Kaneka to become a ¥1 trillion company by 2020 leveraging on R&D and global expansion

Abenomics introduced an economic jolt in the country. However, despite the expansionary monetary policy and the fiscal stimulus the country’s economic growth won’t be sustainable unless the private sector takes the lead, like it did during the economic miracle in the 80s or in the 90s. In this context, what is your personal perspective about the impact of the Abenomics on your industry?

I appreciate Abenomics very much, but from my point of view, there are still two main challenges that need to be addressed. First, the demographic factor. Prime Minister Abe is obviously working very hard to reboot the Japanese economy, but we should not forget that the population in Japan is decreasing. This is one of the biggest differences between the United States and Japan. In the US, the increase in population is also coming from overall immigration, notably from the Hispanic community. This aspect is essential for the growth of the national economy.

On the other hand, Abenomics is only focusing on the domestic market while many companies like Kaneka, Toyota, Sony and Honda are generating revenue outside of Japan. Therefore, Abenomics should also involve a philosophy of growth outside of Japan. Abenomics is still very domestically oriented, while many Japanese companies are making their profits in overseas markets and bringing back dividends and profits that contribute significantly to the local economy. So far, Abenomics has not really provided proper support for outward-looking businesses and this is essential to be competitive globally.

Despite the slowdown in certain emerging economies, especially China, the growing geopolitical risks and the drastic decline in resource price such as crude oil, Kaneka Corporation reported 6 consecutive years of sales growth.
What are the main drivers behind this sustainable growth and which business segments show highest growth potential?

A key factor for Kaneka is a strong focus on R&D, which allows us to keep developing new products. Moreover, we sell products not only in Japan but worldwide. For instance, 80% of our product called Kanekalon, which is used to make wigs and hair extensions, is sold in Africa, not Japan. The Japanese market contributes to only 1% of hair extension sales, illustrating that the true locomotive for growth is the global market.

With regard to the different segments showcasing the highest potential, polymers and plastic products are definitely remarkable drivers for Kaneka. Our next step is to keep working very hard in promoting life science products to expand our market.

Kaneka is the perfect example of a chuken kigyo–a mid-sized hidden champion–that thanks to its investment in R&D have been able to conquer large shares of the global market in their respective sectors of activity. The year 2009 marked your 60^th anniversary. How would you describe the genesis and key innovative milestones marking more than 60 years of history for Kaneka?

2009 was our 60^th anniversary but it was also the year of the financial crisis–a very difficult period. So basically our 60^th anniversary was a self-determining point that not only led us to change sales targets, but also the company’s structure in order to build a new successful path in the future. For example, by targeting foreign business segments or restructuring the company around international sales, the 60^th anniversary was the starting point for a new Kaneka objective.

Nowadays, Kaneka consists of 9 business units from PVC and chemicals to solar energy;  our investments and R&D are focused on 4 areas: environment and energy, food production support, health care, information and communications.

We strongly believe that investing in these 4 areas will be crucial in the achievement of our objectives. We are aiming to become a 1 trillion Yen company by 2020, ten years after our 60^th anniversary.

Since you mentioned the importance of R&D as core value for Kaneka, could you give us some examples of the kind of activities you are shaping in order to continually develop with the Japanese concept of hitozukuri to drive sustainable growth within the company?

Hitozukuri and kotozukuri aim at selling the needed products to consumers, but even more importantly than selling our products, is providing solutions. For instance, we are selling solar batteries; however, we are not limiting ourselves. We are providing our customers with solutions to realize a zero energy home. We have developed a polymer expanded polystyrene heat insulation and a lithium ion battery for home applications.  By combining solar cell heating solutions with plastics, we will also be able to provide windows as well.  We want to provide the technology to realize general energy solutions for our customers.

Innovation in Japan, and good innovation in general, is expected to always create new solutions. Actually, our next step is to go from making things to building concepts, a story within the story, a new solution or a number of prototypes that we develop. By providing these end-to-end stories, we believe that we can enrich our customers’ lives.

In this context, I am aware that Kaneka is also active in the new zero energy housing (ZEH). The Japanese government has embraced the goal of making ZEHs as the standard of newly built houses by 2020. Looking at the application of Kaneka’s products for ZEHs, what are the strengths of Kaneka Solar Photo Voltaic panels?

Kaneka achieved the highest conversion rate and reached the highest efficiency in terms of solar cells.  These solar cells were developed in cooperation with IMEC (Interuniversity micro-electronics center), a research institute in Belgium where we have a laboratory.

Kaneka is a big conglomerate; an open innovation platform by having a laboratory in IMEC we always aim for the highest efficiency solar batteries.

In terms of vision and future plans, do you see any opportunities for partnerships overseas, with other laboratories for instance?

Yes, we have recently opened the “Kaneka US Innovation Center”, in the Silicon Valley near San Francisco. This location will be the new base for us to conduct R&D activities and a wonderful opportunity to deepen our collaboration with American people, institutes, and industries.

When you say that today there is new trend toward selling a concept, selling a story, could you explain to us a little more about the launch of “Kaneka United for the Future”?

“Kaneka United for the Future” expresses  the company policy in terms of our R&D focus  as we aim to forge a corporate image fashioned from the five “ties”. They are “Tie to the future”, “Tie to the world”, “Tie with value”, “Tie for innovation” and “Tie with people”.

We are tied to the future; as a research and development company brimming with creative energy and passion, we will create future-oriented businesses that leap beyond current market needs and back them up with new product development which will protect the global environment and contribute to the quality of life.

Kaneka is connected to the world; we are determined to become a truly global enterprise with diverse human resources working together on a global scale. Our presence will be felt in markets around the world, including newly emerging ones.
We strongly emphasize our value; we are proud of our unity and identity as the Kaneka Group and will take on the challenges of value creation and business innovation through close collaboration.

Innovation is at the core of our business; we will never cease to pursue innovation, fusing wisdom from both internal and external sources without getting caught up in organizational compartmentalization and conventional ways of doing things.

We have a strong bond with people; in the Kaneka Group we believe that the wellspring of corporate growth resides in human resources and we will continue to seek innovation as we cultivate and nurture our valued employees.

Looking ahead, you have a strong bond with providing solutions for the future of society. How would you describe and what would you like the contribution to socio economic development of Japan coming from Kaneka to be?

Our contribution is not limited to Japan; we have been able to experience success in both sales and growth even in overseas markets. For example, we built a facility and production unit in Belgium which is not directed by Japan, but is operated and directed by employees from the area.  Constructing assets and hiring personnel in the region helps us understand the local needs and what is necessary for the European market.

Our core philosophy is not only to generate sales and profit, but to meet customer requirements by identifying their needs and providing  the right answers and solutions. In the end, I believe that our strong customer-oriented approach will always result in profits and corporate sales.  When going back to Japan, our commitment to the social infrastructure is something that works exactly in the same way. We are always looking at the market needs and finding solutions that are required by the people. I think this is clearly what the development of the ZEHs (zero energy housing) stands for and we have the government support to achieve our objectives in that regard.

Understanding the needs of our society, and being able to develop and provide for those needs locally, is the concept that we have been successful in so far and that will lead us in the future.

Kaneka has also been contributing to the US economy since you established your branch there in 1982. But recently, you have also launched the Kaneka Foundation. Could you give us a bit more details about CSR activities and the meaning of the foundation?

The activities of the “Kaneka Foundation” are still very limited because we just started it last year. We are going to expand this activity across the US starting from the Houston area and our vision is also to expand to Europe and then globally.

Regarding CSR activities, we are currently collaborating with the World Food Program (WFP). As I stated, Africa is quite a big market for us, where we are not only selling hair extension products but through our direct involvement with the WFP, we are also contributing to the development of African countries.

What is the role of the US market in your future growth strategy, especially when considering your goal of growing overseas sales from 40% to 70%?

Kaneka has been very strong in the US, especially plastic and material business units. However, when we look at the Japanese domestic market, we have been very strong in our life science division with medical products.  For example, with catheters used for heart and brain surgeries, we have a very high market share, while in the US it is very small.

Therefore, we believe that by pushing this new life science division in the US market and increasing our share in medical devices, we will be able to achieve a new path of growth.   Looking forward,  that is where we will be concentrating our resources.

In the US we have a plant site in the Houston area that has always manufactured ingredients for health supplements. We supply these ingredients to manufactures, some of whom engage in retail sales. Nowadays, we are also looking into the possibility of increasing our branding by selling products under our own brand name. By having Kaneka-branded products and being able to develop our own retail network, we believe we will increase Kaneka’s brand recognition and stimulate the presence of the Kaneka brand in the US market in general.

We are the largest CoQ10 manufacturer and the only reduced form of CoQ10 (Ubiquinol) manufacturer in the world.  While our largest facility for this product is in Houston, Texas, Americans are not familiar with the Kaneka brand because we don’t sell Ubiquinol under the name of Kaneka. So far, our Ubiquinol has been advertised under different brands; we now want to promote Ubiquinol with the name of Kaneka.

In its global expansion plan, Kaneka has been very active in M&A in general, is there any plan to pursue this strategy in a way to increase your market share in the US?

We are working very hard in that direction and we are financially positioned to perform M&A.  Specifically,  we are aiming to expand on composite aerospace materials in the near future.

You mentioned life science, a sector that has been identified by the government as strategic to fulfill the sustainable growth of Japan, together with tourism for example. However, we have seen many times that there seems to be a fracture in communications, between your goals and the American society, like the fact that American people do not know that you are the number 1 CoQ10 producer. How do you feel that this gap can be filled?

It’s not easy. I think the most appropriate way is by establishing human relationships. You see, many years ago my boss taught me that the best businessmen in the US set up appointments on Fridays in the late afternoon. Late afternoon appointments probably mean going for dinner together and maybe playing golf the next day. So I think we at Kaneka must focus more on human relationships before sales.

You joined Kaneka in 1987 and after a successful career inside the corporation were finally appointed as President in April 2014. What is your personal vision and what would you like to fulfill during your mandate?

I want to realize the goal of making Kaneka a 1 trillion Yen company. On top of that I have one more target, which is to make Kaneka a more recognized company in the American market. We are a business-to-business company. Therefore, American consumers do not know Kaneka. However, by expanding communication, retail and branding activities, I want to make Kaneka recognized among American consumers.