Lion Corporation (4912) Earnings Call Transcript & Summary

Hello, everyone. I'm Kikukawa, President and CEO. In this presentation meeting, I would like to explain how we will develop business in line with purpose and the development status of new products along with them. Without further ado, let me start. The purpose of Lion is make a difference in everyday lives by redesigning habits. Since the foundation of the company, for 131 years and 30 days, we have repeatedly experienced how important it is to create habits and how useful they are in various occasions. Recently, in line with the purpose you see here, we have been deepening our thoughts on redesigning habits, including questions such as what their definitions are and what the requirements are for their creation. In my presentation today, I'll share with you our answers to these 2 questions. What are the redesigned habits? Our answer is shown here. Positive habits. This simple word shows the definition of the redesigned habits in our thought. Positive is used in the context to describe the active, constructive and motivated stance. If you search its antonym in English, you may come up with reluctant. In our daily lives, there will be many things that we have to do, but we are reluctant. I think there exists many reluctant to do. And many daily habits are also reluctant to do. And we are going to change them into pleasant habits that we will be willing to do. The redesigned habits are positive habits. That's what we believe. Here is the habits, which is good for health is, of course, necessary and important. But we firmly believe that it is not enough. In future, in redesigning habits, we are convinced that we need to create positive habits that can be practiced. We firmly believe that habits have great power to change society. There are many values that you'll never be able to achieve with a maximum effort for 1 week, even if you come up with great idea. Maintaining good health and the global environment will be those examples, among others. We believe that there are many values that can be attained only through steady day-by-day effort over 5 or 10 years. And they're exactly the great values that habits can bring about. We'd like to change all habits into those positive habits. To that end, our experiences related to reluctant to do need to be changed into positive experiences. By the way, I explained that our habit creation attains various social values. However, in addition to this, we believe that it plays a great role in expanding economic value as well. This chart shows the market size of toothpaste in Japan. It is approximately JPY 139 billion in 2022, with expected population decline in Japan. And if the current habit remains unchanged, it will decrease to JPY 133 billion in 2030. However, by introducing positive habits, we can lead customers to high-value-added products. And by changing habits, such as increasing the frequency of tooth brushing, the market size can expand to JPY 204 billion in 2030 with the increase of over JPY 70 billion from the current level. Habits in everyday lives have great power to change society through enhanced health care. And I'd like to emphasize that they also have great potential to expand economic value. I talked about the example of oral care. But we believe that in all business domains that we are involved, success in creating positive habits, we expand the value we offer and expand the economic value. Let me move to the answer for the second question. How can we create positive habits? How can we successfully propose proposition? This slide shows our answer. To realize the proposition at positive habits, 3 keys for success are shown here as 3 Es, effective, emotional and ethical. Needless to say, excellent performance or effect that customers expect or beyond their expectations have been and will continue to be crucial and indispensable. But as I said before, to change something which is reluctant to do into positive habits, we also need to add emotional element so that it will make them feel positive through habits. And the third point, which we deem as extremely important today is ethical. Not only for individual user, but also for society and the entire earth, we'd like to make positive impact through habits. From now on, the inclusion of the third element will be critical as well. This is the overview of our concept. To redesign positive habits, we need to make well-balanced proposition of 3 elements of effective, emotional and ethical. If we miss one of them, the proposition will not be accepted as positive habits. And if any 1 of the 3 triangles at the bottom is outbalanced, it would not succeed either. Optimized balance of these 3 elements will be vital to propose and succeed the positive habits. Explanation of new products in the latter half of the meeting will be based on this concept. We continue to propose new habits through products as before. But furthermore, we'd also like to actively propose the habits through services and the combination of products and services. Through 2 by 3 metrics as shown here, we like to evolve existing habits through products and services, and we'd like to create new habits in the same manner. We have already launched multiple projects to work out new proposition in these domains. We have already identified 4 domains to focus in our challenges to offer values, namely oral health, smart house work, infection control and well-being. We apply 2 by 3 metrics in each of these 4 domains to conceive propositions. Green part, other themes where the progress is observed for the specifics. This time, we introduced a new product to be launched in the next spring. And it is J-1 in smart housework. This may not give you any idea at all. So let us elaborate it later. J project for juunana-sai fabric softener is the first round of our propositions. As we introduced here, of course, this is not the end. We scheduled to launch the second and third proposition for the new products to create new habits in early June and early December. Please look forward to them. Out of 2 questions regarding what is the redesigned habit? Our answer is the positive habits. And what is the requirement to create positive habits? We think it's important to optimize the balance of 3 elements of effective, emotional and ethical. We expect that by leading the entire market in creating these positive habits. We expand customer base and improve their loyalties for our businesses. Based on these ideas, we'd like to create new propositions 1 after another and lead the entire market. And we established a leadership position in habits creation in Japan. I expect you to count on us.

Hello, everyone. I'm Yokote. Thank you very much for joining our meeting despite your busy schedule. I'm in charge of Fabric Care business. I joined the company in 2000 and have engaged in marketing in various divisions, including Living Care and Oral Care. I'd like to explain the specific actions in Fabric Care business to develop positive habits that Mr. Kikukawa explained. As I'm in Fabric Care business, let me talk not about Oral Care nor Living Care but about washing. As for new actions in Lion in future, how 3Es will be developed and positioned in optimized balance to create positive habits were explained. For participants today, I wish you to imagine 3 triangles of E and imagine how the habits can change and how the product I'm going to explain will be adapted in everyday lives. If you come up with any questions, as we set the booth out of the venue, we like to have discussions with you there later. In a few years, Lion would like to take on challenges of the big plan to expand the Fabric Care market by JPY 80 billion. To create JPY 80 billion market in Japan, where population is shrinking, creating positive habits is the key and fabric softener was selected as a first round of initiatives. Prior to the specific explanation of the new product, let me talk about the fabric softeners market. Fabric softeners came into Japanese market about 60 years ago. And Lion entered the market with LION SOFTER in 1966, and many customers continue to use the product over years. SOFLAN brand was born in 1976 about 45 or 46 years ago, and it continued to evolve. Let us think about the name, fabric softener, the agent to soften the fabric. But do you use fabric softener today simply to soften the fabric? Looking back to long history, there were times when the fabric softener market changed drastically. First, at the beginning of 2000, the function of odor prevention was required for fabric softeners, and that expanded the market. And after 2010, the function of lasting fragrance was added. The fabric softener market expanded further with this addition. The market is expected to grow this year to over approximately JPY 150 billion, a huge market in Japan, but there are challenges of commoditizing and the gradual slowdown of growth. Why is the market commoditizing? Because fabric softeners market penetration is as high as 80%. So it is difficult to increase user base prominently. Under such circumstances, in our marketing, there is a lesson learned. We have been selling products with a proposition of fragrance type or odor prevention type. At the store, as a matter of fact, customers have only 2 options to buy. And they opt to buy the product, which seems to be better, whose fragrance seem to last, and this is how they spend intuitively. With this, it is hard to move the market drastically. So this is the new strategy of Lion to create positive habits in this market. In this proposition, we propose a brand-new option of [ Nunjau ], neither fragrance nor odor prevention so that customers can enjoy washing with surprise and positive feeling. This is the conclusion of Lion. I'll show you the video presentation of the product. I wish you to imagine how effective emotional and ethical elements will create positive habits. [Presentation]

This is laundry water, SOFLAN Airis. And we launched the 3 types of fragrance node. I'd like to present proposition of positive habits by not only changing the results of washing, but by changing the entire ambiance of washing into area and a more positive one. To create air ambiance, we offer Airis, air is. This is the origin of the brand name. Later, I'd like to invite research staff to the stage. Before moving to booth, I wish you to experience a technical aspect as well. But let me introduce the product first. With this new product in Nunjau, we offer the brand new sense station, which is completely different from the convention of fabric softener in all senses of smell, touch and visual site. Let me introduce one by one. First, Airis offers a newer version in sense of smell. Airis, it offers the fragrance in the nature. By adopting the new extraction method, different from the conventional ones, natural fragrance of flowers and the airy fragrance of plants are incorporated in the fabric softener, keeping the natural state air plants and flowers. And we realize the technology by adopting the new method of extraction to offer a new fragrance, which is different from the strong node of conventional fabric softeners. Second, you feel the fragrance in immediately through new technology. Second, technology in the sense of smell is related to the fragrance in the space. We adopted airy blooming technology as Lion's propriety technology this time. So speed of fragrance diffusion until you feel the airy fragrance in the laundry room is drastically different. And this is a major characteristic. To be more specific, conventionally, it took about 20 seconds from opening the cover of the washing machine to feel the fragrance, but we can offer the new experience in just 4 seconds with Airis. Second new sensation is the evolution of sense of touch. Following the fragrance, you feel a different touch. It is a light, smooth and airy touch. In addition to the conventional function of softening fabric, recently, the additional functionality of odor prevention and lasting strong node were taken from granted in the market. But in our new product, in addition to the airy fragrance and prompt diffusion of fragrance, we offer the new touch through the newly adopted technology of airy feel. When you think of fabric softener, it tends to be white milky liquid. And if you buy yourself, you know it. But this time, we changed the ingredient fundamentally and by adopting special silicon, we realized the smooth and airy touch. With this technology, the friction between close and the skin was reduced by 20%, and 80% of customers felt the smooth touch of washed cloths. Finally, the technology realized the new experience in visual site. As you see here, Airis is crystal clear, transparent liquid, and it keeps impact on customers' visual site. You have new feeling with fragrance, touch and visual site. Airis is a crystal-clear transparent product, and this is a major characteristic. Actual products are displayed here. And when you see them in store, use them in laundry room, pour the liquid into the cap, pour them in the washing machine at every time you feel the new sensation in sense of smell, touch and visual sites. You feel the evolution of sense. And we also paid special attention to pouch package by making it the transparent one. So far, when customers purchased fabric softeners, they were mindful of the lasting fragrance for the prevention of order that were noticed mainly when they put on cloths. Of course, these factors will continue to be important. But to expand the market and to make washing more positive habits, we Lion would like to change the air and washing through Airis. From the point when customers open the package, open the cover of the washing machine, dry the laundry, bring them out and into the room. And to the point when they were closed, we want to make the air of the entire watching experience, airy and positive one. Through customers trial use at home, we improved our strategy, technology and user experience repeatedly. Many people have already experienced these positive habits and we are able to complete the product with which customers can definitely feel the difference from the conventional products. Laundry water Airis is scheduled to be launched on April 6, 2023. From the concept of positive habits based on 3 Es as Mr. Kikukawa explained, we evolved the characteristics of fabric softener in terms of diffusion of airy fragrance and sophisticated finish. Then customers can feel the difference in sense of smell, touch and visual site and crystal clear liquid, rechanged the impression and that we change the feeling and the air in washing. So this is the answer to the second E. And in the entire market of fabric softener in the auction between the odor prevention and lasting fragrance, we are offering the new option of lasting fragrance of subtle and delicate node, which did not exist before. And with this, we'd like to go far beyond customers' expectation. This is our answer as to how we pursue 3 Es and positive habits. SOFLAN laundry water Airis is scheduled to be launched on April 6 next year. As Mr. Kikukawa mentioned at the beginning, business negotiations are progressing steadily receiving many voices of expectations and many advice. I sincerely hope to expand these new habits throughout Japan. Finally, I'd like to invite Mr. Kikukawa again to the stage.

How did you feel? Since we started the product development based on the new concept of 3Es, we took 3 years. We have been patient for the completion. And finally, we came to this point today. As Mr. Yokote explained, I have a high expectation and firmly convinced that this proposition will make washing more positive habits in Japan, changing from the work that makes you blue. I wish to have your continued interest and expectation for our activities. Thank you for your attention. [Statements in English on this transcript were spoken by an interpreter present on the live call.]