The Film Company That Decided to Sell Face Cream

The Pivot, No. 1. The call or the bet that changed everything.

In 2000, photographic film was one of the best businesses in the world to be in. Every holiday, wedding and birthday ended in a little plastic canister that had to be bought, developed and printed. At Fuji Photo Film, photographic products brought in around 60% of sales and two-thirds of profits.

That was also the year demand peaked. Over the next decade it fell, by 20% to 30% a year, until the market was a tenth of its old size. By 2013, according to the Financial Times, it had shrunk to a twentieth.

Shigetaka Komori, who became Fujifilm's president in 2000, described it later as watching the plug being pulled out of a bath. Demand for film just drained away.

His decision about what to do next is one of the stranger turnarounds in modern business. A company that made film ended up selling face cream, drugs and medical equipment. It sounds like desperation. Look closer and it was something more interesting: a company working out what it actually knew how to do.

They saw it coming

The first thing to say is that Fujifilm wasn't ambushed. Komori was clear about that. Asked about the crisis years later, he said it didn't arrive suddenly; the company had known for a long time that digital cameras would shrink demand for film. It had been researching digital imaging since the 1970s. In 1988 it built what it calls the world's first fully digital camera, the DS-1P. Ten years later its FinePix 700 was one of the first affordable compact digital cameras with image quality to rival film, and for several years Fujifilm held about 30% of the world digital camera market.

Other film makers held back from digital for fear of cannibalising their own sales. Komori's view, as he put it, was that if Fujifilm didn't do it, someone else would. Better to be the one doing it.

But being good at digital cameras didn't solve the problem. A camera is sold once. Film was sold again and again, and it was the film, the paper and the processing that had made the money. Digital cameras were a thinner, more crowded business, and phones would soon squeeze them too. Fujifilm needed something that could replace a profit engine, not just a product line.

"You have to do it at one go"

Komori, who became chief executive in 2003, attacked it from two sides at once.

The first was cost. Fujifilm carried out two big rounds of restructuring, one starting in 2006 as film declined and another from 2009 after the financial crisis. Together they meant the loss or replacement of 10,000 jobs and restructuring charges of more than ¥350 billion, about $3.3 billion. In Japan, where big companies were known for restructuring slowly, it was brutal.

"You have to do it at one go," Komori told the Financial Times. "Or else it will take time and the wound will keep getting bigger." And on the opposition he faced: "Who's going to oppose when the boat is about to sink? It's better than sacrificing the entire company."

The second side was the more unusual one. Instead of asking which markets were attractive, Fujifilm asked what its own technology could do outside photography, and where it could stay competitive for a long time. It settled on six areas to grow, including medical systems, materials for flat-screen displays and, most surprisingly, healthcare and cosmetics.

Why a film company knows about skin

This is the part of the story that sounds like a joke and isn't.

Photographic film is a precise and complicated chemical product, and one of its main ingredients is gelatin, made from collagen. Fujifilm had spent decades learning how collagen behaves and how to stop film deteriorating. It had also spent decades on antioxidants, because the thing that makes a photograph fade is oxidation.

Human skin, it turns out, has some of the same problems. Collagen matters to how it ages, and oxidation is part of why it does. So Fujifilm took what it knew about stopping photos fading and applied it to faces.

In September 2006 it set up a healthcare subsidiary and moved into supplements and cosmetics, selling by mail order. A year later, in September 2007, it launched a red anti-ageing skincare range called Astalift, built around astaxanthin, a red antioxidant pigment, which Fujifilm's chemists had learned to break into nano-sized particles so it stayed stable.

There was a debate inside the company about whether to put the Fujifilm name on the bottles. People might think the products had something to do with film chemicals. In the end, a company manager told Monocle, "we decided that customers trusted the brand." The first sales were by mail order only, which kept the risk low while people got used to the idea. By 2010 Astalift was selling more than ¥10 billion a year.

Start at the fifth station

Cosmetics made the headlines, but the bigger bet was medicine. Fujifilm had tried pharmaceuticals once before, in the mid-1980s, while film was still booming, and it had flopped.

The second time, Komori bought his way in. In 2008 Fujifilm paid $1.4 billion for Toyama Chemical, a mid-sized drug maker that was losing money. "You don't start climbing Mt Fuji from the base, but you start from the 5th station," he said, referring to the halfway point where most climbers begin. Fujifilm improved the efficiency of Toyama's plants and made it profitable three years after the purchase. Its anti-influenza drug, Avigan, later drew attention as a possible treatment during the Ebola and Covid-19 outbreaks.

By 2014, Fujifilm's healthcare business, covering medicine, cosmetics and medical equipment, made up 16% of total revenue of ¥2.4 trillion. Photographic film made up less than 1%.

The rival that didn't

It's impossible to tell this story without the company Fujifilm spent the post-war years chasing. Kodak, its great American rival, filed for bankruptcy in 2012.

The easy version of the comparison is that one company adapted and the other didn't. The truth is less tidy: both knew digital was coming, and Kodak engineers had built an early digital camera of their own. What differed was what each company decided it was. Kodak behaved as if it were in the film business. Fujifilm decided, painfully and expensively, that it was in the business of chemistry, coatings and imaging, and that film was simply the product those skills had happened to make so far.

Komori never claimed the job was finished. In 2014, at 75, he said his plan for the company's rebirth was only about 75% complete; operating profit and revenue were still below their peak from the year to March 2008. Analysts thought it was closer to half.

But the company was alive, and growing in markets it hadn't been in a decade earlier. Photographic film, once the heart of the business, now made up less than 1% of revenue. And the Fujifilm name, which managers had once worried about putting on a bottle, was on a red anti-ageing range selling in the billions of yen.

Sources

• Financial Times, via CNBC, "Audacious makeover helps Fujifilm put best face forward", 21 October 2014: cnbc.com
• Diamond Harvard Business Review (Japan), interview with Fujifilm CEO Teiichi Goto, 2024 (in Japanese): dhbr.diamond.jp
• THE21 Online, conversation between Shigetaka Komori and Takeshi Egami (in Japanese): the21.php.co.jp
• Monocle, "Fujifilm's renewal: from camera film to skincare success": monocle.com
• Fujifilm, company history of Fujifilm Healthcare Laboratory and Astalift research notes: fujifilm.com
• Shigetaka Komori, Innovating Out of Crisis: How Fujifilm Survived (and Thrived) As Its Core Business Was Vanishing (Stone Bridge Press, 2015).

Red Ink Black Ink is independent and has no connection with Fujifilm, Kodak or any brand named here. Photographs are used under the licences shown.