Message from the COO

In 2024, in order to enhance the profitability of each business, I strived to improve the execution capabilities of gemba by following my motto: actual place, actual things, actual situation—the three-actuals principle. During dialogues with stakeholders, including investors, I am asked questions such as, “What do you mean when you say, ‘a power of gemba?’“ and “How will this power lead to profitability?” so I want to once again share my thoughts with you.

I believe the keys to successful management are “correct strategies,” “internal processes,” and the “mindset and actions of each employee.” No matter how correct our strategies are, any problems in our internal processes give rise to a string of obstacles. Moreover, even if our strategies are correct and our internal processes are perfect, the ones who ultimately implement the strategy are the employees. We need to look at whether each employee really understands the strategies and their importance for the survival of the company, and realizes they have a personal involvement in each situation they encounter. If we fail to think about this, no matter how great our strategies and internal processes are, the strategies will simply remain concepts on paper. On top of drawing up major management strategies and verifying their effectiveness, the degree to which management understands the real situation at the gemba is crucial.

Based on this concept, in 2024, I visited and hosted meetings at sites in Japan and overseas. As of April 2025, I had hosted over 100 meetings and had had the opportunity to engage in dialogue with more than 1,000 employees. Seeing their positive, hard-working attitudes gave me great encouragement, and using all my five senses to grasp the real situation at the gemba allowed me to identify various issues and areas for improvement. Again, so that each and every employee can put their all into value creation, I am sharing with management the issues that came to light at these meetings and am working with them to address these issues with a sense of urgency.

We are also strengthening collaboration with the management of operating companies both in Japan and overseas, and in addition to communicating daily, we make time to talk one-to-one once a month. The company presidents are also energetically visiting the gemba, sharing frankly with others their discoveries, and having open discussions on issues, countermeasures, and areas for improvement. Each president has different characteristics and approaches, but I feel they share a common goal and we are gradually building a sturdier management structure.

Furthermore, in regard to the foundation of all business, human capital, and the foundation of innovation, R&D, the appointment of senior executive officers Mr. Hama and Mr. Fujiwara, with their solid expertise and wealth of experience, further solidified our executive structure. On top of that, we also welcomed new non-executive directors onto the Board who have skills well suited to achieve Kirin Group’s ideal business portfolio. Mr. Konomoto is well-versed in overseas business, M&As, ICT, and DX (digital transformation), and Ms. Mikami is highly knowledgeable about research and production areas and the cosmetics business. These appointments will enable us to review our strategies and our execution processes from a variety of perspectives. In addition, our company’s non-executive directors of the Board are unique, because they go in person to our various sites in Japan and overseas to communicate and socialize with gemba employees. A major strength of our company is that all members of the management team can gain a cohesive understanding of the real situation of human capital and each business through initiatives like this.

In 2024, our revenue and normalized operating profit reached historical highs, but many of the companies’ increased revenue and profits are not merely the result of a single year’s efforts. They are proof that we learned from our failures and continued to use the trial-and-error method, that each action was conducted with a strong will to reach our goals, and that we improved our execution capabilities. Additionally, in the takeover bid for FANCL Corporation, we utilized our previous M&A experience and insights from past failures to put all we had into the post-merger integration, just as we did when we acquired Blackmores Limited in 2023.

Meanwhile, the profit attributable to owners of the company fell significantly after accounting for all expenses related to business restructures to move on to the next growth phase. Although the decision was made to avoid postponing issues, we sincerely regret our lack of foresight and analytical skills as managers. Because we can display our enhanced earnings capabilities by increasing net income, not just normalized operating profit, we aim to significantly increase profits in FY2025. As for our financial KPI, we have changed to non-normalized earnings per share, and will strengthen our commitment to improving our net income, and strive to attain our goals.

Furthermore, we reviewed the shape of our business plan. Previously, our Medium-Term Business Plans were formulated as solid three-year plans, but we have changed to plans that set long-term goals that are adjusted annually. Changes in the external environment are becoming increasingly challenging, so by flexibly reviewing the strategy every year in line with environmental changes, we believe we can realize sustainable growth. On the other hand, even if the formulating cycle has changed, our final goal remains the same. We will realize both short-term and medium- to long-term goals by adjusting the path we take depending on the current situation.

We will achieve our goals for 2025 while ensuring we make sufficient preparations toward achieving medium- and long-term growth.

First, since 2019, we have continued investing in the Health Science Business as a future growth driver, but we have labelled 2025 as a time to shift the business from the investment phase to the growth phase. We are committed to making the business profitable by the end of this year.

Regarding the Alcoholic Beverages Business, while the true value of brand strength is being tested, together with Kirin Brewery Company, Limited, and Lion Pty Ltd., we will continue to focus investment on core brands, provide more value-added products and services, and level up the business to one of higher profitability.

In the Non-Alcoholic Beverages Business, Kirin Beverage Company, Limited will enhance the Health Science beverage product mix and further accelerate the restructuring of our product portfolio. Coca-Cola Beverages Northeast, Inc., has over 40 years of history with our Group and, through steadily investing in human capital and facilities, has experienced vast expansion these past few years. Utilizing their strength in trustful relationships between management and gemba, Coca-Cola Beverages Northeast will further improve their operational excellence.

We are already beginning to discuss beyond KV2027. We aim to realize sustainable growth through CSV management, to contribute to the various life stages of consumers using our strengths, especially in the key social issue of health, to be a company people are glad exists, and to become one of the most trusted groups in the world. To build such a future, we will invest in the four organizational capabilities that make up our foundation and become a company that creates one innovation after another.

The first of these four capabilities is human capital. In particular, we will enhance investments in the human capital of the Health Science Business to become one of Asia-Pacific’s largest health science companies and evolve into a globally competitive organization. Regarding the human resources system, we will change to one that encourages each employee to rise to challenges and take proactive actions. We will actively invest in human capital in order to improve each person’s expertise, create strong individuals that can compete globally, and build a strong team rich in diversity.

Second is R&D. We are proud to have continued to create innovations based on advanced technology. However, we cannot simply rest here but must enhance our creativity for building innovative technologies and further improve our social implementation skills that lead to actual business. Going from 0 to 1, like when we developed Lactococcus lactis strain Plasma, is not easy, but we will continue to invest in developing new materials and functions related to health and focus on going from 1 to 10 and 10 to 100.

The third is ICT (information and communication technology), for which we are promoting the acquisition and fostering of DX human capital together with external parties and making great strides in advancing management and business processes. Additionally, we are actively introducing AI to quickly create a place where people and AI co-exist, which will in turn improve operational efficiency and drastically accelerate new value creation.

Fourth is marketing. While bringing our Group’s unique knowledge and know-how in brand businesses, mainly the Alcoholic Beverages and Non-Alcoholic Beverages Businesses, to a higher level with a focus on local citizens, we will also expand those strengths to the Health Science Business. By gaining a deep understanding of local needs, we will evolve into a Group that creates innovations, one after the other, that go beyond consumer expectations.

There is no shortcut to enhancing execution capabilities. Many of the initiatives I have mentioned in this message are on a modest scale and will only produce results if we continue to enact them. It is important that we, the executers, feel connected to consumers and patients, that we imagine their smiles and constantly think of ways to increase those smiles. And we need to be creative in this. This may sound naïve, but if all employees, from management to gemba, persistently work from this perspective, I believe we will become a strong Group with high execution capabilities.

Going forward, management, gemba employees, and employees supporting the gemba will unite as one team to enhance our execution capabilities and strengthen profitability. Additionally, I will provide sincere explanations to and continue dialogues with external stakeholders while promoting management that gains everyone’s sympathy and support.