Altemira’s Can-to-Can cycle the sustainable model for aluminium

Monozukuri is the relentless quest for perfection, and in manufacturing the kaizen philosophy as well as the Just In Time (JIT) processes have become famous throughout the world. In today’s modern business practices, QCD; quality, cost, and delivery have become critical for companies to excel on a globalized stage. Can you give us your take on Japanese monozukuri, and what do you see as the key advantages for Japanese firms that operate internationally?

The essence of monozukuri is still very important and in my opinion, it has remained unchanged for the last 20-30 years. You’ve mentioned philosophies like JIT, QCD, 5S, or even kaizen. In production, those are the key essences of monozukuri and in today’s society, they are still valid. Japan still has a competitive advantage in those basic monozukuri principles.

China is a country that is catching up, especially in regard to those basic monozukuri principles. At my previous company, we had a factory in Mexico, China, and Thailand, and to me, it is amazing to see how Chinese monozukuri capabilities have developed in a very short period of time. However, having said that Japan still excels at these principles and that comes down to Japan’s genba capabilities.

A fundamental issue sounds very basic; finding very small, tiny signs of failure and making quick adjustments. As you know many Japanese companies hold meetings at their genbas first thing in the morning to discuss what happened yesterday and what will be the focus for today. This quick feedback system is very simple, but also very critical. This is why Japan still holds that basic advantage.

At the same time, the question then becomes, “Can Japan win the global monozukuri competition with just these simple monozukuri essences?” My answer is no. Japanese monozukuri in my opinion should focus more on value. It is very good at cost reduction, quality improvement, and meeting customers’ expectations. I start to think however, have we really focused on the value that is good for the customer? In my opinion, it is not enough. In Japan, OEM is very strong, and it is within a pyramid structure with a very tight supply chain. There is a primitive focus on customer requirements and sometimes companies go over spec. This was the strength of Japan for many decades, and while it is still important when thinking about the next 10-20 years Japanese monozukuri companies should shift their focus to value creation.

You mentioned the action on the genba as one of the key advantages, and I presume you are talking about experienced engineers who have been on production sites for decades now. As you know well, this is under threat as Japan’s population continues to plummet. With a low fertility rate and an aging population Japan’s demographic line is predicted to fall well under 100 million by 2060, with well over 30% of the population over the age of 65. To combat this reality, we see AI and digital technologies being introduced more, and at the same time firms go overseas for new clients, opportunities, and labor. How is your business reacting to this population shift?

Honestly speaking, it is a monumental challenge. Those experienced workers, you know the ones that are 50-65 years old, have amazing skills. We need to transfer those skills and that know-how to the next generation. I was under the impression that was a strength of Japanese genba, but those people are now retiring and there are becoming issues with transferring those skills. Those people have hidden skills, and are able to differentiate things just by perception, and those skills simply cannot be transferred through traditional educational techniques.

The question then becomes, “Can AI and IoT replace those workers?” I think to some extent yes, but it is certainly not perfect. We at Altemira find that the genba is struggling, and that struggle comes from the technology skill transfer.

When we talk about packaging, a key point the media is eager to discuss is its impact on the environment. Former prime minister Suga has said that Japan must be carbon neutral by 2050, and if we talk worldwide the UK banned plastic in stores in 2015. We know that Altemira launched its Can-to-Can project. Could you tell us a little bit more about this project, and more broadly, your efforts toward recycling?

That is a very sensitive topic because our customers produce both canned products and PET products. I would like to really tell you about the strengths of aluminum cans, but that will damage my customers’ business to some extent, so I need to be quite careful.

You are right, PET bans are a global trend, but not in Japan. People like PET bottles, and while the recycling ratio is not that bad, PET-to-PET is not that good, in fact, I think it is around 20% whereas cans are around 70%. From a CO2 reduction standpoint, can-to-can is way better than PET-to-PET.

Aluminum cans are very good. Our can-to-can cycle starts at Altemira where we are producing aluminum cans, and once a can is disposed of it goes to our recycling process which is under our subsidiary company Altemira Techno Solutions. They then provide to MA Aluminum who proceed to melt, cast, and roll the material. We are the only company within the industry that can do this entire process within only the group. Toyo Seikan announced that this year they will also start this kind of can-to-can process, but it is not by a single company and their size of recycling is way lower. Altamira is very uniquely positioned because of the scale of our project and the fact that it is all under one company.

Can recycling ratios in Japan are around 70% as I mentioned, which is way higher than in any other country. Japan is excellent at material segregation when it comes to recycling, and in fact, children are taught at a very young age how to do it. Recycling systems are well established, therefore we can collect good quality cans. We have furnaces to melt what we call UBC, which stands for used beverage cans. After that, the cans are recycled and reproduced. This is a big appealing point for our company. Let’s take the process of producing using UBC scrap versus producing using primary aluminum ingots, there is probably a 40% difference in CO2 reduction. The plan is to make an announcement soon on our website about our carbon-neutral policy and I think that is coming perhaps in May 2023.

In July 2022 you launched the new group structure which includes Hanacans, Sakai Aluminum, and MA Aluminum. Can you tell us a little bit more about the synergies that this new group structure brings to your operation and what are the more immediate goals that you’ve set out to accomplish under this new structure?

Okay, I can talk about this from the can side, the sheet side, and the whole group side. Let me start with cans, and what used to be 4 big companies has turned into 3 big companies. Showa Aluminum Cans has now become Altemira, and Showa used to have 3 factories in Japan. Altemira Cans used to be called Universal Cans and they had 6 factories in Japan. Together we now have 9 factories in Japan, and although they are all producing the similer product lines there are some unique aspects to each. Universal for instance used to produce the cans for Monster Energy, and if you ever touch those cans you will feel a tactile element to them. By merging we have combined two unique production methods and cultures, and we are already finding areas of improvement.

Due to the COVID-19 pandemic, we could not do frequent exchanges of people, but now we can and we now have people very frequently visiting different factories and sharing knowledge. The first thing I launched as part of the new group structure was a quality improvement meeting. There we established the quality improvement committee, and there have been many cross-factory discussions on how to solve problems. I think we have plenty of areas where we can find synergy, but most importantly synergies come from the buying and selling side.

In terms of selling, now that we are a bigger company our volume is 2x which also means more negotiations. From a buying point of view, we also are able to buy from the same companies we had before but at a different price and different terms. Basically, we are now reaping the benefits of economies of scale. While we do have operations in Vietnam with Hanacans, that operation is a little bit different. Different in this sense means very simple, mass production.  Customer requirements in Japan are very different from the rest of the world As you can probably guess, guidelines for Japanese quality are very strict. This is why we don’t have too much exchange of information between Vietnam and Japan, and why I said their operation is a little different.

In regards to Sakai and MA Aluminum, while their final products are different, at the end of the day they are both aluminum companies. In fact, I was at Sakai last week and they were holding synergy discovery meetings to try and find some synergies between themselves and MA. Some processes are very similar, so in my opinion, it would be beneficial if both companies utilize each other. Although that is the case, compared to the can side of our business the synergies on this side are smaller.

You mentioned different types of finishes and coatings there, which your company can do for your clients. Branding and innovation are critical for the major players here, and having something that stands out on the shelf is how a customer decides more or less whether to choose a product or not. You have matte finishes, laser engraving, lithographic printing systems, and many more. Could you tell us more about these unique finishes that you’ve been able to develop and how you are helping clients in niche areas of the beverage industry stand out on an international stage?

On January 2nd and 3rd every year, there is the Tokyo-Hakone Round-Trip College Ekiden Race. The two-day race is broadcast every year on television with runners alternating 20km each for a rough total distance of 100km each day. We produce the same colors for Sapporo Beer which is a supporter and sponsor of this Tokyo-Hakone race. We produce designs for them based on each of the qualifying college teams. Once qualification is over Sapporo will notify us so what we have to do is reproduce each of the exact 20 school colors, and as you can imagine that is not easy. I believe Sapporo is sure that only Altemira can produce these products for them, and they really count on us to come through for them.

This is one example of what we are doing in terms of printing in special ways, and for this particular project color is very important. Take for example a company like Budweiser, they haven’t really changed anything branding-wise in 20 years, but Sapporo on the other hand changes so often, and they are not alone. Many Japanese brands are always shifting and changing things so frequently. Now we are not alone, and companies like Toyo can do this too, but you have to ask why a company like Sapporo approached us rather than our competition. I think it comes down to our uncanny ability to create exact colors and maintain high quality.

Is this technology available for European or American customers?

It is available, but the uniqueness of Japan is the specific requirements. That frequency of change makes those clients very specific in nature. The SKU range in Japan is massive. When I visited Vietnam earlier this year, there were maybe 20-30 varieties of beer. Compare that to Japan where there are literally hundreds of different varieties, brands, and SKUs. We need to switch our production frequently and flexibly while making sure that we are meeting their standards. That is very unique.

Within the Altemira group you supply sheets and foils that you can create at a purity of 99.999%. You have one of the largest shares in the industry and you operate this business through Sakai and MA Aluminum. Capacitors and other battery-related items are a big use case for these products, but could you tell us in terms of diversification what new industries are you looking to grow in for that side of your business?

EVs are a clear answer, and the aluminum foil we are producing is used for the exterior of the batteries. I think this is a very promising area, but due to the semiconductor supply issues, production is not growing as we expected. To be honest it is still in the recovery process. If you order an EV in Japan today you may have to wait more than 1 year for certain models, and that still continues to this day. While it isn’t growing as expected, in the future it will surely grow. Toyota’s CEO has made it clear that they are heading in this direction. We actually do have a good market share for the exterior of these batteries, so for our company, this is going to continue to be a very important area.

Japanese carmakers are a little behind in the EV race, and Tesla as well as the Chinese companies are more aggressively approaching the consumer market. Pricing will be very tough so we need to be cost-competitive. 

In terms of Sakai, their end users vary a lot. Condensers are used in many areas such as consumer products and electrical devices. It will depend on the general economy, but I feel Sakai is a very good leading indicator of the economy, and it is now heading downward, however, there are indications of a recovery. It is for this reason that I think the Sakai business will be promising in the future. They are excellent at finding very niche areas where aluminum is used. At the end of the day, aluminum is a very basic material, but we find these days it is replacing a number of different, heavier metals. It is lightweight and easy to recycle while also retaining a cost advantage.

As the former president of JATCO, what is your opinion of the hierarchical structure of the Japanese automotive industry, especially as we transition to EVs?

Sakai is not like those tier 1 big players, therefore the company is flexible and can move freely among the supply chain. We are not part of the Toyota or Nissan supply chain. Those Keiretsu models are very vertical and this really needs to change, and those tier 2 or tier 3 suppliers have such a narrow vision, only looking at what the top of the pyramid is doing. This mentality is unfortunately built into the supply chain structure itself, but the game has changed with EVs and those companies will have to adapt to survive. It is much more horizontal, and those suppliers cannot simply hang on to Toyota or Nissan. They need to be more flexible and need to deal with multiple OEMs. I think what is lacking from these suppliers is an aggressive mentality, and that is because they have been supported for so many decades now. I’m not saying that the top doesn’t support the bottom, and even after the Lehman Shock, not a single Keiretsu company under Toyota went bankrupt. Toyota supported them financially, but changing that mindset is going to be a very difficult task.

One of the biggest weaknesses of this vertically integrated system, commentators claim, is the fact that you have only one client, so innovation is stifled. In terms of innovation, we know that this idea of co-creation and business alliances has been key in all industries in the 21st century. For your business, what types of partnerships are you looking for to help innovation and product development?

Relatively speaking we don’t have too many areas open for collaboration, unfortunately, and for the can business things are mostly standardized. We probably need to be more efficient, and this is where AI and IoT can help.

For aluminum and sheet foil things are a little different, because there is a need for us to identify more application opportunities. When I was at JATCO I was doing this kind of thing, and often I would invite consulting and venture companies to come and brainstorm. For Altemira there really isn’t a huge need right now for any kind of open innovation.

Your company has a long and illustrious foreign presence. Most recently with Hanacans, you have established three manufacturing bases in Vietnam. Can you tell us a little more about the capabilities those bases bring to you, and which future target markets are you looking to next?

Right now we do not have any plans to expand our global footprint. We are sticking with Japan and Vietnam for the can business, and for the sheet foil and extrusion business we have China, India, Thailand, and the US. We are owned by private equity, so from our shareholder's standpoint what we have to do is expand and develop our business in our current portfolio.

Post IPO you would look to change this?

My personal dream is to expand Japanese monozukuri to the global market, so I would be looking to potentially apply can, sheet, and extrusion monozukuri to markets that are receptive to these products. It may be over-spec, but if we can apply this to other countries we should pursue that opportunity.

Imagine that we come back and have this interview all over again in 4 years' time. What goals or dreams would you like to have achieved by the time we come back for that new interview?

Short term I want to make this a public company, which means an IPO. Growth is also important to me. I’ve been the CEO of manufacturing companies for 10 years now, and the most important part for me is to prepare a safe, friendly place for people to work. Most factories are located in rural, local areas. They are not in big cities, and for the employees working at our factories, just the idea of employment itself is so important for them. Giving people opportunities to work and earn a salary really is vital to the survival of some of these small local towns.

Interview conducted by Paul Mannion & Sasha Lauture