Advancing Global Well-Being Through Specialized Chemical Innovation and Sustainable Solutions

Before we start talking about your company, I’d like to get your perspective on some macro-based events in the world. If we talk about the chemical industry in Japan, for many years commentators have noticed how the nation suffers when it comes to production-based chemicals. Of course, Japan lacks raw materials, but it also is suffering from regional competitors with lower costs. However, if we talk about highly functional chemicals or specialized chemicals, Japan is a world leader, nowhere more apparent than in the semiconductor sector, where you have companies like JSR holding a 54% share in photoresist materials. Similarly, your company is a leader in functional aromas and fine chemicals. Could you give us an overview of why Japan is so successful when it comes to specialized and functional-based chemicals?

The strength of Japanese companies in the chemical sector is due to the capability of development and the high quality of the production methods as well as the technology. There are many small and mid-sized companies within the industry and the advantage of these is that they can flexibly respond to the market needs and provide more of a high-mix, low-volume variety of products. And that has given strength to the Japanese chemical industry.

As for the commodity or base chemicals, price-wise, it’s not possible to compete with China, India, and other emerging nations with a low cost of production so Japanese companies have shifted to niche specialty fields, adding and creating new value on special chemicals that require high quality and special services.

I’d like to get your comments on the bull market rally we saw in the Japanese Nikkei 225 last month, where it reached a record high. It’s driven, of course, by tech-based stocks like semiconductor makers such as Tokyo Electron and Advantest. You’re a listed company, so could you comment on the investment opportunity Japan currently represents for foreign investors?

How I view the Nikkei surge is that, of course, the semiconductor industry, as you mentioned, gave it a boost, and also there’s a correlation with the US market. There’s also been, especially during COVID, a movement towards more corporate governance obligations, and with that, especially for the shareholders, transparency, reports, and feedback has been undertaken. With that, there’s been more activity in the market. So the improvement in Japanese corporate governance is contributing to the rise of the stock market.

Potential investors or detractors, if they talk about Japanese monozukuri or the chemical industry, would point to the population decline of Japan as a major negative factor. You know, the population of the world’s first super-aged society is expected to be less than 100 million people by 2050. As you mentioned, Japan is very customer-centric. It drives development. It helps the economy grow. Your company is global and you’ve been able to offset these challenges in several ways. Could you explain to our readers how you’ve done that?

I don’t see the aging and diminishing of the Japanese population as a negative thing. How I see it is that it has allowed Japanese companies to promote new technologies and research and development, especially focusing on the elderly population. In our case, it is focusing more on health-aware regions and also increasing productivity. Also, creating a more compact and productive environment within Japan would even further attract overseas workers to Japan, so creating a working environment that is more open to foreign workers is important. In our case, we are expanding overseas to increase our overseas sales share so for the company profile or portfolio, we can have a good balance between domestic and overseas and take our expertise in Japan and apply it overseas.

Japan Headquarters

We found your international expansion very interesting, and it started a long time ago. If I’m not mistaken, in the 1960s you had your first overseas office in Paris. The industry you deal with, which is fragances and flavors, changes depending on a country’s culture. The food that we consume in Europe is going to be different from the food that people consume in America or Japan. The same can be said about fragances . With this long experience that you have, how did you ensure that you could match the requirements of each country’s cultural affinities toward these products?

Since the fragrance market originated in Europe and was followed by the US, this is a European-based culture that has been shared globally. So at Takasago, we learned from the European fragrance experience and expertise and applied it accordingly with our development in each region. As for the flavors used in the food segment, this is more of a local basis, so what we do is we have a local factory established in areas like Singapore, the US, and Germany, that have their own research and development capabilities. So we can address the needs of the local people. We also have a research center with small segments across the globe so we can understand the local needs and find the optimal solution.

The accumulation of local knowledge leads to the standards we now see globally, so depending on the products we provide, we either focus locally or try to provide global standards.

I would like to ask you next about the food business because what we eat, of course, affects our health. But most importantly, perhaps for many people, is how the food produced affects the environment. It’s been estimated that if all the highest-income nations adopt a plant-based diet, 60% of greenhouse gas emissions could be reduced. Detractors point to the fact that these plant-based foods are highly processed. There are salt-added, genetically modified ingredients, and in some cases, they’re even mislabeled. If high-income countries are to adopt these plant-based ingredients, how do we convince consumers that ultra-processed foods are healthy?

It’s very difficult to answer. Of course, not eating meat is more environmentally friendly. However, food is an important cultural aspect of humans. And of course, eating meat is not only an issue in developed nations but also in developing nations. Since meat alternative products are currently facing challenges in terms of cost and taste, we believe that there are opportunities that Takasago can support.

I began my career working for Roquette in Lille, which makes plant-based proteins that make the steaks of Beyond Steak, for example. As you mentioned, the two big challenges that the plant meat industry faces are the cost and, more importantly, let’s be honest, the taste. The taste is not just the flavor which many consumers when you look at surveys, want the flavor to resemble normal meat. It’s also the texture. The texture of the meat is different. It’s not what consumers expect. And when they consume these alternatives, they expect them to be real alternatives to meat. You’ve been collaborating with companies making these plant-based alternatives. I’d like to understand how Takasago technologies help this industry. How are you able to upgrade the flavor and texture of these plant-based alternatives?

Our business model is responding to the needs of each customer and so it’s more of a custom solution that we provide for different demands. For example, we have several plant meat customers and they each have different needs so what we provide is, for example, the plant-based extracts, the aroma and other flavor technologies that we have, to work together to provide the optimal solution to the problems that the customers are experiencing.

If I could ask you about your latest earnings. We saw that you were able to increase sales by 15% in your briefing on results for the term that ended March 2023. Now, by segment, we saw that Japan was very successful in the flavor business. You were able to acquire new customers and develop new growth categories. Internationally, we know that you’ve been working on your fine chemical businesses, where you’ve been able to increase production efficiency through new facilities. Could you first tell us about those new facilities for the fine chemicals? And what is the competitive advantage of the new system that you have set up?

As for the increase in sales, it is helped by the exchange rate with the increase in overseas sales percentage and the conversion to yen. As for our flavor business, Japan experienced a warm winter this year, so there has been more demand in the beverages sector. It was warm throughout the year so there’s been more consumption of beverages.

As for the fine chemicals division, the business model is to produce in Japan and export overseas. We are currently expanding our Iwata factory and focusing mainly on pharmaceutical intermediates production and we have introduced new equipment to create compounds used in the pharmaceutical industry. New machinery and the continuous flow technology will help us leverage the new technology for the creation of pharma chemicals.

Iwata factory

And could I ask you next about your procurement initiatives? We have the UN Global Compact (UNGC), which is a voluntary, sustainable practice initiative set up for all companies to voluntarily sign up. Now, Takasago has a vast network. You’re sourcing more than 14,000 different raw ingredients from more than 1,000 different suppliers globally. We saw some very interesting suppliers in our research. Could you tell us a bit more about your procurement initiatives? We know you’re a signatory to the UNGC. Could you tell us how you make sure that you’re sustainable and, of course, responsible in your procurement?

The UNGC calls for sustainable development goals (SDGs) or to follow human rights and as an ethical company, we want to be compliant with the UNGC in the procurement of products that have a huge impact on the 2050 environmental goals. As a responsible company, we are trying to express ourselves in the global market as a company that abides by international standards. And, then, sustainable supply is the key essence in the company’s operations for our customers so diversifying the supply chain on our end is necessary for business continuity, while at the same time, doing it in an environmentally friendly way ensures that products we procure abide by international standards.

And if I could ask you about your long-term vision. We know you set up Vision 2040 and on the road towards that, you had a new global plan which just ended in the previous financial year. Now part of that is to increase your overseas growth, especially in emerging markets. Could you update us on how that plan went? And, as we enter new markets, are you looking for new partnerships locally that can help you, crack that market with local knowledge?

NGP-1, our global strategy and global plan was ended and we are entering the next stage, NGP-2, and this strategy calls on the continuity of NGP-1, expanding more in the global arena. As for the European and the US markets, the markets are doing very well, so we want to follow suit and increase our share accordingly. As for Asia and Southeast Asia, we have more focus since we have factories in Indonesia and India, where we’ve been present for over ten years. So what we want to do there is to grow more than the market growth and have a strong presence in each of the Asian nations, for example, in Thailand and also the Philippines, to find local needs and to provide the best application solutions.

If I can ask you, in line with NGP-2, your company focuses mainly on flavors, which are sold to food and beverage companies, etc. You also have fragrances, which are more for perfumery, and cosmetic brands. From a global perspective, which application do you think will be the main driver for growth in the future and why?

It’s not a matter of the market growth itself, but how much share we have in the market and how much potential there is for growth. As for the flavor industry, it’s a vast industry and overall our share is quite low so there is a high potential to increase our share, whereas for the fragrances we already have established a good relationship with the multinational companies so now our focus is more towards the local companies, approaching more of a smaller scale. To increase our presence in each of the markets, not only must we find and provide the best application solutions, but also marketing and sales enhancement is key.

And of course key to tackling those smaller companies will be your tailored approach. R&D is a vital aspect of that. You have R&D centers worldwide with more than 900 staff, you are planning to establish a new R&D facility in Japan by 2028. Could you tell us why you decided to do that?

We want to maintain this diversified range of R&D and I felt that it was a bit oversaturated. So we want to make a major research center in Japan and create an open innovation platform to welcome collaboration with other companies and overseas specialists. Having this new research and development center with the latest technology and equipment will allow innovations and new developments.

It’s not that we will only center our R&D in Japan, but we are already conducting, depending on the theme, research in France, or US, or Germany, so case by case we will determine where will be the best place to conduct the R&D.

I have a question about the flavors. I’d like to get your opinion as the president. You have a range of flavor brands, for example, INTENSATES^Ⓡ, MINTACT^Ⓡ, and LacteboosT^TM. Which one do you like or which one are you personally most proud of the company developing?

The example I would give is LacteboosT^TM, which was created through our research on traditional Japanese fermented foods like miso, sake, and also nattō. We learned from these natural microorganism processes and have taken this idea and developed our new technology to create this original dairy flavor.

This flavor is taken from natural ingredients so it is human-friendly, of course, and it’s a very traditional thing that we have taken but it’s very new in the way that we created a flavor out of it so I’m sure many new applications could be utilized with this.

LacteboosT^TM

I have one more question for you today and it is about your vision. Please imagine that we come back to have an interview with you again on your last day as the president of Takasago. What ambitions would you like to have achieved during your tenure as president?

The vision or goal that I have is to contribute to the well-being of people around the world through our solutions and provide a brilliant future for them.

For more details, explore their website at https://www.takasago.com/en