Restructuring in the ITOCHU's Food Manufacturing Business

-Through business alliances with Prima Meat and ITOCHU Feed Mills, and with Prima Meat and Yayoi Foods-

February 7, 2011

ITOCHU Corporation (headquartered in Minato-ku, Tokyo; Masahiro Okafuji, President & CEO; hereinafter “ITOCHU”) announced today that it will be undertaking business restructuring and alliance building initiatives with the Group’s food companies, in an effort to enhance its system for the supply of safe and secure food materials and products and to increase sales and production efficiency in food manufacturing and in feed and livestock. Specifically, the alliances have been formed among Prima Meat Packers, Ltd. (headquartered in Shinagawa-ku, Tokyo; Tetsuya Matsui, President & CEO; hereinafter “Prima Meat”), ITOCHU Feed Mills CO., LTD. (headquartered in Koto-ku, Tokyo; Akitomo Noto, President & CEO; hereinafter “ITOCHU Feed Mills”) and ITOCHU in the feed and livestock sector, and among Prima Meat, Yayoi Foods Co., Ltd. (headquartered in Minato-ku, Tokyo; Teruo Fujishima, President & CEO; hereinafter “Yayoi Foods”) and ITOCHU in the food manufacturing sector.

1. The objective of the alliance

The operating environment in the domestic food market is becoming ever more difficult, given Japan’s shrinking population, falling birth rate, and aging society, as well as the slump in consumption caused by the economic downturn. With these conditions, competition in the food manufacturing, intermediate distribution, and retail industries is intensifying and change is continuing at a rapid speed, as firms reorganize, form groups, and expand globally.
As part of the enhancement and expansion of the global value chain that it is pursuing under its Strategic Integrated System (SIS) in the food area, ITOCHU announced business integration in the food distribution and marketing business in December 2010. This is the second round of initiatives for the Company, following talks and deliberations aimed at building a system that will enable it to pursue more consistent strategies and ensuring more tightly controlled and effective use of each company’s management resources, to improve customer satisfaction and enhance the corporate value of the Group.
As a result of the alliance, the processes of manufacturing and sale of feed materials and livestock processed products will be further integrated, achieving business process efficiencies through increased traceability and shared sales channels in the feed and livestock sector. In the food manufacturing sector, a more efficient manufacturing and sales structure will be developed by sharing the manufacturing infrastructure, sales channels, and product development system, particularly for frozen and refrigerated food products. Through these efforts, ITOCHU will strive to enhance satisfaction for clients and customers. It will also consider operations in other countries such as China, with the aim of enhancing and expanding the experience and knowledge of the ITOCHU Group.

2. Areas and potential effects of business alliance

(1) Feed and livestock area
Increased quantity of safe and secure materials and processed products

  • Enhanced traceability for feeding, fattening and livestock processing
  • Increased efficiency through the group’s centralized pig breeding business

Increased sales of livestock meat (pork and chicken)

  • Increased sales through the Group’s shared sales channels
  • Increased efficiency through the shared use of sales offices and staff
  • Reduced logistics cost with high-volume advantage

Shared compound feed technology and increased production efficiency

  • Development and production of the best compound feed for each breeding
  • Increased production efficiency of compound feed through sales expansion
  • Joint development for improved pig breed

(2) Food manufacturing area
Shared use of manufacturing infrastructure

  • Develop the optimal product manufacturing system
  • Develop a competitive production system with streamlined and more efficient production processes and an increased operating rate

Increased product sales

  • Increased sales through the Group’s shared sales channels
  • Increased efficiency through the shared use of sales offices and staff

Promoted joint product development

  • Group companies make consolidated efforts to develop distinctive products that meet customer needs

3. Profiles of parties to the business alliance (as of March 31, 2010)

Corporate profile of Prima Meat

Corporate name Prima Meat Packers, Ltd.
Principal business Production and marketing of meat, ham, sausage, and processed foods
Established July 9, 1948
Head office 12-2, Higashi-Shinagawa 4-chome, Shinagawa-ku, Tokyo
Representative Tetsuya Matsui, President & CEO
Net sales Approx. 252.6 billion yen
Capital Approx. 3.36 billion yen
Major shareholders ITOCHU Corporation (39.35%)
Employees 9,887 (including temporary employees)

Corporate profile of ITOCHU Feed Mills

Corporate name ITOCHU Feed Mills CO., LTD.
Principal business Manufacture, processing and sale of feeds, livestock products and food products, and breeding
Established February 1, 1961
Head office 35-13, Kameido 2-chome, Koto-ku, Tokyo
Representative Akitomo Noto, President & CEO
Net sales Approx. 93 billion yen
Capital 1.91 billion yen
Major shareholders ITOCHU Corporation (85.9%)
Employees 1,306 (including temporary employees)

Corporate profile of Yayoi Foods

Corporate name Yayoi Foods Co., Ltd.
Principal business Manufacture and sale of frozen prepared foods
Established June 27, 1947
Head office 8-12, Shiba-Koen 1-chome, Minato-ku, Tokyo
Representative Teruo Fujishima, President & CEO
Net sales Approx. 34.1 billion yen
Capital Approx. 770 million yen
Major shareholders ITOCHU Corporation (93.2%)
Employees 1,209 (including temporary employees)

4. Outlook

The alliance is not expected to have any impact on ITOCHU’s consolidated financial results for the fiscal year ending March 31, 2011.