Japan Markets ViewUnicharm Stocks Strong, Reflecting the New Normal of Living with Cats

[Nikkei QUICK News] The stock price of Unicharm Corporation (8113) has been steady. On August 24, it rose to JPY4,972, putting it on track to break the yearly high (JPY5,084) recorded in February. The “Kyo-sei Life (cohesive society)” Unicharm is striving to realize includes not only the development of personal care that is rooted in the aging population, but also the healthy living of cats, dogs and other pets with people. While more and more people are welcoming pets into their families as their time at home has been increasing, Unicharm stocks are attracting attention as one of the brands expected to contribute to realizing the New Normal (co-existing with coronavirus) lifestyle.

 

*Relative chart of Unicharm and Nikkei 225 with the beginning of 2020 as 100

 

■ Unicharm is the only large listed company among its competitors
Unicharm has been in the pet care business since 1986, selling pet food products such as “Silver Spoon” and toiletries for pets. Ikuo Mitsui, fund manager of Aizawa Securities, said, “As more and more people are being careful in choosing pet food to ensure the longevity and health of their pets, Unicharm, with its long history in the business, is becoming closer to consumers, which may be one of the reasons why Unicharm stocks are strong.”

 

Unicharm’s sales in the pet care business for the January-June period of 2021 were JPY48.6bn, up 9.5% from the same period last year. Although the sales scale is small compared to the mainstay personal care business (JPY325.4bn), the YoY sales growth rate is almost double that of the personal care business (5.4%). Furthermore, Unicharm is the only large listed company in Japan that is involved in a wide range of pet care businesses. On the other hand, Inaba Pet Food Co., Ltd. of Shizuoka City, known for its paste-type pet treat “CIAO Churu,” is not listed.

 

“Unicharm’s uniqueness is that it is a large company with a growing pet care business and that it has no listed competitors. The value of this uniqueness is huge,” said Tomohiro Okawa, Chief Investment Strategist at P.S. Oskar Group.

 

■ Capturing the demand for New Normal
In the COVID-19 pandemic, the number of people living with pets is increasing. According to the Japan Pet Food Association, the number of new pets within the first year of ownership increased 16% to 483,000 cats and 14% to 462,000 dogs in 2020, the highest growth rate and number of pets in the past five years. The popularity of cats seems to be due in part to factors unique to the COVID-19 pandemic, such as the fact that they don’t need to be walked and are easy to live with indoors. The pet food market is also expanding year by year.

 

Mr. Okawa said, “Post COVID-19 is not yet in the foreseeable future, and as New Normal, which has only been a word so far, gradually begins to materialize, Unicharm is capturing demand in the pet care market.”

 

Unicharm calls pets “partner animals” as members of families and society. In the “Kyo-sei Life Vision 2030,” a medium- to long-term ESG target announced in October 2020, Unicharm set an indicator of the “Percentage of products and services that contribute to the realization of a society where partner animals (pets) are welcomed by family members and community residents.”

 

Childcare and nursing care products and sanitary products also performed well, and consolidated net profit (International Financial Reporting Standards) for the January-June period of 2021 was the highest for the same period since the accounting standards were changed in 2017. According to Mr. Mitsui of Aizawa Securities, there is a high expectation that “Unicharm will be able to develop products that are distinctly different from those of foreign manufacturers, as they are actively expanding their user base and adding high values as a company that tackles global issues such as babies, the elderly and pets.” Although the stock price may adjust in the short term, Unicharm’s presence in the stock market may become even stronger in the medium to long term, for both the pandemic and Post COVID-19.

 

 

 

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