Jonathon Walsh reveals how the unlikely combination of soccer and snacks has brought Tohato Inc. back from the brink

YOU MAY not have heard of Tohato Inc., a wellknown Japanese confectionary manufacturer, but chances are you know its brands — including Caramel Corn, Harvest, All Raison, and the hot and spicy Habanero snack. You may also not know that Tohato Inc was the first “pre-packaged Chapter 11” restructuring company in Japan. Now under the guidance of CEO & President Yoshihiro (Joe) Hemmi the company is in its second year of post-bankruptcy operation. Its 300 staff are looking to the future — and pulling in ¥20 billion in sales.

So how was a former investment write-off pulled out of financial quagmire and put back on track?

The initial plan was to cut manufacturing costs while keeping revenue stable. Today, the company is striving to put its revitalization plan into three phases and looking at three key functions: corporate sales and marketing, manufacturing and people.

The sales and marketing issues were relatively simple, and largely involved getting in touch with customers to reassure them they would continue to be supplied with the products.

Manufacturing was more difficult. The trick was to convince suppliers to continue providing raw materials to ensure that the factory could keep operating. But that was only one of the problems.

“One of the obstacles was that the confectionary business had been cash-starved and had received very little investment in the last five years,” Hemmi says.

“So the first step we took was to strengthen the very basic foundation including buildings and infrastructure and we basically tried to put money around that. Subsequently, the initial capex doesn’t really tie directly to revenue generation but it was critically necessary to make sure the employees were motivated and loyal enough to stick with us and keep going forward.”

Critical indeed. Restructuring management had to go hand-in-hand with the task of encouraging those who remained to persevere in their efforts to build a new Tohato.

“Changing the management team and other people in the family was a critical element” Hemmi says, “but going down the managerial hierarchy, we needed to distinguish who could change and who couldn’t change, and we are still undergoing that process now.” To help with that process Tohato has called upon former Toyota Corporation Line Managers who listen to staff members’ proposals as well as offering hands-on advice.

Fortunately, for staff lacking in morale, a boost was just around the corner — thanks to the Boukun Habenero product introduced in November 2003. The spicy snack has provided the company with ¥2-3 billion revenue, and significantly raised the company’s market credibility.

Tohato is now, according to Hemmi, ready for the third phase — how to ensure that the company’s phenomenal rise keeps on going. And, besides a well thought out business plan, Tohato has a secret weapon that it believes might help with just that. Hidetoshi Nakata, Japan’s most well known footballer, is on the pay roll.

“Nakata is the Chief Branding Officer of Tohato,” Hemmi explains. “He comes to meetings three to four times a year. Nakata likes snacks, biscuits and cookies so we sent him samples to Italy and he often sends back comments, some of which we ignore and others which we take on board. It is interesting because we are possibly the only company who was willing to have someone like Nakata as a company officer, who is not simply a symbol and subsequently, he doesn’t appear in television commercials for the company.”

Internally, Nakata’s participation has had a significant effect. “When we were trying to encourage people who had just gone through bankruptcy, it takes constant communication and hand-holding and understanding what they are thinking to make it happen,” Hemmi says. “Nakata’s participation was a very effective way to provide a significant impact.”

Tohato Inc. is aiming to go public in 2006.