Kokubu Group strives towards its vision of becoming the No. 1 food value creator by proactively understanding food related needs of society.
For 11 consecutive years, we’ve seen Japanese food-related exports increase. If we look at up to 2023, they reached JPY 1.45 trillion. This has been consolidated overseas by the growing popularity of Japanese restaurants, which grew from 55,000 in 2013 to more than 200,000 today. How do you account for this substantial rise in Japanese food exports? Why is now the time for washoku to shine internationally?
As you mentioned, Japanese food is growing in popularity across the globe, and there are several reasons. One is that the Japanese government has strongly promoted tourism as a core pillar of Japan’s growth strategy, and that has led to increased inbound tourists recently. With that, people come to Japan and enjoy Japanese food like ramen or sushi. When they go back to their own countries, they want to enjoy the same delicious cuisine they had on holiday; thus, we see an increase in the number of Japanese restaurants overseas. More or less, most Japanese cuisine can trace its roots back to other countries such as China, Korea, India, Pakistan, and Bangladesh. What Japanese people have done is take these overseas cuisines and evolve them or adapt them in a Japanese way. The uniqueness of Japanese restaurants is their ability to evolve to their customers’ tastes.
Japanese cuisine, where chefs utilize the unique characteristics of ingredients to create original dishes, clearly demonstrates its flexibility and adaptability.
The Japanese government is now pursuing its target of JPY 5 trillion in exports by 2030. Sushi and ramen are the two favorites of Westerners. Is this target achievable by 2030? To reach that target, new foods and dishes will need to be introduced to Western audiences. Which particular dishes do you see as the ones with the most potential to penetrate Western markets?
There are many products that have yet to be introduced overseas, and that would surely be popular. It is important to promote these products as new possibilities actively. Achieving JPY 5 trillion cannot be done by organic growth alone, and we see active implementation as the only path to success. Especially when working with processed foods, in Japan, there is always a marketing allowance for promoting the product. This could include working with local influencers and social media agents. Since these promotional costs are enormous, it is important to work with the government to keep costs down.
In order to expand food exports, it is important to develop an infrastructure in Japan for exports. The food industry was not very enthusiastic about food exports because its main market was Japan. The business was targeted at a market of 120 million Japanese population. However, from now on, due to the declining population, it is necessary to actively promote food exports with an eye on overseas markets. However, food exports are subject to various regulations in each exporting country, which must be addressed. We believe that the Japanese government, local governments, and industry associations need to share their know-how regarding overseas regulations and build a tolerant infrastructure to support companies.
And another aspect is the introduction of cutting-edge technology. For example, with the latest freezing technology, it is now possible to freeze perishable Japanese foods like tofu and sushi, which previously could not be preserved through freezing. Foods that could not be exported due to freshness issues can now be delivered to international markets using this freezing technology. It is also necessary for us wholesalers to collaborate with companies that possess such advanced food technologies and to establish the necessary infrastructure.
The Kokubu Group's four-temperature-zone logistics center in Singapore, scheduled to open in October 2024
Japan’s aging population is a point of contention for Japanese food firms. On the one hand, you can look at the fact that one in ten people are over the age of 80, so the nutritional needs of the elderly are growing. On the other hand, there is going to be a shortage of labor, and companies like yours are implementing special services for their clients. Can you tell us about some of the added-value services you are offering to offset this labor challenge?
With the aging population, there are going to be shortages of manpower in the retail and restaurant industries, and this is already becoming very prevalent. As a value-added service, Our company undertakes efficient logistics and process center operations. These tasks include the pre-processing of side dishes such as cutting ingredients, processing fish, packaging, and breading ingredients. By providing these services. By processing and delivering these services in batches at the process center, the retailers and restaurants to whom they are delivered are eliminating in-store work and providing a solution to labor shortages. We provide value with these pre-cooking steps, making sure that the actual cooking steps are done in stores. It enables the efficient serving of freshly prepared foods.
In a recent article in the Japan Association of Refrigerated Warehouses, they said that one-third of all refrigerated warehouses in Japan were more than 40 years old. In 2030, the government will introduce the new F-Gas regulations, and this will make a lot of these logistic centers obsolete. It is even believed that Japan might be on the verge of a fresh food crisis due to this bottleneck. The Kokubu Group has one of Japan’s largest logistics networks, with more than 300 locations across the country. What are your thoughts on this potential fresh food crisis? Do you believe that this unique situation presents opportunities for your company to leverage your logistics systems further for the domestic market?
For our cold warehouse facilities, since 2016, we have been introducing a natural coolant that could be used as an alternative to floron. Our entrance into cold storage was quite late. A majority of our large-scale warehouses use natural coolants, either CO2 or ammonia. We also changed the coolant based on the logistics center area. There are some smaller scale warehouses that are using the alternative to floron I mentioned, which will switch over to natural coolant as time progresses.
We’ve seen in recent times you’ve made investments to take your logistics network overseas. In 2018 for example you started Kokubu Logistics in Singapore, and in 2020 you opened a series of new warehouses in Malaysia. Looking at the future, are you looking to expand your logistics network further overseas?
The Kokubu Group has extensive and comprehensive know-how in logistics and domestic networking. We want to take this experience overseas, particularly in Asia with the prospect that there would be higher demand in cold supply chains.
"K&K Kelly's Luncheon Meat" in three varieties. Developed and imported by the Kokubu Group in collaboration with its group company in Singapore, to be launched in Japan from September 2024
Your core business is as a wholesaler, and you handle more than 600,000 food items from both domestic and international manufacturers. We understand that you have partnered with more than 10,000 manufacturers, but we wanted to understand your long term plans a little better. You position yourself as a food marketing company, selling the products and providing additional services. Can you tell us a little bit more about this co-creation aspect?
As a wholesaler of foods and liquor, we procure products from producers and manufacturers, and sell wholesale to retailers, or directly to consumers. In the past, we have regarded our target customers to be businesses that procure and sell food. In the 11th Long-Term Management Plan, which is now in its Fourth year, we have further expanded the scope to include the entire food value chain, from primary producers to the general public, in order to achieve "food value creation." In addition, we are also involved in almost the entire food supply chain, such as being commissioned by a major retailer to operate their fresh foods processing center.
One such example of our approach towards a service-oriented company is our many collaborations. Sony Network Communications and POLA, for example, have a joint venture, and we are assisting with this partnership, offering applications『SOULApie』for the maintenance of health, including recommended daily food intake and sleep monitoring. We can contribute to healthier lifestyles by advising better-balanced meals. By gathering data, we can contribute to the best sales in the retail industry and connect with manufacturers. Using this data, we can provide services and help companies approach consumers. In the 11th Long-Term Plan, we have introduced the concept of "Co-creation Ecosystem." We believe that innovation in the food value chain is more attainable when not only the company works alone, but when various partner companies cooperate and utilize each other's strengths, and that it is important to co-create with a wide range of partners.
Way back at the beginning of the Meiji era you were a soy sauce manufacturer, but since then you’ve really pushed to become a wholesale business. Even today, you do still have your own products as well as assist clients in developing new products. Do you see opportunities to continue to have your own branded products? How do you avoid stepping on the feet of your clients and inadvertently engaging in competition with them?
We will continue operating with our own branded products. It is our mission to create more unique, one-of-a-kind products that are needed by our customers. By maintaining our in-house development capabilities, we are able to strengthen our know-how and expertise in product development as well as consumer marketing.
As you alluded to, overseas, there are very different taste preferences. Japanese sushi is very simple, whereas a California roll is very complex. When you develop products for overseas regions like China and Asia, are you adjusting the flavors or the type of marketing you are doing?
It is true that taste palettes are different by nation. There are demands for traditional, authentic Japanese food, which is our strength, but there are also demands for Japanese food that has been adapted to local tastes. For Southeast Asia, this might be spicy food, and in the US, it might be fancy-looking food. One such example is nori, a traditional Japanese food, which are seaweed. In the West, seaweed isn’t considered appetizing, so in order to make it more attractive to Western markets, we have found a nori assimilated sheet that is made of soybeans, which makes the color white. This is not our original product, but we have introduced it to the American market. So far, it has been a huge hit. It is important in our business to thoroughly study local market needs and find the most appropriate product for distribution overseas.
In recent years, plant-based foods have grown in popularity. People are becoming more aware of the health benefits of plant-based foods. Additionally, people with ethical and environmental concerns can rely on a plant-based diet. Research by the Good Foods Institute says that 66% of 16-40-year-old people are willing to pay a premium for healthier, plant-based products. To what extent are you looking to integrate plant-based alternatives into your portfolio in the future?
Our group has been actively promoting plant-based food for around three years now. To this end, we have a capital alliance with a venture company called Deats Food Planning, which is developing a new type of ingredient that can be used in plant-based alternatives. They are proactive in both the domestic and overseas markets. The main ingredient that is currently focused on is the residue left after making tofu. Konjac is also another ingredient that is seeing some limelight, and Konjac, scientifically known as Amorphophallus konjac, is a plant native to Asia. It is primarily known for its root or corm, which is rich in a soluble dietary fiber called glucomannan. This root is commonly used in Japanese cuisine to produce a gelatinous food product also known as konjac. Since the popularity of plant-based food has spiked, it is important not only to develop ingredients but also to raise the level of dishes so that the taste is more widely accepted in various markets.
Ajinomoto Frozen Food Co., Inc for example developed a soybean meat alternative which they put inside of a gyoza dumpling. I personally tasted it and felt it was delicious and I could taste the quality. Additionally, since it is well within import regulations it could be exported to many different countries. Raising the quality so that products can be accepted is very important.
Your company aims to act as a bridge for the development of Japanese food culture around the world. To do so, you are looking to incorporate your divisions as core components of the Kokubu group as a whole. Could you tell us more about your international operations and which particular markets you believe have the most potential for your firm in the future?
As for our overseas strategy, something we consider critical are the creation of partnerships with local companies. When we entered the Chinese market we had many partners, and now some of those partners have become our subsidiaries. Finding markets that are large in scale and population are attractive to our company.
Imagine that we come back in five years and have this interview all over again. What goals or dreams do you hope to achieve by the time we come back for that new interview?
In five years time I hope to pass down all of my knowledge and know-how to the succeeding generation. I want to encourage the growth of our employees synchronizing with the growth of the company. We will nurture our international business to become one of the pillars of our company's operations.
For more information, visit their website at: https://www.kokubu.co.jp/english/
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