TOKYO -- Japanese snack maker Calbee listed its shares on the Tokyo Stock Exchange on March 11, 2011, the very day a massive earthquake and tsunami devastated northeastern Japan. Five years on from that unforgettable day, the company is performing better than ever, with its market capitalization at one point swelling tenfold from the time of listing.
In addition to achieving further growth in the snack segment, in which Calbee has the largest share of the domestic market, the company has been carving out an expanding chunk of the cereal market thanks to the success of its Frugra fruit granola. Chairman and CEO Akira Matsumoto recently spoke with The Nikkei about Calbee's global expansion plans and recipe for revival in China.
Q: Calbee's projected price-earnings ratio has jumped to around 40 from about 13 at the time of listing. What do you make of the market's evaluation?
A: I will never forget the day we went public. Our plant in Utsunomiya (in Tochigi Prefecture, north of Tokyo) was affected by the earthquake, and we had difficulty gathering supplies.
Our share price was low at the time not because of the earthquake but because we hadn't been able to show what we were capable of. Now the stock market has started to evaluate the growth potential of our products and brands.
Q: Calbee is on track to post its seventh straight record net profit for the current fiscal year through March, and your operating profit margin is forecast to rise to 12%. What is driving that growth?
A: We have reduced our cost-to-sales ratio to 56% from slightly over 60%, but our target is 50%. Raw material costs are rising due to the cheap yen, but we plan to raise operating rates by boosting our share of the domestic snack market and increasing production.
We will not raise prices because consumers' disposable incomes remain stagnant. We have actually cut unit prices by dealing more with discount stores and private-label products.
Q: What is your strategy for your popular granola, Frugra?
A: Annual sales of Frugra hovered around 3 billion yen ($26.2 million) through 2011, but they are expected to jump to 22 billion yen this fiscal year. We hope to see that figure rise 30% a year. Currently, the main buyers of Frugra are females who like to try new things. We need to broaden our customer base. But given that, per serving, Frugra is more expensive than bread, we need to lower prices to pull in more customers.
Q: You've set a lofty overseas sales target of 150 billion yen by around 2020. How do you plan to achieve that?
A: I know we still have a long way to go (from the current target of about 29 billion yen), but I haven't abandoned that goal yet. Our bean snacks are gaining popularity among health-conscious U.S. consumers, but we need to come up with new hot sellers.
In Europe, we have begun producing and selling in the U.K., and we plan to start selling our products in Spain as well next year. We also want to expand into Scandinavia and Germany.
We are changing our strategy for China, where we dissolved a joint venture last autumn. The new strategy will be ready by this autumn, though it will take some time before production and other efforts begin.
We plan to expand overseas, but we will be careful about where to step on the accelerator. We will be cautious in making new investments in resource-rich markets where the economies are sluggish, such as Russia and South America.
Interviewed by Nikkei staff writer Miwa Naruse