■ Company Features

1. Characteristics of the flower altar business

The strength of "Beauty Cad Holdings <3041>'s original business, the "flower altar business", lies in 1) the differentiation achieved through high design complexity as a pioneer of flower altars and 2) the unique distribution system, scale benefits, and competitive pricing through business efficiency. Regarding 1), it is utilized in planning and proposing creative altars according to the requests of the bereaved families, and a system has been established to deploy the same service nationwide while taking into account regional characteristics. On the other hand, regarding 2), collaboration with the "flower wholesale business" (such as its unique distribution system) and establishing a positioning as the "cost leader in the industry" have been important support, providing a significant advantage for responding to environmental changes and future business expansion.

2. Characteristics of the flower wholesale business

The strengths of the "flower wholesale business" include 1) a unique distribution system, 2) information gathering capabilities, 3) persuasive pricing (realizing the optimal procurement balance domestically and internationally), and 4) refrigerated transport. Concerning 1), it acquires nationwide market information through partnerships with central and regional wholesale markets nationwide and a network with national producers, providing speedy and satisfying product offerings to customers. Additionally, with regards to 2) and 3), recognizing price discrepancies by region even for the same standardized flowers, procurement personnel are assigned to each branch and sales office to understand price and demand trends in each area, offering optimal prices, and balancing the ratio of procurement from domestic and international sources to achieve optimal procurement and minimize risks due to sudden weather fluctuations or supply-demand volatility. For 4), to enhance customer service, it has been expanding a consistent cold chain from domestic and international production areas to consumers in collaboration with domestic logistics companies.

3. Realization of business synergy

By collaborating between the "flower altar business" and the "flower wholesale business", it has achieved 1) mutual complementing of profits, 2) reduction of inventory risks, and 3) creation of synergy through feedback of information. Concerning 1), while the price of flower altars in the "flower altar business" remains constant, a certain percentage of the procurement price in the "flower wholesale business" becomes profit. This enables mutual complementing of profits where if the procurement price decreases, the profit of the "flower wholesale business" decreases while the profit of the "flower altar business" increases due to lower costs. Additionally, for 2), in the event of sudden orders for funerals, the company adjusts flower procurement quantities in the "flower wholesale business" and focuses on wholesale with fewer varieties of flowers mainly used in the "flower altar business", thereby consistently maintaining a low flower loss rate. Concerning 3), by gaining insights into consumer and flower shop demand and consumption trends through the "flower altar business" and obtaining supply trends from production areas and wholesale markets through the "flower wholesale business", they efficiently and promptly feed back this information and mutually leverage it in their businesses.

4. Expansion of business capacity through M&A

The company has been working on expanding its scale and creating synergies (achieving large-scale logistics, mutual utilization of customer base and talent, and providing integrated services) through the development of peripheral businesses centered on M&A. The "bridal flower decoration business" entered in May 2007 can reduce costs by effectively reallocating management resources such as staff, vehicles, and facilities since it does not overlap with the busy season of the "fresh flower altar business". The subsidiary software development company SHF, which was acquired in April 2012, incorporates the company's altars and offerings into mobile device tools to promote sales to funeral-related companies nationwide and provides various business support systems for funeral-related companies. In the advancing digital transformation of the funeral industry, it has become possible to enclose relationships with customers through systems. Career Life Support, consolidated in June 2015, plays a role in supporting the integration of the supply chain in terms of personnel. While in recent years there has been a history of streamlining operations under a policy of focusing on core businesses, M&A remains an important growth strategy for future business expansion (improving market share). The insights and know-how accumulated through various M&A activities (including post-merger integration) have formed organizational capabilities and can be evaluated as strengths that will lead to successful future M&A endeavors.

(Written by Fisco Guest Analyst Ikuo Shibata)