Introduction
In the consolidated financial results for the fiscal year’s first half, ended September 30, 2024, net sales increased, and despite decreased operating profit, ordinary profit and profit attributable to owners of parent also increased.
In Food and Beverages (Japan), both sales and profits decreased. The number of bottles of dairy products sold fell short of both our original projection and the previous year’s results. In particular, the number of Yakult 1000 series bottles sold fell short of our expectations, and this was the main contributory factor.
Conversely, in Food and Beverages (Overseas), both sales and profits increased. Higher sales and profits in the Americas region contributed substantially, while in the Asia and Oceania region, the decreases in sales and profits were narrower than they had been until the first quarter.
We have decided to downgrade our full-year forecasts, having reassessed the final outcome for the full year in light of results and business activities during the first half, notwithstanding an anticipated recovery in the domestic business during the second half.
Dividends
As already announced, the interim dividend for the fiscal year ending March 31, 2025 is 32 yen, an increase of 4.5 yen from the previous fiscal year, in line with our dividend policy of placing top priority on aiming to continuously increase payouts. The year-end dividend forecast is also 32 yen, resulting in an annual dividend forecast 8.5 yen higher than in the previous fiscal year.
Going forward, we intend to continue strengthening shareholder returns.
Initiatives in Each Segment
Food and Beverages (Japan)
The number of bottles of Yakult 1000 series products sold is trending at around 3 million bottles per day. Over approximately five years since October 2019, when we started selling Yakult 1000 in Tokyo and six other Kanto prefectures, the series has grown to account for around 30% of the sales volume for dairy products as a whole. However, the number of bottles sold has now leveled off.
Meanwhile, the market for products to relieve stress and promote sleep continues to grow and we believe that this market offers potential for us to further improve results for Yakult products.
As many customers asked us for a Yakult 1000 product that is less sweet, we heeded those requests and created Yakult 1000 Toshitsu Off which we launched this month (November 2024).
We will use the rollout of this product as an opportunity to gain more customers, thereby achieving further growth.
Home Delivery Channel
We started selling Yakult 1000 Toshitsu Off in Tokyo and three other Kanto prefectures since November. This product, which is based on the original Yakult 1000, caters to the wishes of customers concerned about sugar content, calories, and sweetness. We believe that the rollout of this product will enable us to attract new customers and to reapproach customers who stopped consuming our products due to sugar-related concerns. The Yakult Ladies, who communicate the value of our products, are now free of limitations in promoting Yakult 1000 series products, after having to be mindful of our maximum production capacity as they pursued their activities during the previous fiscal year.
Yakult 1000 Toshitsu Off will be launched nationwide from the beginning of 2025, so we are currently preparing to enable the Yakult Ladies to conduct intensive value dissemination initiatives. We want to use this rollout as an opportunity to introduce our products to a large number of people and increase sales volume for the Yakult 1000 series.
Retail Store Channel
We made progress in distributing six-packs of Y1000, boosting the product’s in-store exposure. There is still ample potential for uncovering latent demand.
We are also making overtures toward sales channels other than retail stores, such as consumer cooperative (co-op) deliveries to individuals, meeting venues, and vending machine sales, to ensure that our products reach every corner of Japan.
Sales volumes for New Yakult series products declined following our price revision in September 2023, but we regard the current level as rock bottom. We are now continuing steady value dissemination initiatives by strengthening our efforts to propose effective use of sales spaces to retail stores and undertake market-based sales promotion. We believe that bottle sales will gradually increase as a result.
Food Products Utilizing Plant-Derived Ingredients
In October 2024, we established Yakult Plants Factory Co., Ltd. as a manufacturing subsidiary and started producing our new Tonyu no Chikara brand of plant-derived products. With the launch of these offerings, Yakult entered the market for food products utilizing plant-derived ingredients, which has been expanding globally in recent years.
We have only just started selling these products, so it is still too soon to comment on their contribution to our business results. However, we intend to gradually raise our profile in this area, having recognized that the market is certain to grow in future.
International Business
The number of bottles sold per day in our overseas business as a whole during July through September 2024 exceeded the same period of the previous fiscal year by around 3%, yielding the first year-on-year gain for eight quarters.
Our overseas results are now fluctuating at around the same level as during the fiscal year ended March 31, 2024, but we are aiming to gradually increase them through the second half and into next fiscal year by pursuing a range of business activities in the respective countries.
Yakult U.S.A. Inc.
In May 2024 we raised prices by more than 6%, but this had no significant impact on the number of bottles sold and sales are still growing continuously, as they were before the price revision.
The number of stores stocking our products is increasing steadily, expanding our sales channels. However, in regions we entered recently, our exposure remains very limited in many stores, so we need to raise our profile going forward. Alongside augmenting the number of partner stores, we will also get the most from each one by increasing the number of bottles sold per store.
We have decided to build a second U.S. plant in the southeastern state of Georgia with a view to starting production in September 2026, and plans are progressing steadily. We will build a plant that is environmentally friendly in addition to meeting an increasingly diverse range of customer needs.
Yakult S.A. De C.V. (Mexico)
During the current fiscal year, ending March 31, 2025, the number of bottles sold is trending above that of the previous fiscal year, which was the highest ever. Even now, a long time since we first entered the Mexican market, the value of our products is still steadily being disseminated and fans of Yakult are still increasing.
In February 2024, we revised our prices by just under 5%, and the combination of more bottles sold and higher prices boosted both sales and profits. The Mexican business will continue contributing to higher sales and profits in our Americas region as a whole by keeping up its stable growth.
Yakult Vietnam Co., Ltd.
This company is steadily expanding both its home delivery and retail store sales channels, maintaining a high rate of growth. Yakult Light, the low-calorie product launched in April 2024, performed well and pushed the number of bottles sold even higher. We are just starting to cultivate the Vietnamese market in earnest, so we expect this rate of growth to continue.
Guangzhou Yakult Co., Ltd.; Shanghai Yakult Co., Ltd.; and Yakult (China) Corporation
Even now, the downturn in business confidence is causing sluggish consumption to persist unabated. But, despite the challenging business environment, we continued to steadily take whatever action we could within China itself.
One such initiative was the launch of Yakult Peach Flavor (Iron Plus) in May 2024. Featuring peach flavor, which is popular in China, the product targets a wide demographic primarily comprising women, young children, and seniors, who are all susceptible to iron deficiency.
We had not previously developed new flavors as a proactive strategy, but we anticipated that this peach flavor would prompt consumers to pick up a Yakult product for the first time and broaden the options for potential customers. As a result of extensive sales promotion activities, sales of Yakult Peach Flavor (Iron Plus) are significantly exceeding our target, and the Yakult brand’s profile in stores has been boosted. This strong performance persisted into July and beyond, contributing to a year-on-year sales gain in the third quarter.
However, this does not mean that we have shifted our focus to development of new flavors; our fundamental strategy of communicating the benefits of Lactobacillus casei strain Shirota remains unchanged. We intend to conduct value dissemination initiatives more intensively than ever before, encouraging customers who show an interest in Yakult to drink it daily, thereby ensuring further recovery in the number of bottles sold. We believe that, if growth is to be assured during the next fiscal year and beyond, results in the second half must unambiguously surpass the previous year’s results.
PT. Yakult Indonesia Persada
The slowdown in consumption is still persisting and the number of bottles sold remains lower year-on-year. Under such circumstances, the home delivery channel has proved more successful than the retail store channel in reducing and eliminating the decline in sales.
Meanwhile, efforts to rebuild the Yakult Ladies organization are achieving steady progress. Yakult Ladies’ sales capabilities have recovered to their pre-COVID-19 levels due to our renewed commitment to in-person training. At the same time, the number of Yakult Ladies, which was previously decreasing, has now started increasing again.
In conjunction with efforts to rebuild the organization, we launched Yakult Light via the home delivery channel in October 2024 as part of our strategy to restore sales volumes. The number of bottles sold in the home delivery channel is currently surpassing the previous year’s level. We will continue building on this success to increase Yakult Ladies’ motivation to work and to bolster our efforts to attract new customers. We believe that the recovery in the home delivery channel will make up for the decline in the retail store channel, enabling our Indonesian business as a whole to gradually move closer to the previous year’s level.
Conclusion
Finally, I would like to note that our current four-year medium-term management plan will conclude on March 31, 2025. We are in the process of deliberating internally on the next medium-term management plan, which we will make public when we announce our full-year financial results in May 2025.
I look forward to informing stakeholders of the course we intend to follow during the next phase of our journey as a company.
Hiroshi Narita,
President and Representative Director
Yakult Honsha Co., Ltd.
