Looking to the next century
January 01, 1998
by Teresa Acklin
With nearly 100 years of success, Japan's largest milling company sees new flour mill, modern corporate facilities and overseas investments as keys to continued growth.
By Morton I. Sosland, Editor-in-Chief
Japan's largest flour milling company, Nisshin Flour Milling Co., Ltd., plans on marking the 100th anniversary of its founding in the year 2000 with a series of events that other milling companies around the world would find it difficult to rival. Nisshin in its centennial year will move its corporate headquarters into a totally redesigned and modernized new building in the heart of Tokyo; it will have just completed the construction of a new 500-tonne-per-day flour mill; and it will be in the process of launching a new pasta manufacturing plant that currently is being built at Tacoma, Washington, in the United States.
In a recent conversation in Japan with Osamu Shoda, president of Nisshin, joined by Ryuji Nakamura, director and general manager of the group's flour milling department, and Matt Hashimoto, director and general manager of the international department, a sense of great excitement emerged about the conduct of the group's activities not only in its home country of Japan but in its business in Southeast Asia as well as in North America.
While plans for the actual anniversary celebration have not yet taken shape, Mr. Shoda, the third generation of his family to head Nisshin Flour Milling, acknowledged that only a continuation of Japan's current business recession would restrain the centennial observance. He certainly hopes that a memorable series of events will be possible in 2000 in light of the obvious pride that he, his family and his corporate associates have in the progress that Nisshin has made over the years in becoming not only Japan's largest flour milling business, but one of the largest millers and grain-based food companies in the world.
In the fiscal year ended last March 31, Nisshin's sales amounted to U.S.$2.7 billion; its income before taxes, including investment income, was U.S.$94,355,000; and its net income after taxes totaled U.S.$50,302,000. Shareholders' equity as of March 31, 1997, totaled U.S.$1.11 billion, while fixed liabilities were U.S.$230.9 million.
Nisshin currently operates 13 flour mills, which ground 2.1 million tonnes of wheat in the latest fiscal year ended March 31. Flour milling accounts for 49% of group sales.
Nisshin also has four feed manufacturing plants; two processed food factories whose products include pasta, tempura and batter mix, pasta sauces, bread crumbs and branded wheat flour for consumers. The group entered the frozen food business in 1993 with a frozen spaghetti. It owns all of Nisshin Technomic Co., Ltd., which manufactures a range of commercial mixes and ingredients for bakeries, caterers and other food manufacturers. It also makes a line of ham and sausage products.
Processed foods account for 32% of sales, and feed manufacturing accounts for 17%. The group also has a pet food factory and two sites for making pharmaceutical products.
Investing for the Future
The degree of Mr. Shoda's commitment to assuring that Nisshin maintains and expands its leadership as a global factor in grain-based food is underscored by the investments being made in the new headquarters building and the new flour mill. Both projects will incorporate the latest technology that is available for a headquarters location and a flour mill. On top of these projects is the new pasta manufacturing plant being built on the U.S. West Coast.
The new flour mill, to be built as a free-standing plant of 500 tonnes of daily wheat milling capacity, “will be a 21st century mill, incorporating all our know-how and technology about milling,” Mr. Shoda stated. The new mill will be built at Nisshin's Tsurumi mill complex on Tokyo Bay, which already is Japan's largest single flour milling plant. To become the seventh milling unit at Tsurumi, the new mill will bring the complex's aggregate capacity to 2,150 tonnes of wheat, or about 1,540 tonnes of flour per day.
Construction on the new mill is scheduled to begin this spring, and operations will start in the centennial year of 2000.
Already well under way is the nearly total reconstruction of the building planned for Nisshin's new group headquarters in the Imperial Palace district of Tokyo. This project will allow consolidation of the company's headquarters into the newly-rebuilt building while other important parts of the company continue to use the current headquarters in the Nihonbashi district. The group has had its offices in the latter area since early in the 20th century.
Rather than build a totally new headquarters, Nisshin acquired the former headquarters of another food group. It has retained the basic steel frame, but will totally change the exterior and interior of the building. New offices will be occupied beginning in 1998.
The new building, with the address, 1-25 KandaNishiki-Cho, Chiyoda-ku, Tokyo, has just under 9,000 square meters of space in nine floors and a basement.
“We are now leasing space in nine buildings to house our headquarters personnel,” Mr. Shoda explained. The new structure will allow most of the headquarters operations to be located in two buildings owned by Nisshin. “We have planned this move to achieve significant cost reductions and also to improve our productivity,” he said.
Expanding Global Activity
While Nisshin's decision to add a brand new 500-tonne capacity flour mill at the Tsurumi complex obviously reflects confidence in the Japanese flour market, where Nisshin currently provides a third of annual consumption, the conversation with Mr. Shoda also focused on the considerable attention the group has for external growth. It was nine years ago, in 1989, that Nisshin made its first move into the North American continent with the acquisition of Rogers Foods Co., Ltd., at Armstrong, British Columbia, Canada.
This purchase, made after a considerable study of opportunities in flour milling in the Western Hemisphere, “has lived up to our expectations,” Mr. Shoda said. He pointed out that the daily capacity of the Rogers mill has been increased from 140 tonnes of wheat per day when acquired in 1989 to 200 tonnes currently. Acknowledging that the mill at maximum capacity can grind about 60,000 tonnes of wheat a year, he said that the company had been cautious about seeking to expand markets into the United States, concentrating its efforts in western Canada. In addition to bakery flour, the Rogers mill grinds specialty grains, like oats and barley, and makes consumer flour and specific value-added grain based products.
“Our operation of Rogers has been a learning experience,” Mr. Shoda said, backed by Mr. Hashimoto, who has responsibility for the North American operations as well as all other non-Japan businesses of the group. “We are learning how American bakers and other users procure flour, how they set their quality standards and what they expect of their suppliers. We have found an open door to our initial efforts, and we are mainly looking at how best to conduct business in the competitive North American market."
Nisshin's new pasta manufacturing plant at Tacoma, Washington, will produce pasta utilizing Nisshin's extensive food technology knowledge. This business, named Medallion Foods Inc., will draw upon semolina supplied by U.S. millers. By locating the new facility in Washington state, Nisshin expects to have ready access to a steady supply of raw materials, as well as proximity to the growing pasta markets of Japan and the United States.
Mr. Hashimoto already is considering how Nisshin will develop and market an American liking for the pasta that will be made at the Tacoma plant. Nisshin recognizes that building a pasta brand presence in North America will be costly and difficult, and thus, it will produce specific premium products for niche markets serving up-market customers.
Turning to Nisshin's other international operations, Mr. Shoda acknowledged that without a reliable local partner, the group has been hesitant in looking at possibilities in China.
“If we can find a compatible partner, doubts could be mitigated,” Mr. Shoda said. It was noted that “Nisshin” actually means “Japan-China.”
Other than North America, Nisshin's foreign ventures have been primarily in the “tiger” countries of Southeast Asia. The Nisshin executives acknowledged the challenges these nations are currently facing as the result of recent currency and stock market fluctuations.
Three of these operations are in Thailand, and all are joint ventures Nisshin STC Flour Milling Co., Ltd., which operates a flour mill with 240 tonnes of daily wheat milling capacity and is a joint venture 49% owned by Nisshin, 38% by Capital Silo and 11% by Thai-MC; Thai Nisshin Seifun Co., Ltd., a pasta sauce and frozen food manufacturing business, owned 55% by Nisshin and 35% by Yamamori; and Thai Nisshin Technomic Co., Ltd., which makes prepared flour products and where Thai MC Co., Ltd. and Sumitomo Thai International are partners with Nisshin.
Mr. Hashimoto spends more than half of his time traveling, much of it in Southeast Asia, where he is continually looking for opportunities for Nisshin to invest to utilize its flour milling and food manufacturing technology to build a business in developing markets. Like their counterparts in flour milling in North America and Europe, these executives of the largest flour milling company in the world's second largest economy have concluded that while finding promising opportunities outside the home market is an exceptionally difficult task, the possibility of future returns can offset these difficult challenges.