digest version - kagome
TRANSCRIPT
Digest Version
CONTENTS
Editorial Policy
Message from Top Management
Kagome’s Approach toward Sustainability and Corporate Philosophy
Sustainability Initiatives
Our Business Development
Our Foundation for Creating Value
Our Strategy
Strategies and Results by Division
Summary of Financial and Non-financial Performance
Corporate Governance
Risk Management
CSR Management
2
3
5
7
15
17
19
21
29
31
34
34
Editorial Policy
Changes in Reporting and Future DevelopmentsFiscal 1999-2004
Fiscal 2005-2009
Fiscal 2010-2012
Fiscal 2013
Fiscal 2016
: Environmental Report
: Social & Environmental Report
: CSR Report
: Sustainability Report
: Integrated Report (planned)
Date of PublicationDecember 2014
T E L
F A X
Inquiries
: 03-5623-8705
: 03-5623-2334
Regarding CSR information, we referred to the GRI Sustain-ability Reporting Guidelines v. 3.1, ISO 26000, and the Ministry of the Environment’s Environmental Reporting Guidelines 2012 during the creation of this report. All three guidelines outline highly comprehensive disclosure of CSR information.
CSR Disclosure
WebsiteIn addition to the Kagome Sustainability Report, CSR information is also released via our website.
http://www.kagome.co.jp/english/
Kagome Sustainability Report 2014Full Report (108 pages)
The full report covers the entirety of sustainability efforts at Kagome.
Kagome Sustainability Report 2014Digest Version (34 pages)
This booklet can be downloaded in PDF format.
The Kagome Group’s Corporate Philosophy is one of “Appre-ciation,” “Nature” and “Corporate Openness.” Kagome owes its growth to the creation of value, in accordance with these principles, through contribution to society. Beginning with the release of our first Environmental Report in fiscal 1999, and continuing through to the release of the Kagome Sustainability Report in fiscal 2013, we evolve our initiatives year-by-year and report on these efforts to our stakeholders. The Kagome Sustainability Report 2014 marks the 16th year of reporting. In creating this report, we strove to introduce the foundation of value creation at Kagome in more concrete terms to our readers. In the upcoming fiscal 2016 report, we will aim for an integrated report based on explicit and transparent value creation.
Reporting Period and ScopePeriod : April 2013 – March 2014
In this report, "Kagome" refers to Kagome Co., Ltd., "domestic Kagome Group" refers to Kagome Co., Ltd. and its domestic Group companies, and "Kagome Group" refers to Kagome Co., Ltd. and its Group companies worldwide.
Scope of the Report
*A portion of activities from outside the period may also be included.
Nihonbashi-hamacho F-Tower 3-21-1, Nihonbashi-hamacho, Chuo-ku, Tokyo 103-8461, JAPANCorporate Communications DivisionGlobal Sustainability Department
Special Feature
1 2
CONTENTS
Editorial Policy
Message from Top Management
Kagome’s Approach toward Sustainability and Corporate Philosophy
Sustainability Initiatives
Our Business Development
Our Foundation for Creating Value
Our Strategy
Strategies and Results by Division
Summary of Financial and Non-financial Performance
Corporate Governance
Risk Management
CSR Management
2
3
5
7
15
17
19
21
29
31
34
34
Editorial Policy
Changes in Reporting and Future DevelopmentsFiscal 1999-2004
Fiscal 2005-2009
Fiscal 2010-2012
Fiscal 2013
Fiscal 2016
: Environmental Report
: Social & Environmental Report
: CSR Report
: Sustainability Report
: Integrated Report (planned)
Date of PublicationDecember 2014
T E L
F A X
Inquiries
: 03-5623-8705
: 03-5623-2334
Regarding CSR information, we referred to the GRI Sustain-ability Reporting Guidelines v. 3.1, ISO 26000, and the Ministry of the Environment’s Environmental Reporting Guidelines 2012 during the creation of this report. All three guidelines outline highly comprehensive disclosure of CSR information.
CSR Disclosure
WebsiteIn addition to the Kagome Sustainability Report, CSR information is also released via our website.
http://www.kagome.co.jp/english/
Kagome Sustainability Report 2014Full Report (108 pages)
The full report covers the entirety of sustainability efforts at Kagome.
Kagome Sustainability Report 2014Digest Version (34 pages)
This booklet can be downloaded in PDF format.
The Kagome Group’s Corporate Philosophy is one of “Appre-ciation,” “Nature” and “Corporate Openness.” Kagome owes its growth to the creation of value, in accordance with these principles, through contribution to society. Beginning with the release of our first Environmental Report in fiscal 1999, and continuing through to the release of the Kagome Sustainability Report in fiscal 2013, we evolve our initiatives year-by-year and report on these efforts to our stakeholders. The Kagome Sustainability Report 2014 marks the 16th year of reporting. In creating this report, we strove to introduce the foundation of value creation at Kagome in more concrete terms to our readers. In the upcoming fiscal 2016 report, we will aim for an integrated report based on explicit and transparent value creation.
Reporting Period and ScopePeriod : April 2013 – March 2014
In this report, "Kagome" refers to Kagome Co., Ltd., "domestic Kagome Group" refers to Kagome Co., Ltd. and its domestic Group companies, and "Kagome Group" refers to Kagome Co., Ltd. and its Group companies worldwide.
Scope of the Report
*A portion of activities from outside the period may also be included.
Nihonbashi-hamacho F-Tower 3-21-1, Nihonbashi-hamacho, Chuo-ku, Tokyo 103-8461, JAPANCorporate Communications DivisionGlobal Sustainability Department
Special Feature
1 2
Kagome aims to be a strong company, capable of sustainable growth, by resolving social issues through food
Message from Top Management
Representative Director and President, Kagome Co., Ltd.
Reaffirming our mission at Kagome during a time of environmental changes
During the first year of our mid-term management plan called Next 50, which was launched at the start of fiscal 2013, we recorded consolidated net sales of ¥193 billion, down 1.6% year on year. Furthermore, both sales and profits are expected to fall in fiscal 2014 as well. This was attributable to the failure of Kagome’s new products to adequately compen-sate for the drop-off following the tomato boom and the declining popularity of existing products, and in part to nega-tive business conditions, such as soaring raw materials costs and poor weather. Looking back on these results, we have come to realize that our foundation for securing stable profits, upon which Kagome’s creation of value that contributes to society rests, is fragile and overly affected by changes in the external environment. Given this, we have sent the Next 50 plan back to the drawing board because of our failure to fully assess our capabilities which serve as the pillars of this plan. Nevertheless, we will continue to follow our long-term objec-tive of growing into a global brand, while also embarking on “working style reform” and “profit structure reform.”
Looking back on our initiatives to date Genuine Autonomy and Independence
Mid-Term Management Policy
The most important element in pursuing these initiatives is that we have to bear in mind that Kagome cannot continue to provide value to society without acquiring the practical strength to continuously attain appropriate economic profits. Heretofore, one of Kagome’s strengths has been its corpo-rate culture, which incorporates traits such as “Autonomy and Independence” and “People-centric management” to create more conducive working environments. However, issues, such as divisions between operations that impede cross-departmental cooperation and a tendency for the location of responsibility to be unclear, has weakened the company’s competitive strength and ability to adapt to change. By promoting coordination between domestic divisions through domestic business integration with me at the helm, we aim to strengthen cross-cooperation and break through current impediments.
Kagome has grown as a company by focusing its manage-ment on people. Growth for our employees means growth for Kagome. Giving employees the practical strength to continuously attain appropriate economic profits leads to fulfillment of stakeholder trust and consequently realization of our social responsibilities. Genuine “Autonomy and Independence” means that each individual can accurately grasp changes in the environment, and that swift cooperation can be taken to realize our corporate philosophy.
Since our founding in 1899, Kagome has contributed greatly to peoples’ healthy dietary habits by developing and provid-ing products that capitalize on the value of the tomatoes and nature’s bounty. Today, Kagome supplies some 30% of all the tomatoes consumed in Japan, and about 10% of all the country’s green and yellow vegetables. This success has been made possible by Kagome’s employees, who pursue the ideals of “appreciation for all stakeholders,” “continually developing new values that contributes to peoples’ health and wellbeing through nature’s bounty” and “realizing corpo-rate openness with people and society” found in our corpo-rate philosophy, which has earned the understanding and trust of stakeholders.
Significant changes in society await us over the next 50 years. In Japan, these include the aging of society, where one in three people will be of advanced age by 2035, a declining population, a rise in social security costs, an increase in the number of single- and two-person house-holds, and the decline of rural areas and agriculture. Over this same time, there will be an increase in the world’s popu-lation and further economic growth, while environmental issues such as water, food, resources and energy supplies are expected to worsen due to climate change, and nutritional issues, such as obesity and malnutrition, will likely become more prevalent. To continue contributing to society through food, Kagome must resolve social issues in Kagome’s individual way, and enhance our ability to gener-ate economic value through innovation, while shifting our
business model from product-oriented to solutions-oriented, anticipating changes in society and incorporating the demands of the times into business strategies.
The new mid-term management policy will focus on strength-ening our profit base to ensure continuous growth, with emphasis on the three key themes listed below:
The first theme of priority is to “increase value”—increasing
profitability by raising the value of existing profits. Ongoing initiatives include the introduction, already underway, of ‘Smart PET bottles” in sizes better suited to flavorful consumption by two-person households, and ‘premium’ straight tomato juices that distinguish themselves from concentrate products through the use of limited, seasonal domestically sourced tomatoes.
The second theme is “Improved productivity.” This will involve cost reduction, minimizing disposal costs of retained goods, optimizing advertisement investment, narrowing down products, and promoting “working styles reform” so as to realize mid- to long-term profit structure improvements that include even fixed costs in their scope. Initiatives include implementation of no overtime work after 8:00 pm, introduc-ing more conducive working environments, establishing the Business Process Redesign Department under the president’s direct control, third-party evaluations of the necessity and value of specific operations, and reappraisal of unnecessary work. These initiatives aim to raise productivity by 30%. We are also working to revise our HR evaluation system, raising the extent of evaluation for “job-specific duties and outcomes” in accordance with working levels , propagat-ing awareness of new working styles, and creating working environments that promote advancement regardless of factors such as age, race, nationality or gender.
The third theme is “Innovation.” The tomato is the world’s most highly consumed vegetable, and consumption is expected to continue to increase each year by a total of one million tons (equivalent to the total yearly consumption in Japan). The tomato is also the number one vegetable by sales in Japan. Realizing the concept “leave anything about toma-toes up to Kagome,” and expanding the strengths accumu-lated in the tomato industry to other vegetables, will lead directly to the creation of new business opportunities for the company. In light of these priorities, we will build a platform for sustainable growth by strengthening coordination between departments and concentrating management resources on the important mid-term growth fields as follows.
First, we aim to become a “Global Tomato Supplier.” The economic development of emerging nations has also resulted in an increase in obesity and other lifestyle-related diseases, and rising health needs. Kagome will utilize its strengths in all business processes—from raw materials production to sales—to swiftly construct businesses suited to each market (for instance through the development of products suited to local climates and consumer tastes) and promote Group-wide growth.
Secondly, we will promote the “conversion of domestic agriculture into a growth industry.” In addition to pursuing domestic production of all tomato juice ingredients destined
for domestic consumption as well as maintaining and expanding on contracted cultivation of tomatoes for process-ing in Japan, we are also pursuing cultivation of vegetables for packed salad and pre-cut vegetables, such as raw edible tomatoes and baby leaves (mesclun). We will also ensure profitability and contribute to regional development by working to realize the concept of “locally produced and nationally consumed,” utilizing local specialty produce as ingredients in our nation-wide products.
Thirdly, we will pursue the “Expansion of Domestic Institutional and Industrial Businesses.” With the increase in the number of working women and elderly persons and the number of one- or two-person households, the frequency of home cooking has decreased and the market for eating out and ready-made meals has risen. In order for Kagome to supply all tomatoes and vegetables used in the professional-use market, we aim to develop products that correspond fundamentally to market needs, so as to realize the concept “leave anything about tomatoes up to Kagome.”
Fourthly, we will address the “Fresh Innovation Challenge (FIC).” We will create new demand through technical innova-tion that allows customers to experience new vegetable beverages with even greater levels of freshness.
3 4
KAGOME SUSTAINABILITY 2014
Kagome aims to be a strong company, capable of sustainable growth, by resolving social issues through food
Message from Top Management
Representative Director and President, Kagome Co., Ltd.
Reaffirming our mission at Kagome during a time of environmental changes
During the first year of our mid-term management plan called Next 50, which was launched at the start of fiscal 2013, we recorded consolidated net sales of ¥193 billion, down 1.6% year on year. Furthermore, both sales and profits are expected to fall in fiscal 2014 as well. This was attributable to the failure of Kagome’s new products to adequately compen-sate for the drop-off following the tomato boom and the declining popularity of existing products, and in part to nega-tive business conditions, such as soaring raw materials costs and poor weather. Looking back on these results, we have come to realize that our foundation for securing stable profits, upon which Kagome’s creation of value that contributes to society rests, is fragile and overly affected by changes in the external environment. Given this, we have sent the Next 50 plan back to the drawing board because of our failure to fully assess our capabilities which serve as the pillars of this plan. Nevertheless, we will continue to follow our long-term objec-tive of growing into a global brand, while also embarking on “working style reform” and “profit structure reform.”
Looking back on our initiatives to date Genuine Autonomy and Independence
Mid-Term Management Policy
The most important element in pursuing these initiatives is that we have to bear in mind that Kagome cannot continue to provide value to society without acquiring the practical strength to continuously attain appropriate economic profits. Heretofore, one of Kagome’s strengths has been its corpo-rate culture, which incorporates traits such as “Autonomy and Independence” and “People-centric management” to create more conducive working environments. However, issues, such as divisions between operations that impede cross-departmental cooperation and a tendency for the location of responsibility to be unclear, has weakened the company’s competitive strength and ability to adapt to change. By promoting coordination between domestic divisions through domestic business integration with me at the helm, we aim to strengthen cross-cooperation and break through current impediments.
Kagome has grown as a company by focusing its manage-ment on people. Growth for our employees means growth for Kagome. Giving employees the practical strength to continuously attain appropriate economic profits leads to fulfillment of stakeholder trust and consequently realization of our social responsibilities. Genuine “Autonomy and Independence” means that each individual can accurately grasp changes in the environment, and that swift cooperation can be taken to realize our corporate philosophy.
Since our founding in 1899, Kagome has contributed greatly to peoples’ healthy dietary habits by developing and provid-ing products that capitalize on the value of the tomatoes and nature’s bounty. Today, Kagome supplies some 30% of all the tomatoes consumed in Japan, and about 10% of all the country’s green and yellow vegetables. This success has been made possible by Kagome’s employees, who pursue the ideals of “appreciation for all stakeholders,” “continually developing new values that contributes to peoples’ health and wellbeing through nature’s bounty” and “realizing corpo-rate openness with people and society” found in our corpo-rate philosophy, which has earned the understanding and trust of stakeholders.
Significant changes in society await us over the next 50 years. In Japan, these include the aging of society, where one in three people will be of advanced age by 2035, a declining population, a rise in social security costs, an increase in the number of single- and two-person house-holds, and the decline of rural areas and agriculture. Over this same time, there will be an increase in the world’s popu-lation and further economic growth, while environmental issues such as water, food, resources and energy supplies are expected to worsen due to climate change, and nutritional issues, such as obesity and malnutrition, will likely become more prevalent. To continue contributing to society through food, Kagome must resolve social issues in Kagome’s individual way, and enhance our ability to gener-ate economic value through innovation, while shifting our
business model from product-oriented to solutions-oriented, anticipating changes in society and incorporating the demands of the times into business strategies.
The new mid-term management policy will focus on strength-ening our profit base to ensure continuous growth, with emphasis on the three key themes listed below:
The first theme of priority is to “increase value”—increasing
profitability by raising the value of existing profits. Ongoing initiatives include the introduction, already underway, of ‘Smart PET bottles” in sizes better suited to flavorful consumption by two-person households, and ‘premium’ straight tomato juices that distinguish themselves from concentrate products through the use of limited, seasonal domestically sourced tomatoes.
The second theme is “Improved productivity.” This will involve cost reduction, minimizing disposal costs of retained goods, optimizing advertisement investment, narrowing down products, and promoting “working styles reform” so as to realize mid- to long-term profit structure improvements that include even fixed costs in their scope. Initiatives include implementation of no overtime work after 8:00 pm, introduc-ing more conducive working environments, establishing the Business Process Redesign Department under the president’s direct control, third-party evaluations of the necessity and value of specific operations, and reappraisal of unnecessary work. These initiatives aim to raise productivity by 30%. We are also working to revise our HR evaluation system, raising the extent of evaluation for “job-specific duties and outcomes” in accordance with working levels , propagat-ing awareness of new working styles, and creating working environments that promote advancement regardless of factors such as age, race, nationality or gender.
The third theme is “Innovation.” The tomato is the world’s most highly consumed vegetable, and consumption is expected to continue to increase each year by a total of one million tons (equivalent to the total yearly consumption in Japan). The tomato is also the number one vegetable by sales in Japan. Realizing the concept “leave anything about toma-toes up to Kagome,” and expanding the strengths accumu-lated in the tomato industry to other vegetables, will lead directly to the creation of new business opportunities for the company. In light of these priorities, we will build a platform for sustainable growth by strengthening coordination between departments and concentrating management resources on the important mid-term growth fields as follows.
First, we aim to become a “Global Tomato Supplier.” The economic development of emerging nations has also resulted in an increase in obesity and other lifestyle-related diseases, and rising health needs. Kagome will utilize its strengths in all business processes—from raw materials production to sales—to swiftly construct businesses suited to each market (for instance through the development of products suited to local climates and consumer tastes) and promote Group-wide growth.
Secondly, we will promote the “conversion of domestic agriculture into a growth industry.” In addition to pursuing domestic production of all tomato juice ingredients destined
for domestic consumption as well as maintaining and expanding on contracted cultivation of tomatoes for process-ing in Japan, we are also pursuing cultivation of vegetables for packed salad and pre-cut vegetables, such as raw edible tomatoes and baby leaves (mesclun). We will also ensure profitability and contribute to regional development by working to realize the concept of “locally produced and nationally consumed,” utilizing local specialty produce as ingredients in our nation-wide products.
Thirdly, we will pursue the “Expansion of Domestic Institutional and Industrial Businesses.” With the increase in the number of working women and elderly persons and the number of one- or two-person households, the frequency of home cooking has decreased and the market for eating out and ready-made meals has risen. In order for Kagome to supply all tomatoes and vegetables used in the professional-use market, we aim to develop products that correspond fundamentally to market needs, so as to realize the concept “leave anything about tomatoes up to Kagome.”
Fourthly, we will address the “Fresh Innovation Challenge (FIC).” We will create new demand through technical innova-tion that allows customers to experience new vegetable beverages with even greater levels of freshness.
3 4
KAGOME SUSTAINABILITY 2014
KAGOME SUSTAINABILITY 2014
In its approach toward sustainability, Kagome seeks to realize its corporate philosophy while working through its buseness activities based on the sprit of mutual aid . By doing so, we are striving to contribute to the wellbeing of people as well as the sustainability of the environment and of society, on both a Group-wide and an individual basis.
Over more than a century, Kagome has developed products derived from the wealth of nature's bounty, including tomatoes and other fruits and vegetables. The entirety of the human race is at a critical point in history, sharing a sense of urgency regarding the preservation of people's health and the sustainability of the Earth's environment. This is why Kagome must furtherstrengthen its focus on its mission of contributing to the wellbeing of people as well as to the sustainability of the environment and society.
Kagome’s Approach towardSustainability and Corporate Philosophy
Corporate philosophy ~A management spirit that prevails through changing times~
We are thankful for nature's bounty and for our relationships with people. We respect natural ecosystems and value human sensibilities.
Through nature's bounty, we endeavor to create rich value that is ahead of the times and to contribute to consumer's health and wellbeing.
We aim to be an open company that engages in fa i r and transparent corporate activities and respects each person's individuality and abilities.
NatureAppreciation Corporate Openness
Brand Statement
Since our founding in 1899, we have provided consumers with products that incorporate our desire to “capitalize on nature’s bounty and agricultural value and contribute to people’s health and wellbeing.”
Tomato-related seasoning*1
Tomatosauce*1
Tomatoketchup*1
Tomatojuice*2
Mixed vegetablejuice*2
Mixed vegetableand fruit juice*2
Top Market Share Products in Japan in 2013
51.1
Kagome Products: Our Journey so Far
%59.3
%86.0
%54.9
%51.0
%58.1
%
1899Founder Kanie Ichitarobegins Western vegetable cultivation
1903Tomato sauce
2009Tomatonabe(Tomatoflavoredsoup stock)
2001KagomeDeli
1996Salsa
1961Tomato sauce with minced meat
1973Vegetable juice
1933Tomatojuice
1908Tomato ketchup / Worcestershire sauce
1995Mixed vegetable andfruit juice (Yasai Seikatsu)
2004YasaiIchinichiKoreIppon(Ippai)
2014Salad bank series(baby leaf)
2006Labre vegetablelactobacillusbeverage
Domesticfresh
vegetablesbusiness
Domesticdirect
marketingbusiness
Domesticinstitutional
and industrialproductsbusiness
Overseasbusiness
Domesticgift
productsbusiness
1998Freshtomatoes
1998Kagome Kenko Chokuso-bin (direct marketing)
Domestic food business Domestic beverage business
*1 Source: Intage SRI (foodstuffs), Jan.-Dec. 2013, monetary base*2 Source: Intage SRI (soft drinks), Jan.-Dec. 2013, monetary base
1966Ketchup
in plastictubes
(world’sfirst)
1969Mixed
apple juice
Code of Conduct
Mid-Term Management Policy
BrandStatement
CorporatePhilosophy
Contributing to the wellbeing ofpeople as well as the sustainability
of the environment and society
Our promise to customers
To strive for healthier food that makes the most of natural antioxidants and immune system boosters
To produce healthy, great tasting foods without relying on unnatural additives or technolo-gies
To create demand for enjoyable meals, considering the needs of our bodies and our planet
5 6
KAGOME SUSTAINABILITY 2014
In its approach toward sustainability, Kagome seeks to realize its corporate philosophy while working through its buseness activities based on the sprit of mutual aid . By doing so, we are striving to contribute to the wellbeing of people as well as the sustainability of the environment and of society, on both a Group-wide and an individual basis.
Over more than a century, Kagome has developed products derived from the wealth of nature's bounty, including tomatoes and other fruits and vegetables. The entirety of the human race is at a critical point in history, sharing a sense of urgency regarding the preservation of people's health and the sustainability of the Earth's environment. This is why Kagome must furtherstrengthen its focus on its mission of contributing to the wellbeing of people as well as to the sustainability of the environment and society.
Kagome’s Approach towardSustainability and Corporate Philosophy
Corporate philosophy ~A management spirit that prevails through changing times~
We are thankful for nature's bounty and for our relationships with people. We respect natural ecosystems and value human sensibilities.
Through nature's bounty, we endeavor to create rich value that is ahead of the times and to contribute to consumer's health and wellbeing.
We aim to be an open company that engages in fa i r and transparent corporate activities and respects each person's individuality and abilities.
NatureAppreciation Corporate Openness
Brand Statement
Since our founding in 1899, we have provided consumers with products that incorporate our desire to “capitalize on nature’s bounty and agricultural value and contribute to people’s health and wellbeing.”
Tomato-related seasoning*1
Tomatosauce*1
Tomatoketchup*1
Tomatojuice*2
Mixed vegetablejuice*2
Mixed vegetableand fruit juice*2
Top Market Share Products in Japan in 2013
51.1
Kagome Products: Our Journey so Far
%59.3
%86.0
%54.9
%51.0
%58.1
%
1899Founder Kanie Ichitarobegins Western vegetable cultivation
1903Tomato sauce
2009Tomatonabe(Tomatoflavoredsoup stock)
2001KagomeDeli
1996Salsa
1961Tomato sauce with minced meat
1973Vegetable juice
1933Tomatojuice
1908Tomato ketchup / Worcestershire sauce
1995Mixed vegetable andfruit juice (Yasai Seikatsu)
2004YasaiIchinichiKoreIppon(Ippai)
2014Salad bank series(baby leaf)
2006Labre vegetablelactobacillusbeverage
Domesticfresh
vegetablesbusiness
Domesticdirect
marketingbusiness
Domesticinstitutional
and industrialproductsbusiness
Overseasbusiness
Domesticgift
productsbusiness
1998Freshtomatoes
1998Kagome Kenko Chokuso-bin (direct marketing)
Domestic food business Domestic beverage business
*1 Source: Intage SRI (foodstuffs), Jan.-Dec. 2013, monetary base*2 Source: Intage SRI (soft drinks), Jan.-Dec. 2013, monetary base
1966Ketchup
in plastictubes
(world’sfirst)
1969Mixed
apple juice
Code of Conduct
Mid-Term Management Policy
BrandStatement
CorporatePhilosophy
Contributing to the wellbeing ofpeople as well as the sustainability
of the environment and society
Our promise to customers
To strive for healthier food that makes the most of natural antioxidants and immune system boosters
To produce healthy, great tasting foods without relying on unnatural additives or technolo-gies
To create demand for enjoyable meals, considering the needs of our bodies and our planet
5 6
SpecialFeature
Reverseosmosis
Concentrates
Juices
Sustainability Initiatives
Reinvestment in
management resources
Achieving ongoing corporate development
to society
Agriculture around the w
orldand conservation of
the global environment
Prom
oting the healthof people
all over the world
Issues related toagriculture and food
• Imbalances in the distribution of food• Food shortages due to climate change• Decline of agriculture in Japan (Abandoned farmlands and lack of successors)• Environmental pollution by agriculture
Tomatoes can be changed to various forms throughgradation and processing
Kagome Group’svertically integrated
value chain
Primary processing and procurement Agriculture (cultivation guidance) Marketing and salesProduct production and quality control Research and Development Variety development Seeds and seedlings
Agriculture (Cultivationguidance)
ProductsRaising
seedlings
ProcurementPrimary processing
(Non-heatingconcentration)
Productproduction
Seeds andseedlings
R&D
Marketingand sales
People’s healthand longevity
Products basedon tomatoes,vegetables,and fruits
Manufacturing thatsupports from seeds
Fields arethe primary plant
The various products provided
by Kagome that take advantage
of nature’s bounty are based on
seasonal tomatoes and vegetables
full of nutrients and are aimed at
contributing to the health and
longevity of people.
Kagome uses its vertically
integrated value chain that starts with
farmers to make products with added
value using tomatoes and vegetables
that serve as raw materials and to
continue stably providing these
products to consumers.
By making products that effectively use tomatoes, vegetables, and fruits that are nature’s bounty gained from the global environment and delivering these products to consumers, the Kagome Group not only contributes to the health and longevity of people, but also to the sustainability of agriculture and the global environment by being involved with agriculture in the maintenance and evolution of its business. Kagome strives to attain sustainable growth.by implementing this cycle and developing a structure that provides sustainable social value while also delivering economic value, generating higher levels of demand at the same time.
Water
Kagome’s agricultureand food initiatives
• Expansion of bases to ensure stable procurement of raw materials• Advancement and dissemination of seed and cultivation technologies• Improving the efficiency of harvesting agricultural products• Promoting the adoption of smart agriculture for the fresh vegetable
business
Kagome’s humanhealth initiatives
• Functional research on tomatoes and vegetables• Tomato processing volume 520,000 tons (11th in the world)
*Fresh Tomatoes Processed Tomatoland Information Services, May 26, 2014
• Green and yellow vegetable supply volume in Japan 11.3%(Tomatoes 30.6%, carrots 16.3%, bell peppers 4.7%)*FY2012 usage results calculated based on the Food Balance Sheet (FY2012) and the Statistics on Production and Shipment of Vegetable (FY2012) of the Ministry of Agriculture, Forestry and Fisheries, the Trade Statistics of Japan (FY2012) of the Ministry of Finance, and Kagome’s supply and demand for FY2012
Issues related to health• Increase in people with lifestyle-related diseases
in Japan and an increasing tendency for younger people to be affected by these diseases
• Chronic lack of vegetable intake by the people of Japan• Increase in health care costs in Japan • Poor nutrition and over-nourishment due to income
disparities and unbalanced dietary habits in countries around the world
and providing ongoing value
• Tomato extract• Whole tomatoes
• Lycopene• Powder
• Puree• Passata
• Paste• Dried tomatoes
• Juice• Cut tomatoes
7 8
KAGOME SUSTAINABILITY 2014
SpecialFeature
Reverseosmosis
Concentrates
Juices
Sustainability Initiatives
Reinvestment in
management resources
Achieving ongoing corporate development
to society
Agriculture around the w
orldand conservation of
the global environment
Prom
oting the healthof people
all over the world
Issues related toagriculture and food
• Imbalances in the distribution of food• Food shortages due to climate change• Decline of agriculture in Japan (Abandoned farmlands and lack of successors)• Environmental pollution by agriculture
Tomatoes can be changed to various forms throughgradation and processing
Kagome Group’svertically integrated
value chain
Primary processing and procurement Agriculture (cultivation guidance) Marketing and salesProduct production and quality control Research and Development Variety development Seeds and seedlings
Agriculture (Cultivationguidance)
ProductsRaising
seedlings
ProcurementPrimary processing
(Non-heatingconcentration)
Productproduction
Seeds andseedlings
R&D
Marketingand sales
People’s healthand longevity
Products basedon tomatoes,vegetables,and fruits
Manufacturing thatsupports from seeds
Fields arethe primary plant
The various products provided
by Kagome that take advantage
of nature’s bounty are based on
seasonal tomatoes and vegetables
full of nutrients and are aimed at
contributing to the health and
longevity of people.
Kagome uses its vertically
integrated value chain that starts with
farmers to make products with added
value using tomatoes and vegetables
that serve as raw materials and to
continue stably providing these
products to consumers.
By making products that effectively use tomatoes, vegetables, and fruits that are nature’s bounty gained from the global environment and delivering these products to consumers, the Kagome Group not only contributes to the health and longevity of people, but also to the sustainability of agriculture and the global environment by being involved with agriculture in the maintenance and evolution of its business. Kagome strives to attain sustainable growth.by implementing this cycle and developing a structure that provides sustainable social value while also delivering economic value, generating higher levels of demand at the same time.
Water
Kagome’s agricultureand food initiatives
• Expansion of bases to ensure stable procurement of raw materials• Advancement and dissemination of seed and cultivation technologies• Improving the efficiency of harvesting agricultural products• Promoting the adoption of smart agriculture for the fresh vegetable
business
Kagome’s humanhealth initiatives
• Functional research on tomatoes and vegetables• Tomato processing volume 520,000 tons (11th in the world)
*Fresh Tomatoes Processed Tomatoland Information Services, May 26, 2014
• Green and yellow vegetable supply volume in Japan 11.3%(Tomatoes 30.6%, carrots 16.3%, bell peppers 4.7%)*FY2012 usage results calculated based on the Food Balance Sheet (FY2012) and the Statistics on Production and Shipment of Vegetable (FY2012) of the Ministry of Agriculture, Forestry and Fisheries, the Trade Statistics of Japan (FY2012) of the Ministry of Finance, and Kagome’s supply and demand for FY2012
Issues related to health• Increase in people with lifestyle-related diseases
in Japan and an increasing tendency for younger people to be affected by these diseases
• Chronic lack of vegetable intake by the people of Japan• Increase in health care costs in Japan • Poor nutrition and over-nourishment due to income
disparities and unbalanced dietary habits in countries around the world
and providing ongoing value
• Tomato extract• Whole tomatoes
• Lycopene• Powder
• Puree• Passata
• Paste• Dried tomatoes
• Juice• Cut tomatoes
7 8
KAGOME SUSTAINABILITY 2014
In November 2014, Kagome Tomato Juice Premium won the grand prize in the 6th Food Action Nippon Award 2014. The award was received in recognition of the contribution made to increased consumption of domestic agricultural products and the positive impact on the revitalization of agriculture and local communities.
Kagome Tomato JuicePremium awarded the grandprize in the Food ActionNippon Award 2014
Cultivation
Salad Bank Serieslaunched in March 2014
Inside a large-scalehigh-tech farm
High lycopene tomatoes Orange makochan
Kokumi Tomato
12,00010,000
8,0006,0004,0002,000
02010 20122011 2013 2014
(estimate)
Sales of Kagome tomato juice
Sales of Tomato Juice Premium
Straight tomato juicelaunched in 2014
Tomato Juice Premium
(millions of yen)
(FY)
(FY)
1,000750500250
02013 2014
(estimate)
(millions of yen)
Aiming for the domestic production of all tomatojuice by using ingredients harvested in Japan
350
300
250
200
150
100
50
0
350
300
250
200
150
100
50
02011 20132012 2014 2016(planned)
Procurement volume and cultivation area ofraw materials for tomato juice
Procurement volume of raw materials for tomato juice
Increase value by taking advantage of the value of domestic raw materials within an environment in which sales growth has calmed after the tomato boom in Japan has gone full circle and contribute to the sustainability of agriculture in cooperation with local communities while aiming for cost reductions through the extension of the harvesting season and expansion of crop volumes.
Special Feature
1
12,000
10,000
8,000
6,000
4,000
2,000
0
(ha)(hundred tons)
2009 20112010 2012 2014(estimate)
2013
Sales in the fresh vegetables business
Promote new demand by aiming to increase the value of tomato juice with the usefullness of domestic tomatoesEconomic value
Seeking domestic agricultural sustainabilitySocial value
Issue awareness
FY2013FY2016 target
30,000tons19,000tons
*Temporary reduction in FY2011 due to the suspension of contract cultivation of tomatoes in Fukushima Prefecture as a result of the Great East Japan Earthquake
(FY) (FY)
Special Feature : Sustainability Initiatives
Raw material procurement volume Cultivation area
Looking forward to future initiatives by Kagome in mechanical harvesting ~Voices of producers~
Agriead Naruse President and RepresentativeDirector Toshiro Abe
Aiming to create added value by using domestic tomatoes for full production of tomato juiceDomestically-produced tomatoes account for approximately 27% (fiscal 2012 totals for can, PET, and paper container products) of the raw materials used for tomato juice produced by Kagome, with overseas raw materials used for the remaining. Major factors underlying this include sluggish growth in the number of tomato producers and cultivation area stemming from population aging and a lack of successors among domestic tomato contract farmers and the price difference between foreign and domes-tic processing tomatoes. Kagome views the continuous development of high value-added varieties, expansion of the harvest season, and increasing crop volumes as important issues in order to secure a perpetual procurement source for tomato juice raw materials. In response, Kagome aims to develop farming areas, producers, and cultiva-tion methods on its own for tomato juice raw materials and improve the sustainability of domestic agriculture. In doing so, Kagome aims to produce all raw materials for tomato juice domestically, which will make it possible to develop new and attractive forms of tomato juice, including high value-added products that focus on quality and freshness.
Juice tomato farming areas spread across northern JapanKagome is currently working to expand farming areas for tomato juice raw materials with a focus on northern Japan. As part of these efforts, during fiscal 2014 Kagome conducted test cultivation and made adjustments to breeding and cultivation methods for the possible commencement of supplying in a few years in Hokkaido, where large-scale mechanized agriculture is possible. In addition, Kagome has started to expand farming areas for juice tomatoes in collaboration with local agricultural corporations. In Miyagi, Iwate and Aomori Prefecture, where the cultivation area was 4.77ha in fiscal 2013, the cultivation area was increased by four times to 19.71ha in fiscal 2014.
Producing fresh tomatoes while aiming to capture 10% of domestic distributionKagome’s fresh vegetable business has aimed to establish a new form of agriculture through the application of various development capabilities and agricultural technologies for processing tomatoes and computer management, aimed at environmental preservation at large-scale high-tech farms. Although there were issues involving producer-retailer adjustments during the several years following the launch of the business and there were some losses from disposal, the business became profitable in 2012. Kagome sells fresh tomatoes including its Kokumi Tomatoes through retailers throughout Japan. Kagome’s current supply volume of fresh tomatoes is approximately 14,000 tons (approximately 2.5% of the total supply volume in Japan), and Kagome is considering increasing this to 60,000 tons or 10% of the total supply within 10 years. There were large-scale farms at eleven locations as of November 2014 (yield of 25 to 50 tons/10 acres). Kagome is currently introducing high-yield, state-of-the-art farms (target yield of 70 tons/10 acres) and developing a supply system capable of providing a stable supply during the summer. By expanding this business, Kagome aims to convert domestic agriculture into a growth industry and create stable employment opportunities.
Entering the high value-added vegetable market characterized by functionality and convenienceKagome took steps forward during 2014 aimed at further expanding its fresh vegetable business. Baby Leaf (mesclun) was released in March as the first step of these efforts. It contains a higher level of nutrients per weight compared to fully-grown leaves, and because it is popular overseas as a functional vegetable and it can be conveniently eaten after simply washing in the domestic market, its market is expanding. Kagome announced its entry into the “pre-cut vegetables and packed salad” sector in August. Kagome has released a series of salad products character-ized by their high value-added targeted at women extremely interested in beauty and highly health-conscious seniors, as Kagome continues to work towards increasing vegetable consumption by creating opportunities to eat vegetables.
We have continued to employ six regular employees and seven temporary employees on 100ha of cultivated land, including 40ha of land in the area affected by the Great East Japan Earthquake, where we harvest three crops of rice, wheat, and soybeans every two years, as well as vegetables. During 2014, we planted Kagome juice tomatoes, some of which were
varieties for mechanical harvesting. Although mechanical harvesting is necessary for expanding the cultivation area, there are issues involved with increasing the frequency of tomato transport, such as the need to install a sorting device nearby. We look forward to future initiatives by Kagome in this area.
Taking on the fresh tomatoes and vegetables sector
Special Feature
2Develop agriculture specialized on fresh tomatoes and vegetables as new sources of revenue following food and beverages.Economic value
Contribute to the conversion of domestic agriculture into a growth industry.Social value
Sales of fresh vegetables
• In addition to the production and sales of fresh tomatoes from large-scale high-tech farms, enter the “packed salad and pre-cut vegetables” sector characterized by functional ingredients and convenience. • Achieve strong agriculture that aims for profitability improvements through an increase in crop volumes, improvements in the accuracy of producer-retailer adjustments, and the development of high value-added products.
Issue awareness
FY2012FY2014 estimates
10billion yen8.9billion yen
(millions of yen)
Environmental preservation initiatives at large-scale high-tech farms (including initiatives only be implemented at some farms)
• Using clean energy (liquefied petroleum gas, LP gas, natural gas)• Using CO2 from boiler combustion for photosynthesis• Using rainwater that accumulates on the roof of the greenhouse to save water• Using electricity from solar power plant (Hibikinada Greenfarm)
• Releasing Japanese bumblebees inside greenhouses to promote natural pollination and preserve the ecosystem
• Using microorganisms to decompose stalks and leaves that are removed and reuse these resources as fertilizer (Iwaki Onahama Greenfarm)
9 10
KAGOME SUSTAINABILITY 2014
In November 2014, Kagome Tomato Juice Premium won the grand prize in the 6th Food Action Nippon Award 2014. The award was received in recognition of the contribution made to increased consumption of domestic agricultural products and the positive impact on the revitalization of agriculture and local communities.
Kagome Tomato JuicePremium awarded the grandprize in the Food ActionNippon Award 2014
Cultivation
Salad Bank Serieslaunched in March 2014
Inside a large-scalehigh-tech farm
High lycopene tomatoes Orange makochan
Kokumi Tomato
12,00010,000
8,0006,0004,0002,000
02010 20122011 2013 2014
(estimate)
Sales of Kagome tomato juice
Sales of Tomato Juice Premium
Straight tomato juicelaunched in 2014
Tomato Juice Premium
(millions of yen)
(FY)
(FY)
1,000750500250
02013 2014
(estimate)
(millions of yen)
Aiming for the domestic production of all tomatojuice by using ingredients harvested in Japan
350
300
250
200
150
100
50
0
350
300
250
200
150
100
50
02011 20132012 2014 2016(planned)
Procurement volume and cultivation area ofraw materials for tomato juice
Procurement volume of raw materials for tomato juice
Increase value by taking advantage of the value of domestic raw materials within an environment in which sales growth has calmed after the tomato boom in Japan has gone full circle and contribute to the sustainability of agriculture in cooperation with local communities while aiming for cost reductions through the extension of the harvesting season and expansion of crop volumes.
Special Feature
1
12,000
10,000
8,000
6,000
4,000
2,000
0
(ha)(hundred tons)
2009 20112010 2012 2014(estimate)
2013
Sales in the fresh vegetables business
Promote new demand by aiming to increase the value of tomato juice with the usefullness of domestic tomatoesEconomic value
Seeking domestic agricultural sustainabilitySocial value
Issue awareness
FY2013FY2016 target
30,000tons19,000tons
*Temporary reduction in FY2011 due to the suspension of contract cultivation of tomatoes in Fukushima Prefecture as a result of the Great East Japan Earthquake
(FY) (FY)
Special Feature : Sustainability Initiatives
Raw material procurement volume Cultivation area
Looking forward to future initiatives by Kagome in mechanical harvesting ~Voices of producers~
Agriead Naruse President and RepresentativeDirector Toshiro Abe
Aiming to create added value by using domestic tomatoes for full production of tomato juiceDomestically-produced tomatoes account for approximately 27% (fiscal 2012 totals for can, PET, and paper container products) of the raw materials used for tomato juice produced by Kagome, with overseas raw materials used for the remaining. Major factors underlying this include sluggish growth in the number of tomato producers and cultivation area stemming from population aging and a lack of successors among domestic tomato contract farmers and the price difference between foreign and domes-tic processing tomatoes. Kagome views the continuous development of high value-added varieties, expansion of the harvest season, and increasing crop volumes as important issues in order to secure a perpetual procurement source for tomato juice raw materials. In response, Kagome aims to develop farming areas, producers, and cultiva-tion methods on its own for tomato juice raw materials and improve the sustainability of domestic agriculture. In doing so, Kagome aims to produce all raw materials for tomato juice domestically, which will make it possible to develop new and attractive forms of tomato juice, including high value-added products that focus on quality and freshness.
Juice tomato farming areas spread across northern JapanKagome is currently working to expand farming areas for tomato juice raw materials with a focus on northern Japan. As part of these efforts, during fiscal 2014 Kagome conducted test cultivation and made adjustments to breeding and cultivation methods for the possible commencement of supplying in a few years in Hokkaido, where large-scale mechanized agriculture is possible. In addition, Kagome has started to expand farming areas for juice tomatoes in collaboration with local agricultural corporations. In Miyagi, Iwate and Aomori Prefecture, where the cultivation area was 4.77ha in fiscal 2013, the cultivation area was increased by four times to 19.71ha in fiscal 2014.
Producing fresh tomatoes while aiming to capture 10% of domestic distributionKagome’s fresh vegetable business has aimed to establish a new form of agriculture through the application of various development capabilities and agricultural technologies for processing tomatoes and computer management, aimed at environmental preservation at large-scale high-tech farms. Although there were issues involving producer-retailer adjustments during the several years following the launch of the business and there were some losses from disposal, the business became profitable in 2012. Kagome sells fresh tomatoes including its Kokumi Tomatoes through retailers throughout Japan. Kagome’s current supply volume of fresh tomatoes is approximately 14,000 tons (approximately 2.5% of the total supply volume in Japan), and Kagome is considering increasing this to 60,000 tons or 10% of the total supply within 10 years. There were large-scale farms at eleven locations as of November 2014 (yield of 25 to 50 tons/10 acres). Kagome is currently introducing high-yield, state-of-the-art farms (target yield of 70 tons/10 acres) and developing a supply system capable of providing a stable supply during the summer. By expanding this business, Kagome aims to convert domestic agriculture into a growth industry and create stable employment opportunities.
Entering the high value-added vegetable market characterized by functionality and convenienceKagome took steps forward during 2014 aimed at further expanding its fresh vegetable business. Baby Leaf (mesclun) was released in March as the first step of these efforts. It contains a higher level of nutrients per weight compared to fully-grown leaves, and because it is popular overseas as a functional vegetable and it can be conveniently eaten after simply washing in the domestic market, its market is expanding. Kagome announced its entry into the “pre-cut vegetables and packed salad” sector in August. Kagome has released a series of salad products character-ized by their high value-added targeted at women extremely interested in beauty and highly health-conscious seniors, as Kagome continues to work towards increasing vegetable consumption by creating opportunities to eat vegetables.
We have continued to employ six regular employees and seven temporary employees on 100ha of cultivated land, including 40ha of land in the area affected by the Great East Japan Earthquake, where we harvest three crops of rice, wheat, and soybeans every two years, as well as vegetables. During 2014, we planted Kagome juice tomatoes, some of which were
varieties for mechanical harvesting. Although mechanical harvesting is necessary for expanding the cultivation area, there are issues involved with increasing the frequency of tomato transport, such as the need to install a sorting device nearby. We look forward to future initiatives by Kagome in this area.
Taking on the fresh tomatoes and vegetables sector
Special Feature
2Develop agriculture specialized on fresh tomatoes and vegetables as new sources of revenue following food and beverages.Economic value
Contribute to the conversion of domestic agriculture into a growth industry.Social value
Sales of fresh vegetables
• In addition to the production and sales of fresh tomatoes from large-scale high-tech farms, enter the “packed salad and pre-cut vegetables” sector characterized by functional ingredients and convenience. • Achieve strong agriculture that aims for profitability improvements through an increase in crop volumes, improvements in the accuracy of producer-retailer adjustments, and the development of high value-added products.
Issue awareness
FY2012FY2014 estimates
10billion yen8.9billion yen
(millions of yen)
Environmental preservation initiatives at large-scale high-tech farms (including initiatives only be implemented at some farms)
• Using clean energy (liquefied petroleum gas, LP gas, natural gas)• Using CO2 from boiler combustion for photosynthesis• Using rainwater that accumulates on the roof of the greenhouse to save water• Using electricity from solar power plant (Hibikinada Greenfarm)
• Releasing Japanese bumblebees inside greenhouses to promote natural pollination and preserve the ecosystem
• Using microorganisms to decompose stalks and leaves that are removed and reuse these resources as fertilizer (Iwaki Onahama Greenfarm)
9 10
KAGOME SUSTAINABILITY 2014
Increased vertical integration with the addition of United Genetics Holding LLC to the Kagome GroupUnited Genetics Holding LLC (Delaware, US), which joined the Kagome Group in November 2013, is a vegetable nursery company that conducts in-house development of non-genetically-modified tomatoes and vegetables as well as sales in over 80 countries around the world. With this addition,
Kagome Group companies that are involved from the seed level have now expanded to include North America, South America, Southern Europe, and India, in addition to existing business bases. This has enabled Kagome to develop systems for stable supply and profit generation in each of these regions.
118.3units30,000
25,000
20,000
15,000
10,000
5,000
0
(millions of yen)
(FY)2009 20112010 2012 2013
Sales in the overseas business
*Source: Tomatoland Information Services, May 26, 2014
Signing ceremony Ruchi Kagome Foods India Pvt. Ltd.in Mumbai, India
140
120
100
80
60
40
20
0
350
300
250
200
150
100
50
0
(millions of yen)
(FY)2010 20122011 2013 2014(planned)
*Inter-segment transactions have been offset and eliminated.
Unit sales Operating income
Special Feature : Sustainability Initiatives
Supporting local agriculture through “local production, total consumption”
2013 unit sales results
In an aim to support local agriculture and improve the sustainability of agriculture in Japan, Kagome will procure and commercialize local specialties as raw materials on an ongoing and systematic basis, secure sustainable profits by selling these products without waste, and promote consumption of this produce nationwide.
Special Feature
3
Sell distinctive products using special local crops tobroaden demand for products and local specialties.Economic value
Make economic contributions to local agriculture and improve awareness oflocal specialties by purchasing local specialties of juice raw materials.Social value
Issue awareness
132million units/year
Unit sales and operating income from the YasaiSeikatsu 100 Kisetsu Gentei (seasonal) series (millions of units)
The issue of unique producer-retailer adjustments for seasonal productsThere are many specialty vegetables and fruits throughout Japan. In addition to efforts aimed at revitalizing its own farms in Japan, Kagome has entered into agreements with local governments and Japan Agricultural Cooperatives (JA) and launched the “local production, total consumption” program from fiscal 2010 aimed at delivering appealing local products from areas throughout Japan to people nationwide as products under the Kagome brand. The Yasai Seikatsu 100 Kisetsu Gentei (seasonal) series is one of Kagome’s leading “local production, total consumption” products, and unit sales exceeded 130 million units during fiscal 2013. However, seasonal products bring with them the risk of pressure caused on profits by the gap between sales expectations and results. In order to continue “local production, total consumption” as a system going forward, Kagome will work to make improvements including improvements to the accuracy of sales forecasts at retailers in the sales department and shortening of lead time for raw material procurement as an urgent task. Furthermore, as a decrease in unit sales is expected in fiscal 2014 for the first time since the program was launched in 2010, issues that need to be addressed include developing specialty products in new regions and making improvements that incorporate design for the taste of products.
Aiming for sustainable agriculturearound the world
FY2013 sales in the overseas business
• Develop tomato and vegetable varieties and establish cultivation methods suitable for the environment of each country to ensure the sustainable and stable supply of raw materials for products. • Aim to expand local production, local consumption sustainable tomato and vegetable business starting from seed development and agriculture in countries and regions all over the world in order to expand our business.
Special Feature
4Achieve stable raw material procurement and growth of business overseasby expanding the scale of Kagome’s vertically integrated tomato and vegetable business.Economic value
Contribute to the sustainable development of tomato and vegetable cultivation suitablefor climate and soil conditions in countries around the world.Social value
Issue awareness
28billion yen
Initiatives aimed at the stable supply of foreign raw materialsThe Kagome Group has focused on tomato production since its establishment in 1899, and as of 2013 it has grown into a company that has the 11th highest* processing volume in the world. One of the factors that have enabled this is the development of agricultural technologies that aim for sustainability while protecting the providence of nature. Kagome Australia is in full compliance with the pioneering Unilever Sustainable Agriculture Code. It manages water and fertilizer using drip irrigation systems and it has introduced equipment and technologies for soil improvement through crop rotation in an effort to help farmers adopt agricultural practices that enable sustainable cultivation. Holding da Industria Transformdora do Tomate, SGPS S.A. (HIT) farms based on the Global Good Agricultural Practices (Global GAP). In addition, Kagome made the US nursery company United Genetics Holding LLC a consolidated subsidiary in 2013, and commenced variety development of tomatoes and vegetables suitable for the climate and soil conditions for the cultivation area as well as the establishment of cultivation technologies. Efforts are being made from the seed level aimed at developing more advanced technologies to ensure a stable supply.
Contributing to development of countries we operate in by expanding our overseas businessKagome started selling tomato products (primary processing and final products) in North America from 1989, and currently we also sell products to customers in Europe, Asia, and Oceania. In 2013, Ruchi Kagome Foods India Pvt. Ltd. was established as a joint venture with major manufacturers in India, and this company aims to expand its business with a focus on commercial products as well as household products. In the expansion of its business overseas, Kagome focuses on the establishment of sustainable local industries including the development of local human resources in addition to market entry and local production for local consumption. In doing so, Kagome aims to contrib-ute to the strengthening of agricultural production systems, the spread of processing technology, and the promotion of employment in the countries it conducts business in.
Collaboration between producers of “local production, total consumption” products, local governments, and Kagome
Producer
Local community
Kagome
Customers nationwide
Local governmentsJA
Agreem
ent
Commerciali-zation
Dekopon (type of citrus fruit), KumamotoTochiotome (type of strawberry),TochigiCherries, Yamagata
Setouchi Lemon Agreement entered with Hiroshima Prefecture
The Yasai Seikatsu 100Kisetsu Gentei (seasonal) series(From April 2013 to October 2014)
Yasai Seikatsu 100 Setouchi Lemon Mix ~ A Hiroshima Prefecture and Kagome initiative ~Hiroshima Prefectural Government, General Affairs Bureau, Management Planning TeamWith the highest production volume of lemons in Japan- boasting a 50% share of domestic production – Hiroshima Prefecture is conducting various initiatives aimed at revitalizing the citrus industry centered on “Setouchi Hiroshima lemons”; and the prefecture is holding a PR campaign as part of these efforts. In 2012, the Hiroshima
Prefecture Government and Kagome concluded a Setouchi Lemon Agreement; which included the commer-cialization of the Yasai Seikatsu 100 Setouchi Lemmon Mix, a product that has recorded sales of 16 million units. These initiatives have left caused quite an impression in Hiroshima Prefecture.
11 12
KAGOME SUSTAINABILITY 2014
Increased vertical integration with the addition of United Genetics Holding LLC to the Kagome GroupUnited Genetics Holding LLC (Delaware, US), which joined the Kagome Group in November 2013, is a vegetable nursery company that conducts in-house development of non-genetically-modified tomatoes and vegetables as well as sales in over 80 countries around the world. With this addition,
Kagome Group companies that are involved from the seed level have now expanded to include North America, South America, Southern Europe, and India, in addition to existing business bases. This has enabled Kagome to develop systems for stable supply and profit generation in each of these regions.
118.3units30,000
25,000
20,000
15,000
10,000
5,000
0
(millions of yen)
(FY)2009 20112010 2012 2013
Sales in the overseas business
*Source: Tomatoland Information Services, May 26, 2014
Signing ceremony Ruchi Kagome Foods India Pvt. Ltd.in Mumbai, India
140
120
100
80
60
40
20
0
350
300
250
200
150
100
50
0
(millions of yen)
(FY)2010 20122011 2013 2014(planned)
*Inter-segment transactions have been offset and eliminated.
Unit sales Operating income
Special Feature : Sustainability Initiatives
Supporting local agriculture through “local production, total consumption”
2013 unit sales results
In an aim to support local agriculture and improve the sustainability of agriculture in Japan, Kagome will procure and commercialize local specialties as raw materials on an ongoing and systematic basis, secure sustainable profits by selling these products without waste, and promote consumption of this produce nationwide.
Special Feature
3
Sell distinctive products using special local crops tobroaden demand for products and local specialties.Economic value
Make economic contributions to local agriculture and improve awareness oflocal specialties by purchasing local specialties of juice raw materials.Social value
Issue awareness
132million units/year
Unit sales and operating income from the YasaiSeikatsu 100 Kisetsu Gentei (seasonal) series (millions of units)
The issue of unique producer-retailer adjustments for seasonal productsThere are many specialty vegetables and fruits throughout Japan. In addition to efforts aimed at revitalizing its own farms in Japan, Kagome has entered into agreements with local governments and Japan Agricultural Cooperatives (JA) and launched the “local production, total consumption” program from fiscal 2010 aimed at delivering appealing local products from areas throughout Japan to people nationwide as products under the Kagome brand. The Yasai Seikatsu 100 Kisetsu Gentei (seasonal) series is one of Kagome’s leading “local production, total consumption” products, and unit sales exceeded 130 million units during fiscal 2013. However, seasonal products bring with them the risk of pressure caused on profits by the gap between sales expectations and results. In order to continue “local production, total consumption” as a system going forward, Kagome will work to make improvements including improvements to the accuracy of sales forecasts at retailers in the sales department and shortening of lead time for raw material procurement as an urgent task. Furthermore, as a decrease in unit sales is expected in fiscal 2014 for the first time since the program was launched in 2010, issues that need to be addressed include developing specialty products in new regions and making improvements that incorporate design for the taste of products.
Aiming for sustainable agriculturearound the world
FY2013 sales in the overseas business
• Develop tomato and vegetable varieties and establish cultivation methods suitable for the environment of each country to ensure the sustainable and stable supply of raw materials for products. • Aim to expand local production, local consumption sustainable tomato and vegetable business starting from seed development and agriculture in countries and regions all over the world in order to expand our business.
Special Feature
4Achieve stable raw material procurement and growth of business overseasby expanding the scale of Kagome’s vertically integrated tomato and vegetable business.Economic value
Contribute to the sustainable development of tomato and vegetable cultivation suitablefor climate and soil conditions in countries around the world.Social value
Issue awareness
28billion yen
Initiatives aimed at the stable supply of foreign raw materialsThe Kagome Group has focused on tomato production since its establishment in 1899, and as of 2013 it has grown into a company that has the 11th highest* processing volume in the world. One of the factors that have enabled this is the development of agricultural technologies that aim for sustainability while protecting the providence of nature. Kagome Australia is in full compliance with the pioneering Unilever Sustainable Agriculture Code. It manages water and fertilizer using drip irrigation systems and it has introduced equipment and technologies for soil improvement through crop rotation in an effort to help farmers adopt agricultural practices that enable sustainable cultivation. Holding da Industria Transformdora do Tomate, SGPS S.A. (HIT) farms based on the Global Good Agricultural Practices (Global GAP). In addition, Kagome made the US nursery company United Genetics Holding LLC a consolidated subsidiary in 2013, and commenced variety development of tomatoes and vegetables suitable for the climate and soil conditions for the cultivation area as well as the establishment of cultivation technologies. Efforts are being made from the seed level aimed at developing more advanced technologies to ensure a stable supply.
Contributing to development of countries we operate in by expanding our overseas businessKagome started selling tomato products (primary processing and final products) in North America from 1989, and currently we also sell products to customers in Europe, Asia, and Oceania. In 2013, Ruchi Kagome Foods India Pvt. Ltd. was established as a joint venture with major manufacturers in India, and this company aims to expand its business with a focus on commercial products as well as household products. In the expansion of its business overseas, Kagome focuses on the establishment of sustainable local industries including the development of local human resources in addition to market entry and local production for local consumption. In doing so, Kagome aims to contrib-ute to the strengthening of agricultural production systems, the spread of processing technology, and the promotion of employment in the countries it conducts business in.
Collaboration between producers of “local production, total consumption” products, local governments, and Kagome
Producer
Local community
Kagome
Customers nationwide
Local governmentsJA
Agreem
ent
Commerciali-zation
Dekopon (type of citrus fruit), KumamotoTochiotome (type of strawberry),TochigiCherries, Yamagata
Setouchi Lemon Agreement entered with Hiroshima Prefecture
The Yasai Seikatsu 100Kisetsu Gentei (seasonal) series(From April 2013 to October 2014)
Yasai Seikatsu 100 Setouchi Lemon Mix ~ A Hiroshima Prefecture and Kagome initiative ~Hiroshima Prefectural Government, General Affairs Bureau, Management Planning TeamWith the highest production volume of lemons in Japan- boasting a 50% share of domestic production – Hiroshima Prefecture is conducting various initiatives aimed at revitalizing the citrus industry centered on “Setouchi Hiroshima lemons”; and the prefecture is holding a PR campaign as part of these efforts. In 2012, the Hiroshima
Prefecture Government and Kagome concluded a Setouchi Lemon Agreement; which included the commer-cialization of the Yasai Seikatsu 100 Setouchi Lemmon Mix, a product that has recorded sales of 16 million units. These initiatives have left caused quite an impression in Hiroshima Prefecture.
11 12
KAGOME SUSTAINABILITY 2014
Dramatic improvements in breed development capabilities through the use of genetic analysis technologies
Currently, Kagome is using the genetic resources of 7,500 types of tomatoes to conduct breed development for processing tomatoes and fresh tomatoes without using genetic modification technology. The current focus on using genetic analysis technologies has led to a dramatic improvement in the efficiency of breed development. This has made it possible to not only quickly respond to market needs, but also to achieve great improvements in development capabilities for varieties such as those highly resistant to disease and varieties suitable for mechanical harvesting to support the expansion of cultivation areas in Japan.
• Developing tomato varieties that achieve both improvements in quality and flavor along with yield performance and disease resistance.
• Conducting crop type research for new tomato farming areas. Develop-ment of harvesting machinery.Develop cultivation technologies suitable for mechanical harvesting. Development of disease and insect removal technologies
Agricultural Resources Development Department: Initiatives aimed at agricultural sustainability
Following an agrochemicals contamination incident at the frozen food factory of a domestic frozen food manufacturer discovered towards the end of December 2013, Kagome has strengthened food defense (initiatives aimed at preventing the deliberate contamination of foods with foreign substances) company-wide. The Food Safety Department is installing analysis equipment that enables the prompt identification of hazardous substances in the event that a problem occurs. In addition, emergency response analysis procedures have been stipulated and an analysis system has been developed that is capable of providing support 365 days a year.
Tomoo Moriuchi, Manager, Customer Solution Center, Food Safety Department, Research & Development Division
March 2014The possibility became clear that constipation may cause a reduction in nutrient absorption efficiency as well as an increase oxidative stress that can cause aging and cancer.~Survey conducted on female university students~ (announced at the Agricultural Chemical Society of Japan)
Hirotaka Ito, Manager, Agricultural Resources Development Department, Research & Development Division
Strengthening systems for the analysis of hazardous substances in foods from the perspective of food defense
Varieties resistant to the tomato yellow leaf curl disease that has had a global impact
Labre bacteria
July 2014It was verified that drinking vegetable juice before or during a meal controls the drastic increase in blood glucose levels after meals that causes metabolic syndrome.(Announced at the 61st Annual Meeting of the Japanese Society for Food Science and Technology)
October 2014It was verified that continuous intake of beverages containing lactobacillus brevis KB290 (also known as labre bacteria) reduces the incidence of influenza.~Large-scale survey conducted on 15 elementary schools in Nasushiobara, Tochigi Prefecture during influenza season (Announced at the 10th Anniversary Meeting of the Japanese Association for Food Immunology)
Recent research achievements by the Research & Development Division (From April 2013 to October 2014)
Food Safety Department: Initiatives to ensure product safety
July 2013Discovery of an effect in sulforaphane that could mitigate sickness caused by drinking.~Joint research with the Johns Hopkins School of Medicine (US)~(Published in the digital version of the magazine Alcohol and Alcoholism)
Fukushima San Tomato Juice, until safety leads to reassurance
Kagome has great expectations for Fukushima Prefecture as a production area for processing tomatoes. Based on the strong determination of not letting tomato cultivation in Fukushima Prefecture come to an end due to the Great East Japan Earthquake, Kagome verified the safety of tomatoes from Fukushima Prefecture from fiscal 2011 to fiscal 2012 and launched Fukushima San Tomato Juice in November 2013 (processing tomatoes from Fukushima Prefecture are only used with this product). Going forward Kagome will continue to support agriculture in Fukushima Prefecture and expand the circle of people who sympathize with this cause through Fukushima San Tomato Juice.
The MICHINOKU Future Fund (a public interest incorporated foundation) is a scholarship fund jointly established by Kagome, CALBEE, Inc., and ROHTO Pharmaceutical Co., Ltd. for students who lost their parents in the earthquake. It has now entered its fourth year and has awarded scholar-ships to over 300 students. There are expected to be approximately 100 entries in fiscal 2015, and 70 to 100 scholarship recipients every year following that. In March 2014, 46 scholarship recipients completed courses at vocational schools and left the fund to start new careers, and we wish them the best of success. We are currently visiting local governments and support organizations nationwide for the purpose of sharing information with orphaned students that have moved outside of Iwate, Miyagi, and Fukushima Prefecture.
The MICHINOKU Future Fund that aims to foster people to rebuild the Tohoku region
Analysis of radioactive substances
Special Feature : Sustainability Initiatives
Fukushima San Tomato Juice
Gathering of the third scholarship recipients of the MICHINOKU Future Fund
“LYLYCO Waku Waku” Program
Summer gathering of the MICHINOKU Future Fund
Cooking experience using LYLYCO tomatoes raised with their own hands
A total of 3.41 million people have enjoyed the Kagome Theater over a period of 43 years
Keiichi Inagaki, General Manager, Products Planning Department, Consumer Business Division
Yuji Kitaoka,Great East Japan Revitalization Support Department, Corporate Communications Division
Topics
3Dietary education activities to support a rich and varied diet among children and the healthy growth of bodies and minds
• Gathering food risk prediction activity information and incorporating this information in management
• Analysis technology equipment (for chemical substances, microorgan-isms, flavor and smell components, etc.)
• Safety assessments and regular inspections of raw materials (agricultural chemical residues, radioactive substances, etc.)
• Microorganism characteristic and behavior assessments and solutions for establishing control requirements
Japanese harvesting machinery jointly developed by Kagome and agricultural equipment manufacturers Kagome conducts dietary education activities with the aim of fostering an interest
among children and create opportunities for experiencing the joy of food.
Kagome Theater musical that communicate proper eating habits
The Kagome Theater is Kagome’s original musical that has welcomed many parents and children free of charge over summer vacation since 1972. It introduces the role of food and the importance of good health in an enjoyable way though song and dance in hopes that it will provide us with the chance to foster proper eating habits among children during childhood.
Kagome’s “LYLYCO Waku Waku” Program that lets children experience food and farming through the cultivation of tomatoes
Under this program, LYLYCO tomato seedlings and educational materials are distributed free of charge to kindergartens, preschools and elementary schools nationwide. The goal is to foster a sense of appreciation and thanks toward life by raising your own food, cooking it, and then eating it. A total of 45,563 schools and other facilities have participated in the program from FY1999 to FY2014.
Kagome has continually provided humanitarian assistance and agricultural rehabilita-tion support in the areas affected by the Great East Japan Earthquake based on the spirit of cooperation.
Topics
2Great East Japan Earthquake reconstruction assistance as sustained support for the future of the Tohoku region
Kagome’s R&D Division pursues technologies and information that can be used now and in the future based on its mission of supplying the energy for technical growth through the R&D as the source for the Group’s value chain. Tomato seeds
Topics
1Improving the efficiency of tomato breed development and supporting food safety and security
13 14
KAGOME SUSTAINABILITY 2014
Dramatic improvements in breed development capabilities through the use of genetic analysis technologies
Currently, Kagome is using the genetic resources of 7,500 types of tomatoes to conduct breed development for processing tomatoes and fresh tomatoes without using genetic modification technology. The current focus on using genetic analysis technologies has led to a dramatic improvement in the efficiency of breed development. This has made it possible to not only quickly respond to market needs, but also to achieve great improvements in development capabilities for varieties such as those highly resistant to disease and varieties suitable for mechanical harvesting to support the expansion of cultivation areas in Japan.
• Developing tomato varieties that achieve both improvements in quality and flavor along with yield performance and disease resistance.
• Conducting crop type research for new tomato farming areas. Develop-ment of harvesting machinery.Develop cultivation technologies suitable for mechanical harvesting. Development of disease and insect removal technologies
Agricultural Resources Development Department: Initiatives aimed at agricultural sustainability
Following an agrochemicals contamination incident at the frozen food factory of a domestic frozen food manufacturer discovered towards the end of December 2013, Kagome has strengthened food defense (initiatives aimed at preventing the deliberate contamination of foods with foreign substances) company-wide. The Food Safety Department is installing analysis equipment that enables the prompt identification of hazardous substances in the event that a problem occurs. In addition, emergency response analysis procedures have been stipulated and an analysis system has been developed that is capable of providing support 365 days a year.
Tomoo Moriuchi, Manager, Customer Solution Center, Food Safety Department, Research & Development Division
March 2014The possibility became clear that constipation may cause a reduction in nutrient absorption efficiency as well as an increase oxidative stress that can cause aging and cancer.~Survey conducted on female university students~ (announced at the Agricultural Chemical Society of Japan)
Hirotaka Ito, Manager, Agricultural Resources Development Department, Research & Development Division
Strengthening systems for the analysis of hazardous substances in foods from the perspective of food defense
Varieties resistant to the tomato yellow leaf curl disease that has had a global impact
Labre bacteria
July 2014It was verified that drinking vegetable juice before or during a meal controls the drastic increase in blood glucose levels after meals that causes metabolic syndrome.(Announced at the 61st Annual Meeting of the Japanese Society for Food Science and Technology)
October 2014It was verified that continuous intake of beverages containing lactobacillus brevis KB290 (also known as labre bacteria) reduces the incidence of influenza.~Large-scale survey conducted on 15 elementary schools in Nasushiobara, Tochigi Prefecture during influenza season (Announced at the 10th Anniversary Meeting of the Japanese Association for Food Immunology)
Recent research achievements by the Research & Development Division (From April 2013 to October 2014)
Food Safety Department: Initiatives to ensure product safety
July 2013Discovery of an effect in sulforaphane that could mitigate sickness caused by drinking.~Joint research with the Johns Hopkins School of Medicine (US)~(Published in the digital version of the magazine Alcohol and Alcoholism)
Fukushima San Tomato Juice, until safety leads to reassurance
Kagome has great expectations for Fukushima Prefecture as a production area for processing tomatoes. Based on the strong determination of not letting tomato cultivation in Fukushima Prefecture come to an end due to the Great East Japan Earthquake, Kagome verified the safety of tomatoes from Fukushima Prefecture from fiscal 2011 to fiscal 2012 and launched Fukushima San Tomato Juice in November 2013 (processing tomatoes from Fukushima Prefecture are only used with this product). Going forward Kagome will continue to support agriculture in Fukushima Prefecture and expand the circle of people who sympathize with this cause through Fukushima San Tomato Juice.
The MICHINOKU Future Fund (a public interest incorporated foundation) is a scholarship fund jointly established by Kagome, CALBEE, Inc., and ROHTO Pharmaceutical Co., Ltd. for students who lost their parents in the earthquake. It has now entered its fourth year and has awarded scholar-ships to over 300 students. There are expected to be approximately 100 entries in fiscal 2015, and 70 to 100 scholarship recipients every year following that. In March 2014, 46 scholarship recipients completed courses at vocational schools and left the fund to start new careers, and we wish them the best of success. We are currently visiting local governments and support organizations nationwide for the purpose of sharing information with orphaned students that have moved outside of Iwate, Miyagi, and Fukushima Prefecture.
The MICHINOKU Future Fund that aims to foster people to rebuild the Tohoku region
Analysis of radioactive substances
Special Feature : Sustainability Initiatives
Fukushima San Tomato Juice
Gathering of the third scholarship recipients of the MICHINOKU Future Fund
“LYLYCO Waku Waku” Program
Summer gathering of the MICHINOKU Future Fund
Cooking experience using LYLYCO tomatoes raised with their own hands
A total of 3.41 million people have enjoyed the Kagome Theater over a period of 43 years
Keiichi Inagaki, General Manager, Products Planning Department, Consumer Business Division
Yuji Kitaoka,Great East Japan Revitalization Support Department, Corporate Communications Division
Topics
3Dietary education activities to support a rich and varied diet among children and the healthy growth of bodies and minds
• Gathering food risk prediction activity information and incorporating this information in management
• Analysis technology equipment (for chemical substances, microorgan-isms, flavor and smell components, etc.)
• Safety assessments and regular inspections of raw materials (agricultural chemical residues, radioactive substances, etc.)
• Microorganism characteristic and behavior assessments and solutions for establishing control requirements
Japanese harvesting machinery jointly developed by Kagome and agricultural equipment manufacturers Kagome conducts dietary education activities with the aim of fostering an interest
among children and create opportunities for experiencing the joy of food.
Kagome Theater musical that communicate proper eating habits
The Kagome Theater is Kagome’s original musical that has welcomed many parents and children free of charge over summer vacation since 1972. It introduces the role of food and the importance of good health in an enjoyable way though song and dance in hopes that it will provide us with the chance to foster proper eating habits among children during childhood.
Kagome’s “LYLYCO Waku Waku” Program that lets children experience food and farming through the cultivation of tomatoes
Under this program, LYLYCO tomato seedlings and educational materials are distributed free of charge to kindergartens, preschools and elementary schools nationwide. The goal is to foster a sense of appreciation and thanks toward life by raising your own food, cooking it, and then eating it. A total of 45,563 schools and other facilities have participated in the program from FY1999 to FY2014.
Kagome has continually provided humanitarian assistance and agricultural rehabilita-tion support in the areas affected by the Great East Japan Earthquake based on the spirit of cooperation.
Topics
2Great East Japan Earthquake reconstruction assistance as sustained support for the future of the Tohoku region
Kagome’s R&D Division pursues technologies and information that can be used now and in the future based on its mission of supplying the energy for technical growth through the R&D as the source for the Group’s value chain. Tomato seeds
Topics
1Improving the efficiency of tomato breed development and supporting food safety and security
13 14
KAGOME SUSTAINABILITY 2014
Net sales by business segmentFounded·························
Established ····················
Head Office ····················
Tokyo Head Office ·········
Paid-in Capital ···············
Representative···············
Number of Employees ···
1899
1949
3-14-15, Nishiki, Naka-ku, Nagoya 460-0003, JAPAN
Nihonbashi Hamacho F-Tower, 3-21-1
Nihonbashi Hamacho, Chuo-ku, Tokyo 103-8461, JAPAN
¥19,985 million (as of March 31, 2014)
Naoyuki Terada, Representative Director and President
2,349 (as of March 31, 2014)
BeveragesProducts
45.5%
Institutional and Industrial Products
13.3%
0.9%
1.6%
4.3%
4.3%
5.0%
12.1%
12.9%
Others
Business in Asia
Direct Marketing
Gift Products
Fresh Vegetables
Food Products
Global Tomato Business
Asian Business Company
Global Tomato Com
pany
Corporate Com
munications Division
Consumer Business Division
Institutional & Industrial Business Division
Production & Purchasing Division
Corporate Planning Division
Research & Developm
ent Division
(8 headquarters) (2 companies)*as of March 31, 2014 *Transactions between segments are offset in calculations.
Agri- Business Division
Direct Marketing Division
Representative Director and President
Our Business Development
The Kagome Group investigates regions both domestically and worldwide to select optimal growing regions and utilizes expertise cultivated domestically to develop business overseas as well. The Kagome Group aims to be a global brand, delivering deliciousness and health to people worldwide.
Corporate Overview Management Plan Promotion System
Kagome Co., Ltd.
Established 1899, JapanProduces and sells flavoring products, preserved foods, beverages and other foodstuffs, and purchases, produces and sells seedlings, fruits and vegetables
Holding da Industria Transformadora doTomate,
SGPS S.A. (HIT)
Established 2006, PortugalManufactures and sells tomato paste, pizza sauce and other processed tomato products
Taiwan Kagome Co., Ltd.
Established 1967, TaiwanProduces and sells condiments and beverages
Kagome (Hangzhou)Food Co., Ltd.
Established 2005, ChinaProduces and sells beverages
Kagome (Tianjin) Food Industry Co., Ltd.
Established 2013, ChinaProduces and sells seasonings in film containers
Kagome Hongmei (Ningxia)Agriculture Co., Ltd.
Established 2013, ChinaProduces and sells fresh tomatoes grown in China
Kagome Hong KongCo., Ltd.
Established 2014, ChinaImports and sells beverages, foodstuffs and fresh vegetables
Ruchi Kagome Foods India Pvt.Ltd.
Established 2013, IndiaProduces and sells processed tomato products
Vegitalia S.p.A.
Established 2003, ItalyProcesses, freezes and sells Mediterranean vegetables jointly cultivated with contracted farmers
United Genetics TurkeyTohum Fide A.S.
Established 1987, TurkeyProduces and sells seeds and engages in seedling business
Japan
China
France
Spain
Italy Turkey
South Africa
AustraliaNew Zealand
Headquarters
Research and Development Division
Tokyo Head Office
America
Brazil
Chile
Argentina
Portugal
*As of October 2014
*Business locations and raw material producing countries are current as of October 2014.
Business location (company name)
Description of business
Raw material producing country
Branch
Plant
Green farm
Kagome Foods, Inc.
Established 2007, AmericaProduces and sells a variety of professional-use sauces as well as margarine and other vegetable oil-based products
Kagome Longson Sdv.Bhd.
Scheduled to be established December 2014, MalaysiaWill produce and sell professional-use halal seasonings
United Genetics Holding LLC
Established 1990, AmericaDevelops, produces and sells tomato, vegetable and fruit seeds worldwide
Kagome Inc.
Established 1998, AmericaProduces and sells professional-use tomato sauces for major US restaurant chains
OSOTSPAKAGOME CO., LTD.
Established 2012, ThailandDevelops products and produces and sells high-value-added beverages and related products
Kagome Australia Pty Ltd.
Established 2010, AustraliaProduces fresh vegetables and produces and sells processed tomato products
15 16
KAGOME SUSTAINABILITY 2014
Net sales by business segmentFounded·························
Established ····················
Head Office ····················
Tokyo Head Office ·········
Paid-in Capital ···············
Representative···············
Number of Employees ···
1899
1949
3-14-15, Nishiki, Naka-ku, Nagoya 460-0003, JAPAN
Nihonbashi Hamacho F-Tower, 3-21-1
Nihonbashi Hamacho, Chuo-ku, Tokyo 103-8461, JAPAN
¥19,985 million (as of March 31, 2014)
Naoyuki Terada, Representative Director and President
2,349 (as of March 31, 2014)
BeveragesProducts
45.5%
Institutional and Industrial Products
13.3%
0.9%
1.6%
4.3%
4.3%
5.0%
12.1%
12.9%
Others
Business in Asia
Direct Marketing
Gift Products
Fresh Vegetables
Food Products
Global Tomato Business
Asian Business Company
Global Tomato Com
pany
Corporate Com
munications Division
Consumer Business Division
Institutional & Industrial Business Division
Production & Purchasing Division
Corporate Planning Division
Research & Developm
ent Division
(8 headquarters) (2 companies)*as of March 31, 2014 *Transactions between segments are offset in calculations.
Agri- Business Division
Direct Marketing Division
Representative Director and President
Our Business Development
The Kagome Group investigates regions both domestically and worldwide to select optimal growing regions and utilizes expertise cultivated domestically to develop business overseas as well. The Kagome Group aims to be a global brand, delivering deliciousness and health to people worldwide.
Corporate Overview Management Plan Promotion System
Kagome Co., Ltd.
Established 1899, JapanProduces and sells flavoring products, preserved foods, beverages and other foodstuffs, and purchases, produces and sells seedlings, fruits and vegetables
Holding da Industria Transformadora doTomate,
SGPS S.A. (HIT)
Established 2006, PortugalManufactures and sells tomato paste, pizza sauce and other processed tomato products
Taiwan Kagome Co., Ltd.
Established 1967, TaiwanProduces and sells condiments and beverages
Kagome (Hangzhou)Food Co., Ltd.
Established 2005, ChinaProduces and sells beverages
Kagome (Tianjin) Food Industry Co., Ltd.
Established 2013, ChinaProduces and sells seasonings in film containers
Kagome Hongmei (Ningxia)Agriculture Co., Ltd.
Established 2013, ChinaProduces and sells fresh tomatoes grown in China
Kagome Hong KongCo., Ltd.
Established 2014, ChinaImports and sells beverages, foodstuffs and fresh vegetables
Ruchi Kagome Foods India Pvt.Ltd.
Established 2013, IndiaProduces and sells processed tomato products
Vegitalia S.p.A.
Established 2003, ItalyProcesses, freezes and sells Mediterranean vegetables jointly cultivated with contracted farmers
United Genetics TurkeyTohum Fide A.S.
Established 1987, TurkeyProduces and sells seeds and engages in seedling business
Japan
China
France
Spain
Italy Turkey
South Africa
AustraliaNew Zealand
Headquarters
Research and Development Division
Tokyo Head Office
America
Brazil
Chile
Argentina
Portugal
*As of October 2014
*Business locations and raw material producing countries are current as of October 2014.
Business location (company name)
Description of business
Raw material producing country
Branch
Plant
Green farm
Kagome Foods, Inc.
Established 2007, AmericaProduces and sells a variety of professional-use sauces as well as margarine and other vegetable oil-based products
Kagome Longson Sdv.Bhd.
Scheduled to be established December 2014, MalaysiaWill produce and sell professional-use halal seasonings
United Genetics Holding LLC
Established 1990, AmericaDevelops, produces and sells tomato, vegetable and fruit seeds worldwide
Kagome Inc.
Established 1998, AmericaProduces and sells professional-use tomato sauces for major US restaurant chains
OSOTSPAKAGOME CO., LTD.
Established 2012, ThailandDevelops products and produces and sells high-value-added beverages and related products
Kagome Australia Pty Ltd.
Established 2010, AustraliaProduces fresh vegetables and produces and sells processed tomato products
15 16
KAGOME SUSTAINABILITY 2014
Creation of demand
(marketing and sales)
Production
Primary processing,
procurement
Description of activities
JapanBusiness process
Operations at Kagome (maximizing the value of agricultural produce)
• Optimal primary processing for the environment, nutrition and flavor, such as non-thermal concentration methods
• Network of producers, in optimal growing regions for meeting Kagome demands for quality
• Procurement of only first-rate ingredients, with quality and safety controls extending to fields, factories and other suppliers
• An abundance of tomato and other genetic resources• Development of breeds with competitive advan-
tages, according to uses tailored to the conditions of growing region
• Seedling production technologies and sales networks
• Proprietary production technologies that capitalize on material values (aseptic packaging, component conversion technologies, etc.)
• Thorough quality control to preserve ingredient flavors and product safety and reliability
• Optimization of management and production processes to minimize environmental impact
• Agriculture based on Kagome standards, designed to ensure food product safety, agricultural productivity and environmental conservation
• Contracted cultivation of designated breeds, with purchas-ing of total amounts as a precondition of contracts
• Cultivation consults for contracted farmers
• Proposing value ahead of the times, and strong demand creation
• Brands widely appreciated throughout Japan for safe and reliable food products
Communicating the value of products to customers, creating demand by transmitting value
Manufacturing processes and quality control that maximize the benefits of what nature’s bounty provides through the optimal combination of excellent ingredients and superior technologies
Procuring agricultural ingredi-ents that meet Kagome’s high standards for quality, and implementing primary process-ing that ensures full flavor
Contracted farming with designated breeds and overseeing agriculture (left), high-tech farming of fresh tomatoes (right)
Utilizing genetic resources of agricultural crops held by Kagome, creating useful breeds through traditional crossbreed-ing, producing and supplying competitive seedlings
Promoting research and development that maximizes the value of agricultural produce, or nature’s bounty, while also contributing to people’s longevity and health (research sites: Japan, Portugal, etc.)
Strengthening com
petitivenessand im
plementing continual grow
th
KAGOME SUSTAINABILITY 2014
¥6.923billion
Reinvestment in operations:Plant and equipment
All productionsites compliantwith international quality standards
Tomato processing of
520,000tons (11th largest worldwide)
240.5ha of domestic tomato
juice ingredient cultivation
Tomato geneticresources Japan
Approx.7,500breeds
Research personnel:
Approx.200persons
Stakeholder valueContributing to the longevity
and health of people,society and the environmentAdvantages Foundation of Value Creation
Overseas
Production of agricultural ingredientsProducing ingredients through environ-mentally friendly large-scale agriculture, sale within and without Group (Business sites: Portugal, Australia, etc.)
Development of agricultural resourcesDevelopment, seed production and seedling cultivation of new breeds, sales of seedlings within and without Group(Business sites: USA, Turkey, Italy, India, etc.)
Production/sales
Dividends
(individual stockholders: approx. 190,000)
¥6.775billion
¥5.105billion
Operating income
Net income
¥193billion(inc. 11% overseas)
Group sales Six Types of Capital• Financial/instrumental capital ···• Intellectual capital ·············
• Human capital ···················• Social capital ·····················• Natural capital ···················
Business Operations thatTake Full Advantage
of Capitals
Presenting valueto stakeholders
through ourbusinesses
Strengthening the foundation ofvalue creation by maintaining
and strengthening capital
Agriculture
Supply of high-qualityagricultural ingredients
Breed development, seedling production
Supplying seedlings withcompetitive advantages
Research and development
¥2.188billion
*1 FY2012 usage results calculated based on the Food Balance Sheet (FY2012) and the Statistics on Production and Shipment of Vegetable (FY2012) of the Ministry of Agriculture, Forestry and Fisheries, the Trade Statistics of Japan (FY2012) of the Ministry of Finance, and Kagome’s supply and demand for FY2012 *2 Fresh Tomatoes Processed, Tomatoland Information Services, May 26, 2014.
*The above values are current as of fiscal 2013
*2
Our Foundation for Creating Value
Procuring ingredients from within and outside the Group, production and sale of products (for industries and consumers) (Business sites: Portugal, Australia, India, America, China, Italy, Taiwan, Thailand, etc.)
*1
Supply 30.6%of tomatoes
consumed in Japan
total capital of ¥183.6 billionproprietary technology and expertise related to agricultural production and manufacturing processes, etc.,vigorous brand poweremployees (2,349 employees)strong connections with producers, etc.fertile agricultural land, genetic resources, etc.
• Integrated research and development systems for creation of products that capitalize on the value of agricultural produce (from agriculture, researchers of food ingredients for human health, production and processing technologies to product development)
• Worldwide research laboratories
Consumers• Realizing physically and mentally healthy eating habits• Consumption of safe and high-quality foods (ensuring
traceability of raw ingredients)• Discovery of new flavor and healthy value in vegetables• (Overseas) Elimination of nutritional problems (obesity,
malnutrition, etc.)
Farmers, local communities• Realizing stable agricultural management• Support for agricultural production (obtaining exceptional
breeds, obtaining and utilizing vegetable production technologies and expertise)
• Revitalization of local communities through agriculture• (Overseas) Employment and income creation, transfer of
agricultural technology, formation of new producing regions, etc.
Suppliers (raw ingredient production, manufacturing processes)
• Improving quality management and production technologies• Stable acquisition of economic value
Shareholders/investors• Acquisition of stable economic value
Employees• Rewarding work• Improvement of working environments
Natural environments• Conservation of natural environments and agricultural land
ecosystems• Conservation of tomato and other genetic resources
Providing food productsthat maximize the benefits
of nature’s bounty
Kagome’s business relies on capitalizing on the value of agricultural produce, or nature’s bounty. Under the concept “fields are the primary plant”, at the production and processing stages of agricultural produce, we maxi-mize value through an optimal combination of superior ingredients and technologies, and engage in thorough quality control. We deliver products to our customers that make the utmost of freshly harvested flavor.
In this way, Kagome’s business relies on nature’s bounty (natural capital such as produce and agricultural land) and the cooperation of a wide variety of stakeholders, including farmers (social capital). We believe that pursuing business activities that help develop our business and solve issues facing stakeholder also leads to greater competitiveness and continual development for Kagome.
17 18
Creation of demand
(marketing and sales)
Production
Primary processing,
procurement
Description of activities
JapanBusiness process
Operations at Kagome (maximizing the value of agricultural produce)
• Optimal primary processing for the environment, nutrition and flavor, such as non-thermal concentration methods
• Network of producers, in optimal growing regions for meeting Kagome demands for quality
• Procurement of only first-rate ingredients, with quality and safety controls extending to fields, factories and other suppliers
• An abundance of tomato and other genetic resources• Development of breeds with competitive advan-
tages, according to uses tailored to the conditions of growing region
• Seedling production technologies and sales networks
• Proprietary production technologies that capitalize on material values (aseptic packaging, component conversion technologies, etc.)
• Thorough quality control to preserve ingredient flavors and product safety and reliability
• Optimization of management and production processes to minimize environmental impact
• Agriculture based on Kagome standards, designed to ensure food product safety, agricultural productivity and environmental conservation
• Contracted cultivation of designated breeds, with purchas-ing of total amounts as a precondition of contracts
• Cultivation consults for contracted farmers
• Proposing value ahead of the times, and strong demand creation
• Brands widely appreciated throughout Japan for safe and reliable food products
Communicating the value of products to customers, creating demand by transmitting value
Manufacturing processes and quality control that maximize the benefits of what nature’s bounty provides through the optimal combination of excellent ingredients and superior technologies
Procuring agricultural ingredi-ents that meet Kagome’s high standards for quality, and implementing primary process-ing that ensures full flavor
Contracted farming with designated breeds and overseeing agriculture (left), high-tech farming of fresh tomatoes (right)
Utilizing genetic resources of agricultural crops held by Kagome, creating useful breeds through traditional crossbreed-ing, producing and supplying competitive seedlings
Promoting research and development that maximizes the value of agricultural produce, or nature’s bounty, while also contributing to people’s longevity and health (research sites: Japan, Portugal, etc.)
Strengthening com
petitivenessand im
plementing continual grow
th
KAGOME SUSTAINABILITY 2014
¥6.923billion
Reinvestment in operations:Plant and equipment
All productionsites compliantwith international quality standards
Tomato processing of
520,000tons (11th largest worldwide)
240.5ha of domestic tomato
juice ingredient cultivation
Tomato geneticresources Japan
Approx.7,500breeds
Research personnel:
Approx.200persons
Stakeholder valueContributing to the longevity
and health of people,society and the environmentAdvantages Foundation of Value Creation
Overseas
Production of agricultural ingredientsProducing ingredients through environ-mentally friendly large-scale agriculture, sale within and without Group (Business sites: Portugal, Australia, etc.)
Development of agricultural resourcesDevelopment, seed production and seedling cultivation of new breeds, sales of seedlings within and without Group(Business sites: USA, Turkey, Italy, India, etc.)
Production/sales
Dividends
(individual stockholders: approx. 190,000)
¥6.775billion
¥5.105billion
Operating income
Net income
¥193billion(inc. 11% overseas)
Group sales Six Types of Capital• Financial/instrumental capital ···• Intellectual capital ·············
• Human capital ···················• Social capital ·····················• Natural capital ···················
Business Operations thatTake Full Advantage
of Capitals
Presenting valueto stakeholders
through ourbusinesses
Strengthening the foundation ofvalue creation by maintaining
and strengthening capital
Agriculture
Supply of high-qualityagricultural ingredients
Breed development, seedling production
Supplying seedlings withcompetitive advantages
Research and development
¥2.188billion
*1 FY2012 usage results calculated based on the Food Balance Sheet (FY2012) and the Statistics on Production and Shipment of Vegetable (FY2012) of the Ministry of Agriculture, Forestry and Fisheries, the Trade Statistics of Japan (FY2012) of the Ministry of Finance, and Kagome’s supply and demand for FY2012 *2 Fresh Tomatoes Processed, Tomatoland Information Services, May 26, 2014.
*The above values are current as of fiscal 2013
*2
Our Foundation for Creating Value
Procuring ingredients from within and outside the Group, production and sale of products (for industries and consumers) (Business sites: Portugal, Australia, India, America, China, Italy, Taiwan, Thailand, etc.)
*1
Supply 30.6%of tomatoes
consumed in Japan
total capital of ¥183.6 billionproprietary technology and expertise related to agricultural production and manufacturing processes, etc.,vigorous brand poweremployees (2,349 employees)strong connections with producers, etc.fertile agricultural land, genetic resources, etc.
• Integrated research and development systems for creation of products that capitalize on the value of agricultural produce (from agriculture, researchers of food ingredients for human health, production and processing technologies to product development)
• Worldwide research laboratories
Consumers• Realizing physically and mentally healthy eating habits• Consumption of safe and high-quality foods (ensuring
traceability of raw ingredients)• Discovery of new flavor and healthy value in vegetables• (Overseas) Elimination of nutritional problems (obesity,
malnutrition, etc.)
Farmers, local communities• Realizing stable agricultural management• Support for agricultural production (obtaining exceptional
breeds, obtaining and utilizing vegetable production technologies and expertise)
• Revitalization of local communities through agriculture• (Overseas) Employment and income creation, transfer of
agricultural technology, formation of new producing regions, etc.
Suppliers (raw ingredient production, manufacturing processes)
• Improving quality management and production technologies• Stable acquisition of economic value
Shareholders/investors• Acquisition of stable economic value
Employees• Rewarding work• Improvement of working environments
Natural environments• Conservation of natural environments and agricultural land
ecosystems• Conservation of tomato and other genetic resources
Providing food productsthat maximize the benefits
of nature’s bounty
Kagome’s business relies on capitalizing on the value of agricultural produce, or nature’s bounty. Under the concept “fields are the primary plant”, at the production and processing stages of agricultural produce, we maxi-mize value through an optimal combination of superior ingredients and technologies, and engage in thorough quality control. We deliver products to our customers that make the utmost of freshly harvested flavor.
In this way, Kagome’s business relies on nature’s bounty (natural capital such as produce and agricultural land) and the cooperation of a wide variety of stakeholders, including farmers (social capital). We believe that pursuing business activities that help develop our business and solve issues facing stakeholder also leads to greater competitiveness and continual development for Kagome.
17 18
• The continuing growth of the global population, shortages of resources
and foods, and worsening inequality
• The increasing severity of environmental problems such as climate
change, etc.
• The shift in the center of gravity of the world economy, and the
growing demand for tomatoes in emerging economies, in the Asia
region and elsewhere (this relates to changing lifestyles, the adoption
of Western-style eating habits, and excessive food consumption
leading to problems with obesity, etc.)
• The problem of malnutrition in developing nations
• The expansion of free trade zones, FTAs etc.
• The business activities and supply chains to become trans-national in
scope
• Developments in information and communications technology (ICT)
• Growing demands within society for resolving major social issues
• The tomato is the number one vegetable by sales , and also consumers’
favorite vegetable
• The tomato is the world’s most highly consumed vegetable
• Demand is expected to continue to increase each year by a total of 1
million tons in the future
Within Japan Overseas
Important Developments in the External Environment that are Affecting Kagome
There is a growing demand for health foods and healthy diets both in Japan and overseas. We will realize the concept “leave anything about tomatoes up to Kagome” and
also develop the market for other vegetables through our strengths in the tomato business, leading directly to major business opportunities.
Kagome’s Basic Approach to Strategy Formulation
BusinessOpportunities
• Dividend policyTaking consolidated earnings performance as the basis for consistent dividend payments, aiming for a dividend payout ratio of around 40%
Mid-Term Management Policy (FY2015 – FY2016)
The Company’s foundation for securing stable profits is fragile and overly affected by changes in the external environment
CurrentSituation
“Working style reform” and “profit structure reform”(Quantitative targets: Achieving an ordinary profit margin of 4% in FY2015 and 5% in FY2016)
Objectives
Basic approach for realizing the Company’s objectives (1)“Improved Productivity.” through reform of work-style and overhauling of the profit structure
Basic approach for realizing the Company’s objectives (2)Consolidating operational resources in key growth areas, taking into account important changes in society
Innovation Consolidating resources to target key areas that offer significant growth potential over the medium term, and integrating business groups more closely to drive growth
• Developing Kagome as a Global Tomato Supplier
• Change agriculture into a growth industry
• Expansion of domestic institutional and industrial business
• “Fresh Innovation Challenge (FIC)” Etc.
Key issue No. 3
Improved productivity• Making investment in advertising more efficient
• Streamlining our product line
• Bringing costs down
• Making adjustments to earnings management Etc.
Key issue No. 2
Increase valueWorking to improve profitability in existing business areas and existing product segments
• Adoption of “Smart PET bottles”
• Developing premium-brand tomato juice products Etc.
Key issue No. 1
Mid-Term Management Policy
Our Strategy
In 2013, which marked the 50th anniversary of the year (1963) in which Kagome began transforming itself from a regional enterprise based in the Tokai district into a Japan-wide national brand, Kagome announced its “Next 50” medium-term business plan. The aim was to grow into a truly global brand that would help people all over the world to live healthier, richer lives, and which would make a contribution towards finding solutions to the food-, agriculture- and health-related problems that global society faces today.
However, during the first year of our mid-term management plan, we recorded consolidated net sales of ¥193 billion, down 1.6% year on year. Furthermore, both sales and profits are expected to fall in fiscal 2014 as well. This was attributable to the failure of Kagome’s new products to adequately compen-sate for the drop-off following the tomato boom that saw sales of tomato juice products rise to their highest level ever in 2012 and the declining popularity of existing products that had
intense competition from other beverage products, in part due to negative business conditions, such as the soaring cost of overseas raw materials, poor weather, and tax increases, among other factors. Taking a long-term view, periods of impressive sales growth in the past also proved difficult to maintain, and were followed by a fall in earnings.
The fundamental problem facing Kagome is our foundation for securing stable profits, upon which Kagome’s creation of value that contributes to society rests, is fragile and overly affected by changes in the external environment. Given this, we have sent “the Next 50” plan back to the drawing board because of our failure to fully assess our capabilities which serve as the pillars of this plan. Nevertheless, we will continue to follow our long-term objective of growing into a global brand, while also embarking on “working style reform” and “profit structure reform.” Through these reforms, we are aiming to build a sustainable earnings base.
In Kagome’s domestic operations, including the beverage business, which is a core business area, given the likelihood of further production cost increases in the future due to fluctua-tions in the international tomato market and higher costs for imported raw materials due to the depreciation of the yen, cost-down measures implemented over the course of a single fiscal year are not going to be enough to ensure stable earnings growth. One of Kagome’s strengths has been its corporate culture, which incorporates items such as “Autonomy and Independence” and “People-centric management” to create more conducive working environments. However, issues, such as divisions between operations that impede cross-departmental cooperation and a tendency for the location of responsibility to be unclear, have weakened the company’s competitive strength. Recognizing this situation, it is vital that every Kagome employee incorporate “working style reform” and “profit structure reform” into their own individual work activities in order to realize the building sustainable profitability.
Significant changes in society await us over the next 50 years. These include the aging of society in Japan, and an increase in the world’s population and further economic growth. While
environmental issues such as water, food, resources and energy supplies are expected to worsen due to climate change, and nutritional issues, such as obesity and malnutrition, will likely become more prevalent. It can be anticipated that the world will be faced with significant resource- and environment-related constraints. Given this continuous, dramatic change, in order to be able to continue to provide value for society, Kagome will need to shift our business model from product-oriented to solutions-oriented that is able to contribute to resolving social issues in its own way by anticipating changes in society and incorporating the demands of the times into its business strategies.
On the basis of these fundamental ideas, Kagome’s new mid-term management policy will involve “working style reform” and “profit structure reform” aimed at creating sustainable profitability. The target is to achieve an ordinary profit margin of 4% in fiscal 2015 and 5% in fiscal 2016. By addressing three key aspect of reform – “Increase value,”“Improved productivity” and “Innovation” – Kagome will be working to put in place the foundations needed to achieve sustainable profitability.
(For more detailed information about the key issues outlined above, see “Messages from Top Management”)
• “Abenomics,” the increase in the consumption tax rate, and weak yen
• Easing on the restrictions of the labeling of functionality for food products
• Deregulation of agriculture, and reduction or removal of tariffs relating
to the Trans-Pacific Partnership (TPP) negotiations
• The trend towards a larger-scale retail sector, and the growth of
non-store type channels (delivery of retail products, dedicated Internet
businesses)
• The impact of the preparations for the 2020 Tokyo Olympics and
Paralympics (gradual economic growth and increased costs)
• The rapid transformation of the structure of Japanese society (the
declining population, the aging of society, the relationship between
social security costs and the national debt, and the concentration of the
population in major urban areas while rural areas decline)
• Changing lifestyles (the growth in the number of working women and
the trend towards smaller families, the frequency of home cooking has
decreased , and the diversification of social values)
• The changing agricultural environment (the high average age of
farmers, the lack of younger family members willing to take over the
running of the farm, and the shift away from rice cultivation)
19 20
KAGOME SUSTAINABILITY 2014
• The continuing growth of the global population, shortages of resources
and foods, and worsening inequality
• The increasing severity of environmental problems such as climate
change, etc.
• The shift in the center of gravity of the world economy, and the
growing demand for tomatoes in emerging economies, in the Asia
region and elsewhere (this relates to changing lifestyles, the adoption
of Western-style eating habits, and excessive food consumption
leading to problems with obesity, etc.)
• The problem of malnutrition in developing nations
• The expansion of free trade zones, FTAs etc.
• The business activities and supply chains to become trans-national in
scope
• Developments in information and communications technology (ICT)
• Growing demands within society for resolving major social issues
• The tomato is the number one vegetable by sales , and also consumers’
favorite vegetable
• The tomato is the world’s most highly consumed vegetable
• Demand is expected to continue to increase each year by a total of 1
million tons in the future
Within Japan Overseas
Important Developments in the External Environment that are Affecting Kagome
There is a growing demand for health foods and healthy diets both in Japan and overseas. We will realize the concept “leave anything about tomatoes up to Kagome” and
also develop the market for other vegetables through our strengths in the tomato business, leading directly to major business opportunities.
Kagome’s Basic Approach to Strategy Formulation
BusinessOpportunities
• Dividend policyTaking consolidated earnings performance as the basis for consistent dividend payments, aiming for a dividend payout ratio of around 40%
Mid-Term Management Policy (FY2015 – FY2016)
The Company’s foundation for securing stable profits is fragile and overly affected by changes in the external environment
CurrentSituation
“Working style reform” and “profit structure reform”(Quantitative targets: Achieving an ordinary profit margin of 4% in FY2015 and 5% in FY2016)
Objectives
Basic approach for realizing the Company’s objectives (1)“Improved Productivity.” through reform of work-style and overhauling of the profit structure
Basic approach for realizing the Company’s objectives (2)Consolidating operational resources in key growth areas, taking into account important changes in society
Innovation Consolidating resources to target key areas that offer significant growth potential over the medium term, and integrating business groups more closely to drive growth
• Developing Kagome as a Global Tomato Supplier
• Change agriculture into a growth industry
• Expansion of domestic institutional and industrial business
• “Fresh Innovation Challenge (FIC)” Etc.
Key issue No. 3
Improved productivity• Making investment in advertising more efficient
• Streamlining our product line
• Bringing costs down
• Making adjustments to earnings management Etc.
Key issue No. 2
Increase valueWorking to improve profitability in existing business areas and existing product segments
• Adoption of “Smart PET bottles”
• Developing premium-brand tomato juice products Etc.
Key issue No. 1
Mid-Term Management Policy
Our Strategy
In 2013, which marked the 50th anniversary of the year (1963) in which Kagome began transforming itself from a regional enterprise based in the Tokai district into a Japan-wide national brand, Kagome announced its “Next 50” medium-term business plan. The aim was to grow into a truly global brand that would help people all over the world to live healthier, richer lives, and which would make a contribution towards finding solutions to the food-, agriculture- and health-related problems that global society faces today.
However, during the first year of our mid-term management plan, we recorded consolidated net sales of ¥193 billion, down 1.6% year on year. Furthermore, both sales and profits are expected to fall in fiscal 2014 as well. This was attributable to the failure of Kagome’s new products to adequately compen-sate for the drop-off following the tomato boom that saw sales of tomato juice products rise to their highest level ever in 2012 and the declining popularity of existing products that had
intense competition from other beverage products, in part due to negative business conditions, such as the soaring cost of overseas raw materials, poor weather, and tax increases, among other factors. Taking a long-term view, periods of impressive sales growth in the past also proved difficult to maintain, and were followed by a fall in earnings.
The fundamental problem facing Kagome is our foundation for securing stable profits, upon which Kagome’s creation of value that contributes to society rests, is fragile and overly affected by changes in the external environment. Given this, we have sent “the Next 50” plan back to the drawing board because of our failure to fully assess our capabilities which serve as the pillars of this plan. Nevertheless, we will continue to follow our long-term objective of growing into a global brand, while also embarking on “working style reform” and “profit structure reform.” Through these reforms, we are aiming to build a sustainable earnings base.
In Kagome’s domestic operations, including the beverage business, which is a core business area, given the likelihood of further production cost increases in the future due to fluctua-tions in the international tomato market and higher costs for imported raw materials due to the depreciation of the yen, cost-down measures implemented over the course of a single fiscal year are not going to be enough to ensure stable earnings growth. One of Kagome’s strengths has been its corporate culture, which incorporates items such as “Autonomy and Independence” and “People-centric management” to create more conducive working environments. However, issues, such as divisions between operations that impede cross-departmental cooperation and a tendency for the location of responsibility to be unclear, have weakened the company’s competitive strength. Recognizing this situation, it is vital that every Kagome employee incorporate “working style reform” and “profit structure reform” into their own individual work activities in order to realize the building sustainable profitability.
Significant changes in society await us over the next 50 years. These include the aging of society in Japan, and an increase in the world’s population and further economic growth. While
environmental issues such as water, food, resources and energy supplies are expected to worsen due to climate change, and nutritional issues, such as obesity and malnutrition, will likely become more prevalent. It can be anticipated that the world will be faced with significant resource- and environment-related constraints. Given this continuous, dramatic change, in order to be able to continue to provide value for society, Kagome will need to shift our business model from product-oriented to solutions-oriented that is able to contribute to resolving social issues in its own way by anticipating changes in society and incorporating the demands of the times into its business strategies.
On the basis of these fundamental ideas, Kagome’s new mid-term management policy will involve “working style reform” and “profit structure reform” aimed at creating sustainable profitability. The target is to achieve an ordinary profit margin of 4% in fiscal 2015 and 5% in fiscal 2016. By addressing three key aspect of reform – “Increase value,”“Improved productivity” and “Innovation” – Kagome will be working to put in place the foundations needed to achieve sustainable profitability.
(For more detailed information about the key issues outlined above, see “Messages from Top Management”)
• “Abenomics,” the increase in the consumption tax rate, and weak yen
• Easing on the restrictions of the labeling of functionality for food products
• Deregulation of agriculture, and reduction or removal of tariffs relating
to the Trans-Pacific Partnership (TPP) negotiations
• The trend towards a larger-scale retail sector, and the growth of
non-store type channels (delivery of retail products, dedicated Internet
businesses)
• The impact of the preparations for the 2020 Tokyo Olympics and
Paralympics (gradual economic growth and increased costs)
• The rapid transformation of the structure of Japanese society (the
declining population, the aging of society, the relationship between
social security costs and the national debt, and the concentration of the
population in major urban areas while rural areas decline)
• Changing lifestyles (the growth in the number of working women and
the trend towards smaller families, the frequency of home cooking has
decreased , and the diversification of social values)
• The changing agricultural environment (the high average age of
farmers, the lack of younger family members willing to take over the
running of the farm, and the shift away from rice cultivation)
19 20
KAGOME SUSTAINABILITY 2014
Consumer Business Division
Beverage Food Gift
Related segments
Beverage business
Overview of the Division’s Performance in 2013
Executive Officer and General Manager,
Consumer Business Division
Hirohisa Kobayashi
*Kagome expects to launch products with a shelf-life of 5.5 years in Fiscal 2015
Strategies and Results by Division
Our Future StrategyThe mission of Kagome’s consumer business is to deliver the delicious taste and value of tomatoes and other vegetables to Japan’s consumers.
In response to the decline in sales revenue from beverage products – which constitute a key product segment for the Company – in fiscal 2013, from fiscal 2014 onwards Kagome has made “Improved productivity” a key priority, and has been working to develop new growth engines through “Innovation” and “Increase value” to achieve sales growth and renewed profitability in existing business areas. More specifically, through the development of new chilled (5°C and below) food products, Kagome has been striving to create new value both by implementing “Fresh Innovation” that leverages the Company’s unique ability to supply consumers with products that embody a superb level of freshness and developing new, “premium” brand products such as domestically-produced, seasonal, unmixed tomato juice, which are distinct from Kagome’s existing product line, and also by enhancing the value provided by the Company’s existing products, for example by introducing “Smart PET bottles” that hold the right amount of vegetable beverage for a two-person household. In addition, with the growing tendency in Japan for more and more meals to be eaten out or purchased outside and with the diversification of consumer lifestyles and values, it is vitally important that Kagome strive to clarify what it provides, and to further strengthen the relationship between the Company and consumers by breaking down the barriers
between business areas. To achieve this goal, Kagome is working to promote the integration of sales activities that in the past have been carried out separately by individual business units, and to strengthen the management of value provision. In addition, the Company continues to implement various cost-down initiatives, including cost reduction activities and efforts to make expenditure on advertising more efficient, streamlining of the company’s product line, and by improving the accuracy of demand and sales forecasts, achieving speedier, more efficient reporting of retail data, and strengthening the profit management framework, Kagome is enhancing its ability to maintain steady earnings performance regardless of changes in the external environment.
In the vegetable beverage category, sales were favorable for limited-time products in the “Yasai Seikatsu 100” series of products with abundant regional color that strongly evoke a sense of the seasons. These products symbolize the major marketing theme of “locally grown, nationally consumed”. The “Yasai Ichinichi, Kore Ippon” (“Your daily vegetable requirement from one can”) series proposed products with value as preserved vegetable foods by extending the best-before date to 3.5 years for canned products. In this way, promotion was accomplished in channels with no past transactions. In the tomato beverage segment, in August, the “Tomato Juice” made from the first crop of the season, which sells favorably every year, was released in a limited quantity. This low-temperature
products offers the delicious flavor of fresh tomatoes. Although these measures were implemented, the total in the
vegetable beverage category decreased, partially due to the price system change. In addition, the company was unable to make up for the “Tomato Juice” decline caused by reactions to the tomato boom, so the results were slightly below the previous period. In the probiotics category the level remained below the previous period, but from the third quarter (October 1, 2013 - March 31, 2014), sales were favorable at 108% of the previous period. As the result, net sales in the beverage business fell 8.6% from the previous period to 87.811 billion yen, including reductions caused by the changed price system.
Food businessProducts were released and promoted based on the theme of “Tomato Discoveries”—activities to inspire customers to newly discover and re-discover the delicious and fun qualities of tomatoes. Tomato ketchup exceed the previous period due to factors such as efforts made to propose Neapolitan Spaghetti menu items. The popular Neapolitan Stadium event was held in Yokohama in November 2013 to gather the Neapolitan Spaghetti dishes from across the country as a symbol of the company’s menu item proposal efforts. In the tomato condi-ment segment, efforts were devoted to the cultivation of the easy-to-use “Tomato Pack” series in paper containers with few environmental impacts, which was released in March 2013. Tomato nabe (hotpot) products were popular due to increased
customer convenience offered by the broth that can be enjoyed as-is, with no need to add water, that was released this fiscal year. Regarding pasta sauce, three flavors were released from the popular “Anna Mamma” bottled pasta sauce series in August. These products were highly evaluated because they allow customers to easily enjoy the rich, delicious flavor of tomatoes, and have sold favorably since their release. Sales of sauces were also strong. The food business total decrease due to the changed price system, but it was in essence slightly above the previous period. As a result, net sales in the food business fell 15.5% from the previous period to 23.277 billion yen, including reduction caused by the changed price system.
Gift products businessThe environment related to ochugen (mid-year gifts) and oseibo (year-end gifts) has been severe, and the overall market is shrinking. However, the company acquired high adoption ratios in each distribution channel and recorded its highest net sales figures to date. In addition to vegetable beverage gifts products, domestically produced fruits juice gift products, and freeze-dried soup gift products that were introduced during the oseibo period, sales were favorable for products limited to specific
corporation and other products with a premium impression. The company was able to cultivate demand beyond the ochugen/oseibo period, including Mother’s Day and souvenirs, via sweet gifts products such as “Tomattini” backed tomato confections and “Fruttoma” tomato jelly. As a result, net sales in the gift product business rose 5.1% from the previous period to 8.338 billion yen.
21 22
KAGOME SUSTAINABILITY 2014
Consumer Business Division
Beverage Food Gift
Related segments
Beverage business
Overview of the Division’s Performance in 2013
Executive Officer and General Manager,
Consumer Business Division
Hirohisa Kobayashi
*Kagome expects to launch products with a shelf-life of 5.5 years in Fiscal 2015
Strategies and Results by Division
Our Future StrategyThe mission of Kagome’s consumer business is to deliver the delicious taste and value of tomatoes and other vegetables to Japan’s consumers.
In response to the decline in sales revenue from beverage products – which constitute a key product segment for the Company – in fiscal 2013, from fiscal 2014 onwards Kagome has made “Improved productivity” a key priority, and has been working to develop new growth engines through “Innovation” and “Increase value” to achieve sales growth and renewed profitability in existing business areas. More specifically, through the development of new chilled (5°C and below) food products, Kagome has been striving to create new value both by implementing “Fresh Innovation” that leverages the Company’s unique ability to supply consumers with products that embody a superb level of freshness and developing new, “premium” brand products such as domestically-produced, seasonal, unmixed tomato juice, which are distinct from Kagome’s existing product line, and also by enhancing the value provided by the Company’s existing products, for example by introducing “Smart PET bottles” that hold the right amount of vegetable beverage for a two-person household. In addition, with the growing tendency in Japan for more and more meals to be eaten out or purchased outside and with the diversification of consumer lifestyles and values, it is vitally important that Kagome strive to clarify what it provides, and to further strengthen the relationship between the Company and consumers by breaking down the barriers
between business areas. To achieve this goal, Kagome is working to promote the integration of sales activities that in the past have been carried out separately by individual business units, and to strengthen the management of value provision. In addition, the Company continues to implement various cost-down initiatives, including cost reduction activities and efforts to make expenditure on advertising more efficient, streamlining of the company’s product line, and by improving the accuracy of demand and sales forecasts, achieving speedier, more efficient reporting of retail data, and strengthening the profit management framework, Kagome is enhancing its ability to maintain steady earnings performance regardless of changes in the external environment.
In the vegetable beverage category, sales were favorable for limited-time products in the “Yasai Seikatsu 100” series of products with abundant regional color that strongly evoke a sense of the seasons. These products symbolize the major marketing theme of “locally grown, nationally consumed”. The “Yasai Ichinichi, Kore Ippon” (“Your daily vegetable requirement from one can”) series proposed products with value as preserved vegetable foods by extending the best-before date to 3.5 years for canned products. In this way, promotion was accomplished in channels with no past transactions. In the tomato beverage segment, in August, the “Tomato Juice” made from the first crop of the season, which sells favorably every year, was released in a limited quantity. This low-temperature
products offers the delicious flavor of fresh tomatoes. Although these measures were implemented, the total in the
vegetable beverage category decreased, partially due to the price system change. In addition, the company was unable to make up for the “Tomato Juice” decline caused by reactions to the tomato boom, so the results were slightly below the previous period. In the probiotics category the level remained below the previous period, but from the third quarter (October 1, 2013 - March 31, 2014), sales were favorable at 108% of the previous period. As the result, net sales in the beverage business fell 8.6% from the previous period to 87.811 billion yen, including reductions caused by the changed price system.
Food businessProducts were released and promoted based on the theme of “Tomato Discoveries”—activities to inspire customers to newly discover and re-discover the delicious and fun qualities of tomatoes. Tomato ketchup exceed the previous period due to factors such as efforts made to propose Neapolitan Spaghetti menu items. The popular Neapolitan Stadium event was held in Yokohama in November 2013 to gather the Neapolitan Spaghetti dishes from across the country as a symbol of the company’s menu item proposal efforts. In the tomato condi-ment segment, efforts were devoted to the cultivation of the easy-to-use “Tomato Pack” series in paper containers with few environmental impacts, which was released in March 2013. Tomato nabe (hotpot) products were popular due to increased
customer convenience offered by the broth that can be enjoyed as-is, with no need to add water, that was released this fiscal year. Regarding pasta sauce, three flavors were released from the popular “Anna Mamma” bottled pasta sauce series in August. These products were highly evaluated because they allow customers to easily enjoy the rich, delicious flavor of tomatoes, and have sold favorably since their release. Sales of sauces were also strong. The food business total decrease due to the changed price system, but it was in essence slightly above the previous period. As a result, net sales in the food business fell 15.5% from the previous period to 23.277 billion yen, including reduction caused by the changed price system.
Gift products businessThe environment related to ochugen (mid-year gifts) and oseibo (year-end gifts) has been severe, and the overall market is shrinking. However, the company acquired high adoption ratios in each distribution channel and recorded its highest net sales figures to date. In addition to vegetable beverage gifts products, domestically produced fruits juice gift products, and freeze-dried soup gift products that were introduced during the oseibo period, sales were favorable for products limited to specific
corporation and other products with a premium impression. The company was able to cultivate demand beyond the ochugen/oseibo period, including Mother’s Day and souvenirs, via sweet gifts products such as “Tomattini” backed tomato confections and “Fruttoma” tomato jelly. As a result, net sales in the gift product business rose 5.1% from the previous period to 8.338 billion yen.
21 22
KAGOME SUSTAINABILITY 2014
Strategies and Results by Division
Related segments
Fresh vegetables
Related segments
Executive Officer and Division Director,
Direct Marketing Division
Hitoshi Takano
Executive Officerand Division Director,
Agri-Business Division
Keigo Fujii
Agri- Business Division Direct Marketing Division
Our Future StrategyIn its role as Kagome’s “tomato and agriculture expert team,” the Agri-Business Division supervises the activities of contract farmers who produce the “processing tomatoes” that constitute the raw material for the Kagome tomato juice made in Japan, while also undertaking the cultivation of “fresh eating tomatoes” (of the kind that can be bought in supermarkets etc.) at 11 large-scale, hi-tech vegetable cultivation facilities throughout Japan, working to further enhance Kagome’s agricultural materials production technology, producing tomatoes and other vegetables to be supplied to other Kagome divisions, and undertaking fresh vegetable business to supply fresh vegetables directly to Kagome’s customers.
Over the last few years, Kagome has been working to ensure that all of the tomatoes used for tomato juice production are grown in Japan. As part of this contribution to the continued development of Japanese agriculture, Kagome now undertakes production of the Company’s unique fresh tomatoes at a large-scale (53 hectares) environmentally-friendly, hi-tech cultivation facility. By 2012, after 10 years of hard work, this facility was making a profit, and by fiscal 2013 it had grown into an operation that was bringing in over 9.6 billion yen a year in sales revenue.
In the future, Kagome will be working to gain maximum benefit from the strengths of its agriculture-based vertically-integrated business model through the following initiatives: (1) Expanding the fresh tomato supply infrastructure, and expanding the scope of the fresh tomato business in line with functional requirements; and (2) Implementing mechanization of the harvesting of tomatoes used for processing, and expanding the scale of domestic production of tomatoes used as raw materials for juice production, including the development of new production areas in Hokkaido. Additionally, in
recent years, with more women working outside the home and with the increase in the number of single-person and two-person households, there has been a rapid increase in demand for “fresh” processed foods, including packed salads and pre-cut vegetables, with suggestions that this market segment could be worth over one trillion yen per year within a few years time (according to knowledgeable discount store executives and distributors). In response to this trend: (3) Kagome is making a full-scale push into the vegetable market, and has received inquiries from many discount stores and distributors regarding the “Baby Leaves” (mesclun) that Kagome launched in March 2014 and the Company’s expansion into the packed salad and pre-cut vegetables business that was announced in August. In the future, Kagome will be working actively to promote its new “Salad Bank Series” salad ingredients, characterized by high quality and functionality.
Through this expansion of the company’s fresh vegetable business, Kagome will be contributing to the continued growth of Japanese agriculture while also helping consumers to live longer, healthier lives.
Fresh vegetables business
Overview of the Division’s Performance in 2013
At stores, opportunities were acquired for developments linking vegetable beverages and food, such as Tomato Fairs and Kagome Fairs, based on the theme of “Delicious Double Toma-toes!” In the realm of promotion, as a continuation of the previous year support was provided for the Tokyo Marathon in February 2014, and “High-Lycopene Tomatoes” and “Chiisa na
Momoko” were distributed to runners as tomatoes officially recognized by the Tokyo Marathon. The quantity of fresh tomatoes harvested and supply was increased, and the highest net sales figures to date were recorded.
As a result, net sales in the fresh vegetable business rose 8.4% from the previous period to 9.683 billion yen.
Our Future StrategyThe mission of the Direct Marketing Division is to make a positive contribution to customers’ health, longevity, and enjoyment of food, by developing and marketing new products specially designed for direct sales in response to the emergence of new business channels that has accompanied the rapid development of IT. Kagome is now able to communicate with over one million of its customers, listening directly to what customers have to say, and being able to identify what customers expect from Kagome and what their new needs are; a key role for the division is thus to provide customer feedback to all Kagome divisions.
Despite the fact that the market as a whole has been growing more slowly, due in part to the changes in the type of media that customers use, and the impact of tax increases, in fiscal 2013 several products, such as Kagome’s “Shun” series juice products (made from ingredients picked at the best time of year), posted their best ever sales performance. Taking into account the fact that the biggest single customer segment for Kagome’s direct sales business is older people who are more concerned about the quality of the food they eat, and about health issues, it can be anticipated that the continuing aging of Japan’s population should create high growth potential for this business.
As part of the Company’s plan to provide customers with exciting products that provide everything they expect from the Kagome brand that they have been familiar with for so long, Kagome is developing new vegetable-based beverage products that can help to differentiate Kagome products from rival brands, such as the “Tsubuyori Yasai” juice product range, and is working to build up a new food supplements business that makes effective use of
Kagome’s expertise in relation to the functionality of lactobacilli and lycroprene. In addition, while making adjustments to our advertising and promotional strategy in order to win new customers, and working to intensify communication with existing customers, the division is also continuing with the putting in place of a service framework that makes it possible to respond to customers’ needs more flexibly, and is taking steps to strengthen interaction with customers.
Direct sales
Overview of the Division’s Performance in 2013
Sales of “Drink Vegetable Every Day,” a leading product, increased from July 2014 due to additional advertising methods implemented from June to acquire new customers. In addition, a product supply system was created for the “Shun” series of rare, seasonal juices, and sales were favorable. This series includes “Momo Shibori,” a limited-quantity product that went on sale again for the first time in three years, and “Fuyu Shibori,”
made of seasonal winter carrots full of sweetness and nutrients. In addition, the enhanced product lineup (including supplement) also contributed to increased net sales.
As a result, net sales in the direct marketing business rose 7.5% from the previous period to 8.277billion yen, and the highest net sales figures to date were recorded.
Direct marketing
23 24
KAGOME SUSTAINABILITY 2014
Strategies and Results by Division
Related segments
Fresh vegetables
Related segments
Executive Officer and Division Director,
Direct Marketing Division
Hitoshi Takano
Executive Officerand Division Director,
Agri-Business Division
Keigo Fujii
Agri- Business Division Direct Marketing Division
Our Future StrategyIn its role as Kagome’s “tomato and agriculture expert team,” the Agri-Business Division supervises the activities of contract farmers who produce the “processing tomatoes” that constitute the raw material for the Kagome tomato juice made in Japan, while also undertaking the cultivation of “fresh eating tomatoes” (of the kind that can be bought in supermarkets etc.) at 11 large-scale, hi-tech vegetable cultivation facilities throughout Japan, working to further enhance Kagome’s agricultural materials production technology, producing tomatoes and other vegetables to be supplied to other Kagome divisions, and undertaking fresh vegetable business to supply fresh vegetables directly to Kagome’s customers.
Over the last few years, Kagome has been working to ensure that all of the tomatoes used for tomato juice production are grown in Japan. As part of this contribution to the continued development of Japanese agriculture, Kagome now undertakes production of the Company’s unique fresh tomatoes at a large-scale (53 hectares) environmentally-friendly, hi-tech cultivation facility. By 2012, after 10 years of hard work, this facility was making a profit, and by fiscal 2013 it had grown into an operation that was bringing in over 9.6 billion yen a year in sales revenue.
In the future, Kagome will be working to gain maximum benefit from the strengths of its agriculture-based vertically-integrated business model through the following initiatives: (1) Expanding the fresh tomato supply infrastructure, and expanding the scope of the fresh tomato business in line with functional requirements; and (2) Implementing mechanization of the harvesting of tomatoes used for processing, and expanding the scale of domestic production of tomatoes used as raw materials for juice production, including the development of new production areas in Hokkaido. Additionally, in
recent years, with more women working outside the home and with the increase in the number of single-person and two-person households, there has been a rapid increase in demand for “fresh” processed foods, including packed salads and pre-cut vegetables, with suggestions that this market segment could be worth over one trillion yen per year within a few years time (according to knowledgeable discount store executives and distributors). In response to this trend: (3) Kagome is making a full-scale push into the vegetable market, and has received inquiries from many discount stores and distributors regarding the “Baby Leaves” (mesclun) that Kagome launched in March 2014 and the Company’s expansion into the packed salad and pre-cut vegetables business that was announced in August. In the future, Kagome will be working actively to promote its new “Salad Bank Series” salad ingredients, characterized by high quality and functionality.
Through this expansion of the company’s fresh vegetable business, Kagome will be contributing to the continued growth of Japanese agriculture while also helping consumers to live longer, healthier lives.
Fresh vegetables business
Overview of the Division’s Performance in 2013
At stores, opportunities were acquired for developments linking vegetable beverages and food, such as Tomato Fairs and Kagome Fairs, based on the theme of “Delicious Double Toma-toes!” In the realm of promotion, as a continuation of the previous year support was provided for the Tokyo Marathon in February 2014, and “High-Lycopene Tomatoes” and “Chiisa na
Momoko” were distributed to runners as tomatoes officially recognized by the Tokyo Marathon. The quantity of fresh tomatoes harvested and supply was increased, and the highest net sales figures to date were recorded.
As a result, net sales in the fresh vegetable business rose 8.4% from the previous period to 9.683 billion yen.
Our Future StrategyThe mission of the Direct Marketing Division is to make a positive contribution to customers’ health, longevity, and enjoyment of food, by developing and marketing new products specially designed for direct sales in response to the emergence of new business channels that has accompanied the rapid development of IT. Kagome is now able to communicate with over one million of its customers, listening directly to what customers have to say, and being able to identify what customers expect from Kagome and what their new needs are; a key role for the division is thus to provide customer feedback to all Kagome divisions.
Despite the fact that the market as a whole has been growing more slowly, due in part to the changes in the type of media that customers use, and the impact of tax increases, in fiscal 2013 several products, such as Kagome’s “Shun” series juice products (made from ingredients picked at the best time of year), posted their best ever sales performance. Taking into account the fact that the biggest single customer segment for Kagome’s direct sales business is older people who are more concerned about the quality of the food they eat, and about health issues, it can be anticipated that the continuing aging of Japan’s population should create high growth potential for this business.
As part of the Company’s plan to provide customers with exciting products that provide everything they expect from the Kagome brand that they have been familiar with for so long, Kagome is developing new vegetable-based beverage products that can help to differentiate Kagome products from rival brands, such as the “Tsubuyori Yasai” juice product range, and is working to build up a new food supplements business that makes effective use of
Kagome’s expertise in relation to the functionality of lactobacilli and lycroprene. In addition, while making adjustments to our advertising and promotional strategy in order to win new customers, and working to intensify communication with existing customers, the division is also continuing with the putting in place of a service framework that makes it possible to respond to customers’ needs more flexibly, and is taking steps to strengthen interaction with customers.
Direct sales
Overview of the Division’s Performance in 2013
Sales of “Drink Vegetable Every Day,” a leading product, increased from July 2014 due to additional advertising methods implemented from June to acquire new customers. In addition, a product supply system was created for the “Shun” series of rare, seasonal juices, and sales were favorable. This series includes “Momo Shibori,” a limited-quantity product that went on sale again for the first time in three years, and “Fuyu Shibori,”
made of seasonal winter carrots full of sweetness and nutrients. In addition, the enhanced product lineup (including supplement) also contributed to increased net sales.
As a result, net sales in the direct marketing business rose 7.5% from the previous period to 8.277billion yen, and the highest net sales figures to date were recorded.
Direct marketing
23 24
KAGOME SUSTAINABILITY 2014
Related segments
Institutional & industrial products
Related segments
Director andManaging Executive Officer,
Asia Business Company CEO
Hirohito Kodama
Institutional & Industrial Business Division Asia Business Company
Strategies and Results by Division
Executive Officer andDivision Director, Institutional & Industrial Business Division
Satoshi Yamaguchi
Our Future StrategyThe Institutional & Industrial Business Division is responsible for developing and marketing products (mainly tomato- and vegetable-based products) for institutional and industrial use. The division supplies around 16% of all tomatoes consumed in Japan (equivalent to approximately 170,000 tons of tomatoes per year*).
With the rise in the number of working women, and the trend towards an aging population, there has been a steady rise in the share of total expenditure on food accounted for by eating out and by purchasing prepared foods for consumption at home. As more and more people come to rely on eating out and ready-meals for their daily food needs, there has also been a growing demand for healthy food and delicious, tasty food. Reflecting Kagome’s longstanding focus on tomato-based and other vegetable-based foods, the Company has been working to meet the diverse needs of its corporate customers in this area, and has been expanding the scope of its business activities accordingly.
In fiscal 2013, besides implementing a further strengthening of our team-based sales and development framework for serving major corporate customers, we have also been working to develop new products through collaboration with manufac-turers in other food industry segments, such as confectionery. In addition, our division has been collaborating with the Consumer
Business Division on the holding of the “Neapolitan Stadium” event to choose the best Neapolitan Spaghetti (Japanese-style spaghetti made with tomato ketchup) in Japan, as a means of boosting demand for tomato ketchup. Through these ongoing initiatives to create new demand, the division is contributing to the creation of a better gastronomic environment, and helping to realize steady growth for Kagome’s institutional and industrial products business.
Institutional & industrial products
Overview of the Division’s Performance in 2013
The “Tomato Ingredient,” “Tomato Sauce,” “Vegetable Ingredi-ent”, and “Vegetable Beverage” product categories were desig-nated as area of focus, and efforts were made to increase sales. Results were seen from strengthening the support system for major users and institutional and industrial products, and net sales were favorable. “Tomato Discoveries” initiatives included the aforementioned Neapolitan Stadium event, for which collaboration with the food business was strengthened and efforts were made to promote Neapolitan Stadium menu items. Collaboration with other companies included cooperation with
Ginza Cozy Corner Co., Ltd. to propose new tomato sweets that are delicious and fun. The jointly developed menu items and products, utilizing the strengths of both companies, were provided and sold at both companies’ stores and were favorably received. In addition, “Potato Chips Kagome Tomato Ketchup Flavor”�Kagome’s first collaboration product with CALBEE, Inc.� was released by CALBEE. As a result, net sales in the institutional and industrial product business rose 2.9% from the previous period to 25.764 billion yen, and the highest net sales figures to date were recorded.
Our Future StrategyThe mission of Kagome’s Asia Business Company is to contribute to the health and longevity of Asia’s 3.6 billion inhabitants through the provision of tomato- and vegetable-based foods, while also contributing to the ongoing growth of the Kagome Group.
To this end, the Asia Business Company plans to address the Asian market as a whole, and has established facilities in China, Taiwan, Hong Kong, Thailand, Malaysia and India to supply tomato- and vegetable-based beverages, industrial-use sauces and seasonings, and fresh vegetables in the way best suited to the needs of each individual country.
More specifically, the Asia Business Company is developing both the institutional & industrial business and the consumer business. In the institutional & industrial business, the Company is making effective use of the global tomato materials supply capability and ability to develop products to meet the needs of individual custom-ers, and, besides working with multinational corporations and Japanese companies, is also working to provide high-quality products to local companies at reasonable prices, so as to achieve rapid expansion in each regional market. Recognizing the changes in the social environment and in lifestyles that economic growth has brought to Asia, the Asia Business Company has also been striving to emphasize the fact that Kagome foods can be consumed with peace of mind, and that they form part of a healthy diet. To achieve this goal, in relation to the consumer business, the company has been publicizing research results that show the health benefits of tomatoes and fresh vegetables, and has also been publicizing Kagome’s design capabilities with respect to the development of
delicious, safe food products, the know-how and first-class infrastructure of Kagome’s local subsidiaries, the important role that local staff play in Kagome’s local sales operations, and Kagome’s ability to supply reasonably-priced products that suit local tastes. Through these measures, we are working to achieve a steady increase in the number of customers in Asian markets.
Asia business
Overview of the Division’s Performance in 2013
Net sales at TAIWAN KAGOME CO., LTD. increased because of the conversion rate of the weak yen, but net sales in the local currency base were also of a level above the previous period. Net sales at Kagome (Hangzhou) Food Co., Ltd. rose due to increased production of vegetable beverage for the Hong Kong market, as well as the effects of the weak yen, OSOTSPA KAGOME CO., LTD. (which develops and sells beverage
products in Thailand)“ released Tomato Essence” health bever-ages in small “one shot” bottles to consumers in September.
As a result, net sales in Asia rose 35% from the previous period to 3.119 billion yen.*
*The total quantity of tomatoes supplied is calculated by converting tomato materials used in processed tomato products into the corresponding number of raw tomatoes.
*This figure is calculated by offsetting inter-segment transactions against each other.
Asia
25 26
KAGOME SUSTAINABILITY 2014
Related segments
Institutional & industrial products
Related segments
Director andManaging Executive Officer,
Asia Business Company CEO
Hirohito Kodama
Institutional & Industrial Business Division Asia Business Company
Strategies and Results by Division
Executive Officer andDivision Director, Institutional & Industrial Business Division
Satoshi Yamaguchi
Our Future StrategyThe Institutional & Industrial Business Division is responsible for developing and marketing products (mainly tomato- and vegetable-based products) for institutional and industrial use. The division supplies around 16% of all tomatoes consumed in Japan (equivalent to approximately 170,000 tons of tomatoes per year*).
With the rise in the number of working women, and the trend towards an aging population, there has been a steady rise in the share of total expenditure on food accounted for by eating out and by purchasing prepared foods for consumption at home. As more and more people come to rely on eating out and ready-meals for their daily food needs, there has also been a growing demand for healthy food and delicious, tasty food. Reflecting Kagome’s longstanding focus on tomato-based and other vegetable-based foods, the Company has been working to meet the diverse needs of its corporate customers in this area, and has been expanding the scope of its business activities accordingly.
In fiscal 2013, besides implementing a further strengthening of our team-based sales and development framework for serving major corporate customers, we have also been working to develop new products through collaboration with manufac-turers in other food industry segments, such as confectionery. In addition, our division has been collaborating with the Consumer
Business Division on the holding of the “Neapolitan Stadium” event to choose the best Neapolitan Spaghetti (Japanese-style spaghetti made with tomato ketchup) in Japan, as a means of boosting demand for tomato ketchup. Through these ongoing initiatives to create new demand, the division is contributing to the creation of a better gastronomic environment, and helping to realize steady growth for Kagome’s institutional and industrial products business.
Institutional & industrial products
Overview of the Division’s Performance in 2013
The “Tomato Ingredient,” “Tomato Sauce,” “Vegetable Ingredi-ent”, and “Vegetable Beverage” product categories were desig-nated as area of focus, and efforts were made to increase sales. Results were seen from strengthening the support system for major users and institutional and industrial products, and net sales were favorable. “Tomato Discoveries” initiatives included the aforementioned Neapolitan Stadium event, for which collaboration with the food business was strengthened and efforts were made to promote Neapolitan Stadium menu items. Collaboration with other companies included cooperation with
Ginza Cozy Corner Co., Ltd. to propose new tomato sweets that are delicious and fun. The jointly developed menu items and products, utilizing the strengths of both companies, were provided and sold at both companies’ stores and were favorably received. In addition, “Potato Chips Kagome Tomato Ketchup Flavor”�Kagome’s first collaboration product with CALBEE, Inc.� was released by CALBEE. As a result, net sales in the institutional and industrial product business rose 2.9% from the previous period to 25.764 billion yen, and the highest net sales figures to date were recorded.
Our Future StrategyThe mission of Kagome’s Asia Business Company is to contribute to the health and longevity of Asia’s 3.6 billion inhabitants through the provision of tomato- and vegetable-based foods, while also contributing to the ongoing growth of the Kagome Group.
To this end, the Asia Business Company plans to address the Asian market as a whole, and has established facilities in China, Taiwan, Hong Kong, Thailand, Malaysia and India to supply tomato- and vegetable-based beverages, industrial-use sauces and seasonings, and fresh vegetables in the way best suited to the needs of each individual country.
More specifically, the Asia Business Company is developing both the institutional & industrial business and the consumer business. In the institutional & industrial business, the Company is making effective use of the global tomato materials supply capability and ability to develop products to meet the needs of individual custom-ers, and, besides working with multinational corporations and Japanese companies, is also working to provide high-quality products to local companies at reasonable prices, so as to achieve rapid expansion in each regional market. Recognizing the changes in the social environment and in lifestyles that economic growth has brought to Asia, the Asia Business Company has also been striving to emphasize the fact that Kagome foods can be consumed with peace of mind, and that they form part of a healthy diet. To achieve this goal, in relation to the consumer business, the company has been publicizing research results that show the health benefits of tomatoes and fresh vegetables, and has also been publicizing Kagome’s design capabilities with respect to the development of
delicious, safe food products, the know-how and first-class infrastructure of Kagome’s local subsidiaries, the important role that local staff play in Kagome’s local sales operations, and Kagome’s ability to supply reasonably-priced products that suit local tastes. Through these measures, we are working to achieve a steady increase in the number of customers in Asian markets.
Asia business
Overview of the Division’s Performance in 2013
Net sales at TAIWAN KAGOME CO., LTD. increased because of the conversion rate of the weak yen, but net sales in the local currency base were also of a level above the previous period. Net sales at Kagome (Hangzhou) Food Co., Ltd. rose due to increased production of vegetable beverage for the Hong Kong market, as well as the effects of the weak yen, OSOTSPA KAGOME CO., LTD. (which develops and sells beverage
products in Thailand)“ released Tomato Essence” health bever-ages in small “one shot” bottles to consumers in September.
As a result, net sales in Asia rose 35% from the previous period to 3.119 billion yen.*
*The total quantity of tomatoes supplied is calculated by converting tomato materials used in processed tomato products into the corresponding number of raw tomatoes.
*This figure is calculated by offsetting inter-segment transactions against each other.
Asia
25 26
KAGOME SUSTAINABILITY 2014
Global tomato (U.S., Europe, Australia)
Related segments
Managing Executive Officer,Global Tomato Company CEO
Masahiro Sumitomo
We supply products to markets in 85 countries around the world and our vision is to become the world’s best vegetable seeds company. Our vegetables are not genetically modified. Instead all our varieties are developed with traditional skillful breeding techniques. Therefore, our growth is underpinned by innovative research into these techniques. Over the past five years we have been the benefactor of robust, double-digit growth. Going forward, we plan on expanding our presence further and developing more high value-added products. In particular, we are focusing on developing competitive product lines for varieties used in greenhouse cultivation, which is expected to see strong profits.
We have supplied high quality products for 25 years thanks to the support and assistance of our stakeholders. Today, we supply most major US restaurant chains, and our product is used in 40 different countries. We will continue to grow our business by focusing on the development and manufacture of innovative new tomato-based sauces that fulfill the needs of customers. With the 2007 acquisition of Kagome Foods, we now have operations on both coasts and we are able to supply a broad range of product and container types. Going forward, we will capitalize on these advantages to become a “One stop Shop” to our customers.
Luis DeOliveiraExecutive Officer
KAGOME CO.,LTD.
President and CEOKagome Inc.
We are a vertically integrated horticulture company with operations that include planting and growing tomatoes, through to harvesting and processing bulk Paste and Dice. The company is accredited with globally recognized Certifications in recognition of our focus on product provenance, quality and sustainability. In 2014, we commenced growing and processing carrots with high beta-carotene. Starting in 2015, we will extend our value-adding capability with a Foodservice business to address opportunities locally as well as in SE Asia.
The Portuguese climate is particularly favorable for the cultivation of tomatoes as it offers plenty of rain in the winter, but also warm, dry summer. We have not only leveraged this value that nature affords us, but also given specific consideration to improving agricultural practices and the efficiency of water use. Over the past several years we have developed a number of tomato varieties by capitalizing on the particularly fruity and sweet taste created by our unique climate. Going forward, we will focus even greater efforts on improving our various tomato varieties, including those that contain lycopene, to refine the unique features of our tomatoes. Toward that end, we will continue to take full advantage of growth opportunities with our advanced technologies and high quality.
Tomato cultivationProcessing and packaging that meets customers’ real needs
Messages from Overseas CEOs
The U.S.
Strategies and Results by Division
Global Tomato Company
Our Future StrategyKagome’s Global Tomato Company is engaged in the develop-ment of Kagome’s tomato materials business operations on a global basis. The Global Tomato Company’s mission is to make Kagome number one in the world for tomatoes, by striving to “provide our customers with the value that tomatoes embody, and to make this value as widely available as possible,” thereby bringing about sustainable revenue growth, while at the same time making Kagome a universally-appreciated company that people feel is indispensable to their region.
To realize this vision, we have divided the regions in which we operate into 11 strategic areas. Each area is evaluated on the basis of three criteria: (1) whether it is suitable for the production and procurement of high-quality tomatoes; (2) whether the infrastructure needed for tomato materials processing exists in the area; (3) whether the area constitutes a viable market for Kagome’s products (in terms of consumer preferences, growth potential, etc.). This evaluation is used to determine the priority order for market entry, and to identify the key factors that will determine success in each individual market, so that the most appropriate strategy can be formulated for developing each market.
The Global Tomato Company is making a significant contribu-tion towards the long-term growth of the Kagome Group. One reason for this is that tomatoes are the most widely consumed vegetable in the world, and tomato consumption is forecast to continue growing at an average annual rate of 2.5%. Given this situation, there is the potential for this to become a highly profitable business area, in which Kagome does not need to compete on price, but rather on the quality and high added-value that are among Kagome’s long-standing strengths. An additional factor is the ability to make effective use of the Kagome Group’s vertically-integrated business model. Follow-ing the acquisition of a U.S. seed company in 2013, Kagome became the only tomato enterprise in the world that is able to “bring nature’s bounty directly to consumers” through an integrated supply chain that incorporates the ability to develop highly competitive tomato varieties, agricultural production capabilities, product development, processing, right through to sales. By effectively integrating the Group’s resources and
knowhow, Kagome has been able to develop a business model appropriate for each individual market, while every stage in the production and sales process reflects the unrivalled competi-tiveness derived from Kagome’s vertically-integrated model and the ability to provide products that inspire real peace of mind; Kagome is able to make a positive contribution to the achieve-ment of “local consumption of locally-produced tomatoes” on a global scale.
In the future, the Global Tomato Company will continue to undertake revolutionary R&D aimed at enhancing tomato value creation through the development of seed varieties tailored to the climate and soil conditions in individual countries. In addition, in order to further the cultivation of human talent that shares and can pass on the Kagome values that are so impor-tant to a global business, besides implementing a common personnel system worldwide to ensure fair evaluation and treatment of all personnel, Kagome is working to share its values with staff members all over the world, and is cultivating manage-ment talent who have experience with Kagome operations in different parts of the world. All of these efforts are helping to speed up growth for Kagome on a global scale.
The U.S., Europe, and Australia
Overview of the Division’s Performance in 2013
In the United States, we achieved an increase in net sales on a yen basis thanks to the further depreciation of the currency, and we saw a steady rise in shipments to major customers locally as well. In Portugal, we made Holding da Industria Transformadora do Tomate, SGPS S.A. a consolidated subsidiary, which led to an increase in net sales. In Italy, we grew net sales on a yen basis, thanks to the depreciation of the currency. In Australia,
timing of volume off-take created a lag in sales which led to a revenue decrease year-on-year. As a result, net sales from our operations in the U.S., Europe and Australia totaled ¥24,963 million, up 32.6% year on year.*
*This figure does not include inter-segment transactions.
Martin StilwellExecutive Officer and Chief Tomato Officer
KAGOME CO.,LTD.
President and CEOHolding da Industria
Transformadora doTomate, SGPS S.A.
Europe
Remo LudergnaniPresident CEO
United Genetics Holding LLC
The U.S.
John BradyPresident CEO
Kagome Australia Pty Ltd.
Australia
27 28
KAGOME SUSTAINABILITY 2014
Global tomato (U.S., Europe, Australia)
Related segments
Managing Executive Officer,Global Tomato Company CEO
Masahiro Sumitomo
We supply products to markets in 85 countries around the world and our vision is to become the world’s best vegetable seeds company. Our vegetables are not genetically modified. Instead all our varieties are developed with traditional skillful breeding techniques. Therefore, our growth is underpinned by innovative research into these techniques. Over the past five years we have been the benefactor of robust, double-digit growth. Going forward, we plan on expanding our presence further and developing more high value-added products. In particular, we are focusing on developing competitive product lines for varieties used in greenhouse cultivation, which is expected to see strong profits.
We have supplied high quality products for 25 years thanks to the support and assistance of our stakeholders. Today, we supply most major US restaurant chains, and our product is used in 40 different countries. We will continue to grow our business by focusing on the development and manufacture of innovative new tomato-based sauces that fulfill the needs of customers. With the 2007 acquisition of Kagome Foods, we now have operations on both coasts and we are able to supply a broad range of product and container types. Going forward, we will capitalize on these advantages to become a “One stop Shop” to our customers.
Luis DeOliveiraExecutive Officer
KAGOME CO.,LTD.
President and CEOKagome Inc.
We are a vertically integrated horticulture company with operations that include planting and growing tomatoes, through to harvesting and processing bulk Paste and Dice. The company is accredited with globally recognized Certifications in recognition of our focus on product provenance, quality and sustainability. In 2014, we commenced growing and processing carrots with high beta-carotene. Starting in 2015, we will extend our value-adding capability with a Foodservice business to address opportunities locally as well as in SE Asia.
The Portuguese climate is particularly favorable for the cultivation of tomatoes as it offers plenty of rain in the winter, but also warm, dry summer. We have not only leveraged this value that nature affords us, but also given specific consideration to improving agricultural practices and the efficiency of water use. Over the past several years we have developed a number of tomato varieties by capitalizing on the particularly fruity and sweet taste created by our unique climate. Going forward, we will focus even greater efforts on improving our various tomato varieties, including those that contain lycopene, to refine the unique features of our tomatoes. Toward that end, we will continue to take full advantage of growth opportunities with our advanced technologies and high quality.
Tomato cultivationProcessing and packaging that meets customers’ real needs
Messages from Overseas CEOs
The U.S.
Strategies and Results by Division
Global Tomato Company
Our Future StrategyKagome’s Global Tomato Company is engaged in the develop-ment of Kagome’s tomato materials business operations on a global basis. The Global Tomato Company’s mission is to make Kagome number one in the world for tomatoes, by striving to “provide our customers with the value that tomatoes embody, and to make this value as widely available as possible,” thereby bringing about sustainable revenue growth, while at the same time making Kagome a universally-appreciated company that people feel is indispensable to their region.
To realize this vision, we have divided the regions in which we operate into 11 strategic areas. Each area is evaluated on the basis of three criteria: (1) whether it is suitable for the production and procurement of high-quality tomatoes; (2) whether the infrastructure needed for tomato materials processing exists in the area; (3) whether the area constitutes a viable market for Kagome’s products (in terms of consumer preferences, growth potential, etc.). This evaluation is used to determine the priority order for market entry, and to identify the key factors that will determine success in each individual market, so that the most appropriate strategy can be formulated for developing each market.
The Global Tomato Company is making a significant contribu-tion towards the long-term growth of the Kagome Group. One reason for this is that tomatoes are the most widely consumed vegetable in the world, and tomato consumption is forecast to continue growing at an average annual rate of 2.5%. Given this situation, there is the potential for this to become a highly profitable business area, in which Kagome does not need to compete on price, but rather on the quality and high added-value that are among Kagome’s long-standing strengths. An additional factor is the ability to make effective use of the Kagome Group’s vertically-integrated business model. Follow-ing the acquisition of a U.S. seed company in 2013, Kagome became the only tomato enterprise in the world that is able to “bring nature’s bounty directly to consumers” through an integrated supply chain that incorporates the ability to develop highly competitive tomato varieties, agricultural production capabilities, product development, processing, right through to sales. By effectively integrating the Group’s resources and
knowhow, Kagome has been able to develop a business model appropriate for each individual market, while every stage in the production and sales process reflects the unrivalled competi-tiveness derived from Kagome’s vertically-integrated model and the ability to provide products that inspire real peace of mind; Kagome is able to make a positive contribution to the achieve-ment of “local consumption of locally-produced tomatoes” on a global scale.
In the future, the Global Tomato Company will continue to undertake revolutionary R&D aimed at enhancing tomato value creation through the development of seed varieties tailored to the climate and soil conditions in individual countries. In addition, in order to further the cultivation of human talent that shares and can pass on the Kagome values that are so impor-tant to a global business, besides implementing a common personnel system worldwide to ensure fair evaluation and treatment of all personnel, Kagome is working to share its values with staff members all over the world, and is cultivating manage-ment talent who have experience with Kagome operations in different parts of the world. All of these efforts are helping to speed up growth for Kagome on a global scale.
The U.S., Europe, and Australia
Overview of the Division’s Performance in 2013
In the United States, we achieved an increase in net sales on a yen basis thanks to the further depreciation of the currency, and we saw a steady rise in shipments to major customers locally as well. In Portugal, we made Holding da Industria Transformadora do Tomate, SGPS S.A. a consolidated subsidiary, which led to an increase in net sales. In Italy, we grew net sales on a yen basis, thanks to the depreciation of the currency. In Australia,
timing of volume off-take created a lag in sales which led to a revenue decrease year-on-year. As a result, net sales from our operations in the U.S., Europe and Australia totaled ¥24,963 million, up 32.6% year on year.*
*This figure does not include inter-segment transactions.
Martin StilwellExecutive Officer and Chief Tomato Officer
KAGOME CO.,LTD.
President and CEOHolding da Industria
Transformadora doTomate, SGPS S.A.
Europe
Remo LudergnaniPresident CEO
United Genetics Holding LLC
The U.S.
John BradyPresident CEO
Kagome Australia Pty Ltd.
Australia
27 28
KAGOME SUSTAINABILITY 2014
Net sales and overseas sales ratio*1
200,000
160,000
120,000
80,000
40,000
0
20
16
12
8
4
2004 20062005 2007 20092008 20112010 2012 2013
(millions of yen) (%)
(FY)
Operating income and operating margin
10,000
8,000
6,000
4,000
2,000
0
10
8
6
4
2
Total assets and net assets
200,000
160,000
120,000
80,000
40,000
0
Dividends per share and dividend payout ratio
25
20
15
10
5
0
100
80
60
40
20
(Yen) (%)
Net income
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
Return on equity
10
8
6
4
2
(%)
Net income per share
80
60
40
20
0
(Yen)
Net assets per share
CO2 emissions*3,*4Energy usage*3 Water usage*3
1,200
1,000
800
600
400
200
0
(Yen)
Number of employees*2
2,400
2,000
1,600
1,200
800
400
0
(Employees)
Net sales Overseas sales ratio Total assets Net assets
2004 20062005 2007 20092008 20112010 2012 2013 2004 20062005 2007 20092008 20112010 2012 2013
2004 20062005 2007 20092008 20112010 2012 2013 (FY) 2004 20062005 2007 20092008 20112010 2012 2013 (FY) 2004 20062005 2007 20092008 20112010 2012 2013
2004 20062005 2007 20092008 20112010 2012 2013
2004 20062005 2007 20092008 20112010 2012 2013
2004 20062005 2007 20092008 20112010 2012 2013 (FY)
2,000
1,600
1,200
800
400
0
(thousand GJ)
20062005 2007 20092008 20112010 2012 2013
100,000
80,000
60,000
40,000
20,000
0
(tons)
20062005 2007 20092008 20112010 2012 2013
5,000
4,000
3,000
2,000
1,000
0
(thousand tons)
2006 2007 20092008 20112010 2012 2013
*2 The scope includes the Kagome Group. *3 The scope includes Kagome (parent company) and domestic Group companies (Kagome Real Estate Co., Ltd., Kagome Distribution Service Co., Ltd.,and four farms). *4 The internal management fixed coefficient of 0.421kg-CO2/kWh used as electricity conversion factor for the CO2 calculated value.
*1 Intersegment transactions have been offset and eliminated.
Operating income Operating margin(millions of yen) (%)
(FY)
(millions of yen) (millions of yen)
(FY)
(FY) (FY)
Dividends per share Dividend payout ratio
(FY)
(FY) (FY) (FY)
Consolidated financial performance
Non-financial performance
Summary of financial and non-financial performance
29 30
KAGOME SUSTAINABILITY 2014
Net sales and overseas sales ratio*1
200,000
160,000
120,000
80,000
40,000
0
20
16
12
8
4
2004 20062005 2007 20092008 20112010 2012 2013
(millions of yen) (%)
(FY)
Operating income and operating margin
10,000
8,000
6,000
4,000
2,000
0
10
8
6
4
2
Total assets and net assets
200,000
160,000
120,000
80,000
40,000
0
Dividends per share and dividend payout ratio
25
20
15
10
5
0
100
80
60
40
20
(Yen) (%)
Net income
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
Return on equity
10
8
6
4
2
(%)
Net income per share
80
60
40
20
0
(Yen)
Net assets per share
CO2 emissions*3,*4Energy usage*3 Water usage*3
1,200
1,000
800
600
400
200
0
(Yen)
Number of employees*2
2,400
2,000
1,600
1,200
800
400
0
(Employees)
Net sales Overseas sales ratio Total assets Net assets
2004 20062005 2007 20092008 20112010 2012 2013 2004 20062005 2007 20092008 20112010 2012 2013
2004 20062005 2007 20092008 20112010 2012 2013 (FY) 2004 20062005 2007 20092008 20112010 2012 2013 (FY) 2004 20062005 2007 20092008 20112010 2012 2013
2004 20062005 2007 20092008 20112010 2012 2013
2004 20062005 2007 20092008 20112010 2012 2013
2004 20062005 2007 20092008 20112010 2012 2013 (FY)
2,000
1,600
1,200
800
400
0
(thousand GJ)
20062005 2007 20092008 20112010 2012 2013
100,000
80,000
60,000
40,000
20,000
0
(tons)
20062005 2007 20092008 20112010 2012 2013
5,000
4,000
3,000
2,000
1,000
0
(thousand tons)
2006 2007 20092008 20112010 2012 2013
*2 The scope includes the Kagome Group. *3 The scope includes Kagome (parent company) and domestic Group companies (Kagome Real Estate Co., Ltd., Kagome Distribution Service Co., Ltd.,and four farms). *4 The internal management fixed coefficient of 0.421kg-CO2/kWh used as electricity conversion factor for the CO2 calculated value.
*1 Intersegment transactions have been offset and eliminated.
Operating income Operating margin(millions of yen) (%)
(FY)
(millions of yen) (millions of yen)
(FY)
(FY) (FY)
Dividends per share Dividend payout ratio
(FY)
(FY) (FY) (FY)
Consolidated financial performance
Non-financial performance
Summary of financial and non-financial performance
29 30
KAGOME SUSTAINABILITY 2014
Method Used to Select Independent Directors
Auditing by the Board of Auditors, and Internal Auditing
Directors’ Remuneration
Appointment of Outside Directors
While Kagome does not have a formal standard or policy regarding the definition of “independence,” when selecting independent directors, reference was made to the Evaluation Criteria for Determining the Independence of Independent Directors, published by the Tokyo Stock Exchange (TSE). The criteria specified by the TSE are as follows:
A. An independent director must not be a manager of the company in question or of any of its affiliates
B. An independent director must not be an important supplier of, or a manager at an important supplier of, the company in question
C. An independent director must not be an important customer of, or a manager at an important customer of, the company in question
D. An independent director must not be a consultant, accounting specialists or legal specialist in receipt of substantial sums of money, or other assets, from the company in question, with the exception of director’s remuneration
E. An independent director must not be a major shareholder of the company in question
F. A major shareholder must not be involved in the accounting of the company in question or any of its affiliates
32
KAGOME SUSTAINABILITY 2014
Name Position Position, main occupation, and significant concurrent positions
Corporate Governance System
Hidenori Nishi
Naoyuki Terada
Setsuhiro Otake
Hirohito Kodama
Yoshihide Watanabe
Kunihiko Sato
Katsuyuki Miwa
Mutsuhisa Kanie
Akitaka Muraoka
Takashi Ejiri
Morihiro Murata
Seiichi Kondo
Takayuki Hashimoto
Miyo Myoseki
A.B.C.D.E.F.G.H.I.
J.
K.L.M.N.
Representative Director and Chairman
Representative Director and President
Representative Director and Executive Vice President
Director and Managing Executive Officer
Director and Managing Executive Officer
Director and Managing Executive Officer
Director and Managing Executive Officer
Standing Corporate Auditor
Standing Corporate Auditor
Corporate Auditor
Corporate Auditor
Outside Director
Outside Director
Outside Director
Dynapac Co., Ltd. Outside Director Nagase & Co., Ltd. Outside Director
United Genetics Holding LLC Chairman
Asia Business Company CEO
Corporate Planning Division General Manager
Research & Development Division General Manager
Production & Procurement General Manager
Dynapac Co., Ltd. Outside Auditor
Employee of Nishimura & Asahi Hazama Ando Corporation Outside Auditor DIP Corporation Outside Auditor
Morihiro Murata Accounting Office Representative Sumitomo Rubber Industries, Ltd. Outside Auditor
Director, Kondo Institute for Culture & Diplomacy Ambassador, Special Envoy for UN Affairs
IBM Japan Chairman
Marutomo Co., Ltd. President and Representative Director
L N M K J
F D A B C E G
In line with Kagome's aim of Corporate Openness—a principle of its Corporate Philosophy—Kagome has positioned "achieve-ment of management transparency," "clarification of manage-ment responsibilities," "promotion of swift decision making" and
"strengthening of management oversight functions" as the pillars of its corporate governance. This stance is shared by all Kagome Group companies.
H I
Corporate Governance
Basic Approach
31
As of October 2014, the Company's Board of Directors consists of 10 directors who are tasked with making decisions regarding Company-wide management strategies, and with supervising business execution. The term of office of directors is one year, which helps clarify their management responsibilities. Starting from fiscal 2014, Kagome has appointed three outside directors to the Board of Directors, with the aim of having them offer advice, based on their knowledge and experience, during the Board’s evaluation and decision-making process. In addition, the Company has adopted an executive officer system. This system
allows directors to concentrate on their decision-making and supervisory duties, and executive officers to focus on the execu-tion of business operations.
Kagome has adopted a corporate auditor system. The four current corporate auditors, two of whom are external appointees, attend Board of Directors' and other important meetings. Through their attendance in these meetings, they monitor the Company's decision-making processes and the decisions made, as well as business execution status, thereby contributing to the mainte-nance of management soundness and transparency.
In a meeting held in April 2006, Kagome's Board of Directors approved the Basic Policy on Internal Control. In accordance with this policy, the Company has promoted related initiatives to improve business efficiency and effectiveness, maintain the reliability of its financial reporting, ensure compliance with laws and regulations, and secure its assets.
Kagome’s Board of Corporate Auditors is made up of four Corporate Auditors. Regarding the exercising of the Corporate Auditors’ duties, the individual Corporate Auditors conduct auditing in accordance with the auditing strategy and division of labor decided on by the Board of Corporate Auditors. Kagome has signed an auditing agreement with Nagoya Audit Corpora-tion whereby Nagoya Audit Corporation submits a report on external auditing implementation results pursuant to the annual external auditing plan; where appropriate, external auditors attend audit meetings, and there is a regular exchange of information and views with the external auditors, ensuring close
collaboration.Kagome’s internal auditing operations are carried out by the
Internal Audit Department, which has a staff of three personnel. The Internal Audit Department staff evaluates whether individual business locations are carrying out their operational activities appropriately and efficiently in accordance with the require-ments of the law, relevant regulations and the Company’s business strategy, aiming to contribute to the rationalization and efficiency enhancement of the Company’s operations. If problems are discovered during auditing, the Internal Audit Department engages in consultation, draws up a response strategy or a plan for the taking of necessary remedial measures, and implements it. By having members of the Board of Corporate Auditors participate in auditing undertaken by the Internal Audit Department, etc., the auditing function is rendered more effective and collaboration is enhanced.
With the aim of strengthening corporate governance, three outside directors (of which two were independent directors) were appointed at Kagome’s 70th Annual General Meeting of Shareholders held on June 18th, 2014. While this change
represents a continuation of Kagome’s longstanding efforts to enhance corporate governance, Kagome will also be making full use of the knowledge and experience possessed by these outside directors in its corporate management.
Kagome’s directors’ remuneration comprises basic remunera-tion, as well as performance-linked directors’ bonuses and stock options. The ratio of bonuses and stock options in relation to basic remuneration is set separately for each individual director.
Basic remuneration is fixed-amount compensation that is set within the framework of the total directors’ remuneration approved by the Shareholders Meeting, based on the annual salary of the highest position held by the director in question and the relative importance of the roles played by that director.
Directors’ bonuses and stock options are determined based
on company-wide performance (measured using the consoli-dated ordinary profit ratio) and the contribution made by the individual director.
In order to enhance the transparency and objectivity of decisions regarding directors’ remuneration, the Company has established a Remuneration Committee to serve as an advisory body to the Board of Directors. Corporate Auditors’ remunera-tion is determined by consultation within the Board of Corporate Auditors, within the framework of the total auditors’ remunera-tion approved by the Shareholders Meeting.
Method Used to Select Independent Directors
Auditing by the Board of Auditors, and Internal Auditing
Directors’ Remuneration
Appointment of Outside Directors
While Kagome does not have a formal standard or policy regarding the definition of “independence,” when selecting independent directors, reference was made to the Evaluation Criteria for Determining the Independence of Independent Directors, published by the Tokyo Stock Exchange (TSE). The criteria specified by the TSE are as follows:
A. An independent director must not be a manager of the company in question or of any of its affiliates
B. An independent director must not be an important supplier of, or a manager at an important supplier of, the company in question
C. An independent director must not be an important customer of, or a manager at an important customer of, the company in question
D. An independent director must not be a consultant, accounting specialists or legal specialist in receipt of substantial sums of money, or other assets, from the company in question, with the exception of director’s remuneration
E. An independent director must not be a major shareholder of the company in question
F. A major shareholder must not be involved in the accounting of the company in question or any of its affiliates
32
KAGOME SUSTAINABILITY 2014
Name Position Position, main occupation, and significant concurrent positions
Corporate Governance System
Hidenori Nishi
Naoyuki Terada
Setsuhiro Otake
Hirohito Kodama
Yoshihide Watanabe
Kunihiko Sato
Katsuyuki Miwa
Mutsuhisa Kanie
Akitaka Muraoka
Takashi Ejiri
Morihiro Murata
Seiichi Kondo
Takayuki Hashimoto
Miyo Myoseki
A.B.C.D.E.F.G.H.I.
J.
K.L.M.N.
Representative Director and Chairman
Representative Director and President
Representative Director and Executive Vice President
Director and Managing Executive Officer
Director and Managing Executive Officer
Director and Managing Executive Officer
Director and Managing Executive Officer
Standing Corporate Auditor
Standing Corporate Auditor
Corporate Auditor
Corporate Auditor
Outside Director
Outside Director
Outside Director
Dynapac Co., Ltd. Outside Director Nagase & Co., Ltd. Outside Director
United Genetics Holding LLC Chairman
Asia Business Company CEO
Corporate Planning Division General Manager
Research & Development Division General Manager
Production & Procurement General Manager
Dynapac Co., Ltd. Outside Auditor
Employee of Nishimura & Asahi Hazama Ando Corporation Outside Auditor DIP Corporation Outside Auditor
Morihiro Murata Accounting Office Representative Sumitomo Rubber Industries, Ltd. Outside Auditor
Director, Kondo Institute for Culture & Diplomacy Ambassador, Special Envoy for UN Affairs
IBM Japan Chairman
Marutomo Co., Ltd. President and Representative Director
L N M K J
F D A B C E G
In line with Kagome's aim of Corporate Openness—a principle of its Corporate Philosophy—Kagome has positioned "achieve-ment of management transparency," "clarification of manage-ment responsibilities," "promotion of swift decision making" and
"strengthening of management oversight functions" as the pillars of its corporate governance. This stance is shared by all Kagome Group companies.
H I
Corporate Governance
Basic Approach
31
As of October 2014, the Company's Board of Directors consists of 10 directors who are tasked with making decisions regarding Company-wide management strategies, and with supervising business execution. The term of office of directors is one year, which helps clarify their management responsibilities. Starting from fiscal 2014, Kagome has appointed three outside directors to the Board of Directors, with the aim of having them offer advice, based on their knowledge and experience, during the Board’s evaluation and decision-making process. In addition, the Company has adopted an executive officer system. This system
allows directors to concentrate on their decision-making and supervisory duties, and executive officers to focus on the execu-tion of business operations.
Kagome has adopted a corporate auditor system. The four current corporate auditors, two of whom are external appointees, attend Board of Directors' and other important meetings. Through their attendance in these meetings, they monitor the Company's decision-making processes and the decisions made, as well as business execution status, thereby contributing to the mainte-nance of management soundness and transparency.
In a meeting held in April 2006, Kagome's Board of Directors approved the Basic Policy on Internal Control. In accordance with this policy, the Company has promoted related initiatives to improve business efficiency and effectiveness, maintain the reliability of its financial reporting, ensure compliance with laws and regulations, and secure its assets.
Kagome’s Board of Corporate Auditors is made up of four Corporate Auditors. Regarding the exercising of the Corporate Auditors’ duties, the individual Corporate Auditors conduct auditing in accordance with the auditing strategy and division of labor decided on by the Board of Corporate Auditors. Kagome has signed an auditing agreement with Nagoya Audit Corpora-tion whereby Nagoya Audit Corporation submits a report on external auditing implementation results pursuant to the annual external auditing plan; where appropriate, external auditors attend audit meetings, and there is a regular exchange of information and views with the external auditors, ensuring close
collaboration.Kagome’s internal auditing operations are carried out by the
Internal Audit Department, which has a staff of three personnel. The Internal Audit Department staff evaluates whether individual business locations are carrying out their operational activities appropriately and efficiently in accordance with the require-ments of the law, relevant regulations and the Company’s business strategy, aiming to contribute to the rationalization and efficiency enhancement of the Company’s operations. If problems are discovered during auditing, the Internal Audit Department engages in consultation, draws up a response strategy or a plan for the taking of necessary remedial measures, and implements it. By having members of the Board of Corporate Auditors participate in auditing undertaken by the Internal Audit Department, etc., the auditing function is rendered more effective and collaboration is enhanced.
With the aim of strengthening corporate governance, three outside directors (of which two were independent directors) were appointed at Kagome’s 70th Annual General Meeting of Shareholders held on June 18th, 2014. While this change
represents a continuation of Kagome’s longstanding efforts to enhance corporate governance, Kagome will also be making full use of the knowledge and experience possessed by these outside directors in its corporate management.
Kagome’s directors’ remuneration comprises basic remunera-tion, as well as performance-linked directors’ bonuses and stock options. The ratio of bonuses and stock options in relation to basic remuneration is set separately for each individual director.
Basic remuneration is fixed-amount compensation that is set within the framework of the total directors’ remuneration approved by the Shareholders Meeting, based on the annual salary of the highest position held by the director in question and the relative importance of the roles played by that director.
Directors’ bonuses and stock options are determined based
on company-wide performance (measured using the consoli-dated ordinary profit ratio) and the contribution made by the individual director.
In order to enhance the transparency and objectivity of decisions regarding directors’ remuneration, the Company has established a Remuneration Committee to serve as an advisory body to the Board of Directors. Corporate Auditors’ remunera-tion is determined by consultation within the Board of Corporate Auditors, within the framework of the total auditors’ remunera-tion approved by the Shareholders Meeting.
Risk Management
General Risk Countermeasures Task Force
CSR Management
Maintaining a sense of affection towards Kagome while looking at them strictly
Reason for appointmentThe Kagome Group aims to provide goods and services related to tomatoes to the world through its vertically integrated business model. We will utilize Seiichi Kondo’s abundant overseas experience with the central government agencies and his knowledge of the economy to contribute to the expansion of our overseas business and diversity.
In modern society that is developed by economic activity such as investment, by individuals and through the work of economic organizations, companies that serve as engines of the economy must be "good corporate citizens" in that they return profits to society. It is only when equipped with such qualities that companies can claim to possess "governance." However, sometimes organizations can be overly tied to their own past, be both inward-looking and conservative, and accordingly they fail to fully meet the requirements of social justice. For this reason, while remaining at arms' length, they require individuals who monitor their activities and provide appropriate advice. I believe this idea defines precisely the role of the outside director.
I will do my utmost to fulfill my responsibilities as an outside director by learning as much as I can about Kagome. I will closely watch the company’s activities so as to provide frank opinions even if such views are not necessarily what senior management wants to hear.
Pushing forward the visualization of management with an uncompromising attitude
Reason for appointmentIn IBM’s global business operations, it has a pioneering and consistent approach towards diversity. We will utilize Takayuki Hashimoto’s knowledge that he has gained through leading IBM to contribute to the establishment of an organization that is highly tolerant of change and to the design and introduction of a new global human resources policy that enables the optimal allocation of diverse human resources.
In line with Kagome’s Corporate Philosophy of “Corporate Openness,” over the first year of the introduction of outside directors, lively discussion centered on the Board of Directors have been conducted. In order to continue to live up to the expectations of stakeholders and grow under a constantly fluctuating business environment typified by changes in the economy, politics, and natural disasters stemming from changes in the global environment, it is necessary to keep a firm axis, remain constantly aware of one’s reason for being, clarify what can be changed and what cannot be changed, and work with a sense of urgency to enact reforms. I push forward the further visualization of manage-ment to encourage appropriate decisions within this type of operating environment and approach discussions to this end with an uncompromising attitude as an outside director. In addition, I will focus on fostering an inclusive corporate culture so that diversity can be incorporated to create further value.
Providing support from the perspective of a woman, mother, and young person
Reason for appointmentMarutomo Co., Ltd. develops products using natural marine resources, such as katsuobushi (bonito flakes). We will utilize Miyo Myoseki’s knowledge as a corporate manager that also managed to achieve a balance with raising children to contribute to the Company’s management aimed at offering new value to customers around the world.
All of Kagome’s directors feel passionate about the company and about tomatoes, all of the staff members get along really well, and the company has a very nice atmosphere, and for this reason my impression of the company has been really positive. Kagome has actively created opportunities such as local observation activities and study sessions so that even outside directors without any specialized knowledge of tomatoes or agriculture are able to make impartial decisions. I believe that Kagome can continue being a company that is needed by society by creating the value of “inspiration” generated together by producers, business partners, and consumers in addition to deliciousness, and that in doing so it will lead to an even further improvement in corporate value. I hope to support the decision-making process of the Board of Directors from the perspective of not only a manager, but also a woman, mother, and young person, in hopes that I can be of some help with issues involving changing lifestyles.
Seiichi Kondo
IBM Japan Chairman
Takayuki Hashimoto
Marutomo Co., Ltd.President and Representative Director
Miyo Myoseki
Messages from Outside Directors Risk Management Structure
Utilizing ISO26000
Major risks and countermeasures
Awareness of risk and countermeasures
Risks related to the procurement of
raw materials andproducts
Risks related tosafety
Risks related toinformation systems
Risks related todisasters
Risks
The Group procures raw materials and some products from multiple countries. While the Group implements various measures to ensure stable procurement, it is exposed to the following risks involving its procurement countries and ensuring stable prices and procurement volumes accompanying changes in the structure of global food supply and demand. •Unpredictable changes to laws and regulations •Political and economic turmoil •Social turmoil such as terrorism or war
These factors expose the Group to the risks of increased procurement prices and supply shortages, which could have an adverse effect on the Group’s performance and financial position.
The Group views the quality and safety of food to be an important management issue, and it conducts various initiatives to ensure quality and safety. Specifically, the Group holds a Quality Assurance Committee every month that is participated in by members of top management, conducts activities aimed at preventing product complaints and accident, and works to provide proper product labeling. Although the Group has adopted the stance of so-called “food defense” and has established systems to prevent the deliberate contamination of foods with foreign substances and prove that there are no abnormalities, the Group’s brand image could be damaged in the event of contamination by foreign substances, and the Group’s performance and financial position could also be adversely affected by costs including recall costs, litigation costs, and compensation costs in the event of contamination by foreign substances. In addition, strengthening traceability to ensure the quality and safety of food could result in high costs for system construction, and this in turn could also have adverse effect on the Group’s performance and financial position.
The Group holds the personal information of a large number customers as a result of business activities including sales promotion campaigns and mail-order sales. The Group implements appropriate security measures for information management including systems to prevent this important information from becoming lost, misused, or tampered with. However, in the event of unpredictable circumstances such as power failures, disasters, defects in software and equipment, and computer virus infections, there is the risk of internal information including customer information being lost, leaked, or tampered with if information systems are destroyed, suspended, or suffer temporary disorder. If such a situation were to occur, it could impede with business activities, and this could have adverse effect on the Group’s performance and financial position.
In order to avoid potential risks from the suspension of the production line, the Group conducts disaster counter-measures that include regular disaster prevention inspections and equipment inspections as deemed necessary and the diversification of the supply chain. However, this does not mean that the full protection of production facilities from disasters such as natural disasters can be guaranteed. Such disasters could cause sales to decline and costs to increase, and this could have adverse effect on the Group’s performance and financial position.
Director, Kondo Institute for Culture & DiplomacyAmbassador, Special Envoy for UN Affairs
Kagome has set up the General Risk Countermeasures Task Force as a single integrated entity to further manage risk. The members of this group consist of Directors and particular Execu-tive Officers and Auditors, who deliberate risk countermeasure policies and countermeasures for serious risk issues and then
make swift decisions. In addition, five committees, namely the Compliance Committee, Information Security Committee, Quality Assurance Committee, Research Ethics Review Commit-tee, and Investment Committee have been established in an aim to enhance the risk management structure.
Kagome utilizes ISO26000 as the international standard for social responsibility to promote CSR management. During FY2013, an analysis was conducted on the state of initiatives covering seven
themes: organizational governance, human rights, labor practices, the environment, fair operating practices, consumer issues, and community involvement and development.
33 34
KAGOME SUSTAINABILITY 2014
Risk Management
General Risk Countermeasures Task Force
CSR Management
Maintaining a sense of affection towards Kagome while looking at them strictly
Reason for appointmentThe Kagome Group aims to provide goods and services related to tomatoes to the world through its vertically integrated business model. We will utilize Seiichi Kondo’s abundant overseas experience with the central government agencies and his knowledge of the economy to contribute to the expansion of our overseas business and diversity.
In modern society that is developed by economic activity such as investment, by individuals and through the work of economic organizations, companies that serve as engines of the economy must be "good corporate citizens" in that they return profits to society. It is only when equipped with such qualities that companies can claim to possess "governance." However, sometimes organizations can be overly tied to their own past, be both inward-looking and conservative, and accordingly they fail to fully meet the requirements of social justice. For this reason, while remaining at arms' length, they require individuals who monitor their activities and provide appropriate advice. I believe this idea defines precisely the role of the outside director.
I will do my utmost to fulfill my responsibilities as an outside director by learning as much as I can about Kagome. I will closely watch the company’s activities so as to provide frank opinions even if such views are not necessarily what senior management wants to hear.
Pushing forward the visualization of management with an uncompromising attitude
Reason for appointmentIn IBM’s global business operations, it has a pioneering and consistent approach towards diversity. We will utilize Takayuki Hashimoto’s knowledge that he has gained through leading IBM to contribute to the establishment of an organization that is highly tolerant of change and to the design and introduction of a new global human resources policy that enables the optimal allocation of diverse human resources.
In line with Kagome’s Corporate Philosophy of “Corporate Openness,” over the first year of the introduction of outside directors, lively discussion centered on the Board of Directors have been conducted. In order to continue to live up to the expectations of stakeholders and grow under a constantly fluctuating business environment typified by changes in the economy, politics, and natural disasters stemming from changes in the global environment, it is necessary to keep a firm axis, remain constantly aware of one’s reason for being, clarify what can be changed and what cannot be changed, and work with a sense of urgency to enact reforms. I push forward the further visualization of manage-ment to encourage appropriate decisions within this type of operating environment and approach discussions to this end with an uncompromising attitude as an outside director. In addition, I will focus on fostering an inclusive corporate culture so that diversity can be incorporated to create further value.
Providing support from the perspective of a woman, mother, and young person
Reason for appointmentMarutomo Co., Ltd. develops products using natural marine resources, such as katsuobushi (bonito flakes). We will utilize Miyo Myoseki’s knowledge as a corporate manager that also managed to achieve a balance with raising children to contribute to the Company’s management aimed at offering new value to customers around the world.
All of Kagome’s directors feel passionate about the company and about tomatoes, all of the staff members get along really well, and the company has a very nice atmosphere, and for this reason my impression of the company has been really positive. Kagome has actively created opportunities such as local observation activities and study sessions so that even outside directors without any specialized knowledge of tomatoes or agriculture are able to make impartial decisions. I believe that Kagome can continue being a company that is needed by society by creating the value of “inspiration” generated together by producers, business partners, and consumers in addition to deliciousness, and that in doing so it will lead to an even further improvement in corporate value. I hope to support the decision-making process of the Board of Directors from the perspective of not only a manager, but also a woman, mother, and young person, in hopes that I can be of some help with issues involving changing lifestyles.
Seiichi Kondo
IBM Japan Chairman
Takayuki Hashimoto
Marutomo Co., Ltd.President and Representative Director
Miyo Myoseki
Messages from Outside Directors Risk Management Structure
Utilizing ISO26000
Major risks and countermeasures
Awareness of risk and countermeasures
Risks related to the procurement of
raw materials andproducts
Risks related tosafety
Risks related toinformation systems
Risks related todisasters
Risks
The Group procures raw materials and some products from multiple countries. While the Group implements various measures to ensure stable procurement, it is exposed to the following risks involving its procurement countries and ensuring stable prices and procurement volumes accompanying changes in the structure of global food supply and demand. •Unpredictable changes to laws and regulations •Political and economic turmoil •Social turmoil such as terrorism or war
These factors expose the Group to the risks of increased procurement prices and supply shortages, which could have an adverse effect on the Group’s performance and financial position.
The Group views the quality and safety of food to be an important management issue, and it conducts various initiatives to ensure quality and safety. Specifically, the Group holds a Quality Assurance Committee every month that is participated in by members of top management, conducts activities aimed at preventing product complaints and accident, and works to provide proper product labeling. Although the Group has adopted the stance of so-called “food defense” and has established systems to prevent the deliberate contamination of foods with foreign substances and prove that there are no abnormalities, the Group’s brand image could be damaged in the event of contamination by foreign substances, and the Group’s performance and financial position could also be adversely affected by costs including recall costs, litigation costs, and compensation costs in the event of contamination by foreign substances. In addition, strengthening traceability to ensure the quality and safety of food could result in high costs for system construction, and this in turn could also have adverse effect on the Group’s performance and financial position.
The Group holds the personal information of a large number customers as a result of business activities including sales promotion campaigns and mail-order sales. The Group implements appropriate security measures for information management including systems to prevent this important information from becoming lost, misused, or tampered with. However, in the event of unpredictable circumstances such as power failures, disasters, defects in software and equipment, and computer virus infections, there is the risk of internal information including customer information being lost, leaked, or tampered with if information systems are destroyed, suspended, or suffer temporary disorder. If such a situation were to occur, it could impede with business activities, and this could have adverse effect on the Group’s performance and financial position.
In order to avoid potential risks from the suspension of the production line, the Group conducts disaster counter-measures that include regular disaster prevention inspections and equipment inspections as deemed necessary and the diversification of the supply chain. However, this does not mean that the full protection of production facilities from disasters such as natural disasters can be guaranteed. Such disasters could cause sales to decline and costs to increase, and this could have adverse effect on the Group’s performance and financial position.
Director, Kondo Institute for Culture & DiplomacyAmbassador, Special Envoy for UN Affairs
Kagome has set up the General Risk Countermeasures Task Force as a single integrated entity to further manage risk. The members of this group consist of Directors and particular Execu-tive Officers and Auditors, who deliberate risk countermeasure policies and countermeasures for serious risk issues and then
make swift decisions. In addition, five committees, namely the Compliance Committee, Information Security Committee, Quality Assurance Committee, Research Ethics Review Commit-tee, and Investment Committee have been established in an aim to enhance the risk management structure.
Kagome utilizes ISO26000 as the international standard for social responsibility to promote CSR management. During FY2013, an analysis was conducted on the state of initiatives covering seven
themes: organizational governance, human rights, labor practices, the environment, fair operating practices, consumer issues, and community involvement and development.
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KAGOME SUSTAINABILITY 2014
