Top Message

Strong organizational capacity and new value creation gives rise to innovation. Lion is becoming a next-generation healthcare company. Itsuo Hama, Representative Director, President Executive Officer

1. Lion had record high sales and earnings in the fiscal year ended December 2016. There is a growing sense that “Lion has changed.” What do you think is the source of this change?

Change in the way of thinking by employees has added “muscular strength” to the “physical strength” of our earnings capacity, and we have been establishing a business model that leads to success.

Looking at change in terms of business results, we have maintained profitable growth both domestically and overseas. In Japan, we have strengthened our brands in oral care and pharmaceuticals with high-value-added products, and improved the earnings structure for fabric care. Overseas, we have cultivated a global brand centered on oral care and other personal care, and expanded our business in major Asian countries.

This success is closely connected to the change in the way of thinking within the Company. Lion’s founder believed in the philosophy of “returning the profit gained through business to society.” Implementing this philosophy requires the physical and muscular strength to continually expand earnings. We have worked to reestablish this corporate philosophy as Lion’s shared corporate DNA, and build an organization able to steadfastly move forward. This internal change in our way of thinking has become our “muscular strength,” and bolsters our “physical strength (profitability). ”

For example, in presidential roundtable meetings* with young employees and managers around the country, I have noticed many enthusiastic statements, including unique ideas, and suggested improvements to operational processes to achieve KPIs (key performance indicators). We have fostered a corporate atmosphere in which success achieved through repeated trial and error breeds self-confidence, and leads to the next action, idea, or creation. This process has generated a virtuous circle that has strengthened internal ties among business divisions, which are in charge of product development and marketing, as well as our sales division, R&D division, and other divisions. We aim to use this strong organizational capacity and new value creation to spark innovation, and establish Lion as a “next-generation healthcare company.”

* In presidential roundtables, the president visits Company offices, getting together with young employees and managers for free and open exchanges of opinion. Since assuming the position in 2012, President Hama has held around 15 such meetings each year.

Results in 2016
Billions of yen 2016 2015 Change
Net sales 395.6 378.6 +4.5%
Operating income 24.5 16.3 +49.6%
Profit attributable to owners of parent 15.9 10.6 +49.4%
2. Lion’s growth scenario includes being a “next-generation healthcare company.” What does this involve?

Lion’s aim is to offer care (prevention) and cure (treatment) for all generations, from infants to the elderly, and to create new value in the areas of health, cleanliness, and comfort. This includes providing one-to-one solutions tailored to an individual’s health status.

Our plan is to use “healthcare” as the basic approach in each of our business categories. In oral care, for example, recent research has identified a close connection between the hygiene of a person’s mouth and their physical health. From the standpoint of oral healthcare, this expands the possibilities for proposing and creating not only toothbrushing and other dental care products but also a wide range of ideas and products to improve lifestyle habits. The health status of each person is different, which creates market opportunities. We also hope to support mental health by presenting ideas for a comfortable life.

3. As part of its policy for 2017 of aiming to be a next-generation healthcare company, Lion has established measures to strengthen its position in the Japanese market. What are your specific plans?

We are focusing on expanding “empathetic marketing” presenting new lifestyle habits, and reinforcing the digital approaches that comprise the tools and information to spark an empathetic response. We are also accelerating efforts to pursue various types of tie-ups, based on the idea of “new combinations.”

“Empathetic marketing” is an approach designed to create completely new high-value-added product markets. Instead of a “product-centered” focus on developing new functionality, in empathetic marketing we are taking an “experience-centered” approach in which consumers try the product, recognize the benefits, and adopt new lifestyle habits.

An example of empathetic marketing is our initiative to tailor marketing to regional characteristics, which is one of the keys to empathetic marketing. Living environments, cultures, customs, and preferences are particular to specific regions, both within Japan and overseas. To take one example, depending on differences in local foods and climate, clothing becomes soiled in different ways. Marketing that generates empathy distinctive to that area allows Lion products to make inroads into regional communities and gain customer understanding and acceptance more effectively.

We have also launched a new initiative for joint in-store measures with other companies. Along with proposals for sales spaces, we are offering new value through an “experience” approach that links the product categories of each company, and generating broad-based empathy. We are also considering marketing tie-ups in the future.

4. Turning to overseas strategies, what are Lion’s strengths in terms of competing with the global giants in Asian markets?

We cannot compete by doing the same things. Backing the reputation of Japanese quality, we will utilize the strengths and expertise we have gained in the Japanese market, and seek sustainable growth through a different approach than that of our global competitors.

The trust and value placed in Japanese products is a huge advantage. For example, the aging of populations in both Northeast and Southeast Asia will increase rapidly in the next 5-10 years. We will be able to apply our experience and expertise in Japan’s senior market to these markets as well. Also, since the percentage of young people across Northeast and Southeast Asia is higher than in Japan, we created the KODOMO brand* of products for children, and achieved growth in this region. By combining this unique and strong brand power with this high value added, we are confident we can develop larger markets over the longer term.
* ”Kodomo” means “children” in Japanese.

Further, as in Japan, we do not just sell products, but are expanding our market position by educational activities and social contribution activities related to healthcare.

5. You have included reinforcing e-commerce channels, mainly in China, as a priority measure. What has been your progress and results so far?

We have been pursuing e-commerce in China as a new alternative sales channel to retail stores. Currently, e-commerce accounts for half of Lion’s sales in China, with toothbrushes among the best-selling items on the main online sites.

We have struggled with retail sales in China, but were one of the first companies to embrace e-commerce, leading the growth we have today.

We will use e-commerce channels to highlight the added value of Lion products and enhance our appeal as a Japanese brand in order to strengthen our brand power, and thereby increase sales in retail stores as well. We have a plan to apply the Chinese business model to Taiwan, South Korea, and Southeast Asian markets as well.

6. The strength of R&D activities and human resources development are vital to corporate growth. Since your background is in the R&D division, what are your expectations for R&D?

I think that collaboration, both within and outside the organization, is essential to creating new businesses and sparking innovation. Especially in R&D, I hope that our “new combinations” of internal and external collaboration through open innovation will quickly lead to value creation.

There is a saying in the R&D world that “success breeds success and that a person who makes one breakthrough is likely to do it again.” This is because an exceptional research result opens up several channels to bring together a newly inspired personnel network and information, creating a virtuous circle that leads to the next success. Lion as a company will change with these new combinations, and it is my hope that the R&D division will be at the forefront.

7. What are the main points of the corporate governance reform measures by the Basic Corporate Governance Policy, formulated in June 2016?

We will discuss and consider Lion’s business activities from various perspectives, centered on external directors and experts. By steering the Company in the proper direction, we aim to establish a structure that ultimately returns profit to shareholders.

Lion’s top priorities for corporate governance are to increase management transparency, strengthen supervisory functions, accelerate decision making, and ensure compliance.

I also think it is important to create a flexible structure that incorporates varied opinions, and in which management itself generates new combinations with external parties. We formulated the basic policy as the rules to achieve this.

In terms of organizational structure, we established a new Nomination Advisory Committee comprising mainly external directors to advise the Board of Directors. This is also aimed at ensuring diversity in our executives. The former Management Evaluation Committee has been remodeled as the Advisory Committee, comprising outside experts other than external directors, to provide a wide range of perspectives on Lion’s management policies and strategies.

These policies will encourage debate on Lion’s business activities from diverse viewpoints, leading to more-accurate decision making, and meeting the expectations of shareholders.

8. Finally, what message do you have for shareholders and investors?

Lion’s business performance has grown significantly since I assumed the role of president in 2012. However, this new history is nothing more than the starting line. As Lion seeks to become a next-generation healthcare company, I think investors can look forward to dramatic growth, and a future filled with potential.

Lion’s improvement in profitability is not just from cost-cutting. It is the success of structural reforms and changes in the way of thinking throughout the Company. Next year (2018), we will announce our growth strategies for beyond 2020, and accelerate our efforts for nurturing a “Spirit of Tenacity and Creativity” that will help us put these strategies into action. Shareholders and investors should expect even bigger things from Lion.

Finally, our basic policy of providing returns to shareholders as a management priority is unchanged. We will further strengthen our profitability, make investments for growth, and ensure continuing and stable shareholder returns.

April 2017

Itsuo Hama
Representative Director, President Executive Officer