Business Risks

Outlined below are the major risks identified by the Meiji Group that could have an impact on the Group’s business results and financial position and which may materially influence investors’ decisions. Forward-looking statements included in the outline below are the views held by the Group as of the submission date of securities report (June 26, 2015) and include uncertainties related to future developments.

1. Prices Increases of Raw Materials
Prices of the Meiji Group’s key raw materials (milk, dairy products, cocoa beans, nuts, etc.) and energy commodities may be affected by supply and demand conditions and speculative influences, etc., in Japan and abroad. Such high prices have the potential to greatly impact procurement and production costs.
2. Effect of Business Globalization
The Meiji Group purchases some of its raw materials and goods from overseas. It also operates businesses overseas. Therefore, unexpectedly dramatic foreign currency fluctuations or the impediment of business activities due to unforeseen events, such as war, terrorism, or political or social changes, could affect the Group’s business results and financial position.
3. Weather
The Meiji Group’s food business may be affected by the weather. For example, a cool summer can decrease sales of ice cream and dairy products. Extreme heat can decrease sales of chocolate and other confectionery goods. These have the potential to impact the Group’s business results and financial position.
4. Changes in the Business Environment Faced by the Dairy Products Industry
In the Meiji Group’s food business, sudden changes in the international trade system, such as customs duties, in the dairy farming system, such as the Act on Temporary Measures concerning Compensation Price for Producers of Milk for Manufacturing Use, or in practices have the potential to impact the Group’s business results and financial position.
5. Food Product Safety
The Meiji Group takes various actions to ensure product safety and preventative measures against risks foreseen to occur throughout production. However, if there is a largescale product recall, or even if there is not any direct problem with the Group’s products, rumors in the food industry might affect the Group’s products, which could result in a drop in sales, huge costs, etc. These have the potential to impact the Group’s business results and financial position.
6. Side Effects in Pharmaceuticals
The Meiji Group conducts product development, manufacturing, and marketing for the pharmaceuticals business in compliance with various laws and standards enforced by regulatory authorities. Nevertheless, unforeseen side effects have the potential to occur during development and after product release. The Group prepares for such incidents by carrying appropriate insurance coverage for various types of liabilities, including product liability. However, there is no guarantee that insurance will be sufficient to cover all damages associated with such liabilities. Unforeseen side effects therefore have the potential to impact the Group’s business results and financial position.
7. Government Trends in Medical Care
In the Meiji Group’s pharmaceuticals business, prices of medical-care pharmaceuticals are affected by government medical policies, including drug price revisions and the healthcare insurance system. These have the potential to impact the Group’s business results and financial position.
8. Research and Development in the Pharmaceuticals Business
New product development for the Meiji Group’s pharmaceuticals business implements extended periods of product testing, which requires significant expenses. Instances occur in which safety or efficacy issues compel the Group to extend, suspend, or discontinue research and development projects. The progress status of research and development has the potential to impact the Meiji Group’s business results and financial position. Moreover, launches of products developed by the Group may be delayed if research and development does not proceed as planned, which could require the Group to utilize products of other companies. Such cases have the potential to increase outlays for intellectual property rights and licensing.
9. Lawsuits
In research and development and other business activities, the Meiji Group takes care to avoid infringing on intellectual property rights of third parties. However, the outcomes of unexpected litigation by third parties who claim infringement on their intellectual property rights have the potential to impact the Group’s business results and financial position.
10. Information Leaks
The Meiji Group has large amounts of confidential information that is required in business operations, including such personal information as that of customers, and important information concerning its management. For the management of this information, the Group takes appropriate actions, including system controls; it established the Information Management Committee, provides training to employees, etc. However, there is the risk that currently unforeseeable unauthorized access or computer virus infection will cause leaks, falsification, or the loss of confidential information, or that the computer system could become temporarily unusable, etc. If such a situation occurs, it has the potential to impact the Group’s business results and financial position.
11. Natural Disasters
In its facilities and production plants, the Meiji Group establishes and implements a risk management system to ensure that it can continue business activities when natural disasters occur. However, an unanticipatedly large earthquake and/or other disaster or large-scale destruction of social infrastructure or the widespread outbreak of an infectious disease could have a negative impact on the Group’s business results or financial position due to such factors as disruptions in product supply, damage resulting from a loss of assets, the destruction of facilities, or delays in supply chains.

Further, the above list does not include all of the risks the Group faces.