Ajinomoto and Itoham form ties in food business

TOKYO, May 30 (Reuters) - Ajinomoto Co (2802.T) and Itoham Foods (2284.T), two of Japan's largest food companies, plan to work together in procurement, product development and marketing to better cope amid tough industry conditions.

Ajinomoto is Japan's largest seasoning maker whose main products include salt, soup stock and edible oils, while Itoham is the country's second-largest processor of ham and sausages after industry leader Nippon Meat Packers (2282.T).

Japanese food makers are scrambling to cut costs to offset soaring prices of raw materials used in food production and to feed livestock while also grappling with a sluggish demand outlook as the country's population declines.

The two companies said in a statement they would aim to combine Ajinomoto's strength in food and amino acid technologies with Itoham's know-how in processing meat and other foods to streamline material procurement and to lower costs.

Areas of cooperation include product development, mutual use of raw materials, and joint sales promotions. They will also look at working together on food safety issues and at how they can better use their bases in and outside of Japan.

Both companies said the alliance would not have a significant impact on their earnings in the current business year to March 2009 but they expect synergies to total about 4 billion yen ($38 million) over the next four years. ($1=105.56 yen)

(Reporting by Nathan Layne, editing by Brent Kininmont)