Morinaga Group INTEGRATED REPORT 2021

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

INTEGRATEDREPORT 2021
Morinaga Group For the Fiscal Year Ended March 31, 2021

CONTENTS
Profile2
4
6

Sustainability Section
40

Corporate Philosophy
History
History of the Morinaga Group’s Value Creation
At a Glance
Financial and Non-Financial Highlights

Strategy Section

The Morinaga Group traces its roots back to the commitment of its founder Taichiro Morinaga to deliver highly
nutritious and delicious Western confections to the people of Japan. Beginning with caramel, which helearned about in the United States, it was his vision to bring foods from Japan to the world and create foodculture beyond borders. His commitment has been passed down over the years, regardless of changes in thetimes and business environment, becoming a driving force behind the Morinaga Groupʼs growth.

The Morinaga Group’s Corporate Philosophy

8

Message from Top Management

14
16
18
22
25

Value Creation Process for Achieving Our Vision for 2030
Materiality
Long-Term Business Plan: 2030 Business Plan
Medium-Term Business Plan: 2021 Medium-Term Business Plan
Policy 1 Improve Proﬁtability through Business Portfolio
Optimization and Structural Reforms

34
38

Policy 2 Build Business Foundation Linked with Business Strategies
Policy 3 Promotion of Diversity

Initiatives for Sustainability
40 Sustainability Management
42 Contributions to Healthy Lives of People around the World
46 Diversity and Inclusion of People
48 Achieving Sustainable Value Chains
50 Conserving the Global Environment
52 Strengthening the Business Management Foundation

Governance Section
54
56
58
62

Executive Management Team
Messages from Outside Directors
Corporate GovernanceCompliance and Risk Management

Financial Section
64
66
74

11-Year Financial and Non-Financial Summary
Financial Summary
Corporate Profile/ Stock Information/ Editing Policy

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 ofproducts, and fluctuations in foreign exchange rates. However, elements affecting future forecasts are not limited to these. Furthermore, the Company applied the Accounting Standard on Revenue
Recognition (ASBJ Statement No. 29; March 31, 2020) from the beginning of the fiscal year ending March 31, 2022. Monetary amounts and indicators appearing in this report are based on thisaccounting standard.

Delicious, Fun, and Healthy
The Morinaga Group will continue to create healthy foods thatcan be enjoyed beyond generations, thereby bringing smiles to the faces of people
around the world now and in the future.
Good quality
Pursue quality with integrity

Only-one value
Create new value and inspiration

Link together
Strengthen relations oftrust with stakeholders

Sustainable society
Contribute to a sustainable society

Act globally
Expand the scope andpossibilities of activities

Give first priority to customers
Altruism

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, and 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 the foundingof the Group and will continue to uphold as our firm belief for many more years to come. To describe the essence of our Corporate
Philosophy in one expression, it is “Delicious, Fun, and Healthy.”Morinaga Group INTEGRATED REPORT 2021

Morinaga Group INTEGRATED REPORT 2021

1

Profile

Strategy Section

Sustainability Section

Governance Section

Financial Section

History

History of the Morinaga Group’s Value Creation

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 of customers. Through continuing to makefood that helps to keep people’s mind and body healthy, from today to tomorrow and from one generation

Net salesto the next, we will continue to bring smiles to the faces of people around the world.

(Billion yen)

200

150

2020

Paving the way for the modernization ofJapan’s confectionery industry

Generating new value pivoting
around technology

Delivering deliciousness and smiles to people
around the world

Our founder Taichiro Morinaga, who spent 11
years in the United States learning about
confectionery manufacturing technology,
founded Morinaga’s Western Confectionery
Shop with the commitment to deliver highly
nutritious and delicious confections to thepeople of Japan. With the aim of modernizing
Japan’s confectionery industry, the company
created a foundation for the confectionery
business in Japan such as mass production
with machinery and mass sales by
establishment of sales networks and advertising, spreading Western
confections nationwide in the process.

Morinaga has continuously refined its manufacturing technologies forconfectioneries and foods and expanded its sales with the aim ofbringing a richer diet to the people of Japan, starting from caramel,
chocolate and cocoa during its founding. We entered the frozen
desserts business in 1956 and the health business in 1983.
From these businesses, we created a number of new mainstay
products that have become hits today including HI-CHEW from ourmanufacturing technology for Milk Caramel, Choco Monaka Jumbo using
our technologies for baked confections and chocolates, and in Jelly
utilizing our expertise in training and nutrition.

In 1961, we established Taiwan Seika Co., Ltd. (currently Taiwan Morinaga
Co., Ltd.) as a joint venture company. In 2003, we established Morinaga(Shanghai) Co., Ltd., (currently Shanghai Morinaga Co.,
Ltd.) with an eye toward expanding our overseas
business focused on HI-CHEW, and in 2010 weestablished Morinaga Food (Zhejiang) Co., Ltd. Our
inroads into the United States market began in 2008
with the establishment of Morinaga America, Inc.,
followed by Morinaga America Foods Inc. in 2013
marking the start of production and acceleration ofbusiness growth. Continuing our efforts to deliver
value to people around the world, in 2019, weestablished Morinaga Asia Pacific Co., Ltd.

Releases sustainable
raw materials
procurement policy
and medium-termtargets

2019
Establishes Morinaga
Asia Pacific Co., Ltd.

2013
Establishes Morinaga America
Foods, Inc.
Develops proprietary healthTM
ingredient called Passienol

2011

1928

1905

Establishes Takasaki
Morinaga Co., Ltd. as
flagship factory

Develops Morinaga Belt Line Store(sales network)

Registered our first symbolic trademark

2018

100

2010

1961

Establishes Morinaga Food
(Zhejiang) Co., Ltd.

Establishes Taiwan Seika Co., Ltd.
(currently Taiwan Morinaga Co., Ltd.)

2008

1919

1904
First in the industry to require
employees to wear uniforms toenhance hygiene

50

The first in the industry to introduce
an eight-hour work day

Establishes Consumer Room(customer service departments)

Holds the first Morinaga Mother’s Day Meeting
to popularize Mother’s Day in Japan1918

Establishes Morinaga
America, Inc.
Launches the “One Chocolate
for One Smile” campaign

1971

1937

Releases the first domestically produced
milk chocolate in Japan

2004
Commences direct marketing business2003
Establishes Morinaga (Shanghai) Co., Ltd.,(currently Shanghai Morinaga Co., Ltd.)

1956

1915

2000

Commences frozen desserts business

Begins manufacturing biscuits

1899
Founded as Morinaga’s
Western Confectionery Shop

0

1899

Meiji (1868-1912)

Obtains Platinum Kurumin
certification, a symbol ofa company supportingchildcare.

1930

1995

Commences the health businessCompany name is changed to Morinaga & Co., Ltd.

1920

2017

Morinaga’s four factories in Japan obtain ISO 14001 certification

1983

1912

1910

Morinaga’s factories inJapan and production
subsidiaries obtain FSSC
22000 certification
Morinaga is recognized
as a Certified Health &Productivity Management
Outstanding Organization(Large Enterprise Category[White 500])

1940

1950

1960

Taisho (1912-1926)

1970

1980

1990

Introduces Morinaga HACCP

2000

Showa (1926-1989)

2010

2020

Heisei (1989-2019)

Reiwa (2019 to present)* Consolidated net sales from FY1978/3

Morinaga’s Main Brands
Brands more than a century old

Brands more than 50 years old

Brands more than

30 years old

Brands more than 10 years old

1913

1919

1923

1957

1967

1971

1972

1973

1974

1975

1982

1989

1993

1994

2003

2006

2009

Milk Caramel

Milk Cocoa

Marie

Morinaga Hotcake Mix

Choco Ball

Koeda

Choco Monaka Jumbo

Morinaga
RamuneMorinaga
Amazake (canned)

HI-CHEW

OttottoIce Box

DARS

in Jelly

Carré de chocolat

Morinaga
Collagen Drinkin Bar*Product names and images as of October 2021.

2

Morinaga Group INTEGRATED REPORT 2021

Morinaga Group INTEGRATED REPORT 2021

3

Profile

Strategy Section

Sustainability Section

Governance Section

Financial Section

At a Glance

The Morinaga Group engages in the food manufacturing, food merchandise, and real estate and services
businesses. The food manufacturing business, which accounts for 96% of the Group’s net sales, includes
three business divisions forming the core of the Group’s business activities.

The Morinaga Group Today
Reportingsegments

Business Overview/ Strengths

Main Products

Confectionery and Foodstuffs(Billion yen)

123.4 123.3 122.0 120.8
7.6

8.0

7.5

8.2

108.8

HI-CHEW
Morinaga Biscuits(Marie)6.3

In the domestic confectionery and foodstuffs business, we areconstantly creating new and delicious food solutions pivoting around
our long-selling brands such as Morinaga Biscuits, Choco Ball,
HI-CHEW, and Morinaga Cocoa.
Commanding our proprietary food processing technologies
combining innovations with our traditions of more than 120 years inbusiness, we are working on value creation that contributes to people’s
healthy and vibrant lifestyles including high cacao chocolate, cocoa
drink, and amazake drink blending deliciousness and health functions.

We deliver products with unique texture and taste 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.” Currently, we
have operations in the United States, China, Taiwan, and Thailand, andwe are looking to further expand our business footprint.

2017/3 2018/3 2019/3 2020/3 2021/3

Net Sales

Net Sales

Operating Income
Confectionery andFoodstuffs

Confectionery andFoodstuffs

Strategic Business Categories
Net Sales/ Operating Income

Net Sales and Operating Income (FY2021/3)(FY)

Operating Income

HI-CHEW

31.9%

54.4%
Frozen Desserts

Frozen Desserts

Morinaga Group

23.5%

35.3%

Net Sales

Health Products

18.0%

199.9 billion yen

OthersOperating Income

Health Products

26.5%
Others(Food Merchandise, Real Estateand Services, Other Services)19.1 billion yen(Food Merchandise, Real Estateand Services, Other Services)

4.1%

6.3%

Frozen Desserts
Food Manufacturing Business(Billion yen)

35.4

37.0

47.0
37.2

40.7
Choco Monaka Jumbo

7.0
3.9

4.2

5.5
4.1

2017/3 2018/3 2019/3 2020/3 2021/3

Net Sales

Ita Choco Ice
ice cream bars

(FY)

Operating Income

Health Products(Billion yen)

35.4
30.7
5.7

6.8

36.9
7.8

38.4

35.9

in Barin Jelly

7.0
5.3

(FY)

Operating Income

Morinaga Collagen Drink

Food Merchandise/ Real Estate andServices/ Other Services

4

We are working to create new value aimed at “health of mind andbody” through foods. in Jelly, which replenishes nutrition anywhere
and anytime based on sports science theory, has maintained its top
share in the jelly drinks market for 26 years. Our product initiatives
in the “in-” brand are meeting the health needs of various lifestyles inmodern society.

We support customers’ wellness life by directly bringing productswith both function and deliciousness to consumers. Morinaga Collagen
Drink, which is sold exclusively in the direct marketing channel, has
1sold more than 200 million units to date* , making it the best-selling2
collagen drink in Japan* .

2017/3 2018/3 2019/3 2020/3 2021/3

Net Sales

We continue to deliver value and inspiration to customers throughproducts made with our proprietary technologies and the Group’s
unique confectionery and foodstuffs technologies showcased in our
top brands of Choco Monaka Jumbo and Ita Choco Ice ice cream bars,
and we have seen their net sales increase 20 years running. Our
marketing, which concentrates management resources on mainstay
brands, has also enabled us to build businesses with high profit
margins.

*1. For existing products, as of April 2019 (survey by Morinaga & Co., Ltd.)*2. Source: H.B. Foods Marketing Handbook 2021 No. 1, Fuji Keizai (beauty
effect/ collagen category/ 2019 results), for the Morinaga Collagen Drink
series, including products before and after updating.

Reach of the Morinaga Group (As of June 30, 2021)*

Morinaga Group

North America

19 companies
Employees: 2,911

2
Employees: 157
Group companies:

Morinaga America Foods, Inc.
Shanghai Morinaga Co., Ltd.
Morinaga (Zhejiang) Co., Ltd.
Morinaga America, Inc.

Morinaga Asia Pacific Co., Ltd.
Taiwan Morinaga
Co., Ltd.
Morinaga Bioscience (Thailand) Co., Ltd.

OthersAsia (excluding Japan)(Billion yen)

9.8
1.3

9.2
1.3

9.1
1.4

8.7
1.4

8.1
1.2

2017/3 2018/3 2019/3 2020/3 2021/3

Net Sales(FY)

Operating Income

Morinaga Group INTEGRATED REPORT 2021

220916̲E̲森永製菓̲英文2021̲中面̲印刷用.indd 4-5

Couverture Chocolate

Food allergentest kits

In the food merchandise business, we develop and market
commercial-use food ingredients. In the real estate and services
business, we own real estate properties and manage golf courses. In
the other services business, we research, develop, manufacture, andmarket food allergen test kits and other products.

5
Employees: 373
Group companies:

Japan[Morinaga & Co., Ltd.]Business locations:4 factories, and 2 supervising branches
Employees: 1,493[Group companies]

11* Listed consolidated companies and non-consolidated companies accounted forusing the equity method. Employees represent total for consolidated companies.

1research center,

Employees:

888
Morinaga Group INTEGRATED REPORT 2021

52022/09/16 11:47

Financial and Non-Financial Highlights

Strategy Section

Financial Highlights
Net Sales

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

(%)

30.0

12

240.0
200.0

199.4

205.0

205.3

208.8

199.9

25.0

9.8

9.6

8.8

20.2

10.2

9.6

10

19.1

8

21.2

160.0

20.0

120.0

15.0

6

80.0

10.0

4

40.0

5.0

2

0

17.6

19.7

0

2017/3 2018/3 2019/3 2020/3 2021/3 (FY)0Operating Income to Net Sales Ratio

Profit Attributable to Owners of Parent/
ROE

Shareholders’ Equity/
Shareholders’ Equity Ratio*(Billion yen)(%)(Billion yen)

20.0

15

150.0

10.8

10.0

55.0

10

100.0

5

50.0

0

0

89.1

10.8

10.2

54.8

55.7

48.7

11.8
13.4

12.8
11.1

60.9

13.2
11.0

15.0

Message from Top Management
Value Creation Process for Achieving Our Vision for 2030
Materiality
Long-Term Business Plan: 2030 Business Plan
Medium-Term Business Plan: 2021 Medium-Term Business Plan
Policy 1 Improve Proﬁtability through Business Portfolio Optimization and Structural Reforms
25 “in-” Business
26 Direct Marketing Business
27 Frozen Desserts Business
28 U.S. Business
30 Domestic Confectionery and Foodstuffs Business
32 Improve Profitability through Structural Reforms Centering on Functional Sectors
34 Policy 2 Build Business Foundation Linked with Business Strategies
34 Human Resources Strategy
35 R&D Strategy
36 Financial Strategy
37 DX Strategy
38 Policy 3 Promotion of Diversity

2017/3 2018/3 2019/3 2020/3 2021/3 (FY)Operating Income

13.6

8
14
16
18
22
25

(%)

60

123.0
97.8

96.4

104.6

40

20

5.0

0
Profit Attributable to Owners of Parent

0

2017/3 2018/3 2019/3 2020/3 2021/3 (FY)2017/3 2018/3 2019/3 2020/3 2021/3 (FY)ROEShareholders’ Equity

Shareholders’ Equity Ratio

2017/3 2018/3 2019/3 2020/3 2021/3* The Company applied Partial Amendments to Accounting Standard for Tax Effect Accounting, etc., from FY2019/3. Figures for FY2017/3 and FY2018/3 were retroactively adjusted in line with thisaccounting standard.

Non-Financial Highlights*1

Ratio of Female Managers(%)

Rate of Occupational Injury(Frequency Rate* / Total Frequency Rate* )CO2 Emissions(%)(Thousand t-CO2)

2

3

3

10
7.7

8

80

8.3

6.7

2.33

2

2.02

74.1
67.5

68.9

10.6

9.6

60

6
40
4
1
0.50

2
0

0.52

0.00

0

2019/3 2020/3 2021/3 (FY)

1.05

9.4

0

2019/3 2020/3 2021/3 (FY)
Frequency Rate20

Total Frequency Rate

2019/3 2020/3 2021/3 (FY)4Japan Scope 1 + 2 *5Overseas Scope 1 + 2 **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 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 companies.)*4. Consolidated basis*5. Figures for FY2019/3 are for each production site. Figures for FY2020/3 and onward are for the Group on a consolidated basis.

6

Morinaga Group INTEGRATED REPORT 2021

Morinaga Group INTEGRATED REPORT 2021

7

Profile

Strategy Section

Sustainability Section

Governance Section

Financial Section

Message from Top Management

Our Mission Reaffirmed During the COVID-19 Pandemic
The fiscal year ended March 31, 2021 was a challenging year as

I am also grateful to our factories across Japan because they

most social and economic activities were brought to a standstill

adapted to the changing situation and continued to provide a stable

due to the COVID-19 pandemic. I would like to take this opportunity

supply of products without ever stopping production. Here, I would

to extend our deepest sympathies to those who have lost theirlike to express my deepest appreciation to all our stakeholders

loved ones during the pandemic. At the same time, I would like

who have supported the Morinaga Group’s business operations,to express our heartfelt appreciation and respect for frontline

including our manufacturing partners and our employees.

essential workers who have helped us make it through thisdifficult time.

In April 2020, we donated 360,000 units of “in Jelly” in supportof healthcare professionals. I was overjoyed to receive many

The year 2020 was supposed to be a bright year for the

handwritten letters from healthcare professionals saying how

Morinaga Group in sharing Japanese confections and foodmuch these products helped to keep them going when they could

culture with the rest of the world through the Tokyo Olympics andnot eat regularly. This experience reaffirmed my sense of pride in

Paralympics. However, the COVID-19 pandemic continues and we

our products and presence.

spent much of the previous year working across the company toaddress the challenges presented by the pandemic.
First, speaking of our countermeasures to prevent the spread of

As the period of people staying at home continues, and many
people are searching for relaxation and rejuvenation in their lives,
sales of hotcake mix, biscuits, and frozen desserts grew. The

the virus among employees, we had already introduced a telework

previous year allowed us to reaffirm the role in people’s lives andsystem since the fiscal year ended March 31, 2018 as part of ourvalue provided by our products and deeply consider the direction

work style reforms, which helped facilitate operations at our head

the Morinaga Group after more than 120 years of history should

office and in our sales departments despite the pandemic.

follow in the future when the pandemic ends.

Looking Back on the 2018 Medium-Term Business Plan

Eijiro Ota
Representative Director, President

Looking back, during the 2012 Medium-Term Business Plan, which

Financial Results

ran from the fiscal year ended March 31, 2013 to the fiscal year
ended March 31, 2015, the Morinaga Group faced challenges as
operating income totaled 3 billion yen annually and the operating
income to net sales ratio was between 2 and 3% due to the impact
from the Great East Japan Earthquake. However, during the 2015
Medium-Term Business Plan, we achieved operating income of 10
billion yen annually, reaching what had been our target for many
years. The theme for the 2018 Medium-Term Business Plan was
solidify this earnings power and translate it into future growth.
Under the 2018 Medium-Term Business Plan, we made steadyTargets for
FY2021/3

Results for
FY2021/3

Operating income to
net sales ratio

10% or higher

9.6%

Wellness sales ratio

50% or higher

45.7%

Overseas sales ratio

10% or higher

6.1%

ROE

10% or higher

11.8%

Shareholders’ equity ratio

50% or higher

60.9%

Dividend payout ratio

30%

30.0%

progress toward our targets until the second year, but eventually
fell short because of the impacts of the COVID-19 pandemic in the

8fiscal year ended March 31, 2021. The negatives from in Jelly andOther businesses including foodstuffs and direct marketing also

“We will Change into a Wellness Company” that pursues

HI-CHEW largely cancelled out the positives of Morinaga Hotcake

performed well. In the frozen desserts business, Choco Monaka

Mix and Morinaga Biscuits. As a result, net sales for the fiscal year

Jumbo posted an increase in sales for the 20th consecutive year.

ended March 31, 2021 totaled 199.9 billion yen, down 8.8 billion

In the U.S. business, we grew sales by 1.7 times (compared to thethe enriched and glorious life of people around the world by

yen year on year. However, factoring out the 7.4 billion yen in net

fiscal year ended March 31, 2018) over the three-year period ofsales in the fiscal year ended March 31, 2020 of Pringles, for which

the 2018 Medium-Term Business Plan, helping our entire overseas

our distributorship agreement ended on March 31, 2020, overallbusiness achieve profitability.

creating healthy foods through a management approach giving

net sales were nearly on par with the previous year. Operating

Furthermore, driven by our efforts to increase profitability

income came in at 19.1 billion yen, down 2.0 billion yen, and net

through company-wide structural reforms and to strengthen costincome was 13.4 billion yen, up 2.5 billion yen, marking our bestcompetitiveness by rebuilding our production bases, the operating

every employee ownership that relies closely on our Purpose.

ever profit. Of this, we have determined that the negative impacts

income to net sales ratio was 9.6%, which is close to the 10% levelfrom the COVID-19 pandemic caused net sales to decline by 8.8

despite the impacts of the COVID-19 pandemic. This shows that webillion yen and operating income by 2.4 billion yen.

have made steady progress with further improved profitability andMorinaga Group INTEGRATED REPORT 2021

Sales of our mainstay product in Jelly were cut in half year

an upgraded business foundation, which we worked on during thison year in April and May 2020 due to the COVID-19 pandemic.

Medium-Term Business Plan. I believe that this also indicates ourUsing flexible and efficient sales and marketing activities, sales

reforms for building a high profit structure focused on competitive

had recovered and increased 20% year on year in September.

brands has paid off in the form of customer recognition and praise.

Morinaga Group INTEGRATED REPORT 2021

9

Profile

Strategy Section

Sustainability Section

Governance Section

Financial Section

Formulating a New Corporate Philosophy Reexamining the Morinaga Group’s Reason for Existence

The Morinaga Group will Change into a Wellness Company in 2030.

In taking the reins as the ninth president in 2019, the 120th

Our Purpose (The Morinaga Group will continue to create healthyanniversary of the company, I asked myself what the Morinaga

foods that can be enjoyed beyond generations, thereby bringing

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

Group should value, what constitutes a good company, and whatsmiles to the faces of people around the world now and in theis my most important role as president. The answer I arrived

future) outlined in this corporate philosophy represents the heartat was “permanence,” which we have managed to achieve byof our efforts to achieve corporate permanence by connecting theovercoming a number of challenges during our long 120-year

Morinaga Group with employees and society.

history.

In response to this new corporate philosophy, many

I found that continuing to contribute to society by creating

employees have indicated that they were happy with thevalue that society truly needs, as well as to strive for our

process of carefully screening employee voices and that thecompany’s sustained growth and development, no matter

philosophy itself feels like their own. We plan to hold dialogues

the situation, will lead to the happiness of all stakeholders,

directly with employees at our business sites around theincluding customers and employees.

world to help disseminate this Purpose. While we have been

Based on this belief, we asked employees to voice theirin business for 120 years, our future is not guaranteed. To

opinions regarding the meaning of the Morinaga Group goinggrow continuously, I will take the lead in driving us towardforward. In response, we received passionate feedback frombeing an organization that tackles value creation aimed at theclose to 1,000 employees. The newly formulated corporateachievement of our Purpose by ensuring the employees think

philosophy represents the culmination of discussions by ourand judge for themselves whether their activities align with our

executive management team based on these employee voices.

Purpose.

Delicious, Fun, and Healthy
The Morinaga Group will continue to create healthy foods thatcan be enjoyed beyond generations, thereby bringing smiles to the faces ofpeople around the world now and in the future
Good quality
Pursue quality with integrity

Only-one value
Create new value andinspiration

Link together
Strengthen relations oftrust with stakeholders

Act globally
Expand the scope andpossibilities of activities

Sustainable society
Contribute to a sustainable society

Give first priority to customers

Altruism

Be a pioneer
Have an indomitable spirit

Three values to provide

Values are provided for

Health of

Health of

Health of

mind

body

environment

Customers

Employees

Society2030 Vision: Change into a Wellness Company
The Morinaga Group established the 2030 Vision to outline the

There is steadily growing preference among consumers for

position we want to be in by 2030 in fulfilling our Purpose. Thiseven indulgence items such as confections to be healthy. Duringvision declares that “We will Change into a Wellness Company”

the COVID-19 pandemic, the number of people worried aboutthat contributes to a sustainable and fulfilling society by

their calorie intake is on the rise because of increased teleworkproviding the three values of health (health of mind, health ofand fewer opportunities to exercise and go out. This is why webody, and health of environment) to the three stakeholders ofare stepping up product development that further contributes

customers, employees, and society. The words “change into” in

to “health of body,” including reducing sugar content and finding

particular contain my strong conviction. While feeling a sense ofeffective ways to consume protein.

accomplishment in the company’s growth following the resultsMoreover, without business processes that generate productsof the 2018 Medium-Term Business Plan, I wanted to convey toas well as sustainability in society and the environment, we

employees through this message that we will strive for more.

will not be able to truly feel a sense of deliciousness fromSpecifically, the Morinaga Group has contributed to “health of

our hearts. Therefore, to ensure the entire value chain of ourmind” by providing a sense of happiness such as deliciousness

products is sustainable, we will work collectively as a company

and fun through our many products centered on confections

to resolve social issues including climate change and food loss

and foodstuffs. We have proudly contributed to “health ofand waste.

body” through our products like in Jelly. As such, during theformulation of the 2030 Vision, I focused on how we can become
a company that delivers happiness to everyone involved with

Value ties between people

the Morinaga Group. This is because I wanted to work even

Align our business imperatives with social challenges

harder toward people’s “health of mind and body” and “health ofenvironment” surrounding us.
We will analyze scientifically our value such as “contributions
through provision of a sense of happiness including deliciousness
and fun” that the Group has provided over the years as “healthof mind” to benefit product development that further boosts thissense of happiness and customer satisfaction.

10

Morinaga Group INTEGRATED REPORT 2021

Morinaga Group INTEGRATED REPORT 2021

11

Profile

Establishment of the 2030 Business Plan

*1

Net sales:

Non-Financial Targets

300 billion yen

Governance Section

Financial Section

70

Provide value of health to% or more of the Japanese population
through new initiatives aimed at becoming a wellness company *2*1. Amounts and indicators based on
Accounting Standard on Revenue
Recognition (ASBJ No. 29; March 31, 2020)
applied from the beginning of FY2022/3*2. 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 between
the ages of 15 and 79). Going forward, theCompany will explore the establishment ofa vision on a global basis.
*3. Ratio of affirmative answers on theemployee awareness survey*4. Consolidated basis; paper covers productpackaging only.
*5. Scope 1 + Scope 2 (domestic consolidated
basis compared to FY2019/3)

The Medium-Term Business Plan starting from the fiscal year

The point of emphasis in implementing these initiatives willending March 31, 2022 will see us work on “building a new

be proactive investment in future growth. During the three-year

foundation for dramatic growth” forward as the first stage inperiod of the 2021 Medium-Term Business Plan, we aim toachieving the 2030 Business Plan.

increase operating cash flow by 18 billion yen, from around 54

In the “in-” business, we will work to restore and expand in Jelly,billion yen during the previous medium-term business plan toboost sales of in Bar products, and create new foods using the “in-”around 72 billion yen this time around by growing the focusedbrand. In the direct marking business, we will provide services

domain and improving the profitability of the basic domain. As

tailored to individual customers using digital marketing. In the U.S.

part of this, we have committed to investing around 45 billion

business, we will continue to increase sales of HI-CHEW and begin

yen over the three years of the plan in facilities for the frozen

rolling out jelly drinks developed for the U.S. market. In the frozen

desserts business at the Takasaki Factory No. 3 and opening a

desserts business, we will focus on new product rollouts using the

new research center aimed at the growth of the focused domain.

Morinaga Group’s unique confectionery technologies following theAlso, aimed at achieving the 2030 Business Plan, we will expand

through open innovation, and for new product development

start of operations at the Takasaki Factory No. 3. In the domestic

investments for inorganic growth such as M&A and alliances

toward the U.S. market. In 2022, we will open a new research

confectionery and foodstuffs business, we will aim to improve

along with investments in intangible assets such as R&D, DX,

terms of reliability and technology, with an eye toward thecenter to strengthen basic research with a long-term perspective

profitability and generate stable profits.

and advertising, which will form the foundation for long-term

growth and profitability of each business, based on medium- toand update key technologies. As for our DX strategy, first we

long-term environmental changes.

will increase the efficiency of business operations and increase

Operating income to
net sales ratio:

12% or higher

Overseas sales ratio:

15% or higher

Focused domains’ sales ratio:

60%

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

80%*3

Procurement ratio of sustainable raw materials(cacao beans, palm oil, and paper):100%*4CO2 emissions reduction:30%

To achieve the 2030 Vision, we will need to implement
strategies that utilize the Group’s accumulative strengths in

Therefore, we identified important issues both financial and*5value creation. These investments will be carried out according

businesses in the exploration and research domain as well as build

Purpose and 2030 Vision considering medium- to long-terma business base that supports future growth. Under our financial

environmental changes. The 2030 Business Plan represents thestrategy, we will actively invest in growth and maintain our stableend result of this process.

financial base while offering consistent shareholder returns

The 2030 Business Plan contains three basic policies. First is

supported by the implementation of the 2030 Business Plan.

to improve profitability through business portfolio optimization

The third basic policy is promotion of diversity. When I

and structural reforms. We have selected the “in-” business,became President two years ago, I declared that diversity would

direct marketing business, U.S. business and frozen desserts

form a focal point of our business strategy. The reason behindbusiness as the four businesses expected to see high growth

this is to generate innovation to resolve the challenges faced byand profitability through the creation of health value utilizing

customers and society. People are the key drivers supporting

the Group’s strengths. These businesses have been defined as

the Morinaga Group’s business operations and our aspirations

the focused domain category. At the same time, the domestic

for sustainable growth. We will build an organization that values

confectionery and foodstuffs business, operating subsidiaries ineach and every employee of the Morinaga Group and empowers

Japan and Taiwan, which generate cash in a stable manner andthem to fully harness and contribute their uniqueness andsupport the growth of the focused domain, have been defined as

skill sets. Our workforce of unique individuals will become athe basic domain. Our target is to reverse the sales ratio of thedriving force behind the diversity of knowledge and creation

focused domain versus the basic domain and exploration andof new value. This will give rise to innovation indispensable toresearch domain from the current 40%:60% split to 60%:40%

achieving our Purpose and the 2030 Vision.
We will implement these three basic policies and initiatives

to management judgement with an eye toward both capital costs

1

Financial Targets *profitability, and looking ahead, we will work to create new

non-financial (materiality) that we need to address to attain ourby 2030. Toward this end, we have decided to boldly deploy

Net sales:
Operating income:Targets for FY2024/3

190 billion yen
21.5 billion yen＜KPIs＞

and future growth.
Our earnings forecast announced at the start of this mediumterm plan calls for decreased operating income due to risingdepreciation expenses from capital spending. Despite cost
increases from depreciation and intangible investments, we will
push ahead with these investments, recognizing they will result in

Operating income to
net sales ratio:

11% or higher

an intentional plateau, aimed at achievement of the 2030 Vision.

Overseas sales ratio:

9% or higher

As for shareholder returns, we will provide stable dividends

Focused domain sales ratio:
ROE:+5 points or higher*2
10% or higher

Dividend payout ratio:

30%

What we are aiming for in 2030

*1. Amounts and indicators based on Accounting Standard on Revenue Recognition (ASBJ No. 29;
March 31, 2020) applied from the beginning of FY2022/3*2. Compared to the average value during the 2018 Medium-Term Business Plan

totaling more than 12 billion yen over the course of the plan’s
three years, reaching a dividend payout ratio of around 30%. After
pressing forward with expansion of the focused domain, improving
the earnings power of the basic domain, and investing in future
growth, our targets for the fiscal year ending March 31, 2024,
the third year of the plan, call for net sales of 190 billion yen andoperating income of 21.5 billion yen, which marks a record high.

Growing Sustainably with Society
During the course of its more than 120-year history, the Morinaga

After the COVID-19 pandemic ends, there is a high likelihood

management resources in the focused domain. In the exploration

aimed at our materiality, and through sustainable businessGroup has earned the trust of society having become an integral

that a number of unpredictable changes in our businessand research domain category, we will explore new businessprocesses, we aim to reach net sales of 300 billion yen, anpart of its customers’ lives. Today, when our Purpose is clear andenvironment could occur in the future. No matter the situation,

opportunities expected to produce growth in the future and create

operating income to net sales ratio of 12% or higher, and an

we are taking new steps forward, we will work collectively as athough, with our Purpose close to our hearts, we will continue

new businesses that can become the next focused domain.

overseas sales ratio of 15% or higher by the fiscal year ending

Group to achieve this plan with strong conviction and commitment.

working to become a company that can grow sustainably byMarch 31, 2031.

The driving force behind our effort will be our people. We wanttackling the challenges of value creation for customers andto be a company where every employee boldly tackles newsociety using a management approach with everyone having
ownership.

The second basic policy is to build a business foundation linked
with business strategies. Aimed at implementing our business

Moreover, to realize the 2030 Vision, we will also need to

strategies, we will enhance our business foundation including

address ESG issues. Under our ESG Committee, establishedchallenges unafraid of failure. It will be important for each andhuman resources, R&D, DX*6, and financial position. Under ourin April 2021, we will commence full-fledge efforts toward theevery employee to courageously work on value creation forhuman resources strategy, we will work to develop leaders who

Group’s sustainable management. We will tackle such issues

customers and society, with our Purpose close to our hearts, bywill drive our business toward attainment of our Purpose and theas sustainable raw materials procurement (cacao beans andconstantly checking whether their activities align with our Purpose

2030 Vision and foster human resources who will contribute topalm oil, etc.), GHG*7 emissions reduction, plastic container/(The Morinaga Group will continue to create healthy foods thatthe creation of social value with their advanced expertise. Our R&D

packaging reduction, and food loss and waste reduction using

can be enjoyed beyond generations, thereby bringing smiles to thestrategy calls for the enhancement of research and development

long-term targets, in an effort to build a sustainable society.

faces of people around the world now and in the future.) As long as

Eijiro Ota

we can combine the power of all our people, I am convinced that

Representative Director, President

for creating new value contributing to “health of mind and body”

12

Sustainability Section

Start of the 2021 Medium-Term Business Plan

Financial and Non-Financial Targets for 2030
Financial Targets

Strategy Section

Morinaga Group INTEGRATED REPORT 2021

*6. Digital transformation*7. Greenhouse gases

we can achieve our Purpose and the 2030 Vision.

Morinaga Group INTEGRATED REPORT 2021

13

Profile

Strategy Section

Sustainability Section

Value Creation Process for Achieving Our Vision for 2030

Governance Section

Financial Section

PurposeThe Morinaga Group will continue to create healthy foods that can beenjoyed beyond generations, thereby bringing smiles to the faces ofTo achieve 2030 Vision, we will create the three values of health of mind, body, and environment andpeople around the world now and in the future.

realize sustainable growth by contributing to people’s wellness around the world.

2030 Vision• Rising health consciousness
through food
• Socioeconomic and lifestylechanges brought about by the
COVID-19 pandemic• Declining birthrate/ aging
population and contraction ofJapanese market (labor shortages)• Changes in consumer behavior
and business model driven by theevolution of digital technologies• Rising world population andclimate change, etc. (unstable raw
materials procurement)• Growing need to resolve social
issues (SDGs and ESG investment)• Contribute to healthy lives ofpeople around the world• Diversity and inclusion of people• Achieve sustainable value chains• Conserve the global environment• Strengthen the business
management foundation

Change into a Wellness Company
Evolution of Management
Promote management with a longterm perspective using our current
business model as a foundation

1. Promote Purposedriven Management

2. Implement the 2030
Business Plan
See page 18 and 40

See page 16

Customer value

Social value• Provide value of health to more than
70% of Japan’s population throughnew initiatives aimed at becoming a2wellness company*• Procurement ratio of sustainable4
raw materials: 100%* (cacao beans,palm oil, and paper)5• CO2 emission reduction: 30%*
• Use of plastics for in Jelly products:
6
25% reduction*
7• Food loss and waste: 70% reduction*

Employee value• Ratio of employees who find their job
meaningful at work and who are ingood mental and physical health at3
work: 80%*

Customer value

Employee value

Economic value

Materiality

Shareholder value

External Environment

See page 11

Economic value *1• Net sales: 300 billion yen• Operating income to net sales ratio:
12% or higher• Overseas sales ratio: 15% or higher• Focused domains’ sales ratio: 60%

Shareholder value
Social value• Management aware of capital costs• Achieve stable dividend

Transition
strategyManagement Capital (FY2021/3)[Financial capital]• Net assets: 123.9 billion yen• Profitability: Operating income to net sales
ratio at 10% level• Production sites: 8 factories in Japan and3 overseas• 1 research center[Intellectual capital]• Patents owned: 172 in Japan and
125 overseas
Trademarks owned: 503 in Japan and
8593 overseas*• R&D expenses: 2.22 billion yen• Consumers looking for adelicious, easy, and quick
nutritional support• Consumers looking to satisfy
a craving or refresh withconfections or ice cream

Development andmarketing

Procurement andmanufacturing• Plan and develop products thatmeet constantly changing needsfrom customer’s perspective• Process healthy ingredients in a
delicious manner• Stable procurement basedon strong partnerships with
suppliers• Stable manufacturing of safeand reliable products by way
of proprietary mass production
technologies and sophisticatedquality management• Diverse raw materials with consideration forsustainability and close quality control

Trust(history and brands spanningmore than 120 years)

Basic research/
Ingredient research

Food processing
technologies*1. Amounts and indicators based on Accounting Standard on Revenue Recognition (ASBJ No. 29; March 31, 2020) applied from the beginning of FY2022/3. *2. Scope: Products defined 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 INTAGE Inc. SCI annual purchase rate (scope: consumers nationwide between the ages of 15 and79.) Going forward, the Company will explore establishment of a vision on a global basis. *3. Rate of positive responses on the employee survey. *4. Group consolidated basis; paper covers product packaging.

14

Morinaga Group INTEGRATED REPORT 2021

• Delicious • Fun • Healthy • Nutritional• Convenient (easy and quick)

Logistics and sales• Distribute products utilizing
a stable logistics system anddiverse sales channels• Advertising and in-store
promotions for new productswith familiar brands[Value provided to shareholders]
Confectionery and foodstuffs

Health products

Frozendesserts

Annual dividend per share:
66 yen in FY2019/3 to 80 yen in FY2021/3[Morinaga’s value]• Improve profitability and capital efficiency(operating income to net sales ratio of 9.6% and
ROE of 11.8%)• Grow U.S. business and turn a profit inoverseas businesses• Labor environment that is safe and secureStrengths[Social capital][Natural capital][Value provided to customers]them across a broad range of channels

9• Employee loyalty: 80%*
• Health management: selected for“White 500” four years running• Relationships of trust with various
stakeholders built over more than 120 years
in the business• Many long-seller brands

Value Created (FY2021/3)

Outputs

Fast development and mass production of products that meet customer needs and deliver
For whom[Production capital][Human capital]

Current Business Model

Food development
capabilities

Production technologies/
Mass production
technologies

Product distribution
capabilities and information
provision capabilities

Employee-friendly
workplace environment*5. Scope 1 + 2 (domestic Group consolidated basis; compared to FY2019/3). *6. Scope: Amount of plastics used in packaging materials (intensity; compared to FY2020/3; including replacement with biomass plastics).
*7. Scope: Food loss and waste occurring from receipt of raw materials to delivery (distribution) (domestic Group consolidated basis; intensity; compared to FY2020/3). Excludes feedstuffs and fertilizers, etc., that are
returned to the food resource chain. Food disposed of by incineration or in landfills is defined as “food loss and waste.” *8. Number of rights owned as of the end of FY2021/3. *9. Positive responses to “I feel pride as amember of this company” and “I feel fortunate to work for this company” on the employee awareness survey.
Morinaga Group INTEGRATED REPORT 2021

15

Profile

Strategy Section

Sustainability Section

Governance Section

Financial Section

Materiality

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

Main challenges included in materiality

1. Develop delicious and healthy foods

1. Contribute to Healthy
Lives of People around
the World

Main expected opportunities and risks(filled circles indicate opportunities and filled triangles indicate risks)Long-Term Targets for 2030

Growing business opportunities following the rising health consciousness
of consumers
Declining market competitiveness over the medium to long term caused
by delayed response

2. Develop products with new value in response to
consumer needs

Growing business opportunities and improving competitiveness by tapping
into latent markets
Declining market competitiveness over the medium to long term caused
by delayed response

3. Develop sustainable products

Growing business opportunities from rising awareness of sustainability
among consumers

Main Actions Ahead of 2030

1. Develop and supply products that contribute to“health of mind and body”• Contribute to health through existing and new
products• Enhance R&D• Communicate with consumers

2. Develop and supply products with sustainable value

Consider development of products with sustainablevalue

3. Supply safe and reliable foods• Carry out quality management in line withinternational standards and certification regimes
on food safety• Disclose and provide appropriate information
on products

1. Foster people, culture and organizations to achieve
our Purpose and the 2030 Vision• Spread corporate philosophy• Entrench human resources development programs• Increase workforce in overseas business2. Foster organizations that are diverse and dynamic

Spread our Diversity and Inclusion Policy

3. Build workplaces that are healthy and comfortable,
and drive motivation• Reduce total annual working hours• Thorough health checkups for all employees• Improve mental health

1. Promote sustainable raw materials procurement

Promote sustainable procurement in Japan (cacao
beans, palm oil, and paper packaging materials for
products)

2. Promote CSR supply chain management• Formulate supplier guidelines and hold briefings• Conduct assessments

3. Reduce food loss and waste

Control food loss and waste and promote recycling

Provide value of health to more than 70% of Japan’s
population through new initiatives aimed at becoming
1

a wellness company*

4. Food security and quality assurance
5. Appropriately convey social and environmental information
about products

1. Foster human resources to achieve our vision

2. Diversity andInclusion of People

4. Conserve the Global
Environment

5. Strengthen the Business
Management Foundation

Increasing social trust
Declining social trust, brand value, and corporate value

Securing of talent needed to contribute to realization of our Purpose andthe 2030 Vision
Declining sustainable growth capabilities due to delayed response

Morinaga Group INTEGRATED REPORT 2021

survey: 80%
sustainable society

Improving innovation capabilities and environmental response capabilities
Declining organizational competitiveness and social reputation due todelayed response

2) Corporate growth driven by diverse workforce
3) Employee motivation and achievement of “health ofmind and body”

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 response

2. 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. Reduce food loss and waste

Lowering costs by reducing manufacturing loss and returns
Declining social reputation due to delayed response

4. Co-exist and co-prosper with local communities

Increasing social trust
Growing operational risks at business sites, etc.

4. Co-exist and co-prosper with local communities• Collaborate with local governments and companies• Strengthen ties with communities near ourfactories

1. Mitigate and adapt to climate change

Growing risks in procurement of agricultural raw materials
Rising production costs due to carbon taxes, etc.
Declining corporate value due to delayed response

1. Respond to climate change issues• Reduce CO2 emissions and introduce renewableenergy• Crystalize adaptation measures to climate change

2. Promote environmental consideration in containers
and packaging• Reduce use of plastics for in Jelly products• Consider recycling for containers of in Jelly products

3. Effective use of water resources• Identify regions with high water stress• Efficient use of water resources

1) Sustainable procurement of raw materials: 100%2(cacao beans, palm oil, and paper)*2) CSR supply chain management: implement for 80% or
3more of raw materials transaction value*
43) Reduce food loss and waste: 70%*1) Reduce greenhouse gas (GHG) emissions
5• Achieve net-zero GHG emissions by FY2051/3*
6• Reduce CO2 emissions 30% by FY2031/3*
2. Eco-friendly plastic containers and packaging along withrecycling and reuse

Creation of innovation through external collaboration
Declining corporate value due to delayed response

2) Reduce plastic waste: 25% reduction of plastics used
7

for in Jelly products*

1. Strengthen corporate governance

Increasing management efficiency and corporate value
Declining evaluations from capital markets

1. Build a highly transparent and efficient
governance system

Comply with Japan’s Corporate Governance Code

2. Globalize management foundation (strengthen base foroverseas expansion and respect local cultures, etc.)

Acquiring trust from countries and regions where we operate
Increasing ability to promote and implement management strategy

2. Promote globalization of management foundation• Organize requirements for globalization ofmanagement foundation• Develop infrastructure and formulate action plan

3. Human rights management

Damage to social trust, brand value and corporate value

3. Reinforce human rights management

Conduct training on business and human rights

4. Address next-generation food technologies (nextgeneration food services, DX and robotics, etc.)

Improving productivity
Growing business opportunities from innovation

4. Evolve business operations using DX• Streamline operations with IT• Consider data utilization system that helps
improve competitiveness5. Increase social trust and reputation through disclosure of
ESG information

Increasing social trust and corporate value

5. Increase ESG information disclosures

Disclose information on website, etc.

*1. Scope: Products defined 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 between the ages of 15 and 79). Going forward, the Company will explore establishment of a vision on a global basis. *2. Group consolidated basis; paper covers
product packaging. *3. Group consolidated basis.

16

Rate of positive responses on the employee awareness1) Morinaga Group’s contributions to building a

2. Diversity and inclusion

3. Achieve Sustainable
Value Chains

Response to
SDGs

Main Actions for
FY2022/3 to FY2024/3

Instead of uniform targets for 2030, we promoteresponse to individual issues as needed*4. Scope: The data is based on domestic Group consolidated basis; intensity; compared to FY2020/3. Food loss and waste occurring from receipt of raw materials to delivery (distribution). Food loss andwaste is defined as food product waste disposed of by incineration or in landfills, excluding food product waste that can be recycled as feed or fertilizer.
*5. Group consolidated basis. *6. Scope 1 + 2 (domestic Group consolidated basis; compared to FY2019/3). *7. Scope: Amount of plastics used in packaging materials (intensity; compared to FY2020/3;
including replacement with biomass plastics).
Morinaga Group INTEGRATED REPORT 2021

17

Profile

Strategy Section

Sustainability Section

Governance Section

Financial Section

Long-Term Business Plan

2030 Business Plan
Financial and Non-Financial Targets for 2030
The Morinaga Group formulated the 2030 Business Plan as a long-term business plan aimed at 2030 in order to enhance corporate
value by achieving medium- to long-term growth while contributing to the realization of a sustainable society under its new
corporate philosophy.

Financial Targets*1

Non-Financial Targets

70

Net sales:

300 billion yen

2030 Vision

Operating income to
net sales ratio:

12% or higher

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

80%*3

The Morinaga Group will Change into a Wellness Company in 2030.

Overseas sales ratio:

15% or higher

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

Procurement ratio of sustainable raw materials(cacao beans, palm oil, and paper):100%*4Focused domains’ sales ratio:

60%

CO2 emissions reduction:

30%*5

We formulated the 2030 Vision to outline the position we intend to be in 2030 as the Group’s goal of the 2030 Business Plan. The Morinaga
Group has cultivated its brand and enhanced its technical prowess during the course of its more than 120-year history supported by thetrust of customers. Looking ahead, the Morinaga Group will seek to achieve sustainable growth through value creation in “health of mind,
body and environment,” which will drive its change into a wellness company.

1st Stage

Provide value of health to% or more of the Japanese population
through new initiatives aimed at becoming a wellness company *2*1. Amounts and indicators based on Accounting Standard on Revenue Recognition (ASBJ No. 29; March 31, 2020) applied from the beginning of FY2022/3*2. 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 between the ages of 15 and 79). Going forward, the Company will explore the establishment of a vision on a global basis.
*3. Ratio of affirmative answers on the employee awareness survey *4. Consolidated basis; paper covers product packaging only. *5. Scope 1 + Scope 2 (domestic consolidated basis compared to FY2019/3)

Policy 1: Improve profitability through business portfolio optimization

Basicand structural reforms
Policies Policy 2: Build business foundation linked with business strategies

2021 Medium-Term Business Plan

Policy 3: Promotion of Diversity

Under the 2021 Medium-Term Business Plan (from the fiscal year ending
March 31, 2022 to the fiscal year ending March 31, 2024), which is positioned
as the first stage of the 2030 Business Plan, we will build “a new foundation fordramatic growth” as we promote the strengthening of our business foundation
for achieving future growth.

Focused domain
category

Basic domain
category

Exploration &Research domain
category

Structural Reforms for Functional Sectors

2018 Medium-Term Business Plan (Results and Issues)
During the 2018 Medium-Term Business Plan, which ran from the fiscal year
ended March 31, 2019 to the fiscal year ended March 31, 2021, operating income
declined due to the impacts of the COVID-19 pandemic in the final fiscal yearof the plan. However, we built a business foundation that could consistently
generate an operating income to net sales ratio at the 10% level by improving theearnings power mainly of domestic businesses. Looking ahead, we will secure
earnings power to consistently generate funds for growth investments and foster
an organization with a high degree of management efficiency by effectively
linking limited management resources to value creation through governancereforms and initiatives for DX, aimed at accelerating our growth strategy.

Main Changes Predicted to Occur inthe Business Environment Going Forward• Full-fledged population decrease, lower birthrate, and aging population of Japan
leading to shrinking markets and labor shortages• Economic development mainly in emerging markets and increasing populationworldwide• Growing seriousness of social issues, including climate change• Rising awareness toward health worldwide attributed to aging societies andefforts to curtail medical expenses• Growing demand for psychological security attributed to the COVID-19 pandemic• Changes in purchasing and consumption styles of consumers due toadvancements in digital technology

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, andenvironment.” By providing the three values of “health of mind,” “health of body,” and “health of environment” to the three stakeholders of customers,
employees, and society, the Morinaga Group will achieve sustainable growth.

Customers x Health of Mind and Health of Body

Three values
to provide

We are further evolving the values we provide in order to contribute to “health of mind”
and “health of body” of customers through all our products. Under “health of mind,” we will
enhance emotional values using a science-based approach to further enhance customer
satisfaction. Under “health of body,” we also address health needs through food by further
enhancing the value we provide via the development of food with functional claim.

Health of

Health of

Health of

mind

body

environment

Employees x 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 andcan share their skills dynamically.

Society x Health of Environment
Values areprovided for

Customers

Employees

Society

Sustainable Business Management

Environmental changes surrounding the foodstuff industry

Contribution to Health of Mind, Body, and Environment

Change intoa Wellness Company

Business Foundation

Changes in macroeconomic environment

To achieve customer wellness, we believe it is essential to not only make our foods delicious
and healthy, but also ensure that our manufacturing process producing these foods and thevalue chain are sustainable. Therefore, we are working to address social issues related to ourbusiness, such as food loss and waste, human rights issues, and environmental issues, aiming
to achieve an environment where customers truly feel deliciousness in the foods we make.

Strategies Aimed at Achieving the 2030 Vision
Under the 2030 Business Plan, we have defined the three basic

management resources essential to future growth using a long-policies as “Improve proﬁtability through business portfolio

term perspective in the areas of human resources, technology,

optimization and structural reforms,” “Build business foundation

cash, and digital based upon our human resources strategy,

linked with business strategies,” and “Promotion of Diversity” in

R&D strategy, financial strategy, and DX strategy. Also, throughorder to achieve our financial and non-financial targets outlined

promoting diversity and inclusion, we will achieve a workplacein the 2030 Vision. In turn, we formulated strategies based on

environment where our diverse workforce finds their job

these basic policies.

meaningful and can fully harness their skills.

As part of our business strategy, we have defined the three

By implementing these strategies in an integrated manner,business domains, the “Focused domain,” comprising businesses

we will build a resilient management foundation for sustainablewith high profitability and growth potential that will drive thegrowth and deploy the cash generated from improved profitabilityGroup’s growth, the “Basic domain,” comprising businesses thatgained from structural reforms in the focused domain. This will

will generate cash in a stable manner through steady net sales

position us to increase the entire Group’s growth efficiency andgrowth to be allocated to the focused domain, and the “Explorationachieve the 2030 Vision.

and research domain,” exploring additional growth opportunities

Business Plan, we will actively explore opportunities globally inachieve the 2030 Vision and increase profitability using company-

terms of inorganic growth using alliances and M&A and ensure

wide structural reforms focused on functional sectors.

that management carries out bold and swift decision making.

In order to build a management foundation that will underpin
our business strategies, we will aim to increase and strengthen

18

Morinaga Group INTEGRATED REPORT 2021

Furthermore, to increase the probability of achieving the 2030

aimed at 2030. Through these domains we will create value to

In executing these strategies, the basis of our actions will begrounded in sustainability management.
Morinaga Group INTEGRATED REPORT 2021

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Profile

Sustainability Section

The Three Basic Policies of the 2030 Business Plan

Key Measures

We formulated three basic policies aimed at achieving the 2030 Vision and reaching our financial and non-financial targets.

In the focused domain, we will actively work to tap into newmarkets and develop new products mainly in our mainstay
brands of in Jelly, HI-CHEW and Jumbo to accelerate growth. In
the basic domain, we will further increase added value primarily
in the mainstay brands of Morinaga Biscuits and Morinaga Cocoa
and generate stable cash by transforming the business structure

1

PolicyImprove Proﬁtability through Business
Portfolio Optimization and Structural Reforms

Business Portfolio Optimization
High

Component Ratio

Focused domain category: ~ driving growth ~Growth potential“in-”DirectMarketingU.S.

Frozendesserts

businessbusinessbusinessbusiness

40%

60%

Basic domain category: ~ cash generation ~Domestic confectionery & foodstuffs
business, Operating subsidiaries in Japan+ Taiwan

60%
40%

Exploration & Research domain
category: ~ business creation ~• Global (China, Southeast Asia, Oceania,
Europe, etc.)• Digital and others

2018
Mid-Term
Business Plan

2030

(average during term)

Concentration of Management Resources on
Focused Domain
We selected the “in-” business, direct marketing business, U.S.
business, and frozen desserts business as businesses promisinghigh profitability and growth prospects aimed at the 2030 Vision anddesignated these as the focused domain. By deploying management
resources to the focused domain in a concentrated manner, we will
drive the Group’s growth. We will invest management resources
optimally based on differences in the growth stage of each businessto accelerate the speed of growth.

Stable Cash Generation from the Basic Domain
We defined the domestic confectionery business, which is theGroup’s largest business with stable earnings power, the domestic
foodstuffs business, which has many category No. 1 brands, andoperating companies in Japan and Taiwan as the basic domainthat will generate funds in a stable manner for investment in thefocused domain. The basic domain will seek to achieve steady andhigh sales growth and enhance earnings while further increasing
the added value in order to contribute to “health of mind” and“health of body” of customers.

Initiatives in the Exploration and Research Domain
We defined the exploration and research domain as new initiatives
with an eye toward 2030 and beyond, such as business model
creation compatible with advancements in digitalization anddevelopment of wellness products localized to the preferences andneeds of countries and regions where we operate. In this domain, we
will create new businesses and incorporate them into our businessportfolio as well as foster a strong foundation for the future.

Improving Earnings Power through Structural
Reforms Mainly Targeting Functional Sectors
We will generate funds to invest in the focused domain as wellas implement company-wide structural reforms mainly targeting
functional sectors such as procurement, manufacturing, logistics,
and sales in order to prepare for various management risks,
aiming to further increase earnings power.

20

Strategy Section

Morinaga Group INTEGRATED REPORT 2021

2

PolicyBuild Business Foundation Linked with
Business Strategies

Human Resources Strategy
As we foster human resources for achieving our Purpose andthe 2030 Vision and create workplaces where our diverse
workforce can thrive professionally, we will take steps tostrengthen human resources management with a global
perspective. This includes developing leaders who will drive
our business activities toward attaining the goals of the 2030
Business Plan, encouraging seniors to play an active role, andincreasing business efficiency using labor-saving solutions.

Basicdomain3

PolicyPromotion of Diversity

Our people will be the driving force behind our ability to
become a sustainable company that grows continuously andsupports the wellness of people around the world. As such, wewill promote diversity and inclusion in order to maximize thepower of our workforce. Under the belief of leveraging each
person’s individuality, we will create an organization where ourdiverse workforce can exhibit their skills and help us achieve
our Purpose and the 2030 Vision. We will also enhance ourinnovation capabilities for creating value for customers andsociety.

Key measures“in-” business

Aiming to become No. 1 brand among foods supporting“health of mind and body” centering around sports

Expansion of in Jelly
Expansion of in Bar and creation of new foods leveraging the “in-” brandDirect marketingbusiness

Evolving into healthcare business supporting customers’
wellness realization

Evolution of existing businesses using digitalization
Creation of new businesses using foundation cultivated in the direct
marketing business

U.S. businessBusiness growth from expanding the HI-CHEW brand andcreating a jelly drinks market

Further acceleration of growth of the HI-CHEW brandCreation of jelly drink market and exploration of potential for wellness
domain products

Frozen desserts
business

Stably expanding business by concentrating on productswith competitive advantages that exploit confectionery
technologies

Evolution of “freshness marketing”
Acquisition of customers in peripheral markets and creation of newmarkets using technological advantages

Confectionery
business

Changing the category portfolio so as to build a highrevenue base

Improvement of chocolate business profitability and increase in net sales
Stimulation of demand through invigoration of the candy market
Further increase of demand in the biscuit market

Foodstuffs
business

Shifting from article-of-taste brands tohealth-oriented brands

Establishment of Morinaga Cocoa and Morinaga Amazake as healthoriented brands

Beating the labor shortage as well as establishing a
powerful profit structure to allow us to compete aroundthe world

Control of rising raw materials expense ratio by reviewing productspecifications
Creation of smart factories using digitalization
Control of rising logistics costs with an eye toward hub optimization
Optimization of sales bases and productivity improvement looking ahead
to future market changes

Establishing powerful management foundation to support
the business strategies to increase corporate value overthe medium to long term

Establishment and execution of plans for maximizing human resources
Cross-functional support of business strategy by creating new value
centering around technology
Reforms of business activities using digitalization and continued
improvement of earnings power

FocuseddomainProcurement
departments

Functional
sectors

Manufacturing
departments
Logistics
departments
Sales departments

DX Strategy
We will strategically introduce and utilize digital technologies
to increase operational efficiency through digitalization andcreate new value by using the vast amounts of data available on
customers and markets. This will enable us to strengthen ourmanagement foundation and business competitiveness aimed atachieving the 2030 Business Plan.

of categories with weaker profitability. As part of our structuralreforms and building a management foundation, we will speed up
reforms to create strong earnings and management foundations
enabling us to compete around the world in response to labor
shortages in Japan caused by the declining birthrate and aging
population.

Target State in 2030

Financial Strategy
In addition to promoting management aware of capital costs, wewill engage in financial management that contributes to increased
corporate value by closely monitoring each financial indicator.

Financial Section

List of Key Measures in the 2030 Business Plan

R&D Strategy
We will revamp our research center in 2022 and promote open
innovation through increased alliances with outside parties,
in order to continually create value that contributes to “healthof mind and body” for people around the world. In particular,
we will evolve the Group’s three core technologies andstrengths of jelly drinks, confectionery technologies in sub-zerotemperatures (frozen desserts), and soft candy to underpin thegrowth of the focused domain.

Governance Section

Managementfoundation

Human Resources
strategy
R&D strategy
DX strategy

Basic Strategy for Cash Allocation
We will prioritize growth investments for achieving dramatic
growth mainly in the focused domain and investments in intangible
assets for strengthening our management foundation throughR&D and DX. We will closely monitor each financial indicator so as
to optimize the balance between shareholder returns and internal
reserves in preparation for business risks.

Build New Implementation Structure
Aimed at achieving the 2030 Business Plan, we will establish
dedicated organizations for diversity, DX, and sustainability
management and ensure the steady implementation of ourstrategies. Furthermore, going forward, we plan to initiate

governance structural reforms to further enhance the Group’s
execution abilities along with reinforcing Group management andaddressing issues including risk management.

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Profile

Strategy Section

Sustainability Section

Governance Section

Financial Section

Medium-Term Business Plan

2021 Medium-Term Business Plan

2030 年の財務・非財務目標
Targets of the 2021 Medium-Term Business Plan

We aim to reach record high operating income by accelerating investment
for achieving long-term growth and further enhancing earnings power.

1

Financial Targets *Non-Financial Targets

FY2021/3 Results

FY2024/3 Targets

Net sales:

168.2 billion yen

190.0 billion yen +21.8 billion yen

Operating income:19.1 billion yen

21.5 billion yen

Daisuke Fujii＜Key Performance Indicators＞

Director and Senior Operating Officer in charge ofCorporate Strategy Division

Operating income
to net sales ratio:

11%11% or higher

Overseas
sales ratio:

7%9% or higher

Building a New Foundation for Dramatic Growth
The Morinaga Group has improved its earnings power since
the fiscal year ended March 31, 2016 through such initiatives
as reducing the number of items, concentrating management
resources on main products, and undertaking various structuralreforms. Under the 2018 Medium-Term Business Plan, whose
theme was “solidify business foundation, accelerate growthstrategy,” we concentrated management resources on brandsof best selling items mainly in the domestic business andaccelerated our channel strategy to further elevate our earnings
power. In addition, we focused on developing and marketingproducts for a healthy body including in Jelly and Morinaga
Collagen Drink, while in the United States we engaged in businessactivities to achieve dramatic growth of HI-CHEW. As a result, wewere able to build a strong management foundation capable ofconsistently achieving an operating income to net sales ratio at the
10% level and to increase cash for allocation toward future growth.

The 2021 Medium-Term Business Plan has been positioned as
the first stage toward achieving the 2030 Business Plan. During
the course of this plan, we will engage in business activities under
the theme of “Building a New Foundation for Dramatic Growth.”
We anticipate soaring raw materials costs and rising humanresources costs as long-term trends, resulting in a persistently
challenging business environment. Nevertheless, we will actively
invest in the strengthening of our management foundationand growth of the focused domain as well as further increase
earnings power through structural reforms focused on thebasic domain and functional sectors. Also, we will begin upfront
investments in the exploration and research domain and explore
possibilities for inorganic growth aimed at our long-term growth.
By implementing these business activities with good speed
and in a well-balanced manner, we aspire to achieve record highoperating income in the fiscal year ending March 31, 2024, thefinal year of the medium-term business plan.

1st Stage: 2021 Medium-Term Business Plan

Building a New Foundation for
Dramatic Growth2030
VisionFocused domains’sales ratio:

Change+2.4 billion yen

Approx. 40% +5 points or higher*

growth of exploration and research domain and inorganic growth

Focused domain: driving growth
Basic domain: stable cash generation

Cacao beans

FY2026/3

100%

Palm oil

FY2024/3

100%

Paper*2

FY2023/3

100%

2

ROE:

12%

10% or higher

Dividend payout
ratio:

30%

30%*1. Scope: Morinaga products in Japan*2. Scope: product packaging*1. Amounts and indicators based on Accounting Standard on Revenue Recognition (ASBJ No. 29; March 31, 2020) applied from the beginning of the fiscal year ending March 31, 2022
*2. Comparison with the average during the period of the 2018 Medium-Term Business Plan

Key Measures
Driving Growth through the Focused Domain“in-” business• Expand sales of in Jelly• Bring new “in-” brand products to market

Direct marketingbusiness• Release new collagen products• Implement CXM* using digitalization

U.S. business• Expand HI-CHEW lineup• Bring jelly drink products to market

Frozen desserts
business• Evolve “freshness marketing”• Invest to expand production at
Takasaki Factory No. 3*An acronym for customer experience management

Efforts for further growth:

Procurement ratio of sustainable
raw materials*1

In the “in-” business, we will aim to increase sales of in Jelly
and in Bar products and develop products that capture lifestylechanges, such as increased time at home, to expand the eating
scene and add health value. Moreover, we will promote productdevelopment in various categories using the “in-” brand aiming
to create new food products. In the direct marketing business,
we will develop the new collagen products after mainstay
Morinaga Collagen Drink and evolve existing businesses using
digital marketing tailored to individual customers. Also, wewill work on exploring and creating new businesses aimed atfuture growth. In the U.S. business, we will expand the lineup
through development of extension products aiming for thefurther growth of HI-CHEW, and we will start new initiatives tocreate a jelly drinks market. In the frozen desserts business,
we will evolve freshness marketing to further expand targets of
the Jumbo brand and capture customers in peripheral markets
using differentiated desserts such as The Crepe and Ita Choco
Ice ice cream bars. At the same time, we will begin operations
at the Takasaki Factory No. 3 from the fiscal year ending March
31, 2022 as a new manufacturing site underpinning growth.

Stable Cash Flow Generation From the Basic Domain
Confectionery
business• Establish new HI-CHEW series in market• Invest to increase production ofMorinaga Biscuits

Foodstuffs business• Strengthen appeal of health value ofMorinaga Cocoa and Morinaga Amazake

In the confectionery business, we will focus on new productdevelopment in our mainstay brands of HI-CHEW and Morinaga
Biscuits appropriate for customers’ lifestyles aimed at increasing
the net sales weighting of candy and biscuits with highprofitability. In the foodstuffs business, we will implement a
number of initiatives, including appealing health value, in orderto shift from conventional articles-of-taste to the health brandcentered on the Morinaga Cocoa and Morinaga Amazake brands.

Efforts to strengthen business foundation further:structural reforms and business foundation

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Profile

1

PolicyStrategy Section

We will explore new businesses mainly involving the creation ofa business model in response to advancements in digitalizationand development of wellness products in overseas markets.
Specifically, we will move ahead with research on the utilizationof customer data and investments in DX aimed at building a datautilization platform. Also, we will continue to capture market
opportunities by engaging in business activities in the strong
growth markets of China, Southeast Asia, Oceania, and Europe.

Structural Reforms Focused on Functional Sectors
Procurement departments will review a shift of raw materials
and product specifications to achieve sustainable raw materials
purchasing and make efforts to control the increase in the raw
materials expense ratio. As part of this, these departments
will rebuild our supply chain management infrastructure using
digital technology to achieve streamlining and upgrading raw
materials purchasing simultaneously through operational
reforms. Manufacturing departments will work to minimize lost
opportunities and implement labor-saving solutions to make all
our manufacturing sites in Japan and overseas smart factories
through the use of digitalization, such as IoT. In the fiscal year
ending March 31, 2022, we will begin transforming the Group’s
flagship factory of Takasaki Morinaga Co., Ltd. into a smart factoryand build a strong manufacturing foundation to compete globally.
Logistics departments and Sales departments will work to
optimize bases by strengthening our presence in urban areas andstreamlining regional areas with an eye toward market changes
and to lower costs as well as increase productivity.

Building a Strong Management Foundation
Under our human resources strategy, we will formulate asuccession plan, acquire specialists, and consider labor-saving
systems, all in a timely manner, aiming to maximize our humanresources. In terms of R&D strategy, we will revamp our research
center in 2022, upgrade mass production technologies, andstrengthen alliances with outside research institutions as ameans to creating new value for customers. Under our DX
strategy, we will begin “DX1.0” initiatives that seek to enhance
profitability with digital technology and commence operational
reforms using IoT and RPA*. We will respond to various issues,
including reinforcing Group management and risk management
to continue strengthening our governance system, andimplement each strategy steadily through proactive and swift
decision making.
* An acronym for robotic process automation; a technology for automating manual operatingprocesses and tasks on a computer.

• Frozen desserts

Operating cash flow
Approx.

72 billion yen

Capital spending
Approx.

45 billion yen

Over 12 billion yen
Investment
in growthIntangible
investment(foundation building)24

Morinaga Group INTEGRATED REPORT 2021

• New research center•“in-” brands(in-Bars, etc.)• Confectionery(biscuits, etc.)

Shareholder returns

Funding as needed(Factory No. 3 of Takasaki
Morinaga Co., Ltd., etc.)• Stable dividend anddividend payout ratioof around 30%• Investment ininorganic growth

Financial Section“in-” Business

What we are aiming for in 2030

Main products

Aiming to become No. 1 brand among foodstuffs supporting“health of mind and body” centering around sports
Targets for2030

Net sales:

50 billion yen

in BarIn Jelly

Awareness of Business Environment
The “in-” brand was launched in 1994 with the release of in Jelly.
The brand created the new food culture of replenishing nutrition
easily on the go when playing sports or needing a quick breakfast,

providing an all-new lifestyle. Today, the lifestyles of customers areundergoing major changes due to the COVID-19 pandemic. As aresult, customers now demand new value proposals.

Results and Issues from the 2018 Medium-Term Business Plan
Under the 2018 Medium-Term Business Plan, we increased net
sales while maintaining the high profitability mainly of in Jelly andin Bar following the growth strategy centered on the “in-” brand.
The “in-” brand continues to maintain the top share in the jelly
drink market having established a solid footing in the marketplace.

We recognize that a future issue will be expanding the productlineup after determining how to address changes in eating scenarios
due to increased time at home and rising health consciousness
using a line-up of products based on each nutritional element in in
Jelly, which currently focuses on energy replenishment.

Exterior rendition of new research center scheduled to open in 2022

Medium- to Long-Term Strategy

Cash Allocation<Examples>

Governance Section

Improve Proﬁtability through Business Portfolio Optimization and Structural Reforms

Focused domain

Creation of New Business through the Exploration
and Research Domain

Sustainability Section

The cash generated will be prioritized for allocation toward
investments in the focused domain and managementfoundation building. This cash will also be used to strike theoptimal balance between a stable dividend with a targeted
dividend payout ratio of 30% and internal reserves in
preparation for various business risks. As for capital spending,we plan to spend around 45 billion yen, which is more thanthe 2018 Medium-Term Business Plan. Spending will involve
building a manufacturing system for the frozen desserts
business at the Factory No. 3 of Takasaki Morinaga Co., Ltd.
and opening of the new research center. In addition, we will
accelerate investments in intangible assets for building astrong management foundation using R&D and DX, creating afoundation for long-term growth.

Incorporating sports and exercise into our daily life is becoming
more important in terms of health promotion and maintenancebased on not only people’s desire to stay healthy as they age but
also concerns about unprecedented pandemics. The Morinaga
Group will utilize its know-how in nutrition and physique building
cultivated through our knowledge of sports nutrition along with
proprietary food processing technologies to respond to the needsof customers seeking delicious and healthy eating. By 2030,
our goal is to be recognized as “the No. 1 brand supporting thenutrition, exercise, and deliciousness of everyone from top athletes
to general consumers proactively seeking to stay in optimal shapebased on sports science.” Toward this end, we will continue to
evolve to provide greater health value.

Overview of the Medium- to Long-Term Strategy forthe “in-” Business
Brand Vision for “in-”Initiatives in the 2021 Medium-Term Business Plan
Aimed at achieving the “in-” brand vision by 2030, the “in-”business will follow three basic strategies during the 2021
Medium-Term Business Plan, as we seek greater growth as a key
driver of our change into a wellness company.

Basic Strategies of the “in-” Business inthe 2021 Medium-Term Business Plan
Basic strategies

Details1• Encourage people to play sports to stay healthy and respond toconvenience needs• Cultivate needs by taking increased stay-at-home hours as an opportunity• Expansion of target age group (children, seniors, etc.) and drinking scenes

2• Meet diversified and growing needs for protein• Meet needs in two directions for better sports performance andbodybuilding (high protein content), and for health maintenance(protein replenishment + carbohydrate restriction)

Growth of
in Jelly Products

Growth ofin Bar Products

3

New Brands

No. 1 brand supporting the nutrition, exercise, and deliciousness of everyone
from top athletes to general consumers proactively seeking to stay in optimal
shape based on sports science• R&D: increase by
1 billion yen*
• DX: increase by
1.4 times, etc.*

Growth of in Jelly Products

Growth of “in-” Brands

Provide wellness value to diverse
customers in various lifestylescenarios* Compared to the period of the 2018
Medium-Term Business Plan

• Expand consumption scenes of coreproducts (energy, etc.)• Respond to new needs and targets

Provide new value to customers using
the in Bar and new “in-” products,
following the success of in Jelly, andfoster the brand so that it creates
new markets• Begin efforts to create future foods by taking advantage of
the “in-” brandCommunication Examples for Expansion of Drinking
Scenarios of in Jelly
Consumers are worried about
getting out of shape becauseof the increased time spent at
home. In Jelly products support
this motivating factor amongcustomers.

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PolicyProfileStrategy Section

Sustainability Section

Direct Marketing Business

Focused domain

Frozen Desserts Business

What we are aiming for in 2030

What we are aiming for in 2030

Evolving into healthcare business supporting customers’

Stably expanding business by concentrating on differentiatedwellness realization

products that exploit our proprietary confectionery technologies

Net sales:

20 billion yen

Targets for
2030
Morinaga Collagen Drink

Oishii Aojiru

Awareness of Business Environment
Morinaga Direct Store supports the wellness lifestyle of eachand every customer through direct delivery of health and beauty
products such as collagen drinks. The size of the direct market
for health products in the fiscal year ended March 31, 2020 was
566 billion yen*, reaching 115% growth in the past five years.

Under the 2018 Medium-Term Business Plan, we followed agrowth strategy centered on the Morinaga Collagen Drink brand.
We enhanced the reliability of the product as a food with functional
claim and steadily increased the number of regular customers
through active investments in advertising to reach the top spot* in

Net sales:

50 billion yen

The market is growing steadily following increased consumption
through online direct sales and rising health awareness as a resultof the COVID-19 pandemic.
* Source: H.B. Foods Marketing Handbook 2021, Fuji Keizai

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

The frozen desserts business is expected to see market expansion
due to increased opportunities for consumption by seniors, whocomprise a growing part of the population, along with risingtemperatures due to global warming. With a focus on Jumbo as
the top brand in the frozen dessert market, we are concentrating

sales of collagen drinks. We believe it is our task to strengthen directcommunication with customers going forward to further improve
our support of customers’ wellness life.
* Source: H.B. Foods Marketing Handbook 2021 No. 1, Fuji Keizai (Category for beauty-oriented
products and collagen products/ 2019 results), for the Morinaga Collagen Drink series,
including products before and after updating.

Based on the strategy of focusing on mainstay brands in the 2018
Medium-Term Business Plan, we have been investing in marketingwith an emphasis on the Jumbo brand, which has established
its position in the market and increased sales for 20 consecutive
years (56.2% share within the monaka category in FY2021/3*).

Medium- to Long-Term Strategy

Initiatives in the 2021 Medium-Term Business Plan
We have established the Customer Experience Management(CXM) Promotion Office in an effort to develop a system forpromoting business activities that will create experience-basedvalue for customers. At the same time, we are developing a
structure to maximize value provision by utilizing the hugeamount of customer data. As for products, we will launch new

Morinaga Group INTEGRATED REPORT 2021

Ita Choco Ice ice cream bars

products with collagen as ingredients to expand the collagenbusiness, as well as enhance the sales promotion of Oishii
Aojiru to develop the next potential brand for growth.

Secrets Behind the Success ofMorinaga Collagen Drink
Morinaga Collagen Drink available
exclusively through the direct
marketing channel is the bestselling collagen drink in Japan withcumulative sales exceeding 200
million units. It is a food productwith three verified functional
claims in terms of efficacy on skinmoisturization, knee joints, andbones. While it contains the highest
content of collagen peptide in theindustry at 10,000 mg, it does nothave the odor that is unique tocollagen, thanks to our proprietary
food processing technology, making
it enjoyable and delicious.

our management resources on market mainstay brands thereby
conducting our business to effectively yield profits. Using ourconfectionery technology, we have provided customers with asense of healing through desserts that goes beyond the realm of
ice cream.

Results and Issues from the 2018 Medium-Term Business Plan

* INTAGE SRI+

We provide products that are both functional and delicious at theMorinaga Direct Store to support our customers’ healthy minds
and bodies.
The continuous patronage of our products and services isessential in order for us to contribute to “health of mind andbody” through food, and as such, it is important to enhancecustomer experience (CX). We are visualizing customer behavior
and emotions through data that we can collect from various
contact points; from product recognition to after care, in order toimplement product design and customer service that are tailoredto each individual. This will allow us to improve CX and maintain
an amiable long-term relationship with customers. In addition,
we will harness the Group’s strength such as food processing
technology, nutritional function and ingredient research, and raw
material procurement that we have amassed over more than 120
years of business to conduct product development and providethat best supports the health of customers.

Choco Monaka Jumbo

Awareness of Business Environment

Results and Issues from the 2018 Medium-Term Business Plan

26

Financial Section

Improve Proﬁtability through Business Portfolio Optimization and Structural Reforms

Focused domain

Targets for
2030

Governance Section*1

Other product groups beside the Jumbo brand are also growing
steadily, as overall sales of the frozen desserts business havegrown by 10 billion yen within the period of the 2018 Medium-TermBusiness Plan (which increased by 21.9 billion yen in the 10-year
period up to FY2021/3). We believe our task going forward is toconduct product development and enhance production systems toaddress the expansion of dessert needs.

Medium- to Long-Term Strategy
We will create new dessert needs that contribute to “healthof mind” through enhancing product development using ourconfectionery and food technology. Specifically, we will further
pursue “freshness marketing” in order to continuously improve on
the unique value of “crispiness” in our Jumbo brand products. Also,
we will promote collaboration between industry and academia
on the research of emotional values evoked in consumers by thecrispy texture of Jumbo in order to explore deeply the “health ofmind” aspect. Furthermore, we will also invest in equipment for
the necessary improvement in the production system to achieve
this strategy.

Basic strategies for the frozen desserts business in the2021 Medium-Term Business Plan

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

Basic strategies

1

Evolving of“freshness marketing”

2

Capturing customers fromadjacent markets

Details• Further evolve the Jumbo group’s
unique value “crispy texture”• Expand the target and scenes
for eating the product• Capture customers from adjacentmarkets with differentiated productsthat are more like desserts• Develop new products more closely
tailored to customer needs• Meet the challenges of increasing
added value of products

3

New market creation using
product development withtechnological advantages

Expand applications of flavored
ice products for new market entry*2*1. For existing products, as of April 2019 (survey by Morinaga & Co., Ltd.)*Source: H.B. Foods Marketing Handbook 2021 No. 1, Fuji Keizai (Category for beautyoriented products and collagen products/ 2019 results), for the Morinaga Collagen
Drink series, including products before and after updating.

Evolution of “Freshness Marketing” and Initiatives for Vanilla Monaka Jumbo
Since its release in 2011, sales of Vanilla Monaka Jumbo have grownsteadily, recording 120% growth in the fiscal year ended March 31,
2021 compared to the previous year. Since spring 2021, the ice cream
is now coated with white chocolate on two sides, which shuts out thesmall amount of moisture released gradually from the ice cream. This iscreated using a new manufacturing technology aimed at maintaining thecrispiness of monaka for as long as possible.

“Chocolate Wall”
maintains the crispy
texture of monaka

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PolicyProfileStrategy Section

Sustainability Section

Governance Section

Financial Section

Improve Proﬁtability through Business Portfolio Optimization and Structural Reforms

Focused domain

U.S. BusinessMedium- to Long-Term Strategy

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

Toshiyuki Sakai
Director and Senior Operating Officer,
Responsible for Overseas BusinessNet sales:

30 billion yen

HI-CHEW/ Original Mix

HI-CHEW/ Tropical Mix

Awareness of Business Environment

We will launch brand extension products aimed at further
increasing sales of the HI-CHEW brand. At the same time, as
it is essential to strengthen manufacturing capabilities tomatch expanded sales, we will develop a global supply system,
collaborate with manufacturing companies, and re-establish
a logistics system to ensure the steady supply structure of
products. In addition to HI-CHEW, we will develop a market forjelly drinks as a wellness product that contributes to “healthof mind and body,” as well as search for the third and fourth
products at the same time. We will also conduct development
support for environmentally conscious products.

Initiatives in the 2021 Medium-Term Business Plan
Our target sales in the U.S. business for the fiscal year ending
March 31, 2024 are 10 billion yen. We will continue to expand
the handling ratio of HI-CHEW across the U.S. to ensure it canbe bought anytime, anywhere, by anyone. Furthermore, we will
expand the product lineup of HI-CHEW with proactive investmentof management resources, as well as accelerate R&D investment
to develop brand extension products that suit consumer needs.
In addition, we will enhance brand recognition through televisioncommercials and digital advertisements, and expand contact
points with customers to improve loyalty to the HI-CHEW brand.
Also, we will create a market for jelly drinks.

Key Measures for HI-CHEW in the U.S. Market

The U.S. candy market consists of major manufacturers withfunding and developing power, where rival brands compete
against one another. However, as the market is growing year
on year, it carries a great significance for our global businessexpansion if we can increase the number of fans of the HI-CHEW
brand in the U.S., the world’s largest candy market. Given themarket condition, HI-CHEW has been embraced for its real fruity

taste and chewiness like none other, with a steady growth insales since its launch and a positive reputation among customers
in the U.S. Going forward, as an initiative to address growing
global health awareness and environmental issues, we believethat products and product development that contribute to “healthof mind, body, and environment” will be in demand.

Expand distribution of
main products

Expand product lineup

Increase brand appeal

Expand handling ratio
across the U.S.

Launch new products

Launch TV commercials
nationwide in the U.S.

Results and Issues from the 2018 Medium-Term Business Plan
In order to establish the acceptance of HI-CHEW in the U.S.
market, we have taken initiatives to promote the distinctive quality
in the fruity taste and texture created based on the technology
developed in our domestic business to customers in the U.S.
We have launched the products in major sales channels in the
U.S. and we are expanding these channels and establishing
the products’ visibility in the marketplace. Consequently, therecognition of the HI-CHEW brand has increased, with positive
earnings in the fiscal year ended March 31, 2020, and 7.2 billion
yen in sales in the fiscal year ended March 31, 2021. As such, we
believe we have shifted from market introduction into the growthphase. The huge increase in brand recognition and reliability of
HI-CHEW in the industry is illustrated by the positive evaluation in
the National Confectioners Association (NCA) event*1, and winningthe 2020 Global Nielsen BASES Design Impact Awards*2 for thedesign of HI-CHEW/ Original Mix. On the other hand, as the productlineup is still small compared to that of competing businesses, theexpansion of number of items remains a task to be addressed.
Besides the U.S., HI-CHEW is well accepted and recognized for
its high competitive advantages in consumer surveys conductedin other countries and regions. As such, we will develop the basefor business expansion for further growth going forward.
*1. An employee from Morinaga America, Inc. was selected in the Future Leadership Program (fivecandidate spots available in the U.S.) hosted by the National Confectioners Association.
*2. Recognized for the improved sales results from the renewed design and enhanced
understanding and purchase desire towards the product for the proper conveyance of the brandvalue. This is the first time for a Japanese manufacturer to receive this award, with only 12
brands awarded in the world.

(100 million yen)

Grow all Channels
Mainly American Retailers

80
60

40

40
20

28

26

27

2015/3

2016/343

64

72

Our operating income was also in the black in other overseas markets outside of the U.S. with steady growth in sales during
the period of the 2018 Medium-Term Business Plan. We will further accelerate global expansion with the sales of HI-CHEW. In
addition to HI-CHEW, we will increase imports and sales of Japanese-made products in China. We believe the jelly drink businesshas great potential in Taiwan, and will further expand sales there. We will study the acceptance of wellness products in East Asia,
Southeast Asia, Oceania, and Europe, and consider commercialization in these markets in the future.

50

8

5
0

The wellness market is expected to further expand due tothe increased health consciousness of consumers after the
COVID-19 pandemic. In the meantime, the U.S. has yet to see any
product such as jelly drinks that provide various benefits, which
are popular in Japan. As such, we aim to create a market thatprovides a new value in the U.S. through jelly drinks developed
for the U.S. market as a pioneer of jelly drinks in Japan. We

China

2012/3

received positive feedback through consumer surveys conductedin limited areas and channels, and we will promptly develop amarketing strategy based on these results to launch products
within the fiscal year ending March 31, 2022.
We aim to change into a wellness company also in the U.S.
through creating a new jelly drink market while harnessing thebusiness foundation established with HI-CHEW.

Expansion into Other Overseas Markets

HI-CHEW Sales in the U.S. Market

19

Create a Market for Jelly Drinks

2013/3Morinaga Group INTEGRATED REPORT 2021

2014/32017/3

2018/3

2019/32020/3

TaiwanThailand

Oceania

2021/3 (FY)

Morinaga Group INTEGRATED REPORT 2021

29

1

PolicyProfileSustainability Section

Governance Section

Financial Section

Improve Proﬁtability through Business Portfolio Optimization and Structural Reforms

Focused domain

Domestic Confectionery and Foodstuffs Business

What we are aiming for in 2030
Changing the category portfolio so as to build
a high revenue baseTargets for
2030

Strategy Section

Operating income to
net sales ratio:

10%

HI-CHEW (Grape)

Re-branding of DARS

Delivering Fun with HI-CHEW’s many textures

With the production of DARS started at Takasaki Factory No. 3, we
will redraw the target consumer group and aim for a leap in sales.
The brand will be tailored to the younger generation as the target
group. We are working with artists in our communication measures,choosing the finest quality with a rich milk chocolate taste, andredesigning the package with a stylish appearance that consumers
want to carry with them everywhere.

With HI-CHEW, we will enhance the product lineup focused on
texture. We aim to bring fun textures to customers using ourunique technology, including “UMAI-CHEW,” which is popular for its
crunchy-soft texture, “3-texture HI-CHEW Assortment,” which offers
varying textures between fizzy, squishy crunch, and crunchy soft,and “HI-CHEW Premium,” providing a soothing, squishy bounce withevery bite.

Milk Cocoa

Awareness of Business Environment
Domestic Confectionery Business

Domestic Foodstuffs BusinessOur domestic confectionery business is a fundamental part ofthe company that values the founding spirit of “Delicious, Fun,and Healthy” through delivering confectionery products that
contribute to “health of mind and body” of our customers. As aresult of the increase in time spent at home due to the COVID-19
pandemic, the confectionery consumption scene has changed
significantly depending on the product category and packaging.
We predict that health needs and expectations for social andenvironmental considerations will continue to grow.

The domestic foodstuffs business has been leading the Japanesemarket with the best-in-category products, including the firstmilk cocoa powder drink product manufactured and sold inJapan in 1919, Morinaga Cocoa, our long-standing best seller, andMorinaga Amazake. With the COVID-19 pandemic, customers havebecome more conscious of health; therefore, we predict growing
demand for products made using healthy ingredients.

Domestic Foodstuffs BusinessWe are fostering the brands of Morinaga Cocoa and Morinaga
Amazake, which are No. 1 in their respective categories, byfurther focusing on the health value contained in the ingredientsto increase sales and profitability. For Morinaga Cocoa, we areemphasizing the health value especially in Power of Cacao toPower of Cacao supports the health of consumers
with rich cacao polyphenol and dietary fibers

Results and Issues from the 2018 Medium-Term Business Plan
The confectionery business improved its profitability throughstructural reforms that concentrated on major brands such as
HI-CHEW. The foodstuffs business also improved its profitability
by focusing management resources on No. 1 products in theirrespective category and products with a health value appeal.
In the future, we will strive to further solidify our revenue base,refine the values unique to the confectionery and foodstuffs
business, then explore deep into discovering values that
contribute to “health of mind, body, and environment.”*Main brands in confectionery and foodstuffs business: Carré de chocolat, DARS, HI-CHEW, Ottotto,
Chocoball, Milk Caramel, Morinaga Ramune, Morinaga Cocoa, Morinaga Biscuits, Morinaga Amazake

Morinaga Group INTEGRATED REPORT 2021

Cacao contains polyphenol
and dietary fibers, and is
known as a superfood.

80

69.6%

70

63.2%

62.1%

65.3%

60

Becoming a Wellness Company
0

2018/3

2019/32020/32021/3

Domestic Confectionery Business

30

Morinaga Amazake will take on a new packaging
artwork to emphasize the value contained in its
fermented ingredients

Percentage of Sales Comprised of Main Brands in
Confectionery and Foodstuffs Business*

Medium- to Long-Term Strategy

We will improve the net sales weighting of categories with excellent
profitability (candies, biscuits, etc.) and improve the operating
income to net sales ratio for each number of items. In the chocolate
category, we will launch products such as DARS and Carré dechocolat in new packaging formats to address the diversifying
eating scenes and implement a communications strategy thatsuits the target group to achieve improved operating income to
net sales ratio and secure sales. We aim to increase the net sales
weighting of major candy brands that are highly profitable, suchas HI-CHEW and Morinaga Ramune, through expanding the productlineup and enhancing sales promotions to improve the operating
income to net sales ratio. Moreover, for the biscuits category, which
has grown in response to the demand for staying at home, we will
boost production capacity and introduce products with high added
value in anticipation of sustained demand.

enhance sales promotions, while creating its demand as aregular beverage for adults that is good for the body. Morinaga
Amazake will be rebranded in fall 2021, with an appeal for its
double fermented ingredients, we will provide customers withhealth value in amazake.

2021 Medium-Term Business Plan

Chocolate• Improve the operating income to net sales ratio
and secure a sufficient sales scale by replanningthe product, channel, and communications strategies

Biscuits• Maintain and build up demand that has grown due
to the Covid-19 pandemic• Increase production capacity and develop
new products

Candies• Strengthen sales promotion efforts for HI-CHEW
and Morinaga Ramune• Develop products to meet the needs ofchanged lifestyles and stress reduction due tothe Covid-19 pandemic(FY)

For the confectionery and foodstuffs business, we will provide
value to “health of mind, body, and environment” available only
through product groups that are easily enjoyable. We provide
product formats that are easily accessible and have health value
using functionality through products such as Morinaga Ramune
to support school entrance exam takers with glucose, LACShield® Tablet containing the probiotic “Lactobacillus paracasei
MCC1849,” and 90% Less Sugar Cough Drops that is a food withfunctional claim and contains inulin as a related ingredient tosoothe the stomach.
We are conducting research on the health effects ofingredients in amazake and cocoa powder drink, such as sakelees, malted rice, and cacao beans. In addition, we are also
implementing measures towards “health of the environment.” For
our Koeda chocolate products, we use cacao beans certified by
the Cocoa Horizons Foundation in supporting cacao farmers andreducing deforestation and CO2 emissions. The paper packaging
is made with FSC® certified paper (FSC®N003064) while theindividual packaging film contains partial biomass plastic film.

Easily accessible functional and nutritional values

Research on health effect of ingredients

Otsubu Ramune

LAC-Shield® Tablet

90% Less Sugar Cough Drops(food with functional claim)

We disseminate the Cocoa Reportfeaturing the latest research on thehealth function of cocoa powder drinks.

We are conducting research on the healthand beauty effect of amazake, whichis called “drinkable IV” because of its
nutritious and easy-to-digest features.

Morinaga Group INTEGRATED REPORT 2021

31

1

PolicyProfileSustainability Section

Governance Section

Financial Section

Improve Proﬁtability through Business Portfolio Optimization and Structural Reforms

Improve Profitability through Structural Reforms
Centering on Functional Sectors
What we are aiming for in 2030
We will tackle labor shortages as well

Takashi Hirakue

as establish a powerful profit structure

Director, Senior Operating
Officer, General Manager of
Production Headquarters,
Officer Responsible for
Logistics Department

Hideki Matsunaga
Senior Operating Officer
General Manager ofSales Headquarters

to allow us to compete aroundthe world.

Awareness of Business Environment
Changes in the external environment affecting the Morinaga
Group’s business operations include not only soaring raw
materials costs and consumption trends, which are impacted
directly, but also a number of worldwide and challenging social
issues, including climate change, marine pollution, and humanrights issues.
Going forward, we will need to carefully plan our response inadvance and recognize the impacts on our business activities
that these major issues have over the medium to long term.
Digital technology, which is rapidly evolving with IoT and AI,
is transforming our entire society. We will need to utilize thistechnology to strengthen our business foundation and build up ourcompetitive advantages.
The Morinaga Group will undertake comprehensive structuralreforms mainly in the functional sectors of procurement,
manufacturing, logistics, and sales in order to build a strong
revenue base that will enable us to compete on the worldstage regardless of the business environment. We will actively
promote measures that eliminate labor shortages and enhancecompetitiveness while strengthening our business foundation
related to safety, quality, cost, and delivery.

Changes in External Environment, Impacts on the Group, and the Group’s Approach to Solutions
Forecast of environmental changes
Headwinds, threats, and risks• Tight supply of raw materials worldwide• Decline in size of working population• In the time of COVID-19• Diversification of customer needs• Shortening of product lifecycle• Trend of rising selling expenses

Tailwinds and opportunities• Evolution of robotics technology• Emergence of IoT and AI

Approach to solutions based on future forecasts
Continuing
headwinds

Rising uncertainty

Incorporation oftechnology

Actions to stop headwinds

Challenges for the future• Reduction in raw material loss andwaste• Reduction of defect rate
• Establishment of age-friendly
workplaces• Increase in collaboration withpartner factories• Review and optimization oflogistics hubs
• Optimization of sales organizations• BCP with a procurement perspective• Sustainable procurement• Manufacturing human resources
strategy• Transition to smart factories• Investments to increase production
and reorganization of sites• Examination of overseas businessstructure• Technology-driven eliminationof complaints• Enhancement of sales capabilities

Unwavering Structural Reforms to Achieve the 2030 Vision
1. Structural Reforms of Procurement Functions
The mission of procurement functions is to procure raw materials required for
manufacturing appropriately in a stable manner. Furthermore, in recent years,
based on societal demands, the expected responsibility of these functional
divisions have been expanding outward from legal compliance to traceability,
improved quality control, response to sustainability, and business continuity
planning (BCP) for disasters. The Morinaga Group will build a foundation toproperly address these societal demands related to raw materials procurement
and supply chain management. We will promote DX and streamline our entire
procurement operations aimed at strategic procurement that will enable us tobetter compete in global markets.

32

Strategy Section

Morinaga Group INTEGRATED REPORT 2021

Issues of Procurement Functions and Strategic System

主幹制御器

2. Structural Reforms of Manufacturing Functions
The Morinaga Group has created products with the utmost
priority given to superior quality, safety, and security. Aimedat achieving the 2030 Vision, we will further evolve our safe,
secure, and highly efficient production system built up as a food
manufacturer into one for the next generation. Smart factories
represent one of our initiatives toward this end.
We will combine our long-standing technologies with digital
data from manufacturing facilities to increase the stability ofoperations and improve production efficiency. As one example,
we will speed up collaboration between manufacturing andindirect departments by introducing IoT and AI technologies
to our manufacturing facilities to visualize operating status inreal time. Also, we will reduce production waste and loss by
preventing prolonged shutdowns from the early detection offacility problems. In terms of the transition to smart factories, wehave started from new facilities at the Takasaki Factory No. 3 ofTakasaki Morinaga Co., Ltd. and will continue to do so at our otherfactories inside and outside of Japan.

Cost reductions

Sustainability

Visualize

Information
sharing
Remote assistanceReal time
operations graph

Connect
Japan

Overseas

AI and predictive maintenanceOperations

Graphing
Analysis
Accumulation

Quality
品質
Problems

Main control equipment
Controlequipment

Never shuts down
Decrease defect rate
Prevent prolonged shutdowns

Monitoring
CameraFacility A

BC

Factory No. 3 of Takasaki Morinaga Co., Ltd.
The Morinaga Group is reviewing its production system andintroducing highly efficient manufacturing lines primarily at
its mainstay factories. Takasaki Factory No. 3 is our latest
factory featuring highly efficient facilities in terms of productionand energy consumption. The factory is also proceeding withthe transition to a smart factory. We launched production of
chocolate in the fiscal year ended March 31, 2021 and frozen
desserts in the fiscal year ending March 31, 2022.

Takasaki Factory No. 3

Control room of the Factory No. 3

3. Structural Reforms of Logistics Functions

4. Structural Reforms of Sales Functions

We are moving ahead with a modal shift*1 and diversificationof transport methods aimed at building a logistics system thatis efficient, stable, and environmentally friendly. We will also
increase logistics efficiency by reorganizing and optimizing
our logistics hubs and achieve decent logistics that improve
the working environment of logistics workers. Looking ahead,
we will build a supply-demand system using AI and logistics
platforms driven by DX and introduce labor-saving solutions in
our logistics operations.

We will increase productivity by optimizing sales organizations
with an eye toward changes taking place in the market. Sales
departments will implement area marketing that addresses thediverse needs of customers through decentralization to branches
aiming to strengthen our presence in regions. Additionally,
aimed at strengthening our sales capabilities, we will enhance
the quality of our proposals to retailers through collaboration
between supervising branches with control tower functions andregional branches, as well as build strong relationships with ourlargest customers.

Main Measures for Logistics Structural Reforms

DX promotion and streamlining

Overview of Smart Factories

Optimization of logistics hubs

Modal shift *1

Structural Reforms of Sales Functions Eyeing Market Changes
Optimization ofsales organizations

Reinforcement ofsales capabilities

2

Utilization of transfer centers (TC) *Systemization and labor-saving
solutions for logistics work

BCP establishment

Enhanced
quality control

Promotion of decent logistics*1. Shifting from truck transport of cargo to railway or ship.
*2. Pass-through-type logistics centers where products are sorted and immediately shippedwithout being placed into inventory.

• Strengthen presence inurban areas and streamline
operations in regions• Promote decentralization toward
sales branches• Strengthen control tower
functions of supervisingbranches and sales structureof each branch.

Morinaga Group INTEGRATED REPORT 2021

33

2

PolicyProfileStrategy Section

Sustainability Section

Financial Section

Build Business Foundation Linked with Business Strategies

Human Resources Strategy

R&D Strategy

Aimed at 2030

Masaaki Takahashi
Operating Officer
General Manager of the Human
Resources Division

Aimed at 2030

We are working to achieve employee happiness by

We will support company-wide strategy and operations inencouraging their autonomous growth based on mutuala cross-cutting manner by enhancing development with arelationships of trust with the company and to continuously

medium- to long-term perspective to generate new value forgenerate value for society.

Shinya Moricustomers aimed at the future pivoting around technology.

Director, Senior Operating Officer,
General Manager of R&D Center

Basic AwarenessMedium- to Long-Term Strategy

The Morinaga Group aspires to become a sustainable company
that grows and develops continuously by generating value forsociety collectively together with the company and employeeswith an eye toward attaining our Purpose and the 2030 Vision. We
believe that employee happiness is an essential element of these
efforts.
To achieve employee happiness, it will be important to provide“health of mind and body” to employees and encourage theirautonomous growth based on mutual relationships of trust

between the company and employees. We believe that this willlead to employees’ sense of growth, self-actualization, target
fulfillment, and independent career development, and help
employees find their job meaningful.
In the future Japan’s working population will decline, whichmakes increasing productivity an issue facing the entire Group. At
the same time, as we are still in the process of global expansion,
the Group must accelerate initiatives in terms of human resources
strategy.

Aimed at achieving the 2030 Vision, we will promote research anddevelopment pivoting around technology that contributes to newvalue creation under the following policies.

[Basic Policies on R&D]
1. Undertake research and development consistent withmanagement and business strategies
2. Accelerate initiatives for the co-creation of “health of mind andbody” emphasizing open innovation

Our basic human resources strategy is to balance developmentof human resources for achieving the 2030 Vision with theautonomous growth and self-sustaining career development of
employees.
Aimed at attaining the 2030 Business Plan, we have positioned
1. Training future leaders to develop leadership skills for driving
the business; 2. Foster and secure human resources with advanced
expertise; and 3. Further increase productivity, as main humanresources issues, and we will now implement measures to addressthese issues (see table below). First, our top priority will be todisseminate our new corporate philosophy and the 2030 Vision, andthen by continuously fostering human resources that will make us
achieve these, we will attain the Group’s sustainable growth.
Please see page 38 for our approach to diversity.
Please see pages 46 and 47 for our human resources development
and labor environment.

Responding tosustainability

Opening of
new research
centerCreating
new value

Updating of coretechnologies

Wellness andglobal R&D

Enhancing Basic Research andUpdating Core Technologies• Foster human resources aimed at achieving the 2030 Vision• Promote autonomous growth and self-sustaining careerdevelopment

PurposeRealization

2030 Vision

Main Issues

Employeehappiness

Human
Resources
MeasuresMorinaga Group INTEGRATED REPORT 2021

• Training future leaders• Foster and secure human resources with advanced expertise• Further increase productivity• Create succession plan as well as foster future leaders andhuman resources with global mindset• Strengthen human resources development to enhance
specialized skills• Increase skills by enhancing the human resources development
system and review operations

In terms of “health of mind,” we will promote a deep exploring of emotional
values and establishing evidence using a science-based approach. As for“health of body,” we will promote R&D following the two directions below.
The first is combinations of healthy ingredients and the second is reduced
use of ingredients with possible negative impacts, such as sugar.

Global
We will create new soft candies that match the articles-of-taste and needsof consumers in the regions where we operate, such as the U.S., andengage in research and product development of wellness products.

In spring 2018, we established the center for future value
creation, “MIRAI Research & Innovation Center,” with the goal ofstrengthening R&D from a medium- to long-term perspective
aimed at technology and innovation-led growth. This centerengages in medium- to long-term R&D and new technology
development for new markets. It is taking a deep exploring ofcore technologies, researching ways to lower raw material costs
and stabilize supply, and developing new processing technologies
under the key words wellness and global.

2. Opening of new research center

Human Resources Strategy for Achieving Our Purpose and the 2030 Vision

Human
Resources
Strategy

Wellness

Promoting Value Creation and Co-Creation for the Future
1. Established MIRAI Research & Innovation Center

Enhancingbasic researchMedium- to Long-Term Strategy

34

Governance Section

We will enhance health science research so that we can provide
food products to customers along with science-based evidence
on health functions. We will also work on further enhancing
the Group’s strength in mass production technologies throughcollaboration with manufacturing departments. Moreover,
we will increase allocation of management resources in foodprocessing technologies, which are a driver of products’ mediumto long-term strengths. Through these efforts, we will evolve
our core technologies of jelly drink technologies, confectionery
technologies in sub-zero temperatures (frozen desserts), and soft
candy technologies to underpin growth aimed at achieving the2030 Business Plan.

Enhancing Growth Strategy (Wellness and Global R&D)
We will promote the following approach to R&D aimed at developing
products that are unique to the Morinaga Group and that contributeto “health of mind and body” of people around the world.

In 2022, we will open a new research center for upgrading R&D
and new value creation. In addition to improving the existing R&D
environment, this new facility will enable joint research from thelab to pilot plant levels in preparation for external co-creation withresearch partners inside and outside the Group.

3. Strengthen industry-academia collaboration
We will strengthen joint research with research institutes such asuniversities and accelerate value creation led by external co-creation.
(Partners: Over 70 institutions including Ochanomizu University, Tokyo University ofTechnology, Tokyo University of Science, and Tokushima University)

4. Increase R&D spending
We will increase R&D spending in stages up to the fiscal year ending
March 31, 2031 to increase spending in the fiscal year ending March
31, 2031 (single year basis) by 150% or more compared to the fiscal
year ended March 31, 2021.

5. Response to sustainability
We will promote research and technology development to shift tosustainable materials that are socially and environmentally friendly
centered on our main raw materials.

Morinaga Group INTEGRATED REPORT 2021

35

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PolicyProfileStrategy Section

Sustainability Section

Financial Section

Build Business Foundation Linked with Business Strategies

Financial Strategy

DX Strategy
Aimed at 2030

Shinichi Uchiyama

Aimed at 2030

We will sustainably increase corporate value and achieve

We will strategically introduce and utilize digital technologies

consistent shareholder returns using proactive investments into strengthen our management foundation and businessgrowth and by maintaining our stable financial base.

competitiveness aimed at achieving the targets set out in the

Tomokazu Sano

Director andSenior Operating Officer incharge of Accounting Division

Operating Officer andGeneral Manager of Digital
Transformation Promotion Division

2030 Business Plan.

Results and Issues of the 2018 Medium-Term Business Plan

Basic Understanding

During the 2018 Medium-Term Business Plan, we experienced adownturn in revenue due to the COVID-19 pandemic and end of ourdistributorship agreement for Pringles in Japan in the fiscal year
ended March 31, 2021, the final year of the plan. However, we worked
to increase profitability by concentrating on mainstay brands andstrengthened our revenue base by reducing costs across the company
and reorganizing our factories with the aim of increasing production
efficiency. As a result, during the course of the three years, we
generated stable profits, maintaining an operating income to net sales
ratio at the targeted 10% level and achieved our target for ROE at
11.8%. Consequently, we were able to expand our funding capabilities
by improving our financial condition and stability, building a financialbase that will underpin our future growth strategies in the process.
Going forward, we will address the following three issues. The firstis the execution of investments in growth mindful of capital costs that

The Morinaga Group recognizes that it must increase productivity
and strengthen the management foundation utilizing investments
in quickly evolving digital technologies based on the profoundchanges taking place in the business environment fromadvancements in communication technologies and thedigitalization of society, including AI, big data, and IoT. For thisreason, in the fiscal year ended March 31, 2020 we identified thecurrent situation and challenges and in the fiscal year ended

contribute to increasing corporate value over the medium to longterm. The second is the implementation of shareholder returnmeasures with an eye toward not only dividends but also the total
shareholder return ratio. The third is the response to uncertainty in thebusiness environment and management risks caused by COVID-19.
This will underpin our efforts to achieve the 2030 Business Plan.

KPIs in the 2018 Medium-Term Business Plan
Perspectives

Indicators

Results for FY2021/3

Profitability

Operating income to net
sales ratio

Efficiency

ROE

Security

Shareholders’ equity ratio

9.6%
11.8%
60.9%
30.0%

Shareholder
Dividend payout ratio
returns

The Morinaga Group has clarified its decision-making criteria forinvestments and manages investments fully aware of capital costs
while continuously monitoring the investment return status post
investment. On top of this, the cash generated from our businessactivities will be allocated following the cash allocation policies
outlined in (1) to (3) below. This cash will be used to support theimplementation of our strategies companywide. Furthermore, cash
for satisfying cash demand will in principle be sourced from cash
flow from operating activities, while financing will be executed
after comprehensive consideration of financing conditions such as
appropriate cash on hand levels, term, and interest rate, as well as
impacts on financial indicators such as shareholders’ equity ratio,
ROE and ROIC, to achieve the optimal capital structure.

1. Investments in Growth

10% or higher
10% or higher
50% or higher
30%

2. Shareholder Returns
The Morinaga Group recognizes that solidifying its managementfoundation and returning profits to shareholders are top priorities.
Our basic policy is to provide dividends in line with performance
while ensuring a stable dividend. We will provide shareholder returns
mindful of the total shareholder return ratio and offer a stable andconsistent dividend targeting a dividend payout ratio of 30%.

Our basic policy on internal reserves is to fund shareholder returns
and investments in growth to enhance corporate value as well as
secure a certain level of internal reserves in preparation for
management risks including changes in the macro environment
and the COVID-19 pandemic.

monitoring processes for our business activities by integrating
data internally and externally and utilizing AI and othertechnologies, with the goal of propelling growth potential. As aresult, we will enhance our organizational capabilities forforecasting the future based on insight into the businessenvironment and customer tendencies to propel our change into awellness company and achievement of DX 3.0.
Under DX 3.0, we will continuously invest in digital domains andrepeat testing and learning to create new businesses that
contribute to the wellness of consumers.

We have established a DX Strategy broken down into three stagesof business reforms aimed at incorporating DX companywide.
Under DX 1.0, which will take place during the 2021 MediumTerm Business Plan, we will integrate systems and streamline
business processes across the value chain by deploying
automation solutions, with the goal of upgrading profitability. Inturn, the resources generated from these efforts will be allocatedto the focused domain in the 2030 Vision and for implementing DX
2.0, helping to speed up our growth strategy.
Under DX 2.0, we will build a management foundation with swift
and flexible decision making in response to changes and rebuild

Overview of DX Strategy

2021 to 2023

2024 to 2026

2027 to 2030

DX1.0

DX2.0

DX3.0

–Upgrading Profitability––Propel Growth Potential––Creation of New Businesses–

Theme

Structural reforms centered on
the basic domain

Structural reforms centered on
the focused domain

Achieve further growth centered on
exploration and research domain

Directionof actions• Integrate systems• Automate business process• Review business processes• Integrate data internally and externally• Revamp monitoring functions• Speed up the PDCA cycle• Create new businesses that contributeto the wellness of consumers

Approach to Cash Allocation(1) Investments in growth to achieve the 2030
Business Plan

2. Investments in exploration and research domain
3. Investments in basic domain

Includesinvestments forinorganic growth

Operating cash flow

1. Investments in focused domain(2) Shareholder returns (mindful of total shareholder return ratio)

Business process reforms inthe value chain

Expand IoT and RPA*

Integrate datainternally and externally

Introduce AI

Direction 1:
Utilize knowledge concerning
deliciousness and healthDirection 2:
Utilize diverse customer
contact points

Mainactions(3) Internal reserves in preparation for management risksinMorinaga Group INTEGRATED REPORT 2021

Medium- to Long-Term Strategy

3. Internal Reserves

Investment decision making
fully aware of capital costs

We will aim for a leap in growth by prioritizing investments in thefocused domain, including investments for inorganic growth suchas business alliances and M&A. Additionally, we will achievesustainable and consistent growth by investing in the exploration
and research domain to plant the seeds of future businesses andin the basic domain including renewing aging facilities. We will also
increase investment in intangible assets such as advertising, R&D,
and DX, respond to major changes in the management
environment, and create a foundation for new value creation.

March 31, 2021 we held discussions involving all departments
through the IT strategy project. The formulation of a strategy forinvesting in digital technology represented a culmination of these
efforts. Going forward, the Digital Transformation Promotion
Division established in 2021 will take the lead in driving forward
companywide cross-functional DX, which will support businessactivity reforms and our achievement of the 2030 Vision.

Targets

Medium- to Long-Term Strategy

36

Governance Sectionout*An acronym for robotic process automation referring to technologies that automate business processes and manual work with computers.
Morinaga Group INTEGRATED REPORT 2021

37

3

PolicyPromotion of Diversity

Promoting Diversity and Inclusion
Aimed at 2030
Following the approach of leveraging each person’s individuality,
we will promote diversity and inclusion and generate innovation by

Daisuke Fujii
Director and Senior Operating
Officer in charge of Diversity
Promotion Officecreating dynamic organizations where a diverse workforce can play
an active role together to achieve our Purpose.

Sustainability Section
40 Initiatives for Sustainability
40 Sustainability Management
42 Contributions to Healthy Lives of People around the World
46 Diversity and Inclusion of People
48 Achieving Sustainable Value Chains
50 Conserving the Global Environment
52 Strengthening the Business Management Foundation

Accelerating Innovation Using Management That Leverages Each Person’s Individuality
The Morinaga Group has made efforts to promote female
participation and career advancement in the workplace since 2001
when it reformed its childcare leave and various other programs.
As of the fiscal year ended March 31, 2021, the ratio of female
managers*2 stood at 8.3%. Going forward, in addition to further
Morinaga Group

Diversity and Inclusion Policy
Leverage each person’s individuality
To deliver happiness to ever more people, the Morinaga Groupaims to be a sustainable company that keeps growing. Our
employees are the driving force toward achieving that aim:
implementing diversity and inclusion maximizes that force.
Therefore, we place those values at the core of ourmanagement strategy.
We take the approach of “leveraging each person’s
individuality” and at the same time develop relationships of
mutual trust. In that way, we will create conditions where
everyone can demonstrate their strengths and play an activerole. By enhancing our ability to respond to changes (resilience)and creating new value (innovation) through augmenting thediverse knowledge generated by various individuals, we willcontinue to address those customers’ and society’s challenges.

encouraging female participation and career advancement in theworkplace, we will foster a culture that generates innovation froma combination of wisdom by capitalizing on employees’ values,
individuality, careers, and experience. With this in mind, weestablished the Diversity Promotion Office in April 2020 and theDiversity and Inclusion Policy in April 2021.
To spread and implement the Diversity and Inclusion Policy, we
conducted diversity and inclusion training for around 350
managerial employees because of the importance of promoting
these efforts at the workplace level with the understanding ofboth senior management and middle management. Looking
ahead, participants in this training will spearhead our efforts topromote understanding of the Diversity and Inclusion Policy
among workplaces and ensure it is put into practice. Using
training and various other initiatives, we will ensure that all
employees are on the same page when it comes to achieving theposition we want to be in by 2030.

Five Guidelines for Implementing theDiversity and Inclusion Policy
4. Building Relationships of
1. Understanding and
Trust
Respecting Individuals
5. Emphasizing Independence
2. Promoting the Active
Participation of All Employees
and Challenge
3. Providing Fair Support

Position We Want to Be in by 2030
To elevate the innovation capabilities of our organizations, we need
to foster organizations where each and every employee can refine
his/ her skills, that create intellectual diversity from the sum totalof this diverse individuality, and combine these to produce
synergistic effects. Toward this end, we are working to enhancediversity and inclusion following the KPIs listed below.
1

1. Participation rate in diversity and inclusion training: 100%*
2. Condition where the active role of our diverse workforce is1being promoted: 80% or higher*(rate of positive responses on the employee survey)
3. Promotion of female participation and career advancement in2
the workplace; ratio of female managers: 20%*

Diversity promotion staff*1. Group consolidated basis.
*2. Morinaga & Co., Ltd. (non-consolidated)

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39

Profile

Strategy Section

Sustainability Section

Governance Section

Financial Section

Initiatives for Sustainability

Sustainability Management
The Morinaga Group will enhance its overall sustainability management inorder to achieve its Purpose and the 2030 Vision with Altruism as
the foundation, a tenet valued by the Company’s founder.
Machiko Miyai
Director and Managing Executive Officer
in charge of Sustainable Management Division

Promoting Sustainable Management Based on Our Purpose

These material issues are evaluated for their importance from thetwo axes of “impact on the Morinaga Group’s sustainable growth,”and “impact on the society’s sustainable development” by 11 external
stakeholders (three investors, four business partners, one NGO, andthree Outside Directors) and 10 key members of the Company.
As a result, 21 issues have been rated as important, while
seven of which have been rated as the most important (seemateriality matrix*).
Based on this result and repeated discussion among board
members, given comprehensive consideration on their relation to
the Morinaga Group’s management and business operations, wehave identified five materialities.
Deemed the most important issues

The Morinaga Group’s Materiality Matrix

The Morinaga Group began deliberating material issues forachieving our Purpose and the 2030 Vision in July 2020, andidentified material issues (Materiality) from both financial andnon-financial aspects following the approval of the Board of
Directors. (See pages 16 and 17 for details.)

Deemed important issues

Very important
ImportantSomewhat important

Impact on the sustainable development of society

Human rights and environmental issues in the
production stage of agricultural raw materials
Reduction of food loss and waste
Climate change mitigation and adaptation
Response to the spread of major infectious disease

Developing of delicious and healthy foods
Developing of sustainable products
Food safety and quality assurance
Diversity and inclusion
Developing human resources to achieve the Vision
Sustainable procurement of raw materials
Management based on Purpose

Appropriate conveyance on social and environmental
information of products
Eco-friendly plastic containers and packaging alongwith recycling, reuse, etc.
Incorporating next-generation food technologies
Co-existence and co-prosperity with local communities

Developing products with new value in response to
consumer needs
Strengthening of corporate governance (riskmanagement included)
Human rights management
Enhancing of sustainability management
Increasing social trust and reputation throughdisclosure of ESG information
Globalization of management foundation

We have set Long-Term Targets for 2030 for each materiality in aneffort to achieve our Purpose and the 2030 Vision. Furthermore,
the actions to be taken during the period of the Medium-TermBusiness Plan are formulated by backcasting. (See pages 16 and
17 for details.)
Many of these efforts correspond to the United Nation’s
Sustainable Development Goals (SDGs). The Morinaga Group will
be taking concerted efforts as a whole in order to achieve asustainable society in which the SDGs aim to leave no one behind.

Enhance Sustainability Management
In April 2021, we newly established the ESG Committee, which ischaired by the President and Representative Director in order topromote initiatives for sustainability and achieve the Group’s
overall Purpose. Moreover, we also established the Sustainable
Management Division to support and promote 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 relevant to

Schematics of Sustainability Promotion
Board of Directors

ESG Committee (Chairman: President andOther environmental conservation activities (water
resource preservation, etc.)
Reduction of environmental impact in distribution

Somewhat important

For achieving a diverse andcompassionate society

1. Contribute to healthy lives ofpeople around the world
2. Diversity and inclusion ofpeople3. Achieve sustainablevalue chains

For the future earth environment

4. Conserve the global
environment

Solidify a sustainable
management foundation

5. Strengthen the business
management foundation

the 2030 Targets serving as committee members. The Committee
reports on and shares the latest society trends related tosustainability, as well as deliberates necessary items on policy,
planning, and response to issues in order to achieve our Purpose
and the 2030 Vision. Also, it monitors the progress of activities
aimed at achieving 2030 Goals and leads the entire Group’s
initiatives of sustainability.
In order to achieve the Long-Term Targets for 2030, the sharingof our Purpose and the 2030 Vision with all directors andemployees and sharing of fundamental knowledge onsustainability and ESG is the starting point. For this reason, we
hosted directors training on sustainability and ESG in the fiscal
year ended March 31, 2021 in order to deepen the understanding
with regard to the latest trend on Purpose-driven management
and sustainability. Going forward, we plan to strengthen theemployees’ understanding and knowledge towards sustainability
through training.
Moreover, we will make appropriate disclosure on our activity
results through integrated reports and our company website andincrease the entire Group’s transparency as well as build a trust
relationship with all stakeholders through presenting the Morinaga
Group’s philosophy and activities. Also, we will refine our responseto requests for ESG information disclosure from external surveyorganizations and business partners and achieve enhanced
corporate value for the medium- to long-term.

Representative Director)

Important

Very important*Only results of “Somewhat important”
and better presented

Sustainable
Management Division
Cooperation

Five materialities
2. Diversity andinclusion of people

For healthy lives of people

Social contribution activities

Impact on the Morinaga Group’s sustainable growth

1. Contribute to healthy
lives of people aroundthe world

The Morinaga Group’s Materiality

Defining Long-Term Targets for 2030 and Contributing to the SDGs

Process of Identifying Materiality at Morinaga GroupIn order to identify our materiality, we conducted interviews withexperts in the fields of sustainability, consumer issues, capital
markets and ESG investment, etc., in July 2020 to obtain opinions on
issues that we should address.
Following that, we summarized our 30 material issues for therealization of our Purpose and the 2030 Vision based on vital issues
in management and business, international standards and initiatives
such as SDGs, and Global Compact, expectations and requests fromstakeholders such as customers, business partners, and NGOs,
survey items received from survey organizations on CSR, ESG, andsustainability, and other factors such as the external environmental
trend that surrounds the Morinaga Group and the food industry.

We will steadily establish social values and a resilient
management foundation to achieve sustainable growth throughaddressing our materiality.

Identifying the Group’s Materiality

are taking place at an unprecedented speed. Given this condition,
we must make efforts involving the entire Morinaga Group from along-term perspective and follow clearly established tasks toreach the position we want to be in, in order to achieve ourCurrently in the global community, environmental changes, suchas intensifying social issues including climate change and rapid
advancement of digitization, which are greatly impacting
business activities and increasing uncertainty toward the future,

Purpose and the 2030 Vision.
The Morinaga Group has been conducting business with astrong conviction toward contributing to society since its
inception. With the formulation of a new corporate philosophy, we
have decided to take a proactive approach to undertake efforts
aimed at realizing a sustainable society, including achieving theSDGs as a member of the global community. We believe, thesecumulative efforts will make the Group’s business moresustainable as well as lead to sustainable growth and enhanced
corporate value in the medium- to long-term. Our specific efforts
are presented in the following pages.

3. Achieve sustainablevalue chains

4. Conserve the global
environment

5. Strengthen the business
management foundation

Formulate policy andstrategy, promoteeach initiative, follow
up with relevant
departments

Relevant departments and Group companies
Lecture on diversity for board members, lecturer: Asako Osaki (gender specialist)

40

Morinaga Group INTEGRATED REPORT 2021

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41

Profile

Strategy Section

Sustainability Section

Governance Section

Financial Section

Initiatives for Sustainability

Contributions to Healthy Lives of People around the World
Aimed at 2030
Contributions to the healthy lives of people around the world with our efforts in providing healthvalues for mind, body, and environment.

Long-Term Targets for 2030

• Provide health values to over 70% of Japan’s population through new
initiatives aimed at becoming a wellness company.
Keita Tsukui

Senior Operating Officer
General Manager of Marketing Headquarters* Scope: Products defined 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 INTAGE Inc. SCI annual purchase rate (scope: consumers nationwide between the ages of 15 and79). Going forward, the Company will explore establishment of a vision on a global basis.

Sales Grew by about 20 Times in 10 Years forthe in Bar Series
The in Bar series offers
delicious and easily enjoyable
protein bars that have minimal
distinctive taste of protein achieved using our confectionery
technology. In response to the diversifying needs, we have
expanded our product lineup to include those with extra
protein, low-carb, bite-size chocolate, as well as drinks type.
Sales trend of in Bar assumingbaseline of 100 in FY2012/3

2,202 2,304
1,868
1,604

1,135

Providing the Morinaga Group’s Unique Values in Contributing to “Health of Mind, Body, and Environment”
to customers of all generations and lifestyles in order to contributeto a healthy life by harnessing these capabilities as our strength.
Particularly, lifestyles have been diversifying in recent years, with theneeds for nutritional supplements diversifying, such as “to alsosatisfy a craving,” “in dessert form,” and “in drinks form.” The
Morinaga Group will meet customers’ needs with various categories
and forms of products. For the future, we will focus on thedevelopment of products that dive deeper into “health of mind” andsustainable products, in aiming to realise sustainable growth andenhanced corporate value for the Group by achieving the goal of“health of mind, body, and environment” as stated in the 2030 Vision.

The Group’s quest for health begins with the founder Taichiro
Morinaga’s idea to bring delicious and highly nutritious Western
confections to Japan and the statement of “rich in nourishment /exquisite flavor,” as written on the package of Milk Caramel. Since
then, for over 120 years, we have been striving in our basic research,
food processing technology, product developing capability,
production technology, product promotion capability, and information
provision capability, in order to consistently provide customers withvalues over the age. Even today, we are striving to provide values
through a wide range of product categories to bring “health of mind(deliciousness and fun)” and “health of body (nutrition supplement)”

Values Provided to Customers

Contribute to “health of mind and body” through provision of delicious and sustainable values
Relax and refresh

Nutrition supplements such as energy and vitamins

Research

Replenishing protein

Product development

100
0

160

342

477

Product promotion andinformation provision capacities

2. Information Provision to Consumers

Add various healthvalues to products andachieve great taste

Address diverse eating
scenes and needs

Achieve safety andaffordability

Basic research andmaterials research

Food processing
technology

Product developing
capability

Production technology andmass production technology

Information dissemination based on sports science“in-” BusinessDirect Marketing

Energy, vitamin, minerals, proteins, etc.

Collagen, Aojiru, etc.

Confectionery and Foodstuffs/
Frozen Desserts
Cocoa, Amazake, Ice, etc.

New ingredients, etc.
TM

Passienol , etc.

* Limited-time campaign that donates one yen for each eligible product purchased to the
support program for children of cacao-producing countries.

Children in Ghana enjoying school meals provided by the support program

One Chocolate for One Smile
https://www.morinaga.co.jp/company/english/csr/social/organization.html

Deep dive into “health of mind” and evolve into “healthof body”

Product promotion througha wide range of channels,
accurate and appropriate
information dissemination

Exploring the healthfunctions of products
and materials

We have been conducting the consumer-participation campaignof “One Chocolate for One Smile,”* which has been making
donations to resolve social issues for 13 consecutive years.
Through activities to improve the educational environment forchildren and prevent child labor in cacao-producing countries ofour support partners, Plan International Japan and the non-profit
organization, ACE, the cumulative donation amount by 2020 has
reached 255,314,702 yen.

Deliciously and easily replenish water and salt
There is an increasing occurrence of heat strokes
due to the rising average temperature along with
global warming. The Morinaga Group agrees with
the Heat Illness Prevention - Communication
Project, and is responding to the needs for
replenishing water and salt through our products ofin Jelly <Energy Lemon>, in Tablet, Morinaga Amazake, and Ice Box.

Sales and information

Safe and reliable

Supporting education and preventing child labor incacao-producing countries

2012/3 2013/3 2014/3 2015/3 2016/3 2017/3 2018/3 2019/3 2020/3 2021/3 (FY)

Production

Low-carb and low-calories

3. Initiatives for Resolving Social Issues

754

The COVID-19 pandemic has brought about drastic changes topeople-to-people communication and stress levels. Given that thedemand for healthy minds is stronger than ever before, we are
striving to deeply explore “health of mind” in terms of scientificapproach and consumer-oriented marketing. At the same time,
we are also enhancing our technology to reduce sugar, fat, andcalories to meet the growing needs for “health of body” inconfectionery and foodstuffs.

Replenishing water and salt

protein.” The website gets an average of 1.5 million visits permonth with a multitude of information from protein selection by
Purpose of use, to food menu, and workout advice.

The Morinaga Group operates a training lab that supports the
body building and nutrition counseling for top athletes. We
provide articles put together by trainers and dieticians of theTraining Lab on our website, “Easy-to-understand textbook on

Co-creative Action with Consumers— Project to Connect Smiles to the Future —In 2021, young and mid-career members of the sales
division came together to launch the “Project to Connect
Smiles to the Future,” as a co-creative action with
consumers towards a sustainable society. First, thecampaign of donating the equivalent amount of Chocoball tochildren’s cafeterias throughout Japan based on thenumber of Chocoball purchased and applied for was
launched. The campaign was promoted in stores ofbusinesses endorsing the project, where we received 21,816
applications and truly felt the increasing public interest.

1. Contribute to “Health of Mind, Body, and Environment”
1. Develop products that contribute to “health ofmind, body, and environment”
Delicious, easy, and quick protein supply
The demand for products that can easily replenish proteins is
growing due to interest in body building and habits of training
resulting from a rising health awareness, and as prevention for

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Morinaga Group INTEGRATED REPORT 2021

sarcopenia and frailness in the elderly. The Morinaga Group is
expanding its lineup of protein supply products among the “in-”brand, including “in Jelly.” Recently, we have been working on
enhancing added value such as by introducing E lutein, whichstrengthens the function of proteins.

Kyorochan is the product ambassador of the project. Our aim is to solicit sharedunderstanding and participation from consumers in creating a sustainable society
through provision of fun and easy-to-understand information.

“Easy-to-understand textbook on protein” (Japanese only)
https://www.morinaga.co.jp/protein/

Morinaga’s sustainable “Project to Connect Smiles to the
Future” (Japanese only)
https://www.morinaga.co.jp/sustainability/

Morinaga Group INTEGRATED REPORT 2021

43

Profile

Our Philosophy on Quality Assurance
In realizing our Purpose and 2030 Vision, we believe that trustfrom our customers is the most important. We have establishedthe following quality policy in promoting quality assurance byplacing the utmost priority on excellent product quality together
with safety and reliability, which are the premise for earning
customer trust.

Morinaga Group’s Philosophy on Quality Assurance

Customers’ Voice Suggestions / Requests

Morinaga Group Quality Policy / Quality Assurance Rules / Quality Activity Policy• Marketing Headquarters• Direct Marketing Division• New Business
Development Division

Logistics Division

Quality
Assurance Division
Quality Assessment

R&D Center

Quality Rules
Quality Standards
Quality Audit

Sales Headquarters

Customer Service Center

Overseas Business
Headquarters

Overseas Group Companies

Domestic Group Companies

Production Headquarters(Domestic Factories)

5. Transportation/ Storage/ In-store management
We set rules and request our business partners in the value
chain to follow them so as not to impair the quality of our
products in order to deliver safe products to our customers.

6. Ensuring traceability
To ensure traceability, which forms the basis of quality
assurance, we conduct reliable tracking of history on raw
materials and products at each stage of raw material
procurement, manufacturing, storage, and delivery.

7. Responding to inquiries on quality
Manufacturing Contractors

Delicious, Fun, and Healthy

Framework for Quality Assurance
Quality Policy
Reliable Product Quality

Satisfying Product Quality

Customers’ viewpoint/
Compliance awarenessQuality Policy
We pursue the goal of delivering products that meet our customers’
expectations, by placing the utmost priority on excellent product quality
together with safety and reliability.
Reliable Product Quality

Satisfying Product Quality

Food safety, food defense, compliance (with laws andcorporate regulations), acquiring/ maintaining customers’
trust, information disclosure, etc.
Taste, aroma, texture, unexpected surprise, inspiration, funplan, ease of handling, etc.

Quality Assurance System
In order to practically implement the quality policy, we haveestablished the Quality Assurance Rules, and are centrally andsystematically managing and maintaining the “Quality Assurance
Objective (purpose),” “Target Level,” “Manuals Related to Quality
Assurance,” and “Quality Standards.” We conduct activities on
assuring quality in each department.
All products of the Morinaga brand are developed involving
multiple departments and divisions. We implement a cross-sectional“Quality Assessment System” from the product planning phase toeliminate any omissions or oversight in ensuring quality, safety, andlegal compliance. In addition, we conduct constant analysis in pursuitof excellent quality. The Analysis Group within the Quality Assurance
Division conducts scientific verification and assurance on products
and raw materials. Morinaga Institute of Biological Science, Inc.
develops food allergy analysis kits, which contribute to theverification and assurance of product safety and legal compliance.
We have developed a “Crisis Management Response” that outlines
the handling of matters by directors and employees in the event ofa quality accident.

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Morinaga Group INTEGRATED REPORT 2021

In an effort to deliver safe and reliable products to our customers,
we have established a quality assurance system for all processes
from product development to procurement, production,
distribution, and sales.

1. Product development
We have put a Quality Assessment System in place to identify andtotally remove risks involved in all products in the last stage of theirdevelopment phase that could affect the safety and reliability of
products (checklist that covers 12 categories and approximately 180
items).

2. Procurement of raw materials
We have prescribed strict regulations for the raw materials used in
our products, and purchase ingredients from manufacturers who
can meet these requirements. We check information on the safety
and reliability of raw materials with regard to not only compliancewith the Food Sanitation Act but also food additives and allergenic
substances. We also conduct testing when it is determined to benecessary, confirming that raw materials are safe.

3. Production
All of our domestic production factories (four Morinaga factories andfour affiliated production companies) have obtained the FSSC 22000
certification, an international standard certification for food safetysystems, and JFS-B standard certification.
Moreover, we put efforts into food defense to prevent intentional
contamination of foreign substances in food, enhance entrance/ exit
management within the factory and production sites, thoroughly
implement rules on the prevention of mixing in foreign objects, as wellas conduct camera recordings. We are conducting risk reduction fromboth intangible and tangible aspects by striving to create a worker
friendly workplace that values communication with employees, andenhancing the consciousness of prioritizing safety and reliability.

List of Factories with Certifications (As of June 30, 2021)
FSSC 22000 certification: Mishima Factory, Oyama Factory, Chukyo Factory,
Tsurumi Factory, Takasaki Morinaga Co., Ltd., Morinaga Angel Dessert Co.,
Ltd., Morinaga Dessert Co., Ltd.
JFS-B standard certification: Osaka Center of Aunt Stella Inc.

Financial Section

Initiatives by the Customer Service Center

We conduct shipping inspection as the final check to ensure thequality of our products. Specifically, the process is designed toverify the product’s flavor, alignment with specified color tones,
dimensions, weight, and observance of bacterial standards(microorganism control).

Quality Assurance System

Governance Section

Sustainability Section

4. Shipping inspection

2. Provision of Safe and Reliable Products
The Morinaga Group believes it is its mission as a food
manufacturer to constantly ensure the quality and safety of
products and deliver safe and reliable products to customers.

Strategy Section

For any customer inquiry and suggestions regarding theirpurchased product, we conduct various investigations andanalyses to determine their quality and legal compliance, toprovide a response to the customer.

Our Customer Service Center constantly implements
improvements aimed at achieving a higher level of customer
satisfaction in accordance with ISO 10002, with which theCompany made a self-declaration of conformity in 2013. We
receive and respond to opinions and requests from customers via
a number of channels, including a toll-free number, e-mail, andletters, and are mindful of providing sincere, prompt, andaccurate responses. All of the customers’ voices we received areshared with the entire company through daily and monthly
reports, which enables us to detect issues at their early stages,
and incorporate these voices in product and service
improvement. Moreover, we have published Q&A on our website
to help our customers find solutions speedily.

Breakdown of Inquiries to the Customer Service Center(FY2021/3)
Suggestions
14.5%

8. Quality assurance for overseas

Total
number ofcases

Our overseas production sites have also acquired international foodsafety management system certification, FSSC 22000, and SQF facility
certification. We also conduct quality inspections of manufacturingcontractors overseas to verify that our products shipped are safe.

Initiatives to Improve Customer Satisfaction
Framework for customer satisfaction
Led by the Customer Service Center, Production Headquarters,
and Quality Assurance Division, a meeting of the Customer
Relations Committee is held quarterly to share customers’ voices
among all relevant divisions. We take customers’ voices seriously
and use them to help improve customer satisfaction. Meeting
results from the Committee are reported at the Board of
Directors meetings by a representative officer in charge. In
addition, we agree with consumer-oriented management
recommended by the Consumer Affairs Agency and have made a
voluntary declaration on consumer-orientation.

Customer Relations Committee– Mechanism for Making Use of Customers’ Voices –27,408Inquiries andopinions
85.5%

Improvement of
products andservices

Allergies
3%
Recipe3%
Nutritional facts
3%

Information sharing
on products andservices

Sharing of information ofcustomer requirements
and issues, submissionof proposals

Customer Relations Committee’s members• Quality Assurance Division • Production
Headquarters • Marketing Headquarters• Corporate Communication Division • Logistics
Division • Sales Headquarters • R&D Center• Direct Marketing Division

Management

Sharing of information ofcustomer requirements
and issues, submissionof proposals

Promotional
campaigns
Taste/ quality
7%6%
Additives toBest-before date/ storage raw materials Usage/ efficacy
6%
8%
6%

Results of customer satisfaction survey
The Customer Service Center analyzes every piece of every
suggestion, investigates the cause, and reports the result to thecustomer who gave the suggestions. With the report, we enclose apostcard that requests the recipient to respond to a survey, and theresults of which are used in improving services.

Results of Customer Satisfaction Survey
100

Intention to repurchase

92.6% 93.3%
90.0% 89.8%

Inquiries, opinions,suggestions

Customer Service Center

32%

Breakdown ofinquiries(23,438 cases)

91.4%

0

93.1%
93.4%

Customers
Prompt, accurate,and careful response,
information provision

Sales-related

Others
28%

88.1%

87.3%

Satisfaction level(overall customer service)2017/3

2018/3

2019/387.4%

2020/32021/3 (FY)In FY2021/3, although both the overall satisfaction andintention to repurchase have reached over 87%, these numbers
have declined compared to the previous fiscal year. We believe
the result reflects the increased difficulty to connect by phone
due to the reduced telephone hours and less phone operators
available as an impact of the COVID-19 pandemic. Going forward,
we will establish a more easily accessible inquiry system and try
to be more considerate of our customers in efforts to improvecustomer satisfaction.

Morinaga Group INTEGRATED REPORT 2021

45

Profile

Strategy Section

Governance Section

Sustainability Section

Financial Section

Initiatives for Sustainability

Diversity and Inclusion of People
Aimed at 2030
The Morinaga Group aims to increase its competitiveness and achieve sustainable growth through creating a work
environment that enables diverse personnel to shine and cultivates autonomous human resources who can continuously
generate value for society.

Long-Term Targets for 2030

and development,” “embracing challenges,” “execution,” “nurturing
and self-development,” and “organization” as six essential skills andconducting human resources development through strengthening
the training program that will instill these skills.
In addition, we have also established a training system linked tothe three main topics in human resources strategy: leader training,
expertise enhancement, and productivity enhancement, which are
implemented as a combination with training by job class and selfdevelopment.

Rate of positive responses on the employee survey: 80%• “The Morinaga Group is contributing to enriching people’s lives and creating a society that is more affluent and sustainablethrough its businesses.”• “The active participation of diverse human resources leads to the Company’s growth and persistence.”• “Employees find their job meaningful at work and they are in good mental and physical health at work.”

Basic Stance
The Group has positioned diversity at the center of its
management, and is developing a workplace that fosters the active
participation of diverse human resources and the satisfaction oftaking part in a meaningful job based on the philosophy of“Leveraging each person’s individuality.” We are working onthemes listed in the table on the right based on our humanresources strategy in order to achieve the targets above.

Initiative Themes to Achieve Long-Term Targets for 2030
1. Foster people, culture, and organizations to achieve our
Purpose and the 2030 Vision
2. Foster organizations that are diverse and dynamic
3. Build healthy and comfortable workplaces and help
employees to find their work meaningful

We believe that human resources and organization development
are the most crucial aspects in achieving our Purpose and 2030
Vision. We are conducting ongoing activities to permeate the
Purpose and 2030 Vision among all directors and employees inorder to promote deep understanding and share the Purpose and2030 Vision.
Our ideal employee profile for creating values through businessis as follows. We have defined “problem identification,” “planning

Ideal Employee Profile and the System for Their Cultivation
Employee who is capable of grasping and thinking throughthe essence of matters from a wide perspective

Employee who possesses entrepreneurial mindset and looks
outwardly, and is capable of making decisions from higher perspective

Employee who is capable of acting independently to embracechallenges without being content with the current situation

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

Problem identification

Planning and development

In order to create better values for society, it is essential to maintainand promote “health of mind and body” among employees and theirfamilies and develop a workplace environment for employees towork actively and healthily. To this end, we are promoting initiatives
on work-life balance and health management.

1. Realizing Work-life Balance
We are cutting back on the annual total labor hours anddeveloping a worker-friendly labor environment aimed at striking
a balance between work and life. We have introduced systems
such as teleworking, flextime, staggered commuting, andAnnual Total Labor Hours(Morinaga & Co., Ltd. (non-consolidated))

FY2019/3

1,988 hours

FY2020/3

1,993 hours

FY2021/3

1,961 hours(Morinaga & Co., Ltd. (non-consolidated))
Nurturing and self-development

Organization

70

3
Productivity
enhancement

Marketing Headquarters: Advanced marketer training
Production Headquarters: Production technology training
Sales Headquarters: SP* training
Overseas Business Headquarters: Language skills
enhancement program
Problem-solving skills enhancement training
Business foundation skill training

Ratio of Female Managers(Morinaga & Co., Ltd. (non-consolidated))
10

8.3%
7.7%
6.7%
0

2019/32020/32021/3 (FY)

Human resources development program

10

Training by job class

2. Promotion of Health Management
In order to ensure the health and safety of employees, workers andmanagement are cooperating together in promoting occupational
health and safety activities. Since 2017, the Company has been
actively supporting “health of mind and body” of the employees
and their families through health management initiatives.

Rate of Occupational Injury(includes Morinaga & Co., Ltd. factories and production-related companies)
3

1.05%

2019/30

2019/32020/32021/3 (FY)

Total Frequency
Rate*1Frequency Rate*2 0.52%

0.00%

0

11.0%

2.33%

2.02%

0.50%

30
20

personal holiday calendar where employees can set theirholidays freely, and are minimizing restrictions based on time,location, and weekdays in creating an environment that is
employee-friendly. We have also enabled employees to selectworking styles where they do not have to relocate, if so desired.
We hope to enable work that suits each employee’s requirement
by family, childcare, nursing care, etc.

1

For more detail, please refer to our corporate website.
https://www.morinaga.co.jp/company/english/csr/social/employee.html

Morinaga Group INTEGRATED REPORT 2021

Expertiseenhancement

2

41.0%

40

46

2

58.0%

50

Training by selection

Leader training Next-generation leaders training

In order to achieve a strong and resilient organization that can create new values
and flexibly respond to external environmental changes, it is important to create anorganization that enables employees to actively participate with their diversity ofstrengths. For this reason, in addition to gender, age, race, nationality, and presence orabsence of disability, we are promoting a workplace that enables diverse human resources
with various differences, such as values towards work and life, individual characteristics,
and previous careers to take an active part and exert their strengths. During the period of
the 2021 Medium-Term Business Plan, we will take initiatives aimed at the target of 10% ofmanagers being female.

60

Human
resourcesdevelopment
systemManagement skills and nurturing skills enhancement training

2. Fostering Organizations that are Diverse and Dynamic

Embracing challenges

Required skills

New corporate philosophy
2030 Vision education

Specific examples (abstract)1* An acronym for Sales Promotion（お客様対応全体）
Rate of Male Childcare Leave満足度
Acquisition

Execution

Categories of training

3. Achieving a Healthy and Worker-friendly Workplace Environment

1. Human Resources Development that Leads to the Achievement of the Purpose and 2030 Vision

Ideal employee
profileTraining System (Morinaga & Co., Ltd. (non-consolidated) in FY2022/3)

2020/32021/3 (FY)

*1. 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.
*2. Frequency of occupational accidents indicates the number of injuries/ fatalities (notincluding sick or injured due to non-lost work time accidents) due to occupational
accidents per one million working hours.

Morinaga Group INTEGRATED REPORT 2021

47

Profile

Strategy Section

Sustainability Section

Governance Section

Financial Section

Initiatives for Sustainability

Achieving Sustainable Value Chains
Aimed at 2030
Taking actions to address social issues relevant to our businesses across the entire value chain in contributing toa sustainable society.

Long-Term Targets for 2030
• 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. Paper covers product packaging only. *2. Group consolidated. *3. Domestic Group consolidated basis. Intensity; compared to FY2020/3

1. Cacao Beans

2. Palm Oil

Cacao beans, a key raw material for chocolate, are associatedwith a range of social issues including human rights issues suchas poor working conditions for cacao farmers, poverty, childlabor, and environmental issues such as deforestation. The
Company started using certified cacao beans (Cocoa Horizons*certified cacao supplied by the Barry Callebaut Group) in some ofits chocolate products in the fiscal year ended March 31, 2021,
and aims to switch to 100% of cacao beans from sustainablesources by the fiscal year ending March 31, 2026.

Environmental destruction, such as illegal logging, and humanrights problems in producing regions of palm oil, which is
extracted and refined from oil palm, have become social issues. We
consider it necessary to switch to certified palm oil (e.g., RSPO*certified) that contributes to sustainable procurement. We willswitch 100% of the palm oil used in our main soft candy and ice
cream products to that from sustainable sources by the fiscal year
ending March 31, 2023, and for all products in Japan by the fiscal
year ending March 31, 2024.

* Cocoa Horizons-certified cacao supplied by the Barry Callebaut Group are certified cacao
beans using the Cocoa Horizons Foundation’s mass balance method (certification modelthat combines certified and non-certified raw materials).

* RSPO is an acronym for Roundtable on Sustainable Palm Oil, which is involved in thedevelopment and operation of the sustainable palm oil certification scheme.

3. PaperPromotion of Solving Social Issues in the Value Chain
With the intensifying severity of social issues such as climatechange, all stakeholders are expected to address these issues inaccordance with their own abilities and responsibility. The
Morinaga Group is also making efforts to realize “health ofenvironment” which will contribute to the sustainability of society
and the environment throughout our entire value chain. In
particular, we consider human rights and environmental issues

in the production phase of agricultural raw materials, social andenvironmental issues that arise in the supply chain when
procuring raw materials, challenges in stable procurement, andfood loss and waste as our top priorities. As such, it is our plan topromote sustainable raw materials procurement, CSR supply
chain management, and food loss and waste reduction.
Visit to a cacao sapling farmer in Indonesia by a director in charge(FY2020/3)

Morinaga Group’s Value Chain, Social Issues, and Efforts
Value chain

Research and planning
development

Procurement

Manufacturing

Logistics and sales

Consumption
and disposal

Procurement of Sustainable Certified Cacao in Collaboration with
the Barry Callebaut Group (Switzerland)

Food safety and quality assurance
Delicious and healthy
food development
Appropriate conveyance of social andenvironmental information on products

Sustainable product development

P42-45Development of products with new value
in response to consumer needs

Social issues
and the Group’s
efforts

Sustainable procurement of timber resources for raw papermaterial is in demand as resources continue to decline worldwide
due to deforestation and illegal logging. In order to utilize forest
resources with due consideration for the environment and local
communities, we have been switching to procurement of raw
materials such as FSC®-certified paper (a part of specialty papers
use recycled paper or certified paper by a third-party). We will
make the switch for all major brands in the fiscal year ending
March 31, 2022, and aim to switch 100% of the paper used in
products to that from sustainable sources by the fiscal year ending
March 31, 2023.

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

Since fall 2020, we have been using certified cacao beans (Cocoa Horizons-certified cacao
beans supplied by the Barry Callebaut Group). With the aim to switch 100% of the cacao beans
used in products in Japan to those from sustainable sources by the fiscal year ending March
31, 2026, we will contribute to the prosperity of cacao farmers, prevention of deforestation,
reduction in CO2 emissions, and eradication of child labor.

Supporting drinking water infrastructure
for cacao famers (West Africa)

2. Promotion of CSR Supply Chain Management

Sustainable procurementof raw materials

P48-49Reduction of food loss and waste

Environmental consideration inplastic containers and packaging

We are working together with our raw material suppliers in orderto prevent human rights, labor, and environmental issues within
the supply chain. To this end, we formulated the Supplier
Guidelines in June 2021, which serves as a basis for establishing afair, just, and highly transparent relationship with our business
partners in promoting procurement activities with consideration
toward society and the environment.

Procurement Policy https://www.morinaga.co.jp/company/english/csr/sustainability/supplier.html
Supplier Guideline https://www.morinaga.co.jp/company/english/csr/management/pdf/policy_supplier-guideline.pdf

P50-51

Climate change mitigation and adaptation

3. Reduction of Food Loss and Waste
1. Promotion of Sustainable Raw Material Procurement
We aim to achieve procurement of main raw materials, including
cacao beans, palm oil, and paper resources, without being
involved in the occurrence of human rights or environmental
issues by 2030. In order to achieve this goal, we are cooperating
and working together with our raw material suppliers and otherstakeholders based on Morinaga Group Procurement Policy. We
are firstly taking initiatives on Morinaga & Co., Ltd. products inJapan as outlined in the table on the right and on page 49.

48

Morinaga Group INTEGRATED REPORT 2021

Sustainable Procurement: Medium-term Targets(targets are for Morinaga & Co., Ltd. products in Japan)

Raw materials for products of Morinaga & Co., Ltd. sold in Japan
Switch to 100% of cacao beans from sustainablesources by FY2026/3• Palm oil
Switch to 100% of palm oil from sustainable sources
by FY2024/3• Paper
Switch to 100% of paper from sustainable sources by(for product packaging) FY2023/3• Cacao beans

As the world population increases, the reduction of food loss andwaste has become a global issue, which as a member of the foodindustry, we must seriously address. As the first step for theMorinaga Group, we have established long-term goals for reducing
food loss and waste occurring in the stages of raw materials
receipt, manufacturing, logistics and product delivery. Goingforward, we will consider our efforts in the consumption stage,
while contributing to the reduced occurrence of food loss andwaste, improving the recycling rate and donations to food banks, inpromoting a cycle and effective use of food resources.

Long-Term Targets for 2030
• Food loss and waste: 70% reduction* 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 to FY2020/3)* Food loss and waste is defined as food that has been processed and disposed of byincineration, landfill, etc., except for food waste that has been returned to the circulationof food resources, such as feed and fertilizer.

Morinaga Group INTEGRATED REPORT 2021

49

Profile

Strategy Section

Governance Section

Sustainability Section

Financial Section

Initiatives for Sustainability

Conserving the Global Environmentvisualization of energy consumption. Going forward, we plan toutilize renewable energy and follow the recommendations of the
Task Force on Climate-related Financial Information Disclosure(TCFD).

Aimed at 2030
In order to achieve “health of environment,” we strive for the health of society surrounding people by minimizing
environmental impacts in our important business activities and conducting environmental conservation activities from a
medium- to long-term perspective.

Long-term Environmental Goals• Goal of net-zero GHG emissions by FY2051/3*• 30% reduction in CO2 emissions by FY2031/3 *2

We have built an environmental management system centeredon ISO 14001. In January 2018, the Morinaga Group’s Production
Sites obtained multiple site certification (four factories of Morinaga& Co., Ltd., and three affiliated production companies).

Main Environmental Risks and Opportunities for
the Morinaga Group
Main environmental
issuesClimate change
issues

Risks

Opportunities• Procurement risks ofagricultural raw material• Rising production cost due
to increased burden fromcarbon taxes• Physical risks caused bystorms or floods

Creation of business
opportunities in line withthe changing consumer
needs due to risingtemperatures

Eco-friendly plastic• Declining corporate value
containers andfor delayed response to
packaging along withstrengthened rules
recycling, reuse, etc.

Creating innovation
through external
collaboration

In recent years, marine pollution by plastic waste has become aserious issue that is attracting growing concerns globally. The
Group believes its efforts through business activities areimportant, and has established a long-term goal for reducing
plastic use in the packaging material for “in Jelly” as its mainstay
product. With the initiatives to achieve this long-term goal as astarting point, we will promote environmental conservation
towards achieving a resource-recycling society.

In recent years, natural disasters, such as droughts and floods,
are frequently occurring as a result of climate change. There areregions with increasing risks of water resource shortages as theworld population increases. We believe that water resources are
essential to our Group’s business activities, and it is important topromote business activities that effectively assess water stress*
and utilize water resources. We will identify regions facing high

67.5

68.9

0.30

46.9

47.5

24.0

20.6

21.4

2019/32020/32021/3 (FY)50.1

Scope 1
Scope 2
Intensity

0.20
0.10

20
0

0

2,000

1,709.1
158.7

1,550.4

decarbonized society. To achieve this goal, we are conducting
carbon management including energy conservation and

1,739.3
148.0

1,771.8

Initiatives

Detail

1. Reducing CO2 emissions atfactories• Promote visualization of CO2 emissions• Establish a highly efficient production system• Implement energy conservation initiatives (adopt high-efficiency and energy-saving equipment, operate air conditioning efficiently, etc.)

2. Initiatives at facilities using
fluorocarbons• Consideration for switch to alternative fluorocarbons with a low ozone depletion potential and non-fluorocarbon materials• Strengthen preventive management of fluorocarbon leakage• Introduction of natural refrigerant equipment with zero ozone depletion potential and low global warming potential (Morinaga Angel
Dessert Co., Ltd., Morinaga Dessert Co., Ltd.)

3. Initiatives in logistics• Improve loading rate and reduce transportation and delivery vehicles by joining other companies in the industry intransportation and delivery

Current initiatives (includes tentative items)

Reduce the amount of plastic used in the packaging ofproducts including in Jelly and Choco Monaka Jumbo.

Switch plastic package of HI-CHEW and in Jelly to
Switch to eco-friendly
materials for packaging biomass-derived plastic packaging.

Promote recycling

Plan to promote collecting and recycling of disposedcontainers and packaging

water stress and consider possible actions by conducting water
withdrawal surveys and evaluating our domestic and overseas
production facilities for water stress using the World Resources
Institute’s Aqueduct Water Risk Atlas with the aim of effectively
using water resources.
* Water stress: A state in which water supply and demand is tight. Water stress is when3
maximum available water resources per capita falls below 1,700 m .

High 9%1,591.3

1,602.1

Medium-high55%

Domestic Group consolidated
Overseas production sites

02020/3

Low 9%

169.7

500

2019/3Main Initiatives Aimed at Reducing Greenhouse Gas Emissions

Initiatives

Reduce weight andvolume of plastic

Extremely high 0%

1,000

2. Response to Climate Change Issues

Environmental Initiatives in the Containers and Packagingof Major Brands

Water Stress Evaluation of all Production Sites (FY2021/3)(actual usage between FY2019/3-2021/3)

1,500

Morinaga Group INTEGRATED REPORT 2021

74.1

0.40

0.34

4. Effective Use of Water Resources

Water Resource Consumption (Thousand t)

Please see our corporate website for the Morinaga Group’s environmental policy,
environmental management system diagram, and ISO 14001 certification status.
https://www.morinaga.co.jp/company/english/csr/environment/management.html

5080(t-CO2e/ million yen)

0.37

3. Promotion of Environmental Consideration in Containers and Packaging

1. Environment Management

The Group has set a long-term goal of net-zero greenhouse gas
emissions by 2050 in order to contribute to the realization of a0.38

* Domestic Group consolidated basis. CO2 emissions are rounded up to the second decimal place.
Figures for FY2021/3 are third-party-assured by LRQA.

*1. Group consolidated basis. *2. Scope 1 + 2 (domestic Group consolidated basis; compared to FY2019/3).
*3. Scope: Amount of plastics used in packaging materials (intensity; compared to FY2020/3; including replacement with biomass plastics).

Global environmental issues, such as climate change and plastic
pollution, can potentially impact the Group’s business andperformance over the medium- to long-term. We will accelerate
our initiatives on environmental conservation appropriately andstrategically following our environmental policy in achieving
sustainable growth for the Group and providing “health ofenvironment.”
The ESG Committee, which is chaired by the Representative
Director and President, conducts deliberation, formulation, andprogress status review on important policies and goals related tothe environment in order to realize these missions. The
Environment Integration Office was established with members
from Production Administration Division and Sustainable
Management Division to exchange information with the Factory
Environment Management Committee and other organs, as well as
to promote continuous improvements to our management systemand to reduce the environmental impacts and increase productivity.

100

40

*1 Group consolidated basis.
*2 Scope 1 + 2 (domestic Group consolidated, compared to FY2019/3)• Goal of net-zero GHG emissions by FY2051/3*1• 30% reduction in CO2 emissions by FY2031/3*2• Reduce the plastics used in in Jelly products by 25%*3 by FY2031/3(Thousand t-CO2)

60
1

Long-Term Targets for 2030

CO2 Emissions(Scope 1 + 2, results from FY2019/3 to FY2021/3)*

2021/3 (FY)* Domestic figures reflect Group consolidated figures. Overseas figures reflect figures at production
sites. The domestic Group consolidated figure for FY2021/3 is third-party assured by LRQA.

Low-medium
27%•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 threeoverseas production sites (North Carolina,
USA; Taipei, Taiwan; Zhejiang, China)

Environmental Education and AwarenessWe are conducting education and raising awareness while striving to improve employees’
environmental awareness to conduct business with environmental consciousness in all facets of
our activities. Each year, we offer an Internal Environmental Auditor training seminar for
employees at domestic production sites with the ISO 14001 certification to cultivate and enhanceInternal Environmental Auditors. In the fiscal year ended March 31, 2021, 29 people participatedin the seminar, with a total of 172 participants in the ISO 14001:2015 standards training.

Internal Environmental Auditor training seminar

Morinaga Group INTEGRATED REPORT 2021

51

Profile

Strategy Section

Governance Section

Sustainability Section

Financial Section

Initiatives for Sustainability

Strengthening the Business Management Foundation
Aimed at 2030
We will enhance our sustainability as a corporation as well as achieving sustainable growth and enhancing corporate value.

Action Themes for 2030
1. Achieve highly transparent and efficient governance
2. Globalize management foundation
3. Establish human rights management

4. Promote business operations using DX
5. Expand disclosures of ESG information

Strengthening the Business Management Foundation to Enhance Sustainability
To achieve our Purpose and the 2030 Vision, we will need toenhance our sustainability as a corporation, respond quickly andappropriately to changes in the external environment, and flexibly

engage in business operations. The Morinaga Group will steadily
work on initiatives for the following five themes throughmonitoring by the management meeting and ESG Committee.

3. Reinforce Human Rights Management
Companies must implement management that respects the humanrights of stakeholders within the company and in the value chain
pursuant to the UN Guiding Principles on Business and Human Rights.
We established the Morinaga Group Human Rights Policy in 2018, which
requires that we respect basic human rights and have workplaces thatare free of discrimination and harassment. It also requires that we
eliminate child labor and forced labor in the supply chain of raw
materials procurement partners. Currently, through the “One Chocolate
for One Smile” campaign, we are learning from NPOs and NGOs about
the situation of child labor in cacao producing countries and conducting
exchange of views. We are also working to identify and address humanrights issues in the supply chain, including deepening understanding of
those in palm oil producing areas through our participation in the RSPO.
Moreover we will build a human rights management system following
the UN Guiding Principles on Business and Human Rights and update ourhuman rights policy in response to changes taking place in society.

Roadmap to Reinforcing Human Rights Management
FY2022/3• Start initiatives on human rights due diligence• Establish supplier guidelines• Revise the Morinaga Group Human Rights Policy• Conduct stakeholder engagement with NPOs
• Promote internal training and education(basic approach to respecting human rights and prevention of harassment, etc.)

FY2023/3• Begin supplier-led assessments based on the supplier guidelines• Begin impact assessments of businesses that could have a negative effect onhuman rights• Expand internal training and education(global approaches to business and human rights, etc.)

FY2024/3• Respond to issues identified (starting from urgent issues)• Review progress of response to issues and report in the integrated report, etc.

Looking ahead• Build mechanism for human rights due diligence and roll it out in operations

Action Themes
1. Achieve highly transparent andefficient governance

2. Globalize management foundation

We will achieve effective corporate governance that is highly transparent and efficient based on Japan’s
Corporate Governance Code in order to respond appropriately to changes in society as well as achieving
sustainable growth and enhancing corporate value.
We will support the growth of our overseas business by building a foundation for corporate activities based on
the unique situation in the countries and regions where we operate.

3. Establish human rights management

We will build a global human rights management system based on the UN Guiding Principles on Business andHuman Rights in response to rapidly increasing international request for respect of human rights.

4. Promote business operations using DX

We will promote company-wide and cross-functional DX aimed at increasing the Group’s productivity,
strengthening the management foundation, and creating new business in response to the rapid advancement indigitalization.

5. Expand disclosures of ESG information

We will enhance our disclosure of ESG information in order to obtain appropriate evaluation from the market andin response to the requests for non-financial information disclosure from the capital markets.

Morinaga Group Human Rights Policy
As a member of the international community, the Morinaga Group respects fundamental human rights, undertaking sincere
business activities that do not tolerate human rights violations.
1. Respect for human rights andprohibition of discrimination

We respect fundamental human rights, and will not discriminate in any way based on a person’s race, gender,
nationality, religion, ideology, age, or physical characteristics, or for any other reason.

2. Prohibition of harassment

We will not participate in power harassment, sexual harassment, or any other behavior whatsoever that injures human dignity.

3. Consideration for safety/ hygiene

We will give consideration to safety and hygiene in the workplace, endeavoring to ensure a comfortable work environment, andrespect employees’ fundamental human rights.

4. Building and maintenance of good We will respect the right to freedom of association and collective bargaining and other fundamental rights of employees,
building and maintaining good labor-management relations.
labor-management relations
5. Elimination of child labor/
forced labor

In our various business activities, we will not accept child labor, forced labor, or any other unfair labor practices.
(Established May 2018)

1. Build a Highly Transparent and Efficient Governance System
The operating environment surrounding companies is facing
growing complexity and uncertainty and is changing rapidly
amid the COVID-19 pandemic and other factors. Given thissituation, to achieve the 2030 Vision, we will need to realize
highly efficient and effective corporate governance that canswiftly address these diverse environmental changes and4. Evolve Business Operations Using DX

appropriately identify the needs of stakeholders. The Morinaga
Group is working continuously to achieve highly effective andtransparent corporate governance based on Japan’s Corporate
Governance Code.

The promotion of DX will play an extremely important role in
improving productivity and earnings while strengthening ourmanagement foundation, which will help us to achieve the 2030
Vision. We will make steady progress with transforming our

For details about our corporate governance,
please see the Governance Section on pages 54 to 63.

business activities utilizing investments in digital technologies while
monitoring progress through the management meeting and othermeeting bodies.
For details, see DX Strategy on page 37.

5. Increase ESG Information Disclosures
2. Promote Globalization of Management Foundation
Under the 2030 Business Plan, we will prioritize the UnitedStates as the focused domain of our overseas business. At thesame time, Taiwan has been positioned in the basic domain andwe have been tapping into markets in China, Southeast Asia,
Oceania, and Europe in the exploration and research domain,
serving as the seeds for the next stage of our growth. Aimed at

expansion of our overseas business, we will work to promote
understanding of our corporate philosophy and develop thebusiness infrastructure required for global growth while
respecting the traditions, cultures, and lifestyles of the countries
and regions where we operate. We will reinforce our systems sothat Group employees overseas can work with even greater unity.

We believe that responding to requests for disclosure of nonfinancial information from the capital markets to obtain appropriate
evaluations is vital to the Group’s sustainable growth. Therefore, wewill further step up disclosures of both financial and non-financial
information through our integrated report and corporate website inorder to appropriately convey the Group’s approach and initiatives
for sustainable growth to all stakeholders, including shareholders
and investors. Moreover, we will seek to enhance corporate value by
actively responding to surveys from ESG rating agencies around theworld after carefully reviewing the nature of these surveys.

Main ESG-related Index Evaluating Morinaga & Co., Ltd.
(as of March 2021)

MSCI http://info.msci.com/l/36252/2017-06-27/kj5n9b52Morinaga Group INTEGRATED REPORT 2021

Morinaga Group INTEGRATED REPORT 2021

53

Profile

Governance Section

Strategy Section

Sustainability Section

Governance Section

Financial Section

Executive Management Team(As of June 29, 2021)

Director
Career summary

Career summary

Career summary

Apr. 1982 Joined Morinaga & Co., Ltd.
Jun. 2011 Director, Commissioned General Manager of Frozen Dessert
Business Headquarters of the Company
Apr. 2014 Commissioned General Manager of Sales Headquarters of
the Company
Jun. 2014 Director, Senior Operating Officer of the Company
Jun. 2015 Director, Managing Operating Officer of the Company
Jun. 2017 Director, Senior Managing Operating Officer of the Company
Jun. 2019 Representative Director, President of the Company (present)

Apr. 1983 Jointed Matsushita Electric Industrial Co., Ltd. (Currently
Panasonic Corporation)
Apr. 2011 Officer, General Manager of Environment Headquarters andPower Saving Headquarters of 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 Operating Officer of the Company(present), Commissioned General Manager of Marketing
Headquarters

Apr. 1987 Joined Meiji Dairies Corporation (Currently Meiji Co., Ltd.)
Sep. 1990 Joined Yves Saint Laurent Parfums K. K.
Sep. 1996 Joined Coca-Cola (Japan) Company, Limited
Apr. 1998 Joined Boots MC Company Limited
Jan. 2004 Representative Director, President of L’OCCITANE JAPON K.K
Apr. 2017 Representative Director of Etoile Ltd. (present)
Jun. 2018 Outside Director of Morinaga & Co., Ltd. (present)
Mar. 2019 Outside Director of FUJITA KANKO Inc. (present)

Eijiro Ota

Representative Director,
President

Term of office as a director:

Board of Directors meeting
attendance:

10 years

16/16 times

Responsibilities: Audit Division

Machiko Miyai

Director,
Managing Operating Officer

Director,
Senior Operating Officer

Board of Directors meeting
attendance:

7 years

Significant concurrent positions

President of the Morinaga AngelFoundation
President of All Nippon Kashi
Association

Takashi Hirakue

Term of office as a director:

16/16 times

Responsibilities: Marketing Headquarters, Direct Marketing
Division, Corporate Communications Division, Sustainable
Management Division

Career summary

Career summary

Apr. 1984 Joined Morinaga & Co., Ltd.
Jun. 2008 Senior Operating Officer, General Manager of Frozen Dessert
Business Headquarters of the Company
Apr. 2009 Senior Operating Officer, General Manager of Confectionery
Business Headquarters of the Company
Jun. 2010 Director, Commissioned General Manager of Confectionery
Business Headquarters of the Company
Jun. 2013 Commissioned General Manager of Foodstuff Business
Headquarters of the Company
Apr. 2014 Commissioned General Manager of Marketing Headquartersof the Company
Jun. 2014 Director, Senior Operating Officer of the Company (present)
Jun. 2018 Commissioned General Manager of Production Headquartersof the Company (present)

Apr. 1983 Joined The Mitsubishi Bank, Ltd. (Currently MUFG Bank, Ltd.)May. 2009 General Manager of Nagoya Corporate Banking Division
No. 3, Nagoya Corporate Banking Group of The Bank ofTokyo-Mitsubishi UFJ, Ltd. (Currently MUFG Bank, Ltd.)
Aug. 2010 General Manager of Trade Business Division of The Bank ofTokyo-Mitsubishi UFJ, Ltd. (Currently MUFG Bank, Ltd.)
Jun. 2012 Director of Morinaga & Co., Ltd.
Apr. 2013 Commissioned General Manager of Accounting Division of
the Company
Jun. 2014 Director, Senior Operating Officer of the Company (present)

Term of office as a director:

Board of Directors meeting
attendance:

11 years

15/16 times

Responsibilities: Production Headquarters, Logistics Division,
Quality Assurance Division, Customer Service Center

Shinichi Uchiyama
Director,
Senior Operating Officer

Significant concurrent positions

Term of office as a director:

Reason for appointment

Shiho Takano

Outside Director(Independent Officer)
Significant concurrent positions

Ms. Takano has business experience accumulated in the food industry
and experience as an executive in the cosmetic industry, and based on
the above experience, she provides objective and neutral advice comingfrom a broad perspective that extends beyond the Company’s industry.

Term of office as a director:

Board of Directors meeting
attendance:

3 years

16/16 times

Representative Director, Etoile
Ltd.
Outside Director, FUJITA KANKO
Inc.

Reason for appointment

Naomi Eto

Outside Director(Independent Officer)

Ms. Eto has business experience accumulated in the manufacturingindustry and a wealth of experience as an executive in the retailindustry, and based on the above experience, she provides objective andneutral advice on overall management coming from a broad perspectivethat extends beyond the Company’s industry.

Term of office as a director:

Board of Directors meeting
attendance:

1 year

11/11 times

Career summary

Board of Directors meeting
attendance:

9 years

Career summary
Apr. 1979 Joined Bridgestone Tire Co., Ltd (Currently Bridgestone
Corporation)
Mar. 2009 Executive Officer, responsible for General Affairs andCorporate Communications of Bridgestone Corporation
Jun. 2014 Director, General Manager of Group CC Headquarters ofZensho 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)

16/16 times

Responsibilities: Accounting Division

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

Reason for appointment

Reason for appointment

Shuichi Hoshi
Outside Director(Independent Officer)

Significant concurrent positions

Representative Director,
President of Morinaga FinanceCo., Ltd.

Career summary

Apr. 1979 Joined ITOCHU Corporation
Sep. 1998 Director of Family Corporation Co., Ltd.
Dec. 2002 Director of Yukijirushi Access Co., Ltd. (Currently NIPPONACCESS, 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. (present)
Jun. 2020 Outside Director of Morinaga & Co., Ltd. (present)

Mr. Hoshi has a wealth of experience as an executive in the wholesaleindustry, and based on the above experience, he provides objective andneutral advice on overall management coming from a broad perspectivethat extends beyond the Company’s industry.

Term of office as a director:

Outside Director, SBS Holdings,
Inc.

Board of Directors meeting
attendance:

1 year

11/11 times

Kuniko Urano
Outside Director(Independent Officer)

Significant concurrent positions

Ms. Urano has a wealth of experience as an executive in the machineryindustry, and based on the above experience, she provides objective andneutral advice on overall management coming from a broad perspectivethat extends beyond the Company’s industry.

Term of office as a director:

Board of Directors meeting
attendance:——

Outside Director, Yokogawa
Electric Corporation

Statutory Auditors
Career summary

Career summary

Apr. 1982 Jointed Matsushita Electric Industrial Co., Ltd. (Currently
Panasonic Corporation)
Dec. 2005 Representative Director, President of Panasonic Appliances
Air-Conditioning Malaysia Sdn. Bhd.
Apr. 2016 Director of Panasonic Corporation of China
Jan. 2018 General Manager of Overseas Business Headquarters ofMorinaga & Co., Ltd.
Jun. 2018 Director, Senior Operating Officer of the Company (present),
Commissioned General Manager of Overseas Business
Headquarters

Apr. 1984 Joined Morinaga & Co., Ltd.
Jun. 2013 General Manager of Health Care Business Headquarters of
the Company
Apr. 2016 Operating Director, General Manager of Health Business
Headquarters of the Company
Apr. 2018 Operating Officer, Deputy General Manager of R&D Center of
the Company
Jan. 2019 Operating Officer, General Manager of R&D Center of theCompany
Jun. 2019 Director, Senior Operating Officer (present), Commissioned
General Manager of R&D Center (present)

Toshiyuki Sakai
Director,
Senior Executive Officer

Term of office as a director:

Board of Directors meeting
attendance:

3 years

16/16 times

Responsibilities: Overseas Business Headquarters

Shinya Mori

Director,
Senior Operating Officer

Term of office as a director:
2 years

Board of Directors meeting
attendance:
16/16 times

Career summary

Tadashi Nishimiya
Standing Statutory Auditor

Responsibilities: R&D Center, New Business Development Division

Career summary
Apr. 1987 Joined Morinaga & Co., Ltd.
Apr. 2018 General Manager of General Affairs Division of the Company
Apr. 2019 Operating Officer, General Manager of General Affairs
Division of the Company
Jun. 2019 Director, Senior Operating Officer of the Company (present)
Aug. 2019 Commissioned General Manager of Corporate Strategy
Division of the Company

Daisuke Fujii

Director,
Senior Operating Officer

Term of office as a director:

Board of Directors meeting
attendance:

2 years

16/16 times

Responsibilities: Corporate Strategy Division, General Affairs
Division, DX Promotion Division

Morinaga Group INTEGRATED REPORT 2021

Board of Statutory Auditors
meeting attendance:

Board of Directors meeting
attendance:

16/16 times

16/16 times

Apr. 1980 Joined Mitsubishi Corporation
Jun. 2010 Executive Officer, CFO, General manager of Corporate
Administration of Metal One Corporation
May. 2014 Appointed Managing Director and General Manager of General
Affairs and Accounting Division of MC FERTICOM CO., LTD.
Jun. 2016 Appointed Managing Director, responsible for Functional
Departments and General Manager of Accounting Division of
Meiwa Corporation
Jun. 2019 Standing Statutory Auditor of Morinaga & Co., Ltd. (present)

Reason for appointment

Akiyuki Igarashi

Standing Outside Statutory
Auditor (Independent Officer)

Koichi Sakaguchi
Outside Statutory Auditor(Independent Officer)

Significant concurrent positions

Mr. Igarashi has a wealth of management experience in the wholesaleindustry and abundant knowledge of finance and accounting. He
provides objective and neutral audits from a broad perspective that
extends beyond the Company’s industry.

Board of Statutory Auditors
meeting attendance:

Board of Directors meeting
attendance:

16/16 times

16/16 times

Career summary

Career summary

Apr. 1979 Registered as an attorney, 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, joined Kato Sogo Law Office(Currently GINGA LAW OFFICE) (present)
Jun. 2016 Outside Statutory Auditor of Morinaga & Co., Ltd. (present)

Apr. 1981 Joined The Dai-Ichi Kangyo Bank, Ltd. (Currently Mizuho
Bank, Ltd.)
Apr. 2017 Senior Managing Executive Officer, General Manager ofPlanning and Administration Division of Mizuho ResearchInstitute Ltd.
May. 2019 Advisor of Chuo Fudosan K.K. (present Chuo-Nittochi Co.,
Ltd.) (present)
Jun. 2019 Outside Statutory Auditor of Morinaga & Co., Ltd. (present)
Jun. 2021 Outside Director, MEDIPAL HOLDINGS CORPORATION (present)

Reason for appointment

Attorney (GINGA LAW OFFICE)

54

Career summary

Apr. 1981 Joined Morinaga & Co., Ltd.
Jun. 2010 Senior Operating Officer, General Manager of Foodstuff
Business Headquarters of the Company
Apr. 2012 Senior Operating Officer, General Manager of Corporate
Strategy Division of the Company
Apr. 2015 Senior Operating Officer, General Manager of Marketing
Headquarters of the Company
Jun. 2016 Director, Senior Operating Officer, Commissioned General
Manager of Marketing Headquarters of the Company
Jun. 2018 June 2018 Standing Statutory Auditor of the Company(present)

Mr. Sakaguchi has a high level of expertise and experience as a judge
and attorney, and he provides objective and neutral audits from a broad
perspective that extends beyond the Company’s industry.

Board of Statutory Auditors
meeting attendance:

Board of Directors meeting
attendance:

16/16 times

16/16 times

Reason for appointment

Hiroshi Iwamoto

Outside Statutory Auditor(Independent Officer)
Significant concurrent positions

Outside Director, MEDIPALHOLDINGS CORPORATION

Mr. Iwamoto has experience in financial operations accumulated in thefinancial industry, followed by a wealth of management experience in
the information and communication industry. He provides objective
and neutral audits from a broad perspective that extends beyond theCompany’s industry.

Board of Statutory Auditors
meeting attendance:

Board of Directors meeting
attendance:

16/16 times

16/16 times

Morinaga Group INTEGRATED REPORT 2021

55

Profile

Strategy Section

Sustainability Section

Governance Section

Financial Section

Messages from Outside Directors

The Morinaga Group has defined its Purpose and also formulated the 2030

The Morinaga Group, after holding many discussions, established a new corporate

Business Plan based on this Purpose. The Purpose and 2030 Vision may be viewed

philosophy and announced its Vision for 2030 along with a medium- to long-term

as something vogue. However, I believe that it is quite natural for a company toplan. By clarifying the direction of management, the Group will need to plant thecontribute to society and sustain its growth over the long-term toward this end.

seeds for new business beginning this fiscal year and steadily implement growth

The Morinaga Group maintains a deep appreciation for the conviction of its founderstrategies for its core businesses.

to contribute to society, having been in business for more than 120 years. Given

The Group will need to speed up decision-making and strategy execution while

this background, the formulation process on this occasion involved the entire

strengthening governance in response to the information society symbolized byCompany, including the feedback of employees, strategy of the current

technological innovations and the quick spread of changes to all industries they

management team, and opinions of Outside Directors.

entail. In addition, the Group must produce results by flexibly responding to

The key is not just to come up with targets, but rather achieve them. Outside
Directors are charged with the important role of providing opinions with anchanges in the global environment, one of the major ESG issues and actively
working on it.

outsider perspective as to how the Company can achieve its goals, and contribute

As an outside director, I believe that what is required of me is capacity forin the form of participating in discussions at times and providing a helping hand to

imagination based on my experience in executive management positions at an

the decision-making process. In the case of a 10-year plan, the next generation

operating company in the foodstuff industry. Moving toward the 2030 Vision of

Shiho Takano

following the current management team must shoulder the responsibility. In this“Changing into a Wellness Company” represents an innovation for the Company. I

Shuichi Hoshi

Outside Director

sense, all employees need to aggressively and concretely work toward achieving

will fulfill my duties as outside director using a balanced perspective respecting

Outside Director

the 2030 Business Plan. I believe building a strong foundation so that the entire

the Company’s corporate culture while being mindful of the trust of stakeholders

Company, from management to the frontline, will work as one toward its goals isand providing insight into the future based on broad and long-term perspectives.

the most important element of the 2021 Medium-Term Business Plan.

Since becoming outside director in June 2020, I have found that the major drivers

The Morinaga Group, with its 120 years of history, established a new corporate

behind the Morinaga Group’s growth are its brand power cultivated over 120 years

philosophy this year with the aim of achieving a new and further evolution. Basedas well as the loyalty and devotion of its employees supporting this.

on this, it also announced the 2030 Vision calling for it “Changing into a Wellness

In the fiscal year ending March 31, 2022, the Morinaga Group formulated a newcorporate philosophy including Purpose and established its first-ever long-term

Outside Director

I am honored to have been appointed outside director in this milestone year andVision up to 2030. Achieving these will be extremely important in order to meet theI also feel keenly aware of my important responsibility in this position. I spent

expectations of stakeholders and fulfill responsibilities to shareholders.

more than 40 years at a machinery manufacturer where I was involved in

To accomplish this ambitious Vision and targets, the Company will need to

production, logistics, human resources, public relations, and CSR. During thechange its ways of thinking and transform its methodology; going beyond thecourse of my career, I have found a number of valuable hints not only inside thestatus quo of previous initiatives. Utilizing my career experience at two completely

company but also from other companies and businesses. I also have come todifferent companies, one in heavy machinery and manufacturing business and theknow that the frontline is the starting point for everything in various meanings andother a progressive company in the food service industry, I hope to present

understand the importance of honest and frank communication.

challenges that need to be overcome to achieve the Company’s long-term targets,

Naomi Eto

Company” as the position we intend to be in for 2030.

This year, the Morinaga Group established targets and plans under the 2030

and facilitate discussions for promptly crystalizing required actions, while sharing

Vision and commenced concrete activities. In a business environment that is

my different perspectives from those inside the Company.

changing constantly and profoundly, it is becoming more important to identify andI will also utilize my professional experience in engaging society andshare risks from various viewpoints and boldly tackle challenges without losing

addressing ESG issues. I intend to help the Morinaga Group to achieve truesight of opportunities at the start of these activities. Change is a challenge, but atdiversity and inclusion that goes beyond promoting female participation andthe same time it is also an opportunity for a company to build upon its strengths. I

career advancement in the workplace and to explore ways in which I canintend to contribute wherever possible to the Morinaga Group’s development while

contribute to the Morinaga Group’s entire supply chain, while remembering tobeing mindful of medium- to long-term and objective viewpoints.

Kuniko Urano
Outside Director

always learn from changes taking place in society.

56

Morinaga Group INTEGRATED REPORT 2021

Morinaga Group INTEGRATED REPORT 2021

57

Profile

Strategy Section

Sustainability Section

Governance Section

Financial Section

Corporate Governance
For more detailed information, refer to our website for Corporate Governance and Corporate Governance Report.
https://www.morinaga.co.jp/company/english/about/governance.html
https://pdf.irpocket.com/C2201/gK0G/DWlO/ngba.pdf

Business execution

Corporate Governance Basic Policy
The Morinaga Group has established its corporate governancewith the aim of maximizing corporate value and achieving
enduring corporate growth based on the basic policies ofimproving the health and efficiency of management, ensuring
the reliability of its financial position, providing timely andappropriate disclosure of information, complying with laws andregulations, and strengthening the trust and relationships withall stakeholders.

1. Positioning of Stakeholders
The Morinaga Group considers all stakeholders vital to ourcompany in order to achieve our Purpose. To enable us to fulfill
our social responsibility in all areas of our business activities, weare committed to maintaining and further developing strong
relationships with all stakeholders, and promoting appropriate

collaboration in accordance with corporate philosophy and thecode of conduct.

2. Management Monitoring Functions
We are committed to building an effective internal control system
by strengthening the management monitoring functions of theBoard of Directors, appointing Outside Directors and Statutory
Auditors, requiring attendance by Standing Statutory Auditors atimportant meetings, and placing the Audit Division under the
direct control of the President.

3. Consistency in Thinking within the Entire Group
While respecting the independence of our subsidiaries, we
endeavor to maintain close ties amongst the Group’s member
companies.

Officer Appointment and Remuneration Committee

The Company has clearly defined the responsibility and authority
for each decision-making unit, including the Board of Directors,
Management Meeting, each Director, each Operating Officer, andeach General Manager, according to the Rules for Decisionmaking Criteria.

Board of Directors
The Board of Directors deliberately makes decisions on statutory
matters and the execution of important business based on thebusiness judgment principle and supervises the execution ofbusiness. To ensure the effectiveness and efficiency ofdeliberations at the Board of Directors, sufficient priordiscussions are made at various committees (see diagram on theright) that serve as advisory bodies for the Boards. The Board of
Directors comprises 11 Directors, of which four are Outside
Directors, with seven male and four female Directors.

We have adopted our corporate governance system based on thedetermination that it will contribute to healthy and efficient
corporate management for the following reasons.
(1) Outside Directors: Four Outside Directors have been appointed
to strengthen corporate governance from an objective andneutral standpoint regarding overall management based on theirwide range of perspectives.
(2) Outside Statutory Auditors: Three outside Statutory Auditors(including one Standing Statutory Auditor) have been appointed
to perform audits on the business execution of the Directors.

(3) Management monitoring functions: The Board of Statutory
Auditors meeting is in principle held once a month, and also held
as needed. Standing Statutory Auditors hold regular meetings
with the Representative Director and attend management
meetings and other important gatherings to audit the Directors’
performance of their duties. Among cases under the jurisdictionof any Director, Operating Officer, or General Manager, theStanding Statutory Auditor performs audit on the approval
application for important cases. Statutory Auditors conduct
regular meetings with the accounting auditor and Standing
Statutory Auditors with the General Manager of the Audit
Division, as well as meetings as needed to exchange opinions andperform accounting and business audits.

Corporate Governance System (As of June 29, 2021)
Appointment/
dismissal

Reporting

Cooperation

Comprises 4 Statutory
Auditors (of which 3 are

Immediate supervisor:
instruction/ supervision

Cooperation

Representative
Director

Partial delegationof authority

Appointment/ dismissal/
supervision

Management
Meetings

Appointment/ dismissal
Response

58

Morinaga Group INTEGRATED REPORT 2021

36.3% (4 out of 11)

Internal audit

Instruction/
supervision

Individual
divisions/departments

Instruction/
supervision

Role

Chairperson

Eijiro Ota

Representative Director, President

Committee member

Naomi Eto

Outside Director

Committee member

Shuichi Hoshi

Outside Director

Committee member

Kuniko Urano

Outside Director

Committee member

NameManagement Meetings, which are mainly comprised of Directors
and Standing Statutory Auditors, deliberate and make decisions
on important management themes and other matters for whichauthority is delegated by the Board of Directors.

Operating Officer System
With the aim of increasing the agility to respond to the changing
business environment and accelerating the decision-making
process, the Morinaga Group has adopted an Operating Officer
system. With this move, the Company delegated authority andresponsibility for executing regular business relating to theimplementation of strategies to Operating Officers, ensuring
efficient management and a clarification of responsibilities forbusiness execution.

Corporate
management/
Management
strategy

Position

Outside Director

Chairperson

Main agenda items

Total Risk
Management
Committee

Representative 1. Build and promote a company-wide risk
management system
Director,
2. Build and promote a total risk management
President
systemCompliance
Committee

1. Build and promote compliance management
Representativeand deliberate and implement their relevant
Director,
initiatives
2. Establish and promote compliance action plan
President
3. Report and propose to the Board of Directors

1. Deliberate on policy, target, action, and KPI
related to sustainable management
Representative 2. Follow up on action and KPI progress
3. Share, propose and deliberate on the
Director,
ESG Committee
establishment of subcommittees and agenda
President
items
4. Deliberate on the publication of integrated
reports

IR Committee

Formulation and follow-up on measures toRepresentative improve shareholder value
Director,
1. Timely and appropriate information disclosure
2. Communication approach with shareholders
President
3. Improvement of shareholder value

Specialty and Experience
ESG/
Sustainability

Finance/
Accounting

Legal affairs/
Human resources/
Compliance/ Risk
Labor affairs
management

Marketing/
Sales

GlobalResearch/
Production/
Logistics

Eijiro Ota
Representative Director, PresidentInternal audit
Instruction/
supervision

Outside Statutory
Auditors)
Audit

Comprises 11 Directors(of which 4 are Outside Directors)

Ratio of Outside Directors

Audit Division

Board of Statutory
Auditors

Audit

Board of Directors

ReportingAppointment/ dismissal

Appointment/ dismissal

36.3% (4 out of 11)

Name and position

Accounting Auditor
ReportingGeneral meetingof shareholders

Ratio of Female Directors

Main Areas of Expertise of Directors
Cooperation

Name

Shiho Takano

In addition, the Company has the following committees as advisory
bodies to strengthen the auditory functions of the Board of Directors.

Management Meetings

Rationale for choosing the current corporate
governance system

Composition of the Officer Appointment andRemuneration Committee

Other Main Committees

Diversity of Directors (As of June 29, 2021)

Corporate Governance System

The Officer Appointment and Remuneration Committee has been
established as a voluntary committee to discuss the nomination
and remuneration of Directors. Chaired by an Outside Director,
the Committee deliberates on matters, including officer
appointment and remuneration for Directors and their treatment,
as well as appointment of Operating Officers and representativesof affiliated companies.

Machiko Miyai
Director, Managing Operating Officer
Takashi Hirakue
Director, Senior Operating Officer

Affiliatedcompanies

Shinichi Uchiyama
Director, Senior Operating Officer
Toshiyuki Sakai
Director, Senior Operating Officer
Shinya Mori
Director, Senior Operating Officer<Main Committees as the Advisory Bodies>
Officer Appointment andRemuneration Committee
Total Risk Management
Committee
Compliance Committee

Daisuke Fujii
Director, Senior Operating Officer
Shiho Takano
Outside Director

IR Committee
ESG Committee

Naomi Eto
Outside Director
Shuichi Hoshi
Outside Director
Kuniko Urano
Outside Director

Morinaga Group INTEGRATED REPORT 2021

59

Profile

Approach to the Appointment of Officers
The appointment of an officer is based on the premise that thecandidate possesses appropriate characteristics, insight andleadership, as well as a high level of specialization and richexperience required by the Company.
The appointment of an Outside Director is made fromcandidates who meet the Company’s Independence Standards,
and are capable of stating appropriate opinions and raising
issues on our management challenges from an independent andobjective standpoint. Furthermore, we have the policy of
appointing one or more Statutory Auditor who has considerable
knowledge of finance and accounting.

Independence Standards for Outside Directors
As our policy on the appointment of Independent Outside
Directors, in addition to the Standards for Independence set byfinancial instruments exchanges, candidates should meet all of
the following, as well as be capable of stating their opinions andraising issues from an independent and objective standpoint
regarding our management challenges.
A. If the candidate or the corporation in which the candidate is theexecutive holds shares of the Company, the voting rightownership ratio shall not exceed 10%.
B. In the transactions of the most recent fiscal year, the sales tothe candidate or the corporation to which the candidate
belongs shall be less than 2% of the consolidated sales of theCompany.
C. In the transaction for the most recent fiscal year, the sales of
the candidate or the corporation to which the candidate
belongs shall be less than 2% of the consolidated sales of thecorporation.

Strategy Section

Sustainability Section

Governance Section

Financial Section

Board of Directors Activity Status
In the fiscal year ended March 31, 2021, Board of Directors meetings were held 16 times, with a total deliberation time of approximately
1,800 minutes. The main deliberation themes are as follows:

Main Deliberation Themes in FY2021/3
Category

Main deliberation themes

1. Legal items

Convene a general meeting of shareholders, financial results, and important human resources matters.

2. Items specified in the Corporate Governance CodeEvaluate the effectiveness of Board of Directors, formulate the determination policy for individual directors’
remunerations, and report on the ownership status of cross-shareholdings.

3. Overall management

The Morinaga Group’s Corporate Philosophy, 2030 Business Plan and 2021 Medium-Term Business Plan, capital
investment, transaction system revision.

4. Internal control, risk management, compliance

Compliance Committee report, Total Risk Management Committee report.

Evaluation of the Effectiveness of the Board of Directors
Method of Analysis and Evaluation

Basic Policy and Structure of Executive Remuneration System
Basic Policy
Our Executive Remuneration Basic Policy stipulates that theCompany shall establish and operate a system that prioritizes
the strengthening of executives’ motivation for contributing to
the enhancement of corporate value over the medium- tolong-term and the achievement of sustainable growth, while
discouraging excessive risk-taking. We are determined tocontinue pursuing a better remuneration system, ensuring theobjectivity and transparency of the remuneration determination
process and taking into account regulatory revisions and social
trends in the future.

Structure and Content of Remuneration
The Company’s executive remuneration amount is determinedfollowing our Executive Remuneration Basic Policy, referring to
the levels of executive remuneration paid by leading companies
that are similar in size to the Company. Remuneration for
Directors (excluding Outside Directors and non-residents inJapan) consists of basic compensation, which is paid monthly,
executive bonuses (monetary remuneration) and stockcompensation. The basic compensation comprises 70% as fixed

remuneration according to job title, and the remaining 30%
consists of performance-based remuneration according to thebusiness performance for the previous fiscal year and level ofcontribution to achieving the Medium-Term Business Plan. The
executive bonuses are paid following the approval andresolution at the general meeting of shareholders at a specified
time, while non-monetary remunerations such as stockcompensation are provided as 10% of the basic compensation
for Directors (excluding Outside Directors and non-residents inJapan) for the Purpose of motivating directors to makecontributions to an improvement of medium- to long-term
performance and corporate value.

Structure of Remuneration of Directors
Title

Fixed remuneration (%)

Performance-based
remuneration (%)

7030

Directors(excluding Outside Directors)
Outside Directors

1000Statutory Auditors

100

0

Total Amount of Remuneration for Directors and Statutory Auditors in FY2021/3
Total amount by type of remuneration (Million yen)
Category

60

Monetary remuneration

Total amount of
remuneration (Million yen)Non-monetary remuneration

Fixed remuneration

Performance-based
remuneration

Compensation based on the board
incentive plan (BIP) (performancelinked)

Number of eligible officers(persons)

Directors

202

129

48

24

11

Statutory Auditors

47

47

-

-

4

Morinaga Group INTEGRATED REPORT 2021

To analyze and evaluate the effectiveness of the Board of Directors
as a whole, the Company conducted, during the period fromFebruary through March 2021, a survey of all Directors including
Outside Directors and all Statutory Auditors including Outside
Statutory Auditors regarding: 1) the composition, operation, andagendas of the Board of Directors; 2) nomination, andremuneration of senior management; 3) risk management; 4)
dialogues with shareholders; 5) systems supporting the Board of
Directors; and 6) matters pointed out in the past evaluations of theBoard of Directors. Based on the results of the survey, a discussion
was held at a Board of Directors meeting and an evaluation was
executed by each Director. Moreover, in order to obtain objective
opinions from experts, we engaged a third-party law firm toanalyze and evaluate the results of the survey. The evaluation of
the Board of Directors was discussed and decided at a meeting of
the Board of Directors held in April 2021, with reference to thisthird-party analysis and evaluation.

Results of Evaluation
As a result of the analysis and evaluation by a third-party law firm,
the Company’s Board of Directors for the fiscal year ended March
31, 2021 was determined to be “functioning effectively” in light of
the Companies Act and the Corporate Governance Code, without
any significant dysfunction or structural deficiency, etc. It wasnoted that ample discussions to step up risk management andenhanced function of the Board of Directors as a monitoring board
were areas that require improvement going forward. Based on thisevaluation, the Company recognized that the Board of Directors
was effective and functioning effectively in line with the basic
views on corporate governance, etc., of the Company.

Initiatives for Improvement
There were a number of issues identified in the FY2020/3
evaluation of the Board of Director’s effectiveness. They included:1) more balanced composition of the Board of Directors; 2)appropriate selection of matters to be resolved or reported; 3)further clarification on the nomination processes for Directors andremuneration determination; 4) sufficient discussions to be held on
risk management; 5) intensified discussions with a stakeholder’s
perspective; and 6) further intensified cross-functional discussions.
We believe that significant progress has been made based on the
FY2021/3 effectiveness evaluation.

Initiatives for the Future
We recognize the following issues for the future, in order tostrengthen the function of the Board of Directors, and further
enhance its effectiveness and governance.
1. Conduct ample discussions to step up risk management
2. Study to strengthen the function of the Board of Directors as amonitoring board

Cross-shareholdings
At the Board of Directors, the Company quantitatively evaluates
once every year whether the dividend level and trading profit ofeach stock 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
account the qualitative evaluations including 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 reducesuch holdings. The Company sold some of its cross-held shares in
the fiscal year ended March 31, 2021. With respect to exercising
voting rights related to shares held as cross-holdings, theCompany determines approval or disapproval for proposals by
each individual stock after considering from the viewpoints ofwhether the proposal in question will impose a negative impact on
the relationship and trading with the Morinaga Group, or whether
significant concerns have arisen on corporate governance.
Morinaga Group INTEGRATED REPORT 2021

61

Profile

Compliance

Strategy Section

Governance Section

Financial Section

Risk Management

Basic Philosophy

Efforts in FY2021/3

Basic Philosophy

Assessment and Management of Risks

Founded on its awareness that compliance is a priority issue for all
business activities, the Group has formulated the Morinaga Group’s
Code of Conduct and Standards of Behavior, based on which theGroup is promoting efforts to ensure compliance.

With the aim of embedding a compliance culture into theorganization, we displayed the Morinaga Group Code of Conduct
and Standards of Behavior on panels in each office, and distributebooklets and cards to all employees. In order to increaseawareness of compliance, we have continued to hold compliancetraining sessions not only as part of training by job class, including
those for new recruits and newly appointed managers, but also at
such workplaces as the headquarters and individual offices. In thefiscal year ended March 31, 2021, we also conducted the annualcompliance questionnaire among all employees working atdomestic Group companies to identify the Group’s level ofcompliance and plan for future measures. The results of these
efforts were reported to and deliberated by the Compliance
Committee, as well as reported to the Board of Directors. In thefiscal year ended March 31, 2021, we conducted various training to
improve awareness of compliance, with over 900 employees
taking part.

The Morinaga Group conducts Total Risk Management byidentifying not only apparent risks, but also risks that potentiallyexist in its business activities and takes appropriate measuresagainst the risks.

The Group has categorized assumed risks and identified the main
responsible department based on the Total Risk Matrix to have aclear handle on risks that require prioritized response. Segmented
items that align each risk and the department implementing
response are recorded in the Total Risk Map, with each businessoffice taking specific risk management. The risk countermeasuresfor “normal” and “emergency” times are revised each year, andmonitored through recording/ updating in the Total Risk Map.
Training based on these contents is conducted and the results arethen reported to the Total Risk Management Committee, fulfillingthe cycle of PDCA. In addition, to ensure business continuity in theevent of a disaster, we conduct regular revisions of the business
continuity management (BCM) of mainstay products to ensuresmooth operation of such management, and report the results to
the Total Risk Management Committee.

Compliance System
The Morinaga Group has established Compliance Regulations andset up the Compliance Committee, which is chaired by the
Representative Director, President of Morinaga & Co., Ltd. toformulate and update compliance-related policies as well as
conduct monitoring of activity status.

Morinaga Group Compliance Management System
Compliance Committee

Cooperation• Lawyers and labor union
representatives are included• Advisors (Statutory Auditors)
are included

Individual divisions, departments,
offices, and affiliates

Compliance Training Sessions (FY2021/3)
Compliance supervisor* Responsible for crisis response incase of emergency

Establishment

Cooperation

Reporting(users' identity is
kept anonymous)
Cooperation

Compliance promotion leader
Response

Helpline• Internal (General Affairs Division,

Consultation

Morinaga & Co., Ltd.)• External (All Morinaga Labor Union)• External (Designated law firm)

Response

Name of training

TargetNumber ofparticipants

Training by
job classYears at work and job position

170 employees

Training by
workplace

Morinaga Group and affiliated companies’
employees

767 employees

Risk Management System
The Group has established the Total Risk Management Rules andset up the Total Risk Management Committee, as a body to conduct
a cross-organizational review and implementation of total risk
management. The Committee plans for risk management andperforms monitoring and revision appropriately.

Total Risk Management System
Board of Directors
Inquiries

Establish as neededCompliance Committee

Task Force

Perspective

Risk item

Assumptions

Assumed risk

Response by the Morinaga Group

1. Food safety

Ensuring food safety is thehighest priority issue for a foodcompany• Occurrence of large-scale recall or product liability
compensation due to unexpected quality incidents• Influence on cost burden, social credibility, businessperformance, and financial status

Establish a systematic quality assurance
system such as Quality Assurance Rules
Respond following Crisis Response Manuals

2. Production system

Production system of one
product per factory, in principle

Serious impact on business performance and financial status
due to factory inoperability as a result of a disaster.

Maintain production of mainstay products andimplement re-start measures following thebusiness continuity management (BCM)• Agricultural products as main
raw materials

Impact on business performance and financial status in the eventof price hike or difficulties in acquiring a sufficient volume of
raw materials due to such reasons as poor crops resulting from
unseasonable weather or political instability in the country of origin.

Diversify procurement sources, maintainappropriate inventory, forward exchange
contracts, make primary raw materials
sustainable.

Impact on business performance and financial status due todecreased purchasing opportunity and stagnation of the supply
chain as a result of unforeseen weather conditions, or a largescale natural disaster

Demand prediction and production
management based on information collection
and analysis
Ensure safety, and improve production andsupply systems in the event of a disaster

Impact on business performance and financial status due tostagnation of the supply chain, changes in consumer purchasing
behavior as a result of an epidemic of an infectious disease

Ensure safety during the epidemic, improve
the production and supply system
Conduct survey on consumer behavior,
establish a product development system

Large cost burden, credit damage, impact on businessperformance and financial status in the event of unexpected
information leakage such as unauthorized access

Improve internal system and strengthen
security
Specific measures and credit recovery in theevent of information leakage

3. Raw materials procurement • Petroleum products used as
packaging materials

4. Weather, natural disasters,
etc.

5. Infectious diseases• Impact on the purchasing
behavior• Occurrence of major natural
disaster• Epidemic of large-scale
infectious diseases, etc.
• Change in purchasing
behavior

6. Leakage of corporate and/ • Use of information system inbusinessor personal information• Diversified cyber-attacks

Medium- andlong-termMorinaga Group INTEGRATED REPORT 2021

The Total Risk Management Committee formulated a policy basedon the infectious disease crisis response procedure, and held the
Employees’ Safety Subcommittee and Supply Chain Subcommittee
as the initial response to discuss business continuity and safetymeasures for the employees. We believe it is necessary to continue
verifying the sustainability of the supply chain, recommending
telework, raising employee awareness by sharing the status of
infection, and identifying the degree of impact on BCM/ BCP anddiscussing a response for when business establishments otherthan production sites are closed.

Major Risks Anticipated by the Morinaga Group and Responses Thereto

Short- and medium-term• Chairperson: Representative Director, President• Committee members:
Officers responsible for the Corporate Strategy Division, General Affairs Division,
Accounting Division, Quality Assurance Division, Marketing Headquarters, Overseas
Business Headquarters, and R&D Center as well as the General Managers of the
Production Administration Division, Quality Assurance Division, Corporate Strategy
Division, Corporate Communication Division, Human Resources Division, General
Affairs Division, Audit Division, Accounting Division, Customer Service Center, Sales
Headquarters, Sales Strategy Division, Marketing Headquarters, Overseas Business
Headquarters, Procurement Division, R&D Strategy Division of R&D Center, along withthe labor union representative and legal counsel (part-time).
• Advisors: Standing Statutory Auditor• Secretariat: Legal Affairs Department of General Affairs Division

We have installed a Helpline as a point of contact to reportcompliance violations and provide consultation regarding
compliance. We have set up three contact points for consultation,internally, at the labor union, and at an external law firm, to handle
not only cases of compliance violation that affect the user, but also
cases of violation witnessed by others or potential violations with
an ambiguity. We have appointed both male and female externallawyers, widening the options for those seeking consultation.

Response to COVID-19• Chairperson: Representative Director, President• Vice-chair: Director responsible for the Quality Assurance Division• Committee members:
Officers responsible for the Corporate Strategy Division, General Affairs Division, Accounting
Division, Marketing Headquarters, Overseas Business Headquarters and R&D Center aswell as the general managers of the Production Administration Division, Quality Assurance
Division, Corporate Strategy Division, Corporate Communications Division, Human Resources
Division, General Affairs Division, Audit Division, Accounting Division, Customer Service
Center, Sales Division, Sales Strategy Division, Marketing Headquarters, Overseas Business
Headquarters, Procurement Division, and R&D Strategy Division of R&D Center.
• Advisors: Standing Statutory Auditors• Secretariat: General Affairs Department of General Affairs Division

Operation of the Whistleblower System
All employees working at
Group companies

Response

Total Risk Management Committee

Consultation

Point of contact for consultation

62

Sustainability Section

7. Business expansion into
overseas markets

Expand business throughGroup companies in the UnitedStates, China, etc.

Impact on business performance and financial status due tounpredictable events such as war, terrorism, changes in legal
regulations and tax systems, and sudden fluctuations in exchange rate

Strengthen business and risk management
system by gathering information in eachcountry and region

8. Corporate social
responsibility

Compliance with laws andsocial norms and fulfillment ofcorporate social responsibility

Legal punishment, social sanctions, loss of trust, and damaged
reputation or brand value, entailed in a regulatory violation or
anti-social behavior

Thorough compliance with laws andregulations based on the Code of Conduct
Thorough risk management

9. Secure and foster humanresources• Human Resources, an
important issue for growth• Reduced domestic labor
population

Reduced market competitiveness due to delay in securing
and fostering suitable human resources and developing anenvironment for active job participation. Impact on businessperformance and financial status

Establish the Diversity and Inclusion Policy
Promote human resources development froma specialized and global standpoint

10. Climate change andsustainability

Increased social issues forsustainability such as climatechange due to global warming

Impact on business continuity, performance, and financial status
for the medium- to long-term in the entire value chain from raw
materials procurement to consumer purchasing behavior

Efforts for environmental conservation andachieving a resource recycling society
Enhance management of sustainability issues

Morinaga Group INTEGRATED REPORT 2021

63

Profile

Financial Section

Strategy Section

Governance Section

Sustainability Section

Financial Section

11-year Financial and Non-Financial Summary

Financial information

Unit

FY2011/3

FY2012/3

FY2013/3

FY2014/3

FY2015/3

FY2016/3

FY2017/3

FY2018/3

FY2019/3

FY2020/3

FY2021/3(Million yen)

157,336
6,653
6,880
2,449
4,972
4,996
2,240
8,166
-6,087-2,404
4,579

147,190
2,813
3,140
1,081
7,585
5,506
2,399
4,879
-7,817-1,845-2,937

152,885
2,695
2,973
1,419
13,010
5,594
2,329
5,565
-5,681
3,645-2,615

164,603
3,858
4,446
8,090
14,517
6,808
1,984
7,684
-6,459-5,764625

177,929
5,939
6,530
3,806
2,393
6,581
2,005
11,182-3,022-1,491
8,159

181,868
11,456
12,062
8,092
7,406
6,130
2,152
16,715-2,091-2,311
14,223

199,479
17,612
18,325
11,115
3,750
5,771
2,210
18,400-29,736-2,39815,663205,022
19,751
20,422
10,289
7,310
5,820
2,205
17,788
8,154-17,906
13,943205,368
20,217
20,767
12,816
7,983
5,835
2,194
20,897-20,025-11,888
15,871

208,878
21,23021,95010,824
10,6616,230
2,240
20,994
16,993-4,375
7,988

199,990
19,162
19,767
13,405
20,404
7,909
2,217
12,127-19,862-4,084-7,735127,045
51,84523,947

128,845
52,77324,091

141,154
52,981
29,901

144,441
62,594
26,200151,310
69,393
26,764

163,085
77,223
26,446

183,11291,763
26,282

177,920
100,331
11,265

175,837
97,193
10,666

188,060
105,487
10,000201,915
123,923
10,000

(Yen)

4.2
4.7
5.4
40.4
0.47
984.66
46.90
30

1.9
2.1
2.5
40.7
0.46
1,004.47
20.73
30

1.8
2.7
2.2
37.2
0.57
1,009.48
27.24
30

2.3
14.4
3.1
41.5
0.44
1,151.30
155.37
30

3.3
6.0
4.4
43.8
0.40
1,274.09
73.11
30

6.3
11.5
7.7
45.7
0.35
1,432.50
155.47
35

8.8
13.6
10.6
48.7
0.29
1,713.49
213.60
45

9.6
11.0
11.3
55.0
0.12
1,882.23
197.76
50

9.8
13.2
11.7
54.8
0.11
1,917.22
247.15
66

10.2
10.8
12.1
55.7
0.10
2,080.77
215.18
72

9.6
11.8
10.1
60.9
0.08
2,445.53
266.52
80

(%)

64.0

144.6

110.1

19.3

41.0

22.5

21.1

25.3

26.7

33.5

30.0

FY2019/3

FY2020/3

FY2021/3

24.0
50.1
2.8
6.6
1,550.4
158.7
9.7
0.5
2,717
(1,712)
6.7

20.6
46.9
3.4
7.2
1,591.3
148.0
9.6
0.6
2,711
(1,687)
7.7

21.4
47.5
3.3
6.3
1,602.1
169.7
9.4
0.6
2,825
(1,597)
8.3

Accounting year
Net sales
Operating income
Ordinary income
Profit attributable to owners of parent
Capital spending
Depreciation and amortization
R&D expenses
Cash flow from operating activities
Cash flow from investing activities
Cash flow from financial activities
Free cash flow *1(Million yen)
(Million yen)
(Million yen)
(Million yen)
(Million yen)
(Million yen)
(Million yen)
(Million yen)
(Million yen)
(Million yen)

End of fiscal year
Total assets*2
Net assets
Interest-bearing debt

(Million yen)
(Million yen)
(Million yen)

Financial indicators
Operating income to net sales ratio
Return on equity (ROE)
Return on assets (ROA)*2
Shareholders’ equity ratio*2
D/E ratio
Book value per share (BPS)*3
Earnings per share (EPS)*3
Dividend per share*3

(%)
(%)
(%)
(%)
(Times)
(Yen)
(Yen)

Dividend payout ratio*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 Accounting Standard for Tax Effect Accounting, etc., from FY2019/3. Figures for FY2015/3 and later were retroactively adjusted in line with this accounting standard.
*3. 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 FY2011/3.

Non-financial information

Unit

Domestic

CO2 emissions*4
Overseas

Amount of water resources
consumption*5*9
Amount of waste emissions*6

Scope 1*

9

(Thousand t-CO2)

Scope 2*

9

(Thousand t-CO2)

Scope 1(Thousand t-CO2)

Scope 2(Thousand t-CO2)

Domestic(Thousand ton)Overseas(Thousand ton)

Domestic(Thousand ton)Overseas(Thousand ton)

Number of employees*7

Consolidated

Ratio of female managers*8

Non-consolidated(People)(%)

FY2011/3

FY2012/3

FY2013/3

FY2014/3

FY2015/3

FY2016/3

FY2017/3

FY2018/3

61.6

61.8

62.5

63.9

58.0

55.3

57.0

56.7

-

-

-

4.7

9.0

14.3

18.4

15.1

1,822.5
9.8
2,854(2,475)
4.3

1,724.5
9.2
2,670(2,036)
4.3

1,689.7
10.7
2,573(2,084)
4.5

1,556.0
130.6
11.4
0.3
2,927
(2,323)
4.2

1,487.9
215.3
10.1
1.1
2,978
(2,613)
4.4

1,482.5
182.6
9.8
1.2
3,056
(2,330)4.2

1,548.7
246.6
10.0
1.3
3,256
(2,186)4.6

1,529.9
208.9
9.8
0.9
3,169
(1,950)
5.2*4. Figures for Japan for FY2019/3 and later represent a Group consolidated basis. Figures for overseas for FY2020/3 and later represent a Group consolidated basis. Figures prior to this are for production
sites both in Japan and overseas. The conversion coefficient at the time of CO2 calculation for FY2018/3 and prior uses the fixed coefficient of 0.378kg-CO2/kwh established internally in 2003.
*5. Figures prior to FY2018/3 are for production sites both in Japan and overseas. Figures for Japan for FY2019/3 and later represent a Group consolidated basis.
*6. Figures for production sites both in Japan and overseas.
*7. 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 parenthesis 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.
*8. Figures as of April 1 each fiscal year.
*9. Figures for FY2021/3 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.

64

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65

Profile

Strategy Section

Sustainability Section

Governance Section

Financial Section

Financial Summary

Consolidated Balance Sheets
Million yen

FY2020/3(Mar. 31, 2020)

FY2021/3(Mar. 31, 2021)

Assets43,42731,568Notes and accounts receivable–trade20,96919,934Merchandise and finished goods

10,885

11,430

Income taxes receivable
Other
Allowance for doubtful accounts
Total current assets

383

319

6,264

6,987

81

795

4,349

6,059

-31

-43

86,32877,051

Noncurrent assets
Property, plant and equipment
Buildings and structures

53,262

59,335

Accumulated depreciation-33,055-33,562

Buildings and structures–net

20,20625,773

Notes and accounts payable–trade17,443

18,162342

359

Accounts payable–other

16,178

9,847

Income taxes payable

4,454

1,357

Allowance for bonuses

2,609

2,595

Other

16,826

15,954

Total current liabilities

57,85548,278Long-term loans

10,00010,000

Lease obligations

570

558

1,690

6,946

Lease obligations

Long-term liabilities

Deferred tax liabilities
Provision for directors’ stock benefits

33

57

Provision for environmental measures

303

279

Net defined benefit liability

8,169

7,767

52

262

3,708

3,706

Machinery, equipment and vehicles

85,62094,239

Accumulated depreciation-68,702-70,659

Machinery, equipment and vehicles–net

16,917

23,579Asset retirement obligations

Tools, furniture and fixtures

4,527

4,848

Deposits received

Accumulated depreciation-3,483-3,807

Other

189

135

Tools, furniture and fixtures–net

1,044

1,041

Total long-term liabilities

24,717

29,714

Land

21,581

21,589Total liabilities

82,573

77,992

Lease assets

1,574

1,703

Accumulated depreciation

-739

-875

Lease assets–net

834

828

Construction in progress

9,690

9,618

Common stock

18,612

18,612

Total property, plant and equipment

70,27582,431

Capital surplus

17,281

17,281Retained earnings

64,57274,354

Treasury stock-11,279-11,291

89,187

98,957

13,66020,729

7

23

600

493

Intangible assets

Net assets
Shareholders’ equity

Goodwill

294

196

Other

237

231

Total shareholders’ equity

Total intangible assets

532

427

Accumulated other comprehensive income

Investment securities

26,17535,583Net defined benefit asset

3,085

4,548

Deferred tax assets

773

830

Other

924

1,080

Investments and other assets

Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Foreign currency translation adjustments
Remeasurements of defined benefit plans

1,211

2,803

Total accumulated other comprehensive income

15,47824,049

821

916

-36

-37

Total investments and other assets

30,92342,005

Non-controlling interests

Total noncurrent assets

101,731

124,864

Total net assets

105,487

123,923

Total assets

188,060

201,915

Total liabilities and net assets

188,060

201,915

Allowance for doubtful accounts

66

FY2021/3(Mar. 31, 2021)

Current liabilities

Cash and deposits

Work in process

FY2020/3(Mar. 31, 2020)

Liabilities

Current assets

Raw materials and supplies

Million yen

Morinaga Group INTEGRATED REPORT 2021

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67

Profile

Strategy Section

Sustainability Section

Governance Section

Financial Section

Consolidated Statements of Operations and Consolidated Statements of Comprehensive Income(Consolidated Statements of Operations)

Million yen(Consolidated Statements of Comprehensive Income)Million yen

FY2020/3(Apr. 1, 2019 –Mar. 31, 2020)

FY2021/3(Apr. 1, 2020 –Mar. 31, 2021)

Net sales

208,878

199,990

Net income

Cost of sales

98,747

94,343

Other comprehensive income

Gross profit

110,130

105,646

Valuation difference on available-for-sale securities

Selling, general and administrative expenses

88,90086,484

Deferred gains or losses on hedges-8

14Operating income

21,23019,162Foreign currency translation adjustments

-57

-90
1,590

Interest income

57

Dividends income

461

490

Equity in earnings of affiliates

53

—

Other

411

349

(Breakdown)

Total non-operating income

932

847

Comprehensive income attributable to owners of parent

Non-operating income

Non-operating expenses
Interest expenses

10,962

13,592743

7,069

Remeasurements of defined benefit plans, net of tax

174
-119

-7

Total other comprehensive income

732

8,575

11,694

22,168

11,55021,976

144

192

Net comprehensive income

32

Equity in losses of affiliates—

16

Depreciation

83

131

Other

62

61

Total non-operating expenses

213

242

21,95019,767

1,784

1

Ordinary income

FY2021/3(Apr. 1, 2020 –Mar. 31, 2021)

Share of other comprehensive income of associates accounted for using equity method

Comprehensive income attributable to non-controlling interests
66

FY2020/3(Apr. 1, 2019 –Mar. 31, 2020)

Extraordinary income
Gain on sales of noncurrent assets
Gain on sales of investment securities
Total extraordinary income

1

43

1,786

45

Extraordinary loss
875

796

Impairment loss

2,560

32

Contract cancellation fee

4,855

—

7

38

Loss on sales and retirement of noncurrent assets

Other
Total extraordinary loss

8,298

867

Income before income taxes

15,437

18,944

Income taxes—current

7,102

3,572

Income taxes—deferred-2,626

1,779

Total income taxes

4,475

5,352

Net income

10,962

13,592

138

186

10,824

13,405

Profit attributable to non-controlling interests
Profit attributable to owners of parent

68

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Profile

Strategy Section

Sustainability Section

Governance Section

Financial Section

Consolidated Statements of Changes in Net Assets
FY2020/3 (Apr. 1, 2019 – Mar. 31, 2020)

FY2021/3 (Apr. 1, 2020 – Mar. 31, 2021)
Million yen

Million yen

Shareholders’ equity

Common stock
Balance at beginning of
the fiscal year

Capital surplus

18,612

17,281Retained earnings
57,070Shareholders’ equity

Treasury stock

Total shareholders’equity-11,277

81,687

Changes of items during the period

Common stock
Balance at beginning of
the fiscal year

18,612

17,281Retained earnings
64,572

Treasury stock

Total shareholders’equity-11,279

89,187

Changes of items during the period

Dividends from surplus-3,321-3,321Dividends from surplus-3,623-3,623

Profit attributable to owners ofparent10,824

10,824

Profit attributable to owners ofparent13,405

13,405Purchase of treasury stock

-15

-15

Purchase of treasury stock

Disposal of treasury stock

12

12

Disposal of treasury stock

Net changes of items other thanshareholders’ equity

Balance at end of the fiscal year

0

—

—

7,502

-2

7,499

Total changes of items during
the period

-12

0

0

18,612

17,28164,572-11,279

89,187

Balance at end of the fiscal year

—

0

9,782

-11

9,770

18,612

17,281

74,354-11,291

98,957

Accumulated other comprehensive income

Valuation
Deferred gains
difference onor losses onavailable-forhedges
sale securities
Balance at beginning of the fiscal
year

-12

Net changes of items other thanshareholders’ equity

Total changes of items during
the period

13,04314

Foreigncurrencytranslation
adjustments
656

Accumulated other comprehensive income

Total
Remeasureaccumulated
ments ofother
defined benefit
comprehensive
plansincome1,037

14,751

Noncontrollinginterest

Total
net assets

754

97,193

Changes of items during the period

70

Capital surplus

Valuation
Deferred gains
difference onor losses onavailable-forhedges
sale securities
Balance at beginning of the fiscal
year

13,6607Foreigncurrencytranslation
adjustments
600

Total
Remeasureaccumulated
ments ofother
defined benefit
comprehensive
plansincome1,211

15,478

Noncontrollinginterest

Total
net assets

821

105,487

Changes of items during the period

Dividends from surplus-3,321Dividends from surplus-3,623

Profit attributable to owners ofparent10,824

Profit attributable to owners ofparent13,405Purchase of treasury stock-15

Purchase of treasury stock-12

Disposal of treasury stock

12

Disposal of treasury stock0

Net changes of items other thanshareholders’ equity

616

-7

-56

173

726

67

794

Net changes of items other thanshareholders’ equity

7,069

15

-106

1,592

8,570

94

8,665

Total changes of items during theperiod

616

-7

-56

173

726

67

8,293

Total changes of items during theperiod

7,069

15

-106

1,592

8,570

94

18,435

Balance at end of the fiscal year

13,660

7

600

1,211

15,478821

105,487

Balance at end of the fiscal year

20,729

23

493

2,803

24,049916

123,923

Morinaga Group INTEGRATED REPORT 2021

Morinaga Group INTEGRATED REPORT 2021

71

Profile

Strategy Section

Sustainability Section

Governance Section

Financial Section

Consolidated Statements of Cash Flows
Million yen

FY2020/3(Apr. 1, 2019 –Mar. 31, 2020)

FY2021/3(Apr. 1, 2020 –Mar. 31, 2021)

Operating activities

FY2020/3(Apr. 1, 2019 –Mar. 31, 2020)

FY2021/3(Apr. 1, 2020 –Mar. 31, 2021)

Investing activities

Income before income taxes

15,437

18,944

Proceeds from withdrawal of time deposits

30,000—Depreciation

6,230

7,909

Purchase of property, plant and equipment-14,416-19,853

Impairment loss

2,560

32

Proceeds from sales of property, plant and equipment

2,015

10

Amortization of goodwill

98

98

Purchase of intangible assets

-41

-21

Increase (decrease) in provision for directors’ stock benefits

11

24

Purchase of investment securities-3-3

Increase (decrease) in net defined benefit liability

38

379

Proceeds from sales of investment securities

5

105(Increase) decrease in net defined benefit asset

38

50

Payments of loan receivable-5—

Increase (decrease) in allowance for bonuses

68

-13

Proceeds from liquidation of subsidiaries

Increase (decrease) in allowance for doubtful accounts

-14

13

Other

—

387

-561

-486

16,993-19,862

Increase (decrease) in provision for environmental measures

-25

-23

Net cash provided by (used in) investing activities

Interest and dividends income

-467

-498

Financing activities

Interest expenses

66

32

Net increase (decrease) in short-term loans payable

-657

—

Equity in losses (earnings) of affiliates

-53

16

Purchase of treasury stock

-15

-12

3

—

Proceeds from sales of treasury stock(Gain) loss on sales of noncurrent assets-1,65684

Cash dividends paid

Loss on retirement of noncurrent assets

747

710

Dividends paid to non-controlling interests

Loss (gain) on valuation of investment securities

Contract cancellation fee

4,855

—

(Increase) decrease in notes and accounts receivable–trade

3,586

1,013

-368

-1,290-3,666

751

Other

-303

Subtotal(Increase) decrease in inventories
Increase (decrease) in notes and accounts payable–trade

Interest and dividends income received
Interest expenses paid
Income taxes paid
Contract cancellation fee
Net cash provided by (used in) operating activities

72

Million yen

Morinaga Group INTEGRATED REPORT 2021

Other
Net cash provided by (used in) financing activities

12

0-3,321-3,623

-76

-97

-316

-351

-4,375-4,084-22-39

Net increase (decrease) in cash and cash equivalents

33,590-11,858-4,154

Cash and cash equivalents at beginning of period

9,836

43,427

27,18724,082

Cash and cash equivalents at end of period

43,42731,568

467

532

-66

-31

-6,595-7,599—-4,85520,994

12,127

Effect of exchange rate change on cash and cash equivalents

Morinaga Group INTEGRATED REPORT 2021

73

Profile

Strategy Section

Governance Section

Sustainability Section

Financial Section

Corporate Profile/ Stock Information/ Editing Policy

Corporate Profile (As of March 31, 2021)

Stock and Shareholder Information (As of March 31, 2021)

Company Name

MORINAGA & CO., LTD.

Stock Exchange of ListingFirst Section of the Tokyo Stock Exchange

Representative

Eijiro Ota
Representative Director, President

Industry

Food products

Securities Code2201

Headquarters

5-33-1 Shiba, Minato-ku, Tokyo108-8403, Japan

Establishment

August 15, 1899
Founded as Morinaga’s Western Confectionery Shop

Number of Shares Constituting
One Unit

100 sharesFiscal Year

April 1 to March 31 of next year

Incorporation

February 23, 1910

Capital18,612 million yen

Total Number of Shares
Authorized to be Issued

200,000,000

Business Activities

Morinaga’s main business activities are the manufacture, purchase, and sale of confectioneries(caramel, biscuits, chocolate, etc.), foods (cocoa, cake mix, etc.), frozen desserts (ice cream, etc.),
and health products (jelly drinks, etc.).

Total Number of Shares Issued

54,189,769

Number of Shareholders

24,086 (As of March 31, 2021)

Sales

Consolidated / 199,990 million yen
Non-consolidated / 178,311 million yen

Major Shareholders Status*

Number of Employees Consolidated / 2,825
Non-consolidated / 1,439 (average age: 42.5 years)

Main Offices
Head Office
R&D Center

Domestic Group Companies
Food Manufacturing

Ratio of voting
rights (%)

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

3,549

7.0

Morinaga Business Partner Shareholding Association

3,195

6.3

Custody Bank of Japan, Ltd. (Trust account)

1,884

3.7

MUFG Bank, Ltd.

1,704

3.3

Mizuho Bank, Ltd.

1,289

2.5

Meiji Yasuda Life Insurance Company

1,246

2.4

SSBTC CLIENT OMNIBUS ACCOUNT

1,059

2.1

JP MORGAN CHASE BANK 380055

913

1.8

Shareholder NameBusiness Offices and Affiliated Companies (As of June 30, 2021)

Overseas Group Companies
Taiwan Morinaga Co., Ltd. (Taipei, Taiwan)

Takasaki Morinaga Co., Ltd.

Shanghai Morinaga Co., Ltd. (Shanghai, China)

Tsurumi Factory

Morinaga Angel Dessert Co., Ltd.

Morinaga (Zhejiang) Co., Ltd. (Zhejiang, China)

Distribution of Shares by Owner
Number of shares held(Thousand shares)

Oyama Factory

Morinaga Dessert Co., Ltd.

Morinaga America, Inc. (California, USA)

Mishima Factory

Aunt Stella Inc.

Morinaga America Foods, Inc. (North Carolina, USA)JP MORGAN CHASE BANK 385632

781

1.5

Chukyo Factory

Morinaga Market Development Co., Ltd.

Morinaga Asia Pacific Co., Ltd. (Bangkok, Thailand)

Custody Bank of Japan, Ltd. (Trust account 5)

724

1.4

East Japan Branch OfficeWest Japan Branch OfficeTreasury shares
7.1%
Individuals,
other
21.9%

Morinaga Shoji Co., Ltd.

Securities
companies
1.2%

Foreign-owned
corporations
25.1%

Morinaga Bioscience (Thailand) Co., Ltd. (Bangkok, Thailand)

Food Merchandise

Financial
institutions
29.6%

Other
corporations
15.1%* The Company holds 3,866,566 shares of treasury stock but is excluded from the list of major shareholders
above. The holding ratio is calculated after excluding treasury stock.

Non-consolidated companies accounted for using the equity method

Real Estate and Services
Morinaga Takataki Country Co., Ltd.

Other
Morinaga Business Partner Co., Ltd.
Morinaga Institute of Biological Science, Inc.
Morinaga Finance Co., Ltd.
SEE THE SUN Inc.

Editing Policy
The Morinaga Group has started a new long-term business plan, 2030 Business
Plan, in aiming to continuously enhance its corporate value based on the newcorporate philosophy in the fiscal year ending March 31, 2022. This integrated
report is designed with the goals of disseminating, and promoting understandingof our vision of the future achieved through the Group’s new corporate philosophy
as well as our value creation strategy towards that goal in the short-, medium-,and long-term to audiences inside and outside of Japan. We hope this reportwill deepen our dialogue and mutual understanding with the shareholders andensure our course of action towards value creation. This report aims to present
the Company’s critical issues in achieving its new corporate philosophy from bothfinancial and non-financial aspects, as well as initiatives to address these issues inan easy-to-understand manner referencing the International Integrated Reporting
Framework. For more detailed information, please refer to our corporate website*.
* Morinaga Group Corporate Profile
https://www.morinaga.co.jp/company/english/

74

Morinaga Group INTEGRATED REPORT 2021

Reference guidelines“International Integrated Reporting Framework” of the International Integrated
Reporting Council (IIRC)

Period covered by the Report
FY2021/3 (April 1, 2020 through March 31, 2021)
Information outside of this period may also be reported in case it is appropriate toillustrate past information or recent case studies.

Scope of reporting
This report is relevant to the Morinaga Group*. However, if the information for theentire group is not fully available, the scope of coverage is stated in the report.
* In principle, Morinaga & Co., Ltd. and its consolidated subsidiaries (as of March 31, 2021) arereferred to as the Morinaga Group or the Group.

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75