Nisshin Seifun Group Inc. Business Information, Profile, and History

Company Perspectives:

Nisshin Seifun Group Inc. has been positioned as the holding company of the Nisshin Seifun Group of the 21st century. Its function is to establish business objectives in alignment with the company's guiding principles of "trust," being "in tune with the changing climate" and "contributing to a healthy and fruitful life for all" to maximize group value.

History of Nisshin Seifun Group Inc.

Nisshin Seifun Group Inc., formerly Nisshin Flour Milling Company, operates as a holding company with subsidiaries involved in flour milling, processed foods, health foods, pharmaceuticals, pet food, engineering, yeast manufacturing, mesh products, and livestock feed. The company's processed foods division accounts for nearly 50 percent of sales. Flour milling--the company's original core operation--is responsible for approximately 35 percent of Nisshin Seifun's sales.

Origins

Founded in 1900 by Teiichiro Shoda as the Tatebayashi Four Milling Company, Nisshin's initial business operations focused on wheat-flour production. The company continued to be one of Japan's leading flour producers into the year 2000. When Tatebayashi merged in 1908 with the new Yokohama-based Nisshin Flour Milling Company, the company incorporated under the Nisshin Flour Milling Company name and moved its head office to Tokyo. A research center was established in 1916 to develop new products, including the world's first synthetic vitamin B6. With construction of the company's largest mill at Tsurumi in 1926. Nisshin's flour milling division expanded its production capacity for Japan's growing export market.

Postwar Growth

Nisshin's milling plants, damaged during World War II, were rebuilt and expanded between 1945 and 1949 to meet postwar demands for wheat flour. Further modernization occurred in 1957 with the installation of state-of-the-art pneumatic conveying equipment from West Germany and Switzerland.

In the early 1960s, Nisshin diversified into areas related to its flour-milling technology and expertise. For example, the feed division was formed in 1961 to take advantage of Japan's increasing meat consumption and the corresponding growth of the livestock industry. The division currently ranks third in Japanese livestock-feed production and has since grown to include the Nisshin Stockfarming Center Company for the commercial breeding and selling of hogs.

In the 1960s, Nisshin moved into the commercial processed-food market. Nisshin Foods Company was established in 1962 to manufacture cake mixes and other flour-based products for the consumer market. Nisshin-DCA Foods was created in 1966, through a joint venture with DCA Food Industries of the United States, to produce doughnut mixes. In 1967, the company purchased Ma. Ma-Macaroni Company, a pasta manufacturer. Nisshin Foods Company was the first food company to improve product quality in response to consumer demand by using imported 100 percent durum semolina flour, which was better for processing, instead of domestic wheat flour. New products included convenience foods like frozen noodles, frozen dough, and flour mixes for fried food.

In the early 1970s, Nisshin expanded its product line by forming or purchasing subsidiaries to market pet food, ham, and sausages, create stock-breeding operations, and develop restaurant and catering services. The fine chemicals division, part of Nisshin Pharmaceutical Company, marketed vitamins and other pharmaceutical products manufactured by another division, the Nisshin Chemicals Company. The company also established several international divisions. Nisshin Seifun do Brasil was formed in 1977 to develop business in Brazil, and Nisshin Badische Company produced and sold feed additives through a joint venture with BASF of West Germany.

In anticipation of its 90th anniversary, Nisshin initiated a company-wide strategy known as "NI-90" to encourage innovation and commitment to continued growth. Led by president Osamu Shoda, Nisshin faced the challenges of international trade, changing consumer tastes, increased foreign competition, and a fluctuating yen in the early 1990s. As a member of the powerful Fuyo Group, a leading Japanese industrial group with close ties to Fuji Bank, Nisshin had a solid financial backing for future undertakings.

Changes in the 1990s and Beyond

As Nisshin headed towards the 21st century, it began to position itself to better compete in a challenging business environment. In 1994, the company took full ownership of Nisshin DCA Foods, a U.S.-based joint venture. Two years later, it established Medallion Foods Inc. in Tacoma, Washington, in order to produce and market pasta in the United States. The facility in Tacoma manufactured 72 tons of pasta each day.

The company also worked to strengthen its pharmaceutical holdings. It partnered with Kyorin Pharmaceutical Company Ltd. to establish Nisshin Kyorin Pharmaceutical Company Ltd. in 1996. One year later, Nisshin Flour restructured its frozen food operations in an attempt to increase sales. Wholly owned subsidiary Nisshin Foods Company Ltd. was created as a result.

Nisshin celebrated its 100th anniversary in 2000. Over the past ten years, the company and its peers in the industry had witnessed changes in business laws, deregulation, wavering domestic and international economies, and heightened competition brought on by globalization. That year, the company decided to launch a major reorganization. As part of its strategy for the new century, Nisshin adopted a holding company structure and changed its name to the Nisshin Seifun Group Inc.

Osamu Shoda--Nisshin's president at the time--explained the decision in the firm's 2002 annual report. "Like most companies," Shoda claimed, "Nisshin Seifun has a hand in an array of businesses. While there is some overlap, each of the businesses face different market condition, services a different customer base, and provides a different line-up of products. For a business to be competitive it must structure itself so that it is ideally suited to respond to the unique environment in which it operates." Shoda also added, "The aim of the reorganization is to put our businesses in a better position to respond quickly and closely to changing markets by providing them a greater degree of autonomy while allowing them to more freely form collaborative alliances inside and outside the Group."

Under the new structure, Nisshin Seifun was focused on five core areas--flour milling, processed food, pet food, animal feed, and pharmaceuticals. The company eyed new product development as crucial for future growth. In 2003, for example, Nisshin Flour developed three allergen detecting systems, which were designed as a result of stricter food labeling directives set forth by the government. The company also began expanding its health food offerings and planned to launch CoQ-10 enriched food and drink products, according to a June 2003 Japan Food Service Journal. CoQ10 is a coenzyme found in mitochondrion, a substance that converts food to energy in cells and also controls the cell aging process. In March 2004, Initio Foods Inc. was created as a subsidiary to market freshly prepared foods.

During fiscal 2004, Nisshin Seifun secured record sales and income. The company's restructuring appeared to have paid off and chairman Shoda and president Hiroshi Hasegawa were confident the company would continue down a successful path. With over 100 years of experience under its belt, Nisshin Seifun was well positioned to handle future challenges.

Principal Subsidiaries: Nisshin Flour Milling Inc.; Nisshin Foods Inc.; Nisshin Petfood Inc.; Nisshin Engineering Inc.; Marubeni Nisshin Feed Company Ltd.; Oriental Yeast Company Ltd.; NBC Inc.; Nisshin Pharma Inc.

Principal Divisions: Flouring Milling; Processed Foods; Pet and Animal Food; Pharmaceuticals.

Principal Competitors: Ajinomoto Company Inc.; Nestlé S.A.; Nippon Flour Mills Company Ltd.

Chronology

• Key Dates:
• 1900: Teiichiro Shoda establishes the Tatebayashi Flour Milling Company.
• 1908: Tatebayashi Flour Milling merges with Nisshin Flour Milling and incorporates under the Nisshin Flour name.
• 1916: A research center is established.
• 1926: The company opens its largest mill at Tsurumi.
• 1957: State-of-the-art pneumatic conveying equipment is installed at company plants.
• 1961: Nisshin Flour forms a feed division.
• 1962: Nisshin Foods Company is established.
• 1967: Ma. Ma-Macaroni Company is acquired.
• 1987: Nisshin Foods and Nisshin Chemicals are purchased.
• 1996: Medallion Foods Inc. begins producing and marketing pasta in the U.S.
• 2001: Nisshin Flour adopts a holding company structure and reorganizes as the Nisshin Seifun Group Inc.