Suisan Times

Free Newsletter

Interview of Maruha/Nichiro CEOs talking about the merger

October 1, 2007

Suisan Times: A new era is about to start.


Tatsuhiko Tanaka,
Chairman

Tatsuhiko Tanaka (Nichiro CEO): Nichiro delisted from the Tokyo Stock Exchange on the 25th of September and I can`t find stock its prices in the paper anymore. That`s a weird feeling but I am extremely excited because my expectation of the new group exceeds trivial things.
After announcement of the merger last year in December, we have been intensifying study work regarding the merger and have sorted out gap between ideal and reality. We will establish Nichiro Maruha Holdings on the 1st of October and under the holding firm, we plan to establish four companies each in charge of business related to fishery, food, livestock and distribution next year in April.
This is such a big merger. Therefore there are things we might have to revise while we are actually running but hopefully we can get off to a good start.
The main purpose of the merger is not to make our business big. Rather, the integration is focused on building a strong company. As a company who deals with food, our first mission is to supply high quality foodstuffs. With the tight seafood supply worldwide, we will be put to the in our ability to effectively secure and provide high-quality raw materials to our clients and customers. We are in a difficult time in that respect. In a way, we have to have a lofty ideal to attain that.
Fortunately, Maruha has 127 year-old history, where Nichiro just celebrated 100th anniversary and we have grown with cultivated wisdoms and knowledge with dignity. We have firm determination to make a strong business entity.


Yuji Igarashi,
President

Yuji Igarashi (Maruha CEO): We have so far prospered our businesses through growth strategy, expanding the businesses and improving our finances. But our business style faces limitation if we only look at domestic market. We were aware of the same issue, which led the merger. I hope one plus one becomes three but it is not that easy.
It`s been six years since I became CEO of Maruha. We have come to a point where the company is not able to provide our employees with materials to lift motivations. In fact, in the past few years we never managed to hit previous year`s performances. We need positive atmospherics to keep our employees` spirits alive and well. In that respect, I believe this (merger) will be a trigger to develop new situation; namely a new operation with new weapons.
To map out a blueprint for future growth, business activities overseas play a big role and the business consolidation will widen our possibilities because overseas operations take a certain level of dimension.
Because Maruha and Nichiro have strength in different fields, it will broaden product portfolio of both seafood and other foods.
Since the decision of the merger, employees at the two companies are highly motivated. The atmosphere is just like "Now we can get to a higher level."

ST: What will make you think that the merger is successful?

YI: We will aim for an operating profit of \30 million on sales of \1 trillion. The job ahead of us is to amalgamate the two companies into one. We have to make an effort on this. The difference between other mergers and ours is Maruha and Nichiro are very similar in the way companies grew. Both have long histories, traditions and experienced the same phases. We have been getting along well from the start. Even at branch level, there`s a general feeling that we should work hand in hand, rather than have a rift.

TT:
Nichiro has set higher goals on purpose and spurred employees to hit them in the past. This is just an aside, but this style fell into disfavor with analysts. Operating profit of \30 million on sales of \1 trillion is an enormous figure. Integration costs are huge. The scale of business means nothing if there`s a lack of substance. Therefore, profitability is the top priority.

ST: It is expected sales structure of Maruha and Nichiro will be strengthened under the merger

YI: Yes, indeed. We can pitch Nichiro`s products where Maruha has strong relationships and that`s vice versa. For example, Nichiro has strength in frozen items for retail and we can promote Maruha`s products, such as cans and fish sausages, at the same time. Some wholesalers only do business with Maruha, while Nichiro has relations with different vendors. We might see different relationships with wholesalers, as well.

TT: The seafood business never dies. Rather, this it is getting more attention worldwide. It is becoming more apparent that global seafood demand is on the rise. Yet business model has not been discovered in Japan. Japan especially has too many players at the bottom and weak at sourcing. Even if Nichiro has made great efforts to line up high-quality raw seafood materials, we are only able to secure about half of what we sell. The other half is from someone else, and this makes profitability low. When fishing was in full flower we didn`t care much about processing and distribution. If catch was good and that`s pretty much it. If prices of fish were low, we simply threw out another net. These days were over and we have to cope quickly with the change of times. The fact is that much change has been done at sourcing. Japan is way behind the times.
There have been many cases of merger at the end of distribution (retailers) and buying power is becoming even stronger. We have to realize the fact that more customers are looking to have a wider variety of fish, but sales floors do not reflect their needs.

YI: It is unlikely that we will have a bigger voice over national retailers, such as Aeon, but we will be able to negotiate better. We are in a situation where we have to absorb the high cost of raw materials. We hope this environment will change in the influence of our merger.
Nichiro is innovative in developing frozen foods. Its signature fried rice has great feedback and its subsidiary, Aqlifoods is great at making frozen gratin. On the other hand, Maruha`s frozen foods are mainly seafood and targeted for business use. We have such a wide lineup of products and we need to fully utilize the portfolio for future business operations.

ST: One big point of the merger is global strategy.

YI: Absolutely. The two companiesユ domestic market accounts for 90% and market outside of the country only represents 10%. We believe the seafood market will flourish overseas and will put a focus on the U.S., the E.U. and Chinese Market. Maruha has been viewed as world`s fish shop. Now with the merger we will be world`s biggest in deed in the seafood segment.
Our initial target is the U.S. In Asian countries we plan to expand and enhance processing factories for Japan imports.
We will get a handle on a big scale future M&As in concrete forms. We not only think a great deal of securing raw materials, but also processing and distribution.
We cannot make a forward move if we stick to the same business style. We are very eager to open up potential possibilities and pave a new path.

ST: Will you ramp up efforts for food safety?

TT: Large food manufacturers spend much time and money for food safety. For a business establishment who deals with food, it is the most important aspect. We will strengthen it even more so that customers can enjoy dining experience.

Nissui acquired Cite Marine

October 1, 2007

Nippon Suisan Kaisha (Nissui) announced October 1st it spent \2.6 billion or 16.8 million Euro to acquire a 59% stake in a French frozen and chilled food producer, Cite Marine. Gallou family owns 49% of its shares.

"Cite Marine has strong product development ability. We have judged cite Marine can be a hub of our fishery and processed food business in Europe. We believe we can maximize synergy with Cite Marine and have come to a decision to acquire its shares" explained the company.

The share acquisition is part of Nissui`s medium-term business plan from the 2006 business year that calls for beefing up the company`s European operations following the strengthening of its North America.

 

News Topics INDEX
(C) Copyright 2004-2010, Suisan Times Co., Ltd. All Rights Reserved.