Cheese and ice cream marketer Borden Japan was the victim of its own mistakes, local industry insiders say, failing to build proper distribution, refusing to spend enough on advertising, overpricing products and being left unawares by the strengthening yen.
As a result, Borden folded its tent here June 29, agreeing to license its last remaining business, trademarks, technology and formulations for the Lady Borden and Classy Lady Borden brands to confectionery marketer Lotte Co.
While neither company would comment further, it's believed Lotte will continue marketing 13 flavors of Borden ice creams.
Earlier this year, Borden sold its cheese factory to Rokko Butter Co.
Borden wouldn't give figures, but according to published accounts, by 1993 Borden Japan's sales had shrunk to one-fifth of the $250 million the company registered in 1990.
The company said the Lotte deal was part of a routine restructuring decided at its Columbus, Ohio, headquarters.
"Our divestiture program is on track," President-CEO Ervin Shames said in a statement.
Fred Chrvala, group managing director of Asia Pacific operations for Borden in Singapore, said Borden's exit from Japan was "simply a realignment of resources."
But local market observers said Borden, which decided to go the Japanese market alone in 1990, miscalculated badly.
The company started in Japan in 1971 in a 50-50 joint venture with Meiji Milk Products Co. but was too bullish in the belief that it could survive without Meiji's distribution muscle.
Industry executives said Borden naively believed the power of its brand name alone would be enough to create consumer demand and, therefore, shelf space. But Borden's well-known name didn't have the pull the company thought it had in the highly competitive $3.7 billion Japanese ice cream market.
"Borden never solved the question of how to achieve the necessary distribution and [was] mistaken in halting the joint venture before that question had been answered," said one local market observer.
Like many other marketers in Japan, the rising yen took Borden by surprise. Industry sources say with the dollar falling 20% in the last year alone, Borden simply wasn't able to sustain an already weak business.
Borden also blundered by underspending in the market. Its only major marketing initiative since splitting with Meiji in '90-a $10 million TV ad campaign that ran last fall-may have been cut short. And the effort, believed to have been created by Tokyu Advertising, which shared the business with Dentsu, fell flat because of low spending.
Neither Tokyu nor Dentsu would comment.
Local sources say Borden also dug in its heels against discounting even after competitors slashed prices, leaving its brand one of the highest priced on the market. A 125-milliliter container of Borden's product carried a price tag of $2.50, about double that of competitors coming in for $1 to $1.50 for the same size container.
As a result, Borden's share-which Hiroya Yano, chairman of Borden Japan, in '93 estimated would hit 25% of the premium segment-barely registered by the time Borden decided to leave Japan.
According to Japanese newspaper Nihon Keizai Shimbun, Ezaki Glico Co. led the ice cream market last year with a 14.6% share, followed by Morinaga Milk Industry Co with 13.4% and Meiji with 12%.
Borden's share was so small it didn't even make the list.