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Aeon Group Medium-term Management Plan (FY2014-FY2016)

The Aeon Group executed the “Aeon Group Medium-term Management Plan (FY2011-FY2013)” (hereinafter “previous Medium-term Management Plan”) through the fiscal year ended February 28, 2014. The three-year period beginning with fiscal 2011 was positioned as the first phase of a new growth stage towards 2020. In order to transform major changes in the business environment into growth opportunities, the Aeon Group identified the shift to Asian markets, the shift to urban markets, the shift to senior-oriented markets, and the shift to digital markets as four megatrends and made concentrated investments in these areas of strategic importance. Under the previous Medium-term Management Plan, the Group also undertook structural reforms in the GMS, shopping center development, and the financial services businesses in order to maximize its comprehensive capabilities and become an enterprise group capable of both high profitability and growth. Additionally, regional headquarters for Japan, China, and ASEAN were established along with a financial foundation to support Group growth.

Currently, Japan is experiencing changes in its population trends and social structure. Consumer behavior is significantly changing and diversifying as a consequence. As a result of the consumption tax hike in April 2014, competition is expected to intensify across different business sectors, and the retailing market environment is expected to undergo further significant change. In terms of global trends, in addition to retailers’ promotion of global retailing, locally capitalized retailers are expected to demonstrate strong growth, spurring significant changes in retail markets in China and ASEAN.

Covering a three-year period starting with fiscal 2014, the Aeon Group Medium-term Management Plan (FY2014-FY2016) is positioned as the second phase of achieving a major leap in growth towards 2020, leveraging the management foundation created under the previous Medium-term Management Plan to provide the Group with momentum for growth amid the changes in the management environment.
Aeon will innovate its business models, formats, stores, and products to accelerate the four shifts carried out as a common Group strategy under the previous Medium-term Management Plan, while also implementing product-oriented reforms.

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Acceleration of Four Shifts

Leveraging the management foundation created under the previous Medium-term Management Plan, Aeon has designated executive officers and specialized organizations responsible for executing the four shifts to Asian markets, urban markets, senior-oriented markets and digital markets and is taking other initiatives to deepen and accelerate its commitment to this common Group strategy.

Shift to Asian markets

Under the previous Medium-term Management Plan, the Group made preparations to open new shopping centers in new countries and regional areas in Asia. The opening of the Group’s first SC in Vietnam in January 2014 marked the culmination of these efforts.
AEON aims to accelerate the SC network development program in Asia under the new Medium-term Management Plan. Besides opening a second mall in Vietnam, the Group has plans to open SCs in Cambodia in 2014, as well as the first SCs in two provinces of China (Jiangsu and Hubei) in fiscal 2014. Involving an integrated shift by the Group into Asian markets, these SCs will provide the platform to drive its regional expansion.
Business are growing strongly in existing stores in Malaysia, China and other countries. By sharing know-how developed in Japan and creating global merchandise supply chains and other infrastructure, the Group aims to develop synergies to strengthen competitiveness.

Shift to Asian markets

Shift to urban markets

Shift to urban markets

Aeon will accelerate the expansion of small-scale urban-type supermarket chain My Basket, which achieved profitability in fiscal 2013, as well as small-scale discount store chain Acolle. Aeon will also continue to fortify its business platform in major urban markets in Japan through the expansion of Daiei, Inc. and Aeon Market Co., Ltd., which were made consolidated subsidiaries in fiscal 2013.

Shift to senior-oriented markets

Shift to senior-oriented markets

Positioning seniors who enjoy an active and consumption-rich lifestyle as the “Grand Generation (G.G.),” the Group has tried to develop business models specifically targeting this group of consumers, including the “G.G. Mall” and “G.G. Cards.” Under the new Medium-term Management Plan, the Group will accelerate shift to senior-oriented markets by making efforts to duplicate successful models in other parts of its operations, while seeking to develop product concepts that meet the needs of active seniors and strengthen associated ranges of merchandise.

Shift to digital markets

Shift to digital markets Shift to digital markets

Under the previous Medium-term Management Plan, Aeon strove to establish a foundation for the shift to digital markets through the launch of the AEON SQUARE comprehensive portal website, the nationwide expansion of AEON Net Super, and the development of other platforms.
Rather than just focusing on e-commerce to allow consumers to purchase goods online, the AEON Group aims to leverage the benefits of its multi-format store network across Japan to pursue omni-channel ‘clicks-and-mortar’ retailing strategies, such as in-store pickup of goods ordered online or home delivery of products bought at the store. This approach of omni-channels promises to help accelerate the Group’s growth.

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Product-oriented Reforms

Japan is experiencing increases in the population of senior citizens, single-person households, dual-income households, and urban inhabitants. Aeon is striving to respond to the significant change and diversification of consumer needs accompanying these social trends by carrying out product-oriented reforms which can ensure future growth in retailing revenues and profit.

Promoting product, sales areas responsive to customer needs

In modern society, customers have less time to prepare meals at home, and this trend is expected to accelerate in the future. To respond to changing customer lifestyles, Aeon will innovate its products and sales areas based on such sales concepts of “pre-prepared” and “healthy organic” instead of the traditional sales area concepts of fresh foods and food ingredients.

Further evolution of the AEON Group’s TOPVALU brand

Further evolution of the AEON Group’s TOPVALU brand

Further evolution of the AEON Group’s TOPVALU brand

AEON is fully overhauling the products under TOPVALU brand to take advantage of the consumption tax hike in April 2014. The Group has created a differentiated structure for the TOPVALU range based on the private brands “TOPVALU,” “TOPVALU Select” and “TOPVALU Best Price” to better accommodate the diversifying needs of consumers.
As part of this initiative, Aeon aims to raise the ratio of Topvalu products sold through GMS, supermarkets, discount stores and other Group retail channels as well as to establish the brand as the leading private label in Japan in terms of scale, quality, safety and reassurance.

Organizational changes to promote product-oriented reforms

In order to promote product-oriented reforms, Aeon adopted a product-based organizational structure from fiscal 2014. The product and marketing organizations have been unified to create a structure which can develop products with new value based on a deeper understanding of customer needs. Under the new structure, Aeon will promote the development of strategic product categories to configure new sales floors for GMS, supermarket and other retailing sales areas.
Additionally, in conjunction with the expansion of the middle class in China and ASEAN, Aeon will strengthen its global merchandizing function in order to respond to customer demand for high-quality products.

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Promotion of financial strategy to support growth

To support dynamic growth toward year 2020, the Group plans to construct a robust financial base, focusing on the maximization of cash flows by improving returns on investment and diversifying the means of funding.

Consolidated Target Indices for Fiscal 2016
Operating revenue more than 8 trillion yen
Operating income more than 280 billion yen
ROIC more than 6%
DE ratio
(excl. financial service business)
approximately 1.0
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