Mayonnaise leader puts M&As on the table

Kewpie is one of Japan’s flagship foods manufacturing companies that has been in existence for almost 100 years now. Can you please explain what have been the origins and founding philosophies of the company that enabled it to be so successful throughout the years?

Kewpie Corporation’s story all started when our founder, Nakashima Toichiro, traveled to the United States as an exchange student in the 1910s. He ate potato salad and was very surprised by how inexpensive yet highly nutritious it was. From Japan, we heard that he survived eating potato salad, and we were quite relieved to hear that! Compared with the Americans, Japanese back then were shorter in height and much smaller in physical constitution. Our founder wished that someday we would be able to sell the mayonnaise product in Japan for the Japanese people so that the product fits and that it would be welcomed by the Japanese people and match their taste. What the founder did was that he used double the amount of egg yolk to the comparable brands, which was very unique in taste and also much liked by the Japanese.

Those are the origins of our company Kewpie. The core of our business revolves around mayonnaise, but around it we have five other business segments and one logistics business. Today Kewpie is aiming for global expansion, starting with liquid seasonings and condiments.

Our corporate motto encapsulates three corporate principles: the first one is to “act on moral principles”; the second is to “strive for originality and ingenuity” and the third one is to “look after your parents’ well-being.” “Acting on moral principles” means that we are trying and striving to be original and unique. I think these are the ideas and beliefs that make us very unique globally or even among other Japanese companies. What we place the most emphasis on is safety and trustworthiness. High-quality products can be produced only from high-quality ingredients. In addition, another one of our aims is to contribute to each country’s culinary culture or environment.

Of course the origins of our product are in the United States, however we have incorporated some Japanese ideas into it, so that we believe we have created a Japanese-style food. We hope our rich egg yolk content mayonnaise and our deep-roasted sesame dressing will be widely known and accepted by our global retailers.

Through our business we would like to contribute to people’s food and health. Japan is experiencing an ageing population and declining birth rates, but with originality and ingenuity I think we can still create more value. One of the devices that we used was smaller servings, smaller packages to fit the consumer’s lifestyle. We also have a lot of originality in our containers. The tube of our mayonnaise is five to seven layers, so that the oxygen and moisture does not permeate it.

We are also starting a cut vegetables business so that consumers will consume much more mayonnaise and our dressings. With our egg white business we have catered to the requirements of the demand for low calories but high protein. Those are the main business areas in Japan. We believe that an ageing society will impact Southeast Asia someday, so we’re hoping to be prepared for that. We’ll be using the Japanese model if it turns out to be successful.

Kewpie’s financial performance can be described as a success over the last few years. What have been the key factors that have driven this success and more importantly how do you hope to sustain such impressive growth over the long term?

Our business style has changed from the division of work and the distinction of work, to integrating the smaller subsidiaries, but still making the most of each company’s strengths. In Japan, for those who have difficulties shopping on their own, it will become an issue of how to deliver meals to them. Since we have our own logistics business, we believe we can provide a solution to this.

As per our global business, we have expanded and we are doing business in China and in Southeast Asian nations. In the condiment and seasonings business, we believe that it will take a decade to create one product that fits each local preference and market. For example, depending on the country, they don’t consume or eat raw vegetable salad, so we have tried to develop products that will fit and cater to their locality. That is becoming one of our growth drivers for our overseas business.

In the United States and the European markets, there are already forerunners in the condiments and dressings business, so against that backdrop we would like to introduce Kewpie’s taste and flavors while providing servings suggestions. We would like to differentiate ourselves in order to be successful in the American and European markets.

Kewpie is currently at the beginning of its eighth midterm management plan as we lead up to 2018. Alongside a vision to enhance cost competitiveness, strengthen your management base and create added value across your range of products, you have also established financial targets of ¥625 billion in net sales and ¥35.5 billion in operating income. Can you take us through the core strategies needed to realize these goals? What are some of the ways in which you will look to add value to your product base?

In Japan we are trying to cope with changing local lifestyles. The volumes will drop for sure in Japan, and that is why we need to add value. That means adding more convenience to the products – perhaps by providing products in a kit style, so that you just need to put it in a pan or a pot to heat and cook, if that is easier to cook. Adding value can be done as well through product delivery. In Japan we already have the custom and business styles of delivering the daily newspaper to each home; milk is also delivered to each home.

In regards to our overseas strategies, we are developing some additional product lines in our Southeast Asia business, in addition to the condiments that we provide. For the European and American markets, differentiation will be the key. Our rich egg yolk content mayonnaise and our deep-roasted sesame dressing are our main products. Also, if we can find any company that can share our values and thoughts, maybe we will contemplate M&A opportunities. Our thinking towards M&A is that we’re not so much focused on the size of the business, as much as on the business synergy and good coordination and cooperation that exists between both sides, and on how both sides can exert their strengths and contribute to the local culinary culture.

In Japan, and internationally, a number of steps across the food industry have been taken to cater to the issue of an ageing population. What steps is Kewpie taking to strengthen its positioning in the fast-growing health-food segment and what are some of the innovations you are implementing into your products?

We have a business history of more than 50 years in the baby food segment. Our expertise in the baby food business has helped us enhance our quality control processes. It has enabled us to acquire some knowledge and techniques that have led to the development of soft textured nursing care food. We have the capacity and production system to develop frozen food, chilled food, and ambient food, so we can now easily utilize and leverage these technologies to expand into the aging society business.

With the aging society, households will cook less, meaning that they will have fewer seasonings and condiments on their kitchen shelves. Our value proposition with our rich egg yolk content mayonnaise is that with one tube, you can easily start cooking and seasoning fried vegetables, fried rice, as well as other dishes, while enabling separate servings. We’re making serving suggestions as a way of cooking, as that is a part of our aging society business.

Almost 35 years ago, Kewpie began its operations in the US, since this time, Kewpie’s success and reputation has grown substantially. The company outlined ¥18.9 billion in net sales by 2018. What steps are being taken to sustain US market growth?

A few years ago, we began the process of bringing the Kewpie brand to North America and have a plant in California specifically for these markets where quality, nutrition and social responsibility are vitally important. For example, our line of Kewpie dressings is non-GMO verified, which demonstrates our willingness to develop quality and delicious products specifically for our expansion markets. Our Kewpie mayonnaise for the US market does not contain MSG and we have adapted our popular squeeze bottle to the American market by using a shrink wrap label instead of a bag, because we know that nutrition, allergen and branding information are extremely important to the US consumers’ definition of trust. These are the same types of principals that we have used in our brand’s 90-year history in our home market that we are well prepared to use in expansion markets.

What we are looking to do now is to position Kewpie as a high-profile company brand in the US. Beginning on the West Coast, we are trying to create a more high-brand image, letting customers know about Kewpie mayonnaise and also to let them taste our actual products. We have just started that effort, so I don’t think that we have established a high branding yet in the United States. Also, with the help of our American staff, we’re starting the development of products that cater to local preferences.

How is Kewpie aiming to increase awareness and build on its reputation in the US specifically?

Kewpie has built a reputation of quality and customer focus. Our international branding campaigns are focused on demonstrating Kewpie’s fully developed quality and customer-centered approach in ways that are locally relevant to each market. Universally, all consumers want quality, safety and great taste – the specific meanings can be very different from country to country, but we believe our core philosophy addresses what we all have in common when it comes to food.

We already have a track record of selling in the US nationwide. We have done business with non-GMO and organic food stores so far. With our deep-roasted sesame dressing, we are very particular about the non-GMO and organic ingredients that we use for this product. That way we differentiate ourselves from different craft dressings. We position ourselves as a higher-grade product.

What are the main challenges encountered when growing as a truly global company.

One of the main challenges we face is to really think globally. Adapting to a new consumer model can be tricky. Understanding that what may have worked in our home market may not necessarily translate to new markets, or at least may need to be adapted to be successful. The first step in this process is to gain a real understanding of the consumer needs of each country. We feel that by studying consumers with fresh eyes, we will discover opportunities that may be missed by those who have operated in those markets for generations. This, to us, is an advantage.

Our company, from the beginning, has been thinking globally; it is in our DNA. In the early 1900s, Mr Nakashima founded the company by introducing Western flavors (mayonnaise, salad dressings) to the Japanese market, creating demand where none had existed. This took global thinking. To this day, Kewpie-brand products represent international flavors. We don’t make Japanese food, we just make quality food that all can enjoy.

What is your final message to readers?

Kewpie is a household brand in our home market and has an iconic status with many people around the world, especially among culinary enthusiasts. There are reasons that our consumers and top chefs love our products. We would like each reader to be able to experienc