Start of Talks to Strengthen Food Distribution and Marketing Business
September 29, 2010
ITOCHU Corporation (headquartered in Minato-ku, Tokyo; Masahiro Okafuji, President & CEO; hereinafter “ITOCHU”) hereby announces that ITOCHU, its subsidiary NIPPON ACCESS, Inc. (headquartered in Setagaya-ku, Tokyo; Shigeharu Tanaka, President & CEO; hereinafter “NIPPON ACCESS”), Family Corporation Inc. (headquartered in Bunkyo-ku, Tokyo; Junkichi Kurosawa, President & CEO; hereinafter “FC”), ITOCHU Fresh Corporation Inc. (headquartered in Minato-ku, Tokyo; Osamu Hara, President & CEO; hereinafter “ITOCHU FRESH”), and Universal Food Co., Ltd. (headquartered in Koto-ku, Tokyo; Akira Yamane, President & CEO; hereinafter “Universal Food.” Also, NIPPON ACCESS, FC, ITOCHU FRESH and Universal Food are collectively referred to as “the parties to the business restructuring.”）have agreed to start talks over business restructuring centered around NIPPON ACCESS (hereinafter referred to as “the business restructuring”) to strengthen food distribution and marketing business.
1. Background and aim of the business restructuring
ITOCHU has identified the expansion and improvement of earning platforms as a key measure under its FY2010~FY2011 Medium-Term Management Plan “Frontiere 2010 - Enhancing Corporate Value on the World Stage, Shaping the Future -.” In the lifestyle and consumption-related food segment, which is one of ITOCHU’s core business segments, ITOCHU pursues a Strategic Integrated System (SIS) strategy, organically linking food resources development, food resources supply, product processing, midstream distribution and retail to establish a value chain that realizes efficient production, distribution, and sales.
Meanwhile, the parties to the business restructuring operate as leading companies in their respective fields within the food distribution and marketing industry.
NIPPON ACCESS was established as a subsidiary of Snow Brand Milk Products in October 1952 for the purpose of wholesaling ice cream. Today, NIPPON ACCESS is a leading food wholesaler and core subsidiary in ITOCHU’s food distribution and marketing business, operating a nationwide temperature- controlled logistics network for frozen, chilled and ambient foods, and offering products and services to a wide range of customers, including GMS, food supermarkets, convenience stores, cooperatives, drug stores, home centers and food services.
FC was established in March 1988 and is now a third-party logistics provider which ranks among the top performers in the food distribution industry in terms of revenue and capabilities, offering an array of logistics services to leading convenience stores and other customers.
ITOCHU Fresh was established as YAIZU Marine Products in 1980. In October 1998, six ITOCHU Group companies handling fresh fish, fruit and vegetables, and meat (including YAIZU Marine Products) merged to form ITOCHU Fresh. Today ITOCHU Fresh is a fresh foods sales company with the capability for processing marine products, agricultural products and livestock products.
Universal Food was established in March 1999. It offers business flow, logistics and information systems and product development and food safety management capabilities to food services and food catering companies and is a leading food distribution and marketing company in the food service and food catering industry.
On the domestic food distribution market, Japan’s shrinking population, falling birth rate and aging society, as well as the slump in consumption caused by the two-year long economic downturn are making the operating environment even more difficult. In this operating environment, competition in the food manufacturing and retail industries is intensifying and change is coming at dizzying speed, as firms reorganize, form groups and expand globally, with the weak firms winnowed out, leaving only the strong behind. Likewise, in the food distribution and marketing industry, firms are pushing ahead with restructuring to increase their competitiveness by expanding the scale of their operations and strengthening their capabilities, and ITOCHU believes that, in the future, it will be necessary to develop more diverse, broad-reaching and sophisticated capabilities than ever before.
Under ITOCHU’s SIS strategy, food distribution and marketing business plays a vital role in the value chain, and ITOCHU believes that, to further enhance the Group’s corporate value, we must build a system that allows us to pursue more unified strategies and restructure our business operations to ensure more tightly controlled, effective utilization of each company’s management resources.
2. Potential effects of the business restructuring
At the present stage we consider the potential effects of the business restructuring to be as follows.
- Enhancement of customer satisfaction
The business restructuring is expected to strengthen logistics operations and fresh foods operations in ITOCHU’s food distribution and marketing business. The business restructuring will make it possible for ITOCHU to offer customers “low-cost high quality logistics services,” as well as “comprehensive food merchandising services” with a line-up of products from all categories including fresh foods.
In our view, it will also allow us to offer our customers in the food manufacturing industry a much larger number of retail and food service sales channels, improving efficiency and creating further business opportunities.
- Expansion and improvement of earning platforms in ITOCHU’s food distribution and marketing business
The business restructuring will rationalize and improve the efficiency of ITOCHU’s food distribution and marketing business as a whole through the optimal allocation of management and sales management operations, information system related operations, logistics operations, food safety management operations and other operations of the parties to the business restructuring, and this is likely to lead to expansion and improvement of earning platforms in our food distribution and marketing business.
- Acceleration of the overseas expansion of ITOCHU’s food distribution and marketing business
The business restructuring will accelerate the expansion of food distribution and marketing business, especially in the growth markets of China and Asia. In the past, the parties to the business restructuring have expanded into overseas markets separately; however, as a result of the business restructuring, ITOCHU will take the lead in centrally managing comprehensive merchandising and low cost high quality logistics services.
3. Talks over the business restructuring
ITOCHU and the parties to the business restructuring plan to set up a business restructuring review committee and project team to hold specific talks on issues such as the method and terms and conditions of the business restructuring, and business management and business expansion of the parties to the business restructuring after the business restructuring, and they plan to hold talks with a view to reaching an agreement by March 2011.
4. Profiles of parties to the business restructuring
Corporate profile of NIPPON ACCESS (as of March 31, 2010)
|Corporate name||NIPPON ACCESS, Inc.|
|Principal business||Food wholesale|
|Established||October 1, 1952|
|Head office||3-1-3 Nozawa, Setagaya-ku, Tokyo|
|Representative||Shigeharu Tanaka, President & CEO|
|Net sales||Around ¥1,360.6 billion (Consolidated basis)|
(as of August 31, 2010)
ITOCHU Corporation (93.6%),
Snow Brand Milk Products Co., Ltd. (6.4%）
|Employees||3,066 (Consolidated basis)|
Corporate profile of FC (as of March 31, 2010）
|Corporate name||Family Corporation Inc.|
|Principal businesses||Food-related third-party logistics and center management services|
|Established||March 31, 1988|
|Head office||1-4-1 Koishikawa, Bunkyo-ku, Tokyo|
|Representative||Junkichi Kurosawa, President & CEO|
|Net sales||Around ¥70.3 billio|
ITOCHU Corporation (95%）
I-Foods Co., Ltd.（1%）,
|Employees||227 (including temporary employees, non-regular and part-time employees）|
Corporate profile of ITOCHU FRESH (as of March 31, 2010)
|Corporate name||ITOCHU Fresh Corporation Inc.|
Purchasing, processing and selling of marine products, livestock products and agricultural products
|Head office||2-13-34 Konan, Minato-ku, Tokyo|
|Representative||Osamu Hara, President & CEO|
|Net sales||Around ¥57.5 billion|
|Major shareholders||ITOCHU Corporation（100％）|
|Employees||468 (including part-time, non-regular and seconded employees)|
Corporate profile of Universal Food (as of March 31, 2010)
|Corporate name||Universal Food Co., ltd.|
|Principal businesses||Operation and management of food-service related businesses|
|Established||March 1, 1999|
|Head office||2-3-43 Shinsuna, Koto-ku, Tokyo|
|Representative||Akira Yamane, President & CEO|
|Net sales||Around ¥15.0 billion|
|Major shareholders||ITOCHU Corporation（98%）, Saint Marc Holdings Co., Ltd. (2%)|
81 (including temporary employees)
5. Business forecast
The talks are not expected to have any impact on ITOCHU’s consolidated financial results for the fiscal year ended March 31, 2011.