■Business Overview
Lacto Japan (3139) is an independent food specialty trading company that imports food ingredients such as dairy ingredients, meat, and meat processed foods, etc., and has expanded its business area based on the import and sale business of dairy ingredients, and has continued steady growth. In a single segment, the business division consists of the dairy ingredients and cheese division, the meat ingredients division, the functional food ingredients division, the Asian business (milk ingredients sales division), the Asian business (cheese manufacturing and sales division), and others. Note that the functional food ingredients division, which is expected to grow in the future, was included in the Asian business and others until the previous fiscal year, but as the business scale expanded, sales volume and sales volume were disclosed as an independent division from the 2024/11 fiscal year. The consolidated sales composition ratio for the second quarter of the fiscal year ending 2024/11 is 69.7% for the dairy ingredients and cheese division, 12.5% for the meat ingredients division, 1.9% for the functional food ingredients division, 11.5% for the Asian business (dairy ingredients sales division), 3.2% for the Asian business (cheese manufacturing and sales division), and 1.3% for others.
1. Dairy Ingredients and Cheese Division
Dairy ingredients and cheese are imported from overseas and sold to the domestic dairy industry, food, confectionery, oil, fat, drink, feed manufacturers, etc. Dairy ingredients handle whole milk powder, skimmed milk powder, butter, cream, whey derived from raw milk, and milk preparation products made by adding sugar, fats, etc. to it for primary processing. In addition to dairy products such as ice cream, yogurt, and milk drinks, milk preparation products are used in a wide range of foods as raw materials for processed foods such as bread and confectionery ingredients, and they handle over 500 types of items such as powdered milk products, butter preparations, and cocoa preparations. Cheese is mainly imported from natural cheeses (mainly gouda, cheddar, mozzarella, cream cheese, etc.) and sold as raw materials such as processed cheese* and shredded cheese to domestic dairy manufacturers.
* Processed cheese: Cheese made by adding emulsifiers or the like to several types of natural cheese, then remolding them, and since lactic acid bacteria and enzymes die due to heating, mold is less likely to grow and has excellent preservability. Also, it is possible to mix several types of natural cheeses to create flavors according to consumer preferences.
There is a large difference in domestic and foreign prices of raw materials for dairy products, and imports have been restricted due to non-tariff measures from the viewpoint of protecting domestic producers, but in 1988, import quantity restrictions were abolished for some dairy products such as processed cheese and ice cream due to Japan-US negotiations. After that, in multilateral trade negotiations (GATT Uruguay Round) concluded in 1993, it was agreed to increase tariffs on designated dairy products etc. from 1995 and reduce tariff rates. Based on this agreement, three import forms were developed: 1) current access imports by the Independent Administrative Institution Agriculture and Livestock Industry Promotion Organization (0.137 million tons/year in raw milk conversion) that Japan has promised to the WTO; 2) tariff quota imports where low tariffs are assigned to private sector consumers, etc.; and 3) general import where anyone can import designated dairy products etc. if they pay a fixed tariff. Since then, Japan-Australia EPA (Economic Partnership Agreement), CPTPP (Comprehensive and Advanced Agreement on Trans-Pacific Partnership (commonly known as TPP11)), Japan-EU EPA (Japan-EU Economic Partnership Agreement), and Japan-US trade agreements have come into effect one after another, and volume expansion of tariff quotas and reduction of tariffs are progressing.
* Designated dairy products, etc.: Indicate dairy products such as skimmed milk powder, butter, whey, prepared whey, condensed milk, etc. that conform to standards stipulated by the Act on the Stability of Livestock Farming Management, and imports are permitted due to tariffs.
Domestic raw milk production has been declining over the medium to long term due to dairy farmers going out of business, etc. Meanwhile, domestic demand for dairy products has been steady due to the establishment of health-oriented functional yogurts and changes in eating habits. Of the 11.7 million tons of domestic consumption (raw milk equivalent) in fiscal 2023, domestic production volume is 7.32 million tons, import volume is 4.55 million tons, and the import ratio is about 38%. Against the backdrop of import liberalization of dairy products, the company has filled the gap between supply and demand of raw materials and has demonstrated its existence value as an “organizer” that supports smooth raw material procurement. Furthermore, it has established a unique position as a “business partner” that responds to diversifying development needs and product characteristics of dairy ingredients to Japanese sales destinations, and proposes the development and manufacture of high quality and high value-added raw materials to suppliers.
2. Meat Food Division
In the meat food division, processed meat products such as prosciutto and salami are imported from all over the world, mainly pork (chilled and frozen), and supplied to food manufacturers, including domestic ham and sausage manufacturers, and wholesale/retail stores. As for pork, while Seaboard Foods LLC (hereinafter, Seaboard Foods), a major meat manufacturer in the United States that performs integrated production that guarantees traceability from pig breeding to processing, is the main supplier, we have secured supply sources in Canada, Spain, etc., and are proceeding with diversification of suppliers. Processed meat products such as prosciutto and salami are repack manufacturers that import high-quality products with strong brands from major production areas such as FRATELLI GALLONI S.P.A./ Parma ham, VILLANI S.P.A./ Milan salami (Italy) and Esteban Espuna S.A./ Jamon Serrano (Spain), etc., and have sales routes at major supermarkets (raw ham, which is the raw material, to the shape and size of raw ham for sales purposes It is sold to manufacturers that process and pack it in bags), etc. Furthermore, in response to the diversifying needs of sales destinations, we are expanding the items we handle, such as beef and chicken, and promoting diversification of our business.
3. Functional Food Ingredients Division
We are focusing on sales of functional food ingredients as a new pillar of growth. Since the start of the food system with functional claims in 2015, “food and health” and “food functionality” have attracted attention, and products claiming functionality have appeared in many foods such as yogurt, chewing gum, and chocolate, and consumers' health consciousness has increased. The company established a new business development headquarters in 2020/4, and began importing and selling functional food ingredients such as whey protein. Demand is growing for the sports nutrition industry, the beauty/health industry, the nursing care industry, and the food industry, centering on sports protein ingredients, and the food industry, and they are expanding the handling of food ingredients with various functions, including high-protein protein ingredients derived from milk, and promoting differentiation by proposing combinations with whey protein. In addition, businesses with increased added value are also being developed, such as proposing planning and development of final products utilizing the characteristics of dairy products together with partners capable of OEM production using raw materials procured by the company to brand owners and sports gyms that do not have factories that sell protein products on EC sites. In the future, in addition to milk-derived ingredients, it is planned to expand the business by sticking to raw materials that can promote functions contributing to health, such as plant-derived ingredients, gelatin, collagen, etc., and expanding the range of products handled.
(Written by FISCO Visiting Analyst Matsumoto Akihiro)