Thursday, Dec 14, 2017
Industry & Trade | Asia-Pacific | Japan

Nissin Foods Holdings Co., Ltd.

Noodle pioneer ups R&D as “innovation will never cease”


2 years ago

Koki Ando, President and Representative Director, CEO, Nissin Foods Holdings Co., Ltd.
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Koki Ando

President and Representative Director, CEO, Nissin Foods Holdings Co., Ltd.

Founded almost 60 years ago the Nissin Foods Group began with the invention of the world’s first instant noodles, and soon followed with the world’s first cup-type instant noodles. Today, the group is a truly global operator with interests in 19 countries around the world and it is the market leader by far in Japan with its market share approaching 50%. Koki Ando, President and Representative Director, and CEO, discusses the rise of the pioneering ramen producer, and how he sees the product developing in the years to come.

You have been in the role of CEO of the Nissin Foods Group and successfully guided the company for over 30 years. What in your view is the ingredient behind the successful rise of Nissin over the years?

I have been engaged in this business since I was 10 years old. I have long observed how instant noodles, both cup types and bag types, have played a role in Japan, as well as in the rest of the world.

The invention of instant noodles dates back to 1958, 58 years ago. Momofuku Ando, our founder, invented them inspired by the scene of which people were suffering from starvation after World War II. Today, the global demand for instant noodles is more than 100 billion servings a year worldwide. Succeeding the spirit of the founder, I serve as the chairman of the World Instant Noodle Association. In the food business, we see few global industry associations, except for perhaps mineral water or bottled water associations. My main interest as chairman of the World Instant Noodle Association is quality, and how to improve the quality and the safety of these noodles.

Let me say a few words about instant noodles: in the world, there is no food that we can claim as completely safe. We only have food that we believe to be safe. Scientific and medical knowledge tells us that they are safe, but we cannot know the outcome in the future. For instance, there are plenty of foods with quality-related problems in China, but as an associate, we are trying to solve these problems, and treat them as a common problem.

 

What philosophies installed by your father, the founder of Nissin Foods, are still running as a core part of the company today?

The philosophy installed by our founder is, “peace will come to the world when there is enough food.” Food is the most important pillar supporting human life. The business operations of the Nissin Foods Group originated from this basic human principle.

Instant noodle products bear many advantages, but negative sides as well. On the positive side first of all, instant noodles are extremely fast and convenient food that can be quite useful in the wake of big natural disasters, terrorism or starvation. Second, instant noodles are an all-time product, they are recession proof and continue to sell well even when the economy stagnates, and also, new products will cultivate in new markets.

When it comes to the negative sides, however, when the prices hike, we will temporally have a slight shrink in the market afterwards, and safety issues may arise, causing us a problem in sales as well. People think instant noodles are very cheap, which is true, but this is not the only factor, they can be healthy as well. I define instant noodles as a value food, not a cheap food.

Instant noodles have been changing and evolving a lot over the course of time. Nowadays we have developed new types of noodles, with all types of new flavors and textures, as well as low-calorie noodles; and in the near future we will have noodles with added nutrients, like lacto-bacteria, which will improve human health.

Noodles offer many different nutrients, so we have a lot of potential to exploit them – compared with rice and bread, where we don’t have any more room to change and add more values. Noodles are a sustainable and rich product – we can adapt variable things in them, so they’re no longer a carbohydrate. To me, the product development is endless and we have no end goals.

Until recently, we thought that the best way to go for us was to manufacture our products outside of Japan at a lower cost and import them; however experience has shown us that it wasn’t in fact the best model. Japan offers a very advantageous manufacturing environment, with advanced robotics and internet-based services, and the best scheme is for us to manufacturer our high-quality products in Japan, using Japan’s advanced manufacturing environment, which is remarkable. For example, in the past, we needed 26 people for one assembly line, whereas today we only need eight. This kind of sophisticated and high quality robotics enables us to lower our production costs and make Japan competitive with places like China even. I believe this business model can be replicated for other companies in the world.

 

The company’s financial performance can be viewed very positively with the value of the company jumping from a share price of approximately 2,800¥ in 2012 to a price which sits over 5,500¥, representing a growth of almost 100% over the last four years. What in your view have been the key drivers behind Nissin’s impressive growth?

I believe part of this big increase in the stock price is attributable to shareholders’ future expectations – especially in regards to the growth of the EPS. The expectation is not only coming from the Japanese stockholders, but also from American institutional investors.

The adaption of Japan’s Corporate Governance Code back in June of last year, and the change in our accounting systems to IFRS, will be also be a driver for investors.

 

What key developments are you seeing within the food manufacturing industry and how is Nissin placed to utilize its culture of innovation and marketing capability to position itself strongly within both developing and mature markets?

Innovation will never cease. The core technology that Nissin uses is dehydration, not only for the noodles, but also for the condiments and seasonings. Even though we have business in frozen and chilled foods, we live with the technology of dehydration. People have a myth that dehydrated products lack nutrition, but this is not true. 90% of the nutrition remains in the product after being reconstituted, except for perhaps vitamin C. We have lots of room to work on the technology of dehydration.

In the past, the things that satisfy our five senses could sell, but this is no longer true. Nowadays, unless we can satisfy the entire process of ADME (Absorption, Distribution, Metabolism, and Excretion) we cannot sell.

As for marketing, the key issues are web and direct marketing. As I exemplified, we have person-to-person interaction, this is what I call direct marketing. Within five years, I believe that we will see the day when the consumers can ask for a certain product, and we will deliver directly to that person.

 

Although the instant noodles market by and large created by Nissin has grown into an enormous global market with total annual demand exceeding 100 billion servings, this has not held back the company in terms of diversification into a variety of different business fields, including confectionary, frozen foods, beverages etc. How do you envisage the development of these segments within new markets and what plans have you developed so far?

Besides the instant noodles, which are our core business, we have frozen and chilled foods. Our business has expanded to confectionary items and to yogurts. All what these products have in common, and something we are very focused on today, is to develop healthy food products. We are trying to innovate our products, for example, by putting a hay-fever alleviation agent into the products. We have operations in 19 countries. The Japanese have the highest ratio of consumer complaints, so they are the most sensitive. To satisfy them, we have no reason to fail consumers in other countries; we have a drive to work on the health and quality control of the products. Lastly, in the past, the production plants had been outsourced, but now they are made in-house.

At our R&D facility in Japan, we will make the design of the assembly line, and the actual assembly of the assembly line will be made in other countries, and we will procure the parts from around the world, which will be supplied to a variety of countries.

 

How has your association with top brands such as Manchester United Football Club and Kei Nishikori aided your international profile so far and what other avenues of international exposure are you currently investigating?

Since we developed Cup Noodles 45 years ago, we have constantly supported the young people who are our core users. In this line, we have made a lot of martial arts films, which are supportive and targeted to the youth. Our emphasis on this sport event is also in that line. Besides Manchester United and Nishikori, we will support many different sports, for instance, cricket, which in the Indian market is very popular.

The slogan ‘Hungry to Win’ might sound pseudo-English, but this is what we are trying to do to publicize our message about the willingness.



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