Corporate Overview / Business Strategy in Jun. 2017corp.cocokarafine.co.jp/english/ir/pdf/20170712_CorprateOverview.pdf · Copyright 2017 cocokara fine Inc. All rights Reserved. Corporate

Corporate Overview / Business Strategy in Jun. 2017

Copyright 2017 cocokara fine Inc. All rights Reserved.

Who is cocokara fine Inc.?

1


Group Overview

Drugstore Operations Nursing care services Pharmacy Operations

cocokara fine Inc.

≪origin of the company name≫

We hope everyone’s “ Cocoro”

(mind) and “Karada” (body) are

fine.

E-Commerce

Wholesale

International Business

JPY 290.1 bn. JPY 48.9 bn.

JPY 35.6 bn.

JPY 2.4 bn.

77%

13%

9% 1%

Sales Composition by Business Segment

Drugstore

Pharmacy

Wholesale

Nursingcare service

Scale of operation

JPY 377.2 bn.

Top-rated pharmacy

operations in the

drugstore industry

※FY03/17 Results 2


Cocokara Fine Group Overview

cocokara fine Inc.

cocokarafine Healthcare Inc. Drugstore and Pharmacy operations,Wholesale

IWASAKI KOHKENDO Co., Ltd. Drugstore operations

Toho Chozai Y.K. Pharmacy operations

Koshi Pharmacy Y.K. Drugstore and Pharmacy operations

cocokarafine Next Co., Ltd. Overseas operations centered on product

exports

FINECARE Inc. Nursing care services

Yamamoto Service Co.,Ltd. Nursing care services

cocokarafine Associe Co., Ltd. Operations involving the deployment of a

diverse range of human resources

cocokarafine soleil Co., Ltd. Special subsidiary dedicated to employment of

people with disabilities

SHANGHAI COCOKARA FINE INC. Retail operations for health and beauty care

products in China

(as of Jun.30,2017 ）

Became subsidiary in November 2013 Became subsidiary in February 2017

Drugstore and Pharmacy operations,Wholesale

Nursing care services Others

Became subsidiary in April 2017

Became subsidiary in April 2016

3


Management Policy Corporate Slogan

To pursue the health of mind and body,

and to contribute to the community.

Becoming

“Omotenashi No.1”

・ Establish a community-based

healthcare network.

・ Foster competent human

resources that can satisfy

society’s needs

Management Principle

Management Principle

4


Rank Drugstore Store

1 TSURUHA 1,667

2 MatsumotoKiyoshi 1,545

3 WELCIA 1,472

4 cocokara fine 1,307

5 SUNDRUG 1,027

Rank Drugstore bn. JPY

1 WELCIA 76.4

2 SUGI 69.6

3 TSURUHA 53.7

4 cocokara fine 50.2

5 MatsumotoKiyoshi 40.6

Dispensing fees (Drugstore industry rankings)

Rank Drugstore FY bn. JPY

1 MatsumotoKiyoshi 2016/03 536.0

2 WELCIA 2016/02 528.4

3 TSURUHA 2016/05 527.5

4 SUNDRUG 2016/03 503.7

5 COSMOS 2016/05 447.2

6 SUGI 2016/02 414.8

7 cocokara fine 2016/03 373.2

8 CAWACHI 2016/03 260.6

9 CREATE SD 2016/05 231.8

10 Kusuri no Aoki 2016/05 163.4

Sales Number of stores

Industry Ranking in Japan

*Source: Drug Store Magazine, July 2016

*Source: gekkan-md,Oct.2016

5

No.７ No.4

Stores that dispense over 1,000

prescriptions per month

No.１ Dispensing fee-to-sales ratio (excl. nursing care and wholesale)

No.4

14.4%

Dispensing fees per store JPY 216mn


Hokkaido

28stores

Tohoku

7stores

Tokai&

Hokuriku

214stores

Kantou&

Koushinetsu

445stores

Kansai

371stores

Chugoku

126stores

Shikoku

19stores Kyushu&

Okinawa

97stores

(as of Mar. 31,2017)

4rd Largest Network in the

Industry

1,304stores

Number of dispensing stores：249

Over 1,300 stores in The Higher Populated Area in Japan

Many of our stores are located in major metropolitan areas

Tokyo Nagoya Osaka

6

Urban

drugstores

154stores

Drugstores

in shopping

streets

319sores

Drugstores

in residential

areas

411stores

Community

Drugstores

214stores

Cluster


Corporate History

Drugstore Operations

Drugstore Operations

* Integration of our sales subsidiaries in Apr. 2013

7

cocokara fine Inc. (Listed on TSE1)

Apr.2008 Seijo and Segami merged and established

cocokara fine Holdings, listed on TSE1

Oct.2010 Cocokara fine Holdings and Allied Hearts Holdings merged.

Changed the trade name to cocokara fine Inc.

Nov.2012

Acquires all outstanding shares in KODAMA Co., Ltd., an operator of

drugstores and pharmacies with a focus on Niigata Prefecture, and

makes it a subsidiary.

Apr.2013

Integrated sales subsidiaries*. Unified store operation systems,

backbone systems, and promotional measures, thus eliminating

differences among the sales subsidiaries.

Nov.2013

Acquires all outstanding shares in IWASAKI KOHKENDO Co.,

Ltd. ,an operator of drugstores in Yamaguchi Prefecture, and


Apr.2016

Acquires all outstanding shares in Yamamoto Service Co.,Ltd.,an

provider of nursing care and at-home care service in Setagaya-

ku,Tokyo,and makes it a subsidiary.

Feb.2017 Acquires all outstanding shares in Toho Chozai Y.K., an provider

of dispensing pharmacy business, and makes it a subsidiary.

Apr.2017

Acquires all outstanding shares in Koshi Pharmacy Y.K. ,an

operator of drugstores and pharmacy in Shimane Prefecture ,and


Sep.2010 Iwai Co., Ltd.

Aug.2013 Kojido Co., Ltd.

Dec.2011 Riha Works Ltd.

Oct.2011 Suzuran Co., Ltd.

Aug.2011 Medical Index Co., Ltd.

Jan.2011 SO Pharmaceutical Corporation

Jun.2013 Kusurinoebina.

Sep.2012 ABC Drug Co., Ltd.

Dec.2011 Genki Co., Ltd.

Other M&A activity

Jun.2016 Kobe maruzen Co., Ltd.

Sep.2016 Toyoyakuhin Co.,Ltd.


Drugstore Industry in Japan

8


Drugstores &

Dispensing

market size ＆

調剤薬局

Business

conditioned

1961 1974 1975 1990 2002 ・・・・・・

Universal

care Start separation of

pharmacy and clinic

Distance restrictions

on pharmacies were

abolished

Drugstores

appeared

General

sales stores

Dispensing

pharmacies

Number of

Drugstores

18,874

Number of

Dispensing

Pharmacies

58,326

Pharmacies

prescription

- Expand range of goods

- Discount sales of cosmetics, etc.

Hospitals

Openings

accelerated Drug stores

approx

14 trillion

JPY

Drugstore Industry in Japan

Government statistical

document adds a

“Drugstore” category

Rate at which dispensing separated from prescribing

1990

12.0％

2015

70.0％

9


16

20.6

27 30.1

33.1

37.4 41.5

47.2

52.3

4.1 5.9

8.9 11.2 11.6 12.8 15.2

19.7

24.1

0

10

20

30

40

50

60National medical spending Elderly medical expenses

0

5

10

15

20

25

30(%)

Population aged 65 or over

22.5% in 2010, expected

30.2% in 2025

(Statistics Bureau)

Environments - Super aging society -

10

Outlook for national medical expenses

and elderly medical expenses (Trillion yen)

Note: Elderly medical expenses for Fiscal 1985 to Fiscal 2000 start at age 70; in Fiscal 2005, elderly medical expenses start at age 79

through September and start at age 74 for the remainder of the year; for all subsequent years, elderly medical expenses start at age 75.

Rapidly aging population in Japan Growth in national medical spending in Japan

The national medical expenses

are expected to reach JPY 52.3

trillion by Fiscal 2025

(Ministry of Health, Labour and

Welfare, Japan)

10


Self-Medicated Healthcare “ I protect my health by myself.”

Expand markets related to

Prevention & Self-healthcare

Drugstores and dispensing pharmacies became receptacles for society needs

(Former Japanese healthcare system)

Hospital-Oriented “ Go to the hospital

as soon as you become sick!”

The geriatric health care system was revised.

→ From “ hospitalization” to “ in-home / facility nursing

care” due to a reduction in beds in hospitals

→ An increasing need for community healthcare

“ Switched OTC Drug”

→ Drugs that were available only by prescriptions can be

purchased at pharmacies.

Generic drugs came into wide use

→ Costs of drugs became lower.

Health care reforms by Japanese government over the recent years

Reduced

Medical Treatment

Expenses

Reduction

in Prescription drug

coverage costs

Self-pay ratio of medical expenses are increasing.

→ It costs more to go to the hospital.

Environments - Healthcare Reforms -

11


Direction of cocokara fine

12


Low-Price

Convenient Drugstore Discount Drugstore

Specialization

Counseling-oriented Drugstore

Drugstore Industry

To be the “community

healthcare Infrastructure”

promoting an intimate

relationship to the community

by pursuing convenience &

high expertise.

Three Functions Desired of Drugstores

Accessibility

* CS: convenient stores

* SM: supermarkets

* HC: home centers

13

・Communication between store staff and customers

・Cooperation with medicine, centered on dispensing pharmacies

・Expanding product selection and store size

・Providing new services

・Refined product selection

・Reducing personnel expenses


We expand fields by enhancing, expanding dispensing and nursing care businesses

Drugstore Dispensing Pharmacy

Nursing Care

Health

Prevention

Potential Illness

Illness

Nursing

Care

Terminal Care

・Sales of health

food & drugs

・Health advice

・Nutrition consultation

・Introduction of

cancer screening

・Dispensing

・House call dispensing

・Facility nursing care

・In-home care

・Home nursing

We w

ill m

ee

t p

eo

ple

s’ o

vera

ll h

ea

lth

rela

ted

nee

ds

Pharmacist

Nutritionist

Registered

drug seller

Nursing care

manager

Nurse

cocokara fine’s Business Fields

14


Business Strategy

15


Method of

collecting

opinions

Annual (March 2017)

Call center E-mails 4,182

Telephone calls 23,054

Line of reporting that goes

directly to the president Postcards 791

Total 28,027

Customer consultation center

Flow to utilize customer opinions

Coordinated by Management

Strategy Headquarters, issues

are shared and solutions

deliberated with relevant departments

Customer

opinions

・Customer service at XYZ store is poor

・What are the operating hours of XYZ store?

・Mr. ABC at XYZ store is very kind

・The staff’s comment on XYZ made me feel great!

・I wish there was this type of service available...

・I wish there was this type of product available...

(Cases)

a call center for customers staffed by some 20 people

Mechanisms to Utilize Customer Opinions in Management

Information

aggregation

Sharing issues and

finding solutions Horizontal

dissemination

・Employee education ・Store manual updates

・Operation improvement

・Providing new services

・New product development

・Cooperation with other companies

Omotenashi realization groups

Call center

16

Horizontal dissemination

to stores nationwide through

omotenashi (customer care)

realization groups / store guidance

・Analyze customer feedback,

propose improvements,

implement these and verify

effects


value-added private brands

Prof. Masahiro Goto, Kyushu University

High stability

Product Strategy

Hyaluronic acid

Vitamin C

VIVCO is a hit product with cumulative sales for the series exceeding 1mn units.

Development of prescription drugs

High permeability

VIVCO

Through cooperation with Kyushu University, a research team led by

Professor Masahiro Goto developed the added-value beauty care

product “VIVCO” that utilizes “S/O technology,” the latest patented

technology that increases permeability

17

Hesperidin

・S/O technology

Derived from medical technology

research to deliver antidiabetic

drugs and other active

pharmaceutical ingredients

(typically administered through

injections) via the skin, thus

reducing the burden on patients.


Private-brand products

Discover latent needs through

customer relations,and develops

new products

value-added private brands general private brands

・Quality NB = PB (same)

・Price NB > PB (low price) NB = National brand PB = Private brand

Product Strategy

Contact with customers through

service and presentation abilities

of staff trained by the Company,

leading to realization of sales

Not only sales at company stores,

but also wholesale to overseas

and other companies

general private brands

18

Sales ratio of PB products 9.3%(FY03/17)


cocokara club card

Customer strategy

*Active members: The number of card members who made purchases within the previous year

Active members* 700mn over

19

Member sales composition 76%

Prepaid payment sales composition 20% (Data as of FY03/17)

0%

20%

40%

60%

80%

100%

Sales composition within total drugstore product sales

Member sales composition

maintaining high level(76%)

Prepaid payment sales

composition grew to 20%


Distance to Cocokara Fine

Does not

know / does

not use

Knows,

but does not

use

Visitor (Use occasionally)

Member Loyal Customer (Uses all services)

Twitter Facebook

Card member

registration

OKwave

External

online media

Analog

promotion

(Flyers)

App usage log

Site usage log

Promotion to

individual customers

ID-POS, IoT

Near

Cocokara Club Site (customer site)

Useful

information

Store

information

Product

information

E-commerce

functions

Member

functions

Far

76% 20%

Prepaid

charging

App download

400,000

Target of “My Store”

registrations 200,000

Target of

Positioning “More than a Friend, Less than a Doctor”

App members

“My Store” registrations

Card members

20

“My Store” sales promotion, “Double”

day, flyers, exclusive coupons

Expanding interaction with customers and providing highly convenient services

Member sales

composition

Prepaid payment

sales composition

Customer strategy

Cocokara Club

- Magazine

- Usage of member

functions

- Usage of e-

commerce functions


Internet Sales Measures

・ Creating a framework that will allow customers to

choose medication with a peace of mind

・Points are linked with club cards used at stores

・ Pharmacists are available on Saturdays, Sundays,

and holidays to consult with each customer

TOPICS①: Initiatives with Japan Post (Announced February 2015)

Mail order business for medical products and

household goods, etc., with Japan Post Co., Ltd.,

in order to improve the local life infrastructure.

(Number of bases)

24,000

1,300

21

TOPICS②：Initiatives with Amazon (started in April 2017)

Offering products to Amazon Prime members via Amazon’s Prime Now service (products

delivery within an hour at the earliest) to enhance convenience for local customers

Feature : For safety and peace of mind of customers


“Anytime, Anywhere, Anyone, cocokara fine”

A discount coupon for

that new product I’m

interested in!

I can buy medicine

anytime, how convenient

I’ll reserve a product

that I need to buy today

I can instantly search for

products that are right for me

Product reservation

service (app)

Store Individual sales

promotion

E-mail

Buy online,

in-store pickup

E-commerce

Prescription

service (app)

Pharmacy

Product search

Website

Coupons (app)

Apps

I was just wondering

about that new product!

I received my medicine

without waiting using the

prescription app

【 Customer 】

22


Further Store Productivity Improvements

Price adjustment via the POS

Use of a PC in the store office for

product searches and viewing

sale histories

Use of a PDA on the sales floor

for ordering

・

・

・

23

Set up in-store

Wi-Fi network

Increased in-store work efficiency

Further advances

Jun.2016

Device unification

ICT deployment to improve in-store work efficiency and added value

Launch of Aoi app

10% decrease in inventory shortages

Reduction in opportunity losses

Daily work reduction of 20 minutes per store

Considered introduction of apps to

increase efficiency of in-store functions

In-s

tore

mo

ve

me

nt

= in

effic

ient

・Price adjustment

・Viewing sale histories

・Ordering

・Automated orders

・Measures to counter losses

Promotion

Payments

Member Information

Product explanation,

videos, skin diagnosis, etc.

Payment option not

using a cash-register

Simplified support for

special orders

Knowledge sharing Internal use of social

networking services

Eg.

Eg.

Eg.

Eg.

Annual efficiency gain of about 150,000 hours


Pharmacy Strategy

Source: Drug Store Magazine, July 2016

24

Dispensing Fees

JPY502ｂｎ No.4

Dispensing fees

per store

JPY216mn No.1 (Listed drugstore companies)

Dispensing fee-to-sales ratio (Excluding nursing care and wholesale)

(Drugstore industry rankings)

Stores that dispense over 1,000

prescriptions per month 184stores No.1 (Drugstore industry rankings)

Total number of facilities：249 (Specialized in dispensing：147 Drugstore with dispensing：102)

※as of Mar. 31,2017 ※FY03/17

14.4％


Focus on training of family pharmacists, advance standardization and streamlining of operations

Promotion of the “Health Support Pharmacy”

1)

House call dispensing stores

FY03/16137stores

2)

3)

4) FY03/16 Product sales

123% YoY

25

Pharmacy Strategy

0

50

100

150

200

Enriching self-health management functions via implementation of health monitoring stations and

health consultation meetings, etc., including advice on self-medication and improving overall

quality of life

Expansion of house call dispensing and cooperation with nursing


FY03/17187 stores


Fostering specialized pharmacists and dedicated staff that can support dementia, diabetes, and

cancer patients

Expanding product sale functions in

dispensing pharmacies

FY03/17 Product sales

120% YoY


Nursing care Business Strategy

26

Assisted living senior housing Operates one facility in Sayama City,

Saitama

Assisted-living nursing home Operate one facility in Kiyose City, Tokyo

Short stay Operates one facility in Saitama

Day service Operates five day-service facilities in Tokyo

and Saitama, six rehabilitation-type facilities

in Tokyo and Saitama

At-home nursing base Operates five facilities in Tokyo and Saitama

Home-visit nursing care Operates five facilities in Tokyo and Saitama

In-home long-term care support Operates five facilities in Tokyo and Saitama

Others School business, sales and rental of nursing

care equipment,elder-care taxi,

housing renovation

Strengthening support for at-home healthcare

Developing broad nursing care operations

At-home Nursing /

Home-Visit Nursing Operations

・Upfront investment to secure nurses, etc.

・Yamamoto Service Co. Ltd. (operates an home-

visit nursing care business in Tokyo's Setagaya

Ward) converted into a subsidiary

Strengthening rehabilitation-centric

daytime care services

・ Day Service “Genki Kurabu Kokubunji “

・ Day Service “Genki Kurabu

Higashifuchu “

・ Rehabilitation “ Riha Day Bonnar Tama

Center”

・ Rehabilitation “ Riha Day Bonnar

Fuchumiyoshicho” ・・・

Assisted-living nursing home

Finecaregarden Kiyose


E-commerce (cocokara club)

Drugstore of our group (Sayamadai store)

“Aozora”

The operation of assisted living senior housing

at Sayama-shi Saitama prefecture that has 95

rooms and Promote creating model of

healthcare network

Pharmacy of our group (Sayamagaoka pharmacy)

“Model of SAYAMA”

27

Establish healthcare network

Nursing care (FINECARE Inc.)

At-home nursing care (FINECARE Inc.)

Hospitals and

Clinics at the area


ＲＯＡ (Ordinary income)

10% or higher

ＲＯＥ (Net income)

10% or higher

Net sales JPY420bn

Ordinary income (Ratio to net sales) JPY22bn(5.2%)

FY03/20

Numerical management targets

Medium-term plan through FY03/20.

“Anytime, Anywhere, Anyone,

cocokara fine”

Establish a community-based

healthcare network. +

Medium-term Plan

28

Net sales JPY377.2bn

Ordinary income (Ratio to net sales)

JPY12.5bn (3.3%)


8.6%


8.7%

FY03/17

Net sales JPY349.1bn

Ordinary income (Ratio to net sales)

JPY6.5bn (1.9%)


2.2%


4.8%

FY03/15


190

256

321 335 349 349

373 377 390

420

7.0

10.3

13.4

13.7

9.4

6.5

13.4

12.5

13.8

22.0

0.0

5.0

10.0

15.0

20.0

0

50

100

150

200

250

300

350

400

Net Sales Ordinary Income

(Billion yen) (Billion yen)

Consolidated Sales & Ordinary Income (Trends and Plan)

29

Ne

t s

ale

s

Ord

ina

ry in

co

me

Copyright 2017 cocokara fine Inc. All rights Reserved. 30

Shareholder returns

(%) (%)

2.2 2.1

2.0

2.3 2.1

19.4

42.4

146.7

62.3

24.4

0.0

50.0

100.0

150.0

0.0

0.5

1.0

1.5

2.0

2.5

3.0

FY03/13 FY03/14 FY03/15 FY03/16 FY03/17

DOE

Total payout ratio

300,000 shares

Treasury stock purchase

JPY60→JPY70 Increased Dividend payout

Dividend per share

(JPY) 60 60 60 70 70

Net assets

(JPY mn) 73,417 75,320 75,235 77,955 83,237

Net income

(JPY mn) 7,855 3,598 1,658 6,927 7,037

・Concept of shareholder returns

we will continue to return profits to shareholders in line with business performance, and to consider the total payout ratio and DOE, with the goal of maintaining steady

dividends. We will also consider share buybacks based on market conditions, capital efficiency, and our capital ratio.

DO

E

Tota

l payout

ratio

600,000 shares

Treasury stock purchase


The information published on this book is intended to provide financial data and management indicators on cocokara fine Inc. and its affiliates (hereinafter, "the Company"). Nevertheless, the Company does not make any warranties or statements regarding the content of this information. Some of the information appearing on this book contains mention of the future performance of the Company. These forward-looking statements do not guarantee future performance and include risk and uncertainties. The actual performance of the Company may differ from such statements due to changes in the business environment or other factors.

http://corp.cocokarafine.co.jp/english/

31

Documents

Corporate Overview / Business Strategy in Jun. 2017corp.cocokarafine.co.jp/english/ir/pdf/20170712_CorprateOverview.pdf · Copyright 2017 cocokara fine Inc. All rights Reserved. Corporate