Seven & i to produce vegetables under its private brand

Tag : Vegetables


“We could enhance our chances of success in the agriculture business if we apply to it our product management system, which the Seven & i group has developed and improved over many years,” said Toshifumi Suzuki, Chairman and CEO of Seven & i Holdings Co., Ltd.

“When we grow crops, we need to find the most suitable growing conditions for each crop, and carefully provide fertilizer and water for the crops according to climate and other environmental changes. Actually, this process is similar to our way of managing merchandise at each outlet.”

Ito-Yokado Co., Ltd, a wholly owned subsidiary of Seven & i. Holdings, will soon launch an agricultural business. In August, Ito-Yokado will establish an agricultural production corporation in Tomisato, Chiba prefecture, jointly with JA Tomisato, and begin supplying products to six supermarkets in the prefecture.

In addition, the major supermarket chain operator plans to collect garbage from the supermarkets, turn the garbage into compost, and take it back to the agricultural corporation’s farm.

It is not unusual for companies in non-agricultural industries to make inroads into the agricultural sector. However, this is the first time that a major retailer, like Ito-Yokado, will enter into the recycling-oriented agricultural business, in which a company produces crops, sells them at its outlets, collects garbage from the outlets, and recycles it.

There is another unique point in Ito-Yokado’s way of entering the agricultural business. The company has created a modest business plan, rather than one based on an overly grand design.

Ito-Yokado’s business model contrasts strikingly with that of Uniqlo

A comparison with the agricultural business model of Fast Retailing Co., Ltd, which operates the Uniqlo casual clothing chain, would make it easier to understand the distinctive features of Ito-Yokado’s business model. Although Fast Retailing entered the agricultural sector in 2002, accumulated losses forced the company to withdraw from the business. One example of differences between Fast Retailing’s business model and that of Ito-Yokado is the value added to the vegetables. Typically, newcomers in the agricultural business tend to promote their products by emphasizing their good flavor, excellent taste, or the fact that they are organically-grown vegetables.

Fast Retailing sold such high-value added vegetables, including tomatoes with high sugar content that were produced using special farming techniques called “Nagata Method.” In contrast, Ito-Yokado will neither produce organic vegetables nor use a special farming method. The supermarket chain operator will grow a limited selection of vegetables at a small farm. In the first year, the company will ship five types of vegetables; Japanese radish, cabbage, carrots, spinach and Komatsuna (an edible species of mustard plant). Meanwhile, Fast Retailing produced more than 100 kinds of vegetables, about 20 times more than those of Ito-Yokado.

The supermarket chain operator expects to harvest 130 tons of crops from its 20,000-hectare farmland in the initial year. This means that the company will harvest 356kg of crops per day on average. Such a modest crop yield could probably be delivered by a small pickup truck.

Also, Ito-Yokado only made a small initial investment in its agricultural business. For example, the company will use agricultural machines and equipment of farmers who are investing in the agricultural production corporation. To collect crops, it will use JA Tomisato’s collection center, and to deliver its crops, it will use the agricultural cooperative’s vehicles.

“We aim to make the agricultural production corporation profitable from the first year,” said Toshiaki Takeda, executive officer and general manager of the food business department of Ito-Yokado.

Ito-Yokado’s seemingly unpretentious business plans indicate that the company is extremely serious about the agricultural business. In addition to the members of JA Tomisato, around five Ito-Yokado employees will participate in the production of the crops.

Seven & i Holdings Chairman Suzuki said that Ito-Yokado plans to apply to the agricultural business its product management system, which the company is using in the retail business. The management system enables the staff of each store to check the inventory status of each product in real-time.

In order to make the management system work in the agricultural business, it is necessary for Ito-Yokado employees to actively participate in the crop production, and to ascertain problems to be resolved in the early stage, instead of simply assisting with the various stages of crop-growing work. That may be why Ito-Yokado adopted a moderate, and not bold, business plan.

“We selected easy-to-grow vegetables that are suitable for outdoor farming and can be grown without using any special farming techniques,” said Kazuhisa Toi, senior merchandiser of the vegetables and fruits department of Ito-Yokado. “We also limited the kinds of vegetables we plan to grow so that even our employees without sufficient agricultural skills and knowledge can handle them.”