Basic strategies and customer success

The Group is currently engaged in business based on three basic strategies that focus on expanding the core business (compound flavors and fragrances), securing revenue in the domestic market, and achieving growth in overseas markets. In order to ensure the strategies produce results, we have been promoting management reform. In FY2022, our business remained strong despite difficult business conditions, including resource price rises triggered by the situation in Ukraine and raw material price hikes due to a rapid weakening of the yen. As a result, consolidated net sales continued to reach record high from the previous period and consolidated net profit continued to achieve the highest figure for three consecutive periods. The percentage of overseas net sales to consolidated net sales also increased to 45.9%.

In Japan, we have been improving sales activities and the quality of our proposals, as well as accelerating the speed of customer response by strengthening the cooperation between sales, research, and marketing led by the Business Solution Division. While promoting digital transformation (DX) projects to increase the efficiency of product development and further advancing data usage to acquire new knowledge, we are striving to achieve customer success by providing the Group’s proprietary highquality and high-added-value products with a focus on technology innovation.

Our Group considers customer success as a contribution to improving their corporate value. As such, it is essential to investigate and analyze customers’ issues and consumers’ potential needs, and provide optimal solutions that leverage our flavor and fragrance technology, rather than waiting for requests from customers. Amid the raw material price hikes and price rises, our customers are also facing the need to review their raw materials and manufacturing approaches. Accordingly, we believe that the viewpoint of customer success has become even more important. We aim to further strengthen customer success by enhancing our proposal capabilities through solution sales that meet increasingly diversifying and sophisticated customer needs.

In overseas markets, which we position as a growth driver, we formulate and promote business strategies according to each region to ensure future growth by efficiently putting management resources into the United States and the Asian region (mainly China and Southeast Asian countries). In the United States, we completed our post-merger integration (PMI) with MISSION FLAVORS & FRAGRANCES, INC. in FY2021, producing synergy effects. In addition, we are promoting a second factory construction project in Rancho Cucamonga, California to build a new production system, with part of the factory commencing operations in June 2022. In China, we have beefed up our sales force and have been expanding the marketing area through local mid-range and major companies, as well as by using agencies. We are also promoting a new research building construction project aimed at strengthening the research functionality and increasing operational efficiency. In the Southeast Asian region, we are planning to construct a new factory in Malaysia, in an attempt to strengthen our Southeast Asian strategy, with sites in the country serving as a hub. By managing the supply chain across the globe and further promoting the internationalization of our management, we will provide the value created by our Group to even more stakeholders globally.

Building a sustainable society

More than seven years have passed since the adoption of the sustainable development goals (SDGs) and the Paris Agreement in 2015, and actions are being taken all over the world to solve social challenges. There is a greater demand for initiatives that not only pursue the growth of one’s own company, but also build a sustainable society with a greater focus on stakeholders.

In 2020, the Group signed the United Nations Global Compact and formulated six CSR policies that we should pursue. In order to promote organizational initiatives for sustainability that are integral to the business strategy, we established a Sustainability Committee in 2021. Moreover, we endorsed the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) to further promote responses to climate change in 2022.

Since its foundation, the Group has been developing flavors and fragrances used as a substitute for depleting food materials and raising health consciousness among consumers. In this way, we are contributing to solving problems faced by the modern society, including food shortages. Abnormal weather due to global warming is expected to have a significant impact on the yields and quality of natural raw materials, and customer needs and consumer trends are also expected to change as a result of temperature rises. As we address these challenges, we have realized that it is human resources that unlock the infinite possibilities of flavor and fragrance and provide customer success. All of our employees work to provide safe and reliable products, with top priority placed on ensuring safety and quality control. They demonstrate unwavering professionalism, a passion for responding to our customers’ needs, and the ability to succeed under all circumstances. This allows the Group to provide the best solutions to customers and to grow. The Group’s corporate motto is “A Foundation in Technology,” which is an expression of our stance of contributing to the world through flavors and fragrances as our divisions constantly collaborate and stimulate one another.

The Group will make the most of flavor and fragrance technologies to solve global challenges and contribute to building a sustainable society in which people can enjoy healthy and fulfilling lives.

About the accident at the Itakura Facility of the Fukaya Production Center

On September 15, 2022, a serious accident resulting in the death of an employee of our Company and the injuries of two others occurred at the Itakura Facility of the Fukaya Production Center. We deeply regret that such an accident occurred and sincerely pray that the deceased employee will rest in peace. We would also like to express our deepest apologies for any inconvenience and concern caused to our stakeholders.

We have established an Accident Investigation Committee to investigate the cause of the accident and formulate measures to prevent a recurrence. The details of the investigation on the causes of the accident and the suggestion on measures to prevent a recurrence by the Accident Investigation Committee have been released under the title “An Accident Resulting in the Death of an Employee of Our Company (Causes of accident, measures to prevent recurrence, and operating status)” on November 11 of the same year. We take this accident, which resulted in a fatality and injuries, seriously. In order to prevent such an accident from occurring again, we will ensure that recurrence prevention measures are implemented, as well as build a proper and effective management system.

CEO

Takao Umino