‘Unabsorbable’ price hikes: Ajinomoto predicts further cost increases despite record-breaking profits last year
Ajinomoto released its FY2022 financial results on May 11 2023, announcing ‘record high’ sales of JPY1.36tn (US$10.1bn) and profits of JPY135.3bn (US$1bn), growing 18.2% and 11.9% respectively year-on-year.
Ajinomoto President and CEO Taro Fujie attributed these achievements primarily to the firm’s Seasonings and Foods as well as Frozen Foods businesses globally – but also highlighted that a lot of this was maintained due to price hikes in most of these markets.
“Sales increased significantly overall [and] business profit increased in every segment, boosted by currently translation and further driven by efforts to raise prices in the Seasonings and Foods and Frozen Foods businesses in every region,” he told the floor at the results announcement.
“[We had to take action] to counter soaring costs in raw materials and fuels, primarily in the form of price increases which took effect in the second half of the fiscal year, resulting in a return to profit growth in these businesses.
“[These were necessary measures] in this drastically changing environment, including global cost inflations [as both of these] segments had seen profit decline through Q3FY2022 – [with this], the segments will steadily grow profit in FY2023 as well.”
He stressed that the price hikes were due to increases in costs resulting from inflation, which had grown to a point beyond the company’s ability to absorb, further stating that these costs are not expected to go down quite so quickly this year.
“[Fermentation is very important to Ajinomoto], and we saw the cost of raw materials for this process such as ammonia and other sub raw materials rise significantly from the start of FY2022, followed by the prices of raw sugar, tapioca, and other main raw materials in the second half,” he said.
“Unable to absorb these increases solely through company efforts, in umami seasonings alone we carried out 45 price hikes in 16 countries and regions in FY2022.
“We expect prices in raw material and fuel markets to remain high in FY2023 and foresee further cost increases from the previous year, particularly in the first half – [when this happens], we will identify and decisively carry out necessary counter responses.”
Despite the current economic environment, Ajinomoto has it heart set on achieving further record highs in sales and profits, which it has outlined in its FY2023 forecast numbers.
“Ajinomoto plans to achieve new record high sales of JPY1.47tn (US$10.9bn) and profits of JPY150bn (US$1.11bn) in FY2023, which will be a 7.8% and 10.8% growth year-on-year,” Fujie said.
“Increased revenue is expected for all segments by working to gradually increase quantities, [and just as] we fought back against significantly increased raw materials and fuel prices in FY2022, by firmly raising prices as necessary in FY2023, we will be profitable too.
“There are also plans to invest for the future as necessary including in marketing and R&D.”
Ajinomoto’s Food Products business is to receive a strong marketing enhancement in 2023, via the establishment of a Marketing Design Centre as well as intensive new product innovation.
“In FY2023, we intend to enhance our marketing [and] take the offensive by launching multiple new and revised products as we actively undertake a variety of measures in priority categories to revitalise our business,” Fujie added.
“We have also established the new Marketing Design Centre in April 2023, which will focus on analysing consumer behaviour data then developing the right products and communications which will boost sales via channels that enable direct consumer connection.
“This will not only benefit the local Japanese market but successful models can then be taken global, and we aim to create multiple products in new areas with sales in double-digit billion yen or more yearly.”