Company Research and Analysis Report
FISCO Ltd.
http://www.fisco.co.jp

KENKO Mayonnaise
Co., Ltd.
2915 Tokyo Stock ExchangeFirst Section

1-Aug.-14

Important disclosuresand disclaimers appear
at the end of this document.
FISCO Ltd. Analyst
Yuzuru Sato伪伪Capturing Demand by Meticulously Meeting Customer
Needs in Each Business Category
KENKO Mayonnaise Co., Ltd. (hereafter “KENKO Mayo” or “the company”) is engaged in the
production and sale of salads and delicatessen, mayonnaise and dressings, processed foods
made from eggs, and other products. It has a strong position in the market for commercial-use
and has the leading market share in the “long-life salad” category at 40% and in egg salad forsandwiches and snack breads at 56%. In the mayonnaise and dressings market, it is second
behind Kewpie <2809> with a 14.9% share.
In the fiscal year ended March 2014, although the company had sales of \57,301 million, up
5.1% y-o-y, the third consecutive year of record-high sales on steady growth in demand foregg products and delicatessen products, recurring profit declined for the first time in two fiscal
years by 12.3% due to high raw material costs and the yen’s depreciation.
In FY3/15, sales are expected to rise 4.7% y-o-y due to continued growth. Recurring profit isforecast to increase 19.5%, reversing a previous loss as a result of the full contribution fromprice revisions implemented during the previous fiscal year and last year’s peaking of raw
material costs.
The outlook for the home-meal replacement (HMR) market is favorable owing to an aging
society, an increase in single-person households, and changes in lifestyle due to women’ssocial advancement and other factors. Moreover, an increase in demand for the salad anddelicatessen business is forecast thanks to a rising health consciousness. The company’s
strategy is to absorb this demand by creating teams of sales, product development, and menu
development segmented by business category to meet customer demand with the aim offurther sales expansion. Returning profits to shareholders is one of the company’s priorities:
it aims stable dividend growth with dividend payout ratio of 20% on a consolidated basis andsends out company’s products to shareholders once a year.

伪伪Check Point
・Established top industry position with “long-life salad”
・Expects revenue growth in all businesses in FY3/15
・Focused on global development and expansion of business domain

We encourage readers to review our complete legal statement on “Disclaimer” page.
1

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2915 Tokyo Stock ExchangeFirst Section㻞㻘㻣㻜㻜㻌

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KENKO Mayonnaise
Co., Ltd.

(¥mn)

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1-Aug.-14

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Important disclosuresand disclaimers appear
at the end of this document.
FISCO Ltd. Analyst
Yuzuru Sato伪伪Company Overview
Highly Respected within Industry as a Pioneer in the Salad Market(1) Company History
The company’s origin goes back to March 1958, when it was founded in Kobe as a sales
company for edible oil. Since its founding and up to the present day, the company has had two
major turning points in its history. The first was in 1961 when it shifted its business from salesof edible oil to the production and sales of commercial-use mayonnaise.
At the company’s start up, it sold edible oil to delicatessens in Kansai area for frying croquettes
and chicken and other meats as well as raw materials used in mayonnaise. At that time, there
were many delicatessens that made their own mayonnaise, but homemade mayonnaise sufferedfrom unstable quality as oil and eggs separate in hot summer weather. The company judgedthat there would be demand if it produced and sold mayonnaise of stable quality, and in 1961
it started the business of producing mayonnaise for commercial-use.
Initially, sales struggled, but sales volume increased when the company succeeded in winningcustomer trust by proposing a menu of deli items made with mayonnaise. After 1970, with thegrowing westernization of the Japanese diet and the rise of the restaurant industry, demand
for mayonnaise began to grow and the company entered a growth phase.
The second turning point was in 1977, the year it began to market world’s first “long-life
salad.” Long-life salad remains fresh for one month as long as the bag it comes is not opened.
Demand for it has grown rapidly, especially in the restaurant industry and from bakeries, andpresented a further growth opportunity for the company, which had specialized in making
mayonnaise for commercial-use. Since then, the company has developed and launched astream of industry-first products such as burdock salad, pumpkin salad, and tuna salad. As apioneer that has developed the salad market, its product development capabilities are highly
respected in the industry.

We encourage readers to review our complete legal statement on “Disclaimer” page.
2

■■Company Overview

KENKO Mayonnaise
Co., Ltd.
2915 Tokyo Stock ExchangeFirst Section

In the 1990s, the home-meal replacement (HMR) market began to take off due to changes
in social conditions such as the increase in single-person households, the aging of society,and more women in the workforce, causing demand for delicatessen products and boxedlunches at supermarkets and convenience stores (hereafter “CVS”) to grow. To absorb thismarket demand, the company has expanded the salad and delicatessen business along with theegg products business. The egg products business provides a variety of products includifng
Tamago-Yaki (Japanese style rolled omelet) for lunch boxes, egg salad for sandwiches, KinshiTamago (thin strips of cooked eggs) used as a topping on cold Chinese noodles, boiled eggs for
Oden soup, and scrambled eggs.
Kinshi-Tamago

1-Aug.-14

Important disclosuresand disclaimers appear
at the end of this document.
FISCO Ltd. Analyst
Yuzuru Sato

In 2005, the company started the overseas operations. It established a salad production andsales company (an equity-method affiliate) in China. In addition, it opened the Salad Cafe
(currently 16 shops) to directly capture consumer needs to develop better-suited products.
The company’s stock was traded over the counter on the Osaka Securities Exchange JASDAQ
market in 1994. In 2011, the company was listed on the second section of the Tokyo Stock
Exchange, and then listed on the first section of the Tokyo Stock Exchange in March 2012.
History
1958 March
1961 September
1966 June
1977 October1986 December
1992 June
1994 November
2005 May
2005 August
2005 August2010 July
2011 March2012 March2012 July
2014 March

The company is established and begins edible oil sales
Begins production and sales of KENKO Mayonnaise AS for salads for commercial-use
Changes trade name to KENKO-Mayonnaise Co., Ltd.
Launches the industry’s first “long-life salad” under the Fashion Delica Foods® brand
Begins sales of Burdock Salad for commercial-use
Changes trade name from KENKO-Mayonnaise Co., Ltd. to KENKO Mayonnaise Co., Ltd.
Shares traded over the counter on the Osaka Securities Exchange JASDAQ market
Establishes Kenko Foods (Hong Kong) Co., Ltd. (currently KENKO & TING (HONG KONG)
HOLDING CO., Ltd., an equity-method affiliate)
Establishes Kenko Foods (Dongguan) Co., Ltd. (currently Dongguan KENKO & Ting Foods Co.,
Ltd., an equity-method affiliate)
Establishes Salad Cafe Co., Ltd.
Establishes Hangzhou KENKO & Ting Foods Co., Ltd.(an equity-method affiliate)
Company listed on second section of the Tokyo Stock Exchange
Company listed on first section of the Tokyo Stock Exchange
Establishes PT. Intan Kenkomayo Indonesia (Jakarta, Indonesia; an equity-method affiliate)
Completion of Shizuoka-Fujisan Factory

We encourage readers to review our complete legal statement on “Disclaimer” page.
3

■Company■
Overview

Securing top industry position with “long-life salad”(2) Market Share and Sales by Product and Business Category

KENKO Mayonnaise
Co., Ltd.
2915 Tokyo Stock ExchangeFirst Section

1-Aug.-14

Important disclosuresand disclaimers appear
at the end of this document.
FISCO Ltd. Analyst
Yuzuru Sato

Company sales by product are divided into salad and delicatessen, mayonnaise and dressings,
egg products, and others. Salad and delicatessen has the highest ratio of sales at 44.4% followedby mayonnaise and dressings at 29.8%, and egg products at 23.9% (as of FY3/14). Looking at thepast five fiscal years, although there are no major changes, the sales ratio of egg products has
steadily risen. This is due to yearly growth in demand from CVS for the use of egg products inlunch boxes and sandwiches.
The salad and delicatessen business consists of products produced and sold with a long shelf
life (long-life salad, etc.), and products for daily delivery operated by subsidiaries, comprising
60% and 40% of this business, respectively.

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The sales ratio by business category (as of FY3/14) is 28.2% for the food service industry, thelargest share, followed by 22.5% for mass retailers (supermarket chains), 18.4% for CVS, 14.3%
for bread makers (bakeries), 5.5% for food dispensing, and 11.1% for others (consumer co-ops,
food service wholesaler, etc.). A distinctive feature of the company is that its main business isin restaurant and HMR markets.

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We encourage readers to review our complete legal statement on “Disclaimer” page.
4

■Company■
Overview

Its industry market share for the mayonnaise and dressings business has been stable overthe past several years at around 15%, keeping the second position in the industry. Since it
basically specializes in sales for commercial-use, the company’s name is not well-known to
the general public. However, it competes with Kewpie, the largest commercial producer, andsupplies almost all major restaurants and hotel chains.

KENKO Mayonnaise
Co., Ltd.

Meanwhile, the company, the pioneer of “long-life salad,” has established the industry-leading
market share of over 40% for long-life salad.

2915 Tokyo Stock ExchangeFirst Section㻹㼍㼥㼛㼚㼚㼍㼕㼟㼑㻛㻰㼞㼑㼟㼟㼕㼚㼓㼟㻌㻹㼍㼞㼗㼑㼠㻌㻿㼔㼍㼞㼑㻌㻔㻞㻜㻝㻟㻕

1-Aug.-14
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Important disclosuresand disclaimers appear
at the end of this document.

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FISCO Ltd. Analyst
Yuzuru Sato㻭㼖㼕㼚㼛㼙㼛㼠㼛㻻㼠㼔㼑㼞㼟

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Source: Nikkan Keizai Tsushinsha, Inc. “The Beverage & Food Statistics Monthly”

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㻞㻝㻚㻠㻑㻿㼛㼡㼞㼏㼑㻦㻌㻲㼡㼖㼕㻙Keizai “Foodstuff Marketing Handbook”

Company’s Strength is Management Integration of Production,
Development and Sales(3) Company’s Strengths
The company’s strengths are 1) its nationwide production system that supplies high-quality
products on a stable basis and 2) its collective strength of integrated production, development
and sales, namely product development capabilities that meet customer needs as well as its
meticulous sales response capabilities.

We encourage readers to review our complete legal statement on “Disclaimer” page.
5

■Company■
Overview

KENKO Mayonnaise
Co., Ltd.
2915 Tokyo Stock ExchangeFirst Section

High quality means not only good taste; safety and security are also important elements.
Further, for the company, which is focused on sales for commercial-use, the question of how
much added value can it offer customers holds an important key to its business growth. The
company has taken steps to offer added value through its meticulous response to customers
involving the segmentation of fields by business classification and the integration of its sales,
product development, and menu development teams. The number of product items that it
develops annually exceeds 1,800, meaning it develops five new items every day. As the graphshows, since 2011, it has continued to grow at a rate exceeding the restaurant and HMR
markets thanks to the fruits of these efforts.
Wide-ranging product lineup

1-Aug.-14

Important disclosuresand disclaimers appear
at the end of this document.
FISCO Ltd. Analyst
Yuzuru Sato

Source: Company briefing materials

Excellent development capabilities that meet customer needs

Source: Company briefing materials

We encourage readers to review our complete legal statement on “Disclaimer” page.
6

■Company■
Overview㻳㼞㼛㼣㼠㼔㻌㻾㼍㼠㼑㻌㼛㼒㻌㻾㼑㼟㼠㼍㼡㼞㼍㼚㼠㻛㻴㻹㻾㻌㻹㼍㼞㼗㼑㼠㻌㼍㼚㼐㻌㻯㼛㼙㼜㼍㼚㼥㻌㻿㼍㼘㼑㼟
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KENKO Mayonnaise
Co., Ltd.
2915 Tokyo Stock ExchangeFirst Section

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1-Aug.-14

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Important disclosuresand disclaimers appear
at the end of this document.
FISCO Ltd. Analyst
Yuzuru Sato㻙㻟㻚㻥㻑㻾㼑㼟㼠㼍㼡㼞㼍㼚㼠㻛㻴㻹㻾㻌㻔㼏㼍㼘㼑㼚㼐㼍㼞㻌㼥㼑㼍㼞㻕㻿㼍㼘㼑㼟㻌㻔㼒㼕㼟㼏㼍㼘㻌㼥㼑㼍㼞㻕

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Development of flexible production system that meets customer
needs(4) Production system and group companies
Currently, the company’s nationwide production system comprises seven factories operated by
the parent company and 10 factories operated by seven consolidated subsidiaries. Subsidiaries’
production bases are closely linked to their operating areas because they are the production
bases for delicatessen products for daily delivery to supermarkets, CVS, and other outlets.
Above all, just-in-time (JIT) response capability is essential for CVS that operate 24/7. Someof the factories therefore operate 365 days-a-year, with flexible production systems that canquickly respond to changes in order volume.
Production Bases to Meet Customer Needs

Source: Company briefing materials

We encourage readers to review our complete legal statement on “Disclaimer” page.
7

■■Company Overview

The company also operates in China and Indonesia. It initially operated its business in China
independently, but established a joint venture (50% equity stake) with a Taiwanese foodproducer in 2011, which now operates as an equity-method affiliate. As production bases
for local companies as well as restaurants run by Japanese companies, it has a salad factoryin Dongguan (with annual production capacity of about 1,200 tons) and a mayonnaise anddressings factory in Hangzhou (with annual production capacity of about 25,000 tons).

KENKO Mayonnaise
Co., Ltd.

In Indonesia, it established a joint venture (49% equity stake) with a local food producer in2012 that began production (annual capacity of about 4,000 tons) and sales of mayonnaise,dressings, and sauces in autumn 2013.

2915 Tokyo Stock ExchangeFirst Section

Because its companies in China and Indonesia are equity-method affiliates, their sales are notreflected in the company’s consolidated sales, but are recorded in non-operating income andexpenses as equity in earnings of affiliates. They are included under Other Businesses of theconsolidated segmentation.

1-Aug.-14

Important disclosuresand disclaimers appear
at the end of this document.

Affiliates
Consolidated subsidiaries
DIETCOOK SHIRAOI Co., Ltd.
Lilac Foods Co., Ltd.
KANTOH DIETCOOK Co., Ltd.
KANTOH DIET EGG Co., Ltd.
KANSAI DIETCOOK Co., Ltd.
DIETCOOK SUPPLY Co., Ltd.
KYUSHU DIETCOOK Co., Ltd.
Hello Delica Co., Ltd.
Salad Cafe Co., Ltd.

FISCO Ltd. Analyst
Yuzuru Sato

Ownership (%)
Main business
100.0
Delicatessen-related production and sales
100.0
Delicatessen-related production and sales
100.0
Delicatessen-related production and sales
100.0
Delicatessen-related production and sales
100.0
Delicatessen-related production and sales
100.0
Delicatessen-related production and sales
100.0
Delicatessen-related production and sales
100.0
Delicatessen-related sales
100.0
Operation of shops specializing in salads

Equity-method affiliate
Ownership (%)
Main business
KENKO & TING (HONG KONG)
50.0
Mayonnaise, dressings, and salad sales
HOLDING CO., Ltd.
Dongguan KENKO & Ting Foods Co., Ltd.
50.0
Salad production and sales
Hangzhou KENKO & Ting Foods Co., Ltd.
50.0
Mayonnaise and dressings production and sales
PT. Intan Kenkomayo Indonesia
49.0
Mayonnaise, dressings and sauces production and sales*Shows group investment ratio including indirect investment from wholly-owned subsidiaries.

伪伪 Performance Trends
Favorable market environment due to rising salad anddelicatessen demand(1) Market environment
The following summarizes the market environment surrounding the company by main businesscategory for FY3/14.
○Food Service Industry
Sales in the food service industry in FY2013 grew 0.7% y-o-y, the second consecutive year of
positive growth, and remained on a modest recovery track. Breaking it down, fast-food market
sales, which had been a sales driver in the past, decreased 0.5%, shifting to negative growth.
Drinking establishment and pub sales remained sluggish and were down 3.5%. In contrast, family
restaurant sales fared well, increasing 3.3%, the second consecutive year of positive growth.
With corporate earnings recovering due to the effects of Abenomics and the advancing
depreciation of the yen, consumers’ preference for lower food prices has passed its peak andaverage spending per customer at family restaurants and other establishments is continued toincrease. Demand for salad is expanding thanks to people turning to healthier food.

We encourage readers to review our complete legal statement on “Disclaimer” page.
8

■Performance■
Trends㻳㼞㼛㼣㼠㼔㻌㻾㼍㼠㼑㻌㼛㼒㻌㻿㼍㼘㼑㼟㻌㼎㼥㻌㻾㼑㼟㼠㼍㼡㼞㼍㼚㼠㻌㻮㼡㼟㼕㼚㼑㼟㼟㻌㻯㼘㼍㼟㼟㼕㼒㼕㼏㼍㼠㼕㼛㼚㻌㻔㻯㼍㼘㼑㼚㼐㼍㼞㻌㼥㼑㼍㼞㻕
㼀㼛㼠㼍㼘
㻠㻑

KENKO Mayonnaise
Co., Ltd.
2915 Tokyo Stock ExchangeFirst Section㻞㻚㻡㻑㻲㼍㼙㼕㼘㼥㻌㼞㼑㼟㼠㼍㼡㼞㼍㼚㼠㼟㻰㼞㼕㼚㼗㼕㼚㼓㻌㼑㼟㼠㼍㼎㼘㼕㼟㼔㼙㼑㼚㼠㼟㻛㻼㼡㼎㼟
㻟㻚㻟㻑
㻞㻚㻣㻑

㻞㻚㻝㻑

㻞㻑

㻝㻚㻢㻑

㻜㻚㻡㻑

㻙㻜㻚㻝㻑
㻙㻝㻚㻞㻑
㻙㻝㻚㻢㻑

㻙㻜㻚㻣㻑

㻙㻞㻑

㻙㻝㻚㻡㻑
㻙㻠㻚㻣㻑

㻜㻚㻣㻑

㻝㻚㻝㻑

㻜㻑

㻙㻠㻑

1-Aug.-14

㻲㼍㼟㼠㻌㼒㼛㼛㼐

㻙㻜㻚㻡㻑

㻙㻜㻚㻡㻑

㻙㻞㻚㻤㻑

㻙㻟㻚㻡㻑
㻙㻠㻚㻡㻑

㻙㻢㻑
㻙㻡㻚㻤㻑

㻙㻤㻑
㻞㻜㻜㻥

Important disclosuresand disclaimers appear
at the end of this document.
FISCO Ltd. Analyst
Yuzuru Sato

㻞㻜㻝㻜

㻞㻜㻝㻝

㻞㻜㻝㻞

㻞㻜㻝㻟

㻿㼛㼡㼞㼏㼑㻦㻌㻶㼍㼜㼍㼚㻌㻲㼛㼛㼐㼟㼑㼞㼢㼕㼏㼑㻌㻭㼟㼟㼛㼏㼕㼍㼠㼕㼛㼚○Supermarkets
Food sales in the supermarket industry in FY2013, despite rising vegetable prices, were strong,buoyed by the economic recovery. Delicatessen sales were especially strong, climbing about
4% y-o-y due in part to a rise in single-person households and changing lifestyles resulting
from women’s social advancement. Further, foodstuff sales as a whole in April reversed anddeclined due to the diminishing effect of last-minute demand before the consumption tax-rise,
but delicatessen products alone remained strong, rising 4.6% y-o-y.

㻿㼡㼜㼑㼞㼙㼍㼞㼗㼑㼠㻌㻹㼛㼚㼠㼔㼘㼥㻌㻿㼍㼘㼑㼟㻌㻳㼞㼛㼣㼠㼔㻌㻾㼍㼠㼑㻲㼛㼛㼐㻌㼠㼛㼠㼍㼘㻰㼑㼘㼕㼏㼍㼠㼑㼟㼟㼑㼚

㻝㻜㻑

㻥㻚㻝㻑

㻤㻑

㻢㻚㻞㻑
㻡㻚㻠㻑

㻢㻑
㻟㻚㻢㻑

㻠㻑
㻞㻑

㻞㻚㻢㻑

㻜㻑 㻜㻚㻣㻑

㻡㻚㻤㻑

㻡㻚㻡㻑

㻠㻚㻝㻑

㻟㻚㻟㻑

㻞㻚㻤㻑

㻡㻚㻟㻑

㻞㻚㻥㻑

㻟㻚㻥㻑
㻜㻚㻤㻑

㻠㻚㻥㻑

㻞㻚㻤㻑

㻞㻚㻣㻑

㻡㻚㻠㻑

㻟㻚㻥㻑

㻞㻚㻥㻑

㻟㻚㻢㻑

㻙㻜㻚㻢㻑

㻝㻚㻥㻑

㻝㻚㻟㻑

㻠㻚㻢㻑

㻙㻞㻑
㻭㼜㼞

㻹㼍㼥 㻶㼡㼚㼑 㻶㼡㼘㼥㻭㼡㼓 㻿㼑㼜㼠 㻻㼏㼠
㻞㻜㻝㻟

㻺㼛㼢

㻰㼑㼏

㻶㼍㼚

㻲㼑㼎

㻹㼍㼞

㻭㼜㼞

㻞㻜㻝㻠

㻿㼛㼡㼞㼏㼑㻦㻌㻺㼑㼣㻌㻿㼡㼜㼑㼞㼙㼍㼞㼗㼑㼠㻌㻭㼟㼟㼛㼏㼕㼍㼠㼕㼛㼚㻌㼛㼒㻌㻶㼍㼜㼍㼚㻘㻌㻭㼜㼞㼕㼘㻌㻞㻜㻝㻠㻌㼜㼞㼑㼘㼕㼙㼕㼚㼍㼞㼥㻌㼒㼕㼓㼡㼞㼑㼟㻚○CVS
In the CVS industry, sales of fresh food and small-sized delicatessen products for single-person
consumption and the delivery service market grew. CVSs are increasingly introducing their own
products such as store-brewed coffee and tasty gourmet chicken, a common strategy among
CVSs to increase sales. As a result, sales of daily-delivered products in FY3/13 fared wellthroughout the year, rising 9% y-o-y.

We encourage readers to review our complete legal statement on “Disclaimer” page.
9

■■Performance Trends㻳㼞㼛㼣㼠㼔㻌㻾㼍㼠㼑㻌㼛㼒㻌㻿㼍㼘㼑㼟㻌㼛㼒㻌㻼㼞㼛㼐㼡㼏㼠㼟㻌㼒㼛㼞㻌㻰㼍㼕 㼘㼥㻌㻰㼑㼘㼕㼢㼑㼞㼥
㻝㻠㻑

㻝㻞㻚㻟㻑

㻝㻞㻑
㻤㻚㻥㻑

㻝㻜㻑

KENKO Mayonnaise
Co., Ltd.
2915 Tokyo Stock ExchangeFirst Section

㻤㻚㻜㻑
㻣㻚㻜㻑

㻤㻑
㻢㻑

㻝㻝㻚㻥㻑
㻝㻜㻚㻠㻑

㻣㻚㻤㻑

㻣㻚㻤㻑

㻝㻜㻚㻥㻑

㻝㻜㻚㻠㻑

㻤㻚㻢㻑

㻡㻚㻡㻑
㻣㻚㻜㻑

㻠㻑
㻞㻑

1-Aug.-14㻜㻑㻭㼜㼞㻹㼍㼥 㻶㼡㼚㼑 㻶㼡㼘㼥

㻭㼡㼓

㻿㼑㼜㼠

㻻㼏㼠

㻺㼛㼢

㻰㼑㼏

㻶㼍㼚

㻲㼑㼎

㻞㻜㻝㻟

Important disclosuresand disclaimers appear
at the end of this document.
FISCO Ltd. Analyst
Yuzuru Sato

㻹㼍㼞

㻭㼜㼞

㻞㻜㻝㻠

㻿㼛㼡㼞㼏㼑㻦㻌㻶㼍㼜㼍㼚㻌㻲㼞㼍㼚㼏㼔㼕㼟㼑㻌㻭㼟㼟㼛㼏㼕㼍㼠㼕㼛㼚

Sales Increased but Profit Declined in FY3/14 on Rising Raw
Material Prices(2) Consolidated Financial Highlights for FY3/14
In FY3/14, although sales were up 5.1% y-o-y, the third consecutive fiscal year of recordhigh sales, operating profit was down 12.6% to \2,428 million, recurring profit declined 12.3% to\2,258 million, and net income slipped 10.2% to \1,265 million, all down for the first time in two
fiscal years. Comparing with the initial plan, profits declined while sales exceeded.
FY3/14 Operating Results Summary(\mn)
FY 3/13

Sales
Cost of goods sold
SGA expenses
Operating profit(equity in earnings of affiliates)
Recurring profit
Extraordinary profit
Net profit

FY3/14

Results

Ratio

InitialtargetResults

Ratio

y-o-y

54,53339,62812,126
2,778
-216
2,574
-186
1,409

72.7%
22.2%
5.1%
-0.4%
4.7%
2.6%

55,500
2,720
2,580
1,420

57,301
42,53012,342
2,428
-229
2,258
-44
1,265

74.2%
21.5%
4.2%
-0.4%
3.9%
2.2%

5.1%
7.3%
1.8%
-12.6%-12.3%-10.2%

Changefromtarget3.2%-10.7%-12.5%-10.9%The reason for the profit decline was the rising purchase price for raw materials such as
chicken eggs and edible oil. In FY3/14, the effect of raw material prices amounted to \1,242
million, a factor behind the profit decline. Although a \543 million profit decline was factored
into the initial plan, the effect of rising grain and chicken egg prices during the term caused aneven greater decline.
Although the company revised its prices from the second half, the positive effects of the pricerevision came only to \331 million. Adding up the effects of higher sales (\443 million) andincreased profits (\199 million) from rising production efficiency could not offset the rise in
raw material costs.

We encourage readers to review our complete legal statement on “Disclaimer” page.
10

■Performance■
Trends㻲㼍㼏㼠㼛㼞㼟㻌㼎㼑㼔㼕㼚㼐㻌㻯㼔㼍㼚㼓㼑㻌㼕㼚㻌㻾㼑㼏㼡㼞㼞㼕㼚㼓㻌㻼㼞㼛㼒㼕㼠㻌㻔㻯㼛㼚㼟㼛㼘㼕㼐㼍㼠㼑㼐㻕
㻔¥㼙㼚㻕
㻢㻜㻜

㻵㼚㼕㼠㼕㼍㼘㻌㼠㼍㼞㼓㼑㼠㻠㻜㻥 㻠㻠㻟

㻟㻟㻝㻠㻜㻜㻾㼑㼟㼡㼘㼠㼟

㻟㻟㻠

㻝㻥㻥

㻞㻜㻜

KENKO Mayonnaise
Co., Ltd.
2915 Tokyo Stock ExchangeFirst Section

㻜

㻜
㻙㻠㻣

㻙㻞㻜㻜

㻙㻝㻥㻠

㻙㻠㻜㻜
㻙㻢㻜㻜

㻙㻡㻠㻟

㻙㻤㻜㻜
㻙㻝㻘㻜㻜㻜

1-Aug.-14

㻙㻝㻘㻞㻜㻜
㻙㻝㻘㻠㻜㻜

㻿㼍㼘㼑㼟㻌㼏㼔㼍㼚㼓㼑

Important disclosuresand disclaimers appear
at the end of this document.
FISCO Ltd. Analyst
Yuzuru Sato㻼㼞㼕㼏㼑㻌㼞㼑㼢㼕㼟㼕㼛㼚㼟㻔㼜㼞㼕㼏㼑
㼒㼘㼡㼏㼠㼡㼍㼠㼕㼛㼚㼟㻕㻼㼞㼛㼐㼡㼏㼠㼕㼛㼚㼑㼒㼒㼕㼏㼕㼑㼚㼏㼥㼕㼚㼏㼞㼑㼍㼟㼑

㻙㻝㻘㻞㻠㻞
㻲㼘㼡㼏㼠㼡㼍㼠㼕㼚㼓㻌㼞㼍㼣㼙㼍㼠㼑㼞㼕㼍㼘㻌㼜㼞㼕㼏㼑㼟㻻㼠㼔㼑㼞

Even though the market prices for soybeans, which affect edible oil prices, shifted downward in2013 y-o-y as shown in the graph, the company’s purchase price has a half-year to one-yeartime lag, so we must bear in mind that the effects of sharply rising soybean prices in 2012 waspartially reflected in FY3/14 purchase costs. Further, the effect of the yen’s depreciation in
the previous fiscal year is another factor behind rising costs.

㻯㼔㼕㼏㼍㼓㼛㻌㻿㼛㼥㼎㼑㼍㼚㻌㻼㼞㼕㼏㼑㼟㻔㻐㻛㼎㼡㼟㼔㼑㼘㻕㻴㼕㼓㼔㻌㼜㼞㼕㼏㼑㻞㻜㻭㼢㼑㼞㼍㼓㼑㻌㼜㼞㼕㼏㼑㻸㼛㼣㻌㼜㼞㼕㼏㼑

㻝㻣㻚㻣㻝
㻝㻤

㻝㻢㻚㻝㻟

㻝㻢

㻝㻠㻚㻡㻝

㻝㻟㻚㻥㻠

㻝㻠
㻝㻞

㻝㻠㻚㻜㻢

㻝㻟㻚㻝㻣

㻝㻝㻚㻜㻣㻌

㻝㻠㻚㻢㻠
㻝㻟㻚㻡㻢

㻝㻜㻚㻠㻥

㻝㻜

㻤

㻝㻠㻚㻢㻢

㻝㻞㻚㻡㻥㻌

㻝㻞㻚㻢㻥㻌㻞㻜㻝㻟㻞㻜㻝㻠㻝㻝㻚㻢㻜㻌

㻥㻚㻜㻤㻌

㻢
㻞㻜㻝㻜

㻞㻜㻝㻝

㻞㻜㻝㻞

㻺㼛㼠㼑㻦㻌㻞㻜㻝㻠㻌㼐㼍㼠㼍㻌㼕㼟㻌㼒㼛㼞㻌㻶㼍㼚㼡㼍㼞㼥㻌㼠㼔㼞㼛㼡㼓㼔㻌㻹㼍㼞㼏㼔㻌㼛㼚㼘㼥We encourage readers to review our complete legal statement on “Disclaimer” page.
11

■Performance■
Trends㻺㼍㼠㼕㼛㼚㼍㼘㻌㻲㼑㼐㼑㼞㼍㼠㼕㼛㼚㻌㼛㼒㻌㻭㼓㼞㼕㼏㼡㼘㼠㼡㼞㼍㼘㻌㻯㼛㼛㼜㼑㼞㼍㼠㼕㼢㼑㻌㻭㼟㼟㼛㼏㼕㼍㼠㼕㼛㼚㼟㻓㻌㻔㼆㻱㻺㻙㻺㻻㻴㻕㻌㻼㼞㼕㼏㼑㻌㻔㼀㼛㼗㼥㼛㻕㻌㼒㼛㼞㻌㻹㼑㼐㼕㼡㼙㻙㻿㼕㼦㼑㼐㻌㻱㼓㼓㻔¥㻛㼗㼓㻕

㻲㼅㻝㻞

㻲㼅㻝㻟

㻲㼅㻝㻠

㻟㻜㻜

㻞㻤㻜

㻞㻤㻜

KENKO Mayonnaise
Co., Ltd.
2915 Tokyo Stock ExchangeFirst Section

㻞㻢㻜
㻞㻠㻜

㻞㻠㻜

㻞㻞㻟

㻞㻜㻜

㻞㻝㻝

㻞㻜㻠

㻞㻞㻜
㻝㻤㻞

㻝㻤㻜
㻝㻢㻜

1-Aug.-14

㻞㻢㻜

㻝㻣㻞

㻝㻠㻜

㻝㻢㻤
㻝㻢㻠

㻞㻞㻠

㻞㻞㻜

㻞㻟㻜

㻞㻟㻜
㻞㻜㻥

㻝㻣㻡
㻝㻢㻝

㻝㻥㻟

㻝㻢㻜

㻝㻥㻜

㻝㻣㻢
㻝㻡㻡

㻝㻡㻣

㻝㻡㻣

㻶㼡㼚㼑

㻶㼡㼘㼥

㻭㼡㼓

㻝㻣㻡

㻝㻣㻝

㻝㻞㻜
㻝㻜㻜

Important disclosuresand disclaimers appear
at the end of this document.
FISCO Ltd. Analyst
Yuzuru Sato

㻭㼜㼞

㻹㼍㼥

㻿㼑㼜㼠

㻻㼏㼠

㻺㼛㼢

㻰㼑㼏

㻶㼍㼚

㻲㼑㼎

㻹㼍㼞

Delicatessen business fares well on increased purchase ofmainstay products by mass retail shops(3) Trends by business segment○Seasoning/Processed Food BusinessIn the mainstay seasoning and processed food business, sales rose 3.6% y-o-y to \47,541
million, while operating profit declined 15.8% to \2,106 million. The profit decline was attributableto aforementioned rising raw material costs.
Looking at sales trends by product, we see a slight 1.3% (flat on a sales-weighted basis) decreasein salad and delicatessen items to \15,866 million. Pumpkin salad was introduced in lunch boxes
for CVS, and among Japanese delicatessen items, burdock products for lunch boxes saw brisk
sales, but sales were sluggish to restaurants, especially drinking establishments.
Mayonnaise and dressings increased 1.6% (down 0.6% on a sales weighted basis) y-o-y to\17,093 million. The sales volume of mayonnaise was up due to use in sandwiches and baked
into snack breads as a filling, and sales of dressings grew on new sales, mainly to restaurants
in the form of low-calorie non-oil dressings in 1-liter bottles and 20-ml individual packets. In
addition, the “the world’s sauces” series product lineup increased and contributed to higher
sales. On the other hand, sales to the fast-food industry were sluggish as the industry itself
was stagnated.
Egg products were up 13.2% (up 13.3% on a sales weighted basis) to \13,567 million. Various
egg products including egg salad for sandwiches and for baking into snack breads as a filling,
Atsuyaki-Tamago (thick omelets served in slices) for lunch boxes, and boiled eggs for Odensoup saw increased sales, especially to CVS.

We encourage readers to review our complete legal statement on “Disclaimer” page.
12

■Performance■
TrendsAtsuyaki-Tamago

KENKO Mayonnaise
Co., Ltd.
2915 Tokyo Stock ExchangeFirst Section

1-Aug.-14

Important disclosuresand disclaimers appear
at the end of this document.
FISCO Ltd. Analyst
Yuzuru Sato㻿㼑㼍㼟㼛㼚㼕㼚㼓㻛㻼㼞㼛㼏㼑㼟㼟㼑㼐㻌㻲㼛㼛㼐㻌㻮㼡㼟㼕㼚㼑㼟㼟㻌㻾㼑㼟㼡㼘㼠㼟㻿㼍㼘㼑㼟 㻔¥㼙㼚㻕㻼㼞㼛㼒㼕㼠㻌㻔¥㼙㼚㻕㻤㻜㻘㻜㻜㻜

㻟㻘㻜㻜㻜㻣㻜㻘㻜㻜㻜

㻞㻘㻡㻜㻞

㻞㻘㻡㻜㻜

㻢㻜㻘㻜㻜㻜

㻞㻘㻝㻜㻢㻡㻜㻘㻜㻜㻜
㻠㻜㻘㻜㻜㻜

㻝㻘㻤㻞㻥

㻝㻘㻜㻜㻣
㻝㻝㻘㻥㻤㻢

㻝㻟㻘㻡㻢㻣

㻝㻢㻘㻝㻠㻟

㻝㻢㻘㻤㻞㻜

㻝㻣㻘㻜㻥㻟

㻝㻡㻘㻝㻝㻤

㻝㻢㻘㻜㻤㻝

㻝㻡㻘㻤㻢㻢

㻲㼅㻟㻛㻝㻞

㻲㼅㻟㻛㻝㻟

㻲㼅㻟㻛㻝㻠

㻟㻜㻘㻜㻜㻜

㻞㻜㻘㻜㻜㻜
㻝㻜㻘㻜㻜㻜

㻞㻘㻜㻜㻜㻹㼍㼥㼛㼚㼚㼍㼕㼟㼑㻛㻰㼞㼑㼟㼟㼕㼚㼓㼟㻌㼟㼍㼘㼑㼟㻝㻘㻡㻜㻜㻱㼓㼓㻌㼜㼞㼛㼐㼡㼏㼠㼟㻌㼟㼍㼘㼑㼟㻝㻘㻜㻜㻜㻻㼠㼔㼑㼞㻌㼟㼍㼘㼑㼟

㻝㻘㻜㻝㻡

㻝㻘㻜㻡㻥
㻝㻝㻘㻞㻥㻤

㻡㻜㻜㻜㻿㼍㼘㼍㼐㻛㻰㼑㼘㼕㼏㼍㼠㼑㼟㼟㼑㼚㻌㼟㼍㼘㼑㼟

㻿㼑㼓㼙㼑㼚㼠㻌㼜㼞㼛㼒㼕㼠

㻜

○Side-Dish-Related Business
Sales in the side-dish-related business climbed 14.1% y-o-y to \8,586 million and segment
profit grew steadily, rising 15.0% to \369 million. This was mainly attributable to a steadypurchase of mainstay products such as potato salad and pasta salad by mass retailers(supermarkets). Although raw material prices rose sharply, this was offset by higher sales,effects from improved yields, expense reductions, and other factors, and as a result, the profit
margin remained at 4.3%, the same level as the previous term. The side-dish segment grew at a
rate exceeding the industry average, given the 4.0% growth of sales to mass retailers and 9.0%
increase in sales of products for daily delivery to CVS as mentioned before.

We encourage readers to review our complete legal statement on “Disclaimer” page.
13

■Performance■
Trends㻿㼕㼐㼑㻙㻰㼕㼟㼔㻙㻾㼑㼘㼍㼠㼑㼐㻌㻮㼡㼟㼕㼚㼑㼟㼟㻌㻾㼑㼟㼡㼘㼠㼟㻿㼍㼘㼑㼟㻌㻔㼘㼑㼒㼠㻌㼍㼤㼕㼟㻕(¥mn)

㻿㼑㼓㼙㼑㼚㼠㻌㼜㼞㼛㼒㼕㼠㻌㻔㼞㼕㼓㼔㼠㻌㼍㼤㼕㼟㻕

(¥mn)

㻟㻢㻥

㻝㻜㻘㻜㻜㻜

㻠㻜㻜㻟㻞㻜

KENKO Mayonnaise
Co., Ltd.
2915 Tokyo Stock ExchangeFirst Section

1-Aug.-14

㻤㻘㻜㻜㻜

㻟㻜㻜

㻞㻢㻠

㻢㻘㻜㻜㻜
㻞㻜㻜
㻠㻘㻜㻜㻜

㻣㻘㻡㻞㻢

㻣㻘㻞㻥㻤

㻤㻘㻡㻤㻢

㻝㻜㻜

㻞㻘㻜㻜㻜
㻜

Important disclosuresand disclaimers appear
at the end of this document.
FISCO Ltd. Analyst
Yuzuru Sato㻜㻲㼅㻟㻛㻝㻞

㻲㼅㻟㻛㻝㻟

㻲㼅㻟㻛㻝㻠

○Other Business
Sales of other business include sales at salad shops operated by its subsidiary Salad Cafe andequity in earnings of affiliates of the overseas business. In FY3/14, sales rose 5.4% y-o-y to\1,173 million, and a segment loss of \216 million (compared to a loss of \255 million in FY3/13)
was recorded. However, if we exclude the overseas business, segment profit came to \13million, returning to profitability for the first time in two fiscal years. The Salad Cafe business is
positioned to understand the needs of consumers (end users) for product development.
Regarding the profitability of overseas business, the Chinese business continues to havenegative earnings, along with the loss of Indonesian business due to the startup of a factory inIndonesia last autumn. Sales in the Chinese business rose sharply from \267 million in FY3/13
to \1,147 million in FY3/14. This was attributable to an increase in customers, both local
companies and Japanese restaurant operators.
㻻㼠㼔㼑㼞㼟㻌㻮㼡㼟㼕㼚㼑㼟㼟㻌㻾㼑㼟㼡㼘㼠㼟㻰㼛㼙㼑㼟㼠㼕㼏㻌㼎㼡㼟㼕㼚㼑㼟㼟㻌㼜㼞㼛㼒㼕㼠㻻㼢㼑㼞㼟㼑㼍㼟㻌㼎㼡㼟㼕㼚㼑㼟㼟㻌㼜㼞㼛㼒㼕㼠㻿㼍㼘㼑㼟㻼㼞㼛㼒㼕㼠㼟㻌㻔¥㼙㼚㻕㻿㼍㼘㼑㼟㻌㻔¥㼙㼚㻕

㻟㻜㻜

㻝㻘㻠㻜㻜
㻝㻘㻝㻝㻟

㻞㻜㻜

㻝㻘㻝㻣㻟

㻝㻘㻞㻜㻜

㻥㻢㻜

㻝㻘㻜㻜㻜

㻝㻜㻜
㻝㻥

㻝㻟

㻜

㻙㻟㻥

㻙㻞㻜㻌

㻙㻝㻜㻜

㻤㻜㻜
㻢㻜㻜

㻙㻞㻞㻥㻌
㻙㻞㻝㻢㻌

㻙㻞㻜㻜

㻠㻜㻜

㻞㻜㻜

㻙㻟㻜㻜

㻜
㻲㼅㻟㻛㻝㻞

㻲㼅㻟㻛㻝㻟

㻲㼅㻟㻛㻝㻠

We encourage readers to review our complete legal statement on “Disclaimer” page.
14

■■Performance Trends

Higher sales forecast in all businesses in FY3/15(4) Outlook for FY3/15

KENKO Mayonnaise
Co., Ltd.
2915 Tokyo Stock ExchangeFirst Section

1-Aug.-14

Important disclosuresand disclaimers appear
at the end of this document.
FISCO Ltd. Analyst
Yuzuru Sato

The outlook for FY3/15 is sales of \60,000 million, up 4.7% y-o-y, operating profit of \2,890
million, up 19.0%, recurring profit of \2,700 million, up 19.5%, and net income of \1,590 million,
up 25.6%.
In terms of sales by business, higher sales are expected in all businesses. Among businesses,
the salad and delicatessen business, which was the only segment that had decreased sales, isfurther reinforcing its sales and development strategy segmented by business category. It willfurther expand sales of its mainstay Fashion Delica Foods® (FDF) brand for commercial-use.
In addition, it will expand market channels for its “Salad Made by a Salad Pro” salad series, asmall FDF brand product, which has been marketed since September 2013 for home use. The
sales target for this salad series is \650 million in FY3/15.
Sales of egg products, which had grown by double digits in the previous fiscal year, are expected
to increase 3.5%. As sales to CVS were higher than expected in FY3/14, the sales target issomewhat conservative. In April 2014, the Shizuoka-Fujisan Factory began operation, and withorders continuing at a brisk pace, sales have sufficient upside potential.
In the mayonnaise and dressings business, continued growth in demand for non-oil dressingsand dressings in small packets is anticipated and with the effects of price revisions, sales
are expected to rise 2.1% y-o-y. Moreover, sales of HMR-related business operated by its
subsidiary are expected to increase 8.3% due to greater product acceptance by mass retailers.
Sales by Segment

Seasoning/Processed Food Business
Salad/Delicatessen
Mayonnaise/Dressings
Egg products
OthersSide-Dish-Related Business
Other Business
Total

FY3/12
43,618
15,11816,143
11,298
1,059
7,298
960
51,878

FY3/1345,89416,081
16,82011,986
1,007
7,526
1,113
54,533

FY3/1447,541
15,866
17,093
13,567
1,015
8,586
1,173
57,301

FY3/15E
49,501
16,877
17,44814,048
1,128
9,298
1,200
60,000

(\mn)
y-o-y
4.1%
6.4%
2.1%
3.5%
11.1%
8.3%
2.3%
4.7%

Factors that could lead to higher profits in FY3/15 are the effects of raw material pricefluctuations, which are expected to add \315 million to profits, while sales price revisions
should add \195 million, and increased sales to add another \182 million to profits. On theother hand, a factor that could lead to lower profits is an expected \286 million in higher fixed
costs caused by the operation of a new factory. With regard to increased sales, the portion of
those sales that will contribute to profits will be smaller than in the previous fiscal year, butthat is because the sales growth of products for CVS, which was solid in the previous fiscal
year, appears to be slowing.

We encourage readers to review our complete legal statement on “Disclaimer” page.
15

■Performance■
Trends㻲㼍㼏㼠㼛㼞㼟㻌㼎㼑㼔㼕㼚㼐㻌㻯㼔㼍㼚㼓㼑㻌㼕㼚㻌㻾㼑㼏㼡㼞㼞㼕㼚㼓㻌㻼㼞㼛㼒㼕㼠㻌㻔㻯㼛㼚㼟㼛㼘㼕㼐㼍㼠㼑㼐㻕
(¥mn)
㻠㻜㻜

㻟㻝㻡㻌

㻟㻜㻜

KENKO Mayonnaise
Co., Ltd.

㻞㻜㻜

2915 Tokyo Stock ExchangeFirst Section

㻜

㻝㻥㻡㻌

㻝㻤㻞㻌

㻝㻜㻜

㻟㻢㻌

㻙㻝㻜㻜
㻙㻞㻜㻜

1-Aug.-14

㻙㻟㻜㻜

㻙㻞㻤㻢㻌

㻙㻠㻜㻜

㻿㼍㼘㼑㼟㻌㼏㼔㼍㼚㼓㼑

Important disclosuresand disclaimers appear
at the end of this document.
FISCO Ltd. Analyst
Yuzuru Sato㻼㼞㼕㼏㼑㻌㼞㼑㼢㼕㼟㼕㼛㼚㼟㻔㼜㼞㼕㼏㼑
㼒㼘㼡㼏㼠㼡㼍㼠㼕㼛㼚㼟㻕㻼㼞㼛㼐㼡㼏㼠㼕㼛㼚㼑㼒㼒㼕㼏㼕㼑㼚㼏㼥㼕㼚㼏㼞㼑㼍㼟㼑

㻲㼘㼡㼏㼠㼡㼍㼠㼕㼚㼓㻌㼞㼍㼣㼙㼍㼠㼑㼞㼕㼍㼘㻌㼜㼞㼕㼏㼑㼟㻻㼠㼔㼑㼞

In overseas business, which affects equity in earnings of affiliates, Chinese business sales are
expected to increase 50% y-o-y to \1,585 million, and they will strive to become profitable on amonthly basis in FY3/15. During the previous fiscal year, the company sent over a president for
the Chinese joint venture and changed its sales method to the one developed by the company.
As a result, sales have begun to increase and as demand for mayonnaise and salad has picked
up in China, it should contribute to earnings in FY3/16 and beyond.
Meanwhile, the Indonesian business is now mainly producing and selling mayonnaise forhousehold use, but it has begun selling liquid whole eggs to bakeries. It plans to expand
marketing channels for commercial-use. Products of the Indonesian business have obtained
Halal certification, and it will study the possibility of exporting these products to Southeast
Asia and Japan from FY3/15 and thereafter. In FY3/15, the company anticipates sales of\400 million and seeks to become profitable on a monthly basis within the fiscal year. Equity inearnings of affiliates will continue to be in the red in FY3/15, but if all goes well, it expects tobecome profitable in FY3/16.

伪伪Growth Strategy
Focusing on Global Growth and Expansion of Business Domains(1) Midterm Management Plan IV (Fourth) 2012-2014
The company is now implementing the “Midterm Management Plan IV (Fourth) 2012-2014,” ofwhich FY3/15 is the plan’s final year. It has tackled five themes under the plan with the aim of“raising its business presence as a company that creates/proposes new ideas.” The following
is a brief presentation of the status of those efforts.
○Becoming a global company
Aiming to become a global company, KENKO Mayo has expanded business into China andIndonesia through joint ventures. From Japan, the company now exports dressings, mayonnaise,frozen foods and other products to 26 countries and regions. In FY3/13, it had export sales of\200 million and targets export sales of \500 million in FY3/15.

We encourage readers to review our complete legal statement on “Disclaimer” page.
16

■Growth■
Strategy○Expansion of Business Domain

KENKO Mayonnaise
Co., Ltd.
2915 Tokyo Stock ExchangeFirst Section

The company has expanded its business domain by boosting its efforts in the sauce market.
By increasing the types of sauces that it offers, especially to restaurants, it expects that willlead to a broadening of its salad menu. “The world’s sauces” series, developed to enhance its
product lineup, has commercialized 17 sauces (as of March 2014), and grown 40% y-o-y to 451
tons on a sales by weight (sales were just over \300 million).
Expansion of Business Domain – the world’s sauces/the world’s salad

1-Aug.-14

Important disclosuresand disclaimers appear
at the end of this document.
FISCO Ltd. Analyst
Yuzuru Sato

Source: Company briefing materials

In FY3/15, as new products, the company plans to release a powdered mayonnaise and nutrientrich products to meet today’s increasing health consciousness. Also, as a new business, from
December 2013, it began to produce and sell cut vegetables (packaged salads) to specificcustomers in Hokkaido.
○	Creating and disseminating information on “Salad Cuisine,” and practicing its strategy as acompany that creates/proposes new ideas
To create a salad-eating culture and to expand the salad market, the company has proposedmenus based on business category through the holding of events for the food service industry,and has also focused on “salad cuisine recipes” on its corporate website. As of March 2014,it had posted on its website a total of nearly 370 recipes classified by business category andseason. Its monthly page views have more than doubled from a little over 50,000 one year ago,
to about 130,000 as of March 2014, which has contributed to increased product sales.

We encourage readers to review our complete legal statement on “Disclaimer” page.
17

■Growth■
Strategy

Leveraging its website

KENKO Mayonnaise
Co., Ltd.
2915 Tokyo Stock ExchangeFirst Section

1-Aug.-14
Source: Company briefing materials

Important disclosuresand disclaimers appear
at the end of this document.
FISCO Ltd. Analyst
Yuzuru Sato

○Promoting and spreading the Salad Cafe brandThrough its Salad Cafe shops, the company learns about consumer needs while raising its
brand power. At present, 16 shops have been opened in major urban areas, and it plans to open
stores while focusing on profitability.
○Personnel development and system enhancement
As part of its personnel development, the company will conduct hierarchical training (compulsory
participation) and selective training (training for future CEO and mid-management levels) for
the first time. It will also continue security workshops, e-learning and other training methods
under a policy of ongoing active investment in personnel development.
The performance outlook for FY3/15 is the same as the business targets of the midterm
management plan announced by the company in 2012. The company will most likely to achieve
the target figures stated in the midterm plan. The new midterm business plan for FY3/16 andafter will indicate more specific strategies for even greater growth in terms of approaches tooverseas business and new business domains.

Main Factory for Egg Products is Completed(2) Overview of Shizuoka-Fujisan Factory
As previously mentioned, with the HMR market poised to expand more than before due tochanges in lifestyle and the progressive aging of society, demand for egg products, which areused in lunch boxes, bread, noodles and other items, is expected to continue to grow.
The company has established a dominant position in the industry with a market share of
56% for egg salad for sandwiches and for snack breads. However, in the field of baked eggs
such as Atsuyaki-Tamago (rolled omelet) and Dashimaki-Tamago (flavored omelet) used as aningredient in lunch boxes, it holds a low market share of 7%. Increasing its share in that fieldhas been a business challenge for the company.

We encourage readers to review our complete legal statement on “Disclaimer” page.
18

■Growth■
Strategy

Dashimaki-Tamago

KENKO Mayonnaise
Co., Ltd.
2915 Tokyo Stock ExchangeFirst Section

1-Aug.-14

Important disclosuresand disclaimers appear
at the end of this document.
FISCO Ltd. Analyst
Yuzuru SatoIn an effort to achieve a higher market share in the baked egg field, the company completed
construction of the Shizuoka-Fujisan Factory in March 2014 at a cost of \4,500 million. At
this factory, a continuous production line, from breaking eggs to final product, has been built
and is distinctive for creating high-quality products. Because it is a continuous production, few
people are needed to operate it, which makes it more cost-competitive. Items produced on thisline include Atsuyaki-Tamago, Dashimaki-Tamago, Kinshi-Tamago, Omsheet®, and scrambled
eggs. There are nine continuous production lines, plus one line for semi-automated to respondpromptly to sudden orders.
The company targets an annual production volume of 6,000 tons of baked eggs in 2017, but
given recent brisk orders, it could achieve this target one year ahead of schedule. Since there
is a part of the line that will be moved from the old factory to the new one, production at the
new factory as it stands will not add to sales, but undoubtedly it will contribute to increased
sales as well as the development of new customers. At the existing factories, the company
posted pollution prevention expenses, but such expenses will be slashed at the new factory,
which should be a positive earnings factor.

Further Sales Growth through Increased Market Share andGreater Brand Power(3) Aiming for further sales growth
In the future, the company seeks to further expand sales. Its basic strategy for sales growth isto pursue increased market share in all of its existing businesses. In its overseas business, it
wants to capture Asian market growth.
For general consumers in Japan, the company is expanding in areas where there is certain
demand, by selling its “Salad Made by a Salad Pro” long-life salad series. However, it basicallyfocuses on the commercial-use market. This is because the company’s ability to propose
menus and its meticulous sales support capabilities are the strongest when it demonstrates in
the commercial market including restaurant, mass-retailer and CVS industries.
A future challenge for the company is how to raise its brand power. Even though it hasestablished a solid position in the commercial-use market, brand power inevitably has someinfluence on developing new customers. Every autumn, the company holds a food festival inTokyo and Osaka. Four or five years ago, it started proposing new menus with themes which
could become next year’s food trends and set up booths for each business category. The
event has won popularity and visitors have been on the increase every year. These persistenteffort/activities have surely contributed to the sales growth for the last couple of years.

We encourage readers to review our complete legal statement on “Disclaimer” page.
19

伪伪 Financial Status and Policy on Shareholder Returns
Financial Standing Expected to Improve(1) Financial Status

KENKO Mayonnaise
Co., Ltd.
2915 Tokyo Stock ExchangeFirst Section

1-Aug.-14

Important disclosuresand disclaimers appear
at the end of this document.
FISCO Ltd. Analyst
Yuzuru Sato

The company’s total assets as of March 31, 2014 were \39,686 million, up \5,687 million
y-o-y. The largest variable factor for assets was the large increase in fixed assets following
the completion of the Shizuoka-Fujisan Factory in March. Fixed assets increased \5,995 million
compared with the end of the previous fiscal year, and \4,589 million of this was due to anincrease in the construction in process account after the completion of the new factory.
Capital investments for FY3/14 totaled \6,424 including investments to increase the production
capacity of subsidiaries, the largest capital investment over the past several years. Almost
matching this was the increase in interest-bearing debt, and cash and deposits decreased. Net
assets rose \1,009 million to \15,810 million due to an increase in retained earnings.
Management indicators revealed a temporary deterioration in its financial standing, such asa decline in the equity ratio from 43.5% to 39.8%, and a rise in the debt-to-equity ratio from
37.3% to 62.9% due to an increase in interest-bearing debt following large-scale investments,
but these were all at problem-free levels. Further, the capital investment target for FY3/15 is\780 million and as capital investments are expected to remain at \1,000 million or below forsome time, these indicators should improve again in FY3/15 and thereafter.
Consolidated Balance Sheet

Current assets(cash and deposits)
Fixed assets
Total assets
Current liabilities
Fixed liabilities(interest-bearing debt)
Total liabilities
Net assets[Safety]
Current ratio (current assets/current liabilities)
Equity ratio (equity capital/total assets)
Debt-to-equity ratio(interest-bearing debt/shareholders’ equity)[Profitability]
ROA (recurring profit/total assets)
ROE (net profit/shareholders’ equity)
Operating margin[Efficiency]
Total asset turnover (sales/total assets)

FY3/11
16,203
5,557
14,55030,753
13,281
4,760
7,531
18,042
12,711

FY3/12
16,107
4,017
14,29730,404
13,207
3,705
4,254
16,912
13,492

FY3/13
18,403
5,919
15,59533,99814,2494,948
5,526
19,197
14,801

FY3/1418,095
3,884
21,59039,686
14,8609,015
9,943
23,876
15,810122.0%
41.3%

122.0%
44.4%

129.2%
43.5%

121.8%
39.8%

59.4%

31.7%

37.3%

62.9%

8.9%
11.2%
5.5%

6.8%
7.9%
4.1%

8.0%
10.0%
5.1%

6.1%
8.0%
4.2%

167.3%

169.7%

169.4%

155.5%

(\mn)
y-o-y
-307
-2,035
5,995
5,687
611
4,067
4,417
4,678
1,009

Potential for Dividend Increase Remains on the Back of Earnings
Growth(2) Shareholder Return Policy
The company’s shareholder returns are cash dividend payments and special gift exclusive forshareholders. On the basis of a dividend payout ratio of 20% on a consolidated basis, and out ofconsideration for the continuity of dividends, its policy is to stably raising dividends in line with
its increased earnings. In FY3/15, as operating results are expected to recover, the company
plans to pay a dividend of \23, a \2 increase, for a dividend payout ratio of 20.6%. Therefore,
if there is growth in operating results in FY3/16 and after, it is highly likely to increase cash
dividends.

We encourage readers to review our complete legal statement on “Disclaimer” page.
20

■■Financial Status and Policy on Shareholder Returns

As a special gift to shareholders, KENKO Mayo presents the company’s products as gifts toshareholders of register as of March 31. A present with a value of \1,000 is given to shareholders
with 100 to 999 shares, while a present with a value of \2,500 is given to shareholders of 1,000
or more shares. The investment return per unit of shares including the shareholder special gift
was 2.5% based on conversion at a share price of \1,009 as of July 10.

KENKO Mayonnaise
Co., Ltd.
2915 Tokyo Stock ExchangeFirst Section㻰㼕㼢㼕㼐㼑㼚㼐㻌㻼㼑㼞㻌㻿㼔㼍㼞㼑㻌㼍㼚㼐㻌㻰㼕 㼢㼕㼐㼑㼚㼐㻌㻼㼍㼥㼛㼡㼠㻌㻾㼍㼠㼕 㼛(¥)

㻰㼕㼢㼕㼐㼑㼚㼐㻌㻔㼘㼑㼒㼠㻌㼍㼤㼕㼟㻕㻟㻜㻰㼕㼢㼕㼐㼑㼚㼐㻌㼜㼍㼥㼛㼡㼠㻌㼞㼍㼠㼕㼛㻌㻔㼞㼕㼓㼔㼠㻌㼍㼤㼕㼟㻕

㻟㻜㻑

㻞㻣㻚㻢㻑
㻞㻟㻚㻢㻑

㻞㻡

1-Aug.-14

Important disclosuresand disclaimers appear
at the end of this document.

㻞㻡㻑

㻞㻝㻚㻞㻑

㻝㻥㻚㻟㻑

㻞㻜㻚㻢㻑

㻞㻜

㻞㻜㻑

㻝㻡

㻝㻡㻑

㻝㻜

㻞㻜㻚㻜㻜㻌

㻞㻝㻚㻜㻜㻌

㻞㻜㻚㻜㻜㻌

㻞㻝㻚㻜㻜㻌

(¥1 dividend
increase)㻡㻞㻟㻚㻜㻜㻌
(¥2 dividend
increase)㻡㻑㻜

FISCO Ltd. Analyst
Yuzuru Sato㻝㻜㻑㻜㻑㻲㼅㻟㻛㻝㻝

㻲㼅㻟㻛㻝㻞

㻲㼅㻟㻛㻝㻟

㻲㼅㻟㻛㻝㻠

㻲㼅㻟㻛㻝㻡㻱

Income Statement
FY3/11

FY3/12

FY3/13

FY3/14(\mn; %)
FY3/15E

Sales(y-o-y)Cost of goods sold(ratio)SG&A expenses(ratio)Operating profit(y-o-y)(ratio)Non-operating profit
Non-operating expenses(equity in losses of affiliates)
Recurring profit(y-o-y)(ratio)Extraordinary profit
Extraordinary loss
Income before income taxes(y-o-y)(ratio)Corporate income tax(effective tax rate)
Net profit(y-o-y)(ratio)[Key indicators]
Number of shares outstanding(thousands)
Net profit per share (yen)Dividend per share (yen)Net assets per share (yen)Dividend payout ratio (%)-0.9
36,53672.2
11,319
22.4
2,773
-6.0
5.5
87
180
-4
2,681
-6.0
5.3
31
269
2,443
-8.9
4.8
1,124
46.0
1,319
-8.8
2.6

2.5
38,253
73.7
11,480
22.1
2,144
-22.7
4.1
80
151
-20
2,073
-22.7
4.0
83
1,990
-18.5
3.8
960
48.2
1,029
-22.0
2.0

5.1
39,62872.7
12,126
22.2
2,778
29.6
5.1
100
303
-216
2,574
24.1
4.7
2
188
2,388
20.0
4.4
979
41.0
1,409
36.8
2.6

5.1
42,53074.2
12,342
21.5
2,428
-12.6
4.2
148
318
-229
2,258
-12.3
3.9
1
45
2,215
-7.3
3.9
949
42.8
1,265
-10.2
2.2

4.7
2,890
19.0
4.8
2,700
19.5
4.5
1,590
25.6
2.7

14,211

14,211

14,211

14,211

14,211103.4720.00
894.47
19.3

72.46
20.00
949.44
27.6

99.16
21.00
1,041.54
21.2

89.08
21.00
1,112.55
23.6

111.8923.00
20.6

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