ITO EN INTEGRATED REPORT 2019 At ITO EN, we are working continuously to create new ways of enjoying tea to match changing lifestyles. Japanese Tea Culture The custom of drinking tea spread to Japan around 1,200 years ago, and has since taken root as a part of Japanese culture that continues into the present day. 1960s 1980s 1990s–2010s Delivering delicious Innovation: from Proposing new ways of Aiming to become natural tea to the tables indoor beverages to drinking tea to match a Global Tea Company of consumers outdoor beverages the times Proposing new ways Inventing the world’s first Launching Oi Ocha Enhancing our of selling tea green tea beverage: products to meet global presence canned Sencha contemporary needs Until the 1960s, the accepted ITO EN developed canned In March 1990, ITO EN ITO EN’s aim is to become a method of selling tea was to Sencha (green tea) based on the launched the world’s first green company involved with all sell by weight at specialist tea idea of wanting to enable tea beverage to be bottled in a kinds of tea drunk worldwide. shops, and the number of consumers to drink green tea (1.5L) PET plastic bottle. We For this reason, we are work- retailers was limited. During anytime, anywhere. Until then, went on to develop a steady ing to provide new value— the 1960s, ITO EN launched green tea had been an “indoor” stream of other new products including the appeal and packaged green tea (packaged beverage that people drank at catering to contemporary needs attraction of tea—to enrich the in pre-weighed amounts) at home. The release of canned ahead of the rest of the indus- dietary lifestyles of people supermarkets and grocery Sencha marked the launch of try, including green tea in around the world. stores, in order to alleviate the the world’s first “outdoor” heated, and later microwave- dissatisfaction felt by consum- green tea beverage that con- able PET plastic bottles. ers at the inconvenience of sumers could drink whenever only being able to buy tea at and wherever they pleased. specialist shops. ITO EN INTEGRATED REPORT 2019 1 The Future of ITO EN “We aim to deliver tea that can be enjoyed anytime, anywhere, to customers in Japan and worldwide. 2 ITO EN INTEGRATED REPORT 2019 ITO EN INTEGRATED REPORT 2019 3 CONTENTS 5 ITO EN Group’s management principle 36 Business Overview 6 Company History 36 Always Putting the Customer First 8 Business Operations That Generate Value 37 Tea leaf Chains, Based on Unique Innovation and 38 Oi Ocha Social Value 40 Barley tea 10 Strategies for Creating Value 41 Coffee beverages 42 Vegetable beverages 10 President’s Message 43 Matcha 14 Main Financial Highlights 44 Financial management 16 Medium- to Long-Term Management Plan 45 Key financial indicators 18 Overseas strategy 20 Initiatives to Create a Value Circle 46 2019 TOPICS 20 Value Circle That Corresponds to Always Putting the Customer First 50 ESG Initiatives 22 Product Planning and Development 50 Sustainability Management 24 Procurement 52 3-Way Conversation: President and Outside Directors 26 Production and Logistics 54 Corporate Governance 28 Sales and Distribution 58 List of Officers 30 Vending machines 60 Environment 31 New Haiku Contest / Promoting tea culture overseas 62 CSR Grand Prize / Activities to continue and protect washoku culture 32 Foundation 34 The Value Created by ITO EN TEA TASTERs 63 Glossary of Terms 64 Introduction of Main Group Companies 65 Company Outline Editorial Policy The ITO EN Integrated Report 2019 is issued as an integrated report, combining our financial and non-financial information in a single document. Additionally, we communicate information from multiple viewpoints via various other reports and websites, to enable all stakeholders to gain a greater understanding of ITO EN and its activities. This report focuses primarily on activities during fiscal 2018 (May 1, 2018 to April 30, 2019), but also includes details of selected ongoing initiatives and more recent activities. The professional affiliations and official positions of the stakeholders introduced in this report are current as of the time of their activities. (Date of publication: November 2019) 4 ITO EN INTEGRATED REPORT 2019 ITO EN Group’s management principle “Always Putting the Customer First” Definition of “our” customers Consumers Shareholders Retailers Suppliers Financial institutions Local communities Management Message “Always Putting the Customer First” is the ITO EN Group’s management principle, representing the fact that the foundation of business management at ITO EN is our commitment to placing importance on each and every customer. Our definition of customers includes consumers, shareholders, retailers, suppliers, financial institutions and local communities. We regard everyone involved with the ITO EN Group as our customer, and earnestly strive to address our customers’ needs through the opinions and requests we receive, and by always using the perspective of our customers as the foundation of our management strategies. At the ITO EN Group, we currently have a long-term vision of aiming to become a “Global Tea Company.” To achieve this objective, we commit ourselves to further growth through the concerted efforts of all of our employees in Japan and overseas by such means as strengthening the domestic profit base, improving the collective brand capabilities of the Group, and creating synergy, as well as expanding overseas business and establishing new growth areas. Hachiro Honjo, Chairman of the Board Daisuke Honjo, President and CEO ITO EN INTEGRATED REPORT 2019 5 Company History In 1984, ITO EN invented the world’s first green tea beverage—canned Sencha (green tea)—ahead of other firms in the industry, and began developing the green tea beverage market. Since then we have developed numerous world and industry first technologies and delivered a steady stream of innovative products, including the launch of Oi Ocha brand in 1989, which is now recognized not only in Japan but around the world. Today, working under our management principle of Always Putting the Customer First, and with our long-term vision of becoming a Global Tea Company, we aim to deliver value and propose lifestyle ideas to customers worldwide, ranging from traditional tea culture to the latest cutting-edge technologies. To this end, we have worked to establish our position—primarily in Japan—as a comprehensive beverage manufacturer, producing both tea leaves and tea beverages, and are working as a Group to achieve sustainable growth by strengthening our brands and creating synergies. 1989 Other Tea leaf Launched the Oi Ocha brand 20% 37% Black tea beverages 7% FY4/1990 percentage sales Japanese tea Chinese tea breakdown beverages beverages 1966 1990 Launched green tea The Frontier Tea Corporation, ITO 9% 27% in PET plastic bottle EN’s predecessor, launched packaged green tea. In 1969, the corporate name was changed to ITO EN. 1980 1985 Launched canned Launched canned oolong tea Sencha (green tea) 1992 Launched Jujitsu Yasai (vegetable and fruit mix juice) 1966 1970 1980 1990 History of ITO EN Aug. 1979 Signed a distribution agency agreement May 2001 Established ITO EN (North America) with China National Native Produce INC. in New York, USA. and Animal By-products Import and Aug. 1966 Established Frontier Tea Corporation, Oct. 2004 Built a new crude tea leaf plant and Export Corporation to import oolong ITO EN’s predecessor, in Shizuoka-shi, commenced production at ITO EN tea for the first time in Japan, and Shizuoka. AUSTRALIA PTY. LIMITED. began selling oolong tea. May 1969 Changed the Company’s name to Jul. 1987 Established ITO EN (USA) INC. in Jun. 2006 Obtained shares of Mason ITO EN, LTD. Hawaii, USA. Distributors, Inc. (based in Florida, USA), which engages in the nutri- Feb. 1972 Introduced a high-speed automatic May 1992 Listed its stock on the over-the- tional supplement business. packaging machine manufactured by counter market. Industrial Gesellschaft in Switzerland. Nov. 1994 Established ITO EN AUSTRALIA Oct. 2006 Obtained shares of FoodX Globe Developed vacuum packing technology PTY. LIMITED in Australia. Co., Ltd. (now Tully’s Coffee Japan to preserve the freshness of tea leaves. Co., Ltd.), which operates the Tully’s Sep. 1996 Became a listed company on the Second Coffee chain. May 1974 Constructed Shizuoka Sagara Factory Section of the Tokyo Stock Exchange. at Sagaracho, Haibara-gun (now Oct. 1998 Stock advanced to the First Section of Sep. 2007 Stock listed as Class 1 preferred stock Makinohara-shi), Shizuoka. the Tokyo Stock Exchange. on the First Section of the Tokyo Stock Exchange. Oct. 2000 Released the industry’s first products in heated PET plastic bottles. 6 ITO EN INTEGRATED REPORT 2019 Black tea Other Tea leaf Black tea beverages Other beverages Tea leaf 12% 9% 2% 3% 14% 10% Coffee Japanese and beverages Coffee health tea beverages beverages Japanese tea 11% beverages 7% Vegetable FY4/2019 50% FY4/2010 51% beverages percentage sales Vegetable percentage sales breakdown % beverages breakdown 12 % Chinese tea 11 beverages Chinese tea 4% beverages 5% 2000 Launched products 2016 in heated PET Launched plastic bottle 2007 Launched TULLY’S COFFEE microwaveable BARISTA’S SPECIAL product 2008 Acquired exclusive distributing rights for 2013 Evian mineral water Launched in Japan Healthy Rooibos Tea 2004 2011 Launched Ichinichibun Launched Futatsunohataraki no Yasai (A daily worth Catechin Ryokucha of vegetables) brand (FOSHU certified beverages) 2009 2002 Launched TEAS’ TEA in Japan Launched Kenko Mineral Mugicha Launched first canned coffee under (Healthy Mineral Barley Tea) brand the TULLY’S COFFEE brand 2000 2010 2019 Mar. 2008 Concluded an exclusive distributor Oct. 2012 Obtained shares of NEOS Sep. 2016 Constructed Kobe Factory in Kobe- contract for the sale of Evian natural Corporation, which engages in shi, Hyogo, which performs finishing mineral water in Japan with the automated vending machine business processes for tea leaves used in green DANONE Group (headquartered in operations.