No. 34: The way that a Japanese medium-sized company should take (November 17, 2012)

Management:

Calbee, a coinage from calcium and vitamin, is one of Japan’s leading snack food makers. The company is enjoying a high popularity in the stock market. Its current aggregate value has grown three times since it was listed on the day of the Fukushima disaster in 2011. In the past, it had 15 plants to deliver fresh potato chips to every corner of the country, and the densely distributed production network contributed much to increasing its share in the 1970s and 1980s. With the progress of logistic technology, however, the production network became ineffective.

The new president invited by the founding family from a foreign-affiliated company rationalized the production system. He reduced the production cost by integrating the production and material procurement systems, and allocated the money available from cost reduction for sales promotion cost. The increased rebate realized by the increased sales promotion cost motivated retailers and increased Calbee’s share from 60% to 70%. Accordingly, the capacity operating rate of its plants increased from 69% to 75%. The positive growth cycle allowed the company to triplicate the operating profit to more than 15 billion yen in three years.

Calbee is very active in expanding the market overseas. It concluded a contract with PepsiCo of the U.S. to give the exclusive right to PepsiCo that markets its products supplied by Calbee on an OEM basis in North America, though PepsiCo’s requirements were rather demanding. In exchange for the scarcely profitable contract, Calbee secured stable and inexpensive supply sources of potatoes. Combined with automation of production, this contract helped the company open up a road to an operating profit higher than 10%. The company is developing the Chinese market in alliance with a local company, and conducting feasibility study in Vietnam and Indonesia. It plans to increase the ratio of overseas sales from 4% in 2011 to 30% in 2021.

The Calbee story indicates what a medium-sized Japanese company with an established technology should do in the age of globalization in whatever field it is doing business. That is, the first thing that it needs to do is streamlining the operation to reduce production cost, then it should increase the share with the help of competitive product prices to establish a dominant position in the domestic market. Then, it should develop foreign markets in alliance with a local company with a strong sales force because population decrease and aging of society is accelerating in Japan. Even a snack food can expand the market overseas, even though taste varies with the countries. What is important is not a product but an effort to make a product acceptable to local people of each foreign market. 

One of Calbee’s latest promotion videos

 

No. 33: The target is the global market (November 14, 2012)

Management:

Hitachi Materials and Hitachi Cable, each of which is a subsidiary of Hitachi, will merge next April to create a company with sales of 1 trillion yen to compete successfully in the global market. Hitachi Metals has about 40% share in the world market of high-performance metals for electric vehicles. The company has a strong competitive edge in high-quality metallic materials for autos, electric appliances, and industrial infrastructure. Hitachi Cable has a strong presence in the market of cables for electric power companies, but it has been in the red for five consecutive years because of dwindling sales. The company enjoys competitive advantage in the construction of social infrastructure including railway network and transmission network that has great demand in developing countries.

Hitachi has been placed importance on independence of each subsidiary. Each of Hitachi’s subsidiaries has a great presence in the domestic market, but Hitachi’s subsidiaries are mostly not big enough to compete in the global market. Hitachi acquired five of its subsidiaries through TOB as part of its strategy to focus more on the IT and social infrastructure business. This strategy improved Hitachi’s results dramatically and allowed Hitachi to recorded net profit of about 350 billion yen in the fiscal year ended in March 2012. However, GE of the U.S. and Siemens of Germany are far ahead of Hitachi in the social infrastructure business. Needless to say, the strategy to pursue economies of scale is one of the most critical factors to compete successfully in the global market. 

 

Hitachi Metals and Hitachi Cable merge to increase 

presence in the world social infrastructure market

No. 32: Japan grows more serious about resources in Africa (October 31, 2012)

Business trend:

Japan will hold a conference with cabinet members of major resource-rich African countries to discuss the development of natural resources in Tokyo next May. The conference will be participated by such international agencies as the World Bank and African Development Bank and private companies. About 10 African countries including South Africa, Ghana, and Madagascar are expected to participate in the conference, and Japan wishes to reach an agreement with them on resource exploration.

After the Fukushima disaster, demand for fuel for thermal power generation is growing rapidly in Japan. And the Japanese government is eager to develop the African market for coal and oil. Such subjects as infrastructure improvement wit the help of official development aid and developing human resources from Africa to let them study Japanese environment-conscious technology will be discussed. China is ahead of Japan in resource development in Africa. China invested 15 billion dollars in Africa between 2008 and 2011, whereas Japan invested only 2 billion dollars in the same period. African countries are worried about the development by China from the viewpoint of environment destruction and disparagement of workers’ safety. They eagerly wish Japan to increase its presence in Africa. 

Responding to the voice of African countries, Japan will hold a conference with them on resource exploration in Tokyo next May. The conference will be participated by international agencies like the World Bank besides the African countries.

 

No. 31: Nippon Express introduces a system to manage inventory on a worldwide basis (September 22, 2012)

Management:

Nippon Express currently has warehouses in 278 locations with a total area of 1,700,000 square meters around the world. The warehouses are currently managed by systems that vary with the country, warehouse, and customer. The company will integrate them to manage the warehouses on a worldwide basis. Scheduled to be ready in 2016, the new system will support Japanese, English, and Chinese. It will allow Nippon Express to confirm the operation of all the warehouses on earth instantaneously in Japan, and its customers can realize the optimal inventory control and commodity supply on a world basis. 

The new system will utilize cloud computing. The servers will be installed in Japan and several locations abroad. The investment is about 1 billion yen. Although Nippon Express needs half a year to introduce a warehouse management system tailor-made to each customer, the new system can halve the required time to three months. With the introduction of the new system, the company reckons that it can reduce the personnel for system maintenance form the currently 100 to 50. This decision is part of the strategy to increase the sales in foreign countries from the current 30% to 50%.

Nippon Express in India

No. 30: Railway stations increase the presence greatly in life and business (September 16, 2012)

Management: 
With the growing concern over climate change, the railway business seems to be attracting great attention worldwide. This trend is very notable in Japan. Traditionally, railway stations played a very important role for the development of the urban area in Japan. Unlike in western countries, people used to walk a lot instead of driving a car or riding a horse in Japan. That is, the terminal from which a railway departs and in which it arrive is closely related to people’s life. People shop around and enjoy life in and around a terminal. Motorization changed the life style of Japanese, but the situation is changing fast recently. 

Osaka Station, one of Japan’s big terminals, attracts 2.5 million people daily, and a total of 12 companies are involved in the redevelopment of its vicinity. The Grand Front Osaka project will be completed in the spring of 2013. Four high-rise buildings are being constructed in the 7-ha idled site that used to be a station of freight-train cars. In these high-rise buildings, a total of 522 condos are being constructed, about 90% of which are already sold at this moment. Besides, about 60 residences as expensive as higher than 100 million yen each are selling fast as a pancake. In Osaka, another big project is in progress under the initiative of Kintetsu, Japan’s leading private railway company. The 300 meter tall complex building called Abeno Harukas is being constructed with an investment of 130 billion yen in the southern part of Osaka. It will have museums and an observation deck besides department stores and hotels as tenants. The same trend can be observed in Tokyo, too. The large-scale complex facilities Shibuya Hikarie that features the nation’s largest musical theater, Tokyu Theater Orb, that has a seating capacity of 2,000 was opened July 18 this year. 

It has become clear that people are coming back from the outside the town to the inside the town. The great Ichizo Kobayashi defined the railway station as a place that gives people a communication tool instead of merely as a place where people get on and off the train. In the beginning of the 20th century, he was the only businessman that defined the railway station in that way. The recent trends we observe remind us of his greatness. His famous remark, “If you in need of a customer, why don’t you create a customer?” His remark has something in common with the famous remark of Dr. Peter Drucker. He said, “Business is to create and keep a customer.”  

Grand Front Osaka is being constructed toward 
the opening scheduled for the spring of 2013.

No. 29: Focusing on growing markets with a strategy suitable to each market (July 17, 2012)

Management:

Unicharm, Japan’s leading maker of paper diapers and sanitary products, is busily occupied with expanding the market in Southeast Asia. It will build the third plant in Indonesia and the second plant in India in 2013 with an investment of 2.5 billion yen to cope with rapidly growing demand in Southeast Asia, while closing the plant in Australia. Actually, the existing two plants in Indonesia cannot satisfy the rapidly growing demand at present. Paper diapers, in particular, are enjoying great demand. According to the company, the market of paper diapers and sanitary products combined is 72 billion yen in 2012 and expected to double in 2020. The company achieved sales of about 150 billion yen from the Asian market in fiscal ending March 31, 2012, increasing the sales two times in four years.

Japanese companies that focused on growing markets with a strategy suitable to each market are successfully expanding business in the Asian region. They mainly aim at the low-income class called Base of Pyramid (BOP) whose annual income is less than 430,000 yen. Mandom, one of Japan’s leading cosmetics maker, has 70-80% share in the hair dressing market in Indonesia. It sells its products in a small package with only 3-6 gram content. Ajinomoto, worldwide famous for its seasoning Ajinomoto, sells its products in a small package with 0.09 gram content, whereas a bottle with 75 gram content is standard in Japan. Each package is sold for 0.42 yen. Yakult, Japan’s leading lactic acid bacteria beverage market, is successful with a sales network supported by 27,000 Yakult door-to-door sales ladies in China and Indonesia where the door-to-door sales method was not popular before the arrival of Yakult.

The above stories give various lessons. Focus on growing markets. Do not hesitate to scrap unnecessary bases and build necessary bases for business expansion. Be specific to each market. Ultimately, business is communications between marketers and consumers regardless of the sales method selected.  

 A Yakult door-to-door sales lady and her customer

No. 28: A small big company in the medical instrument industry (June 20, 2012)

Management

Mani, Inc. is not a big company in terms of sales and capital, but it is a big company in the medical instrument industry in terms of presence. It is the leading manufacturer of suture needles for surgical operation and extra fine medical instruments for dental surgery. Since it was established in 1959, it has been concentrating its management resources on developing and marketing suture needles in pursuit of the highest quality and the largest share in the world market.

All executives, development managers, and marketing managers get together in the head office two times a year to compare its products with competitive products from around the world. Participants examine all products submitted for the discussion by market segment. If Mani’s product is No. 1 in quality and share, the question will be “What we should do to widen the margin between the follower and us.” If Mani’s product is No. 2 or below No. 2, the question will be “What measures we should work out to catch up with and beat No. 1.” It is very simple, but the simplicity is the key to any strategy as we learned from Jack Welch of General Electric.

The company develops only products that enable it to become the world leader, and holds a meeting every month to study whether or not the product can be the world leader in the future and whether or not the current development approach is right. Management staffs always ask themselves, “Does the market really need this product?” This is a very important question because engineers mostly tend to assume that the products they are developing will be in great demand in the market. Konosuke Matsushita, the founder of Panasonic, once asked his brilliant engineers, “Do you really think that customers will be happy with your product?” at the end of the product presentation that they delivered with great confidence and emotional excitement. That’s it.

This company declared that it will not be a family company in the future, though it is a family company at present. It does not allow children and relatives of management staffs to join the company. Saying is one thing, doing another. Every company starts with a family company. Neither Mitsubishi nor Toyota is an exception. In some day in the course of development, a company has to say goodbye to family management. Soichiro Honda, founder of Honda Motor, did not allow his son to join his company. Talking about his successor, he asked his management to search an eligible among all employees. If you cannot find an eligible, search him throughout Japan. And if you cannot find an eligible in Japan, find some one all round the world. This story alone is enough to show how great he was. 

No. 27: Imports of rare earthes decrease rapidly in the first quarter (June 15, 2012)

Market

Imports of rare earthes from China decreased nearly 70% in the first quarter from the same period of the previous year. According to the Trade Statistics, imports of rare earthes in the first quarter decreased 58% from the same period of the previous year to 3,650 tons, and those from China decreased as much as 69% from the same period of the previous year to 1,894 tons. In fact, imports of rare earthes have been decreasing on a year-on-year basis for the past five months. The drastic decline can be attributed to the stockpiling and innovation of Japanese companies.

Shin-Etsu Chemical, which has 20-30% share in the world high performance magnet market, already introduced a production method that considerably reduces dysprosium consumption. For magnets used in air-conditioners, it is in the process of introducing the magnet that halves dysprosium consumption, and plans to replace the current magnet with this new magnet entirely by next spring. An increasing number of Japanese companies are returning from metal magnet to ferrite magnet. And magnet makers are actively developing new rare earth-free metal magnets.

In the production of high performance magnets, it is necessary to add dysprosium for nearly 8% in weight to increase heat resistance. Hitachi Metals is studying the method to reduce the content to 4% by the technology to distribute dysprosium effectively. The company plans to establish the mass production technology by 2014. At the same time, Japanese companies are diversifying the supply sources of rare earthes. Mining companies in the U.S. and Australia will start to ship cerium and neodymium to Japan within the year.  

The prices of rare earthes are declining in June. Neodymium is currently 150 dollars per kg and dysprosium is 1,100 dollars per kg. They both declined about 70% in price from July of the previous year when they recorded all-time highs. As is often the case, technological development reduces the prices of natural resources considerably.  

No. 26: Using electric vehicles to create a CO2 emissions quota (June 11, 2012)

Management

Nissan is scheduled to start a system to create a CO2 emissions quota in June using its “Leaf” electric vehicles. The company will create an emission quota for about 10,000 tons per year in collaboration with Leaf owners and sell the quota for the improvement of fast charging facilities and forest conservation. Since an EV does not emit CO2, it can create a quota of 0.9 ton per year that is equivalent to the annual CO2 emissions of a gasoline car. The company gets the reduced CO2 emissions from a LEAF owner for free and sells the combined amounts of emissions to Green Investment Promotion Organization affiliated with the Ministry of Economy, Trade and Industry. Nissan will distribute information on CO2 emissions reduced by EVs to collaborators through the Internet in real time to keep them informed of the progress of CO2 emissions. The emission quota will be sold for 1,500 yen per ton. Nissan so far sold 12,000 Leaf’s in Japan. 

Other companies are creating emissions quotas. TOTO, Japan’s leading manufacturer of bathroom equipment, introduced energy saving equipment, and OMRON, one of Japan’s leading manufacturers of sensors, supports energy saving efforts of households through its power sensors. Mitsubishi UFJ Lease and Finance is trying to create a quota by leasing LED lighting to medium-sized companies. The Ministry of Economy, Trade and Industry started the Domestic Clean Development Mechanism in 2008, and Japan already created about 500,000 tons of quotas that are purchased by many companies. 

No. 25: A restaurant chain installs chargers for electric vehicles for free charging (June 4, 2012)

Management trend

Skylark, one of Japan’s leading restaurant chains, will start to install chargers for EVs in its restaurants across the country for free charging. In the initial stage, it will install them in 900 restaurants, one third of its total restaurants, nationwide in less than five years. The charging cost is estimated at several tens of yen per charge, and company bears it. Skylark plans to absorb the cost increase by introducing LED lighting inside the restaurant. Everyone can charge his car with the charger, even though he is not a restaurant guest.

This is the first attempt of a national restaurant chain to offer this kind of service. The charger to be installed will be a standard charger of 200 V about tens of thousand yen a unit, but the company plans to install quick chargers more than one million yen a unit as well. The total investment is estimated at several hundred million yen. Convenience store chains are also increasing the number of stores equipped with charger. The leading five convenience store chains have already installed chargers in a total of 52 stores.

Automakers are also busily increasing the number of dealers equipped with charger. Toyota installed standard chargers in 1,200 dealers, while Nissan installed standard chargers in 2,200 dealers and quick chargers in 400 dealers. Osaka Prefecture is constructing the “Osaka Infra System Service” network for better charging service in alliance with Enegate, a subsidiary of Kansai Electric Power Company, Nihon Unisys, and Kanematsu.      

 The quick charger that Osaka is spreading for electric vehicles

No. 24: The concept of a convenience store is changing (May 18, 2012)

Management

Rawson, Japan’s second largest convenience store chain, will expand the area per store to nearly 160 square meters to increase the number of such items as vegetables and prepared foods. The average area of a new convenience store was 133 square meters in 2011, and the company will increase the area by 23 square meters to 156 square meters. It has already been operating a test store of this size, and plans to start to expand stores of this size in full swing coming June. The company is scheduled to build 800 new stores this year, 50-70% of which will be a store of the bigger area. Construction cost is expected to remain the same as in 2011 partly because of the decreasing price of LED lighting and review of external wall materials.

The big area will allow the company to increase the items by 300-500 to attract the elderly who wish to shop in the vicinity and housewives who wish to buy prepared foods for dinner on their way back to home from work. In addition, it wishes to increase the number of private brands, and some stores now prepare foods inside the store for shoppers. With the expansion of service and increase of handling items, the company naturally needs to expand the area. Currently, the concept of a convenience store is growing close to a small supermarket specializing in foods and daily necessities. Actually, the difference in sales between supermarket and convenience stores is becoming smaller.  

As the competition among the convenience store chains intensifies, each of them focuses on some specific strategic points. Seven-Eleven will introduce seasonings with ingredients that allow shoppers to prepare foods only with a kind of vegetable they buy at the store. Rawson plans to increase the number of contracted firms to 30 in three years to increase the line-up of vegetables. Family-Mart wishes to increase the number of kinds of small vegetable packs sold at 100 yen each, and Circle K will introduce cut vegetable easily prepared by a kitchen microwave. 

A convenience store is growing bigger with an increase of handling items

No. 23: Will electronic books spread in Japan? (May 13, 2012)

Market trend

Amazon announced that it would launch the e-book business this year, and the Japanese publishing industry is formulating several measures to stimulate the e-book market. Leading publishers, bookstores, and printing companies are trying to spread e-books, but the fact remains that the e-book market was 65 billion yen in 2010, of which nearly 90% was comics distributed to young people through mobile phones. At present, there are less than 100,000 books available for distribution. In addition, they are mostly comics and out-of-copyright literary books that are already being released on the Internet for free. As a matter of fact, e-books account for merely 3% of the total book market that amounts to about 2 trillion yen. In the U.S., the e-book market is estimated at 120 billion yen with 1 million contents.

The great difference in the market size between Japan and the U.S. is because Japan has a different copyright system from the U.S. Writers transfer their copyrights to publishers, and publishers can digitalize their books at their own discretion in the U.S. In Japan, however, writers do not transfer their copyrights to publishers. That is, publishers have to get approval of digitalization from each of the writers in Japan. To overcome this stalemate, publishes try to get the neighboring right for easier distribution of e-books. The Japanese government is working on the request from publishers. The Agency for Cultural Affairs has been discussing this issue since November 2010.

The report published last December required further examination of the influence over the e-book market and organization of legal problems in association of expanding the e-book market, and the discussion is still in progress. E-books are truly convenient and easy-to-handle, but it does not seem probable that the e-book market will expand rapidly and considerably in a short time because consumers will not change their custom of reading books published in paper so quickly and promptly. Most railway stations have a bookstore before them, and it is now possible to get a book bought on the Internet at a convenience store in Japan. Actually, you can easily find a convenience store around the corner in Japan.  

No. 22: Yokogawa Electric withdraws from the semiconductor inspection equipment business (May 12, 2012)

Management trend

Yokogawa Electric, one of Japan’s excellent manufacturers of control equipment, decided to discontinue building inspection equipment for semiconductor production in March 2013 and concentrate its management resources on equipment for plant control. After spinning off its semiconductor inspection business in April 2011, the company has been looking for a buyer unsuccessfully. The plant current building inspection equipment will be remodeled as a plant exclusively for the production of plant control equipment.

The company used to be one of the world’s three big names in the semiconductor inspection equipment business with Advantest and Teledyne of the U.S., and it enjoyed big business with Samsung Electronics of Korea. It achieved sales of 20 billion yen in the semiconductor inspection equipment business in 2010. However, its share fell about 2% lately due to a lack of investment in development. In fact, the business has been in red since 2007. While Yokogawa’s presence in the market dwindles, Advantest acquired Verigy of the U.S. in 2011 to strengthen its ability to provide integrated services. And Yokogawa further decreased its share because its equipment is designed only for a specific process.

As Peter Drucker said, innovation and marketing are the two most critical factors for a company. Stay alert anytime. If you drop your guard, you will lose. Think about Nokia and Research in Motion (RIM), both of whom have hard time to regain their golden age. 

No. 21: Selection and concentration for higher profit rates to get ready for global competition (May 9, 2012)

Business trend

Asahi group officially announced that it would take over Calpis that is Japan’s leading maker of lactic fermented milk drinks from Ajinomoto that is Japan’s leading maker and developer of seasonings and amino acids. Calpis will officially be a company in Asahi group on October 1. This deal seems to indicate the beginning of a series of reorganization of the food industry that is basically a domestic industry.

Coca-Cola group is the leader in the Japanese soft drink market with 28.4% share, followed by Suntory with 21.9% share. Asahi that acquired Calpis will have a share of 12.4%. The fourth position goes to Ito En with 11.2%, and the fifth largest is Kirin Beverage with 9.7%. According to the industrial source, a soft drink brand needs to achieve annual sales of 30 million cases to stay on the supermarket shelf. Asahi group has only two brands that clear the standard. As a matter of fact, lots of new soft drinks are launched in succession, but best selling products are long sellers that have a history of longer than 20 years. In this sense, owning No. 1 and No. 2 brands in a highly segmented market is crucial for every company to survive in the increasingly competitive soft drink market.

In addition, Japanese soft drink makers generally do not achieve a high operating profit rate as compared with leading western food companies. In the world food market, the leader is unquestionably Nestle of Switzerland. Nestle enjoys an operating profit rate of 15% on sales of 1,080 billion yen, and it is followed by Unilever with 14% on sales of 670 billion yen and Craft with 12% on sales of 540 billion yen. Asahi got an operating profit rate of 7% on sales of 110 billion yen and Ajinomoto obtained an operating profit rate of 6% on sales of 73 billion yen. As global competition develops, it is increasingly important to improve profitability and capital efficiency. The deal between Asahi Group and Ajinomoto satisfies the business strategy of the two companies. The former needs to increase the presence in the world market, while the latter wishes to focus on marketing and development of seasonings and amino acids.

Reorganization of Japanese companies to make them ready for global competition will supposedly grow widespread, although long overdue. 

The lineup of Calpis water products that are favorite of Japanese children

The traditional and favorite gift of Japanese in the summer and winter gift exchange seasons

No. 20: Savings, association, and health come to the fore because of yen’s depreciation (April 1, 2012)

Market trend

Japanese yen recovered the level of 80 yen per U.S. dollar in mid-February, and the closing value of the Nikkei Stock Average also recovered the level of 10,000 yen in mid-March. However, the low yen means higher gasoline price. The price of regular gasoline stood at 157.6 yen per liter today, recording the highest price in the past three and a half year. An increasing number of drivers buy gasoline for a fixed value instead of filling up the tank. Another changes in consumer behavior are foreseen.

The unstable political world still makes consumers worry about the economic prospect, and it will supposedly take time to improve the thrifty attitudes of Japanese consumers. But sales of ecology-related products and products to support the recovery of the disaster-stricken areas will go up steadily. LED light fittings and renewable energy systems like residential solar panels will maintain the sales with the background of growing awareness of energy saving.

The March 11 disaster of last year made the association between Japanese even stronger. Many thanks, Facebook! The efforts of devastated prefectures to market their commercial and agricultural products of local specialty will continue to stimulate domestic consumption. On the rebound of satiation, the health conscious trend will grow stronger as shown by the rampant TV commercials of health-care equipment and growing sales of fermented foods. As is often the case, the pendulum swings from side to side.   

An increasing number of convenience stores employ LED lighting for in-store illuminations.

The solar panel market for housing is growing fast with the background of the energy-saving attitudes among consumers. 

No. 19: A new idea on how to make the best use of a railway station (March 19, 2012)

Business trend

JR (Japan Railways) East will launch a new project to support farmers along its railway lines coming April. It will open a direct sales store in a station on its lines in the metropolitan area alternately through the year to sell the signature agricultural products and traditional artifacts of each rural area. Besides helping the direct sales stores achieve good results, the company will give advice to local farmers on what products are selling fast in the metropolitan area for joint development of specialty products in each rural area, and will take care of transport and delivery of products sold.

To be more specific, JR East’s employees who majored in agriculture in college will be the consultants for local farmers. They will give information on fast-selling vegetables and fruits and how to market them more efficiently and effectively in the metropolitan area. The company previously operated this kind of direct sales store irregularly, but it decided to open it on a regular basis to make up for the loss caused by decreasing number of passengers. The company gets a certain rate of profit margin on sales.

Peter Drucker said, “Business is to create and keep a customer.” Likewise, the great Ichizo Kobayashi, founder of Hankyu Railway, said, “If you are in short supply of customers, why don’t you create new customers?” It is not too much to say that the great lesson Kobayashi left to Japanese enabled the Japanese railway business to make such a remarkable progress.

An antenna shop selling local specialties in a railway station in the Tokyo metropolitan area. Railway companies are collaborating with local governments to collect funds for faster recovery of the devastated areas.

No. 18: Japanese nursery companies strengthen their efforts to develop foreign markets (February 17, 2012)

Business trend

Japanese leading nursery companies are strengthening their efforts substantially to develop the market in Central and West Asian. Sakata Seed will establish a local company in Turkey coming April to market such seeds as tomato, watermelon, and cabbage to local producers directly or through local companies. All the seeds the company tries to market are F1 seeds that allow for uniform growth and stable yields. Because F1 seeds are for one generation only, continuous demand for long periods can be expected. F1 is higher in price than true bred, but its ability to realize high productivity will surely benefit local producers.

The company is now active in Serbia and Uzbekistan, and will set up a local base in Ukraine within the year to market cabbage and broccoli seeds characterized by excellent storage quality in Ukraine and its neighboring countries. It plans to increase sales in Central Asia, East Europe, and Russia to 1,200 million yen in 2015. Takii, another leading nursery company, is also exerting energy to develop the market in the Middle East and Africa. Tokita Seed, in which Kirin Holdings invested, has been active in India that produces seven times more vegetables than Japan for the past 10 years and enjoying a big share in carrot seeds.

Japanese annual vegetable production is about 13 million tons. The Japanese seed market will not grow as it did before because of decreasing population and aging society. In addition, the competition with such large companies as Monsanto is intensifying. Developing foreign markets is the best strategy alternative for nursery companies. Surely, offense is the best defense.