Int egr a ted R epor t 20 20
For the Year Ended December 31, 2019

Highlight s of the C ur rent F is c al Year/
Key Per for mance Indic a tor s

Performance Highlights (¥ millions)
FY ended

ItemJan. 2016

Jan. 2017

Jan. 2018

Jan. 2019

Dec. 2019

Net Sales

92,20994,640102,563

104,747

100,017Gross Profit

43,34544,68850,57253,85850,800Gross Margin (%)

47.0

47.2

49.3

51.4

50.8

Operating Income

14,521

16,015

19,412

19,612

17,072

15.7

16.9

18.9

18.7

17.1

15,08016,462

20,12920,39817,284

Ordinary Margin (%)

16.4

17.4

19.6

19.5

17.3

Net Income Attributable to
Owners of Parent

10,197

11,11814,515

14,238

11,538

Total Assets

73,94378,88984,46785,61890,491Net Assets

50,79253,73662,812

66,582

70,463

Free Cash Flows（Note 1）

10,147

12,956

13,508

8,928

10,103

21.3

21.8

25.7

22.8

17.5

15.1

16.3
19.2

22.2

21.2

17.4

Operating Margin (%)
Ordinary Income

ROE (%)（Note 2）
ROIC (%)（Note 3）
EPS（￥）

85.15

92.84

121.20118.8996.37

Dividend per Share（￥）

42.00

53.00

66.00

68.00

70.00

Dividend Payout Ratio (%)

49.3

57.1

54.5

57.2

72.7

Employees（Consolidated）

3,743

3,739

4,306

3,875

3,954

Notes 1. Free Cash Flows = Net cash flows from operating activities minus net cash flows from investing activities
2. Return on equity (ROE) is the ratio calculated by dividing net income for the year by the average equity at the beginning and end of the FY.
3. Return on invested capital (ROIC) is defined as net operating profit after tax (NOPAT) divided by invested capital. This figure is calculated using a tax rate of 30.0% from the year ended January 31, 2018 and for the second(bottom) of the two figures for the year ended January 31, 2017; and using a tax rate of 40.7% for the first (top) of the two figures for the year ended January 31, 2017 and before. Invested capital is calculated using the
average of the beginning and year-end figures.

1

Ann ou ncemen t o f S even th Medium-Te rm
Bu sin ess Pla n

Fiscal 2019 was the final year of our Sixth Medium-Term Business Plan. For the year, thegross margin—a key performance indicator—reached 50.8%, exceeding our initial targetof 50.0%. In our Seventh Medium-Term Business Plan, announced in February 2020, we aim
to achieve sound growth and increased profitability in all regions, centered on threepolicies: brand strategy, product strategy, and regional strategy.

2

Pigeo n Way Update—th e C orn ers ton e of All Ou r Activitie s

During the year, we evolved the Mission component of the Pigeon Way into our Purpose, thus
clarifying the meaning of our existence in society and the role we should play. Specifically, ourPurpose is “to make the world more baby-friendly.” We also defined Pigeon’s Brand
Promise—its pledge to society—which is to “Celebrate babies the way they are.”3

Acceleratio n o f E SG-Focu sed Ma na g e me nt

To make the world a more baby-friendly, and guided by the Pigeon ESG/SDGs Policy,
established in April 2019, Pigeon is accelerating the implementation of environmental,social and governance (ESG) management. Having identified six materialities (key issues)that we must resolve, we are committed to solving social issues surrounding babies andmothers, to create a world that celebrate babies the way they are.

営業利益／営業利益率
Operating
Income/Operating Margin (%)

Net Sales(¥ millions)(¥ millions)Operating Income

21,000120,000

100,017

100,000

Net Income Attributable to Ownersof Parent/Net Income Margin (%)
Operating Margin (%)
50

17,07218,00080,00030

12,00060,000

17.1

3,000

FY endedJan. 2016

Jan.
2017

Jan.
2018

Jan.
2019

0

Dec.
2019

10

(%)

(¥ millions)

16,000FY endedJan. 2016

Jan.
2017

Jan.
2018

Jan.
2019

Dec.
2019

10,103

10,0008,000

50

10,000

40

30

20

6,000
4,000

11.5

0

FY endedJan. 2016

Jan.
2017

Jan.
2018

Jan.
2019

Dec.
2019

10

0

Dividend per Share/
Dividend Payout Ratio (%)

ROE

(¥)

ROIC

80

Dividends per Share

Payout ratio
70.0

25

12,00011,53812,000030

14,000(%)

14,0002,000

ROE/ROICFree Cash Flows

17.5

20

17.4

(%)

100

80

60

15

72.7

60

40
40

6,000

10

4,000

20

20

5

2,000
0

20

6,000

20,000Net Income Attributable to Owners of Parent
Net Income Margin

8,000

9,000

40,000040

15,000(¥ millions)

16,000FY endedJan. 2016

Jan.
2017

Jan.
2018

Jan.
2019

Dec.
2019

0

FY endedJan. 2016

Jan.
2017

Jan.
2018

Jan.
2019

Dec.
2019

ROE is the ratio calculated by dividing net income for the year by theaverage equity at the beginning and end of the FY.
ROIC is defined as NOPAT divided by invested capital. The tax rate is
30.0% and the invested capital is the average of the beginning and yearend figures.

0

FY endedJan. 2016

Jan.
2017

Jan.
2018

Jan.
2019

Dec.
2019

0

The Company carried out a 3-for-1 split of common stock, effective
May 1, 2015.

Pigeon Integrated Repor t 202001

Pigeon His tor y

Corporate▶1949 Dofu Boeki, Pigeon’s
predecessor, established▶1952 Yuichi Nakata appointed
President▶1973 Head office building in
Kanda-Tomiyama-cho, Chiyoda-ku,
Tokyo, constructed▶1975 Kyowa Tokushu Shiko Co., Ltd.
(now Pigeon Home Products
Corporation) joined the Pigeon Group

Domestic Baby &Mother Care Business▶1949 First nursing bottle in Japan
with wide neck (A-type) launched▶1956 Baby and childcare-related products
launched▶1966 Baby powder,first in a new range of baby
hygiene products,
launched

1949～▶1983 Yoichi Nakata appointed
President; Yuichi Nakata appointed
Chairman▶1985 Corporate identity basedon the Pigeon philosophy of “Love”
adopted▶1991 Joso Laboratory (now Central
Laboratory) established▶1995 Listed on the Second Section of
the Tokyo Stock Exchange (July 7)▶1996 Fukuyo Ibaraki Corporation (nowPigeon Manufacturing Ibaraki Corporation)joined the Pigeon Group▶1997 Listed on the First Section of theTokyo Stock Exchange▶1988 Shares registered with the
Securities Dealers Association ofJapan (present-day JASDAQ)▶1957 Pigeon Honyuki
Honpo (Nursing Bottle
Manufacturing) Corporation
established▶1966 Name changed
from Pigeon Honyuki Honpo
Corporation to Pigeon Corporation▶1982 Pigeon Textiles (Pigeon Will
Corporation) established to manufactureand sell maternity wear

▶1975 World’s first diaper liner madeusing binderfree manufacturing method
launched▶1976 World’s first rubber
toothbrush for milk teeth launched▶1977 P-type nursing bottle forbabies with poor sucking strength
launched▶1979 K-type nursing bottle
launched▶1992
Baby wipes launched▶1982 MagMag®
training cup withadjustable tops fordifferent ages launched▶1993 Entry into baby food market▶1994 UV Baby Skincare (first sunscreen
skincare product for babies) released▶1985 Fit (Japan’s first seamlessbreast pad) launched▶1995 Milkpon nursing bottle
disinfectant launched▶1987 Chibion® digital thermometerfor babies launched▶1988 Babies’ natural sucking
peristaltic movement revealed

1990～

1980～

1970～

Child Care Service
Business▶1993 Pigeon Land Joso (child-care
center for infants) opened▶1996 Pigeon Wendy (babysitter
dispatch service) launched▶1999 Pigeon Kids World Corporation(now Pigeon Hearts Corporation)
established

Health & Elder
Care Business▶1975 Habilis Business Department,
targeting the senior market, established▶1983 Nursing care products underthe Habinurse brand launched▶1990 Thai Pigeon Co., Ltd.
established▶1996 Pigeon Industries (Thailand)Co., Ltd. established▶1974 First overseas officeestablished (in Singapore)

Overseas expansion▶1966 Export business started▶1978 Pigeon Singapore Pte. Ltd.
established▶ Highlights of the Current Fiscal Year/
Key Performance Indicators

C2▶P i g e o n H i s t o r y

02Social04

Environmental

37

06

Governance40▶A t a G l a n c e

PigeonIntegrated Repor t 2020
Contents

02

Pigeon Integrated Repor t 2020

▶To O u r S t a k e h o l d e r s
Interview with Outside Director

12Sources of Value Creation

16▶B r a n d E n h a n c e m e n t I n i t i a t i v e▶Business Summaries by Segment

1820Japan Business

20

China Business

24

Singapore Business

26

Lansinoh Business28▶P i g e o n E S G A c t i v i t i e s

List of Directors and Managing Officers▶Management’s Discussion and Analysis▶F i n a n c i a l D a t a▶C o r p o r a t e I n f o r m a t i o n▶I R To o l k i t s Q u i c k R e f e r e n c e

30
32

42
43
48
50
53

n

Nihonbashi Hisamatsu-cho, Chuo-ku,
Tokyo

Corporate▶2000 Seiichi Matsumura appointed
President and COO; Yoichi Nakata
appointed Chairman and CEO▶2002 PHP Hyogo Corporation (nowPigeon Manufacturing Hyogo
Corporation) joined the Pigeon Group▶2007 Akio Okoshi appointed
President and COO; Seiichi Matsumura
appointed Chairman and CEO; Yoichi
Nakata appointed Executive Advisorand Member of the Board▶2013 Shigeru Yamashita appointed President and COO; Akio Okoshi appointed
Chairman and CEO▶2014 The Pigeon Way formulated
Pigeon Corporation absorbed and merged with Pigeon Will Corporation
Pigeon Scholarship Foundation established (authorized as a public interest
incorporated foundation in 2016)▶2019 Shigeru Yamashita appointed Chairman of the Board; Norimasa Kitazawa
appointed President and CEO▶2006 Head office relocated to▶2010 Bonyu Jikkan® series of nursing bottles
and nipples renewed▶2015 Runfee baby stroller that runs smoothly over uneven groundlaunched

Domestic Baby &Mother Care Business

▶2017
▶2018
▶2019
▶2020

▶2002 Bonyu JikkanTM®, a wide-necknursing bottle (which promotes babies’
natural sucking peristaltic movement),
launched▶2003 Baby shoes designed using
research on toddlers’ walking patterns
released

Bingle type B baby stroller launched
Bonyu Assist® series of breast pumps fully updated
Pigeon Official Online Shop opened
SkinFriendly and FunFriends series of pacifiers launched

2010～

2000～
Child Care Service
Business▶2001 Operation of in-company
child-care facilities launched▶2004 Operation of child-care facilities
in hospitals of the National Hospital
Organization (independent administrative
agency) launched▶2002 Operation of approved
child-care center launched

Health & Elder
Care Business▶2000 Pigeon Manaka Corporation
established▶2004 Tahira Corporation (now Pigeon
Tahira Corporation) joined the PigeonGroup▶2007 Recoup brand of anti-aging
products launched▶2011 Daycare service launched by
Pigeon Manaka Corporation▶2015 Sano Day Service Center opened▶2016 “Oral Care for Elderly” series
launched▶2018 “ProFitCare” series, a productline focused on maintaining good seatedposture for nursing-care facility users
launched▶2019 “Sanitary Care” series, (productline focused on maintaining good seating
posture for nursing-care facility users),
launched▶2009 Pigeon Industries (Changzhou)Co., Ltd. established in China

China Business▶2002 Pigeon (Shanghai) Co., Ltd.
established in China▶2006 Pigeon Manufacturing(Shanghai) Co., Ltd. established in China

Singapore Business▶2009 Pigeon India Pvt. Ltd., a sales
subsidiary establishedLansinoh Business▶2004 Lanshinoh Laboratories, Inc.
in USA joined the Pigeon Group▶2015 Pigeon India Pvt. Ltd. factory
established▶2011 Pigeon Malaysia Trading Sdn.
Bhd. established▶2017 PT Pigeon Indonesia made asubsidiary▶2012 DoubleHeart Co. Ltd. establishedin South Korea▶2019 PT Pigeon Baby Lab Indonesia
established▶2010 Lansinoh Laboratories Medical
Devices Design Industry and Commerce Ltd.
Co. established in Turkey▶2015 Lanshinoh Laboratories
Benelux NV established in Belgium▶2011 Earth Friendly Baby brand acquiredby Lansinoh Laboratories, Inc.

▶2016 Lansinoh Laboratories
Shanghai established in China▶2014 Lansinoh Laboratórios Do Brasil
Ltda. established in Brazil

The Pigeon Group (Pigeon Corporation and its consolidated subsidiaries) seeks to maximize economic andsocial value through communications with all stakeholders, including shareholders and other investors.

Purpose of This

This document, which contains reports on management strategies, as well as business and ESG activities,

Integrated Repor t

is designed to deepen your understanding of the corporate value created by the Pigeon Group. You canalso learn about our past consolidated corporate performance (covering longer time spans) by viewing
Investor’s Guide 2020 in our digital IR Library. Please visit www.pigeon.com for details.

Pigeon Integrated Repor t 202003

Effective the year ending December 31, 2020, we have divided
our organization into four segments: Japan Business, China
Business, Singapore Business, and Lansinoh Business. (Please
see P. 11 for more details.)

At a Glance
Re p o r t i n g s e g m e n t s ( F i s c a l 2 0 1 9 )Products/Ser vices

Baby and mother care products
Business Conditions and Group Strengths

China Busine s s

We place an emphasis on nursing bottles andnipples, toiletries, and high-end skincare products.
With more than 500 products on the Chinese
market, we focus on high-end demand from thegrowing number of newly wealthy people in major
coastal cities. We are also strengthening ourpresence in the field of e-commerce.

Mainly China, South Korea,
and East Asia

Lansinoh Business

13.2%(¥13,213 million)

Singapore Busine s s
Mainly Southeast Asia, India,
Middle East, and Oceania

Products/Ser vices

Singapore Business

Baby and mother care products
Business Conditions and Group Strengths

We sell baby and mother care products under the
Pigeon brand. In Asia, following expansion of our
production base in Thailand, we are expanding
our distribution and sales network in India andreinforcing our business in Indonesia.

Products/Ser vices

Baby and mother care products
Business Conditions and Group Strengths

We sell breastfeeding-related products under
the Lansinoh brand, mainly in the United States.
Spearheaded by Lansinoh Laboratories, Inc., weare also expanding our business in the United
Kingdom, Germany, and other European countries,
as well as China and Brazil. We are strengthening
our brand w hile ex panding other productcategories, including nursing bottles.

04

Pigeon Integrated Repor t 2020

L ansinoh Busine s s
Mainly North America, Europe,and China

11.5%(¥11,482 million)¥

10

China Business

36.8%(¥36,824 million)

1: The consolidated nelimination of inters

Products/Ser vices

Baby and mother care products, baby strollers

Domes tic B aby &Mother C are
Busine s sBusiness Conditions and Group Strengths

Based on over half a century of research into
breastfeeding and early childhood development,
we have gained an in-depth understanding ofbabies’ growth processes and identified areasof concern in child-rearing. This has led to ourdevelopment and launch of numerous high-quality
products, resulting in widespread recognition of
Pigeon as a leading company in the industry.

Other

1.3%

(¥1,343 million)
Business%million)Consolidated
Net Sales1

e Business%million)¥

100,017million
Share of net sales(Sales)siness30.8%(¥30,813 million)
Child Care Service Business

3.5%

1: The consolidated net sales figure refers to the amount after
elimination of intersegment transactions.

6.5%(¥6,546 million)

Heal th & Elder
C are Busines s

Products/Ser vices

Child-rearing support services, operation of
in-company childcare facilities and daycare
centers, event child-care services, preschool
education services
Business Conditions and Group Strengths(¥3,492 million)
Health & Elder Care Business8%

4 million)

Child C are
S er v ice
Busine s s

Domestic Baby &Mother Care Business

Leveraging Pigeon’s reputation for safety, peaceof mind, and reliability acquired in baby andchild care products, we earn the confidence ofeveryone by advancing this business segment
and offering high-quality services.

Products/Ser vices

Elder care products and services
Business Conditions and Group Strengths

We are working rigorously to advance thisbusiness segment by introducing new competitive
products and improving the quality of our eldercare services.

Pigeon Integrated Repor t 202005

To Our S t akeholder sNorimasa Kitazawa
President & CEO

The Pigeon Group’s Purpose:
To Make the World More Baby-Friendly
Review of My First Year as a CEO

06

A year has passed since I was appointed president and CEO in April

meaning of our existence in society and the role we should play. We

2019. The first thing we have done was that we divided ourhave also been working on a refresh of the Pigeon brand toorganization along market lines into four segments: Japan Business,

strengthen its power and reach.

China Business, Singapore Business, and Lansinoh Business. This

Pigeon’s Brand Promise—its pledge to society—is to “Celebrate

new organizational structure has enabled us to pursue more agile

babies the way they are.” This means providing a consistent brandbusiness development that reflects the characteristics of eachexperience through the various touchpoints we have with customers.

market. We also locally set up product development teams within

In February 2020, Pigeon was ranked among the top 100 brands ofeach business segment to speed up decision-making for“Best Japan Brands 2020,” selected by Interbrand Japan Co., Ltd. We

manufacturing and marketing according to regional market trend andare proud of this achievement, which recognizes our efforts to

consumer needs. Having launched multiple products in each

improve brand value.

business segment, resulting in steady sales growth, we expedited

We also enhanced our internal systems. In the Japan Business, fordecision-making by transferring authority to the four businessexample, we introduced the Accelerate My Career (AMC) program, asegments, and integrated our head office functions with thecareer system that encourages employees to pursue their own career

establishment of the Global Head Office (GHO) to oversee the entire

paths. In addition, we launched the Pigeon Frontier Award, an in-

Pigeon Group. (Please refer to P. 9 for details about the GHO).

house venture system that inspires employees to freely realize their

The Pigeon Way is the heart and soul of Pigeon and theown thoughts and ideas and encourages them to take on challenges

cornerstone of the actions of all Pigeon Group employees. (Please

without fear of failure. We are also working to further strengthenrefer to P. 7.) In the past year, we have upgraded the Mission

corporate governance, including by establishing a Remuneration

component of the Pigeon Way into our Purpose, to clarify theCommittee and a Nomination Committee in the year under review.

Pigeon Integrated Repor t 2020

Review of 6th Medium-Term Business Plan
The fiscal year ended December 31, 2019 was the final year of our 6th

Business expanded steadily in almost all of its development regions. In

Medium-Term Business Plan. For the year, we posted consolidated net

India, positioned as a priority market for the Singapore Business, wesales of ¥100,117 million, operating income of ¥17,072 million yen,

have continued to strengthen our sales activities. For example, moreordinary income of ¥17,284 million, and net income attributable tothan 50,000 pharmacies in India are now handling our products.

owners of parent of ¥11,538 million1. We enjoyed healthy growth underThe speed of business is accelerating all around the world. In thethe plan through the fiscal year ended January 2019. In the final period

United States and China, in particular, products developed by start-up

ended December 2019, however, there was an unprecedented

companies in various sectors are quickly capturing large swathes of thedecrease in domestic childbirths and a major fall in inbound tourism

market through online sales. We recognize the need to take stronger

demand. As a result, we did not achieve the net sales target initially set

measures going forward. This includes responding to intensifying

under the plan, although we ended the year having reached ourcompetition stemming from expansion of the e-commerce market, asrevised targets, with the exception of net income attributable towell as launching new products more swiftly.

shareholders of parent. Nevertheless, we reported a gross profit
margin of 50.8%, exceeding the 50% target set for the final year of the

1 : Effective the fiscal period ended December 2019, the Pigeon Group changed its fiscal
year-end from January 31 to December 31. Therefore, the period under review was atransitional period of 11 months (February 1–December 31, 2019) for the parent
company and its domestic subsidiaries, which previously closed their accounts on
January 1 each year. For this reason, year-on-year comparisons are not provided.

6th Medium-Term Business Plan.
Over the period of the plan, the China Business achieved double-digit
year-on-year sales growth on a local-currency basis, and the Lansinoh

The Pigeon Way

VisionThe Pigeon Way is thecornerstone of all our activities.
PurposeIt embodies our “heart and soul”
and sets the grounds for ouractions to stream from this core.

Corporate Philosophy
Credo

ValuesAction Principles● Corporate Philosophy● Credo● Vision─ The essence and core of our company

─Our fundamental brief based on the corporate philosophy

─ The goal Pigeon Group aims to achieve

Love

Only love can beget love

To be the baby product manufacturer
most trusted by the world’s babies andfamilies: Global Number One● Purpose● Values● Action Principles

─ Our reason for being and the role we shouldplay in society─Important attributes for all Pigeon employees─ The basic guideline for driving all of our actions

Integrity
Communication, Consent, Trust
PassionAgility
Keep sight of customers
Global collaboration among competent individuals
Leadership and logical working style
Willingness to change

We want to make the world more babyfriendly by furthering our commitment
to understanding and addressing babies’
unique needs

Pigeon Integrated Repor t 202007

To Our S t akeholder sGrowth Strategies in the Global Market
Recognizing Business Risks and Growth Opportunities
The global population is forecast to reach 9.7 billion by 2050, withtotal net sales.)approximately 140 million babies born every year around the

In January 2019, we established a four-segment business unit

world. Indeed, the top 20 nations in terms of childbirths, led bythat clarifies our organization along market lines. Our aim here is

India and China, are expected to account for 91.6 million births

to create a system in which our overseas businesses—mainly inannually—more than 70% of the world total. In light of these

China, Europe, the United States, India, and Indoenesia—will

childbirth forecasts and the benefits of the economic growth they

become powerful growth drivers of the entire Pigeon Group while

generate, we expect our target markets to keep growing.

we target stable growth in our Japan domestic business.

In Japan, however, the number of childbirths declined to864,000 in 2019, falling below 900,000 for the first time since
1899, when statistics started, and overall market growth isexpected to slow down further. (Pigeon's former Domestic Baby &Mother Care Business1 accounts for more than 30% of the Group’s

1 : Under a change to our reporting segments, the Domestic Baby & Mother Care
Business was integrated into the Japan Business, effective the fiscal period ending
December 31, 2020.

Overview of 7th Medium-Term Business Plan
Our 7th Medium-Term Business Plan covers the three-year periodbreast pumps, skincare products, and oral care products.

from January 2020 through December 2022. Under the plan, weWith respect to our regional strategy, we will aim to expand thewill expand the key factors of our success in the Chinese market

key factors of our success in the Chinese market globally.

globally and achieve healthy business growth and profitability in all

However, this does not mean that a business model that succeeds

regions. As for numerical targets, our goal is to achieve annual

in China will work universally, as it is obvious that China and India

consolidated net sales of ¥200 billion in the next 10 years. In theare decidedly different markets. Also, we will adopt a design-

final year of the 7th Medium-Term plan, ending December 2022,

driven approach to product development in addition to meeting

we are targeting net sales of ¥126 billion, representing a

the consumer needs targeted by each business segment. Under

compound annual growth rate (CAGR) of 6.8% compared with thethis approach, which values free thinking, we will place a stronger

fiscal year to December 2019. To achieve these goals, we aim toemphasis on such perspectives as aesthetic sense, sensitivity,

maintain a CAGR of 3–4% in our domestic business and 9–10% inand ease of use. In China, we will also launch innovative products

our overseas businesses. As for earnings, in the final year of thein terms of production and sales methods. The first product isplan we are targeting operating income of ¥23.1 billion (CAGR of

Ssence, a premium skincare product. Ssence is preservative-free,

10.3% compared with the year to December 2019) and net income

available only through our official e-commerce store, and is theattributable to owners of parent of ¥16.3 billion (CAGR of 12.0%)2.

first product offered through our model of selling directly fromTo reach these targets, our new business plan addresses threefactor y to consumer. We anticipate that this will help us

key strategies: a brand strategy, a product strategy, and a regional

accumulate data that is useful not only for marketing but also forstrategy (to be implemented in each market area). Regarding our

future R&D. Under our four-segment business structure, we willbrand strategy, we have created a new Brand Promise—leverage Pigeon’s R&D capabilities to expedite product“Celebrate babies the way they are”—based on our Purpose. Bydevelopment and continuously roll out products that inspire

embodying the Pigeon Way and our Brand Promise into ourinnovation and match the characteristics of their respective

corporate activities and reflecting them every aspect of ourmarkets.

contact with customers, we aim to develop a brand "chosen bycustomers who buy into our business."
As for our product strategy, in addition to increasing the numberof new products, we will leverage our strengths—productdevelopment approach, design, and production and sales
techniques—across the global Pigeon Group. Our aim here is toaccelerate growth in categories where we can differentiate
ourselves from our competitors: nursing bottles and nipples,08

Pigeon Integrated Repor t 2020

2 : Fiscal year to December 2019 (11 months) has been converted to 12 months.

7th Medium-Term Business Plan Quantitative Targets (As of Feb. 2020)
Consolidated Performance Targets (¥ millions)

1: Fiscal year to December 2019 (11 months) has been converted to 12 months.

Dec. 19 Actual(12-monthadjusted basis)1

Dec. 20 Budget

Dec. 21 Budget

Dec. 22 Budget

Net Sales

103,513

109,000

116,900

126,000+6.8%

Gross Profit

52,41856,60061,40066,400+8.2%

Operating Income

17,213

18,10020,20023,100+10.3%Net Income Attributable to Owners of Parent

11,593

12,60014,10016,300+12.0%EPS(¥)

96.82

105.23117.76136.14Gross Margin

50.6%

51.9%

52.5%

52.7%

Operating Margin

16.6%

16.6%

17.3%

18.3%

Net Income Attributable to Owners of Parent

11.2%

11.6%

12.1%

12.9%

FY ended

Item

Dec/19 Result

CAGR *

7th MTBP

ROE

17.5％

20.0％ or higher

ROIC

17.4％

19.0％ or higher* ROE: Return on equity. The denominator is the average of the figures at the beginning and end of the fiscal year.
* ROIC: Return on invested capital. Assumes a tax rate of 30.0%. Invested capital is calculated using the average of the figures at the beginning and end of the fiscal year.

Global Head Office (GHO) system
Clarification of roles, functions and responsibilities of GHO and each business unit
Domestic Baby & Mother Care Business●PIGEON CORPORATION

Related Business●PIGEON HEARTS CORPORATION●PIGEON MANAKA CORPORATION●PIGEON TAHIRA CORPORATION●PIGEON HOME PRODUCTS CORPORATION●PIGEON MANUFACTURING HYOGO CORPORATION●PIGEON MANUFACTURING IBARAKI CORPORATION●PIGEON (SHANGHAI) CO., LTD.
●PIGEON MANUFACTURING (SHANGHAI) CO., LTD.
●PIGEON INDUSTRIES (CHANGZHOU) CO., LTD.

GlobalHead Office（GHO）●DOUBLEHEART CO. LTD.

●PIGEON SINGAPORE PTE. LTD.
●PIGEON MALAYSIA (TRADING) SDN. BHD.
●PT PIGEON INDONESIA●PT PIGEON BABY LAB INDONESIA●●PIGEON INDIA PVT. LTD.
●PIGEON INDUSTRIES (THAILAND) CO., LTD.
●THAI PIGEON CO., LTD.

●LANSINOH LABORATORIES, INC.
●LANSINOH LABORATORIES MEDICAL DEVICES DESIGN INDUSTRY AND COMMERCE LTD. CO.
●LANSINOH LABORATÓRIOS DO BRASIL LTDA.
●LANSINOH LABORATORIES BENELUX NV●LANSINOH LABORATORIES SHANGHAI●Sales / Service offices●Factories

Pigeon Integrated Repor t 202009

To Our S t akeholder s

Promoting ESG-Focused Management
Pigeon positions ESG1 as a core integrated element of management.

Pigeon places particular emphasis on social contribution. To this end,

Since our founding in 1957, we have achieved growth under our

we will continue introducing new products and services that help

mission, which is to bring joy, happiness, and inspiration to babies andresolve social issues by always working with a strong awareness offamilies around the world by providing them with products andour Purpose and our Brand Promise, which are key elements of theservices that embody our Corporate Philosophy of “Love.” Based on

Pigeon Way.

more than 60 years of research babies' sucking behaviors, as well as

We are also working to upgrade the governance (G) component ofobservations of consumer behavior, we conduct R&D aimed at

ESG. For Pigeon, this means establishing and strengthening

identifying potential needs and creating products and services thatframeworks that facilitate transparent, fair, and swift decision-

address people’s concerns. We then work hard to popularize thosemaking. In 2019, for example, we established a Remuneration

products and services.

Committee and a Nomination Committee. Also, the appointment of

Our business helps resolve various social issues surrounding

two new outside directors—Chiaki Hayashi and Eriko Yamaguchi—

babies, mothers, and families, which means Pigeon also exists “towas approved at Pigeon’s Ordinary General Meeting of Shareholders

make the world more baby-friendly.” Therefore, it is natural for us toheld in March 2020. These appointments bring the number of outsideenhance ESG, which we regard as an important management priority.

directors to five, and outside directors now account for more thanWith respect to the environmental (E) component of ESG, where we

one-third of the Board of Directors. We also have four female officers

have not disclosed specific numerical targets to date, we intend to(three directors and one auditor), reflecting our progressive efforts toannounce targets for CO2 emission reductions and other specificpromote diversity.

KPIs 2. As for the social (S) component, in November 2019 weannounced our intention to open a Human Milk Bank within our Tokyo
head office. This is an initiative to support the Japan Human Milk
Bank Association, which supplies donor milk to babies born
prematurely or with extremely low birthweight (less than 1500g).

1 ESG : Environmental (E), social (S), governance (G)2 KPIs: Key performance indicators

Investments and Shareholder Return
In the three-year period of the new 7th Medium-Term Business Plan,

Specifically, we aim to achieve return on equity (ROE) of 20.0% or

we forecast that net cash provided by operating activities will increase

higher and return on invested capital (ROIC) of 19.0% or higher. In theby ¥56 billion. Cash generated from our business operations will be

year under review, we paid an interim cash dividend of ¥35.00 per

returned to shareholders after giving priority to growth-oriented

share and a year-end dividend of ¥35.00 per share. These

investments. Over the next three years we will make aggressive

disbursements brought total annual dividends to ¥70.00 per share, up

investments, including in M&As, totaling around ¥25 billion (¥16 billion¥2.00 year on year. The consolidated dividend payout ratio was 72.7%.

overseas and ¥9 billion in Japan). As for shareholder return, we are

In the fiscal year ending December 31, 2020, we plan to pay total

targeting a consolidated total shareholder return ratio of around 55%,

annual dividends of ¥72.00 per share, up ¥2.00.

with year-on-year increases in dividends for each fiscal year.

In Conclusion
The Pigeon Group’s target market is the global market. Although

received by many customers, we will swiftly add new products

childbirth numbers are declining in Japan, they are increasingthat reflect the characteristics of each region. We ask for yourworldwide, so we believe Pigeon has plenty of scope for growth.

continued support and encouragement.

To augment our existing product lineup, which has been well

10

Pigeon Integrated Repor t 2020

Change in reporting segments
Prior to announcing 7th Medium-Term Business Plan, in fiscal 2019 thePigeon Group reorganized its operations into four businesssegments—Japan Business, China Business, Singapore Business, andLansinoh Business. We are working to accurately grasp market

Reporting segments(until fiscal 2019)

Reporting segments(from fiscal 2020)

Domestic Baby &Mother CareJapan

conditions in each business, expedite decision-making, and speed up
implementation of our various strategies.

Child Care Service

Previously, we had six business segments—Domestic Baby &Mother Care Business, Child Care Service Business, Health & Elder
Care Business, China Business, Singapore Business, and Lansinoh

Health & Elder Care

Business. Under the aforementioned reorganization, will shift to areporting system with four business segments (Japan Business,

Other

China Business, Singapore Business, and Lansinoh Business),
effective fiscal 2020, as shown in the diagram on the right.
Three former business segments (Domestic Baby & Mother Care

China

China

Singapore

Singapore

LansinohLansinohBusiness, Child Care Service Business, Health & Elder Care Business),
as well as manufacturing and sales services handled by domestic
production subsidiaries for non-Group entities (previously included in
the “Other” business segment), will be integrated into the Japan
Business.
On the organizational level, two previous divisions—Child Care
Service Business Division and Health & Elder Care Business Division—
will be integrated into one, named the Related Business Division.

Pigeon Integrated Repor t 202011

Rehito Hatoyama
Outside Director

Norimasa Kitazawa
President and CEO

Pigeon’s Board of Directors engages in lively debatewith the aim of making highly accurate decisions

making gets faster. I think the system is functioning very
well in the sense that consensuses reached by Board
members are reflected in management decisions.

Kitazawa

You have served as an outside director for the past four
years. From this perspective, what is your impression ofKitazawa

you, Mr. Hatoyama, offer many constructive and forwardlooking opinions and recommendations, rather than

Pigeon’s board of directors?
Hatoyama

simply adopt a negative perspective. You are more likely

As I’ve said in the past, one of the great features of

to say “Let’s do this” or “Let’s fix that,” which is very

Pigeon’s Board of Directors is its keen willingness to

helpful for me.

listen. Rather than being a forum for reaching “yes or no”
decisions, the Board engages in lively debates in which

12

The Board has to deal with various issues, but I note thatHatoyama

Thank you very much. As an outside officer, my role is tointernal and outside directors give multiple opinions

reject agenda items that should be rejected. In fact, I

based on their varying perspectives. And instead ofoften do so at Board meetings of other companies. Of

saying “Let’s continue this debate at next month’scourse, I do so at Pigeon as well. That said, fortunately at

meeting,” the Board endeavors to reach decisions on the

Pigeon there are very few proposals that I need to reject.

spot while keeping the discussion alive. I feel that we are

Accordingly, we often find ourselves discussing motions

engaging in this form of debate more frequently in recent

by providing opinions on how we can do better. In ourtimes, and that we are steadily shifting from Japanese-debate on investment profitability, for example, I made astyle to global-style management as our decision-

proposal about which factor—OEM or in-house

Pigeon Integrated Repor t 2020

To Our S t akeholder sInter v iew w i th Ou t side Dir ec tor

production—would more effectively boost suchaddress elements that require correction. In any case, we

profitability. This was based on the perspective ofare taking independent and robust measures in eachshareholder value. Even when discussing subsidiaries, I

region. Each faces different challenges, even withproposed that we address earnings from the parent

respect to the COVID-19 crisis.

company’s perspective. This is because of myKitazawa

Hatoyama

I think you and I have many things in common. Our

unrelenting commitment to representing the interests ofmarket experiences may be different—you are well-shareholders. Also, in December 2019 we announced aversed in China, and I previously worked in Europe anddownward revision of our full-year performance

North America—but we have both leveraged overseas

forecasts. The Board of Directors was able to examine theopportunities to promote business expansion of

figures and discuss all parts of the process, right up to

Japanese companies. And we have shared a common

fixing the final direction. I believe this is proof that theobjective, which is to bring smiles to the faces of families

Board is functioning properly. It’s also testament to thethrough Japanese-brand products. On top of that, we

relationships of trust that we have built with each other.

have embraced the same approach: globalization

That’s right. Another factor was a comment made a longthrough rigorous localization. This means speeding up

time ago by an outside officer, who pointed out thatdecision-making by giving freedom to local employees,“Pigeon’s Board of Directors simply reports; there’s noestablishing a global management system and utilizing

discussion.” That comment prompted all Board members
to adopt a common view that the Board is a forum forgovernance. It’s important to get the right balance.
Kitazawa

That’s right. Our plan is to further strengthen the GHO’s

debate. By adopting a common awareness about issues,

global coordination function, including with respect tothe Board has been able to shift its focus frombranding, to foster more effective governance, in a

preparatory processes, such as collating materials, to anmanner that is not forced by the head office. To this end, Iemphasis on discussion.

want to continue receiving advice from outside officers
from perspectives that do not exist within Pigeon. In

Governance system: Delegation of authority under
new four-segment business structure

particular, I’d appreciate objective general oversightabout compliance and other matters from a third-party
standpoint. You have a broad network from a global

Hatoyama

In the past year, we have been promoting localization
under our four-segment business structure. Localization
has enabled us to see more clearly the faces of our local
teams on the front lines in various regions, leading to abetter understanding among management. I always try

perspective, and your frank input is very helpful for me.
With your knowledge and wealth of experience, I lookforward to your continued advice, including in your role asmember of the Compensation Committee and theNomination Committee.

to ask appropriate questions, but now that front-line
activities are more visible, I feel we can engage in deeper
discussions about items on our agenda. Pigeon’s current
business strategy is to fine-tune its successful businessmodel in China and roll it out globally. Through our Board
discussions, I’ve learned a lot about how you, Mr.
Kitazawa, have promoted localization in China in suchareas as R&D, product planning, and marketing.
Kitazawa

From my own experience, I’ve learned that I couldn't
achieve anything in China just by myself. I had to entrust
all the work to the local staff and, as a result, they
achieved success, which was reflected in our businessperformance and in their remuneration. To expand thissystem to the rest of the world, we divided our operations
into four business segments and assigned authority toeach. Of course, our GHO can deploy governance toPigeon Integrated Repor t 202013

Hatoyama Generally speaking, the role of outside directors is to help

Increasing diversity to reflect business balance

improve the accuracy of decision-making by offering
third-party viewpoints. In addition, I’d like to help

Kitazawa We recently appointed two new outside directors: Erikoincorporate innovation into Pigeon while taking

Yamaguchi, who has been promoting Pigeon’s brandadvantage of my own specialties and insights. I also wantdevelopment in emerging countries, and Chiaki Hayashi,

to foster a more sophisticated, world-class governance

who has been fostering innovation, including IT, both at

system. It’s also in Pigeon’s best interest to embrace newhome and abroad. I feel that we now have greater

perspectives that I do not have. To step up businessdiversity in terms of specialization and can benefit fromdevelopment in emerging countries from theperspectives unique to outside directors with varying

perspectives of mothers and women, we need tocareers. For Audit & Supervisory Board members,

continue increasing the diversity of our workforce in

however, we emphasize the auditing function overterms of nationalities, specialties, and so on.

diversity, and for this reason we are reinforcing our global
audit capabilities.
Hatoyama In our future Board meetings, I look forward to discussions
that reflect our increased diversity. Pigeon’s base of
stakeholders—including shareholders, employees, andbusiness partners—is growing dramatically. In thiscontext, you, Mr. Kitazawa, are playing an active personalrole to ensure that perspectives lacking internally areincorporated from outside.
Kitazawa

That’s right. The Board of Directors is moving in a positive
direction, and I would like to see it evolve further,including with respect to its composition.

Hatoyama

I think the source of Pigeon’s corporate value lies in its
team of people who constantly practice the Pigeon Wayeven as diversification progresses. As an outside director,
I will continue striving to help improve the accuracy ofdecision-making and enhance shareholder value.

14

Pigeon Integrated Repor t 2020

To Our S t akeholder s

Pigeon’s Gover nance S y s tem
From the dialogue between Mr. Kitazawa and Mr. Hatoyama

Mr. Hatoyama, a fellow outside director at Pigeon, has a rare mix of skills.
Previously, he was responsible for the overseas business of a well-known
consumer brand. In that role, he built a track record of outstanding results andearned a reputation as an entrepreneur. At the same time, he has a keen
insight about governance and compliance from an investor’s perspective. In
his interview with Mr. Kitazawa, he mentioned the comment of an outside
officer, who pointed out that “Pigeon’s Board of Directors simply reports;
there’s no discussion.” That outside director was me. That said, I feel that our
Board of Directors has undergone major changes in the last five years since I
was appointed as Pigeon’s first outside director. Pigeon has become
progressively more global in terms of debate on strategies and risks at Board
meetings, improved objectivity and transparency regarding executive
compensation and nomination, and business development. I think we havemade steady progress toward achieving global standards with respect to ourmanagement and governance systems. At present, we are facing the
COVID-19 pandemic, our greatest challenge since World War II. Nevertheless,we as outside directors will work together to strengthen Pigeon’s
management system.

Takayuki Nitta

Outside Director

As reflected in the dialog you've just read between Mr. Kitazawa and Mr.
Hatoyama, Pigeon’s Board of Directors engages in lively discussion. Theirexchange of views is similar to a scene from an actual Board meeting. As far as
I know, the Board has never overturned an agenda item, nor has any
discussion about potential overturning ever negatively impacted theeffectiveness of the Board. I feel that all of our directors, including outside
directors, are free to present their individual ideas, engage in deep discussion,and forge ahead confidently with each agenda item. In the fiscal year underreview, we established a Nomination Committee, following the Compensation
Committee that was set up in the previous year, and I feel that othermechanisms established to date are functioning properly. In addition, we
increased the number of outside directors in March 2020, and outside
directors will likely account for more than 50% of Board members in the near
future. In our new medium-term business plan, we have included contribution
to achieving the Sustainable Development Goals (SDGs) among our
performance indicators. I am confident that Pigeon can help resolve social
issues and reduce environmental impacts. Japan faces a declining birthrate.
Rather than see this as a threat due to market contraction, I’d like to engage infurther strategic debate based on new perspectives in the context of making
the earth more sustainable.

Erika Okada
Outside Director

Pigeon Integrated Repor t 202015

To Our S t akeholder sValue Creation Story
Sources ofValue Creation
Human capital
The Pigeon Way practiced
by all employees
Group total: 3,954 employees(Fiscal 2019)

Financial capital
Consolidated net assets: ¥70.4 billion
Equity ratio: 74.8%(Fiscal 2019)Intellectual capital
Know-how and intellectual property derived
from 60+ years of breastfeeding-related R&D,
manufacturing, sales, and service
Brand value: US$645 million* From Best Japan Brands 2020 (Interbrand)

Manufacturing
capitalGlobal quality control
Production bases: 3 in Japan, 7 overseas

Relationships of trustwith consumers,
business partners,
and medical
practitioners

16

The above figure illustrates Pigeon’s value creation

embodies the “heart and soul” of all Pigeon employees.

story, which is represented as a flow linking sources of

We believe that corporate value created from ourvalue creation (including invested capital), value chain

business activities largely consists of two elements—

initiatives, and corporate value created. At the core is

economic value and social value—and that the social

the Pigeon Way, which is the cornerstone of all ourvalue we create will help achieve the Sustainable

activities. It describes our Corporate Philosophy

Development Goals (SDGs) set by the United Nations(“Love”) and our Credo (“Only love begets love”) andfor 2030.

Pigeon Integrated Repor t 2020

StoryCorporate Value CreatedFiscal 2019 result(Japan only; 11-month period)

Seventh Medium-TermBusiness Plan (target, Fiscal 2022)

Net sales

Gross profit

Economic
Value

Operatingincome

ROE

ROIC

Enhancement of businesscompetitiveness andR&D capabilities
Sustainable reduction ofenvironmental impact

Social Value

Enhancement of
stakeholder responsiveness(Key issues forincreasing social
value)

Improvement in quality ofhuman resources

Creation of an ideal
working environment
Establishment ofsolid management basePigeon’s business model for value creation supports ababies and mothers (“S”), and building a solid

value chain ranging from research and productmanagement base (“G”). Leveraging the growth of ourdevelopment to procurement, production, marketing,four businesses—Japan Business, China Business,sales, logistics, consumer use, and consumer support.

Singapore Business, and Lansinoh Business—we are

Through this value chain, which is centered on Pigeon

realizing sustainable value creation while making ourWay, we are reducing environmental impacts (“E”

value chain stronger.

element of ESG), solving social issues surrounding

Pigeon Integrated Repor t 202017

Brand Enhancement
Ini tia ti ve

In 2020, we renewed the Pigeon brand with the aim of improving our brand power. We
also made a new Brand Promise—“Celebrate babies the way they are”—as ourpledge to society. We will continue delivering consistent Pigeon-brand quality globallyat all points of contact with our stakeholders.

Background of Brand Reinforcement
Since its founding, Pigeon has always adopted the perspective of babies and given
deep thought to what happiness means for them. With our unique outlook, together
with our single-minded passion, we have grown into Japan’s leading manufacturer ofbaby and mother-care products. Pigeon has remained committed to the interests ofbabies, and its mission is to pursue what is important for babies’ true happiness. With
this principle in mind, we formulated the aforementioned Brand Promise. Our aim is toconvey once again our commitment to learning what it takes to make babies happy. In
other words, we want “to make the world more baby-friendly.”Things That Only Pigeon Can Do
In its pursuit of their happiness, Pigeon rigorously studies and closely monitors thewants, needs, and habits of babies. We understand that each and every baby has
wonderful individual attributes and a hidden potential for self-development.
Moreover, all babies are born with magnificent radiance, and we believe that Pigeon,
which has worked closely with babies for many years, is uniquely positioned tohighlight that radiance.
In the modern world, people’s values are diversifying due to globalization andtechnological innovation. Rather than raising children uniformly, mothers andfathers now want to bring out the individuality of each child. Nevertheless, many
hurdles still remain in society for babies to be themselves, to be baby-like, to becarefree, and to grow. They only have one life in this world, and we want them to bethemselves. Pigeon’s aim is to create a society in which babies are cherished “asthey are” together with their mothers and fathers.

18

Pigeon Integrated Repor t 2020

Pigeon Br and S tor y
Every baby is born with a remarkable gift:
the ability to be truly themselves.
Pigeon believes in preserving
and nurturing the qualities that make each baby special.
Our years of experience in serving generations of babies
has taught us there’s no one-size-fits-all approach to development.
Each baby deserves to progress at their own pace
and to become whoever they want to be.
We strive to encourage curiosity, celebrate diversity,and open horizons, because a society that treasures these things
is one that will grow up to be creative, inclusive, and free.

Pigeon Integrated Repor t 202019

Business Summaries
by Segment

Japan Business
Domestic Baby & Mother Care Business● Business Environmen t
In 2018, the total number of births in Japan was 918,000 (confirmed number, according tostatistics released by the Ministry of Health, Labour and Welfare in 2018), a record-low
figure. In 2019, however, the number further declined, to 864,000 (annual estimate,according to statistics released by the same ministry in 2019), falling below the 900,000
mark for the first time since statistics started in 1899.

Sales of Japan BusinessJapan Business(¥ millions)
50,000(Former) Child Care
Service Business

6,986

40,000

4,472

6,546
3,492

30,000● Our Competitive Edge

20,000

Based on more than 60 years of research into breastfeeding and infant and child development,

10,000

Pigeon conducts in-depth research into the growth processes of babies and uncovers various

0

problems that parents encounter when raising children. We have used these findings to develop(Former) Domestic Baby &Mother Care Business(Former) Health &Elder Care Business

48,60035,593Jan. 2019

30,813

Dec. 2019

Dec. 2020
Targetnumerous high-quality products, which embody the strength of the Pigeon brand. Pigeon is now
widely recognized as the leading brand in the industry, and its market share is growing
significantly even for baby strollers, a new introduction to its portfolio.

Number of Childbirths in Japan300(10 thousands)

250● Business Strategies
In our Domestic Baby & Mother Care Business, our core products are nursing bottles and nipples,

200
150

which boast a domestic market share of more than 80%. This business, which also includes
skincare products and baby strollers, is expanding and increasing its market share. Meanwhile,
we are stepping up our approach to the maternity market through our ongoing directcommunication policy, while promoting information dissemination activities targetingcollaboration with medical professionals.

100
50
0

1958 ’68 ’78 ’88 ’98’08 ’16 ’17 ’18 ’19

Source: Ministry of Health, Labour and Welfare● Growth Strategies
In addition to nursing bottles and nipples, for which we have a domestic market share of morethan 80%, we enjoy the No. 1 share for breast pumps and nursing pads. While striving to maintainhigh market shares for these products, we are committed to seizing the top share for our baby
strollers, where there is room for growth. Our current domestic market share for baby strollers isaround 20%, and we aim to increase this to 33% over the next three years. We are also making
growth-oriented investments in the skincare category, which has released various hit products,
such as “Momo-no-ha” the Peach-leaves lotion.

Domestic Market Share of Pigeon's
Main Products in value basis(January 2020)

Nursing bottles

1 82%

No.

Breast pumps

1 65%

No.

Nursing pads

1 61 %

No.

Baby skincare products(washing-related)

1 34%

No.

Note: Figures are extrapolated from market survey databy Intage Inc. using one-month totals at points of sale ofbaby-specialist stores and drug stores across Japan.

20

Pigeon Integrated Repor t 2020

● Fiscal 2019 1 Performance and Highlights
In fiscal 2019, sales in this segment amounted to ¥30,813 million, affected in part by a contraction
in demand from inbound tourism, especially during the second half. Segment income totaled¥4,697 million.
During the year, we launched the caboo series of baby slings, originally developed in the United
Kingdom, as well as the filbaby series of premium baby skincare products. We also stepped up
sales by opening the Pigeon Official Online Shop and Pigeon Official Rakuten Store.
In fiscal 2019, we held a total of 32 events under our direct communications program, including
Breastfeeding College for expecting mothers and seminars about breastfeeding while parenting
for medical professionals. More than 3,000 people attended these events in total.
1:Effective the fiscal period ended December 2019, the Pigeon Group changed its fiscal year-end from January 31 to
December 31. Therefore, the period under review was a transitional period of 11 months (February 1 to December 31,2019). For this reason, year-on-year comparisons are not provided.
caboo baby slings

Key Strategies for 7th Medium-Term Plan (Whole Japan business)▲ ▲Capture top market share for baby strollers
Make investments to strengthen skincare category

Sales target for final year (ending December 2022)¥52.1 billion (compound annual average growth rate (CAGR) of 2.5%)

filbaby premium skincare products for babies

Column Single-tire baby strollers
An independent survey conducted by Pigeon in 2017 revealed that nearly 90% of mothers
and fathers were having trouble pushing strollers when taking their babies outside. In
response, we developed Runfee, a unique single-tire stroller that is light and easy to push,even in urban areas full of bumps, cobblestones, and bumpy asphalt streets.
Subsequently, we further developed and improved our offerings to reflect opinions ofuniversity professors who specialize in tire research, as well as joint verification
experiments with universities into tire operation stress. We now have a wide range ofsingle-tire models such as Runfee, fino, palskip, and Bingle.

Runfee series

Pigeon Integrated Repor t 202021

Business Summaries
by Segment

Japan Business
Related Business (Former Child Care Service Business)● Business Environmen t
In 2018, Japan had a female labor force of 30.14 million people, up 770,000 from the(Former) Sales of Child Care Service Businessprevious year, and a female employment rate across all ages of 51.3%, surpassing 50% for(¥ millions)the first time in 50 years (Status of Working Women, 2018, Ministry of Health, Labour andWelfare). Balancing childcare and work is no longer a problem that only women can solve; it
is issue for society in general, and expectations for Pigeon to play a role are growing.

8,000
7,000
6,000
5,000

4,472

4,000

● Our Competitive Edge

3,492

3,000
2,000

Through its provision of baby and child-care offerings, Pigeon has earned a reputation for

1,000

safe and reliable products. Deploying this brand strength, we are building our child care

0Jan. 2019

Dec. 2019services, which include in-company child care, under the principle that “children’s growthis our first priority,” and we have earned the confidence of customers on that basis. Knownfor its unparalleled knowledge about babies, the Pigeon Group is constantly expanding andimproving the quality of its child care services.

Operation oflicensed and certified
child-care centers● Business Strategy
The reputation and trust earned by our Child Care Service Business represent real social value,
which in turn leads to business growth and development. For this reason, we are working to raise
the quality of our services, which reflect the quality of our business, as our top priority.

● Growth Strategy
The most important priority for our Child Care Service Business is to ensure the quality ofthe staff who interact directly with the children. We have been conducting ongoing
research into the wishes and feelings of babies, who cannot communicate verbally, and weare working to foster human resources who can embody the uniqueness of the Pigeon
brand. Before pursuing increased scale, we emphasize high quality across all of ourfacilities and services. Our aim is to bring smiles to every child while carefully nurturing
each individual facility and each staff member.

● Fiscal 2019 1 Performance and Highlights
In fiscal 2019, sales in this segment amounted to ¥3,492 million, and segment income
totaled ¥49 million. Despite the expiration of a bulk outsourcing agreement for childcare
hospital centers under the National Hospital Organization, in the year under review weoperated 74 in-company childcare facilities. We are continuing to develop this businesswhile striving to improve the quality of our service.
1: Effective the fiscal period ended December 2019, the Pigeon Group changed its fiscal year-end from January 31 to
December 31. Therefore, the period under review was a transitional period of 11 months (February 1 to December
31, 2019). For this reason, year-on-year comparisons are not provided.

22

Pigeon Integrated Repor t 2020

Event child-careservices

Child Care Service Business
Operation ofchild-minding
centers
Kids World
preschool
educational
services

Operation of
in-company
child-carefacilities

Consulting service
and trainingRelated Business (Former Health & Elder Care)● Business Environmen t
Japan’s population is aging rapidly while the number of births declines. The population of(Former) Health & Elder Care Businesspeople aged 65 and over has reached 35.88 million (Ministry of Internal Affairs and(¥ millions)

Communications Statistics Bureau estimate as of September 15, 2019), and the ratio ofpeople aged 65 to the total population has reached a record-high 28.4%. Along with theaging population, the number of people certified as requiring long-term care and support
increased to 6.59 million in 2018, and efforts are under way to promote healthy longevity.

8,000

6,986

7,000

6,546

6,000
5,000
4,000
3,000

● Our Competitive Edge

2,000
1,000

Pigeon’s strengths in this segment lie in its product-planning capabilities—which

0Jan. 2019

accurately pinpoint unsatisfied customer demand—as well as its advanced quality control

Dec. 2019

systems acquired in the course of developing baby care products. Leveraging thesestrengths, we are working to introduce new, competitively superior products and improve
the quality of our elder care services.

● Business Strategy
For elderly people, we are working to improve product competitiveness in the key categories of

Estimate of Future Population in Japan(age 65 and older)
40,000(thousands)

30,00020,000bottom wipes, body wipes, skincare products, food, oral care products, and wheelchairs.
10,000● Growth Strategy
There are very few commoditized solutions that meet the diverse needs of the elder caremarket. Accordingly, Pigeon’s product development capabilities, cultivated through handling a

0

2000

2010

2020 (prediction)

Source: “Population Projection for Japan,” National
Institute of Population and Social Security Researchwide variety of baby products, serve as a great strength in the elder care field. Two factors
differentiating Pigeon from other companies are its meticulous product designs and its stringent
quality control. We will continue strengthening our sales approach to nursing care facilities andenhance our services under the long-term care insurance system.

● Fiscal 2019 1 Performance and Highlights
Sales in this segment amounted to ¥6,546 million, and segment income totaled ¥386
million. In February 2019, we launched ProFitCare, a new series of products that help usersof nursing care facilities maintain good sitting posture, as well as the Sanitary Care Inspiredby Nursing Series of skincare products that help people keep clean even when they areunable to bathe. We will continue strengthening our sales activities toward retail stores andelder care facilities while improving the quality of elder care services and taking otherrigorous measures.

ProFitCare series

1: Effective the fiscal period ended December 2019, the Pigeon Group changed its fiscal year-end from January 31 to
December 31. Therefore, the period under review was a transitional period of 11 months (February 1 to December
31, 2019). For this reason, year-on-year comparisons are not provided.

Sanitary Care Inspired by Nursing Series

Pigeon Integrated Repor t 202023

Business Summaries
by Segment

China Business● Business Environmen t
China’s annual childbirths have averaged about 13–15 million over the past several years.

Sales of China Business

Given that Pigeon generates more than ¥30 billion annual sales from its business in Japan,(¥ millions)where only 0.9 million babies are born annually—as well as continually rising disposable
incomes in China—we regard our growth potential in China to be extremely large.
Meanwhile, Chinese consumers are becoming more and more concerned about productsafety, and Chinese e-commerce market is growing as people born in the 1980s and 1990s
become the new generation of family creators.

● Our Competitive Edge

50,00040,00035,581

36,824Jan. 2019

Dec. 201940,50030,00020,00010,0000Since our full-scale entry into the Chinese market in 2002, we have broadened our sales

Dec. 2020
Targetcoverage across the entire nation, from coastal to interior regions. The main target for
Pigeon’s products is the “new rich” market, and we are developing that market with more

Annual GDP Growth Rate in China

than 500 products—centering our mainstay nursing bottles and nipples, toiletries, and

12

（％）

high-end skincare products—while proposing new lifestyles. By maintaining stable pricing
backed by high product quality, we have increased the number of stores handling ourofferings and dedicated Pigeon sections within retail outlets. We provide wide-ranging
responses to consumer needs while embracing the rapidly growing e-commerce market. In
the meantime, recognition of Pigeon as a safe, reliable, high-quality brand is spreading

10

8

6

● ●

●

●

●
●

●
●

●
● ●

●

● ● ● ●

among Chinese consumers.
0● Business Strategy
We work hard to deepen recognition and penetration of the Pigeon brand in China. At present, we

2003 ’04 ’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12 ’13 ’14 ’15 ’16 ’17 ’18

Source: The figures are compiled by Pigeon Corporation
with data from the International Monetary Fund(IMF) (to 2006) and the Organization for Economic
Cooperation and Development (OECD) (from 2007).

are working in partnership with more than 280 maternity hospitals and more than 150 postnatal
care facilities nationwide to raise awareness about breastfeeding. We have also established morethan 11,000 breastfeeding rooms, mainly in hospitals, to strengthen breastfeeding support
activities and our brand perception. With respect to manufacturing, Pigeon Manufacturing(Shanghai) Co., Ltd., established in 2008, has been making and assembling various products.
These include nursing bottles, silicone nipples, detergents, and toiletries. To address the rapidly
growing market for consumables, Pigeon Industries (Changzhou) Co., Ltd. started operations in
Changzhou, Jiangsu Province in 2011, producing disposable nursing pads and baby wipes. Since
2013, it has also been producing disposable diapers, which Pigeon does not sell in Japan.

● Sales Development and Network

New compact electric breast pump

We are expanding ties with local distributors in order to develop our sales network across theentire nation. For the retail channel, we are reinforcing our distribution network by mobilizing
both primary and secondary distributors as we seek to further boost sales in China. Meanwhile,
we are strengthening our network of dedicated Pigeon sections within baby specialty shops.
Recent years have seen rapid growth of sales via major Chinese e-commerce websites. In
response, we are striving to increase online sales by strengthening initiatives in partnership with
distributors and e-commerce retailers. At the same time, we are using social media to step up
direct communication with consumers.

Disposable diapers available only in China

24

Pigeon Integrated Repor t 2020

● Growth Strategy
Our China Business has achieved dramatic growth as a major pillar of our operations from theperspective of contributing to earnings. Under our Sixth Medium-Term Business Plan, we achieved
double-digit year-on-year sales growth in China as initially forecast. Our Chinese e-commercebusiness has grown dramatically, and sales of Momo-no-ha lotion and other skincare products,
which we started making locally, have been healthy. With respect to R&D, as well, we have madetangible progress by globally advancing our product development efforts, drawing on the results ofresearch into the delicate skin of infants, which we have announced at academic conferences.
Under our Seventh Medium-Term Business Plan, we will work to achieve higher product prices
through our uncompromising commitment to manufacturing. Through sales of Ssence,Store in China

meanwhile, we will build a new business model, the first direct sales system for the Pigeon Group.
We also established Shenzhen Creative Studio to monitor the latest trends and further strengthen
our design-driven approach.

● Fiscal 2019 1 Performance and Highlights
Sales in this segment amounted to ¥36,824 million, and segment income totaled ¥12,483 million.
Our great performance was driven by continued healthy sales of mainstay nursing bottles andnipples, as well as steady increases in sales of breast pumps and laundry products.
During the year, we stepped up efforts focused on the e-commerce market, which continues
to grow. W11, China’s largest e-commerce event of the year, was held on November 11, 2019. At
the one-day event, sales of Pigeon products via the Alibaba Group’s Tmall platform exceeded
CNY100 million for the first time, continuing a strong growth trend. We also leveraged social

Children Baby Maternity Expo (CBME) 2019

media to invigorate direct communication with consumers while promoting sales at physicalstores and the distribution of new products. In addition, we continued emphasizing sales
activities targeting hospitals and maternity clinics. In these ways, we sought to increase contact
points with customers and expand our operations.
1:Effective the fiscal period ended December 2019, the Pigeon Group changed its fiscal year-end from January 31 to
December 31. Therefore, the period under review was a transitional period of 11 months (February 1 to December 31,2019). For this reason, year-on-year comparisons are not provided.

Key Strategies for 7th Medium-Term Plan
▲ ▲Achieve higher product prices through uncompromising commitment to manufacturing
Build new business model with Ssence, the new premium skincare products

Sales target for final year (ending December 2022)¥49.1 billion ((CAGR) of 9.6%)
Child care consultation event at maternity hospital

Pigeon recorded over CNY 100 million one-day sales at China's largest e-commerce
Column shopping event
The e-commerce market in China is the one of the biggest and fast-

November 11, 2019 (TMall event, called “W11”) and June 18, 2019,

growing markets in the world and the ratio of e-commerce sales in therespectively. Both events generated major excitement, with W11

whole consumer market is now almost 20%. The two key platformgenerating ¥4 trillion (CNY268.4 billion) in sales in one day, its highest-

providers are the Alibaba Group, the largest e-commerce company inever figure. Pigeon actively participates in these two events. In 2019, for

China and operator of the TMall and JD.com, Inc., operator of JD.com.

the first time, we joined the “CNY100 Million Club” of companies (299 in

The two companies held their annual e-commerce shopping events on

total) that generated CNY100 million or more in sales at W11.

Pigeon Integrated Repor t 202025

Business Summaries
by Segment

Singapore Business● Business Overview
Approximately 140 million babies are born each year around the world, and the regions covered

Sales of Singapore Businessby our Singapore Business segment represents a major proportion of this total. Specifically, our(¥ millions)Singapore Business encompasses India—with the largest number of births in the world—as well
as Southeast Asia (including Singapore, Indonesia, and Malaysia), the Middle East (including

15,00012,000

United Arab Emirates), Oceania, and others (including South Africa). We are expanding our

14,40012,133

11,4829,000

business in two of those nations—India, with around 26 million childbirths annually, andIndonesia, with about 5 million—which we regard as priority markets.

6,000

In this segment, we are advancing our business mainly in emerging countries, where the

3,000

annual number of births among the wealthy is currently around 1.67 million. However, this is
expected jump 1.7-fold over the next 10 years, to 2.83 million. Moreover, the middle class (with0annual disposable incomes of US$5,000–35,000) is expanding in line with economic growth.

Jan. 2019

Dec. 2019

Dec. 2020
TargetPigeon is also targeting this market (including the upper-middle class, with incomes of
US$12,000 and higher), which is tipped for further growth.
ASEAN: Real GDP Growth Rate (10 countries)（％）● Our Competitive Edge

7

Our competitive advantage in overseas markets derives from two key strengths. One is the appeal of6

our products. This is the result of intensive fundamental research and behavioral observations aimed
at identifying “matters that concern our customers.” Another strength is teamwork with high-quality
business partners. To develop our overseas business, it is extremely important that we build good
relationships with local partners—including distributors and retailers—with excellent local
knowledge. Thanks to the support of good partners in the field, our overseas business development
is accelerating.
Since entering Southeast Asia in the 1970s, customer recognition of the Pigeon brand has grownsteadily, to the extent that our nursing bottles occupy the top market shares in Indonesia, Singapore,

5

4

0

2012

2013

2014

2015

2016

2017

2018

Source: Overview of the Association of Southeast Asian Nations (ASEAN),
Ministry of Economy, Trade and Industry website

Thailand, and Vietnam. In the Middle East, as well, we are enjoying sales growth, especially fornursing bottles and nipples, in Saudi Arabia and the United Arab Emirates.

● Business Strategies
We manufacture nursing bottles and nipples at our local factories in Thailand, India, andIndonesia. These are sold locally and also exported to other countries, including Japan. In
addition, we are addressing new markets in Africa and elsewhere that are tipped for long-term
growth. In 2019, for example, we established a new local distributor in Nigeria, where 7.56 million

Store in Thailand

babies are born annually, in preparation for entry into that market. The Singapore Businesscovers many nations with comparatively low levels of income and regions with diverse
ethnicities, languages, religions, and cultures. It is important that we deepen our understandingof consumers in each region and respond quickly to their needs. Generally, it is said that
consumer activity in a country or region will take off when its per-capita GDP surpasses
US$3,000. Anticipating future market expansion, Pigeon will target renewed growth bydeveloping and releasing products for the middle class in each of its categories.

Store in Vietnam

26

Pigeon Integrated Repor t 2020

● Priority Market: India
According to World Population Prospects 2017 Revision (Department of Economic and Social
Affairs, United Nations), the population of India has been growing at the rate of more than 10
million per year, and has reached 1.33 billion. More than half the population is under 25 years old.
Furthermore, the number of childbirths continues to grow in India, which is projected to overtake
China for the No. 1 spot in the next 10 years. We are working to raise recognition of Pigeon in India
as a mother and baby care brand. In addition to expanding mainly in major cities, such as Delhi
and Mumbai, we are developing outlets linked closely with local communities. We are alsoestablishing and reinforcing our distribution system. Our products are now sold in more than
50,000 stores, centered on pharmacies, highlighting our growing presence in India.
Renwed liquid cleanser for baby accessories
and vegetables● Priority Market: Indonesia
In 2017, we converted PT Pigeon Indonesia, our production operation in Indonesia, into a consolidated
subsidiary. In preparation for full-scale business development in Indonesia, we also established a newsales company there in 2019. Our Go mini breast pumps and our liquid cleanser, developed for middleclass consumers, have performed well in Indonesia. In particular, we switched sourcing of our Liquid
Cleanser, which we had been producing at our factory in Thailand for import to Indonesia, to an
outstanding local supplier in Indonesia. This move upheld high quality, a key strength of Pigeon, while
enhancing price-competitiveness. As a result, unit sales in FY2019 increased 18-fold over the previous
fiscal year, achieving a new manufacturing initiative for the middle class.

● Growth Strategies
In emerging markets, our challenge is to launch products in price ranges suited to each market.
Going forward, we will launch our Go mini electric breast pumps, featuring high quality at a
medium price, in emerging markets in Southeast Asia and Latin America. Under our Seventh
Medium-Term Business Plan, we will increase the production capacity of our Indonesian factory
and the number of items they manufacture. We will also increase the number of locally procured
products in emerging markets, such as India and Indonesia.

● Fiscal 2019 1 Performance and Highlights
Sales in this segment amounted to ¥11,482 million, and segment income totaled ¥2,007
million. During the year, we developed and introduced products targeted at middle-classcustomers in Southeast Asia, the Middle East, and India. We also actively pursued sales andmarketing activities aimed at popularizing the Pigeon brand in our markets.

Go mini electric breast pump

1:Effective the fiscal period ended December 2019, the Pigeon Group changed its fiscal year-end from January 31 to
December 31. Therefore, the period under review was a transitional period of 11 months (February 1 to December 31,2019). For this reason, year-on-year comparisons are not provided.

Key Strategies for 7th Medium-Term Plan
▲ ▲Indonesian plant: Increase production capacity and number of items handled
Increase number of locally procured products in emerging markets,
such as India and Indonesia

Sales target for final year of plan (fiscal 2022)¥17.6 billion ((CAGR) of 9.0%)

Breastfeeding seminar in Singapore (consumer event)Pigeon Integrated Repor t 202027

Business Summaries
by Segment

Lansinoh Business● Business Environment
The Lansinoh Business segment covers North America (including the United States and Canada),

Sales of Lansinoh Business

Europe (including the United Kingdom, Germany, and Belgium), China (Lansinoh Shanghai),(¥ millions)

Turkey, Latin America, and elsewhere. In April 2004, Pigeon transformed Lansinoh Laboratories,
Inc. into a wholly owned subsidiary. Serving as the Pigeon Group’s platform for businessdevelopment in North America and Europe, that company leverages the Lansinoh brand toadvance its business. In addition to North America and Europe, in 2016 we entered the Chinese
market through the newly established Lansinoh Shanghai, expanding our business globally.

15,00013,21312,753

14,35012,000
9,000
6,000
3,000

● Our Competitive Edge
Demand for breastfeeding-related products is increasing amid the spread of worldwide

0

Jan. 2019

Dec. 2019

Dec. 2020
Targetcampaigns promoting the benefits of breastfeeding. Lansinoh Laboratories was establishedin 1984, and its products are now embraced by customers in more than 85 countries andregions. Lansinoh is recognized and strongly supported for its high brand power and thesuperior quality of core products, which include nipple care creams, nursing pads, breastmilk
storage bags, and breast pumps. Also, in January 2014 Lansinoh began introducing nursing
bottles to these markets, strengthening its brand as a breastfeeding and baby-support
company that can provide total solution of Breast care, Pump, Store and Feed.

● Business Development in the United States
In the United States, the total fertility rate is 1.76 (in 2016), and the average number ofannual births is 3.85 million (in 2017), which is relatively stable among economicallyadvanced countries. In that nation, where breastfeeding is recommended, specialist“lactation consultants” provide general support for women around the time of birth byemphasizing the importance of breastfeeding and providing guidance and advice related tosuckling and breastfeeding. Accordingly, demand for breast pumps and otherbreastfeeding-related products is rising.
Our products are already handled by more than 40,000 stores in the United States. In
addition to this network, we recently started selling electric breast pumps through the
durable medical equipment (DME) channel, and sales are growing as a result. This isbecause breast pumps purchased via DME providers may be covered by insurance underthe Affordable Care Act (“Obamacare”). Thanks to our various efforts, our nipple carecreams and nursing pads have garnered the top share of the U.S. market, and our breast
pumps are also increasing market share.

● Business Development in Europe

Smartpump™ 2.0
electric breast pumpfrom Lansinoh

In the European market, we are enjoying sales growth in Germany, France, Belgium, andTurkey. France has the highest fertility rate in Europe, and although the rate slipped to 1.88 in
2018, it remains at a stable level. In Germany, the government has been increasing its support
for child-rearing and welcoming immigrants and refugees, giving rise to a so-called “babyboom” since 2016. In France, Germany, and elsewhere, the ratio of e-commerce sales to total
sales has been increasing recently. In Turkey, meanwhile, sales at major baby product retailchains have been increasing. In these ways, we are working to expand our market share bydeveloping different business strategies for each country and region in Europe.
28

Pigeon Integrated Repor t 2020

Lansinoh-brand product lineup

● Growth Strategies
The Lansinoh Business achieved healthy growth across all sales areas under our Sixth
Medium-Term Business Plan. We posted particularly solid sales growth in the United States
via the DME channel, a new sales route. Under our Seventh Medium-Term Business Plan, we
will strive to establish a leading market position for breast pumps, in addition to nipple carecreams and nursing pads, while expanding our product lineup for hospitals and clinicalresearch centers. We will also help Lansinoh expand and evolve from a “breastfeeding”
brand into a “maternal health” brand.

● Fiscal 2019 1 Performance and Highlights
In this segment, sales amounted to ¥13,213 million, and segment income was ¥1,784 million. In
North America, we enjoyed healthy sales of breast pumps via the DME channel, and we sought tostrengthen and expand our presence. We are also advancing the Lansinoh brand in China andEurope. In those markets, we are reinforcing our e-commerce business, marketing activities, andbrand appeal and working in other ways to target further business growth.

Store in China

1:Effective the fiscal period ended December 2019, the Pigeon Group changed its fiscal year-end from January 31 to
December 31. Therefore, the period under review was a transitional period of 11 months (February 1 to December 31,2019). For this reason, year-on-year comparisons are not provided.

Key Strategies for 7th Medium-Term Plan
▲ ▲Expand and evolve from a “breastfeeding” brand into a “maternal health” brandEstablish leadership position for breast pumps by expanding product lineup for
hospitals and clinical research centers

Sales target for final year of plan (fiscal 2022)¥17.4 billion ((CAGR) of 9.6%)

Lansinoh-brand products that have won various
awards around the world

Column Philosophy of founder on breastfeeding still reflected in Lansinoh products
Lansinoh Laboratories was established in 1984 based on thewith recognition of the Lansinoh brand increasing as a result.

philosophy of its founder, Resheda Hagen, who, based on her own

Lansinoh-brand products are highly regarded by customers allbreastfeeding experience, had a strong desire to support

over the world and continue to receive awards every year. At thebreastfeeding by solving the many issues faced by mothers. One

Bounty Baby Awards 2019 in Australia, for example, our Lansinoh

product, Lansinoh HPA Lanolin nipple cream, is safe and secure even

HPA Lanolin nipple cream won a Gold Prize, and our Lansinohin the mouths of babies. It has earned the trust and support ofTheraPearl 3-in-1 Breast Therapy gel packs won a Bronze Prize. Alsomothers who wish to continue breastfeeding while enjoying life andour Compact Single Electric Breast Pump received a prize in The

has generated widespread sales growth, mainly in Europe and North

Parent’s Award in Poland. These and other honors underscore our

America. Meanwhile, our other breastfeeding products, including

support for breastfeeding among mothers around the world.

breast pumps and breastmilk storage bags, have proved popular,

Pigeon Integrated Repor t 202029

Pigeon ES G Ac ti v i tiesM
B

The Pigeon Group’s Purpose—its reason for being and the role we should play in society—is“to make the world more baby-friendly by furthering our commitment tounderstanding and addressing babies’ unique needs.”
Guided by our Sustainability Vision, “Celebrate Babies With All,”
we place high priority on ESG initiatives and helping achieve
the Sustainable Development Goals (SDGs) set by the United Nations.

Governance

Environment
Reduce environmental
impacts
Leave a rich and nurturing world
for the babies of tomorrow

SocialSolve social issues
surrounding babies and mothers
Create a world that celebrate babies
the way they are

Build a strong
management foundation
Support sustainable growth
so that Pigeon can stayclose to babies.

■ Understanding the Environment in Which the Pigeon Group Operates- Shift from low-carbon to decarbonized society

Global environment
protection

R—- Increase in natural disasters and damage- Marine plastic problem

P- Impact on supply chains- Resource depletionr

Number of births worldwide:
140.2 million per year 1

Climate change- One in seven people (more than 20 million people) isborn with low birthweight (less than 2,500g) 2.
- Of the 2.5 million newborns who die worldwide each year,
more than 80% are born with low birthweight 2.

1 Source: The State of the World’s Children 2019, UNICEF (https://www.unicef.org/reports/state-of-worlds-children-2019)
2 Source: UNICEF News, May 15, 2019 (https://www.unicef.or.jp/news/2019/0071.html)

t

r

i

m

o

P

T

u

d

d

e

n

b

a

b

d

p

30

Pigeon Integrated Repor t 2020

)Medium-Term Targets and the SDGs
Medium-term targets for each materiality and related SDGs are as follows.
By addressing each materiality, Pigeon aims to contribute to solutions for social issues (SDGs).

Enhancement ofbusiness
competitivenessand R&D
capabilities

Develop products and services to help solve social
issues● Increase productivity with AI and IoT● Improve productivity by streamlining the productdevelopment process● Maintain and improve product quality●

Development of next-generation
businesses and products thatoffer solutions to society

Articulate environmental policy and environmental vision
Respond to global warming● Develop environment-friendly products and packaging● Reduce plastics● Prevent pollution● Share knowledge on reduction of environmental impact● Introduce an environmental management system● Earmark funds for environmental costs●●

Sustainablereduction ofenvironmental
impactCarrying out sustained pursuit ofreduced environmental impact

Promote CSR procurement
Respond in a responsible manner to consumers● Engage in social contribution activities● Engage in dialogue with shareholders and investors
in a responsible manner●

Enhancement of
stakeholder
responsivenessContinuing to be loved bystakeholders

Improvement inquality ofhuman resources

Developing professional humanresources that can be active on a
global basis●

Creation of an ideal
workingenvironment

Carrying out thorough workplacedevelopment that will make people
want to continue to work at Pigeon●

Establishment ofa solidmanagement
base

Building a strong managementfoundation to support sustainablegrowth●Articulate HR development policy
Promote HR development and hiring on a global basis● Reinforce expertise of each department●

Promote diversity
Take initiatives toward diverse working styles● Promote work-life balance●

Introduce a new personnel system
Put risk management in place● Strengthen compliance● Strengthen brand power● Enhance ESG responsiveness●●For more information on ESG activities,
please visit our corporate website(https://www.pigeon.com/sustainability/).

Resolving Social Issues— For all babies —Pigeon's product development is based on more than 60 years of infant
research and feedback from customers raising children. For example,
the Company’s nursing bottles and nipples are the result of ongoing
research into babies' sucking behaviors from various perspectives,
including observation of babies' oral cavities through monitoring andmeasurement conducted at the Central Laboratory, home visit
observation, and ultrasonic (echo) tomography.
Pigeon is committed to “enabling all babies to enjoy better sucking.”
To this end, we conduct joint research with neonatal intensive careunits (NICUs) at hospitals and clinics and work in other ways todevelop exclusive products so that infants with low birthweight or

Nursing nipplefor babies with weaksucking function

Nursing bottle forlow-birthweightbabiesNursing bottle forbabies with cleft lips
and/or palates

disabilities can drink breastmilk and packaged milk with minimal
effort. These include nursing nipples for infants with low birth weight,
nursing nipples for babies with weak sucking function, and a nursing
bottle specially designed for babies with cleft lips and/or palates. Our
accumulated expertise, gained through our constant support forbreastfeeding babies in hospitals, is reflected in our general productdevelopment activities and directly linked to the superior
performance of Pigeon-brand products.

Helping low-birthweight babies

Pacifier for premature andlow-birthweight babies

Pigeon Integrated Repor t 202031

S ocial▲● Resolving Consumer Issues

Complaint Response Management System

Feedback from customers is a valuable asset for our company.
Since the 1970s, Pigeon has operated a Customer Service Center

Customerto obtain customer feedback for reflection in its business. In

Customer Service Center

Senior management

Sales & Marketing Dept.

December 2016, we established a complaint responsemanagement system that conforms to ISO 10002 international

Product
development

standards (guidelines for quality management, customer

Productenhancement

satisfaction, and handling complaints in an organization).

Service
improvement

Seeking to further improve customer satisfaction, the Company
issued its Consumer-Oriented Declaration in July 2018.

Business process
improvement

Legal Affairs & Compliance Dept.
Product Development Dept.

Define customer response

Plan : quality; set targets andplans

Do : Implement the process
Check : Monitor and analyze
Act : Make further improvements

Quality Control Dept.

● Activities to Address Issues Surrounding
Babies and Their Families
Pigeon supports the healthy growth of babies born prematurely
or with low birthweight. In this spirit, we will soon start providing
support to open human milk bank in Japan for the supply ofdonor milk. As part of this effort, we are preparing to open the
Nihonbashi Human Milk Bank—the second such facility inJapan—within our Tokyo Head Office (scheduled to open in

What is a human milk bank?

▲Support for Human Milk Banks

A facility that provides “donor milk”—milk processed fromdonated breastmilk— for babies born prematurely or withextremely low birthweight(less than 1,500g) who cannot
obtain breast milk from their mothers. At the human milkbank, the donor milk is inspected and pasteurized and storedsafely according to international standards.

autumn of 2020).

The Smile Lactation Research Institute
In March 2015, we launched the Pigeon Smile Lactation Research Institute in collaboration
with various specialists on mothers and babies during breastfeeding, with the aim ofidentifying issues regarding the breastfeeding period and offering solutions. Since 2018,
we have conducted research aimed at better understanding the feelings of mothers of late
preterm babies (those born 34–36 weeks after conception) who have been admitted to
NICUs or growing care units (GCUs), and we have presented our findings at academic
conferences. Our research revealed the need to provide emotional support to mothers ofbabies born prematurely. As part of our support efforts, we worked with members of ourresearch team to produce a booklet for the families of late preterm babies admitted to

Academic presentation at the 59th General Meetingof the Japan Society of Maternal Health

NICUs/GCUs and distributed it free of charge.

Support booklet for familiesof late preterm babies
admitted to NICUs/GCUs

Lactation Lounges
We have set up breastfeeding/pumping rooms called Lactation Lounges at Head Office withthe aims of creating comfortable working environments for employees with small babies
and contributing to local communities. In addition to employees, the rooms are available foruse by mothers working in the vicinity, as well as mothers and babies living nearby. In othernations as well, we provide support to establish Lactation Lounges in various locations,
including plants and offices, with the aim of helping female employees return to work after
giving birth. As of December 31, 2019, we have supported 12,176 such rooms in 16 countries
around the world.

32

Pigeon Integrated Repor t 2020

Lactation Lounge at Pigeon Head OfficeNewborn Baby Commemorative Tree-Planting Campaign
For more than 30 years, we have continuously held our annual Newborn Baby
Commemorative Tree-Planting Campaign, which began in 1986. Under the slogan “RaisingChildren, Raising Trees: The Spirit Is the Same,” the campaign celebrates children born ineach particular year. The campaign is held at the “Pigeon Miwa no Mori” site, a combinationof national forest and Pigeon-owned land near Hitachi-Omiya, Ibaraki Prefecture. To date,
we have planted trees on behalf of 175,853 babies under the campaign.
In 2007, we built a log house called “Sukusuku House” at the Pigeon Miwa no Mori sitethat is open year-round. Inside, there is a list of tree planters’ names and the babies to

Newborn Baby Commemorative Tree-Planting Campaign

whom the trees are dedicated, as well as written messages from their respective parents.
Visitors can freely browse and relive memories of their babies’ births. We will continue
working to create memories for parents and children.

● Human Resource Development

Sukusuku House

Providing Scholarships to Students

Social Investments in Overseas Communities

The Pigeon Scholarship Foundation, a public interest

In China, we have been building and donating to schools inincorporated foundation, aims to realize a society in which allareas with inadequate educational infrastructure. Following

mothers can give birth and raise children with peace of mind,

the Sichuan Earthquake of 2008, our local Chinese

while fostering the healthy lives and growth of mothers andsubsidiary Pigeon (Shanghai) Co., Ltd. opened the Pigeon

babies. The Foundation provides scholarship support, with

Hope Elementary School in Meishan District of Sichuan

no repayment required, to students in the neonatal,

Province in 2009. Subsequently, we donated school buildings

pediatric, and obstetrics departments of universities

to Huzhu Tu Autonomous County in Qinghai Province in 2010,(students majoring in medicine at domestic general

Xinjiang Uygur Autonomous Region in 2011, and Yuping Dong

universities or medical universities). In the fiscal year ended

Autonomous County in Guizhou Province in 2012. We have

December 2019, the Foundation provided financial support

been donating school buildings at the pace of one building

to 94 students at 23 universities (total of new fifth-year andper year, and the total has now reached 10 schools. We also

sixth-year students).

conduct ongoing exchanges with teachers and students at
Pigeon Hope Elementary Schools, and these efforts havebeen commended by the Chinese national government.

Supporting Children’s Creativity
For the past 40 years, Pigeon has been a supporter of theTomorrow’s Science Children’s Art Exhibition, which
encourages children, our future world leaders, to freely“Babycathon” Ideas Contest for Students

express their visions of future science. The exhibition is

In March 2019, Pigeon held an ideas contest called

hosted annually by the Japan Institute of Invention and“Babycathon” for university students. A total of 21

Innovation (JIII). Our involvement stems from anstudents from five universities participated in theendowment made to JIII by Pigeon founder Yuichi Nakata

event. They were given around one month to come up

in order to help foster children’s creativity. The

with ideas for a “future baby stroller that utilizes IoT

endowment funds prize money that is presented by theto make the lives of babies, mothers, and families

Institute to kindergartens

more comfortable andattended by children who

enjoyable.” On the day

win the JIII Chairman’sof the contest, theyAward or the Excellence

presented their ideas,Award.

which were evaluatedby judges from Pigeon.

Pigeon Integrated Repor t 202033

S ocial● Human Capital: Motivating Work Environments andCorporate Culture
Pigeon defines corporate value as the summation of social value and economic value. In
order to deliver high-quality products to the world, we must create an environment that
motivates employees to work. If we don’t take care of our employees, we cannot succeed
in business. For this reason, we are upgrading various frameworks and systems to create
an appropriate working environment, while building a corporate culture that helps
employees perform their tasks more easily.

● Embracing Diversity
One of our Corporate Ethics Policies is that “Pigeon shall respect its employees’ humanrights and personalities at all times, ensuring them discrimination-free, equal job
opportunities and rewarding work environments, and offering them fair merit ratings to
help their self-fulfillment.” We respect, welcome, and utilize the fundamental differences inour employees’ backgrounds—in such areas as gender, nationality, age, and employment
status—in order to address ever-changing business conditions and diversifying customer
needs.
In December 2018, we received the Forbes Japan Women Award 2018 for our training andother initiatives to promote diversity. We respect the civil and political rights ofDiversity training at a share house for young
employees

employees—including freedom of expression, association, and religion—and engage indialog with them about these rights. Regarding labor, our Compliance Committee
spearheads rigorous compliance-oriented activities to ensure respect for workers’ andhuman rights both in Japan and overseas.

● Training Professional and Managerial Human Resources
Pigeon gives all employees opportunities to participate in technology development,
education, and practical training. In Japan, we eliminated gender differences in job types

Virtual reality-based training to help recognize
unconscious bias

and career courses before the enactment of the Equal Employment Opportunity Law. At
our overseas bases, the employee turnover rate has remained low thanks to our early
implementation of career advancement systems.
Every six years, we run a two-year training course for selected next-generation
managerial human resources. To ensure the continuous growth of the Company, we work
to cultivate next-generation managerial personnel expected to become businessdepartment and divisional managers as “human resources who can refine human powerand continue increasing corporate value under the values of the Pigeon Way.”● Pigeon Rubella Zero Action
In 2019, we launched the Pigeon Rubella Zero Action project as part of our healthmanagement efforts. This project is designed to elevate the rubella antibody retention rate
among employees. It included two in-house educational lectures—one about the costs ofantibody testing and vaccination, and the other, featuring invited specialists, aimed atdeepening understanding of rubella.
Pigeon is also conducting an in-house fundraising drive for the Rubella Elimination
Society which is working to prevent the recurrence of rubella in Japan.
On February 4, 2020, our activities were recognized by an award from the Rubella Zeroproject Executive Committee, which is promoted by the Japan Association of Obstetrics
and Gynecologists.
34

Pigeon Integrated Repor t 2020

In-house lecture to deepen understanding of rubella

● Strengthening Support for Advancement of Women:Child Care Service Initiatives Head Office
Now more than ever, creating an environment that enables women to excel is a vital priority

Female Manager Ratio(Head Office)（%）
30

for the Pigeon Group. To fulfill this need, we focus on training for female management
prospects. In the fiscal period ended December 2019, women accounted or 19.7% of the20

Company’s management. With respect to promoting women’s advancement, we have cited
three core initiatives—expansion of the compatibility support system, workplace mindset

18.7%

16.4%

19.7%

19.7%
15.4%

16.9%

10

reforms, and backup for women’s feelings and skills—thus providing support from theperspectives of both system enhancement and employee mindsets. In May 2018, we
received “Platinum Kurumin” accreditation, which is given to Kurumin-certified companies

0

FY endedJan. 2015

Jan. 2016

Jan. 2017

Jan. 2018

Jan. 2019

Dec. 2019

deemed to be introducing and utilizing excellent compatibility support systems and highlevel initiatives. As a company engaged in child-care services, we have been enhancing oursystems to help employees giving birth and raising children from an early stage.In order topromote the advancement of women and encourage men’s participation in child care, wehave established a variety of child-rearing support systems, including a parental leave
scheme called “One Month Together” and a work-from-home system. In addition to providing
workplace environments where both men and women are entitled to take parental leave,these systems have the added benefit of enabling employees’ child-rearing experiences to bereflected in product development.

Three-Year Action Plan for Promoting Advancement of Women (February 2018 to January 2020)❶ Increase the number of men using
the work-family balance support
system (for child care leave and leavefor school events) to 20 or more

● Work-Life Balance❷ Increase awareness aboutwork-family balance support
regardless of gender❸ Grasp and improve thestatus and outcomes of thework-from-home system❹ Establish frameworks enabling
women to give birth, raisechildren, and return to work withpeace of mind

Head Office

As a matter of course, we comply with domestic regulations on worker protection and work
hours established by legislation and labor agreements. We are also implementing various

Paid Leave Usage Rate
(Head Office)measures to increase labor productivity by discouraging excessively long working hours（%）
70

and fostering a good work-life balance. These include establishing a rule to leave the60

workplace by 7:00 p.m. and setting one day per week as a "no-overtime day." We also

50
40

introduced teleworking in April 2019.
We focus on helping employees return to the workplace quickly after childbirth and supporting

39.0%

44.0%

49.0%

53.4%

30
20

employees who can convey their experiences about child care. For example, we introduced a Life

10

Design Leave and Temporary Retirement System, a Women’s Early-Reinstatement Support

0

System, and a Financial Assistance System for Parents with Children on Waiting Lists.

69.5%
60.7%

FY endedJan. 2015

Jan. 2016

Jan. 2017

Jan. 2018

Jan. 2019

Dec. 2019

Use of Systems Related to Child Care Services and Work-Life Balance
Name

Details

Usage status

Uptake rate: 100%

One Month
Together

1-month parental leave system
for male employees

Leave the workplace(go home)by 7:00 p.m. rule

Rule to leave the workplace by
7:00 p.m. in principle, even when
doing overtime

Life Design Leavea n d Te m p o r a r y
Retirement

System enabling up to 2 years of leaveor temporary retirement for fertility
treatment and adoption processes

Life Design Leavea n d Te m p o r a r y
Retirement

System enabling up to 2 years of leaveor temporary retirement for fertility
treatment and adoption processes

Provided in 2015, 2016, and 2017,2019, and 2020

Telework

System available to all employees towork at home or at a satellite office

System implemented in
April 2019(100% consistently since FY Jan. 2016)

Users: 48 persons(cumulative over 5 years since FY Jan. 2016)

Average overtime per month:
9.1 hours(FY Dec. 2019)
Materials explaining One Month Together

Pigeon Integrated Repor t 202035

S ocial● Worker Health and Safety
Pigeon is meticulous about managing the health and safety of workers. In addition to

ISO 45001 (OHSAS 18001)
acquisition rate at
Pigeon Group
production sites

Japan, we operate plants overseas, including in China, Thailand, India, and Turkey, all ofwhich conform to the Pigeon Group’s workplace health and safety standards. We have also
obtained certification under ISO 45001 (OHSAS 18001) standard for occupational safety and80%

health, which is widely adopted around the world.

Pigeon Group Companies That Have Obtained ISO 45001 (OHSAS 18001) Certification
Company Name

Location

Pigeon Home Products Corporation

Shizuoka Prefecture, Japan

Pigeon Manufacturing Hyogo Corporation

Hyogo Prefecture, Japan

Pigeon Manufacturing (Shanghai) Co., Ltd.

China

Pigeon Industries (Changzhou) Co., Ltd.

China

Pigeon India Pvt. Ltd.

India

Pigeon Industries (Thailand) Co., Ltd.

ThailandThai Pigeon Co., Ltd.

ThailandLansinoh Laboratories Medical Devices Design Industry and Commerce Ltd. Co.

Turkey* Pigeon Manufacturing Ibaraki Corporation (Ibaraki Prefecture, Japan) and PT Pigeon Indonesia (Indonesia) are scheduled to receive certification in 2020.

● Fair Trading
Seeking to protect its product development from patent infringement and similar
violations, Pigeon has established an Intellectual Property department at the Head Office.
This department is responsible for matters pertaining to intellectual property globally.
In China, which faces numerous problems with counterfeited products, we established a
Legal Affairs Department at Pigeon (Shanghai) Co., Ltd. This department is working toincrease respect for property rights, including intellectual property, in collaboration with the
IP department at the Head Office.
Pigeon rejects excessive political involvement. We try to build “win-win” relationships
with our business partners on the basis of equality at all times. In our relationships withauthorities and other entities, we conduct ourselves according to good social common
sense, avoiding the provision and acceptance of entertainment and gifts that could be
regarded as payoffs or facilitations. Our rules in this area are clearly stated in ourCompliance Guidebook. Regarding fair trading and free competition, we make sure that ouractivities conform to competition laws and we actively participate in surveys and the like
conducted by relevant authorities as necessary. We also conduct extensive compliancetraining and other forms of employee education in an effort to prevent collusion withauthorities and involvement in anticompetitive behavior.

36

Pigeon Integrated Repor t 2020

Env ironment● Basic Approach to Environmental Protection:
Environmentally-Friendly Products
The Pigeon Group is committed to taking action against global warming and realizing asustainable society. In addition to complying with relevant laws such as the Energy Saving
Act and Law Concerning the Promotion of Measures to Cope with Global Warming, we
undertake Group-wide environmental initiatives, such as establishing energy-efficientsystems. As a maker of daily-use goods, the Group is committed to ensuring that its
products do not adversely impact the global environment, not only while in use but also
after they are discarded. In addition, we adopt environmentally friendly papers and inks,
and we work to minimize the number of colors on cartons and packaging. As a result, wehave created an extensive lineup of environmentally friendly products.
Shifting from plastic to paper

Plant-based cooking cup

Recycled PET bottles

We changed the material for this container, which is big
enough for two refills, from plastic to paper. In addition
to reducing the amount of plastic used, the container
can now be easily broken down and recycled after use.

The material used in this cooking cup consists mainlyof cornstarch (starch derived from corn).

Our blister packaging consists of 40% recycled PET
bottles.

Plant-based plastic

Protecting our forests

This refill pouch consists of around 39% plant-based bio-plastic. Plants absorb CO2 throughphotosynthesis, so using them as a raw material helps reduce greenhouse-gas emissions.

The cardboard is made from FSC®-certified paper. The FSC® certification system is aninternational forest certification scheme for responsibly managed forests and forest
products procured in such a way that limited forest resources will remain available in
the future.

● CSR-Oriented Procurement
Pigeon is committed to the sustainable use of resources. The main chemically derived
material that we handle is the rubber used as the raw material for our nursing-bottle
nipples. Rather than using natural rubber, we use silicon rubber.

Volume of Raw Materials Procured

FY ended Dec. 2019

PIGEONMANUFACTURING(SHANGHAI)
CO., LTD.

PIGEON
INDUSTRIES(CHANGZHOU) CO.,LTD.

PT PIGEONINDONESIAPIGEON INDIA PVT.
LTD.

PIGEON
INDUSTRIES(THAILAND)
CO., LTD.

THAI PIGEON CO.,LTD.

LANSINOHLABORATORIESMEDICAL DEVICESDESIGN INDUSTRY AND
COMMERCE LTD. CO.

Silicon rubber (t)

620

29

343

28

56

412

33

PPSU (t)

219

12

—

—

—

214

—

Pigeon Integrated Repor t 202037

Env ironment● Climate Change and Biodiversity
The Pigeon Group gives full consideration to climate-change mitigation and biodiversity. To
this end, we have specified the volume of our greenhouse-gas emissions, both direct andindirect, and we are working to reduce such emissions. In May 2019, our two production
companies in China put solar panels into full-fledged use, followed by our production
company in India in October 2019, in order to reduce CO2 emissions. We are also using
photocatalytic paint and adopting LED lighting to save electricity.
PIGEON INDUSTRIES (CHANGZHOU) CO., LTD.

CO 2 Emission Intensity (Scope 1 & 2)
CO2 emissions (kg)/Net sales (¥ millions)

300

Volume of industrial waste (kg)/Net sales (¥ millions)278.06810

278.969
250.261

9.605

9.509

8
PIGEON MANUFACTURING (SHANGHAI) CO., LTD.

200

6

100

FY ended Jan. 2019(2018)

Dec. 2019(2019)

～
～

0

9.941

Dec. 2022(2022 target)

Target4 for final year of
Seventh Medium-TermBusiness Plan
2(fiscal 2022)
CO2 emission
intensity
10%0
FY ended Jan. 2019
reductionfrom FY 2018 (2018)

Dec. 2019(2019)

Dec. 2020(2020 target)
PIGEON INDIA PVT. LTD.

* Scope: Pigeon Group total (Scope 1 & 2)
* At some sales bases, CO 2 emissions are calculated based on electricity usage as reflected in electricity charges, andothers are based on emission coefficients published by the Ministry of the Environment.
* Calculations for domestic operations for December 2019 are based on the 11-month period from February 1 to
December 31, 2019 (due to a change in the fiscal year-end).

● Pollution Prevention
The Pigeon Group is committed to minimizing non-recyclable industrial waste generated byits business activities. Our goal is to reduce the volume of industrial waste per unit ofproduction by 1% per year. We are also working in other ways to prevent pollution at ourplants, such as improving productivity and yield and closing waste incinerators.

Industrial Waste Volume Intensity

Each year, Pigeon Manufacturing Hyogo Corporation
returns around 350 kg of these roll-shaped cores tothe raw-material manufacturer for reuse.

Volume of industrial waste (kg)/Net sales (¥ millions)10250.261

9.941

9.605

9.509

8
6
4
2

～

0

Dec. 2022(2022 target)

FY ended Jan. 2019(2018)

Dec. 2019(2019)

Dec. 2020(2020 target)

Target for final year of
Seventh Medium-TermBusiness Plan
(fiscal 2022)
Industrial waste
volume intensity 1%
reduction per unit
per year* Scope: Pigeon Group total, excluding Pigeon (Shanghai) Co., Ltd.
* Calculations do not include general business waste or waste that is recycled (such as through thermal recycling).
* Calculations for domestic operations for December 2019 are based on the 11-month period from February 1 to
December 31, 2019 (due to a change in the fiscal year-end).

38

Pigeon Integrated Repor t 2020

● Environmental Opportunities
Forests help prevent global warming by absorbing carbon dioxide and also help preserve
biodiversity. In addition, they play a role in preventing floods and erosion while preserving
high water quality, to the extent that they are referred to as “green dams.” Over the past 33
years, we have planted around 145,000 seedlings on 45.15 hectares of land (both national
forest and private land) at the Pigeon Miwa no Mori site, a combination of national forest
and Pigeon-owned land near Hitachi-Omiya, Ibaraki Prefecture. In the national-forest
portion, covering 25.37 hectares, the “green dam” benefits equate to storage andpurification of 5.94 million two-liter PET bottles. Through these forestry efforts, we are also
contributing in a small way to educational activities related to global environmental
protection.

Pigeon Miwa no Mori site

Water storage andpurification equivalent
Of which:
Total area:

45.15

ha

25.37ha of

2Lnational forest

5.94 million
two-liter
PET bottles(More than 9 times the areaof Tokyo Dome (baseball field))

Semi-endangered Iwauchiwa (Shortia uniflora)
flowers blooming at the Pigeon Miwa no Mori site in
Ibaraki Prefecture● Environmental Management Systems
As a company that advances its business globally, the Pigeon Group seeks to obtain ISO
14001 certification for environmental management systems at many of its business sites
and affiliated companies. By the end of 2020, all of our production facilities are scheduled
to obtain certification.

ISO 14001
certification rate
at Pigeon Group
production sites

90%

Pigeon Group Companies with ISO 14001 Certification
Company/facility

Location

Tsukuba Office, Pigeon

Ibaraki Prefecture, Japan

Pigeon Home Products Corporation

Shizuoka Prefecture, Japan

Pigeon Manufacturing Hyogo Corporation

Hyogo Prefecture, Japan

Pigeon Manufacturing Ibaraki Corporation

Ibaraki Prefecture, Japan

Pigeon Manufacturing (Shanghai) Co., Ltd.

China

Pigeon Industries (Changzhou) Co., Ltd.

China

Pigeon India Pvt. Ltd.

India

Pigeon Industries (Thailand) Co., Ltd.

ThailandThai Pigeon Co., Ltd.

ThailandLansinoh Laboratories Medical Devices Design Industry and Commerce Ltd. Co.

Turkey* PT Pigeon Indonesia (Indonesia) is scheduled to obtain certification in 2020.

Pigeon Integrated Repor t 202039

Gover nance● Corporate Governance
The Company has introduced a system of commissioned managing

management. At present, we have 12 directors (including five outside

officers. The aims of this system are to ensure reciprocal collaboration

directors, three women, and one foreign national, and four Audit &between the governance (management decision-making and oversight)

Supervisory Board members (two of whom are outside Audit &function and the business-execution function and to clarify the business-

Supervisory Board members, and one of whom is female).

execution responsibilities of directors. The Board of Directors has the

To perform the management oversight function from an external

authority to oversee the execution of duties by directors and managing

perspective, the Audit & Supervisory Board has appointed two outside

officers. The chairman leads the meetings of the Board of Directors, andmembers. Under the Companies Act, Audit & Supervisory Board

the Board meets to make decisions concerning laws and regulations, themembers are obliged and given strong authority to audit and supervise

Articles of Incorporation, and matters stipulated in the rules of the Board

the Company’s directors, including the right to attend Board of Directors’of Directors (important business execution strategies, such as

meetings to voice their opinions and the authority to examine themanagement targets).

Company’s business operations and financial status. Moreover, they are
guaranteed terms of four years.

With the goal of increasing management efficiency, the Company
reduced the number of Board members from 15 to 13 at its 63rd Ordinary

In accordance with its policies on auditing and allotment of duties,

General Meeting of Shareholders held on March 27, 2020. At the same

Pigeon’s Audit & Supervisory Board members attend Board of Directors’

meeting, the Company added two new outside directors (Chiaki Hayashi

meetings and other important meetings, where they listen to directors,

and Eriko Yamaguchi) to the current three (Takayuki Nitta, Rehito

view important resolution documents, examine the current status ofHatoyama, and Erika Okada), thus increasing the number of outsidebusiness and financial assets, and otherwise conduct meticulous

directors to five. By conducting Board meetings in a manner that firmly

supervision and oversight. Audit & Supervisory Board members also meetdraws out opinions of outside directors and corporate auditors, theregularly with the president to receive reports on important issues. For

Company is strengthening oversight of business execution. The three

information heard from within the Company, the president receives

currently serving outside directors (Takayuki Nitta, Rehito Hatoyama, andfeedback from Audit & Supervisory Board members and exchanges

Erika Okada) provide advice and recommendations that will improve theopinions with them.

Company’s business strategies and corporate governance, based on their

Koichi Otsu and Atsuko Taishido were appointed as outside Audit &respective areas of expertise as well as their wealth of experience andSupervisory Board members in April 2019. With objective perspectives andknowledge, and monitor the appropriateness of decision-making by the

independent standing, they attend meetings of the Board of Directors and ask

Board of Directors.

questions and share opinions during interviews with representative directors

Chiaki Hayashi, one of the new outside directors, was appointed based

and other officers, in addition to auditing the legality of matters, which is theiron her wealth of experience in co-creative manufacturing, her andlegal responsibility as corporate auditors. They also fulfill a monitoring function

advanced knowledge as an entrepreneur, and her ability to contribute toby providing advice and suggestions to ensure the appropriateness andPigeon’s strategic initiatives as a “design-driven company.” Erikoaptitude of decisions made by the Board of Directors.

Yamaguchi, the other new outside director, was appointed based on her
extensive experience and advanced knowledge in business management● Executive Remunerationin developing countries. The Company expects her skills to be of great

Remuneration for full-time directors consists of basic remuneration (based

benefit in its overseas business, which is expected to achieve further

on the position held), bonuses (a short-term incentive), and share-based

leaps forward.

remuneration (a medium-to-long-term incentive). The retirement benefit

The Company is working to increase the diversity of seniorsystem for directors was abolished at the conclusion of the 62nd Ordinary

Organization of Corporate Governance
General Meeting of Shareholders
Appoint/Dismiss

Appoint/Dismiss

Board of Directors

Audit

Advise/Recommend

Appoint/
Dismiss/
Consult(Outside Directors: 3)

Discretionary Remuneration
Committee with 5 Directors(Outside Directors: 3)

Risk Management Committee

Appoint/Dismiss/Supervise

ReportAppoint/Dismiss

Optionally nominatedcommittees
5 Directors

Appoint/Dismiss
Supervise

Appoint/
Dismiss/
Consult

Audit & Supervisory Board
with 4 memberswith 12 Directors(Outside Directors: 5)
Advise/Recommend(Audit & Supervisory Board Members: 2)(Outside Audit &Supervisory Board Members: 2)

Instruct

Report

8 Audit Office

Collaborate

Management Audit
Committee(6 Directors)(1 Audit & Supervisory
Board Member)

5 Executive Managing Officers
13 Managing Officers

Business Departments and Group Companies
40

Pigeon Integrated Repor t 2020

ReportAccounting Audit
Judgment
Report2 Representative
Directors

Place importantmatters on theagendaExecute BusinessAppoint/Dismiss
Accounting
Auditors

General Meeting of Shareholders held on April 25, 2019. Basic remuneration

director) participate in the Company’s financial-results briefings. Pigeon

amounts are determined by each director’s position, which is based on

also takes pains to ensure that shareholders have sufficient time toresponsibilities, and bonuses vary (0–150%) according to the level ofconsider the agenda for each Ordinary General Meeting of Shareholders.

achievement of the Group’s consolidated performance targets (net sales,

The Notice of Convocation for the Ordinary General Meeting ofoperating income, and PVA). Share-based remuneration consists of two

Shareholders is posted on the corporate website about one month before

components: performance-linked (60%) and non-performance-linked

the meeting and is mailed to shareholders three weeks before the(40%). In principle, the performance-linked portion varies (0–150%)

meeting. We also enable shareholders to exercise their voting rights

according to the level of achievement of performance targets and non-electronically via personal computer, smartphone, or mobile phone. Sign

financial indicators stated in the Medium-Term Business Plan.

language interpretation and temporary child-minding services are

To increase the independence, objectivity, and transparency of theprovided during the meetings. Pigeon also permits beneficial

executive remuneration system, the Company established ashareholders to attend as observers, once they have completed certain

Remuneration Committee to serve as an advisory body to the Board of

stipulated procedures.

Directors. More than half of the Committee’s members are independent

At the 63rd Ordinary General Meeting of Shareholders held on March 27,

outside directors, and one of these outside directors serves as chairman.

2020, we took maximum possible measures to prevent the spread of

The Remuneration Committee meets at least four times a year to discuss

COVID-19 infections. For example, our executive officers and management

basic executive remuneration policy and the details of the executive

staff all wore masks, and we distributed masks to attendees. We also

remuneration system, and the Committee also provides advice andprovided seating guidance to ensure social distancing between attendees.

recommendations to the Board of Directors.
Based on the Company’s business environment, as well as surveys andanalyses produced by external databases of other companies in the same
industry (manufacturing) and major companies of similar size, the total
remuneration amount for directors is set at a maximum of ¥800 million
per year for full-time directors and a maximum of ¥100 million for outside
directors. (These figures do not include the employee salary portion for
those directors who serve concurrently as employees). Directors can also
receive a performance-linked stock-based bonus, with total remuneration
set at a maximum of ¥600 million over three business periods. (However,a maximum of ¥200 million was set for the fiscal period ended December
2019.) In order to further strengthen their independence frommanagement, outside directors and Audit & Supervisory Board members
receive only basic remuneration and are not eligible for the retirement
allowance system.

● Executive Nomination Policy
To increase the independence, objectivity, and transparency of theprocess of selecting and dismissing directors, the Company established a
Nomination Committee in 2019 to serve as an advisory body to the Boardof Directors. More than half of the Committee’s members are independent
outside directors, and one of these outside directors serves as chairman.
In addition to human-resource requirements, the Committee is charged
with determining criteria for executive selection and dismissal,
succession plans, terms of office, and the like. Its aim is to attract “humanresources who can continue enhancing human power and increasing
corporate value (sum of social value and economic value) based on thevalues of the Pigeon Way” as envisioned by Pigeon’s CEO.

Responsible Dialogue with Shareholders and Other Investors

63rd General Meeting of
Shareholders (March 27, 2020)

Number of attendees: 159
Voting rights exercised: 84.5%

IR meetings withinstitutional investors

Total number ofcorrespondences: 335 (fiscal 2019)● Compliance System
In accordance with the Pigeon Way, which is the cornerstone of all our
activities, we have established a corporate ethics code to serve as ourbasic policy on compliance. This code consists of universal corporate
ethics guidelines for practicing compliance-oriented management, as well
as a code of conduct that helps individual employees embody the
corporate ethics guidelines in their corporate activities. The corporate
ethical guidelines state that each and every Group employee shall comply
with all laws and regulations, as well as social standards and the spirit
thereof, and act with sincerity and a high ethical sense, in order to win the
deep trust of our stakeholders.
We believe it is important to constantly communicate our Corporate
Philosophy and Values to all employees. For this reason, ourrepresentative directors and all other executives lead by example inrigorously promoting our spirit of ethics and compliance. With respect tocompliance-related education, we provide e-learning courses andconduct corporate-ethics training sessions at domestic and overseas
Group companies in order to spread compliance to all employees. We also
distribute a "Pigeon Compliance Communciation" newsletter each monthto all employees of domestic Group companies to help them understandand address compliance-related matters that could arise in the course of● Internal Audits

their daily work. This communication provides overviews of laws related

To perform internal audits, the Company has established an Audit Office,Unjustifiable Premiums and Misleading Representations, as well as

staffed by eight people. Based on annual plans, the Audit Office conducts

harassment and other compliance-related issues. In addition, we conduct

regular internal audits of every department across the Pigeon Group,annual “Compliance Self-Checks,” in which employees fill out

including domestic and overseas subsidiaries. The results of these auditsquestionnaires to raise their awareness and knowledge about

are reported to the president, directors, and Audit & Supervisory Board

compliance, and we use the results to improve compliance measures. We

members, and evaluations and continuous improvements are carried out

also operate two whistle-blowing systems: “Speak Up” for internal parties

under the PDCA cycle. The Audit Office also conducts internal-control

and “Pigeon Partners Line” for people outside of the Group. The systems

audits related to financial reporting under Japan’s Financial Instruments

help ensure the swift resolution of problems that are detected inside andand Exchange Act (J-SOX).

outside the Group by addressing the problems as necessary at Risk

● Responsible Dialogue withManagement Committee meetings and investigating the facts while

Shareholders and Other Investors

to our business, including the Anti-Monopoly Act and the Act against

protecting the identities of whistle-blowers and consultants. We also pay
due attention to the legality of issues by obtaining advice from lawyers as

Pigeon engages in responsible dialogue with shareholders and othernecessary. Reports on the content of compliance education and theinvestors. In addition to the president and the director in charge, forinternal whistle-blowing system are submitted at meetings of the Board

example, Kevin Vyse-Peacock (director) and Rehito Hatoyama (outsideof Directors and Audit & Supervisory Board each year.

Pigeon Integrated Repor t 202041

Gover nance

Board of Directors, Audit & Supervisory Board Members and Managing Officers(As of March 27, 2020)

Executive Advisor &Member of the Board

Yoichi Nakata

Chairman of the Board

President & CEO

Shigeru Yamashita

Norimasa Kitazawa

Director, Senior Managing
Executive Officer

Eiji Akamatsu
Head of Japan Operations(In charge of Administration Division,
Domestic Baby & Mother Care Business
Division, and Related Business Division)

Director, Senior Managing
Executive Officer

Director, Managing
Executive Officer

Director, Executive Officer

Director (Outside)

Kevin Vyse-Peacock

Tadashi Itakura

Yasunori Kurachi

Takayuki Nitta

Head of Global Head Office(In charge of Business Strategy
Di v ision, Accounting & F inance
Division, and Internal Audit Section)

Deputy Head of Japan Operations(In charge of Research & Development
Division, Quality Control Division, Customer
Communication Division, and Logistics Division)

Director (Outside)

Director (Outside)

Director (Outside)

Director (Outside)

Rehito Hatoyama

Erika Okada

Chiaki Hayashi

Eriko Yamaguchi

Audit & Supervisory
Board Member

Audit & Supervisory
Board Member

Outside Audit &Supervisory Board Member

Outside Audit &Supervisory Board Member

Kazuhisa Amari

Tsutomu Matsunaga

Koichi Otsu

Atsuko Taishido

Lansinoh Business Division Manager,
CEO of Lansinoh Laboratories, Inc.

* Takayuki Nitta, Rehito Hatoyama, Erika Okada, Chiaki Hayashi, and Eriko Yamaguchi are outside directors as defined in Article 2–15 of the Companies Act.
* Koichi Otsu and Atsuko Taishido are outside Audit & Supervisory Board Members as defined in Article 2–16 of the Companies Act.

Managing
Officers

Ryo Yano

Senior Managing Officer
China Business Division Manager
Representative Director of Pigeon (Shanghai) Co., Ltd.

Yusuke Nakata

Senior Managing Officer
Singapore Business Division Manager
Chairman of the Board of Pigeon Singapore Pte. Ltd.

Nobuo Takubo

Business Strategy Division Manager

Hiroyasu Maki

Accounting & Finance Division Manager

Koji Ishigami

Administration Division Manager

Yuko Ohara

Customer Communication Division Manager

Katsushi Tsutsui

Research & Development Division Manager

Kazuyuki Tajima Quality Control Division Manager

Takatoshi Urakari Domestic Baby & Mother Care Business Division

Takanori Tsuru

Related Business Division Manager
President of Pigeon Hearts Corporation

Hiroshi Nishimoto Logistics Division Manager

Ken Kaku

Representative Director of Pigeon Manufacturing(Shanghai) Co., Ltd.

Manager

Koji Matsutori

42

Pigeon Integrated Repor t 2020

Deputy Division Manager of Lansinoh Business Division
Director of Lansinoh Laboratories, Inc

MD&AManagement Discussion and Analysis

Net Sales and Gross Margin by Segment

Annual Sales Trend by Segment(¥ millions)

Domestic Baby & Mother Care
Child Care Service
Health & Elder CareFY ended Dec. 2019
Percentage
Gross
(%)
Margin(%)

Amount100,017

Consolidated Amount

100.0%

30,813(¥ millions)

50.8%

30.8%

1,283

48.8%

Child Care Service Business

3,492

3.5%

12.6%

Health & Elder Care Business

6,546

6.5%

31.3%

China Business

36,824

36.8%

55.3%

Singapore Business

11,482

11.5%

45.2%

Lansinoh Business

13,213

13.2%

58.3%

Eliminations(3,700)(3.7%)

-

Other

1,343

1.3%

9.1%

LansinohOther

120,000

100,000

Domestic Baby & Mother Care
Business

Overseas
China
Singapore

31,68880,0001,343

12,753
12,13334,30530,533

13,213
11,48235,581

23,05122,809

6,901
7,393

7,058
7,541

6,986
4,472

28,05331,82333,84135,59330,813

FY ended Jan. 2016

Jan. 2017

Jan. 2018

Jan. 2019

Dec. 201960,00025,23440,000

6,499
6,757

20,000

0

1,402

1,289

1,273

36,824

6,546
3,492

Note: In the fiscal year ended January 2019, the Pigeon Group changed the name of its Overseas Business to
the Singapore Business in view of its focus on Pigeon-brand operations in Southeast Asia, India, Middle East,and Oceania. At the same time, the Lansinoh-brand operations of the Overseas Business, whose focus is on
North America and Europe, was made into a separate business, the Lansinoh Business.

Note: The consolidated net sales figure refers to the amount after elimination of intersegment transactions.
* Effective the fiscal period ended December 2019, the Pigeon Group changed its fiscal year-end from January
31 to December 31. Therefore, the period under review was a transitional period of 11 months (February 1 to
December 31, 2019)

営業利益／営業利益率

Net Sales

Operating Income/Operating Margin(¥ millions)(¥ millions)

120,000

21,000100,017

100,000

Operating Income

Ordinary Income/Ordinary Margin

Operating Margin (%)
50

17,07218,0009,000
40,00020

6,000

20,000040

30

12,00060,000

17.1

3,000

FY endedJan. 2016

Jan.
2017

Jan.
2018

Jan.
2019

0

Dec.
2019

EPS

FY endedJan. 2016

Jan.
2017

Jan.
2018

Jan.
2019

Dec.
2019

Dividends per Share

(¥)

150

80

Payout Ratio
70.0

120
60

96.37

72.7

90

10

0

20

0

FY endedJan. 2016

Jan.
2017

Jan.
2018

Jan.
2019

FY endedJan. 2016

Jan.
2017

Jan.
2018

Jan.
2019

Dec.
2019

0

FY endedJan. 2016

Jan.
2017

Jan.
2018

Jan.
2019

Dec.
2019

10

0

ROIC／ROE

80

25

0

40

20

17.3

3,000

30

20

0

Dec.
2019

9,000

(%)

60

50

30

12,000

100

40

30

17,284(%)

15,000

(%)

40

60

Ordinary Margin

6,000

Cash Dividends per Share/Dividend Payout Ratio(¥)

Ordinary Income

21,00018,00015,00080,000(¥ millions)

ROE

ROIC

20

17.5

15

17.4

10
5
0

FY endedJan. 2016

Jan.
2017

Jan.
2018

Jan.
2019

Dec.
2019

The Company carried out a 3-for-1 split of common stock, effective May 1, 2015.

Net Income Attributable to Ownersof Parent/Net Income Margin (%)(¥ millions)

16,000Total Assets/Net Assets

Net Income Attributable to Owners of Parent
Net Income Margin(%)(¥ millions)

Total Assets

Equity Ratio
Net Assets

100,000

40

80,00030

60,00020

40,00040

1020,00020

0090,491

14,00011,53812,00010,000

4,000

11.5

2,000
0

FY endedJan. 2016

Jan.
2017

Jan.
2018

Jan.
2019

Dec.
2019

100

74.8

80

70,463

8,000
6,000

（%）

50

FY ended Jan.
Jan. 2016 2017

Jan.
2018

Jan.
2019

Dec.
2019

60

0

FY endedJan. 2016

Jan.
2017

Jan.
2018

Jan.
2019

Dec.
2019

Pigeon Integrated Repor t 2020

43

MD&A
Management Discussion and Analysis

Business Environment and Performancefamilies (Global Number One).”Following the approval of the Partial Amendment to the(2) We will seek to further increase corporate value

Articles of Incorporation at the 62nd Ordinary Generalby improving business profitability and efficiency

Meeting of Shareholders held on April 25, 2019, theand maximizing cash flows. We will also solidify ourCompany changed its fiscal year-end date from January

organizational structure, management system, and

31 to December 31. Therefore, the period under review wasgovernance system with the aim of achieving sustained

a transitional period of 11 months (February 1 to December

growth in the medium and long terms.

31, 2019) for the parent company and its domestic(3) Over the three years of the plan, we will allocate

subsidiaries, which previously settled their accounts

management resources with priority on core products

on January 31 each year. For this reason, year-on-year

while making strategic investments, in order to lay solid

comparisons are not provided. For overseas subsidiaries

foundations for double-digit growth of the Pigeon Group inthat normally settle their accounts on December 31, orthe future.

did so temporarily, the consolidation period remains the
In fiscal 2019, we implemented the aforementioned

12-month period from January 1 to December 31.

business policies and pursued strategies for our▲

various business and functions. As a result, we posted

In fiscal 2019, ended December 31, 2019, the Japaneseconsolidated net sales of ¥100,117 million, operating

economy continued maintaining an overall moderate

income of ¥17,072 million, ordinary income of ¥17,284

recovery tone on the back of solid improvements inmillion, and net income attributable to owners of parent of

employment and earnings conditions, as well as a¥11,538 million.

Business Conditions in Fiscal 2019

turnaround in personal consumption. This was despite

Main exchange rates used in the financial statements

weakening in some areas, especially exports. Meanwhile,(income and expenses) of overseas consolidated

consumer sentiment trends in the aftermath of thesubsidiaries are as follows: US$1.00 equals ¥109.02

consumption tax hike require ongoing monitoring. Also,(¥110.43 in fiscal 2018) and 1 CNY equals ¥15.77 (¥16.70 in

the global economy is facing increasing uncertainties,

fiscal 2018).

including trade problems, the economic outlook in China,▲

in financial and capital markets.

Cost of sales amounted to ¥ 49,216 million. As a result,Fiscal 2019 was the final year of the Group’s Sixth Medium-gross profit totaled ¥50,800 million, and the gross margin

Term Business Plan. During the year, we promoted

was 50.8%.

initiatives aimed at renewed growth, reflecting the

Selling, general, and administrative expenses (SG&A)

slogan of the plan: “Building our dreams into the future—amounted to ¥ 33,727 million, resulting in operating

By creating a bridge towards the Global Number One

income of ¥17,072 million and an operating margin of

manufacturer of baby products.” We also pursued

17.1%. Despite a foreign exchange loss, ordinary income

the following three basic strategies, with the aims

amounted to ¥17,284 million, benefiting from an increaseof expanding the Group’s operations and improving

in subsidy income. Net income attributable to owners ofmanagement quality.

parent totaled ¥11,538 million.

(1) Based on the Pigeon Way, we will formulate andimplement various measures to achieve our goal of
becoming “an indispensable company” for society andrealizing our Vision, which is “to be the baby productmanufacturer most trusted by the world’s babies and44

Income Statement Analysis

overseas economic factors such as Brexit, and fluctuations

Pigeon Integrated Repor t 2020

Performance by Segment▲

For reporting purposes, the Group divides its business into

In this segment, sales amounted to ¥13,213 million, andsix segments: Domestic Baby & Mother Care Business,segment income was ¥1,784 million. For the year, weChild Care Support Services, Health & Elder Care Business,achieved strong sales of breast pumps via the durable

China Business, Singapore Business, and Lansinoh

medical equipment (DME) channel, as well as steady sales

Business.

in China and Europe.
▲

Other

▲

Domestic Baby & Mother Care Business

Lansinoh BusinessIn fiscal 2019, sales in this segment amounted to ¥30,813

Sales in this segment amounted to ¥1,343 million andmillion, due in part to a decline in demand from inboundsegment income was ¥72 million.

tourism, especially in the second half of the year. Segment
income totaled ¥4,697 million.
Financial Position▲

Assets▲Child Care Support Services

Sales in this segment amounted to ¥3,492 million,

As of December 31, 2019, Pigeon had consolidated total

and segment income totaled ¥49 million. Despite theassets of ¥90,491 million, up ¥4,873 million from theexpiration of a bulk outsourcing agreement for childcare

beginning of the year. Over the period under review, current

hospital centers under the National Hospital Organization

assets increased ¥3,731 million, and fixed assets rose

(an independent administrative agency), in the year under¥1,141 million. Main factors boosting current assets were areview we operated 74 in-company childcare facilities.

¥1,467 million increase in cash and time deposits, a ¥1,583
million rise in notes and accounts receivable-trade, and a▲¥784 million increase in merchandise and finished goods.

Sales in this segment amounted to ¥6,546 million, and

The main factor boosting fixed assets was a ¥546 million

segment income totaled ¥386 million. In February 2019,

increase in construction in progress.

Health & Elder Care Business

we launched ProFitCare, a new series of products that
help users of nursing care facilities maintain good sitting▲

posture, as well as the Sanitary Care Inspired by Nursing

Total liabilities at fiscal year-end stood at ¥20,028 million,

Series of skincare products that help people keep cleanup ¥991 million. Over the period under review, current

even when they are unable to bathe.

liabilities increased ¥15 million, and fixed liabilities rose

Liabilities¥976 million. Main factors boosting current liabilities▲

were a ¥332 million decrease in notes and payable-trade

In this segment, sales amounted to ¥36,824 million, andand a ¥1,041 million rise in other current liabilities, which

segment income totaled ¥12,483 million. Our performance

contrasted with a ¥702 million decrease in accrued

was driven by continued healthy sales of mainstay nursing

payables and a ¥678 million decline in accrued income tax.

bottles and nipples, as well as steady increases in sales of

The main factor boosting long-term liabilities was a ¥1,086

breast pumps and laundry products.

million increase in other fixed liabilities, which contrasted

China Businesswith a ¥599 million provision for directors’ and corporate▲

Singapore Businessauditors' retirement benefits.

Sales in this segment amounted to ¥11,482 million, andsegment income totaled ¥2,007 million. During the year,
we developed and introduced products targeted at middleclass consumers in Southeast Asia, the Middle East, India,
and elsewhere.

Pigeon Integrated Repor t 2020

45

MD&A
Management Discussion and Analysis

▲

ROE

▲

Net Assets

Net assets at fiscal year-end amounted to ¥70,463 million,

Pigeon uses return on equity (ROE) as one of the key

up ¥3,881 million from the beginning of the year. This was

performance indicators to seek to improve profitability anddue mainly to a ¥3,275 million rise in retained earnings andcapital efficiency. The Group achieved 17.5% ROE this fiscala ¥338 million increase in foreign-currency translation

year-end.

adjustment.
▲

Pigeon Value Added (PVA), Return on Invested Capital▲Sound Financial Position(ROIC), and Cash Conversion Cycle (CCC)

The Group does not engage in borrowing and has zero

Seeking to increase enterprise value, we are mindful of freeinterest-bearing debt. At fiscal year-end, it had cash andcash flow when conducting internal controls, and we set

cash equivalents of ¥32,416 million, and its equity ratio

our own unique indicator called Pigeon Value Added (PVA),

remained high, at 74.8%.

which is based on economic added value, to make various
investment and other decisions and to make performance
evaluations of each business segment. In fiscal 2019,

Cash Flows

invested capital totaled ¥68,523 million, compared with▲the fiscal-2018 amount of ¥64,698 million and our target

Net cash provided by operating activities amounted toof ¥69,527 million, resulting in a PVA spread of 12.4%,¥14,098 million, up from ¥13,632 million in the previous

compared with the fiscal 2018 figure of 16.2% and ouryear. Factors boosting cash flows included ¥17,104

target of 15.1%. The PVA for fiscal 2019 was ¥8,525 million,

million in income before income taxes, ¥3,276 million incompared with the fiscal 2018 figure of ¥10,494 million anddepreciation, and an ¥896 million increase in notes andour target of ¥10,813 million. All figures for fiscal 2019 fell

accounts payable-trade. Contrasting factors included abelow previous-year figures and our targets.

Cash Flows from Operating Activities¥1,791 million increase in notes and accounts receivable-

Net operating profit after tax (NOPAT) amounted to

trade, a ¥713 million increase in inventories, and ¥5,854¥11,951 million, compared with the fiscal 2018 figure of

million in income taxes paid.

¥13,589 million and our target of ¥14,000 million, andreturn on invested capital (ROIC, with tax rate of 30.0%)▲

was 17.4%, compared with the fiscal 2018 figure of 21.2%

Net cash used in investing activities totaled ¥3,995 million,

and our target of 20.1%.

Cash Flows from Investing Activities

down from ¥4,704 million in the previous year. Main factors

In addition, the cash conversion cycle (CCC) in fiscal

were ¥3,413 million in purchase of tangible fixed assets

2019 was 88.7 days, which was 13.1 days worse than fiscaland ¥606 million in purchase of intangible fixed assets.

2018 (75.6 days) and 15.7 days worse than our target (73.0
days. )▲Cash Flows from Financing Activities

Net cash used in financing activities was ¥8,734 million, up
from ¥8,338 million in the previous year. This was mainly
due to ¥8,230 million in payment of cash dividends.

46

Pigeon Integrated Repor t 2020

Shareholder Return Policy and Measures

During the year, we paid an interim cash dividend of

The Pigeon Group regards the return of profits to¥35.00 per share (¥35.00 regular dividend) and a year-end

shareholders as an important management priority. Our

dividend of ¥35.00 per share (¥35.00 regular dividend).

basic policy is to actively return profits to shareholders

This brought total annual dividends to ¥70.00 per sharethrough the appropriation of retained earnings and other(¥70.00 regular dividends), up ¥2.00 year-on-year. The

means, while reinforcing our financial position based on

consolidated dividend payout ratio was 72.7%.

considerations of medium-term changes in businessconditions and the Group’s business strategies. In addition

Outlook for the Next Fiscal Yearto strengthening our financial position, we effectively

In fiscal 2020 (ending December 31, 2020), we are targeting

use retained earnings in a number of ways to fortify ourconsolidated net sales of ¥109.0 billion, operating income

operational base and improve future Group earnings.

of ¥18.1 billion, ordinary income of ¥18.1 billion, and net

These include investing in new businesses and research

income attributable to owners of parent of ¥12.6 billion.

and development, as well as investing in production(These are our forecasts as announced at the financial

facilities to raise production capacity, reduce costs, andresults briefing held on February 13, 2020. They do notenhance product quality.

account for the impact of the global spread of COVID-19 on

During the year, we strove to further upgrade andour business.)

strengthen our policy of returning profits to ourshareholders. With respect to specific shareholder-return
goals, under our Sixth Medium-Term Business Plan wetargeted a consolidated dividend payout ratio of around55%, as well as increases in year-on-year cash dividends(In this Integrated Report, statements other than historical or present-day
facts are regarded as forecasts. Such forecasts reflect the Pigeon Group’s
hypotheses and judgments based on information currently available, and thus
contain known and unknown risks, uncertainties, and other factors that may
impact on the Group’s performance and financial position.)and improvements in the consolidated dividend payout
ratio in each business period.

PVA Tree: Consolidated Results in FY ended Dec. 2019

Operating income

Consolidated
Top: Dec. 2019 Plan
Mid: Dec. 2019 Results 2
Bottom: Jan. 2019 Results(¥ millions)
1

PVA
Plan 10,813
Results 8,525
Previous fiscal 10,494
year (PFY)NOPATPlan 14,000
Results 11,951
PFY 13,729

Net sales

Plan 20,000
Results 17,073
PFY 1 9 , 6 1 2Plan 106,200
Results 100,017
PFY 104,748

Taxes

Cost of sales

Plan 6,000
Results 5,122
PFY 5,884

Plan 50,900
Results 49,217
PFY 50,889

Capital invested

Working capital

Trade receivables

SG&A expenses

Plan 69,527
Results 68,523
PFY 64,698

Plan 19,809
Results 19,986
PFY 18,622

Plan 16,709
Results 15,796
PFY 15,723

Plan 35,300
Results 33,727
PFY 34,246

Fixed assets
Plan 27,258
Results 27,820
PFY 26,685

WACC
common 5.0%

Cash and otherassets and liabilities
Plan 22,459
Results 20,718
PFY 19,3 91

Inventories
Plan 10,222
Results 10,908
PFY 9,659

Trade payables
Plan 7,12 2Results 6,719
PFY 6,760

1 The figures on the balance sheet used in calculation of PVA are the amounts at the beginning and end of the fiscal year.
2 Effective the fiscal period ended December 2019, the Pigeon Group changed its fiscal year-end from January 31 to December 31. Therefore, the period under review was a transitional period of 11 months (February 1–December 31, 2019.)

Pigeon Integrated Repor t 202047

F inancial Da t a■ Consolidated Balance SheetsItem

F Y ended(¥ millions)Jan. 2016

Jan. 2017

Jan. 2018

Jan. 2019

Dec. 2019

AssetsCash and Deposits

24,29730,052

31,34630,94932,416

Notes and Accounts Receivable - Trade

13,870

16,103

16,44015,004

16,588Merchandise and Finished Goods

6,146

5,328

6,059

7,360

8,144

Other Current Assets

4,600

3,761

4,333

4,888

4,785

Total Current Assets

48,91355,244

58,17858,201

61,933

20,263

21,11621,12722,494

Tangible Fixed Assets

21,471Intangible Fixed Assets

1,346

1,106

3,307

4,223

3,863

Investment Securities

1,477

1,481

1,020

889

950

Total Investments and Other Assets

2,211

2,273

1,865

1,729

2,200

Total Fixed Assets

25,02923,644

26,28927,41728,558

Total Assets

73,94378,88984,46785,61890,491

Notes and Accounts Payable - Trade

3,743

4,857

5,194

4,567

4,900

Accounts Payable

2,147

2,477

3,141

3,363

2,660

Income Taxes Payable

1,505

2,324

2,578

1,951

1,272

894

929

1,035

972

928

Liabilities

Accrued Bonuses to Employees

5,934

10,794

5,725

4,770

5,878

14,223

21,381

17,673

15,623

15,638Long-term Borrowings

5,000

—

—

—

—

Other Fixed Liabilities

3,926

3,770

3,982

3,412

4,389

Total Fixed Liabilities

8,926

3,770

3,982

3,412

4,389

Total Liabilities

23,15025,152

21,65519,03620,028

Capital Stock

5,199

5,199

5,199

5,199

5,199

Capital Surplus

5,180

5,179

5,179

5,179

5,179

Retained Earnings

36,79042,28049,72955,70458,979Treasury Stock

(947)

(948)

(949)

(951)

(1,088)

32

47

44

21

25

Other Current Liabilities
Total Current Liabilities

Net Assets

Valuation Dif ference on Available-for-Sale
Securities
Foreign Currency Translation Adjustment

3,311

628

1,490

(910)

(572)

Non-Controlling Interests

1,225

1,349

2,119

2,339

2,741

Total Net Assets

50,79253,73662,812

66,582

70,463

Total liabilities and Net Assets

73,94378,88984,46785,61890,491Figures less than one million yen are truncated.

■Equity Ratio, ROE, and ROIC（％）

Jan. 2016

Jan. 2017

Jan. 2018

Jan. 2019

Dec. 2019

Equity Ratio

67.0

66.4

71.9

75.0

74.8

ROE

21.3

21.8

25.7

22.8

17.5

15.1

16.3
22.2

21.2

17.4

ROIC

19.2

* ROE is the ratio of net income attributable to owners of parent to the average of shareholders’ equity at the beginning and end of the fiscal year. ROIC is defined as NOPAT divided by invested capital. This figure is
calculated using a tax rate of 30% for the second (bottom) of the two figures for the year ended January 2017 and for the year ended January 2018 and thereafter. A tax rate of 40.7% is used for the first (top) of the two
figures for the year ended January 2017 and the year ended January 2016. Invested capital is calculated using the average of the beginning and year-end figures.

48

Pigeon Integrated Repor t 2020

■ Consolidated Statements of IncomeItem

F Y ended(¥ millions)Jan. 2016

Jan. 2017

Jan. 2018

Jan. 2019

Dec. 2019

Net Sales

92,20994,640102,563

104,747

100,017

Cost of Sales

48,864

49,951

51,99050,88949,216Gross Profit

43,34544,68850,57253,85850,800

47.0

47.2

49.3

51.4

50.8

Selling, General and Administrative Expenses

28,82328,67331,15934,24633,727

Operating Income

14,521

16,015

19,412

19,612

17,072Gross Margin (%)

Operating Margin (%)

15.7

16.9

18.9

18.7

17.1

Non-operating Income

1,112

945

1,263

1,295

1,136

Non-operating Expenses

553

498

547

509

924

15,08016,462

20,12920,39817,284

Ordinary Margin (%)

16.4

17.4

19.6

19.5

17.3

Extraordinary Income

10

122

1,058

243

121

Extraordinary Loss

204

350

271

379

300

Income before Income Taxes

14,887

16,234

20,916

20,262

17,104

Income Taxes - Current

4,548

5,165

5,931

5,794

5,067

Income Taxes - Deferred

(124)

(273)

225

(127)

267

Net Income

10,462

11,342

14,75914,594

11,769

265

224

244

356

230

10,197

11,11814,515

14,238

11,538

Ordinary Income

Net Income Attributable to
Non-Controlling Interests
Net Income Attributable to
Owners of Parent
Figures less than one million yen are truncated.

■ Consolidated Statement of Cash FlowsItem

F Y ended(¥ millions)Jan. 2016

Jan. 2017

Jan. 2018

Jan. 2019

Dec. 2019

Cash Flows from Operating Activities

13,47914,81017,094

13,632

14,098Cash Flows from Investing Activities(3,332)(1,854)(3,586)(4,704)(3,995)

Cash Flows from Financing Activities(6,567)(6,223)(12,812)(8,338)(8,734)

Effect of Exchange Rate Changes on Cash and Cash Equivalents

(873)

(891)

599

(986)

98

Net Increase (Decrease) in Cash and Cash Equivalents

2,706

5,840

1,294

(397)

1,467

Cash and Cash Equivalents at Beginning of Period

21,59024,29730,052

31,34630,949Cash and Cash Equivalents at End of Period

24,29730,052

31,34630,94932,416

Figures less than one million yen are truncated.

■ Data Per ShareItem

F Y ended

Jan. 2016

Jan. 2017

Jan. 2018

Jan. 2019

Dec. 2019

EPS (yen)

85.15

92.84

121.20118.8996.37

Cash Dividends (yen)

42.00

53.00

66.00

68.00

70.00

49.3

57.1

54.5

57.2

72.7

413.88437.43506.79536.43565.64

Dividend Payout Ratio (%)
BPS (yen)■ Number of Employees in Pigeon Group
Item
Employees (Consolidated)

F Y ended

Jan. 2016
3,743

Jan. 2017
3,739

Jan. 2018
4,306

Jan. 2019
3,875

Dec. 2019
3,954

Pigeon Integrated Repor t 2020

49

C orpora te Infor ma tion

Corporate Data (As of December 31, 2019)
Company Name……

Pigeon Corporation

Address …………… 4-4, Nihonbashi Hisamatsu-cho, Chuo-ku,Tokyo 103-8480, Japan

Phone +81-3-3661-4200 Fax +81-3-3661-4320
URL https://www.pigeon.com (global)
https://www.pigeon.co.jp (japan)
Established ………… August 15, 1957
Capital Stock ……… ¥5,199,597 thousand
Fiscal Year-End …… December 31

Note: At the 62nd Ordinary General Meeting of Shareholders convened April 25, 2019,a partial amendment to the Articles of Incorporation was approved, changing the fiscal year-end fromJanuary 31 to December 31, from FY2019 onward.
Our Business ……… Manufacture, sale, import and export of baby and child-care products, maternity items, women’s careproducts, home healthcare products, elder care products, etc.; operation of child-minding centers
Number of …………
361 (Japan, Full-time employees) / 3,954 (Worldwide, Includes Part-time employees)
Employees

Consolidated Subsidiaries (22 companies) (As of April 1, 2020)◦ Pigeon Home Products Corporation◦ Pigeon Singapore Pte. Ltd.

◦ Pigeon Hearts Corporation◦ Pigeon Malaysia Trading Sdn. Bhd.

◦ Pigeon Manufacturing Hyogo Corporation◦ PT Pigeon Indonesia◦ Pigeon Manufacturing Ibaraki Corporation◦ PT Pigeon Baby Lab Indonesia◦ Pigeon Tahira Corporation◦ Pigeon (Shanghai) Co., Ltd.

◦ Pigeon Manaka Corporation◦ Pigeon Manufacturing (Shanghai) Co., Ltd.
◦ Pigeon Industries (Changzhou) Co., Ltd.
◦ Lansinoh Laboratories, Inc.
◦ Lansinoh Laboratories Medical Devices

Design Industry And Commerce Ltd. Co.
◦ Lansinoh Laboratórios Do Brasil Ltda.
◦ Lansinoh Laboratories Benelux◦ Lansinoh Laboratories Shanghai◦ Doubleheart Co. Ltd.
◦ Pigeon India Pvt. Ltd.
◦ Pigeon Industries (Thailand) Co., Ltd.
◦ Thai Pigeon Co., Ltd.

50

Pigeon Integrated Repor t 2020

Pigeon Group Business Structure (As of April 1, 2020)

Global Head Office (GHO)
Pigeon Corporation Head Office: Tokyo 1957

Japan Business (Domestic Baby & Mother Care Business, Related Business)◦Pigeon Corporation

Maternity and baby products: Sales, R&D, etc.
Branches and other offices: Sapporo, Sendai, Tokyo, Nagoya, Osaka, Hiroshima, Fukuoka, Tsukuba
Office, Central Research Laboratory, Hitachiota Distribution Center,
West Japan Distribution Center◦Pigeon Hearts Corporation
Tokyo 1999
Child-minding and daycare services,
babysitter dispatch services, preschool
education services◦Pigeon Home Products
Corporation
Shizuoka 1985
Manufacture and sale of toiletries◦Pigeon Manaka Corporation◦Pigeon Tahira Corporation
Tokyo 2004
Sale of elder care products

Tochigi 2000
At-home elder care services, sale of eldercare products◦Pigeon Manufacturing Hyogo
Corporation◦Pigeon Manufacturing Ibaraki
Corporation

Hyogo 2002
Manufacture and sale of non-woven products

Ibaraki 1996
Manufacture and sale of non-woven products

China Business◦Pigeon (Shanghai) Co., Ltd.
China 2002
Sale of maternity and baby products◦Pigeon Manufacturing (Shanghai) Co., Ltd.
China 2006
Manufacture of maternity and baby products◦Pigeon Industries (Changzhou) Co., Ltd.
China 2009
Manufacture of maternity and baby products◦Doubleheart Co. Ltd.
South Korea 2012
Sale of maternity and baby products

Singapore Business

Lansinoh Business◦Pigeon Singapore Pte. Ltd.

◦Lansinoh Laboratories, Inc.

Singapore 1978
Sale of maternity and baby products◦Pigeon Malaysia (Trading) Sdn.Bhd.
Malaysia 2011
Sale of maternity and baby products◦PT Pigeon Indonesia
Indonesia 2017
Manufacture of maternity and baby products◦PT Pigeon Baby Lab Indonesia
Indonesia 2019
Sale of maternity and baby products◦◦Pigeon India Pvt. Ltd.
India 2009 (sales company) and 2015 (factory)
Manufacture and sale of maternity and baby products◦Pigeon Industries (Thailand) Co., Ltd.

United States 2004
Sale of maternity and baby products◦Lansinoh Laboratories Medical Devices
Design Industry And Commerce Ltd. Co.
Turkey 2010
Manufacture of maternity and baby products◦Lansinoh Labóratorios Do Brasil Ltda.
Brazil 2014
Sale of maternity and baby products◦Lansinoh Laboratories Benelux
Belgium 2015
Sale of maternity and baby products◦Lansinoh Laboratories Shanghai
China 2016
Sale of maternity and baby products

Thailand 1996
Manufacture of maternity and baby products◦Thai Pigeon Co., Ltd.
Thailand 1990
Manufacture of maternity and baby products●Sales / Service offices ●Factories
Pigeon Integrated Repor t 2020

51

C orpora te Infor ma tion

Stock Data (As of December 31, 2019)● Shares Authorized…………………

360 million● Shares Issued……………………… 121,653,486● Total number of shareholders…………………………

17,024……………
● Number of shareholders with voting rights
15,357● Treasury Stock……………………………………… 1,892,826

Major Shareholders (As of December 31, 2019)
Number of shares

Ownership*(Thousand)(%)

The Master Trust Bank of Japan, Ltd. (Trust Account)

8,079

6.7

BNYMSANV RE MIL RE FSI ICVC-STEWART INV ASIA PACIFIC LEADERS FD

4,789

4.0

THE BANK OF NEW YORK MELLON 140042

4,744

4.0

Japan Trustee Services Bank, Ltd. (Trust Account)

4,398

3.7

BBH FOR MATTHEWS ASIA DIVIDEND FUND

2,970

2.5

HSBC BANK PLC A/C CLIENTS RE UCIT5 JAPAN NON TREATY OMNI A/C

2,819

2.4

Y.N Corporation

2,778

2.3

STATE STREET BANK AND TRUST COMPANY 505223

2,593

2.2

Japan Trustee Services Bank, Ltd. (Trust Account 5)

2,451

2.0

THE BANK OF NEW YORK MELLON 140044

2 ,1 1 1

1.8

Shareholder name		* Ownership percentage figures are based on 119,760,660 shares (121,653,486 shares issued, minus 1,892,826 shares of treasury stock).

Share Breakdown by Shareholder Type (As of December 31, 2019)
Individuals andOthers11.0%

Treasury Stock

1.6%

1,892 (thousands of shares)

13,373 (thousands of shares)

Financial Institutions

27.5%

33,389 (thousands of shares)Securities Companies

1.8%
Non-JapaneseCorporations

53.0%

64,491 (thousands of shares)

2,231 (thousands of shares)

Japanese Corporations

5.2%

6,273 (thousands of shares)

Stock Price Range/Turnover of Common Stock（¥）

Pigeon Stock Price(A 3-for-1 stock split was carried out, effective May 1, 2015.)

Pigeon Stock Turnover (Monthly Total)

7,000

60,000,000

6,500
50,000,000

6,000
5,500
5,000

40,000,000

4,500
4,000
3,500

30,000,000

3,000
2,500

20,000,000

2,000
1,500

10,000,000

1,000
500
0

1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2
2015
2016
2017
2018
2019
2020

52

Pigeon Integrated Repor t 20200

■IR Tools (Quick Reference)
The purpose of this Integrated Report is to describe management strategies aimed at conveying the vision of the Pigeon Group, as well as details of the Group’sbusiness and ESG activities. It also designed to deepen understanding of the corporate value created by the Pigeon Group. In addition, we provide a variety ofother information through our Investors Guide and our corporate website, which give qualitative and quantitative details of the Pigeon Group’s history.

Integrated Report 2020

Cover2 Highlights of the Current
Fiscal Year /Key Performance Indicators

Purpose➡

To see Pigeon's Key Performance
Figures.

Corporate Site➡

Investors

Investors
Our Business➡

To see Pigeon's business bysegment.

➡

P. 43 MD&A
P. 48 Financial Data➡

To see the financial data andearnings structure
as a reference forinvestment decisions.

➡

P. 52

➡

To find Pigeon's stock information.

➡

P. 02 Pigeon History
P. 50 Corporate Information➡

To learn about Pigeon's history andcorporate profile.

➡

P. 07 The Pigeon Way
P. 16 Value Creation Story
P. 18 Brand Enhancement
Initiative➡

To learn about Pigeon's corporate
philosophy, culture andmanagement vision.

➡

To understand Pigeon's
management teamand their views and opinions
on business.

P. 04 At a Glance
P. 20 A Business Summary
by Segment

Stock Data

P. 06 To Our Stakeholders
P. 1 2 Interview with Outside
Director
P. 42 List of Directors andManaging Officers

Investors
・Chart Generator

Stock Information

Corporate History

The Pigeon Way➡
➡

Investors
・Top Message
・Medium-Term Business Plan
Management

Sustainability
P. 1 0 Promoting ESG-focusedmanagement
P. 30 Pigeon ESG Activities➡

To understand Pigeon's ESG
initiatives which drive
the sustainable growthof business and corporate values.

➡

・Pigeon ESG / DGs Policy / ESG
Data Book
・Approach to ESG

・Corporate
Governance

Pigeon Integrated Repor t 202053

Pigeon Corporation(Securities Code: 7956)

Address 4-4, Nihonbashi Hisamatsu-cho,
Chuo-ku, Tokyo 103-8480, Japan (Head Office)+81-3-3661-4200
Tel+81-3-3661-4188 (Public Relations & ESG Sect.)+81-3-3661-4320
Fax
www.pigeon.com
URL