Japan: Quenching A Thirst For New Markets
It was the kind of publicity any company would die for. U.S. baseball fans tuning in to watch Seattle Mariners' outfielder Ichiro Suzuki's successful bid to set a new Major League record for hits in a single season in early October were greeted by a flashing digital display behind home plate hawking Amino Vital. The team may have finished dead last in its division, but Ichiro Mania was a godsend for Ajinomoto Co., the Tokyo-based maker of Amino Vital, an energy drink. "Ajinomoto is a household name in Asia, but this is a tough, tough market for us," says Mitsuru Nishikawa, vice-president of Ajinomoto USA Inc.
HEAVY MSG SALES
Amino vital, which also comes in powder form, is the company's latest attempt to convert its expertise in amino acid-derived health supplements and food products into a global franchise. For those who slept through high school biology, amino acids are the basic building blocks of protein. In 1909, Ajinomoto was the first to commercialize a seasoning based on amino acids called monosodium glutamate, and today Ajinomoto -- which has nearly $10 billion in sales -- is the world's leading producer of MSG. It also produces amino acid-based feedstock additives for cattle and poultry, where it competes with Archer Daniels Midland Co., Germany's BASF (BF ), and Changchun Dacheng of China.
Indeed, Ajinomoto's current prosperity -- in the fiscal year ended next March, its operating profits are expected to grow 18%, to $700 million -- owes much to its amino acid feed products, sweeteners, and drugs. All told, the company enjoys a 60% share of the global market for amino acid-linked products. It's a key producer of lysine, a feed additive derived from amino acids that is mixed with corn and soybean meal to fatten up livestock. The emergence of a middle class in China and elsewhere has driven up meat consumption -- and with it, sales of additives such as lysine.
But there's new competition in the animal feed market from companies such as Changchun Dacheng. Moreover, the business is notoriously volatile. In the mid-1990s, a capacity glut put such intense pressure on prices that Ajinomoto and ADM conspired to fix lysine prices globally. The companies were indicted by U.S. authorities and pleaded guilty. Nobody at Ajinomoto is interested in a repeat of that.
So Ajinomoto hopes to expand the consumer side of the business. It has an array of instant soups, pasta dishes, edible oils, and frozen foods. But it is pushing hardest to expand its Amino Vital drink and health supplement brand, which since its launch in 1995 in Japan has grown into a $170 million-a-year franchise. Takuzo Kitamura, head of the global foods and amino acids business, is pushing for more branded consumer products. "If we have more of our own brands, nobody can hurt us," he says. To get there, Ajinomoto needs some hits in the U.S.
The $2.2 billion U.S. market for sports drinks and health supplements, which is expanding 10% a year, is a good place to start. To build brand awareness, Ajinomoto has tieups with the New York Yankees as well as with the Mariners. Its products are in sports club chains and health store retailers such as GNC, which has 5,300 outlets.
Kitamura is shooting for $200 million in U.S. sales by 2009 and thinks health-crazed Americans will start gulping Amino Vital once they appreciate its restorative powers. Ajinomoto claims the drink not only rehydrates users after exercise but also repairs muscle mass.
Amino Vital is all the rage among professional athletes, including Yankee slugger Hideki Matsui and U.S. Olympic triathlete Hunter Kemper. But it will take some marketing to sell it to the critical mass of amateur jocks, who may find all that stuff about amino acids hard to process. That's why that flashing advertisement behind Ichiro was such a triumph -- one that Ajinomoto hopes will start the process of making Amino Vital a household name.
By Brian Bremner in Tokyo