Over the past 50 years, Japanese companies in various industries have claimed key market positions in the global arena. A new class of consumer goods and retail companies, including Fast Retailing, Shiseido, Kao, Aeon and Seven & i Holdings, aspire to be the next generation of global brand leaders, joining the ranks of powerhouse players like Toyota, Honda, Sony and Komatsu. As these companies continue to expand into international markets to achieve worldwide scope, many will face challenges in maximizing the most vital part of their investments — talent — and creating governance models that ensure the global strategy is executed across overseas markets. We spoke with executives of several top Japanese food and beverage companies, including Ajinomoto, Asahi Group Holdings, Suntory Holdings and Kirin Holdings, which are among this new breed of companies that are aggressively expanding through acquisition and organic growth, to gain their perspectives on the talent and governance challenges of global expansion.

a seat at the global tableIssues facing growing Japanese food and beverage companies

A Seat at the Global Table: Issues facing growing Japanese food and beverage companies

collaborate with the core Japanese business, especially

to successfully compete with global leaders such

as Nestle, Coca‑Cola and Unilever, in addition to

strong local players. Small and midsize companies

continue to succeed in local markets because they

truly understand customer preferences on a local

level. If Japanese companies in the sector are to play

on both ends of the spectrum, their leaders must be

entrenched in the needs and wants of the local market.

Maximizing local talent lays the

foundation for global growth

When the domestic Japanese market drove revenue

and profit growth, global business operations lacked

significant strategic importance and, as a result,

Japanese companies tended to dispatch Japanese

managers with good financial and accounting skills

to simply “administer” local operations overseas.

Executives did not necessarily see the need for leaders

with strategic and local market insights who could

drive business growth in international outposts. Even

as they expanded, companies were able to manage

relatively small business operations by using the

limited pool of Japanese leaders with international

experience and some English‑speaking capability.

Today, however, the agenda has changed as more food

and beverage companies have higher expectations for

their international operations, especially as they make

bigger leaps in size via acquisitions. The traditional

model falls short in this environment, where long‑term

performance hinges upon understanding the cultural

nuances in key markets, especially in a sector driven by

the personal tastes of consumers.

Ajinomoto has been successful in penetrating new

markets thanks to its commitment to truly grasping

local cultures. “I believe that ensuring optimal

localization is the key to success in our global

Japanese food and beverage

companies and the global landscape

In the past, when the domestic market was the

focus of business investment and growth, Japanese

companies regarded their operations in other

countries only as supplemental. With international

markets emerging as an increasingly important

source of future revenue and profits, many Japanese

companies have shifted the agenda to expansion

beyond the country’s borders. “Our ultimate objective

is to make Asahi a global brand,” says Toshio Kodato,

executive director of international business for Asahi

Group Holdings, which has focused its acquisition

efforts on companies in Australia and New Zealand,

including Schweppes Australia, Independent Liquor

and Charlie’s Group.

Fellow Japanese food and beverage leader Kirin

Holdings has made investments in companies

spanning the globe, including Australia, New Zealand,

the Philippines, Singapore, Brazil and the United

States. Suntory Holdings also has a worldwide reach,

making acquisitions and alliances throughout Asia,

as well as Europe and the United States. Ajinomoto,

by contrast, has grown mostly organically to date,

but wants to prepare the organization for a future

that could include growth by acquisition. “In order

for us to grow faster and beyond our comfort zone,

especially if we anticipate a more nonorganic type of

business expansion, we need to face the reality that we

have not made enough efforts developing or retaining

non‑Japanese local leadership talent,” says Masayoshi

Kurosaki, general manager of Ajinomoto’s overseas

foods and seasonings department.

Ajinomoto, Kirin, Suntory, Asahi and others pursuing

global expansion are finding they must sharpen their

insight into local markets, drive continuous product

innovation and ensure that international operations

business,” says Kurosaki. “Without fully knowing the

local language, culture and values, you cannot be

qualified as a leader. Our leaders need to have deep

insight into the local food culture and market and the

ability to leverage the Japanese product development

technology, as well as possess strong sales drive into

local food channels. For instance, we have built a

strong business and production base in Indonesia,

which is a Muslim country. We are now making the

best use of the products and the Indonesian talent with

cultural and religious sensitivity in order to penetrate

other Muslim markets such as the Middle East.”

Kodato admits that Asahi still has room to grow

when it comes to its criteria for talent. In the past,

the company sought professionals with accounting

skills and some English‑speaking capability, but today

demands a more market‑oriented, strategic business

leader who understands local consumer needs and

has the organizational skills to build strong local

teams. “We really need a different type of talent to

compete with the other big players,” says Kodato.

A key challenge for many Japanese companies is fully

incorporating local talent into the corporate culture and

providing opportunities for non‑Japanese executives

to advance their careers in the organization. Internal

structural issues can create barriers to motivating and

developing local executives and hiring top outside

leaders. Performance management systems with

unclear job descriptions, a lack of standard assessment

criteria and poor linkage between performance and

compensation can be an obstacle to attracting and

retaining non‑Japanese talent.

In addition, non‑Japanese leaders accustomed to

moving onto new opportunities after certain periods

of time may hesitate to join Japanese companies

where lifetime employment is the norm. These leaders

must also be prepared for a longer decision‑making

process that focuses on consensus‑building, and be

committed to developing the long‑term relationships

that are hallmarks of Japanese business style.

“We need to avoid a ‘glass ceiling’ situation where

local talent does not see future career development

paths in the corporate system,” says Gensei

Murakami, general manager of global human

resources for Suntory Holdings.

Kirin also acknowledges the vital importance of

offering a viable career path in drawing and retaining

top global talent. “We want to hire excellent global

talent from the outside, but to retain them, we need

to satisfy their career advancement aspirations,”

adds Hirotake Kobayashi, senior executive director of

global business at Kirin Holdings. “We have started

career promotion within each of the regions in

Australia and Brazil. We plan to do this in Southeast

Asia, too, as its business becomes bigger. Eventually,

we aim to rotate and promote people across regions

around the world.”

A growing strategic

role for human resources

Greater changes to the Japanese corporate culture and

human resources processes are necessary to create

an environment that derives the best from its talent,

both domestic and international. Typically, the HR

function of Japanese companies was an administrative

one, focused on compensation and benefits, labor

management, promotions and undergraduate

recruitment. Individuals in HR were seldom asked

to act as strategic partners in supporting business

growth. With some rare exceptions, the HR function

in Japanese headquarters was not expected to be

involved in fulfilling overseas local talent needs, even

at the executive level. As Japanese food and beverage

companies rethink their talent needs to meet demands

of globalization, they also must reevaluate the role of

HR in finding, developing and retaining that talent.

Although HR will now be tasked with overhauling

many of the structural issues that affect talent

recruitment and retention as these food and beverage

companies move forward with plans for expansion, it

cannot do this alone. The company’s top leadership

must make a strong commitment to the critical

strategic issue of talent and support HR in making the

needed cultural shift, while HR must act as a partner

in supporting the business model. Additionally, given

its historical focus on domestic matters, the human

resources function at Japanese headquarters would

greatly benefit from bringing on leaders with cultural

flexibility and international perspective.

“Our global HR function was established only a year

ago with the new mission of developing and retaining

global talent throughout the organization for both

Japan and overseas,” says Murakami. “We are in the

middle of an internal talent‑mapping exercise above a

certain management level and will identify key talent

for future cross‑country assignments or promotions.

We still have structural issues to be addressed,

though, where there is a limited framework of

collaborative work with overseas subsidiaries, that

is, between Japan HQ HR and local HRs. There are

no formal reporting lines. There are many challenges

that we will need to overcome.”

However, a global HR platform itself does not always

have to be the ultimate goal. Companies can adopt a

step‑by‑step approach depending upon the state of

the business in a certain region. For instance, Kirin is

developing a job promotion framework within each

region first and will then spread the model globally.

Just as companies need to be mindful of the cultures

of its talent and consumers in each market, uniting

disparate HR departments needs to be handled with

similar diplomacy. “Each overseas subsidiary has its

own history, culture, rules, policies and processes,”

says Toshiya Miyoshi, corporate officer and head

of human resources and general affairs at Kirin.

“Paying full respect to these local practices, we have

started to identify key management talent across

the globe. We have just started exchanging data and

information across regions and we know that this will

take time.”

Food and beverage companies can glean valuable

insights from companies further along in the HR

centralization process, such as Ajinomoto, which first

initiated its globalization efforts more than 20 years

ago. Ajinomoto has a strong, centralized HR function

that influences local executive hiring overseas and

governance matters around the globe. It has centrally

identified 300 senior management professionals

internally in various countries, including non‑

Japanese leaders, and has started to rotate them to

ensure the right people are in the right roles and are

motivated to do their best work — as a result of this

rotation, more than 40 percent of the company’s

Japanese managers have overseas business

experience. The company has also announced that

it plans to significantly increase the proportion

of non‑Japanese board directors at 70 overseas

subsidiaries in two years. Ajinomoto’s organic growth

has likely had a large stake in the smoothness of the

adoption of its corporate culture across its locations;

acquisitions will present a greater challenge in

combining different philosophies, operating models

and cultures.

Outgrowing traditional

governance models

Japanese companies have been accustomed to their own

unique governance and talent development systems

A Seat at the Global Table: Issues facing growing Japanese food and beverage companies

within the domestic market. Now, however, Japanese

companies must go outside the domestic market for

talent and adapt their governance systems accordingly.

Companies face the challenge of exploring,

experimenting and evolving the appropriate

governance model to maximize their investment in

overseas local markets while staying true to their global

strategic direction. Many Japanese companies are

attempting to catch up with the governance practices

of Western MNCs by exploring new models that still

align with their value systems and corporate cultures.

Some companies, such as Asahi, rely on a single

Japanese leader to achieve their goals in international

outposts, while acknowledging the limits of this

approach. Kodato anticipates that Asahi’s governance

will continue to evolve as the business grows. “Our

business in Australia greatly expanded due to M&A

investment, but our governing mechanism is simple

and through the Japanese CEO in the Australian

holding company,” says Kodato. “Fully leveraging the

CEO’s capability and leadership is the best approach

right now. But we cannot continue to rely on one

leader and we will need to develop a more systematic

governance mechanism, board structure and

succession planning for the future. Otherwise, we will

not be able to attract top local talent.”

Other organizations, such as Kirin, are experimenting

with regional board systems to manage risks

and maximize opportunities. It placed a local

non‑Japanese leader as the CEO of its Australian

holding company, a practice uncommon among

Japanese companies. Although having nonexecutive

directors on the board is still not a universal practice

even for large established companies in Japan, Kirin

also has been making the best use of non‑Japanese

local independent directors for its regional holding

companies, highly regarding the directors’ insight

into local markets and their connections with industry

and government communities. In addition, the

company plans to set up a trial international advisory

board comprising advisers from various regions to

support the Kirin Holdings CEO in global strategy

development and implementation. However, in

order to make the board system effective, Kirin faces

continuous challenges of tackling board composition,

nonexecutive director selection and sharing its

corporate culture with those nonexecutive directors.

“It is very important for us to get our board members’

objective opinions so that we can effectively manage

and grow the business,” says Kobayashi. “They

know the local market and regulations. We want to

create a reliable board that is strong and effective

enough to maintain and drive the overall corporate

culture. To achieve this, we need to have constant

close communication with the board members to

have them fully understand Kirin’s strategy. As we

hire independent directors from the outside, this is a

continual challenge, but we have been successful with

this governance model and have replicated it in other

regions such as Latin America.”

Suntory formed an Asia Pacific regional HQ office

in Singapore in 2011, led by a Japanese executive,

with future plans to hire local leadership talent with

regional market insight to support expansion of the

business. In 2012, Suntory nominated the local CEO

of one of its major overseas subsidiaries as a board

member of the parent company, marking the first

time in history that the company had a non‑Japanese

individual serve on the board.

Ultimately, there is no one‑size‑fits‑all governance

approach. Many Japanese food and beverage

companies are currently experimenting with new

governance ideas and systems, with some trying to

strike their right balance of Japanese and Western

practices. Going forward, Japanese companies will

need to customize governance systems that best

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suit the economic, political, regulatory and

cultural realities of the locations where they

operate. Additionally, the ongoing pursuit of

accountability and transparency in their internal

governance systems will likely help these

organizations build credibility across borders.

Moving forward

Many Japanese companies are beginning

to ask themselves how far they should go

in terms of globalizing their own talent and

governance systems in Japan as overseas

business contributions become much more

significant. As we have observed, the lifetime

employment and seniority system discourages

and even blocks the hiring of excellent talent

from the outside. Even if this systemic barrier

were removed, many Japanese employees do

not speak English, so internal communication

becomes an issue if non‑Japanese individuals

are hired. In addition, a weak performance

measurement system and its limited linkage to

compensation present another obstacle in the

hiring of excellent non‑Japanese talent.

Many companies are trying to achieve a

delicate balance and are gradually changing

their conventional domestic systems, but

it will be a lengthy process. Their “internal”

globalization efforts are happening while

they explore better governance and HR

systems globally. Effective governance and HR

systems vary by company, depending on the

globalization stage and individual goals, but

the need for a collaborative effort to fully utilize

local talent (as well as synchronize domestic

and global actions) is vital. Regardless of

nationality, global leaders of Japanese food

and beverage companies must have flexibility

as they continue to expand operations around

the world. Meanwhile, global competition

intensifies and, undoubtedly, companies will

still face challenges as they continue to merge

cultures and systems while vying for market

share. To succeed, Japanese companies in the

sector need to commit to long‑term efforts

to develop governance and talent systems

that eventually will be effective not just in

Japanese and Western markets, but on a truly

international scale.