Tea Life Co.,Ltd.

The Group is highly dependent on the domestic market, and a decline in the number of end users or a decrease in average spending per customer due to the declining birthrate, aging population, and changes in consumer purchasing behavior may lead to a decrease in sales. In addition, requests for rent reductions or cancellations resulting from deteriorating business performance of real estate tenants, leading to lower occupancy rates, could affect both the Wellness and Logistics businesses. As countermeasures, the Group is promoting sales methods and product development aligned with consumption trends, as well as business diversification.

As consumer purchasing behavior shifts toward internet mail order, new entrants ranging from major corporations to individual proprietors have continued to enter the market, and competition is expected to intensify further. This intensifying competition may raise customer acquisition costs and trigger price competition in the Wellness business, potentially adversely affecting performance. The Group is working to mitigate this impact by expanding its lineup of in-house developed products and differentiating its services.

As the Wellness business operates without physical stores, customer acquisition is critical to its survival, requiring substantial advertising expenses for catalog distribution and internet advertising. If advertising rates or paper prices rise sharply, or if advertising efficiency deteriorates, the resulting increase in expenses could put pressure on business performance. The Group is promoting efficiency through the selection of advertising media and improved messaging, as well as reducing costs by shifting from catalogs to digital media.

A significant portion of the raw materials for the Group's main products is produced in China, and unforeseen events such as changes in China's political and economic conditions could cause problems in raw material manufacturing and quality control systems. Supply disruptions or quality issues could have a serious impact on the business in terms of both sales and credibility. The Group addresses this risk by concluding basic agreements with suppliers, regularly strengthening relationships, and gathering information on alternative supplier candidates.

Agricultural products such as tea leaves, black soybeans, dandelion root, and ginseng are key raw materials, and poor harvests caused by abnormal weather or other adverse weather conditions could result in shortages leading to lost sales opportunities and rising procurement costs. Given the nature of agricultural products, it is difficult to fully avoid weather-related risk, which may affect business performance. The Group seeks to mitigate this impact by diversifying risk through new product development and business diversification.

The Group sells a wide variety of products including food, pharmaceuticals, cosmetics, general merchandise, and furniture, and if products that fail to meet standards reach customers, this could not only affect the business and performance but also damage brand credibility. In particular, food and pharmaceuticals are subject to strict legal regulations, and the social impact of any defects occurring in these areas would be significant. The Group thoroughly implements quality control through compliance with national and local government regulations, in-house inspection and legal compliance checks based on its own standards, and the establishment of a complaint response system.

Given the nature of the mail-order business, the Group holds large volumes of customers' personal information and falls under the category of a business operator handling personal information under the Personal Information Protection Act. Should personal information be leaked for any reason, the resulting loss of credibility and increased post-incident response costs could have a material impact on the business and performance. The Group has implemented personal information protection measures, including obtaining Privacy Mark certification and implementing defenses against unauthorized external access and virus infection.

The Group manages business information such as customer information, order information, and information on officers and employees through its systems, and nearly all operations depend on computer processing. If a large-scale system failure or internet outage occurs due to a major disaster, virus infection, cyberterrorism, or other causes, various operations could be disrupted, potentially affecting the business and performance. The Group addresses this by maintaining stable system operation and establishing a backup system for critical data.

The Wellness business conducts import transactions denominated in foreign currencies, and sharp fluctuations in exchange rates could raise procurement costs, potentially affecting the business and performance. In particular, during periods of yen depreciation, increased procurement costs for imported raw materials could put pressure on profits. The Group seeks to mitigate this impact by revising sales prices in consideration of trends in procurement prices.

The Group has a policy of actively utilizing M&A as a key strategy for expanding its business scale and diversifying revenue sources. Although due diligence is conducted by external organizations, if unforeseen risks materialize after an acquisition or expected synergies are not realized, this could affect business performance and financial condition. The Group aims to maximize investment returns through sharing Group strategy, working to create synergies, and establishing a performance monitoring system.