JIN-476 -- Toto, going over the rainbow?

[jin at mailman.japaninc.com]

J at pan Inc Newsletter
The 'JIN' J at pan Inc Newsletter
A weekly opinion piece on social, economic and political trends
in Japan.
Issue No. 476 Wednesday July 30, 2008, Tokyo


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As part of its green theme for the G-8 summit, the toilets in
Toyako were designed to save water by using snow from the
mountains for flushing. The snow was initially used for cooling
the rooms and then, once it had melted, the water was used in
the toilet cisterns and for watering plants. Japanese toilet
giant Toto also used the summit to showcase its new eco-toilet
- the Neorest Hybrid - that has no tank and claims to use 'the
least amount of water per flush of any toilet.' Moreover, it is
green technology toilets that the company sees as its future and
as one of the keys to global success.

Last June, when the Japanese government triggered a serious
slowdown in the construction industry and new housing starts by
tightening the Construction Standards Law, Japanese toilet
manufacturers knew they were in for a hard time. Toto and its
industry rival Inax stepped up their competitive plans for
expansion prospects in China where they saw huge potential in
rapid construction projects and a growing preference for high-
tech sit-down lavatories. Toto already has seven Chinese offices
and a market share of 40%. Furthermore, it recently reported a
sales increase in the fiscal year 2007 of 27.6% for its Chinese
operations, amounting to 22.6 billion yen ($211.2 million). This
huge boost has been partly due to Toto's winning of contracts
related to construction projects for the Beijing Olympics, such
as that for Terminal 3 at Beijing Capital International Airport.
Meanwhile, in 2007, Inax invested billions into its sanitary
products plant in Suzhou and has also been profiting from
increased orders across Asia.

[Continued below...]

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[...Article continues]

For Toto though, global toilet industry domination extends
beyond the region where it already competes in every major
market. In an interview with the Nikkei in January this year,
President Teruo Kise also referred to plans for growth in
Europe and the US. Kise remarked, 'Foreign sales make up about
10% of our overall sales now, but we hope to boost this to
20-30% in 10 years. And we aim to eventually log about 50
billion yen in annual sales in Europe.' This year it entered
the German market via the acquisition of toilet seat maker
Pagette and plans to have products on the market across the
continent by 2009. Stateside, the group started marketing its
combined toilet and bidet, the Washlet, across the country in
2007. A controversial New York advertising campaign featuring
smiling naked buttocks won the company some publicity that,
overall, it probably benefited from rather well
(http://search.japantimes.co.jp/cgi-bin/nb20071115a1.html) and,
as reported by Reuters, US sales rose by 18% last year. Toto
is now the fourth largest sanitary product manufacturer in the
world.

One of the main reasons why Toto has been able to expand
successfully abroad is its astonishing level of innovation,
presumably backed up with impressive amounts of R&D. Japanese
toilets are famous the world over for their high tech functions
from automatic lid mechanisms to seat warming options. Toto's
bidet-toilet, the Washlet, is widespread in Japan and this brand
name has become the common term for the technology even when it
might in reality be made by Matsushita or Inax. The product came
out in Japan in the 1980s but Toto had purchased an earlier
version from the American Bidet Company back in 1964 – a classic
example of Japanese innovative imitation. It is ironic that
Japan, that imported the very concept of sit-down toilets from
the West, is now at the center of cutting edge lavatory
technology. In addition to the water-saving flushing
capabilities, Toto has pushed the boundaries of toilet
applications with developments such as the production of a
urinary diagnosis model as well as a more comprehensive system
of blood pressure measurement. The latter, dubbed the
'Intelligence Toilet,' retails at 400,000 yen(c.US$3,700) and
is produced jointly with Daiwa House.

However, Toto's path has not been or will be without its hiccups.
The company was forced to offer repairs on 180,000 units of its
electric bidets after it received reports of a repeated
malfunction causing fires to break out around the seat heater.
Additionally, although the company is hoping its green
credential will help its chances of international success, the
idea of electric toilets may not go down so well with the energy
conscious consumers. A recent article in the The Washington Post
referred to the electronic toilet as 'a plumbing fixture that
has been reengineered as an ultracomfy energy hog...they use
more power than dishwashers and clothes dryers.' One of the five
pillars of Toto's corporate philosophy as listed on their
website is 'Protect the global environment by conserving finite
natural resources and energy.' With this in mind, one wonders
whether that now Toto has tackled the water wastage issue,
if there is any other R&D that they are sitting on that will
address the problem of excessive electricity use.

Editor-in-Chief
Peter Harris

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