• What is the current sales position for international seasonings and processed foods in each individual country?

    In each individual country, sales are progressing largely according to plan, on a local currency base. Although Brazil is in the midst of a recession, Sazon® flavor seasoning, our mainstay product, recorded double-digit growth in the first half, and it is continuing to lead overall sales performance. There was also double-digit growth in sales of menu-specific seasonings in Indonesia in the first half, and sales there remain strong. In Vietnam in the first half, sales of seasonings remained robust and sales of beverages recorded double-digit growth. Also, sales of Ajinomoto Pancake Mix Powder, a new product, grew significantly and have continued to increase since then. We are aiming to end on a level just short of 10% YoY growth on a local currency base, as other countries offset the shortfall from the initial plan in Thailand. The weakening yen in the forex rates is also helping, and I believe it is possible to achieve the initial sales forecast on a yen base.
    (Q: If sales in the second half remain at a pace that enables the initial plan to be achieved, would it be safe to assume that this momentum will continue into FY2018 and beyond? Also, what are your thoughts on the rate of organic growth?)
    Basically, it is important to appropriately develop products that match the particular country. It is also vital to introduce Ajinomoto technology and knowledge at companies we acquire and accelerate sales growth. We want to achieve a good balance between organic growth and growth through investment. Under the FY2017–2019 Medium-Term Management Plan (FY17–19 MTP), we set target values in order to achieve profit growth in parallel with sales, with a CAGR target of 11% (includes excise tax) for international consumer foods. However, growth in Thailand is currently low at 1% YoY in the basic seasonings market and -1% YoY in the instant noodles market, so I think that we will have to review the 6% CAGR target (includes excise tax) for Thailand. All the same, even though sales have slowed somewhat, Thailand is a key country, so we want to do whatever it takes to achieve the initial business profit target.

  • If growth in international consumer foods slows, the market expectation will be stabilization in earnings. Also, I think that there are still quite a few volatile businesses. What are your thoughts on business restructuring to reduce the risk of volatility, including Life Support and Healthcare?

    Even though the GDP growth rate of individual countries may slow, Ajinomoto Co. sells basic seasonings. So far, we have grown due to rising consumer incomes and the increase in the middle income consumer segment. Population growth in Thailand stopped in 2015. With a slowdown in population growth in emerging countries other than Thailand expected from 2025 onwards, there is still room for growth. We are thinking of measures in the event that population growth starts to slow down, and our growth rate goes down to single figures. Although I did not explain it today, one of these measures is the restructuring of production in Japan. We are planning JPY 15.0 billion under the FY17–19 MTP and JPY 25.0 billion under the next MTP in capital investments to make our seasonings and processed foods production facilities the most productive in the world with labor-saving and automation. We will concentrate technology in Japan and utilize it in the Five Stars with returns on investment through improvement in the gross profit margin. I hope you appreciate that it is a connected strategy. With regard to stabilization in earnings, the Advanced Biopharmaceutical business in Healthcare is the next growth area, and we are currently making forward-looking investments. Some of these will contribute to profit in the final fiscal year of the FY17–19 MTP, and there will be full-scale contribution from 2025. The main thing amid stabilization in earnings is to firmly establish a highly profitable production base for the seasonings business, just as in Japan. This is a scenario for stable, sustainable growth.

  • M&As with a certain scale seem to be essential to achieving future growth for international consumer foods. Rather than ending at acquisition, it is necessary to then put the acquired company on a smooth growth trajectory. You made the comment that AWI is currently struggling. Could the production issues and loss of orders from major customers that AWI is facing have been prevented considering the quality of Ajinomoto Co.’s management in Japan and Asia?

    We have learned a lot from the Post Merger Integration (PMI) following the acquisition of Windsor. Windsor was not originally profitable but was rather a company with problems. However, it had a high market share in the Asian foods category of frozen foods, which was a growth area, and we acquired it in recognition of that. We replaced the CEO immediately after the M&A and employed a CEO who shares our basic approach, such as the Ajinomoto Group Philosophy, Ajinomoto Group Creating Shared Value (ASV), and growth based on specialties, and who would disseminate our approach to employees through strong leadership. I think this was the right decision. We are currently examining the consolidation of Windsor’s nine plants to some extent, as we had been considering since the M&A study stage. This is a reduction in production volume while maintaining a certain level of sales, and is very difficult to manage. In order to achieve the restructuring, we are replacing the general manager class of human resources, such as plant managers and others. Next, we are making preparations for the smooth start of the new appetizer plant in Missouri and the new Mexican foods production system we will implement next fiscal year. We are executing these management reforms precisely. I think there have been some comments that the initiatives are slow, but it is also the first time we have been involved in the management of a major company in the U.S., and I have realized that it is different from management in Asia, where Ajinomoto Co. has expanded its business up until now.

    (Q: Since it is currently in the midst of management reform, can we assume that the new Mexican foods plant planned for next fiscal year also involves some risk?)

    In terms of whether we will need conservative expectations, we are currently at the stage of considering the estimates for the next fiscal year, but today I would like to tell you that we may have such a risk.

  • What is Ajinomoto Co.’s analysis of the reasons for the recent loss of orders for major customers at AWI? Also, as management is focused on profitability, could such large-scale order losses occur in the future?

    I am aware of two major factors related to the recent loss of orders for Italian foods. The policy on Italian products, which have never been a strong brand, was decided when we initially acquired AWI. I believe that strengthening Asian foods, appetizers, and Mexican foods is the right direction, but we misread the sense of speed in product portfolio restructuring. We achieved mutual understanding with the senior management of AWI, but communication on the ground level for each of the themes of plant restructuring and product portfolio restructuring did not keep up. As a result, this seems to have led to the recent higher-than-expected order losses. Taking the recent problems into account, we have implemented management reforms and strengthened the sharing of information with the ground level. I think that in the future we will eliminate order losses that are significantly higher than expectations.

  • The business profit for Japan Food Products has been revised upward, but recorded profit decline for the second quarter alone. Please explain any challenges and risks for the second half and the next fiscal year.

    The biggest factor in the decline in revenue for Japan Food Products in the first half was the impact from the sale of the shares of GABAN Co., Ltd. Apart from this, there was also the effect of a shrinking market for instant coffee and bottled coffee and the associated intensification in competition. These negative impacts were cancelled out with the effect of increased sales of soup to achieve profit growth for the first half despite the decline in revenue. We also strengthened our sales activities, rolling out the concept of Kachi-Meshi®, previously developed for athletes, to ordinary consumers to enable all consumers to have nutritionally balanced meals based on the ASV approach. For example, we disseminated information on Ajinomoto products, linked to information about nutritional balance, to people raising children, students taking exams, students working hard in club activities, and others. These efforts have been steadily producing results. On the other hand, I am also aware of products with problems. Also, although we actively launched new products in frozen foods during the first half, I don’t think there were enough new products in the seasonings and processed foods area. Ajinomoto Co. is a manufacturer, so we will launch new products and continue getting assessments from consumers.

  • Judging from just the second quarter for Japan Food Products, coffee products struggled. Could you explain the reasons for this?

    In the first quarter, sales declined, impacted by the change in supply for counter coffee at a major convenience store from Ajinomoto Co. as a single source to purchasing from two companies. The second quarter is the period when sales of liquid coffee traditionally increase but, in addition to unseasonable summer weather, there was a more than double-digit contraction in the market, greatly exceeding industry forecasts. Also, the instant coffee market, which is the biggest, has been shrinking at a pace of about 2% over the past few years, but it has shrunk about 5% this year, contracting over 10% depending on the month. In other words, the place where coffee is consumed has shifted from in the home to outside the home. Eighty percent of Ajinomoto Co.’s sales are for the household market, and we have been impacted greatly by this change in the market environment. We forecasted this market trend, and have strengthened efforts aimed at the out of home market, including changes to our organizational structure, and have achieved double-digit growth. However, this was not enough to make up for the total as the scale is small, and this led to the decline in sales in the first half.