Seven & i Holdings Co., Ltd. (3382) Earnings Call Transcript & Summary

Good morning, everyone. My name is Isaka, President and Representative Director of Seven & i Holdings. Thank you for taking the time to participate in today's briefing despite it being held on such short notice. With a view toward preventing the spread of COVID-19, today's presentation will be conducted in teleconference form so we ask for your understanding. Early morning today, Japan Standard Time, we entered a contract with the Marathon Petroleum Corporation in the United States for the acquisition of Speedway, their convenience store business. We consider this to be the chance of a lifetime for 7-Eleven, Inc., which we consider a growth driver for the Seven & i Group to further secure its position as a clear market leader in the North American market, which is expected to continue to deliver significant economic growth. In addition, not just in North America, to further strengthening the 7-Eleven brand, which already possesses over 70,000 stores worldwide, we consider this historic integration to be a leap towards the Seven & i Group becoming a global retailer in the truest sense of the word, with the convenience store business as the main pillar. We would now like to discuss this acquisition in detail. Page 2 contains today's agenda. As you can see, we will be discussing the growth opportunity of 7-Eleven, Inc.; the Speedway acquisition; and lastly, ESG initiatives in this order. First, before discussing the growth opportunity for SEI, I would like to go over our philosophy for the Seven & i Group as a whole on Page 4. Please allow us to do this also in the sense of reviewing the positioning of SEI within the Seven & i Group as a whole. The diagram shown here contains the overview of our group strategy as discussed in the financial results presentation for the fiscal year ended February 2020 held back in April. We will be working toward the further growth of the convenience store business, which is a core of growth. The further strengthening of food products, one of the Seven & i Group's strengths in today's day and age when people live to a 100. And finally, large scale commercial basis, improving people's quality of life. We will be evolving these 3 contact points into digital and financial strategies, providing one-stop shop support to our customers. The Seven & i Group has stated its aim of becoming indispensable to our customers' daily lives through these measures. Page 5 contains an overview of our results in recent months in the Japanese market. While the number of cases is lower in Japan compared to the United States, COVID-19 has brought about significant changes in customers' values and way of life. The graph on the left shows the year-on-year existing store sales trend for the major operating companies. The red and green lines show food supermarkets, and the blue line shows the food sales trend for Ito-Yokado. Amidst a climate of people refraining from going outside against the backdrop of an increase in the number of COVID-19 cases and the emergency declaration, we were able to address customers' shopping needs and significantly increase sales. In recent months, too, we have been able to deliver year-on-year growth. On the other hand, the orange line shows 7-Eleven Japan, which saw a temporary sales decline in March, April and May. However, the introduction of new store layouts is underway with an increase in the sales space area for frozen foods and delicatessen products. The positive effects of these, et cetera, allowed us to grow sales year-on-year in June. We are certain we will be able to continue accumulating these figures into the second half of the fiscal year. The lime green portion corresponds to 7-Eleven, Inc. We have included this information as way of reference. We saw mandatory lockdown orders stricter than in Japan translating into a significant decrease starting in mid-March and into April. However, we were able to deliver year-on-year existing store merchandise sales growth for May and June. The U.S. government and local governments consider 7-Eleven, Inc. to be an essential business and have requested us to continue operations within the U.S. In Japan, what are our customers expecting from the Seven & i Group in the with corona and after corona periods? What can and should we do for our customers? We are giving much thought to these questions. However, we believe it's to be our mission to further increase the strength of our food products, which corresponded to 60% of total domestic sales of approximately JPY 8 trillion. We want to fully utilize the Seven & i Group's infrastructure to provide our customers with safe, secure and healthy high value-added food products sold at reasonable prices. In order to realize this, we are carrying out the restructuring of our food supermarkets in the Tokyo metropolitan area, which has the slowest population decline rates and is the most fertile market. To this end, in June, we changed the trade name of York Mart Co. Ltd. to York Co. Ltd. And integrated Ito-Yokado's Shokuhinkan food supermarket business and COMFORT MARKET run by FORECAST Co., Ltd. We will be advancing our Tokyo metropolitan area food strategy centered around York Company Limited, also in coordination with Ito-Yokado and York-Benimaru. Please turn to Page 6. The convenience store business, both in Japan and overseas, constitutes the greatest growth driver for the Seven & i Group. For 7-Eleven Japan, we are currently carrying out the introduction of new store layouts and structural reform associated with head office expenses, et cetera, in carrying out efforts toward a return to a growth trajectory. Additionally, we believe 7-Eleven, Inc. in the U.S. to be the most important growth driver for the Seven & i Group. Today, we carried out an M&A toward further growth for 7-Eleven, Inc. So we would like to delve into the details at a later time in today's presentation. Please turn to Page 7. This might be redundant for those of you familiar with this information, but allow me to give you a brief overview of 7-Eleven, Inc.'s operations. 7-Eleven, Inc. is the largest convenience store chain in the United States with over 9,800 stores in the U.S. and Canada. Approximately, 1/4 of these are company-operated, with the remaining 3/4 being franchise stores. The majority of these stores are what we refer to in Japan as Type C franchises, that is stores for which the head office makes available the land and buildings used to operate the stores. As shown in the table on the upper right corner, 7-Eleven, Inc. owns the global 7-Eleven trademark, except for Japan. Including licensees, the number of locations globally recently exceeded 71,100. For fiscal year 2019, 7-Eleven, Inc. in the U.S. registered chain total sales of USD 36.1 billion and USD 1.1 billion in operating income. In terms of EBITDA, this figure stood at USD 1.8 billion. Merchandise and fuel sales accounted for approximately 50% each in terms of the sales mix. Merchandise accounted for approximately 80% of gross profit. Please turn to Page 8. The graph on the left shows the growth trajectory of 7-Eleven, Inc. from fiscal year 2001 to fiscal year 2019. The vertical bar graph shows merchandise sales and operating income while the line graph shows the trend in store counts. Since Mr. DePinto's December 2005 appointment as President, the growth trend has been up into the right. The pie chart on the right shows the composition share of 7-Eleven, Inc. in terms of the group's consolidated figures. The figures shown here are after the amortization of goodwill to match JGAAP. In terms of operating income, 7-Eleven, Inc. has grown to account for approximately 1/4 and for approximately 1/3 in terms of net income. Page 9 deals with the U.S. convenience store industry. As of December 2019, there were 153,000 convenience stores in the United States. Of these, operators with 10 stores or fewer, including locally owned stores, accounted for more than 65% of all stores. Additionally, approximately 80% of all stores are stores with motor fuels. The top 10 chains combined account for less than 20% of the total, in contrast to the convenience store market in Japan where the top 3 operators account for 90% of the market. This is, therefore, an extremely fragmented market, and there has been an acceleration in terms of a restructuring of the industry. Through our acquisition of Speedway, the third largest convenience store chain in the U.S., 7-Eleven, Inc.'s share in terms of the number of stores will grow to approximately 9%. Page 10 deals with the U.S. macro environment. As you can see, population, GDP and consumption in the U.S. is expected to continue growing up and to the right. The estimate for Japan is shown in red, showing a gentle sloping trend in terms of population, which is expected to dip below 100 million people. Against this backdrop, the Seven & i Group views North America as a very attractive and very important growth market. We are certain of this. Page 11 deals with motor fuels. The graph on the left shows the trend in fuel gross profit by fiscal year for 7-Eleven, Inc. The line graph shows cents per gallon, an indicator representing gross margin per gallon, while the orange area chart shows the trend in the total amount of fuel gross profit for the company. As you can see, we have delivered a sustained gross profit growth. The right portion shows the year-on-year quarterly fuel sales volume over the past 1.5 years and the year-on-year change trend in cents per gallon. The line graph shows year-on-year change in sales volume. As a result of lockdown orders, et cetera, as a consequence of the COVID-19 pandemic, we registered a significant decrease in sales volume in the second quarter. However, we registered a fall in crude oil prices and an easing in terms of the environment in terms of price competitiveness, among other factors. This allowed us to secure a satisfactory cents per gallon figure. These are preliminary estimates, but the fuel gross margin amount for the company as a whole in the second quarter alone grew by 30% year-on-year. Please turn to Page 12. I would like to discuss the situation for fuel from a macro perspective. The data shown here is a fuel consumption estimate put together by the Energy Information Agency in the U.S. Fuel consumption is expected to decrease at a compound annual rate of 1.6% by 2030. However, fuel consumption is expected to show a gentle upward slope between 2030 and 2050. As a result, the 30-year compound annual growth rate average until 2050 is negative 0.4%, representing only a slight decline. Additionally, the graph on the upper right corner contains trade estimates. Starting in 2019, the U.S. is expected to become a net exporter of energy. As a result, as shown in the bottom right graph, the unit cost of fuel is expected to match low prices seen by oil producing countries, a price of $2.63 per gallon, approximately half the prices seen in Japan. Please turn to Page 13, which also contains data provided by the Energy Information Agency in the U.S. The left side contains a projection of improvements in fuel efficiency for various types of vehicles. This improvement is expected not just for regular automobiles but also for pickup trucks, which are popular in the U.S., and SUVs, et cetera. As shown in the graph on the right, the widespread adoption of electric vehicles is expected to take longer than in other countries. And electric vehicles are only expected to account for 10% of the market, even by 2050. In light of this, we believe 7-Eleven, Inc.'s fuel business will be able to deliver stable profits over the medium term. However, over the long term, we will be curbing a dependency on fuel while implementing a strategy focused around fresh food so that we can aim to become a store chosen by customers in the U.S. for our food products as well. Page 14 deals with 7-Eleven, Inc.'s Six Point Plan growth strategy. 7-Eleven, Inc. will be implementing the 6 key measures outlined here, improving store attractiveness and aiming to deliver sustainable growth. We will be further accelerating the development in sales promotions of fresh foods and private brands differentiated from the competition in order to further improve sales and gross profit. At the same time, we will be expanding our loyalty program and the 7NOW delivery service and providing new customer experiences, leveraging digital technology. Through these measures, we would like to change the perception toward convenience stores in the U.S. Page 15 deals with our merchandise strategy. As I mentioned earlier, as in Japan, in the U.S. too, we are aiming to become an indispensable part of customers' daily lives so that customers visit our stores with the goal of purchasing fresh food. In order to realize this goal, we are currently carrying out an initiative with WARABEYA NICHIYO in the Dallas area towards strengthening fresh food. We have implemented Japan-style team merchandising and are in the process of developing products tailored to local tastes and needs. These efforts are starting to bear fruit. COVID-19 has forced us to make slight changes to our plan. However, starting in July, we started expanding the product development methodology we used in Dallas to New York and Los Angeles. We will be expanding this methodology to other regions starting in the fall and beyond. Additionally, we have also carried out tests for our evolution stores, rethinking our product lines from scratch and without any preconceived notions and experimenting with cold-pressed juices, craft beers, in-store bakery, et cetera. Page 16 deals with the expansion of evolution stores. We added 3 new evolution stores through to the end of May in Washington, D.C., New York and in San Diego. Despite the fact we opened these stores in large cities, which have been severely affected by COVID-19, we registered very strong numerical results. Merchandise APSD, customer count and fresh food as a percentage of sales composition for these stores significantly exceeds the district average. The figures in brackets show the percentage increase compared to the district average. Many stores have struggled when it comes to fresh foods, which are served by staff, as a result of customers avoiding these products against the backdrop of COVID-19. However, fresh foods represent a high percentage of the sales composition at our evolution stores. We believe we will register further growth in the sale of food products following the end of the COVID-19 pandemic. Going forward, we will be increasing the opening of new evolution stores and would also like to introduce successful programs seen at our evolution stores into existing stores. Next, I would like to discuss in detail the main topic for today, the Speedway acquisition. Page 18 contains an overview of the transaction. We have entered a contract agreement for the amount of USD 21 billion and the acquisition of approximately 3,900 stores. In fiscal year 2019, the business delivered USD 1.1 billion in operating income and USD 1.5 billion in EBITDA. We expect to complete the acquisition by the first quarter of next fiscal year. We will be discussing the details later on. But taking into account sale and leaseback and tax benefits, synergies, et cetera, we believe the EBITDA multiple can be contained to approximately 7x EBITDA. Furthermore, we have also entered a fuel supply agreement with Marathon Petroleum for a period of 15 years. Brand loyalty for Speedway fuel is very high. So by being supplied by Marathon Petroleum, 7-Eleven, Inc. can be of use to customers in terms of merchandise and also fuel. This agreement allows Marathon Petroleum to increase the number of companies it provides fuel to. So we believe this to be a win-win agreement for both parties. Additionally, this acquisition is expected to uplift consolidated EPS considerably as we forecast an uplift of approximately JPY 50 per share after 4 years. Page 19 contains an overview of Speedway. Speedway operates the third largest U.S. convenience store chain with approximately 3,900 stores in 36 states. It boasts a very high fuel brand loyalty. And another defining characteristic of Speedway stores is the fact that many possess large-scale refueling facilities. The fuel sales volume APSD is 1.5x that of 7-Eleven, Inc. Speedway owns the store real estate for approximately 70% of the stores. The quality of store assets is also very high, and all stores are operated directly. Merchandise accounts for 1/4 of sales and approximately half in terms of gross profit. Page 20 covers the complementary relationship between 7-Eleven, Inc. and Speedway in terms of geography. The green dots show 7-Eleven, Inc. stores while the red dots show Speedway stores. As you can see, there is a very limited number of overlapping areas between the 2 companies, giving way for a superior complementary relationship between the 2. The purple stars show areas with a high population density. This acquisition allows us to acquire a presence in 47 out of the 50 most populated metro areas in the U.S. Page 21 contains an overview of pro forma assets based on fiscal year 2019 results. The figures shown here are based on a simple addition process and don't take into account the creation of synergies. The left column corresponds to 7-Eleven, Inc., the middle column to Speedway and the right side contains the figures of pro forma. These figures represent a simple addition process. As you can see, total sales increase by 70%, operating income approximately doubles and EBITDA also increases by approximately 80%. Regarding the gross profit mix, even including Speedway for which fuel sales has a large weighting, merchandise still accounts for 70%. Page 22 shows an outline of synergies with Speedway. We are certain this contract agreement constitutes a very significant growth opportunity. 7-Eleven, Inc. has a proven playbook for successfully integrating past acquisitions. We believe we will be able to derive significant synergies by offering fresh food and private brand merchandise, one of 7-Eleven, Inc.'s strengths at Speedway. Additionally, by integrating the loyalty programs at both companies, we will acquire a customer base of 16 million people, and we believe this will lead to increased efficiency in terms of sales promotions and marketing. Furthermore, we will be able to fully leverage economies of scale at approximately 14,000 points of distribution to unlock efficiencies in terms of transportation, improve our delivery system and lower the cost of goods sold. As such, we believe this to be an attractive acquisition, leading to many very beneficial synergies. The projected year 3 run rate synergies are between USD 475 million and USD 575 million. Page 23 contains a comparison of both companies, which forms the base for the emergence of merchandise synergies. As you can see, 7-Eleven, Inc. shows higher merchandise sales and merchandise margins. By introducing original products with high merchandise margins, such as 7-Eleven, Inc.'s, fresh food and private brand merchandise, et cetera, at Speedway stores, we hope to achieve a significant improvement in terms of merchandise sales and merchandise margins. Additionally, we hope to achieve a further improvement of merchandise margins through an increase in buying power derived from an expansion to close to 14,000 stores and by leveraging our store network to realize an increase in transportation efficiencies. Please turn to Page 24, which contains 7-Eleven, Inc.'s proven track record of successful acquisitions. Since 2006 and up to recently in 2020, 7-Eleven, Inc. has carried out 42 M&As and acquired a total of 3,362 stores. This includes the acquisition of land in some cases for future store openings. As you can see, 7-Eleven, Inc. has been successful in a large number of past M&As and possesses a proven playbook in this area. I would now like to discuss this track record. Page 25 covers 36 M&A transactions carried out between 2006 and 2018. This is an analysis answering the question of whether or not 7-Eleven, Inc. was able to unlock the kind of synergies I mentioned earlier. 7-Eleven, Inc. has a very strong track record when it comes to past M&As. The company carried out an original investment of USD 7.1 billion over 36 transactions, involving approximately 3,000 stores. After a store optimization process involving the divestment that is the sale of unwanted stores, et cetera, the net investment amount stood at USD 5.4 billion. The current performance of these M&As can be found in the table on the bottom left corner. These are the last 12-month results as of December 2019. EBITDA stood at approximately USD 700 million, an increase of 40% compared to before the acquisition. Merchandise APSD increased by over USD 1,000, and ROIC stood at 9.6%. Additionally, 7-Eleven, Inc. has seen particularly higher returns in M&A transactions associated with big oil. The average for the 4 deals shown on the table to the bottom right shows a merchandise APSD increase of 44% and ROIC of 14.2%. Please turn to Page 26, which contains a review of the Sunoco deal, which we carried out 2 years ago. 7-Eleven, Inc. paid a purchase price of USD 3.1 billion and acquired 1,030 stores. We are currently carrying out PMI in the form of renovations, conversion to franchise stores, et cetera. We have seen positive effects from the introduction of 7-Eleven, Inc.'s private brands, such as 7-Select, leading to a strong growth performance in terms of merchandise sales and merchandise gross profit margin. The section at the bottom contains the financial figures for the past 2 years and the forecast for the current fiscal year. Compared to 2018, we expect EBITDA to grow by 12% and operating income to grow by 29%. In terms of ROO and ROIC, only 2 years have elapsed since the acquisition, and we're still in a phase requiring costs associated with remodeling, et cetera. So these numbers are insufficient. However, we registered an ROIC of 7.4% over the last 12 months up to June 2020, a result we believe to be in line with our plan. It's not just the financial data that supports 7-Eleven, Inc.'s track record, a variety of integration programs are included in the PMI, and know-how in these areas is very important. Page 27 contains a concrete framework for the integration of Speedway. We will be carrying out this integration program to realize, not just positive financial effects, but also fully realized nonfinancial synergies derived from securing talented personnel, sharing the best of both cultures and practices, et cetera. Please turn to Page 28, which contains an EBITDA and operating income forecast taking into account the aforementioned synergies. We expect the acquisition to be closed in the first quarter of fiscal year 2021, but the graph assumes the acquisition closed at the beginning of fiscal year 2021. As you can see, following the acquisition, we expect the 3-year compound annual growth rate for SEI and Speedway to grow by 15%. Please turn to Page 29, which deals with the adjusted purchase price and EBITDA multiple. 7-Eleven, Inc. acquired Speedway for USD 21 billion, and we estimate the EBITDA for fiscal year 2020 at USD 1.53 billion. At the current rate, the EBITDA multiple stands at 13.7x. We will be carrying out a variety of measures with the aim of lowering the adjusted purchase price and the EBITDA multiple. One of these are tax benefits. We forecast USD 3 billion in tax benefits following a tax reform in 2018. The second measure is divestment through the sale of assets, namely the sale of stores in areas where there is an overlap between 7-Eleven, Inc. and Speedway. We expect net proceeds of USD 1 billion from this sale. The third measure is the sale and leaseback of acquired assets through which we expect to lower the adjusted purchase price by USD 5 billion. After implementing these measures, we expect to be able to lower the adjusted purchase price to USD 12 billion. These also affect EBITDA. We hope to create EBITDA arising from the divestment of assets and increased rents through sale and leaseback. To this, we include the aforementioned synergies, allowing us to reduce the EBITDA multiple down to the figure of 7.1x shown in red in the bottom right corner. Page 30 contains the funding plan. We are planning to procure USD 21 billion associated with this M&A deal. Of these, USD 13 billion come in the form of a bridge loan and an equity infusion from Seven & i Holdings of USD 8 billion. Regarding the process of turning this bridge loan into a permanent loan, 7-Eleven, Inc. will be carrying out the repayment of USD 5 billion through the aforementioned sale and leaseback. We are then planning on carrying out private placement debt and bank term loans for the remaining USD 8 billion. Additionally, we are considering the use of debt for the procurement of the USD 8 billion equity infusion from Seven & i Holdings. We are considering corporate bonds and bank term loans, but the method and currency are still under consideration. We are not planning equity financing through the issuance of new shares, et cetera. 7-Eleven, Inc.'s debt-to-EBITDA ratio is expected to worsen to around 5x immediately following the acquisition. But through the measures I mentioned earlier, such as sale and leaseback, et cetera, we believe we can reduce this ratio to less than 3x in 2 years after closing the deal. We will aim toward a further reduction by improving profitability and return the debt-to-EBITDA ratio to 2x or less after 5 years. Page 31 discusses the impact to the consolidated figures. First, starting with the balance sheet. The section to the left contains the actual results for fiscal year 2020. Total assets stood at approximately JPY 6 trillion, with approximately JPY 1 trillion in interest-bearing debt. To the right of that is the estimate for the current fiscal year. The second section from the right contains assets for fiscal year 2022. Immediately following the acquisition of Speedway, we will see a large temporary increase in the balance sheet, and interest-bearing debt will exceed JPY 3 trillion. Following that, we will carry out sale and leaseback and the partial sale of assets in order to reduce assets and debt as represented in the first section from the right. As I mentioned earlier, we are planning to raise debt for the acquisition fund and consequently, equity financing is not planned. We will be reducing the balance sheet through sale and leaseback and the sale of assets, et cetera, while firmly advancing PMI and unlocking synergies. Through this, we hope to lower the debt-to-EBITDA ratio to 3x or less, also on a consolidated basis, in 2 years after closing the deal. In 5 years after closing the deal, we hope to lower the debt-to-EBITDA ratio to 2x or lower. Page 32 contains the impact to the consolidated profit-loss statement. The pie chart to the left shows changes in the weight of the North America business in terms of the consolidated operating income mix. The composition ratio is calculated on a yen basis after the amortization of goodwill. Adding Speedway pro forma to the actual results for the fiscal year 2020 yields a weight of close to 1/3 for the North America business. Through future growth, including synergies, we believe the weight of the North America business will rise further. The vertical bar graph on the right shows the estimated consolidated operating income uplift resulting from the acquisition of Speedway, including synergies. We calculated these figures under the assumption the acquisition closed at the beginning of fiscal year 2022. After the amortization of goodwill, we estimate an uplift of approximately JPY 50 billion during the first fiscal year and close to JPY 100 billion for fiscal year 2025. Please turn to Page 33. The graph on the left shows the consolidated EPS uplift and the graph on the right shows the consolidated ROE uplift. We expect both metrics to soar in fiscal year 2022 since we anticipate booking gains resulting from sale and leaseback. We expect a consolidated EPS uplift in fiscal year 2025 of approximately JPY 50 per share. The estimated 5-year compound average growth rate, including the drop during the current fiscal year, is expected to grow at 8.6%. We forecast the consolidated ROE uplift of approximately 0.8 percentage points in fiscal year 2025. An increase in rent following the execution of sale and leaseback following the acquisition, renovation expenses and JGAAP requirements related to the amortization of goodwill mean we will not be seeing a very large uplift during the first few years. However, including advancing PMI over the mid- to long-term horizon, we are certain this will make a significant contribution toward improving consolidated ROE. As I have mentioned up to this point, we are certain the acquisition of Speedway will contribute to the further growth of the convenience store business in North America, which we consider to be a growth driver and to value creation. As a result of this, we believe this to be a significant leap toward the Seven & i Group becoming a true global retailer. Going forward, we would like to increase 7-Eleven's global presence and competitiveness while further deepening cooperation with 7-Eleven Japan, and at the same time achieve an increase of both corporate value and social value. Lastly, I would like to discuss ESG initiatives. Please turn to Page 35. First, I would like to discuss how the acquisition of Speedway is an excellent opportunity to accelerate 7-Eleven, Inc.'s ESG initiatives. Both 7-Eleven, Inc. and Speedway have up until now taken a proactive approach to ESG initiatives. In terms of initiatives to reduce environmental impact, in addition to the expansion in the number of stores using solar panels, in 2018 7-Eleven, Inc. entered a contract with TXU Energy in Texas, and the number of stores using electricity derived from wind power has grown to 850 stores. 70% of 7-Eleven, Inc.'s stores use 100% LED illuminations, and we have plans for further expansion. Additionally, we have started tests at 11 stores towards offering EV charging sites. As a result of these, we achieved an 18.2% CO2 reduction from 2015 to 2018. Additionally, as you can see, Speedway has also been taking a proactive approach to ESG initiatives. Through this acquisition, the composition ratio of fuel will increase. However, we believe this to be an opportunity to accelerate ESG initiatives through economies of scale and synergies, et cetera. Please turn to the next page, which contains our numerical ESG goals going forward. The left side shows the current goals up until now to be achieved by 2027, which marks the 100th anniversary of the company's founding. These are 20% lower CO2 emissions versus 2015 and the use of 100% eco-friendly private brand packaging. On the other hand, the right side shows new ESG goals adding Speedway. We doubled the original goal to 40% reduction in CO2 emissions by 2027. We are considering launching EV sites at 250 stores and are aiming for 25% of the fuel sold at our stores to be carbon neutral. We will be using eco-friendly packaging for Speedway's private brands as well and promote the sustainable sourcing of ingredients while making use of economies of scale. As in Japan, we will also drive the reduction of plastic usage. Additionally, today, I'm discussing initiatives geared specifically toward the environment, but we will be proactively expanding activities contributing to local communities and to society as societal initiatives and at the same time, promote to the improvement of employee welfare. We will aim to become more recognized as indispensable stores rooted in the local community and at the same time, increase the level of satisfaction of our employees who work as essential workers. Page 37 deals with group ESG initiatives. In May 2019, we announced GREEN CHALLENGE 2050, an environmental declaration consisting of 4 goals: the reduction of CO2 emissions, measures for plastic and measures for food loss and food recycle and sustainable procurement. We aim to reduce CO2 emissions by 30% by 2030 compared to 2013 levels and by 80% or more by 2050. In terms of measures for plastic, we started charging for shopping bags at 7-Eleven stores in Japan in July. We aim to completely eliminate the use of plastic-made shopping bags in the Seven & i Group by 2030. Additionally, the target percentage of eco-friendly packaging used in our original products is 50% by 2030 and 100% by 2050. Please turn to the next page. Page 38 shows the progress of CO2 emissions and measures for plastics in Japan. Both initiatives are progressing at a healthy pace toward the 2030 goal, and we believe achieving these goals is within reach. Regarding measures for plastics. In addition to raising the percentage of eco-friendly packaging used in our original products to 50%, we will, as I mentioned earlier, aim for 0 usage of plastic-made shopping bags by 2030. The Seven & i Group will be further working as a cohesive unit toward accomplishing the 2050 goals. Please turn to Page 39. As one of the Seven & i Group's initiatives for a sustainable society, we take a proactive stance towards investments to reduce environmental impact. At 7-Eleven, Inc., we are promoting the expansion of the number of EV chargers and the use of electricity deriving from wind power generation. Additionally, we will continue making progress in the introduction of LED illumination and high-efficiency air conditioning equipment, et cetera. In Japan, we will be progressing in the move towards energy efficiency by promoting the installation of solar panels and storage batteries to store the energy generated and at the same time, replacing existing sales fixtures with energy-efficient ones, introducing LED illumination and upgrading air conditioning units. In terms of a concrete indicator, we would like to allocate 5% or more of total investments to environmental investments, such as the ones I just described. COVID-19 brought about significant changes to customers' values. We want to aim not just toward an increase in financial value but also in the creation of a sustainable society and the increase in social value. Lastly, please turn to Page 40. We are collaborating not just among the companies within the scope of consolidation for the Seven & i Group but also with 7-Eleven licensees in 17 countries and regions worldwide in the promotion of ESG initiatives. At the Licensee Summit in March 2019, we entered a partnership with licensees from each country and adopted a joint declaration to achieve SDGs. As the world's largest convenience store chain with over 70,000 store locations, we will be collaborating with each country and continue our efforts towards realizing a sustainable society. This concludes today's presentation. Thank you for listening. [Statements in English on this transcript were spoken by an interpreter present on the live call.]