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In 2022, we kicked off our third Mid-Term Management Plan,
which contains the basic strategy of pursuing top line growth
based upon our inherent ability to generate profits.
From the plan’s outset, however, a number of events
occurred, including the rapidly changing situation in Ukraine,
sharp depreciation of the yen, and a spate of natural disasters
gravely impacting agriculture. This resulted in an upheaval in
the management environment on a scale that we have never
experienced before.
In April 2022, we increased prices mainly of tomato condiments after factoring in rising costs associated with the economic recovery from the pandemic in our initial management
plan. Nevertheless, as time passed, the sheer scale of rising
prices for raw ingredients grew larger and for this reason,
we announced revisions to our full-year earnings forecast in
July 2022.
Additionally, we found that these higher prices for raw ingredients were not transient and would continue throughout the
period of the third Mid-Term Management Plan. Accordingly,
we revised our medium-term strategy for the stable
procurement of raw ingredients, implemented additional measures to reduce cost of sales, and conducted promotions
based on changes in the purchase behavior of customers.
In this manner, the entire company worked as one to address
these themes urgently. The year 2022 proved to be a time
when our employees displayed their ability to adapt to change
fostered during the pandemic, as they responded to the situation in a flexible and agile manner.

In the Domestic Processed Food Business, a major theme
was restoring sales of vegetable beverages, our mainstay
product, in addition to addressing rising prices of raw ingredients. By addressing customers’ mindset during the pandemic
of wanting to eat more vegetables to build their immunity, we
have been able to grow sales of our vegetable beverages.
However, tougher competition following the increased number
of products to address people’s vegetable consumption needs
caused sales of Yasai Seikatsu 100, our mainstay brand, to fall
below the level seen in FY2021.
The reason was because customers were thinking less
about Yasai Seikatsu 100’s fundamental value of providing a
Becoming a strong company capable of
overcoming challenges, sustainable growth,
and resolving social issues
We are facing a management environment with an unprecedented level of difficulty caused by the growing
severity of climate change, rising geopolitical risks, and ongoing depreciation of the yen, among other factors.
Nevertheless, I promise our stakeholders that we will overcome these challenges as we move toward what
Kagome strives for by 2025 and become an even stronger corporate group.
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3 KAGOME INTEGRATED REPORT 2023 KAGOME INTEGRATED REPORT 2023 4
President & Representative Director
quick and delicious boost to vegetable deficient diets. Based
on this, we changed direction of our information dissemination and promotions from the second half, enabling us to
recover sales to a level above the previous year in the final
two quarters.
In the International Business, raw ingredient prices continue
to rise. In response, we steadily reflected increased costs in
selling prices while also working to capture demand from the
food service and home meal replacement markets.
As a result, Kagome’s earnings in FY2022 featured revenue
of 205.6 billion yen (up 8.4% YoY) and core operating income*
of 12.8 billion yen (down 9.4% YoY). We managed to achieve
results beyond the earnings forecast revised in July 2022. This
provides us with positive momentum heading into FY2023.

* Core operating income is a profit index that measures constant business performance
by deducting cost of sales and selling, general and administrative expenses from
revenue plus share of loss (profit) of entities accounted for using equity method.

We order many natural farm-produced ingredients, which are a
mainstay raw material, in bulk one year ahead in the amount
required for the next year. Therefore, natural farm-produced
ingredients processed in 2022 are actually used in 2023. In
2022, the price of these ingredients including tomatoes surged
worldwide, but we will actually feel the impacts in 2023. The
increased amount of costs in 2022 and 2023 is expected to
be more than the 14.1 billion yen of core operating income
recorded in FY2021. This is the largest ever increase in costs
that we have experienced in such a short amount of time. It’s
truly a crisis situation. While profits will decline in FY2023,
how we deal with this crisis will have a major impact not only
on our short-term performance, but also the very future of
Kagome. For this reason, 2023 represents a genuine turning
point in our history.
In 2023, we will swiftly implement two initiatives. First, we
will respond agilely to bounce back from higher costs. As a
responsible manufacturer, we will strive to increase productivity and reduce loss. Nevertheless, the sudden and substantial
cost increases we are dealing with now have gone beyond the
level that can be dealt with using our own efforts. In response,
we carried out price revisions for approximately 150 consumer
products and approximately 178 institutional and industrial
use products in February 2023 after carefully explaining our
situation to customers and business partners, including on
the distribution side. Going forward, the entire Kagome Group
will work together to quickly restore sales volume which is
expected to decline temporarily following these price revisions. In the beverage business, starting in spring 2023, we
will roll out a bold new approach to communication embodied
by the concept of “promoting vividly colored vegetables that
make our everyday brighter.” Additionally, in the food products
business, we will step up information dissemination of tomato
condiments centered around Rice Omelet StadiumR 2023, a
competition that will decide the best tasting rice omelet in
Japan. These activities will not only restore demand, but also
help to generate new demand.
Moreover, we will step up our response to stable procurement of natural farm-produced ingredients. Kagome imports
more than 90% of these ingredients and our procurement
network spans some 179 locations (as of FY2021). This is the
result of our many years of efforts to build a diversified global
procurement network. This also helps us to minimize impacts
from changing crop conditions of each growing area. In critical growing areas such as Australia and Portugal, we have
established and expanded subsidiaries locally. With that being
said, to deal with surging prices for natural farm-produced
ingredients, emerging geopolitical risks, and the growing intensity of climate change over the medium to long term, we
strongly recognize the need to further reinforce our global
procurement network and we are now working to restructure
it recognizing this as an important theme.
Second, we are strengthening our exploration of businesses
that will become new growth pillars. Cost and time are
required for this, and over the next several years, the severe
management environment is expected to persist. However, if
we reduce the size of these exploration activities now, we will
be unable to grow further several years down the line. We are
strongly committed to sustaining these exploration activities
for new business in order to overcome the severe situation
and achieve sustainable growth.

The third Mid-Term Management Plan spans the four-year
period from 2022, seeking to achieve the target of what
Kagome strives for by 2025, which is defined as “become a
strong company capable of sustainable growth, using food as
a means of resolving social issues.” This vision reflects the
very value creation process that generates both social value
and economic value through our business activities. Even if
the management environment changes, this fundamental
approach will remain the same. But, we will review our quantitative targets set for 2025. Currently, revenue is outpacing
the initial target of 2% CAGR thanks to rising sales of the
International Business and price revisions. On the other hand,
core operating income has fallen short of our initial assumptions due to rapidly rising raw ingredients prices. Given this
situation, we will set new quantitative targets for 2025 and
announce them before the financial results briefing in
February 2024.
The basic strategy of the third Mid-Term Management Plan
is to achieve sustainable growth by taking four actions that
are organically connected. It represents the key to mediumterm growth under an increasingly severe management environment, and the entire Group is now working steadily toward
this end.

①Promote behavioral change in terms of
vegetable intake
Increasing vegetable consumption represents an important
initiative that resolves the social issue of helping people live
longer, healthier lives and leads to Kagome’s sustainable
growth. We will continue actively sharing information that will
promote behavioral changes to notice one’s own vegetable
deficiency and increase vegetable consumption. VegeCheckR*
surpassed a running total of 2.32 million measurements in
January 2023 following progress made with building out the
service structure over the past two years. We are installing the
machines in supermarkets and other stores, having confirmed
that they result in increased customer purchases of fresh
vegetables, and that VegeCheckR measurements serve as a
reason for visiting a store. Amid growing expectations from
distribution and retail, we will now quickly build a system for
increasing the number of VegeCheckR machines, whose measurements directly lead to behavioral change for vegetable
consumption, and promoting their continued use, as a key
content of this action.

* VegeCheckR: A device that measures vegetable intake level (0.1 to 12.0) and estimated
vegetable intake volume (according to six levels; g) simply by holding the palm of your
hand over a sensor for tens of seconds. Measurement is completed in tens of seconds
providing the convenience of being able to view results on the spot.

②Change to fan-based marketing
Fan-based marketing is a marketing activity for increasing
Kagome fans who identify with our brands, products and
services as well as who feel a strong sense of loyalty. We are
now working to develop various interactive content linking
farming with living and expanding opportunities to supply this
content. This activity aids in resolving the social issue of agricultural development and regional revitalization, and it passes
down our commitment since our founding to create value
from agriculture and deliver this to our customers.
Starting in 2022, we have been promoting an activity called
“food education beginning with growing.” This is because of
the survey Kagome conducted that found roughly half of all
people who consume 350 g or more of vegetables every day,
as recommended by the Ministry of Health, Labour, and
Welfare (MHLW), had experience cultivating or harvesting
these vegetables when they were children. Based on this
finding, we started “food education beginning with growing”
with the commitment to increase the number of future vegetable fans by providing children with opportunities to plant
and grow vegetables. Specifically, at Yasai Seikatsu Farm
Fujimi, we offer interactive classes where participants can
harvest vegetables seasonally. We also hold cultivation
classes and distribute tomato seedlings and organize tomato
harvesting events in stores. By organically developing a broad
range of interactive contents on vegetables, we will increase
contact points with vegetables

③Pursue both organic and inorganic growth
・Organic growth
Focusing on the domestic business’ ability to create demand
and the international business’ growth potential
Under the third Mid-Term Management Plan, we are pursuing
sustainable growth from the two angles of stable organic
growth of existing businesses and inorganic growth by acquiring new resources from M&A and other means.
First, with regard to organic growth, in the Domestic
Processed Food Business, we will focus on creating new
demand and restoring demand following the price revisions
I mentioned above.
Additionally, the organic growth of the International
Business will become a critical point in 2023. Particularly, the
primary processing business that manufactures tomato paste
and other products has seen its market environment undergo
significant changes. Before the pandemic, there was a worldwide surplus in tomato paste inventories and prices had been
stagnant. Therefore, Kagome’s primary processing business
had implemented a strategy of rationalizing production
volume to secure profits. The situation changed as food service demand increased after the resumption of economic activities from the pandemic, and this coupled with climate
change and the situation in Ukraine, caused a tightening in the
supply-demand balance for tomato paste. Considering that
the unstable international situation and growing climate risks
likely will continue going forward, it is very important now to
review the strategy of our primary processing business.
Capitalizing on our strength of owning subsidiaries in primary
processing, we will further strengthen a foundation underpinning the organic growth of the International Business by
securing stable production and supplies of tomato paste.

・Inorganic growth
New business creation through open innovation and growth
strategy in the United States
Three initiatives we have been working on over the past several years emerged as new budding businesses in 2022. First
is our partnership with TWO Inc., a start-up company involved
in plant-based foods. In 2022, we released a plant-based
omelet rice as a frozen food product made using Ever Egg, a
plant-based egg made from carrots and white beans, as our
first foray. This product received rave reviews from our distribution partners and customers. Following this success, in
April 2023, we will launch our second jointly developed product. We intend to use these new products to attract new users
of plant-based foods. Second is the launch of SOVER, a new
plant-based food brand established through our partnership
with Fuji Oil Co., Ltd. In October 2022, we began selling a
cereal made from soybeans and vegetables exclusively on our
official website in an effort to generate a new avenue of
demand. Third is the farm management support business for
processing tomatoes powered by AI. We established DXAS
Agricultural Technology LDA in Portugal together with NEC
Corporation. This new company is providing services to promote more eco-friendly and profitable farm management.
Going forward, we will continue to create buds of new growth
from such open innovation to quickly develop new businesses
that can contribute to our bottom line.
Regarding our growth strategy in the United States, the US
Growth Strategy Department established in 2021 is spearheading multi-faceted reviews on partnerships with other
companies and achieving inorganic growth through M&A and
other means.

④Strengthen the Group’s management foundation
and foster a culture for tackling challenges
Strengthening the Group’s management foundation is vital to
both flexibly addressing current themes and tackling the challenges posed by medium- to long-term growth. In particular,
regarding strengthening the value chain, as I have mentioned,
we have been working to further expand our global procurement network and also expand procurement of raw ingredients in Japan.
In terms of promoting digital transformation (DX), our implementation structure features the Digitalization Promotion
Committee, which is responsible for IT strategy planning
and deciding on major DX projects, and the DX Promotion
Committee, which covers human resource development and
efforts to foster a culture of DX. We are now making progress
with boosting productivity by building out our customer information systems and using RPA. In addition, we are implementing a training program targeting 10% of our workforce by 2025
to foster human resources who can tackle DX themes
independently.
We must continuously create innovation in order to achieve
sustainable growth as a company. Kagome believes that
providing a workplace where its diverse workforce can exercise their potential while feeling job satisfaction will result in
the creation of innovation. Toward this end, we are actively
hiring to reinforce diversity and foster a more inclusive culture.
We are focusing the most on creating a culture that values
psychological safety and establishing an environment where
our diverse workforce can frankly discuss matters and
exchange their opinions. We will increase psychological safety
and foster a culture that embraces the act of tackling challenges through analysis of the engagement survey and holding open discussions with employees through Talk with Top
Management.

Kagome engages in business activities that integrate agriculture, with health and everyday living. This is why sustainability
initiatives fit perfectly with our business activities seeking to
become a company capable of sustainable growth, using food
as a means of resolving social issues. Therefore, we need to
reflect long-term opportunities and risks into management
strategy. Toward this end, we established the Sustainability
Committee in 2022, putting into place a system for discussing
and reviewing matters with a longer term perspective and for
addressing material issues. The Sustainability Committee has
established four sustainability themes that once addressed
will enable us to create long-term value and achieve a sustainable society. These four themes are sustainable agriculture,
circular economy, reduced environmental impacts, and
CSR in the supply chain. Through its subcommittees the
Sustainability Committee is preparing for the future and examining our response, reflecting these findings in management
strategy.
Among the social issues we are looking to resolve, climate
change in particular has become even more serious. We
established a new reduction target for greenhouse gases for
2030, with the ultimate goal to achieve net-zero emissions of
greenhouse gases by the Group by 2050 to help prevent global
warming. This new target has received certification from the
Science Based Targets initiative (SBTi)*. To achieve this target,
we have prepared a roadmap leading to 2030 through our
company-wide cross-functional CO2 Reduction Project. Going
forward, we will actively invest in the environment with a longterm perspective following this roadmap.
Given the severe changes in management environment, we
established the position of CRO (Chief Risk Management
Officer) and the Enterprise Risk Management Committee in
order to clarify our system and roles within risk management.
This provides us with a mechanism for identifying and dealing
with specific risks.

* Science Based Targets initiative (SBTi): An international initiative to certify that a company’s reduction target for greenhouse gases is consistent with the standards set out in
the Paris Agreement

Today, the Kagome Group faces an unprecedented situation
of cost increases never seen before. Such a situation dictates
that we are even more aware of our vision to become a
“strong company capable of sustainable growth, using food as
a means of resolving social issues” and do what needs to be
done. In this manner, we are more than prepared to overcome
this situation. The cooperation and support of our stakeholders is also a key ingredient. We intend to evolve into a Kagome
Group that can grow continuously by co-creating new value
together with stakeholders.
In closing, I ask for your continuing support and understanding as we move forward.

Satoshi Yamaguchi
President & Representative Director