SUGI Holdings Integrated Report 2022

Integrated Report

2022

SUGI Holdings Co., Ltd.
62-1 Shin’e, Yokone-machi, Obu-shi, Aichi, 474-0011
TEL: 0562-45-2700 FAX: 0562-45-2702
https://www.sugi-hd.co.jp/

The SUGI Pharmacy Group strives to contribute toTable of Contents
Integrated Report 2022

local communities by underpinning customers’ healthy,

2 Editorial Policy/Table of Contents
3
5
7
13

Management Philosophy

15
19
21
23

Ideal Vision

Management Messages
Top Interview
Figures relating to the SUGI
Pharmacy Group
Growth Milestones
Value Creation Process
Business Report [Sugi Pharmacy
Co., Ltd.]

25 Market Environment
27 Financial/Non-financial
Highlights

Who is the SUGI Pharmacy Group?

rich lifestyles and community healthcare.

29 Priority Issues (Issues ofMateriality) for Proceeding with
Sustainability Management

Lives during the Coronavirus
Pandemic

41 Sustainable Business Partnerships
43 Contribution to the Global
Environment

45

Information disclosure basedon TCFD recommendations

Growth Foundation

33 Healthy Community
To Protect People’s Daily
39

47 Healthy Workplace Environment
51 Corporate Governance
60 Financial Indices
61 Non-financial Indices

The Integrated Report 2022 has been edited for the purpose of presenting the
SUGI Pharmacy Group’s business philosophy and attitude toward sustainability,and providing stakeholders with easy-to-understand explanations of our activities
carried out based on these activities and their results. The report contains data andarticles regarding the corporate activities that we deem especially important.

64 Consolidated Statement ofReporting Coverage

66 Corporate Profile and Stock

The report has been designed to cover the companies in the consolidated financial
Drugstore operation

Medical consulting

Promotion of disabled
employment

Domestic and international
wholesale trade

63 Consolidated Balance Sheet
Income and Consolidated
Statement of Comprehensive
Income65 Consolidated Statement of Cash
Flows

Information

Data & Corporate Profile

SUGI Pharmacy Group

Editorial Policy

statement of the SUGI Pharmacy Group to the extent possible, although the reporting
coverage varies according to the item.

Coverage Period
March 1, 2021 – February 28, 2022
For some activities, more recent events have also been reported.

Notes on Our Outlook
Home-visit nursing andelderly home-care support

Support for commencementof medical practice

Staff agency service

Wholesale trade of medical
and pharmaceutical products

SWC

The Integrated Report 2022 presents forecasts and outlooks regarding future plans,
strategies and business results of the SUGI Pharmacy Group and its subsidiaries. They
are based on assumptions and views judged from the information currently available
to the SUGI Pharmacy Group. Please note that actual business results might differ fromexpectations due to risks and uncertainties concerning future economic trends, consumer
spending, market demand, taxation, various systems, etc.

1

SUGI Holdings Integrated Report 2022

SUGI Holdings Integrated Report 2022

2

Management Philosophy

We contribute to
local communities throughour sincere, kind services.

In the SUGI Pharmacy Group,
We will remain a “pharmacy.”This is the pride of the corporate group.
This is the pride of all employees.

Who is the SUGI Pharmacy Group?

Management Philosophy

We help many more people smile,
Hoping for the happiness of each employee,
Hoping for the happiness of each customer, andHoping for the happiness of everybody.

Closer to you and more reliable for you. Serving as the source of your smile.

Corporate Watchwords and Management Philosophy
at the Time of Establishment of the Company
Corporate Watchwords

Management Philosophy

Kindness
Serve customers with sincerity
and kindness.

<For Society>
Strive to create a corporate framework
enabling us to contribute to local
communities by selling medical andpharmaceutical products, health foods,
cosmetics and daily items and bydispensing prescriptions.

HonestyWork with business partners
with humility and honesty.
Trust
Be trusted by both customers
and business partners.

3

SUGI Holdings Integrated Report 2022

Since our founding, we have aimed to contribute to local communities by
selling medical and pharmaceutical products, health foods, cosmetics anddaily items, and by dispensing prescriptions. Today, even though we havedeveloped into an operator of a chain of approximately 1,500 drugstoreswith approximately 35,000 employees, we are proud to remain a “pharmacy.”
We are working to further enhance our corporate value and accomplish thesustainable growth of local communities.
Highly acclaimed for its sincere and kind treatment of customers, eachof whom was served attentively through its counseling service, our first
store thrived as a kind “family pharmacy.” Since then, we have adopted
the corporate watchwords of “kindness,” “honesty” and “trust” as theprinciples guiding us to growth. Layers of “kindness” form “honesty” andlead to the establishment of “trust.” These tenets presented in our corporate
watchwords, together with an altruistic spirit, or “sincerity,” are reflected in
our management philosophy, showing our fundamental values. They havebeen anchored among all members of our corporate group and put into
practice.
Action with “sincerity” based on the tenets of our corporate watchwords
and management philosophy with their focal point on “kindness,” which has
been the unchanging focus since our establishment, reinforces our businessand HR foundation, helps customers smile, and pleases and moves them. This
leads to the happiness of employees and the growth of the SUGI Pharmacy
Group, loved by local communities.

<For Employees>
Strive to create a corporate framework
enabling the company to grow together
with employees with the aim of ensuring
their happiness.

SUGI Holdings Integrated Report 2022

4

Management Messages

New Era under New Management

Immutability and Fluidity – All Reforms
Are Intended to Serve Local Communities,
Customers and Patients, and to Maximize the
Immutable Strength of Our Human Assets
Sakakibara: Derived from Japanese haikai poetry, “immutability and fluidity” are adopted as a universal concept in
the field of business, and actually form the cornerstone of
our Management Philosophy. At each of the many turning points we have encountered in the course of the 45
years since our establishment, we have made management decisions from the aspects of “eternal invariability”
and “change in pace with the times.”
The Group’s greatest strength lies in its human re-

Who is the SUGI Pharmacy Group?

Sakakibara: In FY 2021, which marked the 45th anniversary of our establishment, our cofounder Hirokazu
Sugiura retired from the management frontline and new
management was inaugurated, under which I assumed
the chairmanship and Katsunori Sugiura was promoted
from Senior Vice President to President. In this era of livingwith COVID-19, with society and the economy greatly impacted by fluctuations in COVID-19 cases, there are calls
for new reforms to break down conventional stereotypes
and notions, as well as for speed in implementing such
reforms. This is applicable to the SUGI Pharmacy Group,
which boasts strength in in-store communication with its
customers, and there is an urgent need for us to reform
ourselves. We find ourselves in a period of upheaval, andall the more for this reason, in FY 2021, we became evenmore aware of our contribution to local communities
as the Group’s raison d'être. In addition, guided by theManagement Philosophy, we always returned to the basics when making decisions and taking action. In 1976, weestablished Sugi Pharmacy in Nishio City, Aichi Prefecture,in the hope that we could support local citizens’ healthy
lives and contribute to the local community. “Kindness,”“honesty,” and “trust” are our watchwords, which havebeen handed down as our founding principles over 45
years since the establishment of the Group. With the focal point being “kindness,” customers, employees and allother stakeholders are connected with smiles, and thechain of smiles expands the circle of these connections.
By ensuring this process, we strive to contribute to realizing the sustainable growth of local communities fromour perspective as a kind and community-oriented family
pharmacy.

Respect for each individual customer — this philosophy represents theintrinsic value of the SUGI Pharmacy Group. We pursue the qualities
of kindness and contribution to local communities in every aspect, andstrive to enhance our raison d'être and create sustainable value.

5

Eiichi Sakakibara

Katsunori Sugiura

Representative Director & Chairman

Representative Director & President

SUGI Holdings Co., Ltd.

SUGI Holdings Co., Ltd.

SUGI Holdings Integrated Report 2022

sources who can embody kindness to accommodate eachindividual customer’s needs at the stores, and also in the
management framework that underpins such human resources. The spread of COVID-19 is accelerating digitaltransformation (DX) in society and the need for non-contact services. In the SUGI Pharmacy Group, we are working
speedily on various forms of “fluidity” (constant change)such as DX and new projects. We can never accomplish
further growth without continuous reform, or constantchange, and it is equally important to maintain “immutability” (eternal invariability). A typical example of immutability is our respect for our customers, which we infuse
into our direct customer services, and this philosophy willremain unchanged forever.
While following a new policy in step with changes of
the times, we will never change the underlying management principles. No matter how much IT and DX progress
is made in the fields of merchandizing, prescription dispensing, nursing and new projects, the ultimate key lies in
our human assets, namely, our customers and employees.
By ensuring that kindness lies at the forefront of our operations, we strive to earn credibility and trust from ourcustomers and patients, and remain indispensable to local communities. To this end, "immutability and fluidity”
serves as our unwavering management belief.

Now That We Have Celebrated the 45th
Anniversary of Our Establishment, We Will
Create a Future That Will Ably Guide Us
through the Next Five Decades
Sakakibara: To make a sustainable contribution to local
communities and society, it is necessary to identify management risks from a super-long-term perspective, reinforce
our governance framework, and consolidate the foundation for our long-term growth. We have appointed external
directors for monitoring purposes and ensured flexibility
backed by respect for diversity, thereby striving to addressa wide variety of priority issues set by the Group, including
climate change, through the cooperation of all members of
the Group, and establish a framework whereby we can respond to any type of change.
In accordance with the Group’s Management
Philosophy, we will continue to explore how to constantly
present value to customers and society and take on challenges so that we can create a future toward the 50th anniversary that we will celebrate shortly, and toward the milestone of the next half-century.
We will fully prepare ourselves and thus would like tosincerely ask for your support.

SUGI Holdings Integrated Report 2022

6

Top Interview

Katsunori Sugiura
Representative Director & President
SUGI Holdings Co., Ltd.

By integrating the real and the digital with “health” as the
keyword, we will strive to support your healthy and rich lives
and enhance our corporate value and social value.

7

SUGI Holdings Integrated Report 2022

Who is the SUGI Pharmacy Group?

panied by medical care and medicine, with which people
strive to treat disease and injury, address changes causedby aging, and maintain their good health. Under the Total
Healthcare Strategy, we divide human life into the following
three phases: the “self-care” period with a focus on primaryprevention and secondary prevention to maintain a healthy
life; the “medical care and medication” period when people
develop diseases and receive treatment for their symptoms
in the acute phase or the chronic phase; and the “elderly
nursing support and daily life support” period. This strategy
shows our commitment to local residents’ lifetime efforts
for disease prevention and health management, thereby
striving to contribute to their good health through a full
lineup of care.
With our prescription dispensing drugstores serving as
the hub, we will strive to establish a healthcare network byforming partnerships with physical facilities, such as healthcheckup centers, nursing facilities for senior citizens, and fitness centers, and ensuring cooperation with local governments, while making full use of digital transformation (DX).
Such a network will enable us to ensure points of contact
with customers regardless of their health condition, andprovide each customer with the most appropriate productor service well-tuned to his/her condition through the integration of the real and the digital with a focus on the local
community.
If you have any health problems, you will most likely
head straight to a medical institution; however, this approach will no longer work if you wish to live a rich life in theupcoming age of a super-aging society. It is necessary to ensure cooperation with local governments, health insurance
associations, medical care and elderly nursing care workers, and players in many other fields. To realize the Total
Healthcare Strategy, satisfy customers, and continue toincrease their lifetime value, we urgently need to proceedwith alliances with players in the medical field and also other industries toward establishing a network for supporting
communities, senior citizens, and their families. We would
like to take various opportunities to actively cooperate withentities sharing the same ambitions as us, and accelerate
the speed of our efforts.

Tell us about the SUGI Pharmacy Group’s
efforts to create value by leveraging its features
and advantages.
Tell us about the SUGI Pharmacy Group’s
future vision and strategy.
Sugiura: Last year, when we celebrated the 45th anniversary of our establishment, I assumed the presidency of SUGI
Holdings Co., Ltd., which spurred me to further contributeto the good health of our customers and patients throughthe management of the SUGI Pharmacy Group. Our management foundation resides in the Total Healthcare
Strategy, formulated by the SUGI Pharmacy Group. Setting“health and medical care” as the key phrase, this core strategy guides us to provide support for customers and patients
regardless of their health conditions.
From birth until the end of life, human life is accom-

Sugiura: In the SUGI Pharmacy Group, we have approximately 3,400 pharmacists. Today, not only prescription dispensing pharmacies and drugstores, but also supermarkets
and convenience stores, are making inroads into the field ofprescription dispensing, leading to a continuous shortageof pharmacists in Japan and making it extremely difficult tosecure pharmacists. Despite this trend, we have a sufficientnumber of pharmacists, and this is one of our great advantages. The Group was founded by Hirokazu Sugiura andAkiko Sugiura, both pharmacists, and they have spurred our
growth by continuing to take on challenges in developing a
chain of prescription dispensing drugstores since the dawnof the drugstore industry. Our unwavering dedication toprescription dispensing that we have continued since our

SUGI Holdings Integrated Report 2022

8

9SUGI Holdings Integrated Report 2022

ous cycle. Moreover, we can also enhance customer satisfaction by helping employees improve their working styles,
establishing an environment in which they can fully demonstrate their capabilities vigorously, and ensuring that they
can concentrate easily on communication with customers.
While bearing in mind the creation of value through rediscovery, support and enhancement of our ties with customers and external and internal business partners in the realworld, we are actively proceeding with DX.
Based on these sources for creating value, we will handle the priority issues that we set last fiscal year toward realizing sustainability management, including contribution
to the global environment, thereby striving to accomplish asociety where everyone is happy with smiles.

Tell us how you recognize challenges in the
recent external environment surrounding the
SUGI Pharmacy Group’s business environment.
Also, tell us how you would respond to suchchallenges.
Sugiura: The world is witnessing a serious humanitariancrisis in Ukraine, where the precious lives of many citizens,
including even children, are being threatened (as of the endof April). We would like to express our heartfelt condolences
to those affected by the tragedy. While paying close attention to Ukraine’s affairs, we sincerely hope that the current
situation will come to an end and a peaceful, safe daily life
will be restored as soon as possible. Amid the globalizationof the economy and the advancement of the supply chain,
the Ukraine crisis is greatly affecting the SUGI Pharmacy
Group in terms of, for example, the appreciation of resource
prices. The prices of not only petroleum and natural gas, butalso wheat and other foodstuffs, are rising considerably, affecting the procurement costs of products sold by the SUGI
Pharmacy Group. In addition, the supply shortage of rare
metals is resulting in a shortage of semiconductors, leading
to delays in the introduction of a wide variety of equipment
and increasing our costs. Our operations have so far been
based on the scenario that we can maintain a supply chainthat helps us realize more reasonable costs and ensure thesafety and reliability of raw materials. From now on, however, we will diversify our procurement channels to securea continuous, stable supply and take measures to disperserisks. We will use all items even more carefully, generating
less waste and recycling items for as long as possible. We
will continue to implement the 3Rs of reduction, reuse andrecycling, while involving all our suppliers in increasing theefficiency of the entire supply chain toward reducing waste
disposal and logistics costs, as well as curtailing energy
consumption to respond to an increase in electricity costs.
Furthermore, we will raise the awareness of peace and human rights protection. We feel the need to manage the
SUGI Pharmacy Group while reaffirming our mission of contributing to the realization of a sustainable society.
It has already been two years since the breakout of the
COVID-19 pandemic. Despite considerable growth in thevaccination rate in Japan, a trial-and-error process toward
the transition to a “society with COVID-19” is still ongoing,with consumption and the economy greatly affected eachtime a variant emerges. It is said that consumption levels
will not exceed those of the pre-COVID-19 period until thefirst half of 2023, showing little hope for a recovery of consumer spending in Japan for the time being. Taking accountof a further delay in the recovery of inbound demand, we
will accelerate our partnership with a wide variety of companies to ensure many more points of contact with overseas consumers.
Meanwhile, the COVID-19 pandemic has led to the riseof a new form of consumer behavior, as indicated by the
rapid growth of non-contact and non-face-to-face fields,such as EC, online videos, electronic payment, and online
events. While digital technology offers convenience and enables cost reduction, real experience needs to offer something special in order to present its own value. Customers
who actually go to physical stores anticipate that they will
not only be able to purchase what they need after checking
and touching items, but will also encounter exciting items,
make unexpected findings, experience excellent service, or
enjoy something that supplements what they cannot obtain in the digital world. In the SUGI Pharmacy Group, weare reinforcing face-to-face counseling from certified staff
members using digital tools, including, not only counselingfrom pharmacists, but also health counseling from nationally certified dieticians using lifestyle-related disease risk
reports, specific health guidance, and skin analysis andcounseling using a skin analyzer in the field of beauty items.
In addition, we are proceeding with our efforts to accommodate needs for non-contact service by, for example, introducing digital signage into our stores, by launching Buy
Online Pick up In Store (BOPIS), enabling customers to pay
at smartphone-linked registration terminals or pick up theiritems at stores after ordering them online, and by participating in a demonstration experiment of pick-up lockers
for medicine. With demand for home-visit prescription dispensing growing amid COVID-19, we will make our service
even safer and securer, thereby turning the pandemic into a
growth opportunity to expand our operations.

FY 2022 sees the revision of dispensing fees anddrug prices. Tell us about how you will respondto the changes in the field of prescription
dispensing.
Sugiura: Led by the national government, institutional
reform is in steady progress in the field of prescription dispensing, which is the main business domain of the SUGI
Pharmacy Group, in accordance with the Pharmacy Vision
for Patients, presented in 2015. The drug price revision,
performed this April, has had not an insignificant impact
on our sales from prescription dispensing. Meanwhile, therevision of the technical fee is clearly spurring a shift toward
pharmacists’ communication with customers. In the SUGI
Pharmacy Group, we are strengthening such communication by ensuring that pharmacists make confirmation withpatients when presenting drugs regarding the medication
schedule they should follow until the next time they cometo the pharmacy, and whether they have experienced anyside effects. We also provide information to medical institutions to improve therapeutic effects, and take measures toprevent polypharmacy toward ensuring further safety. To
provide strong support for these efforts, we are building aframework for app-based chat communication and online
counseling, while reestablishing an environment for training pharmacists.
In this year’s revision, a prescription refill system has
been introduced, allowing a prescription to be filled repeatedly for a certain period of time, for the purpose of increasing the efficiency of revisiting by patients with stable symptoms in cooperation between their doctors and physicians.
For the SUGI Pharmacy Group, which operates many storesin the suburbs, the introduction of the system means that
we are further required to fulfill our responsibility of serving
patients appropriately based on our communication skills
without overlooking changes in their physical conditions. In
addition, we forecast that we will experience data healthreform, which will help establish a win-win relationship between national budgets and patients by ensuring safety forpatients and offering them convenience through, for example, online qualification confirmation, online medication
instruction, electronic prescription, and information sharing. The direction of these policies aligns precisely with thedirection of the SUGI Pharmacy Group’s Total Healthcare
Strategy. With interest in health growing throughout society, great business opportunities lie ahead for the SUGI
Pharmacy Group, which has set a management strategy
and priority issues to underpin a sustainable society.

Who is the SUGI Pharmacy Group?

foundation helps pharmacy students create their future visions, and stirs empathy from among pharmacists who areconcerned about the ideal vision of the profession. This will
give us a great advantage in terms of recruitment.
Another advantage is our speed in establishing newstores. By pushing forward with our strategic dominanceof setting up new stores in specific areas, we are expanding our operating scale in the metropolitan areas of Kanto,
Chubu and Kansai, while reinforcing our efforts to open
new stores in the Hokuriku region. Last year, despite the
COVID-19 pandemic, we newly set up 112 stores, which
is one of the highest numbers of annual store openings in
the industry. As of the end of February 2022, the number ofstores of the entire SUGI Pharmacy Group reached 1,483,
with the percentage of prescription dispensing stores increasing to 85.5%, one of the highest figures among major drugstore operators. This serves as a source for creating
value when we implement the Total Healthcare Strategy.
For store locations, we operate many stores in the suburbs,
which is one of our striking features. As a “family pharmacy,” we would like to commit ourselves to improving all
the health stages of our customers by providing support,
ranging from daily health management to terminal care,through in-store experts, and contribute to the realizationof sustainable comprehensive community care centering
on medical institutions.
While developing our physical stores, we are also increasingly introducing digital technology in various fields.
The SUGI point membership of more than 19.41 million
customers serves as the foundation underpinning our stable management and growth. By offering services throughour apps to help customers live an even more comfortable
and healthier life, we can further satisfy customers, andthis in turn encourages such customers to use the SUGI
Pharmacy Group’s services even more, generating a virtu-

Tell us about your views on sustainability
management.
Sugiura: The SDGs, ESG and climate change have now
become much-talked-about issues throughout the world,with public interest growing incomparably higher than ayear ago. A familiar example is the growth of popularity of
ethical consumption, as indicated by many consumers selecting items produced with greater consciousness of theenvironment or human rights. This trend is evident in particular among young Millennial consumers and Generation
Z. The world is also witnessing the emergence of problems
that need to be handled throughout the entire supply
chain, such as CO2 emissions in the supply chain (Scope 3)
and suppliers’ commitment to human rights. In the SUGI
Pharmacy Group, we will continue to ask our suppliers to
use raw materials procured in due consideration of humanrights, while changing wrapping materials for our private
brand items to environmentally friendly materials and reinforcing our efforts to develop and promote ethical products. By doing so, we will turn risks into opportunities.
It is crucial not only to obtain growth opportunities, butalso to identify business risk factors. Having specified fivethemes and 16 priority issues under the Sustainability Basic
Policy, we are working toward solving them. In particular,
in FY 2021, we identified risks posed by climate change on
the SUGI Pharmacy Group, in line with the disclosures recommended by the Task Force on Climate-related Financial
Disclosures (TCFD). Using certain parameters, such as a carbon tax, climate change and corresponding electricity payment, we analyzed their impact on our financial conditions
from the long-term perspective from 2030 to 2050. As a re-

SUGI Holdings Integrated Report 202210

sult, we believe that carbon-free management will help us
mitigate our business risks.

Tell us about carbon-free management inparticular. What are your views on thisand what progress have you made in yourcommitments?

Tell us about your views on the Mid-termManagement Plan.
Sugiura: Public anxiety about COVID-19 has led to theestablishment of a “new normal.” In addition, the environment surrounding prescription dispensing is changing
greatly. In light of these points, we have formulated the
Mid-term Management Plan with FY 2022 set as its firstyear. Under the plan, we strive to increase our sales to
1 trillion yen over the five years to FY 2026. To this end,
we will deepen our operations in the field of health care,change customer experience through DX, and expand ourcooperation and co-creation efforts. At the same time, wewill proceed with data-based management, cost structurereform, HR development to acquire and foster those underpinning our future, and institutional development. We
will aim not only to accomplish sustainable growth, butalso to contribute to local communities, which represents
the philosophy we have invariably honored since our establishment.

New Mid-term Management PlanFY 2022 – FY 2026

FY 2020 – FY 2021

Enhancement of our corporate value by
maximizing customers’ lifetime value

Who is the SUGI Pharmacy Group?

Sugiura: Emissions of greenhouse gases, especially CO2,
are making global warming a severe issue. We are awarethat climate change caused by temperature rise is a critical problem negatively affecting the lives of all citizens. In
the SUGI Pharmacy Group, we have set the realization ofa carbon-free society as one of our priority issues, accelerating our commitment. With the world feeling a sense ofcrisis even more keenly concerning global warming andclimate change, governments and companies are intensifying their efforts under the challenging targets they have set
toward establishing a carbon-free society. In the autumn
of 2021, the 26th UN Climate Change Conference of theParties (COP26) was held, making it a de facto global target
to “pursue efforts to limit the average global temperature
increase to 1.5°C above pre-industrial levels.” Some foreigncountries have already established a framework where ahigh tax is imposed according to CO2 emissions. I feel thatJapan will shortly have a similar framework, such as the GX
League. For those in our generation and also future generations, such as our children and grandchildren, the SUGI
Pharmacy Group needs to contribute to the control of therise in average temperature by, for example, introducing renewable energy.
To involve the entire corporate group in proceedingwith carbon-free management under specific numericaltargets, we have first set a 2030 target for Scope 1 andScope 2, both of which cover in-house emissions. In linewith the disclosures recommended by the Task Force on

Climate-related Financial Disclosures (TCFD), we have proceeded with appropriate efforts through the Sustainability
Committee and the Board of Directors, such as identifying
our risks and opportunities and examining a roadmap toward the reduction of CO2 emissions. In December 2021, we
announced our endorsement of the TCFD recommendations. In FY 2021, we opened our first store equipped withsolar power panels, and in FY 2022, we will make further
efforts toward the use of renewable energy. In addition, we
will, of course, not only strengthen the reduction of our daily energy consumption at our stores, but also explore theintroduction or replacement of energy-saving equipment
and the adoption of an energy management system for thecentral control of in-house power use.

Growth toward a corporate groupwith sales of 1 trillion yen

In May 2021, you assumed the presidency of
SUGI Holdings. Now, it has been a year since
the transition from the founding generation to
the new management. Do you have anything in
mind regarding what you’d like to change andwhat you feel should be changed?

●S et up stores with a focus on health care (store areas, store types,

Growth strategy

Deepen operations in the field ofhealth care

Change customer experience throughDX
Expand cooperation and co-creation
efforts

Reinforcement of the
management foundation

Data-based management
Cost structure reform
HR and institutional development

alliance with medical institutions)●M aximize synergy between merchandising and prescription dispensing●E stablish a SUGI Pharmacy-version of comprehensive community caremodel●E volve customer experience through digital technology●D evelop one-to-one marketing●E nhance digital membership and increase the percentage of use ofprescription dispensing services● Optimize SCM* and develop products and categories by establishing

information linkage between the manufacturing, distribution andsales sectors● Establish healthcare networks both at home and abroad● Make the organizations and operations even more effective● Set up stores with high investment efficiency, and renovate existing

stores● Develop organizations and human resources toward the next

generation

Sugiura: We will keep our basic philosophy unchanged, ofour dedication to our customers, contribution to communities, and support for employees in demonstrating theircapabilities. I feel, however, that we can flexibly change
the means of realizing this philosophy. Excluding the basic philosophy, fixed ideas forcing us to perform in a particular way might generate negative effects. For example,
we place great value on communication with customers
at the time of their payment, but we have to consider theongoing cashless trend. Likewise, point programs are alsochanging and evolving. For store types, many of our stores
have an area of 200 to 300 tsubo (1 tsubo = 3.3 m2) witha focus on high visit frequency. In light of future customer
needs, however, we might want to enable customers tovisit our stores and have physical experience before shopping online. It is possible that our store and sales styles willchange greatly due to the needs of the times. Our philos-

ophy will remain unchanged, but we will never hesitate to
make a change as long as it is beneficial to our customers
and employees.

Can you conclude by giving a message to thestakeholders?
Sugiura: Toward realizing our philosophy, “contributeto local communities,” we will make further efforts to expand our alliance to push further forward with the Total
Healthcare Strategy. Last fiscal year again, we concluded
business alliances with a few companies to take on thechallenge of creating new value for local communities.
The scope of cooperation and co-creation is expanding
through alliances with local governments and companies
sharing the same ambition of contributing to citizens’
health. We intend to form partnerships with various players not only through capital and business alliances but
also in other forms, so that we can increase our corporate
value and return it to our shareholders. We believe that if
we can do so, it will lead us to generate great value for society. Together with our stakeholders, we will continue tocommit to the realization of a sustainable society in which
everybody can smile.

*SCM: Supply chain management

11

SUGI Holdings Integrated Report 2022

SUGI Holdings Integrated Report 2022

12Figures relating to the SUGI Pharmacy GroupNet sales on a consolidated basis

625.4

billion yen

StoresOperating income on a consolidated basis

32.1

No. of storesbillion yen* As of the end of February 2022

No. of stores by area

112
storesstoresPercentage
of prescription
dispensing stores

SUGI Pharmacy:
Prescription
dispensing

23.3%

11.5%

FY

FY

2010

2021

Merchandising

1,363 storesPrescription
dispensing

88.5%
Merchandising(Including 1,166 prescription dispensing stores)

107 stores
Home-visit nursing stations:13 stations
Japan Co., Ltd.:

76.7%

19.0%
Other

Household ware

19.1%

Beauty items

18.0%

No. of annual visitors

340

Healthcare

million visitors

20.5%

132.7

billion yen

85.5%

Kansai

502

Chubu

Kanto

401

526

SUGI Point membership

19.41

Digital membership

11.04

t

poin

million members

million members* Total no. of downloads of SUGI Pharmacy app and
SUGIsapo app, as well as registrations of SUGI
Pharmacy as a “family pharmacy” through the Family
Pharmacy app developed by MedPeer

0.1%

Prescription dispensing
Sales of prescription dispensing

54

Customers

Breakdown
Food

Hokuriku

Who is the SUGI Pharmacy Group?

1,483

Changes in the percentages of sales from merchandising and prescription dispensing(only at SUGI Pharmacy) *Excluding sales of Japan Co., Ltd.

Newly
established

Employees
Women

No. of prescriptions filled by us

Up

No. of prescriptions filledby the SUGI Pharmacy

12.9%
from thepreviousyear(Unit: 10,000 prescriptions)
1,200

11.73

16.8%

No. of employees

millionprescriptions

Up

16.1%
from theprevious
year*No. of full-time employees

7,308

Women

Men

47.9% Gender ratio 52.1%

Gender ratioof managers

Men

83.2%

1,000

No. of medical institutions whose
prescriptions are filled by us

57,071

800
600

institutions

400

No. of experts

2000■ Pharmacists
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 (FY)

*Including partner employees■ Beauty advisers■Nationally certified
dieticians

3,390 1,214 498
13

SUGI Holdings Integrated Report 2022

■ Nurses■ Registered pharmaceutical
distributors

87 9,704

SUGI Holdings Integrated Report 2022

14

Ideal Vision
Contribute to Local Communities through Total Health Support, Ranging from Self-Care to
Total Healthcare Strategy through Integration of the Real and the Digital

Medical care andmedication category

Self-care category

Elderly nursing support anddaily life support category

Prescription
dispensing

Health checkup

Online counseling, medical treatment,
and medication instruction

Fitness

Diagnosis■ Strategic Dominance of Setting Up
New Branches around Key Stores
By proceeding with the development ofsolution-oriented “key stores,” which underpin our strategic dominance, we place
the emphasis of our store-opening strategy on the creation of hubs of healthcare
networks evolving around our key stores.
*Our key stores fulfill the enhanced functionof health support expected to be provided bydrugstores. The stores feature a self-service spacefor customers to take health measurements, whileproviding a wide variety of services related tohealth care. They also have a community space
where events organized by nationally certified
dieticians and other experts take place on aregular basis.

Research institute(university)

Healthcare network

Key store
Health insurance
association

Secondary
prevention

Elderly
nursing care

Local government(Healthy lifestyles)

Terminal care

■ Increasing Regional Shares by Opening
Stores Aggressively, and Making Our
Stores Even More Competitive

No. of stores As of the end of February 2022

Personal
healthrecord(PHR)

Primary
prevention

1,483 stores in total

Terminalstage

Showing a commitment to local residents’ lifetime efforts in disease prevention and health management,
and contributing to their good health through a full lineup of care
Healthcare network connecting approximately 1,500 physical stores and local communities

Hokuriku area

54 stores
Kansai area

502 stores■ Increasing Lifetime Value
We provide support tailored to the health stage of each customer, from primary prevention and secondary prevention to
medical treatment, elderly nursing care and terminal care, thereby establishing a lifelong relationship of trust and underpinningtheir healthy, rich lifestyles and community healthcare.

We will underpin customers’ healthy,rich lifestyles and community
Trust from customers

healthcare.

I’m worried about my health checkup
results, so I consulted about theprevention of lifestyle relateddiseases and dieting, and boughtsome supplements and health food.

I consulted a pharmacist about
my child having a sudden
fever; I’m happy that the SUGI
pharmacy in my neighborhood
was open until late at night.

Living alone for the first time,
so I bought daily use items
conveniently at a store with alarge selection of items.

Middle-aged
customers

In addition to in-store
prescription dispensing,
SUGI pharmacy provides
home-visit care; I enjoy
services provided at home,such as home-visit
prescription dispensing.

526 stores
Seniorcustomers

Service
Prescription
dispensing

30s

40s

50s

60s

70s Age group

Expansion of needs in the healthcare category – responding to healthcare needs and daily life support needs –SUGI Holdings Integrated Report 2022

Kanto area

Chubu area

Merchandising

Young family customers

Young customers

15

Elderly nursing
service provider

Municipality and comprehensive community support center

Health counselingand measurement

20s

Home-care
support clinic

Health checkup
institution

Long-term elderly
nursing care

Chronic-phasemanagement

Pharmacy

Expanding through our physical advantages,
mainly stores, and digital technology

Treatment

Healthcheckup

Hospital

Fitness club

Who is the SUGI Pharmacy Group?

In the Total Healthcare Strategy, people’s lives, from birth until the end of their life, are divided roughly into three stages,
covered by the self-care category, the medical care and medication category, and the elderly nursing support and daily life
support category. The strategy is intended to ensure contact points with customers, regardless of their health condition,and provide optimum products and services appropriate for the conditions of customers in different stages by integrating
our physical advantages with digital technology.

Medical Care, Medication, Elderly Nursing Support, and Daily Life Support

401 stores

We are pushing forward with strategic
dominance in the Kanto, Chubu, Kansai and
Hokuriku regions. As of the end of FY 2021, we
had established 1,483 stores in total, featuringindustry-leading regional market shares in the
Chubu and Kansai regions. Many of the storesare prescription dispensing drugstores in suburban areas focused on health and beauty items.
However, we have recently been proactively
promoting the establishment of stores focusedon foods with enhanced convenience for consumers, stores in urban areas focused on beauty
items, and stores featuring medical institutions.

■ Establishing a Network of Prescription Dispensing and Medical Care by Operating Three Types of Stores
We are proceeding with operationsof the three types of stores: “pharmacies
with the function of prescription dispensing,” “pharmacies featuring medical malls
or medical institutions” and “pharmacies
located on the premises of medical institutions.” While achieving cooperation withlocal medical institutions, we are working to ensure that patient information isshared regardless of the type of pharmacy that the patients use, and to establish
a network of prescription dispensing andmedical care to underpin local residents’safe and secure daily lives.

A medical mall or clinic locatedon a store’s second floor or in its
parking area

“Pharmacies with thefunction of prescription
dispensing”

Nagoya University Hospital Store

Expanding the standard
model as an advantagethat we have maintainedsince our establishment“Pharmacies featuring
medical malls or medical
institutions”
Reinforcing cooperation withmedical institutions from theperspective of local medical
infrastructure

Mutualsharingof patient
information“Pharmacies located on
the premises of medical
institutions”
Reinforcing support foradvanced medical care as animportant base connecting core
hospitals and local stores

SUGI Holdings Integrated Report 2022

16

Promotion of DX* and Future Vision

*Digital transformation

Through the integration of physical and digital assets, we will effectively provide services tailored to the lifestyle
habits and health challenges of each customer.

aaa❶ Enter a store❷ Register items

Start shopping with arental smartphone.

Place shopping items ina shopping basket after
registering them.

❸ Settle the accountand leave the store

Pay for the items at aregistration terminal.
Return the smartphone
before leaving the store.

Advantages for customers

Introducing digital signage
and forming a network
We cooperate with manufacturers inproviding information that suits customer
needs.

In the SUGI Pharmacy Group, we work with companies featuring high-level expertise and advantages to realize mutual
cooperation and joint creation, thereby promptly and organically connecting physical and digital contact points withcustomers. We are proceeding with the Total Healthcare Strategy, designed to contribute to improving local residents’
health through our commitment to their lifetime efforts toward disease prevention and health management.

Joint Development of SUGIsapo App, Enabling Users to Continue Healthy Habits

MedPeer Inc.
Capital and business allianceconcluded in March 2018https://medpeer.co.jp● Can pay quickly at a registration terminal.

MedPeer Inc. operates an online doctor community site, in which 140,000 doctors areregistered, and develops an online medical business and preventive care business throughthe use of IT. The apps SUGIsapo Walk, Eats and Deli have resulted from our joint development project in the selfcare business. By taking advantage of these apps, we will continue
to effectively provide services well-tuned to each customer’s lifestyle and health problems.

● Can prevent the spread of COVID-19

thanks to minimum contact with others.

Approach to Customers in China through a Cross-border EC App● Can ensure that the shopping is well-planned by checking the total sum while
shopping.

Inagora Holdings Co., Ltd.

In-store or online
communication

Capital and business allianceconcluded in January 2020
https://www.inagora.com

Inagora Holdings Co., Ltd. operates Wando, an EC app for inbound and cross-borderbusiness specializing in Japanese products. We gain from the company its expertise on
Chinese consumers’ needs and consumption behavior, as well as its marketing knowhow. At the same time, through Wando, we sell trend-sensitive consumers in China
various products, mainly those privately developed by the SUGI Pharmacy Group.

Who is the SUGI Pharmacy Group?

Improved shopping
experience

Introducing smartphone-linked registration terminals

Strategic Partnership for Proceeding with the Total Healthcare Strategy

Online communication

In-store communication
Providing more effective counseling by using
digital tools

Providing customer-oriented
services anytime, anywhere

Based on the product purchase history and other informationcollected through digital tools, we will provide counseling tailoredto the needs of each customer, thereby providing them with
optimal value.

Establishment of relationships of trust with customers leads to their frequent visits, and makes
it possible for us to utilize accumulated data andcontact points for in-store counseling services.

Expansion of the Support Business for Preventing the Aggravation of Lifestylerelated Diseases

PREVENTS Inc.
Business alliance concluded in June2020
https://prevent.co.jp

PREVENTS Inc. provides health insurance associations with a program for preventing lifestyle-related diseases from becoming serious in cooperation with doctors. In our joint project with this company, we will strive to expand the support business for preventing theaggravation of lifestyle-related diseases through the use of SUGI Pharmacy’s nationallycertified dieticians and the introduction of each other’s business partners. This allianceenables us to provide a full line of support, ranging from disease prevention to treatment.

Acceleration of Our Efforts to Set up Stores in Taiwan and the Creation ofSocial Value in the Asia Area
We offer appropriate counseling byusing the product purchase history
gained from electronic records ofcosmetics purchases and information
gained from skin analyzers.

We offer counseling services by
nationally certified dieticians using
lifestyle-related disease risk reports.

We provide follow-up by pharmacists after
medication and online medication instruction.

Great Tree Pharmacy Co., Ltd.
Business alliance concluded in
November 2020
https://www.greattree.com.tw

Expand Communication with Customers by Increasing Productivity through DX
Improved productivity
and service quality

17

Making still more
effective use of portable
information devices● Using AI to ensure analysis quality is uniform● Connecting portable information● Using AI to optimize display racks in line with

devices to various systems, which
contributes to the streamlining oforder placing, stock control, andpoint redeeming operations● Enabling employees to refer tovideo manuals and record files
used for store operation, anytime,
anywhere within the stores

SUGI Holdings Integrated Report 2022

Optimizing the productlineup through the use of AI
customer needs● Introducing an automated temperature

management system

AI optimizing the product lineup
Display productinformation

Proceeding with automationof quality control and further
improving operation quality

AI

Product purchasehistory● Introducing an expiration date management system● Introducing a system for issuing discount labels

Support for Preventive Care and Health and Productivity Management in Vietnam

Omicare Joint Stock Company
Business alliance concluded in July2021
https://omicare.vn/loi-chao-tu-ceo

Reducing risk of quality defects
Reducing disposal loss

Product shelf

Analyzing anappropriate display
and which items
should be removed

Omicare Joint Stock Company operates Omi Pharma, a drugstore with a pharmacy function, and EC business in Vietnam. In the SUGI Pharmacy Group, we provide
the company with our business model and management know-how, some of our
products and trademarks, and HR interaction opportunities. In so doing, we strive toreinforce the company’s function as a base for offering healthcare counseling anddisseminating related information, so that we can establish a framework to support
preventive care and health and productivity management in Vietnam.

Expansion of Sales through Catalogue Mail-Order and EC

Online app screen

Temperature sensor

Great Tree Pharmacy Co., Ltd. is a drugstore chain operator running approximately 200
stores in Taiwan. We will provide the company with the total healthcare business model
established by the SUGI Pharmacy Group, as well as some of our products and trademarks.
In addition, both parties share each other’s management know-how. This will enable bothof us to further proceed with our business development. Through our alliance with Great
Tree Pharmacy, we will strive to achieve new value creation in the Asia area.

Temperature sensor

Scroll Corporation
Business alliance concluded in
February 2022
https://www.scroll.jp/

Scroll Corporation operates based on the catalogue mail-order know-how that the company has long accumulated as a mail-order business. In the EC market, the company focuses on the B-to-C model wherein it sells individual customers a rich lineup of products,
including items privately developed by its group companies. In line with this alliance, thecompany and the SUGI Pharmacy Group will share a wide variety of products and distinctive know-how on mail-order business, thereby striving to contribute to local communities.

SUGI Holdings Integrated Report 202218

Growth Milestones

The numberof our drugstoresexceeds

The numberof our drugstoresexceeds

100

Business Development (FY)

500

’01

’06

2001 ● Listed on the first section of the Tokyo
Stock Exchange

1976

1,000

’07

’08

’13

2007 ● Acquired full ownership of Japan
Co., Ltd.
2008 ● Changed the trade name Sugi
Pharmacy Co., Ltd. to SUGI
Holdings Co., Ltd.
● Transferred to a holding-company
system due to an incorporationtype company split, with Sugi
Pharmacy Co., Ltd. and SUGI
Medical Co., Ltd. newly established● Acquired full ownership of Iizukayakuhin Co., Ltd.

Launched as a “family
pharmacy” in a small town inNishio City, Aichi Prefecture

The numberof our drugstoresexceeds

1,500

’16

’18

2013 ● Established the first key store in
Kumami2016 ● Established the Obu Center as ourown logistics center

’19

’20

Net sales(billion yen)

600

’21

2018 ● Concluded a capital and business alliance with the
MedPeer Group● Established DCP Solution Co., Ltd. to provide
support for doctors to open clinics
2019 ● Established Nagoya University Hospital Store as a “pharmacy
located on the premises of a medical institution”
2020 ● Concluded a capital and business alliance with Inagora
Holdings Co., Ltd.
● Established S Trading Co., Ltd. to supply products toboth domestic and foreign markets● Concluded a business alliance with Great Tree Pharmacy Co., Ltd.
2021 ● Concluded a business alliance with Omicare Joint
Stock Company (which operates Omi Pharma,a drugstore with a pharmacy function, and EC
business in the Socialist Republic of Viet Nam)
● Conducted a split and absorption of SUGI Medical
Co., Ltd.’s home-visit nursing business into HMA
Co., Ltd., and changed the trade name HMA Co.,
Ltd. to SUGI Nursing Care Co., Ltd.

500

Who is the SUGI Pharmacy Group?

Establishment’00

The numberof our drugstoresexceeds

400
Products and Services (FY)

’02

’03

’05

2002 ● Launched a home-visit prescription
dispensing service for individual patients
2003 ● Launched aseptic prescription
dispensing in a clean room2005 ● Launched facility-visit prescription
dispensing services for facilities forsenior citizens

’08

’14

2008 ● Launched home-visit
nursing and elderly homecare services

’18

’19

’20

2018 ● Launched the meal delivery service SUGIsapo
Deli2019 ● Launched a specific health guidance service bynationally certified dieticians● Released the pedometer app SUGIsapo Walk
● Released the diet record app SUGIsapo Eats
2020 ● Launched the sales of a lifestyle-relateddisease risk report using big data

2014 ● Launched the rental and salesof welfare products

300

200
CSR・ESG (FY)

’08

’09

’13

2008 ● Began participation in the Pink
Ribbon Campaign
2009 ● Established SUGI Smile Co., Ltd. topromote disabled employment● Launched cosmetic therapy atfacilities for senior citizens andhospitals

’76
19

’80

SUGI Holdings Integrated Report 2022

’90

’00

’01

’02

’03

’04

’05

’06

’07

’08

’09

’14

’17

2013 ● Launched the donation of AEDs tofacilities for senior citizens● Launched the donation of medical
wigs to breast cancer patients2014 ● Launched support for children withintractable diseases and their families
2017 ● Concluded comprehensive partnershipagreements with local governments
toward the realization of sustainablecommunity development

’10

’11

’12

’13

’14

’15

’16

’18

’21

2018 ● Concluded a partnership contract with FC Kariya, anonprofessional soccer team● Acquired Platinum Kurumin certification
2021 ● C ertified for two years in a row as an outstanding enterprisein terms of health and productivity management●E stablished the ESG Promotion and Sustainability
Committee●A nnounced the endorsement of the Task Force on
Climate-related Financial Disclosures (TCFD)●A warded the grand prize of the Supply Chain
Innovation Award 2021 in recognition of our efforts
to ensure cooperation between the manufacturing,
distribution and sales sectors toward realizing
optimum inventory and reducing return2022 ● Concluded with Fujita Academy a basic agreement
regarding cooperation for community healthcare
and a contract to establish a joint research seminar●T ransferred to the Tokyo Stock Exchange Prime Market
and the Nagoya Stock Exchange Premier Market

’17

’18

’19

’20

’21 （FY）

100

0

SUGI Holdings Integrated Report 2022

20

Value Creation Process
Technology
innovation● Promotion of 5G andexpansion of IoT● Integration of the real andIncreasingly serious
social problems● Aging population and lower

birthrates● Increase in medical costs● Global warming● Use of plastics

the digital

Changesin society

Business operations for creating value for societyNewbusiness

Shopping
supportBeautyitems

Healthcare

Shift to DX

Merchandising● Changes in consumption behavior● Shift from ownership to sharing
Preventive
care program

ip with many stakeh
old
ersh
n
t
ers
r
Pa

Solution of social problems
e-commerce

Home-visit
prescription
dispensing

Realizing
continuous
growth of sales
and incomes

Medication
instruction

Prescription
Shift to DX
dispensing
Medication
follow-up

Presenting value

Accomplishing a society where
everyone is happy and full of smiles- Addressing 16 priority issues Addressing
the aging
population andlowerbirthrates

Medication
management

Addressing
each priority
issue and KPI

Total Healthcare Strategy

Reducing
medical costs

Contributing
to the global
environment

Realizing themanagement philosophy

Maximizing
customers’
lifetime value(LTV)

Household
ware

Food

Changes in values● Diversification of values

Healthimprovement
app
Shopping
truck service

Who is the SUGI Pharmacy Group?

While responding to increasingly serious social problems, technology innovationand changes in consumers’ values, we leverage our strengths in developing businessand services in cooperation with our business partners, with “merchandising” and“prescription dispensing” serving as our two main business sectors.
We strive to create new value for customers and accommodate local health needs.
At the same time, we endeavor to grow into a corporate entity that can gain the
support of the public, and realize a society where everyone is happy and full ofsmiles.

Sources for creating value

The SUGI
Pharmacy Group’s
strengths

Communityoriented store
network

Kindness

Membershipof 19.41
million as thecornerstone

Plenty ofexperts

Expertise on
prescription
dispensingSoundfinancialfoundation

Returning value

Honesty Trust

Underpinning community healthcare
and contributing to local communities
21

SUGI Holdings Integrated Report 2022

SUGI Holdings Integrated Report 2022

22

Merchandising

Business Report [Sugi Pharmacy Co., Ltd.]

pandemic, we address customers’ and patients’anxieties and worries at the front line in local
communities and support their safe and healthy
daily lives.

Shinya Sugiura
Director of SUGI Holdings Co., Ltd.
Managing Director of Sugi Pharmacy Co., Ltd.

ing in considerable growth of sales of protein-related products.
Moreover, the pandemic made many customers realize the importance of oral care, while many more people suffered fromdifficulty sleeping due to mental stress caused by the pandemic.
Paying close attention to such changes in the market and needs,
we carefully altered our store layouts, expanded the selling spaces of target products, and enhanced the appeal of our stores. In
addition, we ensured linkage between the SUGI Pharmacy app,which has marked 8.33 million downloads, and various services,
including the provision of product information, discount coupons, and additional point coupons, to enhance customer satisfaction. On top of keeping up with the trend shift caused by the
pandemic, we also worked toward attracting young customers
by handling many more genderless items and promoting beauty
items at stores in association with social media. We thus took thenecessary sales measures promptly.
As a result of customers’ support for these efforts, we recorded
net sales of 488.3 billion yen. Despite the severe market environment, we were thus able to increase our business results.

Who is the SUGI Pharmacy Group?

Among the ongoing impact of the COVID-19

In FY 2021, which marked the 45th anniversary of our establishment, we cooperated with our suppliers in selling 45th-anniversary commemoration products and proceeding with sales
promotion for the anniversary, thereby strengthening our efforts
to expand sales.
In addition, toward future business growth, we made our store
portfolio even more sound by setting up new stores and renovating or relocating our existing stores. We also worked toward establishing a digital CRM foundation in order to realize one-to-one
sales promotion. At the same time, to improve our productivity,
we reduced the store workload by expanding the scope of automated ordering and improving the relevant systems, optimized
working hours by reviewing staff assignment, and optimized theentire supply chain of the manufacturing, distribution and sales
sectors by establishing information linkage with suppliers.
With the impact of the COVID-19 pandemic still continuingfrom the previous year, in order to reinforce sales of food products by taking advantage of an increase in demand due to thepandemic requiring people to stay home, we equipped storeswith many more freezing or cooling showcases to increase salesof frozen foods, and ensured that many more stores handle perishable food. Moreover, at all stores, we strengthened the lineup
of products that were typically purchased at drugstores and thatwould contribute to improving physical strength and immunity.
Under the lead of registered pharmaceutical distributors, all our
staff called for customers to take anti-infection measures by recommending them to take vitamins and other items.
Many people refrained from going out, leading them to become more aware of improving their physical strength andhealth and more interested in working out at home. We ensured
that our stores appealed even more to such customers, result-

Sales (merchandising of Sugi Pharmacy Co., Ltd.)(billion yen)
500
400

370.4

394.8

433.5

480.9

488.3

300
200
100
0

2017

2018

2019

2020

2021 (FY)

Prescription Dispensing
Despite the ongoing impact of the COVID-19 pandemic, FY 2021 saw some trends of economic conditions returning to normal thanks to an increase in the vaccination
rate. In the latter half of 2021, however, the rapid spreadof the omicron variant led the imposition of pre-emergency measures in Japan. In addition, the world experienced
the appreciation of raw material prices, returning society
to an unstable situation once again.
The drugstore industry is still expanding the prescription
dispensing market, although sales of food products anddaily items declined in FY 2021 as a rebound from theirrapid demand growth in the previous year. Moreover, as aresult of the establishment of the custom of always wearing a mask and increase in public awareness of hygiene,
there is a protracted decline in demand for cosmetics andOTC pharmaceuticals. This is intensifying competition
both inside and outside the industry, spurring each operator to set up new stores and conduct M&A. Combinedwith this situation is the revision of dispensing fee points
and drug prices. Consequently, the business environmentis becoming even severer, with no cause for optimism.
In this environment, SUGI Pharmacy is striving to improve
its profitability by featuring product lineups and store operation designed to respond to changes in customers’ lifestyles and growth in their awareness of health and disease

23

SUGI Holdings Integrated Report 2022

prevention amid the COVID-19 pandemic, improving customer service through enhanced store operation efficiency,
and showing due consideration for staff assignment. In the
category of prescription dispensing, where we have always
had an edge since our foundation, we are increasing our
productivity and enhancing the quality of our communication with customers by, for example, transferring some
operations involving the handling of drugs to medical office workers, training pharmacists, making full use of digital
tools, and ensuring alliances with medical institutions.

While setting up new pharmacies to expand our operations in thefield of prescription dispensing, we renovated some stores to enlarge
their dispensing rooms or waiting rooms, thereby striving to invigorate existing stores. When doing so, we selected high-priority storesfrom the perspective of the increase in the number of filled prescriptions and the amount of used pharmaceuticals. This led to the improvement of the waiting environment for patients and the working
environment of pharmacists and medical office workers. The number of prescriptions filled at the renovated stores has remarkably increased from the figure marked before the renovation, showing that
our renovation efforts are steadily generating favorable results.
To boost the percentage of use of our prescription dispensing services among those who have purchased our products, we increased
the profile of the service and encouraged users to download our
Family Pharmacy app. Our store staff actively encouraged customers
to use the app, resulting in a considerable increase in the numbersof patients registering us as a family pharmacy, cases of medication
follow-up, and prescriptions sent through the app. Moreover, we reinforced in-store staff cooperation between the merchandising andprescription dispensing sectors so that communication with andcounseling for customers, from which our history started, and otherservices are fully offered.
To reinforce communication with patients and medical institutions in the form of medication instruction, medication history management, medication follow-up, and mutual information linkage
with medical institutions, all of which are primary roles of pharma-cists, as well as to enable pharmacists to concentrate on communication with patients, we proceeded with the automation of operations
by introducing dispensing machinery and the transfer of some operations involving the handling of drugs to medical office workers.
For the dispensing machinery, we are equipping all stores with newreceipt computers and introducing one-dose packaging machinery,ointment mixers, and checking systems. Furthermore, we are setting up stores specializing in home-visit prescription dispensing inorder to enhance the patient service level in the field of home-visit
prescription dispensing, strengthen partnerships with players from awide variety of industries, and improve the operating efficiency.
As a result of patients’ support for these efforts, we filled 11.73
million prescriptions (up 16.1% from the previous year’s level), withsales in prescription dispensing services reaching 132.7 billion yen(up 12.9% from the previous year’s level).

Sales (prescription dispensing of Sugi Pharmacy Co., Ltd.)(billion yen)
150
120
90

84.1

91.0

105.2

117.5

132.7

60
30
0

2017

2018

2019

2020

2021 (FY)

SUGI Holdings Integrated Report 2022

24

Market Environment
What is required in addressing challenges, such as the aging and declining population and the need to reduce medical costs,
is total healthcare covering self-care, elderly nursing support, and daily life support focused on each customer. Drugstoresare experiencing accelerated digitalization in a wide variety of forms in line with changes in society. In addition, the Ministryof Health, Labour and Welfare is promoting policies to reorganize all pharmacies into “family pharmacies” by 2025.

Size of the drugstore
market*1

Specific cases● Promotion of comprehensive community

Aging and declining
populationcare● Better response to home-care support needs● Change in purchasing behavior of seniorcitizens

Drugstore segment

Mega trend● Rapid increase in self-care demand

Need to reduce
medical costs(Digitalization)● Integration of physical and digital assets● Promotion of 5G and enhancement of IoT● Unified and continued management of

medication information supported by ICT● Rapid expansion of the e-commerce market

Change in consumer
behavior

22.04 million in 2000

Population aged
65+ in Japan*2● Rise in health consciousness● Change in consumer behavior due to the

COVID-19 pandemic; Quick shopping in
nearby areas

External prescription
rate(Market size)

Size and share of
the prescription
dispensing market for
drugstores*4

Trend

Business Organization’s Recommendation on Ideal Visions for Pharmacies and Pharmacists
The Japan Business Federation has presented a healthcare model and recommended the use of online features so that the industry
can accommodate health care needs, which are expected to diversify increasingly in line with technological innovation and changes in
consumer behavior.

Demand in the self-care category, such as maintenance and promotion of good health and disease
prevention, and demand in the life support category,such as meals and product sales for senior citizens, aregrowing rapidly in accordance with the increase inpopulation aging. The pharmacy industry is one of the
few growing sectors in the age of population decline.

39% (2.7 trillion yen) in 2000

Online healthcounseling

Rental of
welfare products

Home-visit prescription
dispensing

Product sales anddelivery of
medical supplies

Preventive carefor senior citizens

Health promotion
apps

63% (6.1 trillion yen) in 2010

Prescription dispensing

76% (7.5 trillion yen) in 2020*3
Prescription dispensing amount: 1.07

Home-visit
nursingElderly nursing support anddaily life support category

Delivery of healththerapeutic meals

Behavior change
support and healthpromotion
programs

Medical care and medication category
High-level
pharmaceuticalmanagement

trillion yen in 2020 (+9.0% YoY)
Prescription dispensing market share:

Medication follow-up
Polypharmacy
prevention

Delivery ofdispensed drugs

13.8% in 2019

Aggravation
prevention

Online medication
support/instruction

In the prescription dispensing market, a shift frompharmacies located near medical institutions toprescription dispensing drugstores located in suburban areas is in progress following the Pharmacy
Vision for Patients, promoted by the Ministry of
Health, Labour and Welfare. This is an importantsegment supporting the growth of drugstores.

*1: “Fact-finding survey of drugstores in Japan” by the Japan Association of Chain Drug Stores*2: Press release by the Ministry of Internal Affairs and Communications*3: P rogress of Separation of Dispensing and Prescribing Functions (Trend in Insurance Dispensing), the Japan
Pharmaceutical Association*4: Dorabizu on-line (Drugstore Association) Prescription Dispensing at Drugstores Exceeds 1 trillion Yen for the FirstTime (Released on April 16, 2021) https://www.dgs-on-line.com/articles/877“Pharmacy Vision for Patients” Promoted by the National Government
In 2015, the Ministry of Health, Labour and Welfare released the Pharmacy Vision for Patients in order to present the future vision offamily pharmacies toward realizing separation of the dispensing and prescribing functions with a focus on patients. Taking advantageof the revision of the Pharmaceutical and Medical Device Act, the Ministry has also presented the course of action to reorganize current
pharmacies into family pharmacies.
2015■ Using smartphone apps and other tools for presenting suggestions for appropriate health management■ Providing a full line of online services ranging from counseling to medication instruction and medication follow-up■ Outsourcing prescription dispensing to highly automated prescription dispensing pharmacies■ Spreading e-prescriptions ■ Spreading last-mile delivery and delivery boxes

The Ministry of Health, Labour and Welfare released
the Pharmacy Vision for Patients∙ Aiming to equip all pharmacies, including thoselocated near medical institutions, with the functions ofa family pharmacy

2020

It became mandatory to provide medication follow-up(revision of the Pharmaceutical and Medical Device Act)∙ Providing patients with continuous medication follow-up

SUGI Holdings Integrated Report 2022

Product sales

Self-care category(Specific details)*With reference to Healthcare in the Age of Society 5.0 Vol. III – Many More Healthcare Options Coming from the Use of Online Features, Japan Business Federation

25

36.40 million in 2021

39.21 million in 2040 (estimate)evaluation of the operations of handling
drugs and communicating with customers)● Outcome evaluation (health promotion andprevention of aggravation)

Prescription dispensing segment

Technologicalinnovation

8.3 trillion yen in 2020

10 trillion yen in 2025 (estimate)

Trend● Revision of dispensing fees (appropriate

Who is the SUGI Pharmacy Group?

2.7 trillion yen in 2000

2021

A pharmacy certification system was introduced(revision of the Pharmaceutical and Medical Device Act)∙ “Local alliance pharmacies” and “pharmacies alliedwith specialized medical institutions”

2025

All pharmacies will be reorganized into “family pharmacies”∙ Use of ICT ∙Family pharmacy + health support functions

2035

Pharmacies will demonstrate the family pharmacy
function in daily living areas∙ Acclaiming pharmacies relocated to a daily living area

SUGI Holdings Integrated Report 2022

26

Financial/Non-financial Highlights

Financial index Net sales(billion yen)
600

457.1

488.7

602.8

Financial index Operating income

Financial index Net assets per share

Financial index Dividend per share/Payout ratio(billion yen)
40

(Yen)
4,000

(Yen)
100

30

24.8

400

26.0

34.0

30.1

32.1
3,000

20

300

2,559

2,694

2,956

3,245

3,460

80
60

24.3

80
23.8

40

25.5

23.4

30
20

40

200
10

1,000

20

100
0

23.1

2,000

（％）
50

Dividend per share
Payout ratio

2017

2018

2019

2020

0

2021 (FY)

Financial index Profit attributable to owners of parent
20.7(billion yen)
20

21.1

17.9

16.4

2017

2018

2019

2020

Financial index ROE

19.3

（％）
12.0

10.6

10.9

11.9

11.0

9.0

15

0

2021 (FY)

2017

2019

2020

2021 (FY)

0

70

80

80

2017

2018

2019

2020

Financial index Capital investment

Non-financial index Number of stores(billion yen)30

(stores)
1,500

9.4
20

18.0

6.0

10

2018

10

60

20.3

21.5

23.3

1,105

1,190

1,287

1,391

2021 (FY)0

Who is the SUGI Pharmacy Group?

500

542.3

625.4

1,483

1,000

11.7
10

500

3.0

5

0

2017

2018

2019

2020

0

2021 (FY)

Financial index ROA
10.7

10.5

2018

2019

2020

2021 (FY)

Financial index Total assets
10.9

10.7

9.7

9.0

300

6.0

200

313.7
253.9

0

2017

2018

2019

2020

2021 (FY)Non-financial index Year-end total square meters of sales floor(billion yen)
400

（％）
12.0

2017

345.9

334.7

265.4

（10,000 m2）
100
80

66.7

72.2

78.1

84.7

91.5

0

2017

2018

2019

2020

2021 (FY)Non-financial index Number of point members(million persons)
20

15

13.96

15.14

16.45

18.04

19.41

60
10
40

100

3.0

0

2017

2018

2019

2020

0

2021 (FY)

Financial index Net assets/Equity ratio(billion yen)
250
200

213.8

Net assets
Equity ratio

63.8

62.7

150

58.2

58.0

（％）
100

63.9

80

2017

2018

2019

2020

2021 (FY)

20

162.0

166.5

182.7

200.6

2017

2018

2019

2020

2021 (FY)

0

2018

2019

2020

2021 (FY)

0

2017

2018

2019

2020

2021 (FY)Non-financial index Number of employees

Non-financial index No. of managers/Ratio of female managers(persons)
20,000(persons)
2,500

336
300

259

341

287

313

16,46415,00010,000

40

50

2017

Financial index Net income per share

200

0

0

(Yen)
400

60

100

5

20

5,000

100

0

2017

2018

2019

2020

2021 (FY)

0

Total

13,236
Partner
employees

18,177

19,0782,000

14,252
8,758

10,282

11,467

11,770Female
1,500

156

10.8

178
11.6

1,000

7,973

Full-time
employees

5,494

6,182

6,710

7,308

2017

2018

2019

2020

2021 (FY)

5,263

（％）
No. of managers
Ratio of female managers

500
0

Male

1，
358

2017

2018

1,292

313

228
13.6

1，
451

15.6

358
16.8

25
20

15

1，
692

1，
768

10
5

2019

2020

2021 (FY)0*Number of partner employees converted into the number of 8-hour workers

27

SUGI Holdings Integrated Report 2022

SUGI Holdings Integrated Report 2022

28

Priority Issues (Issues of Materiality) for Proceeding with Sustainability Management
As a corporate group closely related to the lives of people in local communities, the SUGI Pharmacy Group believes
that sustainable corporate growth will be achieved by solving social issues in order to contribute to the establishmentof a sustainable society and by consequently realizing our management philosophy. In 2021, we reviewed our priority
issues (issues of materiality) and specified five themes.

Process for Identifying Priority Issues (Issues of Materiality)
We identified our priority issues (issues of materiality) through the process below. We will flexibly review them as necessary,in accordance with changes in our business and the external environment.

Sustainability Basic Policy
The SUGI Pharmacy Group aims to contribute to the sustainable development of local communities throughcooperation with stakeholders, in order to realize a vigorous society by seriously addressing a wide varietyof environmental and social issues and increasing the number of healthy and energetic people throughcorporate activities.

First, we clarified our challenges based on interviews with the heads of departments and directors in charge, as well as on opinions from external
specialists. Then we renewed the priority issues,
while referring to the guidelines on sustainability(GRI, SASB), the SDGs, ESG rankings, and the statuses of rival companies at home and abroad. In
the renewal process, we took into consideration
our management philosophy and Sustainability
Basic Policy.

Five Themes and 16 Priority Issues (Issues of Materiality)● Improvement of access to reasonable and quality● Personal information protection● Health education and support for patients in thecommunity● Improvement of therapeutic effects for patients● Establishment of a robust society in terms of disasterWe considered the orderof priority based on theopportunities, risks andmajor efforts for eachpriority issue from theperspectives of economic value and social value,and created the materiality matrix.

After the board of
directors reviewed
the order of priority, we finalized thefive themes and 16
priority issues (issues of materiality).

risk reduction and crime prevention● Contribution to rich lifestyles

through products● Maintenance of product safety
and security● Establishment of a responsible supply
chain management framework

HealthyCommunityand enhanced information
security● Reinforcement of corporate
governanceConfirmation of thefeasibilityHigh● Maintenance of product safety

and security

Growth Foundation

healthcare services● Ensuring safety in medical care and proper
management of medical and pharmaceuticalproducts● Improvement of convenience in everyday
life and support for the community

Consideration of theorder of priority

Selection of priority issues● Improvement of access to reasonable

and quality healthcare services● Health education and support

for patients in the community● Realization of a carbon-free society

P33−40● Reform to realize healthy and● Ensured safety in medical care andproper management of medical andpharmaceutical products

safe working styles● Establishment of a robust society in terms of

Sustainable
Business Partnership

P51−59P41−42Contribution to
Local Communities

Importance for society

Corporate
Governancedisaster risk reduction and crime prevention● Personal information● Improvement of convenience ineveryday life and support for thecommunity

protection and enhanced
information security● Improvement of therapeutic

effects for patients● Establishment of a responsible● Contribution to rich lifestyles

through products● Human resources development

supply chain management
framework

Healthy Workplace
Environment
P47−50● Reinforcement of corporate

Contribution to
the Global
Environment

governance● Realization of a recycling-based society

P43−46● Utilization of diverse humanresources● Human resources development● Reform to realize healthy and safe working

styles● Utilization of diverse human resources

29

SUGI Holdings Integrated Report 2022

● Realization of a carbon-free

Importance for the SUGI Pharmacy GroupHigh

society● Realization of a recycling-based society

SUGI Holdings Integrated Report 202230

Five Themes and Priority Issues (Issues of Materiality)
Themes and issues of priority
Improvement of access to reasonable andquality healthcare services
Ensured safety in medical care and proper
management of medical and pharmaceuticalproducts

Healthy community

Improvement of convenience in everyday lifeand support for the community
Health education and support for patients inthe community
Improvement of therapeutic effects forpatients
Establishment of a robust society in terms ofdisaster risk reduction and crime prevention

Opportunity Acquisition of growing markets
Risk

Customer defection

Opportunity Increase in customer satisfaction
Risk

Decline of brand value / Decrease in the number of patients

Opportunity Acquisition of growing markets / Improvement in brand value
Risk

Decline of brand value

Opportunity Increase in customer satisfaction
Risk

Decline of brand value

Opportunity Increase in customer satisfaction / Increase in dispensing fees
Risk

Reduction in dispensing fees

Opportunity Improvement in brand value
Risk

Opportunity Acquisition of growing markets / Improvement in brand value
Risk

Risk

Opportunity Cost reduction / Improvement in brand value
Risk

Contribution to theglobal environment

Risk● Improving access to products and services

Risk● Improving medication adherence by providing

Healthy workplaceenvironment

Decline of competitiveness

Opportunity Enhanced recruiting capability / Inspired innovationand organizations● Supporting patients and their families● Improving therapeutic effects by providing

information to medical institutions● Establishing robust stores and infrastructure● Supporting disaster-affected people inlocal communities● Providing health-conscious products● Focusing on the development of highvalue-added products● Establishing a product quality assurance

framework● Disclosing information appropriately● Managing supply chain appropriately● Focusing on the development of ethicalproducts● Promoting smooth communication with

suppliers● Reducing environmental impact throughthe entire life cycle● Promoting store development aimed at conserving

water resources● Promoting recycling through the cooperation of

the manufacturing, distribution and sales sectors● Improving capacity development training for

employees● Shifting to a job-focused human resources system● Promoting health and productivity management

Risk

Employees leaving the company / Decline of brand value● Actively providing opportunities for

employees to fully demonstrate theirabilities● Promoting work-style reforms

environment in consideration of employees’ safety● Generating opportunities with a focus on diversity

Risk

Corporate
governance

Risk

Occurrence of risks in business continuity / Decline ofcorporate value

Opportunity Improvement in corporate value

Reinforcement of corporate governanceRisk● Fostering a corporate culture that respects

Slowing store launch / Decline of brand value

Opportunity Improvement in corporate value

Occurrence of risks to business continuity / Decline ofcorporate value● Developing a framework that supports

diverse working styles

Utilization of diverse human resources

SUGI Holdings Integrated Report 2022

● Supporting activities by local communities● Promoting the establishment of a workplace

Opportunity Accelerated store launch / Inspired innovation

Personal information protection andenhanced information security

pharmaceutical products using digital tools

medication follow-up● Improving therapeutic effects by preventing
polypharmacy● Reducing greenhouse gas emissions

Decline of brand value● Providing information on medical andand care● Providing information to and raising awareness ofpatients and their families● Shifting to renewable energy

Human resources development
Risk● Providing more information to promote prevention

value

Realization of a recycling-based society● Providing data-based healthcare services

services for in-home patients

Cost increase due to carbon taxes / Decline of brand

Opportunity Inspired innovation

31

training and infrastructure development● Safely collecting medical and pharmaceuticalproducts and medical equipment

Customer defection

Opportunity Improvement in brand value / Cost reduction

Reform to realize healthy and safe working
styles● Collecting near-miss cases and sharing them for

Rival companies acquiring growing markets

Customer defection

Related SDGs

function● Enhancing online services

Suspension of operation due to natural disasters, etc. / Declineof brand value

Opportunity Improvement in brand value

Realization of a carbon-free society● Increasing the number of stores with a counseling● Enhancing medical and elderly nursing-care

Maintenance of product safety and security

Establishment of a responsible supply chain
management framework

Major efforts

Growth Foundation

Sustainable business
partnership

Contribution to rich lifestyles throughproducts

Opportunities and risks

diversity● Strengthening efforts for personal information● Strengthening the information security

protection and providing thorough training

framework and providing thoroughtraining● Improving board effectiveness● Providing thorough compliance training● Strengthening the risk management

framework

SUGI Holdings Integrated Report 2022

32

Priority Issues [Issues of Materiality]

Healthy Community

Since our establishment, we have developed the drugstore model of“pharmacies with the function of prescription dispensing” aimed atcontributing to local communities, ahead of our rivals. At present, wehave evolved it into a new business model covering self-care, elderly
nursing care, and terminal care based on our Total Healthcare Strategy.

Improvement of Access to Reasonable and Quality Healthcare Services
Serving as “local alliance pharmacies” and “pharmacies
allied with specialized medical institutions”

In this era of digitalization, the importance of counseling by experts at physical stores is increasing. The SUGI
Pharmacy Group is now working to integrate the recordsof customers and patients, including product purchase
information, counseling history, and lifestyle-related records obtained through our apps, including the numberof daily steps they take and the meals they eat. Using thisinformation, we are striving to increase the number ofstores that can provide satisfactory counseling services
based on the needs and issues of each person.

In FY 2021, we focused on serving as “local alliance pharmacies”
and “pharmacies allied with specialized medical institutions,” bothof which are promoted under a national initiative. By utilizing ouraccumulated know-how on home-visit prescription dispensing,
we increased the number of stores providing the service. We proceeded with the development of local alliance pharmacies thatcan serve as local healthcare hubs by sharing patients’ detailed information with the relevant medical institutions at the time of their
hospital admission and discharge, and by providing comprehensive support in the phases of elderly nursing care and terminal care.
We are also making efforts to serve as “pharmacies allied withspecialized medical institutions” with high-level pharmaceuticalmanagement functions that provide training for specialized pharmacists in thefield of oncology, and workin close cooperation withmedical institutions providing specialized medical
care.
Nagoya University Hospital Store, a pharmacy allied with a
specialized medical institution

Providing a data-based healthcare service
We began to issue lifestyle-related disease risk reports fordetermining lifestyle-related disease risk based on healthcheckup results. Analyzing the probability of developinga stroke, myocardial infarction or diabetes, such reports
contain suggestions from a nationally certified dietician toprevent such onset.

Enhancing the digital membershipbase
The membership of our digital apps (SUGI
Pharmacy, SUGIsapo Walk, SUGIsapo Eats,and Family Pharmacy [by MedPeer, Inc.])comprises the base for a variety of our digitalized healthcare services and sales promotion tailored to individual needs. In FY 2021,
we focused on promoting the downloading of each app and achieved 11.04 million
downloads. With the goal of a total of 15
million downloads of our digital apps (bythe end of FY 2023), we will enhance ourdigitalized healthcare services and sales
promotion tailored to individual needs.

downloads

8.33

1.51
millionmilliondownloads

downloads(FY 2021)(FY 2020)(Gateway to theservices)

milliondownloads(FY 2021)(FY 2020)

15 million
downloads
SUGIsapo Eats

In total

120,000
downloads(FY 2021)(FY 2020)

Digitalcontact point

2.21

FY 2023 target

downloads

SUGI Pharmacy app

SUGI Holdings Integrated Report 2022

6.01
million30,000Introducing devices
that inspire newawareness

33

SUGIsapo Walk

SUGI Pharmacy app

Family Pharmacy
app

160,000
downloads

360,000
downloads(FY 2021)(FY 2020)

SUGIsapo Walk

SUGIsapo Eats

SUGIsapo Deli

A pedometer app that allows users to earn SUGIsapo
Miles, which can be exchanged with SUGI Points

A diet recording app that allows users to earn SUGIsapo
Miles just by taking photosof their meals

A meal delivery service
under the supervision ofnationally certified dieticians

Joint campaign withbusiness partners

Exchange with SUGI
PointsFamily Pharmacy app

We gather and offer various information basedon the needs of eachcustomer.

Redemption of points forrewards is also available
on the app.

Growth Foundation

Increasing the number of stores with a counseling
function

An electronic prescription
notebook app on whichusers can register theirfamily pharmacy*Developed by MedPeer, Inc.

SUGI Holdings Integrated Report 2022

34

Priority Issues [Issues of Materiality]｜ Healthy Community

Ensured Safety in Medical Care and Proper Management of Medical and Pharmaceutical Products
Introducing error prevention systems inprescription dispensing
We have installed picking support systems and powder
medicine checking systems at all of our stores that provide
prescription dispensing services, and will ensure that all
new stores have the same systems. Moreover, by proceeding with the introduction of one-dose package checking
systems and introducing many more automated picking
machines and automated one-dose packaging machines,
we will support pharmacists in concentrating on communication with customers and establishing a safe pharmaceutical environment.

Safely collecting medical andpharmaceutical products andmedical equipment
In line with the needs of customers and patients, we are increasing the number of stores
where infectious waste (e.g.,used injection needles) is collected. To prevent such collection
from leading to needle stick accidents, we have a framework
for managing collected waste
appropriately.

Opening stores specializing in home-visit prescription
dispensing

We have opened key-stores specializing inhome-visit prescription dispensing and pursuingefficiency and safety. At Imaike-MinamiStore, they have a special space for home-visit
prescription dispensing on the second floor. On
top of committing to home-visit prescription
dispensing, they are also engaged in the rentalof welfare products that patients can use while
they are hospitalized and even after they aredischarged from the hospital, in cooperation withnearby hospitals.

Improvement of access to products and services■ Providing a shopping truck service
In cooperation with local governments, SUGI Pharmacy
operates shopping trucks that go to community centers,
including those for senior citizens, to provide shopping
support. By offering this service, we also strive to contribute to encouraging senior citizens to go out and to help
them acquire the habit of exercising.

* We sell collection boxes to patients and collect the sold boxes.

Responding to specialty pharmaceuticals

One-dosepackagechecking
systemWe are proceeding with the installation of digital signage in our waiting rooms in order to provide patients
waiting for the dispensingof their prescription withinformation on secondary
prevention,
preventive
care, treatment and other topics that will guidethem to lead a healthy life.

Improvement of Convenience in Everyday Life and Support for the Community

Imaike-Minami Store
Nagoya City,
Aichi Prefecture

Supporting activities by local communities andorganizations■ Donating AEDs to facilities for senior citizens
In the SUGI Pharmacy Group, we have annually donatedAEDs to facilities for senior citizens since FY 2013. In FY 2021,
we donated AEDs to 35 facilities located in Osaka Prefecture,
Hyogo Prefecture, Kyoto Prefecture, Nara Prefecture andShiga Prefecture, meaning that we have so far donated AEDs
to a total of 217 facilities in 42 cities. After the donation, we
visit the facilities and organize seminars for facility staff tolearn how to use the device properly.

We provide a catalogue mail-order service for 13,000
households in three elementary school districts incooperation with distributors of the Chunichi Shimbun.
The distributors serve as the point of contact for thisservice and deliver ordered items from the SUGI Pharmacy
store located near the service user’s home.

Health Education and Support for Patients in the Community
Providing specific health guidance at stores in local
communities

Providing home-visit prescription dispensing andnursing services as a framework underpinning thecomprehensive community care system■ Providing a catalogue mail-order service throughcooperation with newspaper distributors

Organizing online health seminars“Helping local residents maintain their own lifestyles
in familiar surroundings” is the basic concept of the comprehensive community care system. To achieve this, we
provide in-home patients with home-visit prescription
dispensing, home-visit nursing, and life support services(product sales and meal support).

(Left/right) Seminar on health andbeautyHome-visit prescription dispensing and home-visit
nursing services (as of February 2022)
No. of service stores
Home-visit
prescription No. of users (monthly average)
dispensing
No. of users (yearly total)
No. of service stations
Home-visit
nursing

35

No. of recipientsin FY 2021
556

4,862

13,368+185% YoY

160,41113

No. of users (monthly average)

1,493

No. of users (yearly total)

17,913SUGI Holdings Integrated Report 2022

Growth Foundation

Providing information on medical and pharmaceuticalproducts using digital tools

Specialty pharmaceuticals require special temperature
management and side-effect monitoring. This meansthat value-added distribution, such as specialized coolingwarehouses and special involvement of pharmacists, arenecessary. In the SUGI Pharmacy Group, we have set up
a specialized cooling warehouse and have begun to fillprescriptions for specialty pharmaceuticals at Nagoya
University Hospital Store. To fulfill our social responsibilityof distributing cutting-edge pharmaceuticals withhigh therapeutic effects, we will continue to actively fillprescriptions of specialty pharmaceuticals.

Of particular notice is our home-visit prescription dispensing service by pharmacists, which we launched aheadof our competitors in the industry. By 2025, we strive toprovide the service to a yearly total of 250,000 people,
along with our home-visit nursing and life support services.

In-store health guidance service in which anationally certified dietician gives suggestions on theprevention and improvement of metabolic syndrome
Online maternity seminar

SUGI Holdings Integrated Report 2022

36

Priority Issues [Issues of Materiality]｜ Healthy Community

Organizing in-store seminars on preventive carefor senior citizens

Providing support for breast cancer patients
To raise the public awareness of early detection, early
diagnosis and early treatment of breast cancer, we display
posters, calling people to have a checkup, in our stores,
and also distribute a breast cancer self-check handbook to
encourage self-checking at home. In addition, to contribute to raising the QOL of patients concerned about hairloss as a side effect of their anticancer drug treatment, wehave donated medical
hair wigs to 100 breast
cancer patients annually
since FY 2013. As of FY
2021, we had offeredwigs to approximately
900 patients.
Calling for applicants on our website

Improvement of Therapeutic Effects for Patients
Sharing information with medical institutions
through tracing reports

Based on the cooperation between our prescription dispensing and merchandising sectors, we have encouraged
customers who have purchased merchandise to download our Family Pharmacy support app, with the total
number of downloads reaching 360,000. Consequently,
100,000 prescriptions (approximately 10% of the total)
are sent per month through the app, leading to improved
convenience for patients. We will continue to reinforce
the support framework for patients through the app.

We are making efforts to maximize therapeutic effects
by providing medical institutions with information on the
medication status of patients through tracing reports. Specifically, we conduct regular confirmation with patients
through a phone or smartphone app regarding, for example, the therapeutic effects they experience at the time oftaking the medicine, whether they have experienced anyside effects, whether they have any unused medicine, and,if applicable, the background to and reason for forgetting
to take the medicine or taking the wrong medicine. We report such information to doctors so that they can use it intheir decision-making at the next consultation.

Improving medication adherence by providing
medication follow-up
By adopting preliminary counseling, namely providing
medication instruction to patients when they present prescriptions at the counter, we ensure that pharmacists canconcentrate on communication with customers, whichis their primary role. In addition to detailed medication
instruction to patients at the store, pharmacists also provide medication follow-up via a smartphone app after thepatients return home and take the drugs, thus allowing
them to deal with their problems anytime, anywhere. In FY
2021, the number of medication follow-up cases reached
430,000. By reinforcing the activity, we would like to improve medication adherence and therapeutic effects.

SUGI Holdings Integrated Report 2022

Mainly from among stores located in regions whose
governments request us to install AEDs, we select storeswith frequent visits of senior citizens and other customers.
The number of our stores equipped with AEDs is increasing.
As of the end of February 2022, we have installed AEDs
at 180 stores (approx. 10% of the total), and we are planning to increase the rate to 20% by the end of FY 2025.

Contribution to the enhancement ofcommunity safety and security

Supporting local disaster countermeasures anddisaster risk reduction efforts
We are reinforcing various initiatives to address challenges of local communities by concluding comprehensive
agreements with local governments. For local disaster countermeasures, we provide support by offering disaster relief
goods and allowing our stores to be used as evacuation sites
at times of emergency for evacuees and stranded commuters. For local disaster risk reduction efforts, we cooperatewith local communities in implementing disaster drills.

Achievements by
FY 2021

Total number of agreements

74

Comprehensive agreements

19

Agreements on services not coveredby health insurance

2

Watching-over agreements

9

Disaster risk reduction agreements

37

Agreements on the environment, etc.

7

Selected for the Co-creation Opportunity Formation Support Program (Regional Revitalization Category)In the Co-creation Opportunity Formation Support Program, intended to present an ideal social future vision
based on the SDGs and promote R&D for realizing thevision, we are selected as the base for realizing the development of a healthy community where family ties are
ensured and citizens and IT enjoy mutual prosperity.
For this initiative, we strive to realize healthy longevity
and preemptive medicine, and develop a healthy community free from worry for residents’ families, even if they

live far away from the residents. We aim to realize early
prediction of disease development through non-invasive
diagnostic devices, and provide highly accurate technology by enabling self-management of health to be “visualized.” In addition, we strive to integrate medical care andhealth support services, and provide a remote version of
a community health service, thereby providing secondary
prevention and preventing disease aggravation towardenhancing healthy longevity.

Concluding with Fujita Academy a basic agreement regarding cooperation for community
healthcare and a contract for establishing a joint research seminarCommunication with a patient through a chat system

Reinforcing alliance toward preventing polypharmacy
Polypharmacy (multiple medication use causing harmful effects) is a social issue primarily related to senior citizens. To prevent this, we are undertaking joint research with the National
Center for Geriatrics and Gerontology on an operation modelfeaturing a local alliance involving doctors and pharmacists at
hospitals and pharmacists at pharmacies. Usually, it is difficult
to address polypharmacy in outpatients and in-home patients
after their discharge from hospital. By reinforcing cooperation
between hospitals and pharmacies, however, we are striving
to eliminate polypharmacy and consequently to increase theeffectiveness and safety of medical therapy.

37

Installing AEDs at many more stores

Growth Foundation

Establishing a framework for supporting patientsby using our Family Pharmacy support app

Establishment of a Robust Society in Terms of Disaster Risk Reduction and Crime Prevention

On February 3, 2022, we concluded with Fujita Academy abasic agreement regarding industry-academia cooperation
for community healthcare and a contract for establishing a
joint research seminar. Intended to reinforce the parties’ alliance to prepare for disasters in terms of community healthcare, the basic agreement refers to material support, establishment of the necessary measures, mutual cooperation,
information sharing, and HR development of disaster risk reduction. Meanwhile, the joint research seminar is designed
to establish a Smart Healthcare Town Model.* This contract
concerns the Co-creation Opportunity Formation Support
Program, for which we were selected in October 2021.

Signing the agreements*Smart Healthcare Town Model
By ensuring that a drugstore serves as the local health service hub and realizing preemptive medicine through research, we strive to accomplish a heathy longevity society
where citizens become healthy without making conscious efforts. In addition, we aim to establish a healthcare data platform to develop a healthy community with themutual flourishing of citizens and IT, free from worry for residents’ families even if they live far away from the residents.

SUGI Holdings Integrated Report 2022

38

Priority Issues [Issues of Materiality]｜ Healthy Community

To Protect People’s Daily Lives during the Coronavirus
Pandemic

Offering the SUGI Pharmacy Group
headquarters to Obu City as a COVID-19
vaccination site
The SUGI Pharmacy Group offered its headquarters to
Obu City, Aichi Prefecture as a COVID-19 vaccination site.
The Group offered conference rooms in its headquarters aspart of its cooperation with large-scale weekend mass vaccination, using facilities of private-sector business operators
promoted by Obu City, Aichi Prefecture a total of four times
during the period from September 18, 2021 (Saturday) to
October 10, 2021 (Sunday). Our pharmacists also assisted
the vaccination campaign by filling syringes with vaccine
doses.
In order to continue to protect people’s daily lives fromCOVID-19, the SUGI Pharmacy Group will support thehealthy lives of people in the community in every way tocontribute to local communities.

Offering cooperation with fillingsyringes with COVID-19 vaccine doses
In order to assist the ongoing COVID-19 vaccine rollout, the SUGI Pharmacy Group has engaged in local
contribution activities by filling syringes with vaccine
doses at vaccination sites based on its social mission asa pharmacy group.
Against the social background of rising needs to carryout mass vaccination speedily, a shortage of healthcare
professionals has been highlighted, and pharmacists
in the Group are offering cooperation to help achieve
speedy vaccination.

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SUGI Holdings Integrated Report 2022

In order to control COVID-19 infection cases, particularly those dueto the Omicron variant, prefectural governments in Japan have started a project to offer free PCR and antigen tests at pharmacies. Aimedat maintaining a balance between infection control and everyday life,
this project offers free tests to those who cannot be vaccinated for
health-related reasons, in order to encourage people to use the vaccine
and test package and take the tests. In response to a request from Aichi
Prefecture, the Group has been offering antigen tests at 101 stores in
Aichi Prefecture since December 30, 2021 (Thursday). As this is one of
the major expected roles of pharmacies, we will continue to respond
appropriately by expanding the geographical coverage of the tests.

Responding to noncontact needs byintroducing the “DrugReceiving Locker”

Growth Foundation

Participation in the project to offer free PCR
tests, antigen tests, etc.

As a non-face-to-face, non-contact
solution amid the COVID-19 pandemic, some of our stores have started
operating the Quist delivery locker
system to enable customers to receive
prescription drugs for which they
have already been given medication
instructions, any time during the business hours of the store.

SUGI Holdings Integrated Report 2022

40

Priority Issues [Issues of Materiality]

Sustainable Business Partnerships
Contribution to Rich Lifestyles through Products
Focusing on the development of highvalue-added products
The SUGI Pharmacy Group will strengthen the development of high quality, highfunctionality, and high value-added private brand products that are equivalent tonational brand products in terms of efficacy, quality, ease of use, and price. We aim
to resolve the worries and problems of ourcustomers through these products.

Developing unique products: Prieclat U

Expanding collaboration and co-creation through ouroverseas partner companies
We have entered into a business partnership with Great Tree
Pharmacy Co., Ltd. in Taiwan, and have introduced a SUGI Pharmacy section (to sell Japanese products) to about 200 stores operated
by Great Tree Pharmacy (as of February 2022).
As a result of wide exposure to the SUGI brand, awareness of theJapanese product section has increased, and the number of repeat
buyers of Japanese products has increased. Since FY 2020, we haveworked to expand our collaboration and co-creation with our partner companies in Asia, starting from our collaboration with Inagora, which operates Wando, an inbound, cross-border EC platform.
In FY 2021, we started selling products in Taiwan and Vietnam.
Above: SUGI Pharmacy section within Great Tree Pharmacy
Below: EC website for Taiwanese consumers (Shopify)

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SUGI Holdings Integrated Report 2022

Maintenance of Product Safety and Security
Establishing a product quality assurance system

Developing and promoting eco-friendly products

In FY 2021, we strengthened our quality control systems in order to develop safe, high-quality private brandproducts. Specifically, we requested that all our business
partners involved in the development of private brandproducts perform self-checks based on specification
documents prepared by the Group, and the results wereconverted to evaluation scores. We request our business
partners to improve on problematic items and conduct
on-site audits to ascertain improvements. We will continue to maintain high quality by building an appropriatearms-length relationship with our business partners.

In FY 2021, we started to develop eco-friendly private
brand products. We selected materials that would help environmental preservation, such as FSC certified paper, biomass
plastic, and vegetable oil
ink. As a near-term target,
we aim to increase the ratio of eco-friendly products
to all private brand products to 30% by FY 2030
(from 10.2% in FY 2021).

Actively collecting and utilizing customer feedback
In reference to customer feedback, such as“I wish there was a product of this kind” and“I want this part of the product to be improved,”
we will endeavor to develop products that satisfy customer needs.

Collecting opinions from customers
through a SUGI Pharmacy app

Developing products using FSC certified
paperDisclosing information
appropriately
In order to ensure that our
private brand products areused safely and securely, we
have increased the numberof items we provide with enhanced disclosure of ingredients, nutrients, allergens, andchemical-free status.

Growth Foundation

Press conference to announce a new productPrieclat is a skincare product series celebrating the third anniversary since its
launch. It embodies our desire to provide “skincare that makes you truly feelthe difference” in order to treat the skin of people who no longer feel any difference from using any skincare products and suffer from worrying signs ofaging, under the concept of the “power of penetration derived to create shining skin.”With the power of penetration enabled by SNDP® technology that brings
deep into the skin layers various ingredients that were previously difficult toabsorb, Prieclat products help you develop moisturized, firm and shining skin.
The latest product in the series Prieclat U, which was launched in April 2022,
arose from the concept and keyword of “gender neutrality.” Rejecting the ideas that “skincare is just for women” and “skin problems and types differ between men and women,” we launched this new category brand that departs
from the concept of gender difference, to target all people who want to improve their skin condition.
By rejecting broad categorization based solely on gender, we offer a newvalue based on a selection of products suited to the skin condition of each individual. Through such products, we will work to promote diversity and help
achieve the SDGs.

We will develop systems and promote initiatives to fulfill our responsibilities for the entire supply chain. Moreover, through the procurementand development of safe and secure products, we will contribute tofacilitating the rich lifestyles of people in local communities.

Establishment of a Responsible Supply Chain Management System
Smooth communication with business partners
To achieve coexistence and co-prosperity with our business partners and address various social challenges, wehold briefing sessions to explain the annual policies andplans of the SUGI Pharmacy Group to our business partners.
By promoting their understanding and cooperation, we expect to receive their support for our business, such as the
improvement of products and services and streamlining ofoperations, as well as advancing environmental conservation and other initiatives to realize a sustainable society.

Recently held briefing sessions
to explain our policies andplans to 385 attendees from266 business partners

Establishing a business partner code of conduct
and requesting compliance
The SUGI Pharmacy Group Business Partner Code of
Conduct clarifies the requirements with which we request
compliance by all our business partners involved in products and services offered by the SUGI Pharmacy Group. It
is a system for comprehensive assessment including, specifically, respect for and protection of human rights, legal
compliance, appropriate working conditions including theprohibition of child labor and forced labor, environmental
preservation, quality control, personal information management, internal reporting systems, and supply chain
management systems. While valuing our partnerships
with all our business partners, the SUGI Pharmacy Groupwill request their understanding of and compliance with
the Code of Conduct to achieve mutual improvements on
an ongoing basis.

SUGI Holdings Integrated Report 2022

42

Priority Issues [Issues of Materiality]

A sustainable global environment is essential for us to continue ourbusiness and store operations. Therefore, we have been promoting
environmental and other measures to realize a recycling-based society
and a decarbonized society.

Contribution to the Global
Environment
Realization of a Decarbonized Society
Shifting to renewable energy
We have started to introduce a solar panel-based power generation system into stores to realize the shift torenewable energy. Going forward, we will promote theshift to renewable energy through the installation of solar
power generation panels owned by the Company, as wellas on-site corporate PPA solar power generation panels(owned by a third party) and off-site PPA solar power generation panels.

Realization of a Recycling-based Society
Introducing energy saving equipment andreducing power consumption (energy saving)
We are working to reduce power consumption byclosely monitoring temperatures and regularly clearing AC equipment at stores as well as the headquarters
and other offices. We have also been working to replace
conventional lighting with LEDs at all our stores since FY
2013. We will also replace old LEDs in due course in orderto reduce power consumption and CO2 emissions further.

Stores with LED lighting(No. of stores)

97

1,500

Solar power generation panels installed on the rooftop of Fujimi
Store in Kariya City, Aichi Prefecture

81
72

（％）
100

1,454
1,353

80

1,126
900

1,004

60

Reducing the consumption of fossil fuels
In order to reduce the consumption of fossil fuels bycompany cars, we have started to introduce electronic vehicles (EVs). We will continue to promote the introductionof EVs, as well as hybrid vehicles. We have also introduced
a mechanism to monitor the driving status of vehicles,
such as sudden braking and starting, to seek safe driving
and the reduction of fossil fuel consumption at the same
time.

600

40

300

20

0

2018

2019

2020

2021

(FY)

0

Submission of a voluntary action declaration in support of the “white logistics” promotion movement
We have endorsed the purport of the “white logistics” promotion movement advocated by the Ministry of Land, Infrastructure, Transport and Tourism, the Ministry of Economy, Trade and Industry, and the Ministry of Agriculture, Forestry and Fisheries, and submitted a voluntary action declaration on August 1, 2021 to work toward the realization of sustainable logistics.
Specific actions set forth in SUGI Pharmacy’s voluntary action declaration

43

Action areas

Specific actions

Recommendations andcooperation to improvelogistics

If there are any requests from business partners or logistics companies regarding manual unloading by truck drivers,
the rationalization of ancillary work, etc., we will diligently discuss the matters with them and actively propose
solutions.

Introduction of a reservation
systemIntroduce a truck reservation system to reduce the waiting time of truck drivers.

Use of pallets, etc.

Reduce loading time by utilizing pallets, foldable containers, returnable containers, etc.

Provision of receiving/shipping
information from business
partners in advance

We will secure adequate work hours for on-site workers and truck drivers to allow them to complete their work anddelivery without undue time constraints, in order to promote the rationalization of logistics by requesting business
partners to share quantity information and data with the distribution center in advance.

Reducing fluctuations in order
quantity

Reduce weekly and monthly fluctuations in order quantity to shorten the waiting time for loading and improve
operating efficiency.

Promotion of documentationof shipping contracts

Select logistics companies to contract with through the mutual review of applicable laws and regulations to ensure
legal compliance.

SUGI Holdings Integrated Report 2022

Won the Supply Chain Innovation Award
Sugi Pharmacy Co., Ltd., together with Lion Corporation and PALTAC CORPORATION, won the grand prize in
the Supply Chain Innovation Award 2021, which was given in recognition of their achievements in leading theindustry toward supply chain optimization. Sugi Pharmacy established a dedicated team in 2020 and has promoted collaboration among these three companies in the areas of increasing sales through data-powered collaborative marketing, supply chain optimization, and the development of exclusive products. The grand prize wasgiven to these three companies in recognition of their efforts to optimize inventory and reduce returns under thebottom-up, speedy, and open coordination among the manufacturing, distribution and sales functions. Goingforward, we plan to launch a new project involving other wholesalers and manufacturers, and make publicly
available the solution models to be developed. Through this project, we will work to reduce waste and create newvalues through close coordination among the manufacturing, distribution and sales functions.

Strengthen initiatives to reduce food waste
Since FY 2021, we have been implementing the “temaedori” (taking from the one in front) initiative together with the government agencies concerned and JACDS
member companies.
This initiative is aimed at reducing food waste by encouraging customers who plan to eat food right away tochoose from and purchase products in the front.
At the same time, we will promote the initiative to reduce
the food-loss-and-waste ratio
through the promotion of selling out by revising food disposal
standards, the reduction of excess
inventory by revising inventory
standards for bread, and the optimization of inventory by introducing automatic order placement for food.

Health × Biodiversity × Digital
We held a “SUGI Green Walk
Challenge” event, which featured
SUGIsapo Walk, a pedometerapp. We are working on the popularization and enlightenment of
biodiversity through donations
to environmental groups in proportion to the number of people
who have achieved certain step
counts in walking rallies, and theprovision of information on endangered species of animals.

Initiatives aimed at conserving water resources
In order to start water saving initiatives in store activities,
we will work on the visualization of displacement in FY
2022. By analyzing changes in displacement over timeand comparing displacement among different store
types (in terms of size and services), we will implement
measures to save water effectively.

Growth Foundation

1,200

98％

Promoting resource recycling through coordination among
the manufacturing, distribution and sales functions

Reducing the use of plastic
We continue to charge for plastic checkout bags to reduce their use.
No. and weight of used checkout bags
FY 2019

FY 2020

FY 2021

No. of used bags
(unit: 1 million bags)

262

144

43

Weight of used bags
(unit: ton)

2,000

1,100

328

Reduction of about 85%

Reducing marine plastic waste by installing water
stations
We have endorsed the “work together to install water
stations” challenge of the Sutehaji Project, which will be
carried out by co-creation partnersof TEAM EXPO 2025 (Expo 2025
Osaka, Kansai), and participated in
the project as a co-creation partner.
Through the installation of water
stations, we aim to contribute to
the reduction of PET bottle use andmarine plastic waste.

SUGI Holdings Integrated Report 2022

44

Priority Issues [Issues of Materiality]｜ Contribution to the Global Environment

Information Disclosure Based on TCFD Recommendations
Discussion of assessment results■ 2℃ scenario

Responses to TCFD recommendations
The SUGI Pharmacy Group endorsed the recommendations in the
TCFD’s final report in December 2021. From now on, we will disclose
information in accordance with the framework recommended by the
TCFD (governance, strategy, risk management, and metrics and targets), and promote initiatives on climate change issues to contributeto the realization of a sustainable society.

* TCFD stands for the Task Force on Climate-related Financial
Disclosures. The TCFD was established by the Financial Stability Board
at the request of the G20 to discuss how climate-related information
disclosures and financial institutions’ responses should be.

Governance and risk management■ 4℃ scenariosues, management of progress toward targets, materiality
assessment of risks, priority setting, and the determinationof response measures to be taken before making reports
and recommendations to the Representative Director& President. We have also established a Risk Committee
within the Sustainability Committee as a body to manage
relevant risks and execute tasks in accordance with the instructions of the Sustainability Committee.
The Sustainability Committee is supervised by the Boardof Directors, which receives reports and issues instructions
as necessary on important matters deliberated by the Committee to ensure that its decisions are free from errors.

We expect that physical risks, such as extreme weather,will increase. We expect damage to store operations due tothe frequency and intensification of natural disasters causedby climate change. As a result, we expect increases in expenditure for repairs and decreases in sales due to temporary store closures.

■ Common risks and opportunities under bothscenarios (2℃ and 4℃)

Selection of climate change scenarios

We expect that changes in consumer preferences andbehavior will be influenced by temperature rises. If we areunable to develop and display products that meet customer needs or effectively market services that meet customer needs, opportunity losses may arise. On the other
hand, we could take advantage of increases in opportunities if we can capture such needs.

We have assessed risks and opportunities that may have an impact on the Group in reference to the 2℃ and 4℃ scenarios
identified in the IPCC’s Fifth Assessment Report, after collecting various parameters based on future forecasts.

Next steps

Strategy

Assessment of risks and opportunities
Assessment

Category
Assessment in the world of +2℃

Assessment in the world of +4℃

Risk: Expenditure will increase following the introduction of carbon
pricing.
Transition risks and opportunities

Policies andregulations

Carbon pricing

Risk: Expenditure will increase due to increases in production andprocurement costs of products and services throughout the
supply chain.

Physical risk and opportunities

Technology

Logistics
efficiency

Opportunity: Expenditure will decrease as a result of more efficientlogistics.

MarketElectricity prices

Risk: Expenditure will increase due to rises in electricity prices.

Customerpreferences

Risk: Sales will decrease due to a delay in the provision of ecofriendly products and services.
Opportunity: Sales will increase as we develop private brandproducts that meet the needs for sustainableconsumption.

EV charging

Opportunity: The frequency of visits to stores will increase as weenhance the charging environment.

ー

Risk: Sales will decrease to a limited extent due to temporary store
closures and lower customer traffic.

Risk: Sales will decrease significantly due to increases in
temporary store closures and lower customer trafficcaused by physical damage to stores.

ー

Risk: Expenditure will increase as insurance premiums
increase in response to increases in natural disasters.

Opportunity: Sales of disaster prevention and stockpiling-related
products will increase.

Opportunity: Sales of disaster prevention and stockpilingrelated products will increase.
Risk: Repair expenses will increase due to physicaldamage to stores.

Risk: AC-related expenditure will increase as the temperature rises.

Risk: AC-related expenditure will increase as thetemperature rises.

Chronic

Drastic increases
in extreme
weather

Averagetemperature
Production andprocurement

SUGI Holdings Integrated Report 2022ー■ Response measures toward the realization of arecycling-based society epair and reuse of foldable containers and transporR
tation and delivery equipment■ Reuse of furniture, fixtures and equipment following
store renovation or closure■ Monitoring of any abnormal quantity of supplies orinventories at each store and providing guidance■ Development of private brand products with
eco-friendly packaging■ Promotion of the “temaedori” (taking from the one
in front) campaign to prevent food waste■ Reducing waste by sharing information with ourbusiness partners■ Charging for plastic bags■

Current status of the GroupYear

Risk: Expenditure will increase due to the introduction of CFC-freeequipment at stores.

Acute

Energy saving measures■ Daily operational improvements and enlightenment
for power saving■ Introduction and replacement of energy saving equipment■ Introduction of energy management systems
Energy creation measures■ Installation of solar power generation panels ownedby the Company■ Installation of on-site and off-site solar power generation panels on a PPA basis
Other measures to reduce CO2 emissions■ Purchase of non-fossil certificates and green power
certificates■ Purchase of CO -free menu services from electric2
power companies■ Use of EVs as company cars

Metrics and targets
Risk: The impact of carbon pricing will be limited.

Control of CFCs

Reputation

The Group will implement the following measures to beable to create a sustainable society not only for society,but also for the Group itself.

■ Response measures toward the realization of adecarbonized society

Growth Foundation

Responding to climate-related risks and opportunities
is one of the key ESG issues we should tackle with concerted group-wide efforts. Based on this recognition, we
have established a Sustainability Committee (which meetsat least twice a year) as an advisory body to the Representative Director & President for the purpose of promoting sustainability management including the deliberationand determination of basic policies and necessary mattersrelating to such responses.
The Sustainability Committee holds meetings attended
by directors in charge of the main divisions, and conducts
the planning of measures to address climate-related is-45

We expect that various transition risks will increase. In
this scenario, we expect that countermeasures against climate-related issues will be strengthened and decarbonization will progress. As a result, we expect increases in
expenditure due to the introduction and higher rates ofcarbon taxes and the widespread use of renewable energy.

ーNo. of stores
CO2 emissions (t-CO2)

Opportunity: Sales will increase as we develop private
brand products that meet the needs forsustainable consumption.

Risk: Expenditure will increase as purchase costs increase
due to lower production of raw materials.

CO2 emissions / store (t-CO2)

FY 2014

FY 2015

FY 2016

FY 2017

FY 2018

FY 2019

FY 2020

FY 2021

947

996

1,048

1,105

1,190

1,283

1,391

1,483

104,299

105,432

104,597

112,201

110,339

104,000

110,809

To be measured

110.1

105.9

99.8

101.5

92.7

81.1

79.7

To be measured* CO2 emissions based on the use of gasoline by company cars are calculated on a trial basis based on the pro rata allocation of FY 2020 results using the number of stores.
* CO2 emissions shown in the table above are Scope 1 and 2 emissions (emissions from the Group). Scope 3 emissions are currently being calculated.

Metrics and targets
The SUGI Pharmacy Group has set targets for each of
the metrics shown on the right, and will strive to reduceclimate change risk and capture opportunities. In particular, we aim to reduce CO2 emissions per store by 35% in FY
2030 compared to FY 2014, and to reduce them further
to effectively zero in FY 2050, while striving to achieve thistarget as early as possible.

 atio of reduction in CO2 emissions (Scope 1 and 2)
R
per store■ Ratio of reduction in CO emissions from our supply
2
chain (Scope 3)■ Renewable energy ratio■■ Metrics to measure progress toward therealization of a recycling-based society atio of eco-friendly private brand products
RFood-loss-and-waste ratio■ Volume of plastic bags used■

■ Metrics to measure progress toward therealization of a decarbonized society■

SUGI Holdings Integrated Report 2022

46

Priority Issues [Issues of Materiality]

Healthy Workplace Environment
Human Resources Development
Improving capacity development training for
employees
We clarify the “required skills” for each task and role
as well as for in-house certification, and provide training for employees to obtain such skills and demonstratethem on site. We will increase the average training time
provided to each employee in order to promote humanresources development.

Considering employees as important assets that support the company
and improve our corporate value, we are developing systems to ensure
diverse careers and working styles for our employees, creating a workplace environment where they can work healthily and happily, and fostering a corporate culture accepting of human resources with diverse
backgrounds.

Reform to Realize Healthy and Safe Working Styles
Group award program
Employees who have given an excellent performanceby acting thoroughly in line with the Company’s management philosophy are recognized at the year-end award
ceremony. In addition, based on thank you messages received from customers on a daily basis, employees of therelevant stores are recognized as appropriate. In FY 2021,
121 individuals were so recognized.

Promoting health and productivity management■ Certified again in 2022 as an outstanding
enterprise in terms of health and productivity
management
The SUGI Pharmacy Group was certified as a 2022 outstanding enterprise (in the large-enterprise division) interms of health and productivity management. We wereselected as such jointly by the Ministry of Economy, Tradeand Industry and Nippon Kenko Kaigi, in recognition of
our strategic efforts concerning health and productivity
management, based on the stance of viewing the enhancement of employees’ health as a management issue.

Launch of a project to reduce in-store work
In FY 2021, after collecting problems in stores througha questionnaire to all 35,000 employees and interviews
during rounds of all the stores by the directors of SUGI
Pharmacy, we started a project to reduce in-store work
and improve store operations by changing systems andoperations, introducing IT systems, and other measures.
By reducing in-store work, we will thereby create an environment where employees can focus on the customers.

Mechanisms to support the physical and mental
health of employees■ Establishment of a health consultation channel
This is a channel for consultation by email or telephonewith external industrial counselors. Employees can accessthis channel at any time directly without going throughthe Company, so that they can use it with peace of mind.
National competition (award) for beauty advisors to compete in their customer
service skills

Employees recognized in the employee magazine

Provision of opportunities for growth throughachievement presentation​
To facilitate horizontal rollout of best practice and human resource development, pharmacists and medical office workers who have delivered excellent results gather
together at an achievement presentation meeting.
Reviewing and giving a presentation on annual results
at this meeting lead to confidence in one’s daily work. Receiving feedback from other participants provides opportunities for further development of their abilities.

Growth Foundation

The Company established the “Mental Health Promotion Office” for employees in March 2007 for the first timein the industry, and the Office started its activities. By now,
we have introduced various mechanisms in this area.

■ Conducting stress checks■ Certified as a Platinum Kurumin company
SUGI Pharmacy has been certified as a Platinum Kurumin
business operator. This certification is granted to general employers who conform to the designated standards
regarding parenting support. In FY 2021, 805 employees(721 women and 84 men) took parenting leave, with thepercentage of those returning to work after their leave
reaching 97.7%.

In order to prevent and detect any mental health problems at an early stage, we conduct stress checks annually. Employees can also conduct these checks from theirsmartphones, allowing them to easily monitor their own
stress conditions. Stress checks are conducted to provide
employees with the opportunity to notice their own stressand prevent any mental health problems, and also to improve a workplace that is causing them stress and transform it into a comfortable workplace.

■ Consultation with doctors via chat or video callThis mechanism allows employees to easily consult doctors on technical matters anytime and anywhere, free ofcharge.

Capacity development training for employees

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SUGI Holdings Integrated Report 2022

SUGI Holdings Integrated Report 2022

48

Priority Issues [Issues of Materiality]｜ Healthy Workplace Environment

Utilization of Diverse Human Resources
Preparing fields and opportunities with a focus ondiversity
The SUGI Pharmacy Group will make serious efforts
to enhance diversity and inclusion (mutual acceptanceand recognition of differences as strengths).

■ Increasing the ratio of female managers

Eleven in-house job coaches and 30 career counselors
provide operational guidance and daily support to 226
employees with disabilities working at eight offices nationwide. At stores, these employees perform cleaning
and arrange products on shelves, while at our headquarters, they sort mail, perform cleaning, and ship products to
support logistics.

Percentage of employees with disabilities(FY 2021, SUGI Pharmacy Group)

2.43%
Initiatives to create an open work environment(Strengthening employee engagement)■ Establishment of a consultation channel toprovide support for any kinds of workplaceconcerns that employees may have
We have established an external reporting channel
to respond to any concerns, such as: “I have a problem
at the store”; “I have something I want to talk about”; “I
have something I want the Company to address”; “This iswrong”; “I have something I cannot report to my boss andI want the Company to address”; “I want the Company toimprove the work environment”; or “I am worried about
my relationships with others.” This is aimed at fostering
peace of mind in employees as well as risk awareness thatany harassment will be subject to admonition, in order toeliminate harassment and create good human relationships and a pleasant work environment.

■ Multi-rater evaluation system
Multi-rater evaluation is an evaluation system that allows employees to evaluate the daily behavior of theirbosses in order to promote communication between theboss and his or her team members and encourage theboss’s self-growth. Evaluation results are provided to theboss anonymously, allowing team members to evaluate
their bosses frankly with peace of mind.

■ Self-declaration system
This system provides employees with the opportunity toreview their current status and develop a future plan (career development plan) to clarify their future challenges.
Based on the requests of employees, the system has been
upgraded to enable employees to make self-declarations
using their own smartphones from this year.

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SUGI Holdings Integrated Report 2022

Interview
Please tell us the Group’s approach to human resources,
which are also one of the areas for growth investments.
Mori: The most important assets of the Group are its employees. What is most important for the Group in pursuing
its growth strategy is to secure and develop human resources and to develop human resource management that helps
employees grow without a sense of insecurity.
First, from the perspective of securing human resources,
we will strengthen, in each area, the recruitment of qualified
employees such as pharmacists and registered pharmaceutical distributors, who are necessary for store operations. At
the same time, we will strategically hire human resources
with strong expertise in digital fields, which will rapidly advance in the future, as well as other fields, such as medicalcare, development, products, international business, and administration, to promote the Group’s growth strategy. It isalso important to create a comfortable work environment tohelp existing employees demonstrate their ability freely. To
this end, in addition to working hour management, encouraging employees to use their paid leave, measures to prevent
occupational injury, compliance education, and the promotion of diversity, we have established a consultation channel
to provide support for any kinds of concerns that employees
may have. This is a mechanism through which the administration and sales teams can work together to find a solution.
The Company is currently certified as a Platinum Kurumincompany and an outstanding enterprise in terms of healthand productivity management. By strengthening such initiatives, we will work to secure excellent human resources.
Next, in the area of human resource development,
through coordination among “education and practice,”“evaluation and assessment,” “personnel changes and job
rotation,” and “self-enlightenment,” we will implement
growth strategies by developing leaders who will promotebusinesses and strengthening on-site capabilities to promote store operations that can satisfy customer needs. Leaders are developed through participation in external seminars
and internal leadership seminars in which all directors serve
as lecturers, job rotation that requires strong performancein multiple departments, and measurement of abilities
through regular external assessment, among other things.
In order to strengthen our on-site capabilities, we develop
on-site leaders and experts through education based on
the internal skills matrix, such as store manager education,
pharmacist and registered pharmaceutical distributor education, manager (store manager, etc.) candidate education,and education in the fields of wellness and beauty, as well as
strategic personnel changes, such as personnel changes thattake into consideration human resource development andShigeki Mori
General Manager, Human Resources Department andGeneral Manager, Legal Affairs Office, SUGI Holdings Co., Ltd.
Director and General Manager, Administration Division,
Sugi Pharmacy Co., Ltd.

motivation factors, and promotion to store manager position from the technical fields of beauty and wellness.
Lastly, as part of our efforts to develop human resource
management that helps employees grow without a sense of
insecurity, we are undertaking reforms of personnel systems
and corporate culture, which form the foundation for suchmanagement. For the last two years, we have worked to
drastically revise our personnel systems for managers, general office workers, and partner employees so that they aretransformed into personnel systems that embrace growth,sound competition, and crisis awareness in addition to security and stability, from the current systems that are more akinto a seniority system, in order to further stimulate employees’
desire to grow. Going forward, in view of the advent of theera of the 100-year life, we will promote reforms of personnel systems, such as the mandatory retirement system, retirement benefit programs, flexible work styles, and the promotion of health and productivity management, in a manner toadapt to changes in the times, to ensure that the Company
will continue to offer a workplace in which employees canbe themselves and continue to work happily with vigor. As
part of corporate culture reform, we have been having all
officers conduct rounds of all stores and distributing anonymous questionnaires among all 35,000 employees since FY
2021. We are working to develop an open corporate culture
in which the management diligently listens to the opinionsof employees and is perceptive to their feelings toward theCompany, and the voice of each employee reaches the management.
By securing and developing human resources and developing human resource management that helps employees
grow without a sense of insecurity focusing on the areas
mentioned above, we aim to realize our growth strategy andmanagement philosophy by pooling the strengths of each
employee, who are the Company’s most valuable assets.

SUGI Holdings Integrated Report 2022

Growth Foundation

Developing services to address the needs of diverse customers and patients based on the ideas and perspectivesof diverse people including female employees is indispensable for the sustainable growth of the Group. Therefore,
we are strengthening our efforts for human resources development and improvement of the workplace environment so as to increase the ratio of female managers to
30% by the end of FY 2029. Regarding human resources
development, we train employees to obtain and practicethe skills needed to discover and resolve essential challenges, communication and leadership skills, knowledgeof products, specialized and managerial knowledge, andtechnical skills.
Regarding the improvement of the workplace environment, we focus on improving the benefits package andencouraging each employee to present their opinions tothe company, thereby reinforcing support for employees.
We will also promote work-style reforms to support a better work-life balance. In order to create an environment
where male employees can also maintain a balance between work and family life, and men and women can cooperate with each other in furthering the empowermentof women, we will encourage male employees whose
spouses are expecting a child to take parenting leave andpromote work style reform so that male employees cantake parenting leave with peace of mind to raise the ratioof male employees who take parenting leave to at least
30%.

■ SUGI Smile’s efforts50

To become a company needed by society, the Company has been working on
achieving sustainable growth and the improvement of its medium- to longterm corporate value in collaboration with its stakeholders. To that end, we
continue to strengthen our corporate governance by improving the soundness
and transparency of our management.

Priority Issues [Issues of Materiality]

Corporate Governance
Basic Views on Corporate Governance
Based on our management philosophy, we believe that
we should contribute to society by effectively utilizing theassets and resources we have borrowed from society suchas people, products, stores, money and information, andreturning profits to society. To that end, we regard the enhancement of corporate governance as one of the highest
priorities of our management. We have also established abasic policy for the purpose of being a sound and highly
transparent listed company that provides accurate information to all stakeholders, and promoting profitable and

Board of Directors / Board of Auditors
effective management. We also endeavor to improve andfurther develop our corporate governance by continuously examining the content of the basic policy.

Click the website below for the SUGI Pharmacy Group
Corporate Governance Basic Policy.
URL: https://www.sugi-hd.co.jp/ir/ir_english/pdf/cg_basicE.pdf

Corporate Governance System

Diagram of the Corporate Governance System

The Board of Directors consists of diverse directors interms of background, such as expertise, experience andgender. The number of Directors is maintained at an appropriate level in accordance with the provisions of the
Articles of Incorporation, in order to ensure that the Boardof Directors functions most effectively and efficiently fromthe following viewpoints:(1) Sufficient diversity should be secured to conduct decision-making and supervision of management.
(2) The Board of Directors Discussions should engage in active discussion on relevant matters including concerns
raised by the Independent External Directors.
In principle, at least one-third of the Directors are required
to be Independent External Directors in order to make useof their abundant experience and expertise outside theCompany for the management of the Company, and at thesame time to strengthen the supervisory function of the Boardof Directors and improve the transparency of management.
Number of Directors

5

Number of Directors who are External Directors

2

Number of External Directors designated as
independent officers

2

General Meeting of Shareholders
Appointment / dismissal(As of May 20, 2022)

Appointment / dismissal
ReportBoard of Directors

Consultation

Direction

ReportInformation Security
Committee
Risk Committee

51

AdviseNomination andRemuneration Committee

AdviseSustainability Committee
Direction

ReportSUGI Holdings Integrated Report 2022

Audit Department
Audit

Participation /reportCoordination

Coordination

Representative Director

ReportBoard of Auditors

Coordination

ReportEach department / Group company[Internal Control System]

Accounting Auditor

Supervision

Consultation

Audit

Appointment / dismissal
ReportComposition of the Board of Auditors
The number of Auditors is as provided for in the Articles
of Incorporation, and a majority of Auditors shall be External Auditors. Persons with the insight, high ethical standards, objectivity and integrity required of Auditors will be
appointed. In particular, at least one person with expertisein finance, accounting and legal matters will be selected.
Number of Auditors

3

Number of Auditors who are External Auditors

3

Number of External Auditors appointed as
independent officers

3(As of May 20, 2022)

Roles of the Board of Directors
The Board of Directors performs its supervisory functions
by realizing highly effective corporate governance. In addition, it pursues the sustainable growth of corporate value
by making the best decisions using objective judgment andappropriately exercising its authority.
(1) The Board of Directors makes important managerial decisions in accordance with laws, ordinances, the Articles
of Incorporation and internal rules, and supervises business execution.
(2) After precisely understanding the cost of capital of theCompany, the Board of Directors formulates manage-

ment strategies and management plans, taking into
consideration the management philosophy and changes
in the external environment, and discloses their outline.
As for the formulated management strategies and management plans, the Board of Directors annually checks
and analyzes the progress status, reviews the businessportfolio, and revises, as needed, the management resource distribution plans including new investments, theestablishment of new stores, system investments, andinvestments in human resources development.
(3) The Board of Directors is proactively involved in theformulation and operation of educational programs
aimed at finding and developing capable Directors andtop management for the Group including its operating
subsidiaries. Furthermore, based on the management
philosophy and management strategies, the Boardof Directors appropriately supervises the content of
the programs and subsequent development throughpost-program assignment and promotion of the participants in the programs.
(4) The Board of Directors delegates its decision-making to
the Representative Directors in terms of business execution of matters other than those matters that should be
decided by the Board of Directors, in accordance withlaws and regulations, the Articles of Incorporation, andinternal rules.
(5) As for the meetings of the Board of Directors, each
Director and Auditor shall secure an attendance rate ofat least 80%.

Growth Foundation

The Company has chosen to adopt a corporate structure as a company with a Board of Auditors. In addition to the Boardof Directors comprising five Directors (including two External Directors)* and the Board of Auditors, we have also established a Nomination and Remuneration Committee as an advisory organization to the Board of Directors concerning thenomination of, and remuneration for, Directors and Auditors. We have also separated the functions of decision-making andsupervision of management from business execution, thus enhancing flexibility in our business execution by delegating
authority to the management team except in matters to be determined by the Board of Directors, in accordance with laws
and regulations, the Articles of Incorporation, and internal rules.*As of May 20, 2022

Composition of the Board of Directors

Roles of the Board of Auditors
As an organization independent from the management
team, the Board of Auditors performs audits concerning the
Directors’ business execution, the internal control system,
accounting, and other matters.
(1) The Board of Auditors prepares a standard for appropriate evaluation of the Accounting Auditor. On an annual
basis, the Board of Auditors evaluates the independence
and expertise of the Accounting Auditor based on thestandard, and decides the details of the proposal for the
General Meeting of Shareholders concerning the appointment or dismissal of the Accounting Auditor.
(2) The Board of Auditors secures sufficient cooperation
with External Directors so that they can smoothly collectinformation while maintaining their independence.
(3) The Board of Auditors collects necessary and sufficient
information to perform appropriate audits by securing cooperation with the Internal Audit Department,
the Finance and Accounting Department, the Legal
Department, and other departments concerned.

SUGI Holdings Integrated Report 2022

52

Priority Issues [Issues of Materiality]｜ Corporate Governance

Career Summary and Reasons for Appointment of Directors (As of May 20, 2022)

Eiichi Sakakibara

September 1986: Joined the Company
September 2008: Managing Director, Sugi Pharmacy Co., Ltd.
March 2011:
Representative Director & President, Sugi
Pharmacy Co., Ltd.
March 2017:
Representative Director & Chairperson, Sugi
Pharmacy Co., Ltd. (to date)
May 2017:
Representative Director & President, SUGI
Holdings Co., Ltd.
May 2021:
Representative Director & Chairperson, SUGI
Holdings Co., Ltd. (to date)Representative Director &Chairperson
Date of birth:
August 14, 1956
March 2006:
March 2011:
March 2014:
March 2017:
May 2018:
May 2021:

Joined the Company
Managing Director, Sugi Pharmacy Co., Ltd.
Representative Director & President, SUGI Smile
Co., Ltd. (to date)Representative Director & President, Sugi
Pharmacy Co., Ltd. (to date)Representative Director & Senior Vice President
Representative Director & President, SUGI
Holdings Co., Ltd. (to date)

Katsunori Sugiura
Representative Director &President
Date of birth:
October 14, 1978

Shinya Sugiura

Joined the Company
Director, Sugi Pharmacy Co., Ltd.
Director, SUGI Medical Co., Ltd.
Managing Director, Sugi Pharmacy Co., Ltd. (todate)
May 2017:
Director, SUGI Holdings Co., Ltd. (to date)
May 2021:
Representative Director & President, SUGI
Medical Co., Ltd. (to date)
December 2021: Representative Director & President, SUGI
Nursing Care Co., Ltd. (to date)Director
Date of birth:
November 30, 1979

April 1970:
May 2007:June 2008:

May 2012:

Shigeyuki Kamino

May 2015:
June 2021:

April 1983:
March 1994:
January 2015:
May 2016:
August 2016:

Yoshiko Hayama
External Director
Date of birth:
October 7, 1959

53

SUGI Holdings Integrated Report 2022

June 2017:
May 2018:
March 2020:

June 2020:

Joined The Fuji Bank, Limited. (currently,
Mizuho Bank, Ltd.)
Registered as a Certified Public Accountant
Representative, Yoshiko Hayama Certified
Public Accountant Office (to date)Director, SUGI Holdings Co., Ltd. (to date)
Fellow Member, The Japanese Institute ofCertified Public Accountants (to date)
External Director, COCO’S JAPAN CO., LTD.
External Director, Adastria Co., Ltd. (to date)
External Director, Dynac Holdings Corporation(Member of the Audit and Supervisory
Committee)
External Director, Zensho Holdings Co., Ltd. (todate)

Ms. Yoshiko Hayama has abundant experience and professional knowledge developed by serving as a certified public
accountant, and an external director and external auditorof listed companies. She has also actively made remarks
and recommendations during deliberations of the Board of
Directors’ meetings. We expect from Ms. Hayama appropriate supervision and advice based on her strong expertise infinance and accounting and profound insights in the areasof legal affairs, compliance, and risk management, from theviewpoint of an independent officer, and thus reappointed
her as External Director.

Ms. Kana Yasuda has engaged in a wide
range of business fields, including accounting audits for business corporations as acertified public accountant and a certified
public tax accountant, also serving as anexternal auditor and an external director for
listed companies. We have reappointed Ms.
Yasuda as External Auditor, expecting her to
conduct strict audits from an independent
standpoint, supported by her strong expertise in the areas of accounting and tax andabundant experience in the areas of legal
affairs, compliance, and risk management.

August 1988:
March 1993:
May 2002:
April 2004:

Mr. Makoto Kamiya has professional
knowledge and abundant experience developed as a certified public accountant
and certified public tax accountant. We
have judged that he is capable of appropriately fulfilling the duties of External
Auditor by applying a high level of expertise from his independent standpoint, andthus appointed him as External Auditor.

Toshihiko Sakamoto
External Auditor
Date of birth:
October 25, 1946

October 1993:

Kana Yasuda
External Auditor
Date of birth:
April 10, 1969

October 2005:
July 2007:

Makoto Kamiya
External Auditor
Date of birth:anuary 7, 1964

May 2020:

June 2020:

Joined Tohmatsu & Co. (currently, Deloitte Touche Tohmatsu LLC)
Registered as a Certified Public Accountant
Partner, Tohmatsu & Co. (currently, Deloitte Touche Tohmatsu LLC)
Registered as a Certified Public Tax Accountant
Partner, Tohmatsu Tax Co. (currently, Deloitte Tohmatsu Tax Co.)
Representative Partner, Tohmatsu Tax Co. (currently, Deloitte
Tohmatsu Tax Co.)Managing Partner of Nagoya Office, Tohmatsu Tax Co. (currently,
Deloitte Tohmatsu Tax Co.)
Director, Kamiya Makoto Certified Public Accountant, Certified
Public Tax Accountant Office (to date)
Auditor, SUGI Holdings Co., Ltd. (to date)
Auditor, Mizkan Asset Co., Ltd. (to date)
Auditor, Yamazaki Mazak Capital Co., Ltd. (to date)

Skills Matrix

AuditorExternal Director
Date of birth:
May 23, 1947

Mr. Shigeyuki Kamino has been involved in the management of other companies for many years. Based on his
abundant experience in, and knowledge of, management,
he has actively made remarks and recommendations during
deliberations of the Board of Directors’ meetings, and has
also served as Chair of the Nomination and Remuneration
Committee. Based on the judgment that his appropriate supervision and advice from a high-level, independent standpoint supported by his profound insights and supervisory
capability in the areas of corporate management, businessstrategies, and organizational and human resource management will significantly contribute to the further development and expansion of the Group, we reappointed him
as External Director.

Joined KPMG Century Audit Corporation (currently, Ernst & Young
ShinNihon LLC)
April 1997:
Registered as a Certified Public Accountant
March 2000:
Established Yasuda Tax & Accountant Office, Director (to date)
March 2004:
Registered as a Certified Public Tax Accountant
September 2009: External Auditor, Simpo Co., Ltd.
May 2010:
Auditor, SUGI Holdings Co., Ltd. (to date)June 2016:
External Director, GEO HOLDINGS CORPORATION (to date)June 2019:
External Director, Chuo Spring Co., Ltd. (to date)June 2020:
External Director (Member of Audit and Supervisory Committee),
KONDOTEC INC. (to date)
September 2021: External Director, Monogatari Corporation (to date)

May 2012:
March 2017:
May 2017:

Director

April 2009:

Joined Nagoya Railroad Co., Ltd.
Representative Director, Mie Sangyo Co., Ltd.
(to date)
Representative Director & Senior Vice President,
Nagoya Railroad Co., Ltd.
Representative Director & President, MEITETSU
Department Store Co., Ltd.
Chairperson, Chubu Department Store
Association
Director, SUGI Holdings Co., Ltd. (to date)
External Director, AT-Group Co., Ltd. (to date)

Mr. Toshihiko Sakamoto has been involved inbusiness management at other companies,
and has abundant experience in, and knowledge of, management. Furthermore, he took
office as an Auditor of the Company in May
2012, and is familiar with the business of theCompany. We have judged that he is capableof conducting strict audits of the Company’sbusiness from an objective viewpoint by applying his profound insights concerning corporate management and knowledge of theoverall management of the Company, andthus appointed him as External Auditor.

June 2006:
June 2009:

Mr. Katsunori Sugiura, as Representative Director of theCompany and Sugi Pharmacy Co., Ltd., has been involved inmanagement, while fulfilling his responsibilities by actively working on, for example, the formulation of a businessstrategy to realize a “total health care strategy” designed
to provide comprehensive support to customers from themaintenance of health and prevention of disease to nursing
care and terminal care, DX (digital transformation) strategy,
new businesses both in Japan and overseas, and corporate
value improvement through the promotion of the SDGs.
Based on the judgment that his business knowledge andleadership for sustainable improvement of corporate value
will significantly contribute to the further development andexpansion of the Group, we reappointed him as Director.
Mr. Shinya Sugiura, as Managing Director of Sugi Pharmacy
Co., Ltd., supervises the sales division, while fulfilling his responsibilities by actively working, as Representative Directorof Sugi Medical Co., Ltd. and Sugi Nursing Care Co., Ltd., on
the formulation of medium- to long-term strategy for thehealthcare business and leading various related collaborative initiatives with companies in other industries, and theimprovement of value-added of the pharmacies with thefunction of prescription dispensing, leveraging his experience and knowledge in the area of healthcare business.
Based on the judgment that his knowledge and experience
will significantly contribute to development of the corebusiness of the Group, we reappointed him as Director.

General Manager, Finance and General Affairs Division, Nagoya
Branch, ITOCHU Corporation
Representative Director & President, C&S Co., Ltd.
Senior Managing Director in charge of human resources, financeand accounting and information systems, ITOCHU Sugar Co., Ltd.
Auditor, SUGI Holdings Co., Ltd.
Auditor, Sugi Pharmacy Co., Ltd. (to date)
Full-time Auditor, SUGI Holdings Co., Ltd. (to date)

October 2001:

Growth Foundation

April 2004:
March 2010:
March 2011:
March 2017:

Mr. Eiichi Sakakibara, as Representative Director of theCompany and Sugi Pharmacy Co., Ltd., has led the Groupand carried on its management philosophy, while fulfilling
his responsibilities with his profound insights and extensive
experience in the drugstore industry, by actively working
on, for example, the selection of items and the creationof stores that suit the lifestyle of consumers that havechanged amid the COVID-19 pandemic, and the improvement of customer services. Based on the judgment that his
management track record, broad business knowledge, andleadership for sustainable improvement of corporate value
will significantly contribute to the further development andexpansion of the Group, we reappointed him as Director.

Career Summary and Reasons for Appointment of Auditors (As of May 20, 2022)

Name

Corporate
Management

Business
Strategy

Organization / Legal / Compliance /Human Resources Risk Management

Eiichi Sakakibara

●

●

●

Katsunori Sugiura

●

●

●

Shinya Sugiura●●

Shigeyuki Kamino●●

Finance /Accounting●●

Yoshiko Hayama●●

Toshihiko Sakamoto●●

Kana Yasuda●●

Makoto Kamiya●●

Training program (for officers including thoseof the major subsidiaries)
We continuously provide opportunities for External
Directors and External Auditors to share our management philosophy, management plan, business overview, finance, organization, etc. We offer training
programs for Directors, Auditors and Directors of the
major subsidiaries concerning relevant laws, finances,
corporate governance, risk management, etc. when
they newly take office. After they take office, we continuously provide or mediate training opportunities
according to their duty, capability and experience,and offer them financial support for the cost.

Healthcare

Content of the training programs (FY 2021)
Domestic and overseas economic
statusMarketingTrend of capital markets

Legal affairs and corporate
governance

Trend of medical systems

Corporate Governance Code

Sustainability management

Compliance training

ESG

Risk management

Management strategy

Organization and HR management
and leadershipManagement and financeDigital transformation

SUGI Holdings Integrated Report 2022

54

Priority Issues [Issues of Materiality]｜ Corporate Governance

Effectiveness Evaluation of the Board of Directors
Effectiveness evaluation of the Board of Directors
For the purpose of securing further effectiveness and improving the functions of the Board of Directors, we implement an effectiveness evaluation of the Board of Directors.
We conducted a written questionnaire survey and heldinterviews on the self-evaluation with all the Directors
and Auditors concerning the effectiveness of the Board of
Directors in terms of its structure, operation and agenda, as
well as the systems to support the Board of Directors, management strategy, and challenges.
Based on the results of the questionnaire survey, we implemented constructive discussions for future initiatives
by sharing the evaluation results of the current status andchallenges within the Board of Directors.

Outline of evaluation results

Future initiatives
Following the initiatives in the fiscal year ended February2022, we will continue to facilitate discussions on mediumto long-term strategies, digital transformation, and ESG
initiatives. We will also enhance the training programs for
Directors and candidates for Directors to help them respondquickly to changes in the economic environment both inJapan and overseas, changes in the healthcare system,
etc., and further improve the effectiveness of the Board of
Directors by ensuring its access to the latest information sothat it can appropriately address various challenges.

Interview
It has been seven years since you assumed officeas Director. Could you tell us about the progressin effectiveness improvement of the Board of
Directors during that period?
Kamino: Recently, reports and proposals on medium- to long-term group strategies, healthcare strategies, digital transformation, and ESG are put on
the agenda of the monthly meetings of the Boardof Directors for its lively discussions under the leadership of President Sugiura. At times, discussion becomes so heated that it is difficult to end it within thepredetermined time. We have also had much discussion on such topics as the close examination of thecost of capital for opening a new store, the promotion of women to managerial positions, and risk management based on various perspectives and objective
evidence such as numerical data that are relevant toeach topic.
The Board of Directors (including External Directors
and Auditors) consists of members with diverse expertise, and its composition is improving gradually.
As a result, the current management structure is optimal for the size of the Company.
While the external environment surrounding hospitals, pharmacies, etc., is changing more rapidly than

55

SUGI Holdings Integrated Report 2022

before, the Company will promote management thatis sustainable over the long term, in order to conform to its management philosophy that should notchange while at the same time adapting to changes
in the times under the spirit of “immutability and fluidity.” To this end, I will endeavor to fulfill my responsibilities as External Director by supervising and supporting the steering of management, while learning
new things on my own initiative.

Remuneration system for Directors and Auditors
Under the remuneration system for Directors and Auditors, basic amounts are fixed for each title and position using
remuneration data provided by specialized external organizations, as well as publicly available data while considering the
remuneration levels of industry peers of similar sizes. The composition of remuneration differs between Internal Directors
and External Directors and Auditors.
In FY 2022, we introduced non-monetary compensation (restricted stock compensation) as a new component of the
remuneration of Directors and Auditors.

■ Composition ratios of fixed compensation,
performance-linked compensation, and nonmonetary compensation (restricted stockcompensation)

officers (External Directors and External Auditors).
The final decision on remuneration of Directors andAuditors is subject to appropriate deliberations by the
Nomination and Remuneration Committee.

The remuneration of Internal Directors consists of fixedcompensation, performance-linked compensation, andnon-monetary compensation (restricted stock compensation), whose amount is based on the Company’s financial
performance for each fiscal year. This is designed to provide
the Internal Directors with incentives to work toward sustainable improvement of the corporate value of the Company.
The remuneration of External Directors and Auditors is
composed only of fixed compensation in view of their roles
and independency.
The composition ratios of remuneration of Directors andAuditors are determined each time in consideration of thebusiness results of the Company, after verifying the levels of
remuneration of industry peers of similar sizes.
Composition ratios of remuneration for FY 2021
Fixed
compensation

Performancelinked
compensation

Non-monetarycompensation

Internal
Directors

83％

17％

－

External
Directors andAuditors

100％

－

－

Category(restricted stockcompensation)* We introduced non-monetary compensation (restricted stock compensation) as a
new component of remuneration of Directors in FY 2022.

■ Calculation method of fixed compensation
The amount of fixed compensation is deliberated by
the Nomination and Remuneration Committee, and thatfor Directors is determined by the Representative Director
who is delegated by the Board of Directors, whereas thatfor Auditors is determined by the Board of Auditors basedon its deliberations.

■ Calculation method of performance-linked
compensation
According to the degrees of achievement of the budgetof consolidated ordinary income for each fiscal year,
we set the basic amounts for each title and position, towhich the degree of contribution by each Director is added. Then, the Representative Director who is delegatedby the Board of Directors determines the amount to be
paid following the deliberation of the Nomination andRemuneration Committee.
We have chosen consolidated ordinary income as anindicator for performance-linked compensation because
we recognize the importance of improving overall profitability including financing activities.

Growth Foundation

The effectiveness evaluation conducted in the fiscal year
ended February 2022 indicated that the effectiveness ofthe entire Board of Directors was secured at a high level.
The evaluation results also indicated that discussions on
medium- to long-term strategies, digital transformation,

and ESG initiatives in the fiscal year ended February 2022
were even livelier than in the prior year.
In addition, constructive opinions were submitted toand discussed by the Board of Directors in order to securehigher effectiveness on such topics as further information
sharing for the Board of Directors to discuss and monitor
managerial responses to risks from a medium- to long-term
perspective, and the improvement of training programs for
Directors and candidates for Directors.

Remuneration System for Directors and Auditors■ Calculation method of non-monetarycompensation (restricted stock compensation)■ Nomination and Remuneration Committee
As an advisory body to the Board of Directors, we established a voluntary Nomination and Remuneration
Committee, a majority of which is composed of external

Regarding restricted stock compensation as non-monetary compensation, the specific number of shares allottedto each Director and other necessary matters are determined by the Board of Directors based on the deliberation
results of the Nomination and Remuneration Committee.

Total amount of remunerations for the current fiscal year including remuneration of Directors and Auditors
Number of persons

Fixed compensation(millions of yen)

Directors (of which, External Directors)

7（3）

107（15）19（−）

126（15）

Auditors (of which, External Auditors)

3（3）16（16）

−（−）

16
（16）

Total (of which, External Directors andExternal Auditors)

10（6）124（32）19（−）

143（32）Category

Shigeyuki Kamino
External Director, SUGI Holdings Co., Ltd.

Bonus
(millions of yen)

Total amount(millions of yen)

Notes: 1. The total amount of remuneration paid to Directors excludes the portion of employees’ salaries of Directors who concurrently serve as employees.
2. The upper limit on remuneration of Directors was resolved at 400 million yen per year (not including salaries received as employees) at the 25th ordinary general meeting ofshareholders held on May 24, 2007.
3. The upper limit on remuneration of Auditors was resolved at 30 million yen per year at the 25th ordinary general meeting of shareholders held on May 24, 2007.
4. The above-mentioned figures include the remuneration paid to one Director who resigned at the end of the 39th general meeting of shareholders held on May 2021.

SUGI Holdings Integrated Report 2022

56

Priority Issues [Issues of Materiality]｜ Corporate Governance

Relationships with Shareholders

Establishment of the Sustainability Committee

Securing shareholders’ rights
We are determined to act appropriately to treat all shareholders, including minority shareholders and foreign shareholders, substantially equally according to the number ofshares they hold, and secure shareholders’ rights as represented by the exercise of voting rights at the general meeting of shareholders.
In the case where we are to implement a capital policy that may result in a change of control or a large-scale
dilution, we will resolve the matter by fully discussing thenecessity and rationality at the Board of Directors before
providing sufficient explanation to shareholders from theperspectives of fulfilling fiduciary duties for shareholders.

Constructive dialogues with shareholders andinvestors

Status of dialogues with investors
FY 2020

FY 2021

Financial briefings for institutional
investors and analysts (1H and full-year)22

Financial briefing small meetings for
institutional investors and analysts

25

34

Conference hosted by securities
companies

6

8

133

168

Individual meetings for institutional
investors (face-to-face meetings andinterviews by phone)

57

SUGI Holdings Integrated Report 2022

Cross-shareholdings■ Policy on acquisition and shareholding(1) In principle, we will not hold shares under a cross-shareholding policy toward the improvement of corporate
value except in the case of strategically important collaboration, and the case where the maintenance anddevelopment of trading relationships are confirmed.
(2) As for shares held, we will periodically verify the rationality of holding the shares, and the Board of Directors will
check this on an annual basis, the details of which will be
disclosed. We will gradually sell any shares whose holding purpose is no longer significant, in a manner taking
into consideration the status of the relevant issuer.
(3) As for the exercise of voting rights of the shares held, we
make comprehensive judgment by confirming whether
each agendum will contribute to the enhancement ofcorporate value from the medium- to long-term perspectives, while respecting the management policy of
the relevant issuer.
(4) We will not carry out any transaction with a company
that holds the Company’s shares if the transaction is not
economically rational. When such a company expresses
the intention to sell the Company’s shares, we will not
try to prevent it from doing so.
■ Verification results by the Board of Directors
As for the cross-shareholdings of the Company as ofFebruary 28, 2022, the Board of Directors has examined eachstock to confirm the significance of its holding purpose.

With the aim of promoting sustainability management, we have established the Sustainability Committee as an advisory
body to the Representative Director & President.
❶ The Sustainability Committee discusses the sustainability strategy and initiatives for the entire Group, andreports and makes recommendations to the Representative Director & President.
❷ The Sustainability Committee consists of members appointed by the Representative Director & President as
appropriate in light of the purpose of the committee.
❸ The Risk Committee and the Information Security Committee have been established inside the Sustainability
Committee as the bodies that manage relevant risks and perform tasks assigned by the Sustainability
Committee.

Risk Management
For the purpose of promoting sound, highly transparent
and efficient management, the Board of Directors will improve the systems concerning compliance, appropriatenessof financial reporting, risk management and other matters,
seeking more effective functions in the internal control system from the perspectives of group management, and supervise their operation status by utilizing the Internal Audit
Department. In order to enhance the accuracy of internal
control, we endeavor to minimize managerial risks by documenting and monitoring the details of the business operations of each Group company, the assumed risks, and theircountermeasures. The Representative Director & President
Examples of the major risks to be managed
Risks
1-1
1.
Risks concerningbusiness strategy

Examples of the major risks
Business
environment● Drastic reductions of drug prices and dispensing fees
● Revisions of applicable tax rules and accounting standards

1-3 Investments● Failure in investments in new stores● Failure in M&A investments

2-1

Large-scaledisasters

2.
Risks relating tonatural disasters and 2-2 Climate change
infectious diseases,
etc.
Infectious
2-3diseases

3.
Risks relating
to corporate
management● Intensified competition with industry peers and different industries● Industrial reorganization and oligopoly through large-scale M&A

Applicable laws
1-2 and regulations,etc.

Disclosure
We appropriately disclose information on a timely basis
in compliance with laws, regulations and related rules toward the realization of fair and highly transparent management.
(1) We will proactively disclose both financial and non-financial information if such information is considered
useful for shareholders and other stakeholders to deepen their understanding of the Company.
(2) Disclosure will be made in such a manner that our shareholders and other stakeholders can easily access it.
(3) From the viewpoint of information disclosure particularly to overseas investors, we will prepare materials in
English concerning the Company profile, management
strategy, medium-term management plan, budget,
trend of business results, notice of convocation of thegeneral meeting of shareholders, corporate governancebasic policy, and ESG. These materials will be posted on
the website of SUGI Holdings Co., Ltd.

has established the Risk Committee and the Information
Security Committee inside the Sustainability Committee tocontrol high-risk fields in the management, thus improving
the relevant business operations and preventing accidents
at an early stage.
The Risk Committee prevents risks from occurring by
evaluating and identifying serious risks concerning corporate management such as business strategy, natural
disasters, and infectious diseases, and by taking actions inadvance. In the event of a crisis, we are prepared to immediately establish a separate “emergency task force” to act
quickly and appropriately.

Growth Foundation

We endeavor to improve medium- to long-term corporate value through constructive dialogues with shareholders and investors.
(1) We will focus on the improvement of IR activities to gain
understanding concerning our corporate philosophy,
management strategy, financial strategy, management
plan, business results, and concept of sustainability.
(2) The Representative Director & President will supervise
all aspects of dialogue, and consultation will be provided by the relevant departments, if necessary.
(3) As for individual face-to-face meetings with shareholders and investors, the IR department will serve as thecontact point, and the matter will be appropriately handled within a reasonable scope based on the requestsof, and the purpose of the meeting with, the shareholders and investors.
(4) In order to promote constructive dialogues with shareholders and investors, the IR department and otherrelated departments will periodically exchange opinions and share information based on their professional
viewpoints, and respond to matters in cooperation witheach other.
(5) Useful opinions and requests expressed in dialogues
with shareholders and investors will be provided to theBoard of Directors, etc. as necessary.
(6) The composition of shareholders will be checked periodically, based on which communication will be im-proved in an appropriate manner suited to the shareholders and investors.
(7) In carrying out dialogues with shareholders and investors, we will comply with laws and regulations and otherrelated rules, and manage insider information properly.

● Stagnant economic activities● Suspension of business activities due to damage to stores, offices, systems and employees● Damage to properties held and repair costs arising therefrom● Damage to stores and facilities due to typhoons, heavy rains, etc.
● Introduction of a carbon tax, etc. due to the tightening of regulations● Stagnant economic activities● Self-restraint and suspension of business activities at stores● Suspension of business activities due to infection of employees

3-1

Wrongdoing andaccidents● Occurrence of serious mistakes in prescription dispensing● Fraudulent activities by officers or employees● Defective products, foreign substance mixing, and inappropriate labeling

3-2

Information
security● System failures caused by accidents, defects, etc.
● Unauthorized invasion and/or access and virus infection from external networks● Leakage of customer information

3-3 Human rights● Worsening of work environments and safety and health● Acts of human right violation (harassment and discriminatory practices)

3-4 Human resources● Shortage of managerial human resources● Intensified competition for hiring capable human resources

3-5 Supply chain● Human rights and environmental issues concerning the supply chain● Changes in purchase prices

SUGI Holdings Integrated Report 2022

58

Priority Issues [Issues of Materiality]｜ Corporate Governance

Financial IndicesInternal Reporting System
For the purpose of preventing and correcting violation of laws and regulations or misconduct by systems or individuals, SUGI Pharmacy Group has established a compliance consultation channel, enabling employees to seek consultation
anonymously. The Internal Reporting System is operated in accordance with the internal rules, and reporting channels are
established within the Group and in external law offices. In order to prohibit disadvantageous treatment of informants andincrease the recognition and understanding of the above-mentioned system, we have ensured that contact information forthe system is displayed at our stores and offices, and have also distributed the Compliance and Disaster Countermeasure
Pocket Book. By such promotional activities, we endeavor to establish a sound reporting system.
The Internal Reporting System was renamed “Anything Consultation Dial for All Workplace Concerns” in FY 2021 to create an environment where employees feel able to use it more freely.

Personal information protection and enhanced information security
The SUGI Pharmacy Group works to strengthen the protection of personal information and information security in orderto protect and prevent the leakage of personal information, customer information, and confidential information. By establishing the Information Security Basic Policy, the Group is taking various measures to prevent any unauthorized access fromoutside, virus infection, or data leakage. As the same time, we work to strengthen information security systems and educate
employees appropriately.
Reinforcement of information security systems
and education

Prevention of unauthorized access from outside● Establish the Information Security● Install firewalls

Basic Policy● Inform employees of the Information
Security Basic Policy and provide
relevant education● Obtain certification from an externalorganization (ISMS)● Implement defense against

Prevention of virus infection

FY 2018

FY 2019

FY 2020

FY 2021Net sales

457,160

488,701

542,361

602,850

625,477

Operating income

24,87326,05330,15934,041

32,137

Ordinary income

25,90027,23731,47335,33333,082

Profit attributable to owners of parent

16,411

17,94020,782

21,12019,389Depreciation

6,455

7,389

8,412

9,940

11,268Cash flows from operating activities

27,56422,89445,35334,027

7,174

Cash flows from investing activities-17,911-22,362-18,422-29,254-23,892

Cash flows from financial activities-3,401-13,897-4,895-5,274-5,295

Cash and cash equivalents at end of period

47,67634,311

56,34755,84533,831

unauthorized intrusion from websites

Net assets

162,046

166,563

182,750

200,629

213,890

Total assets

253,989

265,481313,757

345,933

334,758

Net income (yen)

259

287

336

341

313

Net asset (yen)

2,559

2,694

2,956

3,245

3,460

Dividend (yen)

60

70

80

80

80

Equity ratio

63.8

62.7

58.2

58.0

63.9

Return on equity (ROE)

10.6

10.9

11.9

11.0

9.4

Return on total assets (ROA)

10.7

10.5

10.9

10.7

9.7

Payout ratio

23.1

24.3

23.8

23.4

25.5

All stores: Corporate group as a whole

+6.1

+6.9

+11.0

+11.2

+3.8

All stores: SUGI Pharmacy operations*

+8.3

+9.9

+13.8

+12.7

+5.3

Existing stores: Corporate group as a whole

+2.3

+2.2

+5.1

+4.3

-0.7

Existing stores: SUGI Pharmacy operations*

+2.7

+2.6

+5.9

+4.7

0.0

Sales from prescription dispensing

84,10891,074105,279

117,597

132,743

Number of prescription sheets filled by us (thousands)

7,704

8,698

9,833

10,101

11,730Prescription cost (yen)10,917

10,471

10,707

11,642

11,318● Prevent the receipt of virus-infectedemails

Per share information

Prevention of data leakage● Prohibit the connection of PCs with

● Apply security patches

external devices● Implement measures to prevent emails
from being sent to the wrong recipients● Restrict access to customer information● Install security rooms and security cameras● Preserve logs of PC operations and email
sending to strengthen the ability to investigate
in the case of leakage and secure tracking trails

browsing of websites

FY 2017

End of consolidated fiscal year

● Introduce anti-virus software● Restrict communications with and(Millions of yen)Management indices (%)

The SUGI Pharmacy Group has been engaging in management tocontribute to society by effectively utilizing assets and resourcesborrowed from society (people, things, money, information, etc.)
and continuing to provide profits to society. To realize this, we understand that it is our top priority management issue to strengthen the information security of the entire Group by protecting ourcustomers’ personal information and other information assets
owned by us from various threats, including unauthorized accessand cyberattacks. Based on this concept, the Group establishedthe “Information Security Basic Policy.”

Going forward, we will endeavor to maintain and improve information security through compliance with, and proper handlingof, the aforementioned policy and the “Handling of Personal
Information (Privacy Policy)” by our officers and employees.

Click the website below for the Information Security
Basic Policy (set forth in Attachment 2 of the
Corporate Governance Basic Policy).
URL: https://www.sugi-hd.co.jp/ir/ir_english/pdf/cg_basicE.pdf

Conformance of information security management systems to standard requirements
Certain operations at the SUGI Pharmacy Group, including registration and change of information of point card members, responses to incoming calls and maintenance of incoming callrecords, provision of specified health guidance, and provision of health information to corporate customers, conform to the standard requirements of ISO27001. The Group will endeavor
to strengthen and upgrade its responses in the areas of personal information protection andinformation security by receiving examinations by external organizations appropriately.

Annual sales growth rate (%)

Data & Corporate Profile

Information Security Basic Policy

Indices on prescription dispensing information

JQA-IM1863

Scope of registration
activities∙ Responding to incoming
calls and maintaining
incoming call records∙ Managing theregistration of andchanges in point card
members*“SUGI Pharmacy operations” indicates only the number of stores of SUGI Pharmacy.

59

SUGI Holdings Integrated Report 2022

SUGI Holdings Integrated Report 2022

60

Non-financial Indices
FY 2018

FY 2019

FY 2020

FY 2021

FY 2018

FY 2019

FY 2020

FY 2021

Numbers relating to diversity and work style

Numbers representing the Company
Number of stores
Number of new stores
Year-end total square meters of sales floor

1,190

1,287

1,391

1,483

102

116

121

112

722,317781,303

847,543915,322

Numbers relating to customer base

Number of managers

1,536

1,679

2,005

2,126

Percentage of female managers (%)

11.6

13.6

15.6

16.8

Percentage of disabled employees (%)

2.47

2.54

2.36

2.44

Number of employees with foreign nationality

134

353

472

454

Number of visitors per year

245,658,072

269,803,126

316,850,068

339,909,390

Number of employees who took parenting leave

396

455

697

805

Number of SUGI Pharmacy point members

15,154,963

16,459,486

18,042,809

19,414,675

Percentage of male employees who took parenting leave (%)

5.5

18.2

27.9

To be measured

Number of SUGI Pharmacy app downloads*1－

3,506,481

6,018,926

8,331,741

Percentage of those returning to work after parenting leave (%)

90.1

93.4

93.7

97.7

Number of SUGIsapo app downloads*2－

611,625

1,549,738

2,342,561

Matters relating safety and health (%)

Number of Family Pharmacy app downloads－－

161,060

368,644

Regular health checkup rate

92.7

99.7

99.6

To be measured

Percentage of smokers

17.9

17.0

15.2

12.0

－

9,469

10,213

10,284

73.7

88.3

68.3

136.0

Numbers relating to prescription dispensing
Number of prescription dispensing pharmacies
Percentage of prescription dispensing stores (%)
Percentage of prescription dispensing of drugs that require special management (%)
*3

833

930

1,050

1,166

Numbers relating to human resource development

78.4

80.0

82.9

85.5

Number of participants enrolled in dementia supporter courses

－

－

－

2.4

Average hours per employee spent in capacity development training
Numbers relating to the environment

Numbers relating to private brands
Percentage of private brand sales (%)

8.6

9.4

8.3

8.6

Number of plastic bags used

270

262

144

43

Percentage of eco-friendly private brand products*4 (%)

－

－

－

10.2

Tonnage of plastic bags used

2,400

2,000

1,100

328

Electric power consumption (thousand kWh)

240,121250,121279,619

To be measured

Gasoline consumption of company cars (liters)

320,714348,007375,300

405,420

1,004

1,126

1,353

1,454

Percentage of stores with LED lighting (%)

72

81

97

98

Food waste ratio (%)

－

－

0.45

0.41

Numbers relating to function updates for an aging society
Number of stores providing home-visit prescription dispensing services

447

487

541

556

Total number of customers who used home-visit prescription dispensing services

115,326

128,880

146,794

160,656

9

11

13

13

11,645

12,453

14,59017,913

Number of home-visit nursing stations
Total number of customers who used home-visit nursing services

Numbers relating to governance risk and compliance

Numbers relating to contribution to the enhancement of community safety and security
Total number of partnership agreements concluded
Comprehensive agreements

Number of stores with LED lighting

－

53

58

74

Number of Board of Directors meetings held

13

13

12

12

－

13

13

19

Number of Risk Committee meetings held

－

21

58

31

－

2

2

2

Directors

6

6

7

6

－

9

9

9

Men

5

5

5

4

Agreements concerning the environment, etc.

－

－

－

7

Women

1

1

2

2

Disaster risk reduction agreements

－

29

34

37

2

2

3

3

Total number of AEDs donated to facilities for senior citizens

127

147

182

217

Men

1

1

1

1

Total number of stores where AEDs are installed

27

47

130

180

Women

1

1

2

2

Percentage of independent outside directors (%)

33.3

33.3

42.8

50.0

16.6

16.6

28.6

33.3

3

3

3

3

Numbers relating to employees

Independent External Directors

5,494

6,182

6,710

7,308

Percentage of female directors (%)

Men

3,074

3,340

3,540

3,804

Auditors

Women

2,420

2,842

3,170

3,504

Men

2

2

2

2

Percentage of women (%)

44.0

46.0

47.2

47.9

Women

1

1

1

1

Percentage of partner employees (converted into the number of 8-hour workers) (%)

61.5

62.5

63.1

61.7

Percentage of independent outside auditors (%)

100.0

100.0

100.0

100.0

Number of new graduates hired

567

590

695

727

Percentage of female auditors (%)

33.3

33.3

33.3

33.3

Number of pharmacists

2,567

2,803

3,025

3,390

Compliance training attendance ratio (%)

99.5

95.3

100.0

100.0

Number of registered pharmaceutical distributors

6,766

7,810

8,527

9,704

Annual number of calls to “Anything Consultation Dial for All Workplace Concerns”*5

269

430

832

1,254

Number of nationally certified dietitians

348

426

466

498

Number of nurses

80

88

92

87

Number of full-time employees

Data & Corporate Profile

Agreements on services not covered by health insurance
Watching-over agreements*5: The system was renamed in FY 2021 to ensure that employees feel able to use it more freely.

*1 This is the number since the revamp of the app in October 2018. *2 This is the total number of downloads of the Walk app and the Eats app.
*3: Percentage of drugs that require special management (narcotics, raw materials for stimulants, psychotropic drugs, and toxic substances) to the prescription dispensing of all drugs.
*4: Percentage of eco-friendly products to all private brand products.

61

SUGI Holdings Integrated Report 2022

SUGI Holdings Integrated Report 202262Consolidated Balance Sheet(Millions of yen)

(Millions of yen)

As of the end of As of the end of
FY 2020
FY 2021

As of the end of As of the end of
FY 2020
FY 2021(Feb. 28, 2021)(Feb. 28, 2022)(Feb. 28, 2021)

AssetsLiabilities

Current assets
Cash and deposits

Current liabilities

86,845

Securities

31,6559,000

91,061

70,98733,5779,000

Income taxes payable

6,588

1,586

2,599

1,899

Inventory

71,16571,571

Provision for bonuses

Others

15,20715,455

Others28,14228,092-1-1

Total current liabilities

128,391

102,565

213,871

192,434

Allowance for doubtful
accounts
Total current assets

Non-current liabilities
Retirement benefit liability

Consolidated Statement of Income

FY 2021(Mar. 1, 2020 to Feb. 28, 2021)(Mar. 1, 2021 to Feb. 28, 2022)

Net sales602,850

625,477

Cost of sales

421,219

433,987

Gross profit

181,631

191,490

Salaries, allowances and bonuses

60,524

66,688Provision for bonuses

2,576

1,873

Retirement benefit expenses

1,081

1,267

Rent expenses

30,12232,362Others53,284

57,161

Total selling, general and administrative expenses

147,590

159,353

34,041

32,137

Interest income

88

84

Dividend income

602Operating income
Non-operating income

Gain on donation of non-current assets

Non-current assets
Property, plant and equipment(Millions of yen)

FY 2020

Selling, general and administrative expenses

62,831
Accounts payable – trade

Accounts receivable – trade(Feb. 28, 2022)

Consolidated Statement of Income and Consolidated Statement ofComprehensive Income

7,304

8,169

Rental income

439

455

1,801

1,856

OthersBuildings and structures

101,330

112,267

Asset retirement obligations

Accumulated depreciation-41,419-46,622

Others

3,520

3,473

Buildings and structures(net)

59,91065,645

Total non-current liabilities

16,912

18,302

Land

8,517

145,304

120,868

6,087

6,659

Total non-operating income

978

729

3,368

3,129

21

19

1,425

1,547

135

281

Non-operating expenses

Construction in progress

2,861

3,238

Others35,96340,651

Accumulated depreciation-25,043-28,933

Others (net)

Intangible assets

11,717

82,20989,366

5,326

6,612

4,297

4

5

Deferred tax assets

9,839

11,946

Guarantee deposits

25,74727,491Others

2,938

2,631

Allowance for doubtful
accounts-36-27

Total investments andothers44,527

46,344

Total non-current assets

132,062

142,323

Long-term loans receivable

Total non-operating expenses

493

335

2,075

2,183

35,33333,082Extraordinary losses
Shareholders’ equity
Capital stock
Capital surplus

15,434
24,632

15,434
24,632

167,983

182,427-9,298-9,300198,751

213,194

Investments and other assets

6,032

OthersOrdinary income

Net Assets

Retained earnings

Investment securities

Loss on retirement of non-current assets

Treasury stock
Total shareholders’ equity
Accumulated othercomprehensive income
Valuation difference on
available-for-sale securities
Remeasurements of defined
benefit plans
Total accumulated othercomprehensive income
Total Net Assets

Impairment loss

3,812

5,626

Total extraordinary losses

3,812

5,626

Profit before income taxes

31,521

27,456

Income taxes – current

12,355

9,660

Income taxes – deferred-1,955-1,594

Total income taxes

10,4008,066

Net income

21,12019,389Profit attributable to owners of parent

21,12019,389

Data & Corporate Profile

Total property, plant andequipment

10,919Rental costs

8,764
Total Liabilities

Interest expenses(Millions of yen)

Consolidated Statement of Comprehensive Income
2,208
-329
1,878
200,629

1,065
-369
695
213,890

Net income

FY 2020

FY 2021(Mar. 1, 2020 to Feb. 28, 2021)(Mar. 1, 2021 to Feb. 28, 2022)

21,12019,389-1,142Other comprehensive income
Valuation difference on available-for-sale securities

1,890

Remeasurements of defined benefit plans

-185

-39

Total other comprehensive income

1,705-1,182

22,825

18,207

22,825

18,207

Comprehensive income(Breakdown)

Total Assets

63

SUGI Holdings Integrated Report 2022

345,933

334,758

Total Liabilities and Net Assets

345,933

334,758

Comprehensive income attributable to owners of parent

SUGI Holdings Integrated Report 202264

Consolidated Statement of Cash Flows

Corporate Profile and Stock Information(As of February 28, 2022)(Millions of yen)

FY 2020

FY 2021(From Mar. 1, 2020 to Feb. 28, 2021)(From Mar. 1, 2021 to Feb. 28, 2022)

Cash flows from operating activities
Profit before income taxes

31,521

27,456

Depreciation

9,940

11,268

Impairment loss

3,812

5,626

Increase (decrease) in provision for bonuses

643

-699

Increase (decrease) in retirement benefit liability

644

804

0

-8

Interest and dividend income

-149

-87

Gain on donation of non-current assets

-271

-233

Increase (decrease) in allowance for doubtful accounts

Interest expenses

21

19

Loss on retirement of non-current assets

103

Decrease (increase) in trade receivables-3,443-1,922

Decrease (increase) in inventories-7,445-203

Increase (decrease) in trade payables

8,586-20,079

Others

1,081

-128

Sub-total

44,952

21,814

Interest and dividends received

84

25

Interest paid

-17

-16

Income taxes paid

-10,993-14,648

Net cash provided by (used in) operating activities

34,027

7,174-67,000-81,000

Cash flows from investing activities
Payments into time deposits

63,00081,000-32,000-24,000

Proceeds from redemption of securities

31,00026,000Purchase of property, plant and equipment-18,627-20,743

Purchase of intangible assets-2,936-2,636

Purchase of investment securities-43－

Proceeds from sale of shares of subsidiaries and associates－

100

Collection of loans receivable

0－-2,505-2,512

Proceeds from refund of guarantee deposits

267

299

Others-408-399-29,254-23,892-1-1

Payments of guarantee deposits

Net cash provided by (used in) investing activities

Stock Information

Trade name: SUGI Holdings Co., Ltd.
Established: March 8, 1982
Capital:15,434,588,000 yen
Number of employees:
Number of full-time employees:7,308 (ona consolidated basis)
Number of partner employees: 11,770*

Total number of shares authorized to
be issued by the Company:
Total number of issued shares:
Number of shareholders:*Number of partner employees converted into thenumber of 8-hour workers

Major operations:Control and management of companies
operating in such fields as prescription
dispensing, drugstores, and home-visit
nursing stations
Headquarters: 62-1 Shin’e, Yokone-machi, Obu-shi, Aichi
474-0011
Main store:
1-8-4 Mikawa Anjo-cho, Anjo-shi, Aichi
446-0056
Number of stores:
1,483 (Total of the Group)- Sugi Pharmacy:1,363- Japan: 107- SUGI home-visit nursing stations: 13
Directors (as of May 20, 2022)
Representative
Director & Chairman: Eiichi Sakakibara
Representative
Director & President: Katsunori Sugiura
Director:
Shinya Sugiura
External Director: Shigeyuki Kamino
External Director: Yoshiko Hayama
External Full-time
Auditor:Toshihiko Sakamoto
External Auditor:
Kana Yasuda
External Auditor:
Makoto Kamiya

200,000,000
63,330,838
31,844

Share distribution according to shareholders■ Financial institutions:13.7%■ Financial instrumentbusiness operators:1.7%■ Other domestic
corporations:35.8%■ Foreigners:31.0%■ Individuals and others:15.4%■ Treasury shares:2.4%

Major shareholders (Top 10)
Name

Number of Shareholding
shares held
ratio
(thousands)(%)

Sugi Shoji Co., Ltd.

20,972

33.92

The Master Trust Bank of Japan (trust
account)

6,442

10.42

STATE STREET BANK AND TRUSTCOMPANY 505223

2,125

3.43

Katsunori Sugiura

1,892

3.06

Shinya Sugiura

1,892

3.06

THE BANK OF NEW YORK MELLON
140051

1,627

2.63

CEP LUX-ORBIS SICAV

1,445

2.33

Tsuruha Co., Ltd.

1,272

2.05

Custody Bank of Japan, Ltd. (trust
account)

1,046

1.69

THE BANK OF NEW YORK MELLON
140042912

1.47(Notes) 1. We possess 1,517,333 treasury shares, but exclude ourselves from theabove list of the major shareholders.
2. The shareholding ratio is calculated after excluding our treasury shares.

Data & Corporate Profile

Proceeds from withdrawal of time deposits
Purchase of securities

Corporate Profile

Cash flows from financing activities
Purchase of treasury shares
Repayments of finance lease obligations

-328

-348

-4,944-4,944-0-0-5,274-5,295

Net increase (decrease) in cash and cash equivalents-502-22,013

Cash and cash equivalents at beginning of period

56,34755,845

Cash and cash equivalents at end of period

55,84533,831Dividends paid
OthersNet cash provided by (used in) financing activities

65

SUGI Holdings Integrated Report 2022

SUGI Holdings Integrated Report 2022

66