Sonton Holdings has inherited a founding spirt that allows them to help people enjoy a healthy and varied global food culture.
For 11 consecutive years, food-related exports in Japan have registered record-breaking numbers, reaching JPY 1.45 trillion in 2023. This trend has also been felt on a global scale, with the number of overseas Japanese restaurants tripling more than in the past decade, going from 55,000 in 2013 to 200,000 in 2023. How do you account for the continued rise in record-breaking levels of Japanese food-related exports as well as the recent growth in the popularity of traditional Japanese cuisine?
In 2013, Japanese cuisine was registered as an intangible cultural heritage by UNESCO, as it is highly regarded around the world for its seasonal dishes that reflect the changing of the seasons (spring, summer, autumn and winter) and its culture, which is linked to traditional events in various regions of Japan. This contributed to its rise in popularity around the globe. There has also been an increasing number of inbound tourists coming to Japan. I believe that they enjoy Japanese food as it is not only relatively low in price, but it is also quite tasty. I think that when they return to their own countries, they will miss Japanese food again, and their appreciation of washoku has been enhanced.
Japanese food companies and restaurant chains are also aware of Japan’s declining birth rate and declining population. To mitigate this issue, they are looking to expand to the international market. Just the other day, I saw on TV that Marugame Seimen is taking steps to expand outside of Japan. These activities are now bearing fruit for Japanese food companies.
After seeing this growth, the Japanese government has set the goal to push those numbers a lot higher. With the pivot towards a more globally focused and proactive policy, such as the establishment of the Japan Food Product Overseas Promotion Center and initiatives like the Global Foodstuff Initiative, the country now aims to push its food exports to JPY 5 trillion by the end of the decade. This is a very ambitious goal. Do you believe that this target is achievable in this time frame, and if so, what steps must be taken to achieve this number?
It is still difficult to judge whether or not we will be able to achieve this within that time frame. However, the government must set up a timeframe, or we will not be able to reach the target of JPY 5 trillion. I believe that when you look at the self-sufficiency rate of food in Japan and compare it to other advanced countries, Japan is quite low. In order to increase the self-sufficiency rate, we need to develop and strengthen agriculture in Japan as an industry. I think that strengthening Japan's food exports will lead to an increase in the self-sufficiency rate. In Japan, where the population is declining, a major theme in agricultural development policies is expanding sales channels. If we can export not only as primary products but also as processed products, the possibilities will expand. As a company, we deliver our products to Japanese confectionery manufacturers, and we help them to export their products overseas. For example, Macha is now very popular overseas. We procure Japanese-made Matcha powder, process it into filling and deliver it to confectionery manufacturers, who use it to come up with snacks that they can export overseas. That is how our company is contributing to this initiative. Japan needs to revitalize its agriculture and improve its self-sufficiency rate,
In the West, bread is considered a staple food that constitutes the foundation of a meal, whereas, in Asia, rice fills that staple role, with bread being seen as more of a snack food. Despite this historical cultural difference, the bread market in Asia is expected to grow and reach over USD 99 billion in 2030. This is due to a variety of reasons, including population growth in emerging economies and an increase in the desire for more convenient and ready-to-eat products. What strategies are you implementing to educate consumers about the versatility of bread and capitalize on the international opportunities throughout Asia?
In 2014, we expanded to Indonesia. However, we are not trying to expand the Japanese-style sweet bread market there. Our goal is to develop as many Sonton products as possible in various fields, while respecting Indonesian food culture and understanding the needs of the market. We have been approaching Indonesian confectionery manufacturers, ice-cream manufacturers, and café chains with our products. We aim to have multiple products in a variety of fields in the food market there. That is the approach that we are taking.
As you mentioned, the bread market in Indonesia and other Asian countries is expanding. However, as we are not a bread manufacturer, we are not taking the approach of educating the consumers about bread or expanding the market in that way. In Indonesia and the other surrounding ASEAN countries, there are local manufacturers who want to expand the bread market. We are giving them value-added fillings, which are unlike existing fillings. We possess technology that they can leverage. By doing so, we can tell them that our fillings are more fit for their bread dough or that they provide a better taste. By providing them with these added values, we are contributing to the expansion of the bread market in those countries.
The tastes and palates of consumers around the world are very different. There is a big difference between Japan and the US, for example. You can also find those differences in ASEAN countries. Indonesians, for example, have a big propensity toward spices and food that has a lot of taste through the utilization of herbs and spices. How are you tailoring your product development to cater to the palates of local populations?
I completely agree with what you just mentioned. We had a difficult time in Indonesia for the first few years. We dispatched our top engineers there, and we used the most advanced facilities and equipment to manufacture fillings in Indonesia. However, the feedback that we received from the Indonesian manufacturers was that our taste was too light. After that, we hired local Indonesian engineers and technicians to do product development. These Indonesian technicians made the decisions when it came to the taste while leveraging Japanese technology. As a result, the taste of our products was accepted by the market there.
We have been exporting products from Indonesia to other ASEAN countries. However, there are similar hurdles, as in Thailand, they say that our Indonesian products are too sweet, or in Singapore, they say that they want a softer touch. It has been difficult.
Products the company produces in Indonesia
In March of this year, your flagship product line, Family Cup, underwent a major revamp, with the packaging being redesigned completely for the first time in decades, placing your mascot Ton-chan prominently on the front of the packaging. As part of this, you also released a promotional video featuring famous voice actor Kenji Nojima. What factors influenced the decision to undertake such a major rebranding, and what has been the response from the customers?
The Family Cup has been our product for 60 years. We frequently heard from people in the market that it was maybe too sweet or that it had a cheap image. Also, due to inflation, there have been a lot of price hikes in many different sectors. For these reasons, we decided to overhaul the product to ensure that it was aligned with the current times.
With this update to your lineup, not only did you change the packaging, but you also refined the recipes. For example, Family Cup Jam has had its fruit content enhanced to a new high level in addition to a balancing of its sugar content, while Family Cup Cream’s spreadability has been improved even when you take it from the refrigerator. Can you tell us about your product research and development process and how you continuously refine your recipes?
In order to meet the demands of the times, the Family Cup has been upgraded with lower sugar content, more fruit content, and improvements to make it easier to eat and spread, etc., with the aim of moving away from being a low-cost product.
The Family Cup, which has been using environmentally friendly paper containers for some time, will continue to improve its recipes as a product that will continue to exist for over 100 years.
It is very interesting to hear how your company hones your products and recipes as time goes by. Something that we also found interesting was the evolution of your product portfolio. Your company began as a comprehensive filling maker mainly catering to the business's B2B side, such as restaurants and bakeries. Over time, you have diversified by expanding into spreads and various types of creams, all the way to jam, as we mentioned. Furthermore, your subsidiary Yakurai Foods also makes sauces and curry-related products. How do you foresee the evolution of your portfolio over the next five years? Are there any new products or recipes that you are looking to bring to the market?
We are currently researching Delica products or non-sweet bread. Right now, there is a big demand for savory bread. Our fillings need to sufficiently cater to savory bread, so we are trying to strengthen our lineup. As you mentioned, we started as a B2B company. However, there is constant evolution in both our B2B and B2C segments. Although we did not have a major revamp in the household segment in the past, we have been constantly evolving our recipes. This time, however, we listened to what the market voices were saying about our products not fitting the current era. That was why we decided to have a major revamp of our products.
When it comes to our savory lineup, we have our curry, and we also produce pizza sauce and white stew. However, due to some restrictions in our technical capabilities or our sales network, there is leeway to grow this savory segment. Also, Japanese people are now refraining more from eating products that are too sweet. They also have more of a healthy mindset. With that in mind, we want to increase our savory ratio and continue to evolve our product portfolio.
In addition to the products that you just mentioned, you also offer a complete service where commercial customers can access seasonally recommended recipes. They can also download promotional items and video content. How does this value-added service help you build a loyal customer base and set you apart from your competitors so that they continue to come back for more?
We have a function on our website that allows people to download recipes, which our competitors are also doing. However, as part of our sales activities, our sales reps go to buyers and constantly provide them with information. The way in which we cater to and respond to our customers' demands has led to us gaining a high reputation compared to our competitors.
We have a lot of confidence in our capability to respond to the demands coming from the customers. For example, if a customer tells our sales reps that they want a new product, our sales reps immediately tell our R&D department. Our development team then takes a short amount of time to come up with a sample to give to the customer. Once the customer approves of the sample, we instantly bring it to our manufacturing line, and production is started a very short time later. We have this flexibility in place, and our sales reps visit all of our customers to hear their demands. Also, our in-house horizontal network sets us apart from our competitors.
Speaking of your organization, in your message on your corporate profile, you highlighted that Sonton is currently embarking on major reforms, including a large-scale reorganization of your corporate structure and systems. Can you tell us more about this reorganization and what goals you expect to achieve from this?
We decided to review our midterm management plan. This involved the creation of a task force that included the younger generation of our employees as they will shoulder the future of the company. This task force designed a new midterm management plan that is currently in its second phase. The ultimate goal that we have set for ourselves is that by 2030, we hope to achieve JPY 40 billion and for our earnings before interest, taxes, depreciation, and amortization (EBITDA) to be JPY 4 billion. We have been introducing reforms to help us achieve those targets.
Throughout our time in Japan, we have heard about the importance of partnerships, whether finding local distributors to help drive sales and open new markets or seeking new producers to diversify supply chains. Are you currently looking for any new partners be it in terms of distribution, development, or acquisitions?
We do not currently have any specific proactive activities when it comes to looking for partners. However, as I mentioned earlier, we want to have more savory fillings in our product lineup. If we were to do that by ourselves, it would be difficult. Therefore, if there are any manufacturers out there that mainly do these kinds of savory fillings, we are eager to request them to do OEM production, for example. Other than that, we have yet to make any concrete plans when it comes to partnerships.
We saw in our research that in 2019, you created Sonton International in China. This came after creating Sonton Yantai in China in 2016. In 2023 however, you ended up transferring those two subsidiaries to one of your joint-venture partners. Why did you decide to make that decision?
This decision was made due to the huge impact that Covid-19 had. In China, there was a three-year lockdown. That made it impossible for us to continue to do business in China. Also, during that period, our business there was of a growing trajectory. Another factor was that the Chinese commercial customs were very different from the commercial customs in Japan or the West. Those subsidiaries have given us tremendous experience in the Chinese market, which is a good thing. However, we decided that it would be too difficult to continue our business there. We decided to transfer those two subsidiaries to our joint-venture partner.
We spoke earlier about Indonesia. Looking to the future, are there any other markets that you are looking to further expand into?
First of all, we feel that it is important to focus on Indonesia and grow our business there. Indonesia has a huge population. This means that there is a lot of leeway for us to grow further. Also, as you know, Indonesia is an Islamic country, so they are centered around halal foods. When it comes to non-halal regions or countries, we are at a disadvantage. However, we do have hopes that in the future, we can expand into countries that are mainly non-halal.
As our product is food, we also need to consider the best-before date. As a result, our main target in the future will be the ASEAN countries. Right now, we are considering which of those countries will be the best for us whether that be Thailand, Vietnam, or the Philippines. That is the discussion that we are currently having. However, as you mentioned earlier, while those countries are geographically close to Japan, their tastes are very different. Catering to these different tastes is a challenge. One of the ways to tackle this challenge could be through the setting up of an R&D center in Singapore, for example. We could invite technicians and engineers from all of the countries that we would like to tap into to come there. That would provide us with an international leverage of technology to carry out product development at the center. That is a dream we have for the future.
Please imagine that we come back in 2032 which will be the 90th anniversary of the company. What goals or ambitions would you like to have achieved by then? What would you like Sonton Food to look like by then?
As I mentioned, as part of our midterm management plan we want to achieve JPY 40 billion. However, there is a cap on our production capabilities right now. In the next interview, I would like to be able to tell you that we have set up and begun operations at a new factory. That is my goal for the future.
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