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CEO interview
Suntory’s growth from Beam integration offers lessons in collaboration and adherence to core values
A decade ago, spirits maker Suntory was primarily a Japanese business. Now, it’s well on the way to being a global one, Takeshi Niinami, the first outsider to lead the family-run business...
Takeshi Niinami became President and CEO of Suntory Holdings just over seven years ago, in October 2014. His task: to help the company manage the biggest event of its 120-year history – its purchase of the US’s Beam Inc, maker of Jim Beam and a host of other spirits, for US$16 billion.
It was an audacious deal. Beam’s revenues were more than twice those of Suntory’s own spirits division, while the sum paid made it the fourth biggest overseas acquisition by a Japanese company.
To help the company negotiate the new challenges it faced, Suntory hired Niinami, its first non-family-member leader.
He arrived with plenty of experience. For just over 10 years he had been president and CEO of Lawson, Japan’s second-largest convenience store chain, and before that he had headed up a hospital food joint venture between Mitsubishi and France’s Sodexo.
But rather than deciding to bring in new ways to help him through his initiation into the company, he turned to what he calls Suntory’s “founding spirits”. From the start, he says, “I asked myself: What are the core values that carried the company along over 120 years?”
Various traits stood out: an obsession with quality, a focus on doing new things and taking risks, and of course Suntory’s strong relationship with its workers.
Most important, he says, is Suntory’s relationship with the society that surrounds it. “From the beginning, Suntory always took care of the community,” he says.
“It’s the community that has always given us our business opportunities, so first and foremost we have to give back to society. We’ve survived through difficult times because of the huge support of the community.”
“Always, our thinking starts from giving back to society. Are we doing anything wrong? We have to be transparent, and we have to communicate frankly with society, get feedback and then take action,” he explains.
Giving back to society
Today, that giving back to society is focused more and more on the environment and creating a genuinely sustainable business, centered on the key ingredient across all its beverages.
“In Japan, we’ve completed a program to replenish twice as much water as we use in production. We’re now taking this program to the other countries where we operate,” says Niinami.
The company is dedicated to the circular economy, particularly when it comes to plastics. “We know that PET bottles are a huge issue. The impact on biodiversity creates a danger to humankind as well as other species.”
Companies cannot act alone when it comes to sustainability, says Niinami, noting that Suntory and Coca-Cola Japan have been playing a leading role in motivating the industry to collect and recycle plastic bottles for decades.
The two companies – number one and two in Japan’s beverage market – continue to compete when it comes to products and innovation. But for the environment, they have agreed that collaboration is far more important. “This is not the area where we fight,” he says.
Integrating Beam
For the Beam integration, a challenge was expanding Suntory’s global footprint while maintaining those core values.
Niinami notes that it the history of Japanese acquisitions at that time was that many were not successful. “We didn’t know why, but we knew we were going to be heavily scrutinized,” he says. “The easiest thing for me to address this attention was going back to basics – to think what Shinjiro Torii, the founder, would have done if this had happened to him.”
His first decision was not to try to run things himself. “Of course, I wanted to demonstrate my capabilities and talent to Suntory’s shareholders and founding family, so naturally I was tempted to go and govern all of Beam by myself,” he says.
But he rejected that approach, certain that applying Japanese practices in an American company would only cause problems, opting instead for a more collaborative approach.
He established Suntory University, a series of talent development programs, to cultivate global leaders and promote the philosophy and values of the company’s founder.
For three years, he brought members of Beam’s senior management team to Tokyo, giving them the opportunity to experience the company’s philosophy first-hand and see projects such as Suntory’s Natural Water Sanctuaries, now numbering more than 20 across Japan, with a total area of 12,000 hectares.
“That led to lots of dialogue between the two sides,” he says. “Then, those senior managers went back to the US and talked about their experience with Suntory in Japan – they became evangelists for our values.”
At the same time, he sent Japanese middle managers to the US. “There they played a key role in linking senior management with rank-and-file staff – a function that’s a prerequisite for the success of any integration, and the big trigger for doing something new.”
The outcome? In the next five years, Beam performed very well in terms of sales and profits.
Promoting better drinking
Alcohol, the substance at the heart of Suntory’s empire, is also being rethought by the company.
“We’ve been shifting toward premiumization – that’s less drinking, but better drinking: a lower amount of alcohol, but more relaxation, more comfortable drinking by drinking great brands,” says Niinami.
A new capitalism?
Niinami completed his MBA at Harvard Business School in 1991, during the heyday of neoliberal capitalism and just ahead of the bursting of Japan’s asset price bubble.
Looking back, he recalls being surprised that ethics didn’t feature higher on the curriculum.
“When I was at Harvard, I thought ethics and greed could work together – greed being the animal spirit you need to drive innovation and create something valuable, but balanced on the other side by ethics,” he says. “But that wasn’t discussed much. There was a class in my first year on business ethics, but it wasn’t an accredited class.”
“I still believe in the value of capitalism,” he says, adding that its social and environmental costs have to be addressed. “Can we have a new capitalism that redistributes wealth to those who are in poverty and with less use of natural resources? These are the major things we have to fix.”
Keeping it real
For Niinami, leadership includes managing one’s appearance and behavior. Behind the scenes or at home with his family, he’s often exhausted. “But in front of our people, I have to be the main actor,” he says. “For me, being authentic as a CEO means being connected to values, but also managing yours in a way that means we come across as representing those values.
“And this is a very important point. Too often people think that such acting is not authentic. No. It is authentic, as long as you’re still passionately connected to your values.”