Japanese food companies aim to expand

07 April 2010

TOKYO: Some of Japan's biggest food companies are attempting to expand their global reach, as they seek to offset challenging conditions at home.

Major obstacles facing brand owners in the country include declining birth rates, the long-term slowdown of the national economy and the more recent impact of the financial crisis on consumer behaviour.

"The domestic market is shrinking, deflation is cutting into sales and the sense of crisis is looming stronger and stronger," Arihiro Muroya, a senior economist at Norinchukin Research Institute, said.

Yakult Honsha, which owns Sofyl, the yoghurt line, and Yakult, the probiotic dairy drink, generates around a quarter of its annual revenues of ¥293 billion ($3.1bn; €2.3bn; £2.1bn) outside Japan.

It ships 6.5 billion units of these two brands abroad a year, with 38,000 "Yakult women" selling them door-to-door in Latin America and Asia.

"We want our product to be available virtually everywhere, like Coca-Cola, and make a contribution to the health of people around the world," Hiroshi Narita, director of Yakult Honsha's international arm, said.

Ezaki Glico, the confectionary specialist, has also forged an alliance with Kraft, its US counterpart, which sells its Pocky chocolate range in Europe, where it has been rebranded as Mikado.

Mikado currently delivers approximately ¥15bn in revenues a year, with totals increasing by roughly 10% every 12 months.

"Big Western manufacturers go for mass production and low-cost efficiency. I suppose the things we make are too costly and time-consuming for them," Mikio Kusama, head of the global business division at Ezaki Glico, said.

Ajinomoto, which has a portfolio covering seasonings, oils, food and drinks, posted revenues of ¥1.2 trillion in 2009, 31.8% of which came from overseas, up from 22.8% eight years earlier.

Sales of one of its core offerings, monosodium glutamate, have grown by 80% away from Japan over the last decade, with demand rising in Latin America, Africa and the rest of Asia.

By contrast, its domestic performance has seen improvements of "a few percentage points every year" in this timeframe, its chief executive, Masatoshi Ito, said.

"The home market is a mature one, where we focus on rich, high-value-added goods," he added.

According to Ichiro Nakamura, of Lotte Group, the confectionary company, the manufacturing techniques used in its Koala's March cookies are one example of Japanese firm's superiority in certain areas.

"We have a special technology that puffs up the koala-shaped cookies so there is hollow space inside where soft chocolate can be injected later," he said.

"And unless you have the right technology, the cookies are going to break easily when packed into boxes."

However, Kentaro Mori, of the Boston Consulting Group, argued "Japanese firms may say, 'We have superior products.' That alone won't do."

"You need sales and personnel who understand the trends of the local market, developers who will take the local taste into account and marketers who can explain the product to the locals on their terms."

Data sourced from New York Times; additional content by Warc staff