Financial Results
for the Year Ended December 31, 2012 — Consolidated(Based on Japanese GAAP)
February 8, 2013

Company name

Sapporo Holdings Limited

Security code
Listings
URL

2501
Tokyo Stock Exchange (First Section); Sapporo Securities Exchange
http://www.sapporoholdings.jp/english/

Representative
Contact

Tsutomu Kamijo, President and Representative Director, Group CEO
Tatsuya Komatsu, Director of the Corporate Communications Department

Telephone
Scheduled dates:+81-3-5423-7407

Annual general meeting of shareholders

March 28, 2013

Filing of annual financial report

March 29, 2013

Commencement of dividend payments

March 29, 2013

Supplementary information to the year-end earnings results

AvailableYes(mainly targeted at institutional
investors and analysts)

Year-end earnings results briefing held

1. Consol idated Financial Results for the Year Ended December 31, 2012
(January 1 – December 31, 2012)(Amounts in million yen rounded down to the nearest million yen)

(1) Operating Results(Percentage figures represent year-over-year changes)
Net sales

Operating income

Ordinary income

Net income

million yen%

million yen%

million yen%

million yen%

Year ended
December 31, 2012

492,490

9.6

14,414(23.7)

13,689(18.6)

5,393

70.4

Year ended
December 31, 2011

449,452

15.5

18,88322.6

16,807

17.3

3,164

(70.6)

Note: Accumulated other comprehensive income
Year ended December 31, 2012:11,090 million yen (1265.4%)
Year ended December 31, 2011:

812 million yen（△91.3%）

1Year ended
December 31, 2012

Net income
per share

Diluted net
income per
share

Return on
equityOrdinary
income tototal assets

Operatingincome tonet sales

Yen

yen

%

%

%

13.77

-

4.2

2.4

2.9

8.08

-

2.5

3.2

4.2

Year ended
December 31, 2011

Note: Equity method investment gains or losses
Year ended December 31, 2012: 180million yen
Year ended December 31, 2011: 33million yen(2) Financial Position

Total assets

Net assets

Shareholders’equity ratio

Net assets per
sharemillion yen

million yen%

yen

December 31, 2012

597,636

134,94622.1

336.60December 31, 2011

550,784

124,775

22.4

314.87

Cash flows fromoperating activities

Cash flows frominvesting activities

Cash flows fromfinancing activities

Cash and cash
equivalents at endof period

Note: Shareholders’ equity
December 31, 2012: 131,795 million yen
December 31, 2011: 123,293 million yen(3) Cash Flows

million yen

million yen

million yen

million yen

Year ended
December 31, 2012

29,618(59,485)

30,159

9,725

Year ended
December 31, 201122,313(50,891)

24,2459,057

2

2. Dividends
Total

Dividend per share

dividends

Payoutto net

paid

ratio

assetsRecord date or
periodDividends

End Q1End Q2End Q3Year-end

Full year(full year)(consol.)(consol.)

yen

yen

yen

yen

yen

million yen%%

Year ended
December 31, 2011

—

0.00

—

7.00

7.00

2,740

86.6

2.2

Year ended
December 31, 2012

—

0.00

—

7.00

7.00

2,753

50.8

2.1

Year ending
December 31, 2013
(forecast)

—

0.00

—

7.00

7.00

49.8

3. Forecast of Consolida ted Earnings for the Year Ending December 31, 2013
(January 1 – December 31, 2013)(Percentage figures represent year-over-year changes)
Net
Net sales

Operating income

Ordinary income

Net income

incomeper share

Year ending
December 31,
2013

million yen%

million yen%

million yen%

million yen%

Yen

512,000

4.0

15,300

6.1

14,000

2.3

5,500

2.0

14.05

4. Other*For details, see "7. Changes in accounting policy” on page 29.
(1) Changes to scope of consolidation: None
*Changes affecting the status of significant subsidiaries (scope of consolidation)(2) Changes in accounting policy, changes in accounting estimates, and retrospective restatement
1) Changes in accordance with amendments to accounting standards etc.: Yes
2) Changes other than 1) above: Yes
3) Changes in accounting estimates: Yes
4) Retrospective restatement: None
(3) Number of shares issued and outstanding (common stock)1) Number of shares issued at end of period (treasury stock included):
December 31, 2012: 393,971,493 shares
December 31, 2011: 393,971,493 shares
2) Number of shares held in treasury at end of period:
December 31, 2012: 2,418,030 shares
December 31, 2011: 2,400,991 shares33) Average number of outstanding share during the period:
Year ended December 31, 2012: 391,560,982 sharesYear ended December 31, 2011: 391,580,207 shares
Audit Status
The year-end financial results are not subject to audit pursuant to the Financial Instruments
and Exchange Act. The audit of the year -end financial results herein had not been com pleted
as of the date of this document.
Appropriate Use of Earnings Forecasts and Other Important Information
This document contains projections and other forward-looking statements based on information
available to the Company as of the date of this document. Actual results may differ from thoseexpressed or implied by forward-looking statements due to various factors. For the assumptions
underlying the forecasts herein and other information on the use of earnings forecasts, refer toOutlook for the fiscal year ending December 31, 2013” on page 12.

4

1. Analysis of Operating Results(a)Consolidated Financial Results for the fiscal year ended December 31, 2012
(1) Overview
Millions of yen, except percentages
Net sales

Operating income

Ordinary income

Net income

2012

492,490

14,414

13,689

5,393

2011

449,452

18,883

16,8073,164

9.6(23.7)(18.6)

70.4

Change (%)

In 2012, the Japanese economy remained on a moderate recovery trajectory as
consumer spending rebounded in line with earthquake -recovery efforts. Overall, however,
the economy continued to f ace difficult conditions, including the protracted appreciation of
the yen and a global economic slowdown centering on Europe. More specifically, conditionsin the industries in which SAPPORO Group companies operate were as follows.
The soft drinks indust ry saw sales gains for some new products and existing brands asfavorable weather conditions, including a hot summer and warm temperatures lingering into
early autumn, help ed boost demand. The alcoholic beverage and restaurant industries,
however, did not see demand rebound as much as expected from the disaster -depressed
levels of 2011, as the recovery in consumer spending has been slower than expected. In thereal estate industry, high vacancy rates in the Greater Tokyo office leasing market caused
by a recent increase in new office supply are gradually improving. Rent levels, however,remained weak.
Amid this environment, we began implementing the new Sapporo Group Management
Plan 2012–2013, which targets the establishment of a new Group management struct ure
that will guide Group companies into a dynamic growth stage. This plan puts forth threebasic strategies for achieving this growth: “ Accept challenges leading to g rowth in all
businesses,” “ Steadfastly implement growth measures,” and “Create new growth
opportunities .”With regard to the first of these three basic strategies, “Accept challenges leading to
growth in all businesses ,” we have called on employees in all our businesses to leverage thestrengths of their respective business’ brands and manage ment resources while accepting
new challenges to enable us to stay ahead of the competition.
In line with our second strategy, “Steadfastly implement growth measures,” our Real
Estate business has increased its stake in Yebisu Garden Place to 100% and sta rted
implementing measures to boost the property’s value as it approaches its 20th anniversary
in 2014. Similarly, the Food & Soft Drinks business established POKKA SAPPORO FOOD &BEVERAGE LTD. The newly established company has been readying a new businessstrategy in preparation for the launch of integrated business operations in January 2013.
Overseas, we are strengthening our alcoholic beverage and soft drinks businesses inSoutheast Asia . The alcoholic beverages business has established Vietnam as abridgehead for expansion into the markets of neighboring countries. The overseas soft5

drinks business, with Pokka Singapore as the center of operations, is aggressively pursuingmeasures to strengthen its position throughout the region.
Finally, in line with our third strategy, we are creating new growth opportunities in South
Korea and in the United States. In South Korea, we are strengthening the Sapporo brandvalue and product distribution network, while in the United States we are aggressively
pursuing M&A opportunities and tie-ups targeted at full -scale entry into that country’s softdrinks market.
The efforts outlined briefly above contributed to the SAPPORO Group’s consolidated
results in 2012, as discussed below.

Net Sales
In 2012, the Sapporo Group posted consolidated net sales of ¥492.4 billion, up ¥4 3.0
billion or 10% from 2011. The Japanese Alcoholic Beverages and the Restaurants
businesses both achieved higher sales than in 2011, when they were directly negatively
affected by the impact of the ea rthquake and tsunami disaster. The International Businesssegment also achieved higher sales, aided by the consolidation of Silver Springs Citrus from
April 2012. Sales at the Food & Soft Drinks business were up sh arply, in part thanks to afull-year’s contribution from the POKKA Group , which was consolidated in April 2011.
Operating Income
Consolidated operating income totaled ¥1 4.4 billion, down ¥4.4 billion or 24% from 2011.
The Restaurants business achieved profit growth on increased sales, and Real Es tatebusiness profits were higher thanks to the inclusion of revenues and earnings from Yebisu
Garden Place in the Group’s consolidated income statement from March, following theacquisition of the 15% interest in trust beneficiary rights in Yebisu Garden Place held by theformer joint holder in the complex. Gains in these segments, however, were outweighed bylower profits or losses in other segments as the result of various profit-reducing factors,
including an aggressive year -over-year increase in market ing expenses by both theJapanese Alcoholic Beverage business and the Food & Soft Drinks business, increased
goodwill amortization in the Food & Soft Drinks business, a first-quarter operating loss at the
POKKA Group , and expenditures by the International Business segment to open newmarkets in Vietnam .
Ordinary Income
Consolidated ordinary income totaled ¥13. 6 billion, representing a ¥3. 1 billion or 19%
year-over-year decline.
Net Income
Despite the decline in ordinary income, consolidated net income incr eased by ¥2.2 billion
or 70% to ¥5.3 billion. The year-over-year gain largely reflects lower extraordinary losses
than in 2011, when such losses were inflated by changes in accounting standards for asset
retirement obligations and disaster-related losses .

6

Segment information is outlined below. We changed accounting methods from the firstquarter of 2012 but have applied the new methods retroactively to enable period-over-period
comparisons and analysis.
Moreover, as of the first quarter of 2012, the nam es of reportable business segments havebeen changed as follows: “International Alcoholic Beverages” is now “International
Business” and the Soft Drinks segment and the POKKA Group have been merged into asingle segment called “Food & Soft Drinks”. To enable year-over-year comparisons in thisdocument, figures for the year -earlier period have been retroactively adjusted to reflect the
new segmentation.

(2) Results by Business Segment
Millions of yen, except percentages
Net sales
2011

2012

% change

2.4

9,304

7,522

(19.2)

36,121

39.5

378

(73)

-

108,060

132,174

22.3

3,690

364

(90.1)

Restaurants

24,091

25,615

6.3

219

538

146.0

Real EstateBusiness

22,46823,217

3.3

8,552

9,396

9.9

Japanese
Alcoholic
Beverages
International
Business
Food &
Soft Drinks

2011

2012

268,189

274,490

25,888Operating income% change

Japanese Alcoholic Beverages
We estimate that total domestic demand for beer and beer -type beverages declined 1%
year over year in 2012. Beer and happoshu sales volumes declined slightly, while volume
sales of new -genre beer slowed but continued to show year -over-year growth.
Amid this environment , our Japanese Alcoholic Beverage business launched a renewal
version of new-genre beer Mugi to Hop in January and in March began year -round sales ofMugi to Hop Black. Both launches were enthusiastically received. In July , we launched
Hokkaido Premium, made from Hokkaido malt and Furano hops. The addition enhanced our
new-genre beer lineup, providing customers with a refreshingly flavored beverage incontrast to the more robust flavored Mugi to Hop. As a result, sales of our beer andbeer-flavored beverages increased year over year, and we expanded our market share.
In the nonalcoholic beer category, we launched a renewed Sapporo Premium AlcoholFree in February, and in May we unveiled the world’s first completely nonalcoholic black
canned beer, Sapporo Premium Alcohol Free Black. The new products supported
year-over-year growth in sales volume in this category.
In the low-alcohol or ready -to-drink (RTD) ※ category, our tie-up with Bacardi Japan Ltd.
led to the April launch of the jointly -developed Bacardi Mojito, which was well received byconsumers in Japan and triggered a mojito boom. In March, we launched a renewed version
of Sapporo Nectar Sour Peach Sparkling. We also continued to develop and market a7

variety of limited-volume RTD beverages with seasonal flavors, part of Sapporo’s unceasing
effort to bring new products to the market that satisfy customer demand for beverages
suitable for a wide range of occasions. As a result, unit sales of RTD beverages expanded
sharply in 2012.
In the wine business, demand for our everyday imported and domestic wines continued togrow, as did sales of our premium domestic wine Grande Polaire. As a result, t he wine
business achieved year -over-year growth in 2012. Meanwhile, our western spirits business
saw its sales volume increase thanks to the contribution from Bacardi products.
The shochu business also achieve d strong sales growth in 2012. Sales were supportedby the favorable reception for two new blended shochus: Imo Shochu Kokuimo, a blended
shochu introduced in March, and Mugi Shochu Koimugi, a barley-based shochu launched in
September.
Overall, the Japanese Alcoholic Beverages business posted sales of ¥27 4.4 billion, up ¥6.3
billion, or 2%, year over year. Aggressive spending on marketing during the period, however,weighed on segment operating income , which declined ¥1.7 billion, or 19%, to ¥7.5 billion.
※ RTD, or ready-to-drink, beverages are already mixed low-alcohol content cocktail-likebeverages that can be consumed as is immediately after opening.

International Business
In North America, where the timing of a full -fledged economic recovery remains unclear,
we estimate that total demand in the beer m arket increased only slightly in 2012. On theother hand, the Asian beer market continues to grow steadily, supported by the region’s
fast-growing economies.
In this environment, our International Business segment continued marketing activities
targeting the premium beer market, where it has core strengths. Canadian subsidiary
SLEEMAN BREWERIES achieved a 4% year-over-year increase in unit sales (excluding
outsourced production of Sapporo brand products and sales of domestic brands) , keeping
its six-year growth streak intact. In the United States, Sapporo USA posted a 1%
year-over-year increase in sales volumes of Sapporo brand beers. At the end of January
2012, we strengthened our foothold in the United States’ soft drinks market when we
acquired a 51% equ ity stake in Silver Springs Citrus, Inc., the United States’ largest makerof private-brand drinks. The new subsidiary’s results since April are included in ourconsolidated statements of income.
In Vietnam, from April we began a full -fledged marketing of fensive, including TV
commercials, as part of our efforts to build brand recognition for the Sapporo Premium
brand. In South Korea, at the end of January we took a 15% equity stake in a company
established by our local partner, Maeil Dairies Co., Ltd., est ablishing the structure needed toaccelerate sales of Sapporo brand beers to the household and commercial markets in South
Korea. In Oceania, we worked to strengthen sales via a brewing and sales licensing
agreement entered into in October 2011 with Austra lia’s Coopers Brewery. In Singapore, we

8continued to work with our local subsidiary to expand sales channels in the local householdmarket. The efforts outlined above helped us achieve 68% year-over-year growth in beersales volumes in Asia and other marke ts outside North America.

As a result, the International Business segment saw its existing local operations achieve
expansion on local -currency bases. These gains, combined with the addition of Silver
Springs Citrus to the Sapporo Group, helped boost seg ment sales to ¥36. 1 billion, up ¥10.2
billion, or 40%, year over year. Segment operating income, however, declined to thebreakeven point, ¥0. 4 billion lower than in 2011.

Food & Soft Drinks business
Sapporo Beverage Co., Ltd.
We estimate that domestic demand for soft drinks increased 3% year over year in 2012.
New product launches and strong demand for existing brands drove sales in the first half of2012, and favorable weather conditions, such as a hot summer and warm weather throughearly autumn boosted sales in the second half.
In this environment, Sapporo Beverage concentrated on growing and strengthening its
core brands. Specific measures included a TV ad campaign in a tie-up with a children’s TV
program to raise brand recognition for our Ribbon br and. Sales were also boosted by acollaborative sales campaign with a popular video game and expansion of over -the-counterand vending machine sales channels. For our Gabunomi series, we tied up with a pop ular
animation character to further expand our sales channels and build an even stronger market
presence. Unit sales of Gerolsteiner (naturally carbonated water from Germany) surpassed
the previous year’s level on the success of in -store trial offers and repeat purchasepromotions. Unit sales of the Oishii Tansansui lineup of bottled soda waters also exceeded
the previous -year level. However, overall sales volumes at Sapporo Beverage in 2012
declined 7% year over year, reflecting a reversion to the norm after last year’s surge indemand for unsweetened bev erages in the aftermath of the earthquake and tsunami
disaster.
With regard to costs , we overcame rising material costs by optimizing our production
structure and carrying out cost -structure reforms throughout the value chain via a rigorous
select-and-focus approach.
POKKA GroupOur estimate of domestic demand trends for soft drinks in 2012 is as stated at the
beginning of the previous section. In addition, we estimate that total demand forlemon-based products (flavorings) increased 1% year over year whi le demand for instantsoups (including soups in a cup) declined 3%.
In this environment, the POKKA Group’s Domestic Food & Soft Drinks businessendeavored to strengthen and cultivate brand power by focusing investments on core
brands and newer growth bran ds.
POKKA’s domestic soft drinks business announced a renewal of the Kireto Lemon lineup

9and launched a new TV commercial in support of the product. The company bolstered its
Pokka Coffee lineup and developed some promotional canned drinks. In August, POK KA
launched a renewed version of its Aromax canned coffee series and introduced Aromax
Kyokugen no Kaori Black, a limited edition product sold only in the Tokai region (centered on
Nagoya City). POKKA’s aggressive marketing effort throughout the year also included the
May launch of Yasuragi Kibun no Corn-Cha, a new unsweetened tea offering made fromroasted corn, and offerings in small containers that meet the need for hot soups in autumn
and winter .
POKKA’s domestic foods business also pursued aggressive marketing strategies,
including the increased use of cross -merchandising via TV commercials, the internet andin-store displays, to promote its products, led by POKKA Lemon 100. The business also
strengthened the lineups for its Jikkuri Kotokoto soup series and the Kongari Pan series of
instant cups of soup. To stimulate demand for its canned soups during the summer, POKKA
introduced Tsumetai Potage, a canned cold soup. The Kantanbimi line of Korean soups
available in both cup and pouch versions was bolstered by the addition of new products,
including hanryu Kuppa Samugedan , which was launched in October .
In the Domestic Restaurants business, P OKKA’s Café de Crié coffee shop chain faced anincreasingly competitive operating environment, including challenges from low-priced coffeeserved at major convenience store chains. P OKKA responded by refreshing the Café deCrié menu with items on a regular basis and by continuing to remodel existing outlets andopen new ones.
The Overseas Beverage & Foods business mad e steady progress in improving its COGS
ratio and lowering distribution costs as it dealt with intensifying price competition in the
Singapore market and declining sales to export markets.
POKKA’s Overseas Restaurants business saw a slight slowdown at Hon g Kong
operations from February amid a generally tepid market as the number of customers frommainland China declined. Business remained upbeat in Singapore, however, as sales were
stimulated by revised menus that suited customer preferences at individual store locations
and by increased sales of pastries.

Reflecting the efforts and results at its various individual businesses, as summarized
above, the Sapporo Group’s Food & Soft Drinks segment sales in 2012 amounted to ¥132.1
billion, a year -over-year increase of ¥24.1 billion or 22%. The strong sales result was aided
by a full-year contribution from the POKKA Group, whic h was consolidated from April 2011 .
The strong sales gains were, however largely offset by increased marketing expenditure ,higher goodw ill amortization, and an operating loss at the POKKA Group in the first quarterof 2012. As a result, segment operating income totaled ¥0.3 billion, a decline of ¥3.3 billion
or 90% from 2011.

10

Restaurants
Japan’s restaurant industry continues to face a v ery severe operating environment, as
concerns about further deterioration in employment and incomes

inhibits consumer

spending and strengthens the trend toward eating and drinking at home.
Amid this difficult environment, our Restaurants business endeavor ed to increasecustomer traffic and rejuvenate existing outlets by focusing on quality improvements,
especially in the service area, carrying out various kinds of campaigns, and stepping up
marketing to corporations as a means of creating demand for large group parties.
In our core beer hall restaurant format, we sought to strengthen each individual beer hallbrand by clarifying basic strategies for each and aiming at the creation of new value.
To reform the segment’s profit structure, we reduced costs by renegotiating rents on shop
spaces and closing 11 unprofitable outlets.
We also opened 13 new outlets during 2012, including more traditional formats such as
YEBISU Bar outlets, mid-sized Ginza Lion brasseries, and the new The Kitchen Ginza Lionas well as new format restaurants in highway rest areas, and commissioned golf country
clubs and multi-shop wine-and-dine complexes. As of year-end, the Restaurants businesshad 193 outlets in operation.
The segment’s 2012 sales came to ¥25.6 billion, up ¥1.5 bil lion or 6% over 2011.
Operating income, meanwhile, rebounded to ¥0.5 billion, up ¥0.3 billion or 14 6% as a resultof our cost -cutting efforts, which included reining in personnel costs and renegotiating rental
fees, and profitability improvements supported by the closure of unprofitable outlets.

Real Estate
In the real estate industry, high vacancy rates in the Greater Tokyo office leasing market
caused by a recent increase in new office supply began to ease. Rent levels, however,remained weak.
In this environment, our Real Estate business managed to maintain high occupancy rates
at its Yebisu Garden Place complex and other properties concentrated in the Tokyo
Metropolitan area.
In January 2012, we changed the name of our consolidated real estate subsid iary Yebisu
Garden Place Co., Ltd., to Sapporo Real Estate Co., Ltd., as part of our plan to raise the
Sapporo brand value and strengthen Group synergies while continuing efforts to raiseoccupancy rates and rent levels at Group properties.
In March, we reacquired trust beneficiary rights amounting to a 15% interest in Yebisu
Garden Place held by the joint holder in the complex, returning us to 100% ownership.
Having reclaimed full control of the complex, we began considering measures that would
strengthen its branding, add to the facility’s overall convenience, and thereby enhance theproperty’s asset value. As a result, we have started adding emergency power systems andwill continue to make changes that add to the property’s value.
Our real estate development business is focusing on the strategic Ebisu area and has
started redevelopment of the Seiwa Yebisu Building. Demolition of the old structure started

11

in December. The new building, which will have more total floor space than its forerunner , isscheduled for completion in autumn 2014.
Overall, Real Estate business sales in 2012 totaled ¥23.2 billion, up ¥ 0.7 billion or 3% year
over year, while segment operating income reached ¥9.3 billion, representing an increase of¥0.8 billion or 10% year over year.

(b) Outlook for fiscal year ending December 31, 2013
(1) Overview
Millions of yen, except percentages

Net sales

Operating

Ordinary

incomeincomeNet income

2013 forecast

512,000

15,30014,0005,500

2012 results

492,490

14,414

13,689

5,393

4.0

6.1

2.3

2.0

Projected increase (%)

In 2013, in accordance with the Sapporo Group Management Plan 2013 –2014, theupdated version of our rolling two -year plan, the Group will focus on three fundamental
strategies, namely to “Accept challenges leading to growt h in all businesses,” “Steadfastly
implement growth measures,” and “Create new growth opportunities.” We regard the next
two years as a crucial period for establishing the foundations that will enable us to achieve
our goals and will make every effort to e nhance our corporate value during this period. In
2013, we aim to increase Group sales and expand operating, ordinary and net income. Ourconsolidated forecasts and outlook for the Sapporo Group in 2013 are as follows.

Net Sales
The Japanese Alcoholic Be verage business will place greatest emphasis on
restrengthening its beer brands, with a particular focus on expanding sales of existing
brands. It will also endeavor to expand sales of shochu and western spirits, two non -beercategories showing strong grow th potential, while restructuring i ts non-alcoholic beer andlow-alcoholic beverage brand lineups.
Our International Business will strive to gain wider brand recognition for the SLEEMAN
and Sapporo brands in the North American market while also expanding sales in Southeast
Asia from its new regional base in Vietnam. We also plan to expand soft drink sales in the
North American market by leveraging new Group member Silver Springs Citrus, Inc., whichbecame a consolidated subsidiary early in 2012.
In the Food & Soft Drinks business, Pokka Corporation and Sapporo Beverage were
integrated and made a new start as POKKA SAPPORO FOOD & BEVERAGE, which began
operations in January of 2013. The company will strive to strengthen existing Sapporo and
POKKA brands and develop distinctive new products that will help drive growth.
The Restaurants business will endeavor to expand sales by further strengthening its

12existing brands and opening new outlets, with a focus on the YEBISU Bar chain and the
mid-size Ginza Lion br asserie format. In addition, the segment aims to seize the opportunity
afforded by the inclusion of POKKA FOOD (SINGAPORE) PTE. LTD. to pursue an overseas
growth strategy centered on expansion of our chain of beer halls.
The Real Estate business will continue efforts to maintain and raise occupancy rates whiletargeting appropriate rent levels. The business targets new growth by adding value to its
core Yebisu Garden Place property and through the redevelopment of its Seiwa Yebisu
Building.
Based on the above plans for each segment, we envisage consolidated sales of ¥51 2.0
billion (a year-over-year increase of ¥ 19.5 billion or 4%) in 2013.

Operating Income
The Japanese Alcoholic Beverages business plans to increase profits by boosting sales
and continuin g cost control measures. With regard to the International Business segment,
while increased profits are envisaged in North America , we expect segment operating
income to be roughly unchanged in 2013 as a result of continued investing to build markets
and brand recognition in Vietnam . In the Food & Soft Drinks business also , we plan toincrease profits by boosting sales . Gains in both sales and profits are expected in t he
Restaurant business, as it plans to continue efforts to strengthen the profitability of its
operations , while operating income is expected to decline in 2013 in t he Real Estatebusiness as redevelopment of its Seiwa Yebisu Building cuts into leasing revenues.
Overall, we forecast 2013 consolidated operating income of ¥ 15.3 billion (up ¥0.8 billion or
6% year over year) .

Ordinary Income
We envisage consolidated ordinary income in 2013 of ¥1 4.0 billion, up ¥0. 3 billion or 2%
from 2012, thanks in part to lower interest payments.

Net Income
We envisage consolidated net income in 2013 of ¥5.5 billion, a ¥0.1 billion or 2% increase
versus 2012.

The 2013 outlook for each segment is outlined below. From fiscal 2013, the results of two
Group companies —Sapporo Logistics System s Co., Ltd., which to date has been includedin the Japanese Alcoholic B everage segment, and POKKA Logistics Co., Ltd, which was
included in the Food & Soft Drinks segment—will be accounted for in the Other segment.
Similarly, the results of POKKA FOOD (SINGAPORE) PTE. LTD. will be accounted for in
the Restaurants segment inst ead of the Food & Soft Drinks segment. The consolidated
financial statements for fiscal 2012 have been retroactively adjusted to reflect thesechanges.

13(2) Outlook by Business Segment
Millions of yen, except percentages
Net sales
2012

2013

% change

1.9

7,522

9,000

19.6

43,300

19.9

(73)

0

-

129,017

136,500

5.8

364

1,000

174.7

Restaurants

26,62126,800

0.7

539

800

48.4

Real EstateBusiness

23,217

23,600

1.6

9,396

8,300

(11.7)

Japanese
Alcoholic
Beverages
International
Business
Food &
Soft Drinks

2012

2013

269,947

275,200

36,121

Operating income% change

Japanese Alcoholic Beverages
We expect the operating environment for our Japanese Alcoholic Beverages business toremain challenging as the drinking population shrinks while consumer preferences an dvenues for drinking alcoholic beverages grow increasingly diverse.
Faced with this operating environment, our Japanese Alcoholic Beverages business has
adopted the campaign slogan “Bringing more cheer to your ‘Cheers’!” and is pursuing thedual strategi es of “Growth in the beer-taste market” and “Growth as a comprehensive
alcoholic beverage enterprise .” While endeavoring to establish a market presence befitting
Sapporo that will further enhance our profitability and raise our corporate and brand values,
we will continue to build stronger bonds with customers , in whom we hope to inspire
excitement and joy through the consumption of our products.
Our beer business will again focus on its three core brands —Yebisu, Sapporo Draft Beer
Black Label, and Mugi t o Hop—while also devoting resources to polish ing the brand imageof our Sapporo Premium Alcohol Free offering in the nonalcoholic beer beverage market.
In the RTD category ※ , we aim to establish a solid market presence with our Bacardi RTD
and nectar sour beverages.
In the wine business, we are focusing on our Grande Polaire brand, which is approachingits 10th anniversary and is made exclusively from domestically grown grapes. We also seek
to expand sales of additive-free wines and wines in PET bottles, two growing market
segments. We will strengthen our imported wine business, with a focus on four core
brands—Yellow Tail, Beringer, Mythique and Santa Rita.
In the western spirits segment, we will seek to continue market products that arouseinterest in both the home and commercial markets, such as our Bacardi rum–based Bacardi
Mojito.
Meanwhile, our shochu business is focused on expanding the market for its two blended
shochu brands —Kokuimo and Koimugi. We also plan to release a new plum wine ( umeshu)
that we hope will arouse considerable demand.
With regard to costs , we will continue to strengthen the Japanese Alcoholic Beverages
business’ earnings base by implementing ef fective procurement policies that respond to14

fluctuating ingredient and raw material prices, building a more flexible and adaptableproduction structure, and further improving cost effectiveness, particularly with respect tospending on sales promotions.
※RTD, or ready-to-drink, beverages are already mixed low-alcohol content cocktail-like beverages that canbe consumed as is immediately after opening.

International Business
In North America, many uncertainties continue to cloud the prospects for a full -fledged
economic recovery. We therefore expect total demand in the North American beer market tobe largely flat again in 2013. In this environment, our International Business aims tocontinue solidifying its North American market position by capitalizing o n its strengths in thepremium beer category.
In Canada, SLEEMAN BREWERIES will continue to spend aggressively on marketing as
it seeks to maintain and enhance the value of its core premium brands. Including sales of its
growing value brands, the company aims to achieve unit sales growth that exceeds total
demand growth.
In the United States, Sapporo USA also aims for unit sales growth in excess of total
demand growth. While continuing to target the Japanese -American market segment, our US
subsidiary will redouble its efforts to strengthen our presence to the wider Asian -Americanand general population se ctions of the US beer market. In addition, we will leverage thestrong business base of Silver Springs Citrus, Inc., which we acquired in January 2012, to
expand our soft drinks business in the North American market.
Outside of North America, we aim to boost sales by actively engaging in growth markets in
Asia and elsewhere while keeping an eye on opportunities to tap into new markets as we
strengthen the foundations of our International Business segment and expand its operations.
In particular, we are continuing full -scale marketing efforts in Vietnam to quickly establish our
Sapporo brand in t hat market. In South Korea, we are accelerating sales of Sappo ro brandbeers in the household and commercial markets through utilizing the 15% equity stake weacquired in January 2012 in a company established by our local partner, Maeil Dairies Co.,
Ltd. We plan to boost beer sales in Oceania, mainly through a brewin g and sales licensing
agreement with Australia’s Coopers Brewery. Finally, in Singapore, we plan to redouble ourefforts to expand s ales channels into the household -use beer market in a cooperative effort
with our local subsidiary.

Food & Soft Drinks bus inessJapan’s soft drink industry continues to face rising material costs and strong consumer
price consciousness. We therefore think that total industrywide demand is unlikely to
expand much in 2013.
In this environment, our Food & Soft Drinks business p lans to absorb integration -related
costs to the maximum level possible by thoroughly promoting low -cost operations acrosseach link in the value chain. In addition, the segment ’s marketing division is reviewing its

15

growth strategies and planning to develop business in five categories: beverage brands,
overseas brands, lemon & natural foods, soups & related foods, and commercial -use
products.
The business plans to concentrate marketing expenditures and resources on such core
domestic and overseas beverage brands as Gerolsteiner , Aromax, Ribbon, and Gabunomi.
For newer brands, such as the Yasuragi Kibun no Corn-Cha tea drink, marketing plans will
be narrowly focuse d on specific target groups.
In the lemon & natural foods category, while continuing to promote our Kireto Lemon
beverage series and our POKKA Lemon 100 series, the business continues to introduce
new derivative products, such as Hiroshima Lemon and the Osake ni Plus series of cocktail
fruit mixers. The Food & Soft Drinks business is seeking out tri al users for its products while
promoting healthy fruit-based drinks, such as cranberry juice and prune juice.
In the soup and related foods category, we plan to bolster the Kongari Pan and Jikkuri
Kotokoto soup brand lineups and continue to build out th e newer lineup of Kantanbimi
Korean soups. We also plan aggressive expansion into such new categories as cold soups,
grain-based soups, and desserts.
The core products of the commercial -use category include alcoholic-beverage mixers,
soft drinks in return able bottles, POKKA Lemon, and powdered teas and soups. We aim fordramatic new growth of our commercial -use business by leveraging group synergies
created by the integration of the two formerly independent Group companies.
The domestic and overseas r estaurants business will continue to enhance its Café deCrié brand value and expand its business. In addition to remodeling existing outlets in linewith a new brand package, the business is promoting effective chain expansion targeted atcreating a dominant market presence. It is also developing a new market for its Café de Crié
outlets by opening some inside hospitals.
The overseas soft drinks business, expects to see stiffer competition in its core Singapore
market owing to the policies of competitors. In response, it plans to maintain its leading
share of the Singapore market for tea drinks and expand sales in new product categories,
such as carbonated beverages. It also plans to expand sales to other countries in Southeast
Asia and extend its export marke t to the Middle East and other regions. To support theseplans and build the foundation for further gro wth, the business will increase its production
capacity.
In the overseas restaurants business, Group subsidiary POKKA Hong Kong will continue
to focus on the operation of its existing outlets, centering on the POKKA Café chain but also
including Tonkichi tonkatsu (breaded pork cutlets) restaurants and Mikichi ramen shops.
The subsidiary plans to leverage its multiple formats to expand into new areas.

Restaurants
Japan’s restaurant industry continues to face a very challenging operating environment.
The price of foodstuffs continues to rise and p rice competition is growing more severe as
restaurant operators try to attract customers that are increasingly eating and drinking at

16

home as a pending consumption tax h ike and other difficult economic conditions heighten
consumers’ concerns about protecting their living standards.
In this difficult environment, we continue to strengthen the branding of the Group ’s
various restaurant formats while carrying out various campaigns and marketing programs,
including stepping up the marketing of larg e group parties to corporations , in a concerted
effort to increase customer traffic at our restaurants.
We will continue recent efforts to reform the segment’s profit structure, including cost
reductions achieved by creating a distribution system with a single center for serving ourTokyo metropolitan logistics network, seeking lower rents and thereby cutting fixed costs,
and closing unprofitable locations.
We are focusing restaurant openings on the YEBISU Bar format, the mid -size Ginza Lion
brasseries, and The Kitchen Ginza Lion format. We also will develop new restaurant formats
to meet a wider range of consumer needs and preferences.
POKKA FOOD (SINGAPORE) PTE. LTD., accounted for in the Food & Soft Drinks
segment in 2012, has been included in the Restaurants business from January 2013 andwill further develop our restaurants business in Singapore through our chain of Sapp oro
Lion outlets.

Real Estate
Japan’s real estate industry is expected to move into a clear recovery trend as the supplyof new office buildings begins to decline and an economic recovery unfolds.
Meanwhile, our Real Estate business has been working to raise occupancy rate s and therent levels at Group properties. It also seeks to further strengthen the branding of Yebisu
Garden Place, the Group’s flagship property, and add to the facility’s overall convenience,
thereby enhancing the property’s asset va lue. In line with these goals, we are increasing thenumber of emergency power-generating systems at the property. In February 2013, theReal Estate business began operation s at ChezVia Yebisu, an apartment building in theEbisu area that provides a new ur ban lifestyle choice.
In addition, we have started the reconstruction of the Seiwa Yebisu Building, which we
intend to turn into a centerpiece property in the Ebisu district. We are also consideringaredevelopment project that would increase the floor sp ace of the Sapporo Ginza Building
located at Ginza 5 -chome.

Note: The above forecasts are based on information available to the company at the timeof disclosure with the understanding that a number of uncertain factors may influence
performance and that actual results may differ materially from those expressed or implied
herein.

17

2. Review of Consolidated Financial Condition
Consolidated Financial Condition
Consolidated assets as of December 31, 2012, totaled ¥597.6 billion, a ¥46.8 billion
increase from December 31, 2011. The increase is attributable to an increase in land andproperty holdings accompanying the acquisition of the additional 15% equity inte rest in
Yebisu Garden Place , which more than offset a decrease in intangible fixed assets related t o
the amortization of goodwill. Consolidated liabilities totaled ¥462.6 billion, a ¥36.6 billion
increase from December 31, 2011, reflecting increases in bank loans and other financial
liabilities, which were partially offset by a decrease in deposits received.
Consolidated net assets totaled ¥134.9 billion, a ¥10.1 billion increase from December 31,
2011. Asset growth was supported by increases in unrealized gains on securities and in theforeign currency translation adjustment account, as well as postin g of net income for fiscal
2012.
(b) Consolidated Cash Flows
Cash and cash equivalents (collectively, “cash”) totaled ¥9.7 billion as of December 31,
2012, a ¥0.6 billion or 7% increase from December 31, 2011. The increase reflects the net
result of cash generated by operating activities and financing activities and cash used ininvesting activities, including purchases of subsidiary shares, investment securities, andfixed and intangible assets.
The following is an explanation of consolidated cash flows by category in 2012 and thefactors that affected cash flows in each category.

Cash flows from operating activities
Operating activities provided net cash of ¥29.6 billion, a ¥7.3 billion or 33% increase over2011. Major sources of operating cash flow in cluded ¥10.5 billion in income before income
taxes and minority interests and ¥25.8 billion in depreciation and amortization. Major uses ofoperating cash flow included a ¥2.9 billion reduction in deposits received, a ¥1.8 billion
increase in inventories, and a ¥2.0 billion decrease in notes and accounts payable-trade.
Cash flows from investing activities
Investing activities used net cash of ¥59.4 billion, an ¥8.5 billion or 17% increase over 2011.
Major investment outflows included purchases of property, plant and equipment of ¥51.1
billion, purchases of intangible fixed assets of ¥2.7 billion, and purchases of subsidiaries’
shares accompanying changes in the scope of consolidation of ¥1.6 billion.
Cash flows from financing activities
Financing activities provided net cash of ¥30.1 billion, a ¥5.9 billion or 24% increase over2011. Major inflows included a ¥34.0 billion net increase in commercial paper, proceedsfrom long-term bank loans of ¥27.8 billion, and ¥9.9 billion from the issuance of corporate
bonds. Major outflows included ¥31.4 billion repayments of long-term bank loans and ¥10.0
billion in bond redemptions.

18

Cash Flow Indicators
As of December 31,

Equity ratio (%)
Equity ratio based onmarket capitalization (%)

2008

2009

2010

2011

2012

22.1

23.4

25.3

22.4

22.1

41.5

39.3

29.1

20.7

18.4

9.9

18.4

7.8

11.8

10.2

Cash flow tointerest-bearing debt
(years)Interest coverage ratio

6.0
3.5
7.6
6.2
8.4
(%)
Equity ratio: Total net assets / Total assets
Equity ratio based on market capitalization: Market capitalization / Total assets
Cash flow to interest -bearing debt: Interest -bearing debt / Cash flow
Interest coverage ratio: Cash flow / Interest expense
Notes:
1. All of the above indicators are calculated based on consolidated financial
statement data.
2. Market capitalization is calculated based on the number of shares issued andoutstanding, excluding treasury stock.
3. “Cash flow” is operating cash flow.
4. Of the debt carried on the consolidated balance sheet, interest -bearing debt is total
debt on which interest is currently payable.
3. Dividend Policy and Dividends for 2012 and 2013
Providing fair returns to shareholders is a key management policy of the Sapporo Group.
Our basic policy is to pay stable dividends to the extent permitted by our operating
performance and financial condition.
In accordance with the above policy, we plan to pay annual dividends of ¥7 per share for2012, the same dividend we paid in 2011.
In 2013, we plan to maintain the annual dividend at ¥7 per share, as we stea dily carry out
our management plan while also making strategic investments and strengthening ourfinancial foundation.

Dividends for 2011 and 2012 (yen per share)
InterimYear-end

Total

2012

0.00

7.0

7.0

2013

0.00

7.0

7.0

19

4. Management Policy(1) Fundamental Management Policy
The Sapporo Group’s management philosophy is “to make people’s lives richer and moreenjoyable.” In conducting its business activities, the Sapporo Group strives to maintainintegrity and corporate conduct that reinforces stak eholder trust and aims to achieve
continuous growth in corporate value. This is our fundamental management policy.
(2) Operating Performance Targets
The Sapporo Group’s New Management Framework’s management targets for 2016 are as
follows.
Consolidated n et sales:¥600 billion

Consolidated operating income: ¥40 billion (before goodwill amortization)
Debt/equity ratio: around

1.0

ROE:

above 8% (before goodwill amortization)(3) Medium- to Long-Term Management Strategies
1) Create High-Value-Added Products and Services
In all of our businesses, we will build sustained market advantages and pursue maximal
capital efficiency by concentrating management resources in market segments where weare most competitive. We will creat e high value-added products and services , placing
priority on “providing valuable products and services that customers can identify with” asa shared Group value.
2) Form Strategic Alliances
Instead of single-mindedly operating our businesses on a stand -alone basis, we will form
strategic alliances with strong partners to amplify our strengths, complement ourfunctional capabilities, and gain access to know -how in the aim of expeditiously gaining
competitive advantages on a large scale.
3) Promote Internat ional Expansion
We will pursue overseas expansion not only in our alcoholic beverage operations but
also in our soft drink and food operations. We aim to establish strong brands in overseas
markets by leveraging our proprietary technological capabilities a nd business alliances.
4) Expand Group Synergies
We will pursue greater inter -business synergies through flexible coordination andcooperation that transcends individual Group companies and organizational frameworks.
(4) Issues to be Addressed
Fiscal 2013 marks a major turning point in our Group organization, including the startup in
January of the integrated operation of our Food & Soft Drinks business by POKKASAPPORO FOOD & BEVERAGE LTD. With just four years left to reach the goals set forth in
our New Management Framework concept, these next two years represent a crucial stage
during which we must place the Sapporo Group firmly on a track to achieve the se goals. We
have therefore formulated the Sapporo Group Management Plan 2013 –2014 to guide us

20during this crucial stage. This revised version of our two -year rolling plan outlines threebasic strategies for guiding us toward realization of the New Management Framework.
1) Accept challenges leading to growth in all businesses
The first of the three basic strategies calls on employees in all our businesses to leverage
the strengths of their respective business’ brands and management resources while
accepting new challenges to enable us to stay ahead of the competition.
2) Steadfastly implement growth measures
To fully realize the benefits of the many initiatives undertaken by the Group in recent
years—including the full integration of our Food & Soft Drink business’ two coresubsidiaries into POKKA SAPPORO FOOD & BEVERAG E LTD., entry into theVietnamese market, and pursuit of plans to enhance the value of Yebisu Garden
Place—we will continue to make forward investments and take other steps to strengthen
our foundations.
3) Creating new growth opportunities
We will continue to aggressively pursue attractive M&A deals and alliances, both inJapan and overseas.
In addition, the Sapporo Group regards the fulfillment of our corporate social responsibility(CSR) as crucial to the Group’s sustained growth. We will conduct progr ams with suchthemes as “Provision of safe products of reliable quality”, “Coexisting with the wider society”,
and “Preservation of the earth’s environment”. Additionally, we will continue our CSR andcompliance programs as the foundation that governs our corporate behavior, and build
awareness of the importance of CSR and compliance within our corporate culture throughin-house education.

21

5. Consolidated Financial Statements(1) Consolidated Balance Sheets(millions of yen)

AssetsI Current assets
1 Cash and cash equivalents
2 Notes and accounts receivable - trade
3 Merchandize and finished products
4 Raw materials and supplies
5 Deferred tax assets
6 Other
7 Allowance for doubtful receivables
Total current assets
II Fixed assets
1 Property, plant and equipment(1) Buildings and structures
Accumulated depreciation
Buildings and structures, net(2) Machinery and vehicles
Accumulated depreciation
Machinery and vehicles, net(3) LandLease assets
Accumulated depreciation
Lease assets, net(4) Construction in progress(5) Other
Accumulated depreciation
Other, net
Total property, plant and equipment
2 Intangible assets(1) Goodwill(2) Other
Total intangible assets
3 Investments and other assets(1) Investment securities(2) Long-term loans receivable(3) Deferred tax assets(4) Other(5) Allowance for doubtful receivables
Total investments and other assets
Total fixed assets
Total assets

22

December 31, 2011

December 31, 2012

AmountAmount9,204
79,34017,113
10,948
4,539
8,258
(386)
129,018

9,755
83,581
20,372
12,072
3,737
9,026
(287)
138,258

376,200(201,765)
174,435
203,307(163,080)
40,226
83,82619,150(9,071)
10,0792,058
20,149(16,396)
3,752
314,379

384,995(205,155)
179,839
210,465(170,803)
39,661
115,413
19,255(9,469)
9,785
4,425
19,987(16,050)
3,936
353,061

40,147
8,844
48,99237,541
7,444
44,98531,208
10,142
2,203
16,251(1,411)
58,394
421,766
550,784

35,6709,783
2,040
15,222(1,386)
61,330459,377
597,636

(millions of yen)

Liabilities
I Current liabilities
1 Notes and accounts payable - trade
2 Short-term bank loans
3 Commercial Paper
4 Current portion of long-term debt
5 Lease obligations
6 Liquor taxes payable
7 Income taxes payable
8 Accrued bonuses
9 Deposits received
10 Other
Total current liabilities
II Long-term liabilities
1 Bonds
2 Long-term bank loans
3 Lease obligations
4 Deferred tax liabilities
5 Employees' retirement benefits
6 Directors’ and audit & supervisory board members’
severance benefits
7 Dealers' deposits for guarantees
8 Other
Total long-term liabilities
Total liabilities
Net Assets
I Shareholders' equity
1 Common stock
2 Capital surplus
3 Retained earnings
4 Treasury stock, at cost
Total shareholders' equity
II Accumulated other comprehensive income
1 Unrealized holding gain on securities
2 Deferred hedge gains (losses)
3 Foreign currency translation adjustments
Total accumulated other comprehensive income
III Minority Interests
Total net assets
Total liabilities and net assets

23

December 31, 2011

December 31, 2012

AmountAmount32,35457,37013,00010,0003,899
32,535
2,985
2,118
15,301
43,024
212,589

32,98555,27047,00010,0003,860
33,3973,830
1,860
12,35842,583
243,146

32,000106,798
7,715
12,186
7,452

32,000113,376
7,346
13,002
7,385

53

26

32,623
14,589213,418
426,008

32,914
13,491
219,543
462,689

53,88646,31028,741(1,197)
127,741

53,88646,30831,393(1,199)130,389

1,993(8)(6,432)(4,447)
1,482
124,775
550,784

5,122
9(3,725)
1,406
3,151
134,946597,636(2) Consolidated Statements of Income(millions of yen)
Year ended
December 31, 2011
AmountI Net sales
II Cost of sales
Gross profit
III Selling, general and administrative expenses
1 Sales incentives and commissions
2 Advertising and promotion expenses
3 Salaries
4 Provision for bonuses
5 Retirement benefit expenses
6 Other
Total selling, general and administrative expenses
Operating income
IV Non-operating income
1 Interest income
2 Dividend income
3 Equity in income of affiliates
4 Foreign exchange gain
5 Gain (loss) on gift voucher redemptions
6 Other
Total non-operating income
V Non-operating expenses
1 Interest expense
2 Exchange loss
3 Other
Total non-operating expenses
Ordinary income
VI Extraordinary gains
1 Gain on sales of property, plant and equipment
2 Gain on sales of investment securities
3 Settlement received
Total extraordinary gains

24Year ended
December 31, 2012

449,452
286,678
162,774

Amount492,490313,117
179,373

26,39017,532
27,117
1,357
3,245
68,246
143,890
18,883

32,83820,221
31,1471,225
3,499
76,027
164,958
14,414

343
595
33
511
769
2,253

263
734
180
535
570
980
3,264

3,557
107
664
4,330
16,807

3,448
541
3,990
13,689

315
25
261
602

83
21
104

-

VII Extraordinary losses
1 Loss on disposal of property, plant and equipment
2 Loss on sales of fixed assets
3 Impairment loss
4 Loss on devaluation of investment securities
5 Loss on sale of investment securities
6 Business structure improvement expenses
7 Effect of adoption of new accounting standards for asset retirement obligations
8 Compensation expenses
9 Loss on phased acquisition
10 Loss on change in equity
11 Disaster losses

997
23
1,669
1,261
23
1,084
267
566
244
5,430

2,087
11
188
582
64
346
-

Total extraordinary losses
Income (loss) before income taxes and minority interests
Income taxes: current
Income taxes: deferred
Total income taxes
Income (loss) before minority interests
Minority interests in gains (losses)
Net income

11,5695,840
4,114(1,316)
2,798
3,042
(122)
3,164

3,281
10,512
5,668
(317)
5,350
5,161
(232)
5,393

Net income before minority interests
Other comprehensive income*1
Unrealized holding gain on securities
Deferred hedge gains (losses)
Foreign currency translation adjustments
Share of other comprehensive income of associates accounted for using equity method
Total other comprehensive income
Comprehensive income*2(Breakdown)Comprehensive income attributable to owners of the parent
Comprehensive income attributable to minority interests

3,042

5,161

(959)
(0)
(1,139)(130)(2,230)
812

3,130
9
2,739
49
5,928
11,090998(186)

11,248(158)

25

(3) Statements of Changes in Shareholders' Equity(millions of yen)

Shareholders’ Equity
Common stock
Balance at end of previous period
Balance at end of period
Capital surplus
Balance at end of previous period
Changes during period
Disposition of treasury stock
Total changes during period
Balance at end of period
Retained earnings
Balance at end of previous period
Changes during period
Cash dividends
Net income
Total changes during period
Balance at end of period
Treasury stock
Balance at end of previous period
Changes during period
Purchase of treasury stock
Disposition of treasury stock
Total changes during period
Balance at end of period
Total shareholders' equity
Balance at end of previous period
Changes during period
Cash dividends
Net income
Purchase of treasury stock
Disposition of treasury stock
Total changes during period
Balance at end of period
Total accumulated other comprehensive income
Unrealized holding gain on securities
Balance at end of previous period
Changes during period
Net change in items other than shareholders' equity during period
Total changes during period
Balance at end of period

26

Year ended
December 31, 2011

Year ended
December 31, 2012

AmountAmount53,88653,88653,88653,88646,31546,310(4)(4)
46,310(2)(2)
46,30828,31728,741(2,741)
3,164
423
28,741(2,740)5,393
2,652
31,393(1,190)(1,197)

(18)
11
(7)
(1,197)(7)
5(1)(1,199)127,329

127,741(2,741)
3,164
(18)
7
411
127,741(2,740)
5,393
(7)
2
2,648
130,389

2,985

1,993

(992)
(992)
1,993

3,129
3,129
5,122

Deferred hedge gains (losses)
Balance at end of previous period
Changes during period
Net change in items other than shareholders' equity during period
Total changes during period
Balance at end of period
Foreign currency translation adjustments
Balance at end of previous period
Changes during period
Net change in items other than shareholders' equity during period
Total changes during period
Balance at end of period
Total accumulated other comprehensive income
Balance at end of previous period
Changes during period
Net change in items other than shareholders' equity during period
Total changes during period
Balance at end of period
Minority interests
Balance at end of previous period
Changes during period
Net change in items other than shareholders' equity during period
Total changes during period
Balance at end of period
Total net assets
Balance at end of previous period
Changes during period
Cash dividends
Net income
Purchase of treasury stock
Disposition of treasury stock
Net change in items other than shareholders' equity during period
Total changes during period
Balance at end of period

27

(7)

(8)

(0)
(0)
(8)

17
17
9

(5,258)(6,432)(1,174)(1,174)(6,432)

2,707
2,707
(3,725)(2,281)(4,447)(2,166)(2,166)(4,447)

5,854
5,854
1,406

1,597

1,482

(115)
(115)
1,482

1,668
1,668
3,151

126,645

124,775(2,741)
3,164
(18)
7
(2,281)(1,869)124,775(2,740)
5,393
(7)
2
7,523
10,171
134,946(4) Consolidated Statements of Cash Flows
Year ended
December 31, 2011
AmountI Cash flows from operating activities
1 Income (loss) before income taxes and minority interests
2 Depreciation and amortization
3 Impairment loss
4 Amortization of goodwill
5 Increase (decrease) in employees’ retirement benefits
6 Increase (decrease) in allowance for doubtful receivables
7 Interest and dividend income
8 Interest expense
9 (Gain) loss on sales of fixed assets
10 (Gain) loss on sales and disposal of fixed assets
11 (Gain) loss on sales of investment securities
12 (Gain) loss on revaluation of investment securities
13 Effect of adoption of new accounting standards for asset retirement obligations
14 (Increase) decrease in notes and accounts receivable - trade
15 (Increase) decrease in inventories
16 Increase (decrease) in notes and accounts payable - trade
17 Increase (decrease) in liquor taxes payable
18 Increase (decrease) in deposits received
19 Increase (decrease) in other current liabilities
20 Other
Sub total
21 Interest and dividends received
22 Interest paid
23 Income taxes paid
Net cash provided by (used in) operating activities
II Cash flows from investing activities
1 Purchases of investment securities
2 Proceeds from redemption and sale of investment securities
3 Purchase of stocks of subsidiaries and affiliates
4 Purchases of newly consolidated subsidiaries
5 Purchases of property, plant and equipment
6 Proceeds from sales of property, plant and equipment
7 Purchases of intangibles
8 Increase in long-term loans receivable
9 Collection of long-term loans receivable
10 OtherNet cash provided by (used in) investing activities
III Cash flows from financing activities
1 Net increase (decrease) in short-term bank loans
2 Proceeds from long-term bank loans
3 Repayment of long-term bank loans
4 Proceeds from issuance of bonds
5 Redemption of bonds
6 Increase (decrease) in commercial paper
7 Cash dividends paid
8 Payments received from minority shareholders
9 Repayment of finance lease obligations
10 Purchase of treasury stock
11 Proceeds from sale of treasury stock
Net cash provided by (used in) financing activities
IV Effect of exchange rate changes on cash and cash equivalents
V Net increase (decrease) in cash and cash equivalents
VI Cash and cash equivalents at beginning of period
Ⅶ Increase( decrease) in Cash and cash equivalents from newly consolidated
subsidiaries
Ⅷ Cash and cash equivalents at end of period

28(millions of yen)
Year ended
December 31, 2012
Amount5,840
24,482
1,669
3,109
(204)
(108)
(939)
3,579
(315)
1,020
(1)
1,261

10,51225,805
188
3,879
(82)
(132)
(997)
3,480
(83)
2,099
43
582

1,084
(4,705)(1,579)(701)(1,676)(4,129)(540)
1,368
28,511955(3,605)(3,548)22,313(2,015)(1,826)(697)
769(2,955)(927)(723)
36,9201,045(3,515)(4,832)
29,618(2,154)262(16,141)(18,662)(11,608)769(1,814)(25)
327(1,843)(50,891)(1,186)419(87)(1,611)(51,133)
178(2,736)(25)
93(3,395)(59,485)

13,194
38,612(24,926)
9,960(20,000)
13,000(2,735)
181(3,028)(18)
724,245
121(4,212)
13,2706,475
27,878(31,488)
9,960(10,000)
34,000(2,737)(3,923)(7)
230,159
253
545
9,057

9,057

122
9,725

6. Notes on the Going-concern Assumption
Not applicable

7. Changes in accounting policy(Method of accounting for sales)
Sapporo Beverage Co., Ltd., and POKKA CORPORATION, both subsidiaries of theCompany, are to be merged on January 1, 2013.
In line with this merger, the reportable segments for Soft Drinks and POKKA Group
presented in the consolidated accounts for the year ended December 31, 2011 have been
integrated into a single segment called “Food & Soft Drinks” from the first quarter of the year
ended December 31, 2012. In addition, a portion of the sales incentives paid to business
partners (wholesalers and retail outlets) on the sales price of flavored-water drinks and foodproducts, which to date have been accounted for under selling, general and administrative
expenses, are excluded from reported sales from the year ended December 31, 2012.
These changes to accounting methods are applied retroactively to the Company’s financial
statements for the fiscal year ending December 31, 2011, and the consolidated financial
statements for the full year ending on the same date.
As a result, sales, gross profit, and selling, general and administrative expenses on therevised financial statements for the fiscal year ending on December 31, 2011, haveeach been reduced by ¥4,647 million from the amounts reported before the retroactive
application of the new accounting method. Operating income is unaffected by the change.

(Changes in depreciation method)
In response to Japan's recent corporate tax law amendments and effective from the year
ended December 31, 2012, the method which some group domestic consolidated
subsidiaries use for depreciation of property, plant, and equipment acquired on or after April
1, 2012 are adjusted to reflect the revised corporate tax code. The impact of this change on
the Group’s fiscal year consolidated operating loss, ordinary loss, and the loss before
income taxes is negligible.

8. Changes in presentation methods(Consolidated balance sheets)
Effective the year ended December 31, 2012, “commercial paper,” which was previously
included in “other” under “current liabilities,” is individually presented because of its
increased importance in monetary terms. Accordingly, the consolidated financial statements
for the year ended December 31, 2011 have been retroactively adjusted to reflect the29change.
As a result, ¥56,024 million included in “other” under “current liabilities” in the consolidatedbalance sheets for the year ended December 31, 2011 was presented as “commercial
paper” of ¥13,000 million and “other” of ¥43,024 million.

9. Additional information(Application of accounting standard for accounting changes and error corrections)
The Company has adopted the Accounting Standard for Accounting Changes and Error
Corrections (ASBJ Statement No.24, December 4, 2009) and its associated Guidance on
Accounting Changes and Error Corrections (ASBJ Guidance No. 24, December 4, 2009) inregards to accounting changes and the revision of errors on past accounts being carried out
from the star of the first quarter of the year ended December 31, 2012.

10. Business combination
Year ended December 31, 2012 (January 1 – December 31, 2012)[Business combination through acquisition]
1. Outline of business combination(1) Name and business of acquired company
Name: SILVER SPRINGS CITRUS, INC.
Business:

Manufacturing and sales of PB chilled beverages for major food supermarkets
and commissioned manufacturing of chilled beverages for major beverage
manufactures(2) Main reason for the business combination
The goal of the Sapporo Group stated in the “Sapporo Group Management Plan
2011-2012,” a two-year rolling plan with the “New Management Framework” covering theperiod until 2016, which will be the 140th anniversary of Sapporo Holdings, is to solidify theGroup’s growth trajectory. Under the management plan, Sapporo International (“SI”) aims to
expand its business area from its International Alcoholic Beverages business to International
Business, positioning North America, as an operational base, and fast-growing Asia as apriority area. Through the agreement, SI has acquired a business base for its beveragebusinesses in North America, where it has a competitive advantage in the Alcoholic
Beverages business, and launched business expansion in North America. The agreement
enables SI to accumulate the know-how and expertise necessary to establish a foundation
for its beverage businesses in North America, where it already has an operational base for
its Alcoholic Beverages business. In addition, by securing steady profit from Silver Spring30

Citrus, SI aims to stimulate further growth of its international business.
(3) Date of business combination
January 31, 2012
(4) Legal form of business combination
Cash payment in exchange for shares(5) Name of company after business combination
SILVER SPRINGS CITRUS, INC.
(6) Percentage of voting rights acquired
Percentage of voting rights held before the business combination:-%

Percentage of voting rights acquired on the date of business combination:

51%

Percentage of voting rights held after the business combination:

51%(7) Primary reason for deciding on the acquiring company
The Company was decided on as the acquiring company because it proposed to buy theequity in exchange for cash.

2. Period for which earnings of the acquired company were included in the consolidated
financial statements
The earnings of the acquired company for the nine-month period from January 1, 2012
through September 30, 2012 are included in the Company’s consolidated statements ofincome for the year ended December 31, 2012. The fiscal year end date of the acquiredcompany is September 30, which is three months different from that of the Company.

3. Acquisition cost and breakdown
Acquisition price:¥1,835 million

Costs incurred directly in the acquisition:¥0 million

Acquisition cost:¥1,835 million

4. Amount of goodwill, reason for its recognition, amortization method, and amortization
period(1) Amount of goodwill: ¥421 million(2) Reason for its recognition: The acquired company's future business activities are
expected to generate excess profits.
(3) Amortization method and amortization period: 5 years with the straight-line method31

5. Assets acquired and liabilities assumed at the date of business combination
Current assets:¥2,609 million

Fixed assets:¥1,731 million

Total assets:¥4,340 million

Current liabilities:¥1,524 million

Long-term liabilities:¥99 million

Total liabilities:¥1,624 million

6. Approximate effects on the consolidated statements of income for the year ended
December 31, 2012 assuming that the business combination was completed on January 1,
2012 and method of calculation
Net sales:¥2,081 million

Ordinary loss:¥13 million

Net loss¥19 million(Method adopted to estimate approximate effects)
The approximate effects correspond to the acquired company's net sales and income/loss
recorded on its consolidated statements of income assuming that the business combination
was completed on January 1, 2012. These approximate effects have not been audited.

32

11.Property Leasing
The Sapporo Group holds office buildings (including land) for lease in the Tokyo
metropolitan and other areas. Net leasing income on those properties in the year ended
December 31, 2011 was ¥7,049 million (leasing income was mainly recorded as operating
revenues; leasing expenses were mainly recorded as operating expenses). Net leasing
income on those properties in the year ended December 31, 2012 was ¥7,945 million(leasing income was mainly recorded as operating revenues; leasing expenses were mainly
recorded as operating expenses).
The carrying value of those properties on the consolidated balance sheets, change incarrying value during the years ended December 31, 2011 and 2012, and the total fair value
appear in the following table.
(millions of yen)
Year ended

Year ended

December 31 2011 December 31 2012
Carrying value on consolidated balance sheets
January 1

173,601

173,297(304)

36,627

December 31

173,297

209,924

Fair value at December 31

299,800

335,672

Change during the period

Notes:
1. Carrying value on the consolidated balance sheets represents acquisition costs net ofaccumulated depreciation and accumulated impairment loss.
2. The change during the year ended December 31, 2011 comprises increase mainly arisingfrom property acquisitions (¥3,993 million) and decrease mainly due to depreciation (¥3,951
million) and impairment loss (¥318 million). The change during the year ended December 31,
2012 comprises increase mainly arising from property acquisitions (¥41,663 million) anddecrease mainly due to depreciation (¥4,122 million) and disposal (¥873 million).
3. The fair value at December 31 is mainly based on property valuations performed bythird-party real estate appraisers.

33

12.Segment Information
1. Overview of reportable segments

The Company’s reportable segments are components of the Sapporo Group about which separate financial information is available. These segments are
subject to periodic examinations to enable the Company's board of directors to decide how to allocate resources and assess performance.
The Sapporo Group utilizes the assets of the Group and its traditional areas of strength in the two business domains, "creation of value in food" and"creation of comfortable surroundings." Under Sapporo Holdings, a pure holding company, each group company formulates development plans andstrategies for its products, services, and sales markets and conducts business accordingly.
The Group's businesses are therefore segmented mainly based on the products, services, and sales markets of Group companies and their affiliatedcompanies. The Company's five reportable segments are Japanese Alcoholic Beverages, International, Food & Soft Drinks, Restaurants, and Real
Estate.
The Japanese Alcoholic Beverages segment produces and sells alcoholic beverages in Japan, while the international segment produces and sells
alcoholic beverages and soft drinks overseas.
The Food & Soft Drinks segment produces and sells foods and soft drinks.
The Restaurants segment operates restaurants of various styles.
The Real Estate segment's activities include leasing and development of real estate.

2. Calculation methods for sales, income (or loss), assets and other items
Accounting methods applied in reportable segment by business largely correspond to that presented under "The Basis for Preparation of Consolidated
Financial Statements" and "Change in Accounting methods." Reportable segment income is based on operating income. Intersegment sales or transfers
is based on market price. Intra-group sales and transfers are calculated as if the transactions were to third parties based on market prices.

3. Sales, income (or loss), assets, and other items(millions of yen)
Year ended December 31, 2011 (January 1, 2011 – December 31, 2011)
Japanese
Alcoholic
Beverages
Net sales(1) Operating revenues(2) Intra-group sales and transfers
Total
Segment income (loss)
Segment assets
Other
Depreciation and amortization
Increase in property, plant and equipment, andintangible assets

International

Food &
Soft Drinks

268,189
5,773
273,9629,304
215,079

25,88837
25,925378
40,252

108,060
687
108,748
3,690
100,713

24,091
24,091
219
10,46922,4682,236
24,704
8,552
180,208

448,697
8,735
457,432
22,145546,724

13,248

1,052

5,054

573

4,414

24,343

5,180

4,363

5,625

515

4,966

20,652Other *1
Net sales(1) Operating revenues(2) Intra-group sales and transfers
Total
Segment income (loss)
Segment assets
Other
Depreciation and amortization
Increase in property, plant and equipment, andintangible assets

Total

Restaurants Real Estate

Adjustment

Amounts reported on thestatements of income*2

755
40
796
(643)
1,992

449,452
8,776
458,228
21,502548,717(8,776)(8,776)(2,618)2,066

449,452
449,452
18,883550,784

133

24,476

6

24,482

8

20,66011

20,671

Total

Notes:(1) "Other" comprises businesses, such as food businesses, that are not included in reportable segments.
(2) Segment income and losses are adjusted based on operating income reported on the quarterly consolidated statements of income for the corresponding
period.

34

(millions of yen)
Year ended December 31, 2012 (January 1, 2012 – December 31, 2012)
Japanese
Food &
Total
AlcoholicInternational
Restaurants Real EstateSoft Drinks
Beverages
Net sales(1) Operating revenues(2) Intra-group sales and transfers
Total
Segment income (loss)
Segment assets
Other
Depreciation and amortization
Increase in property, plant and equipment, andintangible assets

274,490
5,977
280,468
7,522
205,338

36,121
34
36,155(73)
50,474132,174699
132,874364
104,452

25,61525,615538
10,30823,2172,574
25,791
9,396
215,189

491,6199,285
500,905
17,748585,762

10,307

1,506

6,653

567

4,611

23,646

2,772

1,441

7,632

808

42,20654,862Other *1
Net sales(1) Operating revenues(2) Intra-group sales and transfers
Total
Segment income (loss)
Segment assets
Other
Depreciation and amortization
Increase in property, plant and equipment, andintangible assets

Total

Adjustment

Amounts reported on thestatements of income*2

871
44
915
(413)
2,210

492,4909,330
501,820
17,335587,973(9,330)(9,330)(2,920)
9,662

492,490
492,490
14,414
597,636

0

23,6472,157

25,8058

54,871

2,200

57,071

Notes:(1) "Other" comprises businesses, such as food businesses, that are not included in reportable segments.
(2) Segment income and losses are adjusted based on operating income reported on the quarterly consolidated statements of income for the corresponding
period.
4. Reconciliation and main components of differences between income and loss of reportable segments and figures on the statement of income (information ondifferences)(millions of yen)
Year ended
Year ended
December 31, 2011
December 31, 2012
Segment income (loss)
Total for reportable segments
22,145
17,748Loss from other segments
(643)
(413)
Unallocated corporate costs*(2,505)(3,035)Intra-segment sales
(112)
115
Operating income on the statement
18,883
14,414
Note: Unallocated corporate costs consist mainly of SGA that is not attributable to reportable segments.

Segment income (loss)
Total for reportable segments
Assets of other segments
Set off of receivables from the Company’s administrative

Year ended
December 31, 2011

(millions of yen)
Year ended
December 31, 2012

546,724585,762
1,992
2,210(19,558)(19,365)
Unallocated corporate assets*
21,62529,028
Total assets on the consolidated financial statements
550,784
597,636
Note: Unallocated corporate assets do not belong to reportable segments and consist mainly of working funds (cash and cash
equivalents and marketable securities), long-term investments, and assets of general administration divisions.

35

5. Related Information
Year ended December 31, 2011 (January 1, 2011 – December 31, 2011)
1. Information by product and service
Information by product and service is omitted here, as the same information is disclosed elsewehere.
2. Segment Information by Geographic Area
(1) Net sales
Sales in Japan constituted more than 90% of total sales by segments. Accordingly, geographical segment information has not been disclosed.
(2) Property, plant and equipment
Information has been ommited as total fixed assets held in Japan constituted more than 90% of that shown on the balance sheets.
3. Information by major customer
The Company does not have major customer whose share accounts for more than 10% of net sales on the consolidated statements of income.
Accordingly, information by major customer is omitted here.
Year ended December 31, 2012 (January 1, 2012 – December 31, 2012)
1. Information by product and service
Information by product and service is omitted here, as the same information is disclosed elsewehere.
2. Segment Information by Geographic Area
(1) Net sales(millions of yen)North
America
34,657

Japan
439,113

Asia
14,835

Other
3,883

Total
492,490(2) Property, plant and equipment
Information has been ommited as total fixed assets held in Japan constituted more than 90% of that shown on the balance sheets.
3. Information by major customer
The Company does not have major customer whose share accounts for more than 10% of net sales on the consolidated statements of income.
Accordingly, information by major customer is omitted here.
6. Impairment loss on fixed assets or goodwill by reportable segment
Year ended December 31, 2011 (January 1, 2011 – December 31, 2011)(millions of yen)
Reportable segments
Japanese
Alcoholic
Beverages
Impairment loss

Food &
Soft Drinks

International309-

Restaurants

Real Estate

314

8

70

Total
703

Other

966

Generalcorporate andintercompany
elminations

Total

-

1,669

Year ended December 31, 2012 (January 1, 2012 – December 31, 2012)(millions of yen)
Reportable segments

Impairment loss

Japanese
Alcoholic
Beverages-

Food &
Soft Drinks

International-

Restaurants

50

Real Estate

125

Total
-

175

Other

12

Generalcorporate andintercompany
elminations

Total

-

188

7. Amortization for and unamortized balance of goodwill
Year ended December 31, 2011 (January 1, 2011 – December 31, 2011)(millions of yen)
Reportable segments
Japanese
Alcoholic
Beverages
Amortization
Unamortized
Balance as ofDec. 31, 2011

International

Food &
Soft Drinks

Restaurants

Real Estate

Total

Other

Generalcorporate andintercompany
elminations

Total

0

1,054

2,054

-

-

3,109

-

-

3,109

-

12,17627,971--40,147--

40,14736

Year ended December 31, 2012 (January 1, 2012 – December 31, 2012)(millions of yen)
Reportable segments

Amortization
Unamortized
Balance as ofDec. 31, 2012

Japanese
Alcoholic
Beverages-

International

Food &
Soft Drinks

Restaurants

Real Estate

Total

Other

Generalcorporate andintercompany
elminations

Total

1,126

2,753

-

-

3,879

-

-

3,879

11,89325,647--37,541--37,541

8. Gain on negative goodwill by reportable segment
Year ended December 31, 2011 (January 1, 2011 – December 31, 2011)
Not applicableYear ended December 31, 2012 (January 1, 2012 – December 31, 2012)
Not applicable37