Under pressure from Chinese shareholders, could the Zojirushi microwave succeed

Under pressure from Chinese shareholders, could the Zojirushi microwave succeed?

Zojirushi Magic Bottle Company of Japan, best known for their rice cookers and stainless steel thermos, is looking to branch out into new markets. It has introduced a restaurant chain in addition to reentering the microwave oven market after 17 years with an all-in-one microwave oven. Zojirushi and major shareholder China Galanz have argued twice in the past over the appointment of directors at shareholder meetings. How does Zojirushi plan to adapt to the increasingly saturated Japanese home appliance market? Zojirushi’s “Elephant” branded microwave oven was released to Japanese consumers on September 1st. A customer in her forties who had come into the store looking to replace her conventional oven with a microwave exclaimed in surprise, “(Zojitsu) rice cookers are quite famous, but I didn’t expect an all-in-one microwave oven…”

The new item has a 26-liter capacity, is marketed toward families of three to four members, and uses the EVERINO brand name. A dichotomy between black-and-white styles exists. 65,780 yen total, including tax (about RMB 3221.51). President Norio Ichikawa of Zojirushi has a lot of faith in the microwave industry. And he went on to say “While more and more high-quality, high-priced products are becoming available, many people still lack the means to afford them. The multi-function microwave oven is the final possible appliance category.” Zojirushi launched its microwave oven division in 1983. What was restricted at the time was a “single-function” product whose only function was to heat and keep food warm, with the goal of lowering production costs through outsourcing and attracting customers at low prices. But after it started engaging in price competition, it saw its profits decline. Zojirushi stopped making microwaves in 2005 after facing intense competition. It doesn’t fully reflect the characteristics of Zojirushi, but it expands the product line, as President Ichikawa recalled. After leaving the microwave oven industry in 2005, the idea of returning to that field began to percolate in 2015. Both current and former Zojirushi employees, as well as customers and retailers, have put forth the following ideas: “Zojirushi is known for their rice cookers and electric stoves. Is there supposed to be no microwave?” Collaborative “Technology Growth Cell” group. In spite of this, not a single member of the seven-person team, including office head Hiroshi Yamane, possessed any prior expertise in the microwave oven industry. In his speech, Yamane stated, “There is a market size, and the technical experience of existing products such as electric ovens can also be used.” Also, “microwave ovens are a Red Sea market with household penetration rate of more than 90%,” which worries him. As a result, Zojirushi started working on a microwave oven combo unit. The company predicts that in 2021, the domestic microwave oven shipments in Japan will be 120 billion yen, including its own brand (PB) products, with the microwave oven integrated machine accounting for more than 80% of the total. However, total shipments amounted to fewer than 6 million units, with half of that number coming from single-function products and the other half from microwave oven all-in-one machines. Due to factors like users’ lack of experience with the appliance, “the unit price of the microwave oven all-in-one machine is relatively high, but sales volume has not increased” (President Ichikawa). Zojirushi sought a solution, and it found it in a convection microwave that can simultaneously reduce cooking time and simplify its use.

While it lacks features found on more expensive products, such as steam cooking, some aspects have been refined in response to customer feedback. Customer expectations for “Ease of Operation” and “Reduced Cooking Time” are being met thanks to the “Heat & Grill” function’s ability to seamlessly transition between microwave heating and grill cooking. Reports state that in the case of grilling alone, a hamburger patty or crispy grilled dish for 4 people will take 20 minutes to complete, and in the case of using the heat grill function, only 13 minutes. Consumers have responded enthusiastically since its introduction. A woman in her 30s from Osaka city said, “The appearance is simple, the functions are complete, and it is easy to use.” Zojirushi has “plans to expand in capacity and functions in the future” and will produce 8,500 EVERINOs per month in the first year (President Ichikawa). However, the work of building a positive reputation for the brand is only beginning. A sales associate at a home appliance store once remarked, “When consumers buy microwave ovens, the first thing they care about is price and brand.” Awareness-building is, therefore, Zojirushi’s top priority in this situation.

The introduction of an all-in-one microwave oven by Zojirushi represents more than just a new product category for the company. Because Zojirushi lacked the necessary machinery, they were unable to produce their microwave ovens in large quantities. It has leveraged China Galanz through contract manufacturing. Zojirushi and Galanz agreed to begin working together commercially in March 2021 in order to pool resources, particularly in terms of technology and manufacturing expertise, in order to create innovative kitchen appliance-focused electrical goods. Home appliance original equipment manufacturer (OEM) Galanz. The company’s primary offering is microwave ovens under the Galanz brand, which it owns in both China and the United States. The company estimates that it has a 30% share of the global market. Galanz is projected to earn 32 billion yuan in revenue in 2021, as ranked by the All-China Federation of Industry and Commerce’s “2022 China Top 500 Private Enterprises” list. Galanz For their own investment portfolios, Zojirushi’s chairman Liang Zhaoxian and vice chairman Liang Huiqiang bought 15.51 percent of the company’s stock in the summer of 2018. (as of October 2021). Zojirushi’s major shareholders and management have been at odds over the company’s strategy for growth in emerging markets like China, adding a further layer of interaction between the two companies. At the 2020 and 2022 shareholder meetings for Zojirushi, Galanz voiced concerns about the company’s management and proposed a plan to have its own elected candidates serve as outside directors. However, the general meeting of shareholders voted the plan down after hearing Zojirushi’s opposition. The relationship between shareholders and management will not impact product development, according to Zojirushi’s president, Ichikawa: “(EVERINO) is a product that combines Zojirushi’s planning and development capabilities and Galanz’s manufacturing technology.” The mental distance between Zojirushi and the rest of the pack may have shrunk, but not when it comes to the company’s management problems. Zojirushi’s strong brand appeals to Galanz because the company wants to use it to promote its own brand of products in Japan. Zojirushi’s international expansion, however, was too sluggish for Galanz’s tastes. Liang Huiqiang has always been confident in his ability to expand Zojirushi’s business in the Japanese market by utilizing the product effect. When the personnel proposal was turned down once more in February 2022, he did not make any references to future collaboration.

Zojirushi’s revenue and profits have been on the decline for the past four fiscal years, starting with the 2017 fiscal year (as of November 2017). Specialized demand for inbound tourists’ primary exports—rice cookers and thermoses—has evaporated. Zojirushi, on the other hand, reacted slowly to the rise of online shopping and didn’t make the most of the attention it received as a result of its success with consumers. Zojirushi suggested increasing e-commerce sales and developing in international markets like mainland China and Taiwan to turn things around. The Liang family’s overseas sales ratio is roughly 30% in fiscal year 2021 (as of November 2021). The gap between the current level and the necessary 50% or more is significant. Zojirushi also proposed a strategy to strengthen the restaurant business in their 2021 revised mid-term management plan. In April of 2022, the Hanshin Umeda Main Store in Osaka City was home to the world’s first onigiri specialty store, “Zojitsu Silver White Rice Ball.” More than that, it runs eateries and bento shops in Osaka and is planning to expand into other city centers. The company’s main product is rice cookers, and it plans to expand its market share by opening restaurants serving bento and rice balls. It will take some time for catering to become a significant source of income. Over the course of the 2010s, many of Japan’s once-mighty home appliance manufacturers were acquired by Chinese conglomerates as the nation’s manufacturing base declined. Getting into the microwave oven business is helping Zojirushi, which has been experiencing slow performance growth, to cooperate with major shareholders and to meet the expectations of those shareholders for the growth of the company. How does Zojirushi see his relationship with Galanz progressing? Zojirushi, in any case, can only succeed in one way.

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