INTEGRATEDREPORT

2023

Morinaga Group For the Fiscal Year Ended March 31, 2023

The Morinaga Group’s
Corporate Philosophy

Our Mission(Purpose)

Our Visions(Vision)Our Commitments(Value)The Code of Conduct andStandards of Behavior

Delicious, Fun, and Healthy
The Morinaga Group will continue tocreate healthy foods that can be enjoyedbeyond generations, thereby bringing smiles to thefaces of people around the world now and in the future.
Good quality

Only-one value

Act globally

Pursue quality with integrity Create new value and inspiration

Expand the scope andpossibilities of activities

Link together

Sustainable society

Strengthen relations of trust with stakeholders

Contribute to a sustainable society

Give first priority to customers

Al tru is m

Corporate
Message

Be a pioneer
Have an indomitable spirit
Value ties between people
Align our business imperatives with social challenges

The Morinaga Group’s Corporate Philosophy is composed of Our Mission, Our Visions, and Our Commitments.
Our Mission states how the Group will contribute to society. Our Visions comprise the five visions that we will pursue toward
the future. Our Commitments represent the values that we have developed during the more than 100-year history since thefounding of the Group and will continue to uphold as our firm belief for many more years to come. To describe the essence ofour corporate philosophy in one expression, it is “Delicious, Fun, and Healthy.”2030 Vision

The Morinaga Groupwill change into a Wellness Company in 2030.
We will further evolve reliability and technology building on our 120-year history to support people’swellness lifestyles in all generations worldwide.

Three values
to provide

Health ofmind

Health ofbody

Healthofenvironment

The Morinaga Group defines “wellness” as“the state of realizing or pursuing an enriched
and glorious life on the basis of health of mind,
body, and environment.” By providing the threevalues of “health of mind,” “health of body,”

Values areprovided forand “health of environment” to the three

Customers

Employees

Societystakeholders of customers, employees, andsociety, the Morinaga Group will achievesustainable growth.

Contents
Introduction
Corporate Philosophy

42 Confectionery and Foodstuffs Business
44 R&D Strategy

02 At a Glance

46 Structural Reforms of Production Functions

04 The Morinaga Group’s Commitment and Efforts to Resolve

48 DX Strategy

Social Issues through Business

06 Message from Top Management
12 Special Feature: Value Co-Creation Story—Resolving Social
Issues through the “in-” Business

49 Human Resources Strategy
52 Special Feature: Employee Roundtable
Discussion—Toward Achieving Our 2030 Vision
Sustainable Management

16 Financial and Non-Financial Highlights

55 Approach to Sustainable Management

Future Vision and Path to Achieve It

56 Promotion of Health Management

18 The Morinaga Group’s Materiality

58 Sustainable Value Chains

20 Value Creation Process for Achieving Our 2030 Vision

60 Conserving the Global Environment

22 Strategic Road Map for Achieving Our 2030 Vision

64 Initiatives for Human Rights

24 Long-Term Business Plan: 2030 Business Plan

Governance

26 Medium-Term Business Plan: 2021 Medium-Term Business Plan

66 Messages from Outside Directors

Value Creation Strategy

68 Corporate Governance

29 Message from the CFO

74 Compliance and Risk Management

34 “in-” Business

76 Executive Management Team

36 Direct Marketing Business

Financial Performance

38 U.S. Business78 11-Year Financial and Non-Financial Summary

40 Frozen Desserts Business

80 Financial Summary
88 Corporate Profile/Stock Information/
Third-Party Assurance

Cautionary Statement about Forward-Looking Statements
This report contains forward-looking statements on such matters as the Morinaga Group’s plans, strategies, and business performance.
These statements are based on judgments made using information obtainable at present. Consequently, actual performance could vary
greatly from forecasts because it is subject to various risks and uncertainties. Elements affecting forward-looking statements include
the economic environment surrounding the Morinaga Group’s business domains, competitive pressures, relevant laws and regulations,changes in the development status of products, and fluctuations in foreign exchange rates. However, elements affecting future forecasts
are not limited to these. Furthermore, the Company applied the Accounting Standard for Revenue Recognition (ASBJ Statement No. 29,
March 31, 2020), and other regulations, from the beginning of the fiscal year (FY) ended March 31, 2022. The figures for FY2020 are fromafter retroactive application of the said accounting standard.

Morinaga Group INTEGRATED REPORT 2023

01

At a Glance
The Morinaga Group engages in the confectionery and foodstuffs business, thefrozen desserts business, the “in-” business, and the direct marketing businessin Japan, and in the food manufacturing business overseas mainly involving
the U.S. business. Particularly, we aspire to drive the entire Group’s
growth, defining four businesses—the “in-” business, the direct
marketing business, the U.S. business, and the frozen desserts
business—as the focused domain categories.

The Morinaga Group Today
Strategic Business Categories
Main Products

Net Sales/Operating Income

Confectionery & Foodstuffs Business*1(Billion yen)

■ Net sales

73.3

72.4

Operating income

74.3

6.1
3.2

HI-CHEW

Milk Cocoa

2020(Billion yen)Frozen Desserts Business

40.1

38.4

4.8

7.4

Choco Monaka Jumbo

2020(Billion yen)

1

Japan

“in-” Business*

Ita Choco Ice

2021■ Net sales

2021■ Net sales

28.0

23.6

6.8

1.5
2022(FY)
Operating income

40.5

3.4

in BarDirect Marketing Business

2020(Billion yen)

9.1

7.4

0.3

0.6

Oishii Collagen Drink

2021■ Net sales

Operating Subsidiaries and Others

2020(Billion yen)2021

■ Net sales

15.0

13.4

0.5

Aunt Stella Inc./
Assorted cookies

U.S. Business*

Morinaga Market
Development Co., Ltd./
Assorted confectioneries

30.6
7.0

2020

2021

■ Net sales2022(FY)
10.2

0.6

2022(FY)
Operating income

16.9
0.7

2022(FY)
Operating income

14.6
10.5

Overseas

7.2

1.4

ChargelChina, Taiwan, Exports, etc.

2020
(Billion yen)2021

■ Net sales

5.7
4.5

HI-CHEW (China)

in Jelly Products (Taiwan)

2022(FY)
Operating income

7.0
0.5

0.3

0.0
2020

*1 Products including candies, chocolates, and others in the “in-” brand are included in theconfectionery and foodstuffs business.
*2 Includes profits relating to exports bound for the United States from China and Taiwan.

02

1.4

1.0

HI-CHEW

2021

We are working to create new value aimed at “health of mind and body” throughfoods. in Jelly, which replenishes nutrition anywhere and anytime based on sports
science theory, has maintained its top share in the jelly drink market for 28 years.
Our product initiatives in the “in-” brand are meeting the health needs of various
lifestyles in modern society.

Operating income(0.7)(Billion yen)2

Our strength is found in products made with the Group’s unique confectionery
technologies in sub-zero temperatures such as in our top brands of Choco
Monaka Jumbo, which was released more than half a century ago, and Ita
Choco Ice, featuring the shape and texture of a chocolate bar. By concentrating
management resources on mainstay brands, we are implementing effective
marketing and achieving steady business growth.

2022(FY)

Oishii Aojiru**Aojiru is a Japanese vegetable beverage

We are constantly creating new and delicious food solutions pivoting on our
long-selling brands such as Morinaga Biscuits, HI-CHEW, Choco Ball, andMorinaga Cocoa. Capitalizing on our proprietary food processing technology
cultivated over more than 120 years since our establishment and the resultsof our research and technological development related to ingredients, we areworking to provide products that benefit health of mind and body aimed at
becoming a wellness company.

Operating income

4.5

in Jelly

Business Overview/Strengths2022(FY)

We support customers’ wellness lifestyle by directly bringing products with both
function and deliciousness to consumers. Oishii Collagen Drink, which is soldexclusively in the direct marketing channel, has sold more than 300 million units
to date*3, making it the best-selling collagen drink in Japan*4. In addition, we areworking to develop Oishii Aojiru as a product set to become the next importantpillar of our business in the future.
Aunt Stella Inc. manufactures and sells cookies and other products and operates
restaurants. Morinaga Market Development Co., Ltd., sells confectioneries
and foods to theme parks and companies as well as sells imported products.
Morinaga Shoji Co., Ltd., develops and markets commercial-use food ingredients.
Morinaga Institute of Biological Science, Inc., researches, develops,
manufactures, and markets food allergen test kits and other products. For otherbusinesses, we own real estate rental properties and manage a golf course.
In the U.S. business, we are expanding HI-CHEW, which has a real fruity taste andunique texture that has been embraced by customers in the United States. We areworking to expand the HI-CHEW brand while developing new products that provide
wellness value tailored to the needs of local customers and releasing products in
new packaging formats. Chargel, a jelly drink developed for the U.S. market, wasreleased in 2022. We are working to create a market in the United States for jelly
drinks harnessing the business foundation established with HI-CHEW.
Including global expansion of HI-CHEW, we deliver products with unique texture andtaste based on our long-standing technologies cultivated in our domestic business tocustomers around the world together with the Morinaga Brand and our Corporate
Message of “Delicious, Fun, and Healthy.” In Taiwan, in Jelly was launched in 1999
and is sold in response to rising health awareness. It is also sold in Hong Kong andSingapore. We are also working to tap into new markets while expanding wellness
products such as Oishii Collagen Drink in China via e-commerce.

*3 Includes the Oishii Collagen Drink series and products before and after the updating of existing products, as of October 2021
(survey by Morinaga & Co., Ltd.)*4 Source: H.B. Foods Marketing Handbook 2023 No. 1, Fuji Keizai (beauty effect/collagen category/2021 results), for the Oishii
Collagen Drink series, including products before and after the updating of existing products.

Future Vision andPath to Achieve It

Introduction

Value Creation
Strategy

Sustainable
Management

Financial
Performance

Governance

Net Sales and Operating Income (FY2022)*5

Morinaga Group

Morinaga GroupNet sales

Operating income

194.3

15.2

billion yen

billion yen

Net sales%: component ratio■ Confectionery and Foodstuffs Business■ Frozen Desserts Business■ “in-” Business■ Direct Marketing Business■ Operating subsidiaries and others■ U.S. Business■ China, Taiwan, and exports, etc.

38.2%
20.9%
15.7%
5.3%
8.7%
7.5%
3.6%

Operating income%: component ratio■ Confectionery and Foodstuffs Business■ Frozen Desserts Business■ “in-” Business■ Direct Marketing Business■ Operating subsidiaries and others■ U.S. Business■ China, Taiwan, and exports, etc.

10.1%
22.6%
46.1%
4.3%
4.8%
9.7%
3.7%

Reach of the Morinaga Group (as of March 31, 2023)*6
North America

Morinaga Group19

companies

Group companies: 2

Employees

Employees: 271

3,076

Morinaga America Foods, Inc.

Shanghai Morinaga Co., Ltd.
Morinaga (Zhejiang) Co., Ltd.
Morinaga America, Inc.
Morinaga Asia Pacific Co., Ltd.
Morinaga Bioscience (Thailand) Co., Ltd.

Taiwan Morinaga
Co., Ltd.

Japan
Asia (excluding Japan)
Group companies: 5
Employees: 399[Morinaga & Co., Ltd.]Business locations: Head Office,
1 R&D center, 4 factories,
and 2 supervising branches
Employees: 1,472[Group companies] 11
Employees: 934*5 Breakdown of operating income contains -1.3% as an adjustment excluding the above.
*6 Listed consolidated companies and non-consolidated companies accounted for using the equity
method. Employees represent the total for consolidated companies.

Morinaga Group INTEGRATED REPORT 2023

03

The Morinaga Group’s Commitment andEfforts to Resolve Social Issues through Business
Under the commitment of its founder, the Morinaga Group has been consistently providing customers
with new value and inspiration, while responding to changes of the times and those in the lifestyles ofcustomers. Through continuing to make food that helps to keep people’s minds and bodies healthy,
from today to tomorrow and from one generation to the next, we will continue to bring smiles to thefaces of people around the world.

Short Stories Symbolizing Our Commitment
Founder’s commitment

For our employees

1899 Establishment
Paving the way for the modernizationof Japan’s confectionery industry

1919
Introduction of theeight-hour workday

The Morinaga Group was established based on thecommitment of its founder, Taichiro Morinaga, wholearned confectionery manufacturing techniques in
the United States, to deliver highly nutritious anddelicious Western confections to the people ofJapan. The company created a foundation for the
confectionery business in Japan such as mass
production with machinery and mass sales throughsales networks and advertising, and spread
Western confections nationwide in the process.
In 1918, we became the first in Japan to begin
integrated production of chocolate from cacao
beans. Through huge capital investments andthe introduction of advanced technologies wemanaged to overcome several challenges andhelp popularize chocolates in Japan.

Having valued the spiritof co-existence andco-prosperity, we have considered the health ofmind and body of our employees since 1919 when
we introduced the eight-hour workday. We alsoestablished the Morinaga Health Insurance Society
in 1926. This management stance has been passed
down to the present day, and we were certified as a
Health & Productivity Management Outstanding
Organization for 2023 (Large Enterprise Category).

For our customers
1905
Registered our first symbolic trademark
We registered our first symbolic trademark to set ourselves apart from low-quality
knockoffs. Our belief in quality, that is, “not allowing containers with raised bottoms forthe sake of appearance” and “adopting individual packaging to protect quality,” has been
passed down since our establishment.

For society
2008
Launched the
One Chocolate for
One Smile campaign
Since 2008, we have used proceeds from productsales to fund initiatives to improve the educational
environment for children and future generations
and address child labor issues in cacao-producing
countries such as Ghana. Our commitment is to“pave the road to the future with the smiles of bothpeople who eat chocolate and the children being
educated in cacao-producing countries.”

Looking back on our history and ahead to the future, we formulated a new corporate philosophy in 2021. In this corporate
philosophy, we redefined our commitment nurtured over our more than 120 years in business in the form of “Our Commitments(Value).”* With these commitments, we will contribute to the realization of a sustainable society through our business.
*Give first priority to customers, Be a pioneer, Have an indomitable spirit, Value ties between people, and Align our business imperatives with social challenges. See page 1 for details of our corporate philosophy.

History of creating foods and Morinaga’s main brands
Brands more than a century old

1913
Milk Caramel

04

1919
Milk Cocoa

Brands more than 50 years old

1923
Marie

1957
Morinaga Hotcake Mix

1967
Chocoball

1971
Koeda

1972
Choco Monaka
Jumbo

1973
Morinaga
RamuneFuture Vision andPath to Achieve It

Introduction

Value Creation
Strategy

Sustainable
Management

Governance

Financial
Performance

Aiming to Resolve Social Issues through Food
Delivering deliciousness and smiles to people around the world
The Morinaga Group has created new value pivoting on technology developed inconfectionery manufacturing with the aim of resolving social issues through food. First,
we expanded the business of foodstuffs, frozen desserts, and health products focusing on
Japan. In recent years, we have also been accelerating the growth of our overseas businesscentered on HI-CHEW. In 2022, we launched Chargel, aiming to create a market for jelly
drinks in the United States.
We continue to take on the challenge of realizing richer and healthier eating habits forpeople around the world.

1913

1994

2022

Spreading Highly Nutritious
Confections

Creating New Foods
in Response to Consumer Needs

Bringing Delicious and
Healthy Foods to the World

Released Milk Caramel

Released in Jelly

Released a health-conscious
version of HI-CHEW

At a time when Japan faced a challenging
food situation, we aimed to popularize
caramel, which offers high nutritional value.
After repeated trial and error to adapt to theclimate and tastes of Japan, we released
Milk Caramel in 1913. The following year, in
1914, Milk Caramel became a major hit after
we packaged it in inexpensive and portablecontainers. With the slogan of “rich innourishment/exquisite flavor,” Milk Caramel,
which symbolizes the founder’s commitment
to popularize caramel, is now beloved acrossgenerations.

Released in 1994, in Jelly was developedwith the goal of helping to create a healthy
body. At that time, this jelly drink in a pouchwith unparalleled portability delivered quick
nourishment in various situations. It also led
to the creation of a new food culture andmarkets. Even now, in Jelly continues to
evolve while responding to the needs of thetimes for simplifying food and maintaining
health.

Brands more than 30 years old

1974
Morinaga Amazake(canned)1975
HI-CHEW

1982
OttottoHI-CHEW is known for its unique texture
and fruitiness and is growing in popularity
around the world. In 2022, we released
HI-CHEW REDUCED SUGAR in the UnitedStates featuring added wellness value. By
using dietary fiber as an alternative to sugar,
we lowered the amount of sugar usedby 30% compared to the conventional
HI-CHEW while maintaining the same taste.
Leveraging our strengths in productdevelopment, production, and mass
production technologies, we provide value
and inspiration to people around the world.

Brands more than 10 years old

1989
Ice Box

1993
DARS

1994
in Jelly

2003
Carré de chocolat

2006
OishiiCollagen Drink2009
in BarNote: Product names and images as of September 2023.

Morinaga Group INTEGRATED REPORT 2023

05

Message from Top Management

The Morinaga Group will change into a Wellness
Company in 2030 by accelerating reforms andstrengthening its business foundation.

Eijiro Ota
Representative Director, President

06Introduction

Future Vision andPath to Achieve It

Value Creation
Strategy

Sustainable
Management

Governance

Financial
Performance

Looking Back on FY2022
Posted the Second Consecutive Year of Record High Net
Sales Despite the Challenging Operating Environment
FY2022 saw several alarming events throughout the year. In addition
to the COVID-19 pandemic, raw materials and energy prices soared
due to heightened geopolitical risks, which, combined with thesignificant depreciation of the yen, led to a higher-than-expected
increase in the cost of business. These changes in the external
operating environment will persist, and the pace of these changes
is expected to speed up.
Despite these challenges, the Group was able to achieve record
high net sales* for the second consecutive year thanks to its accurate
understanding and response to changes in consumers and the strong
sales of the U.S. business. On the other hand, to secure operating
income, we successfully offset most of the 7.8 billion yen increase incosts. This was made possible through the effects of price revisions,increased sales, and Company-wide efforts such as pursuing low-cost
operations in production to absorb higher costs. Although profitability
remains an issue, the ratio of sales in the focused domains and theratio of overseas sales far exceeded the targets set in the 2021
Medium-Term Business Plan, and we were able to improve ourbusiness portfolio while achieving strong growth.
Over the medium to long term, we are working to secure net sales
and operating income, while increasing corporate value through theenhancement of functions that contribute to heightened productivity
and proactive investments in intangible assets. We are strategicallyinvesting in advertising to accelerate growth, mainly in the focuseddomains. With the aim of improving profitability by optimizing
operational efficiency, we are also promoting several other efforts.
These include the visualization of factory operation status, thechangeover to smart factories with even more stable operation using
the digital data of manufacturing equipment, and the development ofa data utilization infrastructure by revamping the direct marketingsystem. To realize the 2030 Vision, we will continue to invest in
growth that leads to the enhancement of corporate value.
*Accounting Standard for Revenue Recognition applied retrospectively.

Looking Toward the Final Year of the2021 Medium-Term Business Plan
As a result of these initiatives, in FY2022 we were able to steadily
increase the top line, mainly in the focused domains, despite thechallenging operating environment. Our results exceeded the initial
forecast, and we posted record high sales for the second consecutive
year. Price revisions proceeded as planned, and I strongly feel thatmanagement resilience is steadily increasing.
On the other hand, operating income in FY2022 declined
significantly. The operating income to net sales ratio was 7.8% in
FY2022, compared with the target of 11% in the 2021 Medium-TermBusiness Plan. Although we had not achieved our ROE target as of
FY2022, we are determined to proactively recover to the targeted
10% level in FY2023.
FY2023, the final year of the 2021 Medium-Term Business Plan,
represents an important year that will lead to the next Medium-TermBusiness Plan, and we will work together to strengthen our efforts toachieve our targets.

Instilling Our Corporate Philosophy and Promoting
Internalization in Realizing the 2030 Vision
Formulated Corporate Philosophy, Purpose,and the 2030 Vision

Initiatives for Realizing the Corporate Philosophy
and the 2030 Vision

When I became President in FY2019, we posted record high profits,
but we faced a difficult situation with the outbreak of the COVID-19
pandemic at the end of the fiscal year and a significant decline insales of our mainstay brand in Jelly. Based on the belief that acompany with a clear purpose and vision has the resilience tocontinue to grow flexibly even in the face of dramatic environmental
changes, I have been formulating a long-term vision for the next 10
years alongside our new purpose since becoming President.
In FY2021, we announced our corporate philosophy, including our
Purpose, and the 2030 Vision, which is to change into a Wellness
Company in 2030.

To form an organization that continues to grow while responding tochanges, it is essential to clarify our corporate philosophy and visionand ensure that they are firmly instilled in each individual who
supports the organization. To avoid these becoming an empty
catchphrase or slogan, we held more than 70 meetings to exchange
opinions with approximately 1,700 employees in Japan and overseas
since the plan was formulated in May 2021. At the beginning of these
discussions, employees asked many questions to better understandthe content of the Vision, such as “What does it mean to change intoa Wellness Company?,” but gradually this changed into questions
about the definition of “health of mind” and specific strategies forrealizing the vision, such as how to effectively communicate wellness
to consumers. Regarding “health of mind,” we have set the target as
Morinaga’s six building blocks for “health of mind” (Kokoroku, kokoro
Morinaga Group INTEGRATED REPORT 202307means mind and roku means six in Japanese) and organize seminars
to promote awareness throughout the Company to deepen common
understanding within the Company.

Kokoroku as the definition of “health of mind”
Positive
emotions
Relaxing
andfeeling
at ease

Feeling a
sense ofaccomplishment

Accomplishment

Smilingandfeelingenergetic

Healthofmind
Feeling
fully
engagedMeaningFeeling a
sense ofmeaningin life

RelationshipFeeling
connected
topeopleKokoroku
Morinaga’s six

Engagement building blocks

for health of mind

Increasing happiness in asustainable manner by satisfying
one or more of the conditions below

1 Smiling andfeeling energetic
2 Feeling a sense of
meaning in life
3 Feeling connected
to people
4 Feeling fully engaged
5 Feeling a sense ofaccomplishment
6 Relaxing and feeling at ease

Assumption:
Healthy state of mind. Not eligible for mentally unhealthy conditions.

Two years after the formulation of our corporate philosophy,
we surveyed our employees in Japan regarding it. About 90% of
employees empathize with and understand the corporate philosophy,
and about 60% feel that they have been able to internalize thecorporate philosophy. Our corporate philosophy and Purpose resonate
strongly with our employees outside Japan, too. During the opinion
exchange meetings with local employees held in the United States,
Taiwan, and Thailand last year, we were able to engage in active
dialogue in each location, focusing on questions with a high levelof ownership, such as “What should we contribute to realize our
purpose?” This left a strong impression on me. Looking ahead, we
expect our employees in Japan and overseas to deepen mutual
exchanges and motivate each other, thereby further instilling thecorporate philosophy and promoting internalization.

important for each and every employee to demonstrate theirpresence as an independent and strong individual, and to create
diverse and dynamic organizations that are strong and flexible enoughto make the most of each individual. We have established thepromotion of diversity and inclusion as one of our basic policies forrealizing the 2030 Vision. The goal is to create new value from theinnovation generated by diversity. I believe that by continuing tosolve the issues of our customers and society through continuous
innovation, we can be a sustainable company that continues to growand be chosen by customers.
As one specific example, we started an open recruitment system
for new businesses in 2020. We would like to foster a culture inwhich our employees take on challenges regardless of age or career,embrace mistakes in a positive light, and make efforts to pass ontheir lessons learned to the next generation.
Various milestones became opportunities for my own growth. In
my fifth year with the Company, I was transferred from the Yokohama
Branch Office, which had about 50 employees when I was first hired,to the Himeji Branch Office, which had only about seven at the time. I
was disappointed because I used to believe that I would have greater
opportunities working in a larger branch. However, it turned into a

Promoting Diversity &Inclusion and Creating Innovation
An organization is made up of people. It all comes down to “people”
for achieving the vision and responding to change. I believe that it is08

Dialogue session at Morinaga America Foods, Inc.

Future Vision andPath to Achieve It

Introduction

Value Creation
Strategy

truly great asset for my subsequent sales career and current role inmanagement as I took on multiple roles at the Himeji Branch Officeand experienced a wide range of on-site work such as delivery andsales. Based on my own experience that “experience will come inhandy later,” we make personnel changes centered on humanresources who will play a central role in the future and have them

Sustainable
Management

Governance

Financial
Performanceexperience fields completely different from those in the past. We
believe that the experience of working in a new place will not only
contribute to individual growth but also create new challenges toreach even greater heights. We will continue to work on humanresources, corporate culture, and organizational development topromote diversity.

Addressing Various Issues to Achieve the 2030 Business Plan
Progress and Outlook of the2021 Medium-Term Business Plan

The Further Growth of the U.S. Business

In FY2022, despite the sudden and larger-than-expected surge in raw
materials and energy prices, coupled with the impacts of foreignexchange rates, we strategically increased investments in intangible
assets, resulting in lower profits than the previous fiscal year. In
terms of net sales, however, our performance in the focused domains
in the 2030 Business Plan, including the “in-” business, the U.S.
business, and the direct marketing business, continued to perform
well. This steady growth contributed to achieving record highnet sales of 194.3 billion yen and steadily increasing the top line,
achieving record high net sales*1 for the second consecutive year,
exceeding the initial forecast, and achieving the target of 190.0 billion
yen for the final year of the 2021 Medium-Term Business Plan one
year ahead of schedule. FY2023 marks the final year of the first stage
toward achieving the 2030 Business Plan. Although we anticipate
soaring raw materials and energy prices to significantly exceed
our expectations compared to when we formulated the 2021
Medium-Term Business Plan, we will continue to flexibly respondto changes in the external operating environment through various
initiatives and achieve increased net sales and profits in FY2023.

The U.S. business is a major driver of the Group’s growth strategy.
We have continued to actively invest in its expansion. In the U.S.
business, we had set a target to reach net sales of 10 billion yen
in the 2021 Medium-Term Business Plan, but we already achieved
this target in FY2021, and in FY2022, due to the impact of foreignexchange rates, we saw net sales surge 39% year on year to 14.6
billion yen. Since we established operations in the United States in
2008, we have achieved dramatic growth.
On my business trip to the United States last year, I saw HI-CHEW
on the shelves of not only Japanese supermarkets but also local
American grocery chains. As of the end of September 2022, therecognition rate of HI-CHEW in the United States was 51%*2,
indicating that brand awareness has increased among local
consumers and is becoming more established in the marketplace. Asof December 31, 2022, the distribution ratio was 77.4%*3, covering awide area throughout the United States, and the retail store turnoverratio was up 14%*4 compared with the previous year, signifying thestrong sales situation. Even so, our market share was just 1.24%*3
as of December 31, 2022, so I still feel that there is great potential for
growth. Looking ahead to 2030, we will further increase sales andFinancial and Non-Financial Targets for 2030
Non-Financial Targets

Financial Targets*1
Net sales

300

Provide value of health to 70% or more of theJapanese population through new initiatives
aimed at becoming a wellness company*5

billion yen

Operating income
to net sales ratio

12%

or higher

Ratio of employees who find theirjob meaningful and who are in goodmental and physical health at work

Overseas sales ratio

15%

Procurement ratio ofsustainable raw materials

Focused domains’sales ratioor higher

60%(cacao beans, palm oil, and paper)

CO2 emissions

80%*6
100%*730%*8reduction*1 The Company applied the “Accounting Standard for
Revenue Recognition (ASBJ Statement No. 29, March
31, 2020),” and other regulations, from the beginning of
FY2022.
*2 According to Morinaga’s research*3 IRI data
*4 IRI data (January to December 2022)*5 Scope: Products defined as a deep dive into “health ofmind,” accelerate “health of body,” and evolve “healthof mind” to “health of body.” Population percentage
calculated based on INTAGE Inc. SCI annual purchaserate (scope: consumers nationwide between the agesof 15 and 79). The Company intends to explore theestablishment of a vision on a global basis.
*6 Ratio of affirmative answers on the employee
awareness survey*7 Consolidated basis. Paper covers only productpackaging.
*8 Scope 1 + 2 (domestic Group consolidated basis;compared with FY2018)

Morinaga Group INTEGRATED REPORT 202309

marketing of HI-CHEW and accelerate growth by making strategic
investments in advertising, while focusing on building the foundation
for the jelly drink Chargel, which was launched in the United Statesin February 2022. Chargel is now sold at Japanese supermarkets,mainly on the West Coast, and we are working to raise awareness ofChargel in the sports scene through free sampling at marathons andcycling events, and we are seeing positive results. In addition, we areconsidering launching new products as potential candidates for thethird arrow of earnings by the end of FY2023.

Achieving Growth Globally
Positioning the further global expansion of HI-CHEW as a growth
driver in the future, we established the HI-CHEW Global Branding
Office at our headquarters in April 2023. The Group’s overseas
expansion of HI-CHEW started in Taiwan and China ahead of theUnited States, and since then we have expanded these efforts toother countries such as Indonesia and various European nations.
However, in the 2030 Business Plan, we clarified that the “U.S.
business,” rather than the “overseas business,” is in the focuseddomains and Taiwan is in the basic domains, whereas China,
Southeast Asia, Oceania, and Europe are considered exploration andresearch areas. This strategy stems from our experience of developing
businesses in various regions, and we have identified areas where
HI-CHEW is highly accepted based on differences in climate,consumption behavior, people’s religion, culture, and other factors.
As a result of market development focused on the United States,
HI-CHEW has gained the substantial support of many customers andhas become firmly rooted in the U.S. market. At the same time, theacceptance of HI-CHEW is increasing in Oceania and Europe, whereseeds have been sown. To further expand HI-CHEW globally, there arechallenges in terms of production capacity and global procurement of

The Morinaga booth at the Sweets & Snacks Expo in Chicago

00
10

raw materials that we need to address. Therefore, the HI-CHEW
Global Branding Office will proceed with the development of an
optimal global system and the formulation of an integrated marketingstrategy for the HI-CHEW brand.

Capital Cost-Conscious Management
To achieve the 2030 Business Plan, we recognize that improving
profitability and efficiency is also a major challenge that we are
currently working to address. In FY2022, we implemented various
financial measures with a focus on capital costs and significantly
reduced our net cash position at the end of the fiscal year, marking
a decrease of 29.2 billion yen from the end of FY2021. To carry out
business structural reforms and further scrutinize investment plans,
we are promoting ROIC management to strengthen our profit
structure and raise awareness of investment efficiency. Recognizing
the important role of employee understanding in ROIC management,
we distributed our own video-based learning materials. By
understanding how the work of each individual impacts ROIC,
we support the “internalization” of ROIC management.

Creating Opportunities for Inorganic Growth
We aim to achieve inorganic growth in the runup to 2030. We are
specifically considering various projects with a view to businessgrowth in a non-continuous manner through M&A and businessalliances. In the focused domains, with growth markets but fierce
competition, we are actively seeking partner companies that
can accelerate the growth of the Group. From the perspective of“changing into a Wellness Company,” we are exploring various
investment opportunities including expertise in manufacturing healthingredients and functional foods, the procurement of raw materials,
and the development of new products for our Direct Marketingbusiness.

Introduction

Future Vision andPath to Achieve It

Value Creation
Strategy

Sustainable
Management

Governance

Financial
Performance

Co-Creation with Stakeholders for Resolving Social Issues
Co-creation with stakeholders is indispensable for resolving social
issues. Currently, we are moving ahead with co-creation efforts invarious fields.
Through co-creation with more than 90 universities and research
institutes, and other companies, the Morinaga R&D Center isworking to elucidate the emotional value of confectionery foods that
contribute to “health of mind.” This involves utilizing various methods,
such as investigating aspects like deliciousness and enjoyment,
to develop and offer high-value-added products. For example, in
the Group’s strength in “physical properties and texture control
technology,” which is utilized in Choco Monaka Jumbo and HI-CHEW,
we aim to develop products with high emotional value. We aim todeepen our understanding of customer preferences by incorporating
the methods of sensitivity research to capture changes in the bodyand emotions during eating. The results of research on Choco
Monoka Jumbo are being widely disseminated externally as partof the Jumbo Smile Project*.
We have also been updating our business and human rights
initiatives to strengthen our foundation as a company with global
business operations. The Group signed the UN Global Compact inApril 2022, and in October 2022 we joined the Japan Center for
Engagement and Remedy on Business and Human Rights (JaCER) as
an inaugural member to establish a mechanism for remedying humanrights violations outside the Company. In April 2023, we revised theMorinaga Group Human Rights Policy and are now promoting humanrights initiatives such as clarifying the Group’s approach in linewith the UN Guiding Principles on Business and Human Rights. In
addition, we believe that sustainability initiatives, such as sustainableprocurement of raw materials and addressing climate change issues
and managing natural capital, are important for the Group’s corporate
activities. We believe that collaboration and cooperation with ourbusiness partners and other stakeholders are essential for the
implementation of these activities, and we will advance these
activities with their understanding and cooperation. Awareness of theSDGs and the environment is increasing, especially among young

people, and we believe that steadily advancing these initiatives will
not only benefit society but also create business opportunities for
the Group.
The 2030 Vision declares that we will provide “health of mind andbody” to our employees. We are promoting health and productivity
management to create a work environment where each employee
can maximize their abilities, and have been recognized as a CertifiedHealth and Productivity Management Organization 2023. The trainers
at the “in” Training Lab have created the Morinaga Factory Exercise
program tailored for our factory workers. In addition, our efforts toencourage voluntary activities for the well-being of all employees
have been recognized, earning us new certification as a “Sports Yell
Company 2023” by the Japan Sports Agency. We will continue toactively promote initiatives to maintain and improve the health of ouremployees as important stakeholders.
At the Sustainability Advisory Board meeting in March 2023, we
discussed with experts the three topics of diversity, health of mind,
and ESG information disclosure. We received positive feedback thatwill give us confidence regarding the initiatives I briefly explained
above. With advice and recommendations on the Group’s initiatives
based on a wide range of knowledge, including international
developments and social trends, we will now appropriately reflect
these insights in future sustainable management, thereby leading to
the creation of new value for the Group.

Second meeting of the Sustainability Advisory Board*An initiative launched in the spring of 2023 to enhance communication with customers with the goal of marketing Choco Monaka Jumbo as an ice cream product that brings smiles to all.

Aimed at Embodying Our Purpose and Realizing the 2030 Vision
With the aim of shining for a century, the Morinaga Group iscommitted to being a sustainable company that will continue to growtogether with our stakeholders while enhancing resilience and ourability to flexibly respond to changes. In FY2023, we will achieve a
V-shaped recovery in operating income while continuing to invest in
growth such as R&D and DX and hold discussions to formulate thenext medium-term business plan.
For shareholders, we increased dividends and initiated sharebuybacks for the eighth consecutive year, marking the largest

shareholder returns ever. We will continue to value dialogue withshareholders, investors, and all stakeholders to accelerate the speedof transformation and achieve further growth and evolution. With our
Purpose serving as our compass, and as the foundation for all
employees, we will strive to become a Wellness Company that cancontribute to the dynamic and bright lives of people around the world.
I appreciate your continued support as we move forward.

Morinaga Group INTEGRATED REPORT 2023

11

Special Feature

Value Co-Creation Story

Resolving Social Issues
through the “in-” BusinessThis section introduces the Group’s story of value co-creation detailing
how the “in-” business, which drives our growth, identifies social
issues related to “health of mind, body, and environment” andhow it works together with stakeholders to resolve them.

Realizing the 2030 Vision by Providing

Minoru Sato
Executive Officer
General Manager of HealthMarketing DivisionMarketing Headquarters“Health of Mind, Body, and Environment”
Source of “in-” Business Competitiveness
Against the backdrop of growing health consciousness, the Grouplaunched the health business, the predecessor of the “in-” business,in 1984 to contribute to the “development of healthy minds andbodies” for customers centered on sports nutrition. Since the startof the business, we have created products such as in Jelly that caneasily replenish nutrition and in Bar Protein that can easily replenish
protein, helping to resolve issues facing customers in the domain
of food. In creating these products, we have made full use of ourknow-how gained from the health business over the years. The “in-”business has been amassing know-how related to building a healthy
body and nutritional intake for close to four decades, from theestablishment of a high-tech laboratory for training and nutrition
counseling in 1986 to the current Morinaga “in” Training Lab. We
believe that the know-how related to building a healthy body andconditioning gained by supporting top athletes in various sports is aunique asset and strength of the “in-” business. The connections

with many top athletes and sports stakeholders built over many yearsof support are also invaluable assets.
At the same time, as a food manufacturer, the Group has honed its
food processing technology to achieve deliciousness while thoroughly
blending nutrients, along with its product developing capability suchas packaging formats tailored to different occasions.

in Barin Jelly

Future Forecast Concerning “Health of Mind, Body, and Environment”
After three years of the COVID-19
No
pandemic, anxiety about the virus
28.2%
is declining, as seen by Japan’s
downgrading of the virus to a
Do you feelstressed?
Class 5 disease under the
Yes
Infectious Diseases Control Act%
in May 2023. However, there
are still many people who feel
Hakuhodo Institute of Life and Living:stressed in their daily lives. There“The Chronological Lifestyle Survey on
the Japanese People,” May to June
are various stressors, such as2022, men and women ages 20–69,
work, personal relationships,
Tokyo metropolitan area + Hanshin area,
3,084 respondents
caring for a family member,childcare, the social environment, and geopolitical concerns, whichhave resulted in increased interest in mental disorders. Ideas such as
positive psychology*, which focuses on positive emotions and aims
for a good state of mind, are also garnering attention. We believethat the importance of “health of mind” will continue to increase in
the future.
“Health of body” has also changed significantly due to the
COVID-19 pandemic. Participation in sports is declining because
people’s activities were restricted during the pandemic. As fewer

71.8

opportunities for exercise also lead to fewer consumption
opportunities for in Jelly and in Bar, we are paying particular attention
to business opportunities for the “in-” business. In addition, theamount of physical activity in consumers’ daily lives is on a downward
trend due to fewer opportunities to go out with the entrenchment of
remote work and the increased use of online shopping, as well as the
spread of products and services that make housework convenient.
We believe if people continue with their current nutritional intake,there will be increased risk of lifestyle-related diseases such as
obesity. Furthermore, if the amount of physical activity by the elderly
remains low, the risk of frailty and nursing care increases due todeclining physical strength. For “health of body,” we believe that itis necessary to create opportunities for people to play sports anddevelop products that respond to changes in consumer behavior.
Regarding “health of environment,” we recognize thatenvironmental pollution caused by plastic waste is a global issue,
and we believe that the Group must act. Furthermore, to realize asustainable society, all people need to be aware of the SDGs and taketheir own actions. Nevertheless, although consumer awareness of
the SDGs is increasing, there are still relatively few people who are
acting. As a consumer goods manufacturer, we will contribute to*The psychology that aims to nurture positive emotions, such as what is going well and looking to the future.

12

Future Vision andPath to Achieve It

Introduction

Value Creation
Strategy

Sustainable
Management

Financial
Performance

Governance

We Will Change intoa Wellness Company
Three values
to provide

Health of

Health ofbody

Healthofenvironment

Customers

Employees

Societymind

Morinaga “in” Training Lab

Values areprovided for
By combining the strengths of the “in-” business with thestrengths of the Group, we intend to contribute to the “health ofmind, body, and environment” by providing customers and society
with deliciousness, convenience, nutrition, and information andopportunities related to sports.

Deliciousness, Convenience,
Nutrition, and Sports“in-” brand contract athletes

Know-how of building a healthy
body and nutritional intake● Relationships with sports
stakeholders

Food processing
technology● Planning anddevelopment●●

Baseball(Tokyo Yakult Swallows)
Masanori Ishikawa

Judo
Naohisa Takato

Surfing
Shino Matsuda©Kazuyuki OGAWA

Photo: ISA/Pablo Franco

Total Score of the New Physical Fitness Test (points)“health of environment” by providing opportunities for customers towork together to achieve the targets of the SDGs.
Based on these situations and forecasts, we will utilize the assetsof the “in-” business as we work to provide “health of mind, body,and environment” to customers and society while co-creating withall stakeholders.

Sports Participation Rate (once a week or more) for Those
Aged 20 and Older (%)■ 2019 ■ 2022

20s–30s

43

35

41

34

40

33

39

32

38

31

37

30

36

29

35

28

34

40s–50s

36

42

Men Women Men Women
25–29
35–39

70

27

Men Women Men Women
45–49
55–59

Japan Sports Agency: 2019 Physical Fitness and Exercise Capacity survey; 62,936 men andwomen nationwide ages 6–79 (preliminary figures for 2022)

65
59.9

60
55.1

55

51.5

SDGs Recognition Rate (%)

56.4
53.6

52.3

50
45

■ 2019 ■ 2022

100

■ I know about the SDGs in detail80■ I have heard, but I don’t know

60
42.5

40

40

20

35
2016

2017

2018

2019

2020

2021

2022

Japan Sports Agency: FY2022 National Public Opinion Survey on Sports Participation; 40,000
men and women ages 18–79

0

86.0

about the SDGs in detail
54.2

51.8

91.6
51.2

33.8
29.1
16.0
40.4
14.8
19.1
34.2
20.5
11.1 3.6 11.8 4.2 10.0
Feb. 2018 Feb. 2019 Jan. 2020 Jan. 2021 Jan. 2022 Feb. 2023

Dentsu: Consumer Survey on the SDGs; first to sixth surveys, 1,400 men and women ages
10–70s nationwide (6,576 respondents in the second survey only)

Morinaga Group INTEGRATED REPORT 2023

13

Special Feature

Value Co-Creation Story

Resolving Social Issues through the “in-” Business

Health of

Body“Health of Body”

Provided by the “in-” Business

Providing Products That Control Nutritional Intake
Carbohydrates are an important nutrient as a source of energy forhuman activity. However, a rising number of customers are looking
to limit their intake of carbohydrates, such as those concerned
about weight gain, and we believe that the need for control ofcarbohydrates will continue to increase.
To meet such needs, we developed in Jelly Energy Management
containing medium-chain fatty acid MCT oil and released it first with
Seven-Eleven Japan Co., Ltd. This product replenishes energy withfats instead of carbohydrates and is the first in Jelly product to featurefats. We struggled to adjust for the way fats affect flavor and texture.
To minimize the influence of the fat-derived flavor and texture andachieve the same refreshing, delicious, easy-to-drink style of in Jelly,in Jelly Energy
Management

Tasting of prototypes

we explored and tested a combination of flavors and otheringredients many times, which eventually led to commercialization.
Furthermore, in April 2023, we renewed it as a food with functional
claims using evidence from Nisshin OiliO Group, Ltd., our supplierof MCT oil. We will continue to further improve our products andconcisely convey their value tocontribute to the “health of body”
of our customers.

Preparing prototypes

Creating Opportunities for Exercise
In May 2023, we sponsored an online sports event called Satsuki Run& Walk by R-bies, INC., which organized the website RUNNET andhas connections with many runners. The event makes it possible
for people to participate in running and walking events anytime,
anywhere, if they have a smartphone. As even those who are notgood at exercising and the elderly can easily participate during their
day-to-day lives, our aim was to create opportunities for exercise,
which have declined due to the COVID-19 pandemic. A total of
250,916 people participated in the event. We also sponsored theSatsuki Relay Marathon held at Japan National Stadium.
In October 2023, we plan to sponsor October Run & Walk. We willcontinue to strive to create opportunities for consumers to exercise
and encourage their participation.

Health of

Mind

Satsuki Run & Walk, easily participablewith a smartphone

Satsuki Relay Marathon“Health of Mind”

Provided by the “in-” Business

Providing Optimal Foods for Situations Requiring Concentration
The Group believes that “health of mind” can be nurtured by focusing
on positive emotions and things that are going well, such as “feelingfully engaged,” “feeling a sense of accomplishment,” and “smilingand feeling energetic.”
To promote a work-life balance, we believe that more consumers
will place importance on their hobbies and entertainment. We believethat the value of our main product, in Jelly, which can easily replenish
energy and satisfy hunger to a moderate extent, can contributenot only to activities that use the body but also to hobbies andentertainment that use the brain.

14

As a symbolic
example of this,in response to
the fact that in
72nd ALSOK Osho Tournament
Jelly is a favoriteof players of shogi (Japanese chess), the “in-” business decided tosponsor the Osho Tournament, one of the eight titles in professional
shogi from 2022. Players embrace the fact that in Jelly can fill theirstomach moderately without being hungry or full, allowing them toconcentrate on the match. In addition, we believe that in Jelly canIntroduction

Future Vision andPath to Achieve It

Value Creation
Strategy

contribute to similar situations where people are immersed insomething, and we have begun to expand promotions throughtournament organizers and supporting players in eSports, which is
expected to grow its footprint in the future.
In the “in-” business, we intend to contribute to “health of mind”
such as “feeling fully engaged,” “feeling a sense of accomplishment,”
and “smiling/feeling energetic” by providing nutritional support toimprove the performance of mind sports such as shogi and eSports.

Sustainable
Management

Financial
Performance

Governancein Jelly eSports
WORLD CHALLENGE CUP 2022

For more details, please refer to Morinaga’s Concept of “Health of Mind” on our corporate website.
▶ https://www.morinaga.co.jp/company/english/ir/policy/strategy/kokoroku/

HealthofEnvironment“Health of Environment”
Provided by the “in-” Business

Improving Usability and Reducing Plastic Usage throughCollaborative Container Development with Suppliers
Our product in Jelly has undergone four improvements to its cap
since its launch in 1994. These improvements were realized throughjoint development with Hosokawa Yoko Co., Ltd., which has been
supplying CHEER PACK®* since its release. While improving theease of opening caps, we have reduced the amount of plastic used,
thereby improving customer usability and contributing to “healthof environment.”
Given that the larger the diameter of the cap, the easier it tends
to be to open, it is difficult to increase size while reducing materials
usage. With that being the case, the people in charge of various

Koji Enomoto
Jelly Category Manager of
Health Marketing DivisionMarketing Headquarters

departments at Morinaga & Co., Ltd., and Hosokawa Yoko Co., Ltd.,
managed just that by sharing their wisdom and repeated trial anderror on the current shape ofcaps and straws.
We will continue to study
this issue and work on “healthof environment” with the aimof both customer satisfaction
and resolving social issues.
Business meeting with Hosokawa
Yoko Co., Ltd.
*CHEER PACK is a registered trademark of Hosokawa Yoko Co., Ltd.

Promoting the Spread of Plogging as a Hybrid Form of “Health of Mind, Body, and Environment”
Many of the products of the “in-” business have a high affinity
governments that are working to improve the health of citizens andwith active scenes such as sports and can be consumed anytime,create comfortable cities, and our company that provides foods
anywhere on the go. However, we recognize that this is closely
suitable for active scenes.
related to the social issue of plastic waste in cities.
Plogging is an opportunity for people who enjoy running on a
Therefore, the “in-” business hopes to contribute to “health of
regular basis, as well as people who are not good at sports, to moveenvironment” by spreading a new sport called “plogging,” in which
their bodies, leading to the creation of opportunities for exercise.
people pick up trash while jogging. In March 2023, we held a
We also believe that the experience of cleaning up the city while
plogging event with Kuki City, Saitama Prefecture, which has madeexercising with friends contributes to “health of mind,” such asa declaration to be a city of health, happiness, and sports and with“feeling connected to others.” By promoting these activities, we will
which we have a comprehensive partnership agreement. The
link them not only to “heath of environment” but also to “health ofevent was held in collaboration with Yokohama F. Marinos, withmind” and “health of body.”
which we concluded a partnership agreement in July withvolunteers from Yokohama City’s Tsurumi Ward Office, theward of which is the location of a manufacturing plant forin Bar Protein, and the Yokohama City Sports Association.
We believe that we can expand the circle of initiatives bycollaborating with companies and organizations from different
pathways, such as professional sports teams that embody theappeal of sports and have the power to communicate, local
Plogging event in Kuki City, Saitama
Plogging event held with Yokohama F. Marinos,
volunteers of Yokohama City’s Tsurumi Ward
Office, and the Yokohama City Sports Association

Morinaga Group INTEGRATED REPORT 2023

15

Financial and Non-Financial Highlights
Financial Highlights
Net Sales*1

Operating Income*1/
Operating Income to Net Sales Ratio*1(Billion yen)(Billion yen)

250

30

200

205.3

208.8
181.2

168.2

194.3

150

■ Operating income

Operating income to net sales ratio

25

9.8

20

20.2

10.2

9.8

50
0

2019

2020

2021

2022

6
4

5

2
0

2018

2019

2020

■ Shareholders’ equity

ROE

(%)

(Billion yen)

25

150

22.0

54.8

10.8
12.8

10

100

15

10.8

13.4

10.1*2

7.9

0

10

60.7

130.0

(%)

60

124.5

104.6

40

50

2020

2021

20

5
0

2019

(FY)

11.8

10.0

2018

96.4

60.7

55.7
122.7

27.7
13.2

2022

Shareholders’ equity ratio

60.5

20

30

2021

Shareholders’ Equity*1/Shareholders’ Equity Ratio*1■ Profit attributable to owners of parent

20

15.2

10

(FY)

Profit Attributable to Owners of Parent*1/ROE*1

40

8

0

2018

(Billion yen)

7.8
17.6

15
100

10

21.2
19.1

(%)

12

11.4

2022

0

0

2018

(FY)

2019

2020

2021

2022

(FY)

*1 The Company applied the “Accounting Standard for Revenue Recognition (ASBJ Statement No. 29, March 31, 2020),” and other regulations, from the beginning of FY2021. The figures for FY2020
are from after retroactive application of the said accounting standard.
*2 Excluding the impacts of extraordinary income from the sale of cross-shareholdings.

Non-Financial Highlights
Ratio of Female Managers*1

Rate of Occupational Injury

CO2 Emissions
Japan Scope 1 + 2*4(Frequency Rate*2/Total Frequency Rate*3)
(%)

10
8

9.4

Frequency rate

10.0

Overseas Scope 1 + 2*4(Thousand t-CO2)

Total frequency rate

3

80

75.7

76.3

9.6

10.4

10.8

2020

2021

2022

68.9

8.3

2.33

60

2

6

40
4

1

1.30

1.01

20

0.52

2

0.25
0.00

0

0
2020

2021

2022

(FY)

2020

2021

0
2022

(FY)

*1 Figures are non-consolidated for Morinaga & Co., Ltd., as of April 1 of each fiscal year.
*2 Frequency of occupational accidents indicates the number of injuries/fatalities (not including sick or injured due to non–lost work time accidents) due to occupational accidents per one million
working hours. (Figures for Morinaga & Co., Ltd., factories and production-related affiliated companies)*3 Frequency of occupational accidents indicates the number of injuries/fatalities (including sick or injured due to non–lost work time accidents) due to occupational accidents per one million
working hours. (Figures for Morinaga & Co., Ltd., factories and production-related affiliated companies)*4 Group consolidated basis

16

(FY)

Future Vision andPath to Achieve It
The Morinaga Group’s Materiality

18

Value Creation Process for Achieving Our 2030 Vision

20

Strategic Road Map for Achieving Our 2030 Vision22

Long-Term Business Plan: 2030 Business Plan

24

Medium-Term Business Plan: 2021 Medium-Term Business Plan

26

The Morinaga Group’s Materiality
We have identified the materiality that the Morinaga Group must address to achieve our Purpose
and the 2030 Vision.

Process of Identifying Materiality
Interviews with experts on theissues the Group should address

Identification of the Group’s materiality
candidates based on the external environment,
management/business aspects, the SDGs,
international norms, and other considerations

Main Challenges
Included in Materiality

Materiality

1 Develop delicious and healthy foods

1

Contribute to the
Healthy Lives of People
around the World● Growing business opportunities from rising awareness of sustainability
among consumers

4● Securing of talent needed to contribute to the realization of our Purpose
and the 2030 Vision▲ Declining sustainable growth capabilities due to delayed responses

2

Diversity and inclusion● Improving innovation capabilities and environmental response capabilities▲ Declining organizational competitiveness and social reputation due todelayed responses

1

Sustainable procurement of raw
materials● Achieving long-term stable procurement of safe and high-quality raw
materials▲ Growing risks surrounding procurement of agricultural raw materials due
to delayed response2

Human rights and environmental
issues in the production stage of
agricultural raw materials● Reducing human rights and environmental risks▲ Declining social trust, brand value, and corporate value

3

Reduction of food loss and waste● Lowering costs by reducing manufacturing loss and returns▲ Declining social reputation due to delayed responses

4

Co-existence and co-prosperity
with local communities● Increasing social trust▲ Operational risks at business sites

1

Mitigate and adapt to climatechange▲ Growing risks in procurement of agricultural raw materials▲ Rising production costs due to carbon taxes and other regulatory measures▲ Declining corporate value due to delayed responses

2

Eco-friendly plastic containers andpackaging for recycling and reuse● Creating innovation through external collaborations▲ Declining corporate value due to delayed responses

1

Strengthen corporate governance● Increasing management efficiency and corporate value▲ Declining evaluations from the capital markets

2

Globalization of the managementfoundation

5

3

Human rights management

4Address next-generation foodtechnologies

Diversity andInclusion of People

Strengthen theBusiness Management
Foundation

5

18● Increasing social trust▲ Declining social trust, brand value, and corporate value

1 Foster human resources to achieve
our vision

Conserve the
Global Environment● Growing business opportunities following the rising health consciousness of consumers▲ Declining market competitiveness over the medium to long term caused bydelayed responses

3 Develop sustainable products

environmental information about products

Achieve Sustainable
Value Chains

Main Opportunities and Risks( ●: Opportunities and ▲: Risks)● Growing business opportunities and improving competitiveness by tapping
into latent markets▲ Declining market competitiveness over the medium to long term caused by delayed responses

Develop products with new value

5 Appropriately convey social and3

Note: The figure at right is the “Materiality Matrix.”

2 in response to consumer needs

4 Food security and quality assurance

2

Assessment of the importance of materiality
candidates by internal and external stakeholders(e.g., strengthen the foundation for overseas
expansion and respect local cultures)(e.g., next-generation food services, DX,robotics)

Increase social trust andreputation through the disclosureof ESG information● Acquiring trust from countries and regions where we operate● Increasing the ability to promote and implement our management strategy▲ Damage to social trust, brand value, and corporate value● Improving productivity● Growing business opportunities from innovation● Increasing social trust and corporate value*1 Scope: Products the Company defines as “Deep dive into ‘health of mind,’” “Accelerate ‘health of body,’” and “Evolve ‘health of mind’ to ‘health of body.’” Population percentage calculated
based on the INTAGE Inc. SCI annual purchase rate (scope: consumers nationwide ages 15–79). The Company will explore the establishment of a vision on a global basis. *2 Group consolidated
basis; paper covers only product packaging. *3 Group consolidated basis *4 Scope: Food loss and waste occurring from receipt of raw materials to delivery (distribution) (domestic Group
consolidated basis; intensity; compared with FY2019). Food loss and waste is defined as food that has been processed and disposed of by incineration, landfill or other methods, except for foodwaste that has been returned to the circulation of food resources, such as feed and fertilizer. *5 Group consolidated basis

Value Creation
Strategy

Future Vision andPath to Achieve It

Introduction

Sustainable
Management

Financial
Performance

Governance

Identifying materiality
through discussions
by executive
management

Very important2

Important

Impact on the sustainable
development of society

Materiality Matrix
3

1

3

1

1

2

*1

1

*2

5

4

2

Identified the following
five materialities

4

1
2
3

2

4

1
Important

2

3

5

*3

Very important

4
5

Impact on the Morinaga Group’s sustainable growthNote: Only the results of “Very Important” and “Important” are presented.
*1 Response to the spread of major infectious disease *2 Management based on our Purpose*3 Enhancement of sustainability management

Target and Progress
Results for
FY2021

Target for 2030

Results for FY2022

Progress●

Provide the value of health to morethan 70% of Japan’s population
through new initiatives aimed at
becoming a wellness company*1●

Reviewing detailed

Reviewing detailed

requirements

requirements●●

Encouraging each business segment to develop
products that provide health of mind and body
aimed at becoming a wellness company
Defining health of mind
Carrying out quality management in linewith international food safety standards andcertification regimes*12
Providing customer service based oninternational standards of customer
satisfaction*13

Relevant Pages

Pages for eachbusiness segment
pp. 34–43

Upper: Morinaga & Co., Ltd.

Rate ofpositive
responses
on theemployeeawarenesssurvey:80%1) Sustainableprocurementof rawmaterials*2

Morinaga & Co., Ltd. (non-consolidated)*8(non-consolidated)*8 Lower: Domestic Group
9

Targets●

consolidated basis*

1) Morinaga Group’s
contributions to building asustainable society

89.7%

90.4%
87.5%

2) Corporate growth driven by
a diverse workforce

70.1%

72.0%
66.5%

3) Employee motivation andachievement of “health ofmind and body”

74.6%

●

75.6%
71.2%

Cacao beans 100%9%*10

34%*10Palm oil

100%

2%*10

9%*10

Paper

100%

98%*102) CSR supply chain management:
implement for 80% or more of raw
materials transaction value*3

●

●

●

99.9%*10

Raw materials 81%* (Survey not conducted in FY2022)
Materials
81%*11
11

●

+8%

▲49%

●

●

1) Reduce greenhouse gas (GHG) emissions
・Achieve net-zero GHG emissions by FY2050*5
・Reduce CO2 emissions by 30% by FY2030*6

+2%

+3%

2) Reduce plastic waste:
Use of plastics for in Jelly products:
25% reduction*7

Reduction inconsideration

Reduction inconsideration

●

●

●

ー

ー

ー

ー

●

ー

●

●

ー

ー

ー

ー

Achieve
Sustainable
Value Chains●●

Carrying out initiatives to prevent food loss and waste
on the frozen desserts production line of Takasaki
Morinaga Co., Ltd., which had been an issue
Contributing to less food loss and waste by developing
products with non-standard products (e.g., cracked cookies)
Installing cameras that detect air/steam leaks
from facilities at domestic production sites
Planning to install a solar power generation
system at Takasaki Morinaga Co., Ltd.
Working with packaging manufacturers to
explore ways to reduce plastic waste
Strengthen the function of the Board of Directors as amonitoring board by expanding discussions on risk
management aimed at increasing board effectivenessChanged the determination of remuneration for individual
directors from the Representative Director, President to
the Officer Appointment and Remuneration Committee

Conserving the
Global Environment
pp. 60–63

Governance
pp. 66–77

DX Strategy

Formulated the Morinaga Group Human Rights
Policy in April 2023
Implementing human rights due diligence

Human Rights
p. 64

Promoting changeover to smart factories

Structural Reforms of
Production Functions
pp. 46–47

Publishing an integrated report and regularly updating
sustainability information on the corporate website

External Recognition
p. 88

●

ー

Conducting dialogue with suppliers based on
survey results

HealthManagement
pp. 56–57

Exploring ways to standardize core IT systems
domestically and internationally
Actively recruiting employees locally●Instead of uniform targets for 2030,
we promote responses to individual
issues as needed

Promoting sustainable procurement for domestic
products of Morinaga & Co., Ltd., per the results at left
Formulated a road map and now implementing
initiatives to reach targets at both domestic andoverseas Group companies

Human Resources
Strategy
pp. 49–51

pp. 58–59●

3) Reduce food loss and waste: 70%*4

Expanded the scope of the survey from
Morinaga & Co., Ltd., to the consolidated Group
companies in Japan in FY2022
Carried out interviews and initiatives for
improvement at business sites where there wasa gap between targets and results
Considering further expanding the scope of thesurvey to overseas Group companies

p. 48*6 Scope 1 + 2 (domestic Group consolidated basis; compared with FY2018) *7 Scope: Amount of plastics in packaging materials (intensity; compared with FY2019; including the shift to biomass
plastics) *8 Scope: Full-time employees of Morinaga & Co., Ltd. (non-consolidated) excluding forwarded employees *9 Scope: Domestic Group consolidated basis; full-time employees of theGroup excluding those forwarded to overseas Group companies *10 Scope: Morinaga products in Japan; paper covers only product packaging *11 Scope: Morinaga & Co., Ltd., in Japan(non-consolidated) *12 FSSC 22000, SQF Codes edition 9, JFS-B standards, and other guidelines *13 ISO 10002

Morinaga Group INTEGRATED REPORT 2023

19

Value Creation Process for Achieving Our 2030 Vision
To achieve our 2030 Vision, we will create “the three values of health of mind, body, and environment”
and realize sustainable growth by contributing to people’s wellness around the world.

Strengths of theMorinaga Group

Value Created (FY2022)
Value provided to customers

Value provided to shareholders

Delicious
Fun● Healthy● Nutritional● Convenient (easyand quick)

Dividends paid:
4.7 billion yen
Share buybacks:11.1 billion yen
Total returns to shareholders:
15.8 billion yen

●
●

Trust

Financial results
Achieved record highnet sales*1
Growing net sales offocused domains● Receiving higher ESG
scores from outside
institutions●●

Basic researchand ingredientsresearch

Outputs
Food processing
technologies

Product
development
capability

Direct Marketing
U.S.
“in-”
Business
Business
Business

Frozen Desserts
Business

Confectionery andFoodstuffs BusinessDistribute products utilizing a stable
logistics system and diverse sales
channels● Advertising and in-store promotions
for new products with familiar brands●

Logistics
and sales

Production
technologies andmass production
technologies

Business Model
Product distribution
and information
provision capacities

Human resources

Fast development
and mass production of productsthat meet customer
needs and deliveryof them across a
broad range ofchannels

Employee-friendly
workplaceenvironment

Management
Capital(FY2022)

Procurement
andmanufacturing

Development
andmarketing●Stable procurement based on strong
partnerships with suppliers
Stable manufacturing of safeand reliable products by way ofproprietary mass production
technologies and sophisticated quality
management

Plan and develop products that meet
constantly changing needs from
customers’ perspectives● Process healthy ingredients in a
delicious manner●

Consumers looking for delicious, easy,and quick nutritional support● Consumers looking to satisfy a cravingor refresh with confections or ice
cream●

For whomFinancial capitalIntellectual capitalSocial capital• Net assets: 125.8 billion yen• Shareholders’ equity ratio: 60.7%• Long-term credit rating: A stable (JCR)• Issuance of sustainability bonds andrenewal of long-term borrowings• Patents owned: 172 in Japan and79 overseas
Trademarks owned: 590 in Japanand 636 overseas*2• R&D expenses: 2.8 billion yen• Relationships of trust with various
stakeholders built over more than
120 years in the business• Many long-selling brands

Production capital

Human capital

Natural capital• Production sites: 8 factories in Japanand 3 overseas• One R&D center• Employee loyalty: 84%*3• Health management: Certified Health& Productivity Management
Outstanding Organization

Diverse raw materials with consideration for sustainability and quality
control*1 Accounting Standard for Revenue Recognition applied retrospectively*2 Number of rights owned as of the end of FY2022*3 Rate of positive responses to “I feel proud as a member of this company” on theemployee awareness survey*4 The Company applied the “Accounting Standard for Revenue Recognition (ASBJ
Statement No. 29, March 31, 2020),” and other regulations, from the beginning of
FY2021.

20●

Transition
strategy*5 Scope: Products the Company defines as “Deep dive into ‘health of mind,’” “Accelerate‘health of body,’” and “Evolve ‘health of mind’ to ‘health of body.’” Population percentage
calculated based on the INTAGE Inc. SCI annual purchase rate (scope: consumers nationwide
ages 15–79). The Company will explore the establishment of a vision on a global basis.
*6 Rate of positive responses on the employee awareness survey*7 Group consolidated basis; paper covers only product packaging*8 Scope 1 + 2 (domestic Group consolidated basis; compared with FY2018)

Introduction

Value Creation
Strategy

Future Vision andPath to Achieve It

Sustainable
Management

Financial
Performance

GovernancePurposeThe Morinaga Group will continue to create healthy
foods that can be enjoyed beyond generations,
thereby bringing smiles to the faces of people
around the world now and in the future.

2030 Vision

We Will Change into a Wellness Company.
The Morinaga Group defines “wellness” as “the state of realizing or pursuing anenriched and glorious life on the basis of health of mind, body, and environment.”
We continuously provide the value of health of mind, body, and environment tocustomers, employees, society, and other stakeholders, thereby contributing to therealization of a sustainable society.

See page 24

Financial and Non-Financial Targets (Value Co-Creation)
Financial Targets*4
Economic
value

Non-Financial Targets

Net sales:

300 billion yen

Customervalue

Provide value of health to more than 70% of Japan’s
population through new initiatives aimed at becoming awellness company*5

Operatingincome to net
sales ratio:

12% or higher

Employeevalue

Ratio of employees who find their job
meaningful and who are in goodmental and physical health at work:

80%*

Overseas
sales ratio:

15% or higher

Social value

Procurement ratio of sustainable
raw materials (cacao beans, palmoil, and paper):100%*

Focuseddomains’sales ratio:

60%

CO2 emissions:

30%* reduction

6

7

8

Evolution of Management
Promote management with a long-term perspective using our current business model as a foundation

Promote Purpose-Driven Management

Implement the 2030 Business Plan

Conserve the global environment

Contribute to the healthy lives of people around the world
Diversity and inclusion

Materiality

Achieve sustainable value chains

Declining birthrate/aging population and contractionof the Japanese market (labor shortages)

Strengthen the business management foundation
See page 18

Changes in consumer behavior and our businessmodel driven by the evolution of digital technologies

Increasing health consciousness through foodSocioeconomic and lifestyle changes brought
about by the COVID-19 pandemic

See pages
24 and 55

External
Environment

Rising world population and climate change, etc.
(unstable raw materials procurement)

Increasing need to resolve social issues(SDGs and ESG investment)

Morinaga Group INTEGRATED REPORT 2023

21

Strategic Road Map for Achieving Our 2030 Vision
We have created a road map covering our corporate philosophy/long-term vision, strategy, and performance
aimed at the realization of the 2030 Vision.
2018 Medium-Term Business Plan (2018–2020)

Solidify Our Business Foundation and
Accelerate Our Growth Strategy

Morinaga Group
Trust
History and brands spanning more than
120 years

Basic research andmaterials research
Functional research on amazake, cocoa,
and collagen, etc.

Corporate philosophy/Long-term vision

Strengths of the

Our Commitments since Our Founding
Founding onward

See pages 4 and 5

We have valued the founder’s commitment encompassing the words, “Delicious, Fun, and Healthy.”

2019

Upon our 120th anniversary, we revisited theGroup’s approaches to “Delicious, Fun, and Healthy”
by asking all employees their thoughts.

Build a Business Foundation That
Can Generate Profits Consistently

Food processing technology
Striking a balance between the following.
・Key technologies of producing jelly drinks,
frozen confectionery, and soft candies
・Aiming for deliciousness while adding nutritional
components and reducing carbs and calories

Strategy
Existing domain：Focus on major brands to increase profitability
Wellness domain：Focus on development and sales promotion of
products that benefit “health of body”● Global domain ： Establish a business foundation in the United States● New management ： Establish a PDCA cycle for management/businessand raise the bar of management●

Product development
capability

Strategy●

Increased earnings power mainly in domestic
businesses● Achieved dramatic growth of HI-CHEW in the United States● Built a business foundation that can consistently
generate an operating income to net sales ratio of 10%

Products for various scenes and needs

Outcomes●

Production technology
and mass production
technology

Challenge●

Stable operations and increased businessefficiency realized through the transition tosmart factories[Results of the 2018 Medium-Term Business Plan]

Product promotion andinformation provision
capacities

Human resources
Deep appreciation for our corporate
philosophy and a high level ofengagement

Financial

Performance

Product rollout in a wide range of channels
Dissemination of accurate and appropriate
information

Increase capital efficiency using efficient asset
allocation for greater growth

FY2018FY2019FY2020Net sales (Billion yen)

205.3

208.8

168.2*1

Operating income
to net sales ratio (%)

9.8

10.2

11.4

Overseas sales
ratio (%)

5.9

5.3

7.0

Focused domains’sales ratio

42% on average during the period of
the 2018 Medium-Term Business Plan

Employee-friendly workplace
Realization of systems fostering diversity
and a highly productive work environment*1 The Company applied the “Accounting Standard for Revenue Recognition (ASBJ Statement No. 29,
March 31, 2020),” and other regulations, from the beginning of FY2021. The figures for FY2020 reflectretroactive application of the said accounting standard.
*2 The Company applied the “Accounting Standard for Revenue Recognition (ASBJ Statement No. 29,
March 31, 2020),” and other regulations, from the beginning of FY2021.
*3 Comparison with the average during the period of the 2018 Medium-Term Business Plan

22

Future Vision andPath to Achieve It

Introduction

Value Creation
Strategy

Sustainable
Management

Governance

Financial
Performance

2030 Business Plan
1st Stage: 2021 Medium-Term Business Plan (2021–2023)

Building a New Foundation for
Dramatic GrowthEstablished a New Corporate Philosophy and the 2030 Vision
The Morinaga Group’s Corporate Philosophy

See page 1

2030 Vision

The Morinaga Groupwill change into a Wellness Company in 2030.

Corporate
Message●Our Mission(Purpose)

Our Visions(Vision)●Our Commitments(Value)See pages 24 and 25

Restructured our corporate
philosophy to cover the meaning of
our existence, our visions, and ourcommitments

We are committed to evolving the trust and technologies we have cultivated over the past 120 years
to support the wellness of all generations around the world.

●Three values
to provide“Delicious, Fun, and Healthy”
became our new Corporate
Message

Values areprovided for

The Code of Conduct andStandards of Behavior

Health ofmind

Customers

Health of

Healthofbodyenvironment

Employees

Society

Become a company that
continuously provides“health of mind, body,and environment” tocustomers, employees,
and society

How to Change into a Wellness Company
2030 Business Plan

2030

VisionSee pages 24 and 25

Policy 1 : Improve Profitability through Business Portfolio Optimizationand Structural Reforms● Policy 2 : Build a Business Foundation Linked to Business Strategies● Policy 3 : Promote Diversity and Inclusion●

Efforts for further growth:
exploration and research domain and inorganic growth

Exploration andResearch Domain
Focused Domain

Focused domain: driving growth

Basic Domain

Basic domain: stable cash generation

Business
Foundation

Efforts to further strengthen the business foundation: structural reforms and business foundation[Targets and Results of the 2021 Medium-Term Business Plan]
Financial*2
Net sales(Billion yen)

Operating income(Billion yen)

Operatingincome to net
sales ratio (%)
Overseas sales
ratio (%)

FY2021
results

181.2

FY2022
results

194.3

FY2023targets

15.2

21.5

9.8

7.8

11

11.2

Focuseddomains’ sales
ratio (%)

190.0

17.6

9.1

FY2021
results

48.8

49.8

ROE (%)

22.0(10.1)*4

7.9

Dividend payout
ratio (%)

16.3*547.9

or higher

9 or higher

Non-Financial (Morinaga products in Japan)
Sustainable procurement
ratio in Morinaga & Co., Ltd.,products in Japan*6
Cacao beans (%)[Targets of the 2030 Business Plan]

FY2022
results

FY2021
results

FY2022
results

934

100 by FY2025

Targets

Palm oil (%)

2

9100 by FY2023

Paper (%)

98

99.9

100 by FY2022*4 Excluding the impact of extraordinary profit from the sale of cross-shareholdings*5 35.3% when excluding the impact of extraordinary profit from the sale ofcross-shareholdings*6 Paper covers only product packaging*7 Scope: products the Company defines as “Deep dive into ‘health of mind,’” “Accelerate‘health of body,’” and “Evolve ‘health of mind’ to ‘health of body.’” Population percentage

FY2023targets+5

percentage
points or
higher*3

10or higher

30

Financial*2
Net sales (Billion yen)
Operating income to
net sales ratio (%)
Overseas sales ratio (%)
Focused domains’sales ratio (%)

300
12 or higher
15 or higher
60

Non-Financial
Provide value of health to more than 70% ofJapan’s population through new initiatives
aimed at becoming a wellness company*7
Ratio of employees who find their job
meaningful and who are in good
80*8
mental and physical health at work (%)
Procurement ratio of sustainable
100*9
raw materials (cacao beans, palmoil, and paper) (%)
CO2 emissions (%)

30

reduction*10

calculated based on the INTAGE Inc. SCI annual purchase rate (scope: consumers
nationwide ages 15–79 ). The Company intends to establish a vision on a global basis.
*8 Ratio of affirmative answers on the employee awareness survey*9 Group consolidated basis; paper covers only product packaging*10 Scope 1 + 2 (domestic Group consolidated basis; compared with FY2018)

Morinaga Group INTEGRATED REPORT 2023

23

Long-Term Business Plan

2030
Business Plan

The Morinaga Group formulated the 2030 Business Plan as along-term business plan aimed at 2030 to enhance corporate valueby achieving medium- to long-term growth while contributing to therealization of a sustainable society under its corporate philosophy.

2030 Vision

The Morinaga Group will change intoa Wellness Company in 2030.
We will further evolve the reliability and technology built in our 120-year history to support
people’s wellness lifestyles for all generations worldwide.

1. Improve Profitability through Business Portfolio

Basic
Optimization and Structural Reforms
Policy 2. Build a Business Foundation Linked to Business Strategies
3. Promote Diversity

Focused Domain
Category

Basic Domain
Category

Exploration andResearch Domain
Category

Structural Reforms Focused on Functional Sectors

Business Foundation

As the goal of the Group’s 2030
Business Plan, we formulated the 2030
Vision to outline where we intend to
be in 2030. The Morinaga Group has
cultivated its brand and enhanced its
technical prowess during its morethan 120-year history supported by thetrust of customers. The Morinaga
Group will seek to achieve sustainablegrowth through value creation in“health of mind, body, and environment,” which will drive its change intoa wellness company.

Sustainable Business Management

Provision of“Health of Mind, Body,
and Environment”
The Morinaga Group defines wellness as “thestate of realizing or pursuing an enriched andglorious life on the basis of health of mind,
body, and environment.” We aim to become acompany that continuously creates the threevalues of “health of mind,” “health of body,”
and “health of environment” for the threestakeholders of customers, employees, andsociety.

24

Change into a
Wellness Company
Three values
to provide

Values areprovided for

Health ofmind

Customers

Health of

Healthofbodyenvironment

Employees

SocietyIntroduction

Value Creation
Strategy

Future Vision andPath to Achieve It

Sustainable
Management

Governance

Financial
Performance

Three Basic Policies and Strategies
Policies

Strategies

Improve Profitability through Business
Portfolio Optimization and Structural
Reforms
Business Portfolio Optimization

Policy1

Growth potential

High

Component Ratio

Focused domain category: ~ driving growth ~“in-”Business

DirectMarketingBusiness

U.S.
Business

FrozenDesserts

40%

Business

60%
40%

Exploration and Research domain category:~ business creation ~・Global (e.g., China, Southeast Asia,
Oceania, Europe)・Digital and others

Policy2

Policy32018 Medium-TermBusiness Plan
(average during term)

Build Business Foundation
Linked to Business Strategies

Promote Diversity

By deploying management resources to the
Focused Domains in a concentrated manner, we
will drive the Group’s growth.

Stable Cash
Generation from the
Basic Domains

We will seek to achieve steady sales growth andenhance earnings while further increasing added
value to contribute to the “health of mind” and“health of body” of our customers.

Initiatives in the
Exploration andResearch Domain

Creating new businesses and incorporating theminto our business portfolio looking toward 2030
and beyond

Improving Earnings
Power through
Structural Reforms
Mainly Targeting
Functional Sectors

Implementing structural reforms mainly targetingprocurement, manufacturing, logistics, and sales
sectors to prepare for various management risks,
aiming to further increase earning power

Human Resources
Strategy

Enhancing human resources management from a
global standpoint to realize our Purpose and 2030
VisionR&D Strategy

Evolving highly competitive and important
technologies to underpin the growth of the
Focused Domains, while also creating new value

Financial Strategy

Increasing corporate value by implementing
management that is fully aware of the capitalcosts in a sustainable manner

DX Strategy

Strategically introducing and utilizing digitaltechnologies to strengthen the managementfoundation and business competitiveness60%

Basic domain category: ~ cash generation ~Domestic Confectionery and Foodstuffs
Business, Operating subsidiaries inJapan, and Taiwan Business

Concentration ofManagement
Resources on the
Focused Domains

2030

Under the belief of “leveraging each person’s individuality,” seeking to realize
an organization where our diverse workforce can exhibit their skills andencouraging innovation capable of creating value for customers and society

Customers × “Health of Mind” and “Health of Body”
We are further evolving the values we provide to contribute to the “health of mind” and “health of body” of customers throughall our products. Under “health of mind,” we will enhance emotional value using a science-based approach to further enhancecustomer satisfaction. Under “health of body,” we will address health needs through food by further enhancing the value we
provide via the development of food with functional claim.

Employees × “Health of Mind” and “Health of Body”
We will further promote work-style reforms along with health management including mental healthcare to foster an organization
where employees find their job meaningful and can share their skills dynamically.

Society × “Health of Environment”
To achieve customer wellness, we believe it is essential not only to make our foods delicious and healthy but also to ensure that
our manufacturing processes producing these foods and the value chain are sustainable. Therefore, we are working to addresssocial issues related to our business, such as food loss and waste, human rights issues, and environmental issues, aiming toachieve an environment where customers truly enjoy the foods we make.

Morinaga Group INTEGRATED REPORT 2023

25

Medium-Term Business Plan

2021 Medium-Term Business Plan
In the final year of the 2021 Medium-Term Business Plan,
we will continue to respond to rapid changes in theoperating environment, such as soaring raw materials prices,and strategically implement growth investments, with theaim to achieve record high net sales for the third consecutive
year and achieve a V-shaped recovery in operating income.

Daisuke Fujii
Director, Managing
Executive Officer
Responsible for
Corporate Strategy
Division

Looking Back on FY2022

ResultIn FY2022, growth carried over from the previous fiscal year led by
the focused domains of the “in-” business and the U.S. business, andwe set a record high for net sales* for the second consecutive year.
On the other hand, although operating income declined year on year

due to the impacts of soaring raw materials and energy prices andstrategic advertising investments, we were able to absorb costs ofmore than 6.5 billion yen thanks to price revisions and the effect ofincreased sales.
*Accounting Standard for Revenue Recognition applied retrospectively

Issues and Looking Ahead
In the focused domains, we will continue to concentrate
management resources, as we seek out greater growth led by the
U.S. business. In the basic domains, we will continue to develop
products that capture changes in consumption styles following therecovery from the COVID-19 pandemic and strengthen our efforts to
reduce costs through structural reforms. We will explore possibilities
for inorganic growth, including new business ventures, and continue
to develop new products that contribute to “health of mind” and“health of body” of consumers to grow net sales and increase
profitability.

Business
Foundations

Functional
Sectors

Basic
Domains

Focused
Domains

What We Are Aiming for in 2030

26

At the same time, to further grow our overseas business, we will
extend the reach of HI-CHEW in areas such as Taiwan, China, andOceania, as well as explore and expand the potential for jelly drinks
and other products.
In addition, we will continue to implement structural reforms mainly inthe functional sectors, such as production, logistics, and sales, to addresschanges in the external environment and further improve our profitability.
Furthermore, by actively allocating management resources topersonnel, R&D, and DX, we will strengthen the business foundationof the entire Morinaga Group and promote business strategies.
Key Measures

Details“in-”business

Aiming to become the No. 1 brand among
foods supporting “health of mind and body”
centering on sports❶ Growth of in Jelly products❷ Growth of in Bar products❸ Create new foods leveraging the “in-” brand

pp. 34–35

Directmarketingbusiness

Evolving into a healthcare business supporting
the realization of customers’ wellness❶ Evolve existing businesses using digitalization❷ Create new businesses using the foundations cultivated in
the direct marketing businesspp. 36–37

U.S.
business

Growth of the U.S. business by expanding
the Hi-CHEW brand and creating a jelly
drink market❶ Further accelerate the growth of the HI-CHEW brand❷ Create a jelly drink market and explore the potential for wellness
domain products

pp. 38–39

Frozendesserts
business

Stably expanding the frozen desserts businessby concentrating on differentiated productsthat exploit our confectionery technologies❶ Evolve freshness marketing for the Jumbo group of products❷ Acquire customers in peripheral markets and create new markets
using technological advantages

pp. 40–41

Confectionery
business

Changing the category portfolio so as to build
a high revenue base

❶ Improve chocolate business profitability and increase net sales❷ Stimulate demand through invigoration of the candy market❸ Further increase demand in the biscuit market

Foodstuffs
business

Shifting from “article-of-taste brands” to“health-oriented brands”❶ Establish Morinaga Amazake as a health-oriented brand❷ Establish Morinaga Cocoa as a health-oriented brandProcurement
sectorManufacturing
Beating the labor shortage and establishingsectora powerful profit structure to allow us to
Logistics
compete around the world
sectorSales
sectorHuman
resources
strategy
Establishing a powerful management
R&D
foundation to support the business strategies
strategy
to increase corporate value over the mediumDX
to long term
strategy
Financialstrategy[Procurement] Control the rising raw materials expense ratio
by reviewing product specifications[Manufacturing] Change over to smart factories using digitalization[Logistics] Control rising logistics costs with an eye toward
hub optimization[Sales] Optimize sales bases and improve productivity looking
ahead to future market changes[Human Resources] Establish and execute plans to maximize humancapital[R&D] Provide cross-functional support for business strategy bycreating new value centering on technology[DX] Reform business activities using digitalization and continually
improve profitability[Finance] Explore the optimal capital structure, strengthen theinvestment management system, and increase shareholder
returns aimed at the promotion of capital cost management

pp. 42–43

Manufacturing
pp. 46–47

Human
Resources

R&D

pp. 49–51 pp. 44–45
DX
p. 48

Financepp. 29–33

Introduction

Future Vision andPath to Achieve It

Value Creation
Strategy

Sustainable
Management

Governance

Financial
Performance

Key Measures in FY2023

Focused Domains
In the “in-” business, we will accelerate growth of in Jelly by further
expanding drinking scenes and targets. In response to various healthneeds, we will expand and strengthen the “in-” brand.
In the direct marketing business, we will work to expand existing
businesses centered on Oishii Collagen Drink and Oishii Aojiru, whichis growing dramatically as the second pillar, and explore new
possibilities such as overseas expansion of collagen drinks andexpansion of foods offered at Morinaga Direct Store.

To further grow the U.S. business, we will expand the regions
where HI-CHEW is sold, develop brand-new products to acquire newcustomers, engage in aggressive marketing activities, and expand
production lines. We will also accelerate our efforts to create a jelly
drink market for Chargel.
In the frozen desserts business, we will work to further improve
the quality of Choco Monaka Jumbo and strengthen marketing
activities for Vanilla Monaka Jumbo. In addition, we will continue tofocus on developing products such as Ita Choco Ice and The Crepe.

Basic Domains
In the confectionery business, we will strengthen marketing activities
under major brands such as HI-CHEW, Morinaga Ramune, andMorinaga Biscuits, taking advantage of increased demand forconfectioneries and the recovery of inbound tourism demand due tothe easing of travel restrictions, with the aim of increasing the ratio ofsales in the relatively profitable candy and biscuit categories.

In the foodstuffs business, we will continue to develop Morinaga
Cocoa’s lineup of products with functional claims and develop
measures to promote drinking opportunities to establish Morinaga
Cocoa as a health beverage.

Structural Reforms Focused on the Functional Sectors
The Procurement Sector will continue to enhance our efforts to lower
costs and improve profitability in response to soaring raw material
costs.
In the Manufacturing Sector, we will expand the changeover ofsmart factories to all the factories in Japan to ensure stable operationand operational efficiency.

In the Logistics Sector, we will relocate bases in the Tokyo
metropolitan area to improve the efficiency and stability oftransportation and delivery.
The Sales Sector will continue to work on promotions under the
keyword “wellness” tailored to the characteristics of each retailer
type.

Building a Strong Management Foundations
In terms of human resources strategy, we will pursue humanresources development and foster an organizational culture throughsuccession planning and the development of specialized humanresources, as well as promote diversity and inclusion by encouraging
self-sustaining career development and utilizing senior humanresources.
In terms of R&D strategy, we will accelerate research to change
into a wellness company. This includes strengthening our R&D
capabilities in the United States, stepping up development in thewellness field, and creating new value by launching new development
methods. At the same time, we will build an intellectual property
strategy to utilize the outcomes of R&D.
As for DX strategy, we will introduce core IT systems to enhance
consolidated business management and rebuild product databasesystems to evolve product development operations.
In terms of financial strategy, we will enhance our ability togenerate funds through ROIC management and financial measures,
while also increasing growth investments and shareholder returns.

Morinaga Group INTEGRATED REPORT 2023

27

Value Creation Strategy
Message from the CFO

29“in-” Business34

Direct Marketing Business

36

U.S. Business38

Frozen Desserts Business

40

Confectionery and Foodstuffs Business42

R&D Strategy

44

Structural Reforms of Production Functions

46

DX Strategy

48

Human Resources Strategy

49

Special Feature: Employee Roundtable Discussion—Toward Achieving Our 2030 Vision52

Future Vision andPath to Achieve It

Introduction

Sustainable
Management

Value Creation
Strategy

Financial
Performance

Governance

Message from the CFO
Tetsuya Takagi

We will sustainably increase
corporate value and achieve stable,consistent shareholder returns by
pursuing capital cost management.

Toward2030

Chief Financial Officer
Director,
Senior Executive
Officer

Progress of the 2021 Medium-Term Business Plan (2021–2023)
Business growth in the focused domains defined in the 2030 Business Plan was a key driver in ourrecord high net sales*. We are working to restore profitability to respond to changes in the businessenvironment symbolized by soaring raw materials and energy prices.
Under the 2021 Medium-Term Business Plan (MTBP), the Group is
working diligently to “Build a New Foundation for Dramatic Growth.”
In FY2022, the second year of the plan, we achieved record highsales* for the second consecutive year, driven by business growthin the focused domains as defined in the 2030 Business Plan,
our long-term management plan. Sales in the focused domains
accounted for approximately 50% of total net sales, and the rapid
growth of overseas businesses, mainly in the United States, helped
push the overseas sales ratio to double digits for the first time. In
terms of net sales, we expect to achieve the target set in the 2021
Medium-Term Business Plan.
While we have made steady progress with the transformation of
our business portfolio, our current profitability has declined due tosoaring prices of raw materials and others and increased investment
burdens for future business growth. Raw materials prices are
expected to remain elevated over the medium term, and based on

this assumption, we will implement flexible and appropriate pricerevisions and increase cost reductions, expense efficiency, andinvestment efficiency to improve profitability.
By steadily implementing these initiatives and various measures
based on our financial strategy, we aim to restore ROE to 10%, which
is a target for the final year of the 2021 Medium-Term Business Plan.
*Accounting Standard for Revenue Recognition applied retrospectively

KPIs in the 2021 Medium-Term Business Plan
FY2022

FY2023

194.3 billion yen 190.0 billion yen 204.0 billion yen

Net sales
Operating income
Operating income to
net sales ratio
Overseas sales ratio

15.2 billion yen

21.5 billion yen

17.3 billion yen

7.8%

11% or higher

8.5%

11.2%

Focused domains sales ratio

9% or higher

12.7%

49.8% 47% or higher

51.5%

10% or higher

10.0%

ROE

7.9%

Overseas Sales Ratio (%)

Focused Domains Sales Ratio (%)

Operating Income to Net Sales Ratio (%) ROE (%)

15

60

15

12.7
11.2

10

+2.2 pt
2021 MTBP target (9%)

5

49.8

50

51.5

15
2021 MTBP target (11% or higher)

10

5

8.5

7.8

10.0
10
2021 MTBP
target (10%5 or higher)−3.2 pt+2.8 pt
2021 MTBP target (+5 pt)

40
Approx. 42

0
2021

2022

2023
(FY)
(Forecast)

2018
2021
MTBP average

0

0

30
2020

2022

Forecast

Plan

Results2023 (FY)(Forecast)

2020

2021

2022

−2.1 pt
7.9

Excludes impacts of extraordinary profit
on the sale of cross-shareholdings(22.0% when included)

2020

2023 (FY)(Forecast)

2021

2022

2023 (FY)(Forecast)Morinaga Group’s Financial Challenges
We recognize that sustainably increasing corporate value is the most important challenge facing theGroup financially.
Trend in P/B Ratio
Price-to-book ratio (P/B ratio) is one of the indicators used to evaluate
corporate value from the perspective of the capital markets. Looking
at the Group’s medium- to long-term trend, our P/B ratio has been on
a downward trend since FY2018 and has been at a level of about 1.5
times as of the end of FY2022. We are aware that the Group’s growthpotential has not been adequately evaluated by the capital markets.
On the other hand, return on equity (ROE), which is an indicator of
return on capital, had been trending at 10% or more until FY2021, but
it had been on a downward trend since FY2020 due to rapid changes
in the external environment, such as the impact of the COVID-19
pandemic and soaring prices of raw materials. In the Group’s case,ROE (left)
(%)
16
14
12
10
8
6
4
2
0

P/B ratio (right)(Times)
4
3

*

2
1

2015

2016

2017

2018

2019

2020

2021

2022

2023

(FY)

0

(Forecast)*Excludes the impacts of extraordinary profit on the sale of cross-shareholdings

Morinaga Group INTEGRATED REPORT 2023

29

Financial Capital Strategy

the correlation between P/B ratio and ROE is relatively strong, andwe believe that it is important to increase ROE to enhance corporate
value in the future.

To increase corporate value, it is important toimprove return on capital and optimize thecost of capital.

etailsWe believe that to improve ROE we need to pursue both
1) improvement return on capital and 2) optimization of the cost ofcapital. For the former, under ROIC management, the optimization of
the business portfolio, the improvement of business profitability, andthe efficiency of invested capital and similar factors, pose challenges.
With regard to the latter, while ensuring financial security, we will
adjust the weighted average cost of capital (WACC) to around 6%
to attain an optimal capital structure by expanding the use ofinterest-bearing debt.
Through initiatives to resolve these challenges, we will strive tosustainably enhance corporate value and provide stable, consistentshareholder returns.

Trend in Net Sales and Return on Invested Capital (ROIC)
ROIC (left)(%)(Billion yen)

16

210

12
180

8
4
0

2018

Sustainably enhance corporate value by
improving return on capital and optimizing thecost of capital● Provide stable, consistent shareholder returns
●

2019

2020

2021

2022

(FY)

150

Trend in Financial Leverage■ Interest-bearing debt (left)*2■ Cash and deposits (left)

Net D/E ratio (right)(Billion yen)(Times)

60

0.4

45

0.2

30

0

15

−0.2

0

Financial
Challenges■ Net sales (right)*1

2018

2019

2020

2021

2022

(FY)

−0.4

*1 Since the Company applied the “Accounting Standard for Revenue Recognition (ASBJ
Statement No. 29, March 31, 2020),” and other regulations, from the beginning of FY2021,
the figures for results in FY2020 used for year-on-year comparisons have been calculated
following retrospective application of said accounting standard.
*2 Interest-bearing debt represents liabilities on the consolidated balance sheet, excluding
lease obligations, for which the Company pays interest.

Framework of Financial Strategy
To realize the sustainable enhancement of corporate value, we will practice capital cost management.
The Morinaga Group’s basic policy is to increase corporate value
sustainably and achieve stable and continuous shareholder returns
using proactive investments in growth and by maintaining our stablefinancial base. Aimed at achieving the 2030 Business Plan, we
will contribute to all stakeholders by implementing capital costmanagement and maximizing corporate value.
Toward this end, we will enhance our financial management
following the three main financial strategies outlined below.

Strategy1Strategy 1

Improve business growth potential and capitalefficiency using ROIC management

Strategy 2

Streamline capital cost by ensuring financial
security and creating an optimal capital structure

Strategy 3

Increase shareholder returns

Improve business growthpotential and capital efficiency
using ROIC management

Business portfolio management
Allocate cash and prioritize domains forinvestment● Use the ROIC tree to improve capital efficiency
and implement PDCA management● Clarify decision-making criteria for investments
based on capital cost

Strategy Streamline capital cost by ensuring
financial security and creating an
2
optimal capital structure
Implement capital costmanagement●●

Strategy
Increase shareholder returns
3

Secure funds to address risks and manage
financial security● Pursue an optimal capital structure● Optimize capital cost levels (WACC)● Manage capital efficiency indicators(ROE and ROIC)● Secure funding methods (preparatory funds forinvestment and working capital)●

Provide stable and consistent shareholder returns
Increase the medium- to long-term DOE level● Buy back shares flexibly with an awareness ofthe total shareholder return ratio●●

Financial risk management

30

Financial governanceCash management

Introduction

Strategy 1

Future Vision andPath to Achieve It

Sustainable
Management

Value Creation
Strategy

Financial
Performance

GovernanceImprove business growth potential and capital efficiency using ROIC management

We are strengthening the system of ROIC management from three perspectives.
The Morinaga Group is strengthening its system of implementing
ROIC management according to the three perspectives of1) corporate, 2) business operations, and 3) managementof individual investments. The commonality of these three

ROIC management

perspectives is whether we can generate returns in excess of capitalcost. We will make management-level decisions based on financial
assessments, as well as non-financial elements, and implement the
PDCA cycle to increase growth potential and capital efficiency.

Commonality ofbasic perspectives

Financial management perspective

1 Corporate perspective
Company-wide financial target
management● Business portfolio optimization●

2 Business operation perspective●

Business-specific capital efficiency
management

Whether we cangenerate returns inexcess of capital cost(value creation)

investment
3 Individual
management perspective

Whether the Company as a whole can achieve capital efficiency targets
Company-wide ROIC target = Σ business-specific ROIC > WACC

2

Whether each business can achieve business-specific ROIC targets
Business-specific ROIC > Business-specific hurdle rate
In case of gaps, the strategy will be adjusted based on
rolling reviews

3

Whether individual investments clear our investment criteria
Implement regular investment payback reviews (PDCA cycle)

Profitability management for individual
investments

We will clarify our strategy according to thebusiness and brand mission and aim to form
an optimal business portfolio.
Regarding ROIC management from a corporate perspective, we
analyze ROIC and its components for the entire company and eachbusiness, and check whether it exceeds the cost of capital (WACC).
In addition, we will confirm the key points for strengthening the
growth potential and return on capital of each business and eachmarket category, and consider the mission, transformation, andoptimal allocation of management resources in the business portfolio.
In FY2022, we proceeded with discussions on business strategies
for growth, focused on the four businesses that were designatedas focused domains in the 2030 Business Plan at the Business
Execution Meeting. In the confectionery and foodstuffs business,
which has a relatively large amount of invested capital, we areconsidering strategies and measures to improve the efficiency of thisinvested capital.

We will increase return on capital of ourbusinesses utilizing the ROIC tree.
Regarding ROIC management from the perspective of business
operations, management and the divisions in charge use the ROIC
tree for each business to identify problem areas that will lead to
improvements in return on capital, and they consider strategies andmeasures to solve these issues. From the formulation of the FY2023
budget, we have started to inspect the budget level based on the
ROIC tree, which will lead to continuous improvement activities using
the PDCA cycle in the future. In addition, to instill ROIC management
down to the frontline level, we are promoting understanding of theconcept of ROIC management and the relationship between frontline
activities among all employees using our own video-based teachingmaterials.
Regarding the third perspective, individual investment
management, in FY2022 we revamped our investment management
system, including the investment evaluation method, decision-making
process, and investment review process. We are now working tostrengthen the foundation for capital cost management.

Direction of Business Portfolio Growth/Transformation(Sample Image)Direct marketing
Emphasize increased
business size
● Capture newcustomers● Convert one-time
customers to
subscription
customers

Improvement●

Return on capital (ROIC)

●

1

“in-”
Emphasize growth
Capture new
demand● Expand/Strengthen
the “in-” brand
●
●

U.S.
Prioritize business growth● Accelerate the growth of
HI-CHEW● Create a market for Chargel●

Frozendesserts

Expand market share andpursue business growth● Set ourselves apart using
confectionery technology● Improve return on capital●

Review

Confectionery
and foodstuffs
Increase profitability throughwellness and higher addedvalue● Improve return on capital●

Growth (size of net sales)
Note: The size of the circle indicates the scale of net operating profit after tax (NOPAT).

Reverse the ROIC Tree
Perspectives of strategy/
measures (examples)
1)Extensive review of portfolio by
reducing items with low
profitability2) Improvement of raw material
procurement capabilities
Sourcing of alternative raw materials
and diversification of suppliers,
expansion of joint procurement,
securing of long-term contracts,
utilization of commodity futures, andsimilar initiatives3) Optimization of the composition of
in-house production and outsourced
manufacturing by business partners

Drivers ofimprovement
Variable costof sales ratio
Variable selling
expenses ratio
Logistics expense ratio
Loss on disposal of
defective products
Manufacturing cost ratio
based on fixed costs
such as labor and utilities
Loss on disposal of
inventory assets4)Reorganization and optimization of
the logistics system

Adverting expense ratio5)Optimization of variable selling
expenses, sales structure, andadvertising investment basedon thorough management of
cost-effectiveness

Depreciation ratio
Repair cost ratio
Indirect labor cost ratio
Other manufacturing
expenses

6) Maximization of production output
and capacity utilization by optimizing
the Company-wide production system

Company-widecommon fixed cost ratio7) Thorough evaluation of the profitabilityof new and renewal capital
investments based on optimization of
the invested capital turnover ratio

Working capitalturnover ratio8)Other measures

Operatingincome to net
sales ratio

Fixed asset turnover
ratio

ROIC

Invested
capitalturnover ratio

Morinaga Group INTEGRATED REPORT 2023

31

Financial Capital Strategy

Strategy 2

Streamline capital cost by ensuring financial security and creating an optimal capital structure

On the premise of maintaining our financial security with our credit rating at “A”* or higher, we will
optimize the cost of capital by utilizing financial leverage.

Financial Indicators

Guidance

Japan Credit Rating Agency,
Ltd. (JCR), rating

Maintain at “A” or above

2 or more months’ sales● Between -0.1 and
0.5 times● Less than 2.0 times●

Cash on hand
● Net D/E ratio● Interest-bearing debt to
EBITDA ratio●

Strategy 3

In FY2022, excessive cash on hand was one of the factors behindthe decline in return on capital. Therefore, we significantly reduced
the net cash balance while taking financial security into consideration(from 46.6 billion yen at the end of FY2021 to 17.3 billion yen at theend of FY2022). We will continue to optimize capital costs by making
adjustments to reach our optimal capital structure.
*Credit rating of Japan Credit Rating Agency (JCR)

Trend in Financial Position(Times) –0.5

Net D/E ratio (stock)

The Morinaga Group’s basic policy is to ensure a certain level offinancial security in preparation for changes in the macroeconomic
environment, uncertainty in the business environment, and increases
in management risks. Furthermore, our basic rule is to maintain aJapan Credit Rating Agency, Ltd. (JCR), credit rating of “A” or above
as a benchmark for financial security.
Moreover, referencing financial guidance for funding to satisfy
demand, we will aim for an optimal capital structure holisticallyconsidering appropriate levels of cash on hand, capital cost, funding
conditions, and other factors.

2020

–0.3

2018
2017
2019

–0.1

Note: Years in this graph indicate fiscal years

Less than 2.0 times
2015

2016

2021

2014

0.1
−0.1 to 0.5
times

0.3
0.5
0

0.5
1.0
1.5
2.0
Interest-bearing debt to EBITDA ratio (flow)

2.5(Times)Increase shareholder returns

During the 2021 Medium-Term Business Plan, we significantly increased shareholder returns.
We will continue to sustainably enhance corporate value and aim for stable, consistent shareholder returns.
The Morinaga Group’s basic policy is to offer stable and consistentshareholder returns backed by a solid business foundation.
As for shareholder returns, we will seek to raise the dividend on
equity (DOE), an indicator of capital policy, over the medium to longterm while considering a dividend payout ratio level and free cash
flow and ensuring a healthy balance sheet.

In addition, we will consider prompt approaches to share buybacks
as needed with an eye toward the total shareholder return ratio.
In FY2022, we provided our largest ever shareholder returns of 15.8
billion yen, comprising the year-end dividend of 4.7 billion yen and sharebuybacks of 11.1 billion yen. During the 2021 Medium-Term Business
Plan (2021–2023), we expect to achieve shareholder returns of morethan 31.8 billion yen, which is substantially higher than planned.

Trend in Shareholder Returns
2015 MTBP
6.9 billion yen*1,*2

2.6%
22.5%

2.9%

21.1%

2018 MTBP
19.3 billion yen*1,*2
3.5%

3.6%

3.5%

2.8%

2021 MTBP
31.8 billion yen + extra*1,*2
3.6%
35.3%

25.3% 26.7%

33.5% 30.0%(Excludes
extraordinary
profit)

16.3%

3.8%
47.9%

3.9%

39.6%

Share
buybacks
5.2

1.8
35
2015

45
2016

0.1
2.6
50
2017

3.3

3.6

4.0

1.4
4.4

66
2018

72
2019

80
2020

90
2021

(Billion yen)*1

Dividends
4.7
100
2022

4.8

(Billion yen)*2

Dividend
per share(Yen)*2105
2023 (FY)(Forecast)*1 Data covers the acquisition amount during the relevant accounting period (for
FY2023, the amount acquired up until May 16, 2023).
*2 Data indicates the amount of appropriation of surplus for the relevant accounting
period.

32

Dividend
payout ratio

15.8
11.1

8.4

2.3

Dividend on
equity (DOE)

Financial Indicators

Guidance

Dividend on equity (DOE)

4.5% or more (target for FY2030)

Share buyback amount

Establish based on theinvestment and capital plan in
the Medium- to Long-TermBusiness Plans

Share Buybacks Completed during the2021 Medium-Term Business Plan*3
Resolution date

Acquisition dateAmount

MethodFebruary 28, 2022

October 25, 2022

9,999,887,500 yen

Marketpurchases

February 10, 2023 February 14, 2023

2,486,250,000 yen

ToSTNet-3

5,256,900,000 yen

ToSTNet-3

May 11, 2023

May 16, 2023

*3 Data up to the share buybacks completed on May 16, 2023

Future Vision andPath to Achieve It

Introduction

Value Creation
Strategy

Sustainable
Management

Governance

Financial
Performance

Approach to Cash Creation and Cash Allocation Based on Financial Strategy
We will enhance our ability to generate cash through ROIC management and financial measures andstrengthen growth investment and shareholder returns.
During the 2021 Medium-Term Business Plan (2021–2023), in addition
to generating EBITDA in a relatively stable manner, we procured funds
through various means, including the issuance of sustainability bonds
and the significant reduction of cross-shareholdings.
At the same time, we revisited our cash allocation. This included thecontribution of additional funds to our retirement benefit trust, capital
investment that prioritizes investment in focused domains and building abusiness foundation, investments in intangible assets, and shareholder
returns that substantially exceeded our plan. As a result, we havesignificantly adjusted our net cash position to improve return on capital.
Looking ahead, during the 2024 Medium-Term Business Plan
(2024–2026), we will promote ROIC management and optimize capitalcosts, while considering further increasing growth investment andshareholder returns.

3-year cumulative forecast under the2021 Medium-Term Business Plan (2021–2023)

Future approach

Operatingcash flow

Generate operating cash flow of 55 billion
yen–60 billion yen*1 over the three-year period
EBITDA comparatively stable▶ Strengthen management of capital efficiency indicator(ROE and ROIC) targets▶ Optimization of business portfolio●❶ Sustainability bond issuance (+9 billion yen)
Allocated to the reconstruction of the Morinaga
Shibaura Building with ZEB Ready certification

ROIC
management●❷ Renewal of long-term loans
Access to funds for medium- to long-term
investments in a low interest rate environment●

Clarify key points to strengthen each strategy unit

▶ Improvement of capital efficiency of each business

Utilize the ROIC tree to identify issues and conduct
continuous improvement activities using the PDCA cycle▶ Strengthening of profitability management for individual
investment●●❸ Contributions to the employee retirement
benefit trust (−5.0 billion yen)
Early resolution of the unfunded portion andincreased return on capital

Financial measures●❹Reduction of cross-shareholdings (25.0 billion
yen*2 or more)
Ratio of cross-shareholdings (market value) toconsolidated net assets fell sharply from 29% to 8%●

Began adjusting leverage to achieve an optimal
capital structure

Capital investments: approx. 49.0 billion yen(+4.0 billion yen vs. plan)
Prioritizing investments in focused domains and building abusiness foundation, while also addressing the aging of facilities

Securefinancialsecurity
Adjust to an
optimalcapitalstructure(Optimize
capital cost)●

Cash allocation

Proactive
investments
in growth●●●

structure
Consider raising interest-bearing debt within financial
guidance levels
Secure cash on hand at two or more months’ of sales▶ Promote asset-light operations
Further reduce cross-shareholdings
Divest and dispose of unnecessary business assets andnon-business assets
●

●

●

●

and non-financial capitalContinue strategic advertising investment centered on
focused domains
Increase R&D investment See pp. 44–45
Full-scale DX investment (e.g., core system renewal) See p. 48
Strengthen human capital investment See pp. 49–51▶ Flexible response to strategic M&A opportunities(cash and investment)
●

●

●

●

●

●

Consider performance fluctuation risk and financial
leverage level▶ Utilize interest-bearing debt to achieve an optimal capital▶ Increase and enhance investments in intangible assets●

Shareholder returns: 30.9 billion yen*3 +extra(+18.9 billion yen vs. plan)
Provided shareholder returns greatly exceeding the2021 Medium-Term Business Plan
Increase dividends for the eighth consecutive year
Share buybacks totaling more than 17.7 billion yen
Cancel treasury stock up to about 2% of the total
number of issued shares●▶ Full shift to “investments in growth” centered on focused domains●

Intangible investments: Increase advertising and R&D
spending vs. plan
Strategic advertising investment centered on focused domains
Increase R&D spending to create new customer value
Start DX investment mainly for business efficiency▶ JCR rating of “A” or above

Furtherincreaseshareholder
returns▶ Increase DOE over the medium to long term●

DOE of 4.5% or higher (around FY2030)▶ Continue flexibility in share buybacks●

Consider investment capital needs, financial leveragelevel, and other factors, with an awareness of the total
shareholder return ratio*1 Amount after deducting the effects of contributions to the employee retirement benefit trust from operating cash flow
*2 Total amount for FY2021 and FY2022*3 Total amount of dividend payments and share buybacks between April 2021 and March 2024 (shares bought back up to May 16, 2023)

Aiming to Increase Corporate Value Still Further
From FY2022 onward, we are focusing on “capital costmanagement” in order to realize the 2030 Business Plan, whichis the Group’s long-term business plan.
To help investors understand these initiatives, we have been
actively engaged in IR activities, such as enhancing segment
information in disclosures, switching the timing of financial results
briefings and provision of materials to a quarterly basis, holding

theme-specific IR Days, increasing the number of small meetings andindividual IR interviews, and strengthening dialogue with overseas
investors through overseas IR and conferences. We will utilize thevaluable opinions received through these IR activities and dialogue
with stakeholders in our management activities to continue toincrease corporate value in a sustainable manner.

Morinaga Group INTEGRATED REPORT 2023

33

Improve Profitability through Business Portfolio Optimization and Structural Reforms

Focused
Domain“in-” Businessin Jelly

What we are aiming for in 2030
Aiming to become the No. 1 brand among foodstuffs supporting“health of mind and body” centering on sports

Minoru Sato

[Initiatives for target achievement]

Executive Officer
General Manager of HealthMarketing DivisionMarketing Headquarters

We are expanding and strengthening the “in-” brand in
response to health needs by extending the targets andgrowing awareness of drinking situations.

in BarAwareness of the Business Environment and Business Overview
Since the launch of in Jelly in 1994, the Group has created a new foodculture of replenishing nutrition easily on the go. Amid the changing
social dynamics of women’s greater participation in society, the aging
society, and an increase in the number of people living alone, people’s
awareness and interest in health spiked during the COVID-19 pandemic,
which is a trend that is expected to continue. Also, with the concept ofa work-life balance penetrating society, people are spending more timeon their hobbies and entertainment, and as a result, consumers arelooking for ways to simplify food and prepare meals quicker.
Given this environment, demand is growing for jelly drink products
and food products with balanced nutrition that provide or restrict
nutritional elements related to health issues easily, and the jelly drink
market in Japan is forecast to grow to 89.4 billion yen in 2025,* marking
a 10% increase over FY2022.
In FY2022, net sales of the “in-” business totaled 30.6 billion yen, up
9% compared with FY2021. Operating income rose 200 million yen
year on year to 7.0 billion yen amid strong sales, which helped to offset
soaring raw materials prices and aggressive spending on advertising.

Net Sales
2030(Billion yen)

Target

50
40
30

50.0

20
10

23.6

28.0

30.6

2020

2021

2022

0
2030

(FY)

Operating Income(Billion yen) ■ Operating income
86Operating income to net sales ratio

(%)

24.3

25

22.9

19.2

20
15

4
7.0

6.8

2

4.5

10
5
0

0
2020

2021

2022

(FY)

*Pouch-type Jelly Drink Market (2022 sales estimates and 2025 sales forecast) according to the 2023 Processed Foods Marketing Data Book No. 4 by Fuji Keizai

Medium- to Long-Term Strategy
There will be a greater necessity for exercise and adjusting nutrient
intake to avoid malnutrition or overnutrition against the backdrop of anincreased elderly population and concerns of future contagious diseases.
In the “in-” business, the Morinaga Group will utilize its know-how innutrition and physique building cultivated through our knowledge ofsports nutrition along with proprietary food processing technologies to
respond to the needs of customers seeking delicious and healthy eating.

Overview of the Medium- to Long-Term Strategy
for the “in-” Business
Brand Vision for “in-”No. 1 brand supporting the nutrition, exercise, and deliciousness ofeveryone from top athletes to general consumers proactively seeking to
improve their conditioning based on sports science

34

Growth of in Jelly Products

Growth of “in-” Brands

Provide wellness value to diverse
customers in various lifestyle scenarios● Expand drinking situations of coreproducts (e.g., in Jelly Energy)● Respond to new needs and targets

Provide new value to customers
using in Bar and new “in-” products,
following the success of in Jelly, andfoster the brand so that it creates
new markets

We have established a vision for the “in-” brand for 2030 (see figure atbottom left), under which we will continue to evolve the brand for thegreater provision of health value.

Initiatives in the 2021 Medium-TermBusiness Plan
We will promote business growth based on the framework of thethree basic strategies.

Basic Strategies for the “in-” Business in the2021 Medium-Term Business Plan
Basic Strategies

1

Details
Encourage people to play sports to stay healthy and respond toconvenience needs● Cultivate needs by taking increased stay-at-home hours as an opportunity● Expand the target age group (e.g., children, seniors) and drinking situations

Growth of
in Jelly
Products●

Growth of●

2 in Bar Products
Creation of

3 New Brands●●

Address diversifying and growing needs for protein
Address sports performance and muscle building (high protein) andhealth maintenance (replenish protein and manage carbohydrates)
Begin initiatives to create future foods by taking advantage of the“in-” brandIntroduction

Future Vision andPath to Achieve It

Value Creation
Strategy

Sustainable
Management

Financial
Performance

GovernanceStatus of Efforts in FY2022
The jelly drink market continued to grow steadily in FY2022, up 16%*
over the previous year. As a result, in Jelly continued to perform welleven after the price revisions implemented in December 2022. In
response to changes in lifestyles during the COVID-19 pandemic, weare continuing to address the need for nutritional replenishment andhealth maintenance when losing appetite, as well as for drinking
situations such as snacking between meals, at work, or whenstudying. As a result, net sales in FY2022 reached a record high. We
will continue to respond to changes in the environment and focus on
initiatives to expand drinking situations and targets.
As for in Bar, we revised the product lineup, including the launchof new products, but the competitive environment continued tointensify amid the diversification of protein intake methods, resulting

in weaker performance year on year. The needs for protein intake andsimplifying foods are expected to grow, and we will strengthen thecommunication of product value in both products and promotions tocreate demand. In particular, a commercial featuring Lars Nootbaar,
who represented Japan at the World Baseball Classic in 2023, createda great deal of buzz, and we are working to grow sales of in Bar
further capitalizing on this opportunity. We will continue to promote
initiatives for the creation of new brands under such themes asdeveloping products that can provide nutrition in new forms andcreating the advanced food products of the future.

TV commercial “A competitor’s drive” for the “in-” brandTV commercial “Eat, Nootbaar” for in Bar Protein*INTAGE SRI+ Pouch-type Drink Market (estimated cumulative sales amount from April 2022
to March 2023)

Becoming a Wellness Company
Through the “in-” business, we have been accumulating know-how ofnutrition and physique building by supporting nutrition and training
based on sports science, which forms the foundation of the “in-”brand. The Morinaga “in” Training Lab, a training facility exclusively for
top athletes operated by Morinaga & Co., Ltd., explores cutting-edge
sports science, nutrition, psychology, and other fields to study
body mechanisms, training, and necessary nutrition. Utilizing the

The Morinaga “in” Training Lab featuring training facilities exclusively for
top athletes

know-how accumulated there and our unique food processing
technology, we will meet the needs of customers looking fordelicious and healthy eating habits, from top athletes to general
consumers.
Furthermore, with the aim of providing health value to customers
through the “in-” brand, we are working to further improve thenutritional aspects of existing products, such as fortifying in Jelly Fruit
Texture products with one serving* of multivitamins (12 vitamins).

in Jelly Fruit Texture
Peach

in Jelly Fruit Texture
Melon*One serving is based on the nutrient labeling standard value.

Morinaga Group INTEGRATED REPORT 2023

35

Improve Profitability through Business Portfolio Optimization and Structural Reforms

Focused
DomainDirect Marketing
Business

Oishii Collagen Drink

What we are aiming for in 2030
We will evolve into a healthcare business supporting
customers’ wellness realization.

Koji Nagano
General Manager of
Direct Marketing Division[Initiatives for target achievement]
We supply delicious functional foods directly andcontinuously to customers.
Oishii Aojiru

Awareness of the Business Environment and Business Overview
The Morinaga Direct Store supports the wellness lifestyle of every
customer through the direct delivery of foods for health and beauty
such as collagen drinks. The size of the direct market for healthproducts in FY2021 was 642.5 billion yen*1, reaching 119% growthover the past five years. The market is growing steadily following
increased consumption through online direct sales and rising healthawareness because of the COVID-19 pandemic.
Against this backdrop, sales of the direct marketing business in
FY2022 totaled 10.2 billion yen, up 13% year on year, owing to strong
sales at the Morinaga Direct Store, centered on Oishii Collagen Drink.
Operating income increased by 300 million yen from the previous
year to 600 million yen. The number of new subscription customers
increased buoyed by proactive advertising, even though we revised
the prices of five drinks*2, including Oishii Collagen Drink, in response
to soaring raw materials prices and energy costs. Net sales of ourdirect marketing business have continued to grow for 18 consecutive
years. For FY2022, we topped the market average*3 of 1%
year-on-year decrease.

Net Sales
Target for(Billion yen)

2030

20
15
10
5
0

20.0
7.4

9.1

10.2

2020

2021

2022

2030

(FY)

Operating Income(Billion yen) ■ Operating income
1.0
0.8

Operating income to net sales ratio (%)
10

8.7

8
6.4

0.6
3.7

0.4
0.2

4

0.6

0.6
0.3

0
2020

6

2
0

2021

2022

(FY)

*1 Source: H.B. Foods Marketing Handbook 2023, Fuji Keizai *2 Oishii Collagen Drink Peach, Oishii Collagen Drink Lemon, Oishii Collagen Drink Premio, Oishii Aojiru, and Passienol Drink*3 Japan Direct Marketing Association: Direct Marketing Sales of “Health Food Products”

Medium- to Long-Term Strategy
We provide products that are both functional and delicious at theMorinaga Direct Store to support our customers’ “health of mind
and body.”
The continuous patronage of our products and services is essential
for us to contribute to “health of mind and body” through food, andas such, it is important to enhance the customer experience (CX). We
are visualizing customer behavior and emotions through data that
we collect from various contact points—from product recognition
to aftercare—to implement product design and customer service
tailored to each individual. This will allow us to improve CX andmaintain an amiable long-term relationship with customers. In
addition, we will harness the Group’s strengths in basic research on
nutrition, materials research, food processing technology, and raw
material procurement that we have amassed over more than 120
years of business to develop and provide products that best support
the health of customers.

36

Initiatives in the 2021 Medium-Term Business Plan
In addition to establishing the Customer Experience Management(CXM) Promotion Office, we will utilize customer data to maximize
the value we provide to customers. On top of that, we will promote
the following basic strategies.

Basic Strategies for the Direct Marketing Businessin the 2021 Medium-Term Business Plan
Details

Basic Strategies

Expand business using a regular direct marketing sales
model centered on Oishii Collagen Drink● Develop new collagen products with functionality● Maximize customer experience (CX) value through theprovision of services tailored to individuals with digitalmarketing●1

Evolution ofexisting
businesses

2Creation ofnewbusinesses●

Create new businesses using the customer base cultivatedin the direct marketing businessIntroduction

Future Vision andPath to Achieve It

Value Creation
Strategy

Sustainable
Management

Governance

Financial
Performance

Morinaga Direct Store (Japanese only) ▶ https://www.morinaga.co.jp/direct-store/

Status of Efforts in FY2022
Oishii Collagen Drink posted the top sales in the collagen drink
market for the sixth consecutive year*1, and Oishii Aojiru, acandidate for the second pillar of sales after Oishii Collagen Drink,also performed well with sales growing at a CAGR*2 of 164% overthe previous five years. Sales of Hizakaru Collagen, a food withfunctional claims that contains ingredients supporting theimprovement of knee movement, have been steadily increasing,
too, due to an increase in the number of new subscription
customers. We are now working to further cultivate markets forthis product.
Regarding product quality, based on our subscription customers’
requests, we changed to a plant-based sweetener in two collagen
drink products. For five drinks, we changed to straws made ofenvironmentally friendly biomass plastic.
In addition, in the direct marketing business, we are working
to improve CX by regularly surveying customers to gauge anddeepen their understanding. In November 2022, we redesigned
our website and IT systems to improve customer convenience.
We changed the website to make it easier for customers to findthe information they need and to carry out various procedures
such as changing an order.
In addition, we value our connection with customers throughmeetings to interact with fans and other means. By regularly

Top screen of the redesigned website of the Morinaga Direct Store

Hizakaru Collagen

Fan meeting

listening to the real voices of customers and reflecting them inproduct development, we aim to further improve satisfaction.

*1 Source: H.B. Foods Marketing Handbook 2018–2023, Fuji Keizai (Category for beauty-oriented products and collagen products/2016–2021 results)*2 Compound annual growth rate

Becoming a Wellness Company
Oishii Collagen Drink Peach and Oishii Collagen Drink Lemon wererevamped in July 2023 as foods with functional claims
that specifically market four functions* by adding “functions thatmaintain skin elasticity and improve skin health for those who areconcerned about dry skin due to aging.” We will continue withbasic research of collagen ingredients and provide new value tocustomers in accordance with science-based evidence.
To make the Morinaga Direct Store more appealing, we will takeon the challenge of expanding the range of products we sell in
addition to health foods centered on collagen drinks. Specifically,
we aim to contribute to the “health of mind and body” of ourcustomers by developing and selling products in two domains:high-value-added products that make maximum use of the Group’s
brands and technologies, and foods good for the body that
contribute to health and beauty in daily meals.

Oishii Collagen Drink
Peach

Oishii Collagen Drink
Lemon*Collagen peptide functions:
1) Retains moisture and enhances the moisturizing ability of the skin for thoseconcerned about dry skin (research report)
2) Supports daily activities limited by discomfort in the knee joint (research report)
3) Maintains the elasticity of the skin of those concerned about dryness due to aging,making it useful for skin health4) Supports bone formation
Unlike Food for Specified Health Uses, this product has not undergone an individual review
by the Commissioner of the Consumer Affairs Agency.
This product is not intended to diagnose, treat, or prevent any medical conditions.
People should eat a well-balanced diet based on staple foods, main dishes, and side dishes.

This photo is for illustration purposes.

TAICHIRO MORINAGA Caramel Baumkuchen released exclusively at theMorinaga Direct Store as a high-value-added product

Morinaga Group INTEGRATED REPORT 2023

37

Improve Profitability through Business Portfolio Optimization and Structural Reforms

Focused
DomainU.S. Business
HI-CHEW

What we are aiming for in 2030
Growth of the U.S. business through expanding the
HI-CHEW brand and creating a jelly drink market.

Masaki Matsumoto[Initiatives for target achievement]

Senior Executive Officer
General Manager ofOverseas Business
Headquarters

We will make progress by improving the loyalty of HI-CHEW
customers, establishing a global supply system, andexpanding the food experience and recognition of Chargel.

ChargelAwareness of the Business Environment and Business Overview
While the U.S. economy remains uncertain amid inflation caused bysoaring raw materials and energy prices and labor shortages, the U.S.
candy market is growing strongly. Both the distribution ratio and retailstore turnover of HI-CHEW in the United States are performing wellthanks to the expanded product lineup and various sales measures.
Sales growth in the United States has made a significant contribution
to earnings, and in FY2022, the overseas sales ratio reached 11.2%
for the entire year, exceeding 10% for the first time. We are making
steady progress toward the target of 15% or more in FY2030 in the2030 Business Plan, and we recognize that achieving growth in the
U.S. market is one of the most important issues for the Group in our
future growth strategy.
Against this backdrop, in FY2022, net sales of the U.S. businesstotaled 14.6 billion yen, up 39% compared with FY2021. In the 2021
Medium-Term Business Plan, we achieved our FY2023 target of 10
billion yen in net sales two years ahead of schedule in FY2021, and we
significantly exceeded the previous year’s results in FY2022. On theother hand, operating income declined slightly by 3 million yen fromFY2021 to 1.4 billion yen* due to soaring raw materials prices, higher
labor costs, and up-front marketing investment in Chargel.

Net Sales
2030(Billion yen)

Target

30
20

30.0

10
0

14.6

10.5

7.2
2020

2021

2022

(FY)

2030

Operating Income(Billion yen)
1.5

■ Operating income

14.7

Operating income to net sales ratio (%)
15

14.0
10.1

1.0

0.5

1.4

1.4

2021

2022

10

1.0

0

0
2020

*Includes profits relating to exports bound for the United States from China and Taiwan

5

(FY)

Medium- to Long-Term Strategy
We have increased the distribution ratio of HI-CHEW across theUnited States since its launch, and we continue to expand contact
points with customers. We intend to promote brand extension
products aimed at further increasing net sales. At the same time,
we will establish a global supply system to match expanded sales,collaborate with manufacturing companies, and reestablish a logistics
system to ensure the steady supply structure of products.
The United States has yet to see any product such as jelly drinks,
which are quite popular in Japan, and we believe that demandpotentially exists. As such, we will provide new value to customers
and aim to create a market using jelly drinks developed specifically for
the U.S. market.
With the wellness market forecast to continue growing, we havebeen searching for wellness products contributing to “health of mind
and body” that could be the third earning pillar. We aim to change intoa wellness company also in the United States by creating a new jelly

38

drinks market while leveraging the business foundation establishedwith HI-CHEW.

Initiatives in the 2021 Medium-Term Business Plan
We have been promoting business growth based on the frameworkof the three basic strategies.

Basic Strategies for the U.S. Business in the2021 Medium-Term Business Plan
Details

Basic Strategies

Expand our lineup including extension products● Formulate plans to increase manufacturing capacity inline with sales growth

1

Further accelerationof HI-CHEW●

2Creation of thejelly drink market●

3

Exploration of third
pillar of earnings

Work to create markets using jelly drinks developed for
the U.S. market● Establish innovative marketing strategies●

Explore the potential of differentiated products andwellness-oriented goods

Introduction

Future Vision andPath to Achieve It

Value Creation
Strategy

Sustainable
Management

Governance

Financial
Performance

Status of Efforts in FY2022
The retail store turnover of HI-CHEW has remained strong even after
price revisions instituted in February and November 2022 amid
proactive marketing activities including partnerships with professional
sports teams and sampling events to increase brand awarenessand loyalty. To expand the number of HI-CHEW fans, we launched
products with non-fruit flavors, such as HI-CHEW Fantasy Mix, whichwere well received by customers, and newly developed and launched
HI-CHEW Bites without individual candy packaging in consideration of“health of environment.”
Furthermore, as the second pillar of the U.S. business, we launchedfull-scale initiatives for the jelly drink Chargel, which was developed
for the U.S. market, in February 2022. These initiatives include
sampling at sporting events andstrengthening advertising and PR
activities to expand contact points
with targets aiming at enhancing
brand awareness within the sports
scene.
Looking at the current market
share and brand recognition rate,
we believe that HI-CHEW has thepotential for even greater growth,
HI-CHEW Fantasy Mix
and we will work to grow the U.S.
New flavors such as Rainbow
business together with Chargel.
Sorbet, Blue Hawaii, and Blue
Establishing a stable supply
Raspberry have been a hit withcustomers.
system that can respond to therapid sales growth in the United States is an important management
challenge. In addition to our existing production lines in the UnitedStates and Taiwan, we will continue to swiftly build a production
system from the ground up.

Left: HI-CHEW
Right: HI-CHEW Bites
HI-CHEW Bites were released as an extension product of the HI-CHEW
brand. The environmentally friendly design does not package each piece of
candy individually.

Becoming a Wellness Company
Candy is deeply ingrained in the daily lives of U.S. consumers, but
demand for health-conscious products such as sugar-free candy
is growing, especially due to the need to control weight and cut
down on sugar intake.
To increase the value expected of HI-CHEW by customers suchas real fruit taste and texture, as well as to meet a wide range ofcustomer needs, we are expanding the product lineup to include
healthier options such as HI-CHEW Infrusions, made only using
natural flavors, and HI-CHEW Reduced Sugar, which contains 30%
less sugar.
Chargel, which is caffeine free and provides a quick energy
boost in the form of a jelly drink, is popular with customers who
enjoy cycling and triathlons. We started with our own e-commerce
website (https://chargel.com) and gradually began selling Chargel
in retail stores. We will continue to actively carry out sampling
events with the aim of increasing food experiences andrecognition, and steadily advance toward delivering new value
and creating new markets.

HI-CHEW
Infrusions

ChargelPartnering with a cycling teamFree samples of Chargel were provided to a junior soccer teamMorinaga Group INTEGRATED REPORT 2023

39

Improve Profitability through Business Portfolio Optimization and Structural Reforms

Focused
DomainFrozen Desserts Business
What we are aiming for in 2030
We will stably expand the frozen desserts business byconcentrating on differentiated products that exploit
our confectionery technologies.

Kiyoshi Kawagishi[Initiatives for target achievement]

General Manager ofFrozen Desserts Marketing
Division
Marketing Headquarters

While evolving the freshness marketing of Jumbo, we will
also acquire customers in peripheral markets and create
new markets with our technological advantages.

Choco Monaka Jumbo

Ita Choco Ice

Awareness of the Business Environment and Business Overview
The frozen desserts business is expected to see market expansion
due to increased opportunities for consumption by seniors, who
are set to occupy a larger percentage of the population, along withrising temperatures due to global warming. Also, in addition to risingdemand for convenience, consumption in the frozen foodstuffs
category has been growing amid increased opportunities to eat athome owing to changes in people’s lifestyles.
In Japan, with inflation remaining elevated against the backdrop of
soaring raw materials prices, consumer inclination to save money andchoose safer and more trustworthy brands is expected to increase
further. In the frozen desserts business, we are concentrating
management resources on our core high-quality brands anddeveloping marketing centered on Jumbo, the top brand in the frozen
desserts market, in an effort to efficiently generate profits.
As such, in FY2022, net sales of the frozen desserts businesstotaled 40.5 billion yen, a 1% increase over FY2021. However,operating income declined by 1.4 billion yen from FY2021 to 3.4 billion
yen due to soaring raw materials prices and energy costs coupledwith higher depreciation.

Net Sales

Target for(Billion yen)
50

2030

40
30
20

38.4

40.1

40.5

2020

2021

2022

50.0

10
0
2030

(FY)

Operating Income(Billion yen) ■ Operating income
864Operating income to net sales ratio (%)

19.4

20
15

12.1
8.5

7.4

2

4.8

3.4

0

10
5
0

2020

2021

2022

(FY)

Medium- to Long-Term Strategy
We aim for stable business growth by concentratingon proprietary product development using ourlong-standing confectionery technologies in sub-zerotemperatures. For our major brand Jumbo, we willfurther evolve the unique value of “freshness
marketing.” We will also develop and establish thenext round of major brands that set us apart fromcompetitors and that are more like desserts, such as
Ita Choco Ice and The Crepe. We will tackle thechallenge of value creation in line with customer
needs by developing products with an eye toward
such new markets as the frozen foodstuffs category
aimed at sustainable growth over the medium to longterm. Furthermore, we will invest in equipment for
the necessary improvement in the production system
to achieve this strategy.

40

Initiatives in the 2021 Medium-Term Business Plan
We will promote business growth based on the framework of the three basic strategies.

Basic Strategies for the Frozen Desserts Business in the2021 Medium-Term Business Plan
Basic Strategies

1

Evolving of“freshness marketing”

2

Capturing customers
from adjacent markets

3

Creating new markets
using productdevelopment withtechnological advantages

Details●●

Evolve the “crisp texture” representing thevalue of the Jumbo brand
Expand the target and situations for eating
the productCapture customers from adjacent markets withdifferentiated products that are more like desserts
Develop new products more closely tailored tocustomer needs● Meet the challenges of increasing the added
value of products●●●

Expand applications of Flavored Ice products for
new market entry

Introduction

Future Vision andPath to Achieve It

Value Creation
Strategy

Sustainable
Management

Governance

Financial
Performance

Status of Efforts in FY2022
For the Jumbo group, we launched limited edition products for winterand revamped quality for Choco Monaka Jumbo, which celebrated its
50th anniversary, and Vanilla Monaka Jumbo, and sales increased year
on year thanks to the success of promotions that marketed the crisp
texture. In the spring of 2023, after five years of an improvement
process, we improved the quality of Choco Monaka Jumbo by adding
a “chocolate wall*” in its making to further expand sales.
Although sales of Ita Choco Ice fell below the previous year’s
results in FY2022, we will create consumption opportunities throughpromotions that capitalize on quality allowing customers to fully enjoy
thick and crisp chocolate and establish consistent sales throughout
the year. As for The Crepe, which was changed over to year-roundsales in FY2022, we have further pursued appealing texturesand developed promotions linked to web content. We willcontinue to create further demand by developing uniqueproducts more like desserts that utilize confectionery
technology.
For Ice Box, we actively promoted the product according toeach customer segment, that is, appealing to the consumption
situations, and in addition to the peak demand season, it
captured demand in the fall and winter, with sales performing
well throughout the year. In the future, we will conduct test
sales of Ice Box Otsubu for Chuhai and take on the challengeof mixers for alcoholic beverages, and work on the
Aired first-ever summer TV commercial “Ita Choco Ice”
development of frozen foodstuffs such as frozen hotcakes toin 2022
expand the business domain.

Ice Box Otsubu for Chuhai(conducted test sales insome locations)*A manufacturing technology that coats both sides of the ice cream with chocolate to block the gradual and small release of moisture from the ice cream, maintaining monaka wafer's crisp texture
as long as possible.

Becoming a Wellness Company
With the revamping of Choco Monaka
Jumbo in the spring of 2023, we launched
the Jumbo Smile Project with the aim ofcreating “ice cream that makes everyone
smile.” We actively disseminate
information on production lines and theJumbo Smile Project
key points that developers focus on inlaunched in the spring of 2023
pursuit of crisp texture. In addition, we
started sensitivity research as a new approach to delve deeper into
why the Jumbo crisp texture is popular and find ways to make further
improvements. We will continue to promote research on theemotional value brought to our customers and to pursue the crisp
texture that contributes to “health of mind.”
Ice Box is a product that efficiently and quickly hydrates and cools
the body by using hypotonic quality* ice cubes, replenishing sodium
lost in sweat. We will continue to appeal to consumption situations
where the functions of Ice Box are useful.
In addition, Ice Box has supported the Heat Illness
Prevention-Communication Project since 2019.

Joint research on emotional value with Professor Watanuki of Saitama University

Ice Box Support Team of STU48.
(Setouchi 48, a Japanese idol group)Marketing the water replenishment
and cool down functions*Due to the low concentration of ingredients such as sugar and sodium, the body absorbs water and ingredients quickly when humans drink after sweating.

Morinaga Group INTEGRATED REPORT 2023

41

Improve Profitability through Business Portfolio Optimization and Structural Reforms

Basic
DomainConfectionery andFoodstuffs Business
What we are aiming for in 2030

HI-CHEW

Changing the category portfolio to build
a high revenue base.

Mitsutaka Murase

Azusa Murata[Initiatives for target achievement]

General Manager ofConfectionery Marketing
Division
Marketing Headquarters

General Manager ofFoodstuff Marketing
Division
Marketing Headquarters

We will add the value of wellness to existing
brands and roll out high-value-added
products such as food with functional
claims.

Morinaga
Milk Cocoa

Awareness of the Business Environment and Business Overview
Our domestic confectionery business is a fundamental part of theGroup that values the spirit of “Delicious, Fun, and Healthy” throughcontributions to “health of mind and body” of our customers throughconfectioneries. The health needs of consumers, which increased dueto the COVID-19 pandemic, are expected to continue to grow, anddemand for our products is expected to rise as people go out.
In the domestic foodstuffs business, we have driven the market withmany long-selling brands such as Morinaga Amazake, Morinaga Cocoa,
and Morinaga Hotcake Mix, each with a top market share*. Prolonged
inflation resulting from soaring raw materials prices and other factors are
causing more consumers to want to save money, and consumers are
expected to look toward more reliable brands they see value in.
Against this backdrop, in FY2022, net sales of the confectionery andfoodstuffs business amounted to 74.3 billion yen, up 3% compared withFY2021. Despite price revisions and efforts to increase profitability,
operating income fell by 1.7 billion yen over FY2021 to 1.5 billion yen due
to the impacts of soaring raw materials and energy prices.

Net sales(Billion yen)
80
60
40

73.3

72.4

74.3

2020

2021

2022

20
0

Operating income

Target for(Billion yen) ■ Operating income
8

Operating income to
net sales ratio

10.0

(%)
10
8

6

6

4

4.5
6.1

0
2020

4
2.1

3.2
*INTAGE Inc. SRI+
Amazake, Cocoa, Hotcakes Markets (April 2021 to March 2023; estimated cumulative sales
amount)

2030

8.3

2

(FY)

2021

2

1.5
2022

0
2030

(FY)

Medium- to Long-Term Strategy■ Domestic Confectionery BusinessIn the candy category, which generates excellent profitability, we will
improve the net sales weighting and increase the operating income to net
sales ratio for each number of items. We will increase the net sales
weighting of our main brands HI-CHEW and Morinaga Ramune to improve
the operating income to net sales ratio of the confectionery business.
Moreover, for the biscuits category, which has been growing, we will
boost production capacity and introduce products with high added value.
In the chocolates category, we will strengthen brand power bypromoting a communication strategy in line with new packaging
formats and targets centered on DARS and Carré de chocolat.

■ Domestic Foodstuffs Business
For Morinaga Amazake, Morinaga Cocoa, and Morinaga Hotcake Mix,
we will work on proposals to expand opportunities for easily enjoying
products in day-to-day life. We will achieve net sales growth by
expanding communication and sales promotion that help spark
42

demand for Morinaga Amazake as a product for replenishing water,glucose, and salt for daily health management and during increasingly
hot summer temperatures; for Morinaga Cocoa as a product thatprovides not only physical but also emotional nourishment; and forMorinaga Hotcake Mix as a product with excellent cost performanceand that captures demand among consumers for cost cutting.

2021 Medium-Term Business Plan●

Candies

Biscuits

Chocolates●

Strengthen sales promotion efforts for HI-CHEW andMorinaga Ramune
Develop products to meet the needs of changed lifestyles
and stress reduction due to the COVID-19 pandemic●

Increase the production capacity of Morinaga Biscuits
and develop new products●

Improve the operating income to net sales ratio andsecure sufficient sales scale by reviewing the product,sales channel, and communications strategies

Introduction

Future Vision andPath to Achieve It

Value Creation
Strategy

Sustainable
Management

Governance

Financial
Performance

Status of Efforts in FY2022
In FY2022, the candy category was in a recovery trend, with theoverall market growing 9%* compared with FY2021. In this context,
sales of HI-CHEW, which offers an appealing texture, continued
to perform well even after two price revisions, far exceeding theprevious year’s results. Morinaga Ramune posted record high sales
as we rolled out products for students preparing for entrance exams.
In the biscuits category, while the overall market remained strong, up
3%* year on year in FY2022, Morinaga Biscuits posted record highsales thanks to proactive promotions centered on Moonlight and thesuccess of Marie’s 100th anniversary initiatives, despite temporary
product supply constraints due to the planned shutdown ofproduction to accommodate expansion work on production lines. In
the chocolate category, where the overall market was sluggish, down
1%* compared with the previous year, sales of Carré de chocolat
were below the previous year’s results, and sales of DARS were on
par with the previous year’s results, as they could not escape thechallenging environment. We will review our tactics to re-expand
sales in the autumn of 2023. Sales of Chocoball, which was promoted
to commemorate the 55th anniversary of its release, exceeded theprevious year’s results.
In the foodstuffs business, to strengthen both Morinaga Amazake
and Morinaga Cocoa as health brands, we continued to promote theirfunctional value, such as airing TV commercials for Power of Cacao/
Cocoa Powder, which was renewed as a food with functional claims,
but net sales fell below the previous year’s results. In FY2023, we will
stimulate demand through initiatives focused on the 50th anniversaryof Morinaga Amazake.

First new commercial in the Morinaga Biscuits series in 13 years

TV commercial for Power of Cacao/Cocoa Powder, which was renewed asa food with functional claims

In the confectionery and foodstuffs business, we will roll out
wellness products to meet a broad range of needs and improvebusiness profit through high-value-added products.

*INTAGE Inc. SRI+
Candy/Caramel, Biscuit/Cracker, Chocolate Markets (April 2022 to March 2023; estimated cumulative sales amount)

Becoming a Wellness Company
For the domestic confectionery business, we will provide value to“health of mind and body” available only through product groups
that are easily enjoyable. In the spring of 2023, we completed thenationwide release of two products. First was Chocolate Chip
Cookie 50% Less carbohydrates and Almond Cookie 50% Less
carbohydrates, which are made using half the carbohydrates of
conventional products, while maintaining the deliciousness ofMorinaga Biscuits, and second was Power of Cacao/Chocolate, a foodwith functional claims, containing cacao polyphenols (as flavanols),
which have been reported to improve peripheral blood flow reduced
due to cold conditions and keep the surface
temperature of the hands warm. These releases
allow us to focus on providing even greater
health value.
In the domestic foodstuffs business, we
are working on product development withenhanced functional value leveraging researchoutcomes on materials amassed over the years.
In February 2023, we launched Amazake 30%
Amazake 30%
Less carbohydrates, featuring 30% lessLess carbohydrates

Chocolate Chip Cookie
50% Less carbohydrates

Almond Cookie
50% Less carbohydrates

carbohydrates than the top brand Morinaga Amazake, along with
Hotcake Mix Plus, a food with a nutrient function that contains
Vitamin D in addition to calcium and iron.
To realize the 2030 Vision, we will continue to increase the healthvalue of a wide range of products through the development of
products unique to the Group that combine the results of researchand technology on ingredients with deliciousness.

*Unlike food for specified health uses, this product has not undergone an individual review by the Commissioner of the Consumer Affairs Agency. People should eat a well-balanced diet based on
staple foods, main dishes, and side dishes. This product is not intended to diagnose, treat, or prevent any medical conditions.

Morinaga Group INTEGRATED REPORT 2023

43

R&D Strategy
What we are aiming for in 2030
We will create new customer value for the future based on technology,enhance development from a medium- to long-term perspective, and support
company-wide strategies and businesses in a cross-functional manner.

Shinya Mori
Director,
Managing Executive Officer
Responsible for R&D Center[Initiatives for target achievement]
In addition to promoting “deepening of existing technologies” and“exploration of new technologies,” we will work to create and utilize
intellectual properties to enhance corporate value.

R&D

Continuing to take on the challenge of“exploration of new technologies” while
promoting “deepening of existing technologies”

R&D Strategy Aimed at Achieving the2030 Vision

Strategy 1Long term

To realize the 2030 Vision, we will promote initiatives in line with thefive strategies shown in the figure at right to create new value
through linkages between management and business strategies. Of
these five strategies, we will promote the following initiatives for
Strategy 2: United States, Strategy 3: Wellness, and Strategy 4: New
Value Creation.

For HI-CHEW in the United States, we are expanding our productlineup around the keyword healthy by developing technologies
that replicate the taste of real fruit with natural flavors and sugar
substitute technologies to meet local needs. Against this backdrop,
we established a laboratory in the United States in 2022 to further
enhance our R&D capabilities locally. By linking local marketing andproduction systems to R&D functions in Japan, we will accelerate
product development for the U.S. market. We will develop brandextensions and wellness products to grow sales of HI-CHEW anddevelop the jelly drink Chargel in the United States to provide newvalue to the U.S. market.

Short term

■ Enhancing product development for the U.S. market

Strategy 5

Update the threemain technologies●

Sustainability

Jelly drink technology● Confectionery technology
in sub-zero temperature● Soft candies technology●●●

Strategy 4

Strengthen our growthstrategy in the

New value
creation

Initiatives for speedy productdevelopment, productimprovement, and cost savingsin existing domains

Existing domains

Development ofcontainers
Utilization of waste

Changeover of main raw materials
to sustainable ones

Strategy 2

United States●

Strategy 3●●●

Deep dive into
“health of mind”

SAI MEAT

PassienolTM

Strengthen our
growth strategy

Wellness

Food withfunctional claims

New domains■ Enhancing development for the wellness domain
In the wellness domain, we are enhancing the development of
products that contain proteins and lactic acid bacteria, products with
reduced carbohydrates and calories, and foods with functional
claims. In FY2022, we launched Morinaga Biscuits featuring 50%
less carbohydrates and in Jelly with functional claims. We are also
working to create new value by utilizing the food ingredients andfood processing technology developed originally by the Group.
Passienol™, a food ingredient developed in-house, is rich inpiceatannol, which can activate longevity genes (sirtuins). We will
expand research on sirtuins and contribute to more people who feelyounger than their actual age.

U.S. laboratory
conducting R&D■ New value creation using new development methods
In collaboration with universities and other organizations, we conduct
texture and sensibility research using biometric measurement andsubjective evaluation data* at the time of eating to co-create newvalue. In 2023, these research results are being used to describe
HI-CHEW in TV commercials (texture of happiness) and marketingmeasures for Choco Monaka Jumbo (Jumbo Smile Project).

Measuring cerebral blood flow
as part of sensitivity research*Data that measure emotions from eating by having subjects answer a mood survey containing words that express emotions (e.g., happy, refreshing, unpleasant)44

Introduction

Future Vision andPath to Achieve It

Value Creation
Strategy

Sustainable
Management

Financial
Performance

GovernanceIntellectual Properties
Basic Policy
We have established the following basic policy on intellectual properties aimed at realization of the 2030 Vision.

1) Protection of the Intellectual Property Rights of Others
2) Acquisition of New Intellectual Property throughIntellectual Property Intelligence*3) Robust Management of the Intellectual Property Portfolio
We will explain 2) and 3) in greater detail below.

*Activities to collect and analyze information on intellectual properties and use it for decision-making
in business

Acquisition of New Intellectual Property through Intellectual Property Intelligence
We use information analysis tools to identify trends in technologies
and intellectual properties inside and outside the Group, and actively
invest in intellectual properties to build new business models. In
terms of patents, we have increased the number of applications
related to “health of mind, body, and environment” to grow thewellness domains (see the figure at right). We will continue to
implement both proactive and defensive intellectual property
strategies with health as the keyword and work to create value by
utilizing this information in new ways of marketing.

Ratio of Patent Applications Related to Health (%)
100

100

91

90

2020

2021

72
50

50

44
28

0
2015

2016

2017

2018

2019

(FY)

Robust Management of the Intellectual
Property Portfolio
To realize the 2030 Vision, we will build a robust portfolio ofintellectual properties combining multiple intellectual properties
and intellectual assets. We formulate intellectual property strategies
for each business domain and aim to create and utilize intellectual
properties and intellectual assets in a multifaceted and strategicmanner. The figure below shows the causal path of the Jumbogroup, the flagship brand of the frozen desserts business part of the
focused domain category. It shows how the creation and utilizationof intellectual properties and intellectual assets leads to theenhancement of corporate value.

Causal Path Example—Frozen Desserts Business: Jumbo Group
PurposeThe Morinaga Group willcontinue to create healthy
foods that can be enjoyedbeyond generations, thereby
bringing smiles to the facesof people around the world
now and in the future.

Customer needs

Want something deliciousthat satisfies the appetite
Want to enjoy a texture thatyou can’t get enough ofWant to share happinesswith those around you

Creation and utilization of intellectual
properties and intellectual assets
Factors behindcompetitive strengths/
what sets Morinaga apart

Creation andutilization strategy

Technology and trust
built up since 1899

Technological development
for further crispness andsecuring of patent rights
Establishment ofa patent network

Amassed knowledgeof chocolate
Flexible thinking to use spraycoating technology for Monaka
Crisp texture achieved by delaying
the moisture absorption of monaka(wafer) using the “Chocolate Wall”
Accumulation of knowledge on“crisp comfort” throughtexture and sensibility research
Freshness marketing
utilizing weather data
Sales capabilities with a large
network of stores selling the productSound logo andTV commercials
50 years of sales data andconsumer survey results

Greater accuracy offreshness marketing
Management of know-how
and trade secrets

Deepening of “food texture
and sensitivity of marketing”
Research and marketing

Increased recognition of
product names and features
Trademarks and copyrights

Fun advertising that
increases the efficiencyof brand recognition
Recognition and reputation

For many years, the Group has been working to maximize the brandvalue of the Jumbo group by creating and utilizing its intellectual
properties and intellectual assets. We will continue to promote our

Value provided
to customers

Impacts on society

Makes
everyonesmile

Smiles forthe future

Jumbo satisfies
one’s appetite

Enjoy various texturesin every bite.
(Crisp texture of monaka
wafer and chocolate andthe creamy smoothnessof ice cream)

The ice cream inmonaka wafer
can be easily shared

Able to buy anywhere andanytime when you want it

Toward enhanced
corporate value

Increase net sales

Grow market share

Increase operating income
to net sales ratio

Increase market capitalization
Increase P/B ratio

creation and utilization strategies to generate value for society andenhance corporate value.

For more details, please refer to our corporate website “Intellectual Property.”▶ https://www.morinaga.co.jp/company/english/rd/ip.html
Morinaga Group INTEGRATED REPORT 2023

45

Structural Reforms of
Production Functions
What we are aiming for in 2030
We will overcome labor shortages and establish a powerfulprofit structure to allow us to compete around the world.

Shuji Watanabe[Initiatives for target achievement]

Senior Executive Officer
General Manager of
Production Headquarters

We will promote the changeover to smart factories under the
keywords of visible, connected, and resilient, and establish
a safe, reliable, and efficient production system.

External Environment Related to the Production Function
The external environment surrounding the Group has many factorsthat pose headwinds for production activities, such as labor
shortages due to a decline in the domestic labor force and soaring
costs, including raw materials and energy.
On the other hand, digital technologies such as IoT and AI are
rapidly evolving around the world and in the process transforming
society.
In response to the external environment, which is expected toremain severe, we must undertake structural reforms of production
functions using technology, strengthen the business foundation, andestablish a system for competitive advantages.

Changes in the External Environment Related to
Production Functions●

Headwinds●

Threats

Decline in the domestic labor force
Inflation and the rising cost of services(e.g., raw materials prices, energy prices,personnel cost)

Risks

●

Difficulty procuring raw materials andfluctuating market prices due to climatechange and geopolitical risks

Tailwinds●

Emergence of IoT and AI

Opportunities●

Evolution of robotics technology

Promoting Changeover to Smart Factories
The Group has continued to manufacture products with top priority
given to ensuring excellent quality, safety, and reliability. To realize
the 2030 Vision, we will further evolve our safe, reliable, andefficient production system built as a food manufacturer for the next
generation. One such initiative is the changeover to smart factories.
We will combine our long-standing technologies with digital datafrom manufacturing facilities to increase the stability of operations
and improve operational efficiency.
The keywords for smart factories are visible, linked and resilient.
By automatically collecting data using IoT and sensing technology
on the operation of manufacturing facilities, which was previously
aggregated manually, we can visualize the status of operations inreal time. In addition, by connecting to cameras installed on the
manufacturing floor, managers and members of the Production
Headquarters can connect to the manufacturing site anytime,
anywhere, and check the operation status on video. Furthermore,
we are working to develop a predictive maintenance system toprevent serious failures by incorporating special sensors into
manufacturing facilities, and to build a system to deal with problems
more quickly by recording the time before and after shutdown witha drive recorder and capturing the cause on video. Through these
efforts, we will achieve stable operation of manufacturing facilities.
In addition, many people at Morinaga are working to ensure stable
operation of manufacturing facilities, such as data aggregation, data
analysis, and maintenance. We plan to further increase production

46

Overview of Changeover to Smart Factories

VisibleLinks
Information
sharing andremote support

Real time
operation graphJapan

Operation
Quality
TroubleOverseas

AI and predictive maintenance

Graphing
Analysis
Accumulation

Main controllers

Controllers
Cameras formonitoring ofabnormaloperations

Resilient

FacilityA

Facility
B

FacilityC

Increase utilization rateof good products
Prevent prolonged
stoppages

Introduction

Future Vision andPath to Achieve It

Value Creation
Strategy

Real-time operation analysis
volume to achieve the 2030 Business Plan, which is expected toincrease the operational burden as well. Smart factories will also
contribute to the higher efficiency of these operations.

Sustainable
Management

Governance

Financial
Performance

Able to monitor the manufacturing floor via the cloudThrough these efforts, we will achieve stable operation of
manufacturing facilities; improve operational efficiency; andestablish a safe, reliable, and efficient production system.

Looking Ahead
In FY2022, we repeated development and operation tests at Takasaki
Morinaga’s No. 3 Plant to create the optimal model in line with theactual conditions on the manufacturing floor. In FY2023, we will deploy
this model to all production sites in Japan and build an environment
connected to the cloud, including the administrative departmentsof the Head Office. We visualize the operating status of eachmanufacturing floor throughout the Production Headquarters to speed
up daily production management and improvement activities andimprove quality. We will also look to roll out this model to overseas
production sites.
We will use IoT to automatically collect and amass a large amount ofdata such as on equipment operation status and worker information.
By combining this data with AI technology, we will focus on enhancing
the functions of smart factories for further stable operation andoperational efficiency.
In addition to system development, it is important to shift fromconventional business processes to operations that utilize smart

Discussing with operation supporting tools
factory systems. We will continuously conduct employee training sothat the transition and establishment of new business processes
proceed smoothly.

Rollout to Overseas Production Sites

Morinaga America Foods, Inc.
(North Carolina)

Morinaga (Zhejiang) Co., Ltd.
(Zhejiang)
Taiwan Morinaga Co., Ltd.
(Taipei)Morinaga Group INTEGRATED REPORT 2023

47

DX Strategy
What we are aiming for in 2030
We will strategically introduce and utilize digital technologies tostrengthen the business foundation and competitivenessaimed at achieving the 2030 Business Plan.

Takashi Hirakue[Initiatives for target achievement]

Director, Senior Executive Officer
Responsible for DX Promotion
Division

To lay the foundation for data-driven management, we will
promote the standardization, efficiency, and advancementof operations and IT systems through digitalization.

Medium- to Long-Term Strategy and Promotion Structure
activities on a global level. This will enable timely and multifaceted
analysis and support management’s decision-making.

Medium- to Long-Term Strategy
There have been advancements in communication technology anddramatic changes in the business environment brought about by thedigitalization of society, such as AI, big data, and IoT. Given this,the Group believes that it is essential to invest in digital technologies
to increase productivity and strengthen its business foundation. In
FY2021, we established the DX Promotion Division to advance our
DX strategies.
We aim to build an IT system and data infrastructure as a robust
and flexible business platform that supports sustainable growthby balancing the standardization of operations and strengthening
governance at the global level with the advancement of operations. To
support the growth of our overseas business centered on the UnitedStates using a digital platform, we will expand the reach of our core IT
systems to include overseas businesses. At the same time, we will
standardize the quality of various data generated from business

Strengthening the Promotion Structure
In April 2022, we introduced the recruitment-based DX Ambassador
system to increase our employees’ IT literacy. DX Ambassadors holdstudy sessions and other events according to the issues of theirrespective division to build a foundation for IT utilization. Furthermore,
to enhance the development of human resources specializing indigital technology, we are working with the Human Resources
Division to expand the options for self-led study related to digitalutilization.
In February 2022, we were certified as a “DX Certified Business
Operator” under the DX Certification System* established by the
Ministry of Economy, Trade, and Industry.
*A system run by the national government thatrecognizes businesses preparing for thepromotion of DX

Results of Initiatives and Future Direction
Results of Initiatives

Looking Ahead

We conducted the following initiatives in FY2021 and FY2022.
Purpose

Initiative

Outcomes

Reduction of work hours
for updating procurement
management tables

Streamlining of the update of
raw materials procurement
management tables in the
Procurement Sectors with RPA*1

RPA implementation
reduced processing time
(approx. 500 hours/year)
and human error

Reduced input work for
expense processing● Reduced work hours
for expense approval
operations

Process transformation bydigitizing paper-based
payment processing

Linked Concur Invoice*2 andRemota*3 to digitize expense
processing operations andsave labor in input andapproval operations (approx.
6,300 hours per year)●

Initiated structural reformof production functions(ensuring safety andreliability, stable
operation, and improving
operational efficiency)

Start of changeover tosmart factories*4
Introduction at Takasaki
Morinaga and Mishima
Factory

Visualized factory
operation status using IoT
for early detection ofproblems and remote
tracking of work progress●

Operational transformationof the Accounting Sectors

Introduced various SaaS*5
in the Accounting Sectors

Visualized and standardized
some accounting operations
and ascertained the actual
status of accounting
treatment for the entire Group●●*1 RPA: Robotic Process Automation. Technology for automating business processes andtasks performed on computers for humans*2 Technology that automates business processes such as invoice payment requests and approvals*3 Technology that automatically reads the contents of invoices and converts them into text using AI*4 Using IoT and AI technologies to integrate technology and digital data of manufacturing
facilities to ensure stable operations and increase production efficiency*5 SaaS: Software as a Service. A service that allows users to utilize software on the cloud via a network48

To realize the 2030 Vision, we must continue to develop
high-value-added products globally. To improve the quality and speedof value creation and strengthen business competitiveness, we will
work to standardize and improve the efficiency of each business
operation, including product development, procurement, production,
logistics, and sales. First, we are working to rebuild the productdatabase system to increase the efficiency of product development
operations and realize seamless information sharing and utilization ofdevelopment data across businesses and countries. In Japan, thesystem is scheduled to begin operation in FY2023.
We will support the evolution of product development operations
by utilizing digital technology and help to strengthen businesscompetitiveness.

Introduction

Future Vision andPath to Achieve It

Sustainable
Management

Value Creation
Strategy

Governance

Financial
Performance

Human Resources Strategy
What we are aiming for in 2030
We are working to achieve employee happiness by encouraging their autonomous growth
based on mutual relationships of trust with the Company and to continuously generatevalue for society, all in an effort to achieve the Group’s sustainable growth.

Masaaki Takahashi[Initiatives for target achievement]

Senior Executive Officer
General Manager of Human
Resources Division

We will advance the promotion of diversity, humanresources development, and health management
to maximize the value of human capital.

Medium- to Long-Term Strategy
Based on our corporate philosophy, we have established the 2030
Vision with the aim of being a sustainable company that continues
to grow. The driving force behind this aim is our people, and we will
promote human capital management to maximize the power ofour people, that is, the value of human capital. Specifically, we will
promote a human resources strategy linked to the 2030 Business
Plan and invest in human capital.
Diversity & Inclusion (D&I) is positioned as an essential initiativeof the 2030 Business Plan. By leveraging the individuality of each
employee and creating a diversity of knowledge from the diverse
individuals working together, we will enhance our ability to respond tochanges (resilience) and promote the creation of new value (innovation).
At the same time, we will advance self-sustaining career development
and promote the active participation of our diverse workforce.
In terms of human resources development, in the 2030 Business
Plan, we intend to transform our business portfolio, implement

structural reforms to improve profitability, and strengthen thebusiness management foundation, and we believe that it is necessary
to develop human resources who can evolve and transform various
operations. We will actively invest in human capital to develop leaders
who will drive such evolution and transformation, as well as humanresources who will execute each strategy. Furthermore, regarding thepromotion of health management, we will advance various initiatives
to maintain and improve employees’ “health of mind and body” andrealize a work environment where each employee can maximize
their abilities.
Through the above, we will maximize the value of human capital,
contribute to a sustainable society, and enhance the corporate valueof the Group in a sustainable manner.
For details on promotion of health management, see pages 56 and 57.

Promotion of Diversity and Inclusion
For all employees to embody our Diversity and Inclusion Policy andthe five guidelines, the Group is advancing initiatives to promote
understanding and encourage concrete actions per the policy.
In FY2022, to promote understanding, we continued to conduct
training to spread the Diversity and Inclusion Policy amongsupervisors, in addition to holding lectures on psychological safety,
and organized training on unconscious bias for executives and all
employees in an effort to improve basic skills and obtain knowledge
useful for promoting D&I.
Regarding concrete actions, supervisors took the lead in confirming
issues at each workplace and created action plans and put them into
practice. Furthermore, to accelerate initiatives in the Production andOverseas Sectors, we conducted interviews with managers andfollowed up on the formulation of action plans.
In addition, as a prerequisite for promoting D&I, the Human
Resources Division is focusing on various initiatives to advanceself-sustaining career development and encourage the active
participation of women and seniors to increase the momentum for all
employees to play an active role.

The Diversity Promotion Office of the Corporate Strategy Divisionand the Human Resources Division will continue working together toadvance D&I.

Program to Spread and Implement Diversity and Inclusion
Companywide
survey*Training for Supervisors (370 persons)Lectures andcase studies

Discussions onwhat we want to be
Planning ofaction plans

Sharing
examplesMeeting at workplaces

Sharingacross thecompany

Diversity and Inclusion Policy▶ https://www.morinaga.co.jp/company/english/sustainability/policy/pdf/policy_diversity.pdf

Implementation
at workplaces

Sharing inworkplaces

Lectures
Discussions on what wewant to be and other issues
Reestablishment ofaction plans*Survey on Corporate Philosophy and Diversity

Morinaga Group INTEGRATED REPORT 2023

49

Human Resources Strategy

Promotion of Self-Sustaining
Career Development (Protean Career)Will

To promote self-sustaining career development among employees,
we conducted e-learning on the protean career, to build career
proactively and flexibly, for approximately 2,400 employees, including
those from Group companies, in FY2022, focusing mainly on theconcept behind the protean career. Ahead of e-learning, the President
sends out a message on self-sustaining career development to raiseawareness among employees. In October 2022, we established theCareer Guidance Office, where staff from the Human Resources
Division with career counseling qualifications provide career guidance
to employees that request it. Prior consultation with superiors is not
required for guidance, and we have put in place a system that allows
guidance both face-to-face and online, making it easy to use. In
FY2023, we intend to conduct new training aimed at improving
supervisors’ career support skills. By learning key points in dialogue
with subordinates and methods for creating opportunities, we aim to
educate supervisors on how to establish the knowledge and skills
necessary for providing career support to their employees.

What you want to do/achieve
・Values to honor

Can

Must

What you are capable of,what you possess

What you are expected to do(knowledge, skills, experience)(expectation from the company,
improvement, and changes)

・Characteristics
and traits

・Barriers to overcome
・Roles to fulfill

Ideals for self-sustaining career development▶Our ideal career development—the protean career—ischaracterized by the ability to flexibly transform oneself in theface of environmental changes and enhance one’s skills andknowledge with the mindset that a career is individually driven.
▶We seek to integrate “Will, Can, and Must” by ensuring that
employees know (identity) and change (adaptability) themselves.

Promoting the Active Participation of
Senior Human Resources
With the decline in the domestic labor force, there is a growing needfor seniors to play an active role at work. With this in mind, we began
conducting training mainly for employees in their 50s in FY2022.
Specifically, we conducted unlearning training that provided an
opportunity to rethink “Will, Can, and Must” in line with the conceptof self-sustaining career development. In FY2022, 43 people took thecourse, and in FY2023, 80 people are scheduled to participate. Afterthe training, individual interviews will be held to continuously follow
up on behavioral changes. Furthermore, with the aim of grasping thecurrent situation regarding the active participation of senior humanresources, we surveyed the heads of each division about the degreeof participation in the workplace by senior human resources ages
56 and older. In FY2023, we will implement initiatives to resolve
problems based on the results.

Human Resources Development
We have identified an ideal employee profile and required skills andare advancing employee development and skill building initiatives
accordingly. In addition to hierarchical training and selective training,
we offer human resources development programs to improve the six

Ideal profile ofan employee

required skills, which enable us to enhance human resources
development. Moreover, we will implement the various initiatives
listed on the page at right, including succession planning.

Employee who is capable of grasping andthinking through the essence of mattersfrom a wide perspective

Employee who possesses an entrepreneurial
mindset and looks outwardly, and can makedecisions from a higher perspective

Employee who can act independently toembrace challenges without being content
with the current situation

Employee who is capable of producing results
by engaging others to achieve the Vision

Identifying challenges

Planning and development

Embracing challenges

Execution

Nurturing and self-development

Developing efficient organizations

Required skills

50

Future Vision andPath to Achieve It

Introduction

Value Creation
Strategy

Sustainable
Management

Financial
Performance

Governance

Succession Plan
We are implementing initiatives from a medium- to long-term
perspective to continuously develop candidates at all levels.
For officer candidates, we offer one-on-one coaching with an outside
professional. Through this one-on-one coaching, candidates are given
opportunities to deepen self-understanding, such as how to be a leader.
We continue to develop human resources who meet the Group’s
management personnel requirements, including leadership skills.
For general manager candidates, we conduct off-site training
and Morinaga Recipe Training*1 that teaches the framework forproblem-solving. In off-site training, discussions are held in a groupsetting with participants of the same rank from other companies
on the theme of solving social issues, with the aim to broaden
perspectives and understanding of society and to foster co-creation
with outside parties. Morinaga Recipe Training was attended by 42
employees in FY2022.
For manager candidates, we conduct training for future leaders
targeting select employees in their 30s to develop the eightrequirements*2 of future leaders over a nine-month period. This
training program has been held for four terms. In FY2022, 14
employees attended, bringing the cumulative total to 49. There are
now cases where participants have gone on to become managers.
We will continue to promote these initiatives.

Training for future leaders*1 Training unique to the Group in which the steps for solving problems are summarizedaccording to the Japanese characters for “mo,” “ri,” “na,” and “ga”
*2 Problem formation, problem solving, innovation and creation, risk-taking and growthpotential, independence and pioneer spirit, persuasiveness and influence, listening andinterpersonal relationships, guidance and development

Securing and Developing Human Resources with Advanced Expertise
Recognizing that they are indispensable in each business domain for
the Group to achieve sustainable growth, we will work to secure
human resources with advanced expertise and develop them overthe medium to long term. In FY2022, we defined human resource
requirements for DX, accounting, and global human resources as key
areas. This definition spans several levels, from the development andgrowth phase to the advanced specialization phase. We have set therequired number of people every three years until 2030 and areworking to develop and secure human resources following this plan.
In FY2023, we have begun providing expert-level training options
based on the definition of human resource requirements. In addition
to continuous learning centered on e-learning, the options consistof training that imparts a wide range of knowledge. Based on theconcept of self-sustaining career development, we respect theindependence of employees and openly recruit some participants.

Human Resources Requirements Definition Items and Details (Examples)
Area

Budget management●

Details

Accounting
human resources

Accounting

●

Area

Knowledge and skills of
accounting and tax matters

Language proficiency

Performance
management skills fromthe perspective ofmanagement awarenessof capital costs

Finance
Payment and disbursement,
and cash management● Financial knowledge● Financial strategy
planning, etc.
●

Recommended qualifications
Certified public accountant
Tax accountant● USCPA● The Official Business Skills
Test in Bookkeeping● FASS exam●●

Intercultural understanding Global business experience Recommended qualifications
Practical trading businessexperience● Experience as an
expatriate● Understanding of local laws,
regulations, and systems

Details●

Globalhuman resources

Ability to perform workin English● Mastery of a second
language●●

Understanding of othervalues such as customs,
culture, political
economics, and religion

Through the implementation of these human resources strategies, wewill establish an environment where diverse human resources can maximize

TOEIC
STEP Eiken (English)
Other language proficiency
tests
●
●

their abilities, while building a relationship of mutual trust between the
Company and employees and achieve sustainable growth for the Group.
Morinaga Group INTEGRATED REPORT 2023

51

Special Feature

Employee Roundtable Discussion

Toward Achieving Our 2030 Vision
With an eye on becoming a Wellness Company as part of the 2030 Vision,
employees from various divisions that support the Group sat down to discuss
how they perceive and act on the Corporate Philosophy and the 2030 Vision,
along with how they envision the future.

How do you understand the Corporate Philosophy and Purposeand go about achieving them in your daily work?
Morii: I work in sales, so the Corporate Philosophy, including our
Purpose, represents our basic stance and foundation. Even in actual
business negotiations, we cannot gain customer empathy unless weshow an awareness of contributing to society. This is why I strongly
feel the importance of understanding and personifying our Corporate
Philosophy and Purpose. One of the values in our Corporate
Philosophy is “value ties between people.” I feel that there is alimit to what one person can do in sales, so in practice I value theconnections between people and between companies. This includes,for example, having researchers attend business negotiations andcollaborating with other companies. In addition, I am conscious offormulating sales strategies that emphasize regional characteristics
and issues, and I try to develop them in cooperation with thegovernment and other partners in each region.
Shimizu: I work in production,
where we take actions based on anawareness that the quality of our
products forms the very relationshipof trust with customers. I place great
importance on “pursue quality withintegrity,” which is part of the vision in
the Corporate Philosophy. I’m always
mindful of whether I can provide
my family, friends, and loved ones
Production Technology
with our products with confidence,
Development Division
Production Headquarters
including in terms of quality.
Joined Morinaga in 2002
Confectioneries tend to bring out a
Takayuki Shimizu
child-like grin in just about all people,

regardless of age, nationality, culture,or values. I hope to increase these
nostalgic smiles, and I believe that
this will lead to the realization of our
Purpose. To do so, of course, wemust be sincere so that we ourselves
can continue to smile.
Iwahashi: The Group’s Corporate
Philosophy and Purpose are not
Sales Strategy Division
Sales Headquarters
imposed by top management. They
Joined Morinaga in 2007verbalize what has been handed
Kazuki Morii
down from generation to generation,
during more than 120 years ofhistory. I feel that they also put intowords “Morinaga’s uniqueness.” From what Mr. Morii and Mr.
Shimizu have just said, I’m convinced that employees have acommon understanding of this and that each is taking their own
specific actions. I work in corporate strategy with members toformulate strategies, while facing day-to-day concerns, but there is no
single solution to realizing the position that Morinaga wants to be in.
The Corporate Philosophy functions as a compass to confirm that ourplans are taking us in the right direction.

How does your day-to-day work connect toMorinaga changing into a Wellness Company per the 2030 Vision?
Nakamura: I work in marketing. We are the flagbearers responsible
for coordinating with all the relevant departments involved in ourbrands. In general, when we hear the term “wellness,” we tend to
think only of foods with health functions, but the Wellness Company
advocated by the Group has three perspectives: “health of mind,
body, and environment.” In the spring of 2023, the Jumbo brand that
I’m in charge of added a new technology that is a “chocolate wall” toencase the ice cream, locking in the “fresh crisp texture” for much
longer thanks to the technological evolution that delays the transfer of52

moisture to the wafer. Taking this opportunity, we redefined the valueof Jumbo not only as “crisp texture” but also as “the smile created bythis crisp texture (contribution to health of mind).” In turn, we started
disseminating new information as part of the Jumbo Smile Projectso that customers will know about our freshness and crispness
marketing activities. I believe that connecting customers with people
involved in Jumbo and connecting them to co-creation is an importantjob of marketing.

Introduction

Future Vision andPath to Achieve It

Value Creation
Strategy

Ominato: As people’s health awareness has increased substantiallyin the United States due to the COVID-19 pandemic, the launch of
Chargel in 2022 was of great significance for Morinaga. As a new
category product that allows customers to easily and deliciously
consume nutrients that form the basis of “health of body” andprovides a sense of satisfaction after eating, we hope that manycustomers in the United States will try Chargel. There are a variety offunctional beverages in the U.S. market, including energy drinks. As
someone involved with R&D in the United States, I’m inspired tolearn from the products already on the market, and I think about theelements that will lead to the business growth of Chargel every day.
We are conducting R&D activities while imagining that in 2030,
Chargel will be the drink closest to the “health of body” forcustomers in the United States.

Sustainable
Management

GovernanceShimizu: In production, we arepromoting the changeover tosmart factories that utilize digitaltechnologies such as IoT to undertake
safe, secure, and efficient production.
This initiative is directly linked to“health of environment.” Realizing
efficient production will lower CO2

Financial
Performance

Morinaga America, Inc.

U.S. Laboratory
emissions by reducing the amount ofJoined Morinaga in 2001
electricity and city gas used. It will
Kimihiro Ominato
also lead to a reduction in food loss
and waste caused by equipment
troubles. The external operating environment is constantly changing,and I believe that it is important to take on challenges without fearof failure.

How do you perceive your own futurewhen Morinaga changes into a Wellness Company?
Iwahashi: Since joining the Company, I’ve always said that I want toOminato: To become a global

do a job that my family can be proud of. Transformation of the Groupwellness company, R&D activities

into a Wellness Company also means that I will be able to embody

need to look at the world even morethis desire. With the support of my family, I can immerse myself inthan they do now. For this reason,

my work, and as a result, I can proudly tell them about my work, andcollaboration among R&D

my family—my closest customer—will say “great.” This is the futurelaboratories on a global scale is

I’m aiming for. I believe that if everyone at Morinaga aims to be aimportant. For example, I’d like to

Wellness Company, the Company will grow even faster.

promote dynamic R&D that allows

Nakamura: As with the Company’s wellness, I want to engage

technologies and knowledge

customers with the state of mind of “realizing a rich and bright life

obtained at one R&D laboratory to

based on a vibrant mind, body, and environment” and create products

be seamlessly deployed at the others.

and services that are needed by the world. I’d like to work from aMorii: As an employee of Morinaga, I want to make everyone

higher perspective so that I can identify changes in the externalsmile, from colleagues to stakeholders involved in the Group,

operating environment and be able to respond sensitively and flexibly

while valuing connections with people. I’d like to connect what I

to customer needs and issues. I’d also like to take the initiative in

learn in my daily work to my own growth and acquire the ability

creating a work environment that creates positive synergies.

to pave the way toward the smiles of our customers even in a

Corporate Strategy Division
Joined Morinaga in 2011

Takafumi Iwahashi

Shimizu: In production, many people

drastically changing environment. In this roundtable discussion,

with different employment types andI feel that there is tremendous enthusiasm of the Group that isnationalities are working side by side.

changing into a Wellness Company. I’d like to connect the growing

While embracing diversity, I’d like topower of each department—similar to a relay race—to fulfill our

promote the Company’s policies andCompany-wide commitment of becoming a Wellness Company

strategies flexibly and expansively. By

and play a role as a salesperson in delivering the commitment

providing products that are beloved

directly to customers.

by people around the world acrossgenerations and steadily passing the
Frozen Desserts Marketing
Division
Marketing Headquarters
Joined Morinaga in 2008

Nozomi Nakamura

baton to the next generation, we aim tobecome a company that can increase
the smiles of people around the world
through food.

Morinaga Group INTEGRATED REPORT 2023

53

Sustainable Management
Approach to Sustainable Management

55

Promotion of Health Management

56

Sustainable Value Chains

58

Conserving the Global Environment

60

Initiatives for Human Rights

64

Introduction

Future Vision andPath to Achieve It

Value Creation
Strategy

Sustainable
Management

Governance

Financial
Performance

Approach to Sustainable Management
Machiko Miyai

The Morinaga Group will enhance its overall sustainability
management to achieve its Purpose and the 2030
Vision with “Altruism” as the foundation, a tenet
valued by the Company’s founder.

Director, Managing
Executive Officer
Responsible for Sustainable
Management Division

Sustainable Management and Promotion System
Currently in the global community, environmental changes, which are
impacting business activities and increasing uncertainty toward thefuture, are taking place at an unprecedented speed. Other changes
involve intensifying social issues including climate change and therapid advancement of digitization. Under such conditions, we must
work from a long-term perspective and follow clearly defined tasks
to reach the position we aim to achieve through our Purpose and the2030 Vision. The Morinaga Group has been conducting business witha strong conviction toward contributing to society since its inception.
We will take a more proactive approach toward efforts aimed atrealizing a sustainable society, including achieving the SDGs as amember of the global community.
As organizations to promote these efforts, we established the
ESG Committee, which is chaired by the Representative Director,
President, and the Sustainable Management Division to support andpromote the entire Group’s sustainability and ESG initiatives. The
Sustainable Management Division serves as the secretariat for the
ESG Committee, with the heads of departments working to attain our

long-term targets for 2030 serving as committee members. The
Committee reports on and shares the latest societal trends related
to sustainability, as well as deliberates necessary items on policy,
planning, and responses to issues to achieve our Purpose and the2030 Vision.
We have set up five subcommittees under the ESG Committee.
Each subcommittee is chaired by a Director and comprises members
from relevant departments. Furthermore, we established theSustainability Advisory Board, with the participation of three outside
experts, to qualitatively improve sustainable business management.
Aimed at achieving the Long-Term Targets for 2030, we will steadily
implement activities for sustainability.
The Morinaga Group will continue to disclose the status andprogress of its activities as appropriate through the Integrated Reportand its corporate website, enhance transparency throughout theGroup, and strengthen responses to requests for disclosure of ESG
information from external organizations and business partners.

<Schematics of Sustainability Promotion>
Board of Directors

ESG Committee(Chairperson: Representative Director, President)

Advisory Body:
Sustainability Advisory Board

Secretariat:
Sustainable Management Division“Health of Mind”
Subcommittee

Sustainable Value
Subcommittee

Sustainable
Procurement
Subcommittee

Environment
Subcommittee

TCFD/TNFD
Subcommittee
Second Meeting of the
Sustainability Advisory Board

Relevant Departments and Group Companies

Co-Creation with Stakeholders Aimed at
a Sustainable Society
Resolving social issues related to business requires consistent efforts involving the entire
value chain. We believe that co-creation with stakeholders is essential to address issues suchas health management, sustainable value chains, conserving the global environment, andhuman rights. The Group has identified six stakeholders: customers, employees, business
partners, shareholders and investors, local communities, and the global environment. We willcontribute to the realization of a sustainable society by engaging in two-way communication
with stakeholders through our corporate activities and promoting collaborative initiatives.

Customers

Globalenvironment

Employees

Morinaga
Group
Local
communities

Business
partners
Shareholders
and theinvestmentcommunity

Morinaga Group INTEGRATED REPORT 2023

55

Relevant Stakeholders

Promotion of Health Management

Toward2030

Employees

To continue to be a wellness company, we will work tocreate a work environment that maintains and improves
our employees’ “health of mind and body.”

Basic Philosophy

Promotion Structure

Based on the Morinaga Group Declaration on Health, we support
efforts to maintain and improve employees’ “health of mind andbody.” By creating a work environment where employees canwork in good health and feel motivated, we aim to energize theorganization through improved employee vitality and productivity, as
well as to provide sustainable growth of the Group and better value
to society.

Morinaga Group Declaration on HealthAs a sustainable company that keeps growing, we arecommitted to promoting the health of each and every
employee working for the Morinaga Group to create food that
benefits a healthy mind and body and to contribute to therealization of a sustainable society where everyone can smile.

We have established the position of Chief Health Officer, who is
the officer in charge of the Human Resources Division and reports
directly to the Representative Director, President, and the Health
Promotion Committee, whose members include industrial healthstaff in addition to representatives from the Human Resources
Division and the Morinaga Health Insurance Society. Together, they
make decisions on the formulation of philosophies and policies,
and the consideration and implementation of measures. Persons incharge of health management and industrial health staff assigned tomajor business sites nationwide in Japan are responsible for rollingout specific measures to continuously address health issues facing
employees and their families and improve their health.
Representative Director, President
CHO (Chief Health Officer)
Officer responsible for Human Resources Division

1. We support each and every employee so that they canenhance their health awareness and independently maintainand improve their own health.
2. We seek to increase employee engagement by promoting
diversity management and supporting employee efforts andtheir autonomous growth.
3. We provide a work environment where our employees canwork in safety and comfort.

Health Promotion Committee (Chairperson: CHO)
Committee members: Human Resources Division, Morinaga Health InsuranceSociety, and a general occupational health physician
Cooperation
Corporate Strategy Division
Sustainable Management DivisionCorporate Communications Division

Supervisors of business sites
Heads of divisions
Health management staff
Industrial health staff

Dissemination of health management
information to internal and external
parties

Sharing of issues with all employees,
implementation of measures,alignment of awareness/knowledge levels

Targets and Initiatives
Employee Awareness Survey“Employees find their job meaningful and they are in goodmental and physical health at work.” Rate of positive responses:

80%

Health of Mind■

Promotion of “health of mind”

The term Kokoroku is used at Morinaga to define
the six building blocks behind the ideal state of“health of mind.” We hold seminars for
employees to understand and promote Kokoroku.
■

Measures for Mental Health

Relaxing
andfeeling at
ease

Feeling a
sense ofaccomplishment

Smilingandfeelingenergetic

Health of
Mind
Feeling
fully
engagedFeeling a
sense ofmeaningin lifecan easily seek out consultation.
Feeling
connected
to people■

Kokoroku
Six building blocks of“Health of Mind”

To improve self-management skills and raise awareness of mental
health, we regularly hold training for managers (employee care) andself-care seminars for all employees. The uptake rate of stresschecks has remained at 95% or higher since the introduction of thesystem, and we are using the results to provide opportunities for
employees to take notice of their own stress level and to improve56

the work environment through group analysis. In addition, we haveestablished dedicated points of contact for consultation inside andoutside the Company to create an environment where employees

Measures to Improve Stress Tolerance

We conducted training for increasing tolerance to stress using pulse
surveys with the expectation that it would lead to practical actions
by knowing about changes before and after the training. In addition
to the results of the pulse survey showing an improvement trend
in all items compared to before the training, more than 95% ofparticipants responded that they were “satisfied” with the content
of the training in the post-training survey.

Introduction

Future Vision andPath to Achieve It

Value Creation
Strategy

Sustainable
Management

Health of Body■

Labor Environment

Habit̶A Company-Wide Health Improvement Event

This year marks the 21st anniversary of the Morinaga Health
Insurance Society’s unique initiative called Habit,
in which employees set their own health-related
goals and improve exercise and dietary habits withthe aim of improving the health of employees andtheir families and improving their lifestyles. The
number of participants this year exceeded 1,900.
Voice of a Participant
Working to increase my sleep time and improve calorie intake during
Habit changed my perceptions of lifestyle habits and life rhythm. I willtake this opportunity to change my awareness from within myself andlead a healthier life.

■

Building Age-Friendly* Workplaces

The employees at our workplaces
represent a wide range of age
groups. The Group is focusing on
building age-friendly workplaces
where all employees, regardlessof age, can play an active role. For
Training for senior employees at a factory
example, to support the safety andfurther success of senior employees with a wealthof knowledge and experience, we are implementing
training and physical fitness measurement at the Group’s
factories, as well as our own fall prevention exercises,with the aim of ensuring that all employees can continue
to work safely and remain healthy for a long time.
*Age-friendly means that consideration is given to the uniquetraits of seniors and the elderly

Morinaga’s own fall
prevention exercises

Voice of a Participant
Training and physical fitness measurement
for senior employees became a hot topic
among my peers of the same age, leading to
improved communication. We also take part infall prevention exercises conducted before thestart of work to help prevent occupational
injuries.

Financial
Performance

Governance■

Increasing Health Literacy

We hold our Health Forum every year with outside experts andoccupational physicians as speakers. In FY2022, we held the forum under
the theme of “exercise and health during the COVID-19 pandemic.”More than 80 employees from across Japan participated online, and theforum’s attempt to promote exercise on screen was well received.
■

Initiatives to Reduce Total Working Hours

We are implementing various measures toprevent prolonged working hours that
could have an adverse effect on health.
These include improving the accuracy of
Meeting with the labor union
working hour management. Together withthe labor union, we hold labor-management meetings on working
hour measures to understand the current situation and exchange
opinions on solutions to improve the working environment. We
recommend that the time gained by reducing prolonged working
hours be used to accumulate career capital* and improve the work-lifebalance, leading to the realization of healthier lives for employees.
*Career capital refers to business capital, social capital, and economic capital in our conceptof self-sustaining career development called the protean career.

Total Annual Working Hours and Acquisition Rate of Annual Paid Leave*(Days)
16(Hours)
1,970
1,961

1,960
1,950
1,940
1,930

14.1

11.7

Acquisition
rate of annual
paid leave(Average perperson)

14
12

12.1

1,946

1,945
2020

Total annual
working hours

10
8

2021

2022

(FY)

*Permanent employees of Morinaga & Co., Ltd. (non-consolidated), excluding forwarded employees■

Regular Interviews and Follow-up by Occupational Health
Physicians/Public Health Nurses for Expatriate Employees

Testing physical fitness

Occupational physicians and public health nurses regularly follow up
on the health of expatriate employees assigned to postings abroadso that they can play an active role with peace of mind in anenvironment and culture different from that of Japan. In addition, we
have established counseling services for expatriate employees andtheir accompanying families, provided by clinical psychologists andcounselors who have lived abroad.

Initiatives for Occupational Health and Safety
The Group conducts occupational health and safety activities, a foundationof corporate management, in accordance with the Occupational Health and
Safety Policy. Regardless of individual differences in age, experience, language,
employment relationship, or place of work, we aim to maintain and improve asafe and comfortable working environment for all. For example, we conduct
regular safety training with the highest priority given to the safety and health of
employees, thoroughly manage workplace safety, and engage in accident anddisaster prevention activities.

Frequency Rate
FY2020

FY2021

FY2022

LTIFR*

0.52

0

0.25

Number of occupational accidents
involving fatalities (persons)

0

0

0

*Frequency of occupational accidents indicates the number of
injuries/fatalities (not including sick or injured due to non-lost work time
accidents) due to occupational accidents per one million working hours.
(Figures for Morinaga & Co., Ltd., factories and production-related affiliatedcompanies)

External Recognition
We have been recognized as a 2023 Certified Health & Productivity Management Outstanding Organization(Large Enterprise Category), a program jointly run by the Ministry of Economy, Trade, and Industry andNippon Kenko Kaigi. This marks the sixth consecutive year that we have received this recognition.
In addition, we have been recognized as a Sports Yell Company by the Japan Sports Agency for being acompany that actively promotes and supports sports activities to improve the health of its employees.
Morinaga Group INTEGRATED REPORT 2023

57

Relevant Stakeholders

Sustainable Value Chains

TowardBusiness
partners

Local
Globalcommunities environment

Taking actions to address social issues relevant to our businesses
across the entire value chain in contributing to a sustainable society.

2030

Long-Term
Targets for
2030

Customers Employees

Sustainable procurement of raw materials: 100% for cacao beans, palm oil, and paper*1● CSR supply chain management: Implement for 80% or more of raw materials transaction value*2● Food loss and waste reduction: Food loss and waste reduced by 70% from receiving of raw
materials to delivery (distribution)*3●*1 Group consolidated basis. Paper covers only product packaging. *2 Group consolidated basis*3 Domestic Group consolidated basis. Intensity; compared with FY2019

With the intensifying severity of social issues such as climate change,
all stakeholders are expected to address these issues in accordancewith their own abilities and responsibility. The Morinaga Group has

also been making efforts to realize “health of environment,” which willcontribute to the sustainability of society and the global environment
throughout our entire value chain.

Promote Sustainable Raw Materials Procurement
For main raw materials, including cacao beans, palm oil, and paper,
we aim to switch to sustainable sources by 2030.
Cacao beans, a key raw material for chocolate, are associatedwith a range of social issues including human rights issues such as
working conditions, poverty, and child labor, and environmental issues
such as deforestation. We began using certified cacao beans (Cocoa
Horizons*1–certified cacao supplied by the Barry Callebaut Group) insome of our chocolate products in FY2020, and we intend to switch
to 100% certified cacao beans by FY2025.
Illegal logging and human rights problems in producing regionsof palm oil, which is extracted and refined from oil palm trees, havebecome social issues. The Group will switch to certified palm oil(RSPO*2-certified raw materials) and aims to switch all its products
in Japan to certified palm oil by FY2023.
Sustainable procurement of timber resources for raw papermaterial is in demand as resources continue to decline worldwide
due to deforestation and illegal logging. The Group has beenprocuring FSC®-certified paper*3 (some specialty papers are recycled
paper or certified paper by a third-party organization) and othermaterials and has been working to switch all our products in Japan tosustainable paper. In FY2022, some materials could not be replaced,

resulting in a usage rate of 99.9%. We will continue to promote
initiatives to achieve our goals.
*1 Cocoa Horizons–certified cacao supplied by the Barry Callebaut Group are cacao beans
using the Cocoa Horizons Foundation’s mass balance method (certification model thatcombines certified and non-certified raw materials).
*2 RSPO: Roundtable on Sustainable Palm Oil. The RSPO is involved in the development andoperation of the sustainable palm oil certification scheme.
*3 FSC®N003064

Sustainable Procurement Medium-Term Targets and Progress*
Medium-Term Targets

Resultsfor
FY2022Single Month
Results for
March 2023

Cacao beans

FY2025 100%

34%

72%

Palm oil

FY2023 100%

9%

45%

Paper

FY2022 100%

99.9%

–

*Scope: Morinaga products in Japan. Paper covers only product packaging.

Procurement Policy ▶ https://www.morinaga.co.jp/company/english/sustainability/valuechain/procurement.html

Promote CSR Supply Chain Management
We are working together with our raw material suppliers to prevent
human rights, labor, and environmental issues within the supply
chain. The Supplier Guidelines formulated in June 2021 serve asa foundation for establishing a fair, just, and highly transparent
relationship with our suppliers in promoting procurement activities
with consideration to society and the environment.
To better understand the ESG measures of our raw material
suppliers, in March 2022, we conducted a CSR procurement survey
58of the 48 main business partners of Morinaga & Co., Ltd. (Japan). In
FY2023, we have been holding dialogues with suppliers to determine
the status of their initiatives and promote understanding of theGroup’s policies.
The Group will continue to conduct regular monitoring, build strong
long-term partnerships with suppliers, and engage in activities inaccordance with the Morinaga Group Supplier Guidelines, with theaim of realizing sustainable procurement.

Introduction

Future Vision andPath to Achieve It

Value Creation
Strategy

Sustainable
Management

Financial
Performance

Governance

FY2021 Results of the CSR Procurement Survey
Number of
Ratio ofCompanies Receiving
Raw Material
the Survey
Transaction Value*1

SurveyResponse Rate

Average
Score*2

Raw materials 35 companies

81%

100%

83%

Materials

13 companies

81%

100%

88%

Total

48 companies

–

100%

85%

*1 Morinaga & Co., Ltd., in Japan (non-consolidated)*2 Evaluation of items such as the environment and human rights based on the Global
Compact Network Japan’s CSR Procurement Self-Assessment Questionnaire

Reduction of Food Loss and Waste
our factories, we will strive to shift to more value-added recycling andpromote the effective use of resources.
The Sales Headquarters is also promoting multiple initiatives to reducefood loss and waste. The West Japan Branch Office is continuing towork with Osaka Prefecture as a member of the Osaka Food Loss andWaste Reduction Partnership System. At the 2nd Food Loss andWaste Reduction Network Roundtable held in February 2023, we
proposed recipes that consumers can easily use in their daily lives
as one of the methods for reducing food loss and waste. In addition,
we are cooperating withretailers to eliminate wastefrom the world by supplying
non-standard products
generated during
manufacturing at affordable
prices without discarding
them. We participatedin this initiative with
Recipe proposal at the 2nd Food Loss andnon-standard Potelong
Waste Reduction Network Roundtableof irregular lengths andreceived the Consumer Affairs Agency
Commissioner’s Award in the FY2022
Consumer-Oriented Management Excellent
Practice Awards.
We will continue to promote the recycling
and effective use of food resources throughthese initiatives, reducing the generation offood loss and waste, and donating to foodPotelong of irregular lengths
banks.

Food Loss and Waste Reduction Long-Term Target
and Progress*

Result for
FY2022

FY2030Target-49%-70%*Scope: From receiving raw materials to product delivery (distribution) (Domestic Group consolidated)
Intensity [Annual Food Loss and Waste Amount (t) ÷ Annual Production Weight (t)](Compared with FY2019)
Food loss and waste is defined as food that has been processed and disposed of byincineration, landfill, or other means, except for food waste that has been returnedto the circulation of food resources, such as feed and fertilizer.

As a responsible food company, we must address the issue of food loss
and waste. The Morinaga Group has established a long-term goal forfood loss and waste reduction, which we are now working to achieve.
The Production Headquarters has faced the challenge of reducing
food loss and waste on the frozen desserts production line of Takasaki
Morinaga Co., Ltd., that was newly installed in FY2021. In cooperation
with the factory and related departments, we installed equipment to
reduce defective products during production line operation and further
optimized manufacturing conditions, reducing food loss and waste by
838 tons compared with FY2022. We are also working to increase thefood recycling rate, and the Mishima Factory, Takasaki Morinaga Co.,
Ltd., and Morinaga Angel Dessert Co., Ltd., each have achieved a 100%
recycling rate. In addition to aiming for a 100% food recycling rate at all

15th anniversary of
One Chocolate for One Smile

Project for connecting smiles with chocolates

Cacao-producing countries face various social issues. One
action that the Morinaga Group is taking to address theseissues is the customer-led campaign called One Chocolate for
One Smile This activity marked its 15th anniversary in 2023.
In addition to donations made throughout the year, during
special periods, we run a campaign to donate one yen for eacheligible product purchased by customers, such as Morinaga
chocolates. The cumulative amount of donations up to FY2022
reached approximately 290 million yen, and through our support
partners Plan International Japan and the nonprofit organization
ACE, we are supporting children in cacao-producing countries

from various angles, such as prevention of child labor,
protection of children, school attendance support, and theconstruction of school classrooms.
From FY2021, we added frozen
desserts products such as Ita Choco
Ice to the target products. Ourcommitment is to “pave the roadto a future where people who eat
chocolate and the children learningin cacao-producing countries cansmile together.”

One Chocolate for One Smile (Japanese only) ▶ https://www.morinaga.co.jp/1choco-1smile/

Morinaga Group INTEGRATED REPORT 2023

59

Relevant Stakeholders

Conserving the Global Environment

Business
partners

Local
Globalcommunities environment

To achieve the health of environment, we strive for the health ofsociety by minimizing environmental impacts in our businessactivities and conducting environmental conservation activities
from a medium- to long-term perspective.

Toward2030

Long-Term
Targets for
2030

Customers Employees●

Goal of net-zero GHG emissions by FY2050*1●

30% reduction in CO2 emissions by FY2030*2●

Reduce the plastics used for in Jelly products by 25%*3 by FY2030*1 Group consolidated basis *2 Scope 1 + 2 (domestic Group consolidated basis; compared with FY2018)*3 Target: Amount of plastics used in packaging materials (intensity; compared with FY2019; including replacement with biomass plastics)

Global environmental issues, such as climate change andenvironmental pollution caused by plastic waste, could potentially
impact the Group’s business and performance over the medium
to long term. We will accelerate our initiatives on environmental
conservation appropriately and strategically following the Morinaga
Group Environmental Policy to achieve sustainable growth for theGroup and provide the “health of environment.”
To achieve this, the ESG Committee deliberates, formulates, andreviews progress on important policies and targets related to theenvironment. The Environment Integration Office was establishedby the Production Administration Division and the Sustainable

Management Division to exchange information with the Factory
Environment Management Committee and other organs, as wellas to promote continuous improvements to our environmental
management system
based on the ISO
14001 certificationand to reduce theenvironmental
impacts and increase
productivity.
Third-party assurance of CO2 emissions andwater usage data

Please see our corporate website for the Morinaga Group’s environmental policy, Environmental Management Promotion System,
and ISO 14001 certification status.
Environmental Policy ▶ https://www.morinaga.co.jp/company/english/sustainability/environment/#policy
Multisite Organization Chart and ISO 14001 Certification Status ▶ https://www.morinaga.co.jp/company/english/sustainability/environment/

Response to Climate Change Issues
CO2 Emissions Reduction: Long-Term Target and Progress*

CO2 Emissions (Scope 1 + 2)*■ Scope 1 ■ Scope 2

Intensity(Thousand t-CO2)(t-CO2e/million yen)

100

Result for
FY2022

+3%

CO2

-30%

0.5

0.48

FY2030Target

0.44
80
74.1

75.7

76.3

60

0.3

*Scope 1 + 2 (domestic Group consolidated basis; compared with FY2018)

To contribute to a decarbonized society, we are promoting carbon
management including energy conservation and the introductionof renewable energy to achieve the long-term goal of net-zerogreenhouse gas emissions by 2050. In FY2022, CO2 emissions
increased by 3% compared with FY2018 due to higher production
volume. Nevertheless, we are working to prevent energy loss byintroducing cameras that detect air and steam leaks from equipment
at domestic production sites, while Takasaki Morinaga Co., Ltd., ispreparing to install a solar power generation system expected tolower CO 2 emissions by more than 1,100 tons per year in the near
future. We will continue to work toward a decarbonized society fromvarious angles.
60

40

0.4

50.1

53.4

54.0
0.2

20

0.1
24.0

22.3

22.3

2018
(Baseline)

2021

2022

0

0
(FY)

*Domestic consolidated basis. CO2 emissions are rounded up to the second decimal place.
Figures for FY2020 and onward are assured by a third party, LRQA Limited.
The Company applied the “Accounting Standard for Revenue Recognition (ASBJ Statement
No. 29, March 31, 2020),” and other regulations, from the beginning of FY2021. The
figures for FY2020 are from after retroactive application of the said accounting standard.

Introduction

Future Vision andPath to Achieve It

Value Creation
Strategy

Sustainable
Management

Governance

Financial
Performance

Main Initiatives Aimed at Reducing Greenhouse Gas Emissions
Details

Initiatives

Promote visualization of CO2 emissions● Establish a highly efficient production system by promoting a changeover to smart factories● Implement energy conservation initiatives (e.g., adopt high-efficiency and energy-saving equipment, operate air
conditioning efficiently)● Install a solar power generation system●

1

Reducing CO2
emissions at
production sites

CO2

Consider switching to alternative fluorocarbons with low ozone depletion potential and non-fluorocarbon materials
Strengthen preventive management of fluorocarbon leakage● Introduce natural refrigerant equipment with zero ozone depletion potential and low global warming potential(Morinaga Angel Dessert Co., Ltd., Morinaga Dessert Co., Ltd., and Takasaki Morinaga Co., Ltd.)●

2

Initiatives at facilities
using fluorocarbons

3

Initiatives in logistics●●

Improve the loading rate and reduce the number of vehicles by coordinating transportation and delivery with othercompanies in the industry

Promotion of Environmental Consideration in Containers and Packaging
In recent years, marine pollution by plastic waste has become aserious issue that is attracting growing concern globally. The Group
believes its efforts through business activities are important and has
established a long-term goal to reduce plastic use in the packaging

material for mainstay in Jelly products. With this long-term goal
as a starting point, we will promote initiatives toward achieving a
resource-recycling society.

Environmental Initiatives in the Containers and Packaging of Major Brands
Reduce the weight and volume of plastic products
Pouches with thinner plastics

in Jelly
Protein 5g

in Jelly
Multi Vitamin

Switch to eco-friendly materials for packaging

Promote recycling

Change straws to
5% biomass blended plastic

The in Jelly Recycling Program*
was launched in September 2021.

Cups withthinner plastics

Oishii Collagen
Drink Peach

ICEBOX

Oishii Collagen
Drink Lemon

Oishii Collagen
Drink Premio

A collection box was
set up at Hikarigaoka
Girls’ High School*An initiative jointly led by Morinaga and TerraCycle Japan G.K. to collect empty jelly containers and recycle them into new plastic products.

Effective Use of Water Resources
In recent years, there has been the growing risk of water resource
shortages due to rising populations and the frequent occurrence of
natural disasters caused by climate change. We believe that water
resources are essential to our Group’s business activities, and it isimportant to promote business activities that effectively assesswater stress*1 and utilize water resources. We assessed water
stress and conducted water withdrawal surveys in regions where■ Domestic Group consolidated

2,000
1,500

1,771.8
169.7

1,778.4
179.4

regions facing high water stress and water resources usage. We will
now strive to ascertain risks related to water resources to ensure
effective use of these resources.
*1 A state in which water supply and demand is tight. Water stress occurs when the maximum
available water resources per capita fall below 1,700 m3.
*2 World Resources Institute’s Aqueduct Water Risk Atlas

Water Stress Evaluation of All Production Sites (FY2022)

Amount of Water Resource Usage*(Thousand t)

production sites are located using Aqueduct*2, which identified■ Overseas production sites

Extremely high0%1,909.6203.5

9%1,599.0

9%

High

1,000
1,602.1Low

1,706.1

Medium-high

500

Low-medium

27%

55%

0
2020

2021

2022

(FY)

*Domestic figures reflect Group consolidated figures. Overseas figures reflect figures at
production sites.
The domestic Group consolidated figures for FY2020 and later are assured by a third party,
LRQA Limited.

Scope: Four factories of Morinaga & Co., Ltd. (Yokohama, Kanagawa; Oyama, Tochigi;
Mishima, Shizuoka; Anjo, Aichi), four affiliated production companies (Takasaki,
Gunma; Yamato, Kanagawa; Tosu, Saga; Amagasaki, Hyogo), and three overseas
production sites (North Carolina, USA; Taipei, Taiwan; Zhejiang, China)

Morinaga Group INTEGRATED REPORT 2023

61

Conserving the Global Environment

Information Disclosures Based on the TCFD Recommendations
was established by the Financial Stability Board (FSB). Since then,we have been addressing the TCFD recommendations, including
conducting climate change scenario analysis.

The Morinaga Group recognizes that climate change is an important
issue that affects the continuity of its operations and sustainablegrowth. In April 2022, we endorsed the recommendations of the
Task Force on Climate-related Financial Disclosures (TCFD), which
Area

Details
The Morinaga Group’s analysis of risks and opportunities, target setting, and progress monitoring

Review and Promotion System

concerning sustainability initiatives are deliberated on by the ESG Committee, which is chaired by the
Representative Director, President. Findings are then reported to the Board of Directors, which also

Board of Directors

supervises the status of activities. In FY2022, the ESG Committee convened eight times.

ESG Committee

The deliberations of the ESG Committee are considered in various aspects of decision-making

Governanceconcerning management. To review climate change initiatives, we established the TCFD/TNFD
Subcommittee*1 under the ESG Committee. This subcommittee is responsible for analyzing the Group’s

TCFD/TNFD Subcommittee*1

Chair・Representative
Director,
President
Chair・Director,
Managing
Executive Officer

risks and opportunities and reviewing responses following the TCFD recommendations. It is chaired by
the Director and Managing Executive Officer in charge of the Sustainable Management Division. Regarding the TCFD themes, we held two subcommittee
meetings in FY2022. The results of this review process are reviewed by the ESG Committee and then reported to the Board of Directors, which supervises
the status of activities.
In the process of identifying risks and opportunities of climate change, Morinaga established the 4°C, 2°C, and 1.5°C scenarios for its domestic food
manufacturing business. Based on the information released by the Intergovernmental Panel on Climate Change (IPCC) and the International Energy Agency(IEA), we used these scenarios to analyze the impacts in Japan in 2030 and 2050. The table below contains a summary of the risks and opportunities, andresponses to them.

Examples of the Morinaga Group’s Important Risks
Category Subcategory

Transition Policy andrisks
regulation

Strategy

Physicalrisks

Chronic

Risk Factors

Impact on Operations

ImportanceSpread of GHG emissions
Rising energy costs and logistics
pricing and stricter GHG
costs caused by the introduction ofemissions reporting obligations carbon taxes

MediumStricter energy
conservation policy

Rising cost of capital investment for
manufacturing facilities due to theCompany’s response to energy conservation

Large

Changes in rainfall patterns
and extreme changes inweather patterns

Rising raw material and development
costs due to quality deterioration andyield reduction of crops

Large

Response
Promote initiatives aimed at the CO2 emissions reduction
target● Promote visualization of CO2 emissions at factories,
implement energy conservation measures, and establish ahighly efficient production system through reorganization●

Promote raw materials procurement in consideration of
the environment in line with the Procurement Policy andSupplier Guidelines● Purchase raw materials from multiple suppliers (or multiple sites)●

Examples of the Morinaga Group’s Important Opportunities
Category

Opportunity Factors

Impact on Operations

Importance

Response
Promote efficient production activities by rebuilding the production
system and creating smart factories*2● Establish more efficient system/transport logistics and deliveries
with fewer environmental impacts●

Resource
efficiency

Development and use of
efficient production anddistribution processes

Declining manufacturing andtransport costs

Large

Products
and services

Adaptation to climate

Rising demand for in Jelly andfrozen desserts due to global
warmingMedium●Increase sales of in Jelly and frozen desserts

For more detailed information, please refer to “Information Disclosure based on the TCFD’s Recommendations” on our corporate website.
▶ https://www.morinaga.co.jp/company/english/sustainability/environment/climate-change/tcfd/
We will also address other risks and opportunities deemed important as appropriate.
The Morinaga Group’s Total Risk Management Committee, which is chaired by the Representative Director, President, identifies risks, evaluates the severity,

Risk
Management

reviews countermeasures against these risks, monitors progress, and manages and addresses risks appropriately. Climate change risks are managed andaddressed appropriately as management risks by the same committee. In addition, the TCFD/TNFD Subcommittee conducts reviews in line with the TCFD
recommendations, with the results deliberated by the ESG Committee. The details of discussions held by both committees are reported to the Board of
Directors, which oversees the progress of risk management.
Based on the above, management conducts business operations after carrying out appropriate oversight of company-wide risks.
To mitigate climate change risks, the Morinaga Group has established targets to reduce CO2 emissions

CO2 Emissions (Scope 1 + 2)

(Scope 1 + 2) by 30% from FY2018 in Japan by 2030 and to achieve net-zero GHG emissions by 2050.

(Thousand t-CO2)

Indicators

We are actively improving energy efficiency at our production sites (e.g., preventing air leaks, adding

and Targets

our shift away from fossil fuels. At the same time, we are considering the introduction of renewable

74.1

75.7

76.3 30% reduction

insulation) by upgrading our infrastructure and utilizing new and efficient equipment, thus highlighting
energy and implementing measures to achieve these targets.

2018(Baseline)

2021

2022

*1 The TCFD Subcommittee was renamed the TCFD/TNFD Subcommittee in FY2022.
*2 Smart factory: Using IoT and AI technologies to integrate the technology and digital data of production equipment to ensure stable operations and increase production efficiency

62

Note: Domestic
consolidated
basis

51.8

Aim fornet zero

2030

2050

(FY)

Future Vision andPath to Achieve It

Introduction

Value Creation
Strategy

Sustainable
Management

Financial
Performance

GovernanceInitiatives for Natural Capital and Biodiversity
to understand our corporate activities’ dependence and impact onnatural capital, and work to maintain and conserve it.

The Morinaga Group Environmental Policy clearly states that we will
deepen our understanding of biodiversity and strive to maintain andconserve biodiversity and protect ecosystems. We will make efforts

Area

Details
For governance information related to the Group’s sustainability, please refer to the governance section in “Information Disclosures Based on the TCFD
Recommendations” on page 62. Discussions on natural capital and biodiversity are conducted by the TCFD/TNFD Subcommittee, which operates under the
ESG Committee. Using the beta version v0.4 of the TNFD framework and the LEAP
approach advocated by the TNFD as a reference, we analyze the Group’s dependence andGovernance

Review and Promotion System

impact on natural capital, risks, and opportunities. The subcommittee is chaired by the

Board of Directors

Director, Managing Executive Officer in charge of the Sustainable Management Division.
Regarding the TNFD themes, we held four subcommittee meetings between April and

ESG Committee

September 2023. The results of this review were deliberated on by the ESG Committee. Inturn, findings are reported to the Board of Directors, which also supervises the status of

Chair
・Director, Managing
Executive Officer

TCFD/TNFD Subcommittee*1

activities.

Risk
management

Chair
・Representative
Director, President

Risks and opportunities related to natural capital and biodiversity are examined by the TCFD/TNFD Subcommittee, with the findings deliberated on by the
ESG Committee. The details of deliberations are reported to the Board of Directors, which supervises the status of risk management.

Dependence and Impacts on Natural Capital
The Group recognizes its dependence and impacts on natural capital
associated with corporate business activities as shown in the figure at right.
In addition, we confirmed the dependence and impacts of the Group’s
main business of food product manufacturing, and the Group’s main raw
materials, such as cacao, palm, and wood (paper). The figure below shows

Relationship between the Company and Natural Capital
Natural capital

Ecosystem services

Air

Fauna
Water

Soil

the results of our assessment on 25 items̶16 dependent items and nine
impact items̶using an external tool.
The production of food products is particularly dependent on the supplyof water. We understand that the production of cacao, palm, and wood(paper) depends on many forms of natural capital such as good quality soil,
water, and climate adjustment, and that the expansion of farmland anddeforestation might affect biodiversity.
For cacao beans, palm oil, and paper, the Group is working to procure
100% sustainable raw materials.
We will further deepen our understanding of the situation of natural
capital and strive to maintain and conserve natural capital and biodiversity.

Supporting
services

Maintenanceofecosystems

Regulating
services

Water
purification

Provisioning
services

Water
supplyFlora
Biodiversity(e.g., ecosystem, species, genes)

Changes in thenatural situation
Change inforest area

Change inwater volume

Change in concentrationlevel of pollutants

Impact ofbusiness
activities
on nature

Business activities
depend on
ecosystem services

Dependence

Impacts

The Company

For details on the promotion of the procurementof sustainable raw materials, see page 58.

Assessment of Dependence and Impacts on Natural Capital*2● Larger dependence/impacts 〇 Dependence/Impacts somewhat large

Dependence

Impacts

Ecosystem services●〇

Wood (paper)

●

〇

〇

〇

●

〇

〇

〇

●

●

〇

〇

●

●

〇

〇

●

●

●

Impacts on
ecosystems

Palm

Impacts on otherimportant regions〇

Impacts on importantregions for biodiversity●

Impacts on protectedareas and
conservation areas

●

●

●

●

●

〇

〇

●

●

●

●

●

〇

〇

●

●

●

〇

●

〇

〇

〇

Pollution of soil,
water, and air〇

Deforestation●〇

Environmental factors

Changes in naturecaused by the expansionof farmland, the use ofrivers, and other factors

Supply of water●〇〇

Supply of wood

Prevent tropical
cyclones〇

Prevent harmful
insects and diseases

Prevent hightemperatures●

Prevent fires

Ease of weeding

Cacao

Prevent landslides

〇

●

〇

Food product manufacturing

Pressure on
biodiversity

Provisioning
services

Regulating services〇

Pollination

Conserve
ecosystems

Good quality water

Category

Good quality soil

Supporting services &Regulating services〇●*1 The name of the TCFD Subcommittee was changed to the TCFD/TFND Subcommittee in FY2022. *2 A total of 25 items were assessed, with 19 listed as having a high degree of dependence or impact.

Morinaga Group INTEGRATED REPORT 2023

63

Relevant Stakeholders

Initiatives for Human Rights

Toward2030

Customers

Employees

Business partners Local communities

We will engage in business while respecting global
principles and guidelines so that everyone in the world
can leverage their individuality and protect their rights.

Human Rights Management System
We have established the Morinaga Group Code of Conduct andStandards of Behavior, the Morinaga Group Human Rights Policy,
and the Morinaga Group Supplier Guideline. We are working to share
our philosophy on human rights defined in these policies throughcompliance training sessions for all employees and supplier briefings.
In the unlikely event of a concern about respect for human rights,
the Compliance Committee and the ESG Committee discuss how to
respond, and a system has been put into place whereby the Board of
Directors receives reports from both committees and then provides
supervision and gives instructions.

Human Rights Management System Diagram
Board of Directors
Reports on Plans,
Progress, Responses, etc.

Compliance Committee
ReportingMonitoring

Inquiries

ESG Committee
ReportingMonitoring

General Affairs Division

Sustainable Management DivisionHelpline (accepts anonymous reports)
Human rights informationin the GroupJaCER (accepts anonymous reports)
External human rights information
including the value chain

Reinforce Human Rights Management
Revised the Human Rights Policy
In 2023, after consulting with experts and professionals, we revised
the Morinaga Group Human Rights Policy and declared that wewill respect international frameworks and norms, including the UN
Guiding Principles on Business and Human Rights. In addition toeliminating discrimination, harassment, child labor, forced labor,
and human trafficking, we have made it clear that we will pay what
is considered a living wage; eliminate discrimination, including
gender-based, in recruitment and treatment; and avoid
advertisements that have a negative impact on children.
Morinaga Group Human Rights Policy▶ https://www.morinaga.co.jp/company/english/ir/policy/pdf/humanrights.pdf

Road Map to Reinforcing Human Rights Management
Results for FY2021• Started initiatives on human rights due diligence• Completed the Supplier Guideline• Commenced the CSR procurement survey based on the Supplier Guideline• Conducted stakeholder engagement with NGOs and NPOs
• Promoted internal training and education (e.g., basic approach torespecting human rights and prevention of harassment)

Results for FY2022• Became a signatory to the UN Global Compact• Developed raw materials procurement guidelines for cacao beans, palm oil,and paper• Conducted a theoretical evaluation of the negative impacts our businesshas on human rights• Joined JaCER and began using its grievance platform• Held the “Business and Human Rights Seminar” for executive officers

FY2023

Assessment of Human Rights Issues (Negative impacts)
As part of our human rights due diligence initiatives, we conducted atheoretical evaluation on the negative impacts of the Group’s businesson human rights. At present, we have reaffirmed that considerationfor occupational health and safety and the rights of foreign workers
is required more than ever in manufacturing processes inside andoutside the Group, and that there are various issues related to
wages and working hours in raw materials other than child labor incacao-producing areas. While verifying the results of this assessment,
we will continue to work to identify specific negative impacts.

Grievance Mechanism
We joined the Japan Center for Engagement and Remedy on
Business and Human Rights (JaCER), which was established in 2022,
64• Revise the Morinaga Group Human Rights Policy• Expand internal training and education (e.g., global approaches to businessand human rights)• Respond to issues identified (starting with urgent issues)• Review the progress of responses to issues and report those in the
integrated report and other public documents

Up to 2030
• Increase trust and brand value/corporate value through initiatives forbusiness and human rights

as a founding member, and have begun utilizing its grievancereporting system and professional advice. Through the “Engagement
and Remedy Platform” provided by JaCER, which complies with the
UN Guiding Principles on Business and Human Rights, it is now
possible to accept reports from outside the Company and overseas
in addition to the existing internal helpline. We will strive to respond
appropriately to whistleblowers while receiving advice fromprofessionals, which will lead to the resolution of business andhuman rights issues.

Governance
Messages from Outside Directors

66

Corporate Governance68

Compliance and Risk Management

74

Executive Management Team76

Messages from Outside Directors

Shuichi Hoshi

Naomi Eto

Kuniko Urano

Shinji Sakaki

Outside Director

Outside Director

Outside Director

Outside Director

Naomi Eto

This year, the final year of the 2021 Medium-Term Business Plan, I would like to encourage

Outside Director

Vision, especially the ideal state of our business portfolio to enhance corporate value in 2030 anddiscussions on business portfolio transformation as one of the basic policies for realizing the 2030
beyond.
Regardless of further globalization in the future, Japan’s population decline is a concern for theGroup’s sustainable growth, especially given our focus on the domestic business-to-consumer
business. On the other hand, as Morinaga aims to become a wellness company, new seeds ofgrowth can be expected in response to the need to maintain and improve health related to Japan’s
aging population. I will support new challenges from an unparalleled standpoint to see how theGroup can create new growth businesses and contribute to solve social issues based on theGroup’s technical prowess and the trust of customers cultivated over its long history.
The diversity of human resources is also a driving force for major transformation. In “promoting
diversity,” which is stated in the Company’s basic policy, my role is to encourage the appointment
of diverse human resources, including women, to decision-making positions.

66

Introduction

Future Vision andPath to Achieve It

Value Creation
Strategy

Sustainable
Management

Governance

Financial
Performance

Shuichi Hoshi

The governance and monitoring of the Board of Directors has become even more important for

Outside Director

flexibly responding to changes in the operating environment and continuously growing together

the Group, which is working toward its 2030 Vision to “change into a wellness company” bywith all employees.
Outside directors are fully briefed on agenda items for meetings of the Board of Directors inadvance, and a system is in place to deepen their understanding of the industry and the internalsituation. This includes participating in management strategy meetings and conducting factory
tours. Meetings to exchange opinions with outside directors and statutory auditors are held on aregular basis to help outside directors express their opinions appropriately.
As an outside director, I will monitor the progress of projects in the overseas business and DX
promotion, which are priority challenges in the 2021 Medium-Term Business Plan, and confirm thepath toward the targets. In terms of human resources development, I will promote the progressof development plans and succession plans through the Officer Appointment and Remuneration
Committee. Furthermore, I will monitor sustainability activities led by the ESG Committee toensure that the Company responds appropriately to the diverse requests of stakeholders andadvances information disclosure.

Kuniko Urano

Over the past year, changes in the operating environment surrounding the Group, symbolized by

Outside Director

sound growth achieved through the efforts of all employees is proof that the Company’s ability tosoaring raw materials prices and exchange rate volatility, have been greater than expected. Yet,
respond to changes has steadily improved. Moreover, the Company has shared some direction for
the Group’s future growth, including a focus on the U.S. business where the Company is growing
its presence by maximizing the strengths of its products, as clearly set forth in the 2030 Visionof change into a wellness company. The core pillars are clear, and I believe that it is especially
important to make full use of the Group’s strengths, especially in the development and placementof human resources and in making timely investments.
I believe there are two fundamental aspects of decision-making and execution. First is frankly
discussing risks and opportunities at Board meetings, and second is sharing competitive strengths
with everyone. To that end, it is our responsibility as outside directors to support the Company
so that it can continue to boldly take on difficult challenges by incorporating perspectives fromdifferent industries and experiences. I will make every effort to contribute to the Group’s
development over the medium to long term.

Shinji Sakaki

In FY2022, the Company had to manage an extremely difficult situation due to multiple factors,

Outside Director

by Russia’s invasion of Ukraine, along with the yen’s depreciation.

such as the rising costs of raw materials procurement and the sharp rise in energy costs triggered
The Group has fostered a culture in which all internal and outside directors share anddiscuss issues related to each business and management issue. Execution-side measures are
implemented flexibly and speedily, and progress is being made with the shift to priority areas
toward becoming a wellness company and the expansion of the overseas business sales ratio.
However, to realize the 2030 Vision of “change into a wellness company,” there are still
many business challenges to be cleared, and the Company needs to fulfill its social mission at ahigh level, such as ESG and sustainability. To improve the sustainable growth curve as much as
possible, I would like to support the Company by making use of my experience in management,always thinking ahead without getting too caught up in the past.

Morinaga Group INTEGRATED REPORT 2023

67

Corporate GovernanceCorporate Governance Basic Policy
corporate philosophy and the code of conduct in an effort toachieve co-existence with society and sustainable growth.

The Morinaga Group will strengthen its corporate governance withthe aim of maximizing corporate value and achieving enduringcorporate growth based on the basic policies of improving thesoundness and efficiency of management, ensuring the reliability of
its financial position, providing timely and appropriate disclosure of
information, complying with laws and regulations, and strengthening
the trust and relationships with all stakeholders.

2. Management Monitoring Functions
We are working to build an effective internal control system bystrengthening the management monitoring functions of the Board of
Directors, appointing Outside Directors and Outside Statutory Auditors,
requiring attendance by Standing Statutory Auditors at important
meetings, and placing the Audit Division under the direct control of
the President.

1. Positioning of Stakeholders
To enable us to fulfill our social responsibility in all areas ofour business activities, we are committed to maintaining andfurther developing strong relationships with all stakeholders andpromoting appropriate collaboration in accordance with our

3. Consistent Approach throughout the Group
While respecting the independence of our subsidiaries, we endeavor tomaintain close ties among the Group’s member companies.

Corporate Governance System and Features
Corporate Governance System (as of June 29, 2023)

Internal

External

General meeting of shareholders
Appointment/Dismissal

Accounting
AuditorAppointment/Dismissal

Appointment/Dismissal

Board of Statutory Auditors

Board of Directors

Comprises 4 Statutory Auditors

Comprises 11 Directorsof which 3 are Outside Statutory Auditors
Report/Cooperationof which 4 are Outside Directors
Audit

ReportingDirect control

Representative
Director

Audit
Division

Partial delegation of authority

Business
Execution
Meetings

Instruction/SupervisionInternal audit
Internal audit
Individual divisions/departments
and affiliated companies

POINT

1

Strengthening the management
supervision function of theBoard of Directors

The Board of Directors deliberates and makes
resolutions on management plans and otherimportant management matters and supervises
business execution. It also delegates authority
for less important business execution functions
other than matters resolved by the Board of
Directors to modestly separate management
supervision functions from business executionfunctions.
In addition, the Board of Directors evaluates
the contribution and performance of management through confirmation of the progress ofthe medium- to long-term business plans andstrengthens the management supervisionfunction.

68

POINT

2

Comprises 5 Directorsof which 4 are Outside Directors

Inquiries/Reporting

Appointment/Dismissal
Supervision

Cooperation

Report/Cooperation

Officer Appointment andRemuneration Committee

Effectiveness of Board of Directors’deliberations and independence
and diversity of its composition

To ensure the effectiveness andefficiency of deliberations at theBoard of Directors, sufficient priordiscussions are made at the Officer
Appointment and Remuneration
Committee and various othercommittees (see diagram above).
In addition, in consideration of the
independence and diversity of thecomposition of the Board of Directors,
four of the 11 directors, or more than
one-third, are Outside Directors. The
Board of Directors also comprises
eight men and three women.

POINT

3

Committees
Total Risk
Management Committee

IR Committee

Compliance
Committee

ESG Committee

Corporate Branding
Committee

Customer Relations
Committee

Enhancing the alignment of internal audits, corporate
audits, and accounting audits

The Standing Statutory Auditors hold regular meetings with the
Representative Director. They also attend meetings of the Boardof Directors and other important gatherings to audit the Directors’
performance of duties. Among cases delegated from the Boardof Directors to business execution departments, the Standing
Statutory Auditors perform audits on the approval application forimportant cases. Statutory Auditors conduct regular meetings withthe accounting auditor and the Standing Statutory Auditors with
the General Manager of the Audit Division, as well as meetings asneeded to exchange opinions and perform accounting and businessaudits using close collaboration.
Furthermore, the Audit Division strives to improve the effectiveness of internal audits by reporting directly not only to theRepresentative Director, President but also to the Board of Directors
and the Board of Statutory Auditors as appropriate.

Introduction

Future Vision andPath to Achieve It

Value Creation
Strategy

Sustainable
Management

Governance

Financial
Performance

For more detailed information, refer to our website for Corporate Governance and our Corporate Governance Report.
https://www.morinaga.co.jp/company/english/about/governance.html

Independence and Diversity of the Board of Directors
Ratio of
Outside Directors
OutsideDirectors

36.4%

4 out of 11

Ratio ofFemale Directors
FemaleDirectors

27.3%

3 out of 11

Officer Appointment Policy
The Company has established the Officer Appointment Policy andAppointment Procedures to appoint as officers human resources who
can sufficiently contribute to the creation of value for the Company.
An overview of the appointment policy for officers is presented below.
1. The Company’s Directors and Statutory Auditors shall be selectedfrom among personnel with expertise and experience in thevarious fields necessary to realize the purpose and vision of theMorinaga Group, taking into consideration diversity in terms ofnationality, gender, age, and other factors.
2. Executive Directors and Operating Officers shall be selected fromamong personnel who meet the Morinaga Group Management
Personnel Requirements (those who possess basic qualities,
personal qualities, leadership capability, a challenging spirit,
foresight and conceptual ability, execution ability, and the ability toutilize new technologies and fields) and who can contribute to thesustainable growth of the Morinaga Group.

3. Outside Directors shall be selected from among persons whomeet the Company’s independence standards as separately
determined and who can be expected to express appropriate
opinions and raise issues from an independent and objective
standpoint with respect to the Group’s management issues andother key concerns.
4. Statutory Auditors shall be selected from among persons who
can be expected to conduct accurate audits of the legality andappropriateness of business execution from an objective andneutral perspective by utilizing their knowledge and experience. At
least one of the Statutory Auditors shall be selected from among
persons with sufficient knowledge of finance and accounting, andOutside Statutory Auditors shall be selected from among persons
who meet the Company’s independence standards.

Independence Standards
The Board of Directors formulated the Morinaga & Co., Ltd.
Independence Standards for officers and appointed independent
outside officers who meet the standards to ensure the independence

of officers while also considering the independence standards set byfinancial instruments exchanges.

Morinaga & Co., Ltd. Independence Standards
The Company determines that Outside Directors, Outside Statutory
Auditors, and candidates for these positions satisfy therequirements of independence if they do not fall under any of thefollowing items.
1. A party whose major client or supplier is the Morinaga Group or
an executive thereof;
specifically a party or the corporation to which the party belongs
for which sales in the most recent fiscal year to the Morinaga
Group accounted for 2% or more of its annual consolidated sales.
2. A major client or supplier of the Morinaga Group or an executive
thereof;specifically a party or the corporation to which the party belongs
for which sales in the most recent fiscal year from the Morinaga
Group accounted for 2% or more of the Company’s annual
consolidated sales.
3. A consultant, accounting professional, or legal professional who
receives a large amount of money or other assets from the Company

in addition to their remuneration as Director or Officer, or a member ofa corporation, organization or other entity that receives such assets.
A large amount of assets is defined as 2% of the annual
consolidated sales of the corporation or 10 million yen or more,whichever is higher, in the most recent fiscal year.
4. A party that has fallen under any of Items 1 through 3 above in thepast year.
5. A party that has been an Operating Officer of the Company or its
subsidiaries at the time of their appointment or any time within 10
years prior to their appointment.
6. A relative up to the second degree of kinship of a party described inany of Items 1 through 5 above.
7. A party who does not satisfy the Standards for Independence set
forth by the Tokyo Stock Exchange, or any other person who might
have a conflict of interest with the Company’s shareholders.
8. A person whose total term of office has been more than eight years.

Morinaga Group INTEGRATED REPORT 2023

69

Corporate GovernanceDirectors’ and Statutory Auditors’ Specialties and Experience (Skills Matrix)
In addition, as the Company is expanding its business globally andfurther increasing the ratio of overseas sales is one of the pillars of its
business plan, the Company has set “global” as a necessary skill and“ESG and sustainability” as a skill necessary to address our future
medium- to long-term management issues and issues demanded
by society.

To realize the Group’s Purpose, Vision, 2030 Business Plan, andMedium-Term Business Plan, the Company selects candidates for
Director and Statutory Auditor with a good balance in terms of deep
knowledge and experience (corporate management and corporate
strategy, marketing, sales, research, production, and logistics) andspecialized skills (finance, accounting, human resources, labor affairs,
legal affairs, compliance, and risk management).

Directors’ and Statutory Auditors’ Specialties and Experience (Skills Matrix)
Specialty and Experience
Name

Position

Eijiro Ota

Representative
Director, President

Machiko Miyai
Shinya Mori
Daisuke Fujii
Takashi Hirakue
Hideki Matsunaga
Tetsuya Takagi

Director,
Managing
Executive Officer
Director,
Managing
Executive Officer
Director,
Managing
Executive Officer
Director,
Senior Executive
Officer
Director,
Senior Executive
Officer
Director,
Senior Executive
Officer

Corporate
management
Corporate
strategy

ESG
Sustainability

●

●

●

●

●

●

●

●

●

●

●

●

Marketing
Sales●

GlobalResearch
Production
Logistics

●

●

●

●

●

●

●

●

●

●

●

Shuichi Hoshi

Director●

Kuniko Urano

Director●●

Shinji Sakaki

Director●●

Toshiaki Fukunaga

Statutory Auditor●

Takehiko Sasamori Statutory Auditor●

Statutory Auditor

●

●

●

Sawako Ueno

Legal affairs
ComplianceRiskmanagement●

Director

Statutory Auditor

Human
resources
Labor affairs●

Naomi Eto

Koichi Sakaguchi

Finance
Accounting

●

●

●

●

●
●

●

●

●
●

●

●
●

●

●

●

●

●

●

●
●

●

●

●

Note: The ● symbol is included in the relevant items if the officer possesses specialized knowledge and experience, such as having background as a business manager in each field.

Board of Directors Activity Status
The Board of Directors meets, in principle, once a month and asneeded.
In FY2022, Board of Directors meetings were held 15 times, witha total deliberation time of approximately 2,000 minutes. The maindeliberation themes in FY2022 can be found in the table on the next
page.

70

In FY2022, the Company established items for discussion astargets for deliberation at meetings of the Board of Directors as
an initiative to strengthen the monitoring function of the Board of
Directors. The Company shares information and holds discussions
on important management issues, such as the progress of businessplans, the progress of measures related to the focused domains/basic
domains, and the status of new business development initiatives.

Future Vision andPath to Achieve It

Introduction

Value Creation
Strategy

Sustainable
Management

Financial
Performance

Governance

Main Deliberation Themes in FY2022
Management Strategy
and Sustainability
Progress of business plans
Progress of the focused domains (“in-”and Frozen Desserts) and the basic
domains (Confectionery and Foodstuffs)● Status of the U.S. Business● Initiative to switch to smart factories● Activity status of committees including
the ESG Committee●

Themes●

Evaluation of the effectiveness of
the Board of Directors● Status of cross-shareholdings● Officer personnel changes andremuneration● Group governance●To further enhance the deliberations, prior to the meeting of theBoard of Directors, the Director in charge of the Corporate Strategy
Division provides Outside Directors with explanations of the content

Finance and Investment

Compliance Risk Management

GovernanceCountermeasures against unauthorizedaccess and the information
management system● Operating status of the internal control
system● Compliance Committee report, Total
Risk Management Committee report●

Financial measures (fundraising,investments, and shareholder returns)● Status of IT system renewal●of the agenda as appropriate and in advance. For part-time Statutory
Auditors, the full-time Statutory Auditor provides preliminary
explanations on the content of agenda items for each meeting.

Initiatives to Increase the Effectiveness of the Board of Directors
To further strengthen corporate governance, the Board of Directors
conducts a self-evaluation of its effectiveness, analyzes the results,
and continuously strives for improvement.

As a result of the evaluation of the effectiveness of the Board of
Directors in FY2022, the Company confirmed that the effectivenessof the Board of Directors is continuously ensured and that it isfunctioning effectively. The details are as follows.

Method of Analysis and Evaluation

1
●
●

2

SurveyImplementation: February and March 2023
Scope: All Directors, including Outside Officers,
and all Statutory Auditors

Main themes of survey questions

Composition, operation, and agenda of the Board of
Directors, nomination and remuneration of executive
management, risk management, dialogue withshareholders, system to support the Board of Directors,
and findings from past evaluations of the Board of Directors

Results analysis as well as discussion andmonitoring by the Board of Directors

To ensure objectivity, surveys are aggregated and analyzed by athird-party organization (law firm).
After reporting the above analysis and evaluation results to the Boardof Directors, the Board of Directors evaluates the effectiveness, setspriority issues for the future, and discusses and implements
improvement measures based on these results.
At the Board of Directors meeting held every December, an interim
report and discussions are held on the status of initiatives for theseissues so that progress is monitored.

3

Disclosure

Initiatives for past issues,
results of effectivenessevaluations, future issues, andother relevant issues aredisclosed in the notice ofconvocation of the General
Meeting of Shareholders,
corporate governance report,
and other outlets.

Evaluation Results and Initiatives to Increase Effectiveness
Issuesaddressed
in FY2022

Detailsof initiatives
implemented
in FY2022 toaddress issues

11) Comprehensive understanding of risks throughout the Morinaga
Group (comprehensive understanding and listing by utilizing the
Total Risk Map and Risk Intelligence Map)
2) Risk assessment (the importance of risk is evaluated on athree-point scale based on the degree of impact and frequencyof occurrence)3) Consideration of ways to manage each risk
4) Establishment of a management system that can increase
effectiveness through the PDCA cycle●

Effectivenessevaluation
results for
FY2022
Issues to beaddressed
in FY2023

Further expansion of discussions
to step up risk management

Risk management efforts have been enhanced, and the Company
has been able to make certain improvements and evolve. In the
future, the Group risk management system, including Group
companies, is expected to be further strengthened andenhanced.

1

Deepening discussions and initiatives on risk
management including Group companies

2

Strengthening of the function of the Board of
Directors as a monitoring board

1) Among the individual decision-making matters previously resolvedby the Board of Directors, those of less importance are delegatedto other meeting bodies, and part of the authority of Directors as
officers in charge is delegated to senior executive officers who do
not concurrently serve as Directors. As a result, it is now possible
for the Board of Directors to devote sufficient time to evaluating
management through confirmation of the progress of businessplans and discussing medium- to long-term issues.
2) Regarding the 2030 Business Plan and the 2021 Medium-TermBusiness Plan, the Board of Directors confirmed, evaluated, andreviewed the progress for each overall and strategic outline, anddiscussed issues.
●

Regarding the strengthening of the functions of the Board of
Directors as a monitoring board, the Company was able tostrengthen these functions to a certain extent through initiatives
such as the establishment of new items for discussion. In the
future, further discussions on medium- to long-term businessissues, including sustainability, are expected to be enhanced.

2

Further enhance discussions on medium- tolong-term business issues such as sustainability
and medium-term business plans

Morinaga Group INTEGRATED REPORT 2023

71

Corporate Governance

Composition of the Officer Appointment and Remuneration Advisory Committee(Nomination Committee and Remuneration Committee) and Status of Activities
The Company established the Officer Appointment and Remuneration
Committee (renamed the Officer Appointment and Remuneration
Advisory Committee on March 23, 2023) as a voluntary committee
to review the nomination and remuneration of Directors. The Officer
Appointment and Remuneration Advisory Committee is composed of all
Outside Directors and the Representative Director, President, and thechairperson is elected from among Outside Directors who are membersof the committee, thereby ensuring the independence of the committee.
The Officer Appointment and Remuneration Advisory Committee aims
to strengthen corporate governance and improve transparency andobjectivity. The Committee deliberates on the appointment (selection)and dismissal of Directors, Statutory Auditors, and Operating Officers
at the senior level and above, as well as their rewards and punishments,and on succession planning for Directors and Operating Officers,
including the Representative Director, President, based on advice fromthe Board of Directors, and reports to the Board of Directors.

In addition, the Committee, under the delegation of the Board of
Directors, deliberates and decides on draft proposals prepared by the
Representative Director, President regarding the evaluation of Directors
and Operating Officers at the senior level and above and the amountof remuneration, etc., for individual Directors, and reports on its
decision-making process to the Board of Directors.

Officer Appointment and Remuneration Advisory Committee
Name

Position

Role

Shuichi Hoshi

Outside Director

Chairperson

Eijiro Ota

Representative Director, President

Committee member

Naomi Eto

Outside Director

Committee member

Kuniko Urano

Outside Director

Committee member

Shinji Sakaki

Outside Director

Committee member

In FY2022, the Officer Appointment and Remuneration Advisory Committee met three times. The main details of thedeliberations are as follows.
First
meetingMay
2022

Secondmeeting

January2023

FebruaryThird
meeting2023● Deliberation on candidates for substitute Statutory Auditor for FY2022
Details of● Deliberation on the amount of remuneration for individual Directors and Senior Executive Officers for FY2022
deliberations● Deliberation on concurrent postings of officers● Deliberation on candidates for Director for FY2023● Review of succession plan for the Representative Director, President
Details ofdeliberations ● Deliberation on candidates for Statutory Auditors for FY2023● Deliberation on promotion of Director, Managing Executive Officer for FY2023● Deliberation on promotion of Director, Managing Executive Officer for FY2023
Details of● Review of specialization, career experience, and diversity required of successors for Outside Directors
deliberations● Deliberation on policies related to the selection and remuneration of officers and revisions of regulations

Basic Policy of Executive Remuneration and Determination Process
At the meeting of the Board of Directors held on February 10, 2021, theCompany resolved the policy on determination of remuneration for
individual Directors, and subsequently made partial amendments to thepolicy at the meeting of the Board of Directors held on March 23, 2023.

1. Executive Remuneration Basic Policy
The Company’s basic policy regarding the executive
remuneration system is as follows.
1) Contribute to the realization of the purpose and vision of theMorinaga Group.
2) Promote the realization of medium- to long-term business plans toenhance corporate value into the future.
3) Establish a system and standards that support appropriate risk-taking byDirectors and strengthen their motivation to contribute.
4) Ensure that the system is transparent, fair, and rational for stakeholders,and is determined through an appropriate process to ensure this.

2. Details of Executive Remuneration System(1) Structure and Payment Timing of Monetary Remuneration to Directors
1) Executive Directors(a) Basic compensation, consisting of two types of remuneration:
fixed remuneration (equivalent to 70%) and performance-linked
remuneration (equivalent to 30%), and a fixed amount is paid

72

monthly in cash, 10% of the basic compensation amount is paid
as stock compensation (non-monetary remuneration).
(b) Executive bonuses: Paid in a lump sum in cash in July following
the resolution by the General Meeting of Shareholders.
(c) Stock compensation (non-monetary remuneration): Paid
to Executive Directors upon their retirement (excluding
non-residents in Japan). Details are provided in “(5) Content
of Non-monetary Remuneration.”
2) Outside Directors and Statutory Auditors
In light of their role, basic compensation is fixed remuneration only,
and a fixed amount is paid in cash on a monthly basis.
(2) Policy on Determination of Basic Compensation
A standard amount is determined for each job title according to
responsibilities. The standard amount is set at a level that ensuresmarket competitiveness and strengthens the motivation of each
Director to make a contribution.
(3) Policy on Determination of Executive Bonuses
Executive bonuses are monetary remuneration according to job title,
responsibilities, performance, etc., and their payment is determinedfollowing the resolution by the General Meeting of Shareholders.
(4) Matters Concerning Performance-Linked Remuneration
The performance indicators for performance-linked remuneration for
the Representative Director, President are “the Group’s consolidated

Introduction

Future Vision andPath to Achieve It

Value Creation
Strategy

operating income and ROE.” Those for Executive Directors otherthan the Representative Director, President are as follows: 15%of the 30% performance-linked remuneration included in basic
compensation is based on the Group’s consolidated operating income
and ROE, and the remaining 15% is based on individual performance
evaluations, including contributions to ESG initiatives.
(5) Content of Non-Monetary Remuneration
As non-monetary remuneration, Executive Directors are provided stockcompensation equivalent to 10% of the amount of basic compensation forthe purpose of motivating them to make contributions to an improvementof medium- to long-term performance and corporate value and sharing
profit awareness with shareholders.
Based on the performance-linked stock compensation plan approved at
the 170th Annual General Meeting of Shareholders, Executive Directors
receive points equivalent to 10% of their post-performance-linked basic
compensation each year. They also receive Company shares, etc., throughthe BIP trust, in proportion to the points accumulated, when they retire.

Sustainable
Management

Financial
Performance

Governance

the Company’s business performance with reference to the
remuneration levels of companies in the same industry or of thesame size as the Morinaga Group.
2) With respect to the amount of remuneration for individual Directors,
the Officer Appointment and Remuneration Advisory Committee
deliberates and determines draft proposals on the amount ofcompensation for individual Directors, including performance
evaluations prepared by the Representative Director, President, andreports on its decision-making process to the Board of Directors.
(2) Executive Bonuses
1) In consultation with the Board of Directors, the Officer
Appointment and Remuneration Advisory Committee deliberates
on whether it is appropriate to propose the payment of bonuses to
Directors and Statutory Auditors to the Annual General Meeting of
Shareholders, and when determining it to be appropriate, reports
to the Board of Directors together with the proposed payment
amount, and the Board of Directors approves.
2) The total amount will be paid upon resolution of the General
Meeting of Shareholders.

3. Policy on Determination of Remuneration for Individual Directors(1) Amount of Remuneration for Individual Directors
1) The level of basic compensation is verified by the Officer
Appointment and Remuneration Advisory Committee based on

Total Amount of Remuneration for Directors and Statutory Auditors in FY2022
Total Amount of
Remuneration(Million yen)

Directors (Outside Directors)
Statutory Auditors(Outside Statutory Auditors)

Category

Total Amount by Type of Remuneration (Million yen)
Monetary Remuneration
Non-Monetary Remuneration

Number of
Persons

Fixed Remuneration

Performance-BasedRemuneration

Compensation based on the Board
Incentive Plan (BIP) (performance-linked)

251（39）169 (39)55 (–)

25 (–)

13 (5)

56（34）

56 (34)

− (–)

− (–)

5 (3)

Main Committee Activity Status
Name of Committee

Chairperson

Main Agenda

Total Risk Management Committee

Representative Director,
President

1) Build and promote a company-wide risk management system
2) Build and promote a total risk management system

Compliance Committee

Representative Director,
President

1) Build and promote compliance management and deliberate and implement therelevant initiatives2) Establish and promote compliance action plans

ESG Committee

Representative Director,
President

1) Deliberate on policies, targets, actions, and KPIs related to sustainable management
2) Follow up on action and KPI progress3) Share, propose, and deliberate on the establishment of subcommittees and agendas
4) Deliberate on the publication of integrated reports

IR Committee

Representative Director,
President

1) Timely and appropriate information disclosure2) Communication approach with shareholders
3) Measures for improvement of shareholder value

Cross-Shareholdings
At the Board of Directors, the Company quantitatively evaluates once
every year whether the dividend level and trading profit of each of thestocks held for purposes other than pure investment, so-calledcross-holdings, are commensurate with the cost of capital, andassesses whether such holdings are rational, by taking into accountthe qualitative evaluations. These evaluations include the purposes ofholdings and the medium- to long-term prospect of trading relationships
with the companies in which the Company holds such shares.
Based on these evaluations, it is the Company’s policy to determine
the necessity of each cross-shareholding and reduce such holdings. In

FY2022, the Company sold all its shares of two stocks and some ofits shares in one stock. As a result, the ratio of cross-shareholdings(market value) to consolidated net assets stood at 8%.
With respect to exercising voting rights related to shares held as
cross-holdings, the Company determines approval or disapproval for
proposals by each individual stock. These decisions are made after
considering from the viewpoints of whether the proposal in question
will impose a negative impact on the relationship and trading with
the Group, or whether significant concerns have arisen on corporate
governance.
Morinaga Group INTEGRATED REPORT 2023

73

Compliance and Risk Management

Compliance

Basic Philosophy
Based on the recognition that compliance is a priority issue for all
business activities, we have formulated the Morinaga Group Codeof Conduct and Standards of Behavior, under which the Group is
promoting compliance initiatives.

Compliance System

Actual Compliance Training Sessions (FY2022)

In addition to formulating the Compliance Regulations, theGroup has established the Compliance Committee, chaired by
the Representative Director, President, to build and promotecompliance management. The Group takes strict measures in theevent of a compliance violation, including disciplinary action andpunishment, based on internal regulations.

Morinaga Group Compliance Management System
Compliance
Committee

Cooperation

Lawyers and labor union
representatives are included
Advisors (Statutory Auditors)
are included
Note: Responsible for crisis response
in case of an emergency

Individual divisions,departments, offices, and affiliates●●

Establishment

Compliance supervisor
Cooperation

Reporting(users’ identity is
kept anonymous)

Helpline

Cooperation

Point of contact for consultation
Internal (General Affairs Division,
Morinaga & Co., Ltd.)● Internal (Standing Statutory Auditor,
Morinaga & Co., Ltd.)● External (All Morinaga Labor Union)● External (Designated legal counsel)

Compliancepromotion leader
Response●

Consultation

Consultation
Response

also conducted the annual compliance questionnaire for all
employees working at domestic Group companies. This questionnaire
helps us to identify the Group’s level of compliance as well as planand execute measures to remedy issues. The results of these efforts
by the Compliance Committee are reported to the Board of Directors
in a timely manner.

Employees working at Group
companies in Japan

Efforts in FY2022
With the aim of embedding a compliance culture into theorganization, we display the Morinaga Group Code of Conduct andStandards of Behavior on panels in each office and distribute booklets
to raise awareness among all employees. In FY2022, we conductedvarious compliance training at the headquarters and individual offices
in addition to training by job class, including that for new recruits. We

Name ofTraining

Targets

Number of Participants(running total)

Training by
job classNumbers of applicable
employees from each year
and position applicable237

Training by
workplace

Employees of Morinaga andGroup companies

850

Officertraining

Directors and statutory auditors(at least once annually)

13

In addition, we provide training videos and compliance informationon our company-wide intranet in an effort to increase awareness ofcompliance.

Operation of the Whistleblower
System
We established a helpline as a point of contact to report complianceviolations and review consultations regarding compliance. We have
set up four contact points, both internal (General Affairs Division andStanding Statutory Auditor) and external (labor union and law firm),
to handle not only compliance violations that affect the whistleblower
but also violations witnessed by others or potential violations with
ambiguity. We have appointed both male and female lawyers for thishotline, widening the options for those seeking consultation. In
FY2022, there were 29 consultations received by the helpline
Group-wide. In June 2022, we established the Whistleblower
Regulations, carving out and expanding upon provisions previously
found in the Compliance Regulations. In addition to adding a Standing
Statutory Auditor to the consultation points, the helpline has been
made available to officers and former employees (including temporary
employees) within one year of leaving the Company. In this manner,
we will further strive to detect and correct violations of laws andregulations at an early stage.

Risk Management

Basic Philosophy
The Morinaga Group conducts Total Risk Management by identifying
not only apparent risks but also risks that potentially exist in its

74

business activities and takes appropriate measures against thoserisks.

Introduction

Future Vision andPath to Achieve It

Value Creation
Strategy

Sustainable
Management

Financial
Performance

GovernanceRisk Management System and Risk Identification
Based on the Total Risk Management Regulations, theGroup identifies assumed risks, evaluates the impact andfrequency of risks, creates a Total Risk Map, and determines
the priority of risk responses. We implement the PDCA
cycle in which the divisions that plan and execute risk
countermeasures are clarified, and the planning divisions
formulate risk countermeasures, monitor the status of
implementation, create improvement measures, and reportto the Total Risk Management Committee. In addition, toensure business continuity in the event of a disaster, we
conduct regular revisions of the business continuity
management (BCM) of mainstay products to ensure smooth
operation of such management. The Total Risk Management
Committee reports the results of these initiatives and otherinformation to the Board of Directors.

Total Risk Management System
Board of Directors
Inquiries
Total Risk Management Committee
Approval of management action plans
Approval of final reports

Response
●

●

●

●

●

Chairperson: Representative Director, President
Members: officers in charge of main divisions
Advisor: Standing Statutory Auditor
ReportingTotal Risk Management Committee Secretariat
●

●

●

●

Thorough risk management planning
Identification and assessment of risks
Determination of risks requiring increased responses
Planning and review of risk responses●

Monitoring

Instructions for implementation●

Preparation of
final report
Summarizing of
improvement
measuresReporting

Reporting

Planning division
Planning of risk responses

Instructions for implementation
Executing division

Monitoring

Formulation of
improvement
measuresReportingExecution for risk response

Main Risks Facing the Group and Responses■ Important Risks from a Short- to Medium-Term Perspective
Risk Item

Cost burden and damage to social credibility due to a large-scale
recall attributed to unforeseen quality accidents or product liability
compensation●●

Suspension or delay of product production due to factory inoperability
caused by a disaster or other unforeseen event●●

Fluctuations in raw material prices and procurement shortfalls due tothe following factors:▶Fluctuations in the exchange rate ▶Crop failure due to global warming andunseasonable weather ▶Global spread of infectious diseases, political instability
in the country of origin, conflicts, and other uncertainties ▶Rising crude oil
prices ▶Increase in labor unit price and logistics costs due to labor shortages

Food safety
Production system

Raw materials
procurement

Weather, natural
disasters, and other
unforeseen
circumstances
Infectious diseases
and the changes
they cause
Leakage of corporate
and/or personal
information
Business expansion
into overseas
markets

Response by the Morinaga Group

Assumed Risk
●

●
●

●
●

●

Reduced purchasing opportunities due to weather conditions
Supply chain stagnation due to large-scale natural disasters

Supply chain stagnation due to pandemics of infectious diseases
Changes in consumer lifestyles, preferences, and purchasing behavior
Unexpected leakage of important information due to unauthorizedaccess or other breaches, and in that case, suspension of businessactivities, occurrence of large costs, and damage to credibility●

Occurrence of unforeseeable circumstances due to the following events:▶War or terrorism ▶Political or social change ▶Business practices▶Changes in legal regulations and tax system of each country/region▶Sudden fluctuations in the exchange rate●

Litigation or punishment for violating laws and regulations, and loss oftrust from stakeholders as well as damage to reputation and brandvalue, due to social sanctions●

Occurrence of an accident that threatens the life or health of an
employee, and loss of valuable human resources (e.g., accidents
during manufacturing operations, traffic accidents, overseas
assignments)

Formulation of the Quality Policy and Quality Assurance Rules and establishment of a systematic quality
assurance system● Establishment of Crisis Management Response in preparation for the occurrence of quality incidents
Maintaining production of mainstay products and implementing measures to restart following business
continuity management (BCM)

Execution of foreign exchange contracts and other measures to hedge against exchange rate volatility
Decentralization and diversification of production areas and supplier procurement bases● Maintaining appropriate inventory● Promotion of sustainability of important raw materials and sustainability initiatives by suppliers●●

Establishment of production and supply systems to ensure that product supply does not stagnate
Demand prediction and production management based on information collection and analysis● Ensuring the safety and asset protection of employees and related parties in the event of a disaster
●
●

●
●

●

●

Establishment of production and supply systems to ensure that product supply does not stagnate
Continuous research and analysis of changes in consumer behavior and preferences, and development ofa product research-and-development system to meet new demand
Implementation of a 24-hour monitoring system by the Security Operation Center and development of aninternal management system
Thorough fact-finding and investigation of causes when information leakage occurs, measures to preventthe spread of damage, prompt announcement, and implementation of measures to prevent recurrence

Review of strategies through information collection in each country and region, flexible changes to productsupply bases, and provision of appropriate guidance and audits to overseas subsidiaries● Strengthening of business management and risk management systems of subsidiaries●

Stipulation of compliance with laws, regulations, social norms, and the fulfillment of corporate social
responsibilities in the Morinaga Group Code of Conduct and Standards of Behavior, Human Rights Policy, Tax
Policy, and Anti-Bribery Policy and other guidelines● Establishment of a system to respond promptly and appropriately in accordance with laws and regulations
when risks are recognized●Corporate social
responsibility

Occupational
injuries
Investment inproperty, plant,
and equipment●

Failure to obtain results as anticipated and planned at the initial stageof investment, decline in business profitability, and occurrence ofimpairment losses on property, plant, and equipment

●

●

●

Establishment of the Morinaga Group Occupational Health and Safety Policy; Dissemination of information
inside and outside the Company, and promotion of a safe and comfortable work environment
Labor-management meetings on safety measures to share information on occupational accidents and takemeasures to prevent accidents
Implementation of investment management in accordance with investment management regulations■ Important Risks from a Medium- to Long-Term Perspective
Risk Item
Secure and foster
human resources●

Climate change

Response by the Morinaga Group

Assumed Risk●

Decline in market competitiveness due to delays in securing anddeveloping appropriate human resources and developing systems andenvironments that enable diverse human resources to demonstrate
their abilities and play an active role
Impact on business continuity, performance, and financial status forthe medium to long term in the entire value chain from raw materials
procurement to consumer purchasing behavior

●

●

●
●

Establishment of the Morinaga Group Diversity and Inclusion Policy, dissemination of it among employees, andpenetration through education
Securing and developing human resources based on expertise and global perspectives
Efforts for global environmental conservation and achieving a resource recycling society
Enhancing the management of sustainability issues

For more detailed information, please refer to our corporate website.
▶ https://pdf.irpocket.com/C2201/KSWQ/A8DT/ohGR.pdf (Japanese only)
Morinaga Group INTEGRATED REPORT 2023

75

Executive Management Team

Directors

Eijiro Ota
Representative Director, President〈Significant concurrent positions〉
President of Morinaga AngelFoundation
President of All Nippon Kashi
Association

Shinya Mori
Director, Managing Executive Officer

Takashi Hirakue
Director, Senior Executive Officer

Tetsuya Takagi
Director, Senior Executive Officer〈Significant concurrent positions〉
Representative Director, President ofMorinaga Finance Co., Ltd.

76

Term of office as a director: 12 years
Board of Directors meeting attendance: 15/15 times
Responsibilities: Audit Division and Sales Headquarters
Number of shares of the Company owned (of which,
to be issued as stock compensation): 18,878 (7,978)
Career summary
Apr. 1982 Joined Morinaga & Co., Ltd.
Jun. 2011 Director, Commissioned General Manager ofFrozen Dessert Business Headquarters of theCompany
Apr. 2014 Commissioned General Manager of Sales
Headquarters of the Company
Jun. 2014 Director, Senior Executive Officer of theCompany
Jun. 2015 Director, Managing Executive Officer of theCompany
Jun. 2017 Director, Senior Managing Executive Officer of
the Company
Jun. 2019 Representative Director, President of theCompany (present)
Jun. 2020 President of Morinaga Angel Foundation(present)
Jun. 2021 President of All Nippon Kashi Association(present)

Term of office as a director: 4 years
Board of Directors meeting attendance: 15/15 times
Responsibilities: R&D Center, New Business
Development Division, Direct Marketing Division
Number of shares of the Company owned (of which,
to be issued as stock compensation): 4,772 (2,572)
Career summary
Apr. 1984 Joined Morinaga & Co., Ltd.
Jun. 2013 General Manager of Health Care Business
Headquarters of the Company
Apr. 2016 Executive Officer, General Manager of HealthBusiness Headquarters of the Company
Apr. 2018 Executive Officer, Deputy General Manager of
R&D Center of the Company
Jan. 2019 Executive Officer, General Manager of R&D
Center of the Company
Jun. 2019 Director, Senior Executive Officer of theCompany
Commissioned General Manager of R&D
CenterJun. 2023 Director, Managing Executive Officer of theCompany (present)

Term of office as a director: 13 years
Board of Directors meeting attendance: 15/15 times
Responsibilities: Logistics Division, DX Promotion
Division
Number of shares of the Company owned (of which,
to be issued as stock compensation): 12,066 (3,366)
Career summary
Apr. 1984 Joined Morinaga & Co., Ltd.
Jun. 2008 Senior Executive Officer, General Manager ofFrozen Dessert Business Headquarters of theCompany
Apr. 2009 Senior Executive Officer, General Manager ofConfectionery Business Headquarters of theCompany
Jun. 2010 Director, Commissioned General Manager ofConfectionery Business Headquarters of theCompany
Jun. 2013 Commissioned General Manager of Foodstuff
Business Headquarters of the Company
Apr. 2014 Commissioned General Manager of Marketing
Headquarters of the Company
Jun. 2014 Director, Senior Executive Officer of theCompany (present)
Jun. 2018 Commissioned General Manager of Production
Headquarters of the Company

Term of office as a director: 1 year
Board of Directors meeting attendance: 11/11 times
Responsibilities: Accounting Division, Corporate
Communications Division
Number of shares of the Company owned (of which,
to be issued as stock compensation): 893 (693)
Career summary
Apr. 1986 Joined Fuji Xerox Co., Ltd. (currently FUJIFILM
Business Innovation Corp.)
Jul. 2015 Corporate Vice President, General Manager ofCorporate Planning Division of Fuji Xerox Co.,
Ltd.
Jul. 2017 Executive Counselor of Fuji Xerox Co., Ltd.
Apr. 2018 Managing Executive Officer, responsible(deputy) for Corporate Planning Division of
UNIZO Holdings Company, Limited.
Jul. 2019 Chief Financial Officer, Director & Group
Executive of Twinbird Corporation
Nov. 2021 Joined Morinaga & Co., Ltd.
Apr. 2022 Senior Executive Officer of the Company
Jun. 2022 Director, Senior Executive Officer of theCompany (present)
Representative Director, President of Morinaga
Finance Co., Ltd. (present)

Machiko Miyai
Director, Managing Executive Officer〈Significant concurrent positions〉
Chairperson of Sustainability ForumJapan
Outside Director, SEKISUI CHEMICAL
CO., LTD.

Daisuke Fujii
Director, Managing Executive Officer

Hideki Matsunaga
Director, Senior Executive Officer

Term of office as a director: 9 years
Board of Directors meeting attendance: 15/15 times
Responsibilities: Sustainable Management Division,
Quality Assurance Division, Customer Service Center
Number of shares of the Company owned (of which,
to be issued as stock compensation): 5,932 (3,832)
Career summary
Apr. 1983 Joined Matsushita Electric Industrial Co., Ltd.
(currently Panasonic Corporation)
Apr. 2011 Officer, General Manager of Environment
Headquarters and Power Saving Headquartersof Panasonic Corporation
Oct. 2012 Officer, responsible for Future Life Research,
R&D Headquarters of Panasonic Corporation
Jun. 2014 Outside Director of Morinaga & Co., Ltd.
Dec.2014 Outside Director of KATO SANGYO CO., LTD.
May 2015 Outside Director of YOSHINOYA HOLDINGS
CO., LTD.
Jun. 2018 Director, Managing Executive Officer of theCompany (present)
Commissioned General Manager of Marketing
Headquarters
Feb. 2019 Chairperson of Sustainability Forum Japan(present)
Apr. 2022 Auditor of Ochanomizu University (present)
Jun. 2022 Outside Director of SEKISUI CHEMICAL CO.,LTD. (present)

Term of office as a director: 4 years
Board of Directors meeting attendance: 15/15 times
Responsibilities: Corporate Strategy Division, General
Affairs Division, Strategic Investment & Alliance Division
Number of shares of the Company owned (of which,
to be issued as stock compensation): 3,992 (2,592)
Career summary
Apr. 1987 Joined Morinaga & Co., Ltd.
Apr. 2018 General Manager of General Affairs Division of
the Company
Apr. 2019 Executive Officer, General Manager of General
Affairs Division of the Company
Jun. 2019 Director, Senior Executive Officer of theCompany
Aug.2019 Commissioned General Manager of Corporate
Strategy Division of the Company
Jul. 2022 Commissioned General Manager of General
Affairs Division of the Company
Sep. 2022 Commissioned General Manager of Strategic
Investment & Alliance Division of the Company(present)
Jun. 2023 Director, Managing Executive Officer of theCompany (present)

Term of office as a director: 1 year
Board of Directors meeting attendance: 11/11 times
Responsibilities: Marketing Headquarters
Number of shares of the Company owned (of which,
to be issued as stock compensation): 6,293 (693)
Career summary
Apr. 1990 Joined Morinaga & Co., Ltd.
Oct. 2010 General Manager of Area Sales Division ofConfectionery and Foodstuff Sales Division of
the Company
Apr. 2014 General Manager of Sales Strategy Division ofSales Headquarters of the Company
Apr. 2018 Executive Officer, General Manager of Sales
Strategy Division of Sales Headquarters of theCompany
Apr. 2019 Executive Officer, General Manager ofConfectionery and Foodstuff Sales Division ofSales Headquarters of the Company
Oct. 2019 Executive Officer, General Manager of Sales
Headquarters of the Company
Apr. 2021 Senior Executive Officer, General Manager ofSales Headquarters of the Company
Apr. 2022 Senior Executive Officer, General Manager ofMarketing Headquarters of the Company
Jun. 2022 Director, Senior Executive Officer of theCompany (present)
Commissioned General Manager of Marketing
Headquarters (present)

Future Vision andPath to Achieve It

Introduction

Value Creation
Strategy

Sustainable
Management

Governance

Financial
Performance(as of June 29, 2023)

Naomi Eto
Outside Director (Independent Officer)〈Significant concurrent positions〉
Outside Director, The Nisshin OilliO
Group, Ltd.
Outside Director, NIPPON YAKIN
KOGYO CO., LTD.

Kuniko Urano
Outside Director (Independent Officer)〈Significant concurrent positions〉
Outside Director, Yokogawa Electric
Corporation
Outside Director, NIPPON STEELCORPORATION

Term of office as a director: 3 years
Board of Directors meeting attendance: 15/15 times
Number of shares of the Company owned: 1,000

Term of office as a director: 3 years
Board of Directors meeting attendance: 13/15 times
Number of shares of the Company owned: 2,000

Career summary

Career summary

Apr. 1979 Joined Bridgestone Tire Co., Ltd. (currently
Bridgestone Corporation)
Mar. 2009 Executive Officer, responsible for General
Affairs and Corporate Communications ofBridgestone Corporation
Jun. 2014 Director, General Manager of Group CC
Headquarters of ZENSHO HOLDINGS CO., LTD.
Jan. 2015 Director, General Manager of Group General Affairs
Headquarters of ZENSHO HOLDINGS CO., LTD.
Jun. 2020 Outside Director of Morinaga & Co., Ltd. (present)
Jun. 2022 Outside Director of The Nisshin OilliO Group, Ltd. (present)
Jun. 2022 Outside Director of NIPPON YAKIN KOGYO
CO., LTD. (present)

Apr. 1979 Joined ITOCHU Corporation
Sep. 1998 Director of Family Corporation Co., Ltd.
(currently NIPPON ACCESS, INC.)
Dec. 2002 Director of Yukijirushi Access Co., Ltd. (currently
NIPPON ACCESS, INC.)
Apr. 2010 Executive Officer of ITOCHU Corporation
Jun. 2013 President, Representative Director of
ITOCHU-SHOKUHIN Co., Ltd.
Mar. 2019 Outside Director of SBS Holdings, Inc.
Jun. 2020 Outside Director of Morinaga & Co., Ltd.
(present)

Reason for appointment
Ms. Eto has business experience accumulated in the
manufacturing industry and a wealth of experience as an
executive in the retail industry. Based on this experience,
she provides objective and neutral advice on overallmanagement from a broad perspective that extends
beyond the Company’s industry.

Shuichi Hoshi
Outside Director (Independent Officer)〈Significant concurrent positions〉
Outside Director, SBS Holdings, Inc.

Reason for appointment

Mr. Hoshi has a wealth of experience as an executive inthe wholesale industry, and based on this experience,
he provides objective and neutral advice on overallmanagement from a broad perspective that extends
beyond the Company’s industry.

Term of office as a director: 2 years
Board of Directors meeting attendance: 15/15 times
Number of shares of the Company owned: 0

Term of office as a director: 1 year
Board of Directors meeting attendance: 11/11 times
Number of shares of the Company owned: 0

Career summary

Career summary

Apr. 1979 Joined Komatsu Ltd.
Apr. 2014 Executive Officer, General Manager of Human
Resources Division of Komatsu Ltd.
Apr. 2016 Managing Executive Officer, General Manager
of Human Resources Division of Komatsu Ltd.
Jun. 2018 Director, Managing Executive Officer ofKomatsu Ltd.
Jun. 2021 Outside Director of Yokogawa Electric
Corporation (present)
Jun. 2021 Outside Director of Morinaga & Co., Ltd.
(present)
Jun. 2022 Outside Director of NIPPON STEELCORPORATION (present)

Reason for appointment
Ms. Urano has a wealth of experience as an executive inthe machinery industry, and based on this experience,
she provides objective and neutral advice on overallmanagement from a broad perspective that extends
beyond the Company’s industry.

Shinji Sakaki

Apr. 1980 Joined TOKYU LAND CORPORATION
Apr. 2006 Executive Officer and General Manager of Corporate
Planning Division of TOKYU LAND CORPORATION
Jun. 2007 Director and Managing Executive Officer of
Tokyu Hands Inc. (currently Hands Inc.)
Apr. 2011 Representative Director and President of Tokyu
Hands Inc.
Jun. 2014 Director of Tokyu Fudosan Holdings Corporation
Apr. 2015 Representative Director and President of Tokyu
Livable, Inc.
Apr. 2019 Director and Chairperson of Tokyu Livable, Inc.
Mar. 2022 Advisor of Tokyu Livable, Inc. (present)
May 2022 Outside Director (Audit and Supervisory
Committee Member) of SAN-A CO., LTD. (present)
Jun. 2022 Outside Director of Morinaga & Co., Ltd. (present)

Outside Director (Independent Officer)

Reason for appointment〈Significant concurrent positions〉
Outside Director (Audit andSupervisory Committee Member),
SAN-A CO., LTD.

Mr. Sakaki has a wealth of experience as an executive
in the retail and real estate industries, and based on thisexperience, he provides objective and neutral advice
on overall management from a broad perspective that
extends beyond the Company’s industry.

Statutory Auditors
Board of Statutory Auditors meeting attendance: –Board of Directors meeting attendance: –Number of shares of the Company owned: 0

Board of Statutory Auditors meeting attendance: 12/12
times
Board of Directors meeting attendance: 11/11 times
Number of shares of the Company owned: 2,200

Career summary

Career summary

Toshiaki Fukunaga
Standing Statutory Auditor

Apr. 1982 Joined Morinaga & Co., Ltd.
Jun. 2006 Executive Officer, General Manager ofDevelopment Planning Office of R&D Center of
the Company
Jun. 2011 Executive Officer, General Manager of Chukyo
Factory of the Company
Jan. 2014 Representative Director, President of Morinaga
America Foods, Inc.
Apr. 2017 Executive Officer, General Manager of R&D
Center of Morinaga & Co., Ltd.
Jun. 2017 Director, Senior Executive Officer,
Commissioned General Manager of R&D
Center of Morinaga & Co., Ltd.
Jan. 2019 Representative Director, President of Morinaga
America Foods, Inc.
Jun. 2022 Standing Statutory Auditor of Morinaga & Co.,
Ltd. (present)

Apr. 1985 Joined Mitsubishi Corporation
Sep. 2007 Director of PT Krama Yudha Tiga Berlian Motors (Indonesia)
Jun. 2013 Director, Executive Officer of NIHONSHOKUHIN KAKO CO., LTD.
Apr. 2017 General Manager of Risk Management Officeof Mitsubishi Corporation
Apr. 2018 Division General Manager of Corporate
Planning Division of Toyo Tire & Rubber Co.,
Ltd. (currently Toyo Tire Corporation)
Jan. 2019 Corporate Officer of Toyo Tire & Rubber Co., Ltd.
Mar. 2019 Director of Toyo Tire & Rubber Co., Ltd.
Jun. 2023 Standing Outside Statutory Auditor ofMorinaga & Co., Ltd. (present)

Takehiko Sasamori Reason for appointment
Standing Outside Statutory Auditor(Independent Officer)

Board of Statutory Auditors meeting attendance: 16/16
times
Board of Directors meeting attendance: 15/15 times
Number of shares of the Company owned: 0

Board of Statutory Auditors meeting attendance: –Board of Directors meeting attendance: –Number of shares of the Company owned: 0

Career summary

Career summary
Apr. 1979 Registered as an attorney and joined Tamiya &Tsutsumi Law Office
Apr. 1985 Established Sakaguchi & Takanaka Law Office(renamed Legal Plaza Law Office in April 1998)
Sep. 2000 Appointed Judge of Tokyo District Court
Sep. 2013 Chief Judge of Akita District Family Court
Nov. 2015 Registered as an attorney and joined Kato Sogo
Law Office (currently GINGA LAW OFFICE)(present)
Jun. 2016 Outside Statutory Auditor of Morinaga & Co.,
Ltd. (present)

Koichi Sakaguchi
Outside Statutory Auditor(Independent Officer)〈Significant concurrent positions〉
Attorney (GINGA LAW OFFICE)

Reason for appointment
Mr. Sakaguchi has a high level of expertise and experience
as a judge and attorney. He provides objective and neutral
audits from a broad perspective that extends beyond theCompany’s industry.

Mr. Sasamori has a wealth of management experience in thefood industry and the manufacturing industry, and has specialized
knowledge as a Certified Public Accountant in the State of
Delaware in the United States. He provides objective and neutral
audits from a broad perspective that extends beyond theCompany’s industry based on this knowledge and experience.

Sawako Ueno
Outside Statutory Auditor(Independent Officer)〈Significant concurrent positions〉
Head of Sawako Ueno Certified Public
Accountant OfficeOutside Statutory Auditor of AIRPORTFACILITIES CO., LTD.

Apr. 1988 Joined The Dai-Ichi Kangyo Bank, Ltd. (currently
Mizuho Bank, Ltd.)
Oct. 1996 Joined Showa Ota & Co. (currently Ernst &Young ShinNihon LLC)
Oct. 2008 Partner, Ernst & Young ShinNihon LLC
Sep. 2017 Joined Deloitte Touche Tohmatsu LLC as Partner
Sep. 2019 Director of Deloitte Touche Tohmatsu LLC(retired in December 2020)
Jan. 2021 Joined the Financial Services Agency,
Securities and Exchange Criminal Investigator,
Criminal Investigation Division, Securities andExchange Surveillance Commission, Executive
Bureau of the Financial Services Agency
Apr. 2023 Established and assumed the office of Head of Sawako
Ueno Certified Public Accountant Office (present)
Jun. 2023 Outside Statutory Auditor of Morinaga & Co., Ltd. (present)
Jun. 2023 Outside Statutory Auditor of AIRPORTFACILITIES CO., LTD. (present)

Reason for appointment
Ms. Ueno has highly specialized knowledge and extensive
experience as a certified public accountant, as well as
business experience at the Financial Services Agency.
She provides objective and neutral audits from a broad
perspective that extends beyond the Company’s industry
based on this knowledge and experience.

Morinaga Group INTEGRATED REPORT 2023

77

Financial Performance

11-Year Financial and Non-Financial Summary
Financial information
Unit

FY2012FY2013

FY2014

Net sales(Million yen)

152,885

164,603

177,929

Operating income(Million yen)

2,695

3,858

5,939

Ordinary income(Million yen)

2,973

4,446

6,530

Profit attributable to owners of parent(Million yen)

1,419

8,090

3,806

Capital investment(Million yen)

13,01014,5172,393

Depreciation(Million yen)

5,594

6,808

6,581

R&D expenses(Million yen)

2,329

1,984

2,005

Cash flow from operating activities(Million yen)

5,565

7,684

11,182

Cash flow from investing activities(Million yen)

(5,681)(6,459)(3,022)

Cash flow from financial activities(Million yen)

3,645

(5,764)(1,491)

Free cash flow*(Million yen)

(2,615)

625

8,159

Total assets*2(Million yen)

141,154

144,441

151,310

Net assets(Million yen)

52,98162,594

69,393(Million yen)

29,901

26,20026,764

Operating income to net sales ratio

(%)

1.8

2.3

3.3

Return on equity (ROE)

(%)

2.7

14.4

6.0

Accounting year1

End of fiscal year

Interest-bearing debt*

3

Financial indicators

Return on assets (ROA)*

2

Shareholders’ equity ratio*2
D/E ratio

(%)

2.2

3.1

4.4

(%)

37.2

41.5

43.8

(Times)

0.57

0.44

0.40

Book value per share (BPS)*4(Yen)

1,009.48

1,151.30

1,274.09

Earnings per share (EPS)*4

(Yen)

27.24

155.37

73.11

Dividend per share*

4

(Yen)

30

30

30

Dividend payout ratio

(%)

110.1

19.3

41.0

Dividend on equity ratio

(%)

3.0

2.8

2.5

Total shareholder return ratio*5

(%)

114.5

19.5

41.5

*1 Calculated excluding expenditures associated with payments into time deposits and proceeds from the reversal of time deposits.
*2 The Company applied Partial Amendments to the Accounting Standard for Tax Effect Accounting, etc., from FY2018. Figures for FY2014 to FY2017 were retroactively adjusted in line with this accounting standard.
*3 Interest-bearing liabilities are the sum of all liabilities on which interest is paid that are shown in the consolidated balance sheets, except for lease obligations.

Non-financial informationJapan
CO2 emissions*7
Overseas
Amount of water
resource consumption*8,*13
Amount of waste emissions*9

Unit
Scope 1*

13

(Thousand t-CO2)

Scope 2*13

(Thousand t-CO2)

Scope 1(Thousand t-CO2)

Scope 2(Thousand t-CO2)

FY2012FY2013

FY2014

62.5

63.9

58.0

−

4.7

9.0

Japan

(Thousand tons)

1,689.7

1,556.0

1,487.9

Overseas(Thousand tons)

−

130.6

215.3

Japan

(Thousand tons)

10.7

11.4

10.1

(Thousand tons)

−

0.3

1.1

(People)2,573(2,084)

2,927(2,323)2,978(2,613)

(%)

4.5

4.2

4.4

Overseas

Procurement ratio ofsustainable raw materials*10

Japan

Number of employees*11

Consolidated

Cacao beans(%)

Palm oil

(%)

Paper

(%)

Ratio of female managers*12 Morinaga & Co., Ltd.

*7 Figures for Japan for FY2018 and later represent the Group consolidated basis. Figures for overseas for FY2019 and later represent the Group consolidated basis. Figures prior to this are for production sites bothin Japan and overseas. The conversion coefficient at the time of CO2 calculation for FY2017 and prior uses the fixed coefficient of 0.378 kg-CO2/kWh established internally in 2003.
*8 Figures prior to FY2017 are for production sites both in Japan and overseas. Figures for Japan for FY2018 and later represent the Group consolidated basis.
*9 Figures for production sites both in Japan and overseas.
*10 Paper covers only product packaging.

78

Introduction

Future Vision andPath to Achieve It

Value Creation
Strategy

Sustainable
Management

Financial
Performance

Governance

For more details, please refer to the link below.
https://www.morinaga.co.jp/company/english/ir/library/settlement.html

FY2015FY2016FY2017FY2018FY2019FY2020*6

FY2021*6

FY2022*6

181,868

199,479

205,022205,368

208,878

168,240

181,251

194,373

11,456

17,612

19,751

20,217

21,23019,176

17,685

15,235

12,062

18,325

20,422

20,767

21,95019,782

18,24715,757

8,092

11,115

10,28912,816

10,824

13,416

27,773

10,059

7,406

3,750

7,310

7,983

10,661

20,404

20,411

9,995

6,130

5,771

5,820

5,835

6,230

7,909

10,032

10,087

2,152

2,210

2,205

2,194

2,240

2,217

2,686

2,892

16,715

18,40017,78820,897

20,994

12,127

24,825(2,966)(2,091)(29,736)

8,154(20,025)

16,993(19,862)

9,312(14,209)(2,311)(2,398)(17,906)(11,888)(4,375)(4,084)(5,943)(7,348)14,223

15,663

13,943

15,871

7,988(7,735)34,318(17,080)

163,085

183,112

177,920

175,837

188,060

202,910214,300

205,226

77,223

91,763

100,331

97,193

105,487

123,706

131,174

125,856

26,446

26,282

11,265

10,666

10,00010,00010,00019,000

6.3

8.8

9.6

9.8

10.2

11.4

9.8

7.8

11.5

13.6

11.0

13.2

10.8

11.8

22.0

7.9

7.7

10.6

11.3

11.7

12.1

10.1

8.7

7.5

45.7

48.7

55.0

54.8

55.7

60.5

60.7

60.7

0.35

0.29

0.12

0.11

0.10

0.08

0.08

0.15

1,432.50

1,713.49

1,882.23

1,917.22

2,080.77

2,441.25

2,603.95

2,645.25

155.47213.60197.76247.15215.18266.73552.59208.77

35

45

50

66

72

80

90

100

22.5

21.1

25.3

26.7

33.5

30.0

16.3

47.9

2.6

2.9

2.8

3.5

3.6

3.5

3.6

3.8

22.9

21.5

26.7

92.5

33.6

30.1

21.5

157.9

*4 The Company implemented a five-for-one share reverse stock split on October 1, 2016. Figures calculated assuming that this reverse stock split was carried out at the beginning of FY2012.
*5 The total amount of dividends for which the record date falls in the current fiscal year and the total amount of treasury shares acquired in the current fiscal year divided by net income attributable to owners of the parent.
*6 The Company applied the “Accounting Standard for Revenue Recognition (ASBJ Statement No. 29, March 31, 2020),” and other regulations, from the beginning of FY2021. The figures for FY2020 are from after
retroactive application of the said accounting standard.

FY2018FY2019FY2020*6

FY2021*6

FY2022*6

24.0

20.6

21.4

22.3

22.3

50.1

46.9

47.5

53.4

54.0

2.8

3.4

3.3

3.7

4.0

6.6

7.2

6.3

6.8

6.8

1,529.9

1,550.4

1,591.3

1,602.1

1,599.0

1,706.1

246.6

208.9

158.7

148.0

169.7

179.4

203.5

10.0

9.8

9.7

9.6

9.4

10.8

9.6

1.3

0.9

0.5

0.6

0.6

0.7

0.8

9

34

FY2015FY2016FY2017

55.3

57.0

56.7

14.3

18.4

15.1

1,482.5

1,548.7

182.6
9.8
1.2

2

9

98.0

99.9

3,056
(2,330)3,256(2,186)

3,169(1,950)2,717(1,712)

2,711(1,687)2,825(1,597)2,937(1,658)3,076(1,673)

4.2

4.6

5.2

6.7

7.7

8.3

9.4

10.0

*11 Data as of March 31 each fiscal year. Number of employees represents the number of people working for the Company (excluding forwarded employees from the Group to outside the Group but including
forwarded employees from outside the Group to the Group). For temporary employees, the number in parentheses is excluded from the above number and shows the average number of temporary employees
per year. Temporary employees include part-timers and contract workers but exclude temporary employees from placement agencies.
*12 Figures are non-consolidated for Morinaga & Co., Ltd., as of April 1 of each fiscal year.
*13 Figures for FY2020 CO2 emissions for the Group in Japan on a consolidated basis (Scope 1 + 2) and water usage amount have received third-party assurance from LRQA.

Morinaga Group INTEGRATED REPORT 2023

79

Financial Summary(1) Consolidated Balance Sheets
Million yen

FY2021(March 31, 2022)

FY2022(March 31, 2023)

AssetsCurrent assets
Cash and deposits

56,65236,362

Notes and accounts receivable–trade

22,31323,712Merchandise and finished goods

13,645

16,330Work in process
Raw materials and supplies
Income taxes receivable
Other
Allowance for doubtful accounts
Total current assets

374

498

9,736

14,761

157

3,328

9,236

6,421

(48)

(43)

112,067

101,371

Noncurrent assets
Property, plant and equipment
Buildings and structures

62,29562,990

Accumulated depreciation(32,283)(32,940)

Buildings and structures–net

30,01130,050Machinery, equipment and vehicles

98,116

100,894

Accumulated depreciation(68,740)(72,269)

Machinery, equipment and vehicles–net

29,37528,624Tools, furniture and fixtures

5,236

5,281

Accumulated depreciation(4,015)(4,112)Tools, furniture and fixtures–net

1,221

1,168

Land

21,31820,734

Lease assets

1,851

2,355

Accumulated depreciation(966)(1,051)

Lease assets–net

884

1,304

Construction in progress

2,241

4,373

Total property, plant and equipment

85,05386,256

Intangible assets
Goodwill

98–

Software

–

192

Other

211

647

Total intangible assets

309

839

Investment securities

10,447

10,167

Net defined benefit asset

4,232

4,605

Deferred tax assets

1,191

1,102

Other

1,034

919

(36)

(35)

Investments and other assets

Allowance for doubtful accounts

80

Total investments and other assets

16,86916,759Total noncurrent assets

102,233

103,855

Total assets

214,300

205,226

Introduction

Future Vision andPath to Achieve It

Value Creation
Strategy

Sustainable
Management

Financial
Performance

Governance

For more details, please refer to the link below.
https://www.morinaga.co.jp/company/english/ir/library/settlement.html

Million yen

FY2021(March 31, 2022)

FY2022(March 31, 2023)

Notes and accounts payable–trade20,392

22,798Current portion of long-term loans

10,000

–

367

490

Accounts payable–other

10,538

10,156

Income taxes payable

9,974

360

Refund liabilities

3,611

3,916

Allowance for bonuses

2,697

2,696

453

–

Other

12,112

10,879Total current liabilities

70,14751,297

Bonds payable

–

9,000

Long-term loans–

10,000

Lease obligations

616

950

–

333

Liabilities
Current liabilities

Lease obligations

Asset retirement obligations

Long-term liabilities

Deferred tax liabilities
Provision for directors’ stock benefits

82

88

Provision for environmental measures

274

273

Net defined benefit liability

8,231

3,640

Asset retirement obligations

–

66

3,642

3,633

Deposits received
Other

131

86

Total long-term liabilities

12,97828,072

Total liabilities

83,126

79,370Common stock

18,612

18,612

Capital surplus

17,292

17,186

Retained earnings

97,886

83,396

Net assets
Shareholders’ equity

Treasury stock(12,717)(3,713)

Total shareholders’ equity

121,074

115,482

5,396

5,201

Accumulated other comprehensive income
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges(1)3Foreign currency translation adjustments

1,304

2,263

Remeasurements of defined benefit plans

2,261

1,615

Total accumulated other comprehensive income

8,960

9,082

Non-controlling interests

1,139

1,290

Total net assets

131,174

125,856

Total liabilities and net assets

214,300

205,226

Morinaga Group INTEGRATED REPORT 2023

81

Financial Summary(2) C onsolidated Statements of Operations and Consolidated Statements ofComprehensive Income(Consolidated Statements of Operations)

Million yen

FY2021(April 1, 2021–
March 31, 2022)

FY2022(April 1, 2022–
March 31, 2023)

Net sales

181,251

194,373

Cost of sales

105,425

117,721

Gross profit

75,82676,651

Selling, general and administrative expenses

58,14061,415

Operating income

17,685

15,235Interest income

21

19

Dividends income

543

270

Non-operating income

Equity in earnings of affiliates–

4

Subsidy income

–

263

Other

228

303

Total non-operating income

793

861

Interest expenses

34

56

Equity in losses of affiliates

25–

Bond issuance costs

–

51

112

85

Non-operating expenses

Depreciation
Commission for purchase of treasury stock

0

76

Other

57

68

Total non-operating expenses
Ordinary income

231

339

18,24715,757Extraordinary income
Gain on sales of noncurrent assets
Gain on sales of investment securities
Insurance income

10

7

21,952

274

–

100

21,963382

Loss on sales and retirement of noncurrent assets

700

1,535

Impairment loss

99

649

IT system failure response expenses

193

–

1

71

Total extraordinary loss

994

2,256

Income before income taxes

39,216

13,884

Income taxes—current

11,2792,964

Income taxes—deferred

(22)

628

Total extraordinary income
Extraordinary loss

Other

Total income taxes

11,257

3,593

Net income

27,95910,291

Profit attributable to non-controlling interests
Profit attributable to owners of parent

82

186

231

27,773

10,059

Introduction

Future Vision andPath to Achieve It

Value Creation
Strategy

Sustainable
Management

Financial
Performance

Governance

For more details, please refer to the link below.
https://www.morinaga.co.jp/company/english/ir/library/settlement.html(Consolidated Statements of Comprehensive Income)Net income

Million yen

FY2021(April 1, 2021–
March 31, 2022)

FY2022(April 1, 2022–
March 31, 2023)

27,95910,291(15,333)(195)

Other comprehensive income
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges

(23)

5

Foreign currency translation adjustments

970

1,006

Remeasurements of defined benefit plans, net of tax

(535)

(629)

Share of other comprehensive income of associates accounted for using equity method(0)5Total other comprehensive income(14,921)193

Net comprehensive income

13,037

10,484

12,684

10,182353

302(Breakdown)Comprehensive income attributable to owners of parent
Comprehensive income attributable to non-controlling interests

Morinaga Group INTEGRATED REPORT 2023

83

Financial Summary(3) C onsolidated Statements of Changes in Net Assets
FY2021 (April 1, 2021–March 31, 2022)
Million yen

Shareholders’ equity

Common stock
Balance at beginning of
the fiscal year

Capital surplus

18,612

17,281Retained earnings
74,139Treasury stock

Total shareholders’equity(11,291)

98,742

Changes of items during the period
Dividends from surplus(4,025)(4,025)

Profit attributable to owners of parent

27,773

27,773Purchase of treasury stock(1,467)(1,467)

41

51

10

Disposal of treasury stock–

Cancellation of treasury stock
Net changes of items other thanshareholders’ equity
Total changes of items during
the period
Balance at end of the fiscal year–10

23,747(1,425)22,331

18,612

17,292

97,886(12,717)

121,074

Accumulated other comprehensive income

Total
Valuation
RemeasureForeign
accumulated
Deferred gains
difference onments ofcurrency
otheror losses onavailable-fortranslation defined benefit
comprehensive
hedgesplans
sale securities
adjustments
incomeBalance at beginning of the fiscal year

20,729

23

493

2,803

24,049Noncontrollinginterests

Total
net assets

915

123,706

Changes of items during the period
Dividends from surplus(4,025)

Profit attributable to owners of parent

27,773Purchase of treasury stock(1,467)

Disposal of treasury stock

51

Cancellation of treasury stock–

Net changes of items other thanshareholders’ equity

84(15,333)

(25)

811

(541)

(15,088)224(14,864)

Total changes of items during
the period(15,333)

(25)

811

(541)

(15,088)

224

7,467

Balance at end of the fiscal year

5,396

(1)

1,304

2,261

8,960

1,139

131,174

Introduction

Future Vision andPath to Achieve It

Value Creation
Strategy

Sustainable
Management

Financial
Performance

Governance

For more details, please refer to the link below.
https://www.morinaga.co.jp/company/english/ir/library/settlement.html

FY2022 (April 1, 2022–March 31, 2023)
Million yen

Shareholders’ equity

Common stock
Balance at beginning of
the fiscal year

Capital surplus

18,612

17,292Retained earnings
97,886

Treasury stock

Total shareholders’equity(12,717)

121,074

Changes of items during the period
Dividends from surplus(4,497)(4,497)

Profit attributable to owners of parent

10,05910,059Purchase of treasury stock(11,173)(11,173)

20

20

0

Disposal of treasury stock(105)(20,052)

20,157

–

–

(105)

(14,490)

9,004(5,591)

18,612

17,186

83,396(3,713)

115,482

Cancellation of treasury stock
Net changes of items other thanshareholders’ equity
Total changes of items during
the period
Balance at end of the fiscal year

Accumulated other comprehensive income

Total
Valuation
RemeasureForeign
accumulated
Deferred gains
difference onments ofcurrency
otheror losses onavailable-fortranslation defined benefit
comprehensive
hedgesplans
sale securities
adjustments
incomeBalance at beginning of the fiscal year

5,396

(1)

1,304

2,261

8,960

Noncontrollinginterests

Total
net assets

1,139

131,174

Changes of items during the period
Dividends from surplus(4,497)

Profit attributable to owners of parent

10,059Purchase of treasury stock(11,173)

Disposal of treasury stock

20

Cancellation of treasury stock–

Net changes of items other thanshareholders’ equity

(195)

4

958

(645)

122

150

273

Total changes of items during
the period

(195)

4

958

(645)

122

150

(5,318)

Balance at end of the fiscal year

5,201

3

2,263

1,615

9,082

1,290

125,856

Morinaga Group INTEGRATED REPORT 2023

85

Financial Summary(4) Consolidated Statements of Cash Flows
Million yen

FY2021(April 1, 2021–
March 31, 2022)

FY2022(April 1, 2022–
March 31, 2023)

Income before income taxes

39,216

13,884

Depreciation

10,032

10,087

Impairment loss

99

649

Amortization of goodwill

98

98

Operating activities

Increase (decrease) in provision for directors’ stock benefits

24

5

Increase (decrease) in net defined benefit liability

143(4,760)(Increase) decrease in net defined benefit asset(159)(1,154)

Increase (decrease) in allowance for bonuses

80

(13)

Increase (decrease) in allowance for doubtful accounts

1(6)

Increase (decrease) in provision for environmental measures

(5)

(0)

(564)

(290)

Subsidy income

–

(263)

Interest expenses

34

56

Interest and dividends income

Equity in losses (earnings) of affiliates
Loss (gain) on sale of investment securities

(4)
(274)

(Gain) loss on sales of noncurrent assets

89

58

Loss on retirement of noncurrent assets

599

1,468

–

(100)

Insurance income(Increase) decrease in notes and accounts receivable–trade(2,127)(1,128)(Increase) decrease in inventories(3,752)(7,138)

Increase (decrease) in notes and accounts payable–trade

2,039

2,171

Other

2,773

(1,387)

Subtotal

26,697

11,958Interest and dividends income received

561

288

Interest expenses paid

(33)

(34)

(2,400)(15,290)

Income taxes (paid) refund
Proceeds from subsidy income–

11

Proceeds from insurance income–

100

24,825(2,966)

Net cash provided by (used in) operating activities

86

25(21,951)

Introduction

Future Vision andPath to Achieve It

Value Creation
Strategy

Sustainable
Management

Financial
Performance

Governance

For more details, please refer to the link below.
https://www.morinaga.co.jp/company/english/ir/library/settlement.html

Million yen

FY2021(April 1, 2021–
March 31, 2022)

FY2022(April 1, 2022–
March 31, 2023)

Investing activities
Payments into time deposits
Purchase of property, plant and equipment

(180)

(95)

(15,307)(13,304)

Proceeds from sales of property, plant and equipment

369

176

Purchase of intangible assets

(15)

(282)

Purchase of investment securities

(2)

(2)

24,784

285

Other

(336)

(987)

Net cash provided by (used in) investing activities

9,312(14,209)

Proceeds from sales of investment securities

Financing activities
Proceeds from long-term loans–

10,000

Repayments of long-term loans–(10,000)

Proceeds from issuance of bonds
Purchase of treasury stock
Proceeds from sales of treasury stock
Cash dividends paid
Dividends paid to non-controlling interests
Other

–

8,948

(1,467)(11,250)51

20(4,025)(4,497)

(128)

(151)

(373)

(417)

(5,943)(7,348)384

454

Net increase (decrease) in cash and cash equivalents

28,578(24,068)

Cash and cash equivalents at beginning of period

31,56860,146

Cash and cash equivalents at end of period

60,14636,077

Net cash provided by (used in) financing activities
Effect of exchange rate change on cash and cash equivalents

Morinaga Group INTEGRATED REPORT 2023

87

Corporate Profile/Stock Information/
Third-Party Assurance
Corporate
Profile(as of March 31, 2023)

Business Offices
and AffiliatedCompanies(as of March 31, 2023)

Stock and
Shareholder
Information

Company Name: MORINAGA & CO., LTD.
Representative: Eijiro Ota, Representative Director, President
Headquarters: 5-33-1 Shiba, Minato-ku, Tokyo 108-8403, Japan
Establishment: August 15, 1899 Founded as Morinaga’s Western Confectionery Shop
Incorporation: February 23, 1910
Capital: 18,612 million yen
Business Activities: Morinaga’s main business activities are the manufacture, purchase, and sale ofconfectioneries (e.g., caramel, biscuits, chocolate), foods (e.g., cocoa, cake mix), frozen
desserts (e.g., ice cream), and health products (e.g., jelly drinks)
Sales: Consolidated 194,373 million yen Non-consolidated 161,284 million yen
Number of Employees: Consolidated 3,076 Non-consolidated 1,472 (average age: 43.2 years)
Main Offices

Domestic Group Companies

Overseas Group Companies

Head Office
East Japan Branch OfficeWest Japan Branch Office
Tsurumi Factory
Chukyo FactoryOyama Factory
Mishima Factory
R&D Center●

Food Manufacturing
Morinaga Angel Dessert Co., Ltd.
Morinaga Dessert Co., Ltd.
Takasaki Morinaga Co., Ltd.
Aunt Stella Inc.
Morinaga Market Development Co., Ltd.
● Food Merchandise
Morinaga Shoji Co., Ltd.
● Real Estate and Services
Morinaga Takataki Country Co., Ltd.
● OtherMorinaga Finance Co., Ltd.
Morinaga Institute of Biological Science, Inc.
Morinaga Business Partner Co., Ltd.
SEE THE SUN Inc. ★

Taiwan Morinaga Co., Ltd. (Taipei, Taiwan)
Shanghai Morinaga Co., Ltd. (Shanghai, China)
Morinaga (Zhejiang) Co., Ltd. (Zhejiang, China)
Morinaga America, Inc. (California, USA)
Morinaga America Foods, Inc. (North Carolina,
USA)
Morinaga Asia Pacific Co., Ltd. (Bangkok,
Thailand)Morinaga Bioscience (Thailand) Co., Ltd.
(Bangkok, Thailand) ★

Stock Exchange Listing: TSE Prime Market
Industry: Food products
Securities Code: 2201
Share Unit Number: 100 shares★Non-consolidated companies accounted forusing the equity method

Fiscal Year: April 1 to March 31 of the following year
Total Number of Shares Authorized to Be Issued: 200,000,000
Total Number of Shares Issued: 48,139,769
Number of Shareholders: 26,594(as of March 31, 2023)

Distribution of Shares by Owner

Status of Major Shareholders*Shareholder Name

The Master Trust Bank of Japan, Ltd. (Trust account)
Morinaga Business Partner Shareholding Association
Custody Bank of Japan, Ltd. (Trust account)
MUFG Bank, Ltd.
Meiji Yasuda Life Insurance Company
NORTHERN TRUST CO. (AVFC) RE SILCHESTERINTERNATIONAL INVESTORS INTERNATIONALVALUE EQUITY TRUSTSTATE STREET BANK AND TRUST COMPANY
505103
JP MORGAN CHASE BANK 385632
SSBTC CLIENT OMNIBUS ACCOUNT
Tokio Marine & Nichido Fire Insurance Co., Ltd.

Number of
Shares Held(Thousand shares)

Ratio of Voting
Rights (%)

5,351
3,356
2,078
1,704
1,121

11.3
7.1
4.4
3.6
2.3

1,042

2.2

952

2.0

886
799
696

1.8
1.6
1.4

TreasurysharesFinancial
institutions

2.1%

27.9%

Individuals,
other

25.0%

Foreign-owned
corporations

30.9%

Other
corporations

Securities
companies

12.5%

1.6%

*The Company holds 1,015,263 shares of treasury stock but is excluded from the list of major shareholders above. The holding ratio is calculated
after excluding treasury stock.

External
Recognition
https://www.msci.com/our-solutions/esg-investing88

Future Vision andPath to Achieve It

Introduction

Third-Party
Assurance

Value Creation
Strategy

Sustainable
Management

Financial
Performance

Governance

The Morinaga Group has received assurance from LRQA Limited for the following information appearing in this report toenhance the reliability and accuracy of the information contained in the Morinaga Group Integrated Report 2023.

Scope of assurance

CO2

CO2 emissions
reduction

Amount of water
resource usage

p. 60

p. 61

For more detailed information, please refer to the Third-Party Assurance Statement published in the
ESG Data section of our corporate website.
▶ https://www.morinaga.co.jp/company/english/sustainability/data/pdf/3rd-e_2023.pdf

Director, Managing Executive Officer
Responsible for Sustainable Management
Division

This year marks the third time that the Morinaga Group has published an integrated report following the firstone in FY2021. The objective of our integrated report is to deepen the understanding of stakeholders about
our efforts to enhance corporate value over the medium to long term.
The Group, which launched its 2030 Business Plan in FY2021, is promoting corporate activities with thevision of changing into a wellness company. In this report, we have included value co-creation stories fromour core “in-” business as a special feature. Also, as another special feature, we have included a roundtablediscussion by employees as they are important stakeholders. Both special features convey our initiatives tobecome a wellness company in a clear and concise manner. We hope this content will help our stakeholders
to better understand the Group.
This report is produced by the Sustainability Management Division and the Integrated Report Task Team,
which consists of members from several related departments. As the Director and Managing Executive Officer
responsible for this report, I declare the legitimacy of the preparation process and the accuracy of the content.
We will continue to value dialogue with stakeholders and enhance the content of disclosure andcommunication. I would appreciate it if you would share your frank and honest opinions of this integrated reportwith us.

Editing Policy
The Morinaga Group launched a new long-termbusiness plan in FY2021 called the 2030 Business
Plan, aiming to continuously enhance corporate
value based on the new corporate philosophy. This
integrated report is designed with the goals ofdisseminating and promoting understanding ofour vision for the future through the Group’s new
corporate philosophy as well as our value creation
strategy aimed at fruition of this philosophy over the short, medium, andlong term to audiences inside and outside Japan. We hope this report will
deepen our dialogue and mutual understanding with shareholders anddefine our path toward value creation. Referencing the International
Integrated Reporting Framework and Guidance for Collaborative Value
Creation, this report aims to concisely convey material issues in achieving
its new corporate philosophy from both financial and non-financial aspects,
as well as initiatives to address these issues.
For more detailed information, please refer to our corporate website*.

Information Disclosures System
Value Creation Story

Integr ated Report

Securities Report
Financial results● Financial results briefing
materials●

ESG Data Book●●

Sustainability website●●

Corporate Governance
Report●Investor relations website

Financial

Machiko Miyai

Message on Publication of Morinaga Group Integrated Report 2023

Non-Financial

Assurance of Executive
Officer in Charge

Completeness

Morinaga Group Corporate Profile ▶ https://www.morinaga.co.jp/company/english/▶Reference guidelines“International Integrated Reporting Framework” of the International Integrated Reporting Council (IIRC)“Guidance for Collaborative Value Creation” of the Ministry of Economy, Trade, and Industry▶Period covered by the Report
FY2022 (April 1, 2022, through March 31, 2023)
Information outside of this period might also be reported in case it is appropriate to illustrate past information or recent case studies.
▶Reporting boundary
This report is relevant to the Morinaga Group*. However, if the information for the entire Group is not fully available, the scope of coverage isstated in the report.
*In principle, Morinaga & Co., Ltd., and its consolidated subsidiaries (as of March 31, 2023) are referred to as the Morinaga Group or the Group.

Morinaga Group INTEGRATED REPORT 2023

89

5-33-1 Shiba, Minato-ku, Tokyo 108-8403
https://www.morinaga.co.jp/company/english/
Inquiries
Sustainable Management Division
TEL +81-3-3456-4351 FAX +81-3-3451-3625