■ Business plans and business outlook

We make plans and strategies for each of our businesses, taking into account economic conditions, consumer preferences, competition with rival companies, and other factors, but these external environments change rapidly. Unfavorable economic conditions, such as a future recession or economic slowdown, could occur in the major markets where we conduct business activities. In particular, an aging society and population decline are the overall long-term population trends in Japan. Competition in the beverage and food market has long been fierce, with products from major manufacturers, products from manufacturers with strengths in specific regions or product categories, private-brand products, imported products, and other products all competing against each other. The evolution of digital technology in particular has led to novel sales and advertising activities, making competition even more intense. On top of that, consumer preferences have been rapidly changing. Under such circumstances, it is necessary to accurately grasp significant changes in consumer preferences and use this information in research and development, product quality, new product introductions, product pricing, advertising and sales activities, and the creation of new value in these areas, in order to gain an advantage over competitors and supply the market with sufficient quantities of products that meet consumer demand. If such action is delayed, it could result in a decrease in demand for our products, the capture of the market by competitors, negative effects on our brand image, or inventory write-downs, making our sales or profits decline and adversely affecting our results of operations and financial position. We sell our products through multiple channels, including wholesalers and major retail groups. In Japan, our vending machine network, among others, is also an important distribution channel. Changes in these distribution channels could result in a decrease in sales or profits in certain channels, which could adversely affect our results of operations and financial position. In addition, sales of certain types of our products are significantly influenced by weather conditions. We ordinarily record our highest sales volume levels during hotter weather in the spring and summer months, but unseasonably cool weather conditions during this period could depress demand for our products and negatively impact our results of operations and financial position.
We strive to accurately predict changes in consumer preferences and to research and develop attractive products that match those preferences. We also formulate appropriate supply and demand plans for the volume of products we supply. In addition, we invest our management resources appropriately, such as by actively engaging in advertising and sales activities to introduce new products and promote our brands. We also strive to identify signs of changes in the external environment in a timely manner and respond by revising the plans and strategies for each of our businesses accordingly.

■ Potential acquisitions and joint ventures

We have positioned acquisitions and joint ventures with other companies in Japan and overseas as one of our key management strategies in order to achieve further growth by strengthening our competitiveness. We conduct thorough and sufficient investigations when making decisions regarding acquisitions and joint ventures. However, it is possible that we may not achieve the results we intend due to issues such as: we may be unable to identify appropriate joint ventures and other opportunities; we may be unable to agree on terms with potential counterparties, due to competing bids among other reasons; we may fail to receive necessary consents, clearances, and approvals in connection with a joint venture; we may be unable to raise necessary capital on favorable terms; in entering new geographic markets or product segments, we may change our business profile and face challenges with which we are unfamiliar or fail to anticipate; and we may be unable to realize the full extent of the profits or cost savings that we expect to realize as a result of an acquisition or the formation of a joint venture. If any of these events were to occur, it could adversely affect our results of operations and financial position. We are working to appropriately review our business portfolio in preparation for such risks.
In addition, we record goodwill and trademarks in connection with acquisitions and joint ventures, and there is a possibility that we will record new goodwill and trademarks as a result of new acquisitions and joint ventures in the future. We evaluate these intangible assets by conducting impairment tests each reporting period. The recording of impairment losses on such intangible assets could adversely affect our results of operations and financial position. As such, we have established common rules for investment evaluation and judgment, as well as for monitoring after investment.

■ Quality and safety

We have established quality standards for our products and services. Concerns about the safety of our products and services may arise if: there is a lack of quality, a decline in quality, or a problem with safety in relation to these standards; negative reports are published about the safety of our products and services, even if there are no problems with the safety of our products and services; negative information is spread on social networks; or there are problems with the safety of products of other companies. Such failure to meet our standards or contamination of our products could occur in our own operations or those of third-party manufacturers, distributors or suppliers, who we do not control. If any of these risks were to materialize, we may be forced to cease production, recall products, or be subject to liability claims. In addition, even limited recalls or unfounded or nominal liability claims could adversely affect our brand and reputation. The occurrence of any of these events could adversely affect our results of operations and financial position.
As a corporate Group that manufactures and sells food products, we recognize the quality and safety of our products and services as our most important issue, and we comply with all applicable regulations. We have also established the Suntory Group Quality Policy “All for the Quality,” and we are working to ensure quality control and quality assurance by adopting various standards related to quality, the environment, health and safety, based on the following principles:

1. Each and every member of the Suntory Group wholeheartedly strives to offer products and services from the consumer's and customer's perspectives.
2. We strive to provide our consumers and customers with accurate information that is easy to understand. We earnestly listen to consumer and customer opinions and endeavor to reflect them in our products and services.
3. We abide by laws and regulations.
4. We place a very high priority on the safety of our products and services.
5. We continue to quest for even greater product quality by reference to recognized international quality standards.

■ Raw materials

The supply and demand balance for the main raw materials we use can fluctuate significantly due to factors such as climate change and global market conditions, causing prices to fluctuate substantially. In addition, the prices of energy sources such as electricity and natural gas used in manufacturing can also fluctuate substantially. Continued increases in the prices of these raw materials and energy and increases in production cost will exert pressure on our costs, and if we are unable to sufficiently pass along any such increases to the sales price of our products or if demand for our products declines due to passing along any such increases to the sales price of our products, our business, results of operations, and financial position could be negatively affected.
In addition, we may be unable to procure raw materials sustainably due to circumstances that affect at our business partners, such as climate change, natural disasters, fires, crop failures, epidemic, labor shortages, industrial accidents or other occupational health and safety issues, strikes, manufacturing problems, transportation issues, supply interruptions, government regulation, administrative action, cross-national friction, outbreak of war, political instability, terrorism, a lack of consideration for the environment, human rights issues, and energy crises. Some of these risks may be more acute in cases where raw materials are sourced from a limited number of business partners, or where the business partner or its facilities are located in countries or regions where there is a high risk that the aforementioned circumstances will occur. Changing partners can require long lead times. A shortage of raw materials or a long-term disruption to the supply of raw materials could adversely affect our business, results of operations and financial position.
We are advancing initiatives as stated in “(2) Initiatives for key themes relating to sustainability” in “2. Approach to sustainability and related initiatives.”

■ Supply chains

We and our business partners source materials and conduct manufacturing activities globally. Using supply chain management techniques by utilizing digital technologies to manage proper quality, reduce supply chain cost (logistics, production, procurement, etc.) and improve profitability is one element of our business strategy. However, we may not be able to realize this due to factors including those beyond our control. In addition, damage or disruption to our manufacturing or distribution capabilities due to any of the following could impair our ability to make, manufacture, distribute, or sell our products: climate change; natural disasters; fires; crop failures; infectious diseases; labor shortages; industrial accidents or other occupational health and safety issues; strikes; manufacturing problems; transportation issues; supply interruptions; government regulation; government action; cross-national friction; outbreak of war; political instability; terrorism; a lack of consideration for the environment; human rights issues; and energy crises. Failure to take adequate steps to mitigate the likelihood or potential impact of such events, or to effectively manage such events if they occur, could adversely affect our business, results of operations and financial position, as well as require additional resources to restore our supply chain.
We will optimize our supply chain management by linking data and integrating information on production, logistics, sales, and other activities through our systems. We are advancing initiatives as stated in “(2) Initiatives for key themes relating to sustainability” in “2. Approach to sustainability and related initiatives.”

■ Water

Water is the main ingredient in substantially all our products, but there is the possibility that water resources may not be available in many parts of the world due to population pressures, pollution, poor management, and the impact of climate change. As demand for water resources increases around the world, companies that depend on abundant water resources, including us, may face increased production costs or capacity constraints which could adversely affect our profitability or growth strategy over the long term.
Details regarding the initiatives for water are as stated in “(2) Initiatives for key themes relating to sustainability” in “2. Approach to sustainability and related initiatives.”

■ GHG

Global warming caused by increased GHG emissions may lead to increased production costs due to the introduction of carbon pricing, operational impacts due to a lack of water supply to production bases, and increased procurement costs due to reduced yields of agricultural products, among other risks.
Details regarding the initiatives for GHG reduction are as stated in “(2) Initiatives for key themes relating to sustainability” in “2. Approach to sustainability and related initiatives.”

■ Containers and packaging

We are promoting initiatives aimed at realizing a recycling-oriented society, but environmental pollution caused by the improper handling of used plastics and increased GHG emissions at the time of disposal have become major social issues. An increase in costs due to taxes related to one-way plastics could adversely affect our results of operations and financial position.
Details regarding the initiatives for containers and packaging are as stated in “(2) Initiatives for key themes relating to sustainability” in “2. Approach to sustainability and related initiatives.”

■ Geopolitics and geoeconomics

We conduct business not only in Japan but also overseas. Various factors can occur in overseas business, such as the enactment or amendment of tax systems, laws and regulations that differ greatly from Japan or are not well developed, conflicts between countries, the outbreak of disputes or wars, political instability, protectionist policies, restrictions on international movement, terrorism, riots, and other emergencies, leading to an increase in the cost of raw materials and packaging materials, a shortage of raw materials, an increase in the market price of final products, and an impact on imports and exports, which may adversely affect business profits and make it difficult to continue business operations. In addition, failure to adequately ensure the safety of employees could result in serious danger to their lives or bodies.
We are strengthening and establishing the foundations of our emergency response system in normal times, and we will activate the response system in the event of an emergency and work together across companies. We also repeatedly carry out simulations based on specific cases in normal times, and we are formulating business continuity plans (BCP) to enable us to make timely and appropriate decisions with related departments, including Group companies. In addition, we also collect, analyze, and share information, and carry out activities to continuously strengthen this foundation.

■ Human rights

If a human rights issue arises or has a negative impact within the Group or in our value chain, or if our response to human rights or information disclosure on human rights is deemed insufficient, our credibility could be damaged or consumer confidence in our products could be lost, which may lead to a decline in demand for our products or hinder our ability to procure raw materials, among other risks. The occurrence of any of these events could adversely affect our business or our results of operations and financial position, and may require the investment of additional management resources to restore our credibility.
Details regarding the initiatives for human rights are as stated in “(2) Initiatives for key themes relating to sustainability” in “2. Approach to sustainability and related initiatives.”

■ Business continuity

Natural disasters such as major earthquakes, flooding and landslides caused by typhoons and torrential rainfall, heavy snow, and volcano eruptions, as well as the spread of infectious diseases and other risks that continually threaten both society and the economy, could seriously impact our business continuity and adversely affect our results of operations and financial position.
We have formulated BCPs for production, raw ingredient procurement, logistics, and sales activities in preparation for such risks, and we have taken steps to be able to decentralize our head office functions and infrastructure in an emergency and continue to strengthen our response structure to cope with contingencies. We have established a response manual and response infrastructure for risks that could have a broad impact, and in the event that a major risk actually occurs, we will work to minimize the impact and damage by promptly communicating information, making decisions, and taking appropriate action.

■ Information security

We depend on key information systems and services to accurately and efficiently transact our business, interface with customers, provide information to management, and prepare financial reports, among other activities. We also use AI technology to provide new value to consumers and improve the efficiency of business execution. If these systems were to be compromised by earthquakes and other natural disasters, terrorist attacks, hardware, software, equipment, or telecommunications defects and failures, processing errors, computer virus infections, cyberattacks including computer hacking and unauthorized access with malicious intentions, or any other security issues, incorrect use, failure or malfunction caused by an outside vendor, or any other event, resulting in the leakage of personal or confidential information, infringement of copyrights, image rights, or publicity rights, or the shutdown of information systems for a certain period of time, it could adversely affect our results of operations and financial position.
Given that we are utilizing data in line with globalization and digital technological innovation, there may be instances where we fail to comply with the personal information protection laws and regulations of each country due to a lack of consideration and response to individual privacy. If this were to occur, we could be liable for a large amount of damages and fines or suffer damage to our reputation, which could adversely affect our results of operations and financial position.
We take measures for security, backup and disaster recovery with regard to our information systems. When handling information, we implement appropriate security measures under the Suntory Group’s Basic Principles for Governance of Information Security to safely manage and prevent the leakage of personal information and confidential information, maintain and improve awareness of information security compliance, and ensure the safe and smooth operation of information systems. In addition, we share and comply with the Suntory Group AI Principle for the use of AI throughout the Group, and promote the responsible use of AI. With regard to personal information protection laws and regulations, we assess the current status of the handling of personal data within the Group and existing internal rules, consider measures to comply with legal regulations in each country, and take necessary actions such as formulating internal rules, contracts, and workflow development based on priority level.

■ Compliance

We are subject to a variety of legal regulations in Japan and the other regions in which we do business. These laws and regulations include quality, labeling and health claims, competition, anti-bribery, labor, environmental and recycling, and tax laws and regulations, and apply to many aspects of our business activities, including the manufacture, safety, labeling, transportation, advertising, and sales promotion of our products. Due to our global operations, we must also comply with anti-corruption provisions of Japanese law or foreign statutes. Violations of applicable laws or regulations could damage our reputation or result in regulatory or private actions with substantial penalties or damages. In particular, if an accident or non-compliance with these laws or regulations results in environmental pollution, we could be subject to claims or sanctions and incur increased costs. In addition, any significant change in such laws or regulations or their interpretation, or the introduction of higher standards or more stringent laws or regulations, could result in increased compliance costs.
The Suntory Group strives to create an organization and a corporate culture that place the highest priority on compliance through the activity cycle of establishing standards, dissemination and training, action, and understanding the situation. We are building a compliance promotion system to realize our corporate philosophy from a cross-Group view based on Suntory Group Code of Business Ethics, the fundamental principles shared by all employees for the realization of the corporate philosophy.

■ Securing and training human resources

Our continued growth requires us to hire, retain, and develop our leadership driven management team and highly skilled workforce. We must hire talented new employees and then train them and develop their skills and competencies. Any unplanned turnover or our failure to develop an adequate succession plan for current management positions could deplete our institutional knowledge base and erode our competitive advantage.
In the event that we are unable to build systems and foster a work environment in which diverse human resources can perform as a result of not accepting all types of diversity, such as gender, sexual orientation, age, disabilities, nationality, culture, ethnicity, religion, creed, career and lifestyle, nor appropriately preventing, understanding and addressing employees’ human rights issues, our reputation may be damaged and we may be unable to create innovation from diversity and manage risk due to the possibility of being unable to secure excellent human resources.
Our operating results and financial position could be adversely affected by increased costs due to increased competition for employees, higher employee turnover, increased employee benefit costs or impediments to employee health, etc. that could arise from not being able to adequately perform labor management.
We carry out human resources evaluations for the entire group and by region, and based on the perspective of securing human resources, discuss training measures and placement in addition to working on human resource rotation and global human resource development. In Japan, by further advancing the acquisition of human resources in strategic areas, we are training business management human resources in a planned and structured manner.
Details regarding the human resource development policy and internal environment improvement policy are as stated in “(3) Human capital” in “2. Approach to sustainability and related initiatives.”

■ Interest rate and foreign exchange rate fluctuations

We purchase certain raw materials internationally using currencies other than the Japanese yen, principally the U.S. dollar. Although we use derivative financial instruments to reduce our net exposure to exchange rate fluctuations, such hedging instruments do not protect us against all fluctuations and our results of operations and financial position could be adversely affected. In addition, because our consolidated financial statements are presented in Japanese yen, we must translate revenues, income and expenses, as well as assets and liabilities, of overseas subsidiaries into Japanese yen at exchange rates in effect during or at the end of each reporting period. Therefore, foreign exchange rate fluctuations could impact our results of operations and financial position.
We finance a portion of our operations through interest-bearing loans and in the future we may newly conduct debt financing through loans, corporate bonds, or other means. Although we use fixed-interest transactions and derivative instruments to manage our interest rate exposure, a significant change in interest rates due to turmoil in the financial and capital markets or a downgrade of our credit rating by a rating agency could adversely affect our results of operations and financial position.
We are working to reduce these risks by hedging foreign exchange risks and diversifying our fundraising sources.

■ Regulations on alcoholic beverages

The World Health Organization (WHO) adopted the Global Strategy to Reduce Harmful Use of Alcohol in 2010. There is a call for responsible marketing of alcoholic beverages and increased efforts to address alcohol-related issues on a global scale, such as the adoption of an action plan in 2022 to further promote the Global Strategy to Reduce Harmful Use of Alcohol through 2030. If regulations or other measures beyond our projections are implemented over the long term, the consumption of alcoholic beverages may decrease. If such a risk materializes, it could adversely affect our results of operations and financial position.
The Suntory Group is working to address alcohol-related issues on a global scale by establishing a dedicated department and collaborating with the alcoholic beverage industry in Japan and overseas to (1) prevent inappropriate drinking and raise awareness of appropriate drinking; (2) promote responsible alcoholic beverage marketing activities; and (3) collaborate and cooperate with various stakeholders. We regulate our own advertising activities under strict voluntary standards in order to fulfill our social responsibility as a corporate Group that manufactures and sells alcoholic beverages. In addition, we are working to understand the current situation from a cross-functional perspective, including the policies of international organizations such as WHO and governments around the world, as well as social trends regarding alcohol. We also collect the latest information from around the world on the health risks posed by alcohol.

■ Governance

We own numerous Group companies in Japan and overseas and manage them as a Group. If appropriate Group governance fails to function due to the multi-layered and complex nature of the Group, it could significantly impede the promotion of integrated management and global growth strategies, which could adversely affect our results of operations and financial position.
We are establishing a system for optimal distribution of authority and organization of reporting lines to ensure speed and transparency in decision-making.

■ Control by the parent

As of March 27, 2025, our Parent, Suntory Holdings Limited, owned 59.48% of the outstanding shares of our common stock, and accordingly, has control, or a veto right with respect to fundamental decisions such as election and removal of our Directors, the approval of joint ventures or other business reorganizations, the transfer of material businesses, amendments to our Articles of Incorporation, and the declaration of dividends. Suntory Holdings Limited could continue to influence the determination of all matters that require the approval of the general meeting of shareholders, regardless of the intentions of other shareholders. Our management makes decisions independently of Suntory Holdings Limited, with no matters requiring its prior approval.
The following provides details on our main relationships with Suntory Holdings Limited and its subsidiaries.

1) Details on our transactions with the Suntory Group
Transactions, activities, etc. with the Suntory Group (excluding the Group) including Suntory Holdings are, in accordance with internal regulations, examined beforehand by the departments conducting the transactions, activities, etc. and by the Company’s legal affairs division and finance & accounting division to confirm the necessity and reasonableness of transactions, activities, etc., the appropriateness of their terms and conditions, etc., and the fairness, taking into consideration the perspective of independence from Suntory Holdings. Furthermore, the Board of Directors makes a decision on transactions equal to or exceeding a certain amount and transactions, activities, etc. related to the business resources forming the source of Company’s corporate value, such as brands, human resources, key assets and information (hereinafter collectively referred to as “Important Transactions, Activities, etc.”) after sufficient deliberation has been made on the necessity and reasonableness of the Important Transactions, Activities, etc., the appropriateness of their terms and conditions, etc., and the fairness through the process of the prior deliberation and report by the Special Committee. In addition to deliberation beforehand, after transactions, activities, etc. take place, in accordance with internal regulations, the legal affairs division, finance & accounting division, and internal audit division conduct a check on whether the transactions, activities, etc. were carried out based on the contents of the deliberation. Also, the Audit and Supervisory Committee conducts an audit. For Important Transactions, Activities, etc., the status is reported to the Special Committee and the Board of Directors, and they confirm the results of the transactions, activities, etc. According to these systems, the fairness, transparency and objectivity of the transaction, activity, etc. with the Suntory Group (excluding the Group) is ensured.

2) Personal relationships with Suntory Holdings Limited
Of the eight Directors (including Directors serving on the Audit and Supervisory Committee), Toru Miyanaga, who is a Managing Executive Officer of Suntory Holdings Limited, assumed office as a Director of the Company. This is because the Company has deemed that his extensive experience overseas in finance and accounting divisions in the Suntory Group’s beverage and alcoholic beverage businesses, and his management experience and keen insight into all areas of management in leading the corporate planning division, will contribute to further strengthening the functioning of the Company’s Board of Directors.
In addition, all employees at the Company accepted from Suntory Holdings Limited, are transferred to become employees of the Company and are not considered as seconded employees.

3) Trademarks, patents, and comprehensive licensing agreements
We have entered into a licensing agreement with Suntory Holdings Limited regarding our use of the “Suntory” corporate brand. Based on this agreement, we are licensed to use the “Suntory” name and brand. Under the terms of the agreement, our use of the “Suntory” brand remains effective as long as we remain part of the Suntory Group. Based on the agreement, we are paying brand royalties to Suntory Holdings Limited. Also, for the Suntory Group to facilitate the effective use of intellectual property rights and promote optimization by focusing on maintaining these rights, Suntory Holdings Limited holds a portion of the intellectual property rights such as trademarks, patents, and designs related to our business and we are granted exclusive licensing rights, etc., by Suntory Holdings Limited. We do not pay Suntory Holdings Limited royalties for the aforementioned exclusive licensing rights, etc. Furthermore, were this arrangement to come to an end, these intellectual property rights would be transferred without compensation from Suntory Holdings Limited to us.