ITOCHU-SHOKUHIN Co.,Ltd.

The occurrence of large-scale earthquakes, tsunamis, typhoons, floods, and other natural disasters could cause harm to employees, damage to logistics warehouses and equipment, and inability to ship products due to inventory damage. If damage extends to information system equipment or communication infrastructure, disruption to the transmission and receipt of order data and delays in fund settlement are also anticipated. As a countermeasure, the Group has formulated a Business Continuity Plan (BCP) and conducts annual drills to strengthen its response capability in the event of an emergency.

The progression of global warming could intensify typhoon and flood damage, potentially causing disruption to the supply chain. In addition, the introduction of new regulations such as tightened greenhouse gas emission restrictions or a carbon tax could increase the burden of purchasing prices and logistics costs, both through the Group's own compliance costs and through increased costs borne by business partners. The Group has set a target of reducing greenhouse gas emissions by 40% by 2030 compared to fiscal 2018 levels, and is promoting the introduction and utilization of renewable energy.

There is concern that the outbreak of infectious diseases such as novel influenza or COVID-19 could affect the entire supply chain, including manufacturers' factory production, shipping and receiving, logistics operators handling delivery, and sales destinations. Prolonged movement restrictions and economic stagnation due to city lockdowns could dampen consumer sentiment, potentially affecting business performance and financial condition. The Group has formulated a business continuity plan, and its logistics centers conduct stable business operations while implementing infection prevention measures and safety considerations based on guidance and requests from administrative authorities.

The declining working-age population due to the falling birthrate and aging population, combined with the increase in home delivery volumes accompanying growth in e-commerce transactions, is expected to widen the supply-demand gap for truck drivers. This could not only drive up logistics costs but also make it difficult to secure logistics capacity within an appropriate cost range. This poses a risk that the Group's business operations could be hindered, affecting business performance and financial condition. The Group is working to secure logistics capacity within an appropriate cost range by supporting the

Competition among food wholesale operators is intensifying due to the declining total population, heightened competition among retail customers, and rising logistics costs. If the Group's competitiveness relative to other companies in the same industry declines, this could affect business performance and financial condition over the medium to long term. Although the Group assesses the risk of shifts in the industry landscape due to new market entrants as relatively low, the competitive environment within the industry is becoming increasingly severe.

ITOCHU Corporation is the parent company holding 52.6% of the Company's voting rights, including indirect holdings. If a change occurs in the capital relationship with ITOCHU Corporation resulting in a significant shift in management policy or business development, this could affect the Group's business performance and financial condition. Highly material related-party transactions are approved and implemented after thorough deliberation by the Board of Directors, with maximization of the interests of all shareholders of the Company as the top priority.

Because the Group has built a nationwide network that centrally processes operations from business offices and logistics centers across the country through its computer center, if a physical failure occurs due to a large-scale disaster, or if a system failure occurs due to an unexpected virus, spoofed emails, or cyberattack, or if personal information or confidential information is leaked, this could affect business performance and financial condition through impacts on overall operations, increased security countermeasure costs, and claims for damages. The Group is strengthening its security systems, including establishing backup lines between all locations.

The occurrence of misconduct by officers, employees, or others, or actions that violate laws, regulations, or social norms, could result in legal penalties, litigation, or loss of stakeholder trust, thereby damaging corporate value and affecting business performance and financial condition. The Group has established a Compliance Committee chaired by the officer in charge of compliance, and has set up subordinate organizations such as an Antitrust Law Subcommittee and monitoring teams, while working to reduce the likelihood of legal violations through regular training and employee education.

If an unforeseen accident occurs due to external factors involving the alcoholic beverages, food products, and other items handled by the Group, this could affect the Group's business activities and performance. The Quality Assurance Department has dedicated personnel who work to strengthen the quality control system through investigation and verification of product labeling, process inspections and hygiene management at contracted manufacturing facilities, and audits, inspections, and guidance regarding quality control conditions at logistics centers.

The Group sells products and services to a large number of customers on deferred payment terms (extending credit), and if receivable collection is delayed or becomes uncollectible due to deterioration in the financial condition of credit customers, including as a result of worsening economic conditions, this could affect business performance and financial condition. The Group states that this risk increases in situations where economic activity is significantly stagnant, such as during the spread of infectious diseases. In addition to formulating and appropriately operating credit management regulations, the Group works to reduce collection risk through credit guarantees and the acquisition of collateral.