Tuesday, Oct 17, 2017
Others | Asia-Pacific | Japan

Ariake Japan

Milestones chart the rise of top flavor maker


1 year ago

Kineo Okada, Founder and Senior Advisor of Ariake Japan
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Kineo Okada

Founder and Senior Advisor of Ariake Japan

The highest stock prices in the food industry; one of the largest and most computerized food plants in Japan; one of the first Japanese companies to go global… The leading natural seasoning manufacturer Ariake Japan is a strong performer in the international food industry. Founder and Senior Advisor Kineo Okada explains the company’s recipe for success and how it has avoided the impact of international economic events.

 

What do you think has been the impact of Abenomics on the economy, and/or on your particular industry?

The public opinion is split into two parties on this question. In terms of the economy, there were monetary and fiscal policies implemented, and big firms –especially the ones focusing on exports – benefited greatly from Abenomics. The exchange rate got better for certain companies when the yen was around 124 to 5, however, currently the rate has shrunk to 102 yen to the dollar. Obviously, there are limitations to manipulating the exchange rates and we need to wait and see how Abenomics sinks into the deep parts of the economy before we see the final results. Having that said, for Ariake, in fact a cheaper yen is a disadvantage considering that we rely on imports. We deal in livestock so our exports are not very big. Our company benefits from a higher yen rate.

To summarize, the monetary, fiscal and growth policy did bring about certain benefits to the industry in general but there are limitations to it. Indeed, when something like Brexit happens in other parts of the world, it has a direct effect on our economy as well. For instance, Toyota’s profit plummets because their loss would account for 30-40 billion for a change of 1 yen. As I mentioned, for us the situation is ok as we rely on imports rather than exports. What is more important in our case is the domestic consumption. Abenomics has been trying to boost consumption by encouraging companies to raise wages, but there are not that many companies that have been able to do so. Since the consumption tax hike in 2014, the domestic consumption has been rather stagnant.

Considering that we have six bases abroad, the current economic situation is beneficial to us. This is because the purpose of our overseas facilities are, of course, to distribute our products in these regions, but also to import livestock products as we are lacking this domestically. We currently have six overseas facilities and are expanding with one in Indonesia soon.

 

You mentioned that so far Brexit has not had an impact on Ariake since you are deeply rooted in Europe with your different plants. Are you expecting a negative impact in the aftermath of this decision?

As long as the yen is strong, we will keep on benefiting from it. I have personally been struck by Brexit negatively because my stock values have gone down, but more generally speaking I do not think the British economy has that much of impact here; it is worse for all the international companies having their headquarters there.

 

Ariake’s stock price on the Tokyo Stock Exchange has shown continuous growth the past five years. Also, with ¥46 billion net sales generated this year, it amounts to an increase of over 13% compared to the previous fiscal year (+70% if we take into account the evolution of sales generated the last five years). What do you attribute this impressive performance to?

There have been three major milestones in our company’s history. The first one is our expansion into the United States 26 years ago. It was triggered by an unstable supply of livestock here in Japan, and we entered the market at a very early stage. We had to comply with the strict regulations of the FDA, which are much stricter than our domestic standards. We learned a lot during this process and were able to comply with the internationally acclaimed standards of food administration. This allowed us to gain the trust of our Japanese clients, which resulted in the growth of the company.

Our next important milestone after establishing in the US was the expansion into China. China has a population of 1.3 billion people, but in terms of the food culture, it is pretty similar to the Japanese. Thanks to this, we have been able to do a lot of business there.

A third milestone would be entering the European market, and the Western cuisine. We got acquainted with Joël Robouchon and he led our way into Europe.

We have taken all these steps one by one, and it has allowed us to grow tremendously. It took us 44 years to reach the 20 billion yen level. During the past six years, despite the recession of the Japanese economy and the dwindling population, we have been able to grow by ¥6 billion, which is quite rare. We have the largest share and the profit margin is 20%; which has led to the highest stock price in the entire food industry.

Additional factors that have contributed to the high stock price is first our expansion into France and Belgium, and through the factories, we have been able to establish a good base there. Since French cuisine is the number one in the world, the usage of bouillon has become global, and that is our strong point. Another factor has been the increasing trend of instant noodles, because it is made with a lot of soup stock. The fact that we had already established ourselves in the United States has paid off tremendously, because the consumption of ramen noodles has increased in this market as well.

We also expanded into the convenience store market about 10 years ago, and this sector is currently growing at a fast pace, which is also paying off.

On top of that, another factor contributing to where we are today has been the automation of our factories. We have computerized our facilities and today almost all of them are unmanned – it is called Computer Integrated Manufacturing; it is almost like IoT. We integrated this 30 years ago, long before it became mainstream and it has become our regional concept. 

 

America has been part of your roots from the very beginning. Your plant in Virgina has inspired your expansion and implementation of the computerized system, and since the beginning of this century you have invested no less than 20 billion yen in capital expenditures across the world. What is Ariake’s strength in terms of production?

What is important to highlight is that the reason we so successfully entered the United States was because we had already established a good foundation of factory automation here in Japan. The FDA regulations were extremely strict – especially in terms of the temperature levels as we are dealing with livestock – and we could never have made our entry to the American market possible without our solid foundation of automation-integrated processes here in Japan. This was the very reason why no other Japanese company was able to go abroad at that time.             

European regulations are rather lenient, but the US ones are extremely strict. For instance, the containers have to be closed to prevent condensation. This is because if steam forms, it condensates to the ceiling and droplets will fall down, which increases the risk for infection.  The inspector from the USDA comes almost every day to check it, and if they detect any problems, they can shut down the operations. We have been complying with local regulations and able to keep operating. 

 

As well as being an impressive performer, Ariake has contributing to society as one of the main pillars in its management philosophy. Why is it so important for you to contribute to society?

Contributing to society has always been important to us. As we are in the food industry, we have to provide safety and security as well as tastiness. We are dealing with all natural livestock ingredients coming from chicken, pork, beef, vegetables and fish, and the process is very simple. We are using these natural ingredients, adding water, and extracting the bouillon. We always put the customer first and provide healthy ingredients to society.

We have invested a lot in social contribution; for instance, our company has invested 10 billion yen in a private scholarship fund. This was made possible thanks to the company stocks we had accumulated, and this fund is the largest educational fund in Japan. It targets the students in Nagasaki and those who aim to pursue higher education. We loan 600,000 yen per year; which is 2.4 million yen in four years.

I believe the most fundamental contribution to society is to pay tax and to minimize the differences in society.

To minimize waste means that we are not taking too much from the customers’ pockets and that is also a way to contribute to society. I do not use secretaries or drivers, and when I go abroad, I always go by myself. This is the philosophy that I have and that is shared by many people from the early Showa era. I believe it is thanks to this philosophy that our company has been able to grow this much; I think the differences in corporate culture will become apparent when economic times are harsh and that is why we are able to shine despite this sluggish economy.

During the economic bubble two decades ago, all companies had rising figures. There were no differences, but when the bubble burst and the economy struggled, the customers still preferred us because we could provide top quality products at a reasonable price. That contributed to the increase in our sales and profits. As Konosuke Matsushita, the god of management here in Japan, said, “The real value of a corporation comes out when the economy is sluggish.” This is a creed all managers in Japan know and this is what we embody. We cannot use the bad economy as an excuse for poor performance – it is all about efforts. Efforts will never betray you. 



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