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Takasago International Corporation,
President and Chief Executive Officer
Satoshi Masumura

(Source: Takasago Sustainability report 2018-2019)

Last year, the Takasago group launched a new medium-term management plan One-T (the last phase of Takasago Global Plan) with a target of the sales turnover at 170 billion yen and the ratio of operating profit to revenue at 5.2%. The group will celebrate 100th anniversary in 2020, the final year of this management plan.

In 2018, Takasago reported the record high sales turnover for the first year of One-T. What has contributed to this good result and what are issues that the company needs to tackle?

Our sales turnover for fiscal 2018 increased by approximately 6% or 9 billion yen over that of the previous year - exceeding 150 billion yen for the first time. The operating Profit however decreased by approximately 8% from the previous year to 5.8 billion yen. As a result, fiscal 2018 ended up with “a fall in profit despite a jump in sales”. A significant increase in the procurement cost of raw materials was the main reason for the pressures on the profit. Natural raw materials shortages due to natural disasters, shortages of crude materials triggered by accidents of chemical plants, and factory closures due to tightened environmental restrictions in China - all contributed to significant raw material cost increases.

Even under these circumstances, our growth in Asia continued to steam ahead with double-digit figures. Despite the Asian market growth slowing down, our double-digit growth was achieved by acquiring a number of new businesses. Our India business specifically, started to bearing fruits and showing good results. The vanilla business has become one of our core businesses. In addition, a couple of new Takasago original aroma ingredients, for fragrances were launched in 2018. The fine chemical business, despite a slower growth trend, further improved its business portfolio with the successful expansion using a novel LAH(Lithium Aluminum Hydride)reaction process.

We continued to pursue large-scale investments to ensure our continued growth. Some examples of these are building a production site in Jakarta, Indonesia, acquisition of additional land in Germany for the future expansion, and then expansion of the flavor production facility in Guangzhou, China.

It appears global activities are moving forward and gaining momentum. What are concrete action plans for the second year of One-T?

For the second year for One-T, the primary focus will be on raw materials procurement and strengthening partnership with strategic suppliers. The cost of raw materials, both natural and synthetic, has soared significantly much more than we had anticipated for One-T period. To cope with the situation, a strategic sourcing program called TaSuKi has been implemented. Strategic medium and long term plans and agreements with key suppliers have been or are being developed to ensure the stable supply and prices of key strategic materials. Over many years, Takasago values partnership with key supplier, such as by setting up a joint-corporation with a vanilla processing company in Madagascar and making strategic ties with a processor of grapefruit and orange juices in U.S.A. for citrus flavor/fragrance ingredients. With a long-term view always, we continue to reinforce this solid partnership we have developed over the years and pursue stronger and strategic ties with all of our key suppliers.

Enhancement of global corporate functions is also a key element for our continued success in the future. We are now reviewing and improving business flows among the group companies and working very hard to integrate various systems to ensure appropriate and timely global alignments. Incorporating the best practices of the Takasago group and standardizing business processes globally will surely improve the efficiency and profitability of the entire group’s operations. Globally aligned business processes will enable us to optimize our human resources across the group companies and ensure that we manufacture the same quality products across the globe.

As for capital investment, the new production facility in Jakarta will start its operations soon. Indonesia, which has the largest Muslim population in the world, is a fascinating market with 260 million people and a key for our continued aggressive growth in Asia. Currently, products are imported mainly from Singapore and supplied to customers in Indonesia. In respond to a fast-growing demand in the market, we decided to build a production facility in Jakarta. When completed this fall, Takasago will gain an additional production capacity in South East and South Asia. This production facility, together with our facilities in Singapore and India, allows us to manufacture products at these three sites to supply for growing markets in the region. This will also enable us to shorten lead-time as well as secure flexibility in business plans including business contingency. This will certainly enhance our market presence in many aspects.

This year, unfortunately, the significant negative impact from high procurement cost has impacted our profitability. We continue to tackle issues one by one patiently and resolve these issues on a timely manner.

How about the progress of your initiatives for sustainability? Strengthening sustainability throughout the group is one of your corporate action plans.

During the first year of “One-T”, we made steady progress. Revision of the Charter of Corporate Behavior and Code of Conduct was one of the plans that we have pushed forward. The revision includes our commitment to addressing global challenges such as human rights and climate change, governance concerns such as the risk management including cyber security, realizing a sustainable society (Society 5.0) through innovations, and also ensuring the management’s strong involvement. With that background, the board of directors regularly takes up climate change and TCFD recommendations. The board spent a lot of time discussing material issues last year. This year we strive to embody actions to tackle climate change such as preparation for acquiring SBT initiatives. It is very important to integrate these environmental and social issues and concerns into business actions. In Japan, ever since the Meiji period, an idea of corporate social responsibility has been rooted with a phrase “Benefit for All Three Sides”. Likewise, our corporate philosophy “Contributing to Society through Technology” clearly mirrors this commitment to our social responsibility. Everyone in the Takasago group is continually reminded of “Contributing to Society”, to ensure that we integrate this into our business activities.

Operational safety is also a key in pursuit of sustainable management. Since the fire accident in 2013, we have ensured “Safety is Our Priority” in all our operations. We have also set April 10th as “Takasago Safety Day”, during which the Takasago group reaffirms our commitment on operational safety and all the employees across the globe participate in global as well as in site-specific safety programs. In addition to our day to day safety activities, our initiatives for ISO45001 certification will also help us pursue our global safety alignment and improvement in occupational safety management.

What are R&D demands from the global market?

To meet a growing demand of sustainable products, we are focusing on environmentally friendly products/processes, employing the Takasago group’s unique technologies, such as catalysts and continuous flow for the synthetic products, and natural flavor and fragrance ingredients utilizing fermentation method as well as natural resources processing. Our technologically-driven approach will push us forward to become a top-class flavor and fragrance company.

As for fine chemicals, we added in our technological portfolio a new process innovation to commercialize LAH reaction last year. It was considered extremely difficult to realize the chemical reaction process at a chemical plant scale due to its high reactivity. Combining with our continuous flow technology that ensures safety, we succeeded in the LAH reaction commercialization. We continue to further deepen continuous flow technology capabilities and broaden our product ranges to meet the ever-changing market needs. This will continue to enhance our synthetic business portfolio.

When it comes to fragrances, we often receive requests for fragrances composed of renewable ingredients from customers in Europe and Americas. Last year, Takasago launched a renewable-resources based and highly biodegradable aroma ingredient utilizing our original asymmetric chemistry. As lily-like synthetic aroma ingredients are banned in EU states, Takasago developed an aroma ingredient that utilizes components derived from lily with a safe and environmentally friendly manufacturing process. This has been adopted in a wide range of applications such as fine fragrances and detergents. We also focus on the development of natural flavor ingredients in respond to an increasing demand for natural flavors. Utilizing a company Takasago acquired in 2016 which is specialized in the manufacture of natural ingredients - Central Ingredients Technology, Inc., we are very well positioned to develop and manufacture new and unique bio-based flavor ingredients.

Our Vanilla Center and Citrus Center also play key roles in the expansion of our natural flavor ingredients’ pallet to meet the ever-increasing global needs.

How do you envision Takasago to be as it approaches its 100th anniversary?

Takasago’s corporate logo “Square T” is also called “Triple T” that stands for our strong belief “Trust is earned from technology and teamwork”. We will continue our efforts to understand our customer’s perspective, strengthening sales & marketing forces, enhance R&D capabilities, conduct thorough quality control on all our products, and provide flexible services with agility to ensure a corporate focus on delivering customer satisfaction.

We will celebrate 100th anniversary next year. One hundred years ago, the founders of Takasago had a dream to spread high quality aroma products incorporating Asian and Japan originated natural flavor and fragrance raw materials and synthetic aroma ingredients from Japan to the world. Returning to the same spirit of founders, through aroma, I believe we continue to contribute to health of mind and body of people around the world. Based on our corporate philosophy “Contributing to Society through Technology”, we consolidate all the knowledge and expertise that the group possesses and resolve issues that we are facing, strive to make the management foundation firmer and continue to aim for sustainable growth of the Takasago group.