Calbee : Goals (1.6MB)

SECTION1 The Calbee Group's Goals

Shuji Ito

President & CEO

Calbee Report 2022

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Facing changes in the business environment and addressing social issues toward being

a company that creates the future of food

Recognizing challenges and changes to the environment

2021 was a year in which we saw great changes to our business environment: the continuation of the COVID-19 pandemic, soaring raw materials and energy prices driven by the global geopolitical situation, logistical disruptions and shortages of raw materials due to climate change. The Calbee Group is founded on products created from natural ingredients, and the risk of price rises and shortages of food oils and raw materials had a particularly large impact on our business. Amid these backdrops, in the mid-term management plan from the fiscal year ended March 2020, consolidated net sales are on track as planned, mainly due to the growth of overseas business and entry into the sweet potato business. On the other hand, operating profit has fallen short. Under these circumstances, not only must we recover profit in response to cost increases but, as competition for resources intensifies, we must establish supply chains and food security systems that give due consideration to the environment and human rights, over the medium- to long-term. In addition, the pandemic has dramatically changed people's lifestyles, sense of value, and purchasing behaviors, creating a new normal. We believe it is a major challenge for us to respond the changes.

And yet, despite these big changes to the business environment, our four responsibilities to our customers remain the same: safety, quality, cost, and supply. While we work to ensure that this commitment is not forgotten within the company, we are implementing a number of short-,medium-, and long-term measures. First, we seek to strengthen our ability to offer a stable supply of products by diversifying raw material production locations and suppliers. We also plan to implement flexible price and content revisions in response to increases in raw material, and energy prices both within Japan and overseas.

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However, our efforts are not limited to simply responding to cost increases. We are also working to raise the value of our products by establishing sustainable raw materials procure- ment, raising productivity through the food business structure as a whole, and pursuing better tasting food products through improvements in processing technology. To deliver this value to customers, we believe new perspectives-including through collaboration with domestic and overseas partners-are necessary.

The Calbee Group's Long-term Vision for 2030 is "Next Calbee-Harvest the power of nature. Creating the future of food." As a food company, we aim to answer the changing needs of our customers, take the initiative in addressing social issues and changes in the business environment, and realize sustainable growth and create value for society.

Providing new value that captures changes in our customer's lifestyles

In Japan, many people are spending more time eating at home due to the increase of telecom- muting and mobile work and the reduction in opportunities to meet with large groups of people. This has led to more occasions for eating snacks and cereal foods beyond breakfast and snacking between meals. While the value we provide in terms of taste and fun remains the same, that value is also changing due to shifts in our customers and the places and occasions in which we serve them. Amid this transition, I believe that we need to work together with our customers to create new value.( P15: Deepening Core Business in Japan )

In addition, there is a growing awareness of food-related sustainability, especially among the younger generation. In this context, we are currently implementing initiatives in an effort to communicate not only the taste and fun of Calbee's products to customers but also the value of our supply chain as a whole. One of the initiatives is to start switching to RSPO*-certified palm oil (mass balance method) at all our plants in Japan and displaying the certification mark on the packages of our mainstay products. At the same time, we will continue to earnestly communicate our efforts through food communication (dietary education, factory tours, etc.). ( P30: Sustainability)

• RSPO is the abbreviated name of the Roundtable on Sustainable Palm Oil, a non-profit membership organization established by WWF (World Wide Fund for Nature) and stakeholders related to the palm oil industry (manufacturers, retailers, environmental organizations, etc.)

Calbee Report 2022

10-Year Review of Results

Consolidated Net Sales*

(billions of yen)

350
											278.0	310.0
300
250											12.0
										64.4
200
150
100											201.6
50
0	2012.3	2013.3	2014.3	2015.3	2016.3	2017.3	2018.3	2019.3	2020.3	2021.3	2022.3	2024.3
												(Target)

	Core Business in Japan		Overseas business
Period of Medium-term
	New business and others
	Business Plan

Consolidated Operating Profit

(billions of yen)											(%)
40												40.0	12
30											9.0		9
										25.1
20													6
10													3
0	2012.3	2013.3	2014.3	2015.3	2016.3	2017.3	2018.3	2019.3	2020.3	2021.3	2022.3	2024.3	0
												(Target)

		Consolidated operating profit (left)	Period of Medium-term
			Consolidated operating margin*(right)	Business Plan
* For gross sales.

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Growing overseas business

I believe that expanding the value of the Calbee Group's overseas products is a major pillar of future sustainable growth. The Calbee brand has only just begun to gain recognition overseas, and we intend to promote growth in overseas business by introducing global brands that leverage the strengths we have cultivated in Japan and local brand products that match the tastes of each market.

In Europe and the United States, we are promoting products in the health conscious "Better for you" snack category, such as Harvest Snaps. In the ethnic foods market (Asian foods sec- tions) in the U.S., product brands such as Jagarico and Kappa Ebisen are gradually gaining in popularity. In the Greater China region, demand from tourists to Japan has fostered a strong recognition for the Calbee brand. We intend to capture market growth by expanding snack and cereal product varieties, and by enhancing our production base to include countries in the ASEAN region.

( P17: Global Penetration of Brand Value)

Expanding business in new food domains

To date, Calbee Group have been refining our strengths, centering on the potato business, which currently accounts for about half of our sales. This is a manifestation of our strength over other companies, but also a potential risk in terms of climate change and geopolitics. Going forward, in response to the risks, we want to achieve a diversified business portfolio so that we can always adapt to change and achieve sustainable growth. Therefore, an important aspect of our business is to expand into new food areas.

Calbee Report 2022

One such business area is that arising from the expansion of natural ingredients. We launched our sweet potato business through the acquisition of Potato Kaitsuka Ltd. and will accelerate business growth by leveraging synergies from our expertise gained in the potato business, expanding procurement sources and improving productivity. Furthermore, the Calbee Group intends to develop more business domains in natural ingredients, such as beans and oats, where we already possess strengths. ( P21: Sweet Potato Business Utilizing Potato Expertise)

Another business area is the domain of contributing to good human health and wellness. Amid a variety of issues related to health and wellness, we are particularly focused on solving issues related to sleep. We intend to create value in our new business by using food to foster good health wellness. ( P23: Creating New Value Centered on Customers' Issues)

Human resources and DX (digital transformation) as the foundation of management

The most important asset for future business transformation is human resources. The Calbee Group aims to create an organization that can think constantly about creating new value and where everyone can play an active role by making the most of their diversity. In terms of diversity and inclusion, more important than indices such as the ratio of female managers is conveying the diversity of each individual. To expand overseas businesses, we will also have to develop human resources with a global mindset.

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Calbee Report 2022

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Companies need to enhance their opportunities and mechanisms so that employees have a strong sense of ownership and feel comfortable undertaking challenges. We believe in the importance of enhancing the psychological safety of all employees. As such, it is important that each individual's career actualization and Calbee's sustainable growth move in the same direction. In other words, both Calbee and its employees must think about how to provide value to stakeholders, including customers, and how each employee can envision and implement the future of food. ( P29: Human Resources Development)

The other thing that will provide the foundation for a major business transformation is digital transformation (DX). We are working on each of our value chains while considering how we can utilize information from within our businesses and products and redirect it to creative initiatives. In the area of production, we are currently making progress on implementing next- generation DX-based production at our new Hiroshima Factory (scheduled to begin operations in FY2025/3). Furthermore, in marketing and product planning, we intend to create new value by using DX to evolve the customer relationships and points of contact that we have cultivated over the years. ( P28: Promote DX)

and human rights. Against this backdrop, we aim to realize both social and economic value and maintain correct circulation by using food to solve social issues. We will also create a new future for food while keeping sustainability at the core of our management.

I would like to ask all of our stakeholders for their continued understanding and support of the Calbee Group.

Harvest the power of nature. Creating the future of food.

Toward 2030

Establish our pivotal growth drivers in overseas

markets and new food domains

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Balancing social and economic value by fostering correct circulation

As expressed in our corporate message, "Harvest the Power of Nature," the value we provide is to harness nature's gifts, such as agricultural and marine produce, to deliver products that are tasty, fun, and healthy. We believe that the Calbee Group's raison d'etre is to be a bridge between nature and consumers, to deliver products, and to contribute to both nature and soci- ety. Overuse will deplete natural resources, which we must not do. However, we should not upset the balance by not using them. Our role is to foster correct circulation by balancing supply and demand, and to continue to provide value.

Uncertainty is rising in the business environment around Calbee and there is an even greater need to address issues such the environment, the labor burden in the supply chain,

October 2022

President & CEO

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COO's Message

Makoto Ehara

Executive Vice President & COO

The Challenge of Growing Businesses for a New Era

As stated in our Group Vision, the Calbee Group must provide sustainable value to our stakeholders: customers, suppliers, employees and their families, communities, and shareholders. To this end, we recognize that what is now required of the Calbee Group is to provide new value for a new era under the unchanging banner of Our Value, and to set the direction for the next stage of our growth. I believe it will be vital for us to reform our business structure based on deepening our core domestic business, expanding our global operations, and establishing businesses in new food domains I want us to tirelessly pursue the challenge of creating new growth businesses.

The Calbee Group's current policy for creating new businesses can be broadly categorized into two approaches. The first is "expanding our strengths" by leveraging the raw material procurement capabilities and natural ingredient processing technologies we have developed in our core businesses. In April 2020, we welcomed Potato Kaitsuka Ltd. into the Group and entered the sweet potato business. We believe there is an opportunity to capitalize on the expertise we have cultivated in the potato business amid the growing demand for sustainable agriculture, and plan to work with producers to expand new materials platforms, such as beans. The second approach is "new business exploration" by investing in areas with great potential for future growth, starting from customer problem solving. Our particular focus now is on improving people's intestinal environment and sleep quality through food. We have begun taking on challenges in new areas, such as the launch of Nyumin, Calbee's first functional food, and investing in SʼUIMIN Inc.

To realize our 2030 Vision, we will steadily increase profitability in our core domestic businesses, while at the same time identifying growth areas and strategically allocating human resources, funds, and other resources. We will also consider business alliances and M&A that leverage both internal resources and external capabilities, and seek to move forward at a faster pace.

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