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Pursuing Passion for Quality

Interview - September 10, 2024

Passionately pursuing the enrichment that comes from every cup.

YUTAKA SHIBATA, PRESIDENT AND REPRESENTATIVE DIRECTOR OF KEY COFFEE CO., LTD.
YUTAKA SHIBATA | PRESIDENT AND REPRESENTATIVE DIRECTOR OF KEY COFFEE CO., LTD.

Japan's food-related exports have increased for 11 consecutive years, reaching 1.45 trillion yen when viewed through 2023. This is due to the growing popularity of Japanese food abroad, with the number of Japanese restaurants increasing from 55,000 in 2013 to more than 200,000 today. How do you explain this significant increase in Japanese food exports? Why is now the time for Japanese food to shine internationally?

First of all, Japanese food is considered healthy, and this is wrapped up in a kind of seasonality that is ubiquitous in Japan. The Japanese are very proud of their culture, and this culture has spread beyond their borders to other countries. As a result, when many foreigners come to Japan, they want to visit Japan's unique sushi and ramen restaurants. Some also buy takoyaki (octopus dumplings) at Haneda Airport before returning home. As Japanese culture spreads through the Internet and social media, more and more foreigners are becoming attracted to Japan. The culture of sipping ramen noodles and soup, for example, has penetrated foreign markets. Similarly, with coffee, Japan has developed its own coffee culture, which is now accepted overseas as well.

 

Japan expects 33 million inbound tourists in 2024, surpassing the pre-pandemic record and increasing 30% from 2023. This presents an opportunity for the food and beverage sector to create fusion menus that showcase traditional Japanese coffee culture. Can you tell us how this surge in inbound tourism has affected your business and what adaptations you have made to better serve this sector?

Europeans especially prefer espresso, but in Japan non-espresso coffees are more common. I know from my own experience that Japan's own coffee shops are located all over Japan and are preferred by foreigners. And to satisfy their need for espresso, in 2011 we became a distributor of illycaffè, an espresso coffee maker.


Your company was founded in 1920 and offers a variety of products including beans, ground coffee, instant coffee, and drip coffee. In your company's mission statement, you state that at the time of its founding, coffee was not a familiar part of the Japanese lifestyle, but rather an object of aspiration that people wanted to try. Please tell us about Key Coffee's role in developing coffee culture at home as well as coffee consumption in restaurants and cafes.

Our founder was convinced that coffee suited Japanese tastes and had a strong desire to get Japanese people to drink coffee. 2020 was the 100th anniversary of the company, so the first century was dedicated to spreading the message that coffee should be easy and tasty for everyone. It was our role and mission to make coffee more accessible.

Our first attempt was to launch coffee with syrup in 1921, since coffee was bitter and the Japanese were not used to this strong taste. 1955 saw the launch of coffee classes to spread the word on how to open a coffee shop. Innovation was key to spreading the word about coffee, and the company diversified its product portfolio from simple coffee products.

 

Now that coffee has become an integral part of Japanese culture, how do you foresee the next 100 years?

Now that coffee is well established, it will be enjoyed in various ways for the next 100 years. For example, in Japan, coffee from various regions and brands are enjoyed, but people do not know in depth where the coffee comes from. We would like to conduct educational activities to give people a sense of traceability. Some coffees are produced in regions with many small-scale producers, such as Ethiopia. We as consumers must do more to support the workers in these areas so that the coffee we drink is sustainable from a human perspective. The next 100 years of coffee will be about two important themes: "fun" and "interesting.


Since World War II, Japan has benefited from population growth, but what is happening now can only be described as a population crisis. The population is declining sharply and aging rapidly. Experts even say that by 2050 the population will fall below 100 million and one in three people will be 65 or older. Please tell us how the decline in consumer spending is affecting your business and what measures you are taking to mitigate the effects of the declining population.

It is important to emphasize that the population of coffee drinkers in Japan is small compared to the rest of the world. On average, it is one cup a day, but there are many other beverages available. Although I am not optimistic, I believe there is room to promote coffee more to the Japanese people.

 

One of the major challenges facing coffee makers is their dependence on raw material costs. The market is one in which the price of beans fluctuates widely. For example, last year in Vietnam, unfavorable weather conditions affected Robusta coffee, causing prices to skyrocket. This puts pressure on the profit margins of coffee-related companies. How do you plan to manage your supply chain to reduce price volatility and pressure in the future?

In response to this coffee bean price fluctuation, the company is now trying to increase prices for consumers, understanding that consumers understand the difficult situation. Climate change is having a major impact on the coffee bean harvest. We are working with international research institutions to improve productivity and help farmers. This will allow for more stable coffee production.

 

The idea of artisanal craft coffee is very popular. The Toarco Toraja brand appeals to this demographic. Please tell us about this brand and how you are positioning it to address this new demographic.

We have worked with farmers to create this Indonesian specialty coffee brand. We have also promoted our products through social media and other means to make traceability clear to consumers. This coffee has won awards in competitions for its great taste. The brand is especially popular as a gift, with young and middle-aged alike truly enjoying its taste.

It is not widely known that coffee beans are grown deep in the mountains surrounded by clouds. The high altitude makes the landscape look very mysterious to the average person.

 

In other words, we work directly with farmers in Sulawesi and elsewhere to help them develop their beans. How do you produce climate resilient beans? What kind of partnerships do you have with local coffee growers?

Going back about 45 years, there were not many places producing coffee, but there was information on how to cultivate the land. Several employees from our company were sent to the plantations to educate the farmers. Basically, we built the infrastructure from scratch, and our reason for doing so was simply to produce good coffee. As climate change affects farmers, we want to support them and continue sustainable coffee production.

 

You are part of a group of researchers called "World Coffee Research", which has been trying to develop new coffee products since 2016. What insights or collaborations have you gained from your involvement with this group?

The research is long term and the results of this cooperation are yet to be seen. The biggest problem is climate change, and to mitigate it, they are trying to introduce biodiversity by introducing new coffee varieties. For example, it is said that there are 15,000 varieties of apples in the world, but only about 120 varieties of coffee. Varieties are not well researched and are susceptible to climate change. As a member of the group, we are called upon to support the further development of coffee.

 

Taking Rwanda as an example, one of the criticisms the coffee culture has received is that coffee cultivation involves deforestation. As a result, biodiversity is lost and farmers are more vulnerable to the effects of climate change. What steps do you think need to be taken to make coffee farming and production more sustainable? What reforms are you implementing in your own business?

Sustainability is important to sustain the coffee business and the farmers who contribute to it. To contribute to sustainability, we conduct scientific and technical research to cultivate hybrid varieties. At the same time, we are developing cultivation and breeding techniques together with research institutes and farmers. Coffee trees are sensitive to sunlight, so we need to shade the surrounding area with large trees. We are experimenting with different types of trees to see which ones are suitable.

Internally, we have also adopted sustainable measures, such as growing our own forestry along with our coffee plantations. This is not a perfect solution, but it is something we are constantly trying to accomplish.

 

As you mentioned, you have a large presence in Indonesia and sell coffee beans there as well as in Japan. You have divided your business into two categories: commercial and home use. What kind of sales are you currently focusing on in Asia?

Southeast Asia, where the quality of Japanese products is now highly regarded, is an ideal market for us. People in Southeast Asia are highly interested in Japanese culture and appreciate the high quality of Japanese products. Our focus overseas is on both HORECA (Hotel, Restaurant, and Café/Catering) and home use.


Our research has shown that Key Coffee has formed partnerships with many companies to introduce their products to Japan. Are you looking for new partnerships to introduce your products to Japan? If so, what would be the partner of choice?

As many of you may know, this is our foray into green tea. The Japanese have traditionally been green tea drinkers, and different variations of matcha are becoming increasingly popular around the world. We have long considered partnering with a matcha company in Kyoto, Japan.

By expanding our partnerships with companies that have their own specialties and expertise, we hope to diversify our product lineup and leverage our existing sales channels.

 

FY2024 was an outstanding year, with net sales surpassing 73 billion yen and operating income increasing by more than 200%. Please tell us about this excellent performance. What are the main reasons for this growth?

The biggest reason is that COVID-19 prevented people from eating out and drinking coffee; in 2024, people are more likely to return to restaurants and cafes. Raw material prices, energy costs, and packaging costs are rising. The next few years could be tough.

 

I understand that you yourself wrote and composed the words to Key Coffee's company song, "A Coffee Named Passion.” In light of this, do you have any goals or dreams that you would like to realize while president of Key Coffee?

I was able to become president not only because of my personal efforts, but also because of the efforts of everyone who works at Key Coffee. Thanks to these efforts, we have over 50,000 individual investors who have purchased shares in the company, most of whom are Key Coffee fans.

Sustainability in coffee will be key to the evolution of the industry. The key part of our company has several meanings, referring not only to our coffee consumption, but also to the ingredients and drinking culture. Companies around the world want to be sustainable. There are many small-scale coffee producers in the world and it is my personal mission to support them. Our company wants to make a significant contribution to improving the lives of coffee growers around the world.


 


For more information, visit their website at: https://www.keycoffee.co.jp/e/

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