KUALA LUMPUR -- NH Foods, Japan's largest food producer by sales, sealed a deal on Wednesday designed to expand its footprint in Southeast Asia's Muslim markets.
Also known as Nippon Ham, the company has taken 51% of a joint venture with food producer Lay Hong, which controls half of Malaysia's premium egg market.
Their joint venture company, NHF Manufacturing, has authorized share capital of 30 million ringgit ($7.6 million), and will process meat products for consumption in Malaysia and for export.
With Japan's declining population, NH Foods has been expanding aggressively overseas, particularly in emerging economies. The foreign contribution to group sales reached around 10% in March 2015.
NH Foods plans to invest $250 million overseas by March 2018, which is almost five times its outlay in the past three years. It has a presence in 18 countries, five of which are in Southeast Asia.
Lay Hong will provide halal expertise, preparing the way for entry into Muslim markets including Indonesia, the world's most populous Muslim country with a population of over 250 million. The partnership will also help with preparations for the Tokyo Olympics in 2020.
Established in 1960, Lay Hong is an integrated poultry business with upstream and downstream operations. It produces some 54 million eggs per month, 1.5 million birds, and 1 million tons of processed foods.
Products marketed under the Nutriplus and Wise Choice brands include pasteurized liquid and low cholesterol eggs, raw chicken, nuggets, and sausages. The company also has 16 G-Mart retail outlets in Sabah, eastern Malaysia.
Based in the port city of Klang an hour outside Kuala Lumpur, Lay Hong exports mainly to neighboring countries but has the Middle East and Japan in its sights. "We intend to leverage NH Foods' research and development to strengthen our market presence," said Chairman Yap Hong Chai.
The joint venture is due to complete a new factory by 2018. An executive of NH Foods said it is looking for innovative products, such as ready-to-eat meals targeting upper middle-income earners. New products should be ready for the domestic market by September and export early next year.
Lay Hong was the target of a failed hostile takeover bid last year by rival QL Resources, which has since divested nearly 40% of its stake in the company. The tussle enabled NH Foods to buy a 23% stake in the company and install two board members. Lay Hong's net profit grew 8% year on year to 15.2 million ringgit on revenue of 482 million ringgit in the last three quarters of 2015.