Rengo Co., Ltd.
Rengo Co., Ltd.
Incorporated: 1920 as Rengo Shiki
Sales: ¥222.58 billion (US$1.64 billion)
Stock Exchanges: Tokyo Osaka
Rengo leads Japan’s paper industry in the production of paper containers. Rengo can claim to be the first Japanese company to manufacture corrugated cardboard. In 1990 there were 29 Rengo plants scattered across Japan; 68 % of their collective output is box-board, 19% containerboard, and 11% paper-board.
Rengo began operating in 1909 as a unit of Sanseisha Company. The unit quickly absorbed three other companies, Azuma Shiki Manufacturing, Eritsusha, and Teikoku Shiki. In 1920 the unit was incorporated as Rengo Shiki. The following year, the company completed its Kokura plant. Growth continued, and in 1927 Rengo’s Nagoya plant began operations, followed by its Osaka facilities in 1930. Four years later the Yodogawa plant opened, and Kawagauchi commenced manufacturing in 1936.
In 1937 the Sino-Japanese War broke out, and the government curtailed business growth. Rengo’s expansion halted with the escalation of the war. Nevertheless, production continued, and the Japanese paper industry hit its wartime production peak in 1940, when country-wide paper output reached 1.7 million tons. The Japanese paper industry’s decline continued with Japan’s participation in World War II.
Upon conclusion of the war, the Allied forces occupying Japan reconstructed that country’s long-standing business traditions in the name of economic democratization. At this time, Rengo’s six subsidiaries in China and Korea were confiscated.
From 1951 through 1962, the country’s real national product grew at a rate of 9% a year. Rengo, too, continued to grow apace. By the 1970s the country’s rapid growth was yielding to concerns about the environmental and social costs of economic growth. During the 1970s, among other projects, Rengo developed a paperboard container that preserved fresh fruit, formed a joint venture with Asahi Chemical to manufacture photsensitive resins, and began production of a new synthetic paper. In 1979 Rengo’s total paper and pulp sales reached US$728.5 million.
In 1981 Rengo increased its holding in Hamada Printing Press, a printing machinery manufacturer. The same year, the company devised new manufacturing processes that increased productivity 30%, and imported technology from Molins Company. In 1986 Rengo introduced a three-layer cardboard called Triple Wall, used in shipping of heavy office automation equipment and automobile parts. It also developed a commercially viable form of polypropylene film-reinforced corrugated board for packaging.
In late 1986 the company announced a joint venture with C. Itoh and International Paper Company to produce man-made nonwoven fabrics and products, such as disposable diapers and masks. Rengo took a 60% interest, International Paper 35%, and Itoh the remaining 5%. The joint-venture factory had an annual production capacity of 330,000 to 440,000 pounds.
Sales for the fiscal year ending March 1988 reached ¥201.3 billion, ordinary profits were ¥4.9 billion, and net earnings were ¥1.5 billion. For the year ending in March 1989, sales increased to an estimated ¥215 billion, yielding ordinary profits of ¥7.2 billion and net earnings of ¥2.9 billion. As net earnings per share held at about ¥21.10, the company continued to pay its customary annual dividend of ¥6 per share.
In the early 1990s the company focused on selling comprehensive packaging systems. Demand for packaging in the beverage, processed food, home electric appliance, and textile industries was good, and Rengo’s sales continued to grow, increased by expansion into specialty boxes with anticorrosion, keep-fresh, and other specialty properties. Although there was a rise in the cost of paper, efficiencies in Rengo’s order taking, marketing system, and physical distribution compensated to keep profits rising.
Rengo strengthened its business structure during the late 1980s and early 1990s by purchasing Tokiwa Package Company in Saitama Prefecture, near Tokyo, for ¥4 billion. This strengthened its business network in the Kanto district. Rengo also began construction of a factory in Sendai, in northern Japan, which began operations in 1990. Outside of Japan, Rengo set up a joint venture in Malaysia intending to supply box-board and paperboard to Japanese firms operating there.
As of 1991, the company operated no factories or offices in western countries. Only five other Japanese companies—Oji Paper Co., Ltd.; Jujo Paper Co., Ltd.; Honshu Paper Co., Ltd; Daishowa Paper Co., Ltd.; and Sanyo-Kokusaku Pulp-outstripped it. Steadily increasing sales to home electric appliance manufacturers, cosmetic manufacturers, and beer companies more than compensated for the relatively low sale price of corrugated cardboard; thus, in the early 1990s, Rengo’s future looked bright.