Ajinomoto Co., Inc. (2802) Earnings Call Transcript & Summary

Good afternoon. Good morning, everyone. Thank you very much for taking precious time to attend today's meeting. We thank you very much. I am the MC for today. My name is Kaji from the IR office. First of all, let's introduce the speakers for today. We have representative Executive Officer, President, Mr. Fujie. Mr. Fujie, thank you very much for attending; Executive Officer, Senior Vice President and Chief Digital Officer, Mr. Koda.

This is Koda here.

Executive Officer and Vice President, General Manager of Marketing Design Center, Mr. Okamoto.

Hello. This is Okamoto.

Besides these 3 speakers, we also have 6 other participants from the company including Representative Executive Officer and Executive Vice President, Mr. Shiragami.

Hello, this is Shiragami. Thank you very much for coming.

Executive Officer and Senior Vice President, General Manager of Corporate Division, Mr. Sasaki.

Hello. This is Sasaki.

And Executive Officer and Vice President, General Manager of Bio & Fine Chemicals Division, Mr. Maeda; Executive Officer and Vice President in charge of Sustainability and Communications, Ms. Morishima.

Hello. This is Morishima.

Executive Officer and Vice President in charge of Finance and Investor Relations, Mr. Mizutani.

Hello, this is Mizutani.

Deputy General Manager of Marketing Design Center, Ms. Mukai.

Hello. This is Mukai. Thank you very much for being with us today.

Now as for the flow of today's meeting. At the outset, we would like to have our President, Mr. Fujie, deliver the opening remarks followed by the General Manager of Marketing Design Center, Mr. Okamoto, talking about the marketing initiatives; and the CDO of the company, Mr. Koda, will talk about the DX initiatives and the evolution of DX followed by the Q&A session for the entire meeting. We expect to finish the entire meeting in about 1 hour and 30 minutes. The materials we use for today's meeting is already posted on the IR information side of Ajinomoto's corporate homepage. So please take a look at them as adequate. Please also be advised that this session is recorded all the way to the Q&A session, so that it can be posted on the IR site of the company later on. Now without further ado, we'd like to begin immediately. Mr. Fujie, the floor is yours.

Good morning, everyone. This is Fujie. Thank you very much for taking your precious time to attend today's meeting. We thank you very much indeed. As for today, these are the key messages that I would like to share with you, the 3 points here. The first point, ASV, Ajinomoto Group Creating Shared Value. In order to realize the indicators, marketing and the digital transformation are very important. We have to evolve these. So we are now accelerating efforts in these areas. Secondly, in terms of marketing, we will be evolving our marketing initiatives so that we can deliver new value that are innovative and drive growth and strengthen our structure of our business. As for the third point, for DX, this is about corporate transformation that leverages digital technologies and digital tend to become the purpose, but this X is very important. We would like to leverage digital technology as well and transformation by all of our employees. So the employees themselves will have to undergo a change so that we can enhance our corporate value as a result of that. The next page. This is our aspiration, our purpose, which has also been evolved. We would like to contribute to the well-being overall human beings and society and our planet with AminoScience. Well-being is about a healthy and happy state according to our definition. So we would like to help -- to extend the health expectance -- life expectancy of 1 billion people, and also reduce the environmental impact and regenerate the environment. Those are the 2 outcomes that we aspire to achieve. The next page is the management transformation towards the medium-term ASV initiatives. We are working on this, and we have set challenging targets from the 2030 ASV indicators And backcasting them, we've been polishing up our initiatives so that we are trying to pursue, so that we can pursue our ASV indicators. The next page is the ASV indicators that we have defined at the company. Towards the achievement of these indicators, we believe the evolution of our marketing and DX will be very important. So we are driving innovation towards the achievement of these targets, and toward -- the drive towards growth through evolution of marketing. In April 2023, we established what is called the MDC or the Marketing Design Center. And the slogan here is "standing at the bat and swinging at the bat". So we will have our employees stand at the bat and swing their bats. And by doing so, we would like to create new value and achieve products that can grow into new pillars of business that can earn billions of yen annually. And this is already starting to produce good results, and customers have begun to comment that our domestic products are becoming invigorated, and we are receiving all these compliments from customers of late. And as for DX, in 2019, we established the DX Committee and the Digital Transformation Department. So -- and we started a full-scale deployment of this on a global scale. So by fully leveraging digital technology and transforming our company, we would like to achieve the speed up and scale up of our management. And let me introduce the speakers for today. One of them will be, as you can see on the left-hand side, Tatsuya Okamoto. He was selected as one of the Most Influential CMOs in Asia by Campaign Asia Pacific, Chief Marketing Officer. So he was selected as one of the most influential ones of them. And also, Mr. Koda, on the right-hand side. He was recipient of the DX Promotion Award in Forbes Japan's CIO Award for 2023 and 2024. So those are the active leaders on a global scale. So they will be talking about the initiatives of Ajinomoto and the future directions. So without further ado, I would like to hand the microphone to Mr. Okamoto.

Thank you very much, Fujie-san.

Now over to you, Okamoto-san.

Good morning. Thank you for the introduction. I am the General Manager of Marketing and Design Center, Executive Officer, Tatsuya Okamoto. I'd like to talk about marketing initiatives and evolution of marketing to realize enhancement of corporate value. So marketing design center or MDC has been introduced by Fujie. And it's about human resources development, embraces challenge and we develop human resources that will embrace challenges, and there are 4 focal areas as the following. The first one is based on the insights obtained from consumer data, in the D2C, direct-to-consumer business will be restrengthened. And second one, D2C will connect with customers through a direct connection. So combining consumer data obtained from that big data to accompany the life development of new products and existing businesses and challenge in creating hit products. And then third is creating a new communication strategy model. You will have the existing business through the strengths of mass media and digital marketing and advertising and the public relations. Those will be combined. And the fourth is to expand this business model to expand globally. And then we will lead the development of marketing talent to contribute to the food products business as a whole. And as for marketing investment, this will be implemented in plans of each business. But with the upgrading of strategy and introduction of new techniques, we will enhance effectiveness and efficiency. So next page, Marketing Design Center, why 2023? In April, we established a Marketing Design Center. So there was a major change in external environment. So information explosion was happening and intrinsic desire or interest in food has been declining gradually and there are many platformers. And through those, customers can do the shopping directly. So our purchasing channel that where we sell has been declining. And also for internal environment, because our business model was so strong, so there was less motivation to further build the new models, and there are many strong overseas business brands that we have. So we are content with the solid operation of these new brands. So there is not much motivation to take on challenge for new products. And as a food manufacturer, so we are the first one to have the advertising activities. So mass communication optimized mechanism is in place in our company. But because of that, we were behind in terms of digitalization. In order to resolve this problem, we are trying to establish new channels and strengthen our capability and also establish one-to-one communication with the consumers centered on digital and online communication. So that's how we establish MDC. The formation is shown on the diagram, blue box and pink box. As a service center, there are 2 departments. And as a profit center, there is 1 department. And the marketing development department, as I said, is extracting insights from consumers and upgrading marketing and develop talent. And communication design department will be responsible for communication strategies for domestic and overseas businesses and sales department, and they will develop creative by themselves. And also have retained the customers and then extract insights from the customers. And as for profit center, conventionally, there was a direct-to-consumer sales, marketing has been transferred to this department. And also food direct-to-consumer business will be created to expand this. So D2C department was established for that purpose. And this is how it looks. In the middle, there is communication design department. And then there is a customer base establishment and company-wide customer base. So Ajinomoto Park is going to be expanded to have the customer data stored in here. And in addition, D2C business will be expanded to get customer data. So those 2 types of data will be analyzed with the marketing development department. And by combining that with the big data, you will have a consumer insight. And then there will be service development in the D2C department and communication will be created at communication design department so that we can have the communication that will be fit to the each customer. And this is MDC vision for 2030. For Ajinomoto, since the foundation, we have been providing Ajinomoto for more than 100 years, and there has been many long-seller brands for 20, 30, 40, 50 years. And for each of the times, we are trying to provide a value that is fit to the times. And also long-seller brands should be also established together with members of the value chain. Next, as Fujie has said, there is a swinging bat initiative. So the corporate climate should be enhanced and improved. So we have to create many people who would embrace challenges, and this is very important. And there are 3 boxes in the bottom. And these are the products that I was personally involved. Back in 2001, I was in charge of Soup business. And this was launched Knorr Cup Soup, Knorr Soup DELI, as it is called currently or between 2011 and '13, I was Marketing Manager for Consumer Foods division. And those 3 products are now grown to support domestic business. And then I was involved in frozen food business in 2015 and '16. And the 2 products that were developed has become big products. So on the top of the businesses, encouraged the full swing, and then guarantee the psychological stability so that we can utilize our potential to 120%. And only when these products were developed. So this is the kind of environment that I like to create. So there is a swinging the bat award that we established. On the left, you see the chair on those who carefully aimed and swung with all their might. So why is it important? Marketing a new development -- new development is a leap forward to the future. So as the more you take on challenges, the more failures that you might experience, but you shouldn't judge them. But you have to also circulate back into the business by having learning from the failure. So we have to keep on standing on the bat and then keep swinging to the fullest extent possible. That is the climate that we'd like to create. And based on those indicators, we have service this award. So there is one example that I'd like to share with you. In the second year, young personnel in MDC has generated these results. As you can see on the right, there's a celebrity called Kuro-chan, that's on the screen. So the Kuro-chan was not that favorable. But he actually got married to this woman, and he has improved in his favorable support. And TikTok views, there was no buzz videos in TikTok in the food industry, that would exceed 1 million views, and that was what this person was wondering about, and he was convinced that he could take advantage of this Kuro-chan but his superior said no, but he was adamant and he was convinced that this will be successful. So he directly talked to the product manager back then, and he wanted to do this. And that product manager actually persuaded -- his superior. And so he actually went into Kuro-chan's home and actually shot this video by himself because there is no budget officially given. And it has actually generated 10 million TikTok views and there's less than JPY 1 (sic) [ JPY 0.1 ] in terms of CPV because he recorded this himself. And this has become a key model format. And then the CPV has been less than JPY 1 (sic) [ JPY 0.1 ] since then because this was a big challenge, and it has been actually recycled and reproduced. Let me talk about the new product development. And so as you can see on the left top in the circle, in the business division, the product manager that is responsible for product development. Of course, the development is done circling around this person. But conventionally, there are research personnel or people responsible for creative or media strategies. And each of these are requested by the product manager to do the work for him. But after the MDC, as you can see on the right, product manager is in the middle and research, communication and brand manager and package designer and creative and media person. All these are actually in a single team, and they stay with the product manager since the beginning of the development process. And there are several success stories that I can share with you. In autumn last year, Cook Do, Premium Mala Mapo Tofu was launched. And you can actually aim for billions of yen in sales as a single product this year. But at the outset of the development, as you can see, the Cook Do was well received by a broad range of customers. But if you can also focus on narrow by segments, if you drew down their needs, and the -- our proprietary technologies for more than 45 years, and we also made full utilization of ingredients and blending. And then we were able to have this package design first-ever [indiscernible] ultra paired packaging. So these were created by communication design personnel. And on the right, you see the launch strategy, we used OMO, Online Merges with Offline. Real and virtual worlds were merged. And as you can see, Mapo Tofu can be felt with the growth of restaurant and the customers can disseminate the information within -- between the customers. And in the spring this year, the Pasta Cube that can be created with a single pan. And as you can see on the left, scrum-based process was used as you use in rugby football. And our researchers and inside analyzers have done some food trend research and single pan pasta has become important. That's what they found. And they had also stayed with the N=1 interviews where you drew down the questions. Usually, this will be done by the external consultants, but this was done by ourselves. And they found that there is a desire for ease, but not for cutting corners. But single pan pasta could fail, and it is quite easy, but there is less nutritional balance. So we have put that into the tube to perform recipe so that the pasta would not be sticky, and you can put the other ingredients together in a single pan. So as you can see, the creative on the QR code. And then as you can see on the right top, amongst 200 or more items in pasta, we are keeping the top rank -- one of the top rank sales. And then in the D2C, there was a hit products that came out and the protein soup is one of the examples. And we have searched the unmet needs for protein soup. So you have to drink more and cold, so you cannot eat rice. So taking advantage of our technologies, you can actually have a product that is good for meals with warm one. And on the right, you see the smartphone image and the protein soup. This is just a generic name. But people search for protein soup on the Internet. So you type in protein, and this is going to be found by the consumers' through search. And how many grams of protein can be shown on the single screen of the smartphone. So this has led to the smart success for the product. And in D2C and EC, unlike general commercial channels, there are some general findings. So we have done 100 and -- or 1,200 N=1 interviews and so that we have come up with the value, that will be successful in other D2C businesses. So last one is this one. Direct marketing has been transferred to sales department. So we will promote food business going forward. But in the current status, the D2C business model is based on single item repeat mail order. The small size can be bought at a discount price. And if they continue on shopping the same product, then discount -- further discounts will be given. But there are many other players, so we are inferior, so we'd like to model other business operators that are having different D2C model. So we have to learn from them so that we can have a fan-building D2C based on brand attachment. So one of the success stories is [indiscernible] is run by this company. And by collaborating with them, we are learning their model. And that was started in June, and I would like to use this to promote further. Now let me talk about communication strategy. As you can see before, previously, we were only using the earned media and also paid media and shared media and the owned media. We previously had these medias but those were operated independently from one another. But we have decided to connect them and coordinate them all together under the new PESO model. Why is this needed? Why is this model needed? As you can see on the bottom left, the current customers are in the influx of information. They only catch the information that serves their interest and concerns. And on the right-hand side, even if corporations disseminate the information, those will be reflected -- rejected by the consumers. So -- and they only receive the information that is trustworthy for them. And the media to receive such information could be used differently depending on different themes. So as you can see on the circle at the top hand side, we would like to deliver the information via the media that is most suited for the current situation. This is a successful case. Let me introduce this example to you. This is the Cook Do Oyster Sauce, which is a medium-sized business for us. In the spring of last year, this product was renewed and it has become a better product compared to before. And we have run this model and led it to a success. It's still busy. So I would like to give you the details in the following slide. So this was first ignited by the Shinano Nagano newspaper, which is a local newspaper and the placement was a very small placement, but we had a full page advertisement. And we appeal to the customers to wrap the letters using this newspaper. And then this made a buzz. Tatsuya Fujiwara, the talent here. If you open the vegetable section of the refrigerator, his face will appear. So actually, this was covered on an expanded basis on many different medias and the consumers liked this a lot. And we thought that this will also be contributing to food loss reduction. So all together, a lot of our placement was done, and we were able to regain the top market share for the first time in 4 years for this product. The other one is the influencer marketing. We are working on this to strengthen our influencer marketing. The consumers -- the influencers are disseminating information in large volumes. And the consumers disseminating information. And in order to provide such trustworthy information to other conferences, we have started this initiative with only 4 members 1 year ago. In the last 4 times, we have conducted events and invited influencers. And only the first time of these, we provided fee to the influencers. But other than that, the 3 times influencers participated without any fee. And more than 200 people attended in the most recent event in March of this year. All these influences altogether had a total follower numbers of more than 55 million people. And it is very impossible to achieve this reach, even if we pay for expensive advertisement on TV. And also in order to build this up, as you can see on the right-hand side, we have decided to have the influencers participate with us as ambassador program so that they can continue to disseminate the information on behalf. And for that reason, we have established this ambassador program called AjiFriends. We will have more than 5 -- we would like to increase the number of ambassadors to 10x from the 50 people today to more than 500 people in 2030, so that we can cover and increase the number of followers to more than 100 million people by 2030. So with this PESO model and also as a result of influencers' marketing, we have achieved a good impact. This is the outcome in Japan. Compared from before, the earned media -- acting in the earned media from before but after this, this has increased exposure quite significantly. In terms of conversion and advertisement equivalent, we had an impact of more than JPY 50 billion, so 1.7x increase year-on-year. And next, I would like to talk about the brand. We've been working to enhance the brand, which is another important activity of the marketing design center. As for brands, Ajinomoto would like to establish bonds with customers because this is customer value. So with human and technology and organization assets, we believe this is a very important intangible asset for the business. By working on this, I think we can enhance brand power, and that will stabilize our earnings base. As you can see in the bottom here, if the brand becomes stronger, we will be chosen as a testimony to the attachment and trust. As you can see, HONDASHI is already a top brand for us, but the second brand manufacturer -- we have 1.6x unit price compared to the second runner in the market. And as you can see on the right-hand side, 02 here, the lifetime value increases because loyal customers will continue to purchase for a long time, and this will also support the entire company's profit. And as a model to further strengthen this, we have established what is called enhancing Ajinomoto brand power through the support and contribution model. So towards the contribution, we would like to have the product brand to contribute to the corporate brand. So this is the product contributing to the corporate brand. On the other hand, the corporate brand can also make -- develop a good image through the initiatives, and that will contribute to the product brand and build the reliability of the product itself. So product -- corporate brand supporting the product brand, we would like to run this cycle. And that's what we will try to achieve through this support and contribution model. And brand investment, I think it is very important for us to provide adequate investments and I would like to use this case of RosDee, the Thai flavor seasoning up. The blue bars here is the advertisement and the PR spend in order for us to develop a good image of the product. The gray bars shows the discounts or increase of volume or other sales promotion costs at the shop front. And the red curve shows the mindshare and top of mind. So without any hints given to the customers, the percentage of people who cited RosDee as the top of mind. And the blue one shows the market share. In 2009, a good marketing director joined the company and doubled the investment for marketing, and decreased the sales promotion spend instead. So the total investment has come down compared to before. But nevertheless, we were able to successfully increase the top of mind, mindshare, and accordingly, the market share also increased. And we have also introduced what is called a marketing mix model, MMM, to optimize marketing investment and expand sales volume and improve the brand power more efficiently. As if you can look at the box there, the weekly sales is considered to be the baseline, the brand capability. And we analyzed the contribution of PR advertisement in the sales volumes. And this is the methodology that will allow that analysis. We have introduced this analysis model in 13 brands in Japan in 2021 and also rolled this out in 11 brand overseas in 2023. And all together, this has achieved and generated over JPY 1 billion of investment improvement effect in 2022. And if you look at the modeling there, the sales promotion details such as digital or TV contribution, we can break this down into all these details. And also, we shall be able to analyze the impact of the temperature or the vegetable prices. All these can be analyzed with this model. And this example, and I would like introduce a concrete example here. This is the case of Masako of Indonesia. As you can -- Masako has been selling in brisk. However, the market share did not increase significantly. That was the issue that faced Masako so one marketing design center analyzed this together with the Indonesia Ajinomoto for the 12 months, changed the packages and changed the creative and also visualized investment impact and also increased the digital investment. We thought that we were able to achieve an increase in sales as a result of these activities and this produced the intended results. We have increased the media spend by 100%, but the ROI has also increased by 163%. So this improved efficiency significantly. In April or May this year, the market share increased by 0.8% as a result of these activities. And for the measures to enhance the corporate brand, let me just talk about this. The corporate brand reinforcement and the dissemination of this information as you can see here, there are local companies that are taking the lead here. Food loss, plastic production, all these initiatives have been disseminated by the local companies. And in Japan, the marketing design center is playing a central role in disseminating all this information. As you can see, the food loss and they are communicated to the consumers with a strong impact, and this is the creative that was developed by G generation. And reading smartphones during meal, we wanted to reduce this habit through this initiative. And inner branding is another activity that we are dealing with. Branding enhancement is not only the job of the marketing section. This relates to the entire employees. In order to communicate this, all the other members' activities will be -- was introduced to each other. So this is the video that we have created. So please take a look of the video that we created for this purpose. [Presentation]

So this is the activity undertaken by the inner brand team. So I think this can introduce the different aspects of the business of the company. So we thought that this is very useful for us to share with other people. So as a result of these activities and also the other information provided by the corporate side was also effective in increasing the brand value, which have amounted to USD 1,625 million. So this has been improving quite successfully over the years. Finally, I would like to talk about the development of marketing talents. So depending on the level of each company, we have decided that there are still requirements through OJT. The marketing design center has designed this, and we are rolling out all these initiatives both in Japan and overseas. And from this fiscal year, as you can see at the bottom there, on the far right, we have this global knowledge committee. And so that all the initiatives that are undertaken at one location can be horizontally deployed in other locations. Finally, I would like to talk about this. We would like to make a transformation so that we can become a challenging organization, so that we can become a brand that will be loved more than 100 years ahead, so that we can further evolve and enhance our marketing and contribute to the corporate value.

Thank you, Mr. Okamoto. Now I would like to invite Mr. Koda here.

Thank you very much, Koda speaking. I'd like to talk about DX initiatives and evolution of DX to support the transformation of Ajinomoto Group. So this is today's message, the first one. We position digital information. DX is corporate transformation leveraging digital technology, and we are working on this on a company-wide basis. And in order to advance the level of database management, the aggregating wide range and data management foundation is most important. And what is supporting is cybersecurity measures and development of DX human resources. These are also worked in parallel to facilitate the corporate transformation. So as Fujie has said, in Ajinomoto DX, In DX, X is more important than digital. So what DX is aiming for is 2030 vision realization. And as a means, the businesses and the corporate climate and the way we work should be transformed. And if it is effective, digital technology has to be taken full advantage of. That's how we position it. And our DX has 2 characteristics mainly. The first one, the DX promotion structure that passes horizontal axis through strong vertical axis and transforms. And second, we aim for corporate transformation with participation by all through each person's own initiative. Next. So this is the promotion structure for DX. On the left, you see under CEO, there's Executive Committee. And then there is food products, bio and fine chemicals and corporate divisions. Those vertical business divisions are for execution. And then there's overseas divisions and subsidiaries and then regional headquarters. But DX actually under the CEO, DX promotion committee and also our company-wide task force is led by myself. And in the DX promotion committee, the marketing presentation was done by the Deputy Director, General Manager of Business Unit, Okamoto; and also in R&D, food R&D Director, Kojima and people at that level are actually sitting on this committee. As for more specific ones, there are sub committees under this committee: marketing, R&D, supply -- SCM, DX human resources, smart hub factories and data management and AI. For each of these subcommittees, there are people who are subject matter experts. And then also, showing the overall information in best practice. There's once in the year a session to have this overall structure and information sharing. Now the -- each person's own initiative and participation by all. So on the right top corner understanding and sense making, you have to instill OE and increase digital literacy. So the individual business units and individual companies have to share the practice and information. So there will be occasions for them to do that to give a stimulus. And there's also study sessions and community activities. So those who are keenly interested can learn. There is knowledge from these occasions, and then they can come up with their own tools, and then use digital technologies in their own job. And this -- by running this cycle many times, digitalization could become your own initiatives and more closer to yourself. And then DX strategy of our group, as I said, 2030 goal is what we are aiming for. And in order to expedite the process, we are going to leverage DX. So in the middle, the advancement of database management, there are various items that is under subcommittees. But the data management platform is common to all initiatives, and this is very important. Next page, please. And on the left, as you can see, conventionally in each of the business locations like overseas and domestic business locations are utilizing SCM, management accounting, sustainability, IFRS and business divisions, production and they extract necessary information from those in Excel spreadsheet and send that information to the relevant organizations and then they reconstruct them so that they can have a big view. So the number of sites x number of functions is the total number of interactions that are happening. But from last year, we have come up with ADAMS, so Ajinomoto Data Management System. On this platform, the record data is sent without extra. And then from the data system, the business sites can extract recorded information to serve their purpose. So that is what we are defining now. Next page. So more specifically, on the left, you see data sources on each organization system that's running currently. And then you integrate all of them for the data that should be taken advantage. That will be put into accumulation layer, and then they will be processed for easier use in integration layer. And in the data mart, you store them so that users can get access easily but this is not just the container to store data, but there is a room for data storage and also you have to have a system to protect that. So the whole system is seen as ADAMS so data management platform. Now for ADAMS currently, there is already data stored, accumulated. This is a food SCM data management platform example. As you can see DMP here. So currently, the internal data starting from production all the way towards the right down to retail by putting all the information data here, conventionally, there were vertical segmentation of data, but now it is integrated horizontally. So the storage and inventory reduction has been the result, for example. So paper flow like from raw -- the upstream raw material suppliers to the consumers in the downstream, you can expand this horizontally or I talked about domestic food business, but this could be also expanded to other businesses and other regions. And also, you can store the information chronologically in a long time series, so they can get various insights from this platform. Next page, please. So what will change with this? So before others introduction, so for each of the businesses, if you need data, you have to find where the data is. And then you have to ask permission from data owner, and then you get access to the data. And then you do the cleansing and then analysis is done. That was what was done. But after ADAMS introduction, data acquisition and permission will be skipped and data analysis can be facilitated with more efficiency. So you can reduce the time taken significantly. 40,000 man hours could be reduced. That's what we have estimated. And at the bottom, you can see that in order to create a long product, the ones that are in process in production site A would be used as raw materials for production site B for more processing. So there is a system in production site A and data will be in the Excel spreadsheet and sent to site B and then go on to head office. But what kind of data is regarded for each business? Based on the data requirement you can establish the system where ADAMS can come in. And then there will be no barriers between different sites and organizations. And ADAMS -- with the ADAMS in place, well, I talked about the overall data transformation, but you can also have an ecosystem transformation and business transformation. So this is going to be a very important infrastructure to support the whole business. Now these ADAMS, how this can be used by personnel? I have a video to show you, please take a look. The concierge can be accessed from Ajinomoto's internal Internet. The first step is to find the right data for your purpose. Where can I find the data on forecasted sales via Amazon? That's how you type in, for example, then it will tell you the name of the table that might contain that data and a summary of what is in the data. Here, we have confirmed that we can use the sales data from the monthly aggregate. The data seems to fit your purpose, so you can click on the table name and move on to the next step. The next step is to find out the name of the data item that you need. The name and its contents and data format can be found in ADAMS data catalog. You find the appropriate data item in the list and then copy its economy. The last step then retrieves the actual data contents. Using the table and item names you have looked up in the previous steps, you ask the question in the chat saying, what are the top 5 items for the following months? And then the AI will convert your query into a program that will search the data stored on ADAMS. In this way, the entire process of searching, finding and obtaining data can be completed with only text input. So as you have seen in the video, so even if there is a platform, people may not take advantage of that. So that was our concern. So we take advantage of generative AI so that it can be used more easily and improve the data in ADAMS. Next. So more specific initiatives, as Okamoto said earlier, in Ajinomoto Park, there are many important customers where we can interact with them. And we are integrating IDs of those customers so that we can have a customer data management. So the customer IDs are not necessarily in ADAMS currently, but you can have seamless connection. So what was used in marketing as customer data could be also used for new business creation in the future or identify what the needs are from society. So you can have a collection with ADAMS, and that is going to be very important. And this is close to what I have said as well. But the other day, there's Aete frozen product that was launched. And with the digital connection with customers, conventionally, we were targeting at mass products -- customers, but this is also good for a niche. There's a side dish over the top of the rice with low salt and better nutrition and the sales are performing well. So this is part of DX initiative as well. Next, please. R&D is another one. So in R&D, for things new, there are many people who are more interested. So let me show you one example. So the Electronic Materials business is the one that I'm showing. In the past, many cases of materials and formulations and materials for films that were studied. And there is a result available. So you let AI learn that so that what sort of formulation would have, what sort of performance can be achieved or this is the performance that you would like to achieve. And what are the formulation that will enable you to achieve that? That support function is provided by AI and 24/7 robots can be used for prototyping and also evaluating performance and efficiency has been improved. So this is also where we use DX and digital technologies. . The next page, please. On the production side as well, this is the company called Ajinomoto food manufacturing. The packaging and process was made more efficient using the APPLE packaging management system. Previously, the operational status had to be recorded by manually, but this can now be fetched out automatically from the machines and also by regular sampling, the rate, for example, or the -- all this process information were written down in paper, but those are now contained in the applications, and we have director who record of it. So we can see immediately and review the operation for that day, for example, particular processes manager does not really have to be at the factory but still be able to visually see those operational data and make a judgment. And I think that is already improving efficiency of the factory itself, but the data per se via ADAMS can also be reflected in changing the production plan and also calculating the profit that we can expect from the manufacturing. And the next slide. Operational excellence transformation tax force. This was already covered immediately -- previously but we are far away from DX in some operational matters. So we decided to reform operational performances. As you can see in this picture here, this is about the production information management system. In some cases, the information was not updated. So we were trying to analyze the reason why from the business unit or to the factories and many different divisions are involved in the information management but we try to write down in paper the entire flow of the operation. And then in the next page. And based on that information, we will show you a video here. But in actual activities, the vertical axis is the divisions and organization in the horizontal axis is at the time elapsed. So who's responsible at which time and in what way? In this way, if you can analyze this, we shall be able to track the right information constantly. So I have just shown you a target. This is an 8-meter paper. And in the new product development, all these steps are needed. That's what you can also read from this video. And then the next page, this is the concrete initiative that we have introduced in order to reduce inventories. Like 4 years ago, we set a target of DIO, days inventory outstanding to 70 days. And as of 2023, we saw an increase and also we haven't really completed that. So there's still a gap in order for us to achieve the 70-day target in 2025. The actual track record is shared by all the company level and the management team is now deciding on initiatives so that we can accelerate the improvement of the DIO. Next page. So specifically the details here, the red, orange and gray lines here. The red one shows the product DIO and the yearly based information on left-hand side and monthly's information on the right-hand side. As far as the products are concerned, using ADAMS, we can also look at the inventory database including the channel inventory, and we have seen an increase, so visualization and the countermeasures are very important. So it has been rising up until the mid of the year, but I think this will come down. So I just wanted to convey a message that we can visualize and see clearly how it is trending. The raw materials are represented by the orange curve there and has been on the increase since fiscal 2019 because of the geopolitical issues and also pandemics. So from the perspective of BCP, when we make adjustment that the raw material has to increase in inventory level, that's the reason why we have seen this increase, but the yellow -- the orange curve is controlled with some intention of the company. And the gray one shows the otherwise. This is mainly the work in progress and -- or semi-finished goods and because we have this in the medical business, these are very high added value products, but structurally, it's very complex, and therefore, the production lead time is longer. So because of the nature of the business, this has been coming up, but this is mostly related to the new businesses, and this changes over time. So as far as the product is concerned, we would like to visualize the DIO and take proper countermeasures to reduce the inventory days. And the next page, as we've been talking from before. In the middle, you see is conventionally. So this is -- the past one is in the middle. So the inventory that we have shipped out from the company was considered to be the demand. However, recently, we have been changing this. By incorporating the warehouse outbound data and the market data, including the channel inventory, we are trying to make a judgment where the shortage is happening in the market or elsewhere. And as you can see on the left -- at the bottom there, we have implemented this recently so that we can track the inventory level more properly and be able to reduce 90% of the expiry dates. So visualization and countermeasures are very important in this example as well. And the next one is the global business. The same applies. This is the AMILITE product. And the raw materials for that is now tracked here. So global production and global sales is the business that we are conducting here. So we are now able to track the inventory data at -- in transit as well. So we are trying to control so that it can be stable at the standard level. Now the next page. So I would like to talk about the human resources and the development of human resources will underpin our DX initiatives. The entire employee base will have to acquire digital skills. That's very important for the company. So previously, we had the elementary and the middle and the advanced class for digital technology. And we also -- we are using AI technology, the group-wide organizations, and they have like 200 people. Data scientists, they study and there are some people who are becoming close to data scientists. And we also hired a new fresh out of the college employees in order to reinforce this digital team. And we also have the generative AI, AJI Chat. With these solutions we are trying to have our employees develop their skills and also using local skills, we are trying to work together with the external organization and the operational excellence that I talked about. These down-to-earth activities are also being improved. And finally, about IT security. The next page, please. At our company, IT governance is considered to be very important and the information security is considered a very important element. Not only at the executive committee, but also at the BOD, this is considered a very important. We are going to make a transition to the Zero Trust Network, and that is the important point for the security measures in the future. The work environment is now changing. So we would like to achieve this situations that people can work anywhere, anytime with anybody. And now we are now making a transition to cloud-based services compared to the previous on-premise. And we are now being mindful about the threat of security, including the leakage of information. So the next page, this is the left-hand side shows the previous model, but now because of the damage that we could potentially incur is large. With the left-hand side model, we are now making a transition to this right-hand side model, the Zero Trust Network, including not only the Japanese operations, but also overseas. Finally, DX for Ajinomoto is a corporate transformation that leverages digital technologies. And we will try to leverage business in order to enhance our corporate value. Thank you very much.

For up until 12:00, we will now have a Q&A session.

[Operator Instructions] The first question from Mizuho Securities is Saji-san, please.

There are 2 questions. The both is addressed to Okamoto-san, and there are 2 questions. Firstly, it's about D2C. The single-item repeat mail order was reviewed and [indiscernible] project, is what you worked with on Page 17, I think that's what you said. So is it like a loyal user marketing? Basically, is that what you are now launching. So as part of D2C model transformation, the fan-building product development, that's what you said. So how exactly the D2C business is going to transform itself into? How can we -- how are we supposed to envision that? Can you answer that question first?

Saji-san, thank you very much. Okamoto speaking. Let me answer the question. As you can see, of course, we are in the process of transformation now and the brand building and let customers buy products. I think this is similar to the romantic relationship. So in order for people to love us, we have to communicate our feelings and also answer questions from the customer sincerely. Those interactions are very important. And in the current single item repeat model, more or less, we are unilaterally transmitting information to customers. And then we're just getting them good deals and discounts to facilitate them to buy the products but what the [ cross com ] is doing is that there is a world view that will fit the customer and there's a store manager. And the products that he comes or she comes up with is the one that people support. And that's where the people are encouraged to buy the products. So by taking advantage of a broad product portfolio, I think that can be reproduced in Ajinomoto. So that's what we are gearing our course for. Does that answer your question?

The next question is Page 34. So global knowledge share is what you are going to do. And the fiscal 2024 autumn, you are going to start doing this, but the effects of this whole initiative. What is the ultimate goal, of course, by product, business division or the themes? That's what you're describing here, but what will be the key for the moment? And what would be the benefits tangible to us? And what should we actually watch for your success? And for example, soup business or instant noodle business, are they part of those initiatives as well?

Let me answer the question. There are mainly 2 different directions for operation. One is a marketing design center led horizontal axis like branding or advertising method improvement or measurement of effect of advertising, human resources development. And the other is product area theme like soup or instant noodles or flavor condiments. So those are globally across regional ones. So if you put high tighter products or for example, in some area, global unified brands will be introduced. If those projects come up, then we gather global members with the business division. Taking a central role, we can support them. So it's not like something that is constantly operating. Based on the project, there will be some activities. And in the first half, we are taking initiative as MDC. And I said that there will be support being done. So what sort of relationship that we can have in the day-to-day business to the brand contribution that you have to actually do this and execute this on a day-to-day basis. That is very important. So that is marketing subcommittee that's working on that in the horizontal axis. So it's like almost like a camp off-site project, activities to see what sort of business examples that you can use. There are many other -- several other horizontal axes as well.

May I ask a follow-up question? So global themes as global theme soup and instant noodles are actually on the table?

No, no, no. That's what I said -- that's not what I said. We just cited as an example. So as actual cases come up. So it just happens that those are described here. So I'm sorry, I may have misled you.

Thank you, Mr. Saji, for the question. Now moving on to the next question. The next question will be from -- sorry, excuse me, Goldman Sachs, Miyazaki-san, please begin your question.

This is Miyazaki from Goldman Sachs. I have one question. In the presentation, the marketing design center and DX-related initiatives that you explained today. What is the role and responsibility? I just wanted to know the roles and responsibility when it comes to DX promotion. On Page 6, you have this organization chart on Page 6. So of course, you have the promotion committee for digital transformation. But at the end of the day, the business divisions or the overseas business today -- when they have to take the responsibility at the end of the day, how will the DX team be involved? Or rather, is it so that the DX team will be responsible? So will that enhance the execution? So depending on the organization initiatives, how you're trying to achieve the DX transformation. So those are the things that I would like to ask. As far as the marketing design center is concerned, as far as food is concerned, all these functions are now integrated under MDC. So I think MDC will take the lead in marketing and product development. Is that the case? And then do you have the execution responsibility as well? So I just wanted to know about these detailed arrangement.