Meiji Seika Kaisha Ltd.

views updated

Meiji Seika Kaisha Ltd.

4-16, Kyobashi 2-chome
Chuo-ku
Tokyo 104-8002
Japan
Telephone: (03) 3272-6511
Fax: (03) 3271-3528
Web site: http://www.meiji.co.jp

Public Company
Incorporated: 1916
Employees: 4,418
Sales: $2.94 billion (2003)
Stock Exchanges: Tokyo Osaka Nagoya Fukuoka Sapporo
Ticker Symbol: 2202
NAIC: 325412 Pharmaceutical Preparation Manufacturing; 311320 Chocolate and Confectionery Manufacturing from Cacao Beans; 311330 Confectionery Manufacturing from Purchased Chocolate; 311423 Dried and Dehydrated Food Manufacturing; 311919 Other Snack Food Manufacturing; 325320 Pesticide and Other Agricultural Chemical Manufacturing; 424210 Drugs and Druggists' Sundries Merchant Wholesalers; 424410 General Line Grocery Merchant Wholesalers; 424450 Confectionery Merchant Wholesalers

Founded in 1916 as a manufacturer of biscuits and caramels, Meiji Seika Kaisha Ltd. is one of Japan's leading confectioners. The company manufactures a wide variety of products, ranging from chocolate and snack foods to antibiotics and agricultural chemicals. It is one of the few companies in Japan allowed to sell contraceptive pills. Meiji operates three main business segments—Food, Pharmaceutical, and Healthcare. Japan's sluggish economy in the early years of the new millennium forced Meiji to restructure its operations and launch several cost-cutting efforts. During 2003, the company featured English soccer star David Beckham in advertising campaigns in an attempt to bolster sales of its flagship chocolate products.

Diversification Leading to Growth

Meiji sought to establish a competitive advantage right from the start by being the first company to introduce chocolate snacks, bars, and candies, all of which quickly became a standard part of the Japanese diet. These products soon were followed by other snack and health-related items.

In 1936, the company diversified into the production of canned vegetables and fruit. The technology used in this expansion was later applied to the manufacture and packaging of a variety of related food products, including cocoa, juices, and carbonated drinks, powdered mixes, and high-protein health foods.

Meiji entered the pharmaceutical market when it began to produce penicillin in 1946. This diversification was a logical outgrowth of the company's experience in using fermentation in food production. Successful introductions of other antibiotic products, geriatric and cancer drugs, and diagnostic reagents provided high levels of return on Meiji's extensive research and manufacturing investments and served as the basis for later development of animal feed additives, germicides, and herbicides both for export and for domestic use. Meiji grew to become one of the largest antibiotic producers in the world; pharmaceuticals accounted for approximately 30 percent of the company's total sales in 2003.

Beginning in the late 1960s, Meiji turned its attention abroad, establishing its first U.S. subsidiary, Meiji Seika (U.S.A.), for the import and export of food and confectionery products in 1969. Another American subsidiary, Stauffer-Meiji, was established in 1985 and began manufacturing cookies and crackers from its Pennsylvania headquarters in 1986.

Additional marketing and sales affiliates for food and confectionery items were formed in Singapore in 1974, Europe and Colombia in 1984, and Taiwan in 1986. A joint venture with United Biscuits in 1971 brought that British company's McVitie biscuits to Japan in exchange for Meiji's confectionery expertise. The next year Meiji began to import chocolate manufacturing technology from Switzerland's Interfood Ltd. (now Jacobs Suchard A.G.).

In 1973, Meiji established the Dong-Myung Industrial Company Ltd. in Korea to produce and market its pharmaceutical products. These drugs were subsequently introduced in more than 60 countries through affiliates formed in Indonesia in 1974, Thailand in 1979, and Brazil in 1983—the location of another affiliate created nine years earlier to manufacture and sell the company's veterinary products.

Success in the 1980s–90s

By the 1980s, Meiji's confectionery technology was in high demand. Two joint ventures, one in the United States in 1988 and the other with the French-based Beghin Say S.A. in 1989, were established to manufacture and market the artificial sweetener fructooligo saccharide, which Meiji had introduced in Japan in 1984.

By this time, under the management of Chairman Takeshi Nakagawa, Meiji operated 12 plants, 9 research laboratories, 93 branch offices, 45 subsidiaries, 3 overseas offices, and 102 sales offices worldwide. While continuing to focus on confectionery products, food, and pharmaceuticals, the company also had begun to develop more health-oriented food products, new drugs, enzymes, edible fungi, and agricultural chemicals.

Meiji's skill in applying technological advancements to new product development proved to be a key factor in its growth. Swings in the value of the yen, intensified consumer demand and changing tastes, and increasing competition from both domestic and foreign firms continued to challenge the company's major business areas in the early 1990s. As the competitive environment forced Meiji to reduce product prices in order to hold onto its market share, the company continued to institute operating and production efficiencies and cost-reduction measures to ensure a high level of productivity and performance.

Meiji's strategy and its focus on creating new drugs used for diseases related to the central nervous system and the cardiovascular system appeared to pay off in the 1990s. As competition remained fierce, sales and profits were on the rise throughout much of the decade. At the same time, the company continued to bolster its overseas business. It licensed its Meiact antibiotic to several European firms as well as U.S.-based TAP Holdings Inc. in 1997 and strengthened its presence in Indonesia and China through joint ventures. In 1999 the Japanese government approved the use of certain contraceptive pills, which allowed Meiji to market them for the first time. By 1999, the firm's recurring profits had reached record levels.

Overcoming Challenges in the New Millennium

Meiji entered the new millennium on solid ground. The company launched its Healthcare division in 2001 in an attempt to cash in on significant growth opportunities in the health food and sport supplement industry. After the 2001 terrorist attacks, the company stock rose due to its stockpile of drugs that could be used in the event of an anthrax outbreak. During 2002, the company announced that it would strengthen its research and development efforts for drugs used to fight against infectious diseases. It also entered the water purification market.

The company's bottom line began to falter that year, due in part to sluggish sales brought on by a faltering Japanese economy. A major restructuring effort was launched in 2003 that included plant closures and job cuts. Meiji was dealt a major blow when it was forced to recall products that included a certain flavoring additive that had not received approval under Japan's Food Sanitation Law. The recall ended up costing the company more than 2 billion yen. As such, Meiji recorded its worst financial performance in its history in the first half of 2003.

Under the leadership of newly elected president Naotada Sato, the company set several strategic initiatives in place to help bolster sales. English soccer star David Beckham was featured in an advertising campaign for its flagship chocolate products. It also signed a deal with Proctor & Gamble Far East Inc. to market the potato chips under the Pringles brand name in Japan. In September Meiji introduced karadanavi, a line of nutritional supplements and health food products. The firm announced that it would acquire the animal drug business of Daiichi Pharmaceutical Co. in early 2004. A change in Japanese law that year allowed Meiji to hire temporary staff for its production facilities.

While Meiji continued to face intense competition, the company's executive team was confident that its restructuring efforts would pay off. By focusing on growth opportunities within its Healthcare segment, Meiji hoped to offset sluggish sales in its Food and Pharmaceuticals divisions. With a longstanding history of success behind it, Meiji Seika Kaisha appeared to be well positioned to handle future challenges.

Company Perspectives:

Our corporate principle is to help people lead happier and more fulfilling lives by emphasizing the taste experience and zest in life.

Key Dates:

1916:
The company is established.: 1936:
The company diversifies into the production of canned vegetables and fruit.: 1946:
Meiji enters the pharmaceutical market.: 1969:
Meiji Seika U.S.A. is created to oversee the import and export of food and confectionery products.: 1985:
U.S. subsidiary Stauffer-Meiji is established.: 2001:
The company launches its healthcare division.: 2003:
Meiji launches a major restructuring effort; a product recall costs the company more than 2 billion yen, contributing to the worst financial performance recorded in company history.: 2004:
Meiji announces the acquisition of the animal drug business of Daiichi Pharmaceutical Co.

Principal Subsidiaries

Meiji Trading Corporation (90%); Donan Shokuhin Co. Ltd.; Zao Shokuhin Kaisha Ltd.; Ronde Corporation; Meiji Sangyo Co. Ltd. (85%); Meiji Chewing Gum Co. Ltd. (51%); Okayamaken Shokuhin Co. Ltd. (94%); Shikoku Meiji Co. Ltd. (84%); Taiyo Shokuhin Co. Ltd.; Fuji-Amide Chemical Co. Ltd. (90%); Kitasato Pharmaceutical Industry Co. Ltd. (60%); Meiji Kaihatsu Co. Ltd.; Meiji Sports Plaza Ltd.; Meiji Seika Singapore Pte. Ltd.; D.F. Stauffer Biscuit Co. Ltd. (United States; 92.23%); Laguna Cookie Co. Inc. (United States); P.T. Meiji Indonesian Pharmaceutical Industries (83.86%); Thai Meiji Pharmaceutical Co. Ltd. (Thailand; 93.53%); Tedec-Meiji Farma S.A. (Spain; 20%); Meiji Seika Europe B.V. (Netherlands).