Sustainability

New Mid-Term Management Plan

Towards a Further Leap 2020

We aim to become a company that contributes to customers and society with delicious and healthy foods by transitioning from a conventional product-out to a solution-oriented business.

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Background to the Formulation of the New Mid-Term Management Plan

The new Mid-Term Management Plan "Towards a Further Leap 2020" looks toward "How we want to be in 2030" and "How we should be in 2020" to lay the groundwork for getting there, based on our vision of seeking to contribute to society by creating the future of delicious and healthy foods. Looking back, the Fuji Oil Group has grown from its founding to where it is now as a B-to-B food ingredient manufacturer by using its technology as the source for responding to the wishes of its customers. However, we feel a sense of crisis about whether we can realize "How we want to be in 2030" on our current growth vector. Eliminating this sense of crisis is the fundamental principle of "Towards a Further Leap 2020."

In Japan, the food market as a whole is shrinking in proportion to the decline in the population. Moreover, generating hit products is difficult in a time when consumer confidence is low. Consequently, we must consider seriously what our customers really want, and on top of a solution-oriented business model that actively weaves together story propositions, a competitive advantage will be essential to succeed globally. In other words, strengthening marketing and accelerating our global business development are measures to bridge the gap that separates our current state from "How we want to be in 2030." That means that the Fuji Oil Group needs to take a step up from the B-to-B food ingredient manufacturer with its origin in Japan that it has been until now to become a global enterprise that supports the health of consumers.

In the new Mid-Term Management Plan, there are three basic concepts that form the basis for approaching this new stage. First, "Deliciousness and health" is the Fuji Oil Group’s core principle for contributing to society. Next, "Kachizukuri" (creating value) means the creation of high added value from synergy between "Monozukuri" (creating products) through technological differentiation and "Kotozukuri" (creating movements) derived from marketing that addresses customers’ apparent and latent needs. We will meet the needs of the times by providing solutions to issues. The third basic concept, "Self-reform," entails the major reforms to our awareness that will be necessary to move up to a new stage. We must stop dwelling on the successes we experienced backed by Japan’s former high economic growth.

Basic Policies of the New Mid-Term Management Plan

The new Mid-Term Management Plan lays the foundation for rapid progress toward "How we want to be in 2030," and sets forth the following four basic policies as concrete measures to bridge the gap separating us from this ideal.

(1) Reinforcement of core competence: We will strive for stable growth mainly by expanding our business in hard butters for chocolate and chocolate products, areas in which the Fuji Oil Group has market-beating technologies and a global presence. Starting from these competitive strengths, we aim to be one of the world’s top three companies in terms of sales volume of industrial use chocolate.

(2) Growth of soy business: We will take a fresh look at the soy business we have been engaged in since our foundation and grow it into a major pillar of earnings by developing products and new menu offerings that help to resolve issues for the health of people and the earth.

(3) Development of business in functional high-value-added products: We will leverage the unique technologies of the Fuji Oil Group to vigorously advance into the field of nutrition and health foods. Our originality in areas such as the polysaccharide business and commercialization of stabilized DHA and EPA has already attracted a great deal of attention. We plan to stabilize group earnings by actively developing business in functional high-value-added products.

To reliably promote these three basic policies, it is important to improve the productivity of the entire Group and to reorganize for their execution. Hence, our fourth basic policy,

(4) Cost reduction and unification with global standards: This policy focuses on improving productivity through cost reductions and building a strong financial structure. In addition, as part of our management foundation, we plan to rebuild the Fuji Oil Group’s corporate brand and raise our visibility among all our stakeholders.

Growth Strategy: (1) Reinforcement of Core Competence

Our core competence consists of chocolate, hard butters for chocolate, and confectionery and bakery ingredients. In the chocolate industry, competitiveness is essential due to the trend toward increasing oligopolistic control by major global companies, and the Fuji Oil Group has the substantial advantage of being the only company in the world that produces both chocolate and hard butters for chocolate.

We will position hard butters for chocolate and chocolate as a strategic business unit to concentrate resources through selection and concentration of our portfolio. At the same time, we will use Asia as a foothold for future regional expansion into China, India, the Middle East, North Africa and North America.

China

In addition to existing demand for chocolate and hard butters for chocolate, sales of fillings such as custard cream, as well as margarine and other products, are growing substantially due to growth of China’s bakery market. We will establish a new base in Guangzhou to meet demand in the South China region.

North America

Demand is extremely high in North America for low- and non-trans fatty acid products as well as for hard butters for chocolate. In addition to establishing a new production base, we will strengthen the supply chain to generate synergy between oils and fats and chocolate.

South America

Harald Indústria e Comércio de Alimentos S.A. of Brazil, which became a group company in 2015, handles mainly compound chocolate using hard butters for chocolate. We will strive to develop new hard butter products for chocolate, which are a specialty of the Fuji Oil Group, and strengthen group synergies and supply chains using our original technologies.

Europe

The Fuji Oil Group has a subsidiary in Ghana as a raw material procurement base. We will use this supply chain to expand sales throughout Europe and take on the challenge of capturing the mass-market segment.

Basic Policies and Measures of "Towards a Further Leap 2020"

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Growth Strategy: (2) Growth of Soy Business

Due to demand for health foods and nutritional foods backed by the aging of society and other factors, soy protein ingredients that are easy to process and eat have huge potential. We will re-affirm the value of soy by returning to its essence and expedite selection and concentration within the soy business.

In recent years, "flexitarians" have emerged among millennials in Europe, the United States and elsewhere. Flexitarians, a term coined by combining "flexible" with "vegetarian," are people who are oriented toward vegetarianism but also consume meat and fish depending on the circumstances. Their diets are characterized by a focus on highly nutritious vegetables, fruits, unprocessed grains, legumes and other foods in consideration of healthy eating habits and the global environment. In the United States and Europe "veggie burgers" made with vegetable protein have proved very popular, and in this and other ways a market has formed for plant protein, centered on developed countries.

Using its patented Ultra Soy Separation (USS) manufacturing method, the Fuji Oil Group succeeded in making soymilk cream and low-fat soymilk from soybeans in a manner similar to producing cream and skim milk from raw milk. We also fermented these products to make a breakthrough ingredient similar to cheese. We will energetically promote their rollout in the growing plant protein market to create new value with "Kotozukuri" (creating movements) centered on premium soymilk products and soy meat made using the USS manufacturing method.

n our existing soy protein business, we will expedite consolidation and reorganization from the viewpoint of increasing the efficiency of management resources and work to reduce the cost of products that are already being commoditized. We intend to complete structural reforms to improve profitability and prioritize investment in high-value added businesses such as soy polysaccharides.

  • Cheese-like soymilk ingredients


    Cheese-like soymilk ingredients

  • Mabodofu made with soy meat


    Mabodofu made with soy meat

Growth Strategy: (3) Development of Business in Functional High-Value-Added Products

The close relationship between food and health continues to deepen with rising health consciousness worldwide, including progress in China toward creating a law for foods for special medical purposes.

DHA and EPA are attracting attention as ingredients that can be expected to improve cognitive function and decrease dementia risk, and the Ministry of Health, Labour and Welfare’s Dietary Reference Intakes for Japanese (2010 edition) recommends a combined daily intake of one gram or more. However, conventional forms of DHA and EPA easily deteriorate with oxidation and their characteristic fishy odor poses an obstacle to their use in processed food. Using a new technology, the Fuji Oil Group developed stabilized DHA and EPA with a suppressed fishy odor. This makes it possible to use DHA and EPA in various types of food processing. We plan a launch in 2017, and are anticipating worldwide demand of 1,500 tons in 2020. We will rapidly establish production bases and set up a system for global supply.

"Vege-blend" mixed vegetable and fruit beverage containing stabilized DHA and EPA
  • "Vege-blend" mixed vegetable and fruit beverage containing stabilized DHA and EPA

Furthermore, due to rising health consciousness, demand in the polysaccharides business is also growing worldwide. The Fuji Oil Group developed proprietary technology to extract soluble fibers contained in soybean curd residue and successfully commercialized soluble soy polysaccharides. Adding a small amount of this product to foods can substantially change their physical properties – for example, it increases the dispersion stability of milk protein in acidic milk drinks. It is widely used in processed rice and noodle foods, frozen bread and other foods, and its use in lactobacillus beverages is expected to accelerate due to its ability to suppress coagulation and precipitation of protein. With the growing trend of drinking lactobacillus beverages in Europe and China, we are actively promoting a global rollout and have also started developing polysaccharides from materials other than soybeans.

Strengthening of the Management Foundation

Hitozukuri (Fostering People) To be in demand around the world as a company that supports consumers’ health, it is important to promote and cultivate talented human resources who can act globally. By promoting reform of working style centered on diversity, we will create an environment that fosters people who can proactively take on challenges worldwide. We will also spread the values of the Fuji Oil Group globally to contribute to society with delicious and healthy foods.
Technology Management Since its foundation, the Fuji Oil Group has earned a strong reputation worldwide for its superior technological capabilities. To further accelerate the evolution of our technologies, we opened the Fuji Science & Innovation Center in 2016. As a source of creation for the future, the center will develop new products that contribute in the areas of deliciousness and health as it develops innovative production technologies to further raise our advantage in technology management.
Corporate Brand Until now, the Fuji Oil Group has had a behind-the-scenes presence as a B-to-B food ingredient manufacturer. However, to take our place as a global company that contributes to resolving issues of deliciousness and health, we decided to rebuild our corporate brand from the perspective of global branding. Targeting our 70th anniversary in 2020, we will inaugurate a new Fuji Oil Group with the aims of increasing awareness among all stakeholders and maximizing brand value.

Financial Strategy

Aim to transform ourselves to achieve a strong global financial structure by creating cash flows from sustained profit growth, improving capital efficiency and strengthening financial governance

Strengthen financial function based on four pillars Establish a strong global financial structure
  • 1 Sustained profit growth
  • 2 Maintaining financial soundness
  • 3 Improving capital efficiency
  • 4 Strengthening financial governance

The Fuji Oil Group’s current competitors are global food companies. To succeed in global competition, creating cash flow from sustained profit growth is key. Therefore, we have made the cash conversion cycle (CCC) a core financial indicator. We have set an FY 2020 target of shortening the CCC by 10 days through measures such as a more sophisticated balance between appropriate inventory and production and sales based on supply and demand forecasts, and optimization of the turnover period for accounts receivable and trade payables.

In addition, as we work to secure global sources of profit by reinforcing our core competence and creating new businesses, we will strengthen financial governance to become a truly global integrated enterprise with a shift from what is best on an individual company level to what is best for the Group overall. While proactively investing in regions and businesses where growth is expected, we will establish a solid global financial structure to ensure stable business continuity. Moreover, growth at the same rate as our global competitors will require an improvement in capital efficiency to an equivalent level. By expanding group synergies from Japan to the global level, we will capture demand in growth markets while achieving cost reductions through profit structure reform, with a target ROE of 10%.

The Fuji Oil Group considers the return of profits to its shareholders to be one of its most important management tasks. Our basic policy is to distribute profits appropriately from a long-term perspective while maintaining internal reserves necessary for strengthening the management foundation and for our growth strategy. We have set a payout ratio of 30% to 40% as a target for FY 2020 and intend to maintain stable dividends.

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