At the core of ITO EN's management philosophy is our
emphasis on and commitment to each and every customer
At ITO EN, we consider consumers, shareholders, retailers, suppliers, financial institutions, and local communities our customers. We have always regarded everyone involved with ITO EN to be our customer, and we earnestly strive to address our customers’ needs through the feedback received, and by taking the perspective of our customers as the foundation of our management strategies. We will continue to remain true to our longstanding principle of “Always Putting the Customer First” and pursue new possibilities and challenges.
Income and profit increased due to further strengthening of individual brands, expansion of product lines, and the contributions of Group enterprises.
Based upon our governing principle of “Always Putting the Customer First,” and considered in the light of “what our customers might still like to see improved,” we strive to provide customer-oriented service in accordance with our five basic development concepts of “natural,” “healthy,” “safe,” “well-designed,” and “delicious.” During the fiscal year ended April 30, 2012, in addition to bolstering individual brands such as Oi Ocha, Kenko Mineral Mugicha (healthy mineral barley tea), Jujitsu Yasai (vegetables galore), and Ichinichibun no Yasai (a day’s worth of vegetables), we expanded our product portfolio with the launch of our Futatsu no Hataraki Catechin (Double Catechin Function) series featuring dual-purpose catechins, with Catechin Green Tea, Catechin Oolong Tea, and Catechin Jasmine Tea all receiving the official FOSHU (Food for Specified Health Uses) designation. Moreover, we succeeded in extending sales performance by actively encouraging internal Group synergies with the introduction of a new fragrant and flavorful black tea product, TEAS’ TEA NEW YORK, developed in collaboration with ITO EN (North America), the canned coffee product TULLY’S COFFEE, which retains the superb quality of Tully’s Coffee Japan and Asa no Yoo (morning yogurt), the lactic acid bacterial soft drink developed with Chichiyasu Company, which joined our Group last year. As a result, net sales increased 5.0% from the previous fiscal year, to ¥369,284 million.
As a result of focusing on enhanced efficiency of Group management, comprehensive overall cost reduction, increased cost performance, and improvement in Group subsidiary profitability, operating income increased 6.9% from the previous fiscal year, to ¥18,907 million, and ordinary income rose 8.8%, to ¥17,985 million. Moreover, net income for the fiscal year under review increased 20.5%, to ¥9,249 million, capping off the period with an increase in both revenues and income.
Together with our pursuit of a comprehensive quality control system from tea plantation to delivered product, we are promoting a tea-producing region development project.
At ITO EN, we ensure the safety and security of our customers through the establishment of a strict quality control system. A traceability system has been established that makes it possible to determine the specifics of raw materials and their cultivation particulars, such as source plantation and any use of fertilizers and agricultural chemicals, in addition to basic information such as product lot number, production facility, and date of production. ITO EN refuses to accept any tea leaves as green tea beverage ingredients which are unaccompanied by a complete cultivation record. In 2001, having identified the need to become more closely involved in the revitalization of farming communities and producers as part of our safety and security strategy, ITO EN introduced the Tea-Producing Region Development Project, aimed at the stable procurement of raw tea leaves. Through this Tea-Producing Region Development Project, we are able to provide expertise on tea leaf cultivation to producers, and at the same time purchase entire harvests of tea leaves from these growers. This offers producers the benefit of securing a fixed buyer for their products and facilitates more stable farm management. On the other hand, tea plantations developed through this system enjoy excellent cost competitiveness due to large operating scale, mechanization, and IT advantages. By building a mutually advantageous relationship in which ITO EN is able to reduce raw material procurement costs, the Tea-Producing Region Development Project has seen a steady annual increase in terms of production volume and area. In addition, ITO EN has implemented a system using radiation measurement instruments for inspection and monitoring of all beverage products to ensure impeccable quality prior to shipment, and has established the same inspection system for incoming raw tea leaf supplies. Every system, department, and individual at ITO EN shares a total commitment to ensure customer safety and security now and in the future.
Our overseas sales target focusing on North American business is set at ¥50 billion.
With respect to North American business, we established a local subsidiary, ITO EN (North America) INC., in 2001, which is solidly profitable with sales of about ¥5.5 billion. Prospects for the future appear bright, with demand for sugar-free tea beverages, our specialty, expected to expand significantly in North America. In fact, the green tea beverage market in North America has nearly reached ¥400 billion, but roughly 95% of this is sweetened green tea. Green tea in Japan is naturally sugar free, but in North America unsweetened green tea comprises only about a 5% market share. Against the backdrop of a Japanese food boom and growing healthy trends, the U.S. market is also seeing a gradual rise in interest in unsweetened green tea. In the future a major issue will be maximizing sales price reductions through measures such as localized production. In the context of our long-term management vision, we have set an overall sales target of ¥500 billion, and it is thought that roughly 10%, or ¥50 billion, of that can be expected to come from overseas sales. The pivotal axis in that strategy is certainly still expected to be the United States. The United States is a growth market with an increasing population. As the Hispanic population is experiencing particular growth, we consider it necessary to also research teas adapted to the tastes of our Hispanic customers. In addition, ITO EN is actively working to expand into China and Southeast Asian regions, with a view toward strengthening sales to transform the ITO EN brand into a “Global Tea Company.”
Medium- to Long-Term Business Plan
Aiming to become a global tea company
ITO EN aims to compete globally as a total beverage manufacturer, and the target of ¥500 billion is an interim milestone within the broader context of our long-term management vision. Specifically, we are putting in place a medium-term management plan until 2014 that emphasizes “sweeping reinforcement of existing fields,” “boldly breaking new ground,” and “structural reform toward higher profitability,” toward the achievement of this long-term vision. As a result, we have set a sales target of ¥400 billion and an operating profit target of ¥23 billion by April 2014, aiming for the highest operating profit level in the history of ITO EN. In efforts to augment our flagship ITO EN green tea beverage product lines, the company acquired Tully’s Coffee Japan Co., Ltd., in 2006, with its nationwide chain of coffee shops, and dairy products manufacturer Chichiyasu Company was purchased in May 2011, followed by sales of co-developed coffee and dairy beverages leveraging internal Group synergies. Business performance at Tully’s Coffee Japan Co., Ltd. has been excellent, and the chain currently boasts 461 stores nationwide (as of the end of April 2012). We are committed to creating synergies with these enterprises, while respecting their unique features and corporate styles. Going forward, ITO EN will continue to contribute to society through a broad range of CSR programs, further establishing its position in the green tea sector as the absolute leader in terms of beverage and leaf production from tea-producing regions through used tea leaf recycling, while competing effectively for one of the top two spots as a total beverage manufacturer. Irrespective of season, individual, location, or time, we aim to maintain ITO EN products as a constant companion to our customers, laying out a vision of ITO EN as a “Global Tea Company” that delivers green tea to the world as a unique Japanese gastronomic culture.
Based on a stable profit distribution with common stock and preferred shares, we intend to maintain a dividend payout ratio above 40%.
We are the only listed company issuing preferred shares Class-A preferred stock, domestically. The reason for their issue was a desire to increase the number of individual shareholders. Stockholders are included in our governing principle: “Always Putting the Customer First.” Furthermore, since ITO EN especially values its individual investors, and against the backdrop of a dividend for preferred shares of 125% relative to that for common shares, we wanted to offer our individual investors a familiar yield commodity in the context of a flow from savings to investment. In terms of premium redemption to shareholders, we will make every effort to meet the expectations of all concerned parties, including a share buy-back program.
With regard to the policy of profit distribution, management recognizes continued return of profits to our investors as our most important governing issue, and we will conduct, on an ongoing basis, consolidated dividend payout ratios in excess of 40%, forming the foundation for stable profit distribution. We intend to utilize investment to raise corporate value, in other words, to increase investment value for stockholders, and actively reduce internal reserves through the development of future business.