Celebrating the Japanese Pencil Industry

Sometime next week, tentatively on November 2nd, we’ll be introducing a few select items from two Japanese brands on Pencils.com; Kitaboshi Pencil Company and Tombow. The selection includes several great items for the holiday gift giving season. You can learn more about those specific items in an upcoming Studio 602 story early next week. This expansion of brands at Pencils.com is a part of our continuing effort to introduce more of the products of our pencil slat customers’ from around the world. This allows us to increase the breadth of great high quality pencil offerings on Pencils.com, some of which are not readily available or well known in the U.S. Market. It also helps increase awareness and appreciation of some great pencils and of the wood-cased pencil in general. Given our close relations as a wood slat supplier to many producers around the world, we hope to continue growing our offering mix quite a bit over the next year. This week also marks my annual visit to Tokyo to visit a number of our pencil slat customers and to work with our Palomino and Blackwing producer about production planning and product development for new pencil items we expect to introduce in 2012. Most notably a Palomino quality, private label pencil program, though we’ll share more about this in the coming months as that program moves closer to launch. The Japanese Pencil industry is probably one of the most interesting domestic pencil industries in the world. Relatively young by comparison to its European and US counterparts with several brands dating back 100+ years, most Japanese production and development of wood-cased pencils began in the post World War II era. Over the past 20 years the industry has been subject to many of the globalization pressures faced by other developed western markets it also faces an extra challenge of demographic trends; a declining and aging population which means the consumption of pencils in Japan is actually declining year to year and has been for some time. Japan is the highest cost pencil production market in the world which is reflected in their prices. As a result very little exportation of Japanese wood-cased pencils is occurring, so the local market dictates overall production trends domestically. (In fact Pencils.com with our Palomino and Blackwing products and more Japanese pencils coming may be one of the largest volume export distributors to North America already.) Despite these trends the Japanese production supply chain remains relatively intact and traditional without the degree of radical makeovers of mergers, acquisitions, or the extent of off-shoring production that the industry has witnessed in North America and Europe. Yes, there are certainly fewer producers over time, with several dropping out over the pat few years, but the basic structure has been relatively static. Also taken in context of relative market size vs. Europe and North America there are actually proportionately more Japanese companies actively involved in the production of pencils and pencil components in Japan today than in these other regions. Why is this? Several factors contribute. First, Japan is a high quality and brand loyal market with consumers who understand the difference between good and bad pencils and are willing to pay the difference. The 100 yen pencil is quite common and Beyond the major brands, Mitsubishi with its Hi-Uni and Tombow with it’s Mono, there has long been a unique demand for specialty pencils that also give a collectibles status such as “Character Pencils”, popular Disney, Pokemon and Anime characters licensed to either a pencil producer or a marketing company that contracts a local producer to produce their pencils. “Game Pencils” which treat the 6 sides of the pencil as a sort of die which children can roll against one another and win each other’s pencils. And a whole range of designer theme pencils. Such innovations were first made popular in the Japan before being adopted by some US companies focusing on the school pencil market as they attempted. Even if a marketing company has the rights to a character they most generally still use a Japanese sub-contractor for quality reasons and there have been a few lessons learned about the expectations of the Japanese consumer when the quality of an imported character pencil was not up to par. In the US, more and more of such license or designer theme pencils are imported by marketers from lower cost manufacturing, with just a couple companies actively producing such pencils in the US today. In Japan all the companies are involved in this segment of the market. Second, the unique structure of the Japanese industry involves a variety of specialist subcontractors, some who only specialize in one or two parts of the manufacturing process, such as wood-working, lacquering and finishing, graphite & color core production or packaging. Larger companies such as Mitsubishi and Tombow and mid tier producers such as Sakamoto and Kitaboshi use these often more nimble or uniquely skilled sub-contractors to meet special processing needs, smaller production run sizes and do quicker turnaround on orders. The character pencil marketing companies as well as some branded pens producers such as Pentel rely entirely on sub-contractors for their wood cased pencil needs. Such a structure helps to shorten the supply chain vs. imported pencils in the changing specialty, novelty pencil market. All of these sub-contractors are small family owned companies operating essentially in a building that co-locates production with their own homes. They are more like traditional artisan workshops than what the average person would picture as a factory. The owners of these businesses are highly skilled and knowledgeable about their business. The extreme care and detail they speak with in discussing the technical aspects of doing this or that operation in the manufacturing process can be a truly amazing experience. Generally their home and factory debt has long been paid off and though their equipment is old and slow they are the best at what they do. Still this industry structure faces several threats which are a factor of both the demographic and competitive globalization trends over time. As the overall market shrinks and largest producers feel pressure from lower cost pencils they tend to keep more production in house to retain their economies of scale, thus slowly squeezing some of the subcontractors out. Mainly, focused on non-pencil products such as pens, markers, correction tape, etc. these companies still feel their pencil business is important and need remain the most efficient volume producers. Some have set up off-shore production of certain pencil components or assembly operations for some products in Vietnam or China, similar to western producers who have gone multi-national in their operations. Over time the mid-tier companies have adapted by focusing on introducing new products to diversify their business away from pencils into complementary novelty items, by broadening their sales distribution channels or dropping certain manufacturing functions to use subcontractors, etc. Finally, as the business owners’ age in the sub-contractor segment, often the 2nd or 3rd generation family members are not interested in continuing with the same passion as their parents, so these businesses also tend to shake out due to lack of management succession or natural selection of a sort. As a wood supplier to the Japanese Pencil Industry for three generations, our company is always conscious of these challenges. We value the close relationships we’ve built with many of these companies and families and salute their commitment to producing the highest quality wood-cased pencils. Adding and promoting more pencils produced in Japan to our Pencils.com offerings is just one small way of supporting these friends in the industry. They produce some of the most unique and interesting novelty pencils in the world and in time we hope to make this collectable segment a larger part of our offering in addition to some of the branded items we’ll be introducing in the coming weeks and months. We hope you’ll help you’ll join us in our Japanese Pencil Celebration event in November at Pencils.com.

3 replies
  1. Matthias
    Matthias says:

    A great blog post, thanks for this.

    There is however one point I disagree with, based on anectodal evidence. You wrote "As a result very little exportation of Japanese wood-cased pencils is occurring". In the 1990s, when I was still living in Germany, Japanese pencils had a big market share, without a doubt biggest market share of imported pencils. My guess would be that in the early 1990s they must have had a market share of at least 30%-50%, at least in the stationery shops in the area where I used to live. I still have many pencils from that time. Funnily enough they were usually only marked "Made in Japan", but did not have the manufacturer's name printed on them.

  2. WoodChuck
    WoodChuck says:

    Matthias, I'm glad you like the post and thanks for your comment. I am guessing the pencils were more design oriented and this is one area that there are still some exports going on to high end stationery and gift shops from smaller companies. However, I think your comment actually helps illustrate my point about the current state of the Japanese Pencil Industry today.

    You refer to the 1990's which is the period that increasing globalization of trade and re-alignment to lower cost manufacturing countries as well as channel of distribution consolidation was just beginning to most impact the pencil industry. Today I have not seen such display space allocation to Japanese wood-cased pencils in German stationery shops, and very few Japanese pencils are being exported there as opposed to other writing instruments they are producing or vs. pencils coming in from China, Indonesia and a few other countries.

    Further the highest volumes of pencils and writing instruments are sold increasingly through other sales channels as the number of traditional stationery shops decline. Thus one should be careful to equate shelf space allocation in certain classes of retail outlets with actual market share of sales. At dinner this evening a Japanese customer affectionately referred to some traditional stationery shops as museums, where many people go to look, touch and feel with fabulous product displays, but then often buy elsewhere.

    Interesting, today I was in Itoya Ginza shop which has 7 floors of stationery and art supply items. In addition to the leading Japanese pencil brands there was even more extensive space allocation to European brands such as Caran d'Ache and Faber-Castell in particular. Somewhat less to Staedtler and Derwent which were also present. No US owned brand pencils were available, unless you consider that Derwent is owned by ACCO. However, I cannot begin to guess what this all means about actual market share of sales in this store. (Please note the comment mentioned above was not in reference to Itoya, which our customer viewed as being aggressive relative to competitive pricing within the Japanese market. I am going to post on my twitter feed a photo or two I took of the Caran d'Ache display. Very nice.)

  3. Matthias
    Matthias says:

    The stationery shops your customer referred to as museums are the best! I wish there were more of them and I don't understand how people then buy elsewhere, especially for low priced items like stationery (we're not talking about TV sets etc here, were you can save a lot of money by ordering the item online).

    Nearly all shops here in Lancashire (and Manchester and Liverpool) that sell stationery are part of a chain, they all offer more or less the same – boring. One of them (Paperchase) does have a lot of Japanese pencils, unfortunately more the novelty kind of pencils, you wouldn't find a Tombow or a Pentel Black Polymer there 🙁

    US pencils are rare, not only in Japan, also in Europe. I haven't seen American woodcased pencils in the UK and Germany. General's Kimberly, which even comes in a box labelled in German, doesn't seem to be for sale in Germany.

    A great idea to sell selected items from your customers in your online shop. It would be great if there was a selection of international pencils from many different countries.

Comments are closed.