ito en · of the launch of the mixed vegetable and fruit beverage jujitsu yasai, and ito en will...
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ITO ENTODAY
Products withnatural ingredients
Natural
Products that bring goodness and health to
people’s lives
Healthy
Safe and enjoyableproducts
Safe
Simply designed packagingattests to good taste
Well-designed
Good-tasting products that bring happiness
Delicious
Management Principle “Always Putting the Customer First”
Mission Statement
Product DevelopmentPhilosophy
Since its establishment in 1966, ITO EN has consistently adhered to the management principle of “Always Putting the Customer First.”
The foundation of business management at ITO EN is our commitment to place importance on each and every customer.
Our mission is to put the
customer first, make integrity
our stock in trade, spare no
effort, and earn the confidence
and trust of society.
To satisfy customers, ITO EN engages in product development grounded in five concepts.
Retailers
Suppliers
Financial Institutions
Local Communities Shareholders
Consumers
Definition ofITO EN Customers
Contents
ITO EN provides customers with beverages with delicious natural flavor, placing importance on the goodness of nature. In accordance with the management principle “Always Putting the Customer First,” we think of our customers with single-minded purpose and bring goodness and health to people’s lives by adhering to the “Still Now” ethos of considering what our customers might like to see improved. We endeavor to create products based on the five product development concepts of “natural,” “healthy,” “safe,” “well-designed,” and “delicious” and continue to pursue new possibilities and challenges.
The ITO EN Way of Business
MarketingMarketing
ITO EN BrandsITO EN Brands
CSRCSR Corporate GovernanceCorporate Governance
Tully’s Coffee JapanTully’s Coffee Japan
Production SystemProduction System
Overseas OperationsOverseas Operations
Chichiyasu CompanyChichiyasu Company
04
08
14
16
18
19
20
21
A Message from the Management
Business Overview
Non-Consolidated Review of Operations
Consolidated Financial Highlights
Non-Consolidated Operating Highlights
Market Data
Corporate Data/
Board of Directors and
Corporate Auditors/
The ITO EN Group/
The History of ITO EN
Financial Highlights and
Business Results/
Stock Information
01CORPORATE BOOK 2013
ITO ENFUTURE
The foundation of ITO EN’s marketing strategy is the Route Sales System for directly delivering products to customers from 201 sales offices nationwide.
A Nationwide Network of 201 Sales OfficesA Nationwide Network of 201 Sales Offices
For many years, we have cultivated the optimum raw materials for Oi Ocha in partnership with tea producers. Domestic tea leaves are the source of the high quality of our products, and we purchase more than 20% of tea leaf production in Japan.
Domestic Tea Leaf Purchasing Ratio of 23.2%Domestic Tea Leaf Purchasing Ratio of 23.2%
ITO EN pioneered the world’s first canned green tea beverage Kan-iri Sencha (Canned Green Tea) in 1985 and introduced Oi Ocha, our current flagship brand, in 1989. We pursue taste and quality by using no flavorant additives and 100% domestic tea leaves.
Oi Ocha, the No. 1 Green Tea Beverage BrandOi Ocha, the No. 1 Green Tea Beverage Brand
With the aim of becoming a global tea company, we are establishing the ITO EN brand and opening new markets for green tea from business bases in New York, Florida, Hawaii, Australia, China, and Southeast Asia.
Worldwide Network of 11 Production and Sales BasesWorldwide Network of 11 Production and Sales BasesStrengths
0202 CORPORATE BOOK 2013CORPORATE BOOK 2013
ITO EN set a target of net sales of ¥500 billion as an interim milestone within the broader context of our long-term management vision. We aim to become a “Global Tea Company” that delivers green tea to the world in promoting Japan’s unique gastronomic culture.
Establishment as a total beverage manufacturer
¥351.6 billion ¥400 billion
¥500 billion
Strengthening the domestic management base toward
becoming a global tea company and accelerating
overseas expansion
Long-Term Management V is ion
Changes in business environment
- Economic and consumer trends- Declining birthrate and aging population, etc.
Changes in the industry
- Increasing competition within the industry- Accelerated global competition
Sweeping reinforcement of
existing fields
Boldly breaking new ground
Structural reform toward
higher profitability
Global Tea Company
Sales: ¥351.6 billionOperating profit: ¥17.6 billion
Consolidated basis
Commencement of medium- to long-term plans
Medium-term management plan
Milestone in broader long-term management vision
Establishment of
new management base
Fiscal year ended April 30, 2011 Sales: ¥400 billion or moreOperating profit: ¥23 billion
Consolidated basis
Fiscal year ending April 30, 2014
Sales: ¥500 billionOperating profit margin: 8%Dividend payout ratio: Above 40%
Consolidated basis
Engage on every level from the
tea-producing region through to
used tea leaf recycling, as well as
handling leaves and beverages
themselves
Create a new gastronomic
culture in every country of the
world, contributing to quality in
lifestyle
■
■
Basic Strategy
0303CORPORATE BOOK 2013CORPORATE BOOK 2013
At the core of ITO EN’s management philosophy is our
emphasis on and commitment to each and every customer.
Daisuke Honjo, PresidentHachiro Honjo, Chairman
Management Pr inciple
In developments in the beverage industry in the fiscal year under review, ended April 30, 2013, increased consumer health consciousness and favorable summertime weather contributed to another year of higher sales volumes in the beverage market overall. Nevertheless, the industry faced an increasingly adverse business environment due to the prolonged economic recession, consumer frugality, and price declines in the market. In these business conditions, following the renewal of mainstay products Oi Ocha Ryokucha (Green Tea) and Oi Ocha Koi Aji (Dark), we renewed Oi Ocha Hojicha (Roasted
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 possi-bilities and challenges. 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 develop products satisfying our customers and provide customer-oriented service in accordance with our five basic development concepts of “natural,” “healthy,” “safe,” “well-designed,” and “delicious.”
Business Performance for the Fiscal Year Ended April 30, 2013
04 CORPORATE BOOK 2013
A Message from the Management
Net Sales
(Millions of yen) Operating Income (Millions of yen)
Operating Income Ratio (%)
Net Income (Millions of yen)
ROE (%)
Net Income and ROEOperating Income and Operating Income Ratio
09 10 11 12 13 14(4/30) (Plan)
403,957440,000
09 10 11 12 13 14(4/30) (Plan)
20,250
5.2
23,000
5.0
(4/30) (Plan)14
12,300
10.5
09 10 11 12 13
11,244
10.3
Green Tea), Oi Ocha Genmaicha (Green Tea with Roasted Brown Rice), and products sold in heatable PET bottles. We also pursued further brand value enhancement and sales expansion by offering a broad product line, launching products in slim, easy-to-hold 320ml PET bottles, and adding the new series Oi Ocha Zokkon (Cherished Blend), a product that offers highly aromatic, fresh-brewed quality. In September 2012, ITO EN renewed the package design of Futatsu no Hataraki (Double Function) Catechin Green Tea,
a product certified as a food for specified health uses that helps to reduce fat and bad cholesterol, and sales are developing favor-ably. In the results for vegetable beverages, the cumulative sales volume of Ichinichibun no Yasai (A Day’s Worth of Vegetables) from January to November 2012 surpassed the 10
million case milestone, and sales have continued to steadily increase since. September 2012 marked the 20th anniversary of the launch of the mixed vegetable and fruit beverage Jujitsu Yasai, and ITO EN will continue to deliver health, security, and safety in addition to flavor to ensure acceptance of this product by consumers of all ages. In addition, sales of Asa no Yoo, a yogurt drink developed jointly with Chichiyasu Company, have steadily increased since
its introduction in November 2011, with cumulative sales volume exceeding two million cases. Furthermore, NEOS Corpo-ration became a consolidated subsidiary of the ITO EN Group, and ITO EN will seek to increase sales by strengthening vending machine operations and actively selling products through NEOS Corporation. In overseas operations, ITO EN (North America) INC. steadily increased sales of TEAS’ TEA. To actively develop the business in fast-growing Southeast Asia and neighboring countries and regions, ITO EN established ITO EN Asia Pacific Holdings Pte. Ltd. and joint venture ITO EN Singapore Pte. Ltd. in Singapore. In addition, to further solidify the business foundation in China, ITO EN established ITO EN BEVERAGE (SHANGHAI), LTD. and built a new factory at Fujian New Oolong Drink Co., Ltd. In the restaurant business, Tully’s Coffee Japan Co., Ltd. continued to perform well, achiev-ing higher sales and income. As a result, net sales increased 9.4% from the previous fiscal year to ¥403,957 million. On the earnings front, as a result of a review of expenses coupled with efficient management, operating income rose 7.1% to ¥20,250 million, ordinary income increased 10.7% to ¥19,914 million, and net income climbed 21.6% to ¥11,244 million.
05CORPORATE BOOK 2013
ITO EN aims to operate globally as a total beverage manufacturer and has set a target of net sales of ¥500 billion as an interim milestone within the broader context of our long-term management vision. To pave the way toward achievement of this long-term vision, we will reinforce our domestic sales structure and accelerate overseas expansion. For our medium-term management plan, which concludes in the fiscal year ending April 30, 2014, we are emphasizing such specific objectives as “sweeping reinforcement of existing fields,” “boldly breaking new ground,” and “structural reform toward higher profitability.” Under the plan, we have achieved net sales exceeding ¥400 billion one year ahead of schedule and mounted a Groupwide effort to achieve our target of record-high operating income of ¥23 billion. As one aspect of business development, since 2001 we have been devoting our efforts to the Tea-Producing Region Development Project for the stable procurement and more efficient production of high-quality domestic green tea raw materials, the nurturing of producers, and the active utilization of idle land. Production volume is increasing each year, and we are proceeding with the objective of bringing 2,000 hectares of tea plantation area under cultivation.
Overseas, we are expanding into Singapore, Indonesia, Vietnam, Myanmar, and other markets in active business development targeting fast-growing Southeast Asia and neighboring countries and regions. ITO EN has opened ITO EN BEVERAGE (SHANGHAI), LTD. to further solidify the foundation of the business in China and is building a new factory at Fujian New Oolong Drink Co., Ltd. to put in place a structure for meeting beverage demand in China. Looking to the future, ITO EN will continue to contribute to society through a broad range of CSR programs. We will establish ourselves as the absolute leader in the green tea sector, involved in everything from the development of tea-producing regions to the recycling of used tea leaves as well as a total beverage manufacturer that vies to be one of the top two market leaders in Japan. 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 in promoting Japan’s unique gastronomic culture.
Long-Term Management Vision
Note: Includes existing cultivation contracts with tea plantations
Growth in production volume and tea plantation area under the Tea-Producing Region Development Project
0
1,000
2,000
3,000
06 12 130
500
1,000
1,500
4,000(Tons)
2,000(Ha)
14
Production volume
(Plan) (Plan)15(Plan)
07
1,210
470
08
1,910
690
09
2,120
790
10
2,360
810
11
2,600
850
2,690
860800
380
Tea plantation area
06 CORPORATE BOOK 2013
A Message from the Management
To offer our shareholders a new yield commodity, in September 2007, we issued preferred stock (Class-A preferred stock) with the stipulation that it will not be converted into common stock. We are the only listed company issuing such shares domestically. The background for setting a dividend for preferred stock 25% higher than the dividend for common stock is the desire to offer individual investors a familiar yield commodity at a time when funds are flowing from savings to investments. We make every effort to satisfy expectations for shareholder returns through means including a share buy-back program. ITO EN considers the continuous return of profits to shareholders one of the most important management priorities. We make stable profit distribution as the basis for our profit distribution policy, provide a continuous stream of dividends,
and aim for a consolidated payout ratio of 40% or more from a combination of common stock and preferred stock. We utilize internal reserves for purposes such as investment for corporate value enhancement, strive to increase corporate value—that is, shareholders’ investment value—and intend to actively return profits to investors through future business development. In our efforts to achieve these goals, we look forward to continuing to earn the trust and support of our shareholders.
09 10 11 12 13 14(4/30) (Plan)
Dividend per Share (Yen) Payout Ratio (%)
Dividend and Payout Ratio per Share
Preferred Stock
Common Stock
38
42.9
38
39.1
09 10 11 12 13 14(4/30) (Plan)
48
48.7
48
44.8
July 26, 2013
Daisuke Honjo, PresidentHachiro Honjo, Chairman
Shareholder Returns
Outline of ITO EN Preferred Stock
Note: Class-A preferred stock was listed on the First Section of the Tokyo Stock Exchangein September 2007.
Voting rights
Dividend
Stock split
Shareholder gift coupons
1
(1)
(2)
Common StockSecurities Code(2593)
Preferred Stock(25935)
(1) With regard to voting rights, voting rights for preferred stock are activated when there is no vote to issue preferred dividends for two consecutive years.
(2) Minimum is ¥15. Balance due to pay accumulates when dividend cannot be paid.
×
1.25
Residual assetsRights to demand distribution
07CORPORATE BOOK 2013
Route Sales System Provides Customer Feedback
Since our establishment in 1966, ITO EN has made “Always Putting the Customer First” its core management principle, and appreciating all of our customers is the foundation of our corporate governance. Along with consumers, we view everyone who comes into contact with our company, including shareholders, retailers, suppliers, financial institutions, and local communities as ITO EN customers, and all of our employees are continuously mindful of our customers and strive to build a mutually beneficial relationship based on a solid foundation of trust.
“Always Putting the Customer First”
Our Route Sales System supplies products directly to customers via a nationwide sales network comprising 201 offices. The Route Sales System provides unique benefits to ITO EN and its customers by enabling the Company’s sales force to interact with and gather market intelligence directly from its customers, while providing and developing offerings of ever-greater value. Furthermore, ITO EN operates a Field Marketing System for those customers we are unable to reach through direct delivery, wherein we secure shelf space and promote sales for our core products, building bridges between customers and our company while providing meticulous service to our customers. ITO EN has established a well-balanced sales system, including convenience stores, supermarkets, vending machines, and general retailers, making our products available whenever and wherever our customers might wish to purchase them.
ITO EN’s Route Sales System
Route Salesperson
Newcustomers
Generalretailers
Vendingmachines
●●●
Delivery, displaysMerchandising, campaign proposalsInformation provision
●●
Information-gatheringBusiness negotiations
●●●●
ReplenishmentMaintenanceProduct layoutSales, inventory control
The foundation of our marketing strategy— “Giving shape to the customer’s feedback”
Northern/Eastern Kanto44 offices
Tokyo26 offices
Southern Kanto27 offices
Chubu19 offices
Kansai25 offices
Chugoku/Shikoku/Kyushu34 offices
Business Structure That FacilitatesRisk Management and Prompt Action
Consumers
Sales
Administration
R&D Production
Production andDistribution Block System
Five blocks coveringall of Japan
Fabless Management* to Reduce
Five Block Production System(As of May 2013)
Field Marketing SystemStore visits, securing of shelf space,
strengthening of sales promotion
Proposals from consumersand employees
Products, raw materials, suppliesSafety confirmation at every stage
Sharing of success stories
Route Sales SystemDirect contact between consumers
and employeesDelegation of authority to
front-line operations
Quality Control System
Retailers
Voice System
Capital Investment and Distribution Costs
Marketing Strategy
p*Outsourced manufacturing
Hokkaido/Tohoku26 offices
Business Overview
08 CORPORATE BOOK 2013
Strict, Comprehensive Quality Control Systems
Producer CustomerITO EN Outsourcing Partner ITO EN
The QR code is indicated on the packaging of core products, including Oi Ocha.
Quality Control “QR Code” Mark
Scan with a mobile phone
Radioactive substance inspection system
Food Safety and Security Approach
Raw material Product
Product Traceability SystemUnder ITO EN’s product traceability system for domestically grown raw materials, we check the cultivation control records of tea producers, paying particular attention to information concerning the use of agricultural chemicals. We have established a mechanism that makes it possible to ascertain product history to a level of detail that includes the production plant, production date, raw materials used, and cultivation data by tracing lot numbers recorded on green tea beverages delivered to consumers. We pursue the same degree of detail for vegetable beverages made from raw materials produced overseas. To ensure that we use only safe raw materials that comply with Japanese laws and regulations, we examine certificates of compliance from our suppliers around the world regarding the cultivation, processing, and management of raw materials at production sites.
Raw Material Procurement, Highly Selective Purchasing, and the Tea-Producing Region Development Project
R&DThe Central Research Institute conducts basic research into the flavors, stability, and health benefits of ITO EN’s products. Ordinary product development activities involve research into processing methods for raw materials and manufacturing technologies based on product concepts supported by market research and analyses of consumer preferences. We conduct agricultural technology research on green tea cultivation and manufacturing processes with the aim of ensuring stable supplies of premium-quality tea leaves optimized for use as beverage ingredients and research aimed at developing and nurturing tea and vegetable plantations in Japan and overseas. This research is producing valuable results.
Our responsibility for the safe and stable procurement of raw materials,the supply of products, and research in the health benefits of tea
For more details, please visit:http://www.itoen.co.jp/eng/research_development/index.html
Please access the following link for more on quality control (Japanese only):itoen-hinkan.jp
InspectionInspection
Crude tea processing factory
Finished tea processing procedure
ITO E
N packaging
Respective company w
arehousing
Shop
Bevera
ge
pro
duct
Tea le
af
pro
duct
Tea
grower
Insp
ec
tion
Production System
Insp
ectio
n
We have vigorously pursued using 100% domestically grown tea leaves in making Oi Ocha since its introduction. Although the quality of tea leaves vary slightly according to annual climate conditions, region of production, and cultivation method, our employees pride themselves on conscientiously evaluating quality at the point of production, and obtaining raw tea directly from tea markets and tea growers. In addition, the Tea-Producing Region Development Project, which was established to grow tea fields for the optimum raw materials for our Oi Ocha brand by working together with tea producers, has been increasing its output each year. In the area of beverage manufacturing, with a highly effective cooperative system with manufacturing facility partners, we employ stringent quality assurance measures based on detailed production manuals developed specifically for each production line and product.
As a company dealing with foodstuffs, ITO EN believes that its commitment to quality assurance is the key essential factor in ensuring the survival of the Company. From product design through to raw materials, packaging materials, production, and distribution, ITO EN has established a rigorous quality control system and strives to ensure product safety. We never purchase tea leaves, the raw materials for green tea beverages, that are unaccompanied by a cultivation record.
09CORPORATE BOOK 2013
ITO EN is dedicated to product research and development based on its five product development concepts: “natural,” “healthy,” “safe,” “well-designed,” and “delicious”
Oi Ocha
In 1985, ITO EN pioneered the world’s first canned green tea beverage Kan-iri Sencha. Four years later, in 1989, we introduced Oi Ocha, which is currently our flagship brand. Over the years since its launch, Oi Ocha has developed into a brand loved by consumers across Japan thanks to our rigorous pursuit of taste and quality based on the use of no flavorant additives and 100% domestic tea leaves. ITO EN will continue to build an unshakable position for Oi Ocha as one of Japan’s leading beverage brands.
Futatsu no Hataraki Catechin Series
In 2011, ITO EN launched the “double function” green tea beverage Futatsu no Hataraki (Double Function) under the official FOSHU (Food for Specified Health Uses) designation. For individuals concerned about body fat and cholesterol, we offer this beverage along with oolong tea and jasmine tea to comprise the Futatsu no Hataraki series.
Jujitsu Yasai and Ichinichibun no Yasai
Jujitsu Yasai (Vegetables Galore) and the 100% vegetable beverage Ichinichibun no Yasai (A Day’s Worth of Vegetables) have achieved long-term sales success and significant market penetration. A broad selection of vegetables has been carefully selected as raw ingredients in accordance with the salient characteristics of each of these products. In addition to ensuring the safety of all ingredients, we also pay close attention to their components and nutritional value, in dedicated pursuit of maximum health benefits.
Brand Development
TULLY’S COFFEE
Together with Group member Tully’s Coffee Japan Co., Ltd., ITO EN launched coffee in a bottle-shaped can under the Tully’s brand in 2009. Tully’s Coffee operates more than 500 stores nationwide and was Japan’s first specialty coffee shop chain, receiving broad acclaim for its coffee’s excellent flavor and quality.
TEAS’ TEA NEW YORK
Based on the concept of “new black tea with a pleasant aroma and mild taste,” we adapted the TEAS’ TEA black tea beverage brand sold in the United States by ITO EN (North America) INC. to suit Japanese tastes, and introduced the black tea beverage TEAS’ TEA NEW YORK here in 2009.
Asa no Yoo
Working together with long-established dairy producer Chichiyasu Company, which was Japan’s first yogurt manufacturer and marketer and joined our Group in May 2011, we developed a lactic acid bacterium soft drink called Asa no Yoo. The beverage utilizes a bacterial culture containing over 90% enterococcus faecalis, along with oligosaccharide and calcium.
evian
Since 2008, ITO EN has distributed exclusively in Japan the global mineral water brand evian, which is sold in about 130 countries worldwide.
10 CORPORATE BOOK 2013
Business Overview
ITO EN (North America) INC. was established in New York in 2001. Developing business operations focusing on the mass market and natural food markets across the United States, the company aims to introduce authentic green tea and to establish the ITO EN brand. Consumer awareness of green tea in the United States is increasing year on year, and in the Manhattan borough of New York City we have introduced our core marketing tool, the Route Sales System, in which the close involvement with our customers has resulted in steady inroads into that market. In the United States, obesity is recognized as one of the greatest threats to health, and the increased interest in healthy eating habits and exercise continues to gain momentum. The healthy properties of green tea known to the Japanese are gradually gaining recognition in the United States, and demand for green tea is growing across the country. This trend is exemplified by the growing popularity of Oi Ocha in Silicon Valley and the surrounding area. Moreover, with a view to operational expansion, we acquired shares in Mason Distributors, Inc., a nutritional supplement manufacturer and marketer, making the firm a Group company. It is our intention to further bolster and expand our operational base, leveraging the respective strengths of our two firms.
In 1987, ITO EN (USA) INC. was established in Hawaii, where it commenced the manufacture and sales of canned beverages such as tropical juices, sugar-free teas, and coffee. The mainstay product was Aloha Maid tropical juice, which enjoyed deeply seated popularity with the local population, but in recent years the health trend has been reflected in increased sales of tea beverages.
North America Hawaii
China and Southeast AsiaOceania
Expanding the “ITO EN” brand overseas
In anticipation of increased future demand for green tea raw materials and to secure a stable supply, ITO EN AUSTRALIA PTY. LIMITED was established in 1994 in Victoria, Australia, where the climate resembles that of Japan, and a tea-producing region development project was initiated. In addition to being sold domestically in Australia, the green tea produced there is expected to see demand as a raw material for U.S.- bound products. Also, Australian sales of the Japan-produced Jujitsu Yasai: Veggie SHOT were commenced in 2010, as part of our expansion plans for beverage business there.
In China, the joint venture firm Ningbo Shunyi Tea Products Co., Ltd. in Zhejiang Province is involved in activities such as tea plantation management and tea leaf processing, while Fujian New Oolong Drink Co., Ltd. in Fujian Province conducts manufacturing and sales of beverages mainly for the domestic market. In Southeast Asia, a region enjoying striking economic growth, we have established a new business base in Myanmar in addition to our bases in Singapore, Indonesia, and Vietnam. We plan to accelerate business
development in these
promising markets.
Overseas Business
11CORPORATE BOOK 2013
C S RThe ITO EN Group’s basic CSR promotion policies/Aiming for sustained growth and development together with our stakeholders
Based on our governing principle of “Always Putting the Customer First,” the ITO EN Group aims to enhance corporate value as we continue to grow and develop as a socially responsible enterprise. For this purpose, in February 2013 we established the CSR Charter for the purpose of effectively promoting CSR (corporate social responsibility) Groupwide to better meet the expectations of our stakeholders, including consumers, shareholders, retailers, suppliers, financial institutions, local communities, government, NPOs, NGOs, and employees. Under the charter, we will promote CSR in accordance with the “ITO EN Group Basic CSR Promotion Policies.” In the promotion of CSR, we utilize the international ISO 26000 and domestic JIS Z 26000 standards to practice “Basic CSR” in the seven core subjects of social responsibility defined in ISO 26000. Among these, we have positioned “the environment,” “consumer issues,” and “community involvement and development” as priority CSR areas in which the Company contributes to society by leveraging the core business attributes of the ITO EN Group.
The ITO EN Group does not discriminate based on gender, age, ethnicity, race, religion, or creed, and we engage in business activities that reflect respect for fundamental human rights.
Human Rights
Fundamental Concepts for Each Core Subject of CSR
Labor PracticesSince its founding, the ITO EN Group has operated under the merit system. We will continue to create workplaces that promote the honing of individual skills and abilities through friendly competition based on a spirit of true harmony and increase the work motivation of each and every employee.
Consumer IssuesThe ITO EN Group creates products and provides services in accordance with the development concepts “natural,” “healthy,” “safe,” “well-designed,” and “delicious” under a strict quality control system implemented at every production stage from raw materials to finished product. We intend to further reinforce our quality control system and proactively disclose information on matters including quality control and raw ingredients. In addition, we aim to further enhance customer satisfaction through the development of universal design products and the promotion and handing down to f uture generations of tea culture through utilization of the tea taster system, our internal certification system.
Fair Operating PracticesEvery officer and employee of the ITO EN Group will take seriously the expectations and wishes of stakeholders, including consumers, investors, business partners, and local communities, and conscientiously respond by ensuring the legality and appropriateness of management and the conduct of business on the basis of compliance with the laws of Japan and other countries, internal regulations, and ethical standards.
The EnvironmentThe ITO EN Group fully recognizes that protecting the global environment and ensuring sustainability for the next generation is an important responsibility. For this reason, in the fiscal year ended April 30, 2013 we revised the ITO EN Group “Environmental Policy” and are working to conserve water resources and protect biodiversity. We have set environmental targets based on this policy and, taking into consideration the entire value chain, recognize and work to minimize the impact that the Group’s business activities have on the global environment. As part of our efforts that extend across the entire value chain from plantation to used tea leaves, to ensure that concern for the environment is reflected in used tea processing and products, we have realized value enhancement by developing the ITO EN proprietary Used Tea Leaves Recycling System, which takes advantage of the useful ingredients that remain in used tea leaves and transforms them into familiar everyday products.
As a good corporate citizen, the ITO EN Group participates in community activities and contributes to community development through various activities to vitalize local communities. We engage in the Tea-Producing Region Development Project to procure a portion of the high-quality domestic green tea raw materials used to make Oi Ocha, utilizing idle land in six districts of four prefectures in Kyushu: Miyazaki, Oita, Kagoshima, and Nagasaki. The project has fostered good relationships with local communities through such benefits as stabilization of plantation management for producers and promotion of local agriculture. We also assist communities in addressing issues related to the environment, diet, and culture through our main business. In addition, since the Great East Japan Earthquake we have provided ongoing reconstruction support under the concept “Building ties through tea.” We continuously hold “Tea Lover Gatherings” to help residents of stricken areas maintain ties and connections.
The “Kurumin” certification mark
for companies that support the
development of the next generation
yyyyy yy pp
Recycled products made from used tea leaves for the effective use of used tea leaves
(Received Minister of the Environment Prize at the 20th Grand Prize for the Global Environment Award)
Radioactive material testing equipment
Tea seminar (Dietary Education)
A tea plantation in the Kitsuki district of Oita Prefecture
Community Involvement and Development
For more details, please visit:http://www.itoen.co.jp/eng/csr/index.html
12 CORPORATE BOOK 2013
Business Overview
Corporate Governance
In the ITO EN Founding Charter, the ITO EN Group has formulated the basics for management to continually grow and develop as an enterprise and enhance corporate value: cooperate with its stakeholders, including the government, local communities, consumers, shareholders, retailers, suppliers, and financial institutions, and fulfill its corporate social responsibility (CSR). The management principle above is the basic concept of our corporate ethics and an everlasting truth that supports our corporate governance. Based on this principle, every officer and employee of the Company is active in promoting concerted efforts to realize a sustainable society in line with the interests of all stakeholders and strives to repay their trust. To conduct appropriate corporate governance, as a company with a Corporate Auditors system, our corporate auditors check and audit business conditions, the decision-making process, and other matters regarding the respective representative directors, the directors in charge, and the employees of ITO EN Group companies. As of July 26, 2013, three of the four corporate auditors were outside corporate auditors, and the improvement of management transparency is addressed by reflecting the opinions of such outside experts on management. Internal and outside corporate auditors attend every meeting of the Board of Directors, offering fair and impartial and audit opinions on overall corporate affairs and each item of business, and audit business execution by directors in accordance with the audit policy set forth by the Board of Corporate Auditors.
Governance System
Internal Control SystemThe ITO EN Group has established its internal control system to achieve the following objectives through enhanced transparency in the business operation of the Group in accordance with the basic policy for internal control systems, which was resolved at the Board of Directors’ meeting in May 2006: 1) to improve the effectiveness and efficiency of business operations; 2) to ensure the reliability of financial reporting; 3) to comply with the applicable laws and regulations relevant to business activities; and 4) to safeguard corporate assets. Risk Management SystemRecognizing a myriad of risks associated with compliance, information security, quality, the environment, the conservation of corporate assets, and disasters and accidents with regard to the business execution of the Company, the Company has designated a Risk Department; drawn up internal rules, regulations, and guidelines; and established a cross-sectional risk management system. Corporate AuditorsAs of July 26, 2013, the Company had four corporate auditors consisting of one standing corporate auditor and three part-time corporate auditors. The three part-time corporate auditors are outside corporate auditors who have considerable expertise in legal, financial accounting, and taxation affairs. For the purpose of auditing the legality, etc., of directors’ business execution under the audit plan, the corporate auditors attend important meetings such as those of the Board of Directors to verify the legality and appropriateness of the process and the results of managerial decision making. The corporate auditors also peruse important documents and physically investigate the status of the business execution of the administration, sales, and production departments. Audit results summarized by each auditor are reported at the monthly Board of Corporate Auditors’ meeting to encourage information sharing and exchanges of opinion among the corporate auditors. Furthermore, the Independent Auditor and the Internal Auditing Department periodically meet to make efforts to improve the effectiveness of audits through collaboration via consultations on the audit status. Independent OfficersFrom the viewpoint of protecting ordinary shareholders, the Company has designated two outside directors (Hirokazu Uchiki and Morikazu Taguchi) and three outside corporate auditors (Yoshiaki Takasawa, Yutaka Tanaka, and Masahiro Nagasawa) as independent officers who have no conflicts of interest with ordinary shareholders.
General Meeting of ShareholdersElection, dismissal Election, dismissal Election, dismissal
Audit
Audit
Election, supervision
Audit
[Business execution] [Internal control]
Compliance Committee
・・
・
Budget CommitteeLong-Term Management Planning CommitteePersonnel System Improvement Committee
・
・・
Internal Control Promotion Committee Environment CommitteeOthers
Indep
endent A
udito
r [Manag
ement m
onito
ring]
Ad
vice, gu
idan
ce
Executive Board Internal Auditing Department
Legal DepartmentCompliance Department
Representative Director
Board of Corporate Auditors[Management monitoring]
Board of Directors[Management, supervision]
Dedicated committees
Ou
tside leg
al cou
nsel, etc.
System of Corporate Governance
Internal Control Initiatives
The ITO EN Group has established a sound management system based on the management principle of “Always Putting the Customer First,” which ensures the transparency, soundness, and legality of management, and swiftly discloses appropriate information
The Company’s Board of Directors consisted of 18 directors as of July 26, 2013. At the monthly meeting of the Board of Directors, all of the important items on the agenda are determined with regard to 1) management principles to “raise shareholder value”; 2) business plans; and 3) the decision making and progress of organizational and financial policies. These Board meetings also monitor the status of operations and supervise the business execution of the Company and its subsidiaries. In addition, the Compliance Committee, which was established as an advisory organ to the Board of Directors, deliberates whether the daily business execution of the Board of Directors complies with the applicable laws and regulations.
The Executive Board meeting is held monthly to assist the Board of Directors and the President. Its business execution includes establishing overall execution policies in accordance with the basic management policy, which has been resolved by the Board of Directors, and determining important business items via consultations.
13CORPORATE BOOK 2013
Sales: ¥28,788 million (1.2% decrease from the previous fiscal year)
8.1%Net Sales Share
Tea Leaves
Japanese Tea Beverages Sales: ¥163,012 million (0.5% increase from the previous fiscal year)
46.3%Net Sales Share
ITO EN concluded an import contract with the China National Native Produce and Animal By-Products Import and Export Corporation in 1979 that made it Japan’s first importer of oolong tea leaves and succeeded in commercializing the world’s first canned oolong tea beverage in 1981. Our jasmine tea has a relaxing aroma that makes it highly popular among women.
Sales: ¥17,145 million (9.9% increase from the previous fiscal year)
Product Range Overview
ITO EN succeeded in creating the world’s first green tea canned beverage in 1985 and has subsequently taken advantage of state-of-the-art beverage processing technology in the pursuit of quality enhancement and flavor. We aspire to be a global tea company with a broad product range that includes hojicha (roasted green tea), genmaicha (green tea with roasted brown rice), mugicha (barley tea), and sobacha (buckwheat tea).
Product Range Overview
In addition to building a comprehensive production system that encompasses everything from the sourcing and processing of raw tea to packaging and sales, ITO EN tirelessly pursues quality enhancement, engaging in proprietary technological development in areas such as tea growing methods and tea processing techniques. We are expanding our line of high-quality, delicious tea bags and instant tea products.
Product Range Overview
4.9%Net Sales Share
Chinese Tea Beverages
Increasing consumer health consciousness has fueled the high popularity of ITO EN vegetable beverages. Jujitsu Yasai (Vegetables Galore) is a carrot-based beverage with no added sugar or salt that brings out the natural sweetness of vegetables, and Ichinichibun no Yasai (A Day’s Worth of Vegetables) contains 30 types of vegetables. Another vegetable beverage, Risou no Tomato, delivers the sweetness of ripe tomatoes.
Sales: ¥50,630 million (18.4% increase from the previous fiscal year)
Product Range Overview
14.4%Net Sales Share
Vegetable Beverages
ITO EN offers the Vitamin Fruit line of juices, beverages with food nutrient properties that come in a variety of delicious natural fruit flavors and are fortified with vitamin C, and other seasonal products that provide the deliciousness of seasonal fruits all year round.
Sales: ¥13,190 million (2.5% increase from the previous fiscal year)
Product Range Overview
3.7%Net Sales Share
Fruit Beverages
Jointly developed with Tully’s Coffee Japan Co., Ltd. and sold since November 2009, the Tully’s Coffee series is a line of canned coffee beverages with rich flavor and aroma that has won recognition for great taste.
Sales: ¥27,843 million (21.5% increase from the previous fiscal year)
Product Range Overview
7.9%Net Sales Share
Coffee Beverages
Kaori Kaoru Mugicha(Aromatic Barley Tea)
Oi Ocha
Sarasara Green Tea(Powdered)
Chashi ga Zokkon
Horeta Ocha(A Tea Master’s Cherished Blend)
Kenkou Mineral Mugicha(Healthy Mineral Barley Tea)
Oi Ocha Zokkon(Cherished Blend)
Oi Ocha Green Tea
Catechin Jasmine TeaRelax Jasmine TeaOolong Tea
Risou no Tomato(The Perfect Tomato)
Ichinichibun no Yasai(A Day’s Worth of Vegetables)
Jujitsu Yasai(Vegetables Galore)
Hiyashiume(Japanese Apricot)
Vitamin Fruit
Risou no Orange(The Perfect Orange)
Vitamin Fruit
Risou no Pineapple(The Perfect Pineapple)
W Coffee
ICED COFFEE
Tully’s Coffee
ROYAL PRESSO
Tully’s Coffee
BARISTA’S BLACK
14 CORPORATE BOOK 2013
Non-Consolidated Review of Operations
Tully’s Coffee is a chain of specialty coffee shops that originated in Seattle. Tully’s currently operates more than 500 shops nationwide, providing high-quality products and service in a relaxing atmosphere.
Overview of Principal Consolidated SubsidiariesSales: ¥21,071 million (16.7% increase from the previous fiscal year)
ITO EN (North America) INC., established in New York in 2001, is creating and developing a green tea market in the United States, where increasing health consciousness is fueling higher demand for sugarless tea beverages and green tea bags.
Sales: $76,658 thousand (10.5% increase from the previous fiscal year)
TEAS’ TEA NEW YORK, developed in collaboration with ITO EN (North America) INC., is a new black tea brand that features a pleasant aroma and mild taste. This brand delivers a new flavor sensation in black tea with reduced calories and caffeine.
Sales: ¥16,053 million (5.5% decrease from the previous fiscal year)
Product Range Overview
4.6%Net Sales Share
Black Tea Beverages
ITO EN offers beverages certified as FOSHU (Food for Specified Health Uses), containing amino acids, calcium, dietary fiber, vitamins, and other ingredients that maintain and promote health. We will continue to propose products beneficial in health maintenance by engaging in ingredients research.
Sales: ¥6,100 million (3.6% increase from the previous fiscal year)
Product Range Overview
1.7%Net Sales Share
Functional Beverages
In 2008, ITO EN concluded an exclusive agreement with DANONE of France for distribution in Japan of evian natural mineral water, which offers a perfect balance of natural calcium and magnesium.
Sales: ¥9,074 million (5.6% increase from the previous fiscal year)
Product Range Overview
2.6%Net Sales Share
Mineral Water
ITO EN takes pride in offering a broad range of competitive beverages, including the lactic acid bacterium beverage Asa no Yoo, jointly developed with Chichiyasu Company, carbonated beverages, sports drinks, and food beverages made from carefully selected ingredients, such as Dainagon Shiruko and Tokuno Corn Potage.
Sales: ¥16,937 million (39.1% increase from the previous fiscal year)
Product Range Overview
4.8%Net Sales Share
Other Beverages
ITO EN offers products that put the health of our customers first, including nutritional supplement bars and dietary supplements.
Sales: ¥3,029 million (5.3% decrease from the previous fiscal year)
Product Range Overview
0.9%Net Sales Share
Others
Tully’s Coffee Japan ITO EN (North America)
Tully’s Kabukiza(Commemorative 500th shop)
y
TEAS’ TEA
Grapefruit Tea
TEAS’ TEA
Herb & Lemon Tea
TEAS’ TEA
Bergamot & Orange Tea
Nata de CocoKurozu to Calcium(Black Vinegar and Calcium)
Kurozu to Moromisu(Black Vinegar and
Unrefined Sake Vinegar)
Migakarete Sumikitta
Nihon no Mizu(Japan’s Clear Water)
evian
Designer’s Bottle
evian
Sharapova Design
Asa no Yoo
Low Sugar/Low Fat(Yogurt Drink)
Kabocha no Potage(Pumpkin Potage)
Stylee Sparkling
Asa no Yoo Stick(Yogurt Stick)
Wakaba no Aojiru(Green Juice Young Leaf)
VEGESTICK
15CORPORATE BOOK 2013
(1) The Company implemented a two-for-one stock split on March 1, 2006. (2) On September 3, 2007, ITO EN allocated free of charge Class-A Preferred Stock at a ratio of 0.3 shares to one share of common stock.(3) Effective from the fiscal year ended April 30, 2007, the Company and its domestic consolidated subsidiaries adopted the new accounting standard, “Accounting Standard for Presentation of Net Assets in the
Balance Sheet” (Statement No. 5 issued by the Accounting Standards Board of Japan on December 9, 2005), and “Implementation Guidance for the Accounting Standard for Presentation of Net Assets in the Balance Sheet” (Guidance No. 8 issued by the Accounting Standards Board of Japan on December 9, 2005) (collectively, the “New Accounting Standards”), and “Accounting Standard for Treasury Shares and Appropriation of Legal Reserve” (Accounting Standards Board of Japan, August 11, 2006 final revised, Statement No. 1) and “Implementation Guidance on Accounting Standard for Treasury Shares and Appropriation of Legal Reserve” (Accounting Standards Board of Japan, August 11, 2006 final revised, Guidance No. 2).
Years ended April 30
Profit and LossNet Sales (Millions of yen)Ratio of Cost of Sales (%)Operating Income (Millions of yen)Operating Income Ratio (%)Net Income (Millions of yen)
Financial ConditionTotal Assets (Millions of yen)Total Net Assets (Millions of yen)Total Liabilities (Millions of yen)Current Ratio (%)Equity Ratio (%)Debt/Equity Ratio (%)Free Cash Flows (Millions of yen)Capital Expenditures (Millions of yen)Depreciation and Amortization (Millions of yen)
Financial IndicatorsReturn on Equity (ROE) (%)Return on Assets (ROA) (%)Price Earnings Ratio (Times) (Common Stock)Price Earnings Ratio (Times) (Class-A Preferred Stock)Price Book Value Ratio (Times) (Common Stock)Price Book Value Ratio (Times) (Class-A Preferred Stock)Earnings per Share (Yen) (Common Stock)Earnings per Share (Yen) (Class-A Preferred Stock)Book Value per Share (Yen) (Common Stock)Book Value per Share (Yen) (Class-A Preferred Stock)Cash Dividends per Share (Yen) (Common Stock)Cash Dividends per Share (Yen) (Class-A Preferred Stock)Consolidated Payout Ratio (%) (Common Stock)Consolidated Payout Ratio (%) (Class-A Preferred Stock)Consolidated Payout Ratio (%) (Common Stock and Class-A Preferred Stock)Vending machine installation (units)Number of employees
288,07749.3
21,0667.3
11,685
121,28477,41943,865
201.063.856.7
8,3714,5171,232
15.910.132.0
4.8
(1)130.91
(1)869.21
(1)(3)57
30.2
117,1244,817
2006
239,23549.7
17,5057.3
8,731
102,05562,25839,797188.9
61.063.9
11,584481
1,205
14.78.7
24.3
3.4
193.48
1,388.04
50
25.8
104,5034,229
263,76449.4
19,7107.5
10,451
109,92169,31140,609
199.463.158.6
10,1162,7731,111
15.99.9
22.1
3.3
233.15
1,550.52
70
30.0
111,5164,559
20052004
ROA
Total Assets
Operating Income Ratio
Net Sales
Net Sales and Operating Income Ratio
(Millions of yen)
0
120,000
240,000
360,000
480,000
0
3
6
9
12
13(4/30)
04 05 0806 07 09 10 11 12
(%)
Total Assets and ROA
13(4/30)
04 05 0806 07 09 10 11 12
(Millions of yen)
0
70,000
140,000
210,000
280,000
0
3
6
9
12 (%)
Consolidated Financial Highlights
5.0
403,957
4.8
244,970
16 CORPORATE BOOK 2013
(Millions of yen)
2013
310,20048.5
22,7967.3
12,261
137,314(3)85,936
51,377164.962.659.8
-3,4214,3201,813
15.09.5
29.1
4.2
137.59
(3)963.71
47
34.2
119,8205,010
328,07148.9
19,2365.9
10,096
154,687104,519
50,168187.167.548.0
-9,2217,0852,330
10.66.9
22.1(2)12.4
2.2(2)1.3
81.61(2)91.69
836.81(2)845.61
38(2)48
46.652.348.3
123,6925,223
332,84750.8
10,6133.2
4,765
160,80399,98960,814
179.762.160.9
-1,8712,8044,287
4.73.0
33.917.81.51.0
35.4745.47
800.94805.94
3848
107.1105.6106.6
133,6245,346
332,98450.9
12,4533.7
5,996
179,846100,45579,390168.3
55.879.1
10,6211,8687,034
6.03.5
32.118.01.81.2
45.4455.41
808.37813.37
3848
83.686.681.4
141,4235,237
351,69250.6
17,6795.0
7,675
192,462101,63090,831164.4
52.789.5
17,5812,1009,011
7.64.1
24.115.11.71.3
59.3169.28
821.36826.36
3848
64.169.365.6
149,8795,278
369,28452.1
18,9075.1
9,249
224,843106,010118,833
190.147.1
112.213,394
4,03110,892
8.94.4
20.114.2
1.71.3
72.1882.18
856.76861.76
3848
52.658.454.4
148,0935,285
201220112010200920082007
403,95752.4
20,2505.0
11,244
244,970113,942131,028
182.046.3
115.514,7696,639
13,718
10.34.8
26.518.42.52.0
88.6498.64
923.24928.24
3848
42.948.744.5
155,0655,307
Free Cash Flows
Capital Expenditures
Consolidated Cash Dividends per Share (Common Stock)
Consolidated Cash Dividends per Share (Class-A Preferred Stock)
Consolidated Payout Ratio (Common Stock)
Free Cash Flows and Capital Expenditures
0
(Millions of yen)
-20,000
-10,000
10,000
20,000
13(4/30)
Consolidated Cash Dividends per Share (Common Stock),Consolidated Cash Dividends per Share (Class-A Preferred Stock), and Consolidated Payout Ratio (Common Stock)
(Yen)
0
20
40
60
80
13(4/30)
0
30
60
90
120 (%)
04 05 0806 07 09 10 11 1204 05 0806 07 09 10 11 12
6,639
42.9
38
48
14,769
17CORPORATE BOOK 2013
Net Sales
(Millions of yen)
0
100,000
200,000
300,000
400,000
1309 10 11 12(4/30)
Operating Income and Operating Income Ratio
(Millions of yen)
0
6,000
12,000
18,000
24,000
13(4/30)
09 10 11 12
Operating Income Ratio
Operating Income
Net Income and ROE
(Millions of yen)
0
4,000
8,000
12,000
16,000
0
4
8
12
16
(4/30)1309 10 11 12
ROE
Net Income
0
2
4
6
8
(%) (%)403,957
20,250
10.3
11,2445.0
Analysis of Operating Results
OverviewDuring the fiscal year ended April 30, 2013, Japan continued to face economic headwinds, and the outlook for the economy remained uncertain due to factors including financial problems in Europe and an economic slowdown in developing countries. At the same time, expectations for the economic and financial policies of Japan’s new administration and the impact of those policies led to trends toward a weaker yen and higher stock prices, and promising signs of a business recovery began to appear. In the beverage industry, increased consumer health consciousness, favorable summertime weather, and other factors contributed to a continued increase in sales volumes in the beverage market overall. Nevertheless, the industry faced an increasingly adverse business environment due to the prolonged economic recession, consumer frugality, and price declines in the market. The beverage industry faced continued hardship as a result of sluggish personal consumption due to consumer frugality and declining prices. In these business conditions, in keeping with the management principle of “Always Putting the Customer First,” the ITO EN Group vigorously engaged in business activities while constantly seeking to identify and address areas of customer dissatisfaction in the beverage market. In December 2012, pesticide residue levels that exceeded Japanese food safety limits were detected in three of our oolong-tea-bag products, which led to a voluntary recall of these products. We deeply apologize to our customers, shareholders, and all concerned for the inconvenience caused. We intend to further reinforce our quality control and are undertaking initiatives to prevent a recurrence. As a result, ITO EN recorded consolidated net sales of 403,957 million yen, up 9.4% from the previous fiscal year. On the earnings front, a review of expenses coupled with efficient management resulted in operating income of 20,250 million yen, up 7.1% year on year, ordinary income of 19,914 million yen, up 10.7%, and net income of 11,244 million yen, up 21.6%.
Results by Business Segment
Tea Leaves and Beverages BusinessIn the domestic business, following the renewal of mainstay products Oi Ocha Ryokucha (Green Tea) and Oi Ocha Koi Aji (Dark) in May 2012, ITO EN undertook further value enhancements and sales expansion by renewing Oi Ocha Hojicha (Roasted Green Tea) and Oi Ocha Genmaicha (Green Tea with Roasted Brown Rice) in August and September. ITO EN has launched products in slim, easy-to-hold 320ml PET bottles and will pursue further brand value enhancements and sales expansion by adding the new series Oi Ocha Zokkon (Cherished Blend), a product that offers highly aromatic, fresh-brewed quality, and offering a broad product line. In September 2012, ITO EN renewed the package design of Futatsu no Hataraki (Double Function) Catechin Green Tea (certified as a food for specified health uses), which helps to reduce fat and bad cholesterol, and its sales are developing favorably. Among vegetable beverages, cumulative annual sales volume of Ichinichibun no Yasai (A Day’s Worth of Vegetables) from January to November 2012 surpassed the 10 million case milestone for the first time, and sales are steadily increasing. In addition, September 2012 marked the 20th anniversary of the launch of Jujitsu Yasai, a mixed vegetable and fruit beverage, and ITO EN will continue to deliver nutrition and peace of mind in addition to flavor to ensure product acceptance by consumers of all ages, from children to the elderly. Also, in November 2011 ITO EN launched a new brand of yogurt drinks, Asa no Yoo, developed jointly with Chichiyasu Company. The line has seen steady growth, with cumulative sales volume exceeding 2 million cases. NEOS Corporation became a consolidated subsidiary of the ITO EN Group at the end of the second quarter of the fiscal year ended April 30, 2013, and ITO EN will seek to increase sales by strengthening vending machine operations and actively selling products through NEOS Corporation.
Consolidated Financial Review
18 CORPORATE BOOK 2013
(4/30)1309 10 11 12
Total Liabilities and ROA
(Millions of yen)
0 0
3
6
9
12ROA
Total Liabilities
(4/30)1309 10 11 12
Total Assets and Equity Ratio
(Millions of yen)
0
70,000
140,000
210,000
280,000
0
25
50
75
100Equity Ratio
Total Assets
(4/30)
Cash Flows from Operating Activities
Cash Flows from Investing Activities
Cash Flows from Financing Activities
Consolidated Cash Flows
(Millions of yen)
1309 10 11 12-26,000
0
-13,000
13,000
26,000
40,000
80,000
120,000
160,000
(%) (%)
4.8
131,028
46.3
-16,451
-9,272
24,042244,970
In overseas business, ITO EN (North America) INC. steadily increased sales of TEAS’ TEA. ITO EN established ITO EN Asia Pacific Holdings Pte. Ltd. in the first quarter of the fiscal year under review, and ITO EN Singapore Pte. Ltd. (a joint venture company) in Singapore in the second quarter of the fiscal year under review, to develop the business in Southeast Asia and areas undergoing rapid economic growth. In addition, ITO EN plans to establish a new factory at Fujian New Oolong Drink Co., Ltd. for the establishment of further business in China; also, ITO EN BEVERAGE (SHANGHAI), LTD. was established in the third quarter of the fiscal year under review. As a result, sales in the Tea Leaves and Beverages Business rose 9.3% year on year, to 379,324 million yen, and operating income rose 2.7%, to 17,727 million yen.
Restaurant BusinessTully’s Coffee Japan Co., Ltd. continued to perform well, with net sales rising 7.0% year on year, to 20,525 million yen, and operating income rising 28.2% year on year, to 2,692 million yen.
OthersNet sales rose 31.0% year on year, to 4,108 million yen, and operating income rose 36.0%, to 839 million yen.
Analysis of Financial Position
Assets, Liabilities, and Net AssetsAssetsTotal assets as of April 30, 2013 stood at 244,970 million yen, an increase of 20,126 million yen from the previous fiscal year-end. This change in total assets mainly reflected increases of 5,631 million yen in “Lease assets,” 3,568 million yen in “Notes and accounts receivable–trade,” and 2,826 million yen in “Goodwill.”
LiabilitiesTotal liabilities as of April 30, 2013 amounted to 131,028 million yen, an increase of 12,194 million yen from the previous fiscal year-end. This change in liabilities mainly reflected increases of 4,774 million yen in “Lease obligations” and 3,490 million yen in “Notes and accounts payable–trade.”Net assetsTotal net assets as of April 30, 2013 stood at 113,942 million yen, an increase of 7,931 million yen from the previous fiscal year-end. Contributing factors to this change in net assets were “net income” of 11,244 million yen and “cash dividends paid” of 5,018 million yen.
Cash FlowsCash flows from operating activitiesCash inflows from operating activities were 24,042 million yen. The major factors of cash inflows were 19,484 million yen from income before income taxes, 13,769 million yen from depreciation and amortization, and 1,190 million yen from amortization of goodwill, which were offset by 2,455 million yen in increase in notes and accounts receivable–trade and 8,762 million yen in income taxes paid in cash.Cash flows from investing activitiesCash outflows from investing activities were 9,272 million yen. The major factors of cash outflows were 6,948 million yen for purchase of property, plant and equipment and intangible assets, and 1,406 million yen for net increase in time deposits.Cash flows from financing activitiesCash outflows from financing activities were 16,451 million yen. This was primarily due to outflows of 1,098 million yen for purchase of treasury stock, 10,979 million yen for repayment of finance lease obligations, and 5,007 million yen for dividends paid.
As a result, cash and cash equivalents at end of period amounted to 42,897 million yen, a decrease of 647 million yen from the previous fiscal year-end.
19CORPORATE BOOK 2013
Business Risks
(1) The Domestic Economy; Consumption TrendsA large part of the Group’s business is dependent on developments within Japan’s domestic economy. For this reason, economic or financial movements within Japan, and the influence they may have on the Japanese consumer, can exert an influence on the Group’s business and financial position.
(2) Competition in the Beverage IndustrySevere competition has been unfolding in the Group’s core business beverage market, which has been affected by sluggish growth in sales due to intense price competition fueled by strong sales promotions and consumer frugality. With changes in consumer preferences and severe competition in each beverage category, products in this market have a short life cycle. Under the current environment, ITO EN has focused on green tea beverages, developing products and services in accordance with its customers’ needs. ITO EN delivered impressive results by implementing its “Route Sales System” at the center of its customer service. As we continue to implement these measures, and the market moves in line with our forecasts, we will be able to successfully withstand the competition. However, if these measures do not sufficiently adapt to the changes in the business environment, there is a possibility that the Group’s operating results and financial position will be adversely affected.
(3) Sourcing and Raw MaterialsTea-related beverages are the Group’s core business, with particular emphasis placed on green tea. The decline in the agricultural population and the shrinkage of tea-producing land, accompanied by growing demand for tea leaves, have put undue pressure on production volume. In the event, then, that the market supply–demand balance deteriorates, and, as a consequence, the Group cannot secure supplies of the all-important tea leaves, or that procurement costs rise due to the surge in the prices of such imported ingredients like grains and vegetables, the Group’s cost of goods may increase. Furthermore, within our Beverages division, the share of drinks sold in PET bottles has reached about 75%. It is possiblethat increases in the price of crude oil, which is used in the manufacture of PET bottles, will affect our production costs.
How the Group responds to these changes in the business environment will influence its earnings and financial position.
(4) Production SystemMuch of the Group’s production, comprising beverages composed of tea leaves and other raw materials; ingredients used in beverage products; certain ready-to-drink products; and yogurt products, is carried out in the Group’s own factories. However, most of the production of its ready-to-drink products, and a portion of its tea leaf production, are contracted out to other production facilities. To ensure that there are no stoppages in production, our own facilities are regularly inspected, and we have adopted measures at numerous external production facilities nationwide to ensure their preparedness in the event of an irregularity. However, climatic and other natural disasters influencing production cannot be ruled out, and no guarantees can be given. Should such an event occur, it could exert an influence on the Group’s sales performance and financial position.
(5) Climatic and Natural DisastersAs ingredients such as tea leaves, vegetables, fruits, coffee, and other agricultural produce are needed in the beverages and other offerings that ITO EN produces, the Group’s core business of tea leaves and ready-to-drink beverages is susceptible to damage by climatic and other natural events. In particular, a chilly summer or a warm winter, typhoons, or prolonged rain causing crop damage or loss can lead to shortages and supply price increases and the loss of sales opportunities. In addition, earthquakes or other natural disasters of greater magnitude than anticipated will also disrupt supplies. Events such as these may have an influence on the Group’s sales performance and financial position.
(6) Dependency on the Oi Ocha BrandThe Oi Ocha brand recorded a 37% share of sales in the beverages division for the fiscal year ended April 30, 2013, an exceptionally high share. The domestic green tea market is valued at over 383 billion yen, making it the largest category within the cold beverage market in the 2012 calendar year, according to our research. Of this, ITO EN held a 37% share, again, according to our research. We expect the market for green tea to continue its expansion, and accordingly for the Oi Ocha brand to continue to grow.
The various risks that could potentially affect the business performance and financial position of ITO EN are summarized below, as of April 30, 2013. However, please note that potential risks are not limited to those listed below.
20 CORPORATE BOOK 2013
However, fierce competition in the market for green tea; the introduction of new, diversifying products; or a slowdown in market growth are all factors which could bring about a decline in market share. How the Group responds to these changes in the business environment will influence its sales performance and financial position.
(7) Exchange FluctuationsThe Group is engaged in developing its overseas business. The Group’s overseas subsidiaries submit their financial reports in local currencies, which are translated into yen at the exchange rate when the consolidated financial reports are compiled. Consequently, the Group’s performance and financial position may be influenced by exchange rate fluctuations.
(8) Overseas SubsidiariesThe Group has consolidated subsidiaries overseas, including ITO EN (North America) INC., in New York; ITO EN (USA) INC., in Hawaii; Mason Distributors, Inc., in Florida; ITO EN AUSTRALIA PTY. LIMITED, in Victoria, Australia; ITO EN Asia Pacific Holdings Pte. Ltd., in Singapore; and Fujian New Oolong Drink Co., Ltd. and ITO EN BEVERAGE (SHANGHAI), LTD., in China. These overseas consolidated subsidiaries represent equity investment of 16,725 million yen in the fiscal year ended April 30, 2013, and all reported a cumulative operating loss, except for Mason Distributors, Inc. and Fujian New Oolong Drink Co., Ltd. All the subsidiaries have developed a plan to overcome losses by developing new business relations, achieving greater efficiency in production, and implementing cost savings measures. It is possible that the Group’s business performance and financial position will be affected if the subsidiaries do not meet their objectives.
(9) Legal and Other RegulationsThe Group’s business must comply with the Food Sanitation Law, the Product Liability Law (PL), the Waste Management Law, and various other legal regulations. In addition, under recycling legislation in the state of Hawaii, drinks are subject to a special tax, the proceeds of which are to be used to finance a bottle-recycling plant. The location and structure of the business determines the burden and cost of legal and other requirements. The Group abides by all laws and regulations. If legal or other regulations become more stringent, or if strengthening regulations increase the cost burden, it is possible that they will exert an influence on the Group’s business performance and financial position.
(10) Personal InformationThrough the Group’s activities in route sales and mail order service, dealings with suppliers, and its own consumer-directed marketing activities, such as its New Haiku Contest, a large
amount of client information comes into the Group’s possession. This confidential client information is managed by the Group, or is consigned to a data management company. The Group’s Compliance Department has established a secure structure for the management of this information. The Group recognizes that its credibility would be damaged if such confidential information were leaked to outside parties, which could also exert an influence on the Group’s business performance and financial position.
(11) Food Safety and Hygiene ControlFood safety and hygiene are of the utmost concern for the Group’s management, and product quality management offices have been established to this end. These offices conduct product quality inspections under their own direction and also conduct regular on-site inspections at plants of our outsourcing partners. The Group also holds quality meetings on a regular basis, where manufacturing management and outsourcing plant managers receive feedback on inspection results in an effort to raise awareness concerning food safety and hygiene. In addition to these activities, we also conduct inspections to prevent the introduction of foreign substances derived from raw materials and the use of prohibited additives. In light of circumstances following the Great East Japan Earthquake, the Group is performing testing for radioactive substances on all beverage products as well as raw materials of green tea. Domestic company outlets deal in items that are subject to regulations of the Food Sanitation Law. In addition to compliance with legal ordinances, we conduct thorough sanitary oversight based on standards of hygiene at each store and on the Group manual. At our overseas restaurants, we have employed four qualified food safety and hygiene officers in the United States in accordance with local legislation, who ensure that legal requirements are implemented. The Group has never committed any violation of food safety and hygiene practices, and has never been subject to official censure or guidance in this regard. However, in the event that problems of food quality were to arise (such as a foreign object being found, or incorrectly labeled produce being distributed, or foreign substances derived from raw materials or prohibited additives being used), or if such problems were harmfully rumored to have arisen, or if there were an outbreak of food poisoning or similar occurrence, this could exert an influence on the Group’s business performance and financial position.
(12) Changes in Asset ValuationsThe Group owns assets in land and marketable securities, and it is possible that these will exert an influence on the Group’s business performance and financial position if their valuations decline.
21CORPORATE BOOK 2013
(Millions of yen)
ASSETS
Current assets: Cash and deposits Notes and accounts receivable – trade Merchandise and finished products Raw materials and supplies Accounts receivable – other Deferred tax assets Other Allowance for doubtful accounts Total current assets Fixed assets: Property, plant and equipment; Buildings and structures Machines and vehicles Tools and furniture Land Lease assets Construction in progress Subtotal Intangible fixed assets; Goodwill Software Other Subtotal Investments and other assets; Investments in securities Deferred tax assets Other Allowance for doubtful accounts Subtotal Total fixed assetsTotal assets
44,85640,75021,7717,1569,7472,5182,388
(164)129,025
17,2973,8001,330
17,97833,561
1,91675,885
17,2585,7051,839
24,803
3,6252,0169,994(380)
15,256115,945244,970
43,87237,18119,586
7,2318,6882,6882,355
(54)121,549
15,3953,5671,376
17,35927,929
83966,468
14,4326,1711,897
22,501
3,2431,6129,806(337)
14,324103,294224,843
Consolidated Balance Sheets (Unaudited)As of April 30, 2012 and 2013
20132012
22 CORPORATE BOOK 2013
Current liabilities: Notes and accounts payable – trade Short-term loans payable Lease obligations Accrued expenses Income taxes payable Provision for bonuses Other Total current liabilitiesNon-current liabilities: Bonds payable Long-term loans payable Lease obligations Deferred income tax liabilities on revaluation Allowance for retirement and severance benefits for employees Other Total non-current liabilitiesTotal liabilitiesShareholders’ equity: Capital stock Capital surplus Retained earnings Treasury stock Total shareholders’ equityValuation, translation adjustments and others: Valuation difference on available-for-sale securities Deferred gains (losses) on hedges Reversal of revaluation reserve for land Foreign currency translation adjustments Total accumulated losses from valuation, translation adjustments and othersStock acquisition rightsMinority interestsTotal net assetsTotal liabilities and net assets
LIABILITIES AND NET ASSETS
29,474508
11,77818,023
4,5213,0473,526
70,880
20,0006,602
22,214837
7,8852,607
60,147131,028
19,91220,25980,747(1,467)
119,451
92530
(6,171)(745)
(5,960)34
416113,942244,970
25,984670
9,65317,7794,8822,9992,289
64,258
20,0005,577
19,564837
6,2092,386
54,575118,833
19,91220,25978,954(4,830)
114,294
1583
(6,171)(2,388)(8,398)
2390
106,010224,843
(Millions of yen)
20132012
23CORPORATE BOOK 2013
Income before minority interestsOther comprehensive income: Valuation difference on available-for-sale securities Deferred gains or losses on hedges Revaluation reserve for land Foreign currency translation adjustment Share of other comprehensive income of associates accounted for using equity method Other comprehensive incomeComprehensive income (Breakdown) Comprehensive income attributable to owners of the parent Comprehensive income attributable to minority interests
11,218
75627-
1,68535
2,50513,723
13,70419
9,235
870
88(67)15
1259,360
9,374(13)
Operating income and expenses:Net salesCost of salesGross profitSelling, general and administrative expenses Operating incomeNon-operating income: Interest income Dividend income from securities Rent income Insurance income Compensation income for damaged goods Equity income from an unconsolidated subsidiary and affiliates Foreign exchange gains Other Total non-operating incomeNon-operating expenses: Interest expense Loss on foreign currency exchange Bond issuance cost Expenses for voluntary recall of products Other Total non-operating expensesOrdinary incomeExtraordinary gains: Gain on sales of fixed assets Gain on sales of securities Gain on donation of fixed assets Compensation for transfer Gain on step acquisitions Total extraordinary gains Extraordinary losses: Loss on sales of fixed assets Loss on abandonment of fixed assets Impairment losses Loss on disaster Loss on valuation of investment securities Other Total extraordinary lossesIncome before income taxesIncome taxes – currentIncome taxes – deferredTotal income taxes Income before minority interests Minority interests in income (loss) Net income
403,957211,869192,088171,83720,250
2646504548
168659362
1,408
1,235--
227281
1,74419,914
107-
260270
2169463
01250
70019,4848,276
(10)8,266
11,218(25)
11,244
369,284192,213177,071158,16418,907
1045379342
142-
276647
1,07415995-
2391,568
17,985
39
1212-37
054
662221084
83317,1898,264
(310)7,9549,235
(13)9,249
(Millions of yen)
2012
(Millions of yen)
20132012
Consolidated Statements of Income (Unaudited)
Consolidated Statements of Comprehensive Income (Unaudited)
For the years ended April 30, 2012 and 2013
2013
24 CORPORATE BOOK 2013
Cash flows from operating activities: Income before income taxes Depreciation and amortization Impairment loss Gain on step acquisitions Amortization of goodwill Increase (decrease) in allowance for doubtful accounts Increase (decrease) in accrued bonuses for employees Increase (decrease) in allowance for retirement and severance benefits for employees Interest and dividend income Interest expense Loss (gain) on foreign currency translation Loss (gain) on valuation of investment securities Gain on sales of investment securities Decrease (increase) in notes and accounts receivable – trade Decrease (increase) in inventories Decrease (increase) in other current assets Decrease (increase) in other fixed assets Increase (decrease) in notes and accounts payable Increase (decrease) in consumption tax payable Increase (decrease) in other current liabilities Other, net Subtotal Interest and dividend income received in cash Interest expenses paid in cash Income taxes paid in cash Net cash flows from operating activities Cash flows from investing activities: Net decrease (increase) in time deposits Purchase of property, plant and equipment and intangible assets Acquisition of investments in securities Proceeds from sales of investment securities Acquisition of long-term prepaid expenses Acquisition of investments in affiliates Purchase of investments in subsidiaries resulting in change in scope of consolidation Decrease (increase) in other investments Net cash flows from investing activitiesCash flows from financing activities: Net increase (decrease) in short-term loans payable Proceeds from long-term loans payable Repayment of long-term loans payable Proceeds from issuance of bonds Purchase of treasury stock Proceeds from sales of treasury stock Repayment of finance lease obligations Dividends paid Dividends paid to minority shareholders Proceeds from stock issuance to minority shareholders Other, net Net cash flows from financing activities Effect of exchange rate fluctuation on cash and cash equivalents Net increase (decrease) in cash and cash equivalentsCash and cash equivalents at beginning of periodIncrease (decrease) in cash and cash equivalents resulting from change in scope of consolidationCash and cash equivalents at end of period
19,48413,769
463(260)
1,190142
(150)667(72)
1,235(438)
12(0)
(2,455)(226)
28(8)
175344(20)67
33,94879
(1,223)(8,762)
24,042
(1,406)(6,948)
(155)41
(52)-
(934)182
(9,272)
(367)1,469(478)-
(1,098)1
(10,979)(5,007)
(5)12
2(16,451)
859(822)
43,544175
42,897
17,18910,892
662-
1,148(12)332700(55)
1,074129
10(9)
3,924(4,184)
(103)60
(2,456)(34)
1,723(6)
30,98459
(1,160)(8,420)21,462
(324)(5,637)
(30)85
(63)(84)
(1,966)(45)
(8,067)
300700
(1,115)19,904
(6)2
(8,467)(5,021)
(0)-(4)
6,290(127)
19,55823,986-
43,544
(Millions of yen)
2012
Consolidated Statements of Cash Flows (Unaudited)For the years ended April 30, 2012 and 2013
2013
25CORPORATE BOOK 2013
Shareholders’ equity: Common stock and capital stock: Balance at the beginning of the current period Balance at the end of the current period Capital surplus: Balance at the beginning of the current period Balance at the end of the current period Retained earnings: Balance at the beginning of the current period Changes during the current period Cash dividends paid Net income Retirement of treasury stock Disposal of treasury stock Reversal of revaluation reserve for land Total changes during the current period Balance at the end of the current period Treasury stock: Balance at the beginning of the current period Changes during the current period Purchase of treasury stock Retirement of treasury stock Disposal of treasury stock Total changes during the current period Balance at the end of the current period Total shareholders’ equity Balance at the beginning of the current period Changes during the current period Cash dividends paid Net income Purchase of treasury stock Disposal of treasury stock Reversal of revaluation reserve for land Total changes during the current period Balance at the end of the current period
19,91219,912
20,25920,259
78,954
(5,018)11,244(4,350)
(81)-
1,79380,747
(4,830)
(1,098)4,350
1113,363
(1,467)
114,294
(5,018)11,244(1,098)
29-
5,157119,451
19,91219,912
20,25920,259
74,735
(5,030)9,249-
(32)32
4,21878,954
(4,865)
(6)-4134
(4,830)
110,041
(5,030)9,249
(6)9
32 4,253
114,294
(Millions of yen)
2012
Consolidated Statements of Changes in Net Assets (Unaudited)
2013
For the years ended April 30, 2012 and 2013
26 CORPORATE BOOK 2013
Valuation and translation adjustments: Unrealized holding gains on securities, net of tax Balance at the beginning of the current period Changes during the current period Net changes of items other than shareholders’ equity Total changes during the current period Balance at the end of the current period Deferred gains (losses) on hedges Balance at the beginning of the current period Changes during the current period Net changes of items other than shareholders’ equity Total changes during the current period Balance at the end of the current period Reversal of revaluation reserve for land Balance at the beginning of the current period Changes during the current period Net changes of items other than shareholders’ equity Total changes during the current period Balance at the end of the current period Foreign currency translation adjustments Balance at the beginning of the current period Changes during the current period Net changes of items other than shareholders’ equity Total changes during the current period Balance at the end of the current period Total valuation and translation adjustments Balance at the beginning of the current period Changes during the current period Net changes of items other than shareholders’ equity Total changes during the current period Balance at the end of the current period Stock acquisition rights Balance at the beginning of the current period Changes during the current period Net changes of items other than shareholders’ equity Total changes during the current period Balance at the end of the current period Minority interests Balance at the beginning of the current period Changes during the current period Net changes of items other than shareholders’ equity Total changes during the current period Balance at the end of the current period Total net assets Balance at the beginning of the current period Changes during the current period Cash dividends paid Net income Purchase of treasury stock Disposal of treasury stock Reversal of revaluation reserve for land Net changes of items other than shareholders’ equity Total changes during the current period Balance at the end of the current period
158
767767925
3
272730
(6,171)
--
(6,171)
(2,388)
1,6431,643(745)
(8,398)
2,4372,437
(5,960)
23
111134
90
325325416
106,010
(5,018)11,244(1,098)
29-
2,7747,931
113,942
68
9090
158
2
003
(6,260)
8888
(6,171)
(2,333)
(54)(54)
(2,388)
(8,523)
125125
(8,398)
7
151523
105
(14)(14)90
101,630
(5,030)9,249
(6)9
32126
4,379106,010
(Millions of yen)
2012 2013
27CORPORATE BOOK 2013
2013 YOY % change2012Years ended April 30
20132012
Vending machine installation (units)
Number of sales offices
Number of employees
Years ended April 30
155,065
201
5,307
148,093
200
5,285
Sales by product (total) Tea leaves Beverages Japanese tea beverages Chinese tea beverages Vegetable beverages Fruit beverages Coffee beverages Black tea beverages Functional beverages Mineral water Carbonated beverages Other beverages OthersSales by container (thousands of cases) (total) Cans PET bottles (2L) PET bottles (500ml) PET bottles (350ml and smaller) PET bottles (others) Cartons OthersSales by business category (total) Supermarkets Convenience stores Vending machines OthersSales by region (total)* Hokkaido Tohoku Kanto Chubu Kansai Chugoku/Shikoku Kyushu
351,80728,788
319,988163,01217,14550,63013,19027,84316,0536,1009,0749,5797,3583,029
216,94826,13756,00362,50830,38515,86924,0002,041
351,807135,46490,47258,31267,557
337,98012,47024,375
174,07634,75944,20620,99527,096
332,29729,123
299,975162,16615,60742,75812,87422,92316,9855,8878,5955,6586,5173,198
199,88523,21352,81960,40327,22213,59320,5182,114
332,297128,57382,42953,91067,383
318,23511,46421,542
172,67330,56240,12318,38423,483
5.9-1.26.70.59.9
18.42.5
21.5-5.53.65.6
69.312.9-5.38.5
12.66.03.5
11.616.717.0-3.45.95.49.88.20.36.28.8
13.20.8
13.710.214.215.4
Sales by Product(Year ended April 30, 2013)
Supermarkets 38.5%
Convenience stores 25.7%
Vending machines 16.6%
Others 19.2%
Hokkaido 3.7%
Tohoku 7.2%
Kanto 51.5%
Chubu 10.3%
Kansai 13.1%
Chugoku/Shikoku 6.2%
Kyushu 8.0%
Cans 12.0%
PET bottles (2L) 25.8%
PET bottles (500ml) 28.8%
PET bottles (350ml and smaller) 14.0%
PET bottles (others) 7.3%
Cartons 11.1%
Others 0.9%
Sales by Container (Volume Basis)(Year ended April 30, 2013)
Sales by Business Category(Year ended April 30, 2013)
Sales by Region(Year ended April 30, 2013)
* Excludes sales that cannot be categorized by region, such as mail order sales
Tea leaves 8.1%
Japanese tea beverages 46.3%
Chinese tea beverages 4.9%
Vegetable beverages 14.4%
Fruit beverages 3.7%
Coffee beverages 7.9%
Black tea beverages 4.6%
Functional beverages 1.7%
Mineral water 2.6%
Carbonated beverages 2.7%
Other beverages 2.1%
Others 0.9%
(Millions of yen)
Non-Consolidated Operating Highlights
28 CORPORATE BOOK 2013
TeaCoffeeVegetableFruitCarbonatedMineral waterOthersTotal
Calendar year
Beverage Market
2012
870.1966.2144.4305.6603.3219.2418.9
3,527.7
885.0952.4146.8312.2643.4210.2457.8
3,607.8
Green teaBarley teaBlended teaChinese teaBlack teaTotal
95,500317.0
86,000298.0
85,000284.6
1.5%-1.4%
-9.9%-6.0%
-5.0%2.6%
-8.0%-7.4%0.3%
-4.4%
382.032.0
133.0128.0195.1870.1
375.034.5
126.5131.0218.0885.0
-1.2%-4.5%
-1.8%7.8%
-4.9%2.3%
11.7%1.7%
-3.1%4.6%
-2.0%-6.7%6.3%
-1.4%
402.031.2
144.4138.2194.5910.5
Domestic raw tea leaf production capacity (Tons)Green tea leaf market (Billions of yen)
2011201020092008
2012201120092008
20122011201020092008
Billionsof yen
YOY %change
Billionsof yen
YOY %change
Billionsof yen
YOY %change
Billionsof yen
YOY %change
Billionsof yen
YOY %change
Billionsof yen
YOY %change
Billionsof yen
YOY %change
Billionsof yen
YOY %change
Billionsof yen
YOY %change
Billionsof yen
YOY %change
YOY %change
YOY %change
YOY %change
YOY %change
YOY %change
Calendar year
Tea Beverage Market
Green Tea Leaf Market
Calendar year
871.5952.0167.4325.7680.0232.0408.8
3,637.5
87,900262.9
383.045.5
118.0115.0210.0871.5
872.5948.0150.1325.0642.5252.7412.3
3,603.1
84,100278.3
375.039.5
121.0119.5219.0872.5
4.5%-5.5%
-0.1%0.4%
11.5%0.2%5.8%
-8.2%-0.8%1.0%
2.1%15.2%-3.4%-1.7%-4.1%-0.1%
-1.1%-2.2%
0.0%14.5%-4.3%-8.8%0.7%
-1.4%
Sales Volume Share by
Beverage Manufacturer
Company A 27.9%
Company B 19.6%
ITO EN 11.8%
Company C 10.2%
Company D 10.0%
Others 20.5%
Sales Contribution
by Business Category
Supermarkets 37%
Convenience stores 20%Vending machines 32%Others 11%
Sales Volume Contribution
by Container Type
Cans 31%
PET bottles (1L or more) 29%PET bottles (less than 1L) 31%Others 9%
Domestic Raw Tea Leaf
Production Capacity
0
30,000
60,000
90,000
120,000
1208 09 10 11
Beverage Market
( )
0
1,000
2,000
3,000
4,000
1208 09 10 11
Green Tea Leaf Market
0
100
200
300
400
1208 09 10 11
Source: ITO EN Years: January–December
Tea Beverage Market
Chinese teaBlack tea
Green teaBarley teaBlended tea
120
100
200
300
400
500
08 09 10 11
910.5969.1156.2324.2592.0214.0449.8
3,616.0
2010
Others Data (2012)
Billionsof yen ( )Billions
of yen ( )Tons ( )Billionsof yen
Tea
Vegetable
CarbonatedCoffee Mineral water
FruitOthers
Market Data
-4.4%-0.3%-7.6%-5.7%1.9%2.4%
-6.9%-2.4%
1.7%-1.4%1.7%2.1%6.6%
-4.1%9.3%2.2%
-1.4%-0.5%2.2%4.1%
-0.1%20.2%-9.9%-0.1%
-1.4%1.3%
-17.8%-14.6%
1.7%1.3%
-4.8%-2.7%
29CORPORATE BOOK 2013
CHAIRMAN ANDREPRESENTATIVE DIRECTOR
PRESIDENT ANDREPRESENTATIVE DIRECTOR
EXECUTIVE VICE-CHAIRMAN
EXECUTIVE VICE-PRESIDENTS
EXECUTIVE MANAGING DIRECTORS
MANAGING DIRECTORS
DIRECTORS
OUTSIDE DIRECTORS
STANDING CORPORATE AUDITOR
OUTSIDE CORPORATE AUDITORS
Hachiro Honjo
Daisuke Honjo
Kizuku OgitaYoshito EjimaShunji HashimotoMinoru WatanabeShusuke HonjoShoichi SaitoMitsuo YashiroYoshio KobayashiAkira HiroseMasami KanayamaYosuke Jay Oceanbright HonjoOsamu NamiokaHidemitsu SasayaYoshihisa NakanoHirokazu UchikiMorikazu TaguchiMinoru TakahashiYoshiaki TakasawaYutaka TanakaMasahiro Nagasawa
Corporate Data (As of April 30, 2013)
MAIN DOMESTIC COMPANIES
Board of Directors and Corporate Auditors (As of July 26, 2013)
The ITO EN Group
The History of ITO EN
MAIN OVERSEAS COMPANIES
COMPANY NAME
BUSINESS LINES
HEAD OFFICE
ESTABLISHED
CAPITAL
FISCAL YEAR-END
URL
ITO EN, LTD.Manufacture and sales of tea leaves and beverages47-10, Honmachi 3-chome, Shibuya-ku, Tokyo 151-8550, JapanAugust 22, 1966¥19,912 millionApril 30http://www.itoen.co.jp
ITO EN SANGYO, LTD.OKINAWA ITO EN, LTD.ITO EN KANSAI CHAGYO, LTD.Tully’s Coffee Japan Co., Ltd.
CO., LTD.GREEN VALUE CO., LTD.Chichiyasu CompanyNEOS Corporation
ITO EN (USA) INC.ITO EN AUSTRALIA PTY. LIMITEDITO EN (North America) INC.Mason Distributors, Inc.ITO EN Asia Pacific Holdings Pte. Ltd.Ningbo Shunyi Tea Products Co., Ltd.Fujian New Oolong Drink Co., Ltd.ITO EN BEVERAGE (SHANGHAI), LTD.
1966
19691972
1974
1979
1981
19851987
19891990
1992
19931994
1996
Aug
MayFeb
May
Aug
Mar
FebJul
FebMar
MaySepDecJunSep
Sep
The Frontier Tea Corporation, ITO EN’s predecessor, established in Shizuoka City, Shizuoka Prefecture.Company name changed to ITO EN, LTD.Introduction of high-speed automatic wrapping equipment developed by Industrial Gesellschaft of Switzerland. Develop-ment of vacuum pack technology to preserve the freshness of green tea leaves.Shizuoka Sagara Plant constructed in Sagara Town (now Makinohara City), Haibara, Shizuoka Prefecture, and production systems consolidated there.Signed a contract with the China National Native Produce and Animal By-Products Import and Export Corporation, a Chinese company, to become the first company to import oolong tea into Japan. Oolong tea sales also commenced.Developed and commenced sales of Canned Oolong Tea. Full-scale entry into beverage market followed.Successfully developed and launched Canned Green Tea.Established ITO EN (USA) INC. in Hawaii to play a key role in overseas expansion.Canned green tea line renamed under the Oi Ocha brand.Launched Oi Ocha Green Tea, the industry’s first green tea beverage in a PET bottle (1.5-liter).Initial public offering.Launched Jujitsu Yasai (Vegetables Galore)Issued convertible bonds worth 140 million Swiss francs.Issued convertible bonds worth 100 million Swiss francs.Established ITO EN AUSTRALIA PTY. LIMITED in Australia. Joint venture established with Ningbo Shunyi Tea Products Co., Ltd., in China.Stock listed on the Second Section of the Tokyo Stock Exchange.
1998
2000
20012004
2006
2007
2008
20092010
2011
2012
FebOctOct
MayMay
Oct
Jun
Oct
Sep
Mar
AugFeb
May
JunSepOct
Established joint venture Fujian New Oolong Drink Co., Ltd.Stock advanced to the First Section of the Tokyo Stock Exchange.Launched beverages in heatable PET bottles, a leading-edge development in the industry.Established ITO EN (North America) INC.Launched Oi Ocha Koi Aji (Dark) and Ichinichibun no Yasai (A Day’s Worth of Vegetables).ITO EN AUSTRALIA PTY. LIMITED built and commenced production at new raw tea leaf factory.ITO EN strengthened its U.S. business by acquiring shares in Mason Distributors, Inc., a Florida-based supplier of nutritional supplements.Seeking to expand its coffee business, ITO EN made FoodX Globe Co., Ltd. (now Tully’s Coffee Japan Co., Ltd.), which operates the Tully’s Coffee chain, a consolidated subsidiary.Class-A preferred stock listed on the First Section of the Tokyo Stock Exchange.Agreement signed with Groupe DANONE (France), giving ITO EN exclusive marketing rights in Japan for evian natural mineral water.Launched black tea line, TEAS’ TEA NEW YORK.Established GREEN VALUE CO., LTD. to handle maintenance and procurement of automated vending machines.ITO EN made Chichiyasu Company a consolidated subsidiary to further expand its dairy business.Established ITO EN Asia Pacific Holdings Pte. Ltd. in Singapore.Established ITO EN BEVERAGE (SHANGHAI), LTD. in China.Established representative office in Vietnam.ITO EN made NEOS Corporation a consolidated subsidiary.
30 CORPORATE BOOK 2013
Note: Treasury stock is included in “Private investments and others.”
Stock Breakdown by Holder
Common Stock(%)
Class-APreferred Stock (%)
Class-A
Preferred Stock
Common Stock
Private investments and othersOther companiesForeign corporations, etc.Financial institutionsSecurities firms
35.8033.8112.4617.390.54
48.1728.2716.676.880.01
Financial Highlights and Business Results
Stock Information
Stock Price
Cash Dividends per Share and Payout Ratio
(As of April 30, 2013)
Net Sales
(Millions of yen)
Operating Income and Operating Income Ratio
(Millions of yen) Operating Income Ratio
Operating Income
Total Liabilities and ROA
(Millions of yen)ROA
Total Liabilities
Net Income and ROE
(Millions of yen)ROE
Net Income
Total Assets and Equity Ratio
(Millions of yen)Equity Ratio
Total AssetsCash Flows from Operating ActivitiesCash Flows from Investing ActivitiesCash Flows from Financing Activities
Consolidated Cash Flows
(Millions of yen)
Total number of
authorized shares
Total number of
outstanding shares
Number of shareholders
200,000,000 shares
Common stock 89,212,380 sharesClass-A preferred stock 34,246,962 shares
Common stock 78,809 personsClass-A preferred stock 67,057 persons
Note: Payout ratio = Dividends per share ÷ Year-end share price
0
20
40
60
0
2
4
6
13
6048
(Yen) (%) (Yen) (%)
(4/30)
38
1.6
0
20
40
0
2
4
6
13 (4/30)
2.6
12
38383838
2.6
09 10 11
2.72.63.2
484848
12
4.1
09 10 11
4.64.848
Note: Class-A preferred stock was listed on the First Section of the Tokyo Stock Exchange in September 2007. ITO EN allocated free of charge Class-A preferred stock at a ratio of 0.3 shares to one share of common stock.
Common Stock Class-A Preferred Stock
Common Stock Class-A Preferred Stock
(Yen)
2,000
3,000
1,000
0
6 75 8 9 10 11 12 11 121 2 3 4 12011 2012 2013
2 3 45 6 7 8 9 10
(Yen)
2,000
3,000
1,000
0
6 75 8 9 10 11 12 11 121 2 3 4 12011 2012 2013
2 3 45 6 7 8 9 10
Payout RatioCash Dividends per Share Payout RatioCash Dividends per Share
(%) (%)
0
5,000
10,000
15,000
20,000
13(4/30)
09 10 11 120
10,000
5,000
15,000
0
8
4
12
(4/30)
1309 10 11 120
2
4
6
820,250
5.0 11,244
10.3
403,957
0
100,000
200,000
300,000
400,000
1309 10 11 12(4/30)
-16,451
24,042
(%) (%)
(4/30)
1309 10 11 120 0
9
(4/30)
1309 10 11 120
100,000
200,000
300,000
0
50
25
75
(4/30)
1309 10 11 12-30,000
0
-15,000
15,000
30,000
50,000
100,000
150,000
244,970
46.34.8
131,028
-9,272
6
3
5.9
31CORPORATE BOOK 2013
Printed on paper made with wood from forest thinning. “Mori no Chonai Kai” (Forest Neighborhood Association)— Supporting sound forest management.
The front and back covers of this report are printed on paper that contains recycled Oi Ocha tea leaves. The interior pages are printed on Forest Neighborhood Association “forest thinning support paper.”