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Food & Beverage

Marubeni on mission to win hearts and taste buds across the world

From coffee to beef, trading house doubles down on pandemic-proof foods

Marubeni employs about 30 certified coffee tasters in Japan and abroad.

TOKYO -- About 60 km southeast of Ho Chi Minh City, workers and machines are busy building a massive new instant-coffee factory for Iguacu, a Brazilian unit of trading house Marubeni.

The new plant will have an annual production capacity of 16,000 tons -- lifting Iguacu's total to 40,000 tons when it comes online in 2022 and making the company the world's largest business-to-business seller of the product.

The Vietnam plant is just part of a greater push by Marubeni to capture the shift in global taste buds caused by the coronavirus as well as growing consumer interest in ethical issues.

The company is already one of Japan's top importers of coffee, handling roughly 30% of the beans consumed there. It is now making inroads into the business of processing the beans as well, with an eye on China and Southeast Asia. Demand for instant coffee has been increasing by 5% or more in these markets in recent years, as their roughly 2 billion consumers acquire more Western tastes.

Food products are a key driver for Marubeni's earnings, especially as the coronavirus pandemic knocks the wind out of other industries. Its food division logged a 33% year-on-year jump in net profit to 11.3 billion yen ($106 million) in April-June, accounting for roughly 20% of the companywide total.

"We did a good job capturing demand among people staying home," said Koji Inoue, head of planning and strategy at the food division.

Marubeni mostly sells food products to corporate clients, many of which are mass retailers. This worked out in its favor as the coronavirus spread, with more people stocking up on groceries instead of eating out.

But its success was also a result of careful groundwork laid down in the years before the pandemic.

For example, many Marubeni employees that work with coffee are "cup testers" -- certified professionals in grading coffee quality. They help the company adapt quickly to changing consumer tastes and also work closely with farmers in Brazil, Vietnam and elsewhere to ensure it gets similar quality beans every time.

The coronavirus has changed the way people enjoy coffee at home, according to the Tokyo-based company. The emerging trend now is "single-origin" coffee.

"More people are after small luxuries, like drinking coffee that's just a little bit fancy at home," said one manager.

Even under movement restrictions, the public still needs food to eat. Marubeni aims to take the opportunity afforded by the pandemic to aggressively expand its portfolio of food operations and fill bellies.

Marubeni processes meat for Walmart at U.S. unit Creekstone Farms.

One avenue is through Creekstone Farms, a U.S. processor of premium beef that was converted into a subsidiary in 2017. Last October, Creekstone signed a deal to be a contract meat processor for discount retailing giant Walmart.

The Kansas-based company plans to boost its processing capacity going forward. While most of the business had been focused on the restaurant industry, Creekstone will now branch out to retail stores to capture stable demand.

Although food represents an essential business, such enterprises are not guaranteed to be profitable. The pandemic has battered trading houses whose food-product portfolios are highly exposed to the restaurant sector.

Mitsui & Co.'s food segment turned in a net profit of 700 million yen during the April-June quarter, or about a seventh of the year-earlier result, owing mostly to a slump in food products for eateries.

At Itochu, group company and food wholesaler Nippon Access suffered a 10% decline in net profit at its food segment.

The key to stabilizing earnings lies in how quickly a company can refocus its operations within the new normal. Marubeni has a history of adjusting its portfolio to fit with the times.

The trading house once ran a chain of tempura rice bowl restaurants called Tenya jointly with the Nisshin Oillio Group. Marubeni eventually exited the eatery business in anticipation of a shrinking population and stiff competition.

Now the multinational concentrates on procuring foodstuff, along with production, processing and distribution.

In April, Marubeni formed a food-science team that uses cutting-edge technology, such as gene editing, to develop solutions to environmental problems and food crises. The company looks to develop demand in new areas and construct fresh business models, continuing to constantly reorganize operations.

One trend that has taken off is ethical consumption, with vegans growing in number, mostly in the West.

"Meals are shifting from a means to gain nutrients to an act of consumption with social meaning," said the food-science team leader. The plan is to export the technologies and food products developed to countries such as the U.S.

The food sector is exposed to risks, whether they are environmental factors, consumers' ever-changing tastes, or geopolitical issues. In the previous fiscal year, Marubeni booked steep impairment losses in U.S. grains unit Gavilon Agriculture Investment, as well as in the grain exporting operation on the U.S. West Coast. The company blamed the outcome partly on U.S.-China trade frictions.

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