Interview with Nisshin president

by Josh Sosland
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The acquisition of Miller Milling Co. represents an important step in the ambitious long-term plan at Nisshin Seifun Group to diversify its business from its roots in Japan, the company’s president said.
In an interview with World Grain’s sister publication, Milling & Baking News, Hiroshi Oeda of Nisshin, offered perspectives on the Miller Milling transaction and broader Nisshin ambitions, which include acquisitions and alliances deeper into the food chain, including processed food companies. The purchase of Miller Milling, Bloomington, Minnesota, U.S., closed March 20.
Responding to questions submitted by Milling & Baking News, Mr. Oeda said Nisshin, Japan’s largest flour milling company, was entering the U.S. market with its eyes open, recognizing the high level of competition within U.S. milling and the softness of overall demand for flour-based foods in recent years.
“We well recognize it is not that easy to compete in highly competitive markets such as the U.S.A.,” Mr. Oeda said. “However, we are confident that we can demonstrate a new level of technical service to U.S. customers by exploiting our outstanding production technologies, quality control technologies and development capabilities.”
Nisshin believes that, following weakness at times over the last 10 years, modest growth in per capita flour demand is likely in the years ahead.
“Some segments of flour consumption, such as whole wheat and tortilla flour, have been growing much faster than total flour consumption, and I think this trend will continue for some time,” he said.
The entire interview with Mr. Oeda follows:
Milling & Baking News: Nisshin has shown interest in the U.S. flour milling business for decades. Why is it making a major move now?
Mr. Oeda: The launch into overseas markets has long been planned as a top priority to enable our Group to expand its global revenue. As part of this planning, a couple years ago we created teams in our Group with the sole objective to develop new businesses in countries outside of Japan. I see the acquisition of Miller Milling as the materialized result of this planning. The U.S.A., the largest market among advanced countries in volume with stable increase of flour consumption, has long been one of our targets to get into. Through a long time friendly relationship with Mr. John Miller, we finally consummated the acquisition of Miller Milling. The company is a medium-sized manufacturer and well known for having good customers in the pasta and tortilla markets. We are sure that we can expand their business with cooperation of our Group’s milling technologies and quality
control technologies.
Milling & Baking News: How does the acquisition of Miller fit into your long-term strategic plan — NNI-120?
Mr. Oeda: “NNI” stands for New Nisshin Innovation. We named our new business plan as NNI-120 because 120 signifies that 2020 is our 120th year of operation. The objectives of NNI-120 include: “Achieving US$12.5 billion in consolidated sales” with “30% of this revenue being realized from overseas operations” in the near future.
In order to carry out these objectives, we plan to invest in those focused segments and strengthen both flour milling and processed food business, which are our core competencies, and aggressively seek opportunities of mergers/acquisitions and business alliances both domestically and overseas.
The acquisition of Miller Milling at this time perfectly fits the concept of NNI-120.
Milling & Baking News: The NNI-120 targets of 30% of annual income coming from overseas compares with 5% presently. How are you going to achieve this objective?
Mr. Oeda: We will reach the objectives of NNI-120 by further strengthening flour milling and processed food business as our core business base. We also plan to aggressively expand ourbusinesses in such growth segments as prepared dishes and other prepared food, yeast, biotech, etc. For that purpose, we will aggressively seek opportunities for merger/acquisition and business alliances in the categories of flour milling, processed food, pre-mix, pasta, and ingredients for bakery markets, both domestically and overseas.
Milling & Baking News: Nisshin has mainly operated in Japan and Canada where until now wheat prices have been largely set by government. What preparations have you made to participate in the highly volatile U.S. wheat market?
Mr. Oeda: In Canada, the Canadian Wheat Board has been the sole organization to price and sell wheat to customers, whereas in the U.S.A., the market is more diverse and attuned to commodity exchange market fluctuations. The situation is totally different in Canada and the U.S.A. from Japan. Our Group has long been conducting research in quality and distribution of wheat in different geographic locations. We have been conducting thorough research on cost efficiencies, as well. For a long time, we have been operating overseas mills in Canada and Thailand, so I think we are fairly well prepared for launching into the U.S.A., which is regarded as one of the toughest markets in the world to enter.
Milling & Baking News: At one time, you had a pasta manufacturing plant in Washington state, primarily making products for export to Japan. Is such a project involved in your thinking in the Miller acquisition?
Mr. Oeda: We still own our pasta plant, Medallion Foods in Tacoma, Washington, which started operation in 1996. Medallion is one of our most important pasta supply sources to Japan.
As to Miller Milling, we do not have a plan to export their products abroad aggressively at the moment, as we want them to concentrate their services to U.S. domestic customers.
Milling & Baking News: What is your view of prospects for flour-based foods in the United States and worldwide?
Mr. Oeda: We all know that the food quality of developing and emerging countries has been improving and will continue improving in the future. This is seen especially in the lifestyles in China and India, where more than 1 billion people live. In these and other emerging countries, consumer markets are modernizing drastically and changing into that of the Western World. That means the demand for flour-based food will be increasing.
In the U.S., we understand flour consumption is growing modestly, after a period of decline in the late 1990’s and early 2000’s. The decline was primarily the result of diet fads including the now discredited diet plans. It is anticipated that gradual growth will continue both per capita as well as due to population growth. Some segments of flour consumption, such as whole wheat and tortilla flour, have been growing much faster than total flour consumption, and I think this trend will continue for some time.
Milling & Baking News: How does the Miller purchase affect plans you may have for expansion into other countries, especially in Asia and including China?
Mr. Oeda: In order to execute NNI-120, we have been tackling various projects in order to expand our overseas businesses in the targeted business fields and areas. Our efforts materialized and resulted in the acquisition of Miller Milling. We will continuously and aggressively challenge other projects in order to expand our overseas activities.
Milling & Baking News: What will the management structure be for Miller? How do you expect the business to change under Nisshin ownership?
Mr. Oeda: We decided to send a president from Nisshin. Mr. John Miller, the current president of Miller Milling, agreed to stay in our company as an adviser to smoothly transition the former Miller Milling business to our new management. At the same time we would like him to pass on his many years of experience plus acquaintances in the flour milling industry to us.
As to other Miller Milling management and employees, we do not have a plan to make organizational change because of this acquisition.
Milling & Baking News: How will the U.S. and Canadian businesses interface? Will the businesses be fully independent?
Mr. Oeda: Rogers Foods and Miller Milling service different market segments in different parts of North America. They started cooperation in marketing each other’s flour beginning in 2009. We plan to expand this sales coordination among the two companies in the future. However, the day-to-day management of each company will be conducted separately.
Milling & Baking News: It is our impression that Nisshin has invested more in new milling capacity in Japan than any other company. What are the principal driving forces to explain that — gaining production efficiency, improving flour quality, allowing flexibility in products?
Mr. Oeda: In Japan where consumers’ demands such as for quality are very high, we have decided to carry out necessary investment in our facilities and equipment so that we can mill high quality flour with the most cost-efficient production lines.
Milling & Baking News: Nisshin is well known for its product innovations that have extended to flour and flour-based foods. What opportunities do you see for this approach in the highly competitive American marketplace? Are there “new” products you want to introduce to American flour users?
Mr. Oeda: We well recognize it is not that easy to compete in highly competitive markets such as the U.S.A. However, we are confident that we can demonstrate a new level of technical service to U.S. customers by exploiting our outstanding production technologies, quality control technologies and development capabilities, which we have for a long time been striving ourselves to attain.