Even as anti-Japan rioters were busting the windows of Japanese stores and demolishing Japanese cars in Beijing and other cities in China in mid-September, young fathers in the subprovincial city of Xi’an were taking lessons in how to bathe their newborns with soap and lotion developed by Japanese baby products maker Pigeon Corp.
The sharp contrast was also visible in Wuxi, a city west of Shanghai, where young parents thronged to an event showcasing a new product lineup by Pigeon, the biggest maker in China in the field.
Although violent demonstrations, reignited by Tokyo’s nationalization of three Senkaku islets, threatened businesses of many Japanese companies in China, some firms like Pigeon were little harmed by the move, and for a reason.
“Our products are daily necessities, and there are no alternatives for mothers,” said Pigeon Managing Officer Tsutomu Matsunaga. “Not all the people who joined the riots have babies they have to take care of.”
The company’s sales in China for the February-October period rose 46.3 percent from the same period in 2011 to ¥10.3 billion, accounting for over half of its global sales of ¥19.4 billion.
Sales were little affected by boycotts or competition from other foreign brands, including Phillips Avent of Britain or Germany’s Nuk, he added.
The huge lineup — about 600 items, including baby bottles, shampoo, lotion and diapers — is popular among the wealthy in China, who value the high quality of the brand, he said.
“There are a total of 17 million newborn babies every year in China, which is 17 times as large as the number in Japan,” Matsunaga said. “We expect sales to grow further at least for another decade.”
However, makers of luxury goods, including automakers, were hit hard not only by the destruction but also by boycotts of their products.
Sales of major carmakers in China nearly halved in September and October.
The mischief in the Chinese cities motivated some makers — especially those already saddled with surging labor costs — to consider shifting their factories from a land laced with political risks to other growing markets.
According to a survey conducted in October and November by the Japan External Trade Organization, the number of Japanese companies that wanted to expand in China in the next couple of years slumped to 52.3 percent, down 14.5 points from the same period last year.
It was the sharpest fall among 20 Asian nations and regions in the survey.
Despite the political risks, however, many Japanese companies have no choice but to seek profits in China, the world’s biggest market, as the population at home steadily declines. And competition is heating up as other foreign rivals aggressively expand there.
“In fact, Chinese developers want us in shopping centers together with Uniqlo, Zara and H&M,” said Satoru Matsuzaki, managing director in charge of global operations at Ryohin Keikaku Co., known for its Muji brand, referring to competitors from Japan, Spain and Sweden.
But Matsuzaki added that China will remain the most important market for the maker of clothing, “zakka” goods (sundries) and furniture. There are plans to boost the number of outlets in China from 65 to 100 in 2013.
Masumi Mizuno, president of Mizuno Consultancy Holdings based in Hong Kong and Shanghai, said a company’s products will influence the decision of whether to pull out of China.
“If they just want to manufacture in China, and sell the products somewhere else, they want to go to other countries with low inflation and moderate infrastructure such as Cambodia,” said Mizuno. “If they want to produce value-added goods, they would go to Indonesia, Thailand or the Philippines.”
But if they want to sell daily necessities, they are here to stay, he said.
Those Japanese makers often succeed in China, where consumers are turning to Japanese products for safer food, drinks and other daily necessities, especially after a milk contamination scare in 2008, when suppliers were caught adding the chemical melamine to watered-down milk in China, he said.
And the trend is little affected by political tensions between the two neighboring countries.
“Chinese people have so much confidence in the safety of Japanese products,” Mizuno said.
For example, the world’s largest green tea maker, Ito En Ltd., announced on Dec. 3 that it was preparing to open a sales unit in China, encouraged by the growing demand for bottled sugarless green and jasmine tea in recent years.
The beverage maker also plans to triple local production to 3 million cases per year by March at the earliest.
“We have been preparing the plan since before the anti-Japan demonstrations,” said Ito En spokesman Akihisa Nakagawa. “Even after the riots, we didn’t hear any requests (from local stores) to remove our products from their shelves,” he said.
If a product is deemed safe and healthy, that helps to draw in Chinese consumers.
Yakult, a well-known lactobacillus-based beverage, is one of the most trusted drinks in China.
A run on the beverage overwhelmed production capacity in China in the past year, despite a brief halt in deliveries to supermarkets during the violent demonstrations in September.
The maker of the fermented milk drink, Yakult Honsha Co., plans to build a second plant in Guangzhou, to open next year, that will boost production capacity in the city as well in Shanghai and Tianjin to a total of 5.18 million bottles per day from the current 3.52 million.
The company will stay aggressive, with a plan to build six more sales centers in China by 2015, adding to the current 21.
“We will not adjust the plan, and it is more likely to speed up,” said Hiroshi Narita, the director in charge of international business at Yakult.
Since it launched in China in 2002, Yakult has cultivated customers with sales personnel called “Yakult ladies,” who educate consumers about the health benefits of the beverage.
Sales of daily necessities at Japanese retailers have remained strong in China, as consumers remain loyal to high-quality products and services.
Taking an innovative approach suited to local custom, convenience store chain Lawson Inc. started selling Japanese “oden,” a stewed dish, on skewers so customers can eat on the go, a common practice in China.
Lawson remains committed to its plan to boost the number of outlets to 10,000 by 2020.
“The Chinese government has suggested that the country needs 300,000 to 500,000 convenience stores in the future,” said Motonobu Miyake, who represents Lawson’s China business. “So I believe there will be more room for our expansion.”
Although these companies are cultivating other growth markets in Asia, including India and Indonesia, they are likely to remain focused for the time being on China, where a rapidly growing middle class can best boost their sales.
“At present, people buy our Muji products as if they were (luxury) brands like Gucci and Chanel. But if the level of their lives rises, they will be able to buy Muji as daily products,” Matsuzaki of Ryohin Keikaku said. “Since the population will keep on growing, we plan to continue opening new outlets in China.”
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