LIPPS CO.,LTD

The Hair Wax Series, the company's core product, accounts for more than half of Products Business sales, resulting in a high degree of dependence on a specific category. Changes in consumer preferences or a decline in brand strength leading to reduced market share, or a contraction of the core product market, would directly affect the company's financial position and operating results. Although the company is pursuing diversification of the "LIPPS" brand through development of adjacent products and consideration of new businesses, the structural dependence continues.

FC Chuo Yakuri Kenkyusho Co., Ltd. manufactures nearly the entire volume of the Hair Wax Series, the company's core product, resulting in an extremely high degree of dependence on a single supplier. The basic product supply agreement is automatically renewed annually, and if any disruption occurs in the relationship with this company, securing an alternative manufacturer could prove difficult, potentially having a material impact on business continuity. At present, a favorable business relationship is maintained through close communication.

Prices of petroleum-related raw materials used in the company's core products are affected by crude oil prices and exchange rate fluctuations. If price fluctuations beyond expectations occur due to international circumstances, rising manufacturing costs would reduce profit margins and affect the financial position and operating results. Although the company seeks to mitigate this risk through information exchange with raw material manufacturers and manufacturing subcontractors and through the development of alternative materials, dependence on external factors remains.

If a quality defect or accidental incident occurs, it could damage the "LIPPS" brand image and also expose the company to liability claims under the Product Liability Act. Although the company conducts ingredient verification, manufacturing process checks, and storage condition checks from the development stage through production and storage, complete in-house quality control is difficult given a business structure centered on outsourced manufacturing.

Diversification of domestic supply chain locations, such as manufacturing subcontractors and product storage warehouses, has not progressed, creating a risk that production sites and logistics networks could be severely affected in the event of an earthquake, torrential rain, or major accident. Although the company is studying and implementing a Business Continuity Plan (BCP), the risk of concentrated locations remains at present.

In planning and developing men's cosmetics products in response to changing trends and needs, if commercialization plans are altered or competitors launch similar products first, the company could be forced to lower sales prices or invest additional promotional expenses. Although the company advances commercialization through market research, development planning, and prototyping, development speed and differentiation remain challenges in an increasingly competitive environment.

There is a risk that the brand image of "LIPPS" and "LIPPS hair" could be damaged by the spread of critical reputation or the dissemination of inappropriate or incorrect information. Although the company has established compliance training and internal checks prior to information dissemination, given the speed of information diffusion through social media and other channels, a single incident could have a significant impact on the financial position and operating results.

The company holds customer information from EC mail-order sales and visitor information from the Salon Franchise Business, and any information leakage would significantly damage corporate trust. Although the company has implemented measures such as employee training, internal system development, and access restrictions, risks from external and internal threats such as cyberattacks and internal misconduct continue to exist.

The company is subject to legal regulations such as the Pharmaceuticals and Medical Devices Act, the Subcontract Act, and the Antimonopoly Act, and there is a risk that legal reforms affecting existing business or violations of laws and regulations could damage reputation and constrain business activities. Although the company conducts compliance training for employees and confirms business operations through internal audits, ongoing responses to changes in the regulatory environment are required.

The company is a small organization with 48 employees, resulting in a high degree of dependence on each individual. If it becomes difficult to secure talented personnel due to a shrinking labor population or rising labor costs, or if a mass departure of personnel occurs, this could directly hinder business growth. Although the company is working to improve the workplace environment and strengthen incentive design, maintaining recruitment competitiveness remains a challenge.