Zojirushi Corporation Integrated Report 2022

Value Creation History

Established in 1918 by two brothers with a dream of making vacuum bottles, Zojirushi Corporation has continued to create new value while aligning with changing lifestyles, growing as a brand in Japan and worldwide. Key milestones include:

• 1918: Ichikawa Brothers Trading Company established.
• 1923: Manufacture and sale of vacuum bottles begin; Elephant adopted as trademark.
• 1948: "Pelican Pot," the first postwar product, launched.
• 1961: Company name changed to Zojirushi Corporation.
• 1970: Electric rice warmer launched.
• 1980: Electric pot launched.
• 1981: Stainless-steel vacuum bottles launched.
• 1987: Zojirushi America Corporation established.
• 2006: "My Vacuum Bottle Campaign" launched.
• 2010: Kiwame Hagama induction heating pressure rice cooker launched.
• 2018: Zojirushi marks 100th anniversary; Embudaki induction heating pressure rice cooker launched; listed on Tokyo Stock Exchange First Section.
• 2020: Industry's first stainless-steel vacuum mug with Seamless Sen lid launched.
• 2022: Transitions to Prime Market of Tokyo Stock Exchange; EVERINO oven range launched.

This history reflects changes in society and lifestyles, from electrification and Westernization to the current era of diversity and new lifestyles influenced by digitalization and global challenges.

Business Overview (Fiscal 2022)

Zojirushi's business is categorized by product and region. In fiscal 2022, net sales were ¥82,534 million.

By Product Category:

• Cooking Appliances (¥59,007 million, +5.7% YoY): Includes rice cookers/warmers, electric pots, kettles, griddles, coffee makers, and oven ranges.
• Household and Thermal Products (¥17,065 million, +5.2% YoY): Includes vacuum bottles, tumblers, food jars, and carafes.
• Household Appliances (¥4,533 million, +17.1% YoY): Includes air cleaners, humidifiers, dish dryers, etc.
• Others (¥1,927 million, +8.8% YoY): Includes food and beverage business, industrial equipment.

By Region:

• Japan (¥53,464 million, +2.8% YoY)
• Overseas (¥29,069 million, +13.2% YoY): Asia (¥18,606 million), The Americas (¥9,799 million), Other (¥664 million).

Summary of financial results highlights strong sales in rice cookers/warmers and electric kettles in Japan, and rice cookers/warmers overseas. The EVERINO oven range contributed significantly to sales.

Value Creation Process

Zojirushi's value creation process integrates inputs (Human, Intellectual, Manufactured, Social, Natural, Financial Capital) through its management platform (Horizontal Expansion, Vertical Expansion, Stronger Management Platform) and ESG initiatives to solve social issues. The output aims for increased social value, economic value, and employee value.

Key Targets for 2030:

• Economic Value: Net sales (consolidated) over ¥100 billion, Operating profit (consolidated) over ¥10 billion, Operating profit to net sales of 10%, ROE of 8%.
• Social Value: CO2 emissions (consolidated) 50% reduction (vs. FY2019), Percentage of management positions held by women 15% (non-consolidated).

The company is accelerating its transition toward a sustainable society.

President's Message

Norio Ichikawa, President & CEO, discusses the challenges of fiscal 2022, including high raw material costs, China's lockdown, and currency fluctuations. Despite these, Zojirushi achieved a 6.3% increase in consolidated net sales. The company navigated a challenging business environment marked by the COVID-19 pandemic and geopolitical instability. The medium-term management plan ADAPT Phase II yielded major achievements, including market share growth for the Embudaki rice cooker and improved brand image with the STAN. series. New ventures like Zojirushi Gohan Restaurant and Zojirushi Ginpaku Bento are expanding business domains. The company is building a stronger management platform, focusing on digital transformation (DX) and work-style reform.

The new slogan "Treasuring Everyday Life" reflects the evolution into a food and lifestyle solution brand. The company is committed to shifting towards a solution brand that addresses life and society's issues under the new medium-term plan, SHIFT.

New Medium-Term Management Plan SHIFT

Following the 101st anniversary, Zojirushi aims to strengthen its Brand Innovation for the next 100 years, evolving into a food and lifestyle solution brand. The ADAPT Phase II plan adapted to the new normal, while the upcoming SHIFT plan (2023-2025) focuses on a steady shift to a sustainable solution brand.

Business Results: The report shows trends in consolidated net sales and operating profit/ROE from 2016-2022, indicating recovery and growth.

Results and Issues of ADAPT: Highlights include expanded sales of Embudaki and growth in e-commerce (Japan and overseas), entry into new markets with EVERINO, and the Zojirushi Rental Service. Issues include sales pace for electric cooking products, supply chain fragmentation, and increasing earning power in the food business.

SHIFT Priority Issues: Domain Shift (expanding new domains, becoming a leading cooking appliance brand), Global Shift (sustainable overseas growth, optimizing global production), Digital Shift (DX, smart technology), and Sustainability Shift (transforming into a sustainable company).

Business Strategy

Under ADAPT, Zojirushi consolidated its foundation. The SHIFT plan aims to become a solution brand solving lifestyle and social issues.

Domain Shift: Microwave Oven Business Expansion

Zojirushi aims to expand its microwave oven lineup, launch globally (focusing on Taiwan), and develop core technologies. The company also seeks to establish itself as the leading brand of cooking appliances in Japan by revamping existing products and strengthening e-commerce.

Creation and Development of New Businesses and Products

This includes developing restaurant dining and ready-made meal businesses (Zojirushi Gohan Restaurant, Zojirushi Ginpaku Bento) and exploring continuous-charge models like rentals and subscriptions. The CSV business approach aims to realize both economic and social value.

Global Shift

Focus on sustainable growth in overseas business, balancing sales across regions, and optimizing global production and procurement systems to mitigate risks like foreign exchange fluctuations and supply chain fragmentation.

Special Feature: Debut of oven range EVERINO

Launched in September 2022, EVERINO entered the competitive microwave oven market with positive customer and distributor feedback. The development team shares insights on its value chain, from planning and design to marketing and sales. Key features include proprietary thermo technology, "Reji Guri" (grill function), "Uki Reji" (all-around warming), and "Saku Reji" (for fried food). The product's design emphasizes gentle curves and a refined appearance. The development process involved cross-functional collaboration to address customer dissatisfaction with existing microwave ovens, particularly regarding uneven heating and complex functions.

ESG Strategy

Zojirushi aims to contribute to solutions for lifestyle and social issues through its business activities, guided by its philosophy "Creating a better quality of life." The company is transforming into a sustainable company by focusing on:

• Response to global environmental problems: Promotion of carbon neutrality (target: 50% CO2 reduction by FY2030), development of environmentally friendly products, and promotion of the 5Rs (Recycle, Repair, Reuse, Reduce, Refuse).
• Creation of sustainable customer base: Strengthening customer contact points (digital and in-store), maximizing lifetime value, and increasing customer support service levels.
• Response to new risks: Addressing supply chain fragmentation, countermeasures for aging factories, and business continuity planning.
• Maximization of human capital: Developing human resources, promoting diversity and inclusion, and ensuring occupational health and safety.

Human Resources Development Initiatives

Zojirushi strengthens its human resources base to support brand innovation, respecting diversity and individuality. The company emphasizes employee growth as company growth, with a focus on developing internal systems for independent work. The human resources development system includes training by job level, global talent development (TOEIC, language studies), and on-the-job training. A companywide approach promotes communication and broadens perspectives.

Supply Chain Initiatives

Zojirushi promotes responsible procurement by sharing its values with approximately 230 suppliers across seven countries. The Procurement Policy emphasizes compliance, fair trade, CSR procurement, and co-existence. Supplier Guidelines cover business ethics, work environment, environmental protection, and management. The company conducts supplier surveys and implements a Business Continuity Plan (BCP) in its supply chain. Green Procurement practices and Web EDI are used to enhance efficiency and reduce environmental impact.

Environmental Initiatives

Zojirushi recognizes its responsibility to preserve the environment for future generations. It has established an environmental management structure (ISO 14001 certified) and conducts environmental audits. The company is committed to preventing global warming by reducing CO2 emissions and promoting energy saving. It supports the TCFD recommendations for climate-related financial disclosures. Key initiatives include solar panel installation at Union Zojirushi and developing environmentally friendly products, such as redesigned packing boxes that reduce paper usage and air cleaners with high energy efficiency. Environmental data on CO2 emissions, paper consumption, electricity, water, waste, and recycled resources are reported.

Message from Outside Director

Shingo Torii emphasizes the need for clear targets and step-by-step progress to establish a high-profile solution brand. He highlights the role of outside directors in providing an external perspective to prevent organizational stagnation ("boiling frog syndrome"). Brand Innovation is seen as a requirement of the times, driven by younger generations' values of personality, diversity, and narrative. Customers seek actual solutions and real value, not just products. Zojirushi must focus on deliciousness, recipes, usability, human imagination, and safety/security.

Board of Directors

The report lists the members of the Board of Directors (as of February 16, 2023), including Representative Director, President & CEO Norio Ichikawa, and various Directors and Outside Directors. Attendance rates at Board meetings are provided for each member.

Corporate Governance

Zojirushi enhances corporate governance to secure stakeholder trust and improve corporate value. It operates as a company with an Audit and Supervisory Committee, with a Board of Directors comprising 14 members (6 Outside Directors). Initiatives include shortening director terms, strengthening supervision functions, increasing Outside Directors, and establishing a Nomination and Compensation Committee. The report details the structure, committees, and skill sets of directors, emphasizing independence and expertise.

Risk Management

Zojirushi has established a risk management system and committee to identify, assess, and respond to various risks. Major risks identified include:

• New Product Development
• Declining Product Prices
• Competition from Competitors
• Fluctuating Raw Material Prices
• Impact of Fluctuating Exchange Rates
• Product Liability
• Protection of Intellectual Property Rights
• Appearance of Counterfeit Products
• Seasonal Fluctuations in Performance
• Information Security
• Occurrence of Disasters
• COVID-19 Pandemic

The company employs measures to mitigate these risks, such as improving product performance, reviewing sales prices, expanding product lineups, hedging foreign exchange, product liability insurance, anti-counterfeiting measures, crisis management manuals, and infection prevention measures.

Performance Highlights

The report presents key financial and non-financial performance indicators for fiscal years 2018-2022.

Financial Information:

• Net Sales: Increased from ¥74,947 million in 2018 to ¥82,534 million in 2022.
• Operating Profit: Fluctuated, ending at ¥4,664 million in 2022.
• Profit Attributable to Owners of Parent: Decreased from ¥4,509 million in 2021 to ¥3,658 million in 2022.
• ROE: Decreased from 6.1% in 2021 to 4.7% in 2022.
• R&D Expenses: Remained consistent around ¥800-900 million annually.

Non-Financial Information:

• Number of Employees: Stable around 1,300 (consolidated).
• Percentage of Annual Paid Leave Taken: Increased significantly from 60.9% in 2020 to 80.3% in 2022.
• CO2 Emissions: Decreased from 28,527 tons in 2020 to 28,236 tons in 2022.
• Water Consumption: Decreased from 10,645 thousand tons in 2020 to 8,650 thousand tons in 2022.

Consolidated Financial Statements

The report includes detailed Consolidated Balance Sheets, Consolidated Statements of Income, Consolidated Statements of Comprehensive Income, Consolidated Statements of Changes in Equity, and Consolidated Statements of Cash Flows for fiscal years 2021 and 2022. These statements provide a comprehensive view of the company's financial position, performance, and cash flows.

Corporate Information

Corporate Data: Zojirushi Corporation, headquartered in Osaka, Japan, was incorporated in 1918 and established in 1948, with paid-in capital of ¥4,022,950,000 and 1,308 consolidated employees. Its business activities include manufacturing and marketing of cooking appliances, household appliances, and thermal products.

Stock Information: As of November 20, 2022, the total number of authorized shares was 240,000,000, with 72,600,000 shares issued and outstanding. The company is listed on the Tokyo Stock Exchange (Securities Code: 7965). Major shareholders include CLEARSTREAM BANKING S.A., Norio Ichikawa, and The Master Trust Bank of Japan, Ltd.

Website: Information and performance materials are available on the Zojirushi corporate site and shareholder/investor information pages.