Rising Sun Rising Sales

As the field of Japanese companies in Hawaii narrows, sales go up

August, 2004

“The worst is over,” says Masatoshi Muto, Consul General of Japan in Hawaii. This is his assessment of the outlook for Japanese-owned companies here.

While 2003 was actually a pretty good year for many Japanese companies doing business in Hawaii, there is no question that many of the visitor-related ones felt the pain of the sharp decline in Japanese visitors, which dipped again in early 2003. Muto says, “Hawaii has gone down in relative terms, as the favorite destination for Japanese tourists. The interest of Japanese companies in investing [in Hawaii] might not rise so quickly, but, at the same time, I’m not so pessimistic, because a lot of Japanese people, especially rich people, love Hawaii and it is these people who brought investment to Hawaii in the first place.”

However, Muto says that it is going to take time. He says, “I don’t think that Japanese investment will recover very quickly. First of all, there are a lot of companies that suffered a huge loss during the bubble period or after it, and they have the feeling that they lost a lot of money here. So, it’s hard to get over that feeling.”

It may be a cruel irony of globalization that the Japanese-owned company with the greatest percentage increase in sales, Nissan Motor Corp. in Hawaii Ltd., is being shut down by its Japanese parent to consolidate operations on the Mainland. The distributor’s Hawaii operations are on target to cease in March 2005, but that is not supposed to affect Hawaii Nissan dealers or customers.

Nissan Motor Corp. had a strong 3.4 percent increase in sales in 2003 over 2002, rising from $157.1 million to $209.6 million. President and chief executive officer Eric Miyasaki says, “Our decision to consolidate was more to maximize efficiencies of the operation within Nissan North America and it was not a reflection at all on our performance. We’ve gone through two record years in a row and we’re doing very well. It’s more a reflection of the global automotive competitive environment in our industry.”

However, Miyasaki is bullish on the future for Japanese companies in Hawaii. He says, “I think you might see a resurgence in the near future, because the Japanese economy is probably the strongest it’s been for at least a decade. With that coming back instead of a real estate bubble, there’s a real surge in Japan over the last 10 years or so, so more operating companies might come here and set up companies. Hopefully what happens is, with the Japanese economy and Hawaii’s economy, that there will be more opportunities for operating companies with headquarters in Japan, starting business and doing well in Hawaii.”

There’s no denying that quite a diverse group of Japanese businesses has already banked on Hawaii operations. Seven-Eleven Hawaii Inc. was another good performer.

The company had 2003 sales of $134 million, a 12.6 percent increase over the previous year’s sales of $119 million. Hawaii general manager and vice president Glenn Nagatori says they are projecting 2004 sales of $140 million, or a 4.5 percent increase.

He credits parent company Seven-Eleven Japan Co. Ltd. with providing support and systems such as the Warabeya commissary, which makes Seven-Eleven Hawaii’s bentos and other fresh foods, a distribution center located next to the commissary and a point of sale system that can tell you how well a particular item sold within a two-hour time span. However, Nagatori says the performance of Japanese businesses in Hawaii should not be connected to what’s happening with Japan’s economy and businesses. Nagatori says, “If a Hawaii business has working capital, a sound business model and plan and can satisfy its customers, the business should do well.”

The next time you walk into a Seven-Eleven intending to buy a snack, such as a spam musubi, and walk out with one of its custom bentos, the Hawaii company will have accomplished a couple of its goals: increasing the size of customer transactions and increasing the volume of its fresh-foods business.Japanese-owned businesses in Hawaii did quite well as whole. Average sales per company on this year’s list are $105.9 million, up from last year’s average sales per company of $95.3 million. Still, a handful, mostly with direct visitor-industry ties, slid along what is hoped to be the tail end of the Japanese visitor decline. Notice how the listing of top Japanese-owned companies (on pg. 135) has shrunk from 30 in 2003, to 25. Two of the companies from last year did not report current sales. Shinwa Golf Co. Ltd. sold off its assets. Trans Orbit Co. Ltd. and Interntional In-Flight Catering Co. Ltd. had sales below this year’s Top 250 minimum of $17.6 million. The perennial No. 2 Japanese-owned business in Hawaii, JTB Hawaii Inc., had the second-biggest percentage drop in sales of any company in the Top 250, down 38.8 percent to $236 million in 2003 from $380.4 million in 2002.

Takashi Sugi, vice president and general manager of JTB Hawaii Inc., says 2003 was a very tough year. However, he is optimistic. He says that demand from Japanese visitors is increasing and airlift capacity is being added. This is creating another problem for him in finding adequate inventory in Waikiki, which he says has been swallowed up by U.S. mainland visitors. It’s also good news that Japan’s economy appears to be recovering. However, Sugi says, the travel market lags about six months behind the economy. “We need another few months to catch up,” he says.

Currently, things are looking up, both in Hawaii and Japan. Some economists are predicting that Japan’s economy should grow by a solid 3 percent this year. Consul General Muto says he thinks the companies, which invested decently in Hawaii and have good local advisors, will do well. “Hawaii is a place where human relations are very important and if you want to do business here, you have to know the Hawaiian way of doing business,” he says.

Nissan’s Miyasaki agrees. “They will have to know the market and the people here and culture in order to do well. And that’s where a sound business plan and model come to play,” he says.

Nagatori, the first local general manager of Hawaii’s Seven-Eleven operations since it was acquired by Seven-Eleven Japan (SEJ) in 1990, says that expansion to the tune of at least two stores a year is on his horizon. He says, “I don’t know about what everybody else is going to be doing, but I guess SEJ has a lot of confidence in us and in Hawaii and they’re looking forward to helping us with the expansion.”

Muto adds that, in general, the decrease in the Japanese presence in Hawaii is over. He says, “I think it’s leveling off. In the future it may start to pick up, but, because of the sad experience that we lost all of the money here, that might affect it for a certain period. Japanese companies are starting to grow and we are starting to grow stronger. It’s just the start of the recovery. We have to wait a few more years to have a full recovery.”

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Kelli Abe-Trifonovich