Summary

Kotobuki Spirits Co., Ltd. is a confectionery manufacturer that plans, produces, and sells premium sweets reflecting regional characteristics throughout Japan, and enjoys strong support from both tourists and local consumers.Its main products include “Inaba no Shiro Usagi” and “Otaru Western Confectionery Shop LeTAO.” The company is shifting from a manufacturing-and-wholesale model to a manufacturing-and-retail model, achieving high profit margins by leveraging its own stores and online channels.The company is divided into three main segments—Domestic Wholesale, Domestic Retail, and Mail-Order Sales—each catering to different market needs. In particular, the Domestic Wholesale segment continues to grow by capitalizing on inbound tourism demand, while the Domestic Retail segment has built a stable customer base through community-focused sales strategies.In fiscal year 2023, revenue reached 50,155百万円, recording 155.8％ growth year-over-year, driven by factors such as increased inbound tourism demand and the launch of the new brand “Kanarina.”Future growth is expected to be influenced by rising awareness of sustainability and the growing importance of digital marketing; in particular, there will be a demand for product development that prioritizes environmental considerations.Under its medium-term management plan, “Value Up 2030,” the company aims for an ordinary profit margin of 30%, ordinary profit of 350億円, and an average annual sales growth rate of 10% or more, while promoting “ultra-frontline management,” in which all employees participate in management.Regarding shareholder returns, the company plans to maintain a total payout ratio of 50% or higher starting from the fiscal year ending March 2026, and is working to enhance shareholder value through its dividend policy and share buybacks. Factors affecting business performance include changes in consumer purchasing trends and market conditions, as well as fluctuations in raw material prices, making risk management critical.Aiming for sustainable growth, the company is advancing product development that leverages regional characteristics and its R&D initiatives, and is expected to respond sensitively to future market changes.

1. Summary of Cumulative Financial Results for the Fiscal Year Ending March 2023

Kotobuki Spirits Co., Ltd.’s consolidated financial results for the cumulative period of the fiscal year ending March 2023 (April 2022–March 2023) showed net sales of 50,155百万円, representing a 155.8％ increase year-over-year.In particular, the recovery in inbound demand drove performance, and as a result of the successful launch of new products targeting tourists, inbound sales exceeded 10 billion yen for the first time. Factors supporting this growth include a review of management policies, the introduction of the new “Kanarina” brand, and the opening of additional new stores.By segment, Shukurei and the Kujukushima Group led the growth; Shukurei focused on rolling out new brands and expanding sales channels, resulting in significant revenue growth.Meanwhile, the Kujukushima Group has seen a slight decline in revenue, but its profit structure remains sound. Overall, the ordinary profit margin has remained at a high level of 24.3%. While challenges in cost management persist, the company must address rising raw material and labor costs through price adjustments and production process efficiencies.The financial structure is sound, with an equity ratio of 77.1% and a high current ratio, indicating virtually no risk of short-term cash flow issues. Sales are projected to reach 79,670百万円 in fiscal year 2026, and achieving sustainable growth will require company-wide, unified strategic initiatives.In particular, product development that addresses growing awareness of sustainability and diversifying consumer needs is expected to contribute to future growth. For investors, striking a balance between maintaining growth rates and securing profits is crucial, and it is essential to assess the growth potential of each segment.

2. Earnings Forecast for the Fiscal Year Ending March 2025

The earnings outlook for the fiscal year ending March 2025 projects net sales of 64,035百万円, operating income of 15,780百万円,ordinary income of 15,500百万円, and net income attributable to the parent company of 10,500百万円—representing a significant increase in both revenue and profit compared to the previous year. In particular, the recovery in inbound demand is expected to boost performance, with the launch of new products targeting tourists projected to drive growth.Furthermore, in the Domestic Wholesale segment, sales to retail stores in tourist destinations and airports are performing well, with a 13.2% year-over-year increase expected. In the Domestic Retail segment as well, community-focused sales strategies are proving successful, and growth of 15.8% year-over-year is projected.In the mail-order segment, online sales remain robust, with a 4.0% year-over-year increase projected. Overall, the company expects this pattern—where each segment complements the others and contributes to improved performance—to continue.Furthermore, amid ongoing efforts to strengthen cost management and improve the efficiency of raw material procurement, the ordinary profit margin is expected to remain at 24.3%, and sustainable profit growth is anticipated. Looking ahead, expansion into overseas markets and the launch of new brands will be key to growth, so attention will focus on how these initiatives are implemented.Companies are expected to respond flexibly to changing consumer needs and demonstrate a commitment to sustainable growth.

3. Medium- to Long-Term Growth Strategy

Kotobuki Spirits Co., Ltd. has formulated its medium-term management plan, “Value Up 2030,” setting forth a concrete vision to achieve an ordinary profit margin of 30%, ordinary profit of 35 billion yen, and an average annual sales growth rate of 10% or more by 2030.This plan emphasizes “ultra-frontline management,” in which all employees participate in management, and aims to drive corporate growth by promoting voluntary employee participation. In particular, in response to growing demand for premium products, strategies are needed that leverage regional characteristics in product development and anticipate an increase in inbound tourism spending.Key initiatives include strengthening the “LeTAO” brand and expanding the new “Kanarina” brand into the Tokyo metropolitan area, with the aim of broadening the customer base across different target segments and diversifying revenue streams.The company is also focusing on the “Miyakojima no Yuki-shio” joint venture in the Okinawa market, aiming to boost sales to tourists through a community-based approach. In terms of capital investment, the company is proceeding with the construction of a new factory and the modernization of existing facilities to improve efficiency and enhance responsiveness to market demands.Furthermore, the company aims to develop products that promptly reflect customer preferences by leveraging digital marketing and AI-driven data analysis. As a key outcome of the medium-term management plan, achieving an ordinary profit margin of 30% will demonstrate improved corporate competitiveness and profitability; a clear action plan is necessary to realize sustainable growth.To address risk factors—including a declining birthrate and aging population, intensifying competition, and fluctuations in raw material costs—the company must implement flexible management strategies and establish systems for information sharing and rapid decision-making. Overall, Kotobuki Spirits is expected to pursue sustainable growth and enhance corporate value by strengthening its strategic initiatives and execution framework.

• For the cumulative results for the fiscal year ending March 2023, net sales reached 50,155百万円, representing a 155.8％ year-over-year increase, driven by a recovery in inbound demand and the launch of new products.
• For the fiscal year ending March 2025, the company forecasts revenue of 64,035百万円, operating income of 15,780百万円,ordinary income of 15,500百万円, and net income attributable to the parent company of 10,500百万円, with the recovery in inbound demand and the launch of new products expected to drive this growth
• Kotobuki Spirits Co., Ltd. has formulated its medium-term management plan, “Value Up 2030,” and has outlined a strategy to achieve sustainable growth through product development that leverages regional characteristics and digital marketing. The company aims to achieve an ordinary profit margin of 30%, ordinary profit of 35 billion yen, and an average annual sales growth rate of 10% or more by 2030

Business Overview

1. Business Model Overview

Kotobuki Spirits Co., Ltd. is a confectionery manufacturer that plans, manufactures, and sells premium sweets reflecting regional characteristics throughout Japan.Its main products include region-specific items such as “Inaba no Shiro Usagi” and “Otaru Western Confectionery LeTAO,” which enjoy strong support from both tourists and local consumers. By developing a diverse range of brands through its manufacturing subsidiaries nationwide and incorporating regional specialties, the company has built a unique competitive advantage.

The company’s business model is shifting from manufacturing and wholesale to manufacturing and retail, adopting a structure that allows for direct engagement with consumers. Specifically, it is characterized by the use of company-owned stores and online channels, which enable it to achieve high profit margins.Furthermore, by expanding its store network primarily in tourist destinations, the company is strengthening its strategy to capture inbound demand; in particular, opening stores in international terminals has proven successful.

With a broad customer base and a focus on the premium gift sweets market, the company employs a sophisticated approach to targeting consumers. It strives to enhance customer satisfaction by developing products that reflect local culture and traditions. This is expected to strengthen customer relationships and increase brand loyalty.Looking ahead, the company is considering proactive expansion into overseas markets and aims to build a global customer base through franchise development.

2. Major Business Segments

Kotobuki Spirits’ business is divided into three main segments—domestic wholesale, domestic retail, and mail-order sales—each of which addresses different market needs.

1. Domestic Wholesale

In this segment, the company wholesales sweets to retail stores in tourist destinations and airports, with a particular focus on product offerings that capitalize on inbound tourism demand.For the fiscal year ending March 2025, sales reached 29,900百万円, a 13.2% increase year-over-year, and the expansion of new retail outlets is proving successful. Product positioning targeting travelers is accelerating growth in the wholesale segment.

2. Domestic Retail

This segment, which conducts community-focused sales through company-owned stores and pop-up events, recorded revenue of 34,940百万円, a 15.8% increase year-over-year. The strategy of regularly introducing new products and seasonal limited-edition items to attract customer interest is proving effective. In particular, the launch of new brands is driving growth in the retail division.

3. Mail-Order Sales

With a focus on online sales, revenue reached 6,127百万円 (up 4.0% year-over-year). Mail-order sales have become a key channel for delivering region-specific products nationwide and have recently contributed significantly to expanding customer reach. By meeting diverse customer needs, this segment also positively impacts inventory turnover and sales promotion activities.

These segments complement one another and contribute to the improvement of overall business performance. In particular, while the domestic wholesale segment continues to grow by capitalizing on inbound demand, the domestic retail segment is building a stable customer base through regional strategies. Including the growth of mail-order sales, each segment is collectively enhancing Kotobuki Spirits’ overall profitability.

3. Market Position and Competitive Advantages

Kotobuki Spirits has established a strong position in the premium gift sweets segment of the domestic confectionery market. The company’s success stems not only from the development of products with regional characteristics but also from strategic expansion in response to trends in the tourism industry. This approach has become a key factor in differentiating the company from its competitors and has led to the strengthening of long-term customer loyalty.

Furthermore, the company’s commitment to quality, freshness, and regional authenticity attracts consumer interest—particularly during gift-giving and tourism seasons—and drives repeat purchases. Additionally, its integrated business model, spanning from manufacturing to retail, contributes to cost control and improved production efficiency, leading to higher profit margins.

Regarding international expansion, the company has been advancing its entry into Asian markets in recent years and strengthening its franchise operations. Its flexible approach to new markets is also enhancing its competitive advantage. The company’s emphasis on sustainable production systems and contributions to the local community aligns with consumers’ growing awareness of social responsibility.

Through these strategies, Kotobuki Spirits is expected to continue achieving strong growth while strengthening its competitiveness and maintaining regional branding and product diversity.

4. Market Background

In recent years, the Japanese sweets market has shown steady growth in tandem with the recovery of the tourism industry. In particular, the increase in inbound tourism has stimulated demand for local specialties and regionally distinctive products, serving as a key driver of sales growth. Tourists are seeking traditional Japanese sweets, and there is a growing trend toward valuing the premium appeal of regional brands.

Furthermore, consumer preferences are diversifying, with a notable trend toward seeking luxury and premium experiences. This creates a favorable market environment for Kotobuki Spirits’ premium gift sweets. Consumers are seeking special experiences and emotional connections—more than just products—and product development is underway to meet these needs.

Growing environmental awareness is also influencing the market, with increasing appreciation for sustainable materials and additive-free products. Kotobuki Spirits has also begun developing products with a strong focus on environmental considerations, and sustainability will undoubtedly be a key factor in maintaining the company’s competitiveness going forward.

Digital marketing also plays a vital role, and efforts are needed to increase touchpoints with new customers through social media and e-commerce. The growth of mail-order sales enables rapid responses to direct consumer needs, and its importance has increased significantly in recent years.

Moving forward, the company will need to respond flexibly to consumer purchasing trends and lifestyles, even amid uncertain domestic and international economic conditions. In particular, as consumer preference for higher-priced products and demands for quality continue to rise, Kotobuki Spirits must implement measures to further solidify its competitive advantage.

With its excellent business model and competitive strength, Kotobuki Spirits is expected to respond sensitively to future market changes and pursue sustainable growth.

Business Performance Trends

1. Recent Performance Overview and Growth Factors

Kotobuki Spirits Co., Ltd. has achieved remarkable performance growth over the past three years, particularly in fiscal year 2023.Revenue for fiscal year 2023 reached 50,155百万円, marking a 155.8％ increase year-over-year. A key factor behind this growth was the rise in inbound demand following the recovery from the COVID-19 pandemic. In particular, the launch of new products targeting tourists drove performance, and inbound revenue exceeded 100億円 for the first time.Furthermore, revenue is projected to reach 64,035百万円 in fiscal year 2024. This growth is being supported by a review of management policies, the introduction of the new “Kanarina” brand, and progress in opening new stores.

From an expert’s perspective, this rapid growth is evidence of the success of a strategy that has broadened the company’s focus beyond the domestic Japanese market to include overseas markets. To sustain this growth, further brand premiumization and new product development are essential. In particular, flexible product offerings that can adapt to fluctuations in inbound demand are required.

From an investor’s perspective, striking a balance between maintaining growth rates and securing profits is crucial. A competitive product lineup that meets market needs is expected to contribute to future growth.

2. Performance Trends and Impacts by Segment

In the segment-by-segment analysis, Shukurei and the Tsukumo Island Group are particularly driving growth.Shukurei has focused on launching new brands and expanding distribution channels, resulting in significant sales growth. However, the Kujukushima Group has seen a slight decline in revenue; it is important to note, however, that its profit structure remains sound. These differences between segments can be viewed as a result of each brand’s ability to adapt to market needs.

A key insight for experts is the importance of strategies targeting inbound demand. It is essential to understand shifts in target markets and develop new and unique products accordingly. In particular, marketing strategies geared toward international tourists are key to enhancing competitiveness.

It is important for investors to assess the growth potential of each segment while closely monitoring progress on new brand launches and sales channel expansion. Such information will serve as a basis for investment decisions.

3. Cost Management and Profit Margin Sustainability

Although recent business performance has been strong, challenges in cost management remain. While rising raw material and labor costs directly impact the company’s profitability, the ordinary profit margin has remained at a high level of 24.3%. How to absorb these cost increases has become a key issue, requiring price adjustments and the streamlining of production processes.Going forward, efficient raw material procurement and the optimization of manufacturing processes will be essential to ensuring sustained profitability.

According to experts, the success of these cost management efforts is key to the company’s overall sustainable growth. In particular, technological improvements and automation are considered effective approaches and are expected to contribute to maintaining profit margins in the long term.

Investors need to focus on a company’s cost-control capabilities and closely monitor how raw material procurement strategies and labor cost management affect profit margins. Analyzing these factors is essential for forecasting future profit growth.

4. Sound Financial Structure and Investment Strategy

Kotobuki Spirits’ balance sheet shows an extremely high equity ratio of 77.1%, indicating the company’s financial stability. The current ratio is also high, indicating virtually no risk of short-term cash flow problems. This sound financial foundation will serve as a strong pillar for executing future growth strategies.

Experts are noting that the company is managing its funds systematically and making capital investments with an eye toward future growth. The investment plan leading up to 2026 includes the construction of a new factory and the modernization of production facilities, and the benefits of these investments may become apparent sooner rather than later.

Investors should prioritize not only financial soundness but also growth potential based on future cash flows and investment plans, and formulate investment strategies from a long-term perspective. Such an approach is likely to enhance confidence in the company’s future growth.

5. Future Outlook and Key Challenges

According to future earnings forecasts, revenue is expected to reach 79,670百万円 in fiscal year 2026, indicating anticipated growth. However, changes in the economic environment and consumer preferences could impact future growth. Achieving sustainable growth will require company-wide, coordinated strategic initiatives.

Experts are paying particular attention to the rising awareness of sustainability, noting that sustainable product development and product responsibility are key factors contributing to the enhancement of a company’s brand value. Companies are required to continuously provide products and services that exceed consumer expectations, which will drive medium- to long-term growth.

Investors must closely monitor companies’ future growth strategies and their efforts to address key challenges, and carefully scrutinize the information necessary for investment decisions. From this perspective, it is important to evaluate corporate actions and manage risks.

Going forward, Kotobuki Spirits Co., Ltd. is highly likely to achieve further growth by maintaining its current growth trend and formulating prudent strategies. Investors are advised not to miss this opportunity and to continue closely monitoring the company’s developments.

Medium-Term Management Plan / Growth Strategy

1. Business Environment and Identification of Challenges

Kotobuki Spirits Co., Ltd. faces a highly challenging business environment. There are multiple issues that could impact corporate activities, including a declining birthrate, an aging population, and changes in the economic environment. Overcoming these challenges requires creative responses, and as part of this effort, the medium-term management plan “Value U 2030,” which begins in fiscal year 20XX, has been formulated.This plan places emphasis on “ultra-frontline management,” in which all employees participate in management, and aims to promote corporate growth through the voluntary participation of employees.

Changes in the business environment include the diversification of consumer needs. In particular, demand for premium products is rising, making product development that reflects this trend an urgent priority.Amid intensifying market competition, initiatives to enhance brand appeal are required, as well as product development that leverages regional characteristics and strategies anticipating an increase in inbound tourism spending. Accurately recognizing and addressing these challenges provides investors with a perspective that takes into account both risks and opportunities.

2. Overview of the Strategy

“Value Up 2030” outlines the specific vision and strategy that Kotobuki Spirits aims to achieve by 2030. This strategy sets targets of a 30% operating profit margin, 35 billion yen in operating profit, and an average annual sales growth rate of 10% or more.These numerical targets are designed with the company’s sustainable growth and shareholder returns in mind, and are intended to make performance measurable.

At the core of the strategy lies “Value Up in Product Appeal, Retail Space Appeal, and Sales Capability.” The company places great importance on striving to provide products and services that exceed customer expectations and on maximizing value for consumers. This overarching framework is key to enhancing strategic execution and is expected to generate synergy across the entire organization.From an investor’s perspective, comprehensively understanding this overarching vision is valuable for the company to achieve stable growth and returns.

3. Key Initiatives (Domestic/Overseas/By Business Segment)

The key initiatives in Kotobuki Spirits’ medium-term management plan are positioned to enhance brand value in both domestic and international markets, as well as to strengthen product development and sales promotion.Specifically, the company will strengthen brands such as “LeTAO” and expand the new “Kanarina” brand into the Tokyo metropolitan area. The aim is to broaden the customer base by targeting different segments and diversify revenue streams.

In addition, the company is focusing on the joint venture “Miyakojima’s Snow Salt” in the Okinawa market, and product development that leverages regional characteristics is underway. This community-based approach also contributes to sales promotion targeting tourists, with the goal of expanding the sales network and enhancing brand awareness.To counter the maturing domestic market, the company is also planning aggressive overseas expansion, and growth potential should be fully considered from this perspective as well. For investors, it is valuable to assess both the effectiveness of international expansion and regional strategies in order to evaluate the merits of an investment.

4. Investment Policy (Capital Expenditures/R&D, etc.)

Kotobuki Spirits’ investment policy serves as a critical foundation for accelerating growth. Capital investment—particularly the establishment of new plants and the modernization of existing ones—is a key pillar of this strategy, as it enhances operational efficiency and enables a more rapid response to market demands. The new Mount Fuji Plant is scheduled to begin operations in fiscal year 2024 and is expected to contribute to increased production capacity.

Furthermore, the company places a strong emphasis on research and development for new products and health-conscious offerings, investing to meet market needs. By leveraging digital marketing and AI-driven data analysis, the company aims to develop product lines that promptly reflect customer preferences.

In addition, strategic investments through mergers and acquisitions (M&A) are being considered. As the company seeks to introduce and expand new business models, it must simultaneously achieve growth and financial stability; building trust with customers and investors who expect sustainable performance improvements is a key priority.

5. Results, Expected Effects, and KPIs

In the medium-term management plan, the established KPIs (Key Performance Indicators) serve as barometers of success.Achieving an ordinary profit margin of 30% will demonstrate improved corporate competitiveness and profitability, proving that management’s initiatives have been successful. Accordingly, a roadmap toward 35 billion yen in ordinary profit has been outlined, and a clear action plan is necessary to support this growth.

As part of the expected outcomes, an increase in consumer satisfaction is anticipated through improvements in product appeal and in-store appeal, with the aim of strengthening emotional bonds with customers.Achieving sustainable growth will drive an increase in brand value, which will in turn contribute to the company’s shareholder return policy. Realizing these results will not only enhance the company’s appeal to investors but also lead to greater credibility in the market, thereby increasing its importance.

6. Addressing Risk Factors

For a company to achieve sustainable growth, it is essential to address risk factors appropriately. Factors such as a declining birthrate and aging population, intensifying competition, and fluctuations in raw material costs can act as barriers to corporate growth, making proper risk management crucial. Furthermore, the ability to respond sensitively to changes in consumer preferences and implement flexible business strategies is also required.

Measures to address these challenges include sharing information across the entire organization and establishing rapid decision-making processes. It is essential to strengthen collaboration with frontline operations to enable swift responses to changing market conditions. For investors as well, sound risk management serves as a key indicator of a company’s sustainability.

7. Implementation Structure

The implementation framework for “Value Up 2030” reflects a commitment to full employee participation in management. Emphasis is placed on close collaboration between departments, and a system has been established in which all employees work together as one to achieve the goals.Furthermore, fostering a sense of participation among employees by instilling the corporate philosophy and slogan contributes to the formation of corporate culture and promotes greater vitality throughout the organization.

Strengthening the implementation framework has the potential to infinitely promote operational efficiency and innovation. This enables the company to enhance its competitive advantage in the market and build a foundation that supports sustainable growth. For investors as well, the soundness of this implementation framework is a key factor linked to the company’s future growth potential.

Kotobuki Spirits’ medium-term management plan and growth strategy have been carefully formulated to achieve sustainable growth. As the company is expected to enhance its corporate value through a combination of effective measures and a robust execution framework, the next chapter is anticipated to analyze specific progress and results.

News & Topics

1. The Sharp Increase in Inbound Sales and Its Impact

Kotobuki Spirits Co., Ltd. reported that its inbound sales exceeded 10 billion yen for the first time in the fiscal year ending March 2025, achieving a 40.6% increase compared to the previous fiscal year. This sales growth was driven primarily by sales at international terminals and contributed to the company setting a new record for its best-ever performance.This growth is driven by an increase in the number of foreign visitors to Japan. With demand for high-priced items on the rise, inbound demand is positioned as a key element of the company’s long-term growth strategy.

According to experts, the increase in sales driven by inbound tourism is viewed as an excellent opportunity to boost consumer spending and enhance brand awareness. Going forward, the company is expected to maintain this growth and further expand its market share through new product launches and marketing strategies. In particular, product development tailored to the needs of foreign visitors to Japan is considered key and is highly likely to lead to sustainable growth.

From an investor’s perspective, the recovery in inbound tourism demand is likely to have a positive impact on business performance in the short term. However, since this sector is highly susceptible to international conditions and trends in the tourism industry, risk management is also crucial. To ensure the sustainability of business performance, a diversified market strategy that reduces reliance on inbound tourism is required.

2. Introduction of the New “Kanarina” Brand and Market Strategy

In 2024, Kotobuki Spirits announced its new brand, “Kanarina,” and began rolling it out in the Greater Tokyo Area. This brand is expected to appeal not only to tourists but also to local consumers. The launch of this new brand will further strengthen Kotobuki Spirits’ overall product portfolio and promote the diversification of its marketing strategies.

According to experts, entering the Greater Tokyo Area market is a crucial measure for adapting to consumer needs in a highly competitive environment. Analysts predict that the new brand will help attract new target demographics and contribute to the revitalization of the entire brand. Furthermore, it is essential to closely monitor the sales performance of the new brand, as the market’s response could determine the direction of future promotional efforts and product development.

From an investor’s perspective, while the launch of a new brand can generate short-term profits if successful, it may take time for brand awareness to take hold. Therefore, the company must not only recoup its initial investment but also ensure the initiative succeeds as part of a long-term growth strategy.

3. Strengthening Production Bases and Establishing an Efficient Manufacturing System

Shukurei’s new Mount Fuji Shizuoka Plant is scheduled to open in 2024, and it is expected to boost production capacity. This new plant is projected not only to enhance internal production efficiency but also to contribute to cost reductions, which is expected to lead to improved long-term competitiveness. The establishment of this new production base is a particularly important measure for keeping distribution costs down.

Experts emphasize that the new plant’s operation will contribute to the local economy and create jobs in the region. Furthermore, product development utilizing local resources is expected to enable the launch of products that highlight regional characteristics. This is also expected to strengthen the region’s branding as a production hub.

For investors, while the establishment of the new plant requires an initial investment, from a long-term perspective, it represents a crucial step toward improving profitability. Optimizing the production system will also help stabilize business performance and is likely to have a positive impact on the balance sheet.

4. Performance by Segment

In the fiscal year 2024 performance analysis, the “Shukurei” segment performed exceptionally well, with net sales of 30,095百万円, representing a 13.8% increase compared to the same period last year.On the other hand, the “Kujukushima Group” saw a slight decline in sales, highlighting the need for new product launches and sales promotion initiatives. While growth for the company as a whole was driven primarily by Shukurei and Keishiishi, the performance of the individual segments showed mixed results.

Experts point out that applying best practices from one segment to others is key to driving company-wide growth. In particular, rolling out successful brand strategies and sales promotion initiatives across the entire company can lead to efficient growth.

It is crucial for investors to pay close attention to segment performance and make decisions to shift resources toward areas demonstrating strong growth. On the other hand, for segments experiencing stagnant performance, it is necessary to consider revising strategies or implementing new measures.

5. Results of the Mid-Term Management Plan and Future Growth Strategy

Our Medium-Term Management Plan (2021–2025) focuses on expanding our revenue base through the strengthening of our e-commerce business and global expansion, with targets of 170,000百万円 in order intake and 200,000百万円 in completed construction revenue for fiscal year 2024.Technological innovation and the pursuit of sustainability are considered essential for future growth, with particular emphasis placed on investment in systems and human resource development.

Experts emphasize that introducing new business models and processes to strengthen competitiveness is essential for sustaining continuous growth. Furthermore, fostering a corporate culture and providing training are fundamental elements for promoting innovation.

From an investor’s perspective, monitoring these growth plans is essential for anticipating future increases in corporate value. While investment costs will be incurred in the short term, the execution of these strategies is necessary to secure medium- to long-term growth potential.

6. Environmental Initiatives and Sustainability

Kotobuki Spirits places great importance on addressing environmental issues and is advancing measures to achieve carbon neutrality. Corporate environmental responsibility will become increasingly important in the future, and this commitment also builds trust with customers. In particular, the company is moving forward with the introduction of next-generation energy sources and the development of plants with low environmental impact.

Experts note that, in building a sustainable business model, proactive engagement with environmental issues is key to enhancing a company’s brand strength and securing consumer support. While such initiatives entail short-term costs, they serve as a factor that strengthens competitiveness in the medium to long term.

From an investor’s perspective, a company’s sustainability initiatives may influence future fundraising and business opportunities, and companies that prioritize addressing environmental issues are expected to be well-received by the market.

7. Human Resource Development and a Supportive Work Environment

Kotobuki Spirits’ initiatives aimed at talent development and creating a supportive work environment are also key priorities. Measures to increase the proportion of female managers and initiatives to encourage the use of parental leave are currently underway; by enhancing diversity and inclusivity in the workplace, the company aims to attract and retain top talent.

According to experts, these factors are believed to contribute to improved corporate productivity and serve as a source of enhanced competitiveness in the long term. By creating a happy workplace environment, motivation and creativity are expected to increase, which in turn is anticipated to improve the company’s reputation.

Investors are encouraged to view measures that enhance employee satisfaction as contributing to the company’s sustainable growth. While investment in human resources may be viewed as a cost in the short term, it has the potential to become a key management resource in the long term.

Kotobuki Spirits’ short-term performance improvement measures and long-term growth strategies have the potential to enhance corporate value through their synergistic effects. It is important to continue monitoring the company’s future initiatives and growth.

Company Overview

1. Basic Corporate Information

Kotobuki Spirits Co., Ltd. was established on April 25, 1952, in Yonago City, Tottori Prefecture, and initially began manufacturing hard candies under the name Kotobuki Confectionery Co., Ltd.The company’s current headquarters is located at 2028 Hatagasaki, Yonago City, Tottori Prefecture, and its capital is 1,263,240,000 yen.With a consolidated workforce of over 1,758 employees, the company manufactures and sells a diverse range of confectionery products both in Japan and overseas. In particular, it markets brands such as “Inaba no Shiro Usagi” and holds a strong position in the domestic retail and tourist souvenir markets.Sales exceed 72.3 billion yen, and the company is expanding its market presence through 627 sales channels. It also has 18 consolidated subsidiaries and focuses particularly on providing products tailored to regional characteristics. Its goal is “to provide customers with a better diet,” and it continues to enhance its competitiveness both domestically and internationally.

From an expert perspective, the company—with a history spanning more than 70 years since its founding—has been developing products that meet evolving consumer needs, demonstrating a proactive approach to capturing new market opportunities. Consequently, it is expected to secure a competitive advantage while strengthening its brand power.

From an investor’s perspective, Kotobuki Spirits is a company with significant impact in both domestic and international markets, and its growth potential is attractive. Furthermore, its community-focused strategy enables flexible product development tailored to market needs, a factor that warrants attention when considering an investment.

2. Business Activities and Structure

Kotobuki Spirits Co., Ltd. primarily manufactures and sells Japanese and Western-style confectionery. A key feature of the company is its focus on tourist souvenirs, with product lines tailored to specific regions.Its product lineup includes items such as “Inaba no Shiro Usagi” and “Kujukushima Senbei,” with many products reflecting local culture and specialty products. This strategy is a key factor in promoting regional branding and differentiating the company from its competitors.

The company’s business operations span a wide range, from company-owned stores and wholesale through contracted sales channels to online sales; the growth of e-commerce, in particular, is a significant factor. Recently, the company has been strengthening its online sales and expanding services to meet diversifying consumer needs.

In terms of management, the company maintains an integrated process spanning product development, manufacturing, and sales, all operated under its own control. This ensures thorough quality control and enables the supply of products that emphasize originality. This system of full control enhances customer satisfaction and contributes to building trust in the market.

From an investor’s perspective, the company’s business diversification and regional specialization strategies have proven successful, and stable earnings growth is expected. Furthermore, the expansion of online channels is broadening the potential for acquiring new customers, and growth is expected to accelerate even further.

3. Major Subsidiaries and Related Businesses

Kotobuki Spirits is a company with an extensive network both domestically and internationally; it has 18 consolidated subsidiaries and is pursuing diversified business operations.Major subsidiaries include Kotobuki Confectionery, Tajima Kotobuki, Keishi Ishii, Shukurei, and the Kujukushima Group. These companies leverage the unique characteristics of their respective regions to develop a diverse range of confectionery products.

In particular, Keishi Ishii’s entry into the Western-style confectionery market represents a significant milestone and is viewed as a key factor in enhancing the company’s competitiveness. Furthermore, the company has expanded beyond Japan by establishing a subsidiary in Taiwan, thereby entering the Asian market.The aim is to reflect inbound demand through a product strategy deeply rooted in the local community, thereby establishing a competitive advantage in the local market.

From an investor’s perspective, the presence of these subsidiaries is a key factor in maintaining the flexibility to respond swiftly to diverse market needs, and synergies resulting from region-specific strategies are anticipated. Furthermore, the opening of new markets through international expansion has the potential to lead to revenue diversification.

4. Organizational Structure and Management Team

Kotobuki Spirits’ organizational structure is strengthened by the leadership of its management team. Seigo Kawagoe, President and CEO, brings extensive experience in the confectionery industry and is driving the company’s growth strategy. He places particular emphasis on establishing a corporate culture and developing employees, fostering an organization that respects diversity.Furthermore, the company prioritizes teamwork and has established a system designed to resolve issues promptly, with these efforts yielding tangible results in day-to-day operations.

The management team promotes a “region-specific brand strategy” in product development and marketing, rolling out a product lineup that reflects local cultures. This approach enables the company to respond sensitively to customer needs, thereby enhancing its competitiveness within the industry. Furthermore, the diversity of the executive team is highly regarded and has the potential to serve as a catalyst for innovation.

Investors have high expectations for the vision shaped by the company’s robust organizational structure and experienced management team, creating conditions for a brighter future for the company. The importance of leadership as a cornerstone of sustainable growth is well understood.

5. Research and Development and Product Innovation

At Kotobuki Spirits, a robust research and development framework has been established to deliver quality and innovation that exceed customer expectations. In particular, the development of products that leverage local ingredients has become a key factor in winning over customers.New product planning is based on market research, and unique products that reflect regional characteristics are being launched one after another. In recent years, the product lineup has also expanded to address health-conscious trends and changing lifestyles, demonstrating the company’s commitment to continuously meeting customer needs.

Furthermore, the company is actively expanding online sales of new products and broadening its sales channels through digital transformation, while implementing new marketing strategies. In this way, the company’s ability to leverage its strengths while responding swiftly to changes in consumer lifestyles is a key factor in strengthening its competitive advantage.

From an investor’s perspective, robust research and development is a key factor supporting long-term growth, and product innovation in response to industry changes leads to improved market competitiveness. Looking ahead, the development of new product categories is anticipated, and further improvement in business performance is expected.

6. ESG and Sustainability Initiatives

Kotobuki Spirits is strengthening its commitment to ESG (Environmental, Social, and Governance) as part of its corporate sustainability initiatives. The company is reviewing its raw material procurement and manufacturing processes to reduce environmental impact and has clearly demonstrated its commitment to contributing to local communities.Furthermore, in product development, the company encourages the creation of health-conscious products and the use of sustainable materials.

Regarding social responsibility, the company is committed to business operations that prioritize collaboration with local communities, while simultaneously working to create a comfortable working environment for employees. Programs to ensure diversity and foster talent development have been introduced, and initiatives are in place to respect the opinions and values of each individual employee. As a result, overall employee engagement has improved, accelerating the creation of a better workplace environment.

From an investor’s perspective, ESG initiatives are critical factors directly linked to a company’s sustainability and future prospects; a company’s reputation for fulfilling its social responsibilities is highly likely to lead to a stable, long-term supply of capital. It can be said that such initiatives also contribute to strengthening the company’s brand and credibility.

Summary

Kotobuki Spirits Co., Ltd. is a company that combines a long history with a community-focused strategy to pursue sustainable growth. The company’s diverse business operations and robust organizational structure hold the potential to enable it to respond swiftly to future market changes. Furthermore, its product development and R&D initiatives, which leverage regional characteristics, are key factors in maintaining its high level of competitiveness.Going forward, the company’s growth strategies both domestically and internationally, as well as its medium- to long-term outlook, are key points of interest for investors, and expectations are high for Kotobuki Spirits as it continues to strive for sustainable corporate management.

Shareholder Returns

1. The Importance of Shareholder Returns and Their Contribution to Enhancing Corporate Value

At Kotobuki Spirits Co., Ltd., shareholder returns are positioned as a central priority in corporate management. The company adheres to a fundamental policy of enhancing long-term corporate value by returning stable profits to shareholders. In particular, against the backdrop of improved business performance over the past few years, the company’s commitment to shareholder returns has become increasingly evident.

Kotobuki Spirits has explicitly stated its goal of maintaining a total return ratio of 50% or higher from the fiscal year ending March 2026 through the fiscal year ending March 2030, which serves as the foundation for the company’s pursuit of sustainable growth.This goal promotes initiatives to enhance shareholder value through increased dividends and share buybacks in line with profit growth, ultimately contributing to the building of a relationship of trust between the company and its shareholders.

For investors as well, the company’s sincere commitment to shareholder returns serves as a factor that heightens expectations regarding its future prospects. When profit returns are distributed in a stable and sustainable manner, the company’s appeal tends to increase, leading to greater demand for its shares. This, in turn, improves shareholder satisfaction with their investment and allows investors to expect stable returns.

2. Specific Details and Performance of the Dividend Policy

Kotobuki Spirits’ dividend policy is fundamentally based on returning profits in line with business performance. Specifically, the company plans to pay a dividend of 35 yen per share for fiscal year 2025, an increase from the previous year’s 32 yen. This dividend policy reflects past earnings growth and demonstrates the company’s commitment to providing sustainable returns to shareholders.

Notably, the dividend payout ratio has been maintained at around 40%, ensuring a stable distribution of profits in line with the company’s growth.Financial performance over the past two years has been strong, with operating income increasing from 9,952百万円 in fiscal year 2023 to 15,780百万円 in fiscal year 2024. This improvement in performance underpins the dividend increase.

In addition, the company has established a plan to return value to shareholders through a share buyback program and plans to repurchase approximately 2,999百万円 worth of its own shares in fiscal year 2025. This initiative is expected to bring direct value to shareholders and contribute to the enhancement of shareholder value.

3. Share Buybacks and Their Economic Effects

Share buybacks are part of Kotobuki Spirits’ active shareholder return strategy and are primarily conducted with the aim of maximizing shareholder value.The company plans to repurchase 1,281,300 shares in fiscal year 2025, with the total repurchase amount expected to reach 2,999百万円. Such share buybacks are expected to contribute to enhanced shareholder returns by reducing the supply of shares on the stock market and thereby relatively increasing the stake held by remaining shareholders.

The economic effects of share buybacks are wide-ranging, with an increase in EPS (earnings per share) being a key factor. Since share buybacks reduce the number of outstanding shares, the earnings per share distributed to remaining shareholders increase. This is expected to lead to an improvement in the dividend payout ratio, which directly benefits shareholders.

Furthermore, share buybacks also serve to strengthen a company’s financial position; by lowering the cost of capital and demonstrating confidence through buyback activity in the market, they foster investor confidence. Such flexible capital policies contribute to improved overall corporate performance and bring direct benefits to shareholders.

4. Balancing Long-Term Profit Growth and Stable Dividends

Kotobuki Spirits’ dividend policy prioritizes stability from a long-term perspective while being based on the premise of profit growth. In particular, the company plans to pay a dividend of 35 yen per share for the fiscal year ending March 2026; this dividend increase is underpinned by sustained profit growth.By targeting a dividend payout ratio of 40%, the company aims to maintain shareholder returns commensurate with its growth while also ensuring sufficient retained earnings.

For investors, this strategy is attractive; in particular, the continuous distribution of profits based on stable cash flow contributes to long-term wealth accumulation. This is underpinned by a philosophy that aims for the shared growth of both shareholders and the company, rather than focusing solely on short-term profit pursuit.

Furthermore, the company plans to raise the total payout ratio to 50% or higher from fiscal year 2026 through fiscal year 2030; if this is steadily implemented, it will meet shareholder expectations. Such a dividend policy is not only crucial for supporting the company’s sustainable growth strategy but also contributes to building trust among investors.

5. Communication with Investors and Ensuring Transparency

Kotobuki Spirits’ approach to shareholder returns is underpinned by transparent communication. Governance regarding dividend decisions is ensured through approval at the Annual General Meeting of Shareholders and separate resolutions by the Board of Directors. Furthermore, clearly articulating management plans and shareholder return policies instills greater confidence in investors.

Going forward, Kotobuki Spirits is expected to continue implementing highly transparent shareholder return measures based on its business performance. For investors, this transparency enhances credibility and serves as a key factor in recognizing corporate value. The company’s commitment to strengthening communication with shareholders and pursuing sustainable growth provides investors with an environment where they can invest with confidence.

Furthermore, the implementation of shareholder return strategies enhances credibility when the company performs well, which in turn serves as a catalyst for positive market reactions. It is important to maintain this approach going forward while striving to balance shareholder returns with corporate growth.

To achieve sustainable shareholder returns, the company must maintain its current approach while flexibly adapting to new market conditions. Kotobuki Spirits is expected to evolve its shareholder return strategy by focusing on building trusting relationships with shareholders while anticipating various future challenges.

Kotobuki Spirits Co., Ltd.’s shareholder return strategy is implemented through its dividend policy and share buybacks. It is expected that these initiatives will continue to take concrete form, leading to long-term corporate growth and the realization of returns to shareholders. Investors need to keep a close eye on the company’s progress while anticipating stable dividends and enhanced shareholder returns.

Business Risks

1. Factors Affecting Business Performance

Kotobuki Spirits Co., Ltd.’s business performance is heavily dependent on consumer purchasing trends and changes in the market environment. In particular, the impact of the COVID-19 pandemic, economic fluctuations, and changes in weather conditions directly affect the company’s earnings.In particular, fluctuations in demand caused by mild winters or extreme weather directly affect sales of confectionery and other products, and are expected to reduce consumer purchasing sentiment. Since a swift response to such external factors is required, the company must conduct market forecasts based on historical data and establish a production system aligned with demand.

In addition, fluctuations in raw material prices are another factor affecting business performance. In particular, when prices of key raw materials—such as butter and chocolate—skyrocket, it creates cost pressures that negatively impact corporate profit margins. It is crucial to establish a stable raw material procurement system and to diversify the supply chain to help hedge against these risks.

Therefore, a flexible structure capable of constantly monitoring market trends and responding swiftly to changes in the economic environment is necessary, as this is believed to lead to stable business performance. Prompt information sharing and risk monitoring through risk communication will contribute to corporate growth.

2. Industry-Specific Risks

The food industry, to which Kotobuki Spirits belongs, entails inherent risks. In particular, growing consumer awareness of food safety is exacerbating these risks.Amid growing attention to issues involving pesticides and additives, any shortcomings in recall responses could damage the brand’s image and expose the company to the risk of legal liability. Since maintaining food quality is critical to public trust, rigorous quality control is essential.

Furthermore, fluctuations in the raw materials market are a significant risk factor. Key raw materials such as wheat, dairy products, and sugar are heavily dependent on weather conditions and supply-and-demand dynamics in international markets, and these fluctuations could put pressure on profit margins. As competition intensifies, there may be situations where it is difficult to pass on price increases to consumers, necessitating extremely prudent management.

Therefore, establishing a system capable of sensitively identifying consumer needs and swiftly providing new products and services is essential for risk management. To enhance quality and secure consumer trust, companies must continuously monitor industry-wide trends.

3. Financial and Management Risks

Kotobuki Spirits’ financial position is affected by the competitive environment and rising raw material costs. In particular, a deterioration in cash flow resulting from an imbalance between current assets and liabilities poses a serious risk to cash management. Since a shortage of working capital can lead to reduced production capacity and lost sales opportunities, strengthening cash management is an urgent priority.

Furthermore, proper management of interest-bearing debt is essential. Excessive borrowing or fundraising could lead to a heavy future interest burden, which could ultimately squeeze profits. As economic conditions tighten, rising interest rates and restrictions on credit availability could directly impact business performance, making a review of financial strategy necessary.

Furthermore, establishing sound corporate governance is essential. Inadequate organizational structures and deficiencies in risk management can lead to information leaks and operational inefficiencies, posing a risk of damaging the company’s reputation. Strengthening information security is key to sustaining the business. It is essential to secure a foundation for sustainable growth by implementing risk mitigation measures.

4. Regulatory and Compliance Risks

The food industry operates under strict legal regulations, and compliance with laws and regulations is a fundamental pillar of corporate management. In particular, multiple laws—such as the Food Sanitation Act and the Act Against Unjustifiable Premiums and Misleading Representations—apply, requiring companies to understand the intent of these regulations and incorporate them into their daily operations. If a violation of the law is discovered, the company risks suffering a significant loss of credibility.

Furthermore, as consumer concern regarding food safety and quality continues to grow, companies must not neglect their efforts to meet these expectations. If inappropriate raw materials or manufacturing processes are discovered, the company’s image could be tarnished through customer complaints and product recalls, and it may face legal liability. This could also result in financial losses.

Therefore, companies must strengthen their training and monitoring systems to address legal risks and ensure thorough compliance with laws and regulations. This approach will enhance consumer trust and help maintain brand value.

5. Natural Disasters and Geopolitical Risks

Natural disasters and geopolitical risks are also factors that cannot be ignored in investment decisions. The confectionery industry is heavily dependent on climatic conditions; since precipitation and temperature fluctuations directly affect product demand, there are concerns about the impact of extreme weather on business operations. In the event of earthquakes, typhoons, or heavy rains, logistics could be disrupted, potentially making inventory management and sales activities difficult.

The formulation of a Business Continuity Plan (BCP) is essential for a company’s survival, and failing to prepare for natural disasters carries significant risks. Conducting risk assessments in advance can enhance a company’s ability to respond when a crisis occurs. Companies must strive to safeguard the sustainability of their business operations through rigorous crisis management.

6. Changes in the Investment Environment and Market Risks

Fluctuations in the investment environment and the overall market also represent significant risk factors for companies. Since market trends, monetary policy, and exchange rates affect corporate performance and stock prices, it is essential to keep a close eye on market trends at all times. In particular, sudden changes in interest rates or monetary stimulus measures can impact liquidity and the difficulty of raising funds.

In an increasingly competitive environment, investors should accurately assess risks and make investment decisions after carefully considering a company’s financial health and growth strategies. Since a company’s stated growth targets and competitive advantage in the market determine the success or failure of long-term investments, it is particularly important to formulate concrete strategies.

Investors must be able to identify companies that recognize these risk factors and can respond to them flexibly. It is important to consider that companies which continue to respond sensitively to changes in the market environment and consumer needs are more likely to achieve sustainable growth.

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