Calbee, Inc.

If a quality problem occurs, the Company may be forced to recall products or suspend sales, potentially resulting in loss of customer trust and adverse effects on business performance. The Company strives to ensure quality assurance by building a system for specification design review, audits of raw material procurement and production processes, and traceability across the entire supply chain.

Domestically produced potatoes, the main raw material for the Company's core potato snack products, carry a risk of unstable procurement due to unfavorable weather and a decline in the number of farmers. Deterioration in crop conditions could result in lost sales opportunities and increased costs from emergency procurement. The Company addresses this through contract farming, diversification of production areas, and development of facilities to handle imported potatoes.

The spread of the potato cyst nematode, a significant pest under the Plant Protection Act, restricts seed potato production fields, raising concerns about reduced potato yields and lower quality of processed products. The Company has set a target of converting 100% to nematode-resistant varieties by 2035; however, delays in new variety development, stagnation in adoption, or a greater-than-expected spread of the nematode could have a material impact on business performance.

For raw materials and supplies imported from overseas, there is a risk of changes in procurement sources or price surges due to disasters or geopolitical risks. Increases in raw material and supply prices beyond expectations, or higher procurement costs due to changes in import routes, may affect business performance and financial condition. The Company addresses this by diversifying and multiplying procurement sources and strengthening appropriate inventory levels.

Against the backdrop of the declining working population, exemplified by the logistics industry's "2024 problem," and increased parcel delivery volumes due to e-commerce growth, there are concerns about a shortage of transport and delivery vehicles, which could disrupt product supply. If securing vehicles at appropriate cost becomes difficult, or if transport and delivery costs rise more than expected, business performance may be affected. The Company addresses this through AI-driven supply chain reform and promotion of "White Logistics" initiatives.

Cyberterrorism, computer virus infection, unauthorized access, and similar incidents could result in loss of information, leakage of personal or confidential information, or suspension of information systems, potentially disrupting production and logistics operations and damaging social credibility. The Company addresses this by establishing an incident response system centered on a CSIRT and implementing appropriate security measures.

The intensification of typhoons, heavy rains, and other events due to climate change could directly damage factories and raw material production areas and disrupt the supply chain, while insufficient sunlight hours also raise concerns about reduced potato yields. Increased business costs from the introduction of a carbon tax and changes in consumer purchasing behavior are also anticipated. The Company conducts scenario analysis based on its support for the TCFD recommendations and promotes initiatives to achieve its greenhouse gas reduction targets (a 30% reduction in total emissions by FY2031 (ending March 2031), and net zero by 2050).

If the supply chain is disrupted for a prolonged period due to large-scale earthquakes, wind and flood damage, or other natural disasters or pandemics, product supply could be halted, substantial facility restoration costs could arise, and raw material prices could surge. The Company addresses this through diversification of production sites and procurement sources, multiple sourcing, and promotion of an all-hazard BCP; all Calbee factories (excluding the new Setouchi Hiroshima plant) have obtained resilience certification.

The Company is subject to domestic laws and regulations such as the Food Sanitation Act, the Act against Unjustifiable Premiums and Misleading Representations, and the Plant Protection Act, as well as legal regulations in various overseas countries. If legal violations occur due to amendments to laws or the introduction of unforeseen new regulations, this could lead to penalties, revocation of licenses, litigation, or loss of stakeholder trust. The Company promotes compliance through the establishment of the Calbee Group Code of Conduct and awareness-raising activities.

PepsiCo, Inc. is an equity-method affiliate holding 22.01% of the Company's shares through FLGI, and the two companies have realized synergies under a strategic alliance agreement concluded in 2009. If PepsiCo's management policy or business strategy changes in the future, these synergies may no longer be realized, and if the agreement is terminated, a competitive relationship with the PepsiCo group may arise within Japan.