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

Value Creation
Strategy

Future Vision andPath to Achieve It

Introduction

Sustainable
Management

Financial
Performance

Governance

The Morinaga Group’s Materiality

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

1

Diversity andInclusion of People
2

4

Foster human resources to achieve
our vision

Conserve the
Global Environment

Diversity and inclusion

3

1

1

1

2

1

*2

5

4

2

1
Important

Target for 2030

Results for FY2022

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

●

●

5

● Improving innovation capabilities and environmental response capabilities▲ Declining organizational competitiveness and social reputation due todelayed responses● Achieving long-term stable procurement of safe and high-quality raw
materials▲ Growing risks surrounding procurement of agricultural raw materials due
to delayed response

1) Sustainableprocurementof rawmaterials*2

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

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%*103

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

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

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

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

Reduction inconsideration

Reduction inconsideration

3

●

●

99.9%*10

Raw materials 81%* (Survey not conducted in FY2022)
Materials
81%*11
11●3) Reduce food loss and waste: 70%*4

+8%

▲49%

●

●

● Increasing management efficiency and corporate value▲ Declining evaluations from the capital marketsーー● Acquiring trust from countries and regions where we operate● Increasing the ability to promote and implement our management strategyーー▲ Damage to social trust, brand value, and corporate value

5

Address next-generation foodtechnologies(e.g., next-generation food services, DX,robotics)

Increase social trust andreputation through the disclosureof ESG information

●

●

●

4
5

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

Instead of uniform targets for 2030,
we promote responses to individual
issues as needed

ー

ー

ー

● Increasing social trust and corporate valueーー

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
Conducting dialogue with suppliers based on
survey results

Human Resources
Strategy
pp. 49–51
HealthManagement
pp. 56–57

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

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

Exploring ways to standardize core IT systems
domestically and internationally
Actively recruiting employees locally●● Improving productivity● Growing business opportunities from innovation*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*3

pp. 58–59
●

●

4

18

Human rights management

5

Upper: Morinaga & Co., Ltd.

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

Targets

Rate ofpositive
responses
on theemployeeawarenesssurvey:80%

2(e.g., strengthen the foundation for overseas
expansion and respect local cultures)

3

Progress●● Reducing human rights and environmental risks▲ Declining social trust, brand value, and corporate value

Globalization of the managementfoundation

2

Target and Progress
Results for
FY2021

Human rights and environmental
issues in the production stage of
agricultural raw materials

2

3

Very important●

Strengthen theBusiness Management
Foundation2

Impact on the Morinaga Group’s sustainable growth

Sustainable procurement of raw
materials

Strengthen corporate governance1Note: 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

11

Identified the following
five materialities

4

2

4

● Increasing social trust▲ Declining social trust, brand value, and corporate value● Securing of talent needed to contribute to the realization of our Purpose
and the 2030 Vision▲ Declining sustainable growth capabilities due to delayed responses

3*1● 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

3

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 andAchieve Sustainable
Value Chains

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

Identifying materiality
through discussions
by executive
management

Very important

We have identified the materiality that the Morinaga Group must address to achieve our Purpose

2

Important

Impact on the sustainable
development of society

Materiality Matrix

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

Introduction

Value Creation
Strategy

Future Vision andPath to Achieve It

Sustainable
Management

Financial
Performance

GovernanceValue Creation Process for Achieving Our 2030 Vision
PurposeTo 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

The 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.

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

Basic researchand ingredientsresearch2030 Vision

We Will Change into a Wellness Company.

Outputs

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.

Food processing
technologies

Product
development
capability

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

Frozen Desserts
Business

Confectionery andFoodstuffs BusinessSee page 24

Financial and Non-Financial Targets (Value Co-Creation)
Distribute 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●

Financial Targets*4
Economic
value

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

Net sales:

300 billion yen

Customervalue

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●

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

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

20

7

8

Evolution of Management
Transition
strategy

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

Promote Purpose-Driven Management

Implement the 2030 Business Plan

Diversity and inclusion*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)Materiality

Achieve sustainable value chains

Socioeconomic and lifestyle changes brought
about by the COVID-19 pandemic
Declining birthrate/aging population and contractionof the Japanese market (labor shortages)

See pages
24 and 55

Conserve the global environment

Contribute to the healthy lives of people around the world

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 food*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.

6

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

Future Vision andPath to Achieve It

Introduction

Value Creation
Strategy

Sustainable
Management

Governance

Financial
Performance

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.

2030 Business Plan

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 the2018 Medium-Term Business Plan (2018–2020)

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

Solidify Our Business Foundation and
Accelerate Our Growth Strategy

Building a New Foundation for
Dramatic Growth

Our Commitments since Our Founding
Founding onward

The Morinaga Group’s Corporate Philosophy

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

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

2019

2030 Business Plan

Strategy

Challenge

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

Increase capital efficiency using efficient asset
allocation for greater growth

Financial

Performance

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

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%●[Results of the 2018 Medium-Term Business Plan]

Product promotion andinformation provision
capacities

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

Health ofmind

Customers

Health of

Healthofbodyenvironment

Employees

Society

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

FY2018FY2019FY2020

205.3

208.8

168.2*1

Operating income
to net sales ratio (%)

9.8

10.2

11.4

Overseas sales
ratio (%)

5.9

Focused domains’sales ratio

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]

Net sales (Billion yen)

5.3

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

Exploration andResearch Domain

7.0

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

Financial*2
Net sales(Billion yen)

Operating income(Billion yen)

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

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

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

49.8

ROE (%)

22.0(10.1)*4

7.9

Dividend payout
ratio (%)

16.3*547.9

or higher

9 or higher

Sustainable procurement
ratio in Morinaga & Co., Ltd.,products in Japan*6[Targets of the 2030 Business Plan]

FY2022
results

48.8

Non-Financial (Morinaga products in Japan)

Cacao beans (%)

22

The Morinaga Groupwill change into a Wellness Company in 2030.

●

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

Outcomes

Stable operations and increased businessefficiency realized through the transition tosmart factories●
Our Commitments(Value)See pages 24 and 25

How to Change into a Wellness Company●

Production technology
and mass production
technology

2030 Vision

The Code of Conduct andStandards of Behavior

Strategy

Products for various scenes and needs●

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

●

Product development
capability

See page 1

Corporate
MessageOur Mission(Purpose)

Build a Business Foundation That
Can Generate Profits Consistently

Food processing technology

Established a New Corporate Philosophy and the 2030 Vision

See pages 4 and 5

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

Introduction

Value Creation
Strategy

Future Vision andPath to Achieve It

Sustainable
Management

Governance

Financial
PerformanceLong-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.

Three Basic Policies and Strategies
Policies2030 Vision

Improve Profitability through Business
Portfolio Optimization and Structural
Reforms

The Morinaga Group will change intoa Wellness Company in 2030.

Business Portfolio Optimization

1. Improve Profitability through Business Portfolio
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.

Policy1

24

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

DirectMarketingBusiness

U.S.
Business

FrozenDesserts

40%

Business

Domestic Confectionery and Foodstuffs
Business, Operating subsidiaries inJapan, and Taiwan Business

60%
40%

Policy2

2018 Medium-TermBusiness Plan
(average during term)

Build Business Foundation
Linked to Business Strategies

Promote Diversity

Concentration ofManagement
Resources on the
Focused Domains

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 ~~ business creation ~・Global (e.g., China, Southeast Asia,
Oceania, Europe)・Digital and others

3

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”

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.

Component Ratio

Exploration and Research domain category:

PolicySustainable Business Management

Growth potential

High

We will further evolve the reliability and technology built in our 120-year history to support
people’s wellness lifestyles for all generations worldwide.

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

Strategies

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.

Change into a
Wellness Company
Three values
to provide

Health ofmind

Health ofbody

Healthofenvironment

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”
Values areprovided for

Customers

Employees

Society

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

Introduction

Future Vision andPath to Achieve It

Value Creation
Strategy

Sustainable
Management

Governance

Financial
Performance

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

Key Measures in FY2023

ResultFocused Domains

In 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

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
pp. 42–43

Manufacturing
pp. 46–47

Human
Resources

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.

R&D

pp. 49–51 pp. 44–45
DX
p. 48

Financepp. 29–33

Morinaga Group INTEGRATED REPORT 2023

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