Initiatives under the MAKE WAVES 2.0 Medium-term Management Plan

The Next Stage for Yamaha’s Guitar Business

The basic policy of the Make Waves 2.0 medium-term management plan is to enhance growth capability, and Yamaha’s guitar business is a major driver behind such enhancements. In the business portfolio described by the plan, the guitar business has been positioned as a business to be fostered. Accordingly, we are directing aggressive investments toward this business with the goal of achieving a compound annual growth rate of 10% over the three-year period of the plan.

The guitar market is among the largest of the markets served by Yamaha’s musical instrument business and is expected to continue to display annual growth rates of between 2% and 3% going forward.Mirroring this strong market growth, Yamaha’s guitar business has seen overall revenue triple over the decade leading up to fiscal 2023. Over the same period, revenue from the guitar business in North America has grown fourfold. In China, guitar revenue has increased by eightfold thanks to the trust for the Yamaha brand we have built through the sale of pianos in this country. Meanwhile, the factory constructed in India in 2019 has allowed for the advancement of a local production and consumption strategy integrating sales and production that fits this country and is expected to contribute to a massive increase in revenue in fiscal 2024.

The future growth of our guitar business will hinge on our ability to bolster our product lineup and grow sales of mid-range and high-end products, which account for more than 50% of the market on a value basis. In this feature, we will report on the business division initiatives driving growth strategies based on the priority themes of the medium-term management plan; our exploits in the United States, the world’s largest guitar market; and our efforts to procure the timber that is imperative to making these instruments.

Fostering of Reputation as a Trusted Brand for Mid-Range and High-End Guitars

In April 2023, Yamaha unveiled the FG9, a new addition to its guitar lineup that has been a long time coming, at the NAMM Show, a world-leading musical instrument trade show held at the Anaheim Convention Center in the United States. This high-end acoustic guitar features a price tag of around U.S.$4,000. The aim of the FG9 is to further increase the reputation for Yamaha products in the market and make Yamaha the brand of choice for mid-range and high-end models. Encapsulating this desire, the FG9 made waves among visitors. This strong reception has served to heighten the confidence of Seiji Abe, senior general manager of the Guitar Division, who had led the FG9 development project, with regard to the success of our growth strategies.

The Guitar Division seeks to create products that capture the hearts of users of mid-range and high-end models, who are keenly attuned to the fundamental qualities of musical instruments. Mr. Abe explains, “With entry-level models, consumers care most about basic performance, you know, how durable an instrument is or how consistent its sound is. When it comes to mid-range and highend models, however, users come with an expectation of the type of sound they want to produce and thus pay the most attention to the ‘voice’ of the instrument. It is not uncommon for users in this segment to own multiple instruments. That is why, if we can deliver the type of voice they want, we can no doubt grow our share while standing shoulder-to-shoulder with the U.S. brands that currently have an unrivaled position in the market for midrange and high-end guitars.”

The development project for the FG9 adopted an approach based on the user’s perspective. Meetings were held with the target audience to pinpoint the type of sound they desired, based on which we employed scientific development methodologies, an area of strength for Yamaha, to design the ideal structure. The resulting prototypes were then tested by users to gain input to be reflected in subsequent prototypes. Mr. Abe recounts this cycle, “The voice of a guitar can be improved by trying different qualities of the wood, structures, and coatings. An earnest dedication to every step of the process is essential to winning the trust of users.”

Communication of Our Value to Users

When competing with rivals primarily active in the U.S. market, Yamaha’s global sales network is an incredibly valuable tool. Leveraging this network, we are stepping up efforts to communicate to users the value of Yamaha instruments and to improve recognition of the Yamaha brand in this market. Mr. Abe explains, “Users place a lot of importance on physical interactions when choosing the instrument that best matches them, usually visiting stores to actually test play instruments. As it is the staff at these stores that actually inform users about the characteristics of our instruments, it is crucial for stores to understand and support Yamaha products.” In 2022, a presentation facility was set up in the Kakegawa Factory to introduce musical instrument store owners visiting Japan to the development processes and characteristics of Yamaha instruments. This facility has resulted in sharp spikes in the growth of sales of Yamaha products at the stores of such store owners after they have returned to their countries, which serves as a clear indication of the benefits of this facility in communicating our value to end users.

Synergies Generated by Combining Multiple Brands

Yamaha is currently pressed to strengthen its operations in the electric guitar market, which is essentially the same size as the acoustic guitar market. In addition to pursuing growth in sales volumes by expanding our lineup of mainstay Revstar and Pacifica series electric guitars, we will seek to encourage users to upgrade to mid-range and high-end models in a similar fashion as we are doing with acoustic guitars. To this end, we are differentiating ourselves from the competition with distinctively Yamaha sound and structure design.

Both electric guitars and basses require peripheral equipment to be performed. Yamaha Guitar Group, Inc., boasts a leading share in the market for peripheral equipment, which stands alongside acoustic guitars and electric guitars by accounting for roughly one-third of the sales in the overall guitar market. For example, its Line 6 brand has the No. 1 share of the market for U.S.$500 and above multi-effectors while the Ampeg brand of bass amps holds the No. 2 share.

Highlighting the strength granted by inter-Group synergies, a member of Yamaha Guitar Group’s product planning and development staff commented, “We are always looking at how we can take advantage of the strengths of other Yamaha brands, right from the planning phase. Discussions that go beyond the scope of a single brand often lead to globalscale joint development projects.” A major driver behind growth in Yamaha’s guitar business is joint strategizing and development collaboration between Group constituents in different countries and regions.

Efforts to Strengthen Our Portfolio

Yamaha acquired Cordoba Music Group, LLC, in February 2023. This new addition to the Group is expected to be a powerful asset for complementing and strengthening Yamaha’s product portfolio, particularly with regard to classic guitars, an area where Yamaha has continued to struggle. Cordoba Music Group develops four brands, and the Cordoba brand, which shares its name with this company, boasts the No. 1 share in the U.S. market for classic guitars as well as a solid position in the ukulele market. Meanwhile, its long-standing Guild guitar brand shaped an era of guitars, and has strong support for users involved in the country music genre in the United States, a market that has been hard for foreign brands like Yamaha to penetrate. Incorporating these brands into Yamaha’s lineup is anticipated to enable us to cater to the needs of a wider range of guitar players.

Moreover, the acquisition of Cordoba Music Group bolsters the portfolio of intangible assets that will be imperative to the ongoing growth of our guitar business by allowing us to obtain this company’s development expertise and human capital. As Yamaha seeks to build upon the fundamental value of guitars, these intangible assets are expected to make substantial contributions to the improvement of the overall quality of our guitars and to the ongoing growth of our market presence.

In this manner, Yamaha succeeded in securing a highly promising production base in the United States through its acquisition of Cordoba Music Group. Mr. Abe explains the prospects for this company, “The ‘made in the USA’ label will certainly contribute to the improvement of our brand image. In the future, we hope to use Cordoba Music Group as a production base to grow our guitar business while also examining the possibility of expanding our scale of production in the U.S. market.”

Reliable Procurement Vital to Stable Business Activities

“Sustainable timber procurement is vital to Yamaha from the perspective of longterm production,” states Andi Lugito, leader of Yamaha’s Procurement & Engineering Division. Timber is an essential part of musical instrument production at Yamaha and plays a critical role in shaping the “voice” of an instrument. This is even more true when it comes to guitars. Under Mr. Lugito’s leadership, the procurement division is promoting the sustainable use of timber through the preservation of forest ecosystems as well as initiatives such as Tone Forest activities, which are meant to ensure we can maintain a reliable supply of timber suited to musical instrument production into the future.

Through Tone Forest activities, Yamaha seeks to establish a forest resource cycle of planting, cultivating, preserving, and utilizing the scarce timber resources that are used in musical instruments. The ultimate goal of these activities is to ensure that these resources can continue to be procured in a sustainable manner. It can take decades for a tree to grow to maturity. Accordingly, these activities cannot produce returns in the short term. Despite this long time frame, Yamaha remains motivated by its sense of commitment to its mission. Tone Forest leader Kazushi Nakai elaborates, “The timetables we deal with when it comes to ensuring the sustainable procurement of timber are extremely long and involve a large number of stakeholders. Sustainable procurement is not something Yamaha can achieve by itself. This is why we aim to play a leadership role in expanding our forest resource sustainability initiatives across society.” These activities have already resulted in Yamaha forming new relationships through joint research with NGOs, municipalities, and universities. These relationships expose us to new perspectives and approaches that would not have been found in conventional business activities, which have granted insights that can be used in future new value creation activities. For example, our efforts to preserve African blackwood (Dalbergia melanoxylon) in Tanzania led to new discoveries that prompted the development of techniques for effective use of cuts of scarce timber that would not have previously been used in musical instruments.

Groupwide Efforts for Accomplishing Milestones of the Medium-Term Management Plan

Today, we face concern for the degradation of forests and ecosystems, which are important forms of natural capital that are indispensable to our society. Timber is a crucial part of Yamaha’s business, and we therefore have an obligation to work toward the sustainable procurement of timber. In the past, Yamaha has sought to increase the rate of timber it uses that has been certified as sustainable by third-party organizations in its efforts to utilize forest resources sustainably and to secure a reliable supply of timber. However, the volume of certified timber in distribution is incredibly low for certain species, and there have been issues with the inability to assess the sustainability of non-certified timber.

To address these issues, Yamaha teamed up with international environmental organization Preferred by Nature in May 2023 to formulate its own internal standards for assessing the sustainability of timber. We are thus now capable of determining, based on objective standards, whether the timber we procure is sustainable with consideration for both the environment and society, even when sourcing species for which distribution volumes of certified timber are low. Motoki Takata, who was involved in the process of formulating the standards, cites species for which there is no certified timber, despite these species being irreplaceable in musical instrument production, as one example of when these standards are used. Meanwhile, Tateshi Kikuchi, who is responsible for procuring timber for use in guitars, mentions human-grown timber produced in Southeast Asia, where half of our suppliers are located, and particularly in Indonesia, as another example of when these standards are applicable. The ability to rigorously assess the sustainability of such timber is a major benefit of the new standards. These standards will be used to facilitate efforts toward accomplishing the medium-term management plan’s nonfinancial target of a 75% rate of sustainably sourced timber use.

Yamaha’s ability to properly assess the sustainability of timber in line with these new standards will depend on improving the skills of survey staff and securing the resources necessary to conduct surveys. These are areas that will require attention going forward. Procurement division member Jun Ushiyachi describes his commitment, “Our efforts will not only contribute to the preservation of forests and ecosystems but also to the improvement of corporate value. I want to make the meaningfulness of our efforts known, both inside and outside of Yamaha, so that we can have greater support as we work toward our goals.”

Ever-Shortening Road toward Becoming the World’s No. 1 Guitar Brand

As we have illustrated, Yamaha is making bold steps on its ever-shortening road toward raising its brand value to become the world’s No. 1 guitar brand. We are bolstering our lineup through product development focused on building upon the fundamental value of guitars and through the acquisition of new brands and insight. At the same time, we are securing supplies of high-quality timber that are both reliable and sustainable. Through these efforts, we aim to accommodate customer needs and deliver levels of value that exceed customer expectations and thereby achieve sustainable growth while accomplishing the targets of the mediumterm management plan.