Message from the President & CEO

In fiscal 2023, the final year of its previous medium-term management plan, the 11th Medium-Term Management Plan, Unicharm posted consolidated net sales of ￥941.8 billion, surpassing its target of ￥888.0 billion. However, core operating income ratio stood at 13.6% and return on equity (ROE) came to 13.1%, compared with targets of 15.5% and 15.0%, respectively. Despite an exceptionally difficult business environment, due in part to the impact of skyrocketing raw materials prices and unstable exchange rates, the Company launched several high-value-added products in quick succession, achieving significant net sales growth thanks to its success in shifting its focus to feminine care, wellness care, and pet care, which have particularly large market growth potential. Although we unfortunately did not achieve our targets for core operating income ratio and ROE, we will continue working to improve them. I believe that the accomplishments of the 11th Medium-Term Management Plan lie not only in such short-term financial successes but also in our steady progress in human resource development, which we have adopted as a priority action matter.

    Guided by the view that human resources are the source of its competitiveness, Unicharm focuses on creating an environment that facilitates the growth of its employees and an organization that enables them to play an active role. We call this management with resonance. In our human resource development under the 11th Medium-Term Management Plan, we lowered the rank at which employees can become key strategy project leaders from executive officers to general managers and section heads working on the front lines, a significant difference compared with former practice. Partly due to the high level of difficulty involved, executive officers previously had responsibility for key strategies, which are promoted on a Companywide basis across business and functional divisions. While the former system offered a sense of stability, general managers and section heads have a thorough understanding of the front lines and an abundance of effective ideas. Under the 11th Medium-Term Management Plan, we therefore selected general managers and section heads as leaders and gave them various powers. Of course, I am sure that making a series of important decisions on matters for which they had never previously been responsible entailed considerable pressure. This combination of challenging experiences accelerated the development of our mid-level human resources.

    Executive officers are responsible for providing appropriate support for leaders to achieve success and growth. Unicharm required such officers to work behind the scenes, including coordinating across divisions and securing management resources, to ensure that general managers and section heads could fully demonstrate their leadership abilities. I am pleased to say that all executive officers took great satisfaction in their subordinates’ successes and growth, as if these were their own, and the effect of this approach has exceeded expectations.

    The Company also emphasizes giving opportunities to every employee to communicate their views in their own words. The term we use for small management units, such as sections or groups, is “scrums,” which hold weekly scrum strategy meetings where every member frankly states their views on the issues faced by their scrum, with all members scrutinizing those views to enhance their scrum’s activity plan. Scrums create an activity plan, which serves as a basis for discussion, using the standard format of the Observe–Orient–Decide–Act Loop (OODA Loop) form. This format allows them to clarify the essence of issues by entering standard wording in various columns, thereby improving discussions at the meetings. In addition, Unicharm compiles and distributes the Unicharm Terminology to make it easier for scrum members to communicate their intentions, defining terms to prevent misunderstandings.

    In all our companies and business and functional divisions, every employee implements management with resonance, which systematizes organizational management instincts, know-how, and key points, enabling us to realize organizational management that unifies performance achievement and human resource development.

When formulating the 12th Medium-Term Management Plan, we reflected deeply on how we should create value going forward, based on the aforementioned outcomes and our review of the 11th Medium-Term Management Plan.

    I am proud that Unicharm has continuously engaged in world-leading research and development in the field of nonwoven fabric and absorbent material processing and molding technologies since entering the sanitary pads business in 1963, following its founding in 1961. Nevertheless, as I touched upon at the beginning of my message, in the age of the 100-year lifespan it is more vital than ever to identify new value that customers themselves have yet to recognize so that we can meet their changing needs.

I would now like to provide a summary of the 12th Medium-Term Management Plan.

    Many menstruating women in Africa and in India and its neighboring countries use cloth and other materials instead of dedicated feminine care products, such as sanitary pads. Unicharm will market Sofy in such places to ensure that the brand becomes so popular that it is synonymous with sanitary pads. To this end, we will develop products that are easily accessible to anyone and cultivate distribution channels that allow people to purchase them anywhere, at any time. At the same time, we will rapidly expand the sanitary pad market through activities that boost menarche education and the advancement of women in society. In addition, we aim to get back on a growth track without reducing profitability by offering products tailored to local characteristics, such as highly original period underwear in Japan and China, where population structures are maturing, and cooling sanitary pads that give wearers a cool and fresh feeling in Southeast Asia.

    In addition to feminine care, we also plan to expedite growth in both wellness care, where demand is accelerating due to population aging, and in pet care, where we expect the increase in the number of pets to prompt market expansion.

    Meanwhile, during the period of the 11th Medium-Term Management Plan, we established the Marketing by DX (MDX) Division, which focuses on digital marketing to build new relationships with users. Under the 12th Medium-Term Management Plan, we aim to build new relationships with users with whom we have previously connected only through our established products and services, by creating customer experiences that lead them seamlessly from sanitary pads to other product categories, such as baby and child care products, pet care products, and incontinence care products.

    Through such efforts, we will accelerate the diversification of our products and services to build relationships with individual users throughout their lifetimes, from menstruation to pregnancy, childcare, and other life stages beyond.

    Promoting value creation globally will require us to significantly improve the quality and quantity of resonant personnel—human resources who think deductively and act on their own initiative to powerfully promote business transformation. In addressing this issue, it is of the utmost importance that we become the first-choice employer of a diverse range of people with a variety of backgrounds. Accordingly, I believe that Unicharm must endeavor to create an environment that allows such human resources to play an active role and promote its human resource strategies without delay.

    Based on the implementation of these business plans, we are targeting net sales of ￥1.15 trillion, core operating income ratio of 15.8%, and ROE of 15.0% for fiscal 2026, the final year of the 12th Medium-Term Management Plan.

Creating an environment that facilitates employee growth and pursuing organizational management that empowers employees are never-ending themes of Unicharm’s value creation. The most critical aspect of management with resonance, which Unicharm promotes, is ensuring that every employee plays a leading role.

    A management model will achieve nothing unless it is implemented, regardless of how well it is devised. If the Company expects employees to implement management with resonance seriously, it is important to ensure that employees understand, accept, and empathize with the perspectives of its leadership on a deep level.

    For one hour from 1.00 p.m., Japan time, on the first working day of each week, those in positions of general manager and above around the world assemble for the Management with Resonance Practical Meeting. Directors and executive officers, including myself, take turns to begin the meeting with a presentation. Thereafter, meeting participants discuss Companywide issues and identify solutions. The presentations cover a wide range of topics, from short-term issues to medium-to-long-term measures, such as the progress of the medium-term management plan and single-year targets, with all executives speaking passionately in their own words to approximately 16,000 Group participants.

    The addresses are translated into the languages of the countries and regions where Unicharm operates and discussed at weekly scrum strategy meetings. Scrum members discuss which aspects they found useful or did not fully understand, while leaders offer explanations to clarify the meaning of the presentations. The meetings therefore create an opportunity for every employee to reflect deeply on Unicharm’s future direction. The purpose is to ensure that the presentations do not end up as empty words. Scrum members always pledge to take specific actions, discussing whether they did so and confirming the results and outcomes of their actions at the following week’s meeting. In this way, we emphasize first putting in place a system to encourage specific behavioral change and then using it to change employees’ mindsets.

    Unicharm incorporates targets into the daily work duties of every employee so that they pursue absolute value on their own initiative. Recognizing those who take action and work with a positive attitude inspires them to feel pride and encourages further efforts by changing their mindsets toward their work and the organization. I am convinced that if we combine the mindset change resulting from employees acting on their own initiative with our organizational capabilities, we can create unprecedented and revolutionary value using new ideas. Through such initiatives, we will endeavor to enhance absolute value, thereby contributing to the realization of a cohesive society.

Takahisa Takahara

President & CEO

June 2024