■Growth Strategy and Topics

1. We are promoting a strategy to shift the focus from an “in-house sales model” to a “group/external sales utilization model”

Since the past, Premium Water Holdings ＜2588＞ has acquired customers by carrying out demonstration sales and telemarketing at booths, mainly by its own sales personnel. Since then, in telemarketing, there is a history of increasing the number of new customers by utilizing agents and agents. Partners that sell various products and services such as electricity/gas, telecommunications, home appliances, furniture, and moving have unique customers, so it is easy to acquire customers for home delivery water. In the new strategic policy announced for the fiscal year ending 2024/3, it was declared that “investments aimed at strengthening sales power” will be made more aggressive. Specific measures include “alliances/investments with other companies” and “introduction of new water dispensers.” As before, booth sales and telemarketing with in-house personnel will be steadily enhanced, and it will grow dramatically with a new customer acquisition model utilizing the outside. In the background, it is conceivable that the financial base has been strengthened due to past profit accumulation, that the external utilization model has an advantage in acquisition costs per customer, and that an efficient new acquisition method is required in order to continue net increase (number of new customers - number of cancellations) as the number of owned customers increases. Various patterns such as business alliances and investment/acquisitions are assumed as methods of cooperation with other companies. By the 2024/3 fiscal year, 3 alliance investments will be carried out, and 2 of them (last one mile, INEST) can be expected to strengthen new customer development.

The company implemented a public tender offer (TOB) for the last mile in 2023/3, and as a result, the company's shareholding ratio increased to 39.9% (as of 2024/2). Last One Mile is a start-up company established in 2012/6, and is involved in sales etc. of various services through call centers operated in-house. Starting with the “Moving One-Stop Service Full Change,” which acts as a contract procedure agency for various services in a new lifestyle, we handle many highly convenient services, centering on lifestyle infrastructure services such as electricity and gas. Delivery water is one of them, and it has acquired many customers as the main dealer of natural mineral water manufactured by the company group. In the future, it can be expected that the customer base will be further expanded by sharing sales know-how, etc.

A capital and business alliance agreement was signed with INEST in 2023/11. The company's shareholding ratio is 37.8%. INEST's main business is marketing support business and solution support business, and continues to grow by increasing the handling of products that meet the needs of corporate enterprises and individual customers. In the business for individuals, it carries out agency sales of new electricity, internet lines, etc., and has acquired many customers as the main agent store for premium water. Coupled with similarities in the business areas of marketing and sales, not only can a sufficient complementary relationship be built on that customer base, but complementing the provision method and building a strong cooperation system with INEST, which has a cooperative relationship, promotes further expansion and refinement of individual businesses, and can be expected to complement sales channels, strengthen marketing strategies, maintain and improve customer satisfaction, etc.

In addition, a group restructuring was carried out to sell FC Premium Co., Ltd., which was a consolidated subsidiary, to an affiliated company INEST. One of the company's aims is to focus on the water delivery business and aim to improve profit margins. There is a history where in the past, profitability of the mobile business remained low compared to the water delivery business. Also, FLC Premium will continue to acquire customers as a sales agent in the home delivery water business. As a result of this deal, sales volume (4,377 million yen as of the fiscal year ending 2023/3) of the mobile business carried out by FLC Premium declined. Also, profit from sale of subsidiaries (797 million yen) was recorded as operating income.

2. The second phase of construction of the Gifu Kitagata Plant has been completed and operation has commenced. To production capacity that can cover 2.5 million water sources in total

In 2024/4, the second phase of construction of the Gifu Kitagata Plant was completed and operation began. This plant is the company's third in-house plant after Fujiyoshida and Asago, and has become the largest natural water plant in Japan in the home delivery water market. Its production capacity is 2.4 million bottles or more per month, and it will be on a scale that can cover 1.2 million users (currently the company's owned customers are 1.62 million users). Since the Gifu Kitagata Plant is located in the center of Japan, it is also a strategic base in terms of logistics. If products from nearby water sources currently procured by OEM are switched to production at this Gifu Kitagata Plant, a significant cost advantage will be created, and it is calculated that the total investment amount of 8.9 billion yen can be recovered at an early stage. The inside of the factory is highly automated using the latest equipment, and production capacity and production efficiency have improved dramatically. As a characteristic,

・Truck loader that dramatically streamlines in-factory logistics

・Fully automated warehouse where products can be transported completely automatically

・One machine handles everything from raw pellets to PET bottle molding

There are things like that, and the high level of productivity can be seen. The company's winning pattern of aiming to further reduce manufacturing costs by operating its own factory with high productivity at a high operating rate against the backdrop of a net increase in customers has been further refined.

As production capacity has improved, production capacity has been established that can cover 5 million water sources and 2.5 million units in total for the entire company. By being able to make an advance investment with plenty of room, there are also advantages such as eliminating concerns about lack of production capacity up to a few years in the future, and being able to accept contract production for other companies against the backdrop of cost competitiveness.

(Written by FISCO Visiting Analyst Hideo Kakuta)