Sakata Seed Corporation :Leading seed and vegetable developer focused on ‘something new and different’

Date:06-16-2016

To differentiate, not imitate, is ingrained into the DNA at Sakata Seed Corporation, an industry leading seed, flower and vegetable developer with a sharp focus on R&D to create weather-hardy, high-yield crops. President Hiroshi Sakata explains the company’s ‘monozukuri’ spirit that sets it apart from the competition and the crucial role the seed industry is playing in the challenge to ensure global food security.
 
What would you say has been the impact of Abenomics on the agricultural sector and on Sakata in particular?

Regarding agriculture in Japan, the first thing I have to say is that there are a couple of fundamental issues such as the declining population and the rise in the average age of producers. More or less, the average is late sixties. Diversification of final products, and the reorganization of Japanese Agricultural Cooperatives –those are a couple of issues. I also think Japan needs to face the issue of population decline, which means a reduction in consumer consumption. The government is trying to make the agriculture sector more global, and I believe it is true we must consider international consumption as well as domestic. It makes sense, but is also a very big change. Probably it will take some time to shift and become global, but I think it is the right direction.

I feel we have a tailwind. We contribute to the betterment of life and culture of the people around the world with value created through our innovative vegetable and flower varieties and our services. That is our value. For the last 40 years, we have developed global activities with five domestic research facilities and 10 research facilities abroad, and 25 business locations in 19 countries. I believe we have already covered the key areas in the global market. But still there are many things we can do.

I think our organization is global already, so this trend of globalization is good for us. If we talk about the Japanese domestic market, we can already provide plant varieties that meet the demand. The demand for varieties in each region in the world may be quite different, but we can provide with the right products within 5 to 10 years, by utilizing our global research and development network. We are more or less ready to play in the global market.

Sakata was established in 1913, and built the first germination laboratory in the private sector in Japan. Since then, the company has continued to expand beyond Japan into North and South America, Asia, and Europe. Indeed 2015 was another impressive year for Sakata, posting a record 57 billion yen in revenue. What can you attribute this impressive growth to and what are your top priorities going forward?

Our company’s motto “Quality, Reliability, Service goes all the way back to my grandfather, the founder. It is in our company DNA, and we are a company up for challenges. When we develop new items, we are always focused on something new and different. We do not focus on the so-called “me too” varieties that are similar to our competitors’. Something new and different: that is our DNA, our mentality, and our spirit. That is the base for achieving that kind of growth.
 
We understand that the company is built on the Japanese spirit of craftsmanship, called Monozukuri. Can you explain our readers what Monozukuri means and how it fits into your company’s culture?

Monozukuri is Japanese craftsmanship. One chief advantage of monozukuri that separates us from our competitors is that we do not try to imitate other’s products. The goal of monozukuri is in our company’s DNA. To focus on making something better, not the same. The important thing is that we are focusing on what the consumers’ need is. What do they need? We put a lot of effort into anticipating the future needs of our customers. That is our passion. That is why we in Japan have the unique monozukuri mindset.

You might start at imitation, but as you progress the goal is not the same. It is to create something different. That is monozukuri in Japan, and it is exactly the same thing we are doing here at Sakata. We are creating hybrid seeds that are alive. It takes 10 to 15 years to develop new varieties, which is a lot of cost and time. We have to challenge and beat competing plant varieties. So that means it is similar to the monozukuri mind.

In Japanese, we have various homophones to which different meanings and different Kanji, or Chinese characters, are applied. Usually, "Mono" means "products", and "Zukuri" means "to make" or "to produce".  But there is another word and character that pronounces "Zukuri", which means "to create". At Sakata, our interpretation of monozukuri is not just to "produce" something, but to "create" something new and innovative.
 
Sakata truly embodies this global push of Abenomics. You are expecting to grow your operations in India alone by 130% over the next five years. What are your overall global growth objectives?

For the global view, as you said India; it is a big country with 1.3 billion people. Our estimation is the value of the vegetable seed wholesale market is more or less $400 million a year. We only now have 2.5% of the market share in India. That is our percent of Indian sales, but probably more of an estimation.

If we talk about the worldwide market, we estimate the value of vegetable seeds’ wholesale market to be $5-5.5 billion. Every year it is expanding because of the population increase. It is also because of the shift from the open-pollinated variety to the hybrid variety, which is a higher value seed.

What is the percentage of our Sakata Seed share worldwide? It is still very small. Broccoli is an exception. Fortunately, we have 65% of the market in the world. But there are a lot of vegetables that we have very low shares in. So you can understand, we have space to grow in the future.

Next year, Sakata America will be celebrating its 40th anniversary. With headquarters in California and various facilities across the country, the US market seems to be a cornerstone of your global strategy. How important is the US market for your company, and what are your future priorities in the United States?

Sakata Seed America is the first subsidiary after World War II that we opened in 1977. It is still one of our largest subsidiaries worldwide. Why is it important? Because it is our first subsidiary, and it is one of the top five horticultural seed companies in the US.

America is such a big country, and we are located in California. This provides us with multifunction, not only in sales, but production. Sakata Seed America can afford to achieve the sales itself, and we also have seed production activities located there. Its contribution to the total Sakata group is important due to the favorable climate conditions in California for seed production as opposed to other areas.

Another point is broccoli, a success story that started in America. The vegetable originated from southern Italy, but we created new varieties of broccoli, and introduced it to the American market with great success. Also we produce the seeds in America. The consumption of broccoli expanded so rapidly with the taste, and the health benefits. Then it has expanded from America to Japan, then Europe, and now China, Southeast Asia, and South America. So it is still growing, and it stems from the American operation.
 
What is the future crop that you are going to produce? Clearly, you are very successful with broccoli. 65%, as we discussed. What would you say is the next variety or type of crop that you're going to leverage and create market share?

We are looking for that crop. Currently we are known as the brassica company.  Brassica is a scientific classification that includes broccoli, cauliflower, cabbage, etc… When people read about Sakata they think “oh, the brassica company.” We are very much focusing on this group, but as a seed company, we need more depth in our product range. For this, we also work on the so-called wet seed, or fruit crop seed, which means tomato, cucumber, watermelon, melons, squash, and those kinds of products. In order to be a full-fledged seed company, we need that kind of products as well in the assortment. Sakata Seed America is now challenging to become not only a brassica company, but a whole seed company as well. They are heavily involved in breeding for wet seed now. Those are the things we need to develop as soon as possible in America.

Africa is also of future importance to us. Today, the African market is served by our European operation from France. It makes sense because many of these countries in Africa were colonies of France, and have French influence. But our exports from Japan to Africa go back more than 50 years. Now we have a company in South Africa that we gained through the acquisition of a very old seed company. We have about 120 or 130 employees there. They cover the area of southern Africa, and the eastern part of the sub-Saharan region. We also have offices in Morocco and Kenya. The northeast area near Egypt is controlled by our Jordan office. So we cover the continent from different angles to support our business in Africa. We have had great success in Africa, and I believe it is a very important market for our future because of the food consumption.

We are also creating a BOP project in South Africa for the future. South Africa value-wise has more than 90% of the products produced by the white growers there. If we look to the future, we need to cultivate the black smallholders in the area. We are now trying to provide those emerging farmers with training opportunities to learn how to grow, how to protect from disease, and other basic knowledge of vegetable production business. This is not directly linked to our sales at the moment, but in the future it can contribute to the country’s growth, and hopefully the use of Sakata Seeds.
 
Sakata recently signed an agreement with the Indonesian government to cooperate on biological diversity. Why is biodiversity so important to the world’s growth given the recent focus on food security, and how can Sakata help governments provide the food their people need?

In order to support agriculture in general, seed companies need to introduce crop varieties suitable to grow in that particular region. The necessary characteristics for the variety differ by location, depending on the cultivation environment and dietary backgrounds, such as easiness to grow, high yield, resistance to specific diseases and high content of nutrition. So, who breeds these varieties? We do. This is our task: to meet their requirements.   In order that we may develop varieties to meet different types of specific requirements, we need to have an extremely wide range of genetic resources as breeding materials.  This is why we value biological diversity, and seek access and benefit-sharing opportunities with provider countries, including Indonesia.
 
Sakata recently partnered with UC Davis in America, the number one agriculture school. You have a very long-term approach to your business, which is something American firms could maybe learn from. It is very quarter-by-quarter in America. Would you say this is one of the fundamentals of your success, having a long-term approach to your business?

As I said, breeding a variety takes a long time and patience, even when we use high-level innovative biotechnology. We can make the cycle short, but it is still 8 or 10 years to produce. You cannot develop the variety in the lab. They create variety in the fields. The lab technology strongly supports the breeder, but we still have the long-term goal.

I think it is very important for the seed company itself; as long as the company is breeding, they need a long-term view. Every year, no. Every year something new? No. We are not a factory company.
 
Can you outline some of your environmentally friendly practices that you promote, and why now is a good time for these G7 leaders to act boldly for the future health of our planet?

Climate conditions are key for us. First, the seed is alive and we work with nature. So the climate is one of our most important factors, which is also a risk. We have a couple of risks. The biggest is climate risk, which is uncontrollable. We have other risks like countries, currencies, and investment property, but I think climate condition is key. It can be a headache for us because our final end-users, the growers, are facing great difficulty because of climate change. It is a very big risk.

For our own operation, the risk is in seed production. We need adequate area for seed production, and we are always looking for better climate conditions worldwide. But every year, it is getting more and more difficult to find the right place for seed production. Anyway, the climate condition is key for our industry, the growers, and agriculture.
 
The media has not been very fair with Japan, and have accused Japan of lack of competitiveness. English is not spoken widely. They were doubting the capability of companies becoming global, as you were mentioning before. But the reality is that yes, Japan faces challenges, but there are also a lot of misconceptions or lack of information. As a Japanese citizen and a leader in your industry, what is the role the private sector in Japan should play in order to fill this gap regarding the world and Japan?

I think that “gemba” is the key word. I am always using the word gemba in our global group, and many people understand it. In English, it translates into getting your boots muddy. You have to go to each operation. You cannot judge it at the desk or office. If we say gemba in our company, the gemba is a research station. In seed production, gemba is a field. In sales, the gemba is a sales talk with a customer. I would say the gemba is the most important element. You can hear a lot of information from gemba stations. You cannot judge only with the information on the desk. My advice is go to gemba. That means you have to go to the country to talk, learn, and collect information yourself. That is what we could do.
 
What final message would you like to send to world leaders and what would you say is the new brand of Japan as it leaves behind two decades of poor economic growth and deflation?

The seed industry itself is not usually in the spotlight of the global business arena. Nevertheless, it is actually playing a significant role behind the scenes, because no agriculture or horticulture would be viable without seed. In a sense, seed is a type of IT software created by nature. Breeding at a seed company is an attempt to develop higher performance software that would generate the maximum value out of the grower's field, to nourish the people in the world. In this respect, I think the global leaders should all recognize the crucial role that the seed industry is playing, and should discuss its growth in a strategic context of global economy and human welfare. People around the world enjoy beautiful flowers and tasty vegetables in common, and the supply of those flowers and vegetables are supported by the stable supply of seed. Unfortunately, the recent climate change is bringing serious negative impacts, not only to the production of crops by farmers, growers, but also to seed production activities by seed companies.

Of course it is a long-standing commitment of seed companies to breed highly adaptable varieties that withstand diverse weather conditions, but there's a limitation in the face of extreme climate events. Therefore, I expect the global leaders to work together and find ways to revive a healthy, robust growing environment and to reduce risk of further climate change.