Japan’s food-processing firm Nasco prides itself on the high quality of its ‘blockbuster’ foods and machinery, and insists on bringing the best in European technology to Japan and adapting it to suit market needs for both Japanese and foreign tastes. President Gotaro Nakamura compares the markets in Japan, Europe and the US, and explains why M&As are off the table for Nasco’s future growth.
What has been the impact of Abenomics on Nasco specifically?
We have not felt the impact of Abenomics very much. We started importing food-processing machines from Europe in the 1970s because there was a huge lack in supply not only in Japan but in Asia in general. Since the burst of the economic bubble, the supply structure of our industry is here, but due to the domestic population decrease, the demand estimation of customers has not been very clear in the economy. In a broader sense, it is difficult to say at this point whether Abenomics has been effective or not, or what the next challenge will be – the future will have to tell. As of right now, I haven’t seen many results of Abenomics.
When we think of humans as animals, the difference between a human and an animal is that we have the ability to speak. In the past, there was a movement towards creating what was not existent in society, and that was the mentality of our generation – finding something that is not existing.
For instance, as we have proceeded as a civilization, everything has been developed in the modern world. Microsoft and Apple and such companies are introducing new business into society, and our company’s goal is to provide those people with new business. Take Japan as an example – we have very good food resources, yet for a long time we have had the problems of food waste. Although there are starving countries all over the world, people are disposing of food because of the expiry dates. From this grew the concept of canned food in order to better preserve it – and these are the kinds of ideas that move society forwards. It comes down to good quality and how to sustain this quality for a longer period of time.
For a company such as Nasco, which imports from Europe, how strong do you imagine the impact of Brexit will be on your business?
We are part of a very niche industry, and our company cannot be applied to many sectors because our core business is the making and packaging of food. It is considered to be a very small sector. We chose to import European machinery because of the high quality products in the machine, but it is still on a very small scale. If you compare with companies in the automobile sector, for instance such as Toyota, they export to the world and their quantities are huge.
In terms of that, there are regulations. When producing a high volume of products, there is also a larger risk of mistakes, and that some products pass the tests even though they are not properly done. As I mentioned before, we chose European products because of their high quality and in terms of competition, I do not believe other companies can easily catch up because of the wide range of products.
Since our establishment in 1960, we have been lucky in terms of our business operations. However, due to our small size, we received a lot of external criticism, such as, “Why are you getting involved in this kind of business that major conglomerates are doing?” We were the first small company to do this kind of business that had previously been regarded as something only huge companies would get involved in – yet, we decided to go our own way.
Indeed, creating a stable business is core for our company, but finding the right company to partner with is just as important. Our company can dedicate its growth to these partnerships. Although we import top quality machines from foreign markets, we have to consider the domestic need from the Japanese market as this is where we operate.
It is key to balance those two, and many of the Japanese trading companies have subsidiaries separating the import and export departments. However, one of the main characteristics of our company is that we combine it all into one “export-import” department, and since we deal with food manufacturing, we need to also ensure the machines are going. Since we import our products from Europe, we often encounter questions regarding the spare parts and people believing it will be difficult to import the small parts separately. However, our company has been running for 50 years, which means we have had time to build up a huge number of stock in terms of spare parts that would be difficult for a new company to accumulate. I believe this is one of the reasons we have gained the trust from our clients.
Innovation is part of your slogan; how exactly would you say Nasco is innovative, and how do you believe the fourth industrial revolution could impact your business?
The style, or structure, of logistics has changed over time and generations, because in terms of the food sector, it has a direct relation or impact on our lives. As a food seller company, it is not about distributing our products to the convenience stores or supermarkets, but it is about creating something that we as individuals want, and make it available in the market. I believe that this concept – making something new and creating something that people need instead of just following the trend – is what innovation is about.
In the past, the focus was on following the “American style”, or the “European style”. However, if we look at the packaging, for example, the quantity is not suited for the Japanese people. What we want to do is to adapt things to the Japanese style, which differs from the American and European. Another thing that falls under my personal concept of innovation is to prevent food from rotting, considering that this is a huge global problem today.
You were, as you mentioned, one of the first companies to import technology from abroad. In the future, do you believe you will be importing less technology from abroad, and developing something more “Japanese focused” in terms of innovation, in order to keep your competitive advantage?
As I mentioned, the food machinery sector is very niche. I believe that the quality and level of European machinery will always be unrivalled, even in the future. Of course, there are domestic companies producing food machinery as well, but we have chosen the European machines because of their quality, and we believe in importing those and slightly changing them to fit the demands of the Japanese market rather than buying from a domestic manufacturer.
At the end of the day, what is important is to satisfy the demand of the Japanese and amend the machines to fit the current needs. If we were to export our products abroad, it would be to Asia, because the European market and other parts already have a stable market for these products so it would not be viable for us to enter such markets.
Of course, Europe is your main focus in terms of importing technologies, but what about the United States? Do you plan on importing goods from the US or exporting your products to this region?
If we were to learn something from the US, it would be in terms of software, like Microsoft. It is not about producing machinery; it is about improving the quality or efficiency of these products, and also keeping up with numbers of employees and amount of work hours etcetera. All of these are things I believe we could learn from the US, but in terms of machinery, no. The reason why I say that is because our products are making 10 times the profits in the US – they are “blockbusters”. I believe this has to do with the fact that Europe has a long history of food culture, and America is quite shallow in comparison. Due to the fact that Japan was isolated for so long, our country’s history of food culture begins even later than that of America.
Another reason why I believe we do not have as much to learn from the US in terms of manufacturing and the quality of products is because in Japan, there is a solid trust towards the concept of “Made in Germany”. “Made in the US” does not have the same weight. We mainly deal with German machinery ourselves, and having a look at the automobile sector for instance, many German brands are stable and well-known in Japan as well. In comparison, the US automobile industry is decreasing in size and that is again why we believe the US is not the frontier market for manufacturing.
However, looking from a different perspective, we are not only importing German machines and merely use them as finished products. We make amendments to adapt and satisfy the needs of the Japanese customer, which is at the end of the day a core business of ours, and in this sense we can learn a lot from the software provided by the US.
Since Brexit happened, the GBP has dropped, which has also affected the euro to drop. As an importing company we have benefitted from this, but it is true that major companies have been deeply affected with dropping stock prices and other detrimental side effects.
When events like these take place, I cannot just lower the price of our products because they become cheaper to import; there is a specific value in our products that are not affected. It is not viable for us as a business strategy to decrease our prices because of external global events, so indeed, in that sense we do benefit as a company. Having that said, I do believe Brexit and such situations have negative sides affecting the world economy as a whole.
You mentioned the huge profits you made from the products on the American market – could you elaborate more about this? Is this a big market in terms of exports for you?
In terms of our business strategy, Nasco can be seen as a Japanese agency to sell Mercedes cars for instance. There are both US and foreign agencies all over America selling Mercedes. We are not specifically aiming towards the American market, because the path of trends usually start in Europe, continues to the US, and after that it eventually becomes a trend in Japan. For us, it is about focusing on the rotation of the trend, and more importantly, customizing towards specific regions, and meeting the demands of the customers in the specific areas.
This company dates back 56 years and is a long-standing family business. Can you outline your business and the key milestones that brought Nasco to where you are today?
We try to exclude the benefits of the trading company, and maintaining the same level of quality as the manufacturing company as well. Regarding expansion, I do not want us to grow through M&A, for several reasons. First of all, we do not want excessive stockholders, and also, we do not want to become the subsidiary of a huge company. I believe merging with another company will negatively affect our vision and the policies we have been fostering throughout our history.
If we were to become a subsidiary, we would always have to look out for the parent company; and if we have stockholders, we would need to satisfy them. Our core policy has always been to look out for our customers, not for the parent company and stockholders, and our small size allows us to do this diligently. If we were bigger, this vision or opinion might have been different, and we do not want to step away from this policy.
Your sector is, as you mentioned, very niche. You have three types of services in terms of processing: product packaging, process solution, and the environmental solution. Could you describe those three different businesses a bit further for us to better understand the core of your business?
Our job is to produce everything from the inside of the product, to the packaging, all the way to producing the wrapping. For the wrapping, we mainly use European products; however, in terms of the material, we prefer to use Japanese brands such as Mitsubishi or Toppan, for instance. In terms of the environmental focus, our tactic is to produce products that are more sustainable and do not have to get disposed as easily. We have to comply with the different demands from the convenience stores and supermarkets, and our goal is to work together with them in order to find solutions to prevent environmental exploitation.
In terms of producing something that is not existing in the market, it is highly important for us to sustain good relationships and build trust with our partner companies, but when it comes to improving already existing products, we have more flexibility to do what we want because we do not have capital investments towards the partner company’s interests. In terms of environmentally friendly products, the aim is to decrease the CO2 emissions.
I perfectly understand that you do not plan to expand through inorganic growth such as M&A. Having a better understanding of your business model and your very niche industry, do you plan to expand horizontally into other niche businesses?
We do not plan on diversifying our segments further. This is because many of the companies we partner with or have relationships with are closely linked to the owner companies, and if we start selling our products to other companies, then those products will vanish. It would not be sustainable for us.
At the G7 Summit Prime Minister Abe talked about how to export “brand Japan”. What should Japan represent in the eyes of the world today?
One main quality of Japan that is already being exported is the attentiveness. Everyone can produce hardware or software, or any other technology, but from a more emotional perspective, Japan has the quality spirit of omotenashi. That is one of the reasons Japan was chosen to host the 2020 Olympics.
Comparing Japanese and Taiwanese hotels, for instance, they are explicitly different in terms of the quality of the service. This is something that cannot be counted in numbers; it is about emotions. We also have this politeness in our language that cannot be found in many other places; it is an important value that should be exported.
Japan is also extremely clean compared to other places; for instance, in the US, the roads are very dirty and there are tobacco butts thrown everywhere. We do not have that in Japan. You would be surprised taking a break at a highway stop and seeing how clean and hygienic everything is, even the bathrooms.
Those are all the characteristics I believe that Japan should export, because I believe these are the reasons why Japan has been able to develop as a country, and people will discover all these things about Japan during the 2020 Olympics.