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Respond to volatility (fluctuations in business performance)
The Group has developed branded characters starting with Hello Kitty and has captured profits and expanded our business by licensing our characters to other companies and by planning, manufacturing, and selling gift merchandise. The primary source of revenue was the merchandising rights business, commonly known as product licensing, centered around Hello Kitty. In addition, we experienced repeated ups and downs in performance, such as the decline in operating profit for seven consecutive fiscal years from the fiscal year ended March 31, 2015, through the fiscal year ended March 31, 2021. We believe a major contributing factor was the overconcentration of product licensing in Europe and the Americas, and business development reliant on a single core character, Hello Kitty.
However, since the fiscal year ended March 31, 2022, the development of multiple character brands proved effective, leading to a V-shaped recovery in business performance. In the fiscal year ended March 31, 2025, the Group achieved significant growth, including record-high operating profit. We recognize it as a key management challenge to continue our growth trajectory while establishing a business structure with low volatility (fluctuations in business performance).
To achieve stable business performance, we believe it is essential to increase brand visibility in Europe and the Americas, transition to a sustained growth model, and broaden the attributes of our IP, including characters. To enhance visibility in Western markets, we will make investments in film media. To make a sustainable growth model, efforts will be made to strengthen fan engagement and increase customer loyalty. In expanding IP attributes, we will further strengthen functions beyond the traditional scope by collaborating with external IPs and creators to foster an IP platform.
Review marketing and sales strategies to make global Evergreen IP
To achieve long-term and stable growth, the Group recognizes the importance of shifting away from reliance on externally-driven trends, and “transforming the branding” of our IP. As there was a lack of a foundation resilient to volatility, particularly overseas, we will revise our marketing and sales strategies with the aim of realizing global Evergreen IP. Evergreen IP refers to IP that, like evergreen trees, remain consistently needed and valued over the long term without fading, regardless of changing trends or seasons. By building a state where recognition and favorability of our IP stay fresh and remain continuously in the market and unmoved by external trends, we intend to develop IP with lasting brand value that can withstand environmental changes in the market. As an initiative towards transforming the branding, we will launch various initiatives, such as “investing in global content” for large-scale anniversaries and other events; “collaborating with global platformers” as a way to engage video distribution channels; “strengthening branding supervision on a global scale” including crosscharacter marketing; and “enhancing local designs and local creatives” based on the needs of each overseas region.
Develop a foundation for global growth
To achieve long-term and stable growth, it is essential to further expand our business in key regions such as North America and Asia, particularly in China, strengthen local management capabilities, drive renewed growth in the European market, and develop new markets such as the Middle East, eastern Europe, India, ASEAN countries, Africa, and Latin America. To strengthen the Group's overseas development, the construction of a management system with a global perspective, as well as the establishment of a financial strategy and the Group's corporate governance that can respond to the changes of markets and appropriately allocate the Company's management capital are all essential.
Furthermore, in order to support executing this overseas strategy successfully, we recognize the challenge of establishing two key growth foundations: a “human foundation,” including the development of “global talent” as well as “creative talent;” and an “aggressive finance and governance foundation,” which entails making nonrecurring investments—such as overseas M&A and capital alliances—and actively securing the resources currently lacking within the Company.
Expand IP portfolio and monetize in multiple layers
The Group recognizes the main factor in the volatility in our business performance to be the “narrow scope of value offerings,” specifically a “heavy reliance on Hello Kitty overseas” and a “merchandise-centered” business model. To realize long-term growth with reduced volatility, it is essential to expand our IP portfolio and monetize in multiple layers, implementing measures to broaden both the value provided by our IP as well as the range of our markets and target audiences.
In initiatives to broaden the range of value provided by IP, we will expand from the previous “merchandisecentered” approach to providing value that does not depend on merchandise. These initiatives include providing added value such as activities for supporting my fave, establishing story-based IP linked to video and games, and creating IP experiences through education and other real-world journeys.
As for initiatives to expand the market and target demographic, in addition to the multi-IP development of Sanrio characters, we will work to develop businesses related to UGX*-based creation support and secondary creation, create new market-based IP, and develop untapped segments, including those for kids and boys.
Through these efforts, we aim to further broaden our creative and producing capabilities, thereby expanding both the scope of our IP portfolio and monetization channels.
*User-Generated x (UGX) is a generic term that includes user-generated content and user-generated intellectual property.
Leveraging diversity management
The Group operates our character business in 130 countries and regions and plans to expand our business regions further in the future. Moreover, the market for the character business is expanding irrespective of age from children to the elderly, and product development rooted in diversity and close collaboration with companies are essential. On the other hand, strategies fragmented by region, culture, or ideology make it difficult to secure global talent, maintain the flow of products, and respond swiftly to trends. As such, the establishment of a marketing system formed from a globally integrated information management system and diversity management as well as consolidated group management is essential.