The world’s oldest family companies

Wine is classic—it improves with age and doesn’t go out of style. The winemaking families on our list of the world’s oldest family companies would certainly drink to that. A total of 19 family companies from nine countries have continued for more than two centuries as producers of wine, beer, sake or liquor. The “youngest” on our list, Mexican tequila company Jose Cuervo (tied for 96th), was founded in 1758; the oldest, France’s Château de Goulaine (tied for second), dates all the way back to 1000.

Family business researchers estimate that less than a third of all family companies make it to the second generation. So the odds that a family enterprise will survive to the 46th generation, like Japanese innkeeper Houshi Onsen (first on our list), are long indeed. Here, however, are 100 family companies that have survived for at least seven generations. The frustrating part? There appears to be no universal formula for survival.

The companies on our list operate in a wide range of industries—from the practical, like paper (France’s Richard de Bas, #7) and pencils (Germany’s Faber-Castell, tied for #100), to the indulgent, like perfume (Farina Gegenüber of Cologne, Germany, #71) and licorice (Amarelli Fabbrica de Liquirizia of Rossano Scalo, Italy, #82). Perhaps the secret to success lies not in what the companies produce, but in how they adapt. In 1697 Folkes Group (#65) began making chain mail and swords. Now, they’re in real estate.

Even the most adaptable companies will meet difficulty, though. In 2001, when we published our first list of this kind, Kongo Gumi, a Buddhist temple construction company founded in 578, ranked as the world’s oldest family firm. But in 2006, Kongo Gumi closed, burdened with decreasing demand and $343 million in debt. (See story below.)

“Even a well-managed family business will, over time, have to deal with death, incapacity, recessions and the fading of the entrepreneurial spark,” wrote Charles Batchelor of the Financial Times in July 2007. “Despite these obstacles, some businesses have shown a remarkable ability to survive within family ownership.”

The companies on our list truly deserve a toast.

Leah Kristie served as a student intern at Family Business in summer 2007. We extend special thanks to Professor William T. O’Hara, founder and executive director of Bryant College’s Institute for Family Enterprise in Smithfield, R.I., and his associate Peter Mandel, who conducted the research for our earlier list with support from John Gunasti.

In with the old; out with the older

With temple-builder Kongo Gumi no longer under family ownership, Houshi Onsen, a Japanese spa and inn, is now the world’s oldest family firm.

By James Olan Hutcheson

The king is dead; long live the king.

When Osaka temple-builder Kongo Gumi, founded in 578, succumbed in 2006 after struggling for more than a decade to deal with overextension and recession in its primary business, a new—so to speak—company assumed the mantle of world’s oldest family firm still in operation.

Houshi Onsen, a spa and inn located in the mountains a few hours from Tokyo, was founded in 718, by which time Kongo Gumi was already more than a century old. In 2146, assuming it lasts that long, Houshi will add the title of longest-lived family firm of all time to its list of honors. That should give survival-minded family business leaders the world over plenty of time to figure out what characteristics of these two companies allowed them to attain such remarkable longevity.

An adaptable company gets carried away

In the case of Kongo Gumi, the company benefited from the start by having what amounted to a royal dispensation to begin in business. It all started when Japanese Prince Shotoku invited Korean carpenter Shigemitsu Kongo to come to the island nation to construct the country’s first Buddhist temple. Kongo’s creation still stands, having been rebuilt a number of times over the centuries by the company Kongo started and passed down to his descendants—40 generations of them by the time it came to an end.

Kongo Gumi also benefited by serving a then-new industry—Japanese Buddhist temple construction—that has grown steadily and stably for the most part ever since. A key part of the company’s durability was undoubtedly that it existed not only for profit, but also for principle. Its legacy of specialized building techniques was passed down to succeeding generations of carpenters, each of whom was expected to treat the near-sacred subject with equivalent reverence.

What kept Kongo Gumi a family business was a set of flexible succession principles at odds with some prevailing Japanese practices. Chief among these were a willingness to pass the reins on to someone other than the eldest son, if that person had the makings of a better leader. This included females; the 37th Kongo to lead the company was the grandmother of the man who presided over its eventual liquidation and takeover by a much larger construction concern.

The circumstances that led to Kongo Gumi’s dissolution were, almost by definition, unusual. They were based on the astounding runup in Japanese real estate values during the 1980s, as well as the equally shocking collapse of the country’s land prices that followed in the 1990s. What seemed reasonable adventures into real estate speculation thus led to $343 million in debt, which proved unsustainable as Kongo Gumi’s temple-building business, affected by a secularization trend in Japanese culture, also declined significantly.

The public company that now runs Kongo Gumi as a wholly owned subsidiary, Takamatsu Construction, has brought it back into the black with the help of tight cost controls and a modest rebound in Japanese temple building and maintenance. The current president, a Takamatsu employee with no connection to the Kongo family, identified reliance on overly expensive longtime suppliers and excessive executive perks as problems he has dealt with as part of his turnaround.

Prizing heritage over glitz

So much for Kongo Gumi. What about Houshi? In this case, the company’s founding inspiration was not just royal —it was divine. According to legend, a famous monk was directed by a god to the location of a hot spring with healing powers. The monk told a disciple to build and run a spa at the site. The 46th generation of descendants of that disciple does so today.

Unlike Kongo Gumi, which built temples and other buildings across a wide swathe of Japan, Houshi has a single location. The jewel-like setting of the spa has been preserved by very limited expansion over the centuries. To say that the company has been run without much regard for monetizing its well-regarded name is like saying that the moon’s tourist potential is untested. Although it’s a profit-making business, Houshi is operated as a trust that is nearly holy in its nature.

While this approach may seem odd to Western observers, it’s more in tune with Japanese business practice. Japanese business leaders are, in fact, still trying to get their arms around Western-style management with its emphasis on building shareholder value. Specific techniques such as laying off employees in order to boost short-term profits are very much at odds with the Japanese style of management, which considers harmony a goal approximately as important as profit.

In fact, the similarities between Houshi Onsen and Kongo Gumi are more striking than the differences. And they are shared by many other Japanese companies. Japan is perhaps the world’s most amenable society for long-lived family business. As many as 100,000 Japanese businesses are more than 100 years old, and nearly 100 are more than 600 years old, according to some estimates.

Struck by these figures, a group of Japanese academics is studying several hundred Japanese firms that have been around for 300 years or more. While the research is not complete, early indications are that common characteristics of these Methuselahs are that they base their businesses on principles, impart these principles to employees and others with mottoes and slogans, and emphasize trusting relationships with their clients.

Given the complexity and challenge inherent in keeping nearly any business open for even another day, let alone a millennium or more, these benchmarks seem almost ludicrously simplistic. How is a catchphrase going to promote a new location or push through a price hike? Maybe it won’t, and maybe that’s the point.

The world’s most expensive hotel room is said to be the Ty Warner Suite at the Four Seasons Hotel in New York City, which rents for $30,000 a night and includes a private chef on round-the-clock call, a waterfall in the bedroom, and a 700-square-foot-library. On the other hand, a room at Houshi Onsen, where the glitz is considerably reduced but the heritage goes back 1,289 years, is less than $200.

James Olan Hutcheson (jim@regeneration-partners.com) is a principal at ReGENERATION Partners, a consulting firm devoted exclusively to assisting family enterprises.

For further reading

• “Kongo Gumi: Building a Future On the Past,” by David Pilling, Financial Times, October 19, 2007.

• “Traditional Values Stand Test of Time,” by Yuki Senda, Yomiuri Shimbun, May 19, 2007.

• Houshi Onsen website: www.ho-shi.co.jp/jiten/Houshi_E/history.htm