Ajinomoto
Corporate History & Strategy

The business origin of Ajinomoto lies not in the 1909 seasoning sales but in iodine manufacturing that began in 1888 in Horinouchi, Hayama-machi, Kanagawa Prefecture. Saburosuke Suzuki (the first) had operated a sundry goods store in Hayama, but died of typhus in 1875, leaving his wife Naka Suzuki to support their three children while maintaining the household. The situation further destabilized when Saburosuke II (the second) failed in speculative trading, rendering the family business's income structure even more precarious.

At the time, iodine was in demand as a raw material for pharmaceutical and disinfectant applications, and its production from seaweed was established as a side occupation for fishermen in coastal areas of Chiba, Kanagawa, Shizuoka, and Mie. Hayama possessed similar conditions, and Naka Suzuki chose iodine manufacturing as a production format that could be carried out at home. This response to a household financial crisis became the starting point for the business that would later lead to Ajinomoto.

Iodine manufacturing began with a division of labor in which Naka Suzuki handled production while Saburosuke II managed procurement and sales. On the technical side, Nagayoshi Nagai, who served as both chief engineer at Dainippon Pharmaceutical and professor at Tokyo Imperial University, provided guidance. The involvement of a university researcher in a local cottage industry was exceptional for the time, enabling the Suzuki family to elevate the standard of their manufacturing technology.

In 1892, Saburosuke II began manufacturing iodine derivatives such as potassium iodide and iodoform, constructing a factory of approximately 200 tsubo on the family's farmland and naming it the Suzuki Pharmaceutical Works. Around the same period, his younger brother Chuji joined after graduating from Yokohama Commercial School, establishing a structure where the elder brother handled sales and the younger brother managed production. In 1907, the Suzuki Pharmaceutical Works was incorporated as a limited partnership.

Through incorporation, the iodine pharmaceutical business transitioned to an organized operational structure. Customers were pharmaceutical wholesalers, and seaweed raw materials were procured from the Miura Peninsula and Ise Bay, among other locations. While the business scale was limited, a manufacturing and sales system capable of securing stable earnings had been established.

This pharmaceutical business served a complementary financial role during the launch phase of the Ajinomoto business from 1909 onward. The industrialization of glutamate seasonings required substantial capital investment, and the earnings generated by the iodine pharmaceutical business supported a portion of this. What began as a cottage industry aimed at household financial recovery had, through the pharmaceutical business, accumulated the capital and management experience in the Suzuki family that would later form the foundation for the seasoning business.

In May 1909, the umami seasoning 'AJI-NO-MOTO' was launched for sale. Its technological origin lay in research conducted in 1908 by Kikunae Ikeda, a professor at Tokyo Imperial University. Ikeda focused on the broth from kelp and hypothesized the existence of a fifth taste distinct from sweetness, sourness, saltiness, and bitterness, identifying its principal component as glutamate. That same year, he filed a patent for 'a method for manufacturing seasonings with glutamate as the principal component.'

However, Ikeda himself was a researcher and was not positioned to handle manufacturing or sales. He approached major companies and business leaders of the time seeking someone to undertake the industrialization, but no one came forward, citing the manufacturing risk and market uncertainty. Whether demand existed for it as a seasoning was unknown, and the manufacturing method had not been established.

Meanwhile, Saburosuke Suzuki II, who was operating the iodine pharmaceutical business in Hayama, had learned that Ikeda was conducting research on kelp and had visited his laboratory at Tokyo Imperial University. As Ikeda's outreach to the business community had stalled, he came to entrust Saburosuke Suzuki with the industrialization of the glutamate seasoning.

Saburosuke Suzuki judged that the commercialization of a glutamate seasoning would entail significant uncertainty on both the manufacturing and sales fronts. On the manufacturing side, large-scale facilities were required, and the manufacturing method itself had not been established. On the sales side, market demand for such a seasoning was unknown, and building a nationwide sales network would not be easy.

Accordingly, Suzuki separated the seasoning business from the existing Suzuki Pharmaceutical Works, advancing it as a separate venture to diversify risk. He proposed a contract to Ikeda that would return a portion of the patent revenue, reaching an agreement to pay 10% of patent royalty income. On the sales front, staged market validation was conducted, including trial use at high-end restaurants to gauge reception.

In 1908, a new factory was built in Zushi, Kanagawa Prefecture, and production of the glutamate seasoning commenced. While the product name 'Aji-sei' was also considered, 'AJI-NO-MOTO' was chosen in consideration of market acceptance. This was a decision requiring substantial capital investment relative to the business scale, with earnings from the iodine pharmaceutical business supporting a portion of the investment.

Shipments began in February 1909, with sales conducted through Nihon Shoyu Brewing Co., Ltd. However, the company went bankrupt in 1910 due to a saccharin usage scandal, necessitating the development of sales channels independently. Losing the primary sales partner at a stage when the seasoning market had not yet formed was a major challenge in the business's early period.

On the manufacturing side, a hydrolysis method using wheat gluten and hydrochloric acid was adopted, but hydrochloric acid gas and wastewater generated in the manufacturing process provoked complaints from neighboring farmers. The Zushi factory was located adjacent to residential areas and farmland, and environmental problems intensified as production volumes increased.

As a result, continued operations at the Zushi factory became untenable, and in 1914, a new factory was built in Kawasaki to relocate the production base. The AJI-NO-MOTO business was developed from its inception while simultaneously grappling with three challenges: technology, sales, and environmental response. The structural characteristic of Ajinomoto's birth lies in the fact that an invention that no one had been willing to commercialize was brought to market by a small-to-medium-scale business entity.

By the 1910s, sales volumes of 'AJI-NO-MOTO' were expanding, but hydrochloric acid gas and wastewater from the manufacturing process were affecting farmland and residential life around the Zushi factory. The Zushi factory was situated in an area with adjacent residential neighborhoods and farmland, and as production volumes increased, complaints surfaced in proportion, with the continuation of operations itself becoming a management issue.

In addition, site constraints at the Zushi factory made equipment expansion difficult, and there were limits to scaling up production capacity to match sales growth. At the time, there was no prospect of resolving the hydrochloric acid gas issue through manufacturing process improvements, and in a situation where both environmental problems and production capacity limitations had simultaneously manifested, a review of the production base itself became unavoidable.

Suzuki Shoten made the decision to close the Zushi factory and build a new factory simultaneously. In selecting the relocation site, priority was placed on areas with few residences, the ability to secure large volumes of industrial water, and geographic conditions that could accommodate wastewater treatment. Kawasaki, located in the lower reaches of the Tama River, was at the time under development as an industrial zone, making it possible to secure expansive land.

In September 1914, the construction of the Kawasaki factory was decided. This was a decision involving the risk of accepting substantial capital investment for new facilities, but it aimed to maintain supply of 'AJI-NO-MOTO,' which was in a growth phase, and to consolidate production. Rather than a fundamental solution to the environmental issues, this was a choice that prioritized continued operations through a change in location.

With the Kawasaki factory operational, production of 'AJI-NO-MOTO' was consolidated there, establishing a system capable of handling production volume expansion. Supply-side constraints were eased, forming the production foundation that would support subsequent sales expansion.

However, the hydrochloric acid gas issue was not immediately resolved at the Kawasaki factory either. While operations could continue because the location was intended for industrial use, complaints from the surrounding area persisted. The technical resolution of the hydrochloric acid gas problem through a fundamental review of the manufacturing process would not come until manufacturing process improvements in 1935. The Kawasaki factory was a production base where location-based mitigation and technical improvement overlapped with a time lag.

When 'AJI-NO-MOTO' entered general sales in 1909, demand for it as a seasoning had not yet been established, and initial sales depended on distribution through Nihon Shoyu Brewing Co., Ltd. However, when that company went bankrupt in 1910 due to a saccharin usage scandal, the need arose to build distribution channels independently. Given the nature of seasonings, one-off wholesale transactions made it difficult to secure sustained sales volume, and designing a distribution system extending to the retail level became the challenge.

At the time, trade practices and influential shops varied by region across the domestic market, and a uniform nationwide sales approach was not realistic. Building a system of ongoing transactions with influential shops in each region and entrusting sales to them was required.

Throughout the 1910s, Ajinomoto developed a regional exclusive distributor system starting from Tokyo and Osaka. Exclusive distributors were entrusted with sales in designated areas, with price and distribution volume adjustments made to prevent disorderly discounting and distribution disruption. A multi-layered sales network was further formed by combining sub-distributors and retail shops under the exclusive distributors.

By the 1920s, the exclusive distributor network had expanded to major cities nationwide, with sales expanding primarily in the Kansai region. 'AJI-NO-MOTO' came to be recognized as a product supplied through specific distribution channels, and when linked with the mass production system at the Kawasaki factory, the room for late-entering companies to access major distribution channels became limited. A structure emerged in which distribution channel construction itself constituted a business barrier.

In September 1956, Kyowa Hakko Kogyo announced the commencement of MSG production using a direct fermentation method employing microorganisms. The direct fermentation method produces glutamic acid from sugar-based raw materials, and compared to the acid hydrolysis method, it was expected to simplify processes and reduce manufacturing costs. With greater flexibility in raw material selection and fewer constraints on by-product treatment, it held the potential to transform the cost structure over the medium to long term.

At the time, Ajinomoto maintained a high share in the domestic MSG market through its mass production system centered on the Kawasaki factory and its nationwide exclusive distributor network, but continued to depend on the acid hydrolysis method for production. Falling behind in the direct fermentation method posed a threat to both price competitiveness and domestic market share, and by the mid-1950s, this was recognized as a management challenge.

Ajinomoto's choice was not to turn the competition over the direct fermentation method into an exclusionary technology confrontation, but instead to prioritize market supply stability. In November 1956, the company signed a purchase agreement with Kyowa Hakko Kogyo to buy the full volume of MSG produced by the latter. The negotiations involved the mediation of Tamezaburo Yamamoto, then president of Asahi Breweries, who had relationships with both companies.

Furthermore, in January 1958, a memorandum of mutual confirmation regarding patents was exchanged, and in November 1959, a cross-licensing agreement was concluded. Ajinomoto continued supply through its own sales network, while Kyowa Hakko gained prospects for production expansion. The decision was to resolve the situation on the premise of technology coexistence and market stability, without allowing the competition to escalate into market fragmentation or litigation.

Even after Kyowa Hakko's additional patent publication in February 1960, both companies continued discussions based on the cross-licensing agreement, and the competition over the direct fermentation method did not develop into litigation. Ajinomoto secured supply volume and quality, maintaining sales through the Kawasaki factory's mass production and the nationwide exclusive distributor network.

Meanwhile, this experience made apparent the uncertainty of a revenue model dependent on a single product, MSG. The recognition that manufacturing advantages could be eroded became the catalyst for Ajinomoto's gradual expansion of capital investment into the seasoning and food fields. The emergence of the direct fermentation method was a change in competitive conditions in the short term, but over the medium to long term, it served as a structural turning point that prompted the management decision to pursue stable growth through multiple businesses.

By the late 1950s, Ajinomoto had secured domestic market share in MSG, but the spread of the direct fermentation method had created a situation where dependence on a single product carried earnings volatility risk. While the mass production system and nationwide sales network were maintained, the need to secure revenue sources beyond MSG was growing. Expanding into processed foods for end consumers, in addition to seasoning ingredients, was being considered as a direction for sustaining sales growth.

Overseas, the processed food market was expanding, and soups and cooking foods in particular were recognized as high-value-added segments. However, for Ajinomoto, partnering with an overseas company that already possessed expertise offered more favorable prospects for return on invested capital than making concentrated investments in a new field independently.

In 1963, Ajinomoto partnered with Corn Products Company, a major U.S. food ingredients firm, and launched Knorr Foods as a new company centered on soup products. Corn Products Company possessed product development capabilities in the processed food field and brands with a track record in Western markets, while Ajinomoto assumed the production and sales functions for the Japanese market.

Through this division of labor, Ajinomoto deployed soup products for the Japanese market while leveraging its existing distribution channels. The raw material procurement and factory operations know-how cultivated in the MSG business were also applied to mass production of processed foods. This was a decision to broaden the business scope from a seasoning ingredient manufacturer to a comprehensive food manufacturer handling finished products.

With the launch of Knorr Foods, Ajinomoto realized its entry into the processed food market with soup products as its axis. Soup products distributed nationwide through Ajinomoto's sales network achieved a certain level of penetration in the household market, forming the foundation for transitioning from an MSG-dependent earnings composition to a multi-category sales structure.

This partnership was significant in that Ajinomoto established a method of leveraging external brands and product development capabilities in combination with its own production and sales functions. It was the prototype for the alliance-based business expansion approach that would later be seen in partnerships with General Foods and Danone, and it became the starting point in Ajinomoto's transformation into a comprehensive food company.

In the 1990s, Ajinomoto was continuing R&D on fine chemicals and electronic materials utilizing amino acid and fermentation technologies while maintaining the food business centered on MSG as its main axis. These fields differed from the food business in customer composition, product update cycles, and R&D investment payback periods, and operating within the same organization created constraints in terms of decision speed and resource allocation.

In the electronic materials field in particular, the success or failure of the business hinged not on production scale but on whether materials were adopted. In semiconductor package materials, substrate manufacturers were the direct trading partners, but the final material adoption decision was held by CPU manufacturers. The industry leader Intel updated material specifications with each generational change and selected suppliers.

To continue the business in this environment, decision-making speed and invested capital management different from the food business were required. Making decisions aligned with the food business's earnings cycle had manifestly become inadequate for keeping pace with the semiconductor industry's technology refresh cycles.

In 1998, Ajinomoto reorganized its fine chemicals-related businesses and established Ajinomoto Fine-Techno Co., Inc. As an organization separated from the food business, it was tasked with business operations specializing in electronic materials and functional chemicals. A structure was established that could make decisions on R&D theme selection and invested capital allocation independently of the food business's earnings structure.

In the electronic materials field, management resources were concentrated on 'Ajinomoto Build-up Film (ABF),' an interlayer insulation material for semiconductor package substrates. ABF needed to be evaluated and adopted by CPU manufacturers such as Intel through supply to substrate manufacturers. For this reason, business operations that prioritized not only product performance but also technology responsiveness aligned with generational updates and stable supply were chosen.

The decision to spin off was an attempt to carve out and nurture a high-value-added business with different technological characteristics from the food-centric business portfolio. Operating the electronic materials business not as an extension of the food business but under independent judgment criteria was a prerequisite for keeping pace with the speed of the semiconductor industry.

From 1999 onward, ABF was consecutively adopted for Intel's high-performance CPU package substrates. The fact that consecutive adoption continued in an environment where materials are reviewed with every CPU generational change was the result of the company's technology responsiveness and quality management being evaluated. As a result, Ajinomoto Fine-Techno maintained a high share in the high-performance CPU segment, forming a business barrier that was difficult for competitors to breach.

The sustained high market share enabled business operations that prioritized profit margin over sales growth. In fiscal March 2024, the company recorded a revenue-to-operating profit ratio of 45.9% and operating profit of 26.9 billion yen, becoming an entity that contributes to the profit composition of the entire group as a business with earnings characteristics distinct from the food business.

The 1998 spin-off was a turning point at which Ajinomoto, as a food manufacturer, nurtured a specialized company in a business domain with different technology. By separating the business from the food business's judgment criteria and thereby meeting the demands of the semiconductor industry, a structure was formed that achieved the coexistence of sustained R&D investment and high profitability.

In the early 2000s, the environment surrounding Ajinomoto's amino acid business was shifting its demand center of gravity from food applications to feed applications. Meat consumption was expanding in Asia and Latin America, and demand for essential amino acids to improve feed efficiency was growing. Lysine, in particular, attracted attention as a segment with a large market size and expected volume growth.

On the other hand, in the past vitamin business, European manufacturers had established the market first, only for Asian entrants to subsequently cause rapid expansion of supply capacity and price declines. It was also recognized that raw material-type businesses premised on volume expansion carried the risk of significant earnings fluctuation depending on changes in the market entry structure.

Based on this environmental assessment, Ajinomoto advanced aggressive investment in feed-grade amino acids throughout the 2000s. Centered on lysine, the company built new production facilities and expanded capacity in North America, South America, Europe, and Asia, expanding a consumption-proximate global supply network. Simultaneously, the company advanced the development and industrialization of high-yield new bacterial strains to reduce per-unit manufacturing costs.

This investment decision was based on the prospect that in a phase of continuing demand expansion, rising utilization rates would advance the recovery of invested capital, enabling the coexistence of sales growth and profit generation. In the first half of the 2000s, the feed-grade amino acid business demonstrated a certain contribution to operating profit, strengthening its positioning as a core business.

However, the market environment changed in the 2010s. South Korea's CJ CheilJedang expanded supply capacity, and in the lysine market, price-driven competition became evident. As surplus supply capacity increased, market prices declined, and the business model premised on volume growth became more susceptible to earnings fluctuation.

In fiscal March 2014, the feed-grade amino acid business experienced significant profit volatility, including periods of quarterly losses. The production capacity built through aggressive investment in the 2000s manifested as declining profit margins during periods of intensifying price competition. This experience served as a reminder that even in growth markets, supply expansion can impact profitability, and it connected to the subsequent business portfolio review and management decisions emphasizing capital efficiency.

In the early 2000s, the environment surrounding Ajinomoto's amino acid business was shifting its demand center of gravity from food applications to feed applications. Meat consumption was expanding in Asia and Latin America, and demand for essential amino acids to improve feed efficiency was growing. Lysine, in particular, attracted attention as a segment with a large market size and expected volume growth.

The company had expanded its raw material-type business centered on fermentation technology by the 1990s and judged that there was room to capture the long-term demand expansion in the amino acid field as well. On the other hand, in the past vitamin business, European manufacturers had established the market first, only for Asian entrants to subsequently cause rapid expansion of supply capacity and price declines. As a result, it was recognized that raw material-type businesses premised on volume expansion carried the risk of significant earnings fluctuation depending on changes in the market entry structure.

Based on this environmental assessment, Ajinomoto advanced aggressive investment in feed-grade amino acids throughout the 2000s. Centered on lysine, the company built new production facilities and expanded capacity in North America, South America, Europe, and Asia, expanding a consumption-proximate global supply network. Simultaneously, the company advanced the development and industrialization of high-yield new bacterial strains to reduce per-unit costs.

This investment decision was based on the prospect that in a phase of continuing demand expansion, rising utilization rates would advance the recovery of invested capital, enabling the coexistence of sales growth and profit generation. In the first half of the 2000s, the feed-grade amino acid business demonstrated a certain contribution to operating profit, strengthening its positioning as a core business.

However, the market environment changed in the 2010s. South Korean food major CJ CheilJedang expanded supply capacity, and in the lysine market, price-driven competition became evident. As surplus supply capacity increased, market prices declined, and the business model premised on volume growth became more susceptible to earnings fluctuation.

In fiscal March 2014, the feed-grade amino acid business experienced significant profit volatility, including periods of quarterly losses. The production capacity built through aggressive investment in the 2000s manifested as declining profit margins during periods of intensifying price competition. This experience served as a reminder that even in growth markets, supply expansion can impact profitability, and it connected to the subsequent business portfolio review and management decisions emphasizing capital efficiency.

By the late 1990s, domestic fats and oils demand was stagnating, led by the household segment, while commercial use provided underlying support, keeping the market largely flat. On the supply side, the number of manufacturers was high and production capacity was at elevated levels, making the supply-demand balance prone to loosening and structurally compressing profitability. The fats and oils business, which depended heavily on overseas sources for raw materials, was susceptible to exchange rate and international commodity price fluctuations, creating a business environment where securing stable profits was difficult.

Ajinomoto came to recognize the declining capital efficiency of maintaining the fats and oils business independently and the limited room for future growth. Multiple challenges—dispersed market share, excess capacity, and raw material risk—converged, and the company entered a phase of reassessing the positioning of the fats and oils business within the overall business portfolio.

Ajinomoto decided to proceed with a staged spin-off of the fats and oils business and industry restructuring. In 1999, it consolidated its fats and oils production divisions to establish Ajinomoto Oil Mills, and in 2001, concentrated fats and oils business functions in this subsidiary. Subsequently, in 2002, it merged with Honen Corporation, and in 2003, Yoshihara Oil Mill joined to form J-Oil Mills.

By horizontally consolidating companies that had been competitors, the rationalization of redundant facilities, efficiency of raw material procurement, and integration of sales networks were advanced. For Ajinomoto, this amounted to making a decision close to business divestiture by separating the fats and oils business, while maintaining involvement as a shareholder of J-Oil Mills.

With the launch of J-Oil Mills, domestic fats and oils market share was consolidated, enabling a shift away from the structure prone to price competition. The scale benefits from consolidation were effective in raw material procurement and logistics, contributing to the improvement of the overall industry's earnings structure.

For Ajinomoto, this decision became a turning point for withdrawing invested capital from a low-profitability business and reallocating it to fields with greater growth potential. The separation of the fats and oils business was an early example of business portfolio review that preceded the later introduction of ROIC-based management, and its significance lay in executing the judgment of 'whether to continue holding or to let go' of a business.

In fiscal March 2019, Ajinomoto recorded large-scale impairment losses centered on its overseas food business. While revenue of 1,127.4 billion yen secured year-over-year growth, business profit was 92.6 billion yen, operating profit 53.1 billion yen, and net profit attributable to parent company shareholders 29.6 billion yen—all falling short of the previous fiscal year. Significant profit declines occurred at the profit level despite revenue growth.

The primary cause of the impairment was the overseas food business, centered on North America and Latin America. Goodwill impairment at Ajinomoto North America and Ajinomoto Espanol, and impairment of investments and trademark rights related to Promasidor Holdings, were recorded. Pre-tax impairment totaled approximately 34.7 billion yen, with the parent company attributable amount reaching approximately 31.2 billion yen.

This outcome served as a challenge not to individual cases but to the capital allocation management methodology itself. In the course of prioritizing revenue growth and business scale expansion, investments in overseas businesses had accumulated without sufficient verification of invested capital recovery efficiency.

Based on this reflection, Ajinomoto pivoted to an ROIC-centered management approach in 2019. By calculating ROIC by business segment and comparing it against the cost of capital, a system was established for making decisions on investment continuation, concentrated investment, and business divestiture based on numerical criteria. Whereas capital allocation had previously been easily justified by revenue growth or research significance, return on invested capital was now positioned as the premise for judgment.

In practice, the company decided to divest the animal nutrition business that same year, signaling the intent to shift toward management that assesses investment recovery ex ante rather than making post-impairment corrections. The level of invested capital including goodwill and intangible assets was incorporated into business evaluation, and for businesses with low capital efficiency, options including withdrawal and downsizing began to be considered.

The significance of ROIC introduction extended beyond the addition of an evaluation metric. For the first time, businesses became comparable on a common scale, and low-profitability businesses were placed in a position of accountability not for 'future potential' but for 'capital efficiency.' Businesses that were expected to grow but had poor capital turnover, or businesses that were profitable but had excessive invested capital, became subject to reexamination.

Following the introduction of ROIC-based management, verification of capital allocation was strengthened at Ajinomoto. In dialogue with investors as well, the coexistence of growth and capital efficiency came to be explained, and the quality of information disclosure changed. While the large-scale impairment in 2019 depressed profits in the short term, it served as the impetus to shift the management perspective from 'amount' to 'rate.'

This shift subsequently connected sequentially to the voluntary retirement program in 2019, price revisions in 2023, and restructuring of the business portfolio. Each of these was a decision based on return on invested capital rather than the absolute amount of profit, and ROIC introduction functioned as the framework underpinning these decisions.

The reason ROIC introduction was structurally important for Ajinomoto was that it embedded within management the criteria for promoting withdrawal and concentration. With the articulation of capital allocation rules that do not depend on goodwill or philosophy, business review shifted from a crisis-time response to a judgment made on an ongoing basis.

In November 2019, Ajinomoto announced a 'Special Career Transition Support Program' targeting managers aged 50 and above. The planned number of applicants was approximately 100, with the program including a special addition to severance pay and re-employment support. At the time, Ajinomoto was not in a management crisis—revenue was at the 1 trillion yen level for fiscal March 2020, with business profit also maintained at high levels. The implementation of a voluntary retirement program while in the black was received with surprise by the market.

However, this measure was not merely a headcount reduction but was implemented in parallel with the shift to ROIC-centered management introduced in 2019. As efforts to visualize the relationship between invested capital and earnings on a business-unit basis advanced, the fixed-cost structure including personnel expenses was also included as a target for review.

The targeting of 'managers aged 50 and above' indicated that the primary focus was on adjusting organizational composition and cost allocation rather than reducing total headcount. The management tier had a high fixed-cost ratio and was a factor that tended to depress ROIC. Reviewing personnel composition while still profitable was a choice that prioritized future profitability and capital efficiency.

Through the application period, 144 employees applied, and Ajinomoto recorded approximately 6.5 billion yen in costs for fiscal March 2020. It was a measure that clearly demonstrated the stance of reviewing the fixed-cost structure and connecting it to ROIC improvement, even at the cost of accepting short-term P&L deterioration.

The implementation of the voluntary retirement program reduced management-tier personnel costs and advanced the review of the fixed-cost structure. The approximately 6.5 billion yen in costs temporarily compressed profits but was characterized as being factored into the earnings forecast and positioned as a forward investment for medium-to-long-term capital efficiency improvement.

This measure, similar to the subsequent price revisions and asset compression, is positioned in the early stage of management decisions based on return on invested capital rather than the absolute amount of profit. The decision to review personnel composition while in the black demonstrated that ROIC-based management is a framework encompassing not only P&L management but also the redesign of cost structures.

Since 2019, Ajinomoto had been transitioning to a management approach with return on invested capital (ROIC) as its core indicator, establishing a management system that compared ROIC against the cost of capital on a business-segment basis. Since the levels of fixed assets and inventory directly impact ROIC, reviews including whether to continue businesses had become routine, and the coexistence of profit margin and sales growth was organized as a condition for maintaining capital efficiency.

From the second half of 2022 through 2023, raw material prices, energy costs, and logistics costs simultaneously surged. In addition to major raw materials such as corn and fats and oils, packaging and transportation costs also increased, impacting the cost structure across all businesses. Conventional efficiency improvements and procurement condition adjustments were insufficient to absorb these increases, and declining profit margins were becoming a factor depressing ROIC.

Ajinomoto stated that cost increases had exceeded the scope of corporate efforts and implemented multiple rounds of price revisions across both household and commercial products in 2023. Revision margins were set by product group, targeting household umami seasonings and processed foods, as well as commercial seasonings and processed ingredients. Price revisions were positioned not merely as a short-term P&L improvement measure but as a means of restoring returns on invested capital.

For a consumer-facing company, price increases carry the risk of declining sales volumes, but under ROIC-based management, the deterioration of capital efficiency through declining profit margins was recognized as the more significant management challenge.

In fiscal 2023, Ajinomoto reflected the effects of price revisions in revenue, and unit price increases across both household and commercial products drove revenue growth. On the profit front, price pass-through exceeded cost increases, and operating profit surpassed the previous year. As a result, profit levels relative to invested capital improved, leading to ROIC recovery.

The 2023 price revisions can be categorized as an example that functioned as a capital efficiency improvement measure premised on ROIC-based management, extending beyond merely responding to raw material cost escalation. The decision to prioritize capital returns over consumer response was, like the voluntary retirement and business divestiture, part of decision-making based on the ROIC criterion.

Through the early 2020s, Ajinomoto had advanced business profit recovery and asset-light initiatives, but growth rates and ROIC still varied across businesses. Food businesses served as cash generators but had limited sales growth, while AminoScience businesses offered growth opportunities but required increased invested capital, making capital efficiency management a discussion point.

Under these conditions, annual incremental medium-term plans were becoming inadequate for demonstrating the rationality of long-term corporate value maximization and resource allocation. With multiple domains of differing business characteristics, a framework was needed that articulated long-term capital allocation policies rather than short-term performance figures.

The 2030 roadmap formulated in 2023 organized growth domains into four areas—Healthcare, Food & Wellness, ICT, and Green—and articulated a policy of concentrating resources on businesses that would drive future growth. For businesses with low efficiency, functional separation and withdrawal were also within scope, and the decision to advance reallocation of invested capital was clarified.

On the financial front, targets for 2030 included approximately 17% ROIC, approximately 20% ROE, and approximately 3x EPS (compared to FY2022), with capital investment and M&A positioned as the core of growth investment. The design aimed to achieve both growth investment and shareholder returns by running cash flow improvement and capital cost reduction in parallel. The positioning is not about improving single-year performance but about restructuring management by backcasting from the desired state in 2030.