--- title: "Why Yakult, a Company That 'Doesn't Strive for Progress,' Sells 7.5 Million Bottles a Day?" description: "Yakult, a Japanese probiotic drink brand, has been selling in China for 55 years with a single product and minimal packaging changes, achieving daily sales of 7.5 million bottles in China. Its success stems from a focused product strategy, innovative 'Yakult Lady' home delivery model, and strong brand loyalty." author: "翁怡诺" publisher: "New Distribution" email: "zhaobo258@gmail.com" telephone: "+8615854817671" published: "2020-07-11" language: "en" canonical: "https://xinjignxiao.com/en/articles/why-yakult-a-company-that-doesn-t-strive-for-progress-sells-7-5-million-7b399c4c/" markdown: "https://xinjignxiao.com/en/articles/why-yakult-a-company-that-doesn-t-strive-for-progress-sells-7-5-million-7b399c4c.md" original_source: "https://mp.weixin.qq.com/s/nR4JhvaArPkvI680h7UPpA" translation: "https://xinjignxiao.com/zh/articles/%E4%B8%8D%E6%80%9D%E8%BF%9B%E5%8F%96-%E7%9A%84%E5%85%BB%E4%B9%90%E5%A4%9A-%E4%B8%BA%E4%BB%80%E4%B9%88%E8%83%BD%E6%97%A5%E9%94%80750%E4%B8%87%E7%93%B6-7b399c4c.md" attribution: "New Distribution — https://xinjignxiao.com/en/articles/why-yakult-a-company-that-doesn-t-strive-for-progress-sells-7-5-million-7b399c4c/" usage_policy: "https://xinjignxiao.com/ai-policy.txt" --- # Why Yakult, a Company That 'Doesn't Strive for Progress,' Sells 7.5 Million Bottles a Day? > Yakult, a Japanese probiotic drink brand, has been selling in China for 55 years with a single product and minimal packaging changes, achieving daily sales of 7.5 million bottles in China. Its success stems from a focused product strategy, innovative 'Yakult Lady' home delivery model, and strong brand loyalty. **Click to read the original article for details** A company that develops only one yogurt brand, not only stands firm in the ever-changing business world, but is also about to become a century-old enterprise? That's right: Have you had your Yakult today? Since entering China, Yakult has been selling well for 55 years. A single product, with packaging unchanged for decades, not only hasn't declined but is thriving, earning the nickname 'One Red Bottle Conquers the World.' How did it achieve this? Yakult is a well-known Japanese active lactic acid bacteria beverage brand. The brand was founded in 1935 by Dr. Shirota and has now been around for 88 years. Today, Yakult factories are spread across more than 30 countries and regions worldwide. According to Yakult's 2018 financial report, revenue reached 378.1 billion yen, an 11.4% increase from the previous fiscal year's 339.3 billion yen. Currently, Yakult sells over 40 million bottles daily worldwide, with domestic Japanese sales at 9.543 million bottles per day. Yakult's key financial indicators in recent years are shown below. Source: Standard & Poor's Financial Database **-01-** **Brand Development Path** **1. Three Core Philosophies at Founding** Yakult founder Dr. Shirota proposed three ideas at the company's inception, which later became the three core management philosophies. **The first philosophy is the product's 'disease prevention' function:** The company emphasizes that a healthy gut leads to a longer life, and Yakult, with its intestinal regulation function, is undoubtedly a delicious and healthy product. **The second philosophy is 'a price anyone can afford,'** which the company calls Shirota-ism, viewing reasonable pricing as the foundation of sales. **Additionally, Yakult hopes to quickly provide high-quality products to target customers by building local factories,** a strategy rooted in Dr. Shirota's philosophy of 'sincerity' and 'harmony among people.' It's clear that from the start, Yakult understood the need to instill preventive medicine concepts in consumers, leveraging its specialized function and refining its gut-health benefits to attract consumers. At the same time, Yakult's localized operations and a company culture full of sincerity and harmony resonated with more Japanese consumers. **2. Steady Progress for 30 Years** Yakult is a typical Japanese company: low-key, with excellent product quality, and deeply rooted in Japan. Since its inception, Yakult has shown considerable commitment to its home market. In 1940, Yakult established the 'Shirota Protective Bacteria Association' across Japan. Since its founding, the association has educated consumers, fundamentally building product recognition. This was a very forward-thinking idea at the time, allowing Yakult to rapidly accumulate a loyal customer base in Japan. Subsequently, Yakult realized that while educating consumers, its own technological R&D was the true core barrier. Therefore, in the 1950s, the company established the Yakult Kyoto Research Institute to begin in-depth research on intestinal bacterial strains suitable for humans. Over decades, Yakult built an unshakeable bacterial culture system. From 1935 to 1964, Yakult did not step outside Japan, partly due to the negative impact of World War II, but the company remained committed to its original focus on the domestic market. **3. Steady Overseas Expansion** In 1962, Japan's Kanto Yakult Co., Ltd. cooperated with Taiwan, China, to plan the International Fermented Milk Industry Co., Ltd., and began selling Yakult products in the Taiwan market for the first time. Taiwan was Yakult's first overseas and first Asian development region. In 1964, the first overseas subsidiary, Taiwan Yakult Co., Ltd., was officially established in Taiwan, producing and selling only 100ml glass-bottled Yakult. In 1968, Brazil in South America began selling Yakult, switching to new plastic bottle production. In 1969, Yakult established its third overseas subsidiary in Hong Kong, China – Hong Kong Yakult Dairy Products Co., Ltd. Subsequently, Yakult was sold in multiple Asian countries and regions, such as South Korea (1971), Thailand (1971), the Philippines (1978), Singapore and Brunei (1978), Indonesia (1980), Malaysia (2004), and in China: Guangzhou (2001), Shanghai (2004), Beijing (2006), followed by broader urban areas in China, as well as India (2005) and Vietnam (2006). Notably, for 44 years starting from 1962, Yakult did not truly venture beyond Asia, except for the Brazilian market, slowly expanding its presence in Asia step by step. Currently, Yakult sells about 26 million bottles daily in Asia; excluding Japan, Indonesia sells about 5.8 million bottles daily, and China (including Taiwan and Hong Kong) sells about 7.5 million bottles daily. Initially, Yakult used glass bottle packaging. It wasn't until the 1970s that, to ensure product hygiene and align with modern production processes, it began using and producing the familiar polystyrene plastic bottles, which are still used today. **4. Yakult's Last-Mile Solution: The 'Yakult Lady' Model** The 'Yakult Lady' model is a home delivery service model pioneered by Yakult in Japan. These community salespeople are friendly housewives, and their delivery range is a one-kilometer circle centered on their homes. These individuals serve dual roles as logistics personnel and community sales representatives. Their duties include scheduled home delivery, introducing product functions, conducting consumer education, and maintaining customer relationships. In Japan, 'Yakult Ladies' have become a core channel in Yakult's sales system, alongside traditional channels like supermarkets. For example, in fiscal 2018, 'Yakult Lady' sales revenue accounted for 51.4% of total sales in Japan, while supermarket channels accounted for 48.6%. To ensure each 'Yakult Lady' has a stable income, the company stipulates that only one 'Yakult Lady' is allowed per area. In addition to a base salary, Yakult rewards 'Yakult Ladies' with about 50% of profits each month. In overseas markets, this community-specific channel also exists. Currently, in places like Mexico and Indonesia, community sales account for about 45% of total sales revenue. According to internal company surveys, 'Yakult Ladies' in Southeast Asia earn incomes comparable to white-collar workers, and some outstanding ones even earn more. By ensuring community salespeople's income, these middle-aged women remain loyal to the company, provide the best service they can, and convey the benefits of Yakult to consumers, helping the company improve marketing returns. In terms of delivery, these community salespeople deliver on time regardless of weather, showing high loyalty and passion for their work. This geographically-based, human-connected delivery model is highly forward-thinking, reminiscent of the community fresh food group buying that is very popular in China today. First, both are based on geographic location, whether it's the 'group leader' in community group buying or the 'Yakult Lady,' both can cover a one-kilometer delivery radius. Second, both maintain high-connectivity with consumers: retaining consumers through various social methods and enhancing stickiness. **However, compared to the fiercely competitive community group buying, Yakult already enjoys high consumer loyalty and product recognition. On this basis, through the 'Yakult Lady' community model, it firmly locks in its consumers.** Compared to professional community group buying leaders, 'Yakult Ladies' from the grassroots are more familiar with how to communicate with consumers, especially since Yakult products differ from broader fresh produce; promoting health concepts is the core of product marketing. The mothers' personal example can make other consumers trust more and generate more identification. According to company data, an average person can only complete 70 bottles a day, but a friendly 'Yakult Lady' can secure over 150 subscribers. **5. Yakult's Real Success Secret: Perfecting a Single Product** For over 80 years since its founding, Yakult has insisted on promoting the same product overseas: the classic 100ml Yakult drink. Domestically, Yakult has launched other flavored drinks, ice cream, potato chips, and even hand cream. But in the minds of global consumers, Yakult's only representative product is the classic 100ml bottle. These products are adjusted according to regional consumer preferences, such as sugar content and formula, but the 100ml packaging and product style have deeply entered the hearts of global consumers. From a product positioning perspective, Yakult has a clear positioning for its 100ml bottled drink: a probiotic beverage beneficial for gut health. Consumers get both taste satisfaction and health benefits – killing two birds with one stone. In terms of single-product marketing, since Yakult only sells a single product category, it reduces the pressure of shelf placement for merchants. At the same time, Yakult's highly distinctive red packaging makes the product stand out. Compared to other lactic acid bacteria products, Yakult also has a very unique taste. It can be said that from the product side, Yakult successfully differentiates itself from competitors. Consumers can recognize Yakult products at a glance. In 2002, after 50 years in Taiwan and Hong Kong, Yakult turned to mainland China. It wasn't the best timing, as the Chinese dairy industry at that time generally pursued multi-channel and massive product line strategies to seize market share. For example, Yili had over 100 product categories including ambient milk, yogurt, frozen food, and dairy drinks, with thousands of specifications; Mengniu and Guangming did the same. After entering the market, Yakult focused solely on promoting the 100ml red-bottle low-temperature lactic acid bacteria drink. After starting sales in Guangzhou in 2002, Yakult set up sales points in Shanghai and Beijing, then quickly expanded to coastal areas. Ten years after entering China, Yakult began to conquer inland regions, including major inland cities like Wuhan, Xi'an, and Changsha. As of December 2018, Yakult sold over 7.4 million bottles daily in China through home delivery and retail channels, with a 10-year compound annual growth rate of 24.9% (see figure below). Yakult's average daily sales in China (bottles/day) and channel share (2002–2017) Source: Yakult Annual Report In Japan, Yakult lacked Snow Brand's strong technical capabilities; in South Korea, it lacked Namyang Dairy's strong product portfolio; in Taiwan, its capital investment was not as strong as Wei Chuan's; in mainland China, Yili and Mengniu had already started in the lactic acid bacteria field. Despite being an old brand with many years of history, even a pioneer in the lactic acid bacteria category, Yakult had to start from scratch when entering other regions. Under such unfavorable expansion conditions, Yakult still succeeded, with considerable growth in sales across regions. This success is inseparable from its 80-plus years of steadfast adherence to corporate culture and replication of the single-product strategy. **6. Lactic Acid Bacteria Industry Analysis** Lactic acid bacteria products are highly categorized and finely differentiated, such as yogurt, probiotic drinks, and active bacteria products like Yakult. According to research, in 2018, Japanese lactic acid bacteria drinks held only a 2% market share in the entire beverage market (see Figure 9-29). This category is relatively special compared to other beverages. The selling point of this category is efficacy, such as treating colds, regulating weight, and preventing diseases. In terms of sales, this category often relies on proactive selling or attaching to common food sales for market education, unlike carbonated drinks, coffee, mineral water, and other beverage categories that consumers actively purchase without much market education. The low market share in beverages can be considered a category characteristic of lactic acid bacteria products. In recent years, research shows that due to rapid global population growth and increased health awareness, the compound annual growth rate for the entire lactic acid bacteria beverage category is expected to be 8%. By around 2030, the foreseeable global consumer market population is 1.5 billion, compared to 50 million in 2000 – explosive growth. 2018 Japanese beverage market share distribution Source: Hongzhang Capital Research Under current circumstances, Yakult's achievement of selling about 9.5 million bottles daily in Japan is excellent. Currently, Japan's lactic acid bacteria products sell about 37.5 million bottles daily, meaning one in every four lactic acid bacteria drinks sold is Yakult, demonstrating Yakult's position in the Japanese beverage industry. **-02-** **Financial Analysis** In fiscal 2018, Yakult's revenue was $3.781 billion, up 6.1% from the previous year (see Figure 9-30). Growth in Japan and other Asian regions was the main driver of revenue growth. Compared to fiscal 2017, revenue in Japan increased by 3.2%, and revenue in Asia and Oceania increased by 5.2%. In markets other than Japan and Indonesia, Yakult's main marketing method is in-store sales. Due to differing legal policies on community group buying across regions, the 'Yakult Lady' model popular in Japan may not be applicable elsewhere. However, thanks to Yakult's outstanding product design and corporate philosophy, sales revenue is currently showing a good upward trend. Yakult's operating revenue and growth rate (2009–2018) Source: Standard & Poor's Financial Database From a revenue distribution perspective, Japan and Asia dominate completely, being Yakult's largest global markets. Currently, Japan accounts for 53% of sales (see Figure 9-31), reflecting the company's core philosophy of 'thorough localization.' According to the company's annual report, Yakult will not reduce its focus on Japan in the future and will develop more new products domestically. At the same time, other Asian regions, being closer to Japan with similar consumer habits, are also major operating areas. Currently, markets like China and Indonesia have revenue growth of around 4.5%. Yakult's regional sales share (%) Source: Yakult Annual Report **-03-** **Competitor Analysis** In fiscal 2017, Yakult's net profit was $270 million, with a net profit margin of 8% and a gross margin of 56.7%. Over the past 10 years, while gross margin remained stable, net profit margin steadily increased, mainly due to Yakult's gradually improving R&D system. Compared to fiscal 2016, R&D expenses in fiscal 2017 decreased by about 3 billion yen. The reduction in R&D expenses is not because Yakult stopped developing new products, but because the company decided to stop research on some marginal topics and shift to life science research to better contribute to consumer health. In contrast, Taiwan's beverage giant Wei Chuan, with a broader product line, has not performed well. Wei Chuan's gross margin has been declining year by year, with clear signs of market share loss, incurring losses for three consecutive years from 2014 to 2016, only turning around in fiscal 2017. Yakult's selling expenses have remained relatively stable, thanks to the 'Yakult Lady' system and the single-product strategy. **However, salary expenses are relatively high; nearly 100,000 employees worldwide bring in substantial revenue but also generate massive salary costs.** According to the 2019 financial report, wages and allowances currently account for about 10% of operating revenue. In contrast, Wei Chuan's expense ratio is much lower, but given its consecutive years of poor performance, cutting expenses is reasonable. In terms of EBITDA margin, sustained revenue and net profit growth ensure the continuous improvement of both companies' EBITDA margins. Specific data is shown below. Comparison of sales and administrative expense ratios and EBITDA margins between Yakult and Wei Chuan (2008–2018) Source: Standard & Poor's Financial Database Yakult, with numerous factories worldwide, has a heavier asset model. Compared to Wei Chuan, maintaining a positive return on assets is already commendable. In terms of return on equity, Yakult has also maintained a steady increase. Specific data is shown below. Comparison of return on equity and return on assets between Yakult and Wei Chuan (2008–2018) Source: Standard & Poor's Financial Database In inventory turnover, Yakult's performance is very stable, with a continuous decline over the past 10 years. In contrast, Wei Chuan's inventory management is relatively poor. Looking at accounts payable days, long-term stable relationships with upstream and downstream partners have kept Yakult's accounts payable days consistently stable. In Taiwan, Wei Chuan, as a dominant player, can also secure shorter payment terms. Specific data is shown below. Comparison of inventory turnover days and accounts payable turnover days between Yakult and Wei Chuan (2008–2018) Source: Standard & Poor's Financial Database **-04-** **Stock Price and Valuation** Yakult's stock price hit a low point in 2017, mainly affected by questions about whether its products are truly healthy and news about excessive sugar content. In 2018, Yakult adjusted its strategy in time, continuously launching products with lower sugar content and increasing investment in human health research, which quickly recovered the stock price (see figure below). Yakult stock price trend (2008–2018) Source: Google Finance The secondary market is very optimistic about traditional companies like Yakult that adhere to a single category and possess excellent R&D capabilities. The P/E ratio has remained at a good level, reaching 31.82 times at the end of 2018. The P/S ratio has also steadily increased, from 0.97 times in 2008 to 3.07 times now (see figure below). Compared to Yakult, Wei Chuan's P/E ratio has fallen to around 7 times in recent years, with P/S ratio staying between 0.5 and 0.7 times. The secondary market is very pessimistic about Wei Chuan's recent operations and financial indicators. Yakult's P/E ratio and P/S ratio (2008–2018) Source: Standard & Poor's Financial Database **-05-** **Summary and Insights** Yakult's long-term growth drivers are as follows. **First, product side:** Category pioneer, single product conquers the world, strong economies of scale. Functional positioning, long product life cycle, has become synonymous with the category, enjoying high premiums. **Second, channel side:** Overseas markets primarily use retail channels and the 'Yakult Lady' channel, eliminating middlemen to increase profit margins. Overseas markets have large space; penetration rate improvement combined with systematic price increases drives overall group revenue growth. **Third, innovative 'Yakult Lady' model:** 'Yakult Ladies' are equivalent to a combination of delivery and direct sales, responsible for home delivery, introducing product functions, consumer education, and maintaining customer relationships, similar to the small B in the S2B2C model, and are an important sales channel for the group. However, the 'Yakult Lady' model contributes only 10% of revenue in China, while the average overseas is about 50%. The reason is that Chinese consumers are more resistant to door-to-door sales, and China's developed delivery industry also plays a substitute role. Source: Book: "The Future of New Brands" Publisher: Cheers Publishing / Tianjin Science and Technology Press --- ## Copyright and AI use This article is sourced from New Distribution. 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