Taiyo Kagaku has been creating products for human health and better quality of life with the keywords “safety” and “security” by utilizing the interface control technology it previously developed in the food industry. It has developed Sunsoft, a highly functional polyglycerol fatty acid ester that is used in various cosmetic formulations such as facial cleansing and basic skin care for emulsification, solubilization, cleansing and antibacterial applications. We sat down with president Nagahiro Yamazaki, who explains that Taiyo Kagaku will continue to offer high value-added concepts for human health and quality of life and contribute to reduced environmental impact by leveraging the advantage of materials and its knowledge in surface chemistry and dermatology.
In recent decades, regional manufacturing competitors in countries such as China, South Korea and Taiwan have been able to replicate Japanese monozukuri, but at a cheaper cost. Despite this, Japanese firms, both large and chusho kigyos, maintain a large share in B2B markets in the fields of applied and advanced sciences. As a manufacturer of over 2,000 best-in-class ingredients for the pharmaceutical and food sectors, what do you believe are the competitive advantages of Japanese firms?
Our neighbours, especially China and Korea, are very good at replicating their manufacturing processes where there is a large market and high demand, and selling in large quantities at low prices. We, on the other hand, focus on small niche markets, so Chinese and Korean manufacturers do not have a strong incentive to copy our methods. Another feature of our company is that we understand the needs of our customers, which allows us to make products according to their requirements. That is why we have more than 2000 products. We are constantly developing new versions of our products, building on our existing technology. Few companies have the time and capability to enter into such niche markets.
Your business is divided into your nutritional division, interface and emulsion products division, and natural ingredients division. Can you tell us about the degree of overlap between these three divisions?
While we have three main divisions and different types of products, everyone within each team collaborates with the other teams. Each R&D staff typically rotates through the various departments to learn the basic techniques and skills needed to drive innovation and create new products. In a sense, everyone is unified by the same set of skills to be able to develop any kind of product. The three businesses overlap technologically and are conveniently divided into divisions based on differences in purpose of use and data accumulation, but there is no clear line in that area.
Out of around 500 Taiyo Kagaku employees in Japan, 130 of them are directly involved in R&D. What is the focus of your R&D strategy?
Our core technology is based on interface science. Simply put, our interface science means controlling the contact points between different substances such as the contact points between water, oil, and air. For example, in cosmetics we focus on the contact point with our skin. In Nutrition we focus on how foods are digested and absorbed once they enter the body. In food and beverage, we focus on the contact point of oil based material and water based material (like milk coffee).
Our specialty is controlling the physical functions of the ingredient in addition to its taste. In the case of foods, we focus on texture (texture on the tongue and melting point within the mouth and throat) as well as taste and nutritional functions. For cosmetics, we focus on the texture on the skin. These actions are converted into numeric values that can then be controlled. This is our technological advantage.
About 90 percent of our employees in sales and marketing have an experience to work within our R&D; even the manager who takes care of all deliveries has worked in our research centre. Over the course of the COVID-19 pandemic, the need for salespeople has decreased, but we have been able to divert these employees back to our research team to conduct innovation work, as well as conduct online sales to targeted customers. We are basically a company that sells technology.
The pandemic has led to many significant disruptions, however, there have also been some silver linings, with some sectors intimately linked to your products, including store-bought food and cosmetics such as face creams, performing especially well. How has the COVID-19 pandemic impacted your business? What are some of the changes it has accelerated?
The pandemic has affected many aspects of our business. For example, prior to the pandemic our Japanese domestic cosmetic sales had been rather large, however, once the pandemic hit travel and socializing decreased and there were very few visitors from overseas, which resulted in plummeting cosmetic sales. On the other hand, processed foods for home consumption increased and our customers had a hard time keeping up with the increased demand. Although the number of overseas visitors to Japan has not yet returned, the cosmetics market is recovering slightly with strong growth in China. This is a trend that we expect to continue over the coming years with lower domestic sales but growing demand from China and Korea.
We have also seen a huge increase in the demand for healthy and functional foods and supplements worldwide. I believe that everyone's awareness of health has intensified during the pandemic. Products that help us manage our physical condition, especially those that improve our immunity and sleep and reduce stress are selling very well. Our company is also seeing an increase in global sales of soluble plant fibers that improve intestinal health and the microbiome. As consumers become more knowledgeable about health, the market for functional health foods will continue to grow. We are committed to educating the public about the importance of good health.
During the pandemic one of the biggest changes for us all has been the mind-set of physical distance. As our company is based in central Japan, prior to the pandemic our sales consisted of considerable travel and face to face interactions with our customers. This all changed during the pandemic, and we began to communicate remotely. This has allowed our domestic and overseas sales departments to be more efficient, finding that we no longer have to travel as much as before. We are also finding it easier to deal with the time differences across our global sales with the increased flexibility in working hours. This has greatly improved our ability to communicate at any time with our customers and reduced the time it takes to address our customers issues and assist them with all stages of product development.
With all of the changes, we are continuing to introduce our technology to the world. Our sales approach has also changed and has become smarter. Our new and improved systems have allowed us to instantly contact and service customers anywhere and at any time.
Japan is facing the challenges of a super ageing society – with a third of Japanese people expected to be over the age of 65 by 2035 – such as a labour shortage and the shrinking of the domestic market. As a company making nutritional health products, how has Japan’s demographic decline impacted your firm and how are you overcoming the challenges it poses?
While there is certainly a shrinking of Japan's workforce and domestic market due to demographics, we have been anticipating this trend for decades and have been aggressively expanding our business overseas.
Also, we have not been affected by the shrinkage in the workforce as more and more new graduates are interested in joining our company. I think this is because our company is located in the Tokai region, which includes Mie Prefecture. There are many young people who left for Tokyo for college but want to return to their hometowns to work. Toyota Motor Corporation is located near our company, but there are not necessarily many options for new graduates who want to work in engineering or research.
There are also many young people who would rather work where the cost of living is not as high as it is in Tokyo and Osaka and can raise families in better and more natural environments. We also have many international students joining our company. There are many people who like Japan and work for our company because they like the fact that they can work internationally in a stable company.
Japan is a country with one of the most advanced aging populations. All developed countries in the future will eventually face an aging population and an accompanying increase in medical burdens. Japan will be the first country to experience many of the changes that will occur around the world. We are also entering into the direct consumer businesses to help improve the health of the elderly. We are focusing on testing the effectiveness of our products to improve the quality of life for the elderly and to minimize diseases associated with aging. Although still on a small scale, we are steadily gaining results in the fields of hospitals and nursing care. We hope to spread these findings around the world.
Chirabazol, a plant-derived fatty acid that improves the dispersion of powder in water and resin, plays an important role in the production of more sustainable biodegradable plastics. Can you tell us more about Chirabazol?
Most big plastic manufacturers in Japan are still heavily focused on price: they want to make sure they keep costs low, which may be the reason why biodegradable plastics have not yet become a major trend in Japan. Recently, the SDGs have started to penetrate into every company, and biodegradable plastics have started to attract attention. It is still in the research and development stage and has not yet been produced on a large scale. I believe that this market will expand in the future.
Despite being treatable and preventable, diarrhoea is the fourth leading cause of death in the world and the second leading cause of death in children under five. Your guar gum products are used to treat irritable bowel syndrome (IBS). What other initiatives are you undertaking to combat global health issues?
From early on, we have focussed on the nutritional functions of foods in order to help people. Our goal is not necessary to extend people's lives, but to our lives via healthy living and improved nutrition. Over the past 30 years, we have conducted many clinical studies. Improving the intestinal environment not only improves the lives of those suffering with IBS and diarrhoea, but it also has direct impact for all of us improving brain health and the immune system. There are so many interactions going on in the human body that even a single change can trigger a chain reaction. The human body is like a universe, and I believe there are still many parts of it that have yet to be understood.
Food is not only a source of calories, but many substances that act on the body are also being discovered. Our goal is to improve people's health by enhancing their immunity. This is a field that requires endless research, and we still have a long way to go.
You are involved in over 50 collaborations. How would you describe the role that collaboration and co-creation play in your business?
Collaboration is very natural for us. There are many factors that affect the condition of our cells and gut depending on the characteristics of where we live, such as food, climate, and the environment. We naturally have to collaborate with universities and companies in our respective regions to collect data locally and feed it back to our R&D. In Japan, we are collaborating with many universities, including those in the medical field. They do the basic research and then we take over and do the applied research and commercialization.
We adopt the same approach outside of Japan. There are always many projects that we are working on with other companies. In order to develop products that are appropriate for each region, we cannot imagine not collaborating and co-creating with other companies. It is difficult for us to develop products for each region on our own, so we work together with our customers.
Since your first overseas operation in the United States in 1994, you have established a diverse international presence in China, South Korea, India, and Germany. Can you elaborate on your international strategy?
The history of research and utilization of health functional materials is relatively new, and we first proceeded to market them in the United States and Europe, where the level of health consciousness is high. It is important to know the roots of history. In Japan, there was a period of undernourishment after the war, but as the economy developed, nutrition became more widespread, and the negative effects of overeating came to the fore. Diabetes and metabolic diseases increased and with that an increase in medical costs became a social problem. Nowadays, the number of patients with lifestyle-related diseases is increasing rapidly in other countries such as China and India. Only in such a situation will we have a better understanding of nutrition. Only when people become more health conscious will there be a potential market for health foods. The market for health foods and supplements is closely related to the speed of development in a country and the increase in health consciousness.
We do not target any particular country, but we closely observe the stage each country or region is at. If there is an area where we can use our knowledge and experience, then we are in the right place. We are constantly researching ways to improve our activities.
Imagine we come back to interview you again on the last day of your presidency. What dreams or goals would you like to have achieved by then?
It has been 24 years since I took office as president. Our sales goals and profits are constantly changing, but my main goal is to survive as a company for as long as possible. This is because we have a responsibility to our employees and to our customers, who need our products and are healthier and happier because of them. I don't think it is necessarily good to be large in size, but I would like to be a company that continues to change with the changes in our society, and that is always worth doing. I don't know when my presidency will end, but until my last day as president, I will continue to make efforts to improve the company.