Oct. 23, 2013 Japan-Netherlands Smart Agri Seminar

Making Vegetable Production a Growth Industry

1. Outline of Kagome’s fresh vegetables business 2. Achieving growth industry status through vegetable farming complexes 3. Cooperative sales and Asia market development Kagome Co., Ltd., Granpa Co., Ltd.

Japanese are among the world’s leading consumers of processed tomatoes, while consumption of fresh tomatoes remains sluggish World tomato production Fresh 90 million t = 14 kg/person and per-capita consumption Processed 40 million t = 6 kg/person (6.5 billion people) Total 130 million t = 20 kg/person

Russia 15.0

Italy 27.6

China 21.0

France 9.8 UK 8.3

US 9.2 S . Korea 8.5 Japan 4.8

India 7.7

World tomato production (fresh + processed: 10,000 t/year) Japan

China

Mexico 10.5 Brazil 8.5

Japan’s tomato shipments S hipments (10,000 t)

Crop are a

(Ha)

Leading 20 nations

Total

proce ssed

Total

proce ssed

1987

84

662

55,092

1990

14,200

1,060

65.9

7.6

1997

78

1,637

73,494

2000

13,600

910

70.9

6.5

2007

75

3,360

111,328

2010

12,300

380

61.2

2.7

Source: FAO data

Source: MAFF shipment statistics

Japan consumes 620,000 t (4.8 kg/person) of fresh tomatoes and 720,000 t (5.8 kg/person) of processed tomatoes, including imports Kagome Tomato Discoveries  Aiming to increase Japanese tomato consumption to 20 kg/person!

A Procurement Network Made Up of Large-Scale Vegetable Farms and Fresh Produce Centers Four largest producing regions in Japan

Chitose Farm 4.0 Ha

Nine large-scale vegetable farms General contracted farms (30 farms) Seven fresh produce centers

Nationwide tomato production (2006) Total land area 13,000 Ha Greenhouse land area 8,000 Ha Fertigation 500 Ha Shipments 650,000 t

Azumino Vegetable Farm 5.0 Ha

Sera Vegetable Farm 8.5 Ha Iwaki Onahama Vegetable Farm 10.2 Ha

Hibikinada Vegetable Farm 8.7 Ha

Minori Vegetable Farm 1.3 Ha Kada Vegetable Farm 5.2 Ha

Shimanto Mihara Vegetable Farm 2.7 Ha

Yamada Midori Vegetable Farm 3.0 Ha

Positioning of Kagome’s Fresh Tomato Products (1) Kokumi Tomato (2) Variety Tomato (3) Delica Tomato

High-lycopene

High priced (high quality, high sugar content) JPY600

High-sugarcontent tomatoes

Plum S nack tomatoes

Round bunch Medium bunch Mini-tomatoes

Momotaro S old in packs

Round

Vegetables (Side dishes) (Cooking)

Kids’ cherry

Medium tomatoes Sugar content 10

Sugar content 3

Cooking tomatoes

Fruit (dessert)

Three main characteristics of Kagome tomatoes S mall boxes Tasty type Momotaro S old loose

Firm type JPY100

(1) Rich in lycopene  Removes active oxygen (2) Delicious base  Rich in glutamic acid (3) Firm texture  Suitable for cooking

Regular priced (Casual)

Local packing

Farm

Establishing farm

Shipping

Delivery inspection

Fresh produce center Sorting

FREST System Monthly/weekly/ daily ordering

Delivery

Ordering

Field service Field person

Production plans

Selecting varieties

Selecting varieties

Mass merchandisers Co-ops

Stores Joint purchasing

Me nu proposals PO P support Product display planning Proposing events Crossme rchandising

52-week Business plans

Purchase of entire volume HR development

Fruit and vegetables center

Logistics

Consumers, union members

Uniform Flow of Products, Prices, and Information from Farm to Store

Merchandising support Store staff

Product plans

Sales plans Demand forecasts

Salespersons

plans

HQ Restaurant users Venders

Requires human resources able to make judgments in response to weekly/daily volume fluctuations (in the company, at competitors, and in the market). (Computer systems cannot resolve this.)

Typical Vegetable Production in Japan (2010) Item

Crop area Shipping unit Shipping volume

Unit

Ha Kg/sq. m t/yr.

Retail price

JPY/Kｇ

Wholesale price

JPY100 million/yr.

Home consumption

kg/yr.· person

Household consumption

t/yr.

Processing/ commercial

Leeks

Lettuce

Spinach

Tomatoes

Strawbe rries

Cucumber

12,000

6,000

11,700

23,100

20,800

21,800

5.2

2.8

4.3

1.6

2.5

1.0

624,000

168,000

503,000

370,000

510,000

218,000

350

1,000

280

310

200

430

2,180

1,680

1,380

1,140

1,020

950

3.7

1.0

2.6

1.7

1.9

1.2

480,000

130,000

338,000

221,000

247,000

156,000

23%

23%

33%

40%

52%

28%

Vegetable Farming Complex Plans to Accelerate Industry Growth

Long-terrace tomato cultivation

Dome vegetable plant factory

Long-terrace bell pepper production

Elevated bed strawberry production

NFT leaf-vegetable cultivation

Cucumber fertigation

Realizing year-round supply and stable management through concentration on five growing facilities with advanced environmental controls nationwide.

Use of New Energy in Vegetable Growing Facilities Overseas

Auxiliary LED lighting between trees

(Japan)

Greenhouses fitted with solar panels

(France)

Trigeneration using CHP

(Netherlands)

Rotating Cultivation of Leafy Vegetables in an Airdome Space

70 domes in use or under construction across Japan （2013）

Business/capital partners



Area inundated by tsunami in Great East Japan earthquake

Affected Coastal Farmland in Three Tohoku Prefectures Damaged by Tsunami M ap sh o ws areas n o rth o f the F u k u sh ima Daiich i Nu clear P o wer P lan t. Names o f mu n icip alities are n ot u p to d ate. Areas in u n d ated o n th e Pacific sid e o f th e To h o ku regio n are sh o wn o n th e web site b elo w.

Extent of inundation S o u rce: Geo sp atial In fo rmatio n Au th o rity of Jap an

Large-scale farming complex planned in Hamadagawa Rikuzentakata

Agri-Frontier project planned in eastern Sendai

Sendai Plain Se ndai Natori Iwanuma Watari Yamamoto

Damaged Ha

Rice fields

Vegetable fields

Iwate Pref.

1,172

666

Miyagi Pref.

12,685

2,317

Fukushima Pref.

5,588

335

Fukushima agricultural recovery project planned in Kashima and Haramachi Minamisoma

Michisaki, which has Provided Support for Earthquake Recovery, Prepares to Begin Operation Name Address

Michisaki Co., Ltd. 63 Aza Hosogawa, Gamo, Miyagino-ku, Sendai, Miyagi Pref. 983-0002 Representative Mamoru Kikuchi, Representative Director Founded July 3, 2012 Capital JPY17 million Employees 20 Lines of business Production of agricultural produce using fertigation Processing and sale of agricultural produce (cutting plant) Main produce Strawberries, tomatoes, spinach, leaf lettuce Production area 27,000 sq. m

Total investment JPY1.3 billion Recovery subsidies JPY900 million

Agriculture Involves Higher Risks than Other Industries’ (Particularly Regarding Sales and Supply/Demand) • Business risks due to changes in international conditions Rapid increase in low-priced imported vegetables, rising energy prices

• Operating risks of managing large-scale facilities Lower than expected yields, collapse of facilities, outbreaks of agricultural pests 年実 al 績 p rice 2 0 0 606 actu 2 0 0 707 actu 年実 al 績 p rice 2 0 0 808 p年u調rch 達 ase 2 0 0 808 actu 年実 al 績 p rice 2 0 0 909 cu mu上lativ e 年積

• Demand/Supply, and Competitive Risks in Sales

Home 家庭用全国（実箱/週） us e nationwide (Actual box/week)

Supply < sales: Loss of sales opportunities, penalties Supply > sales: Losses on disposal of products, clearance sales Price competition with farmers in producing areas, entry of other firms and PB

Week 6 Week 1週 週 1 1Week 週 1 Week 6週 2Week 1週 1

6

11

16

21

2Week 6週

26

Week 3 1週 31

Week 3 6週 36

Week 4 1週 41

Week 4 6週 46

Week 5 1週 51

Responding to Changes and Growing Demand through Nationwide Cooperation 4,000

3,500

2004 high 0 4高値 2005 high 0 5高値 2006 high 0 6高値 2007 high 0 7高値 2008 high 0 8高値 2009 high 0 9高値

Tokyo market 東京 市場高値 high prices

3,000

2,500

2,000

1,500

1,000

500

0 １週 Week 1 ６週 Week 6 １１週 Week 11 １６週 Week 16 ２ Week １週21 Week ２６週26 Week ３１ 週31 Week ３６週36 Week ４１週41 Week ４６週46 Week ５１ 週 51

A nationwide produce distribution group is forming! EIGHT CO-OPERATIVE BUYING CO.,LTD

M aruka-sapporoseika

Tokyo Tama Seika

Osaka Daika

Tokyo Seika

Yokohama M arunaka Seika

Fukuoka Dydo Seika

Tokyo Senju Seika

M eika

The goal is to cooperate to create demand for domestic vegetables by establishing promotion councils for individual types of produce and aiming to industrialize vegetable farming through means such as mutual assistance among producer corporations, logistics cooperation, development of a “sixth industry” (primary * secondary * tertiary), and sales support.

Outline of Tomato Production by Region and Varieties in China Top five tomato producers 2006

Pink tomatoes are preferred in the north, red in the south Climate, culture, history, . . .?

10,000 t

Hebei Prov.

555

Henan Prov.

510

Shandong Prov.

508

Xinjiang Uyghur AR

490

Jiangsu Prov.

177

Source: China Agriculture Yearbook 2008

Pink 40% Red 50%

Tomatoes for processing Red 100%

Heated greenhouses, sunlit greenhouses

Temperate

Plastic tunnel culture Highland outdoor Red 100% cultivation

Pink 90% Red 10%

Subtropical

Lowland outdoor cultivation Red 100%

Tropical

Taking on the Challenges of Fresh Tomato Production and Sale to the Upper Classes in China China’s fresh tomato production leads the world at more than 30 million t/year! Heilongjiang

Jilin Xinjiang Uygur ZIzhiqu

Liaoning Inner Mongolia Beijing Tianjin Ningxia

Hebei Shanxi Shandong

Qinghai Gansu

Henan

Shaanxi Tibet

Jiangsu Anhui

Sichuan

Hubei

Shanghai Zhejiang

Chongqing Jiangxi Guizhou

Yunnan

Hunan

Guangxi

Made by Japanese

Fujian

Guangdong

Hainan

Organic delivery services (Shanghai, Beijing, etc.)

Sunlit greenhouse (winter)

Multi-span greenhouse (summer)