain forest and cross rushing streams over rustic bridges. Customers enjoyed listening to a live band while eating a variety of cuisines and drinking the house specialty, Kirin Lager. Kirin also opened a huge complex in Nagasaki which was modelled after a Dutch village. Its Beer Village in Yokohama sported a mini-beer museum, a video library, a beer-tasting corner, a restaurant where eleven kinds of beer were served and two garden areas. The public could tour the plant to see how the beer was brewed.

Kirin introduced a new service enabling customers to order draft beer through their local liquor stores which was then delivered directly to them within three days. During 1986–91, the four companies had collectively released sixty brands which served not only to confuse consumers but to overcrowd the market. Producers eliminated many of the brands after only a few years on the market.


Overkill: Chocolate Madness

I was content with the confections that I had enjoyed in the late sixties but by the 1980s the confectionery industry was releasing a host of reduced sugar (but chocolate-covered) products onto the market, targeting the new breed of consumer – the young, single, working woman. Japan’s economy, continuing its expansion, created better job opportunities and rising salaries. However, in order to avoid the burden of paying notoriously high rents, many young people opted to remain at home with their parents, taking advantage of free room and board. Their disposable income was spent primarily on clothing, cosmetics and comestibles. The confectionery industry wooed women with ad campaigns, innovative packaging, test marketing and sampling at supermarkets and department stores. Marketers used mass media effectively with television personalities promoting the products.

If products failed to receive quick acceptance, they were pulled from the shelves and replaced with new products such as chocolate-covered pickled white radish. In the 1980s Lotte marketed single-servings of chocolate ice cream wrapped in gold kimono-like covers. Meiji marketed “Fresh,” a milk chocolate bar. The Belgian chocolate manufacturer Godiva gained entry to the market by introducing solid chocolate golf balls to Japanese golfers.


Home Alone: TV Adverts Entertain

I usually returned home by 8pm, too tired to do anything else but eat dinner and watch television adverts, which were my chief source of evening entertainment. The adverts were often better than the programs and I would switch between channels to catch as many ads as possible. Two favourites were for a canned coffee sold hot at vending machines and “American Legend, My Mind Levi’s.” I could not foresee that this penchant for watching adverts would prove to be beneficial in my future employment.

When I was in Japan in the 1970s, Levis were a rarity. When I returned in 1988 Levi 501 jeans had become a fashion statement. I was particularly interested in Levi’s entrance into the Japanese market because of my personal friendship with members of the Haas family who own Levi Strauss Inc., a San Francisco company. Two daughters of the former CEO and Chairman, Walter Hass Jr. were students in my middle and high school and two cousins were close friends. The Haas Foundation is well-known for its support of numerous causes, an example of which is the large contribution to the University of California Business School renamed Haas School of Business in memory of Walter Haas Sr. who graduated with a degree in 1907 and who founded Levi Strauss.

Bob Haas, who was the CEO in 1988 and his wife were enamored with Japanese art and antiques and collected many objects for their home. Their interest began in the late 1960s when Levi Strauss was considering entry into Japan. It opened a sales office in 1971, Levi Strauss Ltd, and a distribution center near Tokyo in 1978. The innovative structuring of logistics and its distribution center in the early 1980s helped to achieve direct sales to retailers but it was not until the mid-1980s did Levi’s take off in Japan.

Levi Strauss had such a strong brand image in the United States that for many Americans, Levi’s was synonymous with jeans. Therefore, it could be assumed that Levi Strauss would be ahead of the game in any country where Levi’s were sold.  However, when the firm opened its Japan branch office, Levi Strauss Limited, in 1971 (predecessor to Levi Strauss Japan K.K., established in 1982), it found stiff competition from Japanese manufacturers, and it had to concentrate its efforts on establishing a strong brand image with which the Japanese consumer could identify, enabling them to differentiate Levi from other brands on the market.

A television advert also played a significant role in raising Levi’s profile in Japan and in other Asian markets. Japanese advertisers are so adept at creating a strong brand image without directly alluding to the product that, at times, it is difficult to differentiate between the two.  Where does illusion end and reality (the product) begin? A fine example of the use of this technique was the Levi Strauss Japan K.K. television ad campaign, “American Legend” which was launched in 1978. A Japanese young man in a white tee-shirt and Levis sits in a meditative state on a bench in a bare room. There is no sound.  Life-size photographs of famous Hollywood movie stars such as James Dean and Marilyn Monroe wearing Levi 501 jeans hang on the wall behind him. Captions in English run under the man’s figure reading: “My Mind James Dean” or “My Mind Marilyn Monroe” or “My Mind Clark Gable.”

Although I wore Levi’s, I purchased the hot canned coffee at vending machines situated on train platforms not to drink but to use as a hand warmer on those cold evenings waiting for a train.