MORINAGA MILK

Medium-term Business Plan

Morinaga Milk is engaged in a Medium-term Business Plan, a three-year plan that runs from the fiscal year ending March 31, 2020 to the fiscal year ending March 31, 2022.
Prior to drafting the Medium-term Business Plan, we established the “Morinaga Milk Group 10-year Vision” looking one decade ahead. Under the vision, we have established targets for the fiscal year ending March 31, 2029, aiming to achieve an “operating profit margin of at least 7%,” an “ROE of at least 10%,” and a “ratio of overseas sales of at least 15%,” underpinned by a vision in terms of where the Morinaga Milk Group sees itself one decade ahead in terms of becoming “a company that balances ‘delicious and pleasurable food’ with ‘health and nutrition’,” “a global company that exerts a unique presence worldwide,” and “a company that persistently helps make social sustainability a reality.”
Underpinned by this Vision, we have set the next three years, extending through the fiscal year ending March 31, 2022, as a period during which we will establish a solid business platform. To that end, we have accordingly established the three basic policies of, 1) “achieving sustainable growth by enhancing initiatives laterally across our four pillars of business,” 2) “performing business with an ESG-focus aligned with our Corporate Philosophy,” and 3) “further strengthening our business base in a manner that supports foundations of our corporate activities.” We will also work to achieve our targets for net sales and operating income of ¥630,000 million and ¥30,000 million, respectively.

Long Term Vision (Morinaga Milk Group 10‐year Vision)

  1. Vision 1 A company that balances “delicious and pleasurable food” with “health and nutrition”
  2. Vision 2 A global company that exerts a unique presence worldwide
  3. Vision 3 A company that persistently helps make social sustainability a reality

10-year Targets
(for the fiscal year ending March 31, 2029)

Operating profit margin
3.8% At least 7%
ROE
8.6% At least 10%
Ratio of overseas sales
5.0% At least 15%

Basic Policies of the new Medium‐term Business Plan

Main Management Indicators

(Unit: billion yen)

FYE March 2019 FYE March 2022
(Plan)		 Differences between FYE March 2019: Increases / Decreases Differences between FYE March 2019: Rate of increase / decrease
Net Sales 583.6 630.0 +46.4 +8.0%
Operating Income 22.3 30.0 +7.7 ＋34.3%
Profit
attributable to owners of parent		 14.0 19.2 +5.2 ＋37.0%
Operating Income Margin 3.8% 4.8%
ROE
(Net Income / Equity Capital)		 8.6% 9.3%
Ratio of overseas sales 5.0% 7.1%
Dividend (yen) 55 yen Target payout ratio of 20%

The table can be scrolled to the side.

Sales and Operating Income by Business Segment

(Unit: billion yen)

Net Sales FYE March
2019		 FYE March 2022
（Plan）		 Differences between FYE March 2019: Increases / Decreases Differences between FYE March 2019: Rate of increase / decrease
B‐to‐C Business 303.8 333.0 +29.2 +9.6%
Wellness Business 56.0 61.0 +5.0 +8.9%
B‐to‐B Business 96.9 101.0 +4.1 +4.2%
Overseas Business 28.9 45.0 +16.1 +55.5%
Other / Deleted 97.9 90.0 ‐7.9 ‐8.1%
Total 583.6 630.0 +46.4 +8.0%
Operating Income FYE March
2019		 FYE March 2022
（Plan）		 Differences between FYE March 2019: Increases / Decreases Differences between FYE March 2019: Rate of increase / decrease
B‐to‐C Business 10.4 15.2 +4.8 +46.4%
Wellness Business 3.2 4.2 +1.0 +30.8%
B‐to‐B Business 5.8 7.1 +1.3 +21.5%
Overseas Business 1.6 3.5 +1.9 +124.1%
Other / Deleted 1.3 0 ‐1.3 --.-%
Total 22.3 30.0 +7.7 +34.3%

The table can be scrolled to the side.

Basic Policy Ⅰ Achieving sustainable growth by enhancing initiatives laterally across our four pillars of business

① Further Enhancing our Main Brands

Optimize the value of the eight brands that support the Morinaga Milk Group’s foundation

Main 8 brands net sales plan
Mt. RAINIER CAFFÈ LATTE
Optimize brand exposure by strengthening the lineup, including dairy alternative ingredients
Create sales areas utilizing Morinaga Milk’s proposal capacity, including other cup‐type drinks
Bifidus yogurt
Capitalize on bifidobacteria to set Morinaga Milk products apart from competitors; expand their reach, including other functional yogurt series
Morinaga Aloe Yogurt
Starting point with sale of products with functional claims through functions of aloesterol
Ensure absolute dominance in the fruit yogurt market by pursing Morinaga Milk’s own strengths
PARTHENO
As the top brand in this category, create new demand based on plain flavors
PARM
Propose new functional value and develop ice cream that becomes a national favorite as the top brand for ice cream bars
Pino
In addition to health values, cultivate a wide range of consumers, including seniors, and expand sales channels
MOW
Exhaustively pursue high‐quality ingredients and production methods, based on the avoidance of stabilizing agents and emulsifiers
Fresh Mozzarella Cheese
Expand by proposing recipes with 100 g types and one‐bit types; aim for 50% increase

② Accelerating Development of Bifidobacteria and Proprietary Seeds

Carry out strategy to differentiate Morinaga Milk from competitors by equating Morinaga Milk with bifidobacteria; Increase income 150%

compared to FYE March 2019

B‐to‐C

Wellness

B‐to‐B

Overseas

Capital investment in Morinaga‐Hokuriku Milk Industry Co., Ltd.
Future plans: Quadruple supply of bacteria

③ Developing Overseas Business

Ten‐year target: Triple as percentage of net sales As core of business, ensure high ongoing growth and establish solid foundation

Growth strategy for Overseas business

  • Establish sales bases at four global poles

    • Bases in the EU, North America, China, and Southeast Asia
      Expand B‐to‐B business

  • Expand bifidobacteria and lactoferrin

    • Top share in global market for lactoferrin
      Grow into long‐term revenue source
      Strengthen expansion of bacteria business (bifidobacteria)
      Become a major player in the bacteria business

  • Further growth for MILEI GmbH

  • Expand infant and toddler milk

    • Restore the Morinaga brand to its position in the top 10 of the world’s share

④ Building the Foundations of Next‐generation Healthcare Business

Utilize techniques developed with dairy and provide products that improve health Contribute to the extension of healthy lifespans

  • Develop products that address health issues and create a business structure that can provide them appropriately
  • Create a foundation for a next‐generation health care business that helps extend healthy lifespans and improve wellbeing
  • Develop nutritional supplements for all generations and build up digital and EC channel
Roadmap for next‐generation healthcare business

Basic Policy Ⅱ Performing business with an ESG-focus aligned with our Corporate Philosophy

Establish Seven Priority Issues Set KPI for all Priority Issues and aim to achieve them

  • Health and Nutrition
  • Human Rights
  • Nurturing the Next Generation
  • Corporate Governance
  • The Environment
  • Supply Chains
  • Human Resource Development
Health and Nutrition
We offer health and nutrition by developing and selling products that combine functionality and good taste “For Ever Brighter Smiles”.
The Environment
Manufacturing safe and reliable products while striving to reduce energy use and cut waste and helping to create a sustainable society.
Human Rights
Carry out business activities that consider human rights, respect diversity, and create an environment in which all people can perform to their full potential.
Supply Chains
We procure raw materials and manufacture products with an emphasis on safety and reliability, and consistently provide high‐quality products.
Nurturing the Next Generation
We support the healthy growth of children who will contribute to creating a sustainable society.
Human Resource Development
We will focus on developing human resources who can achieve “For Ever Brighter Smiles”.
Corporate Governance
We will continue to work on establishing and augmenting a highly effective governance system to achieve sustainable growth and improve corporate value.

Basic Policy Ⅲ Further strengthening our business base in a manner that supports the foundations of our corporate activities

Strengthen management foundation through initiatives linking the long‐term vision and management guidelines

  1. 1. Corporate Brand
    Achieve the corporate communication theme of “Partnering Together for Life for a Health Body and Mind”
  2. 2. Human Resource Development
    Address rapid decline in working population, improve Group’s management control level
  3. 3. Capital Investment
    Set up the new bacteria plant, increase production capacity for lactoferrin; improve efficiency and make investments for streamlining after production is suspended at Kinki and Tokyo Plants
  4. 4. Research & Development
    Promote R&D in priority areas, allocate resources in optimal way, strengthen development capacity; clarify research issues addressing changes in external environment
  5. 5. Capital, Interest‐bearing Debt
    Secure financing in anticipation of large‐scale investments in the future (capital investments, M&A), sell assets, bring DER to 0.5 or lower
  6. 6. Capital Policy
    Generate 100 billion yen in operating cash flow over three years; allocate to “growth investments,” “financial stability,” and “shareholder returns”

Shareholder Returns

Dividend

  • Shareholder returns with a target payout ratio of 20%
  • Generate operating cash flow totaling ¥100 billion over three years
    Secure a foundation for growth investments and financial stability and distribute shareholder returns
  • Dividends per share (Left‐hand axis: yen)
  • Payout ratio (Right‐hand axis: %)
  • * The dividend ratio for FYE March 2020 excludes the impact of the transfer of beneficial interests in trust to a consolidated subsidiary. The figure would be 15.2% when not excluding this impact.
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