EUR 850.00 For Business Accounts Only

Morningstar | Ajinomoto transitioning to an asset-light business model

Umami, the fifth basic taste discovered by Prof. Kikunae Ikeda, lays the foundation of Ajinomoto's business, which centers on the research and development of amino acids and related products. Ajinomoto has diversified its business into fields ranging from food to animal nutrition to healthcare by leveraging its research findings of umami and fermentation technologies used for amino acid production.Pursuing growth in the "specialty" businesses including consumer foods and aminoScience is the core tenet of Ajinomoto's long-term strategy. Management intends to improve its product mix and margins by raising contribution of value-added consumer food and specialty amino-acids products while reducing exposure to commoditized products. A growing sense of urgency is reflected in recent acquisition and divestiture activities. To build its core business, several bolt-on acquisitions including that of Windsor Quality, a U.S. frozen food maker, have been made and continue to be targeted. Noncore sweetener and pharmaceutical subsidiaries have been divested.Emerging market expansion backed by a wide variety of offerings and well-recognized brand names has been a key growth driver. In the core overseas markets, Ajinomoto has extended the product lineup from the mainstay "Ajinomoto" to flavor and blended seasonings as well as processed foods tailored for local tastes. It is looking to obtain a top share in the newer instant noodles/soup and frozen food categories while uncovering latent demand of "Ajinomoto" in Africa and the Middle East through local partnership or acquisitions.Transitioning to an asset-light business model is at the top of Ajinomoto’s agenda by 2021. It will further narrow down investment in the areas that it possesses competitive advantages to earn higher returns or become a top-three player. The focuses include seasonings, Asian frozen foods, and specialty chemicals for healthcare and electronic materials. The initiatives with a scope of JPY 100 billion restructuring also comprise divesture of cross-holding shares and reorganization of subsidiaries and joint ventures. We expect the firm to undergo some pain before returning to the growth track in 2023.