DAIO PAPER CORPORATION History

Address:
2-7-2, Yaesu Chuo-ku,
Tokyo
104
Japan

Telephone: (03) 3271-1961
Fax: (03) 3281-2094

Public Company
Incorporated: 1943 as Taio Paper Mfg. Co., Ltd.
Employees: 3,305
Sales: ¥275.40 billion (US$2.03 billion)
Stock Index: Tokyo Osaka

Company History:

The Daio Paper Corporation is Japan's fourth largest paper manufacturer, and controls 6% of Japan's home market. The company produces a full range of papers, including newsprint, sanitary-use papers, and paperboard. Daio, spelled Taio until the late 1980s, has been operated by the Ikawa family since it was established in 1943 in Ehime Prefecture. Although The company's stock has been publicly traded since 1982, the Ikawa family presence is still felt.

Papermaking in Japan has historically been considered something of an art form. Since the seventh century A.D., Japanese papermakers have produced some of the world's finest paper from a wide variety of materials including hemp, mulberry, rice, and other vegetable fibers. Papermaking was traditionally a winter occupation for farmers. Now, papermaking is big business. Machine-made papers began replacing handmade after the Meiji restoration of 1868.

Taio Paper began operations during World War II. The Japanese paper industry enjoyed prosperity based on abundant pulpwood resources in Japan and in Japanese-held territories. Preferred species of trees for pulp included fir, spruce, red and black pine, beech, and hemlock, all of which grew on Japan's home islands. After the war, however, raw materials became much more scarce. Japan lost the southern half of the island of Sakhalin, the Karufuto region, the source of more than half of Japan's pulpwood. Resources from Korea and Formosa were no longer available.

For several years after the war, Japan's paper industry struggled to regain prewar levels of production. In 1950, paper production was only 54% of the prewar level, and tight money hampered capital investment in the industry. Japanese paper manufacturers like Taio were technologically far behind their foreign competitors. U.S. paper mills, for example, used conveyor systems to move logs through the entire pulping process without being repeatedly handled by workers.

Taio's fortunes improved with the industry's by 1953, when prewar production levels were finally met. Cardboard became a major new product; its use rose 20% annually between 1954 and 1964. Total paper production increased fourfold in the same period. By 1964, Japan ranked third, behind the United States and Canada, in paper production. Taio grew rapidly on this wave.

While Japan's paper industry was blossoming in the 1950s and 1960s, its own pulpwood resources dwindled. Imported pulpwood took up some of the slack, but papermakers looked for other options. One twist was the use of synthetics. Japanese manufacturers led the way toward commercial production of extruded polystyrene sheets used as paper. The high quality product had a smooth finish, and was waterproof, and extremely durable. The plastic paper sold for about two-and-one-half times the price of regular paper but was excellent for specific uses. Synthetic paper got a boost from the Japanese government, which provided subsidies for research. By the early 1970s, plastic papers were well established in the Japanese market.

In addition to innovative product development, Japanese manufacturers set out to expand operations overseas, closer to raw material sources. Taio imported woodchips from the United States, Canada, and other countries.

By 1980, Taio felt its dependence on one American company, Weyerhaeuser, was too great. When the price of woodchips escalated in 1980, Taio was prompted to establish greater control of its raw material supply. Taio entered a joint venture with a Japanese trading firm, Marubeni. The resultant Sacramento-based company, The California Woodfiber Corporation, began operations in the summer of 1980.

In the 1980s, patterns of paper use changed along with certain patterns of social behavior. Paper used to publish books, for example, became lighter in weight as the reading public opted for low-priced paperback editions. New technology affected the types of papers used. Demand increased for specialties, like coated papers and photogravure papers. The growth of direct-marketing advertising, such as catalogues and pamphlets, generated increased use of printing paper.

In 1983, Japan's new Law for Structural Improvement of Specific Industries called for a revamping of the paper industry. Taio and other manufacturers were required to dispose of surplus production capabilities. Development of new technologies also became a priority. Supply and demand for paper and cardboard products stabilized as a result of the measures.

By the mid-1980s, Taio found that new technology created new markets. Thermal papers for use in facsimile machines became an important product. In 1987, Taio tallied record profits after three years without profits. The company's rationalization efforts combined with the appreciating yen, allowed Taio to import more woodchips for the same amount of money.

Taio's huge share of the Japanese domestic market resulted in the high profits of 1987. Profits reached new highs again in 1989, and then dipped due to a heavy interest burden from the company's capital expansion. These investments, including a new newsprint machine that came on line in February 1990, promised to pay off handsomely in the 1990s. In fiscal year 1990 Taio Paper Mfg. Co., Ltd. changed its name to Daio Paper Corporation.

Daio Paper followed the trends in international business, taking on a global orientation in the 1980s. In the early 1990s the future of the paper industry was uncertain. Stable markets, like the United States, were seeking less dependence on wood pulp products. New markets were opening up in eastern Europe, the potential of which remained unknown. In the past Daio has proven its ability to adapt to changing market conditions.

Source: International Directory of Company Histories, Vol. 4. St. James Press, 1991.