Business Risks

In Japan, we achieve sustainable growth by flexibly responding to the market through a dual system of the "Retail Market Business" and the "Food Service Business". We aim to create business opportunities by leveraging the Group's ability to expand its business into home-cooked meals, ready-made foods and restaurant sectors, expanding the possibilities of salads and eggs and contributing to healthy and fulfilling food lifestyles. We also aim to expand into the wellness domain by leveraging our proprietary ingredients.
To respond to rapid changes in the market environment and increasingly diverse consumer needs, we operate Sengawa SHIPYARD as a base for developing and verifying new products. At this facility, rapid prototyping through small-lot production is possible, and a system has been established to obtain direct customer feedback at an early stage. Through these efforts, we are promoting market validation-based product development, reducing uncertainty in product launches, and improving the success rate of new products.
Moreover, to promptly provide products and services that address issues in customers' food lifestyles and to create new food scenes, we have reorganized the sales organization into a two-headquarters system comprising the Marketing Division and the Sales Strategy Division, thereby strengthening marketing and proposal capabilities. Through this organizational change, we promote demand development by quickly capturing market changes and strive to maximize profit opportunities.
As for our overseas operations, we will focus on China, Asia-Pacific, and the Americas, in which we will expand our marketing focus toward the middle class demographic from the affluent demographic, which is the Group's current customer base. We will also strengthen our digital communication and marketing functions to achieve greater rates of recognition and product use of "KEWPIE brand". We are investing our management resources intensively into areas that include human resources, product development, marketing and governance to achieve sustainable growth.

In order to reduce the impact of a spike in raw material prices, the Group has been working on initiatives such as revising product prices, adding value, improving production efficiency, and establishing a procurement system based on the Group collaboration. In addition, the Group is working to shift to a business structure that is less susceptible to the effects of market prices for main raw materials.
As for procurement of shell eggs, we take steps that include arranging a combination of scheduled annual volume purchases with producers in respective regions with a focus on major egg producers, fixed-price contracts, and spot contract purchases on the open market. Moreover, we have also established a framework encompassing nationwide procurement and egg-breaking plants that provides coverage through plants in other regions should restrictions be placed on shipments amid an outbreak of avian influenza in some geographic areas. In addition, we have a system in place that enables us to procure eggs even from overseas, as the situation requires. With regard to cost increases due to avian influenza outbreaks and the risks associated with decreases in profits due to production cutbacks, we are working to improve profitability by adding value to our products, while securing raw materials and product inventory, taking into account the timing of these occurrences.
From the perspective of medium- to long-term sustainability, we are working on the issue of animal welfare for egg-laying hens in cooperation with related industries and governments.
Furthermore, as a material issue for sustainability, the Group has identified Sustainable Procurement and is addressing it across the entire Group. For sustainable procurement based on social considerations, we have established the Group's "Fundamental Policy for Sustainable Procurement" and are working to examine not only the quality of raw materials but also their impact on the environment and human rights in the supply chain. To realize the Fundamental Policy for Sustainable Procurement, we have established the Kewpie Group Supplier Guidelines. With these guidelines, we aim to achieve sustainable procurement and shared prosperity with our suppliers by resolving issues in the supply chain based on mutual understanding.

Insistence on the highest product quality has been our most fundamental concern since the Group was established. Accordingly, we rigorously and systematically enhance product quality assurance systems by acquiring Food Safety System Certification (FSSC 22000), engaging in trans-group quality monitoring, developing product quality assurance and traceability systems that make use of factory automation, self-monitoring, and constructing quality standard document control systems for procured ingredients focused on insistence on meeting our safety and hygiene standards.
In addition, we place great importance on ensuring a high level of awareness and understanding regarding product quality among our employees. To this end, the Group helps employees acquire necessary knowledge and technology and instills them an insistence on the highest product quality by offering them training opportunities such as on-the-job training and training sessions. Accordingly, the Group takes appropriate measures to provide safe and high-quality products, which is the foundation of the persistent business development.

We are working on measures that entail establishing business continuity plans (BCP) to go into effect in the event of any crisis extending across the Group, leveraging our experience involving natural disasters.
We have prepared manuals pertaining to respective disaster types in preparation for the potential occurrence of a crisis scenario. This has involved efforts that include developing frameworks for setting up operations in Kansai area that substitute for those of the Tokyo Head Office, establishing emergency communications networks and stockpiling supplies, reinforcing production and distribution facilities, developing systems for confirming available production capacity in the event of a contingency, and developing site redundancies in relation to our core products with respect to production, as well as the functions of raw material procurement and order acceptance.
To ensure that such operations perform effectively, we also carry out large-scale disaster response training sessions (initial response training, product supply training, and safety verification training).

The Group maintains a system that applies multiple layers of security to safeguard against cyberattacks, which entails blocking unsolicited e-mail and unauthorized access, and implementing endpoint detection and response (EDR) systems that monitor information networks around the clock in the course of pinpointing behavior of suspicious computer code and preventing its execution.
We also seek to develop literacy of our employees, which involves regularly conducting simulation-based training in responding to email attacks and offering education on information security. Such efforts also involve having the Information Promotion Committee disseminate relevant information to maintain a high level of information security awareness among our employees.
With respect to business continuity in the event of prolonged suspension of critical systems, we are developing business continuity plans (BCP).

The Group takes steps to secure and retain human resources that involve engaging in ongoing recruitment, upgrading employee education, and developing optimal working environments. Specifically, we promote streamlined operations and labor savings by replacing labor-intensive and complex tasks with machines and robots. In addition, we have extended our range of employment in part by developing working environments that enable foreign nationals to work more effectively.
We are taking steps to reduce our exposure to labor-related risk. This has involved developing workplace environments where employees are able to balance their careers and family life, thereby enabling every employee at all of our locations to work with peace of mind, actively using remote work, developing optimal work schedules and appropriately implementing labor controls pursuant to laws and regulations, providing thorough employee education on harassment prevention, and establishing an internal reporting system (helpline).
In addition to these efforts, to foster motivated human resources who will be able to play an active role for our sustainable growth, the Group has developed a framework for empowering a diverse range of talent, while at the same time actively recruiting and appointing external human resources with high expertise.
Furthermore, as a material issue for sustainability, the Group has identified Respect for Human Rights and is addressing it across the entire Group. 

Our overseas subsidiaries also implement on-site education and various training programs with the aim of instilling the Group's philosophy. We are also developing internal control systems to strengthen our business foundation. More specifically, this has entailed efforts that involve clarifying decision-making authority; establishing and operating various regulations and systems such that include rules on contracts and regulations management, as well as accounting and financial regulations, anti-bribery regulations, and personnel evaluation systems; adopting an internal reporting system; establishing business continuity plans (BCP); and implementing crisis management training sessions.
We have also adopted rules on our handling and security of corporate information and important technical information, and are building a solid ICT network.
We are taking countermeasures against counterfeit goods that involve eliminating from the market products that infringe on our trademark rights and misleading products of other companies, while also seeing to it that we do not confer the right to file for malicious trademarks.
We examine the political and economic situation and trends in laws and regulations in the regions where our production sites are located, and consider and implement necessary measures for each area. We are also prepared for country risks arising from international situations in terms of dealing with tangible and intangible assets, diversifying raw material procurement risks, protecting intellectual property, and evacuating employees.

In the environment aspect, the Group has identified "Effective use and recycling of resources", "Deal with climate change", and "Conservation of biodiversity" as material issues for sustainability and the entire Group is working on them.
The Group's operations are highly dependent on the blessings of nature and are accordingly susceptible to various effects of changes in the global environment and climate change, including lower harvest yields, reduced quality of ingredients, and surging prices. We have been proceeding with initiatives that include flexibly adjusting prices, optimizing our product portfolio with the aim of shifting to a structure that is resilient to raw materials market volatility, and building a procurement framework by coordinating efforts of Group companies. We will address and respond to events related to changes in the global environment and climate change as management risks, while at the same time identifying new opportunities and incorporating them into our corporate strategies.

Deal with climate change