We sat down with Mr. Masayuki Mizuno, president and CEO of Nittai Kogyo to discuss their work to increase the usage of tiles in the Japanese construction industry. Our conversation covers the impact COVID-19 has had on Nittai Kogyo, as well as how tiles can be better utilized in the ever-growing trend of refurbishment and renovation in Japan.
Traders and wholesalers historically have a very important role in Japan. Given that 90% of employment is by small to medium sized enterprises who don't have the agency to import, export, and trade, what role does Nittai Kogyo play in the construction materials supply chain, both domestically and abroad?
We used to depend on a trading company for the import of goods, but now we have the capability to do all of that internally. Since we are a tile manufacturer, we know about the quality of tiles and we can determine what is appropriate for the Japanese market, and then procure the item and sell it domestically.
In terms of exporting, we haven’t done much recently. Our major focus is on agents in countries like Hong Kong and Taiwan, and we work together with an exporter who has distribution channels in those markets.
As a manufacturer and a trader of construction tiles in Japan, what is your analysis of the current state of the Japanese construction sector and how do you foresee its evolution looking forward?
I'm not in a position to analyze the construction industry, so I’ll just give you a generic view that people hold in Japan, which is that there has been a decline in population, in rural areas especially. Since there are less children, high schools are now merging, meaning that we have spare high school buildings. This trend will continue and lead to a decline in new rural residents.
On the other hand, in areas like Tokyo, there is urbanization and an increase in demand for refurbishment, renovation and redevelopment. There is a two-directional move that is going on between urban and rural areas.
More than one third of the Japanese population is over 65, which means a reduced labor force and less demand for products. How has this declining demographic affected the tile sector and your company in particular? How are you reacting to this particular challenge?
Generally speaking, for the tile industry, what we're trying to do is to increase the usage of tiles on buildings. When new buildings are made, there are several types of finishing materials that are used, and we need to compete with them and increase the use of tiles for each building.
In terms of workforce, since we are in the countryside, we don't feel the shortage of manpower because we can procure people locally. However, the shortage of construction workers is taken very seriously by the industry and we must consider whether the demand for tiles will decrease first, or the number of construction workers, in which case, we won't be able to actually utilize tiles.
Can you tell us what you believe to be the core competitive advantage of using tiles rather than an alternative product?
The advantage of using tiles on concrete buildings as an exterior cladding or for floors is that you can increase the durability of the building. Compared to natural stone, it is much cheaper and more durable. Since natural stone is becoming scarce, its price is increasing, so we are strongly recommending the use of tiles for floors.
Traditionally, Japanese people use wooden products in the construction of houses and don't use tiles. To what extent do you need to educate people in the use of tiles?
There's a difference in lifestyle. People in Japan take off their shoes when they go inside a house, so having tiles on the floor is not very appropriate for houses when you're going in barefoot. At the same time, Japanese houses, as you mentioned, are often made of wood and use a wooden structure, consequently, to apply tiles onto a wooden floor, you’d have to take extra steps and it would incur additional costs. In Italy and other European countries, you have concrete and stone houses, so it's very cheap to add tiles to the concrete.
Can you give us some specific examples of how you're looking to increase the usage and the functionality of the tiles that you sell?
There's a tile association in Nagoya. I'm a member, but I'm not in a position to speak on behalf of the industry, but as for our company, we conduct our activities through our ordinary sales channels. We try to promote the usage of tiles by informing people how beautiful the result can be when you use them and the other advantages they have, as well as describing the construction method that best suits the use of tiles.
Are there any key moments or milestones in the history of your company that you'd like to share with us? Could you elaborate on the evolution of the company?
To give you an overview of our history, we started out making fireproof bricks and we grew in line with the overall Japanese economic growth. At the end of the 1960’s and beginning of the 1970’s, Japanese companies started going abroad. Around that time we, had exports to North America and Australia, with Shears being our distribution partner.
However, with the oil shock, all those exports stopped and never recovered. Every Japanese company was affected and there was stagnation in the domestic economy. However, rapid economic growth started a short whole after and with that, the demand for tiles increased, especially for more luxurious styles. That continued until the 1990s, when the bubble burst.
After the economic bubble burst, demand diminished considerably and there followed a period of survival. In order for us to survive, the strategy we adopted was to have a variety of tiles and provide them as a total solution - as a one stop shop for our customers - so we started importing from Malaysia. We were pioneers of importing Asian tiles and in 1995, we had Malaysian tiles imported and that popular. Soon after, we started importing Chinese tiles. People were skeptical of Chinese styles, but since we are a tile manufacturer, we knew the quality and we made sure that it was applicable to Japanese markets.
That also became popular, and we started importing from European tile manufacturers for their design capability. Previously, when the market was growing, it was OK for us to only focus on the manufacturing of, for example, brick tiles, because the market was big enough to support the mass production of just one type of product. However, in a shrinking market, the volume is not as important as the variety of the product lineup, so we have been diversifying the products that we deal with.
What mid to long term changes has the COVID pandemic accelerated or brought about for you here at Nittai Kogyo?
COVID has impacted our company, but I cannot foresee mid-to-long term changes that would be made to our company or the industry. It's true that B2C businesses have advanced, but our products are not appropriate for direct sales to customers.
You have developed some of your own original technologies, such as your EMWs (Easy Maintenance Wall) and your EMF (Easy Maintenance Floor) tiles. Can you tell us a little bit more about these two original technologies and the advantages that they bring in comparison to more traditional products?
With the easy maintenance series, tiles are resistant to stains, and they don't get dirty easily, but people are not very aware of it. In order to promote the strength and ease of maintenance of these tiles, we have developed a product that focuses on highlighting the easy maintenance aspect of it compared to natural stone.
It may look like natural stone, but actually, if you spill coffee or juice on stone, the color gets stained, whereas with tiles, you can retain the original color. There's a technology called Hydrotect, which we are licensed to, but we don't necessarily need to use this to create a tile that's durable and stain resistant.
However, having stains on the tile is not necessarily a bad thing. For example, in European nations, some bricks have a history of over a few hundred years without people washing or cleaning them. It's only the rain, wind and natural phenomena that cleans the bricks. Japanese temples and shrines that have histories of 100-200 years, the wood has matured and has a charm conferred on it by history. It's important to take that into account and at the same time, showcase the beauty of aged tiles. If you choose our easy maintenance tiles, you can see that, compared to concrete over many years, the tiles will stay looking much cleaner.
Can you please elaborate about your international strategy and if there are any particular markets of interest to you?
We don't consider international markets to be a viable option since the global situation is completely different compared to when we were exporting to the USA and Australia. At that time, $1.00 was 360 yen, but after the oil shock, $1.00 became 280 yen, and now it's much less. Unless there is a hi-tech aspect to the product, there isn't much demand overseas and that applies not only to tiles, but also to fabrics. If it doesn't require any advanced technology, then there's no need for overseas companies to purchase our products.
In Taiwan and Hong Kong, there is demand for our product, so we are exporting there. If there's any request for our products, we will be happy to export, but we don’t consider international exports as being a central part of our business. We will continue to focus on the Japanese market.
Toto’s ‘Hydrotect’ product has a self-cleaning capability and is environmentally beneficial also. Could you tell us a bit more about the distinguishing features of Hydrotect?
We are a licensed company with Toto Ltd, so it's hard for me to comment on the technology and product. What's on our and Toto’s website is the disclosed information. It's wonderful technology that’s best suited for white tiles because you don't get any stains. That's the most I can say about Hydrotect.
Let's say we come back to interview you again on the last day of your presidency. What would you like to tell us about your goals and dreams for the company by that time, and what would you like to have achieved by then?
I'm now 59 and I'll be 60 soon. I believe my last mission as the President here is to find an appropriate successor. Japanese companies are currently struggling to find the next generation to take over because many times, the children of a family run business may be working already in a big company, or they become doctors and have their own occupation. As a result, they don't feel attracted to taking over the company.
It's difficult to pass it on to an employee due to company bank loans being the personal liability of the family. There's a personal assurance that's been made to the bank, so you must be able to take the risk of debt with you once you become the president. It is my mission to find a good successor in whom I can be confident that they would do well and support good employees so I can be happy when I leave the company.