Yukiguni Maitake : Update of the Medium-Term Business Plan(2)

Update of the Medium-Term Business Plan

December 19, 2023

Impact of Changes in Business Environment

Changes in the business environment are having a significant impact on the implementation of the Mid-term Business Plan.

Macro environment

Unexpected major changes

• Outbreak of invasion of Ukrainian by Russia
• • Utility costssuch as crude oil, LNG, etc. soared globally
  • Supply of grains and other commodities fell and grain and food costs rose
• Negative impact of tight monetary policies in various countries
• • Cost-pushinflation became a political issue
  • Interest rate hike policies shifted in Europe and the U.S.
  • Expansion of Japan-U.S. interest rate differential and deterioration of current account balance
  • As a result, the Japanese yen currency was depreciated

Consumer

Recovery of consumer confidence stalled

• High prices suppressed consumer confidence
• • Rising prices of everyday itemssuch as food and gasoline
• On the other hand, labor wages were sluggish
• • Low growth labor wages relative to price increases
  • Consumption mindset was being braked

Mushroom market

Unstable supply-demand balance

• Decline in prices due to oversupply
• • Noticeable impact of increased production in other regions
  • Market stagnant due to falling unit sales price
  • Combined with high costs, producers' profits declined across the board

Mid-term Business Plan

Significant impact on the promotion of the basic strategy

A. Domestic Mushroom Market

1. • Market oversupply conditions and consumer preference for price
   • The unit sales price did not increase, and the top line sales revenue did not grow
2. Technology Development
3. • Effects of existing Mid-term Business Plan measures are not fully realized at this stage
   • Faced with initially unanticipated cost increases, drastic measures are needed
4. Global Expansion
5. • First step toward global expansion with the acquisition of a Dutch mushroom business company
   • On the other hand, more cautious expansion is required in light of geopolitical risks

• Future Uncertainty
• • Supply-demandbalance was settled this year, unit sales price level recovered
  • However, given the situation in the previous fiscal year, it is unclear whether market conditions will remain stable in the future

Need to revise basic strategies

1

Policy for Updating the Current Medium-term Business Plan

Respond appropriately to rapid changes in the business environment and promote global expansion over the medium- to long- term while further strengthening the domestic business base.

Domestic market

Overseas (a foreign) market

Business Environment Surrounding Us*

• Demographics (declining and aging population)
• Ongoing inflationary environment
• Trends in other production areas
• Cost increase factors such as fuel and electricity price hikes and yen's depreciation
• Global Mushroom Market growth of about 4% and stable growth is expected through 2025
• Growing Need for Health and Environmentally Friendly Mushrooms (Increased consumer health awareness/animal protein substitution)
• There are no huge mushroom-based players
• Rising geopolitical risks around the world

Updating Policy

Restructuring of the business base

to achieve high profitability

• Steady growth based on premium strategy
• • Strengthen premium positioning and differentiate from other production areas
  • Capture quality-oriented needs through effective marketing
  • Full-scalelaunch of new businesses other than fresh mushrooms
• Promote efficiency across all corporate activities to reduce costs
• • Company-wideBPR to improve business processes and reduce costs
  • Promote labor savings and energy conservation through new investments

Integration of new overseas bases and

further business development

• Smooth PMI (Post Merger Integration) of acquired foreign companies
• • Aiming to further expand business performance by taking advantage of our know-how (production and sales)
• Further Overseas Expansion
• • Pursue additional acquisition possibilities in light of strategic business development and geopolitical risks
  • Expand sales network of our products in Europe and the U.S. in addition to Asia

*Changes from the previous medium-term plan are indicated in blue.

2

Medium- to Long-Term Vision of Yukiguni Maitake

The medium- to long-term vision, management philosophy, and basic business policies will remain unchanged, and the basic strategies of the medium-term business plan will be updated to respond to changes in the business environment.

Medium- to long-term vision: Expand and grow globally as a comprehensive premium mushroom manufacturer

Values

Policies	Basic Business
Medium-Term Business Plan	Basic Strategies of the

company Motto

• Management Philosophies
• • Basic
    Business
    Policies
  • Basic

strategy of the Medium-Term Business Plan

Contribution towards society with quality products

A worthwhile workplace

1. Contribute towards enrichment of citizens' livelihood and the prosperity of food culture
2. Realize contributions to local communities and shareholders, and affluent executives and employees
3. Respect for corporate ethics

1. Reform the culture of challenge
2. Identify customer needs
3. Realize employee enrichment
4. Respect for corporate ethics
5. "Pursuit of value and strength" and "Thorough selection and concentration of businesses"

Further strengthen the business base in Japan and evolve into a comprehensive premium mushroom manufacturer with global operations

1. Domestic mushroom market: Strengthen existing premium business and create new business
2. Business Processes: Streamlining all processes without sanctuary
3. Global expansion: PMI of newly acquired overseas company and search for other targets

3

Diagram of the Medium-Term Business Plan (FYE March 2024 - FYE March 2028)

Based on the current Medium-Term Business Plan, respond appropriately to changes in the business environment and continue to seek growth opportunities on a global basis

presentt

Overseas Market

future

Growth of

overseas

Strengthen and promote the business base in Japan and

integration of new bases and further business

development in global markets

A

Environment

• Stable growth
• Increased health and environmental needs
• Absence of giant players
• Rising geopolitical risks

Domestic Market

Environment

• Demographics (population decline)
• Strategic trends of competitors
• Price increase

Domestic

Growth

bases by

PMI

Further Organic

M&A Implement ation

Premium

Business

Implement

ation

Business

Development beyond Fresh Mushrooms

B

Domestic Mushroom Market:Strengthen Existing Premium Businesses and Creation of new businesses

• Further strengthen our domestic business by enhancing our existing premium positioning, differentiate ourselves from other production areas, and steadily capture the quality-oriented needs of consumers.
• Strengthen sales of premium items that are not available in other production areas, and launch new businesses other than the fresh mushroom business in earnest.

Business Processes: Streamline all processes without sanctuary

• Improve business processes and reduce costs through company- wide BPR
• Promote labor savings and energy conservation through new investments

Business Process

Company-

wideEnergy

process Optimiza-

improvem-tion ent

c◼ Global expansion: PMI of newly acquired overseas companies and search for other targets

• Utilize our expertise to further expand the performance of acquired overseas companies
• Pursue additional acquisition possibilities in light of progress in strengthening domestic operations and geopolitical risks
• As for the organic strategy, we will consider sales of our products in Europe and the U.S. in addition to Asia.

4

Basic Policy A. Domestic Mushroom Market (Our Premium Position)

Our business portfolio consists of 80% base business including Maitake mushrooms, and the remaining 20% is niche/ premium business with high unit sales price, which enables us to realize premium margins compared to other companies.

Mushroom market size (production basis) and share

Niche/ Premium

Composition of revenue
Niche/	Other
	JPY0.3bn

High

Sales unit price

Hon-Shimeji

2020	YM
total	(Mizuho
production
Norin)	Button
volume:
99%	Mushrooms
300 tons
Hatake-Shimeji		2020
		total
2020		production
YM	Volume:
total
7K tons
(Mizuho
production
Norin)
volume:
94%.
430 tons

YM 33%

Base

Maitake

2022

total YM production 51%

volume:

57K tons

EringiBuna-Shimeji

2022	YM	YM
13%
25%
total

production	2022
total production
Volume:
Volume:
38K tons
123K tons

Premium	Other mushrooms	(1 %)
12%	JPY3.5 bn
(11%)
	Eringi
	JPY3.1bn
	（10%）	Revenue
		JPY31.0 bn	Maitake
		FYE Mar	JPY17.9 bn
	Buna-Shimeji	(58%)
		2023
Base	JPY6.0bn
（20%）
88%

Comparison of EBITDA margins between the Company and the mushroom industry

Average of last 2 fiscal years

FYE Mar 2023

30%

Industry average +8.0%

20%	19%
	14%
	11%

low

small

Market size (production volume basis)

large

Note: Market share of each mushroom is calculated using domestic production volume (Our company's production / Total domestic production) Sources: Forestry Agency "Statistical Survey on Production of Minor Forest Products", Ministry of Agriculture, Forestry and Fisheries "Local

Vegetable Production Survey"

10%			8%
0%
	YM	Industory Average

5

Basic Policy A. Domestic Mushroom Market (Base Business Strategy)

In the base business, steadily capture quality-oriented needs and aim to simultaneously achieve high profitability and increase market share

Recompose product allocation to achieve even higher profitability

Base

Maitake

2022
total	51%YM
production
volume:
57K tons

• Review item mix while also expanding newly designed products with added convenience, to achieve both customer satisfaction and improved profitability
• Overcome the seasonal gap by balancing supply and demand and improving operation rates through a combination of fresh mushroom distribution and input into processing and new businesses

Strengthen premium brands

Image of balancing supply and demand

and improving operation rates

Fresh Mushroom Production

Productionand

Production in non-demanding periods to date

To Processing and

Demand for processing and new business

Demand for processed products to date

demand

New Businesses

Rising Occupancy

Supply-demand

Rates

volume

balance

New demand

Overcome Seasonal

Gap

Spring

Summer

Autumn

Winter

Eringi		Buna-Shimeji
2022	YM	YM
202213%
25%
total		total
production
Volume:	production
38K tons	Volume:

123K tons

• Continue to develop a high-end,three-dimensional promotion that links commercials, digital, and packaging to further refine the premium image
• Introduce using results in high-end restaurants and chefs' voices on our website

Further utilization of sales channels

"Kiwami Specialties", which introduces high-end restaurants

that use white maitake mushrooms

*Picture menu may be subject to change in the future.

• Continue to leverage our unique, wide-ranging, and robust direct transactions, which are less susceptible to turbulent market conditions.
• Expand win-win sales channels by leveraging the above strengths to invest sales resources and promote value- proposition type sales floor presentation.

Our unique black-and-white maitake mushroom

shelf configuration

6

Basic Policy A. Domestic Mushroom Market (Expansion of Niche/ Premium Business)

Build a new growth driver by expanding scarce items and fully expanding new business areas.

Expansion of Button mushroom business

Niche/ Premium

Hon-Shimeji
2020	YM
(Mizuho Norin)

• Button mushrooms are an attractive market with room for growth, as they are produced in smaller quantities and have a higher unit sales price than maitake mushrooms
• Expand the scale of our business by strengthening our domestic production base and collaborating with our overseas subsidiaries

Due to merger

centralization of

production control

Overseas Subsidiaries

grouping

Expansion of

production and

business scale

total production	99%
Volume:
300 tons	Button Mushrooms

Full-scale expansion of new business areas

Hatake-Shimeji			YM
		2020	33%
		total production
	YM	volume 7,000
2020	tons
(Mizuho
total production

Volume:	Norin)
94%
430 tons

• Expand alternative meat products that not only reduce environmental impact, but also provide a solution to health issues and good taste
• In addition, we will launch a new proprietary product that combines mushrooms and alternative meat as raw materials
• Utilize existing sales channels with a high percentage of consumers via the sales floor, and expect to acquire and establish space, as well as achieve steady expansion

Alternative meat material

(under development)

Image of distribution product composition by new business

Market volume

Alternative meat

Mmushroom

FYE Mar 2025

FYE Mar 2028

7

Basic Policy A. Domestic Mushroom Market (Future Portfolio)

Aim to expand business to over JPY11 billion by expanding two segments, Niche/ Premium and overseas, while maintaining the base business as the mainstay.

Overseas

6% (+6%)

Niche/ Premium

12%.

Other

JPY0.3bn

Other mushrooms (1%) JPY3.5 bn

(11%)

Eringi

JPY3.1 bn

Revenue: +JPY11.0 bn

CAGR: over 7%

Niche/ Premium

21% (+9%)

Overseas (6%)

New

Business &

OtherRevenue

Mushrooms

(21%)Over

JPY42.0 bn

Maitake (46%)

（10%）

Total Revenue

JPY31.0 bn

FYE Mar 2023

Maitake JPY17.9 bn

FYE Mar

2028

Buna-Shimeji JPY6.0 bn

（20%）

Base 88%

(58%)

Eringi &

Buna-Shimeji

(27%)

Base

73% (-15%)

8

Basic Policy B: Streamline All Processes without Sanctuary

Improve business processes through company-wideBPR to build a business structure in which higher revenue exceeds higher costs.

		Management +			Production
		Production

Production +

Sales

Changes in Revenues and Cost of Sales*

CAGR

➢	Reducte raw material	➢ Reduce more than 200
	storage costs	personnel through
➢	Improve costs through	manpower saving
	in-house production	➢ Energy savings by new
		investments

• Design necessary and sufficient items to meet consumer needs
• Shift to items with higher labor productivity

Revenue

6%

Revenue ⇒

growth

Procurement of Raw	Production	Sales and
Materials	marketing

Corporate-wide management

Control

• Improve operational efficiency through DX

Expenses

Labor costs

Material costs

FYE Mar 2023

FYE Mar 2028

3%	Increasedprofit	exceeds
4%	margins	cost increases
3%

• Excluding inorganic

9