ST. COUSAIR Co., Ltd.

Changes in Japan's economic conditions and the global situation, including the Middle East situation, could adversely affect business performance and financial condition through soaring raw material prices, procurement difficulties, and deteriorating sales environments. As countermeasures, the Group is developing multiple domestic brands and multiple sales channels, and positioning overseas markets as a growth area while making continuous investments to expand global sales.

Deterioration of relationships or occurrence of disputes with suppliers of raw materials and products and wholesale distributors could make procurement as planned difficult, and soaring raw material prices and shortages due to factors such as the Middle East situation could impede stable procurement, adversely affecting business performance and financial condition. The Group strives to maintain win-win relationships through sufficient communication with each business partner.

If an accidental quality deterioration event occurs across the entire supply chain, including suppliers and contract manufacturers, this could result in substantial damages and a decline in sales due to brand image deterioration. The Group has established a system of regular visits to and quality control training for outsourced factories, and has arranged for the Board of Directors and the Risk & Compliance Management Committee to deliberate when significant issues arise.

Heavy snowfall at manufacturing sites in Iizuna Town and Shinano Town, Nagano Prefecture, and earthquakes, wildfires, floods, and the spread of infectious diseases affecting the US subsidiary in Oregon, could result in the suspension of head office functions, halted factory operations, damage to stores, and impeded raw material procurement. The Group ensures business continuity through the use of its US subsidiary and supplier network of over 500 companies, development of multiple sales channels, and diversification of production systems through the establishment of a new manufacturing site in Nagano City.

If a cyberattack, system outage, or data tampering occurs against the proprietary core system, this could adversely affect business performance and financial condition through disruption of business operations and loss of social credibility. The Group is strengthening its resilience through the introduction of user authentication across all systems, vulnerability assessments of EC sites and other systems by external specialist institutions, installation of UTM devices, and security education and training for all employees.

If personal information of customers or employees is leaked outside the company, this could adversely affect business performance and financial condition through substantial damages and loss of social credibility. The Group obtained Privacy Mark certification in June 2023 and continues to strengthen its internal management system based on its personal information protection policy.

Violations of legal regulations such as the Food Sanitation Act, the Act against Unjustifiable Premiums and Misleading Representations, the Food Labeling Act, and the Labor Standards Act could result in substantial damages, administrative penalties, and loss of social credibility, and omissions in allergen labeling on raw materials also carry the risk of causing harm to individuals. The legal affairs department maintains a compliance system by coordinating with legal and patent attorneys, responding promptly to regulatory amendments, and holding internal study sessions.

Adverse weather, natural disasters, changes in the global situation, and geopolitical risks (such as naphtha price surges due to the Middle East situation) could cause procurement difficulties and price increases for raw materials and packaging materials, affecting manufacturing and supply systems. The Group leverages its US subsidiary and a supplier network of over 500 companies nationwide to diversify risk by building a supply chain that eliminates excessive dependence on specific regions or products.

The business of the US subsidiary St. Cousair, Inc. is exposed to country risks related to US politics, the economy, and legal regulations, and business expansion in Asian regions such as Taiwan and South Korea may also be hindered by changes in local conditions, changes in legal regulations, and differences in business customs. In addition, sudden changes in exchange rates for transactions denominated in US dollars could adversely affect consolidated business performance, and the Group uses forward exchange contracts as needed to reduce this risk.

The three founders—the Chairman of the Board, the Representative Director and President, and the Representative Director and Executive Vice President—play important roles in management policy, business strategy, and global operations, and if any of them becomes unable to continue their duties, this could adversely affect business performance and financial condition. The Group strives to build a management system that eliminates excessive dependence on specific directors through information sharing and strengthened management structures via the Board of Directors, the Audit and Supervisory Committee, and the Nomination and Compensation Committee.