Japanese food producer caters for changing appetites and US tastes

What has been key to your success over the years?

Nichirei was established in 1942 during World War II as a company to distribute marine products to the populace under the state-controlled economy. After the war, in December 1945 we relaunched as a private company with the mission of serving the Japanese public by stably providing food to the people.

I believe that our success lies in a willingness to recognize social trends, and decisively shift from the established ways of doing things to new business models.

Last year marked the 70th anniversary of Nichirei. From a start in frozen fish and refrigerated warehousing, we have expanded our business operations to include processed foods, meat and poultry, marine products, frozen foods, logistics, and bioscience.

According to your yearly report, over the past three years, your company has put aside ¥72.6 billion in investments. Could you give us an idea of which areas you’re currently focusing this investment and how it will better enable Nichirei to meet its customer’s needs?

Nichirei considers its core businesses to be processed foods and logistics. We are concentrating investments in these two areas where our strengths lie.

Regarding markets, the Japanese domestic market is contracting overall as the population ages. Looking at the details, however, the number of single-person households is increasing, and lifestyles are shifting toward less cooking at home. This has led to robust demand for processed foods, and this sector of the market continues to grow.

Our investments are focused on allowing us to fully develop business in this growth field.

In the area of commercial-use processed foods, the next-generation products are more than just frozen and processed foods. These are products that have been specifically processed so that the convenience stores and restaurants that comprise our customer base can more easily serve them to consumers.

In household-use processed foods, we are developing products to complement the decline in home cooking, including main dishes, fried rice, and grilled rice balls, as well as vegetables with reduced salt and other healthy attributes.

In terms of temperature-controlled logistics, our distribution centers, transport and delivery network, and logistics personnel are also part of the social infrastructure. Recent earthquake disasters and other disruptions have led to a renewed appreciation of the importance of logistics. Our refrigerated warehouses are aging, and regulations on CFCs and other substances are being tightened. We need to make the appropriate investments to renew our facilities.

We believe that a good business decision is not only about profitability, but is also socially responsible. Ultimately, this provides both corporate growth, and supports the people.

Nichirei’s profitability was just announced to have risen by 20%, reaching around ¥21 billion and exceeding virtually every forecast. This may have been the strongest financial performance ever by Nichirei. Is this trend sustainable, and what have been the key drivers behind it?

I believe that our successful performance in fiscal 2015 was the result of the return on the investments we made in priority fields to strengthen production and storage capacity, issues that we had been working on to address. We are continuing to make investments, though we need be mindful of costs, such as the high cost of construction.

Nichirei’s investments follow rules that require a prior assessment and follow-up review. We think that’s important in order to make effective investments. We also need to conduct careful assessments of previous investments.

In what ways are you attempting to guarantee sustainability in your business model?  How are you seeking to protect the environment?

The depletion of natural resources is an extremely difficult situation for our company. We consider ensuring sustainable resources to be of the highest priority.

Let me give you an example. We import a lot of octopus from a supplier in West Africa. Usually, octopus fishing is about going to sea and catching as many as possible. However, there’s a way sustainable method to catch octopus that doesn’t deplete the resource, which is to lower a trap pot to the sea floor, and bring up only the biggest and strongest octopus. This is a traditional Japanese fishing method. We taught this method to the local fishermen, and had them use it. They continue to use the method to this day. This is one example of how we are benefitting the local economy.

Our corporate social responsibility program comprises three main pillars. The most important is preventing global warming. The second is enabling sustainable production in the global food supply, and the third is maintaining biodiversity. We rely on the bounty of nature to provide food, so we adhere to these three pillars. Nature’s bounty is what allows us to continue as a company. That’s why we believe we have to protect the environment.

We also place great importance on our purchasing policy. We have established a CSR policy that is reflected in our procurement activities. We ensure that suppliers to the Nichirei Group do not use slave labor or operate poor working environments, and that products are not produced under such conditions.

It is often said that corporations must continually generate earnings, and be sufficiently mindful of profits. My belief is that a corporation needs to act in accordance with its philosophy, and generate appropriate earnings based on that philosophy. A corporation of course needs to be able to earn profit, but the most important point is that the profit is earned based on the corporate philosophy. A company that makes profits without a philosophy is the worst, but a company with a great philosophy that can’t generate profit is nearly as bad.

Recently you said, “We should not simply focus on the Japanese market amid globalization. We need to develop and open up new markets both in Japan and internationally.” What is driving this shift towards a more international strategy?

Japan is a mature market, and the size of that market is set to shrink going forward. Internationally, however, the global population and markets are growing. We need to aim for that growth potential.

Nichirei has acquired an excellent US company, InnovAsian. We purchased the company because of its ability to develop products for the US market, and combined it with our strengths as a Japanese food processing company. We are creating products for the American market as an Asian food company catering to American tastes.

Nichirei’s European logistics business also continues to grow. We’ve expanded our operations in Europe by partnering with companies in Poland, Germany, and the Netherlands. Once we have logistic facilities and subsidiaries in a market, the transport of goods within the network is easy. The next phase of development will be seamless integration between our existing logistics facilities. After we achieve that, we will integrate new markets as well.

In terms of overseas sales, our goal is to generate at least ¥100 billion from the Nichirei Group overall, including ¥30 billion in Europe, ¥30 billion in North America, and ¥20 billion in Thailand, China and Asean countries.

How do you anticipate the TPP will impact operations if ratified? Additionally, do you see room to buy out partners and create more seamless integration as you mentioned earlier?

The most important thing will be if the US actually signs the TPP agreement. Import duties will be gradually reduced, and actual tariffs will also be revised. Many countries are participating in the partnership with expectations of gains, so this is an agreement made from differing perspectives.

Tariffs on marine products are already extremely low, so the agreement won’t have much of an impact there. The meat and poultry markets will not be seriously affected either. In terms of processed foods, product prices are likely to decline with the decrease in food material costs, but overseas producers are also expected to enter the Japanese market with products made with favorable ingredients from their home markets; so for Nichirei we think the impact will be a net neutral overall.

In terms of logistics, since Nichirei has warehouses in the major ports of Tokyo, Osaka, and Nagoya, we anticipate an increase in imports from TPP member countries. We have high expectations from a logistics standpoint.

What would you like the global audience to remember about Nichirei?

We are continuing to develop our business in the US market. American consumers already have a highly developed taste for frozen foods. As a Japanese company and brand, we hope for the continued support of US consumers. The majority of employees at InnovAsian are American, and the company specializes in the US market. The products developed by InnovAsian are localized to appeal to American tastes.

These are frozen foods, but they are also delicious. The most important point is that we do not simply produce foods. We create products that achieve our key goals of environmental conservation and sustainability, and reflect our corporate philosophy.