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The Lion Toothpaste elephant. Boonsithi's company in the 1950s had to come up with novel marketing strategies to fight Colgate's hold on Thailand's toothpaste market.
Boonsithi Chokwatana

In-the-factory lessons from Lion: Saha Group chairman's story (9)

Reacting to import tariffs by building a shampoo powder packing plant

Boonsithi Chokwatana | Thailand

Boonsithi Chokwatana is the Chairman of Saha Group, Thailand's leading consumer products conglomerate. This is part 9 of a 30-part series.

After six years in Osaka, I returned to Bangkok in 1960. Saha Pathanapibul was doing well, but no work was assigned to me. "Do what you want," my father told me.

So the following year I decided to work at a new factory that packed shampoo powder, made by Lion, a big Japanese toiletries manufacturer, into containers.

This encounter with Lion and the onward development of trust would play a decisive role in the future of the Saha Group.

It goes back to 1955, when I had returned to Thailand temporarily from Osaka to renew my visa. Receiving a call from Japan that someone from Lion Toothpaste was coming to visit, my father ordered me to drive to Don Mueang Airport to pick him up.

Back then, Lion Toothpaste and Lion Fat and Oil, a soap and detergent manufacturer, were separate companies. They merged in 1980 to form the Lion we know today.

In the lobby at the airport waited Mr. Atsushi Kobayashi, who later became the president of Lion Toothpaste and then the first president of Lion. Only about 30 years old at the time, he was on his way home and arriving via London after finishing his studies in the U.S. He had decided he wanted to see what Thailand was like.

In those days, the Kyoko district of Osaka was becoming famous as a gateway for exports, and it seemed that Kobayashi-san had decided to visit us through that connection.

After hitting it off with Kobayashi-san, my father ordered more than 2,000 tubes of toothpaste.

They did not sell well as Colgate from the U.S. was overwhelmingly popular in Thailand. The Lion toothpaste did not foam well, and it took months to sell all of the tubes.

Nevertheless, wanting to nurture the relationship, my father asked me to visit the factories of Lion Toothpaste and Lion Oil and Fat, which Kobayashi-san introduced to us upon my return to Japan. My father himself also visited the factories in Japan several times.

My father was considering importing and selling powder shampoo in Thailand. In those days, Thailand was behind in paving its roads. Especially in rural areas, dust and sand would kick up wherever one went, and for this reason, Thais' hair was called "red hair." Many people used powdered dish or laundry detergent to wash their hair, which of course was not safe.

The only powdered shampoo available in Thailand then was Kao's Feather.

When I was in Osaka, I brought a sample my father had sent to Lion Fat and Oil and asked if they could make a similar product.

The answer was "Yes." We placed an order for 12,000 boxes a month, which sold very well. We doubled and doubled the order.

Initially what we imported and sold were mainly finished products, but with Thailand's economic structure beginning to change, we had to change our ways of business.

When I returned to Thailand in 1960, the government enacted a law to promote investment, and it raised import tariffs to encourage industrialization through import substitution. The tariff on powdered shampoo rose to 70% from 50%. At that rate, we could not make a profit; the products would not sell if we passed on the price increase to consumers.

What I suggested was that we pack the containers ourselves. If we bought the products as "raw materials" the tariff would only be 30%. By further dividing the products and turning them into finished products, our margins would not drop and there would be no need to raise prices.

We had zero experience in manufacturing. Lion Fat and Oil sent engineers to our plant, which was fully funded by Saha, and provided detailed guidance on everything from construction, the layout of the production line, and how to mix the fragrances for filling the containers.

We later caught up with Kao Feather in market share.

I slept in the factory and rarely went home. Although I had no job title, I assume the other employees knew I was the owner's son.

After learning a great deal about the practical reality of trade during my time in Osaka, then packing the powdered shampoo by our own hands, I gained the kind of on-the-ground knowledge of production that would be essential for Saha's next big step.

This column is part of The Nikkei's "My Personal History" ("Watashi no Rirekisho") series of autobiographies. The series first appeared in The Nikkei in 1956. Since then, a wide variety of world-changing individuals have written or dictated their life stories for publication.

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