Model case 09

The Importance of the Capacity to Change

Transforming a Dilemma into an Opportunity—Reexamining Sales Methods to Triple Sales

Otafuku Sauce Co., Ltd.; Hwisung Hong Partner TSS Production, Inc.; Michihiro Shirakami

Otafuku Sauce is currently engaged in efforts to communicate the appeals of konamon (flour-based) dishes in Europe, the US, and Asia, and in turn to drive exports of its sauce products. Although to date the company has developed new sales channels through face-to-face sales activities, during the COVID-19 pandemic, these methods these methods were no longer viable. “If we cannot connect with our overseas customers, we cannot survive”—this was the message from general manager of the overseas sales department Hwisung Hong and his team. In response, they sought to develop new sales channels through online cooking classes and YouTube videos, and as a result they achieved a 40% year-on-year increase in overseas sales. The secret to the team’s success was their joint work with TSS Production, a company that supports the development of overseas sales channels through content production. Through the use of media, even regional companies can connect directly with overseas retailers and consumers to open up new channels. Below we delve further into this success story.

Chapter 01

Becoming a Media Outlet to Counter the 50% Reduction in Sales Caused by the Pandemic

This year, Otafuku Sauce is commemorating 100th anniversary of its founding. After the war, okonomiyaki—a pancake-like dish made with flour, cabbage, and other savory ingredients—became a so-called soul food for the people of Hiroshima, helping to keep spirits up during the post-war recovery. In 1998, the company set up a local subsidiary in the US. As it was such a simple dish to make, using just flour and cabbage, and as it could be customized in line with the food cultures of each region, the company hoped to spread the joys of okonomiyaki across the world. The company trained locals to equip them with the necessary skills for store management, and today there are approximately 400 restaurants overseas that mainly offer okonomiyaki dishes. The company’s overseas sales department is comprised of six employees, each in charge of different countries. To date, they have exported the company’s main product, Okonomi sauce, to more than 50 countries in Europe, the US, and Asia.
 The department’s main approach is face-to-face sales. According to General Manager Hwisung Hong, “We would spend a third of the year overseas engaged in sales activities and negotiations.” However, the spread of the COVID-19 pandemic saw opportunities to meet with clients face to face disappear, and at one point the company’s sales fell by more than 50%.
 Major cities overseas, where the majority of the company’s clients were based, all went into lockdown. “Around 70% of our transactions were commercial, with restaurants and okonomiyaki shops, for example. It was also the first time we had used remote working systems, and we were at a bit of a loss as to what to do,” says Hong. The department thus used online means to discuss ways to counter this drop in sales. Up until then, household sales only accounted for around 30% of the total. The department knew that their survival was at stake unless they connected with these general consumers and increased this ratio.
 Their solution was to become a media outlet themselves. They uploaded more than 150 recipes onto social media, and at the same time hosted online cooking classes. The department also linked these initiatives to their e-commerce website. Due to time differences, in Europe, local cooking instructors took charge of the classes, while in Australia, where there was little time difference, department members themselves led the cooking classes. Moreover, the department also planned, filmed, and edited more than 80 videos for YouTube. Elsewhere, an okonomiyaki recipe video posted by a popular French YouTuber received 9,000 views, with comments even coming in from Switzerland and Italy.

Chapter 02

Supporting SME’s Overseas Expansion Through Video Content

The department notified local retailers and buyers prior to the release of their YouTube videos in France. Hong says, “This enabled the videos to reach both consumers and commercial customers at the same time, and since then we have continued to maintain our strong business relationships. If it wasn’t for the pandemic, we wouldn’t have come up with this concept.” As a result of these efforts, in 2021 the company achieved a 41% increase in its overseas sales.
 Behind the scenes, the department’s media activities were supported by TSS Production, a wholly owned subsidiary of Shinhiroshima Telecasting, and a company with which Otafuku Sauce had built a strong track record. TSS is a production company from Hiroshima that supports the development of overseas sales channels through the creation of video content. In 2007, TSS began producing a tourism program for overseas TV, but according to TSS’s Doa Shirakami, “We couldn’t create a mechanism where we could generate profit. Thus, we launched a business initiative to create a new Japanese food boom in France, shifting away from sushi to okonomiyaki. This is when I met Mr.Hong.”
 In 2012, TSS teamed up with a popular TV program in France to broadcast a promotion for Hiroshima-style okonomiyaki. Elsewhere, Hong held sales demonstrations in Toulouse and Paris, and long queues formed outside the stores. These activities helped okonomiyaki to skyrocket in popularity, and in 2014 the company saw a threefold increase in its sales in France compared to two years prior.
 Having enhanced its knowledge of overseas markets, TSS established Japan Foodies Choice to help regional SMEs open up new overseas sales channels. “There are many SMEs in outlying regions who offer outstanding products. But they face many obstacles when expanding overseas, be it the lack of language ability; a lack of understanding of export rules, sales methods, and sales channels; or inadequate management resources,” says Shirakami. TSS helps produce short movies—essential to online negotiations and promotional activities—and supports sales tests and sales channel development overseas. In a joint initiative with a food manufacturer from Kyoto, TSS helped the manufacturer exceed transaction targets by an astounding 288% despite being amid the pandemic.

Chapter 03

Products Sell Even During a Pandemic. Overseas Markets Are Full of Business Opportunities

Although TSS’s initial focus was on tourism, the lack of monetization opportunities led it to switch its attention to linking regional businesses with overseas retailers. “During the pandemic, I realized that while you cannot make a business from tourism without the movement of people, food and other products will sell no matter what. There was a really positive response,” Shirakami says.
 From its experience expanding into a wide range of regions including France, Vietnam, the US, and Thailand, TSS has accumulated an abundance of expertise. For example, it understands what sells and doesn’t sell in a particular country, and knows that providing samples and giving talks to importers prior to selling to restaurants is highly effective for increasing shipment volumes. Shirakami adds, “Our role is akin to that of a television station, arranging programs in the timeslot to ensure the highest ratings.” Using its expertise on local needs and its familiarity with various areas, TSS works to ensure quick results. Moving forward, the company aims to grow its unique operations as a “local production company with trading company functions”.
 Meanwhile, the overseas sales department at Otafuku Sauce, which switched its focus from commercial sales to household sales during the pandemic, has successfully boosted its household popularity through maximum use of media, an approach whose value the company knew from previous experience. “We continue to use our self-produced content to communicate with more than 400 okonomiyaki stores around the world, and in turn they have taken on the role of local sales representatives,” says Hong. In 2020, Otafuku Sauce renewed its lineup of retail products, and released a new vegan product in line with high demand in Europe. Further, in April 2021, the company quickly responded to changes in EU processed food regulations.
 Overseas markets present numerous business opportunities. With the market in Africa set to grow, this year, Otafuku Sauce is sending its first-ever shipment to Kenya and is aiming to further increase its sales channels. Mixing local ingredients with a simple base of flour and vegetables is both appealing and exciting. As such, in the future, we are sure to see an even larger number of okonomiyaki fans.

When things have not gone to plan, both Otafuku Sauce and TSS have found success overseas by carefully and calmly looking at what elements are indispensable and where their customers are. Rather than sitting back and being satisfied with their existing product and content capabilities, both have taken the initiative and looked at different approaches to generate innovation. Remote regions in Japan are home to many fantastic products, and there is demand for these products among numerous importers and consumers overseas. “We want to extend a helping hand to SMEs who want to grow their channels overseas but lack the strength and ability to take action.”—Looking ahead, demand for assistance like this from TSS will no doubt increase.
Written by: So Yanagimoto

[Otafuku Sauce website: https://www.otafuku.co.jp/corporate/ ]