Functional food leader eyes global growth

Could you tell us about Pharma Foods and your core activities?

Our expertise is the science of chicken eggs. Everyone knows that chicks are born from eggs after 21 days of hatching. It’s like magic, but it’s nature, it’s life. However, how does it happen? What are the processes behind such prodigy? Eggs are filled with substances that create and maintain life therefore, our objective is to understand such processes and create value-added products from it. In fact, we believe there are many hidden aspects in the chicken egg that we could discover and introduce to the world.

As a matter of fact, we chose the chicken egg because it is cheap and very accessible to everyone, and here in Pharma Foods, we believe eggs unite the world because if we analyze it, the egg is consumed by everyone regardless of their culture, religion or economic class.

Furthermore, besides the chicken egg, we also work closely with bananas, sesame seeds, and milk. The materials we always focus on affordable every-day food, and we would like to extract their best features and expose those to the market, as we have set our mind to get the best value out of simple products.

Here, our main keyword is science. With a strong and solid scientific foundation of our product, we could enhance and help people to live a better life. Hence, R&D plays a vital role in our company. Nevertheless, we realized that our company has a lot of potential for growth. Therefore, it is very crucial to choose the path that we are going to walk on, so we could successfully implement the strategy that we have set at the beginning.

For example, Banafine®, our immune-stimulant ingredient, was born as a result of collaborative research with Dole Japan Inc. We studied their unsellable green bananas with our scientific knowledge and experiences. And a new function helping control influenza infection was found by fermenting the green bananas. This is how we discover the power of food using the power of science.

When it comes to R&D spending, Japan is behind the US and China. As your R&D is the most important aspect of your company, could you elaborate more on how develop new products?

Back in the 1980s, we were constantly looking for the best solutions to answer the needs of our customers. And years later, we came across the idea of life science, in particular, to develop functional food ingredients that maintain health and promote wellness. Consequently, we narrowed down the focus to 3 key elements; immunity, ageing, and nerve system.

Most of our budget is allocated for our R&D. Because, we believe if we implement our best practices in R&D, it will become fruitful. After the discovery in R&D, eventually, it leads to the mass production stage. In this stage, we are similar to other companies where we would like to decrease the production cost but sustain the know-how and quality of the products. Our R&D also looks for the best possible way to make the product affordable and accessible.

In our R&D, the motto is "Be Bold". Our motto reminds us to be brave, so we are not afraid to take risks. We have the concept that there is no goal that we cannot reach. With our best effort, it will lead to a good outcome.

When innovating and creating a new product, what is the most important aspect of the process? Could you tell us more about your main products?

While creating a product, the most important part is the concept of making and interpreting. If you have a false concept, it is impossible to create anything. Of course, along the way, there are lots of misses, but in general, you should believe that you can make it happen.

Our most popular product that is taking the world by a storm is GABA, which is a gamma-aminobutyric acid that functions as a neuro-transmitter in your brain. The GABA type of amino acid is widely contained in nature, such as in vegetables and fruits. We have established a technology to produce GABA in high purity and large quantities by fermenting lactic acid bacteria. The most widely known effects of GABA are stress relief and sleep improvement. And we discovered these functions and published papers about them. Thus, a lot of international companies in food, confectionary, beverage as well as pharma/nutraceutical industries, having strong confidence in us and our product, have launched many different types of market products using our PharmaGABA®. For instance, Natural Factors, one of the biggest nutraceutical companies in the world, launched a supplement “Pharma GABA®” and it’s been a top seller. Another example is a sleep-improvement supplement formulated with our PharmaGABA® by a leading world-wide health & beauty company. This product has been recommended for a national team in the Olympic Games in Tokyo 2020 (now moved to 2021).

https://www.pharmafoods.co.jp/en

We released a product called Bonepep® in 2005, which is an egg yolk peptide that promotes bone formation. Our original concept is coming from an egg, which we believe is a 'bio capsule' that contains both raw materials needed for life and substances to promote growth. Therefore, our R&D team confirmed the existence of a bone health-supporting substance perfect for children and the elderly. In addition, we also have conducted the clinical test of Bonepep® in Panasonic Hospital. We have been lucky enough that we get the coverage in our activities, also able to publish our research in international journals. With such evidences, this product has been a long bestseller in Japan for 15 years and in recent years the demands in China has been increasing.

From chicken eggs, we also develop a hair growth-promoting peptide, HGP®. Based on this simple concept (chicks are bone with hair growing), we noticed that there is a key substance in the egg that could promote hair growth.

Furthermore, Cerepron®, an organic cosmetic substance from Japanese-sake yeast, has also been developed for skin whitening. For this product, China is the biggest market and the demands are still growing. Now we are expanding to Southeast Asia countries, such as Malaysia and Philippines, where there is a bigger market for the product.

By 2050-2060, Japan is expected to decrease the population below 100 million per year. This trend is happening in Europe such as Italy, and America as well. So, what can Japan teach on dealing with an ageing population, and how is Pharma Foods leveraging on this trend?

We are aware that one of Japan's social problems is its shrinking population. The ageing population (above 65 years old) accounts for around 30% of the Japanese nationwide population. Not just Japan, but nearby area such as Korea is also experiencing the depopulation. Therefore, we would like to contribute to sustaining people's health through food. In Pharma Foods, we believe that utilizing functional foods as preventative measures of healthcare will stand alongside with the medical approaches. Hence, we would like to remind people that food is not only about deliciousness and calories; it is about the physiological functions and nutrition benefits as well.

The global functional foods market size is projected to reach USD 275.77 billion by 2025, expanding at a CAGR of 7.9% during the forecast period. Increasing demand for nutritional and fortifying food additives is one of the major growth drivers. Another important factor augmenting the demand is the rising consumer awareness regarding a healthy lifestyle. Could you give us a brief analysis of this growth and how you plan to take advantage of this growth?

The growth in the global functional food market opens bigger opportunities for us, as it becomes a blockbuster market, and we are aiming to be as big as Sony or Nike in the functional food industry. Hence, our company’s idea is to become a “quintessential brain to make our legs run” with no arms needed (manufacturing sites). Therefore, our aim is to utilize our brains to improve our R&D, and afterwards, entrust our clients to be our arms to make the final products. And our sales team, many with R&D experience, do the legwork by visiting potential customers and introducing our unique ingredients in our own words.

In recent years, we have been supplying our unconventional ingredients to the world’s leading companies like Natural Factors and other customers in 17 countries. Our activities to launch new products with them are still continuing to meet the changing needs of the population and to contribute to their health.

Currently, our goal is to create value-added products, in which, we could consequently increase our price margin per product and also, maintain our leadership in the market. At present, we can dictate the price by highlighting the value-added side of our products because we do not have many competitors. However, it is not our main focus because we are a function-oriented company, not a profit-oriented company.

PFI is seeking for an academia & pharma partner to jointly generate innovative biologics and diagnostics. Could you share with us the importance of Co-creation for PFI?

We are actively collaborating with 10 universities in Japan. For example, now we are conducting drug discovery with Tokyo University and Kyoto University. However, we would like to expand our co-creation network overseas to get more insight into the international market.

In Japan, we had a strategic research collaboration with Mitsubishi Tanabe Pharma Corporation regarding the development of innovative antibody drugs to treat autoimmune diseases. We have a proprietary technology on avian-derived monoclonal antibody (mAb) for antibody production, ALAgene®. It enables us to create therapeutic antibodies against drug targets as antigens as is difficult to get mAb through the conventional antibody technologies. And we’re working collaboratively to improve the prototype of it. In the near future, we will fully present product to the global arena.

How do you plan to penetrate the overseas market? Are you interested in international partners such as M&A and Joint Ventures?

Our plan is to find partners. Currently, we are making connections with several overseas companies, from the UK and the USA. Annually, we attend and present in the BIO International Convention in San Diego, USA, which is an event dedicated to the global bio-technology industry. There, we present our progress and steps each year. Besides, we also attend Bio- Japan, which specifically facilitates interaction between Japanese and global companies within the bio-medical industry.

You mentioned Pharma Foods would love to become a part of the big brands. Last year you hit sale of 10 billion JPY, and now, what is your midterm strategy to continuous growth and your international strategy?

Our next goal is to achieve 15 billion JPY this year. In the next 5 years, we aim to establish strong roots in Southeast Asia. Between them, we are interested to expand our business in Indonesia, Thailand, Malaysia, Vietnam, and the Philippines. Singapore's market is fascinating, but we think it is hard to enter their market. However, for Cambodia and Myanmar, we think their market is still in an early stage of development.

We would like to focus our priority in those five countries due to their vast population, around 600 million people combined with a 7% growth rate. We have already appointed dedicated people to take care of each region and to find the best way to penetrate the Southeast Asia market. By implementing our international strategies, in 2025, we would like to reach sales of 30 billion JPY and 50 billion JPY in 2030.

To do so in this short period, we seem very ambitious. But as you can see, 20 years ago, we didn't have anything; we didn’t have the money, the people or the resources. We started the company 23 years ago with only three employees. Now, we have 400 employees, more ideas, a research centre, as well as the resources, and we are speeding up. We believe as long as we are creative, there is no door that we cannot open.