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Nikko: Fully integrated service as a supplier of leading-edge food-processing machines

Interview - January 19, 2024

Founded in 1977, the Japanese company Nikko specializes in supplying state-of-the-art food-processing machines and robots.

KAZUO SATO, PRESIDENT OF NIKKO CO., LTD.
KAZUO SATO | PRESIDENT OF NIKKO CO., LTD.

In the last 25-30 years, Japan has seen the rise of regional manufacturing competitors who have replicated the Japanese monozukuri process, but doing so at cheaper labor costs. This has pushed Japan out of mass production markets. However, Japanese firms are still leaders when it comes to niche B2B fields. How have Japanese firms been able to maintain this leadership despite the stiff price competition?

When it comes to seafood processing machinery, Japan takes a slightly different approach from the methods widely used overseas. This approach is highly unique and allows us to maintain a certain advantage. Taking salmon processing as an example, in regions of the world where salmon is abundant, they process it in a semi-dressed style. They leave the head and remove the fish's internal organs in a semi-dressed fashion. On the other hand, in Japan, we remove the head of the fish and its internal organs in a full-dressed style. These distinctive approaches to seafood processing are one of Japan's strengths.

 

Your firm has played a crucial role in introducing robotics and automation into food automation here in Japan. We are now seeing the growth of IoT, AI, and machine learning to connect various components, enabling real-time monitoring, data collection, and remote control, which all enhance predictive maintenance, reduce downtime, and allow for the detection of anomalies. As a firm that specializes in labor-saving solutions for the food industry, what next-generation technologies are you integrating into your products and services?

Firstly, understanding what the users' needs are and what they aim to achieve is crucial. As a result, it is important to identify whether the technology required to provide solutions for these user needs involves innovations like IoT and AI, or whether it involves the pursuit of new functionalities and precision. Our company has reached a stage where we can implement AI and IoT technologies, and we plan to progressively incorporate them into our upcoming devices. Regarding AI, we intend to implement it in next-generation devices, where it will be used in processes that require accurate recognition of objects. IoT will primarily be used for preventive maintenance and visualizing the operational status of devices, allowing for remote monitoring.

The rapid advancement of technology often creates a gap when it comes to implementing technology in a way that meets the actual needs of factory operations. To address this issue, we believe that through AI and IoT, we can create highly intelligent machines that make implementation in factory settings more straightforward and provide solutions that are more closely aligned with real needs. That's our mission, and as a result, we are dedicating significant efforts to our research and development (R&D) initiatives.

 

When it comes to your R&D capabilities, we know that your company has 124 domestic patents and 20 overseas patents, along with the Hokkaido Robot Laboratory, which is your company’s integrated robotics educational facility. Can you tell us more about your R&D strategy, and how does the Hokkaido Robot Laboratory enhance the capabilities of that part of your business?

I would like to explain the background behind the establishment of “Hokkaido Robot Laboratory (HRL)”. As you are aware, Japan's productive population is declining, with Hokkaido experiencing a particularly significant decrease. The primary processing sector, a key industry in Hokkaido, is labor-intensive. There is an urgent need for structural reforms in businesses, including Digital Transformation (DX), but their implementation has been delayed due to a shortage of knowledgeable personnel. Against this backdrop, the urgent cultivation of DX talent has become evident, but there are few opportunities for such training in the region, leading to a stagnation in talent development. Our company, being one of the top robot integrators in the domestic food industry, has decided to embark on this project, recognizing that we can contribute to society in the field of talent development by leveraging our expertise. At HRL, we are developing our business around three main pillars:

  1. Conducting and certifying "Special Education" for industrial robots.
  2. Offering classes for technical high schools, colleges of technology, and universities in Hokkaido.
  3. Demonstrating solutions for customers' on-site challenges (conducting Proof of Concept (POC) to assess the feasibility of automation with robots).

*Note: In Japan, the adoption of robotics is also included in the definition of Digital Transformation (DX).

A large part of Japan’s economic growth in the years after WWII was due to its booming population. The corporate structure and the economy of Japan were centered around taking advantage of this population boom and all of the industries were centered on the workers. This led to the rapid development of the economy. However, now that Japan is experiencing a population decline, which has caused labor shortages and a decline in human resources, Japan has had to reconsider its overall approach to labor. The integration of more and more digital technologies and automation is necessary to deal with Japan’s demographic decline and changing economic structure. We are at a tipping point where the entire structure of the economy is poised to be reorganized. New approaches to digitalization and the implementation of digital technologies are required across the board. With that, one of the biggest challenges Japan is facing is its lack of engineers and people who know about robotics and IT. This is one of the main reasons for the delay in digitalization.

 

When it comes to integrating AI and digital technology into food processing machinery, what are the key targets in terms of your R&D to streamline your service via AI and digital technologies?

I would first like to explain why we created the “Hokkaido Robot Laboratory” and the role that it plays within our business structure. It is quite well known that Japan is facing a demographic decline. In Hokkaido where we are based, the population decline is particularly accelerated at a rate of 4% per year. The global market for industrial robotics systems is a market with great growth potential and is said to be expanding by 14% per year, specifically in the automotive, electronics, and metal industries. In Japan, it is estimated that the industrial robotics systems market is going to grow by 3.4 times what it currently is, and this is specifically in the services and manufacturing industries. Up until now, these robotics systems were seen to be mostly applicable to specific fields within the manufacturing sector. However, now, in order to address Japan’s labor shortage, we are seeing how these robotics systems can also be implemented in the services, tourism, construction, and architecture sectors of the economy. We are already seeing robots being utilized to deliver food to tables. They are used to make pancakes in the kitchen, roll sushi rolls, and even cook Okonomiyaki. Also, in Haneda for instance, there is a pilot project that was launched as a pop-up for a robot café. On the table, there is a QR code for you to order. The robot then processes the order and delivers it to your table. Everything at the café is fully automated by robots.



We know that with robotic technology, many thought that the service and hospitality sectors would see an increase in applications over time. There was Pepper for example, which was seen as more of a marketing success rather than a commercial one. Why do you think the adoption of service robots has been very slow compared to industries such as manufacturing?

In Japan, the service sector faces significant barriers to digitalization due to cultural emphasis on hospitality, a wide variety of menus, and the complexity of food presentation and decoration (where appearance is considered part of the taste). Additionally, industries such as restaurants and tourism inherently prioritize human-centered operations, making it challenging to find space for robots and machinery. This lack of space is another major obstacle. Constructing a robot-friendly environment is therefore a key challenge moving forward.

Japan has very high standards for hospitality. However, robots have not yet been able to meet those high standards. I believe that robots are currently only reaching about 20% to 30% of the ideal standards. Additionally, customers are not accustomed to robots performing tasks that are typically done by humans. The Japanese government conducted a survey regarding the introduction of robot systems in the hospitality industry and asked companies about the challenges they face when introducing these systems into the industry. As a result, the biggest challenge faced by these companies was the cost of introducing and maintaining robots. The second largest challenge was the lack of space to install robots and machinery within facilities, and the third biggest challenge was finding engineers and workers who could adapt robots to the latest software and make the actual machines operate. These are the biggest challenges when it comes to introducing robot systems into the industry. The results showed that 40% of companies felt that a shortage of labor and a lack of personnel to operate the machinery were the biggest reasons for delays.

In Hokkaido in particular, there was a shortage of educational institutions and facilities for learning in the field of digitalization and IT. This was one of the main reasons we established the Hokkaido Robot Laboratory. We wanted to meet the growing demand for talent and engineers specializing in this field. The lab enables individuals to obtain licenses for operating robots. Additionally, it offers courses for high school students, vocational school students, and university students. The lab conducts tests to solve various issues that companies face in automation and labor-saving. Upon completion of the training courses, a certificate of completion is provided, and trainees can use this certificate and license on their resumes.

Next, I would like to tell you some more about our company and the products that we offer. We established ourselves in Kushiro in December of 1977. We currently have 96 employees. The founder of the company was my father, Mr. Atsushi Sato, who is our chairman, while I currently serve as president. The contents of our business operations include the planning, development, manufacturing, and sale of processing machines aimed at saving power and labor on food, seafood, meat, and agricultural products. Our head office is in Kushiro, while we also have offices in Sapporo and Tokyo. Our business model is unique, and what sets us apart from other companies is that we provide a wide range of services, from planning to sales, all in-house.

After the economic bubble burst, many companies in the manufacturing industry underwent restructuring and split their businesses into two parts: planning and development, and manufacturing. However, we have maintained our integrated business style since our inception, and this decision is deeply rooted in our corporate philosophy and belief.

We hold the conviction that to truly retain the accumulated knowledge in the manufacturing industry and deliver with the highest precision and quality, it is crucial to fully understand and control every aspect of the business, from downstream to upstream, from planning to product release in the market. This philosophy underpins our integrated business model, which proves to be particularly crucial for the business of custom-made machines tailored to meet the needs of our clients.

Our accumulated knowledge and expertise allow us to produce with the high levels of accuracy and quality that our customers require. Taking care of the planning, development, manufacturing, and sales is the best way to utilize our strengths and the wisdom that we have accumulated over the years. We are fully aware that this may be considered quite a countertrend to the mainstream ways in which business is done in today’s world. However, we pride ourselves on this and consider it to be one of the main strengths that we can use to our advantage.

 

Regarding our unique business model and accumulated expertise, we are aware that they enable us to develop unique products. Among the products we plan to exhibit at the FOOD exhibition at Tokyo Big Sight from September 20th, there is a machine for unpacking and removing cardboard cases using collaborative robots. What is the reason behind deciding to exhibit this product at Tokyo Big Sight, and what are your expectations for this exhibition?

The reason we decided to exhibit this product is that we received more requests from customers for this particular machine than any other. When people see such a machine on display, they will recognize that we have a lineup of machines that cater to a wide range of categories. This machine also aligns with our mission and vision. The mission of our company is to provide solutions to customers in the food processing industry. The unpacking and removal device for cardboard cases is one example of a solution to real-world problems faced by food processors.

 

What is your strategy to increase your overseas business? Will you be looking to open distribution centers or sales offices? Could you elaborate more on your strategy going forward for that part of your business?

Partnerships are essential for ensuring the success and sustainability of any business model. They not only expand distribution and customer reach but also facilitate knowledge sharing to provide a learning curve for both parties. This applies to our business as well.

Given the unique nature of our business, which caters to niche areas and specializes in custom orders, replicating this model overseas can be challenging. However, products related to seafood and meat processing have global appeal. Currently, our focus on expanding overseas is primarily in mature markets like North America and Europe. The rationale behind this strategy includes the established infrastructure in these regions, more predictable market trends, and higher purchasing power.

As a strategy to expand our international business, the first step is rigorous market research. This involves identifying potential partners and determining the most suitable products for each specific market. Following this, we consider whether to establish distribution centers or offices overseas. While the idea of establishing a physical presence abroad sounds appealing, it also involves intensive resource utilization. Therefore, this move will be implemented after thorough pre-investigation.

Now, speaking about our unique offerings, our “Auto Sheller” Scallop Processing Device is noteworthy. This is the world's first automated scallop shucking device that automates the complete process of separating the shell, ears, roe, and scallop. This innovation has the potential to be well-received in international markets. However, when considering products like our “Salmon Gutter Machine”, there is formidable competition, especially from European countries such as Germany and Iceland. These nations have a rich heritage in salmon processing and dominate the market.

In conclusion, our future strategy will combine a strong focus on our unique product offerings, the identification of suitable partners, and the gradual expansion of our international footprint. In doing so, we will ensure the truth of our core philosophy: delivering exceptional quality and precision.

This innovative initiative enriches Japan's culinary culture and industry, emphasizing the importance of preserving and further expanding the quality and freshness of traditional Japanese seafood.

The preservation of freshness is a crucial aspect of the food industry, especially in places like Japan where the culture of consuming raw seafood is deeply rooted. Traditionally, seafood has been preserved by mixing it with crushed ice to chill it as much as possible. However, technologies like the Continuous Silk Ice System “Sea Ice” machine developed by our company have taken this a step further, revolutionizing the ability to preserve food in a "supercooled" state for extended periods.

Thanks to this technology, even those who did not have the opportunity to enjoy fresh fish in specific regions of Japan can now savor the highest-quality sushi and sashimi. Furthermore, in the current situation where fish populations are declining, and the fishing industry is waning in strength, freshness preservation systems assist fishermen in increasing their sales. The belief that this technology is an essential machine for safeguarding Japan's seafood industry is indeed valid, and it can be said that this technology contributes to the sustainability and prosperity of that industry.

 

If we fast forward to 2027, you will celebrate your 50th anniversary as a company. If we were to return to redo this interview again, do you have a personal goal or ambition that you like to achieve in that intervening period?

My primary goal is to protect and support Japan's food industry, which has been eroded in many ways due to severe labor shortages. I aim to provide labor-saving technologies to support this industry. Furthermore, we aspire to grow into a company that can offer unique solutions overseas. We hope to export the machines we produce, such as scallop processing equipment, and as a result, have a thriving business in regions like Europe and North America. During my trips to the UK and Australia, I heard about the issues caused by labor shortages. In the future, I hope that our company can provide viable solutions to support the seafood industries in these overseas countries. That is my goal for the future.


Interview conducted by Karune Walker & Paul Mannion

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