TOKYO -- Japan's big trading houses are moving to take advantage of exploding demand for food around Asia. Critical to their strategies are partnerships in target markets. They are also going beyond their usual role as go-betweens, funneling significant funds and human resources into the region.
Mitsubishi Corp. is extending its reach in Indonesia.
In Jakarta, supermarket chain Alfamart on Nov. 11 began selling 10 kinds of packaged bread under the brand name Myroti. The products are made at an Indonesian factory staffed with 200 locals and run by Japan's Yamazaki Baking. Customers snapped it up: Some of Alfamart's 1,800 stores quickly ran out of stock.
The Yamazaki plant is 49%-owned by Atri Pasifik -- a joint venture between Mitsubishi and Indonesian food distributor Alfa Group, whose retail chains, including Alfamart, manage a total of 10,000 shops. The venture buys all of the Yamazaki factory's bread output.
Mitsubishi calls Yamazaki's Indonesian business a high-priority undertaking, given that the country's food market is expected to be worth 17.5 trillion yen ($147 billion) in 2020. That would be more than triple the amount in 2009. And with Indonesian diets becoming increasingly Westernized, the trader sees bread as a future staple.
Mitsubishi has been helping Yamazaki to cultivate the business in other ways. In 2013, the trading company took a 10% stake in Sriboga Flour Mill, which runs a milling facility in Semarang on central Java Island, a one-hour flight from Jakarta. It brokered a deal between the miller and baker, giving Yamazaki access to all the flour it needs for its factory.
Moreover, Mitsubishi dispatched personnel from a flour milling subsidiary to Sriboga. The team offered guidance on hygiene and production methods, so that Sriboga could meet Yamazaki's specifications.
The baking company is appreciative: "We have gained a good business partner through Mitsubishi," said Masaki Saito, Yamazaki Indonesia's president.
Meanwhile, Atri Pasifik is poised to add to Mitsubishi's business channels. The joint venture plans to build new factories with a major Malaysian confectionery maker and a Thai beverage producer.
"We will transplant our vertical-integration model, which we developed in Japan, into other Asian countries," said Takehiko Kakiuchi, executive vice president and CEO of Mitsubishi's living essentials group.
Another sign of Mitsubishi's emphasis on the region's food market: Until three years ago, the essentials division had only a handful of expats in Indonesia. Now it has about 20, almost on a par with those from the energy business group.
One model fits all
Rival trading company Itochu has partnered with one of Thailand's biggest conglomerates, Charoen Pokphand Group. The group's agricultural business model "can be applied to any country," Itochu President Masahiro Okafuji said.
One of CP Group's many endeavors is livestock feed production. A three-hour drive from Bangkok, a feedstuff plant sits on a vast tract of farmland. The high-tech factory has equipment that sorts ingredients, such as corn, by shape and size, then automatically produces feed. The process is monitored with cameras; quality is checked on an hourly basis. Some 6 million tons are turned out annually, all with only three people managing the place.
CP already has similar plants in 16 countries, including China and Indonesia.
The group's business model also involves renting land from local farmers, setting up livestock and chicken farms and supplying feed ingredients. In addition, the company buys fully grown crops and chickens for processing.
"We are looking to create a farm with CP in Myanmar," Itochu's Okafuji said.
Another Japanese trading house, Sumitomo Corp., has allied with Singapore-based flour miller Prima. They are running a flour milling venture in China and a frozen dough business in Australia. "We will cultivate demand in each Asian country by partnering with leading companies" around the region, said Hideki Hijiya, general manager of Sumitomo's lifestyle-related business unit in Asia and Oceania.