Ajinomoto Group restructures: Food manufacturing arm formed in bid to raise profit margins

The new company named Ajinomoto Food Manufacturing will oversees the manufacturing and packaging of seasonings and processed foods.

Currently, Ajinomoto Co and its two subsidiaries Knorr Foods and Ajinomoto Packaging operate separately.

The formation of Ajinomoto Food Manufacturing will see the integration of Ajinomoto Co and its two subsidiaries, specifically 1) manufacturing and packaging of seasonings and processed foods of Kawasaki Administration & Coordination Office and the Tokai plant of Ajinomoto Co, 2) three plants of Knorr Foods, and 3) two plants of Ajinomoto Packaging.  

The formation of an integrated manufacturing arm was part of Ajinomoto’s restructuring plan – which will involve a total investment of about US$351million (40 billion yen).

Ajinomoto Food Manufacturing will manage five plants and deploy about 2,100 employees.

One of the plants located in Shimada-shi, Shizuoka is undergoing construction and is expected to be built by the second half of FY 2019.

About US$131 million (15 billion yen) is invested for its construction.

The new plant will integrate manufacturing and packaging of seasonings and other products.

Through the restructuring and an increase in production capacity, Ajinomoto Group aims to grow business profit margin by approximately 2%, thus improving EBITDA by about US$61 million (7 billion yen) annually from FY 2022 onwards.

Further consolidation ​

Manufacturing and packaging operations will be further streamlined in the years to come.

By April 2020, two out of five plants managed by Ajinomoto Food Manufacturing would be merged into a plant.

And by FY2021, Ajinomoto Food Manufacturing is expected to manage only three plants – located in Kawasaki, Shizuoka and Mie.

“By applying leading-edge technologies, including ICT and automation to dramatically raise efficiency, Ajinomoto Co aims to achieve a world-class level of production that meets customer demand flexibly and quickly,” ​the company said in a press release​.

The continual consolidation is apparently a pre-emptive move for addressing a declining workforce as the population ages.

 “The projected decline in the working-age population will make it more difficult to secure the personnel necessary to support stable production. At the same time, rapid advances in ICT and other technologies are expected to significantly transform the production system going forward,” ​the company explained​.  ​

Business performance ​

Due to intense competition in the domestic market, Ajinomoto Co’s Japan food products segment sales fell 4.4% YoY to around US$773 million (88.1 billion yen) for the quarter ended in June this year, as shown in its financial statements​.

The decline was largely due to lower sales of frozen foods and coffee products which are facing fierce competition in Japan itself.

Overall, its Japan food products segment business profit dropped 46.5% YoY to around US$46 million (5.3 billion yen).