Since its founding in 1905, Kawasaki Kiko has been one of the Japanese tea industry’s major players. Specializing in the manufacture of unrefined tea processing equipment such as steamers and dryers, it also provides facilities for general tea production, including tea farm management machines. We sat down with president Yosuke Kawasaki to learn more about the company’s rich history of delivering high quality tea processing machinery, which are used all over Japan, as well as being exported across the globe.
Japan is a very mountainous country with 75% of the land considered inarable, and as such, we see a lot of microclimates emerge, places where particular crops are very successful. For example, Yamanashi has become a wine country in Japan because of its long hours of sunshine and variation in temperature, making it ideal for growing wine. Can you tell us, as a manufacturer of farm machinery, how have you adapted your products, or how has Japan developed products to match these different climates where crop production takes place?
Some of Japan's famous tea-growing regions have long histories, such as Saitama, Kyoto, and Shizuoka. On the other hand, a relatively new tea production area is Kagoshima Prefecture that basically started with the goal of becoming a prefecture dedicated to tea production. Most of the tea-related companies use riding-type tea garden management machines, but only about 50% of the tea gardens in Shizuoka Prefecture are able to install these types of machines and devices, while in Kagoshima Prefecture, it is about 90%. Kagoshima started as a new production area that was designed to introduce machinery and is still gaining momentum.
For example, the use of tea produced will differ depending on the type and variety of tea, and the degree of mechanization that is difficult in Shizuoka but easy in Kagoshima. In areas where efficiency is difficult to achieve, producers can provide high value-added tea, while in areas where it is easier to increase time efficiency, they can provide raw materials for tea-related beverages and food products at cheaper prices. There are differences in characteristics between regions.
Where do you think Japanese machinery has an advantage over its international competitors? How would you distinguish Japanese agricultural machinery from its competitors?
I think the most important characteristic of the Japanese tea industry is that Japan has already been facing such problems, such as labor shortages and salaries, for a long time, while China, for example, and many other countries are facing only starting to face them. That is why we have the background to have started mechanization much earlier. We have extensive experience accumulated over the years in dealing with these problems that other countries are trying to face. We have accumulated expertise and know-how based on these difficulties that we have already tackled. We have an advantage and competitive edge over other countries because of our previous knowledge of the problems they are trying to face.
Speaking more about that early advantage, your company is making matcha tea, which is a product that is really popular nowadays not only in Asia, but in the U.S. and Europe too. People are more conscious of their health and the antioxidants in matcha make it a popular choice among the health-conscious consumer, and you have your own unique matcha production technology. Can you tell us, especially with the rise of COVID-19, have you noticed a rise in demand for matcha, oolong or other healthy teas, especially in western markets?
I believe that the amount of tea consumption will increase not only in Europe and the United States, but all over the world. Originally this trend was seen before the COVID-19 outbreak, but now that pandemic is happening, people are spending more time at and eating at home. I think the impact of COVID-19 will accelerate the increase in tea consumption.
Of course, the same can be said about matcha. However, considering Southeast Asia and other tea regions in the future, it will be a kind of trend to become more health conscious, for example, with the growing need for organic products and the ever-increasing number of people seeking unsweetened tea beverages. Of course, we will continue to improve the efficiency of our products to meet the needs of those who want to be more health conscious. In addition to that, green tea currently accounts for about 30% of the world's tea production, and as one of the global trends, we believe that number will also increase. Of course, we would like to meet those needs as well.
Countries such as India, Indonesia, and Kenya are well known for their tea production. Of course, China also has a large share of the market. Which countries do you anticipate targeting in the near future?
As for overseas exports, most of our solutions and machines have been exported to China, but as you mentioned, Kenya and other African countries are also big producers. However, only a small number of riding-type machines have been utilized in these countries. Kenya and Africa have dedicated small harvesting machines that we offer as products. In addition, we are currently visiting Sri Lanka for a tea composition analysis project. Thus, at this time, Kenya, Sri Lanka, and China are the countries we have been working with in terms of tea production and processing.
I would like to ask you a few more questions about your product range. Obviously, you have your food dryers and sterilizers, and then you also have agricultural machinery like your riding type tea harvester. Between the two different product divisions, which is your main focus and where do you foresee the most revenue coming from in the future?
At this time, we can say that 80% of our sales come from tea making machinery. As for the current food industry, our sales are still small, but we intend to focus more on food products in the future. Looking at the Japanese tea industry, we see that exports of matcha are growing quite steadily. Of course, tea still has much potential for growth in the future. We do not see a declining trend in the need for tea, but on the other hand, I believe that both the number of tea producers and the number of tea consumers are declining in Japan.
In Japan, traditionally, land farming tended to be small plots and small family lines, but now what is described as taking place is a shukaku consolidation. Here, land has been transferred to larger landowners and corporations, with younger people no longer farming. As such, machinery is having to adapt and get bigger to be used in these larger fields. Have you seen that trend take place in your business and how have you had to adapt your machinery to cater to these new larger farm types?
I would say that we are facing the same situation in our business that you mentioned in your comments on Mitsubishi Mahindra. Given the origins of the industry, we tend to think of tea as a kind of luxury product, a luxury item. However, such needs have diminished and we see many beverages using tea, for example, Starbucks selling matcha lattes, and it is increasingly being used as an ingredient in cooking and food products. Due to its necessity as a raw material, its price is relatively low. Small farmers who are struggling to operate independently sell to large corporations and landowners, and small, scattered farmlands are consolidated into larger ones. There is a polarization between those who see tea as a personal preference and try to run value-added farming operations on a small amount of land, and on the other hand, there are large-scale farming operations, such as those run by large corporations. We have a product lineup that can be adapted to both small and large fields. We also offer automation and further safety modifications to suit the business environment and needs.
You are not only building machines, but you are also creating added value with digital tools. We recognize the importance of research and development of digital technology for Japanese companies to survive in a competitive market. For example, you have tools such as the tea moisture meter, developed in collaboration with Shizuoka University, and the tea leaf analyzer, developed in collaboration with the Tea Research Center of the Shizuoka Prefectural Institute of Agriculture and Forestry Technology. Can you tell us more about these digital tools? How exactly will they change tea production?
Let's start by talking about what is happening now in tea-making plants. With the increasing mechanization and automation of processes, plants can now be managed by just one or two workers. However, there will be challenges in the future. How can we reduce the need for work on the tea plantation, and how can we make the plantation management process more efficient and reduce the number of workers needed? There are several reasons for this. First, tea plantation management requires a lot of manpower throughout the year, for example, spraying pesticides, in addition to dealing with the tea plants. Fertilizer application and growing & harvesting tea plants are also necessary. If pesticides are used on the tea plantation, the amount and type of pesticides used must be accurately recorded. The same applies to fertilizers. When harvesting tea, data must be taken on where the tea is harvested depending on the situation. It is very difficult in practice to do all of these things manually. Therefore, we are trying to use satellite systems and to have pesticides sprayed automatically instead of manually when necessary. These are the kinds of things we are working on right now.
Another issue is that tea leaves are first picked raw and then processed to finally become a product for sale to consumers. Naturally, the quality of the raw leaves and the processing method will greatly affect the outcome of the product. Therefore, we analyze various factors such as the type of raw leaves, the field where they were harvested, the harvesting method, and the processing method. Such data must be thoroughly accumulated and collected. Thorough data collection will help add value not only to the product, but also to the factory or plant.
It's clear that you are working closely with domestic partners such as National University Corporation Shizuoka University and different research institutions. Are you looking for international partners such as governments, other companies in the industry or digital technology firms to collaborate further with?
We do not have any specific partners that we are looking to collaborate with in the near future, but as far as the analyzer is concerned, it was originally intended for green tea, but it is now starting to expand to black tea as well. That is due to a collaborative study we started in Sri Lanka. Just as we were reaching the final stages and collecting data, the COVID-19 pandemic started, so it has stopped now. We have been working with the government and research institutions and we hope to continue in Sri Lanka in the future. We are continuing to evaluate the performance of the analyzers to ensure the success of the project.
However, as a company in the tea industry, we feel that we must not only collaborate with third parties in Japan, but also continue to keep a close eye on the global market. If a developer partner with cutting-edge technology emerges, we would be willing to consider it.
You have been present in China since the 1990s and China is the largest tea market in the world. What steps are you taking to expand your presence in China? Also, how are you increasing your sales in China?
Basically, we have produced tea machines in Japan and exported them to China in the past. Recently, however, China has made remarkable progress in the use of technology, especially in the field of Internet of Things (IoT), and in some areas, it has surpassed Japan. Thus, in terms of value-added machinery, Japanese companies are finding it difficult to demonstrate their strength there.
However, when we think about the strengths of our business, it is not necessarily all about how high the quality of the machine is or what proprietary technology we can incorporate into the assembly of the parts. It is more important to think about why we need to apply these particular processes and what kind of machines are ideal for production. These are the driving forces that give us our competitive edge. It is this know-how, not appropriation of other businesses or technologies, that has allowed our products to be used in Japan and exported around the world. We expect that this competitiveness and know-how will be a big plus in our dealings with foreign countries. We will promote our value to China and other overseas parties without sticking to traditional business models, such as joint ventures and royalty agreements with foreign partners. Our main product, tea making machinery, once purchased by a customer, may be in operation for a very long time, 30 or 50 years. Therefore, it is important, and often difficult, to focus on after-sales care, especially overseas. A third party who can act on our behalf can be very beneficial.
Imagine that we came back on the last day of your presidency and have this interview all over again. What dreams and goals would you like to have achieved by then?
I always think about the meaning of the company itself. I believe the reason the company exists in the first place is to contribute to the tea industry and become a key player in the tea production field. I hope that one day when you come back to interview me, our company will continue to achieve those goals. It is important to always reflect on why we are in this business. Of course it is important to make a profit, but for me, that is not the main driving force. As long as society needs our expertise and know-how, I believe we will continue to move forward. I also hope that each employee will take ownership of his or her own role and motivation, and that we will create a positive and forward-thinking culture, rather than a top-down approach. I am not sure if this is the right answer, but this is my view.