JAPAN PULP AND PAPER COMPANY LIMITED History

Company History:

Japan Pulp and Paper Company Limited (JP&P) is the largest Japanese pulp- and paper-trading company. It is 40%-owned by paper manufacturers and acts as a trading organization to procure raw materials and distribute finished products. When consignment sales carried out for clients are added to its own operations, it is the largest pulp- and paper-trading company in the world. Nonetheless, nearly all sales are domestic.

JP&P operates through a series of representative offices in Asia, North America, and South America; six subsidiaries in Asia, the United States, and Europe; and four non-Japanese Asian affiliates. During the early 1990s this network was beginning to explore export sales. Since Japanese paper companies can supply their own market with finished paper products yet rely on other nations to supply their raw materials, JP&P's overseas activities primarily involve trade rather than distribution.

Saburobei Nakai, a Meiji Restoration-era entrepreneur, set up Echigoya Saburobei Shoten, a private company, in 1845. Located in Kyoto, Echigoya Saburobei Shoten traded in traditional Japanese paper, or washi, an industry then controlled by trade guilds. The company was the first in Japan to sell machine-made paper in 1876 and expanded its distribution by creating a branch office in Osaka two years later.

Still a regional company, it formed a distribution agreement with Oji Paper Company in 1882. Such a business relationship was typical of prewar Japan. Before World War II, Oji Paper supplied 90% of the nation's paper. By 1889 Echigoya Saburobei Shoten had two more branches--in Tokyo and Nagoya--that intensified its presence throughout central Japan.

In 1916 the venture reorganized, became a limited company and was renamed Nakai Shoten Limited. That year it had sales of ¥2 million. During World War I, wartime demand created shortages that lasted through the 1940s of many raw materials. During this period Nakai Shoten slowed its geographic expansion. It was not until 1925, when the company established a branch office in Kyushu, that the company expanded again.

Following World War II, in 1947 the Allied powers permitted civilian trade to resume and Nakai Shoten set up a Sapporo branch office the following year. This office gave the company national distribution for the first time.

With the war's end began dramatic changes in the way Nakai Shoten did business. The Allied occupation government dismantled the zaibatsu, the banking and commercial organizations that had controlled much of Japanese industry before the war. Oji Paper, which Nakai Shoten served, was broken up into three smaller companies. These companies--Jujo Paper Company, Honshu Paper Company, and Oji--still retain partial ownership of Japan Pulp & Paper. JP&P also owns shares in Honshu, as well as other paper companies unaffiliated with the original Oji Paper group.

Most of the company's international activity had to do with the collection of raw materials to supply its manufacturers. During the postwar era the company increased its international presence but remained mainly a domestic company. In 1951 it established an export division, and by 1956 had representative offices in Hong Kong and Bangkok that acted as trading offices.

Contact with other Asian markets led to limited diversification. In 1958, seven years after its first international activity, the company began trading in plastic products. These plastics have been employed largely in packaging, and eventually in building materials.

In 1962 the company established a Sendai branch office--its second office north of Tokyo. The following year the company shortened its name to Nakai Limited.

In the late 1960s the company expanded beyond Asian markets and expanded the scope of products that it dealt with. In 1967 it opened a representative office in New York. The following year it began trading in pulp--a commodity necessary to papermakers. The company's trading in pulp ensured adequate supply and procurement at optimal price, and in 1968 sales reached ¥100 million for the first time.

During the 1970s the company centralized its organization, expanded its product line and made use of its burgeonning capital. In 1970 Nakai Limited merged with Fuji Yoshiten Company, another paper dealer. The new organization was named Japan Pulp and Paper Company Limited. The following year it completed the union by consolidating its national business with a unified wholesale network.

The company immediately began marketing construction materials and machinery for the paper industry and set up a representative office in Jakarta. Construction materials marketed by Japan Pulp and Paper then included more than plywood, particleboard, and other wood products, which are commonly associated with paper and forestry companies. The company sold concrete products for building foundations and interior finishing materials made of ceramics and plastic.

The company went public, listing on the Tokyo Stock Exchange's second section in 1972 to increase its flow of capital. JP&P took advantage of the cash influx and established its first European sales office, in Düsseldorf. It aggressively pursued this new market.

In 1973 JP&P transformed the new Düsseldorf office into its first subsidiary, Japan Pulp and Paper GmbH. Due to its growth the company was soon elevated to the first section of the Tokyo Stock Exchange.

The following year two more subsidiaries were created in its existing markets. In Seattle, Washington, the Japan Pulp and Paper (U.S.A.) Corporation was created, and in Hong Kong, Japan Pulp and Paper Co. (H.K.), Ltd. This latter venture incorporated the existing sales office. In only six years the company's sales had doubled to ¥200 million. By 1980 after another six years, sales jumped another ¥100 million.

Continually increasing its trading capacity, the company also upgraded its information network. In 1979 the company created the JP Information Center Co., Ltd., serving domestic paper companies. The following year information on the distribution of paper would be incorporated.

As the 1980s dawned, JP&P expanded its Asian presence into Beijing with a representative office. It also moved its U.S. subsidiary headquarters to Los Angeles, and closed its sales office in Seattle.

During the 1980s the company diversified into finished paper products and papermaking machines. Serious growth evaded the Japanese paper industry in the early- and mid-1980s. Although the Japanese paper industry later rebounded, JP&P diversified. In 1985 it ventured for the first time into real estate, creating JP Planning Co. Ltd. It complemented this subsidiary with JP Household Supply Co., Ltd.

Papers that accompany office technology saw significant growth in the 1980s. Electronic office automation through such tools as computers and fax machines greatly increased demand for certain paper grades. In 1982 JP&P intensified its pursuit of this growing market by selling automated office equipment in addition to the paper that the machines require. JP&P markets paper for photocopiers, facsimile machines, and computer printers, as well as business forms and carbonless papers. By trading in office equipment, JP&P tracks and keeps pace with changes in that market segment for paper products. Selling facsimile machines, for instance, identifies buyers for compatible papers.

During the 1980s Japanese industry spent more on advertising, leading to a publishing boom. The growth spurred JP&P's sales of newsprint, publication papers, plastics, and printing machinery. The company provides newsprint to five of the six largest newspapers in Japan. By the end of the 1980s, JP&P sold nearly 25% of the newsprint used in Japan. In addition, promotional materials like mass mailings and catalogs grew tremendously in Japan during the 1980s, which also served to increase paper demand. Coated papers for magazines also saw explosive growth. JP&P has significant access to suppliers of this product. Kanzaki Paper Manufacturing, which owns 6.2% of JP&P shares and has 3.3% of its shares owned by Oji, holds the largest domestic market share of coated papers. In addition, Jujo Paper, which owns 10.9% of JP&P, owns nearly 33%. of Nippon Kakoh Seishi, another major supplier of coated papers to the Japanese market.

By 1989 only 61.9% of JP&P's sales were of paper. Packaging received emphasis by Japanese consumer product manufacturers during the decade. By 1988 paperboard accounted for about 40% of the paper made in Japan. Other packaging grades available to the company include kraft paper, heavier grades of paperboard for boxes, and plastic materials for packaging.

In the late 1980s the company's subsidiaries carried out their own expansion. A second European office opened in 1986 in London. In 1988 the company opened Japan Pulp and Paper (SP) Pte. Ltd. in Singapore. By 1990 the company had two more U.S. sales offices, creating one in Atlanta, Georgia, and reopening one in Seattle.

In 1988 reflecting the company's domestic focus, JP&P went into debt to finance a 10,000-ton-capacity warehouse--strategically located near Tokyo's port of entry. JP&P owned 11 distribution companies and this new warehouse accounted for 10% of the company's storage capacity. Japanese investment in paper-production technology reached record highs during the late 1980s, and JP&P income growth kept pace with the national average.

JP&P serves paper manufacturers in more ways than simply through distribution. JP&P has marketed computer systems designed for paper wholesalers and sold them to more than 170 Japanese wholesalers between 1970 and 1989. The company planned to expand its computer software development. It also markets heavy equipment like industrial printing presses.

JP&P's role as the distribution leader in the Japanese paper industry is exemplified by its VAN system, begun in 1989. The on-line system coordinates information from ten other paper traders and makes ordering and distribution information available to customers. Such service capacities, and finance activities, will continue to be emphasized in the company's future.

Japan Pulp and Paper Company procures and supplies printing papers, paperboard, pulp and fiber, plastics, printing and papermaking machinery, and construction materials. The company imports raw materials in the form of paper for finishing, pulp, and wastepaper. It exports machinery, electronics, and paper. Nonetheless, exports are only about 10% of total sales. The Tokyo office controls the trading activities of six regional offices and information from more than 1,000 suppliers worldwide. During the late 1980s Japan started to import more paper. Asia and Oceania are likely to surpass Japan as producers of paper and paperboard, but JP&P is extremely active as a trader in its hemisphere.

Principal Subsidiaries: Japan Pulp and Paper Co., (H.K.) Ltd. (Hong Kong; Japan Pulp and Paper (SP) Pte. Ltd. (Singapore); Far East Paper Pte. Ltd. (Singapore); Japan Pulp and Paper (U.S.A.) Corp., Japan Pulp and Paper Gmbh (Germany).

Further Reading:

Japan Pulp and Paper Company Limited: Corporate Brochure, Tokyo, Japan Pulp and Paper Company Limited, 1991.

Source: International Directory of Company Histories, Vol. 4. St. James Press, 1991.

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