MATERIALITY andSUSTAINABILITYIDENTITY

BUSINESS andSTRATEGIESFINANCIAL INFORMATION /OTHERSGOVERNANCE

Processed food businessBusiness environment
SWOT analysis of the processed food businessStrengths
S

Hiromasa Furukawa
Senior Vice President,
Food Business

SWOT
ANALYSIS

Under our Purpose, “Bringing Joy to Meals and Fun to the Table,” our processed food business works
to develop and furnish products of high added value, closely monitoring ever-diversifying consumer
values and interests. Even amid the soaring business costs seen in recent years, we aim to contribute to the JT Group’s profit growth by continuing to optimize production operations, the frozen andambient food business and the seasonings business, and by achieving high-quality top-line growththrough such means as increasing sales of our more profitable products.

TTop-market-share* products and brands (Sanuki Udon, Gottsu-umai Okonomiyaki)*Fuji Keizai Co., Ltd.
Foodstuff Marketing Handbook 2023: Vol. 2, 32021 results for the frozen udon noodle and frozen okonomiyaki (Japanese savory pancake) categories

WO

Proprietary yeast, processing and freezing technologies

High-quality, efficient production systems based on food safety management

Weaknesses/Challenges


Lopsided sales mix by category and expansion of sales to overseas markets



Rebuilding logistics network to ensure supply stability

Opportunities


Robust Japanese frozen food market with favorable growth prospects
by virtue of growing demand for convenience and preservability
Growth in demand for high-value-added foods and global expansion of“free-from” food market based on individuals’ dietary orientations(e.g., health-consciousness) and beliefs
Technological advancements like DX and IoT that can improve supply
chain efficiency and mitigate labor shortages

Threats

PurposeBringing Joy to Meals and Fun to the Table

Processed food business basic strategy
The processed food business’s role is to augment the JT Group’s profit growth. Its basic strategy is to:n 
Further expand sales of core products incorporating proprietary technologies, and upgrade its ability to develop highvalue-added products in response to changes in consumer preferences;n 
Implement price adjustments in response to the impact of inflation in raw materials, ingredients and logistics costs, andcontinue efforts to improve productivity and reduce costs; andn Accelerate initiatives for business growth with a long-term viewpoint.
The processed food business has two operational components. Core products for the frozen and ambient food business include
frozen udon noodles, packaged cooked rice and okonomiyaki (Japanese savory pancakes), and those for our seasonings businessinclude yeast extract and oyster sauce.

Contraction in domestic demand due to societal aging and population
shrinkage; labor shortages due to working-age population shrinkage
Industry inflation driven by global food shortages; distribution cost
inflation due to labor shortages in logistics industry

Performance over the last five years
Revenue was mostly flat, but the core processed food category continues to trend toward long-term growth. Adjusted
operating profit has been holding up fairly well, bolsteredlargely by product-mix improvements and an optimal
production system promoting lower costs, except in 2020,
when the pandemic affected the business. However, it will
be important to closely monitor the impact of labor andlogistics cost inflation stemming from labor shortages and ofinternational market and exchange rate movements on costs
for raw material and ingredients.

effects, and one-time income from an insurance claim
recorded in 2021.
Revenue and adjusted operating profit (JPY BN)

161.4

158.6

149.3

147.2

155.5

We reported a year on year increase of 5.6% in revenue for2022, due mainly to price revisions to counter cost increases
in the frozen and ambient food and seasonings businesses.
Despite revenue growth owing to price revisions, adjusted
operating profit fell by 11.3% year on year with inflationin raw materials and other costs, negative exchange rate074

Japan Tobacco Inc. Integrated Report 2022

4.1

5.4

2018

2019

■ Revenue■ Adjusted operating profit(0.8)
2020

4.0

3.520212022

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IDENTITY

MATERIALITY andSUSTAINABILITY

BUSINESS andSTRATEGIESFINANCIAL INFORMATION /OTHERSGOVERNANCE

Processed food business

Sustainability initiatives through business activities
Case study 1: O ffering free-from food “BEYOND FREE” reduced-ingredient
foods selected for flavor

Our sustainability strategy and focus areas
In the processed food business, we selected three focus areas and set eight

In the processed food business, we are working to develop
and provide high-value-added products so that everyone
can freely enjoy what they want to eat, while staying close
to the diversifying values and interests of our consumers.
As part of this effort, TableMark Co., Ltd. provides authenticand delicious free-from food in the “BEYOND FREE” category,where specific raw materials and ingredients are excluded.

specific targets for these focus areas in 2019 and have been reporting onCurrently, it offers “BEYOND FREE” products through theShoku-tasu online store in three groups: foods free of specific allergens, foods free of animal ingredients, and low-carbohydrate/low-sodium foods. By offering these products weare working to support everyone with the freedom to enjoy
what they want to eat.

To deliver safe, high-quality processed food for consumers,
processed food business have established four priorities toensure that food safety is deeply embedded within our operations. We embrace our responsibility to positively addresssocial challenges with our consumers through continuing
effort to enrich every heart through food, the sustenance oflife.

KPI progress

progress every year. For details see “KPI progress.”

Four perspectives on food safety management

Case study 2: Biomass plastic as a raw material for packaging
The processed food business manufactures and sells products made from processed rice, such as packaged cookedrice and frozen rice. These manufacturing processes result in“crushed rice,” which can no longer be used for production.
In a first for the industry, we are now using the domesticallydeveloped carbon-neutral biomass plastic RiceResin®*,which contains 10% crushed rice generated by our Group,
as raw material for packaging some of our cooked-riceproducts. In addition to using RiceResin®, we have reduced
the amount of petroleum-based plastic in our packaging byaround 4.2% compared to conventional products. We havedone this by making the exterior film even thinner.
* RiceResin® is a registered trademark of Biomass Resin Minamiuonuma Co., Ltd.
Old rice that is not edible and crushed rice generated during rice milling areupcycled into plastic using new technology

We are also shifting to environment-friendly containers andpacking materials, including the use of biomass-based inks
for product packaging and originally developed compact
trays with less plastic ingredients for packaged rice, expanding our effort to reduce environmental impact.

Food safety standards

Enhancing food quality

We make sure that all of our factories* are certified to theglobal food safety standard FSSC 22000. FSSC 22000 isrecognized by the Global Food Safety Initiative (GFSI), thefood industry’s global body for promoting food safety management. All the factories contracted to manufacture ourproducts are required to meet food safety standards such as
ISO 22000 or FSSC 22000, as an assurance that an adequate
food safety management system is in place.

Food quality control is an essential element of our daily
operations. Along with quality improvement efforts on
factory floors, we ensure that all of our employees receive
training through customized e-learning materials. We also
listen carefully to consumer suggestions for improving
product quality, and quickly share them with our factories
and operations.

*One of our factories, which started operating in 2020, is on track to acquire
this certification

Food defense practices
Food defense is about protecting our manufacturing
processes and products from intentional contamination.
We apply robust food defense guidelines across the supply
chain, both in our own factories and our contracted factories. We also carry out annual audits to check how well theseguidelines are being implemented.

Further food communication
We are always willing to provide details about our foodproducts. We respond to consumers’ requests for information and disclose the precise factory where food products
were made, or the country of origin of the main ingredients.
We understand the importance of listening to consumers,
and have introduced a new online tool to share consumer
feedback with all of our employees. We will continue toembed and reinforce this consumer-centric approachthroughout our operations.
4Read more on JT.com.

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