Smile! It’s ‘Sanrio Time,’ now and ever after

It is hard for a company to be idealistic and profitable at the same time. But Sanrio Co. is achieving both goals, on a surprising scale.

The Japanese gift product company, known for its Hello Kitty character and theme park Sanrio Puroland, respects philanthropic ideas, declaring that its corporate vision is “One World, Connecting Smiles.” And it made record profits in the last business year, boosting its share price to the highest ever. Its market value is well over the ¥1 trillion ($6.5 billion) that it once said was its goal.

“Our company has very strong momentum right now,” said Aya Komaki, the president, CEO and chief design officer of Sanrio Entertainment Co., a Sanrio group company operating Sanrio Puroland in the western Tokyo city of Tama and Harmonyland in Oita Prefecture, during a recent interview, part of a monthly series by Naonori Kimura, a partner for the consulting firm Industrial Growth Platform Inc.

But the path toward getting this far was not effortless for either the company or Komaki herself.

As Hello Kitty’s global popularity gradually lost steam in the 2000s, Sanrio’s profits declined for seven years in a row. In 2020, the COVID-19 pandemic hit the business further at character goods stores and theme parks. In the business year that ended in March 2021, it posted a net loss of ¥3.96 billion.

The founder and president, Shintaro Tsuji, had passed the baton to grandson Tomokuni Tsuji in 2020, and Komaki had been appointed to her current position a year earlier. Sanrio announced a new three-year management plan through March 2025. To limit volatility in its financial results, it outlined three major steps, including expanding its base for global growth by improving its human capital and making good investments and strategies. It also aims not to rely solely on Hello Kitty-related sales but to widen its intellectual property portfolio by developing other popular characters and taking new steps for monetization through, for example, games, virtual events and other digital services.

“After we experienced repeated ups and downs in our financial results, [Tomokuni] Tsuji said we won’t post a sharp drop anymore, even if the pace of our growth slows down. To that end, we compiled the strategies,” Komaki said.

The company showed a sharp recovery from the losses incurred through the temporary shutting down of stores and the theme parks because of the pandemic. After overseas and domestic tourists returned, Sanrio’s group sales in the business year that ended in March 2024 rose 37.7% from a year earlier to ¥99.9 billion and its operating profit rallied 103.5% to ¥26.9 billion. That performance has boosted the share price. The price-to-book ratio, which many listed Japanese companies struggle to push above 1.0, stood above 20 as of mid-February.

Komaki also quoted Tsuji as saying that the record profits were not just due to the company’s strength, but also to external factors such as the end of the pandemic, the recovery of inbound tourism and the growing digital transformation.

Komaki herself went through a series of adversities before taking the post. After she started to work at Sanrio as a new graduate in 1983, she then left the company for family reasons and subsequently suffered the loss of one of her sons, divorce and cancer treatment before returning to the company after decades.

One thing Sanrio can say for sure is that its underlying strength comes from its belief in its philosophy, “Minna Nakayoku” (“Getting Along Together”). That might sound a little odd for a corporate philosophy, but the phrase is the theme of Sanrio Puroland’s musical parade performances and theatrical plays with a touch of kabuki. In the Miracle Gift Parade, the “Queens in the Dark” appear and disrupt Sanrio characters’ happy times and friendships, but after being touched by the characters’ warm hearts, they become friends in the end.

“Of course our philosophy has a very strong influence on us,” Komaki said. “We always stop and think about why we are in business, how many customers we made smile today, or how many smiles our business will be able to bring.” She added that the company calls the times when it makes its customers and workers smile “Sanrio Time.”

The corporate philosophy originates from the founder’s childhood experiences during World War II. He saw, among other things, the body of a mother covering her baby following an air raid and started to wish for peace in the future, Komaki said. Two years after he launched a silk business in 1960, he started to sell products with an original strawberry design — something intrinsically cute that could make people smile — and later added animals and other characters to the lineup.

“At first, Tsuji maintained that it was a ‘social communication business’ by retailing gifts that could be exchanged among people,” Komaki said. Sanrio started selling greeting cards and then broadened into movies, publications and restaurants.

In 1990, it launched its first theme park because Tsuji had started to think it was time to focus more on experiences rather than goods after the flourishing economy had made people materially content. Sanrio Puroland features attractions, live shows, shops and restaurants dedicated to Sanrio characters including Hello Kitty, My Melody and Cinnamoroll.

The unexpected boom in the popularity of Hello Kitty abroad in the early 2000s prompted Sanrio’s license business and entry into global markets, first in the United States and then Germany, South America and elsewhere in Asia, Komaki said.

“In that sense, we are not pursuing profits or aiming to make our business bigger by buying out other companies. We truly focus on ‘Minna Nakayoku’ and think about what might be the missing pieces for realizing that purpose. That way of thinking leads to new targets and new business,” Komaki said.