KUZE CO., LTD.

The food wholesale business accounts for 90.4% of consolidated net sales, creating a risk that deterioration in the performance of major customers in the restaurant industry will directly spill over into the Group's results. Rising costs including food materials, labor shortages, abnormal weather, and economic downturns may put pressure on restaurant operators' businesses, potentially leading to a significant decline in sales. This is recognized as a structural challenge stemming from the high degree of dependence on a specific business and specific customer segment.

Food hygiene issues are an unavoidable challenge for the food industry, and not only hygiene problems within the Group itself but also broader societal food safety incidents could affect business performance. As a countermeasure, the Company has established a Quality Control Department and formulated its own Group quality standards; Kuze, Kisco Foods, and Kuze Fresh One have obtained ISO22000 certification, and Asahi Suisan has obtained FSSC22000 certification, working to improve quality across all operations including sales, logistics, and order processing.

Both the food wholesale and food manufacturing businesses rely on a stable food supply chain as their operational foundation. If a decline in primary industry workers, changes in the supply network, or climate change lead to insufficient product supply or difficulty in securing stable procurement, this could have a material impact on business performance. In particular, intensifying climate change and the aging and decline of agricultural and fishing workers are recognized as medium- to long-term procurement risks.

There is a risk that changes in the political situation of various countries, international conflicts, and foreign exchange fluctuations could raise the purchase prices of goods and raw materials. The Company explicitly recognizes as a new risk the rise in prices of gasoline and materials due to supply concerns for crude oil and petroleum-related products stemming from international conflicts, which could affect both the food wholesale and food manufacturing businesses.

In addition to procurement costs and fuel expenses, outsourcing fees paid to logistics contractors are also trending upward, and a sharp rise in various prices exceeding expectations could put pressure on business performance. As a countermeasure, the Company has set a policy of prioritizing the reliable supply of products to customers while striving to secure stable logistics infrastructure and food materials/supplies; however, if cost pass-through proves difficult, this would directly affect profitability.

The Company has experienced a major impact on its business performance from the COVID-19 pandemic in 2020, and there is a risk that if similar restrictions on activity are imposed by the government in response to a future outbreak of infectious disease, sales could decline significantly due to the resulting damage to the restaurant industry, its major customer base. The high degree of dependence on the restaurant industry amplifies this risk, and the Company positions the diversification of its sales mix through strengthened efforts in the prepared meals (nakashoku) and home cooking (naishoku) segments as a risk mitigation measure.

If natural disasters such as earthquakes, typhoons, heavy rain, or floods, or fires and accidents occur at domestic or overseas logistics facilities, this could disrupt the supply of products to customers. As a countermeasure, the Company has established a "Crisis Management Response Manual for Large-Scale Disasters" and stipulates a system for establishing a crisis management headquarters headed by the President.

If various systems, including core systems, are subject to external cyber attacks, in a worst-case scenario this could affect the supply of products to customers. The Company implements risk countermeasures through continuous updates of defensive measures and internal training, but the increasing sophistication of attack methods requires ongoing strengthening of responses.

The Company conducts overseas business and exports, and if social unrest arises due to changes in the political situation, legal and regulatory revisions, or major economic fluctuations in the regions where it operates, this could affect its business performance and financial position. Geopolitical risks and changes in the regulatory environment are recognized as challenges that could directly affect the continuity of overseas operations.