Its functional food and high-value nutrition products did well, leading to a modest year-on-year increase of 0.2% in operating income to ¥29,315m in its food industry business.
This comes as Japan's economy slowly recovers from its economic slump and employment and incomes continue to rise, though the outlook on foreign economies remains uncertain.
Wealth from health
Section manager Yukitoshi Otsuka told NutraIngredients-Asia: "We are focusing on product development and sales of functional food materials, using years of research and its results. We think the users of our materials (i.e., food manufacturers) and consumers understand the value of the materials and products, and use them because of their increasing health consciousness."
He added that this has encouraged Morinaga Milk to further develop in this area, saying, "We will continue to develop and launch new products using our functional materials in the B2C category.
"In the area of our B2B business, our functional materials have big business opportunities, especially in Asian countries. This includes our heat-sterilised Lactobacillus product, LAC-Shield, which is used in various processed foods in Japan."
The firm's food industry business consists of commercial milk, dairy products, ice cream, and beverages. In its financial report, it stated that despite the positive performance of this segment of its business, "the competitive environment remained harsh, while consumer price increases fell into a sluggish pace".
A key area of focus for the company is probiotics, particularly when it comes to human residential bifidobacteria (HRB).
Otsuka said, "In Japan, we are expanding the business in the categories of yogurts and supplements. Overseas, we are putting more effort into developing the business in China, which tends to grow faster."
Considerations on commodities
Functional food and high-value nutrition products will continue to be a major focal point for Morinaga Milk next year, as industry watchers have predicted that bulk commodity prices will continue to fall.
However, the firm remains confident in its outlook in this regard, thanks largely to its practice of keeping costs low.
Otsuka said, "When commodity prices fall, generally, we do not expect a negative impact on our financial results. In our business, we procure low-cost materials from outside Japan, then process them to develop various products for the Japanese market.
"At the same time, our German subsidiary Milei — which is 100% owned by Morinaga Milk and manufactures and sells raw dairy materials — focuses on the business of high value-added products, executed through low-cost operations."