Japan’s iconic food manufacturing company Meiji celebrates its 100th anniversary this year. Cherished by Japanese consumers and praised for its high quality and reliability, the brand is again pioneering in the food industry with a new focus on healthcare and launching a new series of high-value-added products, or medi-food, at the crossroad between food and medicine, particularly fitted for Japan’s elderly population. President Masahiko Matsuo expands on his company’s success in the midst of a highly sophisticated consumer market.
How has the implementation of Abenomics effected consumer spending and what impact that has been felt across the Meiji Group?
Mr. Abe called for bold monetary policy, flexible fiscal policy, and a growth strategy to encourage private investment. Japan has been stagnant for approximately 20 years and has a number of structural issues that need addressing. The main issue is that we are the world’s most-rapidly ageing society. The birthrate sits at a mere 1.4. The equation is simple, fewer children – more elderly people. In 2025 one in three people are going to be over 60 and the population itself has been continually decreasing. The number of working age people will also continue to decline.
One of the principal questions is how can the government rebuild this country with these issues? Mr. Abe is now trying to create a better environment for having children and encourages raising a family; this includes tax changes, and the increase of affordable nursery schools amongst other things.
To answer your question, we haven’t seen a specific rise in the amount of consumer spending; it has maintained at a relatively stable level. At the Meiji Group, the key word is “health”; this is an area we have been focused on for some time. The life expectancy in Japan is actually quite long; however healthy lifespan isn’t as long as other countries. A woman’s average life expectancy is 86.6 years, whilst healthy lifespan is 74.2 years, and a man’s is 80.2 and 71.2 respectively; so for more than 10 years you must receive nursing care. The government is addressing this issue but it must reduce social security expenses on the other hand.
This is what our business is focusing on, extending the healthy lifespan. For these reasons we are creating value-added products, such as functional yoghurts and generic drugs, as we expect that there will be a growing number of people in hospital.
What are some of the key competitive advantages that you can offer as a group over your competitors, the likes of Morinaga for example?
Our focus is on health; this is certainly something we prioritize over other companies. We are also focusing on premium products for relatively rich people. We are providing value-added products to middle-to-upper-class and senior citizens; they are health conscious and have plenty of disposable income. When they understand the added value they are content to pay a higher price.
In today’s world of sophisticated consumers, the customer now looks as much at what a company stands for as much as what it offers. What does the Meiji Group stand for?
Our products cover all segments of society, from babies to children to the oldest in society, starting with infant formula and milk to chocolate, candy, dietary supplements, sports nutrition, and medicines, such as antibiotics, antidepressants and generics. We are covering the entire life of a consumer. We would like everyone is familiar with and trust the Meiji brand. Our customers’ trust in Meiji and our products is what we stand for.
As the company enters its 100th year of operations, do you have any messages for customers?
We would like to express our sincere appreciation to our customers. Nothing is important than customers’ trust in Meiji and Meiji products. All of our employees who have built up Meiji for 100 years must also be recognized.
How does Meiji create such innovative products as infant milk in tablet form, and what other innovative ideas are currently in use?
Yoghurt comes to mind, with its special functions. Functional yogurts such as R-1, LG21 and PA-3 provide health benefits. We have more than 5,000 strains of Lactobacillus and researchers are accumulating evidence for the new products. We have always encouraged a culture of innovation and our R&D.
How do you believe Meiji helps contribute to the international community?
There are a number of ways, for example, the treatment of infectious diseases is one. In some countries in Asia and Africa treatment of infectious disease is important. We can contribute with our products to help battle against these diseases. Within the US or European countries, there are infectious diseases caused by antibiotic-resistant bacteria; it is of the utmost urgency to treat resistant bacteria. After extensive R&D we finally found a new β-lactamase inhibitor, which extends the range of bacteria the antibiotics are effective against.
Another way we assist is with our direct importation of raw materials, such as cacao from Brazil or Ghana. We are assisting these communities with technological support, digging wells for drinking water, and essentially creating a long-term and sound relationship. As we move our business to China and India, we will create employment opportunities and provide safe and tasty products.
Even as we begin to see better performance from some of Japan’s ‘big ticket’ companies, it is fair to say that a number still lag behind their international competitors in many global markets. What are some of the strategies in place to expand the Meiji Group across Japan and globally?
Providing high-value-added products, structural reform and expanding to overseas markets. Our principal focus will be Chinese, Asian and US markets. We would like to gradually expand our market catchment area. Our profit margin has just exceeded 5%, the next target will be 7-8%, and then 10%.
You have completed a number of acquisitions and formed joint ventures to enhance your global presence. Will you be using more M&A activity to continue the growth towards a 10% ROE?
M&A is indeed an effective and efficient way to expand and we will consider this route as a good option as we move forward. Regarding 10% ROE, we have already reached this milestone, which we are pleased with.
Japan’s society is aging, and the birth rate is declining. Thus, the infant formula market is shrinking gradually over the long term. Which markets have you identified that hold good growth potential?
Though the domestic infant formula market is shrinking, its sales are growing because of so-called “inbound demand.” I’m sure you’ve noticed the many Chinese visitors we have here as you walk on the streets in Tokyo. They are big purchasers of infant formula. They recognize Meiji’s product as one of the best quality infant formulas. In addition, the change in China’s domestic one-child policy will provide an excellent opportunity for us to grow sales, we believe.
Again we are focusing on value-added products such as cacao-rich chocolate, functional yogurt etc.
What importance do you place on the US market and its growth potential for Meiji?
We believe that the US market is the most attractive and potential market. Under the Meiji brand, Hello Panda and Yan Yan are distributed by Meiji America Inc. and they are selling briskly. In 2007, we launched Chocorooms. Those chocolate snacks, combining chocolate and biscuit, have gained popularity. We believe that we have a great variety of products that will be suitable for the US market. We will grow these Meiji brand products.
What concrete steps have you taken to raise brand awareness in the US market?
This is a process that will take time. In Asia, we have a very well recognized brand and reputation. Now we will work more solidly on the US market, but as I said this is a process that will take time.
You have been at this company for almost 50 years so surely it is right to ask you it enters its centenary year what your vision is for the next 100 years?
Being involved in the “food and health” business, we at the Meiji Group are fully aware of our responsibilities, and will strive to continue to maintain our obligations to society by taking on responsible activities as a company, and as people, a member of society. We will continue along the Meiji way, both listening and learning from our customers and ideally widening the world of tastiness and enjoyment whilst meeting expectations regarding health and quality.