Three of the largest losses in Nature-Based Foods businesses came from eel, rice and strawberry. The effect of increased indirect expenses, and how those costs were allocated by year, primarily accounts for the variation of net income in individual business lines. This issue is discussed in greater detail below. Indirect Costs Increased indirect expenses had an impact on all the A0 businesses. There are two issues to examine when reviewing A0’s indirect costs. The first is to understand the total indirect costs needed to support the overall A0 organization. For example, as Figure 2 shows, in 2022, total indirect expenses were ¥56,128,000 for all businesses to support an organization with income of ¥682,000,000 (8.2 percent of sales). In 2024, indirect costs jumped to ¥127,000,000 on sales of ¥738,000,000 (17 percent of sales). Understanding the factors driving this increase in indirect costs is potentially the key to making this business line profitable. Further data is needed to make an in-depth analysis. The second issue is recognizing that the indirect costs are allocated unevenly across the business lines, as captured in Figure D below. For example, in 2022 the restaurant was assigned ¥12,729,000 of indirect costs (22 percent of total of all indirect costs for all businesses) and had income from operations of ¥34,142,000. Further analysis of the distribution of indirect costs will support a strategy of improvement in profitability.
Figure D: Indirect Expenses by Business as a Percentage of Total A0 Indirect Expenses (2018 – 2024)
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