HOKKAIDO COCA-COLA BOTTLING CO.,LTD.

The majority of the Group's sales arise from beverages using the Coca-Cola trademark owned by The Coca-Cola Company, and if trademark infringement or brand damage occurs, it could significantly affect the financial position and operating results. The Group has entered into a bottler agreement covering the Hokkaido region with The Coca-Cola Company and Coca-Cola (Japan) Company, Limited, and the agreement is periodically renewed. The structure of high dependence on a single brand constitutes a fundamental risk to business continuity.

The Group has obtained ISO9001 and FSSC22000 certifications at its Sapporo plant and promotes quality control, but should a quality-related incident occur, regardless of whether it is attributable to the Group, it could significantly damage the brand image. Quality incidents could lead to a decline in sales through loss of consumer trust, potentially affecting the financial position and operating results. The Group strives for prevention through raising employee awareness and promoting accident prevention activities.

The beverage market has been in a mature state in recent years, and no significant market expansion is expected for the time being. Competition among beverage companies to gain sales share is intense, and if sales share at supermarkets and other outlets declines, it could affect operating results. Intensifying competition in the mature market entails the risk of pressure on profitability through price pressure and increased promotional expenses.

Due to the nature of beverage products, sales tend to be susceptible to weather conditions. In particular, a cool summer during peak demand season or heavy snowfall in winter could affect operating results. Given the regional characteristics of Hokkaido, the impact of weather condition fluctuations on sales tends to be more pronounced compared to other regions.

The Group conducts business activities primarily centered on the Hokkaido market, resulting in a structure in which performance is easily influenced by regional economic trends. Against the backdrop of current inflation-driven price increases, a rapid recovery in personal consumption is not assumed, and a rapid decline in personal consumption, should it occur, could affect operating results. The regionally concentrated business model heightens sensitivity to economic fluctuation risk.

The Group holds assets such as land and securities, and a significant decline in land prices or a decrease in the valuation of securities due to deterioration or bankruptcy of investees could affect the financial position and operating results. In addition, the Group maintains a defined benefit corporate pension plan, and if the investment performance of pension assets composed of securities deteriorates, retirement benefit expenses could increase, potentially affecting the financial position and operating results. Both fluctuations in asset value and pension liabilities exist as financial risks.

The beverage manufacturing and sales business is subject to a wide range of regulations, including the Food Sanitation Act, the Product Liability (PL) Act, the Road Traffic Act, the Waste Management Act, and the Containers and Packaging Recycling Act. If these regulations are strengthened, new costs related to regulatory compliance could arise, potentially affecting the financial position and operating results. While the Group complies with all regulations and strives to provide safe and reliable products, there is a risk that costs of responding to changes in the regulatory environment could pressure profitability.

Alcoholic beverages sold by the Group are subject to regulation under the Liquor Tax Act, and changes in liquor tax rates could affect sales prices and trends. If social issues related to alcohol become more serious, sales activities could be affected or subject to regulation in some way, potentially affecting the future prospects, financial position, and operating results of the alcoholic beverage business. The Group operates its business having obtained the various licenses necessary under the Liquor Tax Act.

The Group conducts business activities using water resources, and if water quality abnormalities or depletion of water resources occur, they could have a significant impact on the business. In addition, if the expansion of issues such as marine pollution and increased greenhouse gases leads to a ban on the sale of PET bottles, it could significantly affect the financial position and operating results. While the Group is promoting initiatives such as bottle-to-bottle recycling, weight reduction, and adoption of renewable energy, there is a risk that responding to stricter regulations and transforming the business model will be required, entailing associated costs.

Major production facilities and sales bases are concentrated at the head office location, and in the event of a disaster such as an earthquake or fire, production activities could be halted, potentially leading to insufficient product supply. If the spread of infectious disease causes changes in citizens' lives and stagnation of the Japanese economy, operating results could be affected, particularly through the decline of restaurants, transportation, leisure, and event facilities. As countermeasures, the Group has implemented fire and earthquake resistance measures for major facilities, dispersed storage of products, distributed IT infrastructure, and formulated a BCP (Business Continuity Plan), and in the event of an infectious disease outbreak, the Group's policy is to focus on sales channels that do not decline, thereby curbing the decline in sales.