Ryoshoku Ltd. History

Company Perspectives:

Ryoshoku is Japan's largest wholesaler of packaged food products. It supplies those products to supermarkets, general retailers, convenience stores, and other outlets.

Key Dates:

1925:

Mitsubishi launches wholesale distribution of canned fish and related goods.

1979:

Mitsubishi merges its four regional wholesale food distribution companies into a single unit, Ryoshoku.

1981:

Ryoshoku reorganizes its operations into a new RKG regional distribution network.

1982:

The Tomas total management IT system is launched.

1986:

Distribution of alcoholic beverages begins.

1988:

Branch offices are opened in Sapporo, Sendai, and Hiroshima.

1990:

The company launches the DREAMS long-term strategy, shifting focus from food producers to food retailers; the first RDC opens.

1993:

The company wins the distribution contract for Sotetsu Rosen.

1995:

The company is listed on the Tokyo Stock Exchange secondary board; dedicated confectionery distribution subsidiary Ryoka Japan is launched; a stake in alcoholic beverage distributor Saitama-ken is acquired.

1997:

The New Tomas IT system is launched.

2000:

A stake in alcoholic beverages distributor Nakaizumi is acquired.

2001:

Full control of Saitama-ken, renamed as Ryoshoku Liquor, is acquired.

2002:

Saihara, based in western Japan, is acquired.

2004:

The company announces an OTC distribution agreement with Kobayashi Pharmaceutical.

Company History:

Ryoshoku Ltd. is Japan's second largest wholesale distribution group. A subsidiary of the Mitsubishi Corporation, which holds more than 50 percent of the company, Ryoshoku operates more than 150 distribution and logistics centers throughout Japan, as well as a number of RKG branded cash-and-carry stores. Ryoshoku has traditionally focused the majority of its business on the processed foods sector, which continues to account for more than half of the group's revenues each year. In the 2000s, however, Ryoshoku had made an effort to step up its business in the beverage distribution sector, including beer and other alcohol. By the mid-2000s, this sector accounted for some 25 percent of Ryoshoku's business. The company also has begun to carry over-the-counter drugs in a partnership with pharmaceutical group Kobayashi. In another expansion move into the middle of the decade, Ryoshoku has been solidifying its presence in western Japan, notably through the acquisition of Saihara, a food wholesaler that also has a strong business in beverage distribution. Listed on the Tokyo Stock Exchange, Ryoshoku posts annual sales of more than ¥1.3 trillion ($12 billion). The company is led by Masaharu Goto, chairman of the board, and Tadashi Hirota, president and CEO.

Merger Origins in the 1970s

From the start, Ryoshoku was closely associated with Japan's highly diversified Mitsubishi Corporation, which launched its own food processing operations in the early part of the 20th century. In support of this business, Mitsubishi also entered the food wholesaling market, establishing four regional wholesaling companies, Hokuyo Shoji, Nodaki Shoji, and Shinbushi Shoji in Tokyo and Osaka, in 1925. The Mitsubishi companies focused especially on the distribution of canned seafood and water chestnuts products; the market for other processed foods remained relatively limited in Japan until as late as the 1970s.

Changing food consumption patterns and shifts in consumer shopping trends led Mitsubishi to begin integrating its wholesaling operations at the end of the 1970s. Japan's retail food market traditionally had been dominated by many thousands of small grocery shops. The multitude of these stores, which required a high degree of personalized contact for suppliers, led to the development of a complex and highly inefficient multi-tiered wholesaler model, with a number of large-scale wholesalers, served by an army of small-scale wholesalers, placed several layers between supplier and consumer. The rise of the supermarket in Japan in the 1960s and 1970s, however, brought about a shift not only in consumer shopping habits, but also in the wholesale market. A number of larger regionally and nationally operating retail chains emerged, creating a need for a more limited number of larger and more diversified wholesalers.

In 1979, Mitsubishi decided to merge its four regional wholesalers into a single company, called Ryoshoku Ltd. Integrating the four companies, which each had developed its own corporate culture during the previous decades, proved difficult, and required some years before a single, unified Ryoshoku truly emerged. A major step in that direction came, however, with the company's implementation of its first computer-controlled logistics network, dubbed Tomas, for Total Management System, launched in 1982. In the meantime, Ryoshoku also was faced with difficult market conditions stemming from the economic downturn provoked by the oil crisis in the 1970s.

From the start, Ryoshoku was set up as an independently operating company. On the one hand, Ryoshoku benefited from the confidence inspired in customers by the Mitsubishi name; on the other hand, acting as an independent entity under its own name allowed Ryoshoku to build a closer relationship with its customers. At the outset, the company's own distribution remained rather limited, focusing on canned water chestnuts and canned seafood. Yet Ryoshoku soon began to add other products to its line.

Ryoshoku continued seeking to integrate its operations on a national level. In 1981, the company established RKG, regrouping its regional wholesale operations into a network of large-scale wholesale outlets. The strength of the RKG chain, which also helped to reduce cultural differences among the original Ryoshoku players, enabled Ryoshoku to build its streamlined distribution network into a national operation by the end of the 1980s.

Ryoshoku began expanding its range of goods through the 1980s as well. In 1986, for example, the company received a license to import and distribute alcoholic beverages. The shifting pattern of Japanese food consumption behavior, from a traditional diet based on fresh foods to a diet heavily favoring processed foods, also encouraged Ryoshoku to add more product categories to its distribution operations. In addition, during the 1980s, Ryoshoku continued integrating its business, rolling out the Tomas system on a companywide level by 1988. In that year, the company also added new branch offices in Sapporo, Sendai, and Hiroshima, bringing its total to seven.

"DREAMing" in the 1990s

Through the 1980s, Ryoshoku's distribution operations remained focused on a centralized model based on the traditional so-called front distribution center (FDC). Yet distributing from a central facility proved inefficient as Japan's retail market changed. The emergence of large-scale supermarket groups had created a demand for shipments of cases and even pallets of processed foods, while the country's large number of small mom-and-pop groceries continued to require the supply of single products. The reliance on FDCs also meant that the company was required to invest in and maintain a number of large-scale, but underutilized facilities.

In 1990, Ryoshoku became one of the first in the wholesale sector to recognize this situation and act accordingly, setting up the first of its network of regional distribution centers (RDCs) in Okayama that year. The company's RDCs then took over the work of organizing shipments in cases or as single products, as required. In this way, Ryoshoku achieved far greater productivity, and at the same time reduced the need to invest in additional RDCs.

The creation of the RDC network marked a turning point for Ryoshoku and became a central component for the launch of the company's new long-term strategy, dubbed DREAMS. This new strategy provided a significant departure for the group and the wholesale distribution sector in general. Previously, wholesalers focused their attention on food producers, and the wholesale distribution model was oriented toward serving the needs of the suppliers. Yet under the DREAMS plan, Ryoshoku began a shift in focus that targeted its retailer, and ultimately the consumer, as its primary clientele. In this way, Ryoshoku began transforming its business from that of wholesaling to that of direct sales.

The DREAMS strategy was more specifically developed to enable Ryoshoku to respond more immediately to the requirements of the rapidly growing large- and medium-scale supermarket groups. In particular, the company sought to establish itself as a primary partner with these groups, if only to head off an increasing trend among the supermarket sector of dealing directly with producers. Ryoshoku positioned itself as a cost-efficient alternative, enabling the supermarket groups to avoid the high costs of establishing their own logistics and supply systems.

Ryoshoku scored a major advance in 1993 when it reached an agreement with midsized supermarket group Sotetsu Rosen to supply some 75 percent of the Kanagawa-based retailer's nonfrozen processed foods needs. The contract marked a first in the wholesaling market, and helped establish Ryoshoku as one of the sector's leaders. By 1994, Sotetsu Rosen and Ryoshoku had expanded their relationship to include frozen processed foods as well as candy and pastry.

Ryoshoku's success with Sotetsu Rosen enabled it to attract other customers, such as Daimaru Peacock. In 1993, that retailing group turned to Ryoshoku for its processed and frozen foods supply needs. The following year, Ryoshoku signed on another important client, when Sun-net Tohoku Consumers' Co-operative Union contracted the company for its processed foods, candy, and pastry products. The increase in these latter categories encouraged the company to set up dedicated distribution subsidiaries, such as Ryoku Japan, set up in 1995 to handle the group's confectionery distribution.

National Focus in the 2000s

To serve its growing client list, Ryoshoku expanded its RDC network, establishing new facilities in Kyushu, Tokai, and Hokuriku in 1994, followed by the opening of a site in Hokkaido in 1995. In that year, as well, the company went public, listing its stock on the Tokyo Stock Exchange's secondary board. Mitsubishi nonetheless remained the company's controlling shareholder, with more than 50 percent of its shares.

Ryoshoku deepened its interests in the distribution of alcoholic beverages with the purchase of a major stake in Saitama-ken Shurui Hanbai in 1996. The company achieved a new success in 1997, when York-Benimaru contracted with the company for its processed foods distribution needs. That contract marked Ryoshoku's entry into the wholesale toiletries distribution sector as well. Also in 1997, Ryoshoku rolled out its new total management IT system, called New Tomas, in development since 1995.

The launch of New Tomas coincided with the début of a new type of Ryoshoku distribution facility. As the number of its large-scale supermarket clients grew, the company had recognized the need to develop dedicated facilities. In 1997, Ryoshoku opened the first of its specialized distribution centers (SDCs) in order to provide dedicated facilities for individual large-scale retailer clients. By the early 2000s, Ryoshoku had opened some 45 SDCs around Japan.

Ryoshoku continued its push into the alcoholic beverage sector in the early 2000s. In order to overcome a number of restrictions in that market, notably the need for regional licenses, and the specific complexities of the country's alcoholic beverage market, Ryoshoku continued to seek out new acquisitions. In 2000, the company acquired a stake in Nakaizumi, based in Tokyo, the fifth largest alcoholic beverage wholesaler in the Tokyo and Shizuoka prefectures. The following year, Ryoshoku acquired full control of Saitama-ken Shurui Hanbai, which was renamed as Ryoshoku Liquor. By the middle of the decade, alcoholic beverage distribution accounted for nearly one-third of Ryoshoku's sales, and the company had emerged as the number two in the country in that area.

Ryoshoku finally achieved its ambition to transform itself into a major Japanese wholesaler group operating on a national level in 2002, when it acquired Saihara. Based in west Japan, Saihara not only boosted Ryoshoku's alcoholic beverage distribution division, it also established the company as a major distributor of a full range of goods to that region.

Ryoshoku adopted a new long-term strategy, Evolution21, to guide the company into the new century. Under the new strategy, the company continued to seek out new business opportunities. In the early 2000s, for example, the company began targeting the fast-growing convenience store market, signing up major clients such as 7-11. The company's position in this sector was strengthened when Mitsubishi became a major investor in rival convenience store group, Lawsons. Ryoshoku also had begun providing services to the restaurant industry, and in 2002 the company received a major contract to supply the Royal Co. restaurant chain. In another direction, Ryoshoku reached a cooperation agreement with chief rival Kokubu to set up a joint distribution company, Food Logistics Networks, serving as a link between food producers and food wholesalers.

The company also sought to expand its range of goods. In 2004, for example, Ryoshoku joined with parent Mitsubishi, reaching an agreement with Kobayashi Pharmaceutical to begin distributing the over-the-counter (OTC) products of its Kobashou subsidiaries. The agreement gave the company an entry into OTC drug distribution in the Tokyo, Kobe, Osaka, and Kyoto markets. With sales of more than ¥1.3 trillion ($12 billion) at the end of 2004, Ryoshoku claimed the number two position among Japan's wholesale market.

Principal Competitors: Kokubu & Co., Ltd.; Itochu-Shokuhin Company Ltd.; Kato Sangyo Company Ltd.; Arata Corporation; Yuasa Trading Company Ltd.; Meiji Seika Kaisha Ltd.; Kikkoman Corporation.

Further Reading:

• "Japan's Ryoshoku Buys into Osaka Liquor Company," AsiaPulse News, December 26, 2000.
• "Japan's Ryoshoku Interim Group Pretax Profit Seen Beating Projection," AsiaPulse, August 14, 2002.
• "Mitsubishi to Enter Wholesale Operations for Drug Products," Asia Pulse, March 23, 2004.
• "Royal, Ryoshoku Tie Up," Jiji, February 25, 2002.
• "Ryoshoku, Kokubu to Set Up Joint Distribution Venture," Japan Weekly Monitor, July 22, 2002.
• "Ryoshoku Planning Take-Out Salad Shops," Japan Food Service Journal, April 10, 2002.

Source: International Directory of Company Histories, Vol.72. St. James Press, 2005.

Read more company histories

• Ryan's Restaurant Group, Inc.
• Ryan Beck & Co., Inc.
• RWE GROUP
• S&C Electric Company
• S&K Famous Brands, Inc.
• S-K-I Limited