NC hopes to replicate Morinaga story with other food processors

Gov. Pat McCrory, left, and Gota Morinaga, chairman of Morinaga & Co., chat in June before the official groundbreaking ceremony for the 120,000-square-foot Hi-Chew candy production facility in Mebane. The plant should open in summer 2015.
Gov. Pat McCrory, left, and Gota Morinaga, chairman of Morinaga & Co., chat in June before the official groundbreaking ceremony for the 120,000-square-foot Hi-Chew candy production facility in Mebane. The plant should open in summer 2015.

When one of Japan’s largest candy sellers looked to expand into the U.S., executives visited 50 locations in an exhaustive coast-to-coast study of where they should build a new confections plant.

Eventually, they chose a patch of land off Interstate 40/85 in Orange County over locations in Oregon, Georgia and Canada. The Morinaga manufacturing facility is now under construction on 21 acres, and the plant is set to open next year as the maker of a chewy, fruity candy called Hi-Chew.

Hi-Chew is popular here in Japan, ranking among the best-sellers of the 40 Morinaga products that dominate shelves in subway shops and groceries.

Hi-Chew has been sold on a limited basis in the U.S. since 2008, but officials here expressed broad ambitions and said they see the U.S. as an untapped market. They will employ 90 people in Mebane to make Hi-Chew in the hopes of at least doubling its sales, currently at about $200 million.

If successful, they plan to expand, company executives said here in interviews, and could end up creating as many as 200 jobs. When it opens, the average salary at the plant will be about $38,000, though most jobs will pay less.

For state officials, the Morinaga story is one they hope to draw lessons from – and repeat with other companies – as a solution for long-term job losses in the manufacturing sector. The business of manufacturing food, and all that goes with it, can be a bright spot, especially for rural North Carolina, said state Commerce Secretary Sharon Decker.

Agriculture leads the economy outside the Raleigh to Charlotte crescent. And where jobs in furniture, textiles and even tobacco have declined, there is opportunity in growing, processing and distributing food, officials say.

“It’s critically important” as a way to grow jobs in the state, Decker said.

Decker’s office has studied how food moves in and out of the state to see whether there is a chance to help keep processing in the state, or to foster growth through importing and exporting.

“There are a lot of international foods companies – and we all need to eat,” Decker said. “We think part of the answer for rural North Carolina is around food processing. ... North Carolina is an agricultural state so the notion that food would be a part of our focus makes a lot of sense.”

Peter Thornton, an assistant marketing manager who is focused on international business for the state Department of Agriculture, joined Decker as they visited business interests in Japan this month.

In a small conference room at the state’s Japan Office in Tokyo, they met with a Japanese importer of specialty foods, including creamed honey products made by Triangle-based Vintage Bee. Joshua Tapp, a manager, said about 10 percent of the company’s sales are in Japan and China.

The meeting here focused on small but important details about what customers in Japan like – and how North Carolina companies might fill that need.

Yuko Okubo, president of importer YU for YOU, pulled out a photo of the Tapp family that makes the honey back in North Carolina. Okubo said she keeps the photo handy because buyers want to see who made the product.

She also said the cost of moving creamed honey from North Carolina to Asia led to a profitable realization through trial and error: The packages of honey were too pricey in regular food stores. But they sold well in gift stores as a premium product at $8 for a package of four servings.

Dealing internationally has its pitfalls. Smaller companies can be intimidated by the process or by the challenge of lining up financing, Thornton said. In some cases, transportation and other costs alter pricing to make a product uncompetitive.

Patrick Ford, the international marketing director at the Raleigh company that makes Bone Suckin’ Sauce, a barbecue sauce, has seen a lot of success exporting abroad. But he said he gave up on Japan when government officials wanted all his ingredients and the actual recipe as part of the customs process.

Wages an issue

The Golden Leaf Foundation, which uses money from the national tobacco settlement to stimulate jobs in previously tobacco-dependent areas, is also spending money to help create food jobs.

Dan Gerlach, Golden Leaf’s executive director, acknowledged in an interview and follow-up email exchange that many food jobs are lower wage and require little training. But he said that’s a match for a segment of the state’s population that needs work.

“Food processing is important to North Carolina because it provides additional markets to North Carolina farmers, and because the skill sets needed match up with the labor available throughout North Carolina,” Gerlach said.

“Food, by its perishable nature and by the productivity of the American farmer, can be competitively manufactured here in our state.”

Since 2008, Golden Leaf has made grants for a Nash County company that makes a nut-based spread similar to Nutella; a Pender County company that smokes seafood; a Montgomery County company that packages food; and a Robeson County sweet potato processor.

All of those are part of the effort to have food play a bigger role in job creation.

U.S. growth strategy

Morinaga officials here said they hope their products catch on in the U.S. – and that it’s an important part of the company’s efforts to grow.

Morinaga is a household name in Japan, much like Mars or Hershey is in the U.S. But its history has been characterized by slow and steady growth in Japan, with limited marketing efforts in the U.S.

That is changing and North Carolina will play a part. Japan has an aging population and a declining birth rate, and officials said they must look outside the country to grow. They said other Japanese companies are taking a similar approach if possible.

Takashi Komatsu, a top executive at Morinaga, said North Carolina has a lot going for it. The biggest factors in the decision to build in North Carolina were proximity to East Coast markets; the state’s port operations on the coast; the education of workers in the state; and incentives, which could total about $2.5 million on the company’s planned investment of $48 million.

There was also the benefit of proximity to a supplier, Nitta Gelatin, a Japanese-owned company that has a plant near Fayetteville.

“Nitta said to us that it was good to do business here,” Komatsu said.

Komatsu and Hanji Ikeda, chief manager of planning and development overseas for the company, said the educational level of the North Carolina worker gives the company confidence in its plan.

They also shared details of a possible expansion, first by growing sales of Hi-Chew and then by introducing at least one new product line. The company sells a dizzying array of products here, including caramels, chocolates and ice cream treats.

But they were uncertain of what might be next.

For now, the focus is on Hi-Chew. The fruity candy is already available at many Target stores (in the Asian food section), at checkout counters of some Five Below stores and elsewhere in the Triangle. The product is being made in Taiwan until the Orange County plant opens.

Tasha Pinkney, 47, of Cary was working the cash register recently in Apex at a Five Below store, where Hi-Chew is prominently displayed.

Pinkey said she had no idea the little candy was a part of shifts in the global economy or efforts by the state to grow jobs.

All she knew was that the packages were selling fast.

“It’s a very good seller,” she said. “I buy them myself. I love them. They’re delicious.”