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Sapporo targets US, Southeast Asian markets

Interview - June 15, 2016

Highly focused on building on an already strong brand awareness in Southeast Asia and North America, Japan’s Sapporo Group is looking to further build up its presence by expanding its food products, soft drinks and alcoholic beverages businesses in foreign markets. President & Representative Director and Group CEO Tsutomu Kamijo has the details.

 

TSUTOMU KAMIJO, PRESIDENT & REPRESENTATIVE DIRECTOR, GROUP CEO OF SAPPORO HOLDINGS LIMITED
TSUTOMU KAMIJO | PRESIDENT & REPRESENTATIVE DIRECTOR, GROUP CEO OF SAPPORO HOLDINGS LIMITED

In your opinion, what do you think of Japan’s current and future economic situation?

I believe there are things that should be considered in a brighter respect regarding the current economic situation, and some of these results should be attributed to Abenomics. I believe that there are a few things that have been unexpected, for example the low resource costs and prices. In the future, the population of those who are above 65 years old will be more than 25% of the population. Given such an environment, it is important to address how to attain business success. This will be a continual challenge for us as well.

 

The Sapporo Group has been consistently manufacturing products to the highest level for 140 years. Having guided the company successfully over the period of the last five years in your role as president, can you share with us the core factors that have contributed to the successes of the group?

I believe all the stable growth we’ve seen in the last five years as well as a stable profitability is something that needs to be mentioned. In the past six years, we were experiencing stable increases in our investments as well. Also something to highlight is our overseas revenue, which has increased from 10% to 23%. We have been welcoming new members to the group through M&A, which has been contributing to the group’s growth. Such investments, not in the near future, mid-term investments, will be collected

Unfortunately we do not have a business operation expanded into Europe. There might be the possibility that we may do that in the future, however, the focus for now is North America and Southeast Asia.

 

How do you see the group’s current positioning domestically?

If you look specifically at beer, then I believe that, say, our flagship products like the Black Label and Yebisu brands have a strong foundation in terms of trust and a reliable customer base. Therefore I believe that we’ll be able to win at this kind of competition. This further gives meaning to our existence in the domestic market.

 

Innovation is the core factor that has contributed to your strong positioning in the market today. How do you nurture a culture of innovation through the company, and how are you aiming to stimulate a domestic market that is highly saturated?

I believe there are a lot of issues that can be touched upon, such as the younger generation really moving away from alcoholic beverages. Therefore stimulating the beer market is a difficult topic to approach in the Japanese market especially. But one thing that I can mention is that, from the start, we have always been considerate of how the ingredients should be treated and how the ingredients should be grown. This has led to movements such as developing malt in areas like Canada, Australia, as well as in Japan. Even if you look into things like hops, we develop hops and a variety of craft beer makers use the hops that are developed by us. I believe that it is important to keep considering the growth factor developed by such implementations.

I believe that ensuring safety is the most important issue to be touched upon when talking about development in this business. This is a point that must be highlighted.

 

The Pokka Corporation was integrated into the Sapporo Group in 2013. How successful has this acquisition been in terms of providing you with an opportunity to gain a stronger foothold in the food business and how does this position allow you to grow the group’s corporate value?

In terms of revenue, this was successful in raising ¥140 billion (approx $1.3 billion). I believe that the acquisition of Pokka was extremely meaningful for our business. There are several things that we can mention in terms of this specific topic. First of all, since we’re dealing with food, it was a good way to step foot into the market. We’re talking about one of their products being in the lemon extracts market, which holds the number one share as of now. They were also able to open doors to the soup market, which can be offered in both canned forms and powder forms. If you look at it in terms of cans, they are number one in the market. In terms of the powder-type soups, they are the second in the market. So I believe that this has opened up plenty of business opportunities and operations for us, as well as the growth opportunities for us in the foods market.

Second of all, I’d like to mention our Singapore location. They have been there for 35 years already. In terms of market share, tea has a high percent there—50%. As for fruit beverages, we have the number one share there. So we are considered very highly in the Southeast Asian market. I believe this has also contributed toward our entry into the Vietnamese beer sector.

 

What are your hopes for the Vietnamese operation? Are you looking to establish yourselves throughout the rest of Southeast Asia as well or are you going to be focused by and large on Vietnam?

As for our Vietnamese operations, we believe that the first step is to go forward with establishing a premium beer brand and thereby enhancing the growth. In terms of the Southeast Asian market, if you look at all countries, due to mainly religious reasons, Vietnam is the top beer market that exists in Southeast Asia. Therefore I believe that Vietnam will surely prove to be an important contributor to our growth.

 

Sapporo first made its way to America in 1964. Today, Sapporo stands alone as the #1 selling Asian beer in the United States and it seems that for some time to come the US market represents excellent growth potential for Sapporo. How is Sapporo positioned for growth in the US?

The US market has been the number one market since the time I spent in the United States, and therefore since then I’ve had high expectations regarding this particular market. Maybe our investors believe there is plenty of potential in the United States’ market.

However, there are severe limitations as Japanese beer is considered to be something only for Japanese restaurants or Japanese cuisine. With regard to the North American market as well as in Canada, we have been going forward thinking of how we can continue to improve our awareness as well as our sales distribution as a strategy.

Because we have reached all states already, I believe that it is not a consideration about breadth, but more about depth. Local consideration and local thoughts are something that will become more important in the future too. The US market is the most appealing market that we are considering.

 

With the discussions over the last few years leading up to the TPP, which is still in early talks and is yet to be put in place, but how is that likely to affect any of your operations in the future?

Once the TPP starts, I believe that the most directly impacted sector will be the wine sector, as well as other imports like whisky and other beverages. So when it comes to our operations, there will be some effect on wine as well as other Western-style liquor, but the effects will not be as large as others may expect. This is something that I saw within the company, but if you look at the distance between New York and Los Angeles with relation to where Tokyo is, then you can reach almost to Ho Chi Minh City. With the distribution network spreading, I believe that it is more important to consider how we can keep up with this kind of expansion as a supplier and maintain the brand in this kind of market being confronted today.

 

Where you’d like to see the company for its 150th anniversary in 2026?

The portfolio we have right now we have been building up since 1876 when our beer operation started. I believe that leveraging this will be of continual importance for us. As a food supplier in this market as well, we think providing the highest quality to our customers and acting upon it will be of utmost importance rather than just the pure pursuit of revenues in our operations. By undertaking these principles, I believe that it is possible to take our Sapporo brand to a globally recognized brand.

 

What is your final message to the readers?

I was very thankful to see media like [USA Today] with high quality as well as being easy to approach and read since I was in the United States, around 1985. The United States’ market is one of the most appealing markets for us as well as one of the best partners. We’ll hopefully continue our efforts to provide high-quality products to our customers in the United States. 

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