Good afternoon. Good morning, everyone. Thank you very much for taking your precious time to attend today's meeting. We thank you very much. I am the emcee for today. My name is Kaji from the IR office. Let's introduce the speakers for today. We have Representative Executive Officer, President Mr. Fujie.
This is Fujie. Thank you very much for attending.
Executive Officer, Senior Vice President, and Chief Digital Officer Mr. Koda.
This is Koda here.
Executive Officer and Vice President, General Manager of Marketing Design Center Mr. Okamoto.
Hello, this is Okamoto.
Besides these three speakers, we also have six other participants from the company, including Representative Executive Officer and Executive Vice President Mr. Shiragami.
Hello, this is Shiragami. Thank you very much for coming.
Executive Officer and Senior Vice President, General Manager of Corporate Division Mr. Sasaki.
Hello, this is Sasaki.
Executive Officer and Vice President, General Manager of Bio & Fine Chemicals Division Mr. Maeda. Executive Officer and Vice President, In charge of Sustainability and Communications Ms. Morishima.
Hello, this is Morishima.
Executive Officer and Vice President, In charge of Finance and Investor Relations Mr. Mizutani.
Hello, this is Mizutani.
Deputy General Manager of Marketing Design Center Ms. Mukai.
Hello, this is Mukai. Thank you very much for being with us today.
As for the flow of today's meeting, at the outset, we would like to have our President Mr. Fujie deliver the opening remarks, followed by the General Manager of Marketing Design Center Mr. Okamoto, talking about the marketing initiatives. The CDO of the company, Mr. Koda, will talk about the DX initiatives and the evolution of DX, followed by the Q&A session for the entire meeting.
We expect to finish the entire meeting in about 1 hour and 30 minutes. The materials we use for today's meeting is already posted on the IR information site of Ajinomoto's corporate homepage, so please take a look at them as adequate. Please also be advised that this session is recorded all the way to the Q&A session, so that it can be posted on the IR site of the company later on. Without further ado, we'd like to begin immediately. Mr. Fujie, the floor is yours.
Good morning, everyone. This is Fujie. Thank you very much for taking your precious time to attend today's meeting. We thank you very much indeed. As for today, these are the key messages that I would like to share with you, the three points here. The first point, ASV, Ajinomoto Group Creating Shared Value.
In order to realize the indicators, marketing and the digital transformation are very important. We have to evolve these. We are now accelerating efforts in these areas. Secondly, in terms of marketing, we will be evolving our marketing initiatives so that we can deliver new value that are innovative and drive growth, and strengthen our structure of our business. As for the 3rd point, for DX, this is about corporate transformation that leverages digital technologies. Digital tends to become the purpose, but this X is very important. We would like to leverage digital technology as well, and transformation by all of our employees. The employees themselves will have to undergo change so that we can enhance our corporate value as a result of that. The next page. This is our aspiration, our purpose, which has also been evolved.
We would like to contribute to the well-being of all human beings and society and our planet with amino science. Well-being is about a healthy and happy state according to our definition. We would like to help to extend the health expectancy of 1 billion people, and also reduce the environmental impacts and regenerate the environment. Those are the two outcomes that we aspire to achieve. The next page is the management transformation towards the medium-term ASV initiatives. We are working on this, we have set challenging targets from the 2030 ASV indicators and backcasting them. We've been polishing up our initiatives so that we can pursue our ASV indicators. The next page is the ASV indicators that we have defined as the company. Towards the achievement of these indicators, we believe the evolution of our marketing and DX will be very important.
We are driving innovation towards the achievement of these targets. The drive toward growth through evolution of our marketing. In April 2023, we established what is called the MDC or the Marketing Design Center. The slogan here is "Standing at the bat, swinging at the bat." We will have our employees stand at the bat and swing their bats. By doing so, we would like to create new value and achieve products that can grow into new pillars of business that can earn billions of yen annually. This is already starting to produce good results. Customers have begun to comment that our domestic products are becoming invigorated, we are receiving all these compliments from customers of late. As for DX, in 2019, we established the DX committee and the digital transformation department.
We started a full-scale deployment of this on a global scale. By fully leveraging digital technology and transforming our company, we would like to achieve the speed up and scale up of our management. Let me introduce the speakers for today. One of them will be, as you can see on the left-hand side, Tatsuya Okamoto. He was selected as one of the most influential CMOs in Asia by Campaign Asia-Pacific. Chief Marketing Officer. He was selected as one of the most influential ones of them. Also Mr. Koda, on the right-hand side, he was recipient of the DX Promotion Award in Forbes Japan CIO/CDO Award for 2023 and 2024. Those are the active leaders on a global scale. They will be talking about the initiatives of Ajinomoto and the future directions.
With that, further ado, I would like to hand the microphone to Mr. Okamoto.
Thank you very much, Fujie-san. Now over to you, Okamoto-san.
Good morning. Thank you for the introduction. I am the General Manager of Marketing Design Center, Executive Officer Tatsuya Okamoto. I'd like to talk about marketing initiatives and evolution of marketing to realize enhancement of corporate value. Marketing Design Center, or MDC, has been introduced by Fujie, and it's about human resources development. Embraces challenge, we develop human resources that will embrace challenges. There are four focal areas as the following. The first one is based on the insights obtained from consumer data in the D2C, direct-to-consumer business will be re-strengthened. Second one, D2C will connect with customer through direct connection. Combining consumer data obtained from that big data to accompany life development of new products and existing businesses and challenge in creating hit products. Third is creating a new communication strategy model.
You will have the existing business through the strengths of mass media and digital marketing and advertising and public relations. Those will be combined. The fourth is to expand this business model to expand globally. We will lead the development of marketing talent and to contribute to the food products business as a whole. As for marketing investment, this will be implemented in plans of each business, but with the upgrading of strategy and introduction of new techniques, we will enhance effectiveness and efficiency. Next page, Marketing Design Center. Why 2023? In April, we established a Marketing Design Center. There was a major change in external environment. Information explosion was happening and intrinsic desire or interest in food has been declining gradually. There are many platformers, and through those, customers can do the shopping directly.
Our purchasing channel that where we sell has been declining. Also for internal environment, because our business model was so strong, so there was less motivation to further build the new models. There are many strong overseas business brands that we have. We are content with solid operation of these new brands. There is not much motivation to take on challenge for new products. As a food manufacturer, so we are the first one to have the advertising activities. Mass communication optimized mechanism is in place in our company. Because of that, we were behind in terms of digitalization. In order to resolve this problem, we are trying to establish new channels and strengthen our capability and also establish one-to-one communication with consumers centered on digital and online communication. That's how we established the MDC.
The formation is shown on the diagram, blue box and pink box. As a service center, there are two departments, as profit center, there is one department. The Marketing Development Department, as I said, is extracting insights from consumers and upgrading marketing and develop talent. Communication Design Department will be responsible for communication strategies for domestic and overseas businesses and sales department. They will develop creative by themselves and also retain the customers and then extract insights from the customers. As a profit center, conventionally, there was a direct-to-consumer sales marketing that has been transferred to this department, also food direct-to-consumer business will be created to expand this. D2C department was established for that purpose, and this is how it looks. In the middle, there is Communication Design Department, there is a customer base establishment and company-wide customer base.
AJINOMOTO PARK is going to be expanded to have the customer data stored in here. In addition, D2C business will be expanded to get customer data. Those two types of data will be analyzed at the Marketing Design Center. By combining that with the big data, you will have consumer insight. There will be service development in the D2C department, and communication will be created at Communication Design Department so that we can have the communication that will be fit to each customer. This is MDC vision for 2030. For Ajinomoto, since the foundation, we have been providing Ajinomoto for more than 100 years, and there has been many long seller brands for 20, 30, 40, 50 years. For each of the times, we are trying to provide a value that is fit to the times.
Also long seller brands should be also established together with members of the value chain. Next, as Fujie said, there is a Swinging the Bat initiative. The corporate climate should be enhanced and improved. We have to create many people who would embrace challenges, and this is very important. There are three boxes in the bottom, and these are the products that I was personally involved. Back in 2001, I was in charge of soup business, and this was launched as Soup Do, Knorr Soup DELI, as it is called currently. Between 2011 and 2013, I was marketing manager for consumer foods division, and those three products are now have grown to support domestic business. I was involved in frozen food business in 2015 and 2016, and two products that were developed has become big products.
The top of the businesses encourage the full swing and then guarantee the psychological stability so that we can utilize our potential to 120% and only when these products were developed. This is the kind of environment that I like to create. There is a Swinging the Bat award that we established. On the left, you see the cheer on those who carefully aimed and swung with all their might. Why is it important? Marketing and new product development is a leap forward to the future. As the more you take on challenges, the more failures that you might experience, but you shouldn't judge them. You have to also circulate back into the business by having learning from the failure. You have to keep on standing on the bat and then keep swinging to the fullest extent possible.
That is the climate that we like to create. Based on those indicators, we have established this award. There is one example that I'd like to share with you. In the second year, a young personnel in MDC has generated this result. As you can see on the right, there is a celebrity called Kuro-chan that's on the screen. The Kuro-chan was not that favorable, but he actually got married to this woman, and he has improved in his favorable support. TikTok views, there was no buzz videos in TikTok in the food industry that would exceed 1 million views, and that was what this person was wondering about. He was convinced that he could take advantage of this Kuro-chan, but his superior said no, but he was adamant, and he was convinced that this would be successful.
He directly talked to that product manager back then, he wanted to do this. That product manager actually persuaded his superior. He actually went into Kuro-chan's home and actually shot this video by himself because there was no budget officially given. It has actually generated 10 million TikTok views, there is less than JPY 1 in terms of CPV because he recorded this himself. This has become a key model format. The CPV has been less than JPY 1 since then because this was a big challenge, and it has been actually recycled and reproduced. Let me talk about new product development. As you can see on the left top in the circle in the business division, the product manager that is responsible for product development.
Of course, the development is done circling around this person, conventionally, there are research personnel or people responsible creative or media strategies, each of these are requested by the product manager to do the work for him. After the MDC, as you can see on the right, product manager is in the middle, research partner, communication and brand manager, package designer, creative and media person, all these are actually in a single team. They stay with the product manager since the beginning of the development process. There are several success stories that I can share with you. In autumn last year, Cook Do Premium Mala Mapo Tofu was launched, you can actually aim for billions of yen in sales as a single product this year.
At the outset of development, as you can see, the Cook Do was well received by a broad range of customers. If you can also focus on narrower segments, if you drill down their needs and our proprietary technologies for more than 45 years, we also made full utilization of ingredients and blending, we were able to have this package design, first ever no sizzle or ultra paired back packaging. These were created by communication design personnel. On the right, you see the launch strategy. We use OMO, or online merges with offline. Real and virtual worlds were merged. As you can see, the Mapo Tofu can be felt with the ghost restaurant, the customers can disseminate the information between the customers. In the spring this year, the Pasta Cube that can be created with a single pan.
As you can see on the left, scrum-based process was used as you use in rugby football. Our researchers and insight analyzers have done some food trend research, single pan pasta has become important. That is what they found. They had also stayed with the N equal one interviews, where you drilled down the questions. Usually, this would be done by the external consultants, this was done by ourselves. They found that there is a desire for ease, not for cutting corners. Single pan pasta could fail, it is quite easy, there is less nutritional balance. We have put that into the cubed form recipe so that the pasta will not be sticky, you can put the other ingredients together in a single pan. As you can see, the creative on the QR code.
As you can see on the right top, amongst the 200 or more items in pasta, we are keeping one of the top-rank sales. In the D2C, there was hit products that came out. The Protein Soup is one of the examples. We have searched the unmet needs for Protein Soup. You have to drink more in cold, so you cannot eat rice. Taking advantage of our technologies, you can actually have a product that is good for meals with a warm one. On the right, you see the smartphone image and the Protein Soup. This is just a generic name, but people search for Protein Soup on the internet. You type in protein, and this is going to be found by the consumers through search.
How many grams of protein can be shown on a single screen of the smartphone. This has led to the smart success for the product. In D2C and EC, unlike general commercial channels, there are some general findings. We have done 1,200 N equal one interviews, so that we have come up with the manual that will be successful other D2C businesses. Last one is this one. Direct marketing has been transferred to sales department. We will promote food business going forward. In the current status, the D2C business model is based on single item repeat mail order. The small size can be bought at a discount price. If they continue on shopping the same product, then further discounts will be given. There are many other players, so we are inferior.
We like to model other business operators that are having different D2C models. We have to learn from them so that we can have a firm building D2C based on brand attachment. One of the success stories is Classicom. The [Non-English content] system is run by this company, and by collaborating with them, we were learning their model, that was started in June, we'd like to use this to promote further. Let me talk about communication strategy.
As you can see before, previously, we were only using the earned media and also paid media, and shared media, and the owned media. We previously had these medias, but those were operated independently from one another. We have decided to connect them and coordinate them all together under the new PESO model. Why is this needed? Why is this model needed? As you can see on the bottom left, the current customers, in the influx of information, they only attach the information that serves their interests and concerns. On the right-hand side, even if corporations disseminate the information, those will be rejected by the consumers. They only receive the information that is trustworthy for them. The media to receive such information could be used differently depending on different scenes.
As you can see on the circle at the top-hand side, we would like to deliver the information via the media that is most suited for their current situation. This is a successful case. Let me introduce this example to you. This is the Cook Do Oyster Sauce, which is a medium-sized business for us. In the spring of last year, this product was renewed, and it has become a better product compared to before. We have run this model and led it to a success. It is too busy, I would like to give you the details in the following slide. This was first ignited by the Shinano Nagano Newspaper , which is a local newspaper. The placement was a very small placement, but we had a four-page advertisement.
We appealed to the customers to wrap the lettuce using this newspaper, this made a buzz. Tatsuya Fujiwara, the talent here, if you open the vegetable section of the refrigerator, his face will appear. Actually, this was covered on an expanded basis on many and different media, the consumers liked this a lot. We thought that this will also be contributing to food loss reduction. Altogether, a lot of our placement was done, we were able to regain the top market share for the first time in four years for this product. The other one is the influencer marketing. We are working on this to strengthen our influencer marketing. The influencers are disseminating information in large volumes, the consumers are disseminating information.
In order to provide such trustworthy information to other consumers, we have started this initiative with only four members one year ago. In the last four times, we have conducted events and invited influencers. Only the first time, we provided fee to the influencers, but other than that, the other three times, the influencers participated without any fee. More than 200 people attended in the most recent event in March of this year. All these influencers altogether had a total follower numbers of more than 55 million people. It is very impossible to achieve this reach even if we pay for expensive advertisement on TV. Also, in order to build this up, as you can see on the right-hand side, we have decided to have the influencers participate with us as ambassador program so that they can continue to disseminate information on behalf.
For that reason, we have established this ambassador program called AJ Friends. We would like to increase the number of ambassadors to 10 times from the 50 people today to more than 500 people in 2030, so that we can cover and increase the number of followers to more than 100 million people by 2030. With this PESO model, and also as a result of influencers marketing, we have achieved a good impact. This is the outcome in Japan. From before, the earned media, we have been reacting in the earned media from before, but after this has increased exposure quite significantly. In terms of conversion and advertisement equivalent, we had an impact of more than JPY 50 billion, 1.7x our increase year-on-year. Next, I would like to talk about the brand.
We've been working to enhance our brand, which is another important activity of the Marketing Design Center. As for brands, Ajinomoto would like to establish bonds with customers because this is customer value. With human and technology and organization assets, we believe this is a very important intangible asset for the business. By working on this, I think we can enhance brand power, and that will stabilize our earning space. If the brand becomes stronger, we will be chosen as a testimony to the attachment and trust. HONDASHI is already a top brand for us, but the second brand manufacturer, we have 1.6x our unit price compared to the second runner in the market.
As you can see on the right-hand side, 02 here, the lifetime value increases because loyal customers will continue to purchase for a long time, and this will also support the entire company's profit. As a model to further strengthen this, we have established what is called enhancing Ajinomoto brand power through the support and contribution model. Towards the contribution, we would like to have the product brand contribute to the corporate brand. This is the product contributing to the corporate brand. On the other hand, the corporate brand can also develop a good image through the initiatives, and that will contribute to the product brand and build the viability of the product itself. Corporate brand supporting the product brand, we would like to run this cycle, and that's what we will try to achieve through this support and contribution model.
Brand investment, I think it is very important for us to provide adequate investment, and I would like to use this case of RosDee, the Thai flavor seasoning. The blue bars here is the advertisement and PR spend in order for us to develop a good image of the product. The gray bars shows the discounts or increase of volume or other sales promotion cost at the shopfront. The red curve shows the mind share and top of mind. Without any hints given to the consumers, the percentage of people who cited RosDee as the top of mind. The blue one shows the market share. In 2009, a good marketing director joined the company and doubled the investment for marketing, and we decreased the sales promotion spend instead.
The total investment has come down compared to before, but nevertheless, we were able to successfully increase the top of mind share, and accordingly, the market share also increased. We have also introduced what is called a marketing mix model, MMM, to optimize marketing investment and expand sales volume and improve the brand power more efficiently. The weekly sales is considered to be the baseline, the brand capability, and we analyzed the contribution of PR advertisement in the sales volume. This is the methodology that will allow that analysis. We have introduced this analysis model in 13 brands in Japan in 2021, and also rolled this out in 11 brands overseas in 2023. Altogether, this has achieved and generated over JPY 1 billion of investment improvement effect in 2022.
If you look at the modeling there, the sales promotion details such as digital or TV contribution, we can break this down into all these details. We shall be able to analyze the impact of the temperature or the vegetable prices. All these can be analyzed with this model. This example. Let me introduce a concrete example here. This is the case of Masako of Indonesia. As you are well aware, Masako has been selling in Brisca. The market share did not increase significantly. That was the issue that faced Masako. One Marketing Design Center analyzed this, that together with PT Ajinomoto Indonesia for the 12 months, changed the packages and changed the creative, and also visualized the investment impact, and also increased the digital investment.
We thought that we were able to achieve an increase in share and sales as a result of these activities, and this produced the intended results. We have increased the media spend by 100%, the ROI has also increased by 136.3%, this improved efficiency significantly. In April or May this year, the market share increased by 0.8% as a result of these activities. For the measures to enhance the corporate brand, let me just talk about this. The corporate brand reinforcement and the dissemination of this information. As you can see here, the local companies are taking the lead here. Such food loss, plastic reduction, all these initiatives have been disseminated by the local companies. In Japan, the Marketing Design Center is playing a central role in disseminating all this information.
As you can see, the food loss are communicated to the consumers with a strong impact. This is the creative that was developed by the Z Generation, and reading smartphones during a meal. We wanted to reduce this habit through this initiative. Inner branding is another activity that we are dealing with. Branding enhancement is not only the job of the marketing section. This relates to the entire employees. In order to communicate this, all the other members' activities was introduced to each other. This is the video that we have created. Please take a look at the video that we created for this purpose. This is the activity undertaken by the inner branding team. I think this can introduce the different aspects of the business of the company. We thought that this is very useful for us to share with other people.
As a result of these activities, and also the other information provided by the corporate side, was also effective in increasing the brand value, which amounted to $1,625 million . This has been improving quite successfully over the years. Finally, I would like to talk about the development of marketing talents. Depending on the level of each company, we have decided the skill requirements. Through OJT, the Marketing Design Center has defined this, and we are rolling out all these initiatives both in Japan and overseas. From this fiscal year, as you can see at the bottom there, on the far right, we have this global knowledge committee. That all the initiatives that are undertaken at one location can be horizontally deployed in other locations. Finally, I would like to talk about this.
We would like to make a transformation so that we can become a challenging organization, so that we can become a brand that will be loved more than 100 years ahead, so that we can further involve and enhance our marketing, contribute to the corporate value.
Thank you, Mr. Okamoto. Now we'd like to invite Mr. Koda here.
Thank you very much. Koda speaking. I would like to talk about DX initiatives and evolution of DX to support the transformation of Ajinomoto Group. This is today's message. The first one, we position digital information, DX as corporate transformation, leveraging digital technology, we are working on this on a company-wide basis. In order to advance that level of database management, the aggregating wide-ranging data management foundation is most important. What is supporting is cybersecurity measures and development of DX human resources. These are also worked on in parallel to facilitate the corporate transformation. As Fujie said, in Ajinomoto, in DX, X is more important than digital. What DX is aiming for is 2030 vision realization. As a means, the businesses and the corporate climate, and the way we work should be transformed.
If it is effective, digital technology has to be taken full advantage of. That's how we position it. Our DX has two characteristics, mainly. The first one, a DX promotion structure that passes the horizontal axis through strong vertical axis and transforms. Second, we aim for corporate transformation with participation by all through each person's own initiative. Next, please. This is the promotion structure for DX. On the left, you see under CEO, there is executive committee. There is Food Products, Bio and Fine Chemicals, and corporate divisions. Those vertical business divisions are for execution. There is overseas divisions and subsidiaries, and regional headquarters. DX, actually, under the CEO, DX promotion committee and also our company-wide task force is led by myself.
In the DX promotion committee, the marketing presentation was done by the deputy director, general manager of business unit, Okamoto, and also in R&D, food R&D director, Kojima. People at that level are actually sitting on this committee. As for more specific ones, there are sub-committees under this committee. Marketing, R&D, supply, SCM, DX human resources, smart hub factories, data management and AI. For each of these sub-committees, there are people who are subject matter experts. Also sharing the overall information best practice. There is a once in a year session to have this overall structure and information sharing. Now, each person's own initiative and participation by all. On the top right corner, understanding and sense making, you have to instill OE and increase digital literacy. The individual business units and individual companies have to share the practice and information.
There will be an occasion for them to do that, to give a stimulus. There is also study sessions and community activities. Those who are keenly interested can learn various knowledge from these occasions, then they can come up with their own tools and then use digital technologies in their own job. By running this cycle many times, digitalization could become your own initiatives and more closer to yourself. The DX strategy of our group. As I said, the 2030 goal is what we are aiming for. In order to expedite the process, we are going to leverage DX. In the middle, the advancement of database management, there are various items that are under sub-committees. The data management platform is common to all initiatives, and this is very important. Next page, please.
On the left, as you can see, conventionally, in each of the business locations, like overseas and domestic business locations, are utilizing SCM, management accounting, sustainability, IFRS, and business divisions production. They extract necessary information from those in Excel spreadsheet and send that information to the relevant organizations, then they reconstruct them so that they can have a big view. The number of sites times number of functions is the total number of interactions that are happening. From last year, we have come up with ADAMS, Ajinomoto Data Management System. On this platform, the required data is sent without extra. From the data system, the business sites can extract required information to serve their purpose. That is what we are defining now. Next page. More specifically, on the left you see data sources on each organization's system that's running currently.
You integrate all of them for the data that should be taken advantage. That will be put into accumulation layer, then they will be processed for easier use in integration layer. In the data mart, you store them so that users can get access easily. This is not just the container to store data, but there is room for data storage, and also you have to have a system to protect that. The whole system is seen as ADAMS, data management platform. For ADAMS, currently, there is already data stored and accumulated. This is a food SCM data management platform example, as you can see DMP here. Currently, the internal data is starting from production all the way towards the right down to retail.
Putting all the information data here, conventionally, there were vertical segmentation of data, now it is integrated horizontally. The storage and inventory reduction has been the result, for example. Paper flow, like from the upstream raw material suppliers to the consumers in the downstream, you can expand this horizontally. I talked about domestic food business, this could be also expanded to other businesses and other regions. You can store the information chronologically in a long time series so that you can get various insights from this platform. Next page, please. What will change with this?
Before ADAMS introduction, for each of the purposes, if you need data, you have to find where the data is, and then you have to ask for permission from data owner, and then you get access to data, and then you do the cleansing, and then analysis is done. That was what was done. After ADAMS introduction, data acquisition and permission will be skipped, and data analysis can be facilitated with more efficiency. You can reduce the time taken significantly. 40,000 man-hours could be reduced. That's what we have estimated. At the bottom you can see that in order to create one product, the ones that are processed in production site A would be used as raw materials for production site B for more processing.
There is a system in production site A, and data will be in this Excel spreadsheet and sent to site B, then go on to head office. What kind of data is required for each business? Based on the data requirement, you can establish a system where ADAMS can come in, there will be no barriers between different sites and organizations. With ADAMS in place, well, I talked about overall data transformation, you can also have ecosystem transformation and business transformation. This is going to be a very important infrastructure to support the whole business. This ADAMS, how this can be used by personnel. I have a video to show you. Please take a look. The concierge can be accessed from Ajinomoto's internal internet. The first step is to find the right data for your purpose.
Where can I find the data on forecasted sales via Amazon? That's how you type in, for example. It will tell you the name of the table that might contain that data and a summary of what is in the data. Here, we have confirmed that we can use the sales data from the monthly aggregate. The data seems to fit your purpose, you can click on the table name and move on to the next step. The next step is to find out the name of the data item that you need. The name and its contents and data format can be found in the ADAMS data catalog. You find the appropriate data item in the list and copy its column name. The last step retrieves the actual data contents.
Using the table and item names you have looked up in the previous steps, you ask the question in the chat Saying, "What are the top five items for the following month?" The AI will convert your query into a program that will search the data stored on ADAMS. In this way, the entire process of searching, finding, and obtaining data can be completed with only text input. As you have seen in the video, even if there is a platform, people may not take advantage of that was our concern. We take advantage of generative AI so that it can be used more easily and improve the data in the ADAMS. Next. More specific initiatives, as Okamoto said earlier, in AJINOMOTO PARK, there are many important customers where we can interact with them.
We are integrating IDs of those customers so that we can have customer data management. The customer IDs are not necessarily in ADAMS currently, but you can have seamless connection. What was used in marketing as customer data could be also used for new business creation in the future or identify what the needs are from society. You can have a connection with ADAMS, and that is going to be very important. This is close to what I have said as well, but the other day, there's an Aete frozen product that was launched. With the digital connection with customers, conventionally, we were targeting at mass products customers, but this is also good for a niche. There's a side dish over the top of the rice with low salt and better nutrition, and the sales are performing well.
This is part of the DX initiative as well. Next, please. R&D is another one. In R&D, for things new, there are many people who are more interested. Let me show you one example. The electronic materials business is the one that I'm showing. In the past, many cases of materials and formulations and materials for films were studied, and there is a result available. You let AI learn that so that what sort of formulation would have what sort of performance can be achieved. Or this is the performance that you would like to achieve, and what are the formulation that will enable you to achieve that? That support function is provided by AI, and 24/7 robots can be used for prototyping and also evaluating performance, and efficiency has been improved. This is also where we use DX and digital technologies.
The next page, please. On the production side as well, this is the company called Ajinomoto Food Manufacturing. The packaging and process was made more efficient using the APPLE packaging management system. Previously, the operational starters had to be recorded manually, but this can now be fetched automatically from the machines and also by regular sampling. The weight, for example, or all this process information were written down on paper, but those are now contained in the applications, and we have electronic record of that. We can see immediately and review the operation for that day. For example, a particular processes manager does not really have to be at the factory, but still be able to visually see those operational data and make a judgment. I think that is already improving the efficiency of the factory itself.
The data per se, via ADAMS, can also be reflected in changing the production plan and also calculating the profit that we can expect from the manufacturing. The next slide. Operational excellence transformation task force. This was already covered previously, but we are far away from DX in some operational matters, so we decided to reform our operational performances. As you can see in this picture here, this is about the production information management system. In some cases, the information was not updated, so we were trying to analyze the reason why from the business unit or to the factories, and many different divisions are involved in the information management. We try to write down on paper the entire flow of the operation. Then in the next page, and based on that information, we'll show you a video here.
In our actual activities, the vertical axis is the divisions and organization. The horizontal axis is the time elapsed. Who's responsible at which time and in what way. In this way, if we can analyze this, we shall be able to track the right information constantly. I have just shown you a target. This is an eight-meter paper, and in the new product development, all these steps are needed. That's what you can also read from this video. The next page. This is the concrete initiative that we have introduced in order to reduce inventories. Four years ago, we set a target of DIO, days inventory outstanding, 70 days. As of 2023, we saw an increase, and also we haven't really completed that, so there's still a gap in order for us to achieve the 70-day target in 2025.
The actual track record is shared by all the company level, and the management team is now deciding on initiatives so that we can accelerate the improvement of the DIO. Next page. Specifically, the details here, the red, orange, and gray lines here. The red one shows the product DIO, and the yearly based information on left-hand side, and monthly information on the right-hand side. As far as the products are concerned are using ADAMS. We can also look at the inventory data based, including the channel inventory, and we have seen an increase. Visualization and the countermeasures are very important. It has been rising up until the middle of the year, but I think this will come down. I just wanted to convey a message that we can visualize and see clearly how it is trending.
The raw materials are represented by the orange curve there, and has been on increase since fiscal 2019 because of the geopolitical issues and also pandemic. From the perspective of BCP, when we make a judgment that the raw material has to increase in inventory level, that's the reason why we have seen this increase. The orange curve is controlled with some intention of the company. The gray one shows the other ones. This is mainly the work in progress or semi-finished goods. Because we have this in the medical business, these are very high added value products, but structurally it's very complex and therefore the production lead time is longer. Because of the nature of the business, this has been coming up, but this is mostly related to the new businesses, and this changes over time.
As far as the product is concerned, we would like to visualize the DIO and take proper countermeasures to reduce the inventory days. The next page, as we've been talking from before, in the middle it says conventionally. The past one is in the middle. The inventory that we have shipped out from the company was considered to be the demand. However, recently we have been changing this by incorporating the warehouse outbound data and the market data, including the channel inventory. We are trying to make a judgment where the shortage is happening in the market or elsewhere. As you can see on the left at the bottom there, we have implemented this recently so that we can track the inventory level more properly and be able to reduce 90% of the expiry dates.
Visualization and countermeasures are very important in this example as well. The next one is the global business. The same applies. This is the Amilite product, and the raw materials for that is now tracked here. Global production and global sales is the business that we are conducting here. We are now able to track the inventory data in transit as well. We are trying to control so that it can be stable at the standard level. The next page. I would like to talk about the human resources and the development of human resources will underpin our DX initiatives. The entire employee base will have to acquire digital skills. That's very important for the company. Previously we had the elementary and the middle and the advanced class for digital technology.
We are using NRI System Techno, the Group-wide organizations, and they have 200 people, data scientists. They study, and there are some people who are becoming close to data scientists, and we also hire new, fresh out of the college employees in order to reinforce this digital team. We also have the generative AI, Corite, AjiChat. With these solutions, we are trying to have our employees develop their skills and also using local skills. We are trying to work together with external organization. The operational excellence that I talked about, these down to earth activities are also being improved. Finally, about IT security. The next page, please. At our company, IT governance is considered to be very important, and information security is considered a very important element, not only at the executive committee, but also at the BOD. This is considered a very important one.
We are going to make a transition to the zero trust network, that is an important point for the security measures in the future. The work environment is now changing, we would like to achieve this situation that people can work anywhere, anytime, with anybody. Now we are now making transition to cloud-based services compared to the previous on-premise. We are now being mindful about the threat of security, including the leakage of information. The next page. The left-hand side shows the previous model. Now because of the damage that we could potentially incur is large with the left-hand side model, we are now making a transition to this right-hand side model, the zero trust network, including not only the Japanese operations but also overseas.
Finally, DX Ajinomoto is a corporate transformation that leverages digital technologies, we will try to leverage these in order to enhance our corporate value.
Thank you very much. Up until 12 o'clock, we'll now have a Q&A session.
First of all, let me explain how you ask questions. If you have any questions, on the screen you find Raise a Hand button, then we will identify who can ask questions. Then if your name is called, please unmute yourself and go ahead with your questions. Those of you who are participating from overseas, you can ask questions in English, and there will be simultaneous interpretation. Please limit questions to two per person. I'd like to ask for your kind understanding. If there are too many people who want to ask questions, we may not be able to cover all the people who ought to ask questions. Please, also, I ask for your kind understanding. If you have any questions now, please click on the Raise Hands button. The first question from Mizuho Securities is Saji-san. Please.
Thank you very much. There are two questions. They both is addressed to Okamoto-san, and there are two questions. Firstly, it's about D2C. The single item repeat mail order was reviewed, and Kurashi no Moto Project, is what you worked with on page 17. I think that's what you said. Is it like a loyal user marketing? Basically, is that what you are now launching? As part of D2C model transformation, the fan-building product development, that's what you said. How exactly the D2C business is going to transform itself into? How are we supposed to envision that? Can you answer that question first?
Saji-san, thank you very much. Okamoto speaking. Let me answer the question. As you can see, of course, we are in the process of transformation now, and brand building and let customers buy products. I think this is similar to the romantic relationship.
In order for people to love us, we have to communicate our feelings and also answer questions from the customer sincerely. Those interactions are very important, and in the current single item repeat model, more or less, we are unilaterally transmitting information to customers, then, we're just getting them good deals and discounts to facilitate them to buy the products. What the Classicom is doing is that there is a worldview that will fit the customer, and there's a store manager. The products that he comes or she comes up with is the one that people support and that's where the people are encouraged to buy the products. By taking advantage of a broad product portfolio, I think that can be reproduced in Ajinomoto. That's what we are gearing our course for. Does that answer your question?
Thank you. The next question is page 34. Global Knowledge Share, is what you are going to do, and the fiscal 2024 autumn, you are going to start doing this. The effects of this whole initiative, what is the ultimate goal? Of course, by product, business division or the themes, that's what you're describing here, but, what would be the key for the moment, and what would be the benefits tangible to us? What should we actually watch for your success? For example, soup business or instant noodle business, are they part of those initiatives as well?
Let me answer that question. There are mainly two different directions for our operation. One is a Marketing Design Center led horizontal axis, like branding or advertising method improvement or measurement effect of advertising, human resources open.
The other is a product area theme like soup or instant noodles or flavor condiments. Those are globally across regional ones. If you put a high tighter product or for example, in some area, global unified brands would be introduced. If those projects come up, we gather global members with the business division taking a central role. We can support them. It's not like something that is constantly operating. Based on the project, there will be some activity, some. In the first half of we are taking initiative as MDC, and I said that there will be support being done. What sort of a relationship that we can have in a day-to-day business to the brand contribution, but you have to actually do this and execute this in a day-to-day basis. That is very important.
That is marketing subcommittee that's working on that in the horizontal axis. It's almost like a camp offsite project activities to see what sort of business examples that you can use. There are several other horizontal axis as well.
May I ask a follow-up question? As global themes, soup and instant noodles are actually on the table.
No, no. That's not what I said. We just cite as an example. As actual cases come up, it just happens that those are described here. I'm sorry, I may have misled you.
Thank you.
Thank you, Mr. Saji, for the question. Moving on to the next question. The next question will be from Sorry, excuse me. Goldman Sachs, Miyazaki-san, please begin your question.
Hello. Thank you very much. This is Miyazaki from Goldman Sachs. I have one question. In the presentation, the Marketing Design Center and the DX related initiatives that you explained today, what is the role and responsibility? I just wanted to know the roles and responsibility when it comes to DX promotion. On page six, you have this organization chart on page six. Of course, you have the promotion committee for digital transformation. At the end of the day, the business divisions or the overseas business, when they have to take the responsibility at the end of the day, how will the DX team be involved?
Or rather, is it that the DX team will be responsible? Will that enhance the execution? Depending on the organization initiatives, are you trying to achieve the DX transformation? Those are the things that I would like to ask. As far as Marketing Design Center is concerned, as far as food is concerned, all these functions are now integrated on the MDC. I think MDC will take the lead in marketing and product development. Is that the case? Do you have the execution responsibility as well? I just wanted to know about the detailed arrangement.
Miyazaki-san, thank you very much for the question. This is Fujie, I would like to give an overall comment. For marketing and DX, I would like to have the members add additional comment if that's necessary.
In 2019, in order to have a transverse approach, DX and also business transformation and operational transformation for the entire company. Because we had this very vertically strong culture, rather than partial optimization, how to achieve the overall optimization in our business activity was something that we explored. From the previous president, Nishii-san, we've been working on this in order to achieve improvement. At the Executive Committee, we have discussed this several times in depth. As part of that discussion, the vertical responsibility on the vertical direction, they will take the responsibility all the way to execution. As for the horizontal direction, horizontal direction is about promotion. Vertical and horizontal. By having a good coordination, we thought it was very important that the vertical and the horizontal direction will work in coordination.
Of course, still there are traditional approaches, and in some cases, there is a difference of opinion in the vertical versus the horizontal direction. The three division heads who's responsible for vertical direction and the horizontal team heads will have to work together closely so that we can achieve an agreement. If that's still difficult to achieve an agreement, then the Executive Committee will take responsibility. In this way, we would like to take advantage of the benefits of the vertical axis and also achieve a transverse approach so that we can have a unified approach across directions. Koda-san and Okamoto-san respectively is responsible. That is the overall design. If the two other members, if you have any additional comments.
Yes. This is Koda here. As for DX, as Fujie-san mentioned, this is about having a common transverse approach.
As CDO, digital utilization, if it's related at the entire Ajinomoto Group, it's my responsibility. That's how I feel it. Most recently, Generative AI is now becoming available, the utilization of Gen AI is now being discussed. In this environment, this involves entire risk, of course, also produce benefits. Therefore, I think I shall take the lead here. That's the reason why we have established the AI subcommittee, as you can see at the bottom there. We would like to promote the utilization of AI actively. When we do so, some division will come up with an idea that they would like to use AI, then the subcommittee will discuss about that. If there's a need to make investment, the committee will also talk about the investment so that we can start using AI.
If human resources will be needed, then of course, if it's an issue that it cannot be handled at division level, then we'll have a concurrent responsibility with the DX Committee and try to overcome these dilemmas. That's about promotion. When we talk about digital promotion, I think we have to make sure that we are not late in the utilization of digital technology. The Digital Transformation Committee will work on the issues that we need to address. The division heads and the sub heads of the divisions will share that information together with us, we'll achieve a consensus and drive the transformation altogether with these teams.
This is Okamoto. I would like to ask another comment. Mr. Miyazaki-san, thank you very much for the question, by the way.
As Mr. Fujie mentioned, this is overlapping with Fujie-san's comment, product development and communication strategy, the execution is mainly done at the divisions and also at the local companies at each location. In order for us to improve the brand and strengthen our brand, whether the investigation is properly done, reviewing them, and also make investments based on a new investment policy, all these things are overseen by us. Of course, the human resource development model is operated properly. All these transverse activities are done by myself. I give a suggestion to all the marketing directors and all the divisions, and by operating this properly at each level, we would like to strengthen our operations. That's the cycle that we're working on. Thank you very much for your comments.
If that is the case, by having a proper discussion inside the company, the vertical directions responsible persons are getting convinced. If the agreement is already reached by then and at the entire company level, the business units will implement them and execute them. Is that the flow? Am I right?
Yes, you're correct. Yes. Thank you.
Thank you very much for the explanation.
Thank you.
Thank you very much, Miyazaki-san. Moving on to the next question. Okasan Securities, Sumoge-san, please.
Thank you very much. Sumoge from Okasan Securities. Can you hear me? Thank you. I have also two questions. First one has to do with marketing. Well, this is just a rudimentary question, why are you now able to take on challenges? I'd like to understand correctly. Marketing Design Center was established last year, and also the new businesses organizations have been introduced with reorganization. Conventionally, what was the bottleneck? What hindered that, and why is it now resolved with reorganization and now you're able to take on challenges? Can you elaborate more on that? The second one is about DX, slide 26. The inventory-taking initiative was shown here. The visualization of all the products or inventories in the market is now visualized.
You had to have a close collaboration with retailers to grasp the status of the inventory. How can you make sure that you have the whole grasp of inventory in the distribution, including warehouse, outbound, and others? For example, in the case of healthcare, the inventory could become an issue. How can you deploy that model in healthcare? How were you able to reduce inventory by visualizing this, and how are you going to apply this in other areas?
Well, thank you very much for your question, Sumoge-san. The first question, Okamoto and myself, and the second question will be addressed by Koda. For the first question, for the overall scheme, especially the condiments and food in Japan, for the past seven, eight years, more than JPY 1 billion new services and new products were difficult to emerge.
We did have some basic discussion amongst the management team. As I said already in 2030, the ASV with a challenge spirit is the goal, and we have to aim for that and shoot for that with accumulation of learnings. Okamoto is excellent here, and he has been assigned as a leader for marketing. Now we are taking on this challenge, and by doing so, for domestic food, we would like to aim for regrowth. We are now seeing some tangible results. Other countries than Japan, I think people have been already making some challenges. Profit responsibility is done by domestic food business. Rather than taking on new challenges, the product improvement of the existing products should be more focused in order to support business for a single year profitability.
We are dedicated more on focus on the profitability in a single year, and we may have missed some mid to long-term perspective. That's what we decided to do more in the management team. Okamoto-san, over to you.
I think Fujie has covered all the answers that I wanted to say, there's not much left for me to say. But in the Marketing Design Center, the D2C business is also under this organization. You can have direct connection with the customer through this. Conventionally, the main products for us is the products that is bought by unspecified number of customers. Now we are able to make improvements based on the complaints from the customers. There's a basis for that. Also, the people are now assured that you can take on this challenge, and that's what we are disseminating.
The people who did not take action are not good. Even if you fail, if you did take action, then these people will be appreciated and highly rated. That's what I kept saying, and that has triggered the whole team to take action. There has been a gradual change in corporate culture. I think this is where we were able to contribute somewhat. Koda is going to answer the question about how we visualize the inventory in the distribution. The shipping data, warehouse outbound data, and market inventory, those data are all owned by different entities conventionally. Those disparate data could be integrated for better use. That's what we figured, and we came up with ADAMS to integrate those data. The inventory volume is just an estimate from MV. Then for market data, we paid for the market data for the product.
By expanding the usage of that, we can actually use this for other purposes. We were bound only for marketing purpose, but now this can be used for operation as well. The value has been made higher. We were able to get more data. All the divisions were not working together, but now they are working together to integrate the data. That's how we did that.
There's a follow-up question. "What is the accuracy of estimate that you can achieve now? As for healthcare, I think you're talking about food, but for other businesses, what sort of operation that you can do to apply this in other areas?" The bottom line is how you can integrate and gather information from various locations, like amino acid or personal care products.
Basically, this is actual inventory volume, and that has been integrated within the group. This is quite accurate. As for the market inventory, now, it is not necessarily the case that we can have all the grasp. To what extent we can get data is the question. Basically, as long as we can get the data, we can have accurate visualization of the data. If that's the case, in CDMO for healthcare, understanding the inventory from CDMO would be a bit more difficult. Yes. If this is about CDMO inventory, they make to order. What I said about intermediate work-in-process inventory, that is the products that are staying within our company operation because of the processing time duration. When you talk about pharmaceutical intermediate products, that is not what I meant by market data.
I'm talking about just our products that are in the market.
Okay. Thank you.
Sumoge-san, thank you very much for the question. Now we'd like to move on to the next questioner. UBS Securities, Ihara-san, please begin your question.
Thank you very much for the presentation. This is Ihara from UBS Securities. I have two questions. The first, regarding DX. In your company, Bio-Pharma Service and in ABF, you're trying to increase the capability to foresee the future, which I think is a very important issue for you. In that environment, what is the role to be played by ADAMS? What is now possible today? What will become possible in the future? If you can share that information with us, that would be appreciated. That's my first question. My second question relates to marketing. This is splendid. I was impressed that you have made this progress thus far. Is there any room for further improvement? In what areas can we improve further?
You have made a good progress, but what are the challenges that you're seeing today? If you can share that information, that would be appreciated.
Yes. Thank you very much for the question, Ihara-san. Regarding the first question, the first question will be answered by Koda-san. Second question will be answered by Okamoto-san.
All right. Ihara-san, thank you. As far as DX is concerned, Bio-Pharma Service and ABF, what contribution can ADAMS make in this field? I think that was the essence of your question, right? As far as ADAMS is concerned, in a closed business area, the reason why it has to be ADAMS, there are not so much reason it has to be ADAMS, for example. As I said earlier, how to predict a formula and how fast can we arrive at the product that is needed by customer.
Actually, in that regard, digital technology utilization is very important. ADAMS, after all, is about the common platform by using digital technology, analyzing things in order to improve the performance of the overall company. That's about efficiency improvement. Using data for multiple purpose, ADAMS can play an important role here. For a specific field, a specific action for a specific field, we will have to have data needed for that specific area and utilizing AI. That's the answer, I think. If you expand this to other domains, for example, it might make sense to incorporate the data into ADAMS and utilize it accordingly. ADAMS, if you ask me the question that ADAMS can contribute to everything, I don't think so. In that regard, the bioinformatics, for example, there's room for ADAMS to be utilized in that area.
As you mentioned earlier, for inventory management, each individual department will have to increase their prediction capability. Yes, I agree so. I think so, because in that way, I think the efficiency overall could be better. I think it doesn't make sense to include everything into ADAMS.
Okay, thank you. I got it. Thank you.
As for healthcare inventory, just briefly, including the previous question, I would like to answer the question. As for CDMO electronic materials, as Okamoto-s an mentioned, compared to B2C, the number of clients and the shipment estimation is very limited, and therefore, as you can see on page 27, the inventory is tracked on time. Other than that sampling, obtaining data and making an estimate of the market inventory, we are trying to reinforce this capability here.
During the pandemic, with no one having experience, our people tried to build up inventory just slightly, we made a wrong estimate. Based on that reflection, we'll try to understand what information is needed so that we can prepare the necessary inventory. That is the initiative that we are currently working on for the healthcare side.
This is Okamoto. Thank you very much for your question, and thank you very much for the compliments. As for the future challenges, there are two points. One is about the thickness of our human resources. Our business, after all, covers many diverse areas, including many different countries. Many different countries are in operation. To be honest with you, people to be dispatched or expats, depending on the capability of these people, the business performance could vary. The persons who can educate, we have to increase the resources.
The other thing is that this may be something further down the line, but investment optimization is very important. How to make investment for marketing and human resources and make proper allocations for the optimization at the entire company level. We still have to work on this because we haven't got there yet. This is another challenge that we have to address.
Thank you. Okay. The person-dependent skill improvement and also marketing investment overall optimization or other challenges that you have to address?
Yes, that's correct.
Thank you very much. I understand.
Thank you very much.
Thank you very much. We're approaching the time to end the session. We would like to take the last question from SMBC Nikko Securities, Takagi-san , please.
Thank you very much. Takagi speaking. Can you hear me?
Yes, I can hear you.
Thank you. One question in the interest of time. Earlier, marketing transformation was explained. I was impressed. Especially in Japan, the profitability of food business, how are you going to enhance that profitability? That's what I wanted to ask. Fujie-s an said that there will be growth for domestic food business once again. As far as domestic food business is concerned, it's only 70%-80% of the record-high profits, and margin has been eroded significantly. With the MDC establishment, are you going to be able to enhance the bottom line or top line or product mix improvement? Exactly how you can revitalize your food business in Japan?
Takagi-s an, thank you very much. Let me answer your question, and then Okamoto can add something. For all these three that you said, we would like to achieve everything. In addition, it's not just the Japanese market that we're looking at. Taking advantage of yen's depreciation, exporting Japanese products to overseas is something that we're looking at because there's inbound demand that is increasing, so we have to enhance that. Conventionally, we have been strong in some areas, and we have to continue to support that. In addition, we have to keep finding new values there. There is still room for us to lead to some growth trajectory. Thank you. Okamoto-s an, over to you.
Exactly as Fujie said, as you saw in Pasta Cube example, in Japan, there are still unmet needs by consumers. There are things that they have given up as a given, we can actually fulfill that needs and produce some hit products. By giving up something else that is not filling up the needs, we can focus more on those that are important. There is still room for us to do that, to enhance top line and expand the business and strengthen the business as well. Does that answer your question?
Well, yes. As for the top line. Especially for existing brands, and you're going to introduce smaller scale new brands or products, so there could be less impact for your overall business. There's still ambiguity. Can you elaborate on that?
Well, we're not aiming for smaller scale business. We're looking at products that can have a top line of JPY 5 billion or JPY 10 billion. Of course, we do have that desire. The requirements or needs of the customers are segmented and fragmented. For example, in the D2C, the channels like D2C, like focused channels, like JPY 1 billion times five items could be how we achieve JPY 5 billion a year. Well, the volume and unit price and quality, are you going to see some changes? Yes. In the higher priced zones and affordable zones, there are still challenges in both, so there are opportunities.
We are strong in between, but in areas other than that, there are still opportunity for us to grow our business, and both can be targeted. About sales promotion efficiency, ROI could be visualized. That's what I said. In Japan, are you going to be able to enhance the investment efficiency? Yes, exactly. All the major brands are part of these initiatives every year. We are convinced and confident that we can increase the investment efficiency every year.
Thank you very much, Takagi-san. With that, we would like to conclude the Q&A session. Thank you. I'd like to ask Fujie to give us closing remarks.
Well, thank you very much for taking the time despite your busy schedule. In the interaction, we received a lot of hints and advice from you. Thank you very much. I think you have felt as well, but at Ajinomoto Group, the business foundation, we will try to enhance this further. The culture of the company is now making transformation towards the direction of becoming more challenging. Good practices are now emerging on a global scale, so we will try to establish a model for this. By developing a model and rolling them out across the group, and by doing so, we would like to achieve the speed up and scale up, and thereby constantly improve the corporate value of the company. That is our aspiration. Well, thank you very much for attending today's meeting, and we look forward to your continued patronage. Thank you.
With this, we would like to finish today's session. Thank you very much indeed for your participation. This is the end of the program. Thank you.