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Can This Japanese Snack Food Company Break into the U.S. Market?

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“Cheetos! Please Cheetos!”

Riku Nakamura’s daughter, Akari, lunged towards the grocery retailer shelf.

His spouse, Aoi, sighed. “Remind me: Why are we walking down this aisle again?”

“I wanted to see how rice cakes are displayed. I don’t understand why our rice crackers can’t be in this section, too.”

Aoi nodded at the Cheetos bag Akari was now clutching to her chest. “Maybe you need to add fluorescent cheese dust?”

Riku chuckled, however her joke didn’t raise his temper. He was feeling more and more anxious about work.

Six years earlier, he had been requested to relocate from Tokyo to San Mateo, California, to spearhead the launch of Kenko USA, the first international subsidiary of his employer, Kenko. The largest producer of rice crackers in Japan, the firm had $1 billion in home gross sales and hoped to kickstart progress and globalization plans. It wished to turn out to be the subsequent Kikkoman, which had so rapidly turned Americans on to its soy sauce and stir fry merchandise. Riku and Aoi had each been enthusiastic about the alternative. Pregnant with Akari, Aoi favored the concept of being a stay-at-home mother for some time and agreed to place her educating profession in Japan on maintain in order that Riku might take the promotion.

However, their deliberate U.S. stint had now turned into a stretch — as a result of Kenko USA hadn’t taken off as hoped. Sure, the enterprise was chugging alongside, with gross sales rising a modest 2% per 12 months. But progress was properly under projections, and the division, which was purported to be self-sustaining after 5 years, was nonetheless shedding cash. The board demanded a compelling plan to enhance efficiency. Riku knew that the key was to broaden past Asian supermarkets and grocery shops’ “international” sections and get Kenko crackers into the snack aisles of mainstream U.S. meals retailers, however his group’s efforts had but to bear fruit.

Recently, Kenko USA had been approached by Patty’s Pantry, a nationwide low cost grocery chain, a couple of deal to provide a non-public label line: Kenko’s crackers with Patty’s branding. Rebecca Bairstow, Riku’s quantity two, was advocating strongly for the partnership. She believed that it could assist American customers see Japanese rice crackers as a tasty, gluten-free, wholesome snack selection and would offer the distribution bump the division wanted to develop gross sales and turn out to be worthwhile. But Riku fearful that it could be solely a short-term repair and fail to ascertain the Kenko model in the United States.

Riku’s mentor at headquarters, Fusao Saito, was pushing for extra direct-to-consumer outreach. This would take extra time and money, however with Fusao’s endorsement, Riku suspected the firm would give him that shot.

But he additionally had his household to contemplate. Aoi had been requested to select up lessons at the college once more. Both of them had been getting homesick. And the older their daughter acquired, the extra they realized that they wished her to develop up Japanese, not American.

Riku had assumed that Kenko USA can be a real success earlier than he turned it over to another person and returned to headquarters. Now he wasn’t so positive that will be the case.

“Papa? Cheetos?” Akari requested.

“Let’s find Papa’s crackers first,” Aoi mentioned, gently extracting the bag from her daughter’s grip.

When they arrived in the “World Foods” aisle, Akari toddled as much as the cabinets of Kenko crackers and pointed at her favourite candy taste — mizuame, in the pale yellow package deal.

“How many?” she requested.

Riku and Aoi laughed. “We have plenty at home,” Riku mentioned. “We just wanted to find them on the shelves.”

Akari furrowed her little forehead till Riku winked at her. “Don’t worry. I saw some Cheetos at the checkout.”

Pushback

“It comes down to demand,” mentioned Dave Knight, chief snack purchaser of Clementine’s, a significant California grocery chain. Riku and Rebecca had secured a coveted face-to-face assembly with him at the grocery chain’s headquarters. “We need to see more people buying your products before we can give you more space. We can’t squeeze our top brands from Frito-Lay to make room for something that isn’t a proven seller yet.”

“Of course we understand your position,” Riku mentioned. “But we’re not asking for more space, just different space. Why shouldn’t rice crackers sit with other crackers or popular snacks?”

“Because the packaging, the flavors, the whole brand message is still Japanese. We think that’s great, and there’s a niche market for your product — but in the Asian section. You’ll confuse people if Kenko is in both places.”

“But you have salsa in snacks and the Mexican section,” Rebecca mentioned.

“Salsa is different — it’s American too now!” Dave gave a hearty snicker.

“With all due respect,” Riku replied, “I think you’re missing an opportunity. More and more people are now eating gluten-free and choosing alternatives to fried food. Consumers want different options in the snack category, and Kenzo can be one of them. But you’re hiding us in the ‘World Foods’ aisle.”

Rebecca jumped in. “What about experimenting in a few stores? Put us with the rice cakes in one, with crackers in another, with gluten-free in another, and see which sells best?”

Dave laughed once more. “Honestly, I would if I could. But if I run experiments for you, I’d have to do it for every other new brand. My store managers and stockers would kill me. And my biggest suppliers would ask why I’m giving even a bit of their space to an upstart? It’s just not realistic.”

Riku glanced at Rebecca ruefully.

“You have to demonstrate demand,” Dave continued. “Maybe work with stores to do more extensive sampling — say, every weekend for a month or two? You could also start a coupon program. We’ve sometimes seen that work to stimulate demand for new products.”

“How can we persuade you to try us in snacks now?” Rebecca requested.

“Well, there’s always the option of paying a higher slotting fee. Bumping it from 30 cents per pack to 50? Then I could make a case to my boss.”

Riku puzzled whether or not paying retailers extra to win them over would make sense. But as such a transfer would minimize into margins that had been already low and exacerbate revenue losses, he knew his superiors would possible disapprove. “The demand is there,” he mentioned. “Our market research shows that consumers really like the product.”

Time to Debrief

Rebecca and Riku determined to cease at Peet’s Coffee to get a chunk to eat and debrief earlier than heading to the workplace.

“Well, that was rough,” Riku mentioned, downing his Americano.

“I think we need to get serious about the private label deal,” Rebecca mentioned, sipping her inexperienced tea. “Just look around you.” She gestured to the meals on show. “So much of this is made by other companies but packaged for Peet’s. Patty’s Pantry has huge reach, and the company is ready to place a $4.5 million order with us. Obviously, we’d have to cut our per-pack wholesale price, but we’d avoid the sampling, slotting fees, and advertising. Think of the cost savings. We’d be out of the red in nine months.”

“But no one would know the products were Kenko.”

“Well, no. It would be their brand, their packaging, their flavors. Patty’s is keen to try barbecue and Cajun — flavors that can help us adapt to U.S. tastes.”

“What’s wrong with wasabi?” Riku fired again. Americans already cherished so many Japanese merchandise. Surely Kenko might promote them by itself recipes.

“Dave wants to see demand. We can do that with the Patty’s deal. Down the road, we can focus on our own brand.”

“At that point Kenko wouldn’t be special. Patty’s crackers would have the same quality. And how would we explain the deal to our current retail partners?”

“We’re talking about different customer bases. And if we show strong sales momentum, we can lobby headquarters for manufacturing in the U.S. We’d have lower COGS, better margins. For me it’s a no-brainer.”

A Recommendation

Back residence in San Mateo that night time, Riku sat at his pc, going through his colleagues, who had been sitting round a convention desk. It was morning in Tokyo, and he was checking in with the government group at headquarters.

“Unfortunately, we haven’t seen a major uptick in growth,” Riku informed the group. “We’re holding steady at 2% year-on-year with annual revenues of about $5 million.” He felt like a damaged report. “But Rebecca and I have been discussing several new ideas.”

Kenko’s CEO, Yuki Kato, nodded. “I do think it’s time for new ideas, Riku. Other Japanese imports are doing so well in America. We need to show people that they need Kenko in their pantry, too.”

“Funny that you use the word ‘pantry,’ Kato-san” Riku mentioned. “I’ve mentioned Patty’s Pantry before. It’s a fast-growing chain known for providing high-quality food at low prices. They offered us a deal that could quickly make us profitable.”

Some of his colleagues appeared to perk up, however others, together with the CEO, seemed disillusioned. “I know establishing Kenko USA is a big part of our globalization strategy,” Riku mentioned. “But perhaps we can bring the cracker first, then the brand.”

Fusoa Saito spoke up. “And what are the other ideas?”

“As we’ve discussed, Saito-san, we could ramp up our grassroots marketing,” Riku mentioned. “Sabra, the hummus brand, did an extensive sampling program, not just at grocery stores but also at parks and events. They also tweaked their packaging to be more appealing. These efforts helped them break into the deli sections of mainstream retailers, and they’ve been going strong ever since. Direct-to-consumer promotions could complement this effort.”

“If we were to implement such a program,” Kato mentioned, “what would be the budget and time frame?”

“I would estimate $3.5 million and two years.”

“And do you feel you could lead that initiative yourself?”

Riku instinctively bristled. Had they misplaced religion in his means to make Kenko USA profitable? “That is your decision, Kato-san, but I am confident that our team here could execute on either strategy.”

“Thank you, Riku. We’ll discuss these options, but I’d like a formal recommendation from you.”

“Yes, let me consult with the team. I’ll have something for you early next week.”

After the goodbyes, Riku shut off his pc and walked to the bed room. Aoi was nonetheless up. “Did I hear you say two more years?” she mentioned. “Honestly, Riku, I really don’t want us to stay here that long.”

Question: Should Riku advocate the non-public label deal or the new branded advertising push to his government group?

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About Dexter H. Stewart

Dexter H. Stewartwrites for Business News and Interviews With Expert Section in AmericaRichest.

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