On Jan. 7, red milk cartons debuted at stores nationwide, with dairy farmers and retailers hoping the new brand will boost consumption, which has been down since contaminated milk products sickened thousands of people three years ago.
Shinichi Sugitani, 61, president of the newly launched Nippon Milk Community Co., said in a recent interview that his firm is seeing a solid response to its Megmilk brand products.
“We are receiving much better responses than expected,” he said. “We cannot have specific figures until the end of the month, but buyers from supermarkets and convenience stores are telling us that Megmilk is enjoying brisk sales.”
The firm was born Jan. 1 out of a merger of milk units from Snow Brand Milk Products Co. and two farm organizations — the National Federation of Agricultural Cooperative Associations (Zen-noh) and the National Federation of Dairy Cooperative Associations (Zenrakuren) — with each running its own brand.
Snow Brand fell from grace over the food-poisoning outbreak, which sickened some 14,000 people in summer 2000. The poisoning stemmed from lax management of product safety, and the scale of the outbreak expanded as the firm tried to cover it up.
Snow Brand’s share of the domestic milk market stood at 4.6 percent last November, less than a third the figure before the outbreak, which led to the firm’s sale of its milk units.
Sugitani’s first and most challenging task is therefore to win back consumer confidence. Nippon Milk Community markets three brands other than Megmilk that are not in red cartons — Snow Brand and those of the two farm organizations.
He said the firm’s commitment to product safety is best symbolized by its uniquely red cartons, also its corporate color.
Red was chosen not only because it stands out on shelves but also because it blocks light most effectively, and thus prevents deterioration, Sugitani figured.
The name meanwhile was chosen because of its wholesome connotations. “Megmilk” is coined from the word “megumi,” meaning (mother nature’s) blessing.
Megumi is also a woman’s name, which has not been lost on consumers.
“Actually, we had a call from a young woman named Megumi to wish us well,” Sugitani said. “She said the market release of the milk fell on her birthday.”
The new company’s marketing efforts are being followed up in production.
“We have developed an original quality control system, and we will soon introduce a traceability system that can pinpoint the exact tank the milk came from,” Sugitani said. “It is very difficult to differentiate our milk from our competitors’ products, so with our safety measures, we are trying to secure a competitive edge against our rivals.”
Megmilk, whose ownership has been transferred to the new company, is produced at 15 plants nationwide, of which 10 are former Snow Brand facilities.
In the first phase of fiscal 2003, the firm forecasts 245 billion yen in revenues, with a net loss of 1.2 billion yen. The company aims to turn enough profits in fiscal 2005 to offset its accumulated losses.
Another pressing issue for Sugitani is to stop marketing milk under Snow and the two other brands.
“It’s true that Snow Brand’s market share has dropped, but there is still strong demand for the blue (Snow) milk carton among some consumers,” he said. “Of course, we want to integrate them into the single Megmilk brand as soon as possible to strengthen the brand.”
Timing for such a move could be tricky, but integrating the company’s milk brands will be easier than integrating its workforce, which came from three different entities.
“There is little to worry about at the start, as everyone is desperate to ensure a successful launch. But I have concerns once our operation begins running on a stable track,” Sugitani said. “That’s when people start to become selfish, asserting their own culture, like ‘our company used to do it this way or that way.’ “
Sugitani said he anticipates that the first such occasion will come in the next three or four months.
“That’s when our workers are likely to be freed from the initial tension. We have to watch out, because trouble with clients and other problems are also very likely to happen in such an atmosphere.”