It’s tough to be a vegetarian in a world full of carnivores.

It’s even tougher to be a startup selling a vegan egg-substitute into a world full of carnivore-dominated market, but that’s exactly what Umami United is doing.

Umami United founder Hiro Yamazaki explains that the real diver for vegan-food adoption is not ethics or sustainability, but simple economics.  The startup’s market traction seems to show that he and the team are on the right track.

We talk about the importance of keeping an open mind about product-market fit, Japan’s unusual dietary habits and how to go global on a limited budget.

It’s a great conversation, and I think you’ll enjoy it.

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Show Notes

  • Why are there so few vegetarians in Japan
  • Overcoming the “vegetarian” stigma
  • Why Japan has the world’s 2nd highest per-capita egg consumption (really!)
  • The different go-to-market strategies for Japan and overseas
  • Why industrial kitchens want to move away from natural eggs
  • The challenges in restaurant and home use
  • Umami’s global expansion plans
  • Why so many alternative food startups fail, and why Umami is different
  • Why Japan is a perfect food tech market
  • The future of food tech in Japan

Links from the Founder

Transcript

Welcome to Disrupting Japan, Straight Talk from Japan’s most innovative founders and VCs.

I’m Tim Romero and thanks for joining me.

 

Eggs!

We are going to talk about eggs and about things that are almost eggs. You know, in researching this episode, I learned far more about the egg industry than, well, more than I thought there was to know about the egg industry. It’s complex, surprisingly global and fiercely competitive.

Today we sit down with Hiro Yamazaki, the founder and CEO of Umami United, who’s making a vegetarian egg substitute that is finding product market fit in overseas markets rather than in Japan. And for reasons that have surprisingly little to do with vegetarianism.

Now Hiro and I talk about how to find product market fit when your initial strategy doesn’t work out. Like you expect the best strategy for aggressively going global on a limited budget. And why the Japanese eat a hell of a lot more eggs than you probably think they do. I mean, seriously, this country eats so many eggs! It just blows my mind. The data’s coming up in the podcast.

But you know, Hiro tells that story much better than I can. So, let’s get right to the interview.

Interview

Tim: So, we’re sitting here with Hiro Yamazaki of Umami United, who has developed and is now marketing a plant-based egg substitute. So, thanks for sitting down with us.

Hiro: Thank you so much for having me.

Tim: What you’re doing is really interesting.

Hiro: Thank you.

Tim: So, tell us a bit about the product. What exactly is it you’re making?

Hiro: Right now we’re making a plant-based egg powder product. It’s made out of konjaku, it’s a root vegetable in Japan.  Specifically, we’re focusing on the bakery application right now and baked good. There’s so many eggs, but yeah, we are replacing the functional ingredient from the egg.

Tim: So, as an egg substitute, is it similar in nutritional value to eggs? Is it similar in sort of the cooking functionality of eggs? What exactly is it substituting for? What part of the egg?

Hiro: Yeah, right now we’re more focusing on the egg functionality, like the coagulation forming, those kind of characteristics. But we started actually more scramble egg, omelets, those kind of in a savory application at the very beginning. But after one or two years, we decided to more focus on baked goods.

Tim: Tell me about your customers. You mentioned that you’re focusing on bakeries. Is this like commercial bakeries or more of the industrial side that are feeding, like schools and hospitals? What sort of bakeries?

Hiro: Yeah. Most of our customers right now are industrial, like baked goods manufacturers making French kernels or donuts, those kind of things.

Tim: I noticed on your website you also have direct to consumer products ss well. Is that more for a marketing?

Hiro: Right. We started actually from e-commerce channels, but like you said, it’s more like the marketing perspective.

Tim: Okay. And the main positioning, is it for health benefits or vegetarian vegan lifestyle compliance? What’s the main selling point?

Hiro: Yeah, there are two big categories. One is the vegan, vegetarian, or allergy free. We call it like dietary restrictions. And then the other one is more supply cost because of the broad flu, avian flu. We’re having that in every two or three years. And that’s a huge issue in the industry because the cost and the supply is not stable. So, that’s why our clients are looking for an ex-substitute, not only because of the vegan allergy reason, but also this supply chain issues.

Tim: Yeah, actually I want to get back to that and dig into it much more deeply. But before we do that, I want to ask a little bit about you. I mean, you founded Umami United in December, 2021. But you’ve been involved in this alternative foods movement for quite a while. You also founded an organization called Plant-based Japan. Tell me a bit about that project.

Hiro: Plant-Based Japan is kind of a media and consulting company focusing on the plant-based industry because back then a lot of the tourists coming to Japan after the Olympic game. There’s so many demands about the veganism, the vegetarianism, but we did not have much options here in Japan. So that’s why a lot of tourists needed the vegan, vegetarian information to find out like the specific products or restaurant.

Tim: Yeah. But on a personal level are you a vegan or vegetarian yourself? How did you get interested in this particular space?

Hiro: So, I used to be a vegan for a year or something, but it’s not because I was vegan that I started to become in interested in this industry, but more like back to my, the college student. So, I was actually a volunteer tour guide in Tokyo. But the food dietary restrictions like a vegan, vegetarian, like halal, kosher, so many customers cannot dine together. Then I become interested in this, the food and diversity.

Tim: That makes sense. It explains why kind of the plant-based Japan was the next logical step. Is trying to solve that problem.

Hiro: Right, right. Yeah.

Tim: Awesome. Let’s look at the bigger market again. Japan is interesting in that, I mean, the Japanese diet is pretty healthy overall, but my impression is that there’s not a lot of vegetarians or vegans in Japan.

Hiro: It’s very few. Yeah.

Tim: So. has that limited the interest in this kind of a product in Japan?

Hiro: Yes. I think it affects on limitation for the sales and the marketing for sure. But interestingly, yeah, Japan had a long history that we could not eat meat in over 1000 years, the meat consumption was banned.

Tim: You have to go way back, but yeah, that’s true. That is true.

Hiro: Yeah. Yeah, yeah. Kind of funny. Yeah.

Tim: Not so much anymore. So, what’s driving it in Japan? Is it companies trying to serve that niche market of vegans and vegetarians or is it allergies or is it something else?

Hiro: Yeah, there are few, like you mentioned, allergy is one of that, but it’s only for the egg categories. But like for meat industry, like it’s a different story. Companies are trying to solve more sustainable goals and also inbound. There are so many foreign tourists right now. There’s huge demands.

Tim: So, it’s important to have those vegetarian or vegan options.

Hiro: Right, right.

Tim: So, in researching for this article, I learned a lot more than I expected about eggs in Japan. So, so Japanese people eat a lot of eggs.

Hiro: Yeah. Japan is actually the second largest consumption of egg per capita. One of that number one is Mexico. I don’t know why it’s Mexico. But Japan is number two.

Tim: That kind of blows my mind. So, I mean, on one hand it’s great, the market’s big, but it’s confusing because how like Japanese traditional cuisine doesn’t use a lot of eggs and Japan still overwhelmingly rice instead of bread. So, who is eating all these eggs?

Hiro: I have no actual data, but like, this is my observation, but Japanese people would love to eat like a raw egg. A raw egg on top of the rice. If you go to like the gyudon’s place or pokeball place, there are so many like eggs on topping. I think that’s one of the reasons.

Tim: It’s true. An awful lot of salads will have egg in it.

Hiro: Right, right. So, we use eggs than we expected, I guess. And we also consume a lot of baked goods. But I also really, get surprised Japan is actually number two country.

Tim: So, let’s talk about your go-to market in Japan and then how you’re looking at it overseas. In Japan, you mentioned your focus on industrial kitchens. So, mass market based goods. So, what is the value that your customer sees it?

Hiro: So again, there are two, especially in Japan, most of our customers are using our products for their vegan or gluten-free applications. So special diet. Some of our potential customers trying to use it for reducing the accuses for their recipe because of the supply chain price issue. But when we talk to like US based manufacturers, it’s a different story. In the US most of our prospects are trying to use our product for their cost supply issues because the egg supply is really, really unstable in the US.

Tim: What is the price point for umami eggs versus natural eggs?

Hiro: If the customers use our product for their baked goods, most of the cases cheaper compared to the egg. Of course, depending on the purchasing volume and then the act price because it always up and down.

Tim: Well, I can see why that would be a big advantage in and of itself, even if it’s a bit more expensive, the fact that it’s very predictable is a huge benefit.

Hiro: Exactly. Yeah. We don’t need to be always lower, lower or lowest, but like we need to be like a stable. Yeah, you can try this. Right now or later.

Tim: Let’s just do it afterwards. Yeah, definitely try that looks…

Hiro: Sure, sure, sure.

Tim: So, Hiro’s assistant has just brought in an omelet. Actually let’s try this. I want to try it while it’s hot. So, this is an umami egg omelet?

Hiro: Yeah, sure.

Tim: Let’s try a bite here. That’s really good. And very egg. I would never guess this is not a regular egg omelet.

Hiro: Thank you so much.

Tim: Yeah. It’s delicious.

Hiro: Although I told you like we’re more focusing on the bakery, we also able to make the scramble  or omelets.

Tim: But I could see in like an industrial kitchen, it’s not just the raw materials cost, it’s the processing cost. So, not having to break the eggs have it already as a powder that can be mixed in at whatever ratio they need, I imagine would be a huge advantage.

Hiro: Exactly. When we exhibited trade ratio in the US, we had a booth and then the back wall says 10 kg over product or equivalent to 10,000 eggs.

Tim: So, 10 kilograms of umami powder is 10,000 eggs.

Hiro: Right. 10,000 eggs. And then the space

Tim: Sure. Storage, shipping. You have to worry about breakage with everything. But I imagine breakage with eggs is pretty high.

Hiro: Right, right. Exactly.

Tim: All right. That makes sense to focus on those industrial uses. So, what’s the next natural target after the mass market baked goods? Does it make sense in smaller scale cafeterias and places like that?

Hiro: Yeah, we’re actually working with the small medium sized cafeteria restaurants, especially in Japan. I think this is kind of the culture difference in Japan and the US but like Japanese company prefer to see how the market goes and then gradually start to work on the new project. So, that’s why we need to have like a small medium sized successful cases for showing larger scale of the companies right now. So, it’s a little bit challenging in Japan to straightly go to like a big company while US has already realized the problem and then reducing the egg

Tim: That makes complete sense to have a allergy free or vegan or vegetarian egg option for industrial kitchens. I imagine that scales down well to kind of the commercial kitchens, hospitals, schools company cafeterias. To take a step smaller than that things would seem to flip where you would have like restaurants where people would have to learn how to use umami egg in their cooking. Have individual restaurants also experimented with this?

Hiro: Yeah. So, it’s a bit challenging part, so that’s why our ideal case is too easy to replace without like a training. It’s a little bit challenging part. Not only us, but entire plant-based solutions.

Tim: So, you mentioned in Japan the primary drivers are the need to hit sustainability goals and to reduce costs, but to smooth out the supply chain and operations. Is that the same thing globally? Is that your same strategy going into the US or European markets?

Hiro: Yes, it’s same globally.

Tim: So, last year you went to the us you did some test marketing, some taste tests, talked with a lot of customers. How did that go? What was the reaction like in the US?

Hiro: So, US customer’s reaction is a lot different from Japan’s the vegan, vegetarian or you an allergy reason. There’s so many digital clients who are showing their interest like the university cafeteria or corporate cafeteria. There’s so many demands for the vegan, vegetaririan, but also we talk to like industry level and then they are more caring about the supply issues. The reaction is totally different.

Tim: So outside of Japan, where’s demand the strongest?

Hiro: I think US and Europe, Southeast Asia should be, I think the next, but yeah, we’re more focusing on the US right now.

Tim: So, what are your plans for the US?

Hiro: Yeah. Right now we are targeting the bakery industries and the supply issues is a huge problem. And we already found out like potential clients currently testing a product to reduce their 50% of the eggs. So, there’s huge demand. That’s obvious. We’re testing a product right now, but once we prove our quality and then the market, then definitely it’s time to go to the US more like, not remotely, but I thought to build a team there.

Tim: Just a couple of months ago, you raised about $2 million in new venture funding led by Beyond Next. Is a big part of that investment earmarked for global expansion, or is it going to be really doubling down on the Japanese market?

Hiro: We have two major scopes. So, one of that is the go to the US market. So, building the team, growing the successful cases there. At the same times we’re updating our core ingredients in Japan. So we’re also investing R&D.

Tim: And is the R&D focused on kind of improving the core recipe or hitting scalability?

Hiro: The R&D is more focusing on updating the recipe, especially this heat gelling technology.

Tim: Let’s talk about looking at the industry as a whole, not just eggs. Like the alternative meat startups that were really huge four or five years ago are having a really rough time recently. Companies like Beyond Meat, Impossible Foods, they used to be superstars. Now they’re facing these huge challenges. Now obviously egg and meat are totally different things, but does this represent a shift in the overall market and the consumer sentiment towards substitute foods in general?

Hiro: Yeah, there’s effect to some extent for sure. Especially the finance. So like a lot of VCs are doubting to invest in this entire market. So, that’s why we try to explain we’re not insane as the plant-based meat category because we’re not only focusing on this sustainable or vegan industry, but also like allergy supply. There’s so many other aspects, but for consumer size, I don’t think there’s a huge difference from the last few years. I think 2021 or 2022 around the COVID, it was like a bubble. There’s too much over hoping. But like, I think the demands, the real demands in the real market size is always there and then gradually growing. But like…

Tim: Yeah, I certainly agree it was over-hyped at the time, but is there anything like, aside from the venture fueled hype, what’s fundamentally different about what you’re doing and what these other alternative meat companies are doing?

Hiro: So, the biggest difference is the demand. Alternative meat is trying to solve the environmental issue or health issue, which are good. But from the consumer or industrial client’s perspective, that’s not like the must have solution or must have demands better to have, wish to have while supply issue or other issue. It’s a big thing in industrial markets and it’s more like a very urgent burning demands.

Tim: I guess also if you’re coming in at a price point that is below or close to natural eggs, that’s quite a bit of a different model than the alternative meats. Which had to be marketed as their own thing.

Hiro: Yeah.

Tim: Let’s talk about Japan in general. Because I think Japan strikes me as almost a perfect food tech market. Japanese consumers are very curious. They think a lot about food. They’re very food conscious. They’re willing to pay for quality, relatively high disposable income. So, how do you see the future of food tech in Japan overall?

Hiro: Overall, like Japan is a kind of society which takes time to change. So, that’s why urgent problem, emergency issue is really key to tackle the problems. So, like labor problem or Asian society.

Tim: Japanese consumers seem to be very willing to try new foods. Every year there’s like new food trends that are popular. So, it would seem to me that I agree in some areas Japan’s definitely very slow to change, but in this particular area it would strike me that they’re very quick to change.

Hiro: I agree with you. More like being vegetarian. I think in that scenario, I think it’s a little bit difficult, but it really depends on like the cases.

Tim: So I mean, to me it would seem like Japan’s just an ideal place for food related startups to test market and to develop products.

Hiro: Yeah, totally get it.

Tim: Tough market. You know, Japanese consumers are really picky about food, but…

Hiro: Right, right, right. That’s what I wanted to say. Very picky about food quality. That’s just very challenging part. But especially in Tokyo, if Japanese consumers are willing to try new products.

Tim: I think that’s actually kind of an advantage. So, if you’ve got Japanese consumers who are willing to try new kinds of foods and they’re really, really strict and tough.

Hiro: That’s right.

Tim: Like if you get it right. And you use that feedback and generate something that sells in Japan, you’ve probably got something you can pretty easily take to the global market.

Hiro: Yeah. Like it’s proven, right?

Tim: Well listen, Hiro, before I let you go, I want to ask you what I call my magic wand question. And that is, if I gave you a magic wand and I told you that you could change one thing about Japan, anything at all. The education system, the way people approach risk, how quickly people can make decisions, anything at all to make it better for startups and innovation in Japan, what would you change?

Hiro: Respect diversity.

Tim: Oh, well Japan it’s still a pretty homogenous culture. So, what would that look like?

Hiro: I feel like Japan is a very peaceful country. I love that. But like, because it’s long history as an island and then there’s only two or three ethnic groups for many years. So, that’s why Japan like stability. But sometimes like innovation or something new comes from out of the box, sometimes it’s difficult to find innovative idea out of the box.

Tim: So, are you talking about diversity of people, diversity of ideas?

Hiro: People, ideas, everything. Like the ways of thinking. I was really struggle when I was really little on the same like pace with other kids. And then my parents and my teachers criticize like why it was so like slow or why you cannot do these things. I really suffered.

Tim: Is there’s just supposed to be one way of doing things?

Hiro: Right, right. On those kind of cultures, easy to I think educate very evenly. But sometimes the missing the chances and the uniqueness from the differences. That part I think should be changed.

Tim: Yeah. I think that’s so true. And many Japanese, especially if they were young and went to like elementary school overseas and they come back and have to go to Japanese schools, it’s really hard for them.

Hiro: Exactly. So for me, I was born in Japan and I grew up in Japan by elementary school. And I went to Thailand, Bangkok for five years. It was lucky for me because I met so many like different backgrounds, people like ethnics and the religions and so it helps me a lot to think differently. I was okay, like be different, I was not like bad or good, just different from others.

Tim: So, do you think it’s changing? Because I mean, I think certainly over the last 15 years or so, the Japanese government, both the education ministry and METI, have made real efforts to bring more foreign creative people to Japan.

Hiro: I think it’s changing definitely gradually, but it takes more time.

Tim: Yeah, I think your point about the education system is exactly right. If everyone is taught that there’s only one way of doing things and one right answer from the time they’re very young, it’s really hard to start being innovative and creative when you become an adult.

Hiro: Yes, definitely. Yes.

Tim: But you know, that said, over the last 10, 20 years, there’s been a lot of Japanese startups created. A lot of Japanese people are trying new ideas and doing new things.

Hiro: I feel so too. And some people are not able to be aligned. And then they create something very interesting and very, very, innovative idea. Like for example, if you go to like Harajuku or Akihabara or whatever, like anime or manga, those imagination and those creations.

Tim: Yeah. I think there’s something to that. I mean if you have this very narrow track you’re supposed to be on, and if you’re a little bit outside it, well you might as well just keep going. It’s just like, okay, you’re free now do something totally different.

Hiro: Right, right. So that’s why our have it or culture also makes those kind of very innovative challengers at the same time, ironically.

Tim: Alright, Hiro, thanks so much for sitting down.

Hiro: Thank You so much. Thank you so much. Very fun.

Outtro

And we’re back.

Hiro amd Umami’s pivot from providing a vegetarian option for diners to providing a process optimization for industrial kitchens is one we can all learn a lot from. Sometimes the biggest value a product provides is not in the product itself, but how that product fits into a larger process.

As a simple product, umami eggs face an uphill battle. There’s not that big a demand for vegan menu options in Japan. And neither chefs nor home cooks really want to retrain themselves and rework their recipes to use egg substitutes. It turns out that the obvious market was not that promising for them.

Although I do want to say that was a genuinely delicious Umami omelet! It’s not a question of taste or quality.

In industrial kitchens, however, the price stability, shelf stability, and the simplified handling requirements of umami eggs really shine. And that’s the market they’re going after.The fact that it’s healthier and sustainable is certainly a bonus, but that’s not what’s really driving sales, at least for now.

This is what sets Umami United apart from all the high flying lavishly funded cultured meat and meat substitute startups we saw a few years ago. I mean, those startups were cool, but they were not solving a real problem. Their products were expensive. They did not address meaningful industrial or commercial needs.

And it turns out that the market for vegetarians who like the taste of meat, is a pretty small one.

The difference between Japanese food tech startups and American food tech startups really points to a fundamental difference in the two ecosystems as a whole. The well-funded US startups are clearly the ones in the global spotlight, but Japanese startups are using a lot less money to solve real problems.

In the long run, that’s where startups are at their very best.

 

 

If you want to talk more about eggs or about going global on a budget from Japan, Hiro, and I would love to talk with you. So come by disruptingjapan.com/show247 and let’s talk about it. And if you enjoy disrupting Japan, please share a link online or, you know, tell people disrupting Japan is free forever and letting people know about it is the absolute best way you can support the podcast.

But most of all, thanks for listening and thank you for letting people interested in Japanese startups and VCs know about the show.

I’m Tim Romero and thanks for listening to Disrupting Japan.