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Path to Hello Kitty Began
In Tsuji’s Kindergarten;
Learning From Hallmark

By AYAI TOMISAWA
October 15, 2007

Before World War II, birthday-party gift giving among Japanese children wasn’t widespread. One exception was in kindergartens run by Christian organizations.

That’s where a very young Shintaro Tsuji, now 79 years old, says he got the idea that prompted him, decades later, to found the predecessor company to Sanrio Co., today one of the world’s largest purveyors of gift products. He remains president of Sanrio, which profits from a multitude of products, manufactured by itself or under license and imprinted with its cute cartoonish characters, now numbering about 450 and led by a round-faced white cat known as Hello Kitty.

Thousands of different products bearing the Sanrio characters appear around the world, especially in Japan and elsewhere in Asia and in the U.S. They range from clothing, bedding, jewelry and toys to digital cameras, robots, credit cards and stationery. The Hello Kitty characters also are featured at the Sanrio Puroland multistory indoor theme park in Tokyo.

Mr. Tsuji says he didn’t expect Hello Kitty to become such a runaway hit when she first appeared in 1974. Now he says that without her the company wouldn’t have survived. At Sanrio’s headquarters in Tokyo, Hello Kitty is everywhere — on a floor mat, a phone, a DVD player, and on the neckties of male employees. When Mr. Tsuji sat down for an interview with Ayai Tomisawa, he didn’t have on his usual Hello Kitty tie. But he did wear his Hello Kitty watch.

WSJ: What was your first job and how did you start your company?

Mr. Tsuji: I was a civil servant in the Yamanashi government [a prefecture west of Tokyo] for 11 years. I wound up in the commerce department, where I promoted local products. When I talked about launching my own business, my boss thought I was crazy, because civil-service jobs were well respected, with stable wages. But I was determined.

When I founded Sanrio’s predecessor, Yamanashi Silk Center Co., in 1960, the governor and vice governor of the prefecture and some of my friends invested in it. I was thrilled, but because they invested in me I realized I couldn’t mess up.

WSJ: How did you come up with a gift business?

Mr. Tsuji: When I was a child, giving and receiving gifts on birthdays and Christmas wasn’t common. But I attended a Christian kindergarten, where kids exchanged presents on their birthdays as kids do in Western countries. Also, on Sundays we helped bring things to needy people in the community. I learned that gifts bring smiles to people’s faces, and it made me happy.

Years later when I visited the kindergarten my son attended, the memory came back. I asked the kids if they had ever received a birthday present. Only a few had, from their parents. That’s when I knew a gift business could be successful.

Our first gift business was to paint strawberries onto sandals. Sales took off, and I realized that adding value brings in more bucks. So we asked designers to create characters that we reproduced on stationery items, cups and other products.

WSJ: What was the biggest obstacle?

Mr. Tsuji: The royalties we paid to the designers didn’t come cheap. And if we didn’t own the rights to their designs, competitors might emulate our business and mass produce products more cheaply. So we applied for copyrights, and hired our own designers. Sanrio now has 30, who continue to create characters.

WSJ: Who gave you the best business advice?

Mr. Tsuji: Joyce C. Hall, the founder of Hallmark Cards Inc. Back in the ’60s, the products of our two companies often were placed side by side in department stores in Japan. Exchanging gifts still wasn’t common in Japan, so Hallmark’s greeting-card business wasn’t successful. Mr. Hall invited me to his headquarters in Kansas City in 1969, and praised our gift-giving business. He said that attaching a card to a gift was a more polite thing to do, and asked me to be the distributor of Hallmark cards in Japan.

I was skeptical because a card is just a piece of paper. I doubted it would make a great business. But Mr. Hall convinced me, arguing that unlike gift products, 100 cards could fit in a small box and take up less inventory space. I took a chance, and we began packaging gift products together with cards.

The business wasn’t always profitable. But in the early ’80s, I interviewed elementary-school students again. I asked them if they had received gifts for their birthdays. This time, all of them had, from parents and friends. I realized that exchanging gifts on special occasions had finally taken root in Japanese culture. And I believe that the tie-up with Hallmark contributed to it.

WSJ: What is the toughest problem you face as a manager?

Mr. Tsuji: I have never cut jobs and I probably won’t. But this conviction would contradict the company’s commitment [to shareholders] as a listed company, especially when we are struggling. Our consultants have advised me to cut the payroll to raise operating profit. But a company also has a responsibility to provide a harmonious environment and security for its workers. I believe we can offset our losses by other means.

WSJ: Counterfeit Hello Kitty products from China and elsewhere must be costly to Sanrio. What is the company’s policy on copyright infringement?

Mr. Tsuji: We are taking appropriate measures against product piracy. But we want to do it in a harmonious way. China is still developing copyright legislation that, I believe, will eventually meet international standards.

WSJ: Hello Kitty debuted in 1974, and you can assume its fans are aging as well. Do you plan to target older generations?

Mr. Tsuji: We already have items lined up for older fans. For example, we have nursing-care items, canes, reusable shopping bags and so on. I am hoping that Hello Kitty will continue to appeal to people in all generations.

WSJ: What do you do in your free time?

Mr. Tsuji: I like to write books [16 so far, ranging from fairy tales to business]. I also like to go to our Puroland amusement park and interact with customers.