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Business

Japan natural seasonings giant Ariake sharpens its global edge

TOKYO -- Ariake Japan, the domestic leader in commercial-use natural seasonings, has been expanding its profitability along with its global reach in recent years.

     The company's seasonings are used by a wide variety of clients, including well-known restaurants, and in many types of products, such as instant noodles.

     Ariake does not disclose the names of its corporate customers, but its financial summaries offer clues. The summaries say Ariake has cross-shareholding deals with such companies as Ohsho Food Service, operator of the Gyoza no Ohsho chain of dumpling restaurants; Toridoll, which runs the Marugame Seimen chain of udon noodle restaurants; and Ringer Hut, a chain selling Nagasaki-style champon noodles.

     Ariake has been getting a boost in recent years from two key factors: Demand for natural seasonings is growing in tandem with a general increase in health-consciousness, and a labor shortage in Japan is spurring eateries to increase their use of pre-seasoned soups.

     These tailwinds are propelling the company toward what it expects will be its fourth straight record net profit for the current fiscal year through March and seventh straight year of growth. Ariake's operating profit margin will likely improve about 2 percentage points on the year to 17%.

     Further supporting growth is the company's unique approach of tailoring flavors to the specific needs of its customers. Ariake's research involves identifying natural ingredients that impart a certain flavor and creating the right mix of those components to create what consumers are looking for.

     Many of the ingredients are derived from chicken and pig bones, with some meat still on them, supplied by farmers in livestock-rich prefectures. Ariake has roughly 2,500 types of seasonings in liquid, powder and other forms.

     The company's president, Tomoki Tagawa, said Ariake has amassed its expertise, from procurement of ingredients through suggestions for new flavors. The large amount of know-how it has built up this way is difficult for rivals to emulate, he added.

Lean and mean

In addition to pleasing palates, Ariake has been turning heads with its low-cost production system.

     Its key factory and research and development complex, in Nagasaki Prefecture, sprawls across an area spanning 130,000 sq. meters. Most of the production processes there, from extraction, filtration and concentration of raw materials, are automated. This approach helps slash labor costs, which helps counter the risk of rising raw material prices.

     To achieve sustainable growth, Ariake is stepping up efforts to establish its profitable business model overseas.

      In early March, Kineo Okada, the company's founder and chairman, traveled to Taiwan to inspect a new plant Ariake is building there. On March 11, meanwhile, the company announced it had established an Indonesian unit to pave the way for its first production site in Southeast Asia. The Indonesian plant will produce seasonings mainly for locally operating Japanese companies and local companies. When that facility is online, Ariake will have eight production hubs, including sites in the U.S., France, Belgium, the Netherlands, China, Taiwan and Japan.

     For fiscal 2015, Ariake expects combined sales at its subsidiaries in the U.S., Asia and Europe to rise 19% on the year to 10.9 billion yen ($96.9 million), or about 20% of the total. The company's overseas operating profit will likely be 1.4 billion yen, slightly more than double the previous year's figure, thanks in part to strong sales in the U.S. and China.

     The seasoning maker has been drawing increasing attention among foreign investors. They held roughly 27% of the company's shares as of the end of last September, up 7 percentage points from three years earlier.  

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