I understood that Ajinomoto Co., Inc. (hereinafter referred to as “the company”) has numerous patents, but even then, why are the sales low?
We hold many patents not only in food products but also in the bioscience and fine chemical fields. If we narrow it down to just pure food-related patents, keeping aside pharmaceutical- and bio-related ones, the number comes down and we will be at a level similar to our rival firms in the industry. Now, we are in a major transition period of shifting from commodity to specialty. For example, earlier, as the bulk rate was high, finding an effective fermentation bacteria would have been enough to build business competitive edge. However, following business structure changes, how to make things with added value by leveraging the patents is more important. Given such changes, it can be said that patents are more in numbers.
If you were to pick one technology that would lead to economic value in the next five years, what would it be?
The base for growth will be supported by the technology for food deliciousness. This could be used not only in Japan but also globally in parallel and we can realize the most optimum taste for a region, regardless of country or race. The field where we can expect dramatic growth is the technology related to production of pharmaceuticals. For example, development of next generation drugs (biopharmaceuticals), which can appropriately deliver an antibody attached with the drug to a desired location, is advancing, and we recognize that such competitive technologies are being developed.
Could you tell us how the Client Innovation Center (hereinafter referred to as “CIC”) is going to be operated? Specifically, what kind of expenses will occur in case a project goes forward with the requirements of the company matching that of another? And how will the sales, etc. be handled between the companies after commercialization?
Tie-ups with other companies will be handled case by case, and will not just be limited to CIC. We will discuss with the partner regarding the model for commercialization, the requirement for technological license, etc. One of the main aims of CIC is that the partner will propose means to leverage technology that we have never imagined till now. In order to discuss such new possibilities, it is not just enough that we go to our customers’ sites, because that would limit the technologies that we can explain. Also, as three research centers function inside the same Kawasaki Office, it would be possible to quickly involve the specialists from a given field and have discussions. First, we would like to broaden our imagination and think together about new possibilities with our customers. The subsequent commercialization and specific agreements, etc. can be dealt with as needed.
The company has incurred labor costs and capital investment for the construction and operation of CIC. Is it safe to assume that these are advance investment of the portion to be collected from clients later?
Yes. You can think of it as part of the R&D investment in the broad sense.
I would like to ask about the company’s overall way of thinking regarding R&D. In the flow from commodity to specialty, I feel that the company has made great changes in the way it is done and KPI management. Could you explain a bit more in detail about that?
Till now, there were many independent research by researchers and the themes were decided primarily by the researchers. It is same in the case of fermentation technology also, but we had competitive ability then, so it was alright. However, various materials and businesses became commoditized and the competition intensified, and we had to change our thinking that identifying the customer needs is the most important thing. The collapse of Lehman Brothers was also a turning point, and we have significantly changed the way we manage R&D budget from around FY2011. We have changed it to one where we have stopped independent research and instead began concentrating R&D cost on those that match the requirements of the business division to raise the success ratio. We have made it into one where research is carried out reflecting customer needs and has as many exit points as possible. CIC also, in line with that thinking, has the main goal of grasping customer needs. It is important that researchers themselves go out and grasp the requirements, but it is also important to have base like CIC that can mobilize the company’s technology to identify the unmet needs of customers.
Amid significant changes, what would be the timeframe in which the company expects to see the outcome?
For example, cell cultures used in regenerative medicine has become the de facto standard even though it entered the field late. Having said so, it takes a certain amount of time to commercialize it, so we have started working on technology-based M&As, though on a small scale. Because of this currently we are in a situation where we have more patents, as per my understanding.
Regarding the fact that sales are small compared to the number of patents, isn’t it necessary to utilize them in the B-to-C business to generate sales? How do you plan to utilize the company’s B-to-B technologies in the B-to-C business? Please elaborate on the company’s thinking.
For example, we are offering low-salt, low-fat and low-sugar technologies to various companies and we have begun offering such technologies also to a major company in the United States. In addition, we are in the process of starting a business, which will look at ways to boost customer values of a partnering company in the B-to-B-to-C format, called Integrated Food Solutions. We have been also working on natural bio flavors including fermented vanillin, and are aiming to offer solutions not only of taste but also flavors.
No. First of all, the basic thing is to increase the attractiveness by using our own technologies in our own products. We initially used the low-salt technology in our products. In addition, we will sell the materials and deploy them at other companies.
As for the B-to-C business, Ajinomoto Frozen Foods Co., Inc., AGF, Knorr Foods Co., Ltd. and Ajinomoto Co., Inc. have been separate companies until now and each of them has their own R&D functions. We are trying to combine the R&D functions of these companies into one at the Kawasaki district by FY2020. We believe Ajinomoto Group’s technologies can be leveraged further to respond to consumer needs. The recent popular product, THE★CHA-HAN, also was created this way. In the past we spun off each business for each company to enhance their strengths in their respective fields. As a result, the companies achieved their current positions in the respective markets, but the real strength of the Ajinomoto Group lies in leveraging food technologies that came out of bioscience and fine chemical technologies as well as using bioscience and fine chemical technologies as such in food technologies. We believe it is difficult to demonstrate this strength under the current structure of independent R&D bases and that is why we are trying to step forward. You can assume that the time we take to generate results in the food products business is shorter than that for Healthcare and Life Support. Moreover, food products contribute to accumulation of knowhow, which is hard to be quantified, in addition to technologies to be patented, and we want to generate economic impact from the strengths in total.
What we saw today gives an impression of the next generation tool. However, almost all of the displayed technologies have been discussed at the company’s prior briefings and I found nothing really new. At what frequency do you plan to refresh the displayed technologies? How do you plan to maintain the freshness of the technologies?
It is necessary to refresh not only the contents but also the tools, so it is a task for the future.We will add new contents at each juncture, such as when a relationship advances one step forward and we make an external announcement or when a patent is published.
I would like to ask about overseas research collaboration. I believe the company’s fundamental technology will be quickly deployed overseas. How will the concept of R&D change between Japan and overseas?
Under the current structure, Ajinomoto Co., Inc. carries out basic research and new material development in Kawasaki. Local subsidiaries subsequently localize them and create applications. While Ajinomoto Co., Inc. handles the themes that require considerable amount of labor and data, local human resources at the local subsidiaries develop recipes and how to utilize various materials. For this purpose, preference mapping is very important and we are working on enhancing local response capabilities including education. As a result, we aim to improve the success rate of boosting development speed and development leading to popular products.