Kewpie Kabushiki Kaisha

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Kewpie Kabushiki Kaisha

1-4-13 Shibuya, Shibuya-ku
Tokyo 150-0002
Japan
Telephone: (+81) 33486-3331
Fax: (+81) 33498-1806
Web site: http://www.kewpiexo.jp

Public Company
Incorporated: 1919 as Shokuhin Kogyo Co., Ltd.
Employees: 8,550
Sales: ¥434.5 billion ($3.68 billion) (2002)
Stock Exchanges: Tokyo
NAIC: 311421 Fruit and Vegetable Canning; 311411 Frozen Fruit, Juice, and Vegetable Processing; 311412 Frozen Specialty Food Manufacturing; 311422 Specialty Canning; 311423 Dried and Dehydrated Food Manufacturing; 311615 Poultry Processing

Kewpie Kabushiki Kaisha (QP Corporation is its English equivalent name), one of Japan’s leading food products companies, has built an empire based on its Kewpie brand of mayonnaise products; the company is by far the dominant producer of mayonnaise and related products, including salad dressings, for the Japanese market. Mayonnaise and salad dressings account, however, for just one fourth of the company’s sales of ¥434 billion ($3.7 billion) in 2002. Kewpie also produces and markets canned and retort foods through subsidiary brand Aohata, a segment that added 12 percent to the company’s sales. Under the Deria brand, Kewpie sells vegetables and salads, which contributed 22 percent. As part of that operation, and in conjunction with partner Mitsubishi, Kewpie has developed a packaging system enabling a store shelf-life of four days for fresh-cut vegetable products. Meanwhile, Kewpie’s intensive use of eggs for its mayonnaise operation—the company claims to use some 8 percent of Japan’s total egg production—has led it to develop a variety of egg products, including liquid, frozen, and dried eggs for the institutional and restaurant and other food sectors. The company also produces a variety of other egg-based products for the cosmetics, pharmaceutical, medical, and other industries. The company’s egg products sales add 19 percent to the company’s revenues. The last of the company’s main food businesses is its Healthcare Products division, which produces baby food as well as special food preparations for the elderly and for the healthcare market. In addition to foods, the company is also active in the distribution and logistics market, through its control of publicly listed subsidiary KRS Corporation, which accounts for some 18 percent of sales. Kewpie, named after the famous doll, has a limited presence internationally, with subsidiaries in the United States (Q&B Foods and Henningsen Foods), The Netherlands (Henningsen), and joint ventures in Beijing, Taiwan, and Thailand. More than 90 percent of the company’s sales come from Japan, however. Kewpie is listed on the Tokyo Stock Exchange; the founding Nakashima family remains the company’s largest shareholder, through Nakashimato Corporation’s nearly 20 percent stake.

Launching Japan’s Mayonnaise Craze in the 1920s

Kewpie’s origins trace back to the years following World War I, with the founding of Nakishamato Corporation by Toichiro Nakashima (alternately spelled as Nakajima) in 1918. Nakashima had served as an intern for Japan’s Department of Agriculture and Commerce, and had been sent to study food production techniques in the United States and Europe. Returning to Japan, Nakashima decided to apply the canning, production, and marketing techniques he had learned to the Japanese market. In 1919, Nakashima founded a food production company, Shokuhin Kogyo Co.

The company manufactured traditional Japanese food products, including canned tangerines. In the early 1920s, however, Nakashima traveled to the United States, bringing back a jar of mayonnaise. Until then, mayonnaise had been unknown in Japan. Nakashima recognized, however, that he could adapt the spread for the Japanese market—notably by increasing the proportion of egg yolk in the recipe. The company began marketing its mayonnaise in 1925, adopting the name “Kewpie” after the popular doll created by artist and illustrator Rosie O’Neill.

Nakashima began exporting canned tangerines to England in the late 1920s. The growth of this business led to the founding of a dedicated canning company, Kidoen, in 1932. Located in Hiroshima, near the heart of the Japanese citrus farming region on the Seta Inland Sea, the new company extended production beyond canned tangerines to include orange marmalade and strawberry jam—markets the company once again pioneered in Japan. For these products, Nakashima returned to the canning and production techniques learned during his days as an intern, earning the company a reputation for the quality of its products.

With the outbreak of World War II, however, Nakashima’s businesses faltered. The canning facility was taken over by the government and placed under the control of Hiroshima Prefectural Consolidated Canning Company. Meanwhile, the shortage of the basic ingredients needed for the Kewpie mayonnaise recipe put an end to that operation as well.

Production resumed in 1948, and the Kewpie brands returned to grocery shelves in the country. Meanwhile, the company regained control of its canning business, renamed Aohata Canning Corporation, which soon resumed marmalade production. The Aohata business grew to include sales of canned vegetables, starting with corn in 1950, launched under a new brand name, Blue Flag. Yet the company’s strongest growth came through its mayonnaise, which, with its association with the American lifestyle, became an increasingly popular condiment in the postwar period. The Kewpie brand quickly established its dominance of the Japanese mayonnaise market. In 1957, Nakashimato renamed its food production operation after its most popular brand, and the company became known as Kewpie KK (or QP Corporation).

Diversified Foods Company in the 1960s

Kewpie began experimenting with packaging in the 1950s, releasing its first squeezable mayonnaise container in 1958. That year, the company also introduced the first of a new line of mayonnaise-based products, with the launch of Kewpie French salad dressing. In 1959, the company added another line of food products, with the introduction of Kewpie Bolognese pasta sauce. Once again, Kewpie claimed the introduction of a new and popular product to a Japanese market becoming increasingly open to Western foods.

Kewpie entered another food market in 1960, when it applied its canning and production technology to the baby foods sector. The company grew to become one of Japan’s leading producers of baby foods. In 1960, Kewpie added to its product list with the launch of a new subsidiary, Kewpie Jyozo Co. in 1962, dedicated to the production and distribution of vinegar products—an offshoot of the company’s mayonnaise sales. (Vinegar is one of the primary ingredients of mayonnaise.) The increase in the consumption of salads in Japan in the 1960s led the company to pioneer another market segment, that of Japanese-style salad dressings, with the launch of Kewpie Oriental Salad Dressing in 1965.

Until the mid-1960s, Kewpie had concentrated in large part on the consumer market. In 1967, however, the company created a new subsidiary, Sanei Provisions, which began supplying food products, including egg-based products, to the institutional foods market. On the consumer side, meanwhile, Kewpie responded to growing health-related concerns by launching a low-sugar content marmalade, Aohata 55 Orange Marmalade.

Kewpie’s growth in the postwar period was accompanied by increasingly sophisticated warehousing and distribution operations. In 1966, the company spun that division off as a separate subsidiary, originally called Kewpie Ltd. By 1968, that company had entered the transportation sector as well, developing into a full-fledged logistics company dedicated to the food industry, which took the name of KRS Corporation in 1989.

Kewpie’s growth led to its public listing in 1970, with its shares placed at first on the Tokyo Stock Exchange’s Second Section. Nakashimato remained the company’s largest shareholder, however, and the two companies entered into a long-lasting cooperation agreement. As part of that agreement, Kewpie took over the distribution of parts of Nakashimato’s own food production, including canned and frozen goods. That business was placed under a new subsidiary, Deria Foods, created in 1973. In that year, Kewpie switched its listing to the Tokyo exchange’s primary board.

Kewpie continued to diversify. In 1972, the company launched a new brand, Janef, for its growing interest in the healthcare food products market, which extended beyond its original baby foods to include therapeutic and liquid diets products. Kewpie also had been developing its engineering activities to design machinery for its own food manufacturing operations. In 1975, the company created a dedicated food engineering division, which began to sell its machines to other companies. Kewpie then created a new subsidiary for another offshoot of its core businesses, placing its growing sales of eggs and egg products business under QP Egg Corporation in 1977. Kewpie’s expertise in eggs led the company into the fine chemicals market, with the production of lecithin from egg yolks in 1981.

Company Perspectives

Corporate Policy: Creating an appealing company that responds to people’s trust and expectations.

The basic necessities of life are food, clothing and shelter. The Kewpie Group chooses to specialize in food. To offer delicious and wholesome products at reasonable prices we undertake rigorous testing and screening to obtain the finest ingredients available. Over the years we have devoted our utmost effort to the development and nurturing of original products, persistent improvement of quality, and enhancement of cost competitiveness. Our fundamental corporate policy is to go beyond the satisfaction of customer requirements, and further strive to ensure mutual prosperity with our business partners, to contribute to local communities, and to create an appealing company that can reward the trust and meet the expectations of our shareholders.

International Operations in the 1980s

The international markets attracted the company in the 1980s. In 1981, it entered Thailand, forming a production partnership with Saha Pathana Investment Company to begin producing mayonnaise. The following year, Kewpie turned to the United States, forming Q&B Foods, where it began producing its Japanese-style mayonnaise for the growing Asian community there. That company also began adapting Kewpie’s salad dressings for the American consumer market, launching the Oriental Chef line of salad dressings in 1984.

Kewpie and S aha Pathana formalized their partnership in 1987 with the creation of Thai QP Co. Ltd. The following year, Kewpie entered the Taiwan market as well, through a joint venture with Wei Chuan Foods and Mitsui & Co., called Taiwan QP Co. In the meantime, Kewpie had formed another subsidiary, Kanae Foods, which took over its egg processing activities in 1986.

Kewpie engineering operations produced another side product in the mid-1980s. The company’s focus on consistent product quality led it to develop its own hydroponics system, which, using a special triangular panel (T) and spray (S) system, eliminated the need for pesticides while reducing the bacteria content of fruits and vegetables. The company put its first “TS Farm” into production in 1986, and then began marketing the system to third parties.

In 1990, Kewpie’s developing operations in the United States, where its Oriental Chef line had proven popular, especially on the West Coast, led it to make its first acquisition, of Nebraska egg producer Henningsen Foods, which also had a subsidiary operation in The Netherlands. The company continued its international expansion into the 1990s, setting up a new joint venture in China, now partnering with Mitsubishi to create Beijing QP.

In the mid-1990s, the company attempted to expand its overseas production, particularly through its Asian joint ventures. Yet the economic crisis that swept through the region in the late 1990s limited Kewpie’s international growth efforts. International sales remained a minor part of Kewpie’s overall operations, accounting for less than 10 percent of the company’s sales at the beginning of the 2000s.

Leadership Focus for the New Century

Back at home, however, Kewpie remained one of the food industry’s leaders, successfully fighting off the entry of a number of competitors to its core mayonnaise business to maintain its dominance on that market—the Kewpie brand represented some 70 percent of the total Japanese mayonnaise market. In the meantime, the mayonnaise market in Japan was growing strongly during the 1990s, as a younger generation of Japanese consumers extended the product beyond its traditional role as a condiment into an actual ingredient in a growing number of recipes—including cocktails.

Kewpie also had begun to take steps to refocus itself. In 1990, the company brought its institutional food products business back under its direct control. In 1995, it spun off KRS Corporation as a public company, with a listing on the Tokyo stock exchange. The company maintained control of that company, however, with more than 50 percent of its voting rights. Three years later, Kewpie made a public offering for Aohata as well.

In 2000, Kewpie established a new medium-term strategy for the new century, one based on redefining its core markets where the company was able to establish and maintain leadership positions. As company President Gosuke Oyama said, according to Nikkei Weekly ” You don’t know the next-highest mountain after Mount Fuji, do you? No. 2 and below cannot influence distribution or lead price trends.”

The company leadership strategy led to a refocus on five core food markets: Mayonnaise and Dressings; Canned and Retort Products; Egg Products; Vegetables and Salads; and Healthcare Products, including baby foods and a rapidly growing line of food preparations for the elderly, launched in 1998. The new strategy appeared to be working, as profits rose steadily into the early years of the decade, outpacing the company’s own initial medium-term goals.

Key Dates

1918:: Nakashimato Corporation is founded.
1919:: Toichiro Nakashima founds a food production company called Shokuhin Kogyo Co.
1925:: Production of mayonnaise begins for the Japanese market under the Kewpie brand name.
1927:: The company begins exporting canned tangerines.
1932:: The company begins producing marmalade for the Japanese market; the Kidoen canning company is formed in Hiroshima.
1948:: Production of mayonnaise resumes; the company regains control of its canning operation, which had been confiscated during the war, and renames it Aohata.
1957:: The company changes its name to Kewpie KK (QP Corporation).
1960:: Production of baby foods begins.
1966:: The company spins off its warehousing operation as subsidiary KRS Corporation.
1970:: Kewpie goes public on the Tokyo Stock Exchange.
1981:: The company begins international development with mayonnaise production in Thailand.
1982:: The company forms the U.S. subsidiary Q&B and begins selling Kewpie mayonnaise in the United States.
1987:: The company forms the Thai QP joint venture with S aha Pathana.
1988:: The company forms the Taiwan QP joint venture with Wei Chuan and Mitsui.
1990:: Henningsen Foods of Nebraska is acquired.
1993:: The company enters China through a production partnership in Beijing with Mitsubishi.
1995:: The company spins off KRS as a publicly listed subsidiary.
1998:: The company spins off Aohata as a publicly listed subsidiary.
2000:: A new medium-term strategy grouped around five core food products businesses is adopted.
2002:: The company forms a new production joint venture for the Shanghai market with Mitsubishi, with production slated to begin in 2003.

In the meantime, Kewpie continued to expand both its product line and its operations. In 2002, the company joined with partner Mitsubishi to set up a new food production company in Hangzhou in order to supply jams and mayonnaise to the Shanghai market. Kewpie took a 70 percent share of the new company, scheduled to start production in 2003. Kewpie and Mitsubishi also had been cooperating on a technical basis, resulting in the launch of a new polypropylene-based packaging that enabled fresh-cut vegetables to maintain a four-day shelf life in stores. After more than 80 years, Kewpie remained an innovative force in the Japanese food industry.

Principal Subsidiaries

Aohata Corporation; Akesaovaros Co., Ltd. (Thailand; 44%); Beijing Q.P. Foods Co., Ltd. (China; 65%); Henningsen Foods, Inc. (U.S.A.); Henningsen Nederland B.V. (Netherlands); Henningsen Van Den Burg B.V. (Netherlands; 50%); Kifuki Usa Co., Inc. (U.S.A.); K.R.S. Corporation; Q&B Foods Inc. (U.S.A.); Taiwan Q.P. Co., Ltd. (55%); Thai Q.P. Co., Ltd. (44%).

Principal Competitors

Kikkoman Corporation; Kagome Company Ltd.; Daesang Corporation; Ottogi Corporation; Kenko Mayonnaise Company Ltd.; Fujicco Company Ltd.; Kao Corporation.