Sapporo Holdings Limited
Q2 Financial Results Briefing for the Fiscal Year Ending December 2023
August 10, 2023

Event Summary[Company Name]

Sapporo Holdings Limited[Company ID]

2501-QCODE[Event Language]

JPN[Event Type]Earnings Announcement[Event Name]

Q2 Financial Results Briefing for the Fiscal Year Ending December 2023

[Fiscal Period]

FY2023 Q2[Date]

August 10, 2023

[Number of Pages]

31[Time]

17:00 – 18:03(Total: 63 minutes, Presentation: 27 minutes, Q&A: 36 minutes)[Venue]Webcast[Number of Speakers]

3
Masaki Oga
Yoshitada Matsude
Hiroyuki Nose

[Analyst Names]

Hiroshi SajiManabu Sumoge
Ami Yoshida
Satoshi Fujiwara

President and Representative Director
Managing Director
President and Representative Director,
Sapporo Breweries Limited
Mizuho Securities
Okasan Securities
JPMorgan Securities
Nomura Securities

1Presentation
Moderator: Hello. Thank you for attending today’s financial results briefing for Q2 of FY2023 of Sapporo
Holdings Limited. In attendance today are Mr. Masaki Oga, President and Representative Director of Sapporo
Holdings Limited, Mr. Yoshitada Matsude, Managing Director of Sapporo Holdings Limited, and Mr. Hiroyuki
Nose, President and Representative Director of Sapporo Breweries, Limited.
Please have at hand the financial results, supplementary information to the financial results, and financial
results presentation material. Mr. Oga and Mr. Matsude will provide an overview of the financial results forapproximately 30 minutes based on the PowerPoint presentation material, followed by a Q&A session. The
entire meeting will last approximately 1.5 hours.
Mr. Oga will now begin the explanation.

Oga: Good evening. I am Oga of Sapporo Holdings. Thank you for your time today.
Now, I would like to explain the summary.
For the period under review, revenue was JPY238.5 billion, an increase of JPY24.7 billion from the previous
year, and core operating profit was JPY3.5 billion, an increase of JPY5.7 billion. Operating profit was negative
JPY2.8 billion and profit attributable to owners of parent was negative JPY5.1 billion, for declines from theprevious year. We consider this to be a one-time cost impact, due to the loss incurred in connection with thedissolution of Anchor Brewing Company, LLC, which was recently resolved to be dissolved.
We are steadily absorbing cost increases in raw materials and other items through price revisions, and withthe recovery of the business itself, we believe that our performance is progressing steadily and above plan.
The first major topic is the steady recovery in sales volume of commercial-use products in the alcoholic
beverages business and sales at existing restaurants in the restaurant business.

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This means that sales for commercial use are increasing. In fact, total demand for beer cans is decreasing, but
results for canned Black Label continue to exceed those of the previous year. In RTD products, in addition to
the core brands, new Shin Lemon Sour performed well, driving growth.
In addition, the trend of strong sales of the Sapporo brand overseas continued.
Furthermore, we believe that the effects of the structural reforms in the restaurant business and the food andSoft drinks business, which we have been implementing since the time of the COVID-19 pandemic, are steadily
contributing to profits.

Here you see our sustainability management initiatives, which are set forth in our medium-term management
plan. I would like to introduce two major initiatives that have made progress.
The Sapporo Group Environmental Vision 2050, set for 2019, updates the greenhouse gas emissions reduction
targets.
Once the 2022 results were finalized last year, we updated our 2030 targets to higher goals that meet SBT’scertification criteria. Scope 1 and 2 are targeted at a 42% reduction from the 2022 level, and Scope 3 istargeted at a 25% reduction from the 2022 level.
In addition, the FLAG scope, which covers gas emissions from forest, land, and agriculture to the farm gate of
the so-called land-intensive portion of the food sector, has been updated to a major target of a 31% reduction
from 2022 levels.
In addition, Sleeman Breweries of Canada was selected as one of the 100 most environmentally conscious
companies. As a result of promoting initiatives with employee participation, this company was selected as one
of Canada’s Greenest Employers 2023.

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This table lists the sustainability goals that have already been announced, the newly established goals, andlast year’s results. See later.
That is all for my presentation.
Moderator: Thank you for your explanation. Mr. Matsude will now make an explanation.
Matsude: I would like to add some additional information. As for core operating profit and other profits, aloss from the dissolution of Anchor Brewing Company of JPY5.3 billion was posted for the quarter underreview. In addition, the decrease in profits was partly due to the absence of other operating revenues such as
gains on sales of real estate in the previous year.

4I would like to continue by explaining the external environment that affects our business performance. First,
regarding the impact of the new COVID-19.
This bar graph shows the monthly sales volume of beer for commercial use in the domestic alcoholic
beverages business and the degree of recovery in existing store sales of Sapporo Lion Inc. compared to 2019.
Since March of last year, our performance has been on a recovery track, and you can see that it has been
recovering steadily since January of this year. Regarding the sales volume of commercial use in the domestic
alcoholic beverages business, we have recovered to just under 80% compared to 2019 for the period fromJanuary to June of this year.
Total demand is shown in the blue line graph. Total demand is believed to have recovered to about 70%. One
factor contributing to this outperformance is the strong sales of the bottled type of Sapporo Lager beer, which
we commonly refer to as Akaboshi.
In addition, the restaurant business, Sapporo Lion’s same-store sales recovered to pre-COVID-19 levels in
January to June, at 103% compared to 2019. The number of visitors and the price per customer are also shownin comparison to 2019. The number of visitors recovered by about 90%, and although it has not yet completely
returned, the average spend per customer covered this.

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Next, I would like to explain cost increases due to soaring raw material prices and other factors.
This year, we expect a cost increase of JPY14 billion over the previous year. This is an increase of JPY1.5 billion
from the announcement at the beginning of the year. The JPY14 billion includes JPY11 billion in Japan and
JPY3 billion overseas.
In H1, costs increased by JPY6.5 billion. We will basically respond to these with price revisions. We willcontinue to monitor the situation closely and take measures.

Next, I will explain the breakdown by segment.

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First, look at the sales revenue on the left side. The increase in sales revenue was largely driven by a JPY26.3
billion increase in the alcoholic beverages business. Revenues from food and soft drinks operations and realestate were essentially unchanged from the previous year.
See core operating profit on the right. The increase in profit was largely driven by a JPY4.4 billion increase inprofit from the domestic alcoholic beverages business within the alcoholic beverages segment. In addition,
the restaurant business and the domestic food and soft drinks business contributed to an increase of JPY1.7
billion and JPY1.3 billion, respectively.

Next, I would like to explain the main factors behind the increase in revenue and profit.
Revenues totaled JPY238.5 billion, up JPY24.7 billion, or 12%, from the previous year. I will explain this bysegment. Only the food and soft drinks segment had lower revenue. This was mainly due to the sale of thecafé business and the liquidation of a vending machine subsidiary last year, which had a negative impact of
JPY2.5 billion.
On the other hand, the domestic and overseas alcoholic beverages businesses were the main drivers ofrevenue growth. In the domestic alcoholic beverages business, sales increased by JPY11.4 billion due to higher
beer and RTD volumes and the effect of price revisions. The overseas alcoholic beverages business reported
an increase of JPY12.2 billion in sales, due to the contribution of JPY8.2 billion from the consolidation effectof Stone Brewing Holdings, LLC, in addition to the strong performance of the Sapporo brand.

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I`d like to move on to core operating profit.
Core operating profit was JPY3.5 billion, an increase of JPY5.7 billion. The domestic alcoholic beverages
business was a major driver, and in addition, the restaurant and domestic food and soft drinks businesses
contributed to the increase in profit.
In the domestic alcoholic beverages business, in addition to the effect of increased sales of beer and RTD,
control of fixed costs contributed to increased profits.
In the restaurant business, there was an increase of JPY1.7 billion due to the effect of structural reforms,
supported by increased revenue. The domestic food and soft drinks business improved by JPY1.3 billion, while
structural reform effects such as SKU reduction and liquidation of a vending machine subsidiary contributed
JPY0.9 billion. Thus, we were able to make steady progress in improving profitability.
These are the financial results for Q2 of FY2023.

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Next, I would like to explain the progress of the action plan along with the financial results by segment.

The first is the domestic alcoholic beverages business.
In the domestic alcoholic beverages business, revenue increased by JPY11.4 billion and core operating profit
increased by JPY4.4 billion. Strengthening of beer and RTD and control of fixed costs contributed to theincrease.

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In the beer category, the market for beer is expected to grow, and we are making steady progress in ourefforts to strengthen our beer lineup, centered on Black Label. We intend to further strengthen our efforts in
preparation for the liquor tax revision in October.
I would like to explain the sales volume of beer-type beverages and beers. Our beer-type beverages sales
volume increased 1% from the previous year. Total demand is down 1%. The increase was driven by beer.
Beer sales volume increased 10% from the previous year. Total demand increased by 6%. While there wereenvironmental factors such as a recovery in commercial use, canned beer for home use remained strong while
demand shifted to commercial use. As for the sales volume of canned beer, we were able to keep the decline
at 2% while total demand decreased 6%. Sales volume of canned Black Label exceeded the previous year.
As a result, the percentage of beer in the beer-type beverage category has 70%, which is more progress thanin Q2 of last year. This is well above the 49% of the overall market.

Next is RTD.
RTD is also making steady progress. Sales amount increased 9% from the previous year. Our core brand, Koime
no Lemon Sour, performed well with a 7% increase, and our new product, Shin Lemon Sour, also progressedwell.
In H2 of the year, we intend to further accelerate growth through focused investment in core brands and new
products planned for the fall.
I would also like to add that the suspension of beer production at the Sendai brewery and the reorganizationof RTD production bases are progressing smoothly.

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Next is the overseas alcoholic beverages business.
In the overseas alcoholic beverages business, revenue increased by JPY12.2 billion and core operating profit
deteriorated by JPY0.5 billion.
I would like to discuss the situation by country. In Canada, profit increased by JPY0.7 billion due to an increasein volume and improved unit prices. Meanwhile, in the US, SAPPORO PREMIUM BEER continues to perform
well, and the functional integration with Stone, which was acquired last year, is progressing well. However,
local production of SAPPORO PREMIUM BEER is still under preparation at this time, and integration costs andother factors resulted in a JPY1.1 billion decrease in profit for Q2 of FY2023.
I would like to report on sales by country. First, in Canada, total demand increased by 2% to 3% due to therecovery of the commercial market. Our results were favorable, with a 6% increase.
In the US, the market itself was lower than the previous year due to unfavorable weather, especially on theWest Coast, and inflation across the country. Against this backdrop, SAPPORO PREMIUM BEER performed well,increasing 2%.
Next, I will explain the status of synergies with Stone. First, cost synergies. We were able to create costsynergies of about JPY200 million in H1. The integration of sales and marketing functions has been very
effective.
In terms of sales synergies, we worked with Stone’s sales team, which is strong in organized retail, to secure
the adoption of SAPPORO PREMIUM BEER by a major chain with 1,600 stores. We expect to see the effects ofthis sales expansion in the future. We will continue our efforts toward further functional integration and thestart of production of SAPPORO PREMIUM BEER in H2 of the fiscal year.

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Next is the Restaurant business.
In the restaurant business, revenue increased JPY2.8 billion and core operating profit improved JPY1.7 billion.
The increase in revenue was 42.7%, an increase by a factor of 1.4. We have been working since the COVID-19
pandemic to reduce unprofitable stores by approximately 30% compared to 2019, and have been able toachieve profitability in each quarter since Q2 of last year.
Sales by time zone are shown. This is compared to 2019. Although the number of customers during the latehours is still lower than before the pandemic, we were able to capture customers during the afternoon andevening hours. We believe that the acquisition of inbound tourists and senior citizens are contributing to this.

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Next is the domestic food and soft drinks business.
This business saw a JPY3.9 billion decrease in revenue and a JPY1.3 billion improvement in core operating
profit. Revenue decreased due to the impact of structural reforms. However, core operating profit benefited
from structural reforms that include reduced disposal, reduced vending machine costs, and liquidation of
unprofitable subsidiary, amounting to JPY900 million, in addition to an improved product mix, which enabled
us to make steady progress in improving profitability. We will continue to steadily implement structuralreforms to improve profits.
In the overseas soft drinks business, sales revenue increased by JPY1.8 billion and core operating profit wasalmost the same level as the previous year. As for sales expansion, sales in Singapore increased 4%, sales in
Malaysia increased 10%, and exports grew steadily by 13%. We intend to continue our efforts to expand sales
channels.

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Next , let`s move on to the real estate business.
In this business, revenue increased JPY0.5 billion and core operating profit decreased JPY0.6 billion. Revenue
increased due to the effect of the renovation of Yebisu Garden Place Center Plaza. However, core operating
profit decreased due to lower occupancy rates and higher costs associated with the previously announced
office air conditioning work at Garden Place. We intend to further continue our efforts to enhance the valueof our core properties, particularly Yebisu Garden Place.
I would like to add a few words about the office situation at Yebisu Garden Place. The office occupancy rate
for January to June was 77% due to air conditioning work. This is an 11% decrease from the previous year’s
88% occupancy rate. Most of this is due to the impact of the HVAC work, and the occupancy rate excluding
the HVAC-affected zone is around 90%.
The current occupancy rate is 77%, but some have already signed contracts and are scheduled to move in.
The occupancy rate is expected to recover by about 10% toward the end of the year. In addition, the unit rent
increased slightly compared to the end of 2021 before the HVAC work.
In addition, Yebisu Garden Place received an S rank in the CASBEE Wellness Office Evaluation Certification, as
described here. This is the first case for an office property in Tokyo built over 20 years ago. We intend tomaintain and improve profitability by improving safety and comfort, enhancing the functionality as a town
and information dissemination, and further strengthening leasing.

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Next is the status of Entire Group strategy promotion.
As part of a review of our business portfolio, we decided on July 12 to dissolve Anchor Brewing. Losses
associated with the dissolution are expected to be JPY6 billion. Of this amount, JPY5.3 billion was recorded inQ2. The loss of JPY6 billion is within the scope of the assumptions made in our plan at the beginning of theyear. Anchor Brewing had been incurring an annual deficit of nearly 1 billion yen. However, I am pleased toreport that as of this July, we have almost completed our bleeding stop as of this past July.
Next is balance sheet reform. In addition to reviewing its business portfolio, the Company is selling strategic
holdings of shares. In H1 of the year, we sold JPY0.9 billion of strategic holdings of shares. We intend tocontinue our efforts in H2 of the fiscal year.
YEBISU BREWERY TOKYO is scheduled to open at Yebisu Garden Place in April of next year. We would like tofirmly transmit the brand value of Yebisu Beer from Yebisu Garden Place.
YEBISU BEER HOLIDAY will also be held as last year. The event will be held from August 25 to September 3 at
the center square of Yebisu Garden Place.

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Finally, here is the status of the KPIs in the action plan.
The area circled by the red dotted line is the status in Q2 of FY2023. Overall, the progress has been favorable.
As for RTD growth, we had a fairly large plan at the beginning of the year of a 23% increase, and there is a bitof a large gap with the current situation. However, we intend to achieve this goal firmly by strengthening ourcore brand in H2 of the year and through new products in the fall.
For the real estate business, we plan to disclose annual figures because it does not fit the management ofshort-term market conditions.
The effects of Anchor are described in “Drastic Reorganization of unprofitable businesses,Etc” under “entire
group.” This effect is expected to manifest from Q3.
Thus, we ended H1 of this year smoothly, especially for domestic alcoholic beverages. We hope to receive
your continued support.
This concludes my explanation. Thank you for your attention.
Moderator: Thank you for your explanation.

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Question & Answer

Moderator [M]: We will now begin the question-and-answer session. Please ask one question at a time. Also,in order to answer questions from many people, we will limit each person to two questions. First, Mr. Saji ofMizuho Securities, please ask your question.
Saji [Q]: Thank you very much. One thing I would like to ask is about the domestic beer business. I know thatcommercial beer is doing well due to the recovery of the commercial market, and that existing restaurants
are improving very well in the restaurant business. Canned Black Label for home use is doing very well, and I
think this is one of the main reasons for the outperformance. I would like to know the background behind this.
Also, am I correct in assuming that the beer category will basically continue to improve after the Octoberliquor tax revision? In particular, please tell us if beer, which has a very high percentage of the composition,
will continue to show relative strength.
Nose [A]: I, Nose, will answer your question. As for the performance of Black Label brand, it continues to bestrong. Not only this year, but also last year, I believe that we had an advantage in the competition with ourcompetitors. While the condition of the brand itself is relatively healthy, we believe there is considerable
room for our company to grow.
Compared to competing brands, our products have not yet covered all of our Japanese customers, including
convenience stores, supermarkets, and drugstores. This coverage rate can be brought closer to 100% in the
future. Because of this situation, I believe we have a competitive edge in the canned beer market.
Canned beer has become a center of competition among domestic beer companies. I think it is important how
to fight in this situation. We have been working solidly to strengthen our beer offerings for the past five or six
years, but assuming further market expansion, we believe there is still room for expansion.
We hope to see a further growth, as six-can packs will become even easier to buy if store prices drop by the
tax amount in October. Conversely, we are aware that we have not yet invested enough in Black Label,especially Yebisu. Recognizing that this is an opportunity, we would like to make a firm commitment, including
brand investment.
Saji [Q]: Thank you very much. Let me just confirm one point. In H1 of the year, other companies launchedcheaper beer and temporarily increased sales. Am I correct in understanding that the brand concept andpackaging are basically different, so there was very little impact on Black Label?
Nose [A]: There was an instantaneous impact. But in terms of what we are trying to do, premiumization ofbeer and storytelling of beer, the so-called brand concept is completely different. Although the temporary
impact is not zero, we believe this strategy makes more sense from a long-term perspective.
As for Black Label, we are holding hands-on events in Osaka and Fukuoka this year. Also, as usual, Black Label
THE BAR in Ginza continues to do well, with sales in June exceeding pre-COVID-19 sales. We really have a lotof young people coming. Considering the state of the brand, we recognize that our products, althoughcomparatively more expensive, can compete well.
Saji [Q]: Thank you very much. Second, you have left your full-year earnings guidance for H2 unchanged. I
would like to know about the company-wide performance assumptions. Core operating profit increased by
JPY5.7 billion in H1. Since the full-year forecast was left unchanged, you are planning a profit decline of about
JPY1.5 billion in H2 of the year.

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I feel that the environment for your company is not bad since there is temporary demand due to the Octoberliquor tax revision and beer will receive a tax cut. I would like to know the background behind the fact thatyou are leaving the earnings guidance unchanged, including core operating profit, and the negative factorsthat may affect the profit decline of about JPY1.5 billion in H2 of the year.
Matsude [A]: Thank you for your question. Mr. Oga mentioned at the beginning of the meeting that we areon a positive track compared to the Company’s plan. I hope you will understand that we have ventured toleave the annual forecast unchanged for the reason that we want to take a cautious look at it. Since thecurrent business situation is not bad, we intend to make an upward revision at some point in the future, if
necessary.
As for negative factors, we expect a slight impact of high cost of sales, again presented as an increase of JPY1
billion. However, we feel the strength of the business counteracts this.
Saji [Q]: Thank you very much. So, you are planning carefully, but basically the only risk of a decrease in profit
is a higher cost of goods?
Matsude [A]: I can’t say for sure what the top line will be since it is a seasonal business, but I hope you
understand that it is mostly steady.
Saji [M]: Understood. Thank you very much.
Moderator [M]: Thank you very much. We will now move on to the next question. Mr. Sumoge of Okasan
Securities, please.
Sumoge [Q]: I am Sumoge of Okasan Securities. Thank you. I would like to ask you about the commercial use
products of the domestic alcoholic beverages business. It has recovered to just under 80% in the quarter underreview and appears to be doing very well, outperforming the competition. I would like to ask a few additionalquestions about this.
You said that the bottled beer Akaboshi is doing particularly well. Can you give us some background on this?
For example, is it expanding because of low coverage, as is the case with home beer? Or are you better
capturing the current recovery in movement of people than other companies? Can you tell us a little more
about the background behind the recovery of commercial sales over other companies compared to 2019?
Nose [A]: As you mentioned, the movement of the Sapporo Lager beer called Akaboshi is abnormal for us,
and we are seeing some pretty good momentum. There are two factors.
One is the increase in the percentage of dealers, just as beer for home-use. There are many restaurants thatprovide keg beer of a competitor, but bottled beer of multiple brands. Not only in Tokyo, but also in Osaka,
Hiroshima, and Fukuoka, our lager beer is gradually starting to be served in such restaurants. I am sorry, I do
not know the number of increase, but it is certainly increasing.
Also, there are quite a few more restaurants now that provide multiple brands. The competition between
other companies’ beers and our Akaboshi in restaurants has also been a positive factor for our beer. I believethat these factors have combined to give our beer, especially bottled beer, a competitive advantage today.
Especially during the past three years, our commercial sales staff has not been able to work adequately. Since
May, when the new COVID-19 changed from a category 2 to a category 5 virus, products have begun to rotate
and our sales department has been quite active. This is a great opportunity to expand the channel for productsthat sell, including to commercial liquor stores, and we expect this trend to continue for the foreseeable future.

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We assume that the degree of recovery in the commercial sector will not easily return to pre-COVID-19 levels.
However, I believe that outperformance and strong trend can be expected for the lager beer Akaboshi in suchcircumstances.
Sumoge [Q]: Thank you very much. Regarding the potential, there are a lot of restaurant businesses that are
thinning out their operations, and of course, I have a feeling that it will be difficult in practice to fully returnto 2019 levels. How much do you expect the recovery to be? Also, has your company’s efforts, rather thanprice differences, expanded sales volume, coverage, and areas? Or is there some impact of difference in thesales price per unit, and lower-price products are compensating?
Nose [A]: There is no sales price difference. Please understand that there is no price difference for bottled
beer as we do not sell at any discount. We are also engaged in sales activities, and conversely, we are receiving
an increasing number of requests from restaurants that they want to provide Akaboshi. Deployment has
begun even where salespeople have not been able to reach. It is slowly starting to become that kind of product.
I see that Akaboshi has begun to change dramatically over the past few years to become the product that ourcustomers choose.
However, it is still difficult to see the bottled beer market itself moving in the direction of expansion. As you
have just mentioned, there is a decrease in the number of restaurants, shortening of business hours, ashortage of people in the stores, and changes in the way people work. Also, the amount of bottled beer servedat large parties is inevitably reduced. Because of these factors, it is not very likely that commercial use will
recover significantly to pre-COVID-19 levels. However, we recognize that the condition of the brand is
beginning to be quite good.
Sumoge [Q]: Thank you very much. Another point is about overseas alcoholic beverages. What was the profit
progress of overseas alcoholic beverages in H1 of the year? In Q2, profits continued to decline, although theextent of the decline has narrowed. I understand that Q1 of the US business was difficult due to unfavorable
weather. Q2 also had a fairly large margin of decline in profit. Please let me know how we should view thisprogress.
Nose [A]: Regarding overseas alcoholic beverages, H1 results were as you have seen. By country, theperformance in Canada was strong and exceeded our plan at the beginning of the year. As for Stone Brewing,
which we consolidated last year, our planning is to change the nature of this entity by consolidating thecompany that was originally loss-making, and by leveraging manufacturing and logistics synergies in the US.
New consolidation has added what was not there last year in January to June. Originally, we assumed that the
deficit would be added. That is the main reason why core operating profit is JPY500 million worse than lastyear.
We are also spending capital investment to manufacture new SAPPORO PREMIUM BEER at Stone in the US
from next year onward. We are also taking into account the hiring of some new people in the manufacturing
and warehouse departments for this purpose. Major synergies will emerge in the next year or so. I hope you
will first recognize that we have factored that in to some extent this year.
However, one of the factors that caused the deficit to grow significantly last year, especially in H2, was thatthe transportation cost of SAPPORO PREMIUM BEER brought in from outside the US was much higher than
expected, which put negative pressure on profits. This year, its freight cost will be calmed down and will bealmost in line with the budget. I see that as a major improvement. We are looking at progress based on Stone’s
current situation and expect that the overseas total will probably land as planned at the beginning of the
year.

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Sumoge [Q]: Thank you very much. I would like to check on the progress of initiatives on Stone. You mentionedthat JPY200 million in synergies were generated in H1 of the year. I think it is important to be able to properly
manufacture the SAPPORO PREMIUM brand in the next fiscal year and beyond. Does this seem to be a
problem? Also, on page 16 of the slide, it says something like 1,600 major US chain stores have decided totake up the brand, which would lead to about several times the size of sales. Can you also give us an idea of
the impact on sales and profits, if any?
Nose [A]: The impact of the production of SAPPORO PREMIUM BEER will be greater next year than this year.
Next year, we will be able to start manufacturing as planned, although not 100%, and we recognize thatsynergies will be generated then.
The 1,600-store story relates to the Sapporo brand. We see it as quite impactful for us as well. Although
Sapporo Beer has always been available in Japanese and Asian-affiliated stores, it was difficult to get into local
American-affiliated chains. It was in the midst of these challenges that the Stone team moved in this time andacquired the contract with the store. We recognize that the brand has expanded from its original size ofseveral hundred stores to 1,600 stores, making it a very large volume.
For products, it is important to increase the sales volume per item. To this end, it is significant to increase thehandling agent rate. Especially in the US, the percentage of Sapporo Beer handled is still not high, so we
believe that increasing the number in such a large market will be a positive thing. I also expect good things.
Sumoge [Q]: Will it be taken up next year, not this year? Will it have an impact next year?
Nose [A]: This will be deployed later in the fall.
Sumoge [Q]: Does it start to take effect around Q4 of this year?
Nose [A]: It depends on whether we can distribute to 1,600 stores at once. Please understand that this will
be rolled out gradually, starting this fall.
Matsude [A]: Cost synergies in terms of manufacturing and logistics are significant. We are in the process ofcreating a structure that will allow us to do so in H2 of this year. Since we will not be able to start up vertically
immediately, the positive financial impact is expected to be realized in H2 of the next fiscal year or later.
Sumoge [Q]: Thank you very much. Do you have a quantitative picture of the impact of expanding sales
channels? Like the image of impact on sales and profit. The scale of sales currently being developed in thischannel is also acceptable.
Nose [A]: Sorry, I don’t have the specific numbers on hand. We expect annual sales of SAPPORO PREMIUM in
the US to be about 102% to 103% over the previous year. In particular, I think the most important thing is thegrowth of canned beer, which I believe will increase a little more. We will not know how much of an impact itwill have on profits or volume until it is rolled out. I’m sorry.
Sumoge [Q]: Okay, I understand. It just means a big good story.
Nose [A]: Yes, I hope so.
Sumoge [M]: I understand. Thank you very much.
Moderator [M]: Thank you very much. We will now move on to the next question. Ms. Yoshida of JPMorgan
Securities, please.

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Yoshida [Q]: My name is Yoshida from JPMorgan Securities. Thank you. First, I would like to ask about the
profitability of the restaurant business. I believe the core operating profit margin is 2.4% in the current year’splan, and the target for the mid-term plan is 5%. In H1 of the year, it is already 8.7%. This business will be very
profitable in H2 of the year. I would like to know your thoughts on the future profitability of this business.
Matsude [A]: Thank you very much. In H1 of the year, the effects of structural reforms were steadily realized.
Will the profit margin remain the same in H2 of the year and beyond? We are currently estimating slightly
conservatively. As you know, there are increases in unit labor costs and recruitment costs due to labor
shortages. We now expect that the profit margin will not be as high as in H1 of the year.
As for recovery from COVID-19, there have been significant changes this year. We also see the need to take alittle time to analyze how the inbound effect will contribute.
Yoshida [Q]: Understood. Thank you very much. Although the profit margin will not be as high as in H1 of theyear, 5% of the mid-term plan is higher than the profit margin for the current fiscal year. It looks like it might
exceed 5%, but that is not the case, is that?
Matsude [A]: No, no, I hope you will look forward to that.
Yoshida [Q]: Understood. Thank you very much. The second point concerns the real estate business. The
presentation material states that Yebisu Garden Place is as planned. Profit was again down in Q2, but you planto achieve a profit on par with the previous year in H2 of the year. Looking at the real estate business as awhole, is the core operating profit plan in line with your plan?
Matsude [A]: The current situation is as you say. However, some of the equity investments described here
may not work out as we had anticipated. In short, it is a business that executes investments while closely
examining market conditions and projects. We think that we should expect a slight decrease in this regard.
However, the impact is not that great, and even if it were, it should be considered at the level of several
hundred million yen.
Yoshida [Q]: Understood. The equity investment is making slow progress relative to the plan for this fiscal
year, isn’t it?
Matsude [A]: Yes, that’s right.
Yoshida [M]: I understand. Thank you very much. That is all.
Moderator [M]: Thank you very much. We will now move on to the next question. Mr. Fujiwara of Nomura
Securities, please.
Fujiwara [Q]: Thank you very much. I am Fujiwara of Nomura. First point, I would like to ask again about beer
for commercial use. In Q2, your commercial use was at 80% level compared to 2019 and the market was at
70% level. Is this considered the post-COVID-19 new normal level? Or is there room for more recovery?
Nose [A]: I think this is a difficult question. I hear various comments from the market that the current recovery
rate from 2019 before COVID-19 is in the range of 75% to a little less than 80%. Existing restaurant sales werealso recovering in Lion’s case, but overall, it will be difficult to recover because of the inability to secure sales
in the evening hours due to the reduction of business hours.
From a long-term perspective, I believe keg beer for commercial use has been in a gradual decline since before
COVID-19, and it appears to have dropped off all at once after taking quite a hit over the past four years. If it
had fallen gradually for four years even without the pandemic, on the other hand, one could argue that the21difference is only about a dozen percent. Although we feel that this 20% figure is significant, we also feel thatthe view of the figure of just under 80% will change depending on how the economy returns and changes ineating out styles in the future.
Fujiwara [Q]: The 75%-plus percentage you just mentioned is a market figure, right? Your company isoutperforming it.
Nose [A]: This year, yes.
Fujiwara [Q]: As you said, I believe the gradual descent was hastened by COVID-19. If you don’t return to thepre-COVID-19 level, for example, there are talks in the competitors’ earnings presentations about optimizing
the commercial beer sales organization.
I would like to know if there are any initiatives that your company is taking to maintain profitability in thecommercial-use channel. Or, if there is something you need to do in the future, please let us know.
Nose [A]: In our case, we were already in the process of reorganizing our sales force before COVID-19 began.
I can’t explain it well, but in 2019 we actually switched to a system that looks at profitability of commercialuse products and products for home-use by channel, instead of looking at it by sales department in each areafrom Hokkaido to Kyushu.
Visualizing profitability in such a way, we saw a slight weakness in profitability and a significant decline involume of the commercial-use products over the past four years. In this context, we had already beenreforming the product structure, our structure itself, and the relationship with customers in many ways.
At the same time, we will be raising the price of bottled and keg beers in October, and I believe that this is
one of the key points of our efforts to improve profitability.
The Company also recognized that the profitability of commercial-use products was slightly weaker than thatof home-use products. In fact, it is starting to change quite a bit. We recognize that the fact that profit in H1of the year has improved so much in relation to the increase in sales is the result of various efforts in thecommercial-use business. I don’t have much understanding of how other companies operate, but I am sure
we have a lot of wisdom, and I believe it is possible to promote such activities.
Like keg beer, we don’t discount when we roll out bottled beer, and it doesn’t cost us anything. That is also apositive contribution. We will also continue to improve the product mix, etc. I feel that things are beginningto change dramatically. We have absolutely no intention of stopping this progress. That is my perception.
Fujiwara [Q]: I understand. Let me ask you another point of view. The cost increase is estimated to be JPY14
billion per year for the entire group. Could you please share with us any thoughts you may have regarding thenext fiscal year?
Matsude [A]: I think it is a cost trend. Since the market trend had peaked in mid-2022 and has been declining,
we initially expected the cost of goods sold to move in a positive direction in the next fiscal year and beyond.
However, we believe that the situation is not very optimistic because the exchange rate is working in the
opposite direction.
I don’t think there are many factors that would make it go up more and more, but I don’t see many factorsthat would make it go down either. Especially can materials. Also, how will barley be affected by the wheatmarket? As you know, depending on the situation in Russia and Ukraine, barley prices are also working in anegative direction at the moment.

22Thus, while prices on a dollar basis may be on a downtrend, on a yen basis, we have yet to find room for them
to fall. We would like to monitor the transition a little more. Only marine transportation costs have dropped
significantly, and I think this downward phase will continue, but the impact is not very large.
Fujiwara [Q]: I understand. Various cost increases, such as labor costs, are also affecting suppliers. Therefore,
suppliers must also raise their prices, including processing fees. Is the accumulation of such things a factor incosts not coming down much?
Matsude [A]: Yes, about processing fees. But as for can materials, I think most of it depends on the market
price of aluminum. Certainly, there is a slight influence of processing fees.
Fujiwara [M]: Understood. Thank you very much.
Moderator [M]: Thank you very much. There is still time, but since there are no other questions, we willconclude the Q&A session.
Finally, Mr. Oga will say a few words.
Oga [M]: Thank you very much for listening so attentively. All companies are steadily making progress against
their progress plans, and we hope to achieve this year’s annual plan. We look forward to your continued
support in many ways. Thank you very much.
Moderator [M]: That concludes the online meeting.
Thank you for your participation to the end of today’s meeting. Thank you for your continued support.
[END]______________

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