Fujiya Scandal May Spark Confectionery Business Consolidation
By Kyodo News International, Tokyo
Jan. 17–TOKYO — Fujiya Co.’s business troubles may lead to confectionery industry consolidation in Japan, with Morinaga & Co. surfacing as a candidate to support Fujiya, which earlier this week acknowledged that cream puffs and other confectionery it sold had been made with some ingredients that had passed their use-by dates.
Morinaga, one of the four biggest firms in the Japanese confectionery industry, is considering supporting Fujiya, according to Morinaga executives.
Fujiya has a history of almost 100 years and was the first in the country to market shortcake. Its smiling “Peko-chan” mascot dolls that stand outside its shops are famous and have sometimes been a target of thieves.
Morinaga and Fujiya have had a cross-shareholding relationship for about 20 years and cooperate in each other’s business, such as sharing their product delivery networks.
But the Morinaga executives are mindful of the business risk their company may face if it decides to go ahead with the plan to assist Fujiya, as the size of the domestic confectionery market will most likely shrink in the future due to the declining birthrate.
“We have the will to support,” a top Morinaga executive said, but expressed worries about a possible worsening of the Fujiya product quality scandal.
Morinaga will decide whether to support Fujiya after doing an in-depth study on the merits and demerits of having a closer alliance with the company.
The Japanese confectionery industry has long been dominated by four companies, Lotte Co., Meiji Seika Kaisha Ltd., Ezaki Glico Co.
and Morinaga. Akio Matsuzaki, one of Morinaga’s former presidents, is the father of Akie Abe, wife of Prime Minister Shinzo Abe.
As many Japanese confectioners are family-owned, the industry has been regarded as the most unlikely sector to experience consolidation, but perhaps not anymore, industry watchers say.
Fujiya, founded by Rinemon Fujii in 1910 in Yokohama and now headquartered in Tokyo, is the fifth-biggest in the industry, selling cakes and other confectionery throughout Japan at its own outlets and at others under franchise management.
Fujiya also runs restaurants. It has joint ventures with Nestle and Baskin-Robins for confectionery and ice cream businesses, respectively. It reported sales of 84.8 billion yen for the business year to the end of March 2006.
The stock of Fujiya, listed on the main section of the Tokyo Stock Exchange, has fallen sharply since the scandal erupted.
Fujiya said it will do its best to turn around its operations and maintain the prestige of its brand image. But it seems that Fujiya cannot avoid a serious blow to its business, considering that its products have almost completely vanished from its shops and store shelves.
Speaking at a news conference on Monday, Fujiya President Rintaro Fujii, grandson of the founder, said he will step down to take the blame for the scandal.
Asked whether Fujiya will look for help from other companies, the president looked troubled and did not give a clear answer.
Speculation has been mounting that investment funds may step up buying of Fujiya shares with the aim of targeting its extensive real estate assets.
Fujiya’s head office is located in the upscale Ginza district in Tokyo.
Confectionery company managers and industry watchers are keeping close tabs on movements by investment funds such as Steel Partners Japan Strategic Fund LP, which has acquired a large stake in Glico.
Executives in the industry feel uneasy as the U.S. investment fund launched a hostile takeover bid for Japanese noodle maker Myojo Foods Co. last year, although the bid failed.
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Copyright (c) 2007, Kyodo News International, Tokyo
Distributed by McClatchy-Tribune Business News.
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