Meiji Dairies Corporation

Meiji Dairies Corporation

1-2-10 Shinsuna
Koto-ku
Tokyo, 136-8908
Japan
Telephone: (05) 653-0300
Fax: (05) 653-0400
Web site: http://www.meinyu.co.jp

Public Company
Incorporated: 1917 as Boso Condensed Milk
Employees: 12,684
Sales: $6.7 billion (2005)
Stock Exchanges: Tokyo Nagoya
Ticker Symbol: 2261
NAIC: 311511 Fluid Milk Manufacturing; 311512 Creamery Butter Manufacturing; 311514 Dry, Condensed, and Evaporated Dairy Product Manufacturing; 311520 Ice Cream and Frozen Dessert Manufacturing

Meiji Dairies Corporation, formerly known as Meiji Milk Products Company Ltd., is Japan's leading dairy products manufacturer. The company introduced condensed milk to Japanese consumers in 1917 and its product arsenal evolved to include products such as yogurts, cheeses, ice creams, and various nutraceutical and health foods.

EARLY HISTORY

Milk was not a popular beverage in pre-1917 Japan, but a growing awareness of its nutritional value and an appreciation of the storage convenience of unopened cans helped make the launch of condensed milk in Japan feasible.

With the participation of the Meiji Sugar Manufacturing Company, Boso Condensed Milk Co., Ltd., was founded in the closing months of World War I. Japan had risen to the status of a world power, and the resulting increase in contact with Western nations had begun to weaken the resistance of the Japanese public toward departures from traditional dietary customs and habits.

However, within months of the launch, a postwar recession began to slow the economy. It took several years for condensed milk to gain general acceptance. Recovery was gradual until the late 1920s, when a period of rapid industrialization took hold. As workers from rural areas flocked to the new factory sites, the mood was again favorable for acceptance of new products and changes in dietary habits.

From the invasion of Manchuria in the early 1930s until the end of World War II, Japan was preoccupied with the production and use of munitions. Despite wartime difficulties in transporting goods, Boso continued to make gains.

MERGERS AND DIVERSIFICATION: 1940 THROUGH THE POSTWAR YEARS

When it merged with the Tokyo Confectionery Company in 1940, Boso changed its name to Meiji Milk Products Company, Limited. The company then began to diversify, adding a line of chocolate, candy, gum, snack foods, and other confections, and Meiji grew quickly.

In 1949, Meiji was able to strengthen its position through a merger with Japan Dairy Products and three other companies. The following year, Meiji took over the Imagame factory from the Hokkaido Dairy Farm Association and also bought the Tokyo Dairy Industry and the Shoman Milk Company. A merger in 1951 brought Asahi Milk Products into the Meiji group.

Although most of the companies Meiji had acquired through these mergers were primarily milk producers, the need for continuing diversification had become a significant factor in planning for the future. The use of condensed milk as a dietary supplement for infants set the stage for development of a line of infant formula and baby food, and the postwar baby boom created a ready market.

In the 1950s, as ice cream became popular, Meiji decided to specialize in a high-grade product and eventually introduced "Lady Borden"—to this day an upscale market leader. Meiji's agreement with the Borden Company, an American food company, was the first of a number of business relationships Meiji has maintained profitably with foreign companies.

The next logical step was to introduce frozen foods for individual consumers in the grocery market and in institutional quantities for restaurants, hospitals, and other large organizations. Foods such as pizza, pilaf, frozen rice, and fried entrees were consistently strong sellers, along with puddings and other desserts, margarine, and creams.

NEW PRODUCT DEVELOPMENT IN THE 1980S AND EARLY 1990S

At this time, new products were developed in-house, for the most part. Meiji's research-and-development department explored fermentation processes and worked to develop more efficient technologies for 70 years. One of Meiji's most successful products was Meiji Infant Soft Curd FK-P, an infant formula popular in Japan and many other countries. Another, Meiji Bulgaria Yogurt LB51, was the leading yogurt in Japan.

The growing interest in health foods over the previous several decades not only spurred yogurt sales but also led to the development of other products, such as popular bottled yogurt drinks. Meiji established a subsidiary, Health Way, Inc., to develop and market new health-related foods.

The market for dairy foods fluctuated from time to time, with factors such as the rise and fall of the birth rate, but in general the market was a growing one; the market for cheese in particular appeared to be rising steadily. Through an agreement with Borden, Meiji imported natural cheese and manufactured and marketed processed cheese in Japan.

Branching out into nonfood products and services was also profitable for Meiji. After manufacturing animal feeds for a number of years, the company started raising livestock, and it also manufactured veterinary medicines.

One of Meiji's research-and-development sites, the Meiji Institute of Health Science, was instrumental in adding a line of pharmaceutical products to the company's wares. Among their products were antibiotics, enzymes, and agricultural chemicals. Other products, such as an anticancer drug using lactic acid bacilli, were under development. A Meiji vaccine was proven effective when tested against B-type hepatitis in 1985.

Meiji also capitalized on the time-saving services that were important to Japanese consumers. Nice Day, Inc., a Meiji subsidiary, operated a shop-at-home service for supplies related to child-rearing. Another specialized in home delivery of foods, and still another provided communication services for users of personal computers. Real estate was another interest the company developed during the 1980s.

COMPANY PERSPECTIVES

Meiji Dairies places great emphasis on the infinite possibilities of nature, which it has come to understand through its long relationship with milk. We utilize the gentleness and strength hidden in nature's rich storehouses to create good tasting food people can trust and to ensure sound health. We keep our eyes fixed on the things we must carefully protect and preserve and the objectives that we should strive towards. As a source provider of new food experiences, we give our customers a bright and lively new day every day.

But the main focus of Meiji's efforts in the early 1990s continued to be its original interest: the food market. In aspiring to become a major general food manufacturer, the company worked with several others overseas. For example, Meiji had an agreement with the England and Wales Milk Marketing Board, a major British dairy organization, to work together to develop new yogurt-related products and technology. Working with the American company Abbott Laboratories provided Meiji with the technology to produce new nutritional products. In 1991, the company commissioned the New Zealand Dairy Board to produce all of its powdered milk, which was then exported to Thailand.

In addition to marketing its products to domestic and overseas food outlets, Meiji also established its own chain of franchised food stores. Meiji's innovation, diversification, and strong marketing were expected to move the company in the direction it had chosen, and it was fast becoming a major, comprehensive food supplier.

LOOKING TO THE NEW MILLENNIUM

The company undertook several joint ventures and established new subsidiaries throughout the remainder of the 1990s. In 1994, Meiji Dairy Australia Pty. Ltd. was created. That same year, Guadong M&F Yang Tang Dairy Products Co. Ltd. was created as a joint venture to manufacture ice cream. In 1997, another company was created to oversee the manufacture of ice cream in Indonesia. In 1999, Meiji formed a business alliance with Coca-Cola Japan.

Meiji remained busy on the product front as well. Some of the company's new items included Oolong So-Cha tea in 1994, Clean Pit AZ throat spray in 1995, the Subesube Miruru baby skin care product and the VAAM sports drink in 1996, the MEINYU precipitation hepatitis B vaccine in 1997, and a new line of drinking yogurt in 1998.

Meiji entered the new millennium as Japan's leading dairy manufacturer. The company adopted a new corporate moniker—Meiji Dairies Corporation—in 2001 and also moved company headquarters to a different location in Tokyo. The Tohoku plant went online in August 2000, and the Kyushu facility was operational in May 2002. A new milk product, Meiji Oishii Gyunyu, was launched in June 2002.

The company's business strategy of diversifying its product line appeared to pay off. The company had become the leading seller of commercial milk in Japan in 1998 and the largest dairy products manufacturer in 2000 based on sales and profits. While sales remained relatively flat from 2000 to 2004 due to a slowdown in consumer spending, net income was on the rise. In fact, in fiscal year 2002, the company reported its net profit had increased by 93.5 percent over the previous year. In 2005, Meiji set plans in motion to open a new natural cheese plant in Memuro in the prefecture of Hokkaido. The plant was slated to be Japan's largest natural cheese facility.

Japan was plagued with an over-capacity of milk during this time period due to hot and wet summers that left dairy cows munching on lush grasses and farmers with more milk then they could sell. In fact, in one week during 2006, over 1,000 tons of milk were destroyed. In response to the crisis, Meiji began to look for ways to utilize the surplus, including turning the milk into methane for use in the generation of electricity.

Meiji would face challenges in the coming years and the company was prepared to meet them head on. Domestic competition as well as competition from imports forced the company to adopt strategies to increase profits while strengthening its brand name. Meiji also viewed several factors including the falling birthrate and aging society in Japan, the globalization of the industry, and growing consumer awareness of food safety as major components in Japan's changing dairy industry. The company believed these factors would produce future growth opportunities.

KEY DATES

1917:

The company introduces condensed milk to Japanese consumers.

1940:

Boso Condensed Milk Co., Ltd. merges with Tokyo Confectionery Company; Boso changes its name to Meiji Milk Products Company, Limited.

1949:

Meiji merges with Japan Dairy Products and three other companies.

1951:

Asahi Milk Products is acquired.

1985:

The company develops a Hepatitis B vaccine.

1991:

The New Zealand Dairy Board is commissioned to produce all of Meiji's powered milk.

2001:

The company changes its name to Meiji Dairies Corporation.

PRINCIPAL SUBSIDIARIES

Asahi Broiler Co., Ltd.; Chubu Meihan Co., Ltd.; Chugoku Meihan Co., Ltd.; Fresh Network Systems Co., Ltd.; Hokkaido Meihan Co., Ltd.; Kanazawa Meihan Co., Ltd.; Kantora Logistics Co., Ltd.; K.C.S. Co., Ltd.; Kinki Meihan Co., Ltd.; Kyushu Meinyu Hanbai Co., Ltd.; Meiji Agris Co., Ltd.; Meiji Dairy Products Co., Ltd.; Meiji Feed Co., Ltd.; Meiji Kenko Ham Co., Ltd.; Meiji Oils and Fats Co., Ltd.; Meiji Techno-Service Inc.; Nice Day Co., Ltd.; Nihon Kanzume, Co., Ltd.; Ohkura Pharmaceutical Co., Ltd.; Okinawa Meiji Milk Products Co., Ltd.; Osaka Hosho Milk Products Co., Ltd.; Pampy Foods Inc.; Shikoku Tokai Meiji Co., Ltd.; Tohoku Meihan Co., Ltd.; Tokyo Meihan Co., Ltd.; Tokyo Meiji Foods Co., Ltd.; Tokyo Milk Transportation Co., Ltd.

PRINCIPAL COMPETITORS

Ezaki Glico Co., Ltd.; Morinaga & Co., Ltd.; Snow Brand Milk Products Co., Ltd.

FURTHER READING

Lewis, Leo, "Hot Summers Make Milk Boil Over," Times, March 28, 2006.

"Meiji Dairies 2006 Company Profile Edition 1: SWOT Analysis," Just-Food, July 2006.

"Meiji Dairies to Cut Workforce by 10 Pct Over 3 Yrs," Jiji Press English News Service, March 4, 2003.

"Meiji Dairies' Group Net Profit Up 93.5 Pct in FY '02," Jiji Press English News Service, May 20, 2003.

"Meiji Dairies Plans New Natural Cheese Plant," Jiji Press English News Service, October 7, 2005.

Sakashita, Yoku, "Cutting Fixed Costs Vital to Meiji Dairies," Nikkei Weekly, August 15, 2005.