Trailblazing Taste and Scent Since 1903

To begin, could you provide a brief introduction to T. Hasegawa and its core business?

T. Hasegawa was founded in 1903 in the Nihonbashi district of Tokyo. Since our inception, we have been dedicated to developing aroma products that customers can use with confidence. Today, we specialize in the production of flavors for food and beverage products and fragrances for cosmetics and household goods. In Japan alone, we sell approximately 12,000 product varieties annually, positioning us as a leading flavor and fragrance company in the domestic market. With this solid foundation, we continue to explore the limitless potential of aroma products.

Our sales, R&D, and production divisions collaborate closely to provide customized solutions. One of our key competitive strengths lies in our ability to precisely identify the aromas our customers seek and provide solutions that exceed their expectations. Our sales team combines proven methodologies with consumer insights from our marketing division to develop products that meet current market needs. This approach has enabled a more proactive, proposal-based sales strategy. In 2020, we launched our Business Solution Division to further enhance collaboration between our sales, marketing, and R&D teams.

Japanese manufacturing has long been defined by a commitment to perfection, meticulous attention to detail, and dedicated craftsmanship. How is this spirit reflected in the way T. Hasegawa operates?

As I mentioned earlier, T. Hasegawa was founded in 1903, and we have a long history in flavor manufacturing. Over time, we've built a new culture of technology rooted in traditional values. This philosophy is captured in our corporate motto: Foundation in Technology. Guided by this principle, we are committed to delivering safe, reliable, and high-quality products tailored to meet the specific needs of our clients.

Each year, we invest approximately 8% of our sales revenue into R&D—a figure that may seem high, but we believe it’s essential to maintaining our competitive edge. Our perfumers and flavorists undergo extensive training over a 10-year period. By the end of that training, they are able to identify the aromas of 500 individual materials and 2,000 compound formulations. These specialists are among our most valuable assets, responsible for the creation of our unique flavors and fragrances. That said, the intensity and duration of this training process can be a barrier for some.

We’ve also integrated our R&D efforts with advanced aroma analysis, raw material synthesis, and the development of practical flavor applications for food and beverages. This comprehensive approach has positioned T. Hasegawa as a leader in the industry.

Our production processes are also quite distinctive. T. Hasegawa offers around 12,000 different flavor and fragrance products—not in large, mass-produced quantities, but in smaller, more customized batches. This approach is best described as high-mix, low-volume production. It requires frequent cleaning and meticulous changeovers, which is where our production technologies truly shine. These systems improve efficiency and streamline coordination throughout the manufacturing process.

Beyond the technology, our plant workers take great pride in their craft and are highly motivated to improve their work environment. We have a suggestion box system in place, and every year we receive about 1,500 ideas from our staff. This culture of engagement and continuous improvement sets us apart.

With plants in the U.S., China, and Southeast Asia, we’re actively transferring these practices from Japan to our overseas operations. While it takes time to train and nurture local talent to the same standards, we believe it's essential for maintaining consistent product quality worldwide. These practices have been well received, and we’re confident in the success of instilling our culture and standards in each of these regions.

Today, manufacturing processes are being transformed by AI and automation. How are these innovations influencing T. Hasegawa’s own production operations?

There are certainly many new innovations, and we’ve been actively incorporating digital transformation (DX) into our production processes. However, many of our operations still require subtle, real-time adjustments—something that only experienced human workers can manage effectively. These fine-tuned changes often arise on the spot and need to be carefully recorded to ensure that all engineers involved in the production process are aware of any modifications. While automation and AI are valuable tools, the human element remains essential in maintaining the precision and flexibility our products demand.

It’s clear that human expertise remains a vital part of your production processes. However, Japan as a whole is grappling with the challenges of a significant demographic shift. As the world’s oldest nation, and with a declining population due to low birth rates, Japan faces two major pressures: a severe labor shortage and a shrinking domestic market. How is T. Hasegawa addressing these challenges—both in terms of securing labor and adapting to a contracting domestic market?

Japan’s aging and declining population presents a major challenge, particularly for food-related businesses. For flavor companies, the domestic market is growing at only about 1-2% annually—far slower than markets like the U.S., which are expanding at around 2-4%. Japan is a mature market, so success depends on identifying the right targets and capturing them effectively. While the market may be limited, we’ve been able to maintain high margins and generate stable profits in Japan. However, when it comes to growth, that’s happening overseas. Over the past seven years, our international sales have expanded 2.2 times and now represent 50% of our total revenue.

As for the labor shortage caused by the aging population, we’ve implemented a few key strategies. First, we have put in place a system that allows our experienced workers to work beyond retirement age if they desire. We have also established a system to actively accept professionals who have heard a favorable reputation about our company and wish to work for us. We believe that maintaining a strong reputation in the market will continue to attract top talent. In this way, the necessary number of workers is ensured. Improving the quality of employees through better employee training will also help to alleviate labor shortages.

Recent consumer trends show a growing demand for healthier and more nutritious food and product choices. How is T. Hasegawa adapting its product development and research to align with this shift in consumer preferences?

As you mentioned, global consumer trends are increasingly leaning toward healthier food choices. Pursuing healthier options often means reducingthe intake of sodium, sugar, and fat contents—but when you do that, the flavor is typically compromised. That’s where we come in. We develop flavor solutions that help compensate for what’s been removed, allowing the product to maintain the same great flavor and taste as the full-fat, full-sugar, or higher-sodium version. Our goal is to retain the health benefits while restoring the original flavor experience.

Another trend we’re seeing is the growing popularity of plant-based meat among health-conscious consumers. I’ve personally tried a plant-based burger patty in the U.S. as well as vegan meat alternatives here in Japan. The challenge is that many of these products still carry, for example, a strong soybean flavor and can have a slightly bitter aftertaste. This is where masking flavors become critical. We provide masking agents that can suppress off-notes and bitterness, while enhancing overall taste. For example, we’ve developed a wagyu-inspired flavor that significantly boosts the satisfaction level of plant-based products.

Earlier, you mentioned that one of your key competitive advantages is the ability to create tailor-made products in close collaboration with your clients. Could you walk us through the process you follow when developing a one-of-a-kind flavor or aroma in partnership with a customer?

The process typically begins with a client approaching us with a specific request or concept. Based on that initial brief, we create a prototype batch for testing. From there, it becomes a collaborative, back-and-forth process—we present the sample, gather feedback, refine it, and repeat until the client is satisfied. Of course, there’s always a possibility that a client may turn to another flavor house, but our goal is to deliver something that meets their needs better than anyone else.

In Japan, our R&D capabilities are very strong. Our researchers are passionate about creating new ideas. However, in the past, this enthusiasm sometimes led to a disconnect—products were developed from the researcher’s perspective, not necessarily aligned with what the client actually wanted. There was a noticeable gap between our sales and R&D teams.

In 2020, we recognized this internal challenge and decided to realign the organization. We brought in senior management talent from a major Japanese advertising agency and established a dedicated marketing division. We also invested heavily in big data analytics. For major clients, we now conduct in-depth analyses of their products using what we call FLAVOR JOURNEY™. This involves examining where a client’s product is currently positioned and how it aligns with broader market trends. From this, we can craft flavors that not only satisfy the client’s request but also anticipate future consumer preferences.

Essentially, we become an extension of our clients’ own marketing and R&D divisions. While they may still explore quotes from competitors, the depth and insight of our analysis often give us a competitive edge. Our detailed proposals add real strategic value, which strengthens our chances of securing and maintaining those client relationships.

Throughout this conversation, it’s become clear that flavor and aroma influence far more than just taste and smell—they can also affect mood, trigger memories, and shape emotions. How is T. Hasegawa incorporating insights from neurogastronomy and neuro-olfaction to develop fragrances and flavors that evoke specific feelings, experiences, or emotional responses in end users?

This is an area we’ve been exploring for over 15 years. One key indicator we’ve studied is blood flow detected by cerebral blood flow monitoring system, which can reflect how the body responds to flavor and taste—essentially signaling whether something is perceived as pleasurable. But that’s just one of many. We've also looked at other physiological responses, such as changes in facial surface temperature, and have conducted extensive research into how these indicators relate to flavor perception and emotional response.

We draw on this data when working with clients, especially when it helps explain the impact a particular flavor or aroma may have. So, to answer your question—yes, neurogastronomy and neuro-olfaction are integral parts of our research framework, and they continue to inform how we develop products that resonate emotionally with consumers.

NANOLYS represents T. Hasegawa’s cutting-edge technology with applications for both hair and skin care. What steps are you taking to ensure the success and continued development of the NANOLYS™ platform?

That’s a great question. First and foremost, we believe NANOLYS is a highly promising product—one that effectively encapsulates a variety of beauty ingredients. That said, there’s a difference between having a strong product and achieving widespread market adoption.

Our immediate priority is to demonstrate the effectiveness of this technology within our clients’ formulations. This requires thorough testing, which naturally takes time, so patience is essential as we move through this phase. We remain confident, however, that NANOLYS represents a significant innovation.

To support its success, we’re also actively working to introduce the technology within academic and professional circles, including industry conventions. These efforts are aimed at building credibility and awareness, which we believe will contribute to broader adoption in the near future.

What inspired the development of NANOLYS? What was the core motivation behind creating this technology?

The development of NANOLYS was truly a collaborative effort that brought together all of our divisions around a shared vision. The idea originally emerged from one employee. Once the initial idea was well received, the entire company rallied behind it—refining and developing it into something we believe is truly unique. It’s a great example of how cross-functional teamwork can drive meaningful innovation.

Nearly 80% of your business is concentrated in the food and beverage sector, with the remainder coming from perfumes, cosmetics, and household goods. With 8% of annual sales invested into R&D, it’s clear that innovation is a core part of your strategy. Are there any new fields or industries you’re looking to expand into beyond your current focus areas?

To be honest, this is something that’s always on our minds. Over the years, we’ve explored various directions, including moving upstream in the value chain. Although it has not yet taken concrete form, we would like to take on the challenge if we can find a new business that uses human senses.

Across the industry, many companies have turned to venture capital and acquisitions as a way to secure access to the latest innovations. Is T. Hasegawa exploring mergers and acquisitions as a strategy to acquire cutting-edge technologies within your core areas of focus?

Our current strategy is focused on expanding our compound flavor business both domestically and internationally. Over the years, we’ve completed four acquisitions aligned with this goal. The first was in 2014, when we acquired a company in Malaysia to establish a presence in that market. In 2017 and 2020, we acquired two flavor companies in Southern California. Most recently, in 2024, we acquired a flavor company based in Chicago area.

Our approach is centered on bolt-on M&As, but we’ve observed that post-merger integration (PMI) often doesn't go smoothly in traditional acquisitions. That’s why we take a unique approach. Rather than entering bidding wars or aggressively pursuing targets, we typically identify potential matches in advance. We select around 30 to 40 companies that we believe align with our strategic goals, regardless of whether they are actively looking to sell. Our advisors then reach out to those companies on our behalf.

In most cases only two or three companies respond and those who responded positively are usually the right fit for us. They’re aligned with our values, our goals, and our business model. That’s how we’ve approached our acquisitions in California, which now give us strong coverage in the West Coast, and our acquisition in Chicago, which strengthens our presence in the Midwest.

T. Hasegawa currently holds a significant share of the Japanese market—around 20%. What strategies are you implementing to increase that share and position the company as the number one flavor provider in Japan?

The Japanese market is very stable, which means competition is fierce and every company is fighting for its share of a limited pie. That’s one of the reasons we’ve looked to acquire other flavor companies as a path to growth.

However, there are significant challenges when it comes to M&A in Japan. Many flavor companies are family-owned, and in Japanese business culture, selling or divesting a company can be seen as shameful. These companies often demand guarantees—not only that their executives will remain in place, but also that all employees will be retained. In reality, integrating two different corporate cultures is extremely difficult and often messy.

Given these complexities, acquisitions remain the only real route to increasing market share domestically. But because of the cultural and structural hurdles involved, the opportunities for growth through domestic M&A are very limited.

With the introduction of new corporate governance policies in Japan, we’re seeing a shift—newer executives appear more open to selling or divesting their companies. How do you think these changes in governance and mindset will impact T. Hasegawa’s strategy going forward?

I do believe Japan is gradually changing, but the flavor industry remains quite traditional. That said, as corporate governance policies continue to evolve and mindsets shift, we’ll be watching closely for new opportunities that may emerge.

At the same time, it’s essential that we prepare internally—particularly by training our staff to communicate more effectively in overseas markets. Strengthening these capabilities will allow us to better seize global opportunities when they arise and ensure we’re ready to act when the timing is right.

Are you actively pursuing international growth, and if so, which specific markets are you focusing on for expansion?

Europe currently represents the lowest potential for us, largely because the competition there is well-established and intense—particularly in the fragrance sector, which accounts for about 11% of our total sales. One of our disadvantages in this area is access to raw materials, which makes it difficult for us to compete on cost in that region.

On the other hand, markets like India and Turkey offer significantly more potential. That said, both come with distinct cultural differences, so we need to approach them with careful study and preparation. Many Japanese companies have attempted to enter the Indian market, only to later reverse course. For us, a deeper understanding of local dynamics will be essential before making any commitments.

Many of the companies we’ve interviewed have emphasized the importance of partnerships and collaborations to successfully enter new markets or co-develop innovative products. Is T. Hasegawa currently exploring any new overseas partnerships or collaborations?

When we first began expanding into the U.S. market, it became clear that we needed a strong partner. At the time, we were primarily following the lead of a single other Japanese company, and aside from that, we had no real local support. This limited our growth in the early stages.

We encountered a similar situation in China, where our business was tied to Japanese companies at its inception. That dependency restricted our ability to scale. To grow, we realized we needed to find local partners and better understand local preferences. China, for example, is made up of seven distinct taste regions—each with its own unique flavor profile. Successfully serving these markets required deep localization, and that’s where partnerships became essential.

This experience helped shape our broader strategy. It’s also one of the key reasons we view M&As as such a valuable tool. Through acquisitions, we’re able to tap into existing networks of clients and partners, allowing us to invest in and sustain established local business while accelerating our presence in new markets.

As CEO of T. Hasegawa, is there a personal mission or goal you hope to accomplish during your tenure?

T. Hasegawa has a rich tradition and has built significant financial strength over the past century. While we’re proud of our history, we still see great potential for growth—both for the company and our employees. In my own efforts to enhance shareholder returns, we’ve doubled dividends over the past five years. At present, I believe the company is in a very strong position.

Looking ahead, we’re planning to invest JPY 32 billion in capital expenditures over the next three years. Our customer base is already established, so our focus now is on expanding production capacity to meet growing demand. I anticipate that over the next three to four years, we’ll see much faster growth.

I’ve had the honor of leading this company for the past seven years, and I recognize the importance of preparing for the next generation of leadership. I’m 78 now, and I understand I won’t be at the helm forever, so we’ve put a succession plan in place. Our nominating committee has named Mr. Hasegawa as my successor. Interestingly, despite sharing the company’s name, he is not a family member. He was appointed Chief Operating Officer in October 2024, and we’re now working closely together to ensure a smooth transition.

His first major goal is to achieve JPY 100 billion in sales—a 50% increase from our current level. We’re now in the process of formulating the strategy to reach that target. If you come back to visit us again in the future, I hope we’ll be able to speak about how we’ve achieved that milestone.

For more information, please visit their website at: https://www.t-hasegawa.co.jp/en