Nichiro Corporation

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Nichiro Corporation

12-1 Yurakucho 1-chome
Chiyoda-ku
Tokyo, 100-0006
Japan
Telephone: (81 3) 3240 6211
Fax: (81 3) 5252 7966
Web site: http://www.nichiro.co.jp

Public Company
Incorporated:
1913 as Nichiro Fishery Company
Employees: 769
Sales: ¥167.14 billion ($1.38 billion) (2005)
Stock Exchanges: Tokyo
Ticker Symbol: 1331
NAIC: 311712 Fresh and Frozen Seafood Processing

Nichiro Corporation is Japans number three producer of canned and frozen seafood and seafood-based products. The Tokyo-based company operates nearly 30 subsidiaries in three primary divisions: Processed Food Business, Seafood Trade Business, and Other Business.

The Processed Food division includes the companys production of canned snow crab, scallops, and other seafood; canned vegetables, and other packaged and processed foods, including soups and stews; meats, including ham, bacon, sausage; frozen fish, and seafood; and chilled and frozen processed foods. The company also produces baked bread and other delicatessen foods for the convenience store market, as well as frozen and prepared desserts. This division also operates production subsidiaries in Thailand and China.

Nichiros Seafood Trade Business is a major purchaser and processor of fish. The divisions main subsidiary is Nichiro Seafoods Corporation, which processes and markets primarily salmon and salmon roe for the Japanese market. Nichiro also controls two major fisheries in the United States, based in Seattle, but is primarily active in Alaska. These are Peter Pan Seafoods, which specializes in canned and frozen salmon and salmon roe, and Golden Alaska Seafoods, which produces surimi and roe from pollock. Nichiro also operates seafood products subsidiaries in Indonesia (primarily prawns), and in China.

The companys other businesses include the Hakodate Kokusai Hotel in Hokkaido, the Nichiro Fur Company, a packaging machinery company, and a cold storage facility. Nichiro Corporation is listed on the Tokyo Stock Exchange and generates sales of more than ¥167 billion ($1.4 billion) per year. In late 2006, the company announced that it had agreed to merge with rival Maruha Corporation. That merger, scheduled to be completed in October 2007, was expected to create the worlds largest seafood company.

FISHING ORIGINS IN 1907

Nichiro Corporation originated as a fishing company based in Niigata, the countrys major fishing port, at the dawn of the 20th century. Seiroku Tsutsumi and partner Tsunejiro Hiratsuka set out in their first vessel, the 163-ton Houjumaru, in 1907. For the next six years, the partners fished the water around the Kamchatka peninsula, returning to Niigata to sell their catch.

The seafood market was already an important food sector in Japan, where fish was as much as staple in the Japanese diet as rice. Into the next decade, Tsutsumi and Hiratsuka sought to extend their business beyond sales of fresh fish. Until then, traditional salt and pickling techniques remained the most common means of preserving foods, but Tsutsumiconsidered Nichiros founderrecognized the potential in the innovative canning technologies being developed in the West. In 1913, Tsutsumi opened the first Japanese plant to make use of new sterile canning technology. The company then launched production of canned salmon, adopting the Akebono brand.

Nichiro expanded quickly, adding a number of factories into areas that later came under Russian control. The expansion enabled Nichiro to make an early entry into the export market, and specifically the United Kingdom, where it marketed its canned salmon under the Day Break brand. The enterprises rising sun logo would become a key company symbol throughout the next century.

The expansion of its processing activities enabled the company to build up its core fishing business as well. In 1914, the company launched a new fishing subsidiary, Nichiro Kyogyo Kaisha Ltd., in Hakodate, Hokkaido, which began salmon fishing operations among the islands north of Japan. That company marketed its products under the Kakuichi brand, and remained Nichiros top quality brand into the next century.

By the early 1920s, Nichiro had become one of Japans leading fishing companies. This position was underscored by the opening of a new company headquarters in Tokyo. By then, too, the company had adopted the color scheme for its canned food labelsa red-and-white pattern based on curtains in Tsutsumis home.

Nichiro, which had continued to expand into the middle of the century, was hit hard by the Japanese defeat in World War II. Following the countrys surrender, Nichiro found itself stripped of its operations outside of Japan. The company was forced to rebuild, refocusing its production on Japan itself. In 1946, Nichiro opened a number of new factories and offices, in the Hokkaido, Yamaguchi, Kanagawa, and Miyagi prefectures. In this way, Nichiro extended its reach across most of Japan.

While the company focused its food processing operations on the canned, and then frozen foods market, Nichiros remained a major fishing group. The postwar period saw the company make steady extensions to its fleet. In 1947, for example, Nichiro added tuna fishing vessels, as well as a number of stern trawlers and skipjacks. Nichiros fishing operations received a new boost in the 1950s, after the waters of the northern seas between Japan and Russia were once again opened for salmon and crab fishing. In the 1960s, Nichiro added a number of overseas fishing operations, setting up its own facilities, as well as forming partnerships with local companies.

GROWING FOOD-PROCESSING OPERATIONS IN THE 1960S

Food processing and packaging became increasingly attractive sectors for Nichiro, as Japans economy entered a new period of extraordinary growth. The emergence of the country as a global industrial and financial powerhouse in turn raised the countrys standard of living to among the worlds highest. The increase in disposable income, coupled with the entry of more and more women into the workforce, traditionally long work hours, and shifting consumer tastes, combined to bring on rising demand for processed and prepared foods.

Responding to the changing market, Nichiro steadily expanded its food-processing operations through the 1960s and into the 1970s. The company added a number of new factories in Kurihama, Sapporo, and Hiroshima during the 1960s, and also branched out into feed production during this time. In the early 1970s, the company added several new factories, including sites in Kurihama, Hiroshima, Ishinomaki, and Kobe. By 1973 Nichiro had also branched out from its core seafood operations to include production of meat products, through a new facility opened in Sapporo. Nichiros production also included vegetables, soups, stews, and other food items.

COMPANY PERSPECTIVES

Over the course of our long history, we have changed our name and the details of our business. But one thing that has remained the same is our ongoing commitment to delivering safe and appealing food to as many consumers as possible, under our slogan of Love your mind to taste. This commitment will remain unchanged in the future.

Fish, and especially salmon, remained Nichiros primary foods category. The companys presence in this market received a major boost when the company made its first U.S. acquisition, of Seattles Peter Pan Seafoods, in 1979. One of the major cannery operators in Alaska, Peter Pan had originally been founded in 1912 as the PE Harris company, before being reincorporated under its present name in 1950. The addition of Peter Pan represented a major strategic step for the company, since Japans voracious appetite for fish, and particularly salmon, had led to the depletion of fishing grounds closer to home. Alaska was one of the largestand lastof the remaining salmon regions in the world.

A steady decline in seafood populations, coupled with growing criticism for industrial fishing methods, led Nichiro to launch an effort to develop fish farming capacity, as well. Nichiros interest especially turned to the breeding of king salmon, the preferred salmon variety in Japan. These efforts led to the launch of the companys first fish farm in 1986.

By then, too, Nichiros research and development program also led the company into the health foods sectorwhich would continue to be a fast growing market in Japan at the dawn of the 21st century. Among the companys first health food products was a salmon-based preservative, called Proserve, introduced in 1987.

FOOD FOCUS FOR THE NEW CENTURY

At the beginning of the 1990s, Nichiro launched a new strategy to guide the companys operations into the next century. In 1990, the company changed its name from Nichiro Fishery Co. to Nichiro Corporation, signaling the start of the companys decision to abandon its fishing operations after more than 80 years. By then, however, fishing accounted for just 2 percent of Nichiros total sales. Instead, the company sought to reinvent itself as a pure foods company, backing up its revamped strategy with a new logo and the motto: To contribute to the creation of a rich and healthy lifestyle through food.

In order to replace the loss of its fishing revenues, Nichiro launched a drive to expand its international operations. The company first turned to Thailand, which was then emerging as an important center for fish processing and canning in the region. In 1991, the company set up a joint venture, N&N Foods Co Ltd., which began producing frozen fish. The success of the joint venture enabled the company to add a second production facility in Thailand in 1997. Nichiro also added operations in Indonesia, through subsidiary PT Alfa Kurnia Fish Enterprise, based in Jakarta. In the United States, meanwhile, Nichiro added pollock-based surimi processing operations through the acquisition of Golden Alaska Seafoods. That company had started operations in 1985 with the launch of its own surimi processing vessel.

Back in Japan, Nichiro targeted new retail markets. In 1992, the company created a new subsidiary, Shonan Prime Deli (later Shonan Fresh Deli) in order to develop and produce foods specifically for the fast-growing Japanese convenience store sector. Also during that decade, Nichiro began producing foods for the institutional foods sector, focused especially on frozen foods. Nichiro also began construction on a new factory in Niigata prefecture in 1995 in support of its growing range of prepared foods for the consumer market. This facility, opened in 1997, was supplemented by a new plant in Yamagata that specialized in the production of rice- and noodle-based staple foods. The following year, Nichiro expanded its reach again, adding a soft-drinks facility in Hokkaido.

KEY DATES

1907:
Seiroku Tsutsumi and partner Tsunejiro Hiratsuka launch fishing operations from Niigata port in Japan.
1913:
Tsutsumi founds a salmon canning factory, launching Nichiro Fishery Co., then opens new factories in region north of Japan (later taken over by Russia).
1946:
After losing its holdings outside of Japan, Nichiro begins expand its number of domestic plants.
1979:
Company acquires Peter Pan Seafoods, based in Seattle, which operated canneries in Alaska.
1986:
A fish farming operation is established.
1990:
Company changes name to Nichiro Corporation, then exits fishing to refocus as foods company; establishes joint venture in Thailand.
2003:
Company enters China mainland market with joint venture.
2006:
Company announces intention to merge with Maruha Corporation.

Nichiro took its largest subsidiary, Nichiro Sun-foods, public in 2000. In that year the company also expanded its meat-processing facilities with the construction of a new plant in Tokachi. Into the first half of the new decade, Nichiro also upgraded most of its production network to receive ISO9000 certification, and then ISO4001 certification. By 2003, the companys production network included a new frozen dessert plant in Tottori prefecture, which was added in 2002, and frozen foods maker AQLI Foods, formerly part of Snow Brand Milk Products, which was acquired in 2003.

With Japans population entering a decline at the beginning of the 21st century, Nichiro sought out new markets to preserve its future expansion. Its attention naturally turned to the mainland Chinese market. Nichiros first entry into China came in 2003, with the creation of the Rizhao Nichiro & Rongsense Foods Co. seafood joint venture, established in Rizhao City, in Shandong province. Nichiro strengthened its presence in China again in 2005, with the creation of a new subsidiary, Yantai RiLuDa Foodstuffs Co., based in Laiyang City, also in Shandong.

Into the middle of the first decade of the 2000s, Nichiro held the number three position in Japans seafood industry, behind leader Maruha Corp., part of the giant Maruha Group, and number two Nippon Suisan Kaisha Ltd. Yet, like its competitors, Nichiro faced a future market where dwindling fish supplies spelled intensifying international procurement competition. At the same time, the steadily shrinking Japanese birthratewhich went into negative numbers for the first time in 2006further dampened the groups hopes for continued growth. In response, in December 2006, Nichiro sought out a larger partner, and agreed to merge with Maruha Corporation. The two companies hoped to complete merger by October 2007, creating a new holding company, Maruha Nichiro Holdings. The new entity was expected to guarantee the future expansion of Nichiro as its celebrated its 100th year of operations.

M. L. Cohen

PRINCIPAL SUBSIDIARIES

Golden Alaska Seafoods, Inc. (United States); N&N Foods Co., Ltd. (Thailand); P.T Alfa Kurnia Fish Enterprise (Indonesia); Peter Pan Seafoods, Inc. (United States); Rizhao Nichiro & Rongsense Foods, Co., Ltd. (China); Yantai RiLuDa Foodstaffs Co., Ltd. (China).

PRINCIPAL COMPETITORS

Hanwa Company Ltd.; Maruha Corp.; Nichirei Corp.; Katokichi Company Ltd.; Kyokuyo Company Ltd. (1301); Nichimo Company Ltd.; Hayashikane Sangyo Company Ltd.; Natori Company Ltd.; Uoki Company Ltd.

FURTHER READING

Hedlund, Steven, Japans Maruha, Nichiro Merge: Deal Involves Seven Seattle Area Processors, Seafood Business, January 2007, p. 12.

Japans Major Seafood Firms Expanding Inventories by 415%, AsiaPulse News, December 1, 2005.

Maruha, Nichiro to Integrate Biz in October 2007, Jiji, December 11, 2006.

Nichiro Adds Fast, Economical Strapper to Lineup, Innovative New Packaging in Japan, October 25, 2005.

OP Profit at Maruha, Nichiro Seen Coming in Below Expectations, AsiaPulse News, January 25, 2007.

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