Global demand for rice crackers is continuing to rise, particularly in the US where the market is expanding 10%-20% annually. Market-leading Kameda Seika’s popular products are now available in an increasing number of locations outside Japan – even in the international space station. Chairman & CEO Michiyasu Tanaka discusses the huge opportunities to further expand the company’s reach and some of the innovations coming out of its Rice Research Center.
Abenomics seems to have had an impact on both the economy and global mindsets. What are your thoughts on this subject?
In Japan, individual consumption counts for about 60% of our GDP, and the fact that this is not vibrant is the problem. Looking at the consumers, they have almost everything that they could want in life, and yet they do not know how to enjoy life. Because of the country’s financial situation, there are many people who are concerned about their future. I believe people’s lives have shrunk, and it is not bright and joyful anymore. Abenomics aside, I believe it is important for the Japanese government to stimulate individual consumption as well as picture a bright and fun future for people.
In my personal opinion, the financial situation of our country is in a very precarious state. I understand that the government cannot take any bold measures, and I completely understand their standpoint. What I can say for sure is that Japan in its current state is on the verge of going into a very dangerous situation.
With Kameda Seika’s operations on both sides of the Pacific, in Asia and also in the US, what opportunities will the TPP give your company if ratified in the future?
We can see that people have a positive impression of rice crackers with it being gluten free, low in calories, and good for allergies, because we are experiencing a rapid growth of our products, especially in the American region. The domestic growth rate for rice cracker is 2%-3%, however, growth in the US is 10%-20% per year. The market in Japan for these crackers is 260 billion yen; in the US that same number is 36 billion, and in terms of scale, it keeps expanding. We have three companies in the US, and they represent 60% of the total share.
In Japan, there are manufacturing companies and distribution companies such as Seven & I, who are much bigger in scale than us. That shows that the retail industry is much stronger than the manufacturing side. As a result, the retail price is fixed first, and our profit is the difference between the price and our cost.
However, in the US there are many manufacturers such as Coca-Cola and Johnson & Johnson, who are also distributors. For them, cost plus profit is the sales price. In that sense, I think the picture is much fairer in the United States.
For the past four years, Kameda Seika has been leading the industry with 30% of the market share and you have experienced tremendous growth. One of the key aspects of Abenomics is to globalize Japan, and in that sense Kameda truly embodies the spirit of Abenomics, because your end goal is to create a global food company. How do you plan to achieve this and what are your next plans in terms of international relations?
We do aspire to become more global, but it has nothing to do with Abenomics. There are other confectionery manufacturers here in Japan that make biscuits, cookies and chocolates, and there are similar kinds of companies in the United States. However, we have rice crackers and are positioning our product completely differently because it is a truly Japanese product, and we are propagating it to the world. I believe we are placed in a very competitive position in terms of globalization.
In fact, you started your internationalization process in 1989 in the United States, which is the world’s largest valued market, at over $35 billion. In 2012, you furthered your presence in the US with the purchase of a major organic rice cracker manufacturer, Mary’s Gone Crackers. How important is the US market for your strategic growth?
I believe there is more potential for growth in the health food market in the US. We have plans to put more force into the health-related domain, which I believe puts us in sync with the trend of society in the US. Three weeks ago, a professor from Harvard Business School visited us in order to write a new case on Kameda. One of our subsidiaries in the US engaged in selling traditional Japanese rice crackers has been losing money for nine years. The professor asked us why we are still running this business. I told him that we operate on a long-term basis rather than short-term. In the US, if you cannot get results within three years, you will give up and abandon the business; we are not like that in Japan.
The US is one of the most difficult markets in terms of adapting to the needs of the customers, as the customer needs are constantly changing, especially within the food industry. How have you managed to always stay a step ahead of the competition, especially in the rice cracker industry?
In terms of the US market, there are big manufacturers like Nabisco and Frito-Lay, but our products do not overlap. In addition to the United States, we currently have companies in China, Vietnam and Thailand, and are planning to expand into India and Indonesia as well. We have different bases throughout the globe, and we provide the appropriate types of products for certain types of markets across borders. We are the only company in the rice cracker industry to do such a thing. That is why I believe there are many opportunities for us.
Following 30 years of exporting Japanese food culture, the country is now going through a touristic boom expected to reach over 40 million visitors for the 2020 Olympics. How are you planning to take advantage of this wave of tourists visiting Japan to promote your homemade products?
It is a very fortunate situation that the eyes of the world are on our culture, and through rice crackers we are able to spread the Japanese culture to the world. We are really positioned in a lucky situation. We do not have any specific plans for the Olympics, but thanks to Abenomics there are many foreigners here in Japan. I hope the tourists will try our products during their stay in Japan. I believe this will lead to many business opportunities for us.
Your company is a fantastic example of commitment toward improving people’s lives, by delivering health and happiness through rice crackers. One of your core brands is called “Happy Turn”! Why is contributing to society so important for you?
This is included in our mission statement. It derives from our founder from over 60 years ago when this company was established in Niigata. He said, “For men after the war, there is alcohol to drink, but nothing for women and children.” He decided to produce sweets from rice. Originally, it was actually rice candy, but he changed it to rice crackers. That’s the “wa” from the founder, and it also says in our mission statement that we like to contribute to people’s happiness. It is very important for us to contribute to the people’s health not only in Japan, but abroad as well.
You made a large number of reforms in the company and changed its whole strategy when you were first appointed CEO. What was your aim behind these changes?
We were not doing well at the time, and if we had continued down the same path we would have become bankrupt. Up until that time, the company had grown on a steady basis so everyone was very relaxed about it, so there were so many things that could have been improved. I personally thought I would be incapable of implementing such reforms. We were ahead of other companies in that we introduced an advisory board, which makes strategic advice to the management, the members of which are reputable business people.
In addition, I changed the members of the board so that a majority of its members are from outside. We have great dynamics and teamwork with our outside board members and they are directing very well. We did not simply want to introduce Western-style, but we were just realistic about our limited ability. Based on that realization, we have been taking these measures to reinforce our capability.
It seems that there is still an abundance of possibilities in the rice industry. Could you please tell us more about the Rice Research Center? How will this state-of-the-art center help you conquer more customers?
The reason we created the center is because rice has so many possibilities. Some of the products developed by our research center are as follows. Low protein rice is specifically prepared for people with kidney disease. We just began developing some research for brown rice. Not the brown rice you eat as it is, but the kind that goes into packaged foods or drinks. We have developed many supplements for allergic pets or cosmetic products as well. In addition, we provide space foods to the international space station, which is a big selling point.
What would you like the world leaders who gathered at the G7 Summit in May to remember about Japan and its brand?
I would like the world leaders to feel and reaffirm the quality and safety of Japanese products. The fact that middle to high income tourists from China, the number of which has been increasing in recent years, buy lots of consumer goods at a price much higher than in China shows that they believe in the quality of Japanese products.