Message from the Management

External Environment Surrounding the SUGI Pharmacy Group’s Business Operations and the Group’s Response Policy

trend mainly due to improvements in the employment and income environment and increase in the number of foreign tourists visiting Japan. On the other hand, the outlook remains uncertain due to various factors, such as continued price increases and the effects of exchange rate fluctuations.
The drugstore and prescription dispensing pharmacy industry, despite the tough environment caused by rising prices leading to increased consumer frugality, revisions of drug prices and dispensing fees, and intensifying competition within and across industries, benefited from growth in personal consumption and inbound demand. Sales of health and beauty care products, daily necessities, food, and other items have increased in the merchandising field. Furthermore, in the prescription dispensing field, the number of prescriptions filled has increased in line with the aging population, and the performance of each company has been strong.
Going forward, the Japanese economy is expected to see an increase in consumer spending due to improvements in wages and employment conditions, as well as an expansion of the inbound market due to an increase in the number of foreign visitors to Japan. On the other hand, the outlook is expected to remain uncertain due to changes in the global economy, inflationary pressures in Japan, and worsening labor shortages.
In the drugstore and prescription dispensing pharmacy industry, we foresee that driven by M&A and alliances between companies, including those from different fields, and through intensified competition between companies aiming to aggressively set up new stores, the number of players in the market will be reduced rapidly, leading to an oligopoly in the Japanese market. In the prescription dispensing pharmacy industry, the revision of dispensing fees is becoming increasingly more severe year by year, and there is an ongoing trend of a shift to DX* in pharmacy operation, as indicated by electronic prescriptions and online medication instructions. Following the national policies of “family pharmacy” and “medical DX,” we need to focus on communication with customers, home-visit prescription dispensing services, and the shift to DX.
*DX (digital transformation): Transforming business operations through the use of digital technology

In these circumstances, we understand that we operate in one of the few growing industries in Japan, a country experiencing an aging population and a declining birthrate. In tandem with the increase in the aged population, the number of people interested in their health and beauty is growing, making us expect that the healthcare industry will further expand. Guided by the Total Healthcare Strategy, we would like to explore a wide variety of possibilities and actively cooperate with entities sharing the same ambitions as ours.
This is exemplified by our most recent effort to add the Hanshin Dispensing Group (I&H) as a new member to the SUGI Pharmacy Group in FY2024, following the Kampo counseling company NIHONDO Co., Ltd. and the prescription dispensing pharmacy chain operator Hikari Pharma Co., Ltd. As we celebrate the 50th anniversary of our establishment in FY2026, we would like to integrate the business know-how and resources of each company within the SUGI Pharmacy Group, thereby striving to accelerate our business growth and work together toward developing into a healthcare company trusted by local citizens.

Domestic consumption will continue to decline due to the declining birthrate, aging population, and shrinking population. The SUGI Pharmacy Group is continuing to actively expand its overseas operations. While providing our cultivated know-how, products, and services to local partner companies in Asian countries, which will grow further from now on, and cooperating and collaborating in a wide variety of forms, we are aiming to serve as the “Main Framework Underpinning Local Healthcare” not only in Japan but also in foreign countries.

SUGI Pharmacy Group’s Commitment to Creating Value by Leveraging Its Features and Advantages

The SUGI Pharmacy Group boasts a wide variety of experts, such as pharmacists, nationally certified dietitians, beauty advisers, nurses, and registered pharmaceutical distributors.
Of particular note are as many as 4,820 pharmacists. Affected by the continuing shortage of pharmacists, many prescription dispensing pharmacies and drugstores are urgently attempting to secure pharmacists. In addition, supermarkets, convenience stores, and EC businesses are making inroads into the field of prescription dispensing, making it even more challenging to secure pharmacists. Despite this trend, we steadily secure pharmacists, and this is one of our great advantages.
We are confident that we have always been taking on the challenge, since the dawn of the drugstore industry, of developing a chain of prescription dispensing drugstores, and that we have recently grown while adding many prescription dispensing pharmacies to our group. Our unwavering dedication to prescription dispensing that we have continued since our foundation presents a specific vision to local communities, and also to pharmacy students and pharmacists in service who would like to place a focus on each patient, and stirs empathy among them. This gives us a great advantage in terms of recruitment.
By pushing forward with our strategic dominance of setting up new stores in specific areas, we have been expanding our operating scale in the metropolitan areas of Kanto, Chubu, and Kansai. Moreover, by newly adding the Hanshin Dispensing Group (I&H) to our group, we have further enlarged our operating area, which now covers not only Kanto, Chubu, Kansai, and Hokuriku & Shinshu, but also Hokkaido & Tohoku and Chugoku & Shikoku, and Kyushu.
As indicated by the fact that we newly set up 130 stores in FY2024, we remain one of the industry’s leaders in terms of the number of annual store openings. As of the end of February 2025, the number of stores of the entire SUGI Pharmacy Group reached 2,185. We also proactively opened stores to meet the needs of foreign visitors to Japan. We would like to contribute as a reliable “family pharmacy” that can underpin all the health stages of customers, from birth until the end of their life. To that end, not only are we establishing new stores, but we are also actively renovating existing stores to enlarge their dispensing rooms and waiting rooms. We will continue to ensure that pharmacists and other in-store experts can fully demonstrate their capabilities in order to contribute to the realization of sustainable, comprehensive community care centering on medical institutions.

We are also reinforcing our commitment to digitalization. We provide app services for customers to enjoy even more comfortable and healthier lives. These services are increasing customer satisfaction and leading app users to visit physical stores or use other services, resulting in the formation of a virtuous cycle. Serving as the driving force of our digital strategy, the SUGI Pharmacy app boasts more than 13.8 million downloads. We continue to improve the app’s functions while striving to reflect feedback from customers. By providing information and coupons for individual customers according to the segment, we are aiming to raise the quality of customer experience and the level of customer satisfaction. In addition, by reinforcing our ability to present proposals regarding products and services and accommodating each customer’s needs, we are striving to deepen our ties with them. We are also aiming to establish an environment in which customers can feel “SUGI Pharmacy on the Palm Anytime and Anywhere” by ensuring that customers can use their smartphones or shopping carts as checkout machines at physical stores, as well as by enabling customers to check stores’ product lineup, prices, and inventory outside the stores and place an order on our EC website.

Not only do we provide online counseling services, but we also use digital devices at stores to present proposals in the field of beauty items and proposals regarding lifestyle, thereby increasing customer satisfaction.
By establishing an environment in which each in-store employee can fully demonstrate their capability, we can help them improve their working style and enable them to concentrate on communication with customers, which leads to even better customer satisfaction. We will actively proceed with DX in order to generate value for customers and all other stakeholders.
In addition, we will further strengthen our supply chain management from FY2025. We will strive to maximize the efficiency of in-store operations to the extent possible and establish an environment where staff can focus on even more valuable work. We will also realize a reform to establish a new logistics framework toward even better prescription dispensing and overseas operations. By combining these initiatives with DX, we will aim to achieve optimization of the entire supply chain.

SUGI Pharmacy Group’s Total Healthcare Strategy

Representing the entire vision of our various initiatives, the Total Healthcare Strategy serves as our operating foundation. Guided by the strategy, in which “health and medical care” is set as the key phrase, we provide support for customers and patients regardless of their health condition while addressing the aging population and declining birth rate confronting Japanese society and taking advantage of digital technology created one after another in its continuous evolution. From birth until the end of life, people are frequently supported by medical care and medicine in various situations. Using such medical care and medicine, people strive to treat disease and injury, address changes caused by aging, and maintain their good health. Under the Total Healthcare Strategy, we divide human life into the following three phases: the “self-care” period with a focus on primary prevention and secondary prevention to maintain a healthy life; the “medical care and medication” period, when people develop diseases and receive treatment for their symptoms in the acute phase or the chronic phase; and the “elderly nursing support and daily life support” period. This strategy shows our commitment to local residents’ lifetime efforts for disease prevention and health management, thereby striving to contribute to their good health through a full lineup of care. With our prescription dispensing drugstores serving as the hub, we would like to establish a healthcare network by forming partnerships with physical facilities, such as health checkup centers, nursing facilities for senior citizens, and fitness centers, and ensuring cooperation with local governments while making full use of DX. Such a network will provide us with a platform for using the physical and the digital seamlessly with a focus on local communities. The platform will enable us to ensure points of contact with customers regardless of their health condition and provide the most appropriate product and service for each customer.
Many citizens consult doctors after some health anxiety or worry arises, but such a conventional approach will make it impossible for them to fully enjoy their lives in a super-aging society, which is experiencing the advent of the so-called “100-year life.” We need to continue to support local residents’ healthy lives by ensuring cooperation at each stage with local governments, health insurance associations, medical care and elderly nursing care workers, and players in many other fields. We urgently need to establish a network of players mainly in the medical field and also other domains in order to support communities, senior citizens, and their families. We have already received endorsement from some companies and local governments, leading to the expansion of a healthcare network in various communities. This strategy is also highly regarded abroad, enabling us to cooperate with local companies in Asian countries and proceed with various initiatives. We will continue to work with a wide variety of companies, organizations, and local governments and further accelerate the speed of our efforts toward realizing the Total Healthcare Strategy.

SUGI Pharmacy Group’s Sustainability Management

In 2021, to develop a framework for proceeding with sustainability management, we established the Sustainability Committee and the ESG Promotion Office (presently the Sustainability Promotion Section of the Corporate Branding Department) and set five themes and 16 priority issues (issues of materiality), thereby intensifying our efforts.
Awareness of the SDGs is growing in all generations. A familiar example is ethical consumption, meaning selection of products produced with greater consciousness of the environment and human rights. The world is casting a stern eye on how we address challenges that need to be handled throughout the entire supply chain, such as suppliers’ commitment to human rights. We promote various initiatives based on our corporate social responsibility. We have formulated the SUGI Pharmacy Group Human Rights Policy and the SUGI Pharmacy Group Business Partner Code of Conduct, which constitute our framework to fulfill our responsibility throughout the supply chain. In FY2024, we conduced human rights due diligence on our business partners involved in our in-house developed products and launched analysis and evaluation of their efforts.

We will also continue to focus on recycling resources. Embracing the concept “domestic recycling of domestic resources,” we will fulfill our responsibility as a distributor of many products and make as much contribution as possible in cooperation with many partners. We have strengthened our commitment to Bottle-to-Bottle Horizontal Recycling, intended to recycle used PET bottles into new PET bottles, with the number of our stores serving as a collection point increasing to 142. At such stores, there has been a clear increase in the frequency of customers’ visits.

This service, well received by customers, has enabled us to strike the best balance between environmental contribution and improved corporate performance. Meanwhile, to support the recycling of medicine press-through-pack (PTP) sheet waste generated in a large quantity mainly in the field of prescription dispensing, we serve as a collection point.

Running a food drive

Furthermore, we collect uniforms to be disposed of so that they can be upcycled into resources for in-house equipment. We also work with food banks to address the problems of food loss and poverty. By doing so, we will continue to handle social problems step-by-step, which will lead us to contribute to local communities and ultimately to establish a status as a company loved by local communities.

Views on Carbon-Free Management and Progress in Our Commitment

Setting the realization of a carbon-free society as one of our priority issues, we are accelerating our commitment. We have visualized the emissions from Scope 1 (direct GHG emissions) and the emissions from Scope 2 (in proportion to the use of electricity), and have set a CO2 emissions reduction target to be achieved by 2030 (reduction of CO2 emissions per store by half from the FY2014 level by FY2030). We have also announced our endorsement of the Task Force on Climate-related Financial Disclosures (TCFD) recommendations. In line with the disclosures recommended by the TCFD, we have been proceeding with appropriate efforts through the Sustainability Committee and the Board of Directors, such as identifying our risks and opportunities and formulating a roadmap toward the reduction of CO2 emissions. Our specific efforts to reduce CO2 emissions include installing solar power generation panels on the roofs of dozens of stores under an onsite PPA. We have been setting such panels at many more stores. In addition, we have expanded the coverage of the off-site corporate PPA service, which we began to introduce in FY2024. We procure renewable energy for a total of 65 stores from solar power plants on a long-term, stable basis, while ensuring "additionality" (for an effect leading to investment in new renewable energy facilities). The cumulative effect of this effort is to reduce CO2 emissions by approximately 8,560 t-CO2 per year, and we will strive to achieve reduction by the same level or more every year.

Meanwhile, our total CO2 emissions from Scope 3, which covers all the activities in all the phases of a supply chain, ranging from product procurement to manufacturing, sales, logistics and disposal, amount to approximately 2.4 million tons, more than 15 times the emissions from Scope 1 and Scope 2. However, it is difficult for the SUGI Pharmacy Group alone to reduce the emissions from Scope 3. We need to ensure cooperation with various companies, figure out ideas from scratch together with them, and carry out demonstrative experiments in a trial-and-error manner. While adding value to products with less CO2 emissions by avoiding unnecessary packaging and using vegetable oil ink, we need to demonstrate ingenuity and make efforts in sales so that such products will appeal to customers. Needless to say, we must refrain from distributing unnecessary sales campaign items or creating unnecessary point of purchase advertising. We also need to work together to improve the accuracy in forecasting the units of sales, avoid unnecessary purchases, reduce returns and disposals, and ensure cooperation between the manufacturing, distribution, and sales functions.

At a press conference of the Challenge Carbon Neutral Consortium

At the Challenge Carbon Neutral Consortium, which we joined in FY2023, we provide environmental education through the SUGI Pharmacy app and conduct demonstrative experiments to display, promote and sell environmentally friendly products from participating companies. By forming an alliance unique to the supply chain that transcends industry boundaries, we would like to accelerate our efforts to address environmental issues.

Human Asset Strategy

As indicated by rapid digitalization, the aging population and declining birthrate, the advent of the so-called “100-year life,” and changes in workers’ views on careers, the environment surrounding companies is changing greatly. Acknowledging employees as capital, we believe that human resources are key assets for creating value. We will continue to actively invest in our human assets so that we can enhance our corporate value. Based on this approach, we will link our management strategy with our human asset strategy to promote personnel system reforms, ensure that the right staff members are assigned to the right positions, proceed with health and productivity management, and improve employee engagement.
In addition, as part of our commitment to human rights, we will strengthen our efforts to improve psychological safety within our organizations. The “chain of smiles,” meaning employees’ smiles leading to customers’ smiles, is a key concept in realizing our Management Philosophy. In other words, if store employees and partner employees feel more motivated, it will lead to their greater contribution to customers, better work performance, and ultimately higher productivity.

Psychological safety is important when we think about motivation. If our employees feel greater psychological safety, it will help them to be true to themselves in their daily lives, say what they would like to say, take on bold challenges, and take kind and courteous actions for customers. We have a hotline for employees to seek consultation about any workplace concerns. With the number of annual calls exceeding 1,500, we are featured in the media as one of the best Japanese companies in terms of whistleblowing environment. To immediately inspect a whistleblowing case, we have established the Area Human Resources Departments, thereby increasing our response speed and effectiveness. Moreover, to realize the theme “Focus on Each Individual,” we are striving to ensure that employees can seek consultations from their supervisors more easily, while focusing on the initiative for all our officers to visit stores in order to directly listen to employees. In FY2025 again, we will continue to strengthen our efforts to increase psychological safety.

DX Strategy

Our DX strategy originates from our determination to make our customer services even more fulfilling by enhancing our productivity and improving customers’ lifetime value. It is safe to say that person-to-person interactions, which cannot be digitalized, through counseling and other customer services represent our main strength. To what extent can we present new value by using digital technology? To what extent can we realize not only the digitalization of operations but also the reform of our organizations, operating processes, and even our corporate culture? By addressing these questions, we will become even more competitive and enhance our superiority. It will become even more important not only to improve some operations through digitalization but also to enhance customers’ lifetime value by utilizing DX for establishing points of contact with customers and ensuring continuous ties.
　Accordingly, in line with the slogan “SUGI Pharmacy on the Palm Anytime and Anywhere” to expand the scope of our points of contact with customers and deepen their impact under our DX strategy, we periodically add to and enhance the functions of the SUGI Pharmacy app. The app distributes information on disease prevention and health maintenance, unifies management of customer information through ID integration, and provides coupons based on customers’ purchase histories, enabling us to establish an environment in which customers feel no stress. For customer services at physical stores, we will also reinforce digital communication. For example, we will keep a digital ledger of requests presented by customers and samples provided to customers in the field of cosmetics and use the information for sales promotion on the SUGI Pharmacy app. We will also compile a record of counseling services provided by our nationally certified dietitians. In the future, we would like to create a ledger of digital communication with customers to realize unified management of their health condition.

　By realizing the concept “SUGI Pharmacy on the Palm Anytime and Anywhere” and digital communication, we endeavor to provide customers with opportunities to experience the physical and the digital seamlessly. For customer experience through digital tools, the SUGI Pharmacy app, boasting 13.8 million downloads, will play a major role. Presently, a total of approximately 370 million customers visit our physical stores annually. Our future challenges include how our physical stores will handle an explosive increase in needs expected to be induced by the digital. We will proceed with our commitment to digitalization to carefully address an explosive increase in the number of customer service opportunities, take an approach different from a mere extension of our conventional measures, and further raise the quality of services provided at physical stores. We believe that no company can survive in the future if they cannot handle such challenges. Deeply appreciating our fortune to have opportunities to take care of our challenges, we will ensure that each management leader tackles them as their own issues.

Prescription Dispensing

FY2024 saw a revision of drug prices in April and of dispensing fees in June. As the importance of pharmacists communicating with customers is growing, we are focusing on training our pharmacists so that we can contribute to community healthcare by demonstrating our expertise. In addition, based on the belief that it is our important responsibility to establish a system to prevent any mistakes and reduce operational risks, we will fully commit to building an in-house system that will enable us to provide medications to patients safely and reliably. We will prepare operation manuals, familiarize our employees with them so that they are fully followed, and organize training. We will also aim to create a system that prevents mistakes by improving our personnel structure, reviewing the prescription dispensing environment, and introducing new equipment for reinforcing our checking system. Moreover, in order to accommodate an increase in the number of prescriptions to be filled, we opened new stores and renovated dispensing rooms and waiting rooms at existing stores, thereby improving our operating environment. We will continue to focus on communication with customers, home-visit prescription dispensing services, and the shift to DX in order to realize the concepts “family pharmacists” and “family pharmacies.” We will create value in the non-oligopolized prescription dispensing pharmacy market of 8.2 trillion yen by horizontally expanding our prescription dispensing operations and vertically promoting cooperation between the manufacturing, distribution, and sales sectors. Our efforts to expand our prescription dispensing operations include acquiring ownership of I&H as a subsidiary. Founded in 1976 as Hanshin Dispensing Pharmacy, I&H is a prescription dispensing pharmacy chain operator with an especially long history. Operating hundreds of pharmacies across the country from Hokkaido to Kyushu, they have earned great trust from local residents especially in the Kansai area, where they were founded. Their strengths lie in a large number of pharmacists with expertise, a nationwide network of pharmacy stores, including those located near local core hospitals such as university hospitals, and one of the industry's leading networks of doctors. While taking advantage of the expertise that I&H has as a prescription dispensing pharmacy chain operator and their relationships with hospitals and clinics, we will proceed with our cultural reform and strengthen our compliance system, thereby further accelerating our healthcare and prescription dispensing strategies. We will continue to promote strategic partnerships and expand our prescription dispensing operations.