The 94th Installment
Regional Development through a New Combination of Internal and External Forces
by Hiroaki Itakura,
Professor, Master Program of Information Systems Architecture
What exactly is meant by "regional development"? In his 1912 Theory of Economic Development, Joseph Alois Schumpeter, a pioneering thinker on economic growth theory, proposed that "innovation arises from new combinations." This describes regional development perfectly. Innovation, often rendered as "technological innovation" in Japanese, is not relegated solely to the field of technology. Regional innovations can also happen, and these arise from new combinations of forces internal and external to a locality.
The processed yuzu products of Umaji in eastern Kochi Prefecture are a successful example of this. The mountain village of Umaji, with a population of only 900, is a two-hour drive east of the city of Kochi, 20 km up the Yasuda River from the Pacific Ocean. It's difficult to pass buses on the winding, single-lane road. The area is about 96% woodland. Yet as inaccessible as it is, the village sells this inaccessibility as a positive. Perhaps because of this, since the 1990s it has grown quickly and now yields annual sales of ¥3.3 billion while having created close to 100 jobs. The local agricultural cooperative handles around 70 types of original products made with yuzu (citron) such as a yuzu-flavored soy source named Yuzu no Mura and the yuzu beverage Gokkun Umaji-Mura. The village is still working on new initiatives.
While yuzu has been grown in Umaji since the Heian period, it is always challenging to harvest them intact. This is because there are not many slopes well-suited to growing yuzu in this mountainous region, and because the fruit is easily damaged by the thorns on its own branches. Moreover, population aging has advanced here sooner than in other regions, and nearly every member of the village's elderly population is now a part-time farmer unable to spend much time on harvesting. In the early years when the Umaji brand was little known, misshapen or damaged yuzu rarely sold until they were heavily discounted, making yuzu business largely untenable.
But because no pesticides were used and the fruit tasted good, growers had faith in their products. Thus, growers adopted a strategy of selling yuzu in processed products rather than as raw fruit. However, unlike for raw produce, processed product prices are not determined by compliance with standards. Umaji growers therefore needed to sell such products themselves.
How did a small village in such an inaccessible region make a success of its yuzu processing business? Growth in this case was driven by a new combination of internal and external forces.
At a time of decline for the village's local forest industry, renowned for its production of Yanase Cedar, concern for the village's future prompted Mochifumi Totani, an Umaji native returned from Kochi city and the current president of JA Umaji Agricultural Cooperative, to make a new industry centered on processed yuzu products. Success has since come from the joining of new external forces with the internal forces of Totani's leadership and local residents’ dedication.
The joining of internal and external forces was largely due to the full-scale acceptance of external forces, which is based on exchange with external organizations via a long-running logging railroad in the region. This backdrop is what led the village away from simply developing and selling products and towards selling itself as a product.
To participate, these external forces needed to have an attachment to the locality. In 1988 the village signed an agreement with Ark Institute after receiving prize money from the 101 Exhibition put on by Seibu Ikebukuro, a major department store in Tokyo. The agreement resulted in a golden triumvirate, still in existence today, that centers around the passion of Totani for turning Umaji into a populous village and consists of Ark Institute and two new outside forces in the form of planner and copywriter Ryozo Matsuzaki and Yasuaki Tagami, a product and marketing media art designer.
The name for the drink product they developed, Gokkun Umaji-Mura, took several months to come up with and reflects a regard for the village. The strategy of "selling a product" shifted to "selling a village" — an idea inspired by outside forces that sought to turn the entire village of Umaji, including the way people lived there, into a brand.
By selling the story of how people in the village live, Umaji has taken on its own "site-specific story." Umaji's marketing pamphlets feature not young female models but volunteer child and elderly residents. Gokkun Boya (gulping young boy), designed as part of the Gokkun Umaji-Mura yuzu drink label, has become a mascot that appears not only on other yuzu products but also tourist site and official village leaflets. The Gokkun Boya that Tagami continues to depict functions as a corporate identity that sells a unified image of the village.
The activities of agricultural cooperatives engaged in yuzu business have been taken up by even the local government. One example of this is Umaji's implementation of its Honorary Village Resident[BC1] program. Currently, some 10,000 fans of Umaji — more than 11 times the population of the village proper — have been registered as honorary residents. These people often visit the village and have galvanized the hot springs, logging railroads, and other parts of the region's tourism industry. And while a natural population decline continues to occur due to aging, young people have come into the area, whether migrating from the city or returning to their hometown from urban life.
Umaji has a yuzu processing plant built with Yanase Cedar called Yuzu no Mori and the plant houses a juice extraction factory, bread bakery, and retail shop. Publicly available for tours, it is visited every year by more than 10,000 people across the country who enjoy Umaji's mail-order products. The plant is also passionate about product development and has been expanded with another factory that produces cosmetics made from yuzu. Although it once outsourced part of its cosmetic production and development, it now handles all such functions in-house — a unique achievement among agricultural cooperatives in Japan. The plant is also conducting joint research with a university with an eye to providing further added value.
The village's yuzu business activities even stimulated growth in other industries. Ecoasu Umaji-mura, a semi-public enterprise, was established as a means to revitalize the forest industry. Monacca, a brand of handbag made using Yanase Cedar, has been on display at international trade fairs held in countries like Germany, the U.S., Italy, and France, and has even been sold at New York's Modern Museum of Art. Even in these endeavors, the strategy of selling the village of Umaji was employed.
Schumpeter called those who made innovations "entrepreneurs." Entrepreneurs who configure factors of production into new combinations and thereby create new businesses are needed both inside and outside of localities.
Mail-order sales account for more than half of Umaji's total sales. While Yuzu no Mura and Gokkun Umaji-Mura products are available at supermarkets nationwide, mail-order provides a wide variety of gift sets for mid-year and year-end gift giving. Purchase one of these gift sets and you can look forward to also receiving a catalog filled with folksy illustrations by longtime contributors Matsuzaki and Tagami, as well as the Yuzu no Kaze newspaper, which talks about current events in Umaji using the language of Kochi. For small and medium enterprises in localities where cultivating sales channels is difficult, a business strategy that makes use of ICT can open the door to more customers — no matter the locality.
