II. Expanding production of powdered milk and the Morinaga Milk Company

Powdered milk for infant consumption was first introduced in Japan during the Taisho Era (1912-1925), but before the Second World War it was mainly exported. It was only in the post-war period that artificial milk was improved in quality with the creation of milk production capital, the loosening of regulations related to milk products, the expansion of the milk product market, and the increase in raw materials for the production of milk.

Between 1950 and 1954, the production of major milk products - condensed milk, powdered milk, butter, and cheese - more than doubled (table 3.3). In 1951, the government published regulations for modified powdered infant milk products and all companies started to compete in expanding the market with new modified products utilizing new technologies such as vitamin and mineral reinforcement.

About this time each of the companies competing in the milk products field created their own trademark symbols upon which their involvement in the market was based. The Morinaga Company also competed with other small candy companies, putting out such things as caramels. The company's trademark, that of an angel, was very effective in forwarding corporate expansion plans. Table 3.4 indicates the fact that the trademark symbols used by the Yukijirushi and Meiji milk-product companies were very effective in expanding sales of butter.

Table 3.3. Increase in Value of Milk Products (Condensed/Powdered Milk. Butter, and Cheese) (unit: 1,000 yen)

Source: T. Nakajima, Gendai nihon sangyo hattatsushi 18 shokuhin (Kojunsha Shuppankyoku, 1967), p. 312.

In the pre-Second World War period the Morinaga Company had set up baby health examinations in Tokyo and Osaka in co-operation with doctors and nurses, and these activities went down well with the public. The company used this involvement and co-operation with the medical profession in efforts to promote its products.

In 1952, with a decrease in the importation of milk products, the candy and milk producers competed for resource acquisition; the Yukijirushi Company, which was based in Hokkaido, extended its offices to Tokyo, and the Meiji and Morinaga people widened their net to include Hokkaido. This competition between companies resulted in an increase in milk product prices of 50 per cent.

However, the business boom did not last, and from 1954 to 1955 the sales of milk products decreased and the companies suffered from excess stock and an inability to pay off their debts on time. As a result they attempted to increase the demand for baby milk, and increased production to meet that demand (see table 3.5). During this period, Yukijirushi, Meiji, and Morinaga became the three prime milk-product producers, and by 1961 70 per cent of Japan's total domestic trade in milk products was under their control. Table 3.6 provides some indication of the sales and profits made by these companies. During this period, the Morinaga Company rose to first place in the baby-product field, and at the time of the arsenic milk incident it held 60 per cent of the total market in milk products for infants nationwide, and 65 per cent in the Kansai area.

Table 3.4. Changes in Capital of Five Major Dairy Product Companies, 1946- 1957 (unit: 1,000 yen)

a. In June 1950, Hokuraku was divided into Yukijirushi Nyugyo and Hokkaido Butter.
b. In April 1949, Morinaga Nyugyo separated from Morinaga Shokuhin to become an independent company.
c. Figures in parentheses indicate the months when capital increase took place.

Source: T. Nakajima, Gendai nihon sangyo hattatsushi 18 shokuhin (Kojunsha Shuppankyoku, 1967), p. 311.

Table 3.5. Changes in Production of Modified Powdered Milk Products (unit: tons)

a. Production figures are taken from Ministry of Agriculture, Forestry and Fishery statistics, except for figures for 1947-1949, which are based on surveys by Nihon Seirakugyo Kumiai and Shokuryohin Haikyuu Kodan.

b. Production figures of powdered infant milk before 1950 are included in total powdered milk production figures.

c The figure for 1943 represents the peak in pre-war production

d. The drop in production in 1955 is considered to reflect the recall of MF milk.

Source: Shadan Hojin Nihon Nyuuseihin Kyokai, Nihon nyuugyo nenkan (1980), p 140

Table 3.6. Changes in Sales and Earnings of Top Three Milk Product Manufacturers, 1958-1962 (unit: 1 million yen)

Source: T. Nakajima, Gendai nihon sangyo hattatsushi 18 shokuhin (Kojunsha Shuppankyoku, 1967), p. 317.

At that time these various companies were involved in management rationalization procedures in order to increase their profits, and in March 1955 2,000 schoolchildren suffered food poisoning from powdered skim milk produced by the Yukijirushi Company. The root cause of the poisonings was never made clear. The companies agreed among themselves to carry out independent researches into the cause and to institute independent programmes for product quality control and safety. It can be said that this problem represents the tip of the iceberg in relation to the difficulties attendant on management rationalization.

Profit-oriented production management coupled with mass-production techniques always results in deterioration of the product and reduces the safety levels. Mass production and transportation systems cause problems with increasing acid levels and losses in product freshness. Because of these factors, the Tokushima plant of the Morinaga Company added sodium phosphate to the milk products as a stabilization agent. Instead of the soda authorized by the Japan Pharmacy Bureau for purity, the company used an industrial grade material which was one-third the regular cost of the pharmaceutical grade additive. From April to July 1955, 380 kilograms of this industrial grade sodium phosphate, which also happened to contain arsenic, were added to milk products without being examined for purity or fitness for human consumption.