Business Integration in the Food Distribution and Marketing Business
－Working towards enhanced satisfaction for customers through centralization and aggregation－
December 17, 2010
ITOCHU Corporation (headquartered in Minato-ku, Tokyo; Masahiro Okafuji, President & CEO; hereinafter “ITOCHU”) announced today that it has reached an agreement regarding business integration in the food distribution and marketing business with 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 integration.) The details of this agreement are as follows.
1. The objective of the business integration
On September 28, 2010, ITOCHU and the other parties to the business integration reached an agreement to start talks about business restructuring centered on NIPPON ACCESS, with a view to strengthening the food distribution and marketing business. Since then, there have been ongoing talks and deliberations regarding issues such as the methods and conditions for the business restructuring, and how to operate and expand the business after the restructuring.
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 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.
Under ITOCHU’s SIS strategy, the food distribution and marketing business plays a vital role in the value chain. The decision to swiftly proceed with this business integration was made following talks and deliberations aimed at building a system that allows us to pursue more unified strategies and ensuring more tightly controlled, effective utilization of each company’s management resources, in order to contribute to improving the satisfaction of our customers, and further enhance the corporate value of the entire Group.
2. Overview of the business integration
- First step (scheduled for March 1, 2011)
NIPPON ACCESS and FC will merge, with NIPPON ACCESS absorbing FC to become the surviving company.
NIPPON ACCESS will make Universal Food a consolidated subsidiary by acquiring the shares in Universal Food that are currently held by ITOCHU (98% of the issued shares).
- Second step (scheduled for October 1, 2011)
NIPPON ACCESS and ITOCHU Fresh will integrate their business operations by having ITOCHU Fresh transfer business to NIPPON ACCESS.
3. Potential effects of the business integration
- Enhanced satisfaction for customers
In our view, pursuing the following three types of centralization and aggregation will contribute to enhanced satisfaction for our customers, by allowing us to provide the kind of comprehensive merchandizing and low cost high quality logistics that the individual companies have not previously been able to achieve on their own.
Centralization and aggregation of products
We will create a system for delivering comprehensive merchandizing for food products, which will handle the fresh food (marine products, livestock products and agricultural products) in a comprehensive and centralized manner, in addition to processed food products in the full range of temperatures (frozen and chilled).
In particular, we will take advantage of the strength that NIPPON ACCESS brings with its temperature-controlled distribution network in order to provide customers all around the nation with the three main classes of fresh food products (marine products, livestock products and agricultural products) that ITOCHU Fresh specializes in.
Centralization and aggregation of distribution
We will create a system for providing procurement distribution in a comprehensive and centralized manner, in addition to distribution to stores around the nation in the full range of temperatures. By having top class scale and functionality in the food distribution sector after the integration, we will be able to provide our customers with low cost high quality logistics.
Centralization and aggregation of sales channels
We will create a system that can provide comprehensive merchandizing and low cost high quality logistics to our customers in food services and canteens sectors, as well as GMS and SM and convenience stores.
We also believe that providing our customers in the food manufacturing sector with wider sales channels will lead to greater efficiency and give rise to further business opportunities.
- Expansion and improvement of earning platforms in ITOCHU’s food distribution and marketing business
In our opinion, the business integration 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 integration, 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
In our view, the business integration 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 integration have expanded into overseas markets separately; however, as a result of the business integration, ITOCHU will take the lead in centrally managing comprehensive merchandising and low cost high quality logistics services in a way that takes advantages of the strengths and unique characteristics of each company.
4. Profiles of parties to the business integration
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 September 30, 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 business integration is not expected to have any impact on ITOCHU’s consolidated financial results for the fiscal year ending March 31, 2011.