June 26 (Bloomberg) -- Ajinomoto Co., the creator of monosodium glutamate flavoring more than 100 years ago, plans acquisitions and is looking to expand in Poland as it seeks growth in frozen food and seasoning in Europe and the U.S.
“We’ve been successful in growing frozen food that utilizes Japanese food culture; we’d like to do more,” Chief Executive Officer Masatoshi Ito said in an interview in Paris. “In Europe, there’s not much umami culture” and there’s potential for growth, he said. MSG triggers taste buds sensitive to umami, which means savory in Japanese, and is one of the five basic tastes.
Demand for ramen noodles and other Japanese and Asian-inspired foods is booming and Ajinomoto plans to use its Portland, Oregon, facility to double U.S. revenue to 20 billion yen ($196 million), said Ito, who has been CEO for five years. After supplying machinery to a Polish contractor to make frozen gyoza dumplings, Ajinomoto is also looking at expanding its own site there to supply all of Europe, he said.
Ito said he’s halfway through a plan to move Ajinomoto, with a market value of $9.4 billion, away from the bulk ingredients on which it was founded in 1907. Competition in industrial MSG from China and South Korea is spurring the Tokyo-based company to pursue growth in frozen foods and seasonings tailored to specific national dishes.
While jars of MSG are a familiar sight in Asian kitchens, the additive hasn’t been adopted so readily by home cooks in the U.S. and Europe, and certain snack brands emphasize their products don’t contain it. Still, the market is growing alongside the popularity of Japanese cuisine, Ito said.
The CEO has linked Ajinomoto’s transformation to the timing of preparations for the Tokyo Olympics in 2020. Like the construction of the main stadium, Ajinomoto is looking to have the “final picture in sight” two years before the games, he said. A current three-year plan ending in 2016 will help reduce commodity businesses -- including feed-use amino acids, industrial MSG and sweeteners -- to 10 percent of total revenue. That compares with about 30 percent in the peak years.
Sales are set to increase to about 1.05 trillion yen this year from 991.3 billion yen last year, in line with the company’s growth plan, Ito said. Shares of the company, upgraded to buy from neutral at Goldman Sachs last month, declined 0.9 percent to 1,588 yen as of 2:17 p.m. in Tokyo.
Purchases will play a part in Ajinomoto’s transformation, with potential to acquire brands, sales channels or businesses. The Japanese company is competing against Archer-Daniels-Midland Co. for Zug, Switzerland-based flavorings maker Wild Flavors GmbH, with a price tag of more than 2 billion euros ($2.7 billion), according to two people with knowledge of the matter.
“M&A is an important tool as we don’t believe we can reach our target organically,” the CEO said, declining to discuss specific situations. “If there’s something that makes our business more effective in Europe or the U.S., we may be interested.” A spokesman for Archer-Daniels-Midland also declined to comment.
Ajinomoto has given up its No. 1 position in lysine, which is used in animal feed, to pursue niche markets that rely on technology and innovation. The product is also produced by ADM and Evonik Industries AG.
Ajinomoto’s scientists overcame the challenge of developing a dairy-cow amino-acid capable of passing through four stomachs to the intestines. Its AjiPro-L brand has unlocked a market that’s now touching 1 billion yen, Ito said. Another niche lysine product has been introduced for piglets.
“We can focus on these type of feed-use amino acids, which our competitors can’t follow or would face a challenge to follow,” Ito said.
The target this year is for newer products to account for 40 percent of Ajinomoto’s 4 billion yen or so of amino acid sales. Animal-feed amino acids last year failed to contribute to the group’s profit as new entrants in the bulk-end of the market pushed down prices.
Similarly, operations making bulk MSG will switch to more profitable seasoning blends tailored to beef, chicken or other dishes. Europe and the U.S. are priorities for growth, yet it means overcoming a resistance to savory snacks containing MSG by promoting umami. Natural foods with umami include ripe tomatoes and breast milk.
“These five basic tastes and sensors are common in people,” Ito said.
To contact the reporter on this story: Andrew Noel in London at email@example.com
To contact the editors responsible for this story: Simon Thiel at firstname.lastname@example.org Robert Valpuesta, Thomas Mulier