Food Division Strategies and Initiatives
Industry Environment and Fiscal 2008 Results
The serious financial crisis that has surfaced over the past year is having a quieting effect on what was a tight supply and demand situation for grain and scalating grain prices. This earlier situation stemmed from several sources of increased global demand, including greater consumption in emerging economies and the use of grain as an alternative energy source. However, as economic uncertainty mounts, the dominant trend has become the careful selection among increasingly cost-conscious consumers of cheap yet quality products.
In this climate, we stepped up a variety of measures in fiscal 2008, among them the upgrade and expansion of our system for the stable supply of grain, as well as sales channel expansion in growth markets. In the food distribution sector, we also entered new business alliances in the retail industry.
In the grain sector, we took full-fledged steps to ensure stable supplies to Japan, and to expand sales channels in Asia and other growth markets where demand for foodstuffs is rising. In the sale of soybeans to China, the world’s largest importer, the division has established sales channels that account for up to a 10% trading share of the country’s total soybean imports. We also enacted measures at the site of production in North America, designed to expand our grain silo network in the region, with local subsidiary Columbia Grain, Inc. purchasing grain silos to enhance supply capabilities on the continent.
In the food distribution sector, the division leveraged its product proposal capabilities and strengths in the global procurement of raw materials and products to expand its product sales capabilities targeting mass retailers through investment in functional subsidiaries of AEON CO., LTD. Meanwhile, in our latest partnership with supermarkets, following earlier efforts with The Daiei, Inc., The Maruetsu, Inc., and Tobu Store Co., Ltd., we entered a business alliance with SOTETSU ROSEN Co., Ltd., and initiated steps to improve its corporate value.
As the foregoing actions suggest, we strove to take advantage of the division’s functions and expertise as a general trading company to further enhance product quality that emphasizes safety and reliability, ensure stable product supplies, and bolster price competitiveness.
As a result, in fiscal 2008, segment gross trading profit totaled 113.7 billion yen, an improvement of 26% year on year. However, a loss on the valuation of shares of a logistics affiliate and a loss on shares of marketable securities put downward pressure on performance, leading to a segment net loss of 19.4 billion yen on a consolidated basis.
Initiatives in Fiscal 2009
Worldwide demand for grain is rising steadily, even as consumers hit by the global financial slump buy less and demand lower prices. This situation is an opportunity to capitalize on the division’s advantages in the grain sector. Here, following our North American grain silo acquisition, we will further stabilize our product supply through measures targeting food production sites in South America and Eastern Europe. The latter will include comprehensive alliances with Brazilian grain silo and oil producer Amaggi Exportação e Importação Ltda. (AMAGGI).
In parallel, we are seeking to expand sales targets and pursue cost-competitive grain sales in Asia, the Middle East and Europe through a comprehensive alliance with Sinograin Oil & Fats Corporation, a subsidiary of Sinograin (China’s largest grains reserve operation company).
In the food distribution sector, we intend to play a role in the planning and development of private brand (PB) products, products retailers sell as store brands, primarily through initiatives with business alliance partners AEON CO., LTD., The Daiei, Inc., The Maruetsu, Inc., and SOTETSU ROSEN Co., Ltd. Beyond the supply of products, these efforts will expand the delivery of raw materials in our bid to enhance the benefits of trade. Finally, we plan to aggressively develop operations aimed at capturing internal demand in the growing Chinese and ASEAN markets in a push to further expand earnings.
