Rising Logistics, Labor and Procurement Costs Driven by Labor Shortages and Higher Raw Material Prices

「Consumers held back from purchasing as product prices remained high due to the prolonged weakness of the yen. … It was difficult to pass the increase in procurement prices resulting from the weak yen fully on to selling prices, and the pause in demand for premium products also contributed. Consequently, revenue for the segment as a whole increased, but gross profit did not rise.」

「Demand for the main products, premium and luxury goods, declined. … However, it was difficult to fully offset higher procurement prices through increased sales. Although revenue in the segment increased, it was not enough to offset the decline in segment profit.」

「In addition to the contraction of the night market, sales of premium whisky and high-priced wine struggled as consumers became more focused on protecting their household finances amid price increases for a wide range of goods. However, sales expanded as the company broadened sales channels targeting growing inbound consumption and focused on developing new business partners.」

「To address higher procurement costs resulting from the prolonged weakness of the yen and changing, increasingly diverse consumer trends, we worked to enhance our product mix and strengthen our lineup of value-priced products.」

「However, sluggish sales of high-priced products, centered on the night market, and price competition, among other factors, meant that gross profit for this segment did not increase.」

「Sales of products for inbound consumers grew substantially in the wholesale business as the weak yen increased the number of visitors to Japan. However, sales of high-value-added products were sluggish as procurement prices continued to rise due to the weak yen and demand for premium products consumed at home during the COVID-19 restrictions subsided.」

「Meanwhile, consumers held back from purchasing following price increases, and price competition emerged as logistics stabilized. At the Rokko Mountain Distillery, sales performed well due to expanding sales as awareness grew and demand from inbound visitors, but consumers holding back due to higher prices, sluggish sales of high-end products and intensifying price competition prevented segment profit from increasing.」

「In the wholesale business, we pursued various sales strategies and changes to our product mix in response to market changes, including rapid exchange-rate fluctuations, soaring material costs and the transition of COVID-19 to a Category 5 disease. On the supply side, we expanded our range of premium products in line with the market and enhanced our lineup of cost-effective whisky and wine, which are relatively less affected by economic demand. In sales, we worked on product proposals tailored to various distribution channels, but higher prices led consumers to hold back from purchasing, the recovery in demand, particularly in the night market, was delayed, and consumer preferences changed, so revenue and gross profit in the segment did not increase.」

「Concerns about an economic slowdown are increasing as price increases spread, particularly for energy, food and other necessities, due to higher resource prices, the weak yen and other factors.」

「In the wholesale business, product prices rose due to the rapid depreciation of the yen and soaring material costs, among other factors, and some high-priced products saw consumers holding back on purchases.」

「Industrial production declined due to soaring crude oil and raw material prices and the impact of the Chinese government's strict zero-COVID policy, including city lockdowns. Supply chains were disrupted, increasing pressure for prices to rise in countries around the world.」

「Personal consumption was increasingly affected by a defensive household spending mindset, as rising food and daily necessities prices due to higher labor and raw material costs added to concerns about the future of social security systems, including pensions and medical care.」

「Japan's economy during the consolidated fiscal year continued to face higher logistics and labor costs and soaring raw material costs amid increasing uncertainty in the international environment, including the U.S.-China trade tensions, the UK's withdrawal from the European Union (EU) and the situation in the Middle East.」

「Corporate profits continue to face pressure from higher logistics and labor costs resulting from labor shortages, as well as manufacturer price increases caused by soaring raw material costs.」