• by Thom Forbes  @tforbes, May 22, 2014

Unilever’s sales of its Ragu and Bertolli brands to Japan’s Mizkan Group for $2.15 billion “[marks] a final step the restructuring of its portfolio in North America,” Reuters tells us. It may also be a harbinger of Japanese companies acquiring brands in the West as its domestic market shrinks, according to Bloomberg’s Matthew Boyle.

“The deal is the tip of the iceberg of upcoming Japanese food and beverage makers’ outbound acquisitions to counter slowing domestic demand,” Yasuhide Yajima, chief economist at NLI Research Institute in Tokyo, tells Boyle.

The all-cash deal for the brands, which together generate more than $600 million in annual sales, includes a sauce processing and packaging facility in Owensboro, Ky., and a tomato processing facility in Stockton, Calif. It is expected to close in June.

“The deal represents the latest step in efforts by Unilever, a British-Dutch company, to focus on higher-margin personal care products, particularly in emerging markets,” reports Chad Bray in the New York Times. 

“Personal-care products now account for 36% of Unilever's $68.1 billion in annual sales, up from around 27% in 2008, the year before [Paul] Polman became CEO,” report Peter Evans and Atsuko Fukase in the Wall Street Journal. “Meanwhile, the foods division now makes up 27% of revenue, compared with more than 35% in 2008.” 

Unilever makes and sells products under more than 1,000 brand names worldwide; familiar personal care products in the U.S. include those under the Dove, Axe, Vaseline and Noxzema labels. 

“The Ragu and Bertolli business leads the pasta sauce category in the United States, and we believe that the potential of both brands can be fully realized with Mizkan,” Unilever North America president Kees Kruythoff said in a statement. 

“Calling itself ‘America's favorite pasta sauce,’ Ragú was founded in New York in 1937 and bought by Unilever half a century later,” Evans and Fukase write. Bertolli was founded in Tuscany by Francesco Bertolli in 1865 as an olive oil producer, according to Wikipedia. It expanded its sauces and processed foods lines under Unilever. 

Mizkan was established in 1804 when Matazaemon Nakano brewed the world’s first vinegar from sake lees — “what's left after sake has been pressed out of the mash” — which was “an unheard of and courageous challenge at that time,” according to the company timeline. With headquarters in Handa City, its two guiding principles are “Offer the Customers Only The Finest Products” and “Continuously Challenge The Status Quo.”

“The company unveiled a five-year plan in January, saying it needs to expand overseas as the Japanese population shrinks,” Boyle reports. Spokeswoman Misato Kimata informs him that “the purchase will allow Mizkan to get a majority of its revenue from abroad, compared with 34% in the year through February.”

Mizkan Americas, which was established in 1981 and is based in Mt. Prospect, Ill., “is the pre-eminent manufacturer and marketer of specialty vinegars, mustards, cooking wines, marinades, wine reductions, salted spirits, Asian sauces and dressings, and a variety of other liquid condiments,” according to its website. “Our products are revered throughout the world for Bringing Flavor to Life.” 

In May 2011, Mizkan Americas acquired Borders Foods, “the nation's oldest and most established processors of Green Chile, Jalapeno and Tomatillo peppers and manufacturers of enchilada sauces for both the branded and private label markets.” Before that, it bought the Holland House brand of cooking wines from Mott's LLP, the World Harbors brand of marinades and barbecue sauces, Creole Fermentation of Louisiana and the Gourmet Specialty Division of Imperial Brands. 

“‘Bringing Flavor to Life’ is both the Vision and Slogan of the Mizkan Group, and represents the distinct values we offer to our customers,” according to president and CEO Kazuhide Matazaemon Nakano VIII.

Yes, you read that correctly: VIII. But lest you think that Kazuhide has it easy growing up, consider this insight from the Centre for Research in Business Value Creation at the Kwansei Gakuin University: 

“Mr. Kazuhide remembers that his father, Matazaemon VII, scolded him so severely that other workers who were around involuntarily gasped. Such hard, severe training signified the desire of Mr. Matazaemon VII to nurture his successor, and his hope that his son would fulfill the responsibility as the head of the Kazuhide family, with its long tradition handed down from generation to generation. Later, Mr. Kazuhide recalls, ‘I was usually scolded by my father.’”

Meanwhile, in a 2009 interview on the McKinsey & Company website, Polman told Adam Bird that “execution is strategy in our business,” explaining:

“I’ve seldom met a consumer — and I go to a lot of home visits or go around with shoppers — and I’ve seldom met a consumer who buys our wonderful Knorr products or Lipton or Omo or Skippy because they like our strategy. And so, our business is a very simple one of getting the right products at the right place at the right quality at the right price — all the time.”

The combination of tradition and execution could make for a formidable presence in the U.S. market.