J-Oil Mills offers healthy and sustainable ingredients, that serve as the base for a wide variety of foods, and through their alliance with Upfield, they’ve entered the growing domestic dairy alternative PBF market with the global brand Violife. In this interview, Mr. Hachiuma explains how they can reduce usage of raw materials and edible oils with their product Cho Toku, and their ability to create products high in vitamin K2 such as menattoTM, carefully selecting and ensuring their highest quality.
The Japanese manufacturing spirit known as monozukuri involves the relentless quest of constantly improving products and the minute attention to detail in the manufacturing process. Nowadays, we know that it is more about responding to varying customer requests and providing that added value in the final product delivered. Can you tell us what is the essence of monozukuri, to you?
We have been working with the food service industry, such as convenience stores, restaurants, and fast-food chains, to develop better flavors, lower costs, and improving their operations. We do not just think in terms of oil, but how to contribute more fully to their business. If we think about only oil, we would be regarded as just a supplier, but we stretched our scope to our customers of our business partners so that we can be a true partner with them. That is what separates us from just being a supplier. Having that partnership is the starting point for us. From there, we can learn how to create value for them and then we create our proprietary value for that. Of course, we sell our commodity products, but we also sell value-added products utilizing our unique technologies. Combining our technology and our customer’s views is the key for our monozukuri.
Japan is a changing society, and we know that it is aging very rapidly. That has been the case since 2008 and it is expected that by 2050, up to a third of the population will be over 65 years of age. For this reason, Japan has adapted this new model of society 4.0 to integrated IRT, AI, and big data to continue economic growth but also alleviate any of the social problems that will come with an aging population. We read that you said part of your social mission was to provide support to the elderly and reduce the kitchen workload. Can you tell us more about how you are doing that and how you are contributing to the society 4.0?
Many companies are now moving toward digitalization. Of course, we must also think about this to meet our customers’ needs. We must think about how to improve our productivity through digitalization. But with the changing society, we must also think about how to contribute to the environmental problems we are facing. In the past and even now, profit was the only factor that was required for companies by their stakeholders. But now we must think about issues like the environment and human rights. If we do not put effort into addressing these issues, it will be hard to survive. To achieve that, digitalization and technology must be applied. Of course, these environmental issues and the business side of matters should be balanced and both factors should be respected.
Let me give an example. With our product Cho Toku, we developed technology to enhance durability of the edible oil. That involved reducing the usage of raw materials and at the same time reducing the CO2 during the entire supply chain, from raw material procurement to transportation, storage, production processes, and product shipment. By doing this, Cho Toku expects to reduce usage of raw materials and edible oils compared to commodity canola-oil. There was a 20% reduction of the carbon footprint. We now have a patent for this technology. Those efforts are some of the ideas that we are working with to contribute to the current society.
I wanted to ask you a little bit more about how COVID-19 has affected your business because a lot of sales have dropped drastically, especially the B2C business. There are not many people out shopping now. There is a switch from going to restaurants and consumers buying products to adapting and ordering online. There are more opportunities for takeout companies that provide these services. Can you tell us more about how COVID-19 has affected your business and how you have adapted to these changes as well?
Our main business is B2B, so COVID-19 has had a severe impact in terms of quantity for the first quarter of last year. We have experienced a drastic decrease in sales. Of course, there is a slight increase on the B2C side but comparatively B2C is a smaller portion of our business than B2B. The total decrease of sales in the company was 15% during the first quarter of last year. But after that, the B2B market improved until mid-November of last year. After that, the situation worsened again, and the market soon followed. In summary, our B2B business decreased but our B2C increased slightly.
We see opportunities in the delivery and takeout business because the quality and texture of the food suffer due to the time it takes to deliver. We received a request from foodservice businesses to assist in keeping the high quality and texture of the food during delivery. For that request, our texture design team supported our customers by controlling the retention of moisture and oil in the food. Moisture control is the key to texture control and our high-value-added starch product assists in this. That is part of the new opportunities that we have found during COVID-19 by expanding to the delivery and takeout business.
During this time, health consciousness started to be a trend among consumers. Fortunately, the perception of edible oil is changing. In the past, people wanted to reduce their intake of edible oil, because they thought edible oil might be cause high blood pressure or hypercholesterolaemia. But now with new nutrition studies have shown that a well-balanced intake of edible oils such as omega-3, omega-6, and omega-9 contributes to health. That change has been very good for us. Even though most of the food sector experienced a decrease in the market, the B2C edible oil food market is quickly expanding especially for healthy oils such as olive oil. Omega-3 fatty acids are starting to pick up in the Japanese market. This is the changing market we are now experiencing and adapting to.
You have the oil and fats business such as “ AJINOMOTO Olive Oil ”.
But you also have other units such as the edible oils and processed products like margarine and shortening, that is used in confectionaries and bakeries, and the foodstuffs/fine material business such as the MAMENORI SANⓇ, which is a soybean protein-based product shaped into sheets. Could you tell us which is your main priority and where are you putting your focus, and are there synergies between these business lines?
We have reorganized business structure to create Specialty Food Products Business Unit on April 1. Now we have two units. One is Oils and Fats Business Unit, and the other is Specialty Food Products Business Unit.
Our main business is still edible oil, but our competition is very harsh. For future growth, we expect more in the margarine or shortening oils and fats processed products business, texture design business, and fine material business.
With our oils and fats processed products, we are providing products mainly to the confectionary and bakery businesses as a B2B business. We are also doing some B2C business. We have a partnership with Upfield, who took over a part of Uniliver’s food businesses. Under this partnership, we are producing products under the brand Rama.
In our fine materials segment, we are producing fine food products, with products high in vitamin K2 such as menattoTM. Developed through a natural fermentation process over 20 years ago, menatto™ is the genuine Japanese vitamin K2 (MK-7). It is made in Japan, using a bacterial strain isolated from the traditional fermented Japanese food natto. We are exporting menattoTM mainly to the US and European countries . Now we are trying to strength marketing activity for these products by building our brand. Shortly, we will release brand website in English to promote this globally.
In addition, we had signed an agreement with Upfield GEC Limited for the exclusive import and distribution of Violife and we launched on September 1.
Violife is a leading brand of plant-based cheese that was created in Greece. Violife’s brand owner is Arivia. With the concept of "100% Vegan for all", the brand is sold in more than 50 countries around the world and offers a product line of more than 40 different types of plant-based cheese items, including plant-based slices, shreds, blocks and creamy tabs. They are used mainly coconut oil and free from dairy and nuts.
Through this alliance with Upfield, we entered the growing domestic dairy alternative PBF market with the global brand Violife, creating synergy effects with related businesses in the Specialty Food Products Business Unit.
I wanted to ask you about your midterm business plan that you will launch this April. Your 2030 vision is to strengthen your business portfolio. This ambitious goal is also to reach ¥250 billion by FY2030. Can you tell us more about this plan or the strategies you are adapting to achieve it?
We plan to expand by increasing our topline value-added products, such as Cho Toku and olive oil. Olive oil has a lot of potential here in Japan. Currently, the household penetration is still around 30% but now it comprises the largest portion of the market.
Regarding monozukuri, Japanese consumers are very particular about the taste of products. If they receive a product that is not up to their high standards of taste, they will never buy that product again. So, our quality assurance panel in our lab, is a group of assessors who assemble to perform the sensory analysis of the product under controlled conditions, have the job of checking the quality of a product. For example, before we import olive oils from Spain, we ask our suppliers to send us a sample and we meticulously evaluate them. If the taste of the samples does not meet our stringent standards, we repeat the process with other samples, again and again until the superior product has been found. Our panel is very careful in selecting the best products. That is part of the monozukuri story.
We are looking for opportunities for global growth, especially in ASEAN. This is an area that we are focusing on for expansion in the future because the population is increasing, the middle-class residents are growing and the demand for food is rising. Many tourists coming to Japan from ASEAN countries enjoy the Japanese confectionary because it is a texture and taste that they have never experienced. This caused an increase in confectionary sales for souvenirs. We are trying to expand into the confectionary/bakery business and combine oils and fats and starch businesses to make a synergy that can provide a better product for the people in ASEAN countries. It is still a hypothetical idea, but we believe there is strong demand for Japanese quality foods there.
I wanted to ask you more about your R&D because Japanese companies are famous for their level of spending here in Japan. Of the 3% of the GDP goes towards R&D. Can you tell us more about your R&D strategy and are there any products that you are currently working on that you would like to share with international customers?
With the food business, we are focusing on the deliciousness of the food. We call it Oishisa Design. Design means collaboration between science, art and technology. With that in mind, we have established an Oishisa Design Studio, where industry chefs or pâtissiers are working in collaboration with scientists to develop different flavors. In R&D, we have three functionalities – application, development, and research. The application team works with customers, figuring out what their needs are. The development team tries to create a product that matches those needs. The research team works to find the key materials or technology needed to meet the customers’ needs. This collaboration sometimes includes our marketing or sales teams identifying what the customers want and need. This collaboration is important for the R&D team to create new value for the customers.
You have been present in Thailand since 2014, which was a joint venture with another company, Toyota Tsusho (Thailand) Co., Ltd. You also started in Singapore with holding company, Premium Nutrients Private Limited, as well as in Malaysia. Can you tell us more about your international operation and how it has been beneficial to be in these other locations?
We’re trying to expand our business and focus our market outside of Japan. We know that the Japanese market is decreasing, shrinking and it is going to be more aged in population. The areas we are hoping to expand are ASEAN countries, and North America. We see an opportunity in North America with Specialty Food Products Business. Now we are selling MAMENORI SANⓇ through our local distributers and it gains favorable reputation from the customers It is replacing the nori―seaweed― which was being used in sushi and other dishes. But in addition to that, the soybean sheets can be used in tortillas, tacos and American dishes as well. We are exploring further opportunities such as new applications of this product in cooking, and we try to expand the usage of soybean sheets.
We already sent manufacturing and business management representatives to replicate our same quality and business standard to the overseas market.
Could you let us know about transformation more detail of 6th medium-term business plan?
In addition to expanding high value-added products, improving the profitability of commodity oils is the point of the medium-term management plan. Through implementing pricing strategies and structural reforms, we aim to grow the business into a stable earnings base in the future. In the past, the focus of the edible oil industry was how to fulfill the factory capacity. Quantity was the key driver of business profit, so mass production was the best idea. But now we have an environmental issue since the resource of food is limited. We must now think about whether mass production is sustainable or not for the future. We must also determine how to get better performance from the limited raw materials, as this could become a universal need, perhaps due to environmental issues or food crises in the future. Our technology needs to contribute sustainable society as well as improve profitability.
It is difficult not only from an economic standpoint but due to mindset. People might be afraid to lose quantity. That is the mindset of our industry. If we promote long-lasting oil more, the quantity itself will be decreased and our factory capacity will be lower. So that is a part of a dilemma which we face. But we change in mindset to consider and act what is the best choice for our company and society and the environment.