Food firms going abroad in search of growth markets

JIJI

Major food firms are aggressively expanding abroad escape Japan’s shrinking market, dwindling birthrate and aging population.

Suntory Holdings Ltd. plans to list its core subsidiary, Suntory Beverage & Food Ltd., on the Tokyo Stock Exchange to raise funds for “food and beverage operations growing more international,” according to Nobutada Saji, president of the brewing and distilling company group.

At present, the only listed unit is a restaurant chain; the other subsidiaries are private.

Suntory plans to list a second unit to raise funds to finance mergers and acquisitions abroad, which Saji said will serve as a “big weapon” in its expansion plans.

Meanwhile, Nisshin Seifun Group Inc. has acquired a U.S. flour miller and the milling operations of an Australian company, aiming to chalk up 30 percent of its sales from overseas in fiscal 2020, up from around 5 percent at the end of fiscal 2011.

The Japanese flour miller hopes to glean new knowhow on wheat procurement and grain distribution from the two major wheat-producing nations.

The government procures wheat from abroad for sale to domestic flour millers, but that system may change if Japan joins the Trans-Pacific Partnership free-trade agreement. The deal might force flour millers to find their own ways of getting wheat.

According to Recof Corp., Japanese firms acquired 1,848 overseas businesses in 2012, the most since the M&A advisory firm began compiling data in 1985.

Although the yen’s recent depreciation is raising the cost of acquiring foreign firms, “overseas market forays by food companies will continue,” predicted Masaaki Kitami, a Merrill Lynch Japan Securities Co. analyst who follows the food industry.

Nevertheless, as they go abroad, Japanese firms sometimes run into unexpected problems.

For example, Kewpie Corp., which has been selling mayonnaise in Malaysia since 2010, was recently told by local authorities that its doll logo, which features an angel, is un-Islamic. The company is considering removing the wings from the logo as a compromise by this summer.

As the Kewpie case shows, Japanese firms that want to expand overseas should familiarize themselves with local customs.