Morinaga 2201

森永製菓

Recent Updates

2022-05-16

Announcement concerning dividend of surplus for FY03/22

2022-05-16

Full-year FY03/22 flash update

2022-05-13

Product price increases

Get in touch

5-33-1 Shiba, Minato-ku, Tokyo 108-8403

https://www.morinaga.co.jp/company/

03-3456-0150

Summary

Morinaga & Co., Ltd. was established in 1899 and is the fourth largest confectionery manufacturer in Japan in terms of revenue. The company was the first to produce caramels and other Western confectioneries in Japan, greatly contributing to the popularization of these treats within the country. It also played a key role in modernizing Japan’s confectionery industry by introducing mass production methods and employee welfare initiatives. Today, while the company’s founding business of manufacturing candies, cookies, and chocolates forms a solid foundation, its growth drivers are Frozen Desserts (launched 1956), Health Products (1983), and the US business (2008).

Food & Staples Retailing

Key dates

2022-08-10

Next earnings announcement

2021-12-15

Coverage initiation

Full Report

2022-05-16

Full-year FY03/22 flash update

2022-05-16

Q3 FY03/22 flash update

2022-02-10

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Executive summary

Long-established confectionery manufacturer focusing on Frozen Desserts, Health Products, and the US business

Morinaga & Co., Ltd. (“Morinaga”) was established in 1899 and is the fourth largest confectionery manufacturer in Japan in terms of revenue. The company was the first to produce caramels and other Western confectioneries in Japan, greatly contributing to the popularization of these treats within the country. It also played a key role in modernizing Japan’s confectionery industry by introducing mass production methods and employee welfare initiatives. Today, while the company’s founding business of manufacturing candies, cookies, and chocolates forms a solid foundation, its growth drivers are Frozen Desserts (launched 1956), Health Products (1983), and the US business (2008).

In FY03/21, Morinaga posted revenue of JPY200.0bn and operating profit of JPY19.2bn (OPM of 9.6%). Until the early 2010s, the company had unprofitable businesses such as the restaurant business and loss-making brands, resulting in operating profit hovering around JPY3.0bn with an OPM of 1–3%. In FY03/15, it shifted focus from revenue and market share to operating profit to strengthen its management base and secure resources to implement its growth strategy. Efforts to consolidate sales bases, restructure production bases, pare down unprofitable brands and products, ensure profit orientation from the product planning stage, and curb promotion expenses by focusing on mainstay product lines have resulted in growth in operating profit and OPM.

The core Food Manufacturing segment (95.9% of revenue and 98.1% of operating profit in FY03/21) consists of Confectionery & Foodstuffs (54.4% and 33.4%, respectively), Frozen Desserts (23.5% and 37.0%, respectively), and Health Products (18.0% and 27.7%, respectively). It is our understanding that while Confectionery & Foodstuffs for the domestic market is fundamental to Morinaga’s structure, the business is unlikely to see much growth over the medium to long term. The company therefore aims to invest in the US business (in Confectionery & Foodstuffs, Frozen Desserts, and Health Products), where it expects growth and profitability.

Confectionery & Foodstuffs for the domestic market centers on long sellers that have been on the market for decades (10 to over 100 years). In this business, Morinaga manufactures candies such as HI-CHEW, cookies such as Morinaga Biscuits, and chocolates such as DARS, Carré de chocolat, and Chocoball. This business category has lower profitability than others due to severe price competition and low production efficiency caused by high processing requirements. Shared Research believes that the domestic confectionery market is mature, so room for growth is limited. Accordingly, the company aims to boost revenue only slightly by expanding its lineup of well-recognized, long-selling products. At the same time, it intends to focus on bolstering profits by improving productivity through more efficient promotion.

In Frozen Desserts, Choco Monaka Jumbo (suggested retail price: JPY140), an ice cream sandwich, accounts for about 40% of revenue. Choco Monaka Jumbo is the leading brand in the frozen desserts market, generating at least JPY15.0bn in revenue on the sale of over 100 million units per annum. The frozen treat’s unique crispy texture achieved with the company’s proprietary confectionery processing technology is one of the reasons behind its 20 consecutive years of growth in sales value. The company has pared down its Frozen Desserts lineup to focus on Choco Monaka Jumbo, which has led to relatively high profit margins for the business.

In Health Products, the company focuses on “in Jelly” (suggested retail price: JPY200), a gelatinous energy drink containing vitamins, protein, and other nutrients. The in Jelly lineup, comprising products that have pleasant tastes and textures despite being packed with nutrients, has maintained the top share of the jelly drink market for 26 years.

While many Japanese food manufacturers focus on China and Southeast Asia, Morinaga targets the US market for two main reasons. First, US consumers are willing to pay higher prices, ensuring profitability. Second, the company is attracted by the market’s large size and growing population.

In the US, as of December 2021, the company focused on the sale of HI-CHEW. HI-CHEW is a chewy candy characterized by its soft texture and delicious fruit flavor. There are currently no similar products on the market. The company believes it is possible to expand the business by introducing a variety of products with different flavors and textures. Morinaga has aggressively marketed HI-CHEW to local retailers since 2015, when it began manufacturing the product at the group’s US factory and was thus able to ensure a stable supply. Revenue has grown at a CAGR of 21.4% from FY03/16 to FY03/21. The US business recorded revenue of JPY7.2bn in FY03/21 and maintained operating profit. In February 2022, the company launched "Chargel," a gel drink that provides both energy and nutrition. It intends to develop Chargel into its second core product in the US market, following HI-CHEW.

The retail value of snacks and confectionery in Japan in 2020 was JPY3.2tn (-6.0% YoY). Although the market had been expanding due to an increase in unit prices, it shrank in 2020 as consumers had fewer opportunities to spend time outside the home due to the COVID-19 pandemic. Shared Research believes that Japan’s confectionery market is likely to shrink in the near future as the population declines. Given this, many confectionery manufacturers including Morinaga are working to control costs and maximize profits by focusing on mainstay products in the domestic market. Many companies are also developing health products and seeking growth opportunities overseas.

Looking at the overseas development of competitors, Meiji Holdings Co., Ltd. (TSE1: 2269) sells chocolate and yogurt in China and other Asian countries, and also manufactures and sells antibacterial drugs and vaccines in Japan and overseas. Meanwhile, Ezaki Glico Co., Ltd. (TSE1: 2206) focuses on the sale of Pocky, mainly in Asia.

Earnings trends

In FY03/22, revenue was JPY181.3bn (+7.7% YoY), operating profit was JPY17.7bn (-7.8% YoY), recurring profit was JPY18.2bn (-7.8% YoY), and net income attributable to owners of the parent was JPY27.8bn (+107.0% YoY). Revenue increased because each segment recovered from the effects of the COVID-19 pandemic and because business areas in the focused domain category designated under the 2030 Business Plan grew. Operating profit fell because of a surge in the prices of raw materials and crude oil and an increase in depreciation expenses associated with capital investment for future growth.

For FY03/23, the company forecasts revenue of JPY190.0bn (+4.8% YoY), operating profit of JPY16.5bn (-6.7% YoY), recurring profit of JPY16.9bn (-7.4% YoY), and net income attributable to owners of the parent of JPY10.7bn (-61.5% YoY). Although the company expects revenue to increase thanks to a recovery in demand for "in Jelly" and strong performance of the US business, profit is likely to decline because of an increase in material costs.

The company announced a new three-year medium-term business plan in May 2021. In the final year of the plan, FY03/24, it targets revenue of JPY190.0bn (CAGR of 4.1% from FY03/21 on the new accounting standard basis), operating profit of JPY21.5bn (CAGR of 3.9%), and OPM of 11.0% or higher (versus OPM of 11.4% in FY03/21). In addition, the company aims to achieve an overseas revenue ratio of 9.0% or higher (7.0% in FY03/21), an increase in the ratio of revenue from the focused domain category of 5.0pp or more, ROE of 10% or higher, and a dividend payout ratio of 30% (30.0% in FY03/21). Morinaga plans to generate cash in the basic domain category including Confectionery & Foodstuffs, and invest for growth in the focused domain category consisting of the “in-” business, Direct Marketing business, US business, and Frozen Desserts.

Strengths and weaknesses

Shared Research thinks that the company’s strengths include: (1) a stable revenue base resulting from product development centered on long sellers, (2) differentiated products in Frozen Desserts and Health Products underpinned by confectionery processing technology, and (3) its pivot toward and thorough implementation of a management policy emphasizing profit and efficiency. We see the company’s weaknesses as: (1) the difficulty of improving profit margins in the mainstay confectionery business, which accounts for more than 50% of revenue; (2) limited room for growth in Japan due to the already high domestic market share of many of the company’s mainstay products, and the difficulty of creating new ones; and (3) the time required to increase the ratio of overseas revenue (see the Strengths and Weaknesses section below).

Key financial data

								Before applying new accounting standard			After applying new accounting standard
Income statement		FY03/13	FY03/14	FY03/15	FY03/16	FY03/17	FY03/18	FY03/19	FY03/20	FY03/21	FY03/21	FY03/22	FY03/23
(JPYmn)		Act.	Act.	Act.	Act.	Act.	Act.	Act.	Act.	Act.	Act.	Act.	Est.
Revenue		152,885	164,603	177,929	181,868	199,479	205,022	205,368	208,878	208,878	168,240	181,251	190,000
	YoY	3.9%	7.7%	8.1%	2.2%	9.7%	2.8%	0.2%	1.7%	1.7%	-	7.7%	4.8%
Gross profit		74,499	77,808	81,140	87,598	100,354	104,587	106,515	110,130	110,130	72,575	75,826	-
	YoY	4.8%	4.4%	4.3%	8.0%	14.6%	4.2%	1.8%	3.4%	3.4%	-	4.5%	-
	Gross profit margin	48.7%	47.3%	45.6%	48.2%	50.3%	51.0%	51.9%	52.7%	52.7%	43.1%	41.8%	-
Operating profit		2,695	3,858	5,939	11,456	17,612	19,751	20,217	21,230	21,230	19,176	17,685	16,500
	YoY	-4.2%	43.2%	53.9%	92.9%	53.7%	12.1%	2.4%	5.0%	5.0%	-	-7.8%	-6.7%
	Operating profit margin	1.8%	2.3%	3.3%	6.3%	8.8%	9.6%	9.8%	10.2%	10.2%	11.4%	9.8%	8.7%
Recurring profit		2,973	4,446	6,530	12,062	18,325	20,422	20,767	21,950	21,950	19,782	18,247	16,900
	YoY	-5.3%	49.5%	46.9%	84.7%	51.9%	11.4%	1.7%	5.7%	5.7%	-	-7.8%	-7.4%
	Recurring profit margin	1.9%	2.7%	3.7%	6.6%	9.2%	10.0%	10.1%	10.5%	10.5%	11.8%	10.1%	8.9%
Net income attributable to owners of the parent		1,419	8,090	3,806	8,092	11,115	10,289	12,816	10,824	10,824	13,416	27,773	10,700
	YoY	31.3%	470.1%	-53.0%	112.6%	37.4%	-7.4%	24.6%	-15.5%	-15.5%	-	107.0%	-61.5%
	Net margin	0.9%	4.9%	2.1%	4.4%	5.6%	5.0%	6.2%	5.2%	5.2%	8.0%	15.3%	5.6%
Per-share data (split- and reverse split-adjusted; JPY)
Shares issued (year-end; '000)		270,949	270,949	270,949	54,190	54,190	54,190	54,190	54,190	54,190	54,190	54,190
EPS		5.45	31.07	14.62	155.47	213.60	197.76	247.15	215.18	215.18	266.73	552.59	219.12
Dividend per share		6.00	6.00	6.00	7.00	45.00	50.00	66.00	72.00	72.00	80.00	90.00	90.00
Book value per share		201.90	230.26	254.82	1,432.50	1,713.49	1,882.23	1,917.22	2,080.77	2,080.77	2,441.25	2,603.95
Balance sheet (JPYmn)
	Cash and cash equivalents	10,377	4,765	11,602	26,714	39,902	35,938	39,836	43,427	43,427	31,568	56,652
Total current assets		50,375	43,420	50,999	66,602	83,801	80,077	85,239	86,328	86,328	78,045	112,067
Tangible fixed assets		75,543	76,402	72,754	71,683	67,344	62,142	59,984	70,275	70,275	82,431	85,053
Investments and other assets		13,744	21,737	26,277	24,270	32,974	34,940	29,993	30,923	30,923	42,006	16,869
Intangible assets		1,491	2,881	2,823	2,421	912	758	621	532	532	427	309
Total assets		141,154	144,441	152,855	164,978	185,032	177,920	175,837	188,060	188,060	202,910	214,300
	Accounts payable	17,121	17,151	17,776	16,995	18,620	20,581	21,117	17,443	17,443	18,162	20,392
	Short-term debt	5,121	732	1,300	494	25,308	1,511	964	342	342	359	10,367
Total current liabilities		46,620	36,971	37,653	40,784	71,182	48,657	51,402	57,855	57,855	49,583	70,147
	Long-term debt	15,601	26,488	26,424	26,737	11,673	10,453	10,591	10,570	10,570	10,558	616
Total fixed liabilities		41,553	44,875	45,808	46,970	22,086	28,931	27,241	24,717	24,717	29,620	12,978
Total liabilities		88,173	81,847	83,461	87,755	93,269	77,589	78,644	82,573	82,573	79,203	83,126
Total net assets		52,981	62,594	69,393	77,223	91,763	100,331	97,193	105,487	105,487	123,706	131,174
Total interest-bearing debt		30,722	27,220	27,724	27,231	26,981	11,964	11,555	10,912	10,912	10,917	10,983
Cash flow statement(JPYmn)
Cash flows from operating activities		5,565	7,684	11,182	16,715	18,400	17,788	20,897	20,994	20,994	12,127	24,825
Cash flows from investing activities		-5,681	-6,459	-3,022	-2,091	-29,736	8,154	-20,025	16,993	16,993	-19,862	9,312
Cash flows from financing activities		3,645	-5,764	-1,491	-2,311	-2,398	-17,906	-11,888	-4,375	-4,375	-4,084	-5,943
Financial ratios
ROA (RP-based)		2.2%	3.1%	4.4%	7.6%	10.5%	11.3%	11.7%	12.1%	12.1%	10.1%	8.7%
ROE		2.7%	14.4%	6.0%	11.5%	13.6%	11.0%	13.2%	10.8%	10.8%	11.8%	22.0%
Equity ratio		37.2%	41.5%	43.4%	45.2%	48.2%	55.0%	54.8%	55.7%	60.9%	60.5%	60.7%

Source: Shared Research based on company data
Note: Figures may differ from company data due to differences in rounding methods.

Recent updates

Announcement concerning dividend of surplus for FY03/22

2022-05-16

On May 13, 2022, Morinaga Co., Ltd. made an announcement concerning dividend of surplus (dividend increase) for FY03/22.

The company will propose a year-end dividend of JPY90 per share for FY03/22, an increase of JPY10 from the previous forecast, at the general meeting of shareholders to be held in June 2022.

Product price increases

2022-05-13

On May 12, 2022, Morinaga & Co., Ltd. announced a plan to increase product prices.

Morinaga will increase the prices of some products starting in July 2022. Ingredient and packaging material costs and distribution expenses have continued to increase in recent years. The company has sought to absorb the rise in costs while maintaining quality by implementing measures to improve production efficiency and reduce costs. However, it now expects the factors underlying such rises to extend into the medium to long term. Accordingly, the company decided that it would be difficult to sustain current product prices solely through its cost reduction efforts.

Overview of price increases

Date of first price increases: July 1, 2022
Products subject to price increases: 12 items
Range of price increases: 5.4–7.9% (shipping price)

Product price increases

2022-03-16

On March 15, 2022, Morinaga & Co., Ltd. announced product price increases.

From May 31, 2022, Morinaga will start implementing price increases in stages for some of its products. Ingredient and packaging material costs and distribution expenses have continued to increase in recent years. The company has sought to absorb the rise in costs while maintaining quality by implementing measures to improve production efficiency and reduce costs. However, it now expects the factors underlying such rises to extend into the medium to long term. Accordingly, the company decided that it would be difficult to sustain current product prices solely through its cost reduction efforts.

Overview of price increases

Date of first price increases: May 31, 2022
Products subject to price increases: 50 confectionery items
Range of price increases: Approximately 3–11 % (shipping price)

Acquisition of treasury stock; sale of investment securities and booking of extraordinary gains; revisions to full-year forecast

2022-03-01

On February 28, 2022, Morinaga & Co., Ltd. announced its resolution regarding the acquisition of treasury stock, the sale of investment securities and the booking of extraordinary gains, and revisions to its full-year forecast.

Resolution regarding acquisition of treasury stock

At its board of directors meeting held on February 28, 2022, the company reached a resolution regarding the acquisition of treasury stock.

Reason for acquiring treasury stock: To enhance shareholder returns and improve capital efficiency

Class of stock to be acquired: Common stock of the company (up to 3,000,000 shares in total)

Total acquisition cost: Up to JPY10.0bn

Acquisition period: March 1, 2022 to February 28, 2023

Method of acquisition: Market purchase on the Tokyo Stock Exchange

Sale of investment securities and booking of extraordinary gains, and revisions to full-year forecast

The company has resolved to tender a portion of the common shares it currently holds in Morinaga Milk Industry Co., Ltd. (TSE1: 2264) when Morinaga Milk Industry acquires its own shares through the off-auction own share repurchase system (the ToSTNeT-3 trading system) on March 1, 2022.

Overview of transaction: At 08:45am on March 1, 2022, Morinaga Milk Industry will place a consigned purchase order with the Tokyo Stock Exchange off-auction own share repurchase system (the ToSTNeT-3 trading system) at the closing price on February 28, 2022.

Shareholding before and after the transaction

Shareholding before tender: 6,289,777 shares (including 1,040,000 deemed held shares; 12.70% of the total number of shares outstanding, excluding treasury stock)

Number of shares to be tendered: 4,300,000 shares

Shareholding after tender: 1,989,777 shares (including 1,040,000 deemed held shares; 4.01% of the total number of shares outstanding, excluding treasury stock)

Shareholding policy and reason for sale: The company's policy is to reduce strategically held shares. It holds shares in Morinaga Milk Industry for the purpose of maintaining the integrity of the Morinaga brand and strengthening business transactions, but it has decided to reduce its shareholding to less than 5% of the total number of shares outstanding in order to improve asset efficiency. Regardless of the shareholding ratio, the two companies will continue to share the Morinaga brand and maintain a good relationship in order to increase medium- to long-term value through sustained growth and promote the strengthening of business transactions.

Impact to performance: The company has revised its forecast as it expects to book extraordinary gains of JPY21.9bn (estimated) in Q4 FY03/22 from the above sale of investment securities. Its forecasts for revenue, operating profit, and recurring profit are unchanged, but it has raised its forecast for net income attributable to owners of the parent by JPY15.2bn to JPY28.0bn.

Trends and outlook

Quarterly trends and results

Quarterly trends

Cumulative		FY03/20 (previous accounting standard)				FY03/21 (previous accounting standard)				FY03/22 (new accounting standard)				FY03/22
(JPYmn)		Q1	Q1–Q2	Q1–Q3	Q1–Q4	Q1	Q1–Q2	Q1–Q3	Q1–Q4	Q1	Q1–Q2	Q1–Q3	Q1–Q4	% of Est.	FY Est.
Revenue		52,430	106,989	160,822	208,878	47,605	101,090	154,201	199,990	44,563	93,422	138,663	181,251	101.1%	179,200
	YoY	4.3%	2.2%	1.5%	1.7%	-9.2%	-5.5%	-4.1%	-4.3%	10.8%	10.0%	6.9%	7.7%		6.5%
Cost of revenue		24,357	49,479	75,275	98,747	22,339	46,630	72,127	94,343	24,860	52,403	79,071	105,425
	YoY	1.9%	0.0%	-0.4%	-0.1%	-8.3%	-5.8%	-4.2%	-4.5%	10.3%	11.3%	8.4%	10.2%
	Cost ratio	46.5%	46.2%	46.8%	47.3%	46.9%	46.1%	46.8%	47.2%	55.8%	56.1%	57.0%	58.2%
Gross profit		28,072	57,509	85,546	110,130	25,265	54,459	82,074	105,646	19,702	41,018	59,591	75,826
	YoY	6.4%	4.1%	3.2%	3.4%	-10.0%	-5.3%	-4.1%	-4.1%	11.3%	8.3%	5.0%	4.5%
	Gross profit margin	53.5%	53.8%	53.2%	52.7%	53.1%	53.9%	53.2%	52.8%	44.2%	43.9%	43.0%	41.8%
SG&A expenses		21,895	44,534	66,394	88,900	19,991	42,918	64,903	86,484	13,447	27,830	42,308	58,140
	YoY	2.7%	1.7%	1.1%	3.0%	-8.7%	-3.6%	-2.2%	-2.7%	8.6%	5.7%	6.9%	8.9%
	SG&A ratio	41.8%	41.6%	41.3%	42.6%	42.0%	42.5%	42.1%	43.2%	30.2%	29.8%	30.5%	32.1%
Operating profit		6,177	12,975	19,151	21,230	5,274	11,541	17,170	19,162	6,255	13,188	17,283	17,685	98.3%	18,000
	YoY	21.8%	13.4%	11.3%	5.0%	-14.6%	-11.1%	-10.3%	-9.7%	17.7%	14.2%	0.8%	-7.8%		-6.1%
	Operating profit margin	11.8%	12.1%	11.9%	10.2%	11.1%	11.4%	11.1%	9.6%	14.0%	14.1%	12.5%	9.8%		10.0%
Recurring profit		6,510	13,535	19,839	21,950	5,668	11,972	17,677	19,767	6,736	13,700	17,860	18,247	98.6%	18,500
	YoY	20.0%	14.3%	11.9%	5.7%	-12.9%	-11.5%	-10.9%	-9.9%	18.0%	14.4%	1.1%	-7.8%		-6.5%
	Recurring profit margin	12.4%	12.7%	12.3%	10.5%	11.9%	11.8%	11.5%	9.9%	15.1%	14.7%	12.9%	10.1%		10.3%
Net income attributable to owners of the parent		4,455	9,153	13,273	10,824	3,985	8,315	12,197	13,405	4,830	9,544	12,515	27,773	99.2%	28,000
	YoY	52.7%	19.1%	7.8%	-15.5%	-10.5%	-9.2%	-8.1%	23.8%	20.4%	14.7%	2.7%	107.0%		-4.6%
	Net margin	8.5%	8.6%	8.3%	5.2%	8.4%	8.2%	7.9%	6.7%	10.8%	10.2%	9.0%	15.3%		15.6%
Quarterly		FY03/20 (previous accounting standard)				FY03/21 (previous accounting standard)				FY03/22 (new accounting standard)
(JPYmn)		Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4
Revenue		52,430	54,559	53,833	48,056	47,605	53,485	53,111	45,789	44,563	48,859	45,241	42,588
	YoY	4.3%	0.2%	0.1%	2.5%	-9.2%	-2.0%	-1.3%	-4.7%	10.8%	9.3%	1.1%	-7.0%
Cost of revenue		24,357	25,122	25,796	23,472	22,339	24,291	25,497	22,216	24,860	27,543	26,668	26,354
	YoY	1.9%	-1.8%	-1.3%	1.0%	-8.3%	-3.3%	-1.2%	-5.4%	10.3%	12.3%	3.0%	18.6%
	Cost ratio	46.5%	46.0%	47.9%	48.8%	46.9%	45.4%	48.0%	48.5%	55.8%	56.4%	58.9%	61.9%
Gross profit		28,072	29,437	28,037	24,584	25,265	29,194	27,615	23,572	19,702	21,316	18,573	16,235
	YoY	6.4%	2.0%	1.4%	4.0%	-10.0%	-0.8%	-1.5%	-4.1%	11.3%	5.7%	-1.5%	-31.1%
	Gross profit margin	53.5%	54.0%	52.1%	51.2%	53.1%	54.6%	52.0%	51.5%	44.2%	43.6%	41.1%	38.1%
SG&A expenses		21,895	22,639	21,860	22,506	19,991	22,927	21,985	21,581	13,447	14,383	14,478	15,832
	YoY	2.7%	0.7%	0.0%	9.1%	-8.7%	1.3%	0.6%	-4.1%	8.6%	3.2%	9.2%	-26.6%
	SG&A ratio	41.8%	41.5%	40.6%	46.8%	42.0%	42.9%	41.4%	47.1%	30.2%	29.4%	32.0%	37.2%
Operating profit		6,177	6,798	6,176	2,079	5,274	6,267	5,629	1,992	6,255	6,933	4,095	402
	YoY	21.8%	6.7%	7.0%	-30.8%	-14.6%	-7.8%	-8.9%	-4.2%	17.7%	11.2%	-26.9%	-79.8%
	Operating profit margin	11.8%	12.5%	11.5%	4.3%	11.1%	11.7%	10.6%	4.4%	14.0%	14.2%	9.1%	0.9%
Recurring profit		6,510	7,025	6,304	2,111	5,668	6,304	5,705	2,090	6,736	6,964	4,160	387
	YoY	20.0%	9.4%	7.1%	-30.4%	-12.9%	-10.3%	-9.5%	-1.0%	18.0%	11.1%	-26.7%	-81.5%
	Recurring profit margin	12.4%	12.9%	11.7%	4.4%	11.9%	11.8%	10.7%	4.6%	15.1%	14.3%	9.2%	0.9%
Net income attributable to owners of the parent		4,455	4,698	4,120	-2,449	3,985	4,330	3,882	1,208	4,830	4,714	2,971	15,258
	YoY	52.7%	-1.4%	-10.9%	-	-10.5%	-7.8%	-5.8%	-	20.4%	9.4%	-23.1%	1,163.1%
	Net margin	8.5%	8.6%	7.7%	-	8.4%	8.1%	7.3%	2.6%	10.8%	9.6%	6.6%	35.8%

Source: Shared Research based on company data
Note: Figures may differ from company data due to differences in rounding methods.
Note: The company adopted the Accounting Standard for Revenue Recognition at the beginning of FY03/22; YoY changes for FY03/22 are calculated by retroactively applying the accounting standard to FY03/21 figures.

Quarterly trends by segment

Cumulative			FY03/20 (previous accounting standard)				FY03/21 (previous accounting standard)				FY03/22 (new accounting standard)				FY03/22
(JPYmn)			Q1	Q1–Q2	Q1–Q3	Q1–Q4	Q1	Q1–Q2	Q1–Q3	Q1–Q4	Q1	Q1–Q2	Q1–Q3	Q1–Q4	% of Est.	FY Est.
Revenue			52,430	106,989	160,822	208,878	47,605	101,090	154,201	199,990	44,563	93,422	138,663	181,251	101.1%	179,200
	YoY		4.3%	2.2%	1.5%	1.7%	-9.2%	-5.5%	-4.1%	-4.3%	10.8%	10.0%	6.9%	7.7%		6.5%
	Food Manufacturing		50,422	103,049	154,150	200,117	46,025	97,752	148,234	191,878	42,646	89,715	132,385	172,750		-
		YoY	4.5%	2.4%	1.7%	2.0%	-8.7%	-5.1%	-3.8%	-4.1%	10.3%	9.9%	6.9%	7.8%	-	-
	Food Merchandise		1,374	2,697	4,770	6,234	1,030	2,192	4,143	5,649	1,275	2,438	4,330	5,935		-
		YoY	-4.7%	-7.7%	-5.9%	-6.5%	-25.0%	-18.7%	-13.1%	-9.4%	26.0%	13.0%	6.3%	7.0%	-	-
	Real Estate and Services		496	945	1,445	1,901	418	869	1,377	1,825	500	952	1,464	1,915		-
		YoY	1.4%	0.9%	-0.8%	-0.4%	-15.7%	-8.0%	-4.7%	-4.0%	19.6%	9.6%	6.3%	4.9%	-	-
	Other		137	297	455	624	130	275	446	636	141	315	482	649		-
		YoY	8.7%	12.1%	6.1%	8.0%	-5.1%	-7.4%	-2.0%	1.9%	8.5%	14.5%	8.1%	2.4%	-	-
Operating profit			6,177	12,975	19,151	21,230	5,274	11,541	17,170	19,162	6,255	13,188	17,283	17,685	98.3%	18,000
	YoY		21.8%	13.4%	11.3%	5.0%	-14.6%	-11.1%	-10.3%	-9.7%	17.7%	14.2%	0.8%	-7.8%		-6.1%
	Operating profit margin		11.8%	12.1%	11.9%	10.2%	11.1%	11.4%	11.1%	9.6%	14.0%	14.1%	12.5%	9.8%		10.0%
	Food Manufacturing		6,098	12,900	18,778	20,836	5,179	11,504	16,890	18,795	6,150	13,091	16,858	17,439		-
		YoY	23.7%	14.2%	12.0%	6.3%	-15.1%	-10.8%	-10.1%	-9.8%	17.8%	13.7%	-0.1%	-7.3%	-	-
		Operating profit margin	12.1%	12.5%	12.2%	10.4%	11.3%	11.8%	11.4%	9.8%	14.4%	14.6%	12.7%	10.1%	-	-
	Food Merchandise		76	130	369	461	-10	7	195	280	37	67	251	346		-
		YoY	-20.0%	-19.8%	-8.2%	-14.5%	-	-94.6%	-47.2%	-39.3%	-	857.1%	28.7%	23.6%	-	-
		Operating profit margin	5.5%	4.8%	7.7%	7.4%	-	0.3%	4.7%	5.0%	2.9%	2.7%	5.8%	5.8%	-	-
	Real Estate and Services		222	399	633	824	166	355	584	790	247	440	684	873		-
		YoY	9.9%	4.5%	1.0%	-0.4%	-25.2%	-11.0%	-7.7%	-4.1%	48.8%	23.9%	17.1%	10.5%	-	-
		Operating profit margin	44.8%	42.2%	43.8%	43.3%	39.7%	40.9%	42.4%	43.3%	49.4%	46.2%	46.7%	45.6%	-	-
	Other		11	50	82	126	29	67	124	190	27	98	139	179		-
		YoY	22.2%	92.3%	32.3%	22.3%	163.6%	34.0%	51.2%	50.8%	-6.9%	46.3%	12.1%	-5.8%	-	-
		Operating profit margin	8.0%	16.8%	18.0%	20.2%	22.3%	24.4%	27.8%	29.9%	19.1%	31.1%	28.8%	27.6%	-	-
	Adjustments		-231	-505	-711	-1,017	-90	-394	-623	-894	-207	-508	-651	-1,153
Quarterly			FY03/20 (previous accounting standard)				FY03/21 (previous accounting standard)				FY03/22 (new accounting standard)
(JPYmn)			Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4
Revenue			52,430	54,559	53,833	48,056	47,605	53,485	53,111	45,789	44,563	48,859	45,241	42,588
	YoY		4.3%	0.2%	-53.1%	2.5%	-9.2%	-2.0%	-1.3%	-4.7%	10.8%	9.3%	1.1%	10.5%
	Food Manufacturing		50,422	52,627	51,101	45,967	46,025	51,727	50,482	43,644	42,646	47,069	42,670	40,365
		YoY	4.5%	0.5%	0.3%	2.9%	-8.7%	-1.7%	-1.2%	-5.1%	10.3%	9.6%	1.2%	10.8%
	Food Merchandise		1,374	1,323	2,073	1,464	1,030	1,162	1,951	1,506	1,275	1,163	1,892	1,605
		YoY	-4.7%	-10.7%	-3.4%	-8.2%	-25.0%	-12.2%	-5.9%	2.9%	26.0%	1.6%	-1.4%	9.0%
	Real Estate and Services		496	449	500	456	418	451	508	448	500	452	512	451
		YoY	1.4%	0.2%	-3.7%	0.7%	-15.7%	0.4%	1.6%	-1.8%	19.6%	0.2%	0.8%	0.7%
	Other		137	160	158	169	130	145	171	190	141	174	167	167
		YoY	8.7%	15.1%	-3.7%	13.4%	-5.1%	-9.4%	8.2%	12.4%	8.5%	20.0%	-2.3%	-11.2%
Operating profit			6,177	6,798	6,176	2,079	5,274	6,267	5,629	1,992	6,255	6,933	4,095	402
	YoY		21.8%	6.7%	7.0%	-30.8%	-14.6%	-7.8%	-8.9%	-4.2%	17.7%	11.2%	-26.9%	-80.1%
	Net margin		11.8%	12.5%	11.5%	4.3%	11.1%	11.7%	10.6%	4.4%	14.0%	14.2%	9.1%	0.9%
	Food Manufacturing		6,098	6,802	5,878	2,058	5,179	6,325	5,386	1,905	6,150	6,941	3,767	581
		YoY	23.7%	6.9%	7.3%	-27.4%	-15.1%	-7.0%	-8.4%	-7.4%	17.8%	10.3%	-29.7%	-70.0%
		Net margin	12.1%	12.9%	11.5%	4.5%	11.3%	12.2%	10.7%	4.4%	14.4%	14.7%	8.8%	1.4%
	Food Merchandise		76	54	239	92	-10	17	188	85	37	30	184	95
		YoY	-20.0%	-19.4%	-0.4%	-32.8%	-	-68.5%	-21.3%	-7.6%	-	76.5%	-2.1%	11.8%
		Net margin	5.5%	4.1%	11.5%	6.3%	-	1.5%	9.6%	5.6%	2.9%	2.6%	9.7%	5.9%
	Real Estate and Services		222	177	234	191	166	189	229	206	247	193	244	189
		YoY	9.9%	-1.7%	-4.5%	-4.5%	-25.2%	6.8%	-2.1%	7.9%	48.8%	2.1%	6.6%	-8.3%
		Net margin	44.8%	39.4%	46.8%	41.9%	39.7%	41.9%	45.1%	46.0%	49.4%	42.7%	47.7%	41.9%
	Other		11	39	32	44	29	38	57	66	27	71	41	40
		YoY	22.2%	129.4%	-11.1%	7.3%	163.6%	-2.6%	78.1%	50.0%	-6.9%	86.8%	-28.1%	-39.4%
		Operating profit margin	8.0%	24.4%	20.3%	26.0%	22.3%	26.2%	33.3%	34.7%	19.1%	40.8%	24.6%	24.0%
	Adjustments		-231	-274	-206	-306	-90	-304	-229	-271	-207	-301	-143	-502

SG&A expenses

Cumulative			FY03/20 (previous accounting standard)				FY03/21 (previous accounting standard)				FY03/22 (new accounting standard)
(JPYmn)			Q1	Q1–Q2	Q1–Q3	Q1–Q4	Q1	Q1–Q2	Q1–Q3	Q1–Q4	Q1	Q1–Q2	Q1–Q3	Q1–Q4
Revenue			52,430	106,989	160,822	208,878	47,605	101,090	154,201	199,990	44,563	93,422	138,663	181,251
	YoY		4.3%	2.2%	1.5%	1.7%	-9.2%	-5.5%	-4.1%	-4.3%	10.8%	10.0%	6.9%	7.7%
	Food Manufacturing		50,422	103,049	154,150	200,117	46,025	97,752	148,234	191,878	42,646	89,715	132,385	172,750
		YoY	4.5%	2.4%	1.7%	2.0%	-8.7%	-5.1%	-3.8%	-4.1%	10.3%	9.9%	6.9%	7.8%
	Food Merchandise		1,374	2,697	4,770	6,234	1,030	2,192	4,143	5,649	1,275	2,438	4,330	5,935
		YoY	-4.7%	-7.7%	-5.9%	-6.5%	-25.0%	-18.7%	-13.1%	-9.4%	26.0%	13.0%	6.3%	7.0%
	Real Estate and Services		496	945	1,445	1,901	418	869	1,377	1,825	500	952	1,464	1,915
		YoY	1.4%	0.9%	-0.8%	-0.4%	-15.7%	-8.0%	-4.7%	-4.0%	19.6%	9.6%	6.3%	4.9%
	Other		137	297	455	624	130	275	446	636	141	315	482	649
		YoY	8.7%	12.1%	6.1%	8.0%	-5.1%	-7.4%	-2.0%	1.9%	8.5%	14.5%	8.1%	2.4%
Operating profit			6,177	12,975	19,151	21,230	5,274	11,541	17,170	19,162	6,255	13,188	17,283	17,685
	YoY		21.8%	13.4%	11.3%	5.0%	-14.6%	-11.1%	-10.3%	-9.7%	17.7%	14.2%	0.8%	-7.8%
	Operating profit margin		11.8%	12.1%	11.9%	10.2%	11.1%	11.4%	11.1%	9.6%	14.0%	14.1%	12.5%	9.8%
	Food Manufacturing		6,098	12,900	18,778	20,836	5,179	11,504	16,890	18,795	6,150	13,091	16,858	17,439
		YoY	23.7%	14.2%	12.0%	6.3%	-15.1%	-10.8%	-10.1%	-9.8%	17.8%	13.7%	-0.1%	-7.3%
		Operating profit margin	12.1%	12.5%	12.2%	10.4%	11.3%	11.8%	11.4%	9.8%	14.4%	14.6%	12.7%	10.1%
	Food Merchandise		76	130	369	461	-10	7	195	280	37	67	251	346
		YoY	-20.0%	-19.8%	-8.2%	-14.5%	-	-94.6%	-47.2%	-39.3%	-	857.1%	28.7%	23.6%
		Operating profit margin	5.5%	4.8%	7.7%	7.4%	-	0.3%	4.7%	5.0%	2.9%	2.7%	5.8%	5.8%
	Real Estate and Services		222	399	633	824	166	355	584	790	247	440	684	873
		YoY	9.9%	4.5%	1.0%	-0.4%	-25.2%	-11.0%	-7.7%	-4.1%	48.8%	23.9%	17.1%	10.5%
		Operating profit margin	44.8%	42.2%	43.8%	43.3%	39.7%	40.9%	42.4%	43.3%	49.4%	46.2%	46.7%	45.6%
	Other		11	50	82	126	29	67	124	190	27	98	139	179
		YoY	22.2%	92.3%	32.3%	22.3%	163.6%	34.0%	51.2%	50.8%	-6.9%	46.3%	12.1%	-5.8%
		Operating profit margin	8.0%	16.8%	18.0%	20.2%	22.3%	24.4%	27.8%	29.9%	19.1%	31.1%	28.8%	27.6%
	Adjustments		-231	-505	-711	-1,017	-90	-394	-623	-894	-207	-508	-651	-1,153
Quarterly			FY03/20 (previous accounting standard)				FY03/21 (previous accounting standard)				FY03/22 (new accounting standard)
(JPYmn)			Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4
Revenue			52,430	54,559	53,833	48,056	47,605	53,485	53,111	45,789	44,563	48,859	45,241	42,588
	YoY		4.3%	0.2%	-53.1%	2.5%	-9.2%	-2.0%	-1.3%	-4.7%	10.8%	9.3%	1.1%	10.5%
	Food Manufacturing		50,422	52,627	51,101	45,967	46,025	51,727	50,482	43,644	42,646	47,069	42,670	40,365
		YoY	4.5%	0.5%	0.3%	2.9%	-8.7%	-1.7%	-1.2%	-5.1%	10.3%	9.6%	1.2%	10.8%
	Food Merchandise		1,374	1,323	2,073	1,464	1,030	1,162	1,951	1,506	1,275	1,163	1,892	1,605
		YoY	-4.7%	-10.7%	-3.4%	-8.2%	-25.0%	-12.2%	-5.9%	2.9%	26.0%	1.6%	-1.4%	9.0%
	Real Estate and Services		496	449	500	456	418	451	508	448	500	452	512	451
		YoY	1.4%	0.2%	-3.7%	0.7%	-15.7%	0.4%	1.6%	-1.8%	19.6%	0.2%	0.8%	0.7%
	Other		137	160	158	169	130	145	171	190	141	174	167	167
		YoY	8.7%	15.1%	-3.7%	13.4%	-5.1%	-9.4%	8.2%	12.4%	8.5%	20.0%	-2.3%	-11.2%
Operating profit			6,177	6,798	6,176	2,079	5,274	6,267	5,629	1,992	6,255	6,933	4,095	402
	YoY		21.8%	6.7%	7.0%	-30.8%	-14.6%	-7.8%	-8.9%	-4.2%	17.7%	11.2%	-26.9%	-80.1%
	Net margin		11.8%	12.5%	11.5%	4.3%	11.1%	11.7%	10.6%	4.4%	14.0%	14.2%	9.1%	0.9%
	Food Manufacturing		6,098	6,802	5,878	2,058	5,179	6,325	5,386	1,905	6,150	6,941	3,767	581
		YoY	23.7%	6.9%	7.3%	-27.4%	-15.1%	-7.0%	-8.4%	-7.4%	17.8%	10.3%	-29.7%	-70.0%
		Net margin	12.1%	12.9%	11.5%	4.5%	11.3%	12.2%	10.7%	4.4%	14.4%	14.7%	8.8%	1.4%
	Food Merchandise		76	54	239	92	-10	17	188	85	37	30	184	95
		YoY	-20.0%	-19.4%	-0.4%	-32.8%	-	-68.5%	-21.3%	-7.6%	-	76.5%	-2.1%	11.8%
		Net margin	5.5%	4.1%	11.5%	6.3%	-	1.5%	9.6%	5.6%	2.9%	2.6%	9.7%	5.9%
	Real Estate and Services		222	177	234	191	166	189	229	206	247	193	244	189
		YoY	9.9%	-1.7%	-4.5%	-4.5%	-25.2%	6.8%	-2.1%	7.9%	48.8%	2.1%	6.6%	-8.3%
		Net margin	44.8%	39.4%	46.8%	41.9%	39.7%	41.9%	45.1%	46.0%	49.4%	42.7%	47.7%	41.9%
	Other		11	39	32	44	29	38	57	66	27	71	41	40
		YoY	22.2%	129.4%	-11.1%	7.3%	163.6%	-2.6%	78.1%	50.0%	-6.9%	86.8%	-28.1%	-39.4%
		Operating profit margin	8.0%	24.4%	20.3%	26.0%	22.3%	26.2%	33.3%	34.7%	19.1%	40.8%	24.6%	24.0%
	Adjustments		-231	-274	-206	-306	-90	-304	-229	-271	-207	-301	-143	-502

Food Manufacturing (by division)

Cumulative			FY03/20 (previous accounting standard)				FY03/21 (previous accounting standard)				FY03/22 (new accounting standard)
(JPYmn)			Q1	Q1–Q2	Q1–Q3	Q1–Q4	Q1	Q1–Q2	Q1–Q3	Q1–Q4	Q1	Q1–Q2	Q1–Q3	Q1–Q4
Food Manufacturing revenue			50,422	103,049	154,150	200,117	46,025	97,752	148,234	191,878	42,646	89,715	132,385	172,750
	YoY		4.5%	2.4%	1.7%	2.0%	-8.7%	-5.1%	-3.8%	-4.1%	10.3%	9.9%	6.9%	7.8%
	Confectionery & Foodstuffs		28,325	56,225	89,612	120,877	24,297	49,426	80,808	108,840	21,115	43,217	68,309	93,414
		YoY	3.0%	0.6%	-1.5%	-0.9%	-14.2%	-12.1%	-9.8%	-10.0%	5.1%	6.5%	3.0%	4.8%
	Frozen Desserts		11,276	25,127	33,783	40,753	14,190	29,593	39,394	47,091	11,806	25,589	33,918	40,731
		YoY	6.9%	7.0%	9.0%	9.5%	25.8%	17.8%	16.6%	15.6%	0.0%	4.5%	4.1%	4.8%
	Health Products		10,819	21,696	30,754	38,486	7,537	18,732	28,030	35,947	9,723	20,908	30,158	38,604
		YoY	6.4%	2.2%	3.8%	4.0%	-30.3%	-13.7%	-8.9%	-6.6%	43.5%	26.1%	21.1%	19.9%
Operating profit			6,098	12,900	18,778	20,836	5,179	11,504	16,890	18,795	6,150	13,091	16,858	17,439
	YoY		23.7%	14.2%	12.0%	6.3%	-15.1%	-10.8%	-10.1%	-9.8%	17.8%	13.7%	-0.1%	-7.3%
	Operating profit margin		12.1%	12.5%	12.2%	10.4%	11.3%	11.8%	11.4%	9.8%	14.4%	14.6%	12.7%	10.1%
	Confectionery & Foodstuffs		2,189	3,664	6,729	8,247	1,644	2,417	5,098	6,392	1,850	2,925	4,966	5,461
		YoY	61.7%	43.7%	15.2%	9.2%	-24.9%	-34.0%	-24.2%	-22.5%	10.1%	19.6%	-2.9%	-14.9%
		Operating profit margin	7.7%	6.5%	7.5%	6.8%	6.8%	4.9%	6.3%	5.9%	8.8%	6.8%	7.3%	5.8%
	Frozen Desserts		1,741	4,488	5,454	5,558	2,576	5,674	6,816	7,089	2,189	4,857	5,218	4,649
		YoY	19.9%	20.1%	34.9%	33.4%	48.0%	26.4%	25.0%	27.5%	-15.0%	-14.4%	-23.4%	-34.4%
		Operating profit margin	15.4%	17.9%	16.1%	13.6%	18.2%	19.2%	17.3%	15.1%	18.5%	19.0%	15.4%	11.4%
	Health Products		2,166	4,747	6,593	7,030	958	3,412	4,975	5,313	2,110	5,307	6,673	7,329
		YoY	2.2%	-5.2%	-4.2%	-10.8%	-55.8%	-28.1%	-24.5%	-24.4%	119.6%	56.5%	35.1%	38.2%
		Operating profit margin	20.0%	21.9%	21.4%	18.3%	12.7%	18.2%	17.7%	14.8%	21.7%	25.4%	22.1%	19.0%
Quarterly			FY03/20 (previous accounting standard)				FY03/21 (previous accounting standard)				FY03/22 (new accounting standard)
(JPYmn)			Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4
Revenue			50,422	52,627	51,101	45,967	46,025	51,727	50,482	43,644	42,646	47,069	42,670	40,365
	YoY		4.5%	0.5%	0.3%	2.9%	-8.7%	-1.7%	-1.2%	-5.1%	10.3%	9.6%	1.2%	10.8%
	Confectionery & Foodstuffs		28,325	27,900	33,387	31,265	24,297	25,129	31,382	28,032	21,115	22,102	25,092	25,105
		YoY	3.0%	-1.7%	-4.7%	0.6%	-14.2%	-9.9%	-6.0%	-10.3%	5.1%	8.0%	-2.5%	9.8%
	Frozen Desserts		11,276	13,851	8,656	6,970	14,190	15,403	9,801	7,697	11,806	13,783	8,329	6,813
		YoY	6.9%	7.2%	15.3%	11.8%	25.8%	11.2%	13.2%	10.4%	0.0%	8.6%	2.9%	8.7%
	Health Products		10,819	10,877	9,058	7,732	7,537	11,195	9,298	7,917	9,723	11,185	9,250	8,446
		YoY	6.4%	-1.6%	8.0%	4.8%	-30.3%	2.9%	2.6%	2.4%	43.5%	14.1%	11.0%	15.7%
Operating profit			6,098	6,802	5,878	2,058	5,179	6,325	5,386	1,905	6,150	6,941	3,767	581
	YoY		23.7%	6.9%	7.3%	-27.4%	-15.1%	-7.0%	-8.4%	-7.4%	17.8%	10.3%	-29.7%	-70.0%
	Operating profit margin		12.1%	12.9%	11.5%	4.5%	11.3%	12.2%	10.7%	4.4%	14.4%	14.7%	8.8%	1.4%
	Confectionery & Foodstuffs		2,189	1,475	3,065	1,518	1,644	773	2,681	1,294	1,850	1,075	2,041	495
		YoY	61.7%	23.4%	-6.9%	-11.3%	-24.9%	-47.6%	-12.5%	-14.8%	10.1%	40.3%	-23.5%	-62.0%
		Operating profit margin	7.7%	5.3%	9.2%	4.9%	6.8%	3.1%	8.5%	4.6%	8.8%	4.9%	8.1%	2.0%
	Frozen Desserts		1,741	2,747	966	104	2,576	3,098	1,142	273	2,189	2,668	361	-569
		YoY	19.9%	20.2%	215.7%	-14.8%	48.0%	12.8%	18.2%	162.5%	-15.0%	-13.9%	-68.4%	-308.4%
		Operating profit margin	15.4%	19.8%	11.2%	1.5%	18.2%	20.1%	11.7%	3.5%	18.5%	19.4%	4.3%	-
	Health Products		2,166	2,581	1,846	437	958	2,454	1,563	338	2,110	3,197	1,366	656
		YoY	2.2%	-10.5%	-1.8%	-56.3%	-55.8%	-4.9%	-15.3%	-22.7%	119.5%	31.6%	-11.8%	79.2%
		Operating profit margin	20.0%	23.7%	20.4%	5.7%	12.7%	21.9%	16.8%	4.3%	21.7%	28.6%	14.8%	7.8%

Food Manufacturing (Japan versus overseas)

Cumulative			FY03/20 (previous accounting standard)				FY03/21 (previous accounting standard)				FY03/22 (new accounting standard)
(JPYmn)			Q1	Q1–Q2	Q1–Q3	Q1–Q4	Q1	Q1–Q2	Q1–Q3	Q1–Q4	Q1	Q1–Q2	Q1–Q3	Q1–Q4
Revenue			50,422	103,049	154,150	200,117	46,025	97,752	148,234	191,878	42,645	89,715	132,385	172,750
	YoY		4.5%	2.4%	1.7%	2.0%	-8.7%	-5.1%	-3.8%	-4.1%	10.3%	9.9%	6.9%	7.8%
	Japan		47,942	97,958	146,157	188,992	43,132	92,255	139,320	179,662	38,912	82,000	120,479	156,328
		YoY	6.2%	3.8%	3.0%	2.7%	-10.0%	-5.8%	-4.7%	-4.9%	8.5%	7.5%	4.6%	5.3%
	Overseas		2,479	5,090	7,993	11,125	2,893	5,497	8,913	12,215	3,733	7,714	11,906	16,421
		YoY	-19.4%	-18.2%	-16.6%	-8.4%	16.7%	8.0%	11.5%	9.8%	32.7%	44.7%	38.1%	39.5%
Overseas revenue ratio (consolidated)			4.7%	4.8%	5.0%	5.3%	6.1%	5.4%	5.8%	6.1%	8.4%	8.3%	8.6%	9.1%

Full-year FY03/22 results

Revenue: JPY181.3bn (+7.7% YoY)
Operating profit: JPY17.7bn (-7.8% YoY)
Recurring profit: JPY18.2bn (-7.8% YoY)
Net income attributable to owners of the parent: JPY27.8bn (+107.0% YoY)

The company applied the Accounting Standard for Revenue Recognition (ASBJ Statement No. 29) from the beginning of FY03/22. YoY changes have been calculated by retroactively applying the new standard to FY03/21 figures.

Revenue increased because each segment recovered from the effects of the COVID-19 pandemic and because business areas in the focused domain category designated under the 2030 Business Plan grew. Operating profit fell because of a surge in the prices of raw materials and crude oil and an increase in depreciation expenses associated with capital investment for future growth.

Confectionery & Foodstuffs

Revenue: JPY93.4bn (+4.8% YoY)
Operating profit: JPY5.5bn (-14.9% YoY)

Japan

Revenue in Japan was JPY156.3bn (+5.3% YoY).

Revenue from mainstay brands decreased. Among mainstay brands, revenue from DARS (domestic sales down 5% YoY), Chocoball (down 7% YoY), Morinaga Amazake (down 12% YoY), and Morinaga Cocoa (down 13% YoY) all declined YoY. However, revenue from Morinaga Biscuits was up 8% YoY due to strong performance of seasonal products in addition to regular products. Revenue from HI-CHEW rose 2% YoY thanks to the enhanced texture (one of the main appeals) of Suppai Chew and Hi-Chewlicious. Revenue also grew 2% YoY for Carré de Chocolat. Among other brands, revenue from Morinaga Hotcake Mix was down YoY as home consumption demand stabilized. Revenue from Koeda Chocolate, which marked its 50th anniversary this year, exceeded the FY03/21 results.

Overseas (January–September 2021)

Overseas revenue was JPY16.4bn (+39.5% YoY). The ratio of overseas revenue increased by 2.1pp YoY to 9.1%.

In the US, revenue exceeded the FY03/21 results thanks to increasing sales of HI-CHEW and a high inventory turnover. In China, revenue also exceeded the FY03/21 results because of successful sales promotion of HI-CHEW at convenience stores. In Taiwan, revenue from Milk Caramel, which celebrated its 60th anniversary this year, was strong.

Frozen Desserts

Revenue: JPY40.7bn (+4.8% YoY)
Operating profit: JPY4.6bn (-34.4% YoY)

Ita Choco Ice performed well, recording its highest purchase rate ever, even though it has only been two years since the product was made available all year around. Revenue also increased for Paxiel as a result of content collaboration initiatives. Meanwhile, revenue declined for mainstay Jumbo products (-3% YoY) and ICEBOX (-6% YoY) partly in reaction to a revenue surge in FY03/21.

Health Products

Revenue: JPY38.6bn (+19.9% YoY)
Operating profit: JPY7.3bn (+38.2% YoY)

Revenue from mainstay “in Jelly” increased 22% YoY. The growth was helped by suggestions for new scenarios for consumption, increased demand for substitute meal products when people are not feeling well, and the launch of new products to meet new market needs, such as fruit-flavored items. Revenue from "in Bar" grew 1% YoY as consumers looked for products to help protein intake and for snacks while working at home.

Revenue in the Direct Marketing business increased. Sales of Morinaga Collagen Drink (+20% YoY) were boosted by sales promotion activities, which led to an increase in the number of regular customers.

Other segments

Food Merchandise

Revenue: JPY5.9bn (+7.0% YoY)
Operating profit: JPY346mn (+23.6% YoY)

Real Estate and Services

Revenue: JPY1.9bn (+4.9% YoY)
Operating profit: JPY873mn (+10.5% YoY)

FY03/23 company forecast

		FY03/21（new accounting standard）			FY03/22(After applying new accounting standard)			FY03/23 (After applying new accounting standard)
(JPYmn)		1H Act.	2H Act.	FY Act.	1H Act.	2H Act.	FY Act.	1H Est.	2H Est.	FY Est.
Revenue		84,937	83,303	168,240	93,422	87,829	181,251	99,000	91,000	190,000
	YoY	-	-	-	10.0%	5.4%	7.7%	6.0%	3.6%	4.8%
Operating profit		11,548	7,628	19,176	13,188	4,497	17,685	10,700	5,800	16,500
	YoY	-	-	-	14.2%	-41.0%	-7.8%	-18.9%	29.0%	-6.7%
	Operating profit margin	13.6%	9.2%	11.4%	14.1%	5.1%	9.8%	10.8%	6.4%	8.7%
Recurring profit		11,979	7,803	19,782	13,700	4,547	18,247	10,800	6,100	16,900
	YoY	-	-	-	14.4%	-41.7%	-7.8%	-21.2%	34.2%	-7.4%
	Recurring profit margin	14.1%	9.4%	11.8%	14.7%	5.2%	10.1%	10.9%	6.7%	8.9%
Net income attributable to owners of the parent		8,320	5,096	13,416	9,544	18,229	27,773	6,900	3,800	10,700
	YoY	-	-	-	14.7%	257.7%	107.0%	-27.7%	-79.2%	-61.5%
	Net margin	9.8%	6.1%	8.0%	10.2%	20.8%	15.3%	7.0%	4.2%	5.6%
EBITDA		15,142	11,943	27,085	18,003	9,714	27,717	-	-	27,100
	YoY	-	-	-	18.9%	-18.7%	2.3%	-	-	-2.2%
	EBITDA margin	17.8%	14.3%	16.1%	19.3%	11.1%	15.3%	-	-	14.3%

Factors in operating profit change

Positive factors		Negative factors
Effects of price revisions	JPY2.9bn	Higher raw materials costs	JPY4.3bn
Increased revenue	JPY2.3bn	Energy costs	JPY400mn
US business	JPY90mn	Increased advertising expenses	JPY910mn
		Depreciation	JPY590mn
		Other	JPY270mn

Source: Shared Research based on company data
Note: Figures may differ from company data due to differences in rounding methods.

Full-year FY03/23 company forecast

Revenue: JPY190.0bn (+4.8% YoY)
Operating profit: JPY16.5bn (-6.7% YoY)
Recurring profit: JPY16.9bn (-7.4% YoY)
Net income attributable to owners of the parent: JPY10.7bn (-61.5% YoY)

The company, in order to achieve medium- and long-term growth while contributing to the realization of a sustainable society, will expand its business scale and improve profitability by shifting its business portfolio and focusing its management resources on businesses with high profitability and growth potential. The company will further promote management efficiency through structural reforms to generate stable investment resources and strengthen investments in R&D and digital technology to build a foundation for medium- to long-term growth.

The company expects that the prices of raw materials and crude oil will remain high over the medium term. The company will implement flexible and appropriate price revisions, reduce costs, streamline operations, and improve investment efficiency, in response to these risks.

Actual results versus initial forecasts

Results vs. Initial Est.	FY03/12	FY03/13	FY03/14	FY03/15	FY03/16	FY03/17	FY03/18	FY03/19	FY03/20	FY03/21
(JPYmn)	Act.	Act.	Act.	Act.	Act.	Act.	Act.	Act.	Act.	Act.
Revenue (Initial Est.)	153,800	161,400	167,700	178,700	180,000	185,600	205,000	210,000	207,000	198,000
Revenue (Results)	147,190	152,885	164,603	177,929	181,868	199,479	205,022	205,368	208,878	199,990
Results vs. Initial Est.	-4.3%	-5.3%	-1.8%	-0.4%	1.0%	7.5%	0.0%	-2.2%	0.9%	1.0%
Operating profit (Initial Est.)	5,900	3,800	4,100	3,550	6,200	11,500	18,000	20,000	21,000	18,000
Operating profit (Results)	2,813	2,695	3,858	5,939	11,456	17,612	19,751	20,217	21,230	19,162
Results vs. Initial Est.	-52.3%	-29.1%	-5.9%	67.3%	84.8%	53.1%	9.7%	1.1%	1.1%	6.5%
Recurring profit (Initial Est.)	6,000	3,900	4,400	4,000	6,600	12,000	18,500	20,500	214,000	18,300
Recurring profit (Results)	3,140	2,973	4,446	6,530	12,062	18,325	20,422	20,767	21,950	19,767
Results vs. Initial Est.	-47.7%	-23.8%	1.0%	63.3%	82.8%	52.7%	10.4%	1.3%	-89.7%	8.0%
Net income (Initial Est.)	4,000	2,000	7,600	2,450	4,500	8,200	12,600	13,800	14,500	12,300
Net income (Results)	1,081	1,419	8,090	3,806	8,092	11,115	10,289	12,816	10,824	13,405
Results vs. Initial Est.	-73.0%	-29.1%	6.4%	55.3%	79.8%	35.5%	-18.3%	-7.1%	-25.4%	9.0%

Source: Shared Research based on company data
Note: Figures may differ from company data due to differences in rounding methods.
Note: Due to the Great East Japan Earthquake, the company announced its FY03/12 initial forecast at the Q1 FY03/12 financial results briefing.

2030 Business Plan

In May 2021, Morinaga announced its long-term business plan, 2030 Business Plan, ending in FY03/31.

Performance indicators (after application of new accounting standard)

Key performance indicators		FY03/21	FY03/22	FY03/24	FY03/31
(JPYmn)		Act.	Est.	Est.	Est.
Revenue		168,240	179,200	190,000	300,000
	YoY growth/CAGR	-	6.5%	4.1%	5.4%
Operating profit		19,176	18,000	21,500	36,000
	Operating profit margin	11.4%	10.0%	11％ or higher	12% or higher
	YoY growth/CAGR	-	-6.1%	3.9%	5.9%
Overseas revenue ratio		7.0%	7.7%	9% or higher	15% or higher
Ratio of revenue in focused domain category		Approx. 40％	-	up 5pp or more	60.0%
ROE		11.8%	-	10% or higher	-
Payout ratio		30.0%	-	30.0%	-

Source: Shared Research based on company data
Note: Figures may differ from company data due to differences in rounding methods.
Note: FY03/21 is the base year for CAGR calculations.
Note: The ratio of revenue in the focused domain category in FY03/21 (approx. 40%) is the average for the period of the 2018 Medium-Term Business Plan (FY03/19 to FY03/21).

Numerical Targets of the 2030 Business Plan

Numerical targets for FY03/31 are as follows.

Revenue: JPY300.0bn
OPM: 12% or higher
Overseas revenue ratio: 15% or higher
Ratio of revenue in the focused domain category: 60% or higher

Vision of the 2030 Business Plan

The vision laid out in the 2030 Business Plan goes “The Morinaga Group will Change into a Wellness Company in 2030.” The company defines a wellness company as one that continues to provide customers, employees, and society with mental, physical, and environmental health. It aims to support the wellness of all generations around the world by deepening the trust and expanding the technology it has cultivated over its more than 120 years of history.

Morinaga’s initiatives for becoming a wellness company are as follows.

Deeper exploration of mental health aspects: Scientifically ascertain the emotional value (sense of happiness) embodied in Morinaga’s corporate philosophy of “delicious, fun, and healthy,” which the company believes contributes to mental health, and leverage this knowledge to enhance customer satisfaction. For example, the company plans to work with external research institutions to scientifically explain the reasons why the crispy texture of Choco Monaka Jumbo gives a sense of comfort, and utilize this information in product development.

Accelerate improvement of physical health: Accelerate the growth of “in Jelly” and “in Bar” as consumers become more health-conscious in their food choices.

Shift from mental health to physical health: Work to reduce unhealthy ingredients in products, such as lowering the amount of sugar used, while adding healthy ingredients, such as increasing the amount of protein. Strive to develop food products with function claims.*

*According to Consumer Affairs Agency, “foods with function claims” are foods whose labels bear function claims based on scientific evidence under the responsibility of food business operators. Scientific evidence supporting the function claims is submitted to the Secretary-General of the Consumer Affairs Agency before these products are marketed, but they are not individually approved by the Secretary-General.

Basic approach for achieving the 2030 Business Plan

In order to concentrate management resources on businesses that are expected to grow and create new markets from the perspective of wellness, Morinaga plans to 1) “improve profitability via business portfolio optimization and structural reforms,” 2) “build business foundation linked with business strategies,” and 3) “promote diversity.”

(1) Improve profitability via business portfolio optimization and structural reforms

Concentrate management resources on the focused domain category that offer growth potential and profitability, increasing the ratio of overall revenue that these areas account for to 60% or higher by FY03/31 (versus average of approximately 40% in FY03/19–FY03/21).

Focused domain category (“in-” business, Direct Marketing business, US business, Frozen Desserts): Focus management resources to drive growth

Basic domain category (Confectionery & Foodstuffs, domestic subsidiaries, Taiwan business): Aim to generate stable cash to fund investment in the focused domain category by expanding revenue and improving profitability while curbing investment

Exploration & research domain category (overseas businesses other than the US and Taiwan businesses, new businesses): Aim to create new businesses, develop wellness products that meet the tastes and needs of various countries and regions, and foster new businesses that will shoulder next-generation growth

Through these efforts, Morinaga will implement structural reforms mainly in functional departments (procurement, manufacturing, logistics, and sales) to prepare for management risks while creating resources for investment in the focused domain category with the aim of improving profitability.

(2) Build business foundation linked with business strategies

Build business foundation linked with business strategies

Human resources strategy: Strengthen human resources management based on a global perspective.

R&D strategy: Develop key technologies to support growth in the focused domain category.

Financial strategy: Conduct financial management that contributes to the enhancement of enterprise value.

Digital transformation: Strategically introduce and utilize digital technologies to strengthen the business foundation and business competitiveness.

(3) Promote Diversity

Based on the concept of “leveraging each person’s individuality,” the company will build an environment and culture in which diverse personnel can play an active role and create new value that leads to the resolution of social issues.

2021 Medium-Term Business Plan (FY03/22–FY03/24)

Numerical targets

Numerical targets for FY03/24 are as follows.

Revenue: JPY190.0bn (JPY168.2bn in FY03/21)
Operating profit: JPY21.5bn (JPY19.2bn)
OPM: 11% or higher (11.4%)
Overseas revenue ratio: 9% or higher (7.0%)
Ratio of revenue in the focused domain category: Increase by at least 5.0pp (from an average of approx. 40% from FY03/19 to FY03/21)
ROE: 10% or higher
Dividend payout ratio: 30% (30.0%)

The company applied the Accounting Standard for Revenue Recognition (ASBJ Statement No. 29) from the beginning of FY03/22. The accounting standard has been retroactively applied to FY03/21 figures to enable YoY comparison.

Strategy overview

Morinaga positions the 2021 Medium-Term Business Plan as the first stage in achieving the 2030 Business Plan targets. During the three years of the plan, the company will strive to build a new foundation for rapid progress. The company expects the business environment to remain severe owing to a long-term trend of soaring raw material costs and rising labor costs. That said, it will 1) work on the focused domain category to drive growth, 2) generate stable cash flows in the basic domain category 3) create new businesses in the exploration & research domain category, 4) implement structural reforms, especially at functional departments, and 5) build a solid management foundation. Morinaga plans to concentrate management resources on the focused domain category and increase the ratio of revenue from these areas.

(1) Work on the focused domain category to drive growth

To build a highly profitable business structure, the company plans to concentrate management resources on the focused domain category.

“in-” business

The company’s vision for the “in-” brand in FY03/31 is to become “No. 1 brand among foods supporting health of mind and body pivoting around sports.” It plans to step up investment to achieve its FY03/31 revenue target for the business of JPY50.0bn.

in Jelly: Leverage the company’s brand power and technological capabilities as the player with the top share in jelly drinks. Target growth by expanding target customers to include women, children, and seniors, and also by proposing new scenarios for enjoying the beverage, including for health management, concentration enhancement, and as a countermeasure against heat stroke. Through these efforts, Morinaga will work to expand its market share and sales channels by further increasing its share of the jelly drink section of convenience stores, its main sales channel, from the current level of somewhere above 30%.

in Bar: Develop products that respond to the growing trend toward convenient eating and the growing demand for protein. Increasing the protein content of bars tends to adversely impact the taste, but the company is able to achieve good-tasting protein bars by using processing technology cultivated through the production of confectionaries. Demand is on the rise, and Morinaga will establish a system to increase production and promote growth.

New products: Morinaga is developing new products that will lead to “food creation of the future” based on the “in-” brand, which will showcase the company’s transformation into a wellness company.

Direct Marketing business

The company’s vision for the Direct Marketing business for FY03/31 is to evolve into a healthcare business that supports customer wellness. It plans to step up investment to achieve its FY03/31 revenue target for the business of JPY20.0bn. Revenue for Morinaga Collagen Drink, which is sold only through direct marketing, has trended upward due to an increase in the number of regular customers. The company plans to utilize its customer base to provide services tailored to customers and explore the possibilities for new products and services.

US business

Morinaga’s goal for the US business in FY03/31 is to achieve business growth through the expansion of the HI-CHEW brand and the creation of a jelly drink market. The company will work to increase the number of stores handling its products and expand its product lineup. It targets revenue of JPY10.0bn by end-FY03/24 and JPY30.0bn by end-FY03/31. With the stabilization of production at the local factory, the company has been able to step up sales activities. Revenue in the US business has been on an upward trend as the number of stores handling HI-CHEW grows.

Currently, HI-CHEW is the only Morinaga product sold in the US, but the company plans to start selling jelly drinks during FY03/22. Products customized for the US market will first be sold in a limited number of areas and channels, and will be expanded based on the customer response. Jelly drinks supplying energy, vitamins, protein, and other nutrients do not exist in the US, so the company will work to create a new market. As this process is still in the initial stages, the company has not factored in revenue contribution from the jelly drinks during the period covered by the 2021 Medium-Term Business Plan.

Frozen Desserts

The company’s goal for Frozen Desserts in FY03/31 is to expand the business in a stable manner by focusing on differentiated products employing confectionery technologies. It targets revenue of JPY50.0bn for the business in FY03/31. Morinaga will focus on Choco Monaka Jumbo and other brands to secure profits efficiently. The company will also work to develop new products using its confectionery processing technologies.

Since the mainstay Choco Monaka Jumbo is already handled by nearly 100% of major retailers that sell frozen desserts, Morinaga will work to develop sales channels to retailers that have only handled a limited number of frozen desserts. The company will work to grow revenue by evolving its product development with a focus on freshness, in addition to expanding the target customers and proposed scenarios in which its products can be enjoyed.

(2) Generate stable cash flows in the basic domain category

Concentrate management resources on mainstay brands to grow revenue and improve profitability, generating funds to invest in the focused domain category.

The company’s vision for FY03/31 is to transform its product category portfolio to build a highly profitable earnings base. In Confectionery & Foodstuffs, Morinaga aims to achieve an OPM of 10% in FY03/31. The company has worked on consolidating sales bases, restructuring production bases, reducing unprofitable brands and products, pursuing thorough profit orientation from the product planning stage, and curbing promotion expenses by strengthening mainstay products. Profit margins have improved thanks to these initiatives.

Morinaga will focus on expanding sales of highly profitable candies and cookies to further improve profit margins. For chocolates, the company plans to increase revenue by clarifying the target customer base and conducting cost-efficient promotional activities using social media. It plans to promote cocoa and amazake (sweet rice wine) by appealing to their respective health benefits.

(3) Create new businesses in the exploration & research domain category

The company will search for promising new businesses to undertake, focusing on creating business models in line with the advancement of digitalization and developing wellness products in overseas markets.

Investment in digital transformation: Promote research into the utilization of customer data, and build infrastructure for data utilization.

Overseas (other than the US and Taiwan): Promote business activities in China, Southeast Asia, Oceania, and Europe. In addition to cultivating sales channels in countries and regions that are expected to be receptive to HI-CHEW, the company will investigate the marketability of health products, such as jelly drinks, and explore the possibility of their commercialization.

(4) Implement structural reforms, especially at functional departments

Procurement: Rebuild the supply chain management foundation using digital technology to improve the efficiency and sophistication of operations. Find substitutes for existing raw materials and review product specifications to curb the increase in the raw material cost ratio and achieve sustainable raw material purchasing.

Manufacturing: Aim to convert factories into smart factories through the use of Internet of Things (IoT) and other digital technologies.

Logistics and sales: Optimize logistics and sales bases to reduce costs and improve productivity.

(5) Build a solid management foundation

Bolster the governance system to strengthen group management and risk management, and implement strategies in various areas.

Human resources strategy: Aim to maximize human resources.

R&D strategy: Renovate the research center in 2022, enhance the sophistication of mass production technologies, and strengthen collaboration with external research institutions.

Digital transformation strategy: Aim to improve profitability through the use of digital technologies. Undertake business reforms that utilize IoT and Robotic Process Automation (RPA).

Financial strategy and cash allocation

Morinaga forecasts operating activities will provide a total of JPY72.0bn in cash for the three years of the 2021 Medium-Term Business Plan, exceeding the three-year total of JPY54.0bn under the 2018 Medium-Term Business Plan. The company plans to achieve this target through growth in the focused domain category and improved profitability in the basic domain category. It will allocate cash to capex, shareholder returns, and growth investments, while raising funds as necessary.

Capex: JPY45.0bn

The company plans to invest a total of JPY45.0bn over the three years under the current medium-term plan (versus roughly JPY39.0bn during the 2018 Medium-Term Business Plan) in Frozen Desserts (Takasaki No. 3 Factory), in the “in-” business, in the confectionery business (to expand cookie production lines), and in a new research center, as well as in countermeasures to restore aging factory facilities.

In 2022, the company will establish a new research institute on the premises of the Tsurumi Factory. It will strengthen basic research, update key technologies, conduct research on wellness, including mental health, research wellness products that meet the needs of local consumers, and speed up the development of new products and the improvement and upgrading of existing products. Morinaga will also set up a pilot factory for manufacturing products (a factory with almost the same functions as a typical factory, positioned between the experimental and standard production stages) at the research institute, which will make it possible to shorten the time from trial production to the establishment of mass production technology for a given product line.

As a result of the increase in capex, the accumulated depreciation over the next three years will increase to JPY33.0bn (JPY19.9bn during the three years of 2018 Medium-Term Business Plan). The company expects to incur JPY10.6bn of this amount in FY03/22, and similar or higher levels in FY03/23 and FY03/24.

Shareholder returns: JPY12.0bn

Morinaga plans to pay stable dividends amounting to JPY12.0bn over the three-year period, and targets a payout ratio of 30%. The company will also keep in mind its goal for the total shareholder return ratio.

Investment in inorganic growth

Capex in the focused domain category is a top priority, yet Morinaga will also strengthen investment in inorganic growth to realize the vision set out in the 2030 Business Plan. The company plans to use fundraising as necessary. In the past, Morinaga has only looked into tie-ups and M&A on a case-by-case basis as they were proposed to the company. Moving forward, however, the company intends to actively and flexibly initiate such deals. It plans to invest in companies that can contribute to product development and sales channel expansion, those with strength in digital applications, and those likely to create synergies in the focused domain category.

Investment in intangible assets

The company will work to strengthen advertising activities, R&D, and digital transformation to build a foundation for medium- to long-term growth. For the period of the 2021 Medium-Term Business Plan, the company plans a 10% increase in advertising expenses versus the amount spent during the 2018 Medium-Term Business Plan, a JPY1.0bn increase in R&D expenses, and a 40% increase in investment in digital transformation. Further, the company will allocate more advertising budget to the focused domain category. It also plans to use the human resources freed up through improvements in operational efficiency driven by digitalization to pursue value-added operations.

Business

Business overview

Morinaga is a well-established confectionery manufacturer founded in 1899. It was the first company in Japan to establish a factory specializing in Western-style confectionery. The company’s main business is the manufacture and sale of confectionery (caramels, cookies, chocolates), food products (cocoa, cake mix), frozen desserts (ice cream), and health products (jelly drinks).

Company history

The company’s founder, Taichiro Morinaga, was a ceramics merchant from Imari, Saga Prefecture. He first encountered Western confectionery in San Francisco, where he was selling his wares. After studying confectionery manufacturing techniques in the US for 11 years, Morinaga returned to Japan in 1899 and founded Morinaga’s Western Confectionery Shop in Akasaka, Tokyo, which manufactured and wholesaled Western confectionery.

Based on Morinaga’s desire to deliver nutritious and delicious confectioneries to the people of Japan, the company manufactured and sold caramels, chocolates, cookies, candies, and other products with high sugar and fat content and high nutritional value to the masses. The company started manufacturing caramels in the early days of its history, and has sold them under the name Morinaga Milk Caramel for over 100 years since 1913, while continuously improving the quality and packaging. The company’s innovations, such as the use of waxed paper for individual packaging to maintain quality and the introduction of pocket-sized paper cases for convenient carrying, created significant buzz and laid the foundation for the company’s subsequent rapid growth.

Pioneering initiatives in the early years

Taichiro Morinaga and Hanzaburo Matsuzaki (a former trader who later became the company’s second president), who joined the company in 1905, worked closely together to promote the spread and expansion of Western confectionery and the modernization of the confectionery industry. While gaining the trust of retailers and consumers for their quality products, the pair were ahead of their competitors in introducing new measures such as the establishment of a mass production and mass sales system, the implementation of advertising activities, the introduction of employee welfare initiatives, and trademark registration.

Initiatives since Japan’s period of rapid economic growth

Western confectionery grew in popularity during Japan’s period of rapid economic growth, giving birth to a series of long sellers such as Chocoball, Koeda Chocolate, Choco Monaka (the predecessor of Choco Monaka Jumbo), and Ramune. Revenue grew owing to the success of these brands and diversification of Morinaga’s business. In the 1990s, revenue was generally in excess of JPY200.0bn. In fact, the company recorded its highest ever revenue in the mid-1990s.

In the 2000s, over 100 years since its founding, the company withdrew from unprofitable businesses and products, causing revenue to turn downward. Revenue for FY03/12, affected by the Great East Japan Earthquake, came in at JPY147.2bn.

Under the 2012 Medium-Term Business Plan (FY03/13–FY03/15), the company shifted its focus to securing revenue. Although it succeeded in expanding revenue, profitability remained flat such that operating profit was around JPY3.0bn and OPM 2–4%.

Under the 2015 Medium-Term Business Plan (FY03/16–FY03/18), Morinaga shifted its focus to securing operating profit. As a result, OPM trended between 6–10%, and operating profit exceeded JPY10.0bn for the first time in company history.

Under the 2018 Medium-Term Business Plan (FY03/19–FY03/21), the company continued to focus on securing operating profit. In the confectionery business, Morinaga promoted efficiency by concentrating its management resources on mainstay brands. In the overseas business, the company withdrew from the unprofitable Indonesia business and focused on the US market. The US business turned into the black as a result. OPM trended between 9–11%, and the company established an earnings base capable of generating operating profit of JPY20.0bn per annum.

Products

The company focuses on long-selling brands in Confectionery & Foodstuffs, Frozen Desserts, and Health Products.

In FY03/21, revenue in the main product categories was as follows: candies, including HI-CHEW, JPY27.3bn (13.7% of overall revenue); cookies, including Morinaga Biscuits, JPY25.9bn (13.0%); chocolates, including Chocoball, DARS, and Carré de chocolat, JPY23.1bn (11.6%); amazake (sweet rice wine), including Morinaga Amazake, JPY6.2bn (3.1%); frozen desserts, including Choco Monaka Jumbo, JPY47.1bn (23.5%); and health products, including in Jelly, JPY35.9bn (18.0%).

Product portfolio

Comparison with competitors

Many snack/confectionery manufacturers specialize in a particular category, such as Calbee, Inc. (TSE1: 2229; potato snacks), Kameda Seika Co., Ltd. (TSE1: 2220; rice crackers), and Kanro Inc. (TSE1: 2216; candies).

That said, while Meiji Holdings and Ezaki Glico have narrowed down their confectionery categories to mainly chocolates, they also manufacture and sell a wide range of food products, including dairy products, retort-pouch foods, and products for infants, in addition to frozen desserts. Morinaga’s food product lineup is comparatively limited, as it does not manufacture or sell dairy products.

A small number of high-performing brands

Morinaga focuses on brands that are well known and have a high market share in their respective categories. The company’s basic policy is to avoid selling imitation products of those in which competitors have a high market share.

Ezaki Glico’s Pocky has a high market share for products that combine long stick-shaped baked sweets and chocolate. Its competitors Meiji Holdings and Lotte sell the products Fran and Toppo, respectively, both of which resemble Pocky. Morinaga, by contrast, does not have a product of this type. In addition, Meiji Holdings, Ezaki Glico, and Lotte each have a chocolate-covered almond product, but Morinaga does not.

Product strategy

Product development centered on long-selling brands

Morinaga has many long-selling brands. Prior to World War II, Western-style confectionery was a luxury item mainly targeted at adults. During the period of rapid economic growth from the 1950s to the 1970s, Western confectionery became a product to be enjoyed by children as well, which helped the market to expand. Morinaga released products such as Chocoball, Koeda Chocolate, and Choco Monaka Jumbo during this era, all of which have gained support from consumers over the years as they underwent a series of improvements in quality. Long sellers tend to generate stable revenue because many consumers buy them out of habit. Moreover, their high recognition allows for lower advertising and selling expenses, and thus long sellers tend to be highly profitable.

Launch of major brands

Brands launched 50 or more years ago		Brands launched 30 or more years ago		Brands launched 10 or more years ago
1913	Milk Caramel	1972	Choco Monaka Jumbo	1993	DARS
1919	Milk Cocoa	1973	Ramune	1994	in Jelly
1923	MARIE	1974	Amazake (canned)	2003	Carré de chocolat
1957	Hotcake Mix	1975	HI-CHEW	2006	Morinaga Collagen Drink
1967	Chocoball	1982	Ottotto	2009	in Bar
1971	Koeda Chocolate	1989	ICEBOX

Source: Shared Research based on company data

Among long-selling brands, mainstays such as Morinaga Biscuits, HI-CHEW, Carré de chocolat, DARS, Chocoball, Morinaga Amazake, Choco Monaka Jumbo, and in Jelly account for more than 50% of domestic revenue.

Morinaga has different sales strategies for each major brand according to its stage of growth. For example, as the chocolate market is mature, it is difficult to expect a significant increase in revenue from DARS and Carré de chocolat. Therefore, the company plans to maximize these brands’ contribution to profit by improving their profit margins while expanding revenue through efficient advertising. On the other hand, Morinaga plans to increase selling and advertising spending to promote growth and increase profit for Choco Monaka Jumbo and in Jelly, for which the company expects revenue growth due to the expansion of target customer groups, as well as for HI-CHEW, whose sales are expected to expand in the US. Morinaga intends to maximize profit through such efficient resource allocation and strategic product development.

Sales strategies of mainstay brands

Source: Shared Research based on company data

Curbing the development of new brands

From the 2000s to the first half of the 2010s, when the company focused on increasing revenue, it developed and sold as many as five to 10 new brands every fiscal year. However, while this required a large amount of R&D and advertising expenses, only a few of the products became hits, and many of them ended up selling at a loss, resulting in poor investment efficiency and pressure on operating profit. Against this background, in recent years Morinaga has narrowed down the number of products it developed, and concentrated development and advertising expenses on a small number of products to increase the probability of new products becoming popular. In terms of advertising activities, rather than simply conducting large-scale promotions using TV commercials as it did in the past, the company uses social media to narrow down the target audience while controlling advertising expenses and improving efficiency.

Expanding mainstay brands

Even as the company restrains the development of new brands, it has expanded its mainstay product lineups to keep consumers happy and stimulate demand. While it takes time and money to develop new products, the company can expect a certain level of revenue from mainstay products even with limited promotion expenses.

Expanding product lineups

The company tries to attract a wide range of age groups by selling varieties of mainstay products with different tastes, textures, packaging, and price points. For example, while the HI-CHEW stick packs are aimed at children, Premium Hi-Chew is priced at a relatively high unit price, and targets high school students and older consumers. Morinaga also periodically introduces limited-time products with new flavors and textures to stimulate demand.

Grape Flavor

The most common type of HI-CHEW, popular for its unique texture. Grape is the most popular flavor.

Yummy Bubbly Hi-Chew

Features an exciting squishy and crunchy texture. The company develops products with a variety of textures.

Premium Hi-Chew

A high-priced product for adults. Stimulates demand as a refreshment that provides a quick and refreshing break from work.

Hi-Chew mini

An assortment pack of miniature HI-CHEW candies.

Source: Shared Research based on company material

Crossovers of mainstay products

The company expands its lineup by selling products that are crossovers of well-known mainstay products. These tend to spur purchasing behavior among consumers.

Crossover products celebrating the 50th anniversary of the Koeda Chocolate brand

Source: Shared Research based on company material

Pursuing wellness

“Health” has been a keyword in the food industry in recent years. In addition to developing foods with function claims, many confectionery manufacturers sell lower-calorie versions of existing confectionery and products with health benefits. Morinaga focuses on developing foods that support health. The company’s flagship health product, in Jelly, has maintained the top share of the jelly drink market for 26 years as a product that provides nutrients in a convenient and tasty way. Leveraging the strength of the in Jelly brand, Morinaga has expanded its lineup to include protein bars under the in Bar brand. The company also focuses on research into the health functions of ingredients in its cocoa and amazake products.

Generation of stable cash through food products

Food products account for approximately 15% of sales value from the company's Confectionery & Foodstuffs business (both in Japan and overseas). Within this business, the company focuses on products with consistently high shares in mature markets, such as Morinaga Amazake, Morinaga Cocoa, and Morinaga Hotcake Mix. The profit margins associated with the company's food products tend to be high, as many products in this category are standard items with high brand recognition and generate stable revenue even when the company cuts back on associated spending (advertising, etc.).

Food products are included in the basic domain category under the 2030 Business Plan. The company intends to generate stable cash while maintaining revenue of sufficient scale and pushing forward with efforts aimed at improving its OPM. It plans to use this cash to fund investments in the focused domain category, which includes "in-" business.

Morinaga Amazake: Launched in bottles in 1969 and cans in 1974, Morinaga Amazake has captured the top share in the amazake (sweet rice wine) market. The company sells products included under this brand at room temperature and in a variety of other forms, including chilled, freeze-dried, and powdered versions. It also sells limited-time-only Morinaga Amazake products in a variety of flavors. Although sales volumes associated with this brand have trended downward since the amazake boom of the late 2010s, the company has been conducting academic research regarding the health properties of amazake and developing products that take advantage of the health value that amazake products provide.

Morinaga Cocoa: A long-selling product launched in 1919, Morinaga Cocoa has captured the top share in the cocoa market. The company has conducted extensive research regarding the health effects of cacao polyphenols, a primary ingredient in cocoa, and is implementing product development that appeals to its health benefits. It recognizes Morinaga Cocoa as having high added health value and views them as key products in terms of achieving the vision of its 2030 Business Plan (transformation into a wellness company).

Morinaga Hotcake Mix: Launched in 1957, this long-selling product has been on the market for over 60 years. The company plans to curb promotional activities for this brand while preserving its high profitability and maintaining the current scale of corresponding sales.

Production

Raw materials

The company’s products utilize a wide variety of raw materials, including flour, dairy ingredients, cacao beans, nuts, sugar, fats, oils, mizuame sweetener, and packaging materials. In addition to market conditions for each raw material, the company is affected by forex fluctuations, ocean freight rates, and the price of crude oil for plastics used in packaging, as most of its raw materials are imported.

Purchasing routes vary by raw material. The company sources some, such as cacao beans, through trading companies, while purchasing others, such as chocolate liquor, dairy ingredients, and flavorings, directly from manufacturers. Morinaga procures major raw materials from multiple countries and companies to ensure stability in procurement and lower purchasing prices through competition. In selecting suppliers, the company places importance on stable procurement, safety, and price, and as a result, many of its transactions are with major companies in each respective industry. In order to deliver safe and secure food products to consumers, Morinaga requires its suppliers to submit specifications describing the ingredients and the storage and management systems of raw materials used. The company also conducts on-site inspections of the production and management systems of key raw materials.

Production

Production bases

The company’s domestic production bases include the Mishima Factory (Mishima, Shizuoka Prefecture, inherited in 1920), the Tsurumi Factory (Yokohama, Kanagawa Prefecture, established in 1925), the Chukyo Factory (Anjo, Aichi Prefecture, inherited in 1942), the Oyama Factory (Oyama, Tochigi Prefecture, inherited in 1942), the Takasaki Factory (Takasaki, Gunma Prefecture, established in 2011), and the main factory of consolidated subsidiary Morinaga Angel Dessert Co. Ltd. (Yamato, Kanagawa Prefecture), and the main factory of consolidated subsidiary Morinaga Dessert Co. Ltd. (Tosu, Saga Prefecture).

The company has three overseas production bases: the main factory of Taiwan Morinaga Co., Ltd. (Taipei, Taiwan, established in 1941), the main factory of Morinaga (Zhejiang) Co., Ltd. (Zhejiang, China, established in 2011), and the main factory of Morinaga America Foods, Inc. (North Carolina, US, established in 2015).

Factory overview (as of end-FY03/21)

Factory	Company name	Location	Book value	No. of employees	(No. of temporary employees)	Core products
Tsurumi Factory	Morinaga & Co., Ltd.	Yokohama, Kanagawa Prefecture	JPY7.8bn	184	(109)