Suzumo Machinery 6405
鈴茂器工
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Summary
Best known for its mainstay sushi robots, Suzumo Machinery Co., Ltd. (Suzumo), founded in 1955, manufactures a range of equipment that automatically processes cooked rice into various shapes or dispenses it in exact portions.
Machinery
Key dates
2019-10-03
Coverage initiation
Executive summary
Business overview
Best known for its mainstay sushi robots, Suzumo Machinery Co., Ltd. (Suzumo), founded in 1955, manufactures a range of equipment that automatically processes cooked rice into various shapes or dispenses it in exact portions. Its main customers are restaurants, food retailers, and food product manufacturers.
In 1977, company founder Kisaku Suzuki, perturbed by the Japanese government’s move to reduce land for growing rice, began developing a cooked rice processing machine to increase rice consumption. As sushi was a luxury item then, Suzuki thought of automating part of the preparation process to lower costs and make sushi more affordable to the general public. In 1981, Suzumo launched Japan’s first automated machine to produce sharidama (sushi rice balls) in large quantities. These machines and their derivatives, which came to be known as sushi robots, have henceforth been installed at nearly all major kaiten (conveyor-belt-format) sushi chains, and are credited with opening the door for the expansion of these restaurants. The company also moved on to strengthen its product lineup with additional machinery (e.g. rice ball and rice burger bun makers and systems). In FY03/21, the company recorded sales of JPY9.5bn. It reports in a single segment: Cooked Rice Processing Equipment. Over the past five years, operating profit margin ranged from 8.5% to 15.0%. By region, 77% of the company’s sales were domestic and 23% overseas.
Suzumo cultivates demand by marketing in-house developed/upgraded machinery to restaurants and food retailers facing labor shortages. Its products are designed and assembled in-house, but their parts are mostly procured from outside suppliers with the exception of a few key items. The company’s sales and marketing efforts range from one-on-one sales to hosting special product exhibitions (featuring live demonstrations) that provide important opportunities for new customer development. These product exhibitions, which are called Suzumo Fairs, are held four to five times a year in Japan’s major cities. The company stands out for its product design that focuses on replicating the same delicious taste of cooked rice dishes prepared by hand. Further, Suzumo—as the inventor of sushi robots—has accumulated a wealth of knowledge, which enables it to essentially develop products together with the customers. The company looks to strengthen its relationships with long-standing customers and use this as a base for continued business growth.
The Japanese market for cooked rice processing equipment is worth between JPY20bn and JPY30bn a year, according to company estimates, and is largely split between Suzumo and Fuji Seiki Co., Ltd. (an unlisted company based in Fukuoka Prefecture). In contrast to Fuji Seiki, which specializes in factory-scale equipment, Suzumo’s strength is in compact equipment for use in restaurants and retail outlets. Mainstay products include sushi robots and Fuwarica rice-serving machines, both coming under the category of proprietary sushi robots.
The company’s sushi robots—developed after careful study of the techniques used by sushi chefs—can automatically produce up to 80 pieces of sharidama per minute, replicating the shape and texture of those prepared by a chef. Main users are kaiten sushi chains, sushi takeout/delivery chains, supermarkets, and lodging facilities. At a list price of JPY1,370,000, the sushi robots have a useful life of nearly ten years but are usually replaced every six years. A kaiten sushi restaurant typically has from four to seven of the company’s products on premise, including a sushi robot, a sushi roll maker, and an automatic sushi roll cutter. With roughly an 80% market share, Suzumo dominates the Japanese domestic market for this type of equipment. Overseas competitors make similar machines, but the company does not view them as a threat as the end products differ.
The Fuwarica rice-serving machine serves rice automatically into bowls and other receptacles. The company’s patented technology loosens rice by adding sufficient air between the rice grains, then weighs the rice in exact portions and serves it while maintaining the fluffy texture. Main users are donburi (rice bowl dish) and teishoku (set meal) chains that utilize the machine in their kitchens. At a list price of JPY1,240,000, the product has a useful life of nearly ten years. As opposed to small equipment, factory-scale machinery is used by rice ball and boxed lunch manufacturers, whose main concern is durability, rapid production rates, and low production costs. In this market, Fuji Seiki has over 80% market share (Fuji Seiki estimate).
The company’s Tokyo Factory (based in Saitama Prefecture) is the main site for its assembly operations. Production is based on order estimates and latest information from the company’s sales team. While the company is capable of high-volume production using an assembly line, it chooses to produce a variety of products in small lots. Suzumo's strength lies in its ability to design mechanisms that can replicate food processing tasks otherwise done by hand. Deliveries and maintenance services to domestic customers are handled by the company’s sales offices, while overseas they are handled by the distributors. Resident maintenance teams at its service bases give the company an edge over the competition.
Trends and outlook
In FY03/21, the company reported consolidated sales of JPY9.5bn (+6.2% YoY), operating profit of JPY919mn (+20.1% YoY), recurring profit of JPY921mn (+31.1% YoY), and net income attributable to owners of the parent of JPY683mn (+112.4% YoY). Replacement demand for the company's sushi robots increased against the backdrop of growing demand for take-out and delivery in the restaurant industry, increasing mechanization due to the increasing demand for contactless service, and the shift from the izakaya (Japanese-style pub) format to one centered on set meals. In addition, demand for Fuwarica rice-serving machines unexpectedly rose due to changes in the izakaya format. On the profit front, SG&A expenses fell as the COVID-19 pandemic limited sales activities, which contributed to higher profits.
The FY03/22 forecast calls for consolidated sales of JPY10.0bn (+5.4% YoY), operating profit of JPY930mn (+1.2% YoY), recurring profit of JPY930mn (+1.0% YoY), and net income attributable to owners of the parent of JPY630mn (-7.8% YoY). The company believes that even after the COVID-19 pandemic subsides, business and consumer awareness of hygiene will remain high, and takeout and delivery dining will remain popular. It expects this to drive demand for robots specialized for kaiten sushi takeout and Fuwarica rice-serving machines. The company also expects Japanese companies to resume development in overseas markets when the pandemic is over.
The company unveiled a medium-term business plan along with its 1H FY03/20 results. In FY03/25, the last year of the plan, Suzumo targets sales of JPY15.0bn, operating profit of JPY2.3bn, OPM of 15.0%, and ROE of 10.0%.
While the company is in the process of putting together a medium-term business plan, we see its growth drivers broadly breaking down as follows: in Japan, expansion of Fuwarica rice-serving machine sales to lodging facilities, hospitals, and nursing homes, and a move further into the factory-scale equipment market (i.e., systems for making rice balls and packing rice into lunchboxes) where its competitor excels; and overseas, increased sales of compact equipment to growth markets including Asia, North America, and Europe. Global strategies also call for more collaboration with third-party organizations. Projects on this front include a partnership with ZEN-NOH International (discussed later) to help promote rice-based Japanese-style foods overseas. The company has also established a foothold in the Middle East with the help of a private equity fund (equity commitment from investors such as the Cool Japan Fund). With a new management team in place, the company is also making progress with business reforms, nurturing a consensus-based management approach and putting together a medium-term business plan.
Strengths and weaknesses
Strengths:
Sushi robots’ dominant 80% share of domestic market underpinned by the company’s strong commitment to taste
Mechanical technology that brings out the delicious taste of cooked rice
Specialization in equipment that helps the food industry overcome structural shortages in labor
Weaknesses:
Lack of measures to address price-conscious customers
Limited track record in factory-scale equipment
Lack of another ground-breaking product to follow in the footsteps of its sushi robots
Key financial data
In FY03/14, the company spent roughly JPY660mn to build a distribution center on the grounds of the Tokyo Factory.
Recent updates
Acquisition of shares in Japan System Project Co., Ltd. (making it a subsidiary)
Suzumo Machinery Co., Ltd. announced the acquisition of shares in Japan System Project Co., Ltd. (making it a subsidiary).
The company announced that it had resolved to acquire all shares in Japan System Project Co., Ltd. (an unlisted company, henceforth referred to as JSP) at a meeting of the board of directors held on the same day, making it a subsidiary.
The company plans to use its own customer base, with a wide network in the restaurant industry, to expand the sale of JSP's products and services in the areas of labor-saving at restaurants, operational efficiency, and the shift to non-contact. The company also aims to use JSP's communications network technology, and products and services based around the end-customer, in order to create new products and services that reduce labor and increase efficiency in both restaurant kitchens and front of house. In the future, the company will work towards "total solutions for restaurants" by linking hardware and integrating of software.
The stock transfer execution is scheduled for October 1, 2021. In FY02/21, JSP recorded sales of JPY605mn (-14.5% YoY), operating profit of JPY28mn (+300.0% YoY), recurring profit of JPY50m (+614.3% YoY), and net income of JPY31mn (+342.9% YoY). The impact of this matter on the company's earnings forecast for FY03/22 is minor. Please see the company release for details (Japanese only).
Trends and outlook
Quarterly trends and results
Note: Figures above may differ from those shown in company materials due to differences in rounding.
1H FY03/22 results (out November 12, 2021)
Results overview
1H FY03/22 results overview (April–September 2021)
Business sentiment for Japanese companies was sharply polarized. Sentiment in the manufacturing industry improved as exports rose due to the recovery of overseas economies. In non-manufacturing industries, however, personal service and accommodation/restaurant service businesses, which have been severely affected by the pandemic, remained sluggish. As of the time of 1H results announcement, progress in COVID-19 vaccinations was setting off a full-fledged easing of various restrictions placed to combat the virus, and amid such an environment, employment and income conditions were expected to gradually improve, with consumer spending also recovering going forward. The company has changed its segmentation scheme in FY03/20 and now has only one reportable segment, so it no longer discloses information by segment.
Sales in Japan
In the domestic market, although demand for eating out remained sluggish due to the continued state of emergency and priority measures to prevent the spread of COVID-19, demand for takeout and delivery services grew, along with progress in the shift toward labor-saving operations at restaurants. Replacement demand for sushi robots from major kaiten sushi chains as well as demand for sushi robots for takeout services increased. In addition, demand for Fuwarica rice-serving machines from new customer segments continued to expand, to include such customers as hotels, ryokans (Japanese-style inns), and company cafeterias. As a result, domestic sales rose 1.7% YoY to JPY3.4bn.
Overseas sales
In overseas markets, amid the trend toward a return to normal for economic activity, labor shortages worsened, leading to an increased demand for labor-saving measures. Sales of sushi robots showed strong growth among restaurant operators and supermarkets in North America and Europe. As a result, overseas sales grew 90.5% YoY to JPY1.8bn.
Gross profit was JPY2.6bn yen (+33.4% YoY). In addition to strong sales in the domestic market, the recovery in overseas markets contributed to the increase in overall sales. Operating profit increased 252.0% YoY to JPY635mn. Net income attributable to owners of the parent increased 306.3% YoY to JPY476mn, due in part to an extraordinary gain of JPY39mn on the sale of investment securities.
Full-year company forecasts for FY03/22
Consolidated earnings forecast for FY03/22 (out May 14, 2021)
*Net income attributable to owners of the parent
As of the time of the announcement of Q1 results, there was no change in the full-year forecast. Suzumo believes that the effect of the revised revenue recognition standard on sales will be negligible.
Assumptions underpinning earnings forecast
The company expects that even in FY03/22 there will be a further increase in demand for takeout and delivery at restaurants and the ready-to-eat meal industry (core customers to the company), mechanization due to growing non-contact needs, and a shift from the izakaya (Japanese-style pub) format to a format centered around set meals.
The company will thus strengthen efforts to capture labor-saving needs at major kaiten sushi chains and supermarkets. Also, it will take efforts to strengthen sales and product development of Fuwarica rice-serving machines as it aims to tap into new markets, such as hospitals, long-term care facilities, and hotels. The company expects domestic sales of JPY7.3bn (+0.9% YoY). In the overseas market, in addition to taking efforts for labor-saving needs resulting from the expansion of takeout and delivery, the company will strive to construct and expand the market for cooked rice through rebuilding the sales and services network. It expects overseas sales of JPY2.7bn (+20.2% YoY).
On the profit front, the company expects operating profit growth to be modest. It plans to continue investing in equipment and personnel for production in the Cooked Rice Processing Equipment segment and information systems toward further growth. The company also expects an increase in sales-related expenses, which has been on the decline due to the spread of COVID-19. It anticipates OPM declining by 0.4pp YoY to 9.3%.
Medium-term outlook
The company announced a medium-term business plan when it released 1H FY03/20 results. Dubbed Growth 2025, the five-year plan covers FY03/21 through FY03/25.
In FY03/21, the first year of the plan, the company added as key initiatives the strengthening of corporate governance and the collaboration with external partners such as R.T. Corporation Co., Ltd. (unlisted) and THK Co., Ltd. (TSE1: 6481).
New vision: Delivering the delicious taste and warmth of food to people the world over
Basic strategies:
1) Grow and penetrate further in existing markets.
2) Develop new growth areas/businesses.
3) Proactively invest and collaborate to support business growth.
4) Maximize corporate value through business growth and enhanced social value.
Growth strategy: Focus on expansion of existing markets and creation of new markets. Promote existing products in the domestic and overseas markets. Further, in the overseas markets where there is room for growth, strengthen sales, enter business tie-ups for business expansion, and develop and invest in new products. Pursue business strategies by region as follows:
Domestic strategy: Expand scope of cooked rice processing market and strengthen new product development.
Expand market for Fuwarica rice-serving machines (hotels, family restaurants, boxed lunch shops, hospitals/care facilities)
Establish industry-leading products in factory-scale equipment for food factories.
Enhance product development outside cooked rice area.
Spread awareness of SUZUMO brand among consumers (implement self-service machines and where possible have the company’s products in front of the public eye so that cooked rice processing machines will come to be recognized as indispensable everyday products that produce delicious food in a safe and fun way.)
Overseas strategy: Make further inroads in three key markets (North America/Asia/Europe) and create a fourth (Middle East).
North America: Japanese food is already well established. In order to deepen relationships with existing customers and approach potential customers, collaborate with outside parties including potential business alliances, expand sales and service locations, and propose new cooked rice products.
Asia: The market for Japanese food is growing rapidly, along with economic development. Help grow emerging Japanese food markets by supporting inroads by Japanese companies and consult for local companies in areas of product development and quality,
Europe: While Japanese food is becoming more popular, availability of Japanese-style rice dishes remains limited among businesses and consumers. Establish new offices, restructure the sales network, and collaborate with major local businesses to grow the market.
Middle East: Create a Japanese food value chain and develop the market for cooked rice by collaborating across traditional business boundaries with local and Japanese companies, as well as companies handling ingredients and kitchens. In November 2019, the company invested in and entered a tie-up with Bluefin Trading LLC, which develops takeout shops for supermarkets in the Middle East.
-Japanese food is expected to enter the menus of cafeterias (colleges and hospitals) and public schools
-Expand consumption and unearth latent demand for machinery by adopting new business formats
-New proposals for cooked rice processing (branch out from sushi to onigiri rice balls and donburi rice bowls)
-Japanese food is expected to spread in a similar manner in China and the ASEAN countries
-Build partnerships with regional retailers
-Collaborate with external companies to source kitchen machinery, food supplies, and other materials
-Many businesses prioritize the taste (freshness) of cooked rice products more than efficiency (industrial production)
-Establish a sales and service base to act as a European hub
Creating new businesses: The three themes here are customer value, labor savings, and market creation. Create new products and businesses outside traditional frameworks via co-creation with external parties, leveraging acquisitions and alliances.
Strengthening development: Step up hiring of development personnel and reorganize/strengthen the research, development, and marketing teams to develop completely new products that enrich society. Promote open innovation utilizing the company’s external network.
Capital/financial strategy: Aggressively invest in new products, new businesses, capex, and intangible assets to grow the business and maximize corporate value. Basic stance on shareholder returns is to maintain stable dividends. The company aims to conduct proactive investor relations activities for institutional and individual investors and enhance disclosure in Japan and overseas.
- Molds for new product development
- Production capacity and marketing capability to accommodate sales expansion
- IT systems for productivity improvements
Business
Business model
Suzumo manufactures and sells equipment that automatically processes cooked rice into various shapes or dispenses measured amounts of cooked rice into bowls and other containers. Its customers are mainly restaurants, food retailers, and food products manufacturers. Suzumo studies the production stages of a dish and proposes how to automate the steps that involve processing cooked rice so that the finished product has the same quality as that prepared by hand. It also develops and proposes rice dish menus designed to increase rice consumption. Suzumo adds value to its business through such proposal-based approach along with its inventions of new equipment that helps client companies increase employee productivity.
Overview of group companies
The Suzumo group comprises the parent company Suzumo Machinery Co., Ltd., domestic subsidiaries Hokkaido Suzumo Sales Co., Ltd. and SEH Japan Co., Ltd., and overseas subsidiaries Suzumo International Corporation (in the US) and Suzumo Singapore Corporation Pte. Ltd. (a joint venture). In addition, the company also has numerous local distributors in countries and regions around the world.
Parent company operations include its Tokyo Factory and 11 domestic sales bases. Not shown in the figure below is SEH Japan, a group company responsible for OEM sales of disinfectants and other hygiene products.
*Note: Domestic sales companies include Nagano Suzumo Sales Co., Ltd. (no capital affiliation). Group companies in the Cooked Rice Processing Equipment business include the parent company Suzumo Machinery and two overseas subsidiaries
Product lineup
The company offers a range of equipment used to process cooked rice, but its mainstay is the sushi robot, which automates the preparation of sushi rice balls or “sharidama,” turning out up to 80 pieces a minute. Sharidama—traditionally prepared by a dedicated sushi chef—are bite-size rice balls made of cooked rice flavored with vinegar. Major buyers of sushi robot, which sells for a list price of JPY1,370,000 per unit, include kaiten (conveyor-belt) sushi chains and supermarkets. In addition, the company also sells robots for making sushi rolls (sushi rice and other ingredients such as seafood or vegetables wrapped in dried seaweed).
Customers
Suzumo’s major domestic customers include sushi restaurant chains, donburi and teishoku restaurant chains, supermarkets, ryokans (traditional Japanese inns), and hotels. Major customers overseas are the local outlets of the same restaurant chains that buy from the company in Japan as well as Japanese restaurants operated by local restauranteurs.
Restaurants offering rice in their Japanese food menu value not only the presentation of the serving but the ability to serve predetermined portions of cooked rice with high precision and speed. This is important in the production of sharidama (sushi rice balls), but also in the case of rice served in bowls or on plates. At the same time, however, the restaurant industry in Japan suffers from a chronic shortage of workers, and restaurants often hire many foreign workers who are not familiar with Japanese food traditions. This has given rise to strong demand for the standardization of various processes within the restaurant business, including everything from customer reception to food preparation. Suzumo is doing its part to meet this demand with its lineup of compact commercial products, such as its sushi robots and Fuwarica rice-serving machines designed to fit into the kitchen areas of restaurants.
Sales network
To promote domestic sales, the company regularly holds events for potential buyers where it runs live demonstrations featuring the newest cooked rice processing models. Known as Suzumo Fairs, these events are conducted four to five times a year in areas covered by Suzumo’s six main sales offices across the country. In some cases, the company may additionally hold seminars, inviting food industry experts to speak. Throughout FY03/21, the company canceled the fairs or reduced the number of attendees upon implementing strict measures against the infection for these events in response to the COVID-19 pandemic.
Main products put on display at the Suzumo Fairs include the small sushi robots used by a range of restaurants and retail shops selling ready-to-eat foods, along with the patented lineup of robots for other types of cooked rice processing. To attract visitors, the company posts the event schedules on its website and uses the sales people in its sales and local offices nationwide to directly approach customers within their sales territories.
In addition to its regular Suzumo Fairs, every year the company also participates in about five major trade shows for food processing equipment. The company’s salesforce also conducts conventional sales activities, making an appointment and visiting companies individually. In the case of new customers, however, the company says most are not acquired by direct contacts by sales people but rather were first attracted by one of its Suzumo Fairs or its booth at an industry trade show.
Overseas sales
For sales overseas, Suzumo works through its network of local distributors.
The group has one sales office in Singapore and two in North America. The company also has contracts with local distributors around the world that give it a presence in most of the world’s major cities.
Service and maintenance network
In Japan, Suzumo has built a service network that covers the entire country through its sales offices in major cities and local offices in other areas. The company also has contracts with distributors across Japan. Many of Suzumo’s bases carry a sales team responsible for customers in that area as well as resident service personnel that can handle after-sale maintenance and trouble-shooting.
The network is set up in such a way that when there is a need to install new equipment, conduct periodic maintenance, or handle equipment malfunctions, the company can send out a sales person or maintenance worker from the sales office nearest to the customer or the customer’s site of operation. The company noted it was essential to have a nationwide service network because Suzumo’s biggest clients are major sushi, donburi, and teishoku chains that have outlets around the country.
The company’s overseas service and maintenance network mirrors the domestic setup. In addition to the local subsidiaries in the US and Singapore, local distributors in various countries and regions, with whom Suzumo has distribution contracts, handle after-sale services (e.g., equipment installation and trouble-shooting) and maintenance work.
Business description
Disclosure by business segments
The company used to break down its businesses into two segments: Cooked Rice Processing Equipment and Hygiene Supplies. This segmentation scheme continued through FY03/19, but starting in FY03/20, the company combined these two segments into one reportable segment. Suzumo explained that its Hygiene Supplies segment was small in terms of sales and earnings, and judging from the group’s current business operations as well as the management and internal reporting structure, the rational decision was to combine the businesses under a single segment. The figure below shows segment sales and operating profit for past years under the old segmentation scheme.
Note: The company had two reporting segments through FY03/19, but starting in FY03/20 has only one reporting segment
For the purpose of discussions in this report, we use the sales breakdown the company uses in its supplementary materials to the official financial reports, such as its quarterly results briefing materials. This breakdown divides company sales into three categories: proprietary sushi robots; third-party rice cooking-related equipment; and maintenance, other. Comparing this to the old segmentation scheme used through FY03/19, we note that sales under the Cooked Rice Processing Equipment segment would be spread out among all three of these new categories (proprietary sushi robots, third-party rice cooking-related equipment; and maintenance, other), while sales under the Hygiene Supplies segment would come under the third-party equipment category. (Note: the company does not disclose operating profit for the three business categories.)
Note: Figures derived from company’s supplementary IR materials, and may not match totals reported for segments
Products for stores and commercial kitchens (compact equipment)
The company’s best-known products are its sushi robots for making sharidama (sushi rice balls) and sushi rolls, and its Fuwarica rice-serving machines used to dispense precise portions of rice for dishes served in bowls or on plates.
Sushi robots
Suzumo’s first sushi robot that came out in 1981 was called the “automatic Edo-style sushi machine.” In a traditional sushi restaurant, the professional sushi chef hand-presses the sushi rice into a sharidama and puts the fish or other topping on it in front of the customer. By inventing a machine that could replicate the gripping and forming techniques of a master sushi chef, the company had hoped to bring down the price of sushi and make it more affordable.
The list price of the company’s sushi robots is JPY1,370,000.
The number of units an average customer buys varies greatly depending on the nature of the customer’s business, but the company notes that domestic kaiten (conveyor-belt) sushi chains buy anywhere from one to four sharidama robots per restaurant. In addition to a sharidama robot, a typical kaiten sushi restaurant installs four other kinds of processing equipment: a sushi roll robot, gunkanmaki (warship roll) robot, automatic sushi roll cutters, and a cooked rice mixer that automatically mixes vinegar with cooked rice to makes sushi rice. According to Suzumo, busy restaurants buy one extra sharidama robot (as this machine always receives the heaviest use) and one extra sushi roll robot. This means some sushi chains install around four to seven of its equipment per restaurant. In cases where kaiten sushi restaurants serve rice-based dishes other than sushi, such as curry rice, they may also buy the company’s Fuwarica rice-serving machines (described in more detail later), which would bring the total number to eight.