(1)Food safety

The Group sources products and ingredients from Japanese and overseas manufacturers and producers, and has production subsidiaries in Japan, the US, and China. We endeavor to enhance quality management and secure food safety by measures such as holding regular meetings with participants from the Quality Assurance Department and plants both in Japan and overseas. However, unpredictable issues and accidents in the manufacturing or processing lines could cause large-scale product recalls or large product-liability costs that would affect the Group’s financial status and management results.

(2)Inventory

The Group handles a wide variety of food ingredients and products. In particular, we maintain a certain amount of inventory centering on imported ingredients and products. We focus on inventory management to ensure we carry no excess inventory or expired product, by carefully taking into account harvest timing for agricultural products, production schedules at each plant, shipping schedules to our clients, and food expiry dates, as well as by assigning a person-in-charge for each product, who conducts frequent information exchanges with sales representatives. However, stock disposal due to disparity between sales forecasts and actual results, as well as substantial price fluctuations, could affect the Group’s financial status and management results.

(3)Stable procurement of food ingredients and their rising prices

As the Group sources food ingredients and products in and outside Japan, we face risks such as poor harvests due to natural disasters and climate change, which makes it difficult to secure consistent quality and quantity. We also face the possibility of our purchase and production costs being greatly affected by fluctuations in the overseas market prices of agricultural products due to changes in demand, or by exchange rate fluctuations. To counteract the above, we assign a procurement person-in-charge for each product, and strive to secure a consistent supply by conducting frequent information exchanges with each supplier and verifying the conditions of crops. However, if fluctuations occur on an unpredictable scale, the quality of ingredients and products may be compromised, or shortages may occur, which could impact the Group’s financial status and management results.

(4)Epidemics of communicable diseases or natural disasters

On top of sales offices, the Group also promotes its business through production plants and such. While the Group strives to control risks by such efforts as regularly reviewing the business continuity plan (BCP) and utilizing insurance, unpredictable natural disasters such as large earthquakes and extensive fires could cause loss or damage to the Group’s facilities and plants. In addition, large-scale epidemics of communicable diseases could damage our product supply which rely on ordering and shipping activities, and our production activities which rely on plants, thus affecting the Group’s financial status and management results.

(5)Impact of business globalization

The Group sources a portion of food ingredients and products from overseas, and operates production bases and sales businesses overseas. While the Group aims to manage related risks by designating departments dedicated to overseas procurements and a department to the management of overseas Group companies, wars, terrorism, political or social unrest, disadvantageous taxation and regulations, their amendments and abolition, and other unpredictable circumstances, or a defect in the governance of an overseas Group company, may affect the Group’s financial status and management results.

(6)Trade credit risks

The Group has experienced credit risks owing to accounts receivable of trade partners. We work to prevent credit risks by setting credit limits for each partner based on credit analyses and reviewing the partner based on the approval authority reflecting the credit limit. However, uncollected debts arising from unpredictable circumstances such as bankruptcy of our trade partners could affect the Group’s financial status and management results.

(7)Compliance with legal regulations, etc.

Our business activities are regulated in Japan by laws such as the Food Safety Basic Act and Food Sanitation Act, and in other countries where we conduct businesses by similar legal regulations. Although we have laid out appropriate measures to comply with these regulations, changes in these regulations or receiving a violation warning could limit the Group’s business activities and adversely affect our financial status and management results.

(8)Information and systems

On the back of the advancement of digitalization, besides order, purchase and accounting processing being conducted via information communications and data processing, communication with business partners, information exchanges within the Company, etc. also utilize electronic exchange methods. Therefore, the Group strives to reduce related risks by designating a department dedicated to information systems. However, if an information leakage, data loss, or virus attack occurs, the Group’s corporate activities may be hindered, which may affect the Group’s financial status and management results.

(9)Risks Related to Domestic and International Transportation

In response to labor shortages in the logistics industry, the Group is promoting a modal shift from trucking to rail freight and other modes of transportation, as well as unloading imported cargo at ports close to consumption centers. However, if problems arise, such as delays in product delivery due to a shortage of delivery drivers or a significant increase in logistics costs due to soaring labor and fuel costs, our group's business results may be affected. In addition, the increasing instability in global marine transportation may cause delays in the procurement of products and increases in logistics costs, which may affect the financial position and business performance of the Group.