Roundtable Talk of External Directors

Kagome aims to become a “strong company capable of sustainable growth.” Various perspectives are indispensable in order to make the path toward this vision clearer and incorporate it into concrete actions. External directors with diverse expertise and experience sat down to discuss the challenges that Kagome must tackle in order to achieve sustainable growth from an external perspective.

Yamagami
Kagome is a very good company that promotes vegetable consumption and aims to contribute to longer, healthier lives, and the business itself is directly linked to the resolution of social issues listed in the Company’s materiality, and it also takes into account the work comfort and job satisfaction of employees. On the other hand, as an External Director I need to monitor the management of Kagome not only for being a good company, but also from the perspective of return on investment in Kagome and point out any shortcomings in returns. This is because profit growth is a major premise behind the Company’s ability to continue to provide value to society.

Sato
When with the Company for a long time, we often get the idea of protecting the work that is an extension of what we have been doing. Therefore, as an External Director, it is a very important role to propose and support discontinuous and completely different perspectives.

Arakane
I feel that Kagome wants to foster further awareness of the cost of capital and capital efficiency. It may be related to the fact that Kagome engages in business in the indispensable field of food and it has products with the top market share in Japan. I feel that there is an underlying awareness that if Kagome sincerely works on what is needed and useful to society, it can survive as a company. However, the environment surrounding Kagome is changing drastically, and since food and health are also major social issues, many companies are developing their businesses using various approaches. In order to become a “strong company capable of sustainable growth,” Kagome will need to develop a business strategy that leverages its strengths, and in order to do so, each business division must raise awareness of capital efficiency, including where to invest and how much revenue to generate that will lead to growth. In order to concretely incorporate the goal of becoming “a strong company capable of sustainable growth” into a business strategy that enhances profitability over the medium to long term,I believe that it is our responsibility as External Directors to convey a multifaceted perspective, and make recommendations to management.

Endo
In November 2023, I had the opportunity to visit Kagome Food India Pvt. Ltd. (KFI). KFI is involved in the value chain beginning from the cultivation of processing tomatoes, and it sells the pizza sauce it produces to major pizza franchises, building a value chain similar to Kagome’s successful one. Having the chance to directly observe Kagome’s business in India, which is expected to grow in the future, I gained a firsthand understanding of the growth potential of the Company’s International Business.

Sato
Different countries and regions have different food cultures and face different issues. In India, the color tone of processing tomatoes poses an issue, so through United Genetics India Pvt Ltd., which engages in the seed business, Kagome is improving tomato varieties to ensure they have the standard red color no matter where they may be grown around the world. I believe there is ample room for growth of the International Business by providing solutions tailored to the diet or issues of each individual region.

Arakane
Each country and regions has its own market characteristics and challenges. As such, there are situations where subsidiaries can provide value on their own, and still many others where value can be realized by utilizing the knowledge and resources of the Kagome Group. In October 2023, the International Business Division was reorganized into Kagome Foods International Company. By making it an in-house company, the Company is promoting the delegation of authority and accelerating global strategy. Also, by working closely together within this new in-house company, we hope that the global business strategy of the entire Kagome Group will further progress, rather than on an individual company basis.

Yamagami
Through visits to overseas bases, I had the opportunity to hear firsthand about how the International Business has grown to what it is today, as well as the knowledge we have cultivated as a result. Within the Kagome Group, it seems that the sharing of such knowledge has not always been adequate. The knowledge of Kagome Food International Company is valuable information for mutual growth in cooperation with domestic businesses, and for the Kagome Group to consider strategies with an eye on overseas markets. From this perspective, it is also important for Kagome Food International Company to be open to the Group in terms of the exchange of human resources and knowledge, so that the Kagome Group as a whole is motivated by the knowledge of global business strategy cultivated there, while taking advantage of its independence.

Endo
Since President Yamaguchi was appointed, Kagome has been working to reform its organizational culture with a sense of urgency that the Company must transform our organization into one that ensures psychological safety and allows people to speak openly, and I have experienced that the effects of these efforts are steadily emerging. I think this is because the President continues to send the message that innovation cannot occur unless the Company breaks down rigid organizations and hierarchical relationships and makes the most of each individual’s abilities toward a common goal throughout the Company.

Sato
I have the impression that Kagome is a flat organization with a high level of cooperation among employees. Within the Company, a culture of calling people by Mr. or Ms. rather than their job titles, has developed. It is necessary to understand the meaning of psychological safety correctly, and I believe that President Yamaguchi’s focus on instilling psychological safety is fostering an organizational culture in which anything can be proposed, and even if a plan fails, it can be used as a source of inspiration.

Yamagami
I also feel that the awareness of psychological safety is beginning to permeate among employees. By ensuring psychological safety, the Company will foster a culture in which each employee takes advantage of their diverse ideas and experiences to take on challenges. In order to lead to the creation of innovation, it is important to continue to provide opportunities for raising awareness, especially among managerial positions, while incorporating external knowledge, so that they can understand the purpose of ensuring psychological safety and change their behavior to achieve it. Looking ahead, I think it will be important to incorporate the creation of an organizational culture into an element of evaluation.

Endo
I think that developing human resources in line with the promotion of management strategies and building an evaluation system that can incorporate the progress of company-wide strategies into the evaluation of individual employees is a very time-consuming and difficult topic. Kagome’s human resources strategy still faces many challenges, but I think the Company is on the right track and making steady progress.

Arakane
Kagome’s employees engaging in existing businesses in Japan have acquired management skills while honing their expertise, and I feel that their frontline capabilities are high. On the other hand, as the social environment changes drastically, the Company will have to think about a new form of Kagome in Japan. It is essential not only to develop and expand existing businesses, but also for Kagome to think about the direction in which the world is headed, and to change the behavior of every employee to take on challenges that have never been done before, and to create innovations that promote business model reform along with portfolio modifications.

Endo
In order to accelerate the growth of the International Business in the future, Kagome will need appropriate skills and leadership in both management and frontline operations. Since there is a big difference from the domestic market and in the skills required in different countries and regions, Kagome will need to continue discussing what kind of human resources are in short supply, how to develop them, and how to produce results.

Sato
Prior to 2016, when Kagome set forth its long-term vision of transforming from a “tomato company” to a “vegetable company” by 2025, Kagome had an image of its business domain centered on tomatoes, such as tomato ketchup and tomato juice, but now that it is becoming a “vegetable company,” the scope of its business domains has expanded. I believe that a good combination of the ever-expanding business domains and Kagome’s characteristics (which includes not only product development, but also all processes from upstream to downstream, from breeding and developing plant varieties to cultivation, processing, and activities to convey the value of vegetables) will lead to future growth.

Endo
Kagome aims to be a company that contributes to longer, healthier lives. While a daily vegetable consumption of 350 g is recommended, the current average intake of people living in Japan is less than 300g. In order to contribute to this, Kagome continues to raise awareness broadly among consumers about how consuming vegetables can help improve health through the Let’s Eat Vegetables campaign and VegeCheckR. In the course of these activities, the Company is trying to create clear evaluation criteria for “vegetable companies” as a standard-bearer to deepen the public’s understanding of vegetable consumption. At the moment, I have the impression that these activities are still confined to Japan, but I feel that the entire Group can lead itself to growth by playing a role in promoting vegetable consumption overseas after identifying the characteristics of each country and region.

Arakane
I understand that Kagome’s vision of becoming a “vegetable company” is an expression of its intention to grow in larger markets and provide more value. However, I feel that the Company has not been able to draw up a growth strategy that leverages Kagome’s strengths, and incorporate this into business. The Company is currently at the stage where it is searching for a direction of growth through repeated trial and error. By concretely drawing up and realizing a convincing business portfolio as a “vegetable company,” Kagome will evolve into a “vegetable company” that achieves growth. In addition, as there is a need to resolve global issues such as climate change and food issues caused by population problems, I believe that the role that Kagome, as an expert in vegetables, can play will continue to grow.