CEO Message to Shareholders and Investors

A sustainable society is one where both environmental and social systems flourish, ensuring that future generations inherit a world capable of supporting life and prosperity. However, in our quest for comfort and convenience, we are pushing the planet beyond its regenerative limits. Now is the time to pause, reflect, and chart a course toward sustainable development —one that reduces excessive consumption and waste.

Our commitment to Yoki-Monozukuri is not only a philosophy but also a responsibility to deliver meaningful innovation that enriches lives and contributes to a better world. The foundation of our product development is built on “Five Principles of Product Development”:

Standing on the shoulders of Yoki-Monozukuri, the Global Sharp Top strategy sharpens our focus on areas where Kao is a distinctive market leader today while aiming to achieve greater global recognition. With this focus, we push scientific boundaries to create uniquely valuable solutions with social significance to drive long-term success on a global scale.

At Kao, we have developed unrivaled expertise in interfacial science. Interfaces—where different substances meet, like water and oil or organic and inorganic matter—are everywhere. Our groundbreaking technology transforms these interfaces, allowing seemingly opposite properties to work together seamlessly. This innovation is not just theoretical—it is actively driving commercial opportunities across diverse fields, from chemicals to cosmetics.

Just two of our breakthroughs include:

Each scientific advancement fuels the next, building on our valuable base of proprietary technologies that can be leveraged across a broad portfolio of cross-category product opportunities. This approach to developing our core technologies delivers economic efficiencies, unlocks commercial opportunities, and supports environmental sustainability.

To fully transition into a global growth structure, we have reorganized our consumer products business into a brand- and product-centric division and a region- and sales-driven division. This speeds up decision-making and enhances agility. Additionally, we have launched the Business Connected Division to expand cross-product and cross-brand opportunities, strengthen direct sales, and foster co-creation with global partners. This enables us to leverage brand uniqueness for exclusive sales initiatives and strategic collaborations.

A dedicated Management Finance Unit has been established at Kao’s headquarters to better align global business priorities with strategic investment allocation. Guided by our Capital Strategy Division, we are focusing on enhancing financial profitability through targeted investments in high-growth opportunities. Close collaboration between headquarters and local operations ensures disciplined investment decisions.

The Information Systems Division has been integrated into the Digital Strategy, consolidating digitalization efforts globally. This move enhances business efficiency, accelerates growth, and strengthens our competitive edge through advanced digital technologies.

At Kao, true growth comes from embracing change and seeking continuous improvement. Our Mid-term Plan K27 focuses on maximizing the power and potential of employees, recognizing that people thrive not by being developed but by seizing opportunities to grow. I have personally experienced this firsthand in Kao’s dynamic environment.

To cultivate the talent essential for achieving our Global Sharp Top strategy, we are making targeted investments to ensure that every employee has the support and opportunities needed to excel. We foster a culture where stagnation is not an option and where every individual is encouraged to challenge the status quo.

Growth is not just about skill development—it requires intellectual stimulation and fresh perspectives. To drive this, Kao actively promotes mid-career recruitment, with nearly 50% of new hires coming from outside the company. New talent continues to bring us fresh insights, energizes the organization, and sparks innovation. Additionally, we are expanding our internal and senior job posting systems and empowering employees to take ownership of their careers. These systems allow employees to align their ambitions with strategic business needs, fostering self-driven career development.

To maximize performance and agility, we have evolved our organizational management from a matrix-management model to a scrum-style model. Much like a rugby team, employees take on roles based on their strengths, working together to drive results. This transformation is already delivering tangible outcomes, such as faster product development in our hair care business. As we build our capabilities to work faster across divisions and teams, we are simultaneously setting ourselves up to further exceed consumer expectations and capitalize on commercial opportunities.

Open communication fuels growth. At Kao, we prioritize continuous dialogue, creating an environment where employees feel heard, valued, and engaged. Since 2021, we have implemented Objectives and Key Results (OKR) through an online system that allows employees to view each other’s OKRs globally. This fosters transparency, collaboration, and alignment across the organization, breaking down silos and strengthening teamwork.

The Kao Way is more than just a corporate philosophy—it is the foundation of everything we do. This philosophy is deeply embedded in every employee, aligning our actions, uniting our strengths, and driving our collective vision forward with purpose and consistency.