2216.T

Corporate Purpose & Strategy

• Kanro is a purpose-driven company with the mission "Sweeten the Future", aiming to deliver small, positive sweet moments to consumers globally while contributing to a sustainable future for people and society. It is the only publicly traded specialized candy company in Japan, with Mitsubishi Corporation holding a 30% stake as its major shareholder.
• Kanro's core competitive advantages are: 1) over 100 years of R&D and product development focused on highlighting raw material flavor and functional candy benefits; 2) strong brand equity built on multiple long-running hit products; 3) a robust nationwide sales and distribution network.
• Mid-term strategy (Medium-Term Management Plan 2030) is built on two core pillars: 1) Continue creating Sweet Moments: grow domestic business via ongoing new product launches, capacity expansion, and high-value product positioning for both gummy and candy segments; 2) Transform the business base: expand global business centered on the U.S. market, and grow direct-to-consumer and digital businesses to increase consumer touchpoints.

Domestic Operational Updates

• Puré Gummi is differentiated by its unique sour powder, real fruit flesh texture, and emotional value (multi-color packaging for mood selection, hidden messages, brand extensions like Puré Ring and Puré Gummi Premium).
• Kanro Ame is celebrating its 70th anniversary with a refreshed brand message to attract new consumers who have not tried the product.
• A 13 billion yen investment for a third gummy production line at the Asahi factory is already underway, adding 50% capacity to support domestic growth and increased exports.

U.S. Market Expansion

• The U.S. gummy market is 10 times the size of Japan's, with 3 times per capita consumption. Puré Gummi was reformulated in March 2025 to meet U.S. and Greater China regulatory requirements while preserving its original Japanese flavor.
• Market research found the U.S. gummy market has historically been focused on children, but demand for adult-oriented small-packaged gummies is slowly emerging, which creates ideal timing for Kanro's entry targeting adult consumers.
• Consumer sampling (primarily targeted at women in their 20s and 30s) received positive feedback on Puré Gummi's authentic fruit flavor, texture, and sour taste, indicating strong potential for market acceptance.
• Rollout began October 2025 with grape and lemon flavors starting in West Coast stores with high Asian/Japanese consumer concentrations, and will gradually expand to local U.S. retailers and eventually nationwide chains. Long-term, local production and M&A are on the table once sales scale hits the multi-billion yen level.
• The 2030 target for global business is to reach over 5 billion yen in revenue, accounting for over 10% of total company sales.

• 2025 Fiscal Year Guidance: Kanro upwardly revised its full-year guidance in July 2025 from the February 2025 initial release. Full-year revenue is projected to exceed the 2024 all-time high, driven by strong performance of core brands like Puré Gummi and utilization of the expanded Matsumoto factory gummy facility. Operating profit is projected to hit 4.4 billion yen, a new all-time high, with year-over-year profit growth. The operating profit margin is expected to be roughly flat compared to 2024, remaining at a high level.
• The upward revision added 0.5 billion yen to projected revenue and ~0.1 billion yen to projected profit. The sales upside is being partially allocated to increased growth investment instead of immediate higher profit.
• Medium-Term 2030 Guidance: The plan sets floor targets of: total revenue over 50 billion yen, operating profit margin over 13%, ROIC over 11%, ROE over 15%. EBITDA has been added as a metric to better demonstrate earning power amid rising depreciation from strategic investment.
• The 2030 global business target is for revenue to exceed 10% of total company sales (over 5 billion yen, on the 50 billion yen total revenue target). U.S. business is targeted to reach break-even by 2030.

For the 2024 December fiscal year, Kanro reported total revenue of 31.7 billion yen, with an operating profit margin of 13.5%. In the overall Japanese candy market, Kanro holds a 12.1% market share (the number one position overall). The two core product segments are:

1. Candy (Ame) Segment: Kanro holds a 19.4% market share (top position) in this category. Key flagship products include the 70-year-old Kanro Ame, Kenko Nodo Ame (the industry's first throat candy), and Kin no Milk (the top-selling brand in the milk flavor candy segment). The domestic hard candy market is projected to stay flat at around 120 billion yen through 2030 after recovering from COVID-19 declines.
2. Gummy Segment: Kanro is currently the second largest player with a 15.9% market share, targeting the top position. Its flagship brand Puré Gummi hit 10 billion yen in retail sales in 2024, and has been the top-selling gummy brand in Japan for three consecutive years. The domestic gummy market is projected to grow to 150 billion yen by 2030, and may exceed this initial forecast due to industry-wide capacity expansion. New capacity expansion at the Asahi factory will increase total gummy production capacity by approximately 50% after the new line launches in July 2027.
3. Other Segments: Hitotsubu Kanro direct-to-consumer retail currently operates two permanent stores (Tokyo Station, Harajuku) with online sales, centered on its signature product Gummitzer. It has grown to a meaningful size and already contributes positively to company profits. Global business currently has only minimal export sales centered on Greater China, with U.S. direct sales starting in 2025.

• Rising raw material prices, labor costs, and logistics costs create margin pressure, requiring careful balancing of price adjustments and consumer value.
• Intensifying competition in the fast-growing domestic gummy market, as other manufacturers are also expanding capacity, which could pressure market share.
• U.S. market expansion carries inherent execution risk: scaling the business, establishing distribution, building consumer awareness, and delivering profitable growth will take time, and success is not guaranteed. The scale of U.S. business profit contribution to the company by 2030 is dependent on execution progress.
• High upfront investment in new capacity and U.S. expansion will temporarily pressure margin in the near term as investments are made ahead of revenue growth.

Q: What are the key growth drivers to hit the Medium-Term Management Plan 2030 targets, from a revenue and profit perspective? / A: Management identifies two core growth drivers: domestic gummy business growth led by new capacity, and U.S.-led global business expansion. Increased production from the new gummy line will directly drive revenue growth, and successful penetration of global markets will add further top-line growth. For profit, domestic growth of both gummy and candy will maintain high margin and deliver steady profit growth. Management aims to get U.S. business to break-even by 2030, but the scale of its profit contribution will depend on how the business progresses. The key priority is maintaining a cycle of domestic profit generation to fund ongoing growth investment. (312 words)

Q: How does Kanro balance pricing strategy and product development amid persistent cost inflation and changing consumer trends, while retaining Kanro's core identity? / A: Kanro implemented annual price increases from 2022 to 2024, with no price increase planned for 2025. Future price adjustments will be made carefully after monitoring cost trends and considering internal efficiency improvements. The core strategic approach is high-value product positioning built around four pillars: reward, relaxation, mood switching, and healthcare. This approach aligns with Kanro's identity, and balances core products and premium lines well today. High-value innovation is critical to remaining profitable amid cost pressures, and management will continue balancing core and premium lines to keep consumers excited about Kanro products. (298 words)

Q: What is the current performance and future outlook for the Hitotsubu Kanro direct retail business, and how will it contribute to profit long-term? / A: Hitotsubu Kanro currently only has two physical stores, with online sales centered on Gummitzer, but it has grown into a meaningful business that already contributes positively to company profit after more than 10 years of development. Beyond profit, the business plays a key role in building direct consumer engagement and brand loyalty. Management plans to continue growing the business carefully, and will leverage direct consumer sales data combined with digital analytics to improve product and service offerings across the entire company. (184 words)

Q: How long would it take to complete a U.S. candy manufacturer M&A and start production, compared to building a new line in Japan? / A: Building a new gummy line in Japan takes over 2 years from start of preparation to full operation (the new Asahi line started preparation in 2025 for a 2027 launch). Management expects a new greenfield project in the U.S. would also take approximately 2 years. However, M&A of an existing U.S. manufacturing business would allow faster start-up, because production capacity already exists, so it could be operational in a shorter timeframe. (146 words)