■ Long-term Growth Strategy

Lacto Japan <3139> celebrated its 25th anniversary in May 2023 and regarded the next 25 years as the "second founding period". In January of the same year, it announced a new management philosophy, a long-term vision, and a midterm management plan "NEXT-LJ 2025" (November 2023 to November 2025). Until then, the midterm management plan was revised every term and rolled over. However, it changed to a fixed method of revising the plan every three years, explicitly stating the performance targets for each term. By clarifying the goals for each term, it aims to enhance the effectiveness of the plan, make it a surefire driving force for growth, and facilitate communication with shareholders and investors.

1. Management Philosophy and Long-term Vision

As a new management philosophy, it has defined the purpose as "connecting the world through food, making people healthy and smile." To achieve this, its mission for the future is to contribute to the future of primary industries that are the foundation of food, create new demand for dairy products, and realize a prosperous life for all stakeholders. Its basic value is "be fair." This management philosophy is collectively referred to as "Growing the Future," and it has been established as a corporate brand. It embodies the desire to contribute to a healthy future for people through food, contribute to the future of primary industries that are the foundation of it, and nurture a prosperous future for all stakeholders, including shareholders, trading partners, and employees.

The company sets a long-term vision, "LACTO VISION 2032," with the slogan "from a dairy product trading company to a conglomerate food company," "to become the highest handling dairy product company in Japan and the world," and "to create demand through best matching and contribute to the development of dairy and livestock industries." In order to become a conglomerate food company, it aims to expand the range of new products from existing products such as dairy products and pork to processed foods, side dishes, functional foods that are closer to final consumer goods, provide technical and know-how to the upstream production site such as improving fodder materials and human exchanges with dairy farmers in Asia, advance into downstream areas such as manufacturing and processing other than cheese, and further expand the trading company function. The word "conglomerate" has three meanings: "compound of products," "compound of businesses," and "compound of trading businesses." It aims to propose new solutions by combining other raw materials with dairy products, such as meat and functional food ingredients, as "compound of products," promote product development and business development utilizing not only the trading company function but also the maker function as "compound of businesses," and expand the trading business by aiming at "compound of trading businesses" by not only importing but also exporting from Japan to adjust the supply-demand balance of domestic dairy products.

Its numerical targets are to achieve a consolidated ordinary income of 6,000 million yen (3,134 million yen in the November 2022 period), a foreign ratio of 40% in the same income (27% in the same income), and a total handling volume of dairy products of 0.45 million tons by the November 2032 period (0.24 million tons in the same period). In addition, it has set the following six materialities and some quantitative targets as ESG targets.

(ESG Targets and Materialities)

1) Providing Safe and Secure Food (Thorough quality management, selection of suppliers, and enhancement of process cheese manufacturing system)

2) Contribution to Healthy and Rich Life (Procurement of dairy products that promote nourishment and health from around the world, enhancement of plant-based raw materials: handling volume of 1,900 tons in 3 years (131 tons in the November 2022 period), proposal of food and raw materials that match various lifestyles)

3) Stable Supply through Sustainable Dairy and Livestock Industries (Diversification of supply sources, best matching, training of dairy farmers, efficient and labor-saving procurement and supply through promotion of digitalization)

4) Adaptation to Climate Change and Reduction of Environmental Impact (Diversification of supply sources, contribution to reducing greenhouse gas emissions, reducing food loss and waste, reducing waste, optimizing logistics, reducing environmental impact at its own business sites and factories)

5) Creating a workplace where diverse talents can work with pride (promoting diversity: women's management ratio of 20% or more after 3 years and 30% or more after 10 years (19.7% in November 2022 period), development of a work-friendly environment: 100% male childcare leave acquisition rate after 3 years (66.7% in the same period), strengthening of human resource development: 3 times per person education expenses after 3 years).

6) Enhancement of governance (responsible supply chain management, full compliance with corporate governance, risk management).

(Author: FISCO Guest Analyst Shuji Matsumoto)