Starting 2023 with a new name and a new vision, welzo is at the forefront of digital transformation in the agri field.
It's no secret that the last two decades have seen an exponential decline in the number of agricultural management entities in Japan, which has led to greater difficulty in securing a stable food supply. With that in mind, can you please give us your analysis on the state of the food supply and agricultural production in Japan today?
Agriculture is a primary sector, and there are about 1.3 million people working in the agricultural sector in Japan, and the aging and declining population has been a prevalent factor.
According to the Ministry of Agriculture, Forestry and Fisheries' survey of new farmers in 2021, it is said that about 100,000 people quit farming jobs and about 50,000 newcomers enter the industry annually. On a yearly basis, there's about 50,000 leaving this sector, so in the near future, people working in the agricultural sector will drop below 1,000,000 for sure.
The reason why people are leaving the agricultural sector is because it's not a high paying sector. The average salary of a Japanese businessman is about 4.4 million Japanese yen, but for the agricultural sector, the average is less than 3.5 million JPY.
Overall, the income is low in this field and a key reason why is because the base price of agricultural products is not that high, and also, there's the huge impact the climate on crops leading to price fluctuations.
The average acre of land per Japanese agricultural entity is about 2.9 hectares, compared to the US which is 180 hectares, around 60 times more. In the EU it is 16 hectares which five times more, so as you can see, with the limited land space due to the topographical restrictions, it’s hard for the Japanese to increase their yield.
Due to the restrictions on the use of land, it is very hard to increase the yield and increase the income, and agriculture is considered to be work that requires a lot of effort, so it's hard to attract the young generations. It’s said that there are only 150,000 people working in agriculture under 49 years old (per the Ministry of Agriculture, Forestry and Fisheries Agriculture and Forestry Census, 2021).
Japan’s biggest issue here is self-reliance on food, and we need to take serious actions to secure food safety within our country. We are tackling this issue by introducing integrated smart agriculture by reducing risks and introducing automation and new technology to increase the yield at a shorter turnover. We’re not only trying to change agriculture, but combine it with logistics so the food produced can be better distributed across the nation.
Can you tell us a little more about the impact this change is having, specifically for welzo, and also what opportunities this shift presents?
The current situation of our company is that our main products are gardening related products, agriculture related products, and also fertilizers. With the decrease in the number of agricultural entities, we are constantly losing our accounts, and so we are trying to increase our accounts by approaching new farmers. For the horticultural aspect, people in this field are decreasing also, since with the increase of empty houses across Japan, there are fewer people doing gardening, so we are losing our market here as well.
We have over 100 years of history. Actually, we’re commemorating our 102nd year. In the past, our business was selling as a wholesaler to farmers and agricultural entities, agricultural tool products and fertilizers. Now, we are trying to evolve into a new innovation entity so we can tackle new markets.
A major milestone in your transition from a wholesaler to an innovation company occurred in November of last year when you opened your own research farm, the welzo Research Farm, in Imazu, just a few months ago. Our understanding is that you're hosting experiments here on how digital technologies and AI can help in crop cultivation and monitoring. I was hoping you could tell us, how it's been, four months now, since the opening of this research facility, and more about the current focus of your research?
First, let me give you the background of the reason why we initiated this project. It is a joint research project with Kyushu University, creating an immense research farm together. In our group, we have a company called JAHT, which does research into agricultural technology, and conducts training, giving instruction to the farmers on these technologies.
We are able to accumulate knowledge about how to increase the yield or make the crops sweeter or tastier, or even make the crop bigger. However, these technologies require experts who have deep experience in this field for 20 or 30 years, so we want to extract this experience and digitalize it so it can be widely used.
These experts who have over 20 or 30 years’ experience can determine the condition of a plant by looking at the stems, or the leaves, or how the roots are growing, and also analyzing the weeds that grows around the area.
Since this requires extensive experience, young people entering the field cannot do it overnight, so what we're trying to do is learn and convert that into data with the cooperation of the University of Kyushu. We are trying to make a scientific analysis so we can digitalize and monitor the growth of the plants.
Also, plant growth is highly affected by hormones, so analyzing and taking data about their hormones is also essential. Our ideal is to create a greenhouse and plant growing environment that is fully controlled automatically, including the temperature and the climate, and has only one person working in this greenhouse to grow the food. Our research farm actually is operated by just one person.
We are currently using cameras and sensors to gather all the data, and we are incorporating AI into the learning process to analyze and control the environment effectively. This system can be used anywhere in the world, including in countries with deserts.
Currently, we have many overseas students and foreign students doing joint research together in the field. The purpose of this project, domestically, is to mitigate the impact of the aging population by increasing the performance of each farmer.
By being able to control the climate, the yield will be stable without being affected by climate change. Another interesting thing is that the Japanese agricultural produce market is affected by the amount of yield at the time, so by being able to control production, we can actually control the market price of Japanese produce.
You won an Excellence Award for an image diagnostic model, checking the leaves of strawberry plants for diseases. How are you going to build on this diagnostic system going forward? Some plants are different than others. They have different temperaments and personalities. It can be hard to create a one-size-fits-all diagnostic system to be able to measure or monitor any and all plants, and the idea of having to make a separate program for each crop seems very time consuming. I'm just curious on how you're going to build on this innovation, and how you're going to compensate, or deal with, that kind of challenge of different kinds of plants being grown in the same environment.
In fact, we first started using these digital tools to increase of the yield of the cucumber, because it's easier to grow the cucumber and increase the yield, so working together with Kyushu University, the target was to have a yield of 50 tons per 10 ares of field. Usually it is 25 tons, so by using these digital means, we are able to double the production. Currently, we are trying to gather the data for other plants as well, so we can utilize and increase the yield of those too.
Another of our innovations is HAP°A. With the theme of coexistence between humans and plants, this initiative was started to bring plants closer to us. By incorporating not only the technology we have accumulated so far, but also a wide range of external knowledge, we propose new solutions through communication with plants to address changes in lifestyles and the social problems that arise as a result. This is our new business development department. Team members are now launching a new project, working together with the Fukuoka government, local governments, and nursing homes to explore the future vision of greening parks.
You've talked before about creating a controlled environment for growing, and it has obviously great benefits - doubling the production yield, for example, being able to keep a steady price by controlling the humidity and the temperature and the ground conditions. I think there are some in the world who would argue that might not necessarily be a good thing. When you talk about cultivation of certain plants, the seasons and the climate will make a difference year to year. That can be what's special about what's being grown. This is very common in wine for example. What storms went by that year will affect the soil and the taste of that wine. The same grape will taste totally different from one year to another. What are your thoughts on reconciling the natural element of food with more automated, controlled development?
It's a fine balance, and there are values in each of the things. However, the purpose of our mission is to increase yields and increase the salary of the farmers, so we can have a stable supply of food.
Talking about wine, it is true that the seasonal change in the flavor adds value to the wine itself. However, if you look at grape farmers, you can't actually tell if they are making money or not, or if they have a stable income or not. Our purpose is to provide a stable income and a stable yield so we can all together maintain and elevate the agricultural field.
Japan may be the world's oldest society, but it's not the only super aging society in the world. Many advanced nations are either facing, or starting to face, many of the same challenges in their own agricultural sectors. We looked at the EU and places like Germany, and Italy, with a very similar topography to Japan’s. I'd like to know to what degree your technology is intended for export. Are you interested in approaching these overseas countries?
As a company, we are ambitious in exporting our technology. Japan is struggling with the aging population and lack of younger generations, but globally we are seeing an increase in population, reaching close to 10 billion people, and with that, the stable supply of food is essential everywhere in the world, so providing that as a company is the approach we would like to take.
At the same time, especially in developing nations, the decrease in the agricultural workforce has become a serious issue. With the introduction of smart agriculture, we want to open up a new way of farming with less manpower.
It's important to collaborate with local companies in order to achieve our overseas development and expansion. First, establishing the agricultural farm and greenhouses, and also having the most appropriate sensors. Since we don't plant directly on the ground, we use cultivation bed to plant, and we could delegate the production of this cultivation bed to a local company, but what we'll be providing from Japan is the data that we have analyzed using the AI. We’ll be giving training and instructions remotely, on how to utilize these technologies.
Are there any particular countries or regions, whether it be Europe or developing countries, that you're focused on at this time?
We are open to any religion and any country. Currently, we are working together with overseas students, and we want to enlarge that project to Europe and also to the US. Our technology is not to compete with mass produced produce like corn, maize, flour or wheat, but by working together with local agricultural entities in producing a stable supply. Our technology can also provide a solution in severe environments such as freezing cold areas or arid climates that do not get much rain.
I'd like to know a little bit more in detail about the role that collaborating with outside entities plays within your company, and critically, if you're open to the idea of collaborating with foreign manufacturers or foreign designers.
We are actively seeking collaboration both domestically and overseas. For Momikku, this was developed with the idea of recycling and reusing waste every year from the de-husking process of rice. About 1.8 million (tons of) rice husks are created, and about 400,000 to 500,000 are discarded as waste.
If you burn it, it's harmful to the environment and emits CO2, so we work together with the Japanese Agricultural Cooperatives in each area to collect these rice husks and convert them into a new product.
We are a fabless manufacturer, so working together with our partner factories, we developed Momikku, which is recyclable and also environmentally friendly. We are not only focusing on this product, but increasing the number of eco-friendly products in our lineup.
Let's say we come back to interview you again in three years' time for your company’s 105th anniversary. What would you like to tell us about your goals and dreams for the company in that timeframe? What would you like to have achieved by then?
There are many things that I would like to accomplish here through my presidency within the upcoming three years. It's very important for us to continue laying the foundation for the next generation’s growth.
97% of Japanese companies are family run companies, family-owned companies. However, our company is not a family-owned company, so as the president, it is my role to lay the base for the next generation to evolve, based on the 102 years of our history.
How do I do that? Through the expansion of the business horizontally, based on the accumulated experience that we have. For example, in horticulture, the population is decreasing so demand will decrease. However, if you look at where there is a need for plants, currently foliage plants and others used for decorating interiors have become prevalent in the Japanese market.
These plants are considered to be part of an interior, and we have the ability to provide interior goods and products, but we haven't been able to do that. At the same time, expanding from interior and exterior, we can provide outdoor related products such as chairs and tables.
In addition, we will work to expand our business areas in various fields, such as by utilizing our "green" knowledge in agriculture and gardening, which we are good at, to solve various social problems such as urban development with the participation of the elderly.
There are so many areas that we can continue to expand into, so finding these areas and creating a foothold is crucial in my role as president. The same applies to overseas markets. We have so many strengths and tools to enter into the market, but we haven’t able to penetrate, so we need to take the big first step within these upcoming three years.