Takara Holdings Inc.

Karasuma-Higashiiru
Shijodori, Shimogyo-ku
Kyoto, 600-8688
Japan
Telephone: (+81) 75-241-5130
Fax: (+81) 75-241-5127
Web site: http://www.takara.co.jp

Public Company
Incorporated: 1925
Sales: ¥187.39 billion ($1.57 billion) (2003)
Stock Exchanges: Tokyo Osaka
Ticker Symbol: 2531
NAIC: 312140 Distilleries; 312120 Breweries; 541710 Research and Development in the Physical Sciences and Engineering Sciences; 551112 Offices of Other Holding Companies

Takara Holdings Inc. is the new holding company created from the breakup of the former Takara Shozu into its two core operations: drinks maker Takara Shozu Co. and fast-growing biotech and pharmaceutical company Takara Bio Inc. Takara Shozu, which traces its operations back to the mid-19th century, is one of Japan's leading producers and distributors of alcoholic beverages, including its market-leading shochu (a distilled liquor) range, sake, the sweet cooking wine mirin, and other traditional Japanese alcoholic beverages and alcohol-based seasonings. Takara Shozu also produces soft drinks and Scotch whisky, the latter through its ownership of Scotland's Tomatin Distillery, the largest distiller in that country, as well as bourbon whisky, through its ownership of Age International and its Blanton's brand. In China, the company operates production and sales subsidiaries for its shochu, sake, and other products. The flipside of Takara Holdings is its Takara Bio subsidiary, which is one of Japan's leading biotechnology firms and a pioneer in the genetic engineering field. That company is involved in a variety of research and development areas within the biotech sector, including the development of reagents, manufacturing of DNA chips, and DNA base sequencing—in part through subsidiary Dragon Genomics Center—and development of gene therapies. While Takara Bio represents less than 8 percent of Takara Holdings' total sales—Takara Shozu generated more than 89 percent of the group's ¥187.39 billion ($1.57 billion) in sales in 2003—the division held strong promise amid expectations that the Japanese biotech sector will expand by a factor of 25 by the end of the 2000s. Listed on the Tokyo Stock Exchange, Takara is led by president Hisashi Ohmiya.

Building a Beverage Business in the 20th Century

What scotch is to Scotland, shochu was to Japan after a Fushimi area merchant began producing it as a distilled variant of sake, a fermented liquor, in 1842. The distillery operations grew strongly into the next century, and in 1925 the company was incorporated as Takara Shuzo. Co. Ltd. Takaro Shuzo grew into Japan's leading maker of shochu and mirin, a sweet wine used for cooking, as well as a prominent maker of sake. In that latter category, the company especially became known for its so-called "celebration sake," a special category of sake typically used for gifts and celebrations. The company launched that range in 1933 under subsidiary Sho-Chiku-Bai Shuzo Co.

Takara Shuzo went public in 1949, and the following year opened a research and development center in order to produce new fermentation techniques and agents. The company then attempted to leverage its growing fermentation expertise with an entry into a new beverage category, beer, in the mid-1950s. In 1957, the company launched its own beer brand, Takara Beer, which met with only limited success. Ten years later, Takara exited that market. The company continued developing new alcoholic beverages, however, and in 1977 launched Takara Shochu Jun, a "white" shochu. That product was credited transforming shochu's traditional image and creating an entirely new market. Backed by the strong sales of Shochu Jun, Takara Shuzo joined the ranks of Japan's top alcoholic beverage companies.

That market enjoyed a high degree of protectionism into the 1990s, with foreign alcohol types, especially whisky, taxed heavily—boosting their prices by as much as six times those for sake and shochu. Nonetheless, Takara Shuzo developed a wider portfolio, beginning a distribution relationship in 1971 with Tomatin Distillery, the largest in Scotland and one of the largest in the world, to introduce that company's Speyside whiskies in Japan. Takara Shuzo also began importing a bourbon brand, Blanton's, through a relationship with Age International, operators of one of Kentucky's largest distilleries. In the early 1970s, the company started marketing alcoholic beverages in China as well.

In the late 1980s, Takara Shuzo moved to become a full-range beverage supplier. In 1984, the group launched its hugely successful line of Takara Can Chu-Hi, a shochu -based light alcoholic beverage, then added Takara Barbican, a non-alcoholic beer in 1986. In that year, also, Takara acquired 80 percent of Tomatin, later boosted to 100 percent, marking the first time a Japanese company had acquired a Scottish distillery. By then, the group had entered the United States, setting up Takara Sake USA to take advantage, on the one hand, of the rising Japanese population in the United States and, on the other, of the increasing interest in that market for the traditional rice-based Japanese drink. The company's U.S. interests were strengthened in 1991 when it acquired a strategic stake in Age International, before gaining full control of the bourbon maker and adding its Ancient Age, Ancient Ancient Age, and Blanton's brands to its drinks portfolio.

Biotech Diversification for the New Century

Into the 1990s, Takara Shuzo continued introducing new beverage products, including fruit juices and a new line of health food drinks, starting with Calcium Parlor in 1993. In 1995, the company turned to the Chinese market, establishing a subsidiary in Beijing for the production of beverages and alcohol-based seasonings for that country. In the late 1990s, Takara Shuzo sought to diversify its beverage operations into the wider foods category, starting with the launch of a new seasoning, Cookin' Good, in 1997. The success of that product led the company to extend the Cookin' Good brand to include a full line of seasonings and cooking products. The following year, the group extended its beverage portfolio by adding imported California wines.

Takara continued expanding its range of beverage products into the 2000s, adding a new organic mirin, Tokusen Takara Yuki Hon Mirin, in 2000, Schucho Zipang in 2001, and the "self care" line of Tencha & Shiso health drinks in 2002. The company also built a new brewery, Shirakabegura at its Nada facility, which began producing specialty sakes in 2002. With the launch of government campaigns against drunk driving, the company moved to extend its non-alcoholic beverage line with the addition of Barbican Ginger in 2003. The company also launched Takara Can Chu-Hi Sukish that year, using a special heat-free process in the preparation of fruit.

By then, Takara faced the deregulation of the Japanese drinks industry. The company braced itself for the lowering of trade barriers and the expected flood of foreign brands into the country. With the leading shochu and mirin brands, and a significant place in the sake market as well, Takara remained confident of its position. Nonetheless, in 2001, the company decided to reorganize its operation in order better to meet the coming competition, and, at the same time, to recognize the company's diversified operations. Indeed, by the beginning of the 2000s, Takara Shuzo had also become one of the clear leaders in Japan's biotech sector.

Takara's entry into biotechnology came in the late 1960s, when the company recognized the it could turn the fermentation expertise gained at its research and development center to a new and fast growing sector, that of bio-engineering. In 1970, Takara founded a new, central research and development facility in Otsu and began work on developing new reagents needed for the research sector. At the same time, and in direct relationship with the group's fermentation operations, the company's research and development efforts had been working on inventing new fungal strains, and in 1970 launched a patented method for artificially cultivating Shimeji mushrooms.

Takara's break in the biotech sector came in 1979, when it became the first in Japan to produce restriction enzyme products. The company quickly developed its own production methods and was able to start exporting its own range of reagent kits for the genetic engineering sector in 1982.

The company began adding new products and technologies, such as PCR products for DNA amplification in 1988, and developed its own gene transfer method by 1995. In 1996, the company added a dedicated agribusiness subsidiary, Takara Agri Co, and then began manufacturing DNA chips in 1998.

By then, the company had launched a new research and development laboratory in China, established in 1993. The division's international expansion continued with the creation of a European subsidiary in Paris in 1995 and a subsidiary in Seoul, Korea, that same year. It acquired Korea's ViroMed in 2000.

Company Perspectives:

The Takara Group is committed to contributing to healthy, fulfilling living by seeking out new possibilities in culinary culture, cultural life, and the life sciences and by continuing to create new value. This commitment is underpinned by our fermentation technologies for traditional Japanese sake brewing and our innovative, cutting-edge biotechnologies. A precise vision bolsters value and leads to growth and development into the future. The Takara Group is engaged in business activities based on the Takara Evolution-100 (TE-100) long-term business concept, which covers the ten-year period from 2001 to 2010. We are dedicated to the vision laid out in TE-100, working to increase real corporate value by enhancing both the economic and cultural value of the Group through evolution in five areas: business results, business operations, management, corporate culture and human values, and social and environmental actions. Realizing this vision will fuel the growth and development of the Takara Group into the future.

By the end of the 1990s, Takara had already become one of Japan's biotech stars and a sought-after partner in the global biotech industry. In 2000, the company began a partnership with the United States' Lynx Therapeutics to develop new DNA microbeads array technologies. The following year, the company began working with Italy's MolMed, which licenses Takara's patented RecroNectin gene therapy technology. These alliances were complemented with a partnership with Nanosphere Inc., based in the United States, and, in South Korea, a joint-venture with Pulmuone to develop and distribute mushrooms in that market, both in 2002. The following year, MolMed granted Takara the exclusive Asian rights for the Italian company's suicide gene and other gene therapies for cancer and AIDS treatment.

With the mapping of the human genome completed in the early 2000s, the biotechnology sector promised explosive growth in the coming years. In Japan alone, where biotechnology had been slow in taking off, this sector was expected to expand by as much as 25 times by the end of the new century's first decade. Takara, which already held the position as the country's market leader, decided that, in the face of the future prospects of its biotech operations and the coming competition in its core beverages businesses, the time was right to restructure its operations.

In 2002, Takara restructured as Takara Holdings Inc., spinning off its operations into two new companies, Takara Shuzo, which inherited the company's larger drinks business, and Takara Bio, which took over its fast-growing biotech division. The new structure promised to enable each division greater operational focus and shortened decision-making times. Takara Bio got off with a bang, making its first acquisition, that of Dragon Genomics Co, an operator of a high-throughput genomic sequence analysis center. Revitalized after more than 160 years in operation, Takara Holding planned to remain a leader in both of its core businesses in the new century.

Principal Subsidiaries

AADC Holding Company, Inc. (United States); Age International, Inc. (United States); Beijing Takara Shuzo Brewery Co., Ltd., (China); Dragon Genomics Co. Ltd.; J&W Hardie Ltd. (United Kingdom); Leo Lab Co., Ltd.; Luc Corp. Ltd.; Shanghai Takara Shuzo International Trading Co., Ltd.(China); Singapore Takara Pte. Ltd.; Takara Bussan Co., Ltd.; Takara Butsuryu System Co., Ltd.; Takara Holding Company (United States); Takara Marketing Business Co., Ltd.; Takara Sake USA Inc.; Takara Yoki Co., Ltd.; Thai Takara Co., Ltd.; The Tomatin Distillery Co., Ltd. (United Kingdom).

Principal Competitors

Asahi Breweries Ltd.; Sichuan Yibin Wuliangye Distillery; Mercian Corporation; Oenon Holdings Inc. Bayer AG; Bristol-Myers Squibb Company; Eli Lilly and Company; Pharmacia and Upjohn Inc.; Novartis Corporation; Clariant International AG; Pfizer Incorporated; Daiichi Pharmaceutical Company Ltd.; Rhodia Recherches; Genentech Inc.

Key Dates:

1842:: A Fushimi-area merchant begins distilling Shochu.
1925:: The distilling business is incorporated as Takara Shozu.
1933:: A sake subsidiary and brand Sho-Chiku-Bai Shuzo are established.
1949:: Takara Shuzo goes public on the Tokyo Stock Exchange.
1950:: The company opens a fermentation research and development center.
1970:: A central research and development facility is established in order to begin production reagents and other biotech research.
1977:: The company launches its new "white" Shucho, Takara Shochu Jun.
1979:: Takara becomes the first Japanese company to develop restrictive enzymes.
1982:: The company begins the export of genetic engineering reagents.
1983:: A U.S. sake brewing and sales subsidiary is established.
1984:: Takara Can ChuHi light alcoholic beverage is launched.
1988:: The company begins sales of DNA amplification products.
1993:: Takara begins production of fruit juice and establishes a biotech research and development and production facility in China.
1995:: A European subsidiary in Paris and Takara Korea Biomedical in Seoul are opened.
1997:: The company launches its patented RetroNectin reagent; begins production of DNA chips the following year.
2000:: ViroMed of Korea is acquired and organic mirin is launched.
2002:: Takara Holdings is established and two new subsidiaries, Takara Shuzo and Takara Bio, are created.

Takara Holdings Inc

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