Leading Japanese insecticide manufacturer Earth Corp. plans to expand sales in China and Southeast Asia via a subsidiary in Malaysia, as the risk of dengue fever and malaria in the region drives up demand for repellents.
The company has set up a wholly owned unit in Kuala Lumpur to market insecticides and air fresheners domestically and for export, according to a statement last week. It plans to start operations by October.
The company already has production and sales bases in Thailand and Vietnam that will supply its products to the new subsidiary, Earth Home Products (Malaysia). It also has three sales units in China.
“We picked Malaysia because its middle-income earners have high disposable income in the region,” Sohei Yamamoto, assistant manager of Earth’s corporate planning department, said Friday. “In a broader sense, Indonesia and the Philippines are also targets, but we want to focus on one market at a time.”
Yamamoto declined to reveal sales target figures for Malaysia. The Malaysian unit is capitalized at 5.5 million Malaysian ringgit (¥145 million).
Demand for bug repellent is high in Southeast Asia, where insect-borne tropical diseases are common, while middle-income consumers in China are a target market for Earth’s cockroach traps.
Earth aims to increase overseas sales by 13.4 percent from the last fiscal year to ¥11.3 billion in fiscal 2019 ending in December, and to ¥15 billion in fiscal 2020.
“We believe we can reach the break-even point when we clear ¥15 billion in overseas sales,” Yamamoto said. “Beyond 2020, we would like to see overseas sales grow to a range of 20 billion to 30 billion in five years.”
The company has lowered its overall sales target for fiscal 2020 to ¥190 billion from an initial ¥200 billion after seeing fiscal 2018 come in weaker than projected, at ¥181.1 billion. Last summer’s severe heat wave kept many people indoors, hurting sales of outdoor goods like bug repellent.
Earth set a “conservative” overall sales target of ¥186.5 billion for the current fiscal year, Yamamoto said, but the company left its overseas sales target unchanged.
“The U.S.-China trade dispute is not having a direct impact on our sales,” Yamamoto said. “We may be affected if consumption slows in China or China’s economic growth slows down sharply, but we haven’t seen any signs of that.”
U.S. and Chinese negotiators have yet to reach an agreement, prompting Washington to double its tariffs on Friday on $200 billion worth of Chinese goods.