Sapporo Group Business Results Presentation for 2014

February 13, 2015

Sapporo Holdings Ltd.
URL http://www.sapporoholdings.jp/english

Copyright, 2015 SAPPORO HOLDINGS LTD. All rights reserved.

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Contents
1. Overview of 2014
- Group Overview- Topics by Business

2. Sapporo Group Management Plan 2015 - 2016

3. Overview of 2014 Results
Reference material: Appendix “Supplementary Information to the Earnings Report”

Reference
1. Supplementary Information to 2014 Results (Overview by Business Segment)
2. Sapporo Group’s New Management Framework announced in 2007

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1. Overview of 2014

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Overview of 2014 - Group Overview Responding to changes in the business environment
 Amid unexpected tough business environment such as inclement weather in Japan and North America,changes to external environment including rise in raw ingredient prices and temporary end of sales Goku
Zero, the Group posted operating income of ¥14.7 billion (plan: ¥15.0 billion).

Making all businesses profitable All 5 businesses became profitable as Food & Soft Drinks returns to profit (after goodwill
amortization).

Expanding the strengths
 Premium beer “Yebisu” brand exceeded previous year’s sales while that of new genre Mugi to Hop The
Gold grew 10% year over year, lemon-based drinks grew 7%, lemon-based food products by 4% andinstant soup by 9%.
 Sales increased by 34% year over year in Vietnam beer market, where the Group is into its third year
(excluding exports).
Ebisu First Square, the new base in Ebisu area, completed and started operations fully occupied.

Implementing growth investment
 Group-wide select-and-focus approach. Sales of properties reflecting the strong market, while
acquisition of Country Pure Foods.
Ginza 5-chome redevelopment plan launched towards completion of construction in 2016.
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Overview of 2014 Topics by Business (1)Japanese Alcoholic Beverages
 Sales volume of beer and beer-type beverages (beer, happoshu and new genre) up 1% yoy (total demand
down 2% yoy)
Total
Management resources focused on premium beerdemand Sapporo“Yebisu,” standard beer “Black Label” and new genre“Mugi to Hop The Gold,” as share increased for the 3rdconsecutive year
<Core brands y-o-y>Yebisu brand

100%

Black Label

97%

Mugi to Hop The Gold110%
10,000cases

 “Goku Zero” succeeds in developing themarket with annual sales of 5.77 million cases
Though there was a blank periodof 1 month
New genre: 2.90 million cases
Happoshu (from Jul 15): 2.87 million cases(Initial target: 5.50 million cases)
Copyright, 2015 SAPPORO HOLDINGS LTD. All rights reserved.

“Beer,” “Happoshu + New genre” breakdown2013 total：5,208

Beer sales volume
Composition of beer sales for
Sapporo2014 total：5,238

Happoshu, new genre sales volume
Composition of beer sales for theindustry (est.)

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Overview of 2014 Topics by Business (2)International BusinessNorth
America Despite headwinds such as intensified competition, inclement weather and sharp rise in raw ingredient prices,
the business secured profits as the Group steadily implemented countermeasures

SLEEMAN Net Sales (before elimination of inter-company transactions)in Local Currency (annual)

SLEEMAN (Canada) Slowdown of intensifying pricecompetition of best-value products
 Sales increased y-o-y for the 8thconsecutive year
 Sales volume y-o-y: Premium – up 3%
Value – down 2%

Unit sales (YoY)

2013

2014

SLEEMAN*

104%

99%

Canada total
demandApprox.

Approx.

97%

99%*Excluding Sapporo brand

Sapporo USA (U.S.)
Sapporo USA Net Sales (before elimination of inter-company transactions)in Local Currency (annual) Shipment delays occurred due to thecold wave at the start of the year, but
sales grew y-o-y from April
 Sales increased y-o-y for the 5thconsecutive year

Unit sales (YoY)

2013

2014

Sapporo USA*

105%

102%

*Sapporo brand

Sapporo Vietnam

Vietnam
2012＝100

Sales volume in Vietnam

Copyright, 2015 SAPPORO HOLDINGS LTD. All rights reserved.

 Active sales promotion investment tobuild brand and expand sales
channels
 Sales volume at the beginning of theyear struggled as the Tet season was
shortened
Up 34% (domestic) for the year Sapporo brand is exported to 12
countries and regions including 8
ASEAN countries

Silver Springs Citrus (SSC)(U.S. Soft Drinks business) Raw ingredient cost rose due to badharvest of oranges in Florida
 Working diligently on initiatives toreview selling price and improve raw
ingredient procurement routs

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Overview of 2014 Topics by Business (3)Food & Soft Drinks
 POKKA SAPPORO Food & Beverages Ltd. posted operating income (after goodwill amortization)in its second year in business
Domestic Food & Soft Drinks: POKKA SAPPORO Food &  Domestic soft drinks: Sales, affected by bad weather
in summer and consumption tax hike, recovered in
Beverages Ltd.
winter, posting sales volume of 44.64 million cases
Domestic Food & Soft Drinks 2014 Cumulative Sales Volume YoY(y-o-y 98%), in line with total demand
Total
Sapporodemand Lemon drinks: Expanded sales of Kireto Lemon and
Kireto Lemon Sparkling with product relaunch.
Up 7% y-o-y Lemon-based products: Proposed expanded
application of lemon through new products.
Up 4% y-o-y Instant soup: Strengthened Jikkuri Kotokoto lineup.
Up 9% y-o-yNew product “GREEN SHOWER”
Lemon-based
Instant soup (incl.
products
soups in a cup)
Sales 680,000 cases(flavorings)
Total demand data: Source – Total for SM CVS formats by Intage SRI(nationwide retailer panel
International Soft Drinks – POKKA Corporation (Singapore) Pte. Ltd.
research)
Jan–Dec 2014 yoy comparison of cumulative sales amount for the lemon-based products market
 Both domestic sales in Singapore and(Sapporo’s definition) and instant soup market
Domestic softdrinksexports grewUp 16% y-o-yPokka Malaysia plant completed
Production started in OctoberCapacity: 6 million cases/yearObtained Halal certification

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Overview of 2014 Topics by Business (4)Restaurants
 2014 sales at existing outlets were up 0.5% compared with the previous year (excluding the
Ginza 5-chome and Shimbashi restaurants which were closed for building reconstruction)
Restaurants business in Japan¥million

800

Trends of number of restaurants in Japan andelsewhere and operating income

600
400
200

restaurants

 Sales for all outlets declined as operation of the key
restaurants in Ginza and Shimbashi were suspended due toredevelopment of the buildings they are housed Existing-outlet sales: full-year sales exceeded the previous
year’s level despite heavy snow in Feb. and inclement weather
in Aug.
 Struggled due to rise in raw ingredients and personnel
expenses but continued with solid operation by pursuing
closure of unprofitable outlets.

Status of the restaurants in Japan0
OperatingincomeOpening restaurants, mainly of Ginza Lion and YEBISU BAR key
brands, at favorable locations in the Tokyo Metropolitan area

Number ofrestaurants

 Number of restaurants as of December 31, 2014: 185 in Japan

Restaurant business in Singapore

Opened: 15 outlets Closed: 20 outlets
Yebisu Bar,
Shinjuku I-Land Tower

Operating a total of 14
restaurants in Singapore andother Southeast Asian countries
Oct. 2014: opened the second
outlet of GINZA LION BEER
HALL in Singapore
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Overview of 2014 Topics by Business (5)Real Estate Drove forward three projects to ensure future contributions to Group earnings given thestrong real estate market in the Tokyo Metropolitan area
Yebisu Garden Place

Yebisu Garden Place Leasing to a new tenant after the end of the lease contract with a large tenant at the endof May is almost complete on a contract basis.
 Efforts to enhance the value and improve Augmentation of emergency power supply facilities
for ensuring business continuity at times of disaster as well as enhancement of officeconvenience (completed in March)• Refurbishing commercial and restaurant facilities to enhance the appeal of the entire Ebisu
district• Renovation of communal space in the second basement restaurant floor coinciding with the
opening of large high-end restaurant (April)• Implementing renovation of rental housing building to make it barrier-free and renew facilities
in living space

Ebisu First Square•••

Completed as planned, including costs and construction period, in September, and started operation
fully occupied, becoming the new base of Ebisu area
Before: 6 floors above ground, 1 below ⇒ After: 12 floors above ground, 1 below(total floor area 10,400㎡⇒15,496㎡)
Office building with superior safety and environmental features including energy savings, seismic
isolation structure and 72-hour emergency power generation capability

Ebisu First Square

Ginza 5-chome Redevelopment Plan: Redevelopment plan of Sapporo Ginza Building situatedon Ginza 4-chome intersection• 10 floors above ground, 4 below ⇒11 floors above ground, 2 below (total floor area 4,232㎡⇒7,082㎡)• Demolition started in April 2014 towards completion in May 2016
• Façade design has been finalized (Slide 20) and it is expected to be a commercial facility complex thatwould contribute to the further revitalization of Ginza and generate footfalls
Practicing select-and-focus approach: Strengthened the portfolio with the sale of Sapporo
Sports Plaza, which operates sports facilities and sale of some rental properties taking into
consideration the condition of the real estate market
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2. Sapporo Group Management Plan 2015-2016

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Sapporo Group Management Plan 2015-2016
Outline of the Management Plan
◆ The SAPPORO Group has been investing in its Japanese alcoholic beverages
and real estate businesses, which are pillar businesses that generate steadyprofits; the international business and the food & soft drinks business for future
growth; and R&D, which leads to future growth.
◆ The New Management Framework, to be completed in 2016, is positioned as
the management targets which the Group needs to achieve without fail toensure sustainable growth and we will strive to grow each business and create
profits through M&As and cost reductions so as to achieve the targets
as early as possible while keeping an eye on the next long-term
Next Long-Termmanagement framework.
Pursue M&A

Accelerate investment
for growth
Efficient utilization ofmanagement resources
2014
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2015

2016

Achieve targets
under NewManagement
Framework

Thoroughcost reductions

Management
Framework

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Financial Targets
Management Indicator Targets of Management Plan 2015–2016[Quantitative targets]
・ROE: 8% or higher in 2016
・D/E ratio: around 1.0 in 2016
* By setting ROE as the highest priority indicator,
the Company will enhance profitability and efficiency
and realize a sound financial structure.

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2015-2016 Targets Based on Current Businesses
Management Plan

2014 results2015 targets

2016 targets

Consolidated net sales*incl. liquor tax¥518.7bn¥545.7bn¥579.5bn

Consolidated operating income(before goodwill amortization)¥18.4bn¥20.7bn¥28.0bn2016 NewManagement Framework¥600.0 bn¥40.0 bn
Consolidated operating income¥14.7bn¥16.3bn¥23.5bn

Consolidated ordinary income¥14.5bn¥15.2bn¥22.1bn-

Consolidated net income¥0.3bn¥8.0bn¥11.4bn-

D/E ratio

1.5 times

1.3 times

1.2 timesaround 1.0

ROE(before goodwill amortization)

2.7%

7.8%

9.6%

ROE

0.2%

8% or higher
5.0%

6.9%

*Assumed exchange rates: 2015-2016: US$ = ¥113.00, CAN$ = ¥99.00

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2015-2016 Targets Based on Current Businesses by Segment
Management Plan
2014 results2015 targets

2016 targets¥281.8bn¥49.6bn¥133.4bn¥26.3bn¥21.5bn¥5.9bn¥290.2bn¥67.8bn¥133.7bn¥27.2bn¥20.8bn¥6.0bn¥305.0bn¥76.0bn¥141.7bn¥27.5bn¥22.8bn¥6.5bn¥518.7bn¥545.7bn¥579.5bn

Consolidated total¥10.2bn¥0.1bn¥0.1bn¥0.2bn¥7.6bn¥0.1bn¥(3.9)bn¥14.7bn¥9.5bn¥1.0bn¥0.7bn¥0.9bn¥7.9bn¥0.2bn¥(3.9)bn¥16.3bn¥12.0bn¥2.6bn¥1.4bn¥1.3bn¥9.9bn¥0.2bn¥(3.9)bn¥23.5bn

Consolidated total(before goodwill amortization)¥18.4bn¥20.7bn¥28.0bn

Japanese Alcoholic Beverages

Net salesInternational
Food & Soft Drinks
Restaurants
Real Estate
Other
Consolidated total

Operating income

Japanese Alcoholic Beverages
International
Food & Soft Drinks
Restaurants
Real Estate
Other
Eliminations and Corporate*Assumed exchange rates for 2015-2016: US$ = ¥113.00, CAN$ = ¥99.00
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2015-2016 Japanese Alcoholic Beverages“Seek No.1 by accumulating one-of-a-kind products”
Strengthen cultivation of brand in each field
Key points in Management Plan
■ Beer business➤Concentrate investments on the core brands
to further enhance brand value➤Propose functionalities of new core brands
To launch Green Aroma, a new genre product offor enjoying the fragrance which is 80%
carbohydrate-free, on March 10➤With the start of the craft beer business, develop
various types of beer by leveraging thecompany’s long-nurtured brewing technology
and using carefully selected ingredients andoffer new ways of enjoying beer？

■ Wine and spirits business➤Nurture the brands in line with the theme ofeach product category to promote further growth
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2015-2016 International
Promote further market penetration of
the Sapporo brand around the world
Key points in Management Plan
■Canada, U.S.
➤Optimize brand portfolio and strengthenmarket penetration➤Promote efficiency throughout North America
through collaboration between SLEEMAN
and Sapporo USA■U.S. soft drinks business➤Enhance produce lineup to reduce raw
ingredient price fluctuation risks and acquire
new demand in West Coast➤Maximize synergies between SSC andCountry Pure Foods, whose acquisition has
decided (a 51% stake)
Copyright, 2015 SAPPORO HOLDINGS LTD. All rights reserved.

■Southeast Asia

➤In Vietnam, accelerate expansion of beerbusiness, improve operating income (loss)

and become profitable by promoting brandbuilding➤Strengthen exports from Vietnam and expand
sales and profits to surrounding countries
including South Korea, Australia andSingapore■Other➤The representative office in Singapore,established 2014, to take initiative in early
realization of group synergies in Southeast
Asia
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Country Pure Foods Inc. (CPF)
CPF profile

Location
Business

Production
bases
Net sales

Strength in commercial-use sales to non-commercial organizations such as
educational and medical institutions mainly in the U.S. and it is also engaged in
production of private brand products for major retail chains and contract manufacturing for
major beverage manufacturers
Akron, Ohio
・Manufacturing and sale of commercial use foods (school and hospital meals) andfruit juice
・Manufacturing and sale of private brand fruit juice for retail chains・Contracted manufacturing of fruit juice for beverage manufacturers
4 factories(Akron, Ohio; Deland, Florida; Ellington, Connecticut; and Houston, Texas)
18.3 billion yen (fiscal year through December 2013)

Products produced by CPF
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Production bases of CPF

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2015-2016 Food & Soft Drinks
Move on to growth stage by cultivating brands andimplementing structural reform
Key points in Management Plan
■ Domestic food & soft drinks■ Restaurants in Japan➤ Establish and cultivate our core lemonbased product and soup brands unique to
POKKA SAPPORO➤ Promote further reduction in costs andstructural reforms➤Accelerate the offering of new values andproducts, drawing on the accumulated
knowledge of the Sapporo Group andselected ingredients➤ Open new formats of the development ofCafé de Crié (an intra-hospital restaurants
and suburban-type restaurants)■ Overseas soft drinks➤Strengthen sales and exports byleveraging the opening of the new plantin Malaysia➤Expand into surrounding countries suchas Myanmar, where a licensed
manufacturing contract has been signed

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Malaysian plant

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2015-2016 Restaurants
Expand the Beer Hall restaurant format in Japan andoverseas to disseminate beer hall culture to the world
Key points in Management Plan
■ Japan➤Expand the Beer Hall restaurant format, tosolidify our market position and improveearning capability➤Aggressively renovate existing restaurants,
open new outlets primarily of the core
Ginza Lion and YEBISU BAR brands anddevelop new restaurant formats➤Use the point card system, introduced at theend of the previous fiscal year, to strengthen
our relationships with customers and utilize
the data■ Overseas➤Promote the expansion of the Ginza Lion

Beer Hall restaurants, which have been
received favorably and pursue further
expansion of overseas restaurant business

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2015-2016 Real Estate
Strengthen the Group’s earnings base byenhancing the value of our properties
Key points in Management Plan
■ For sustainable growth of the business➤Promote value of Yebisu Garden Place bystrengthening the office, commercial and dining
functions and to enhance the brand value of the entire
district➤Drive forward the Ginza 5-chome redevelopment plan,
to create a commercial facility complex that cancontribute to further revitalization of the Ginza areaand bring in renewed energy➤Promote strategic review and reorganization of ourbusiness and property portfolio to make our realestate business a strong backbone and to establish astable earnings base for the Group
Exterior image of the Ginza 5-chome redevelopment plan
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2015-2016 R&D Strategies
Promote offering of products and services of value throughresearch and development that leverages the Group
resources to the maximum extent■Lactic acid bacteria➤Propose high value added products with
the Group’s proprietary plant-based lactic
acid bacterium Shiawase Nyusankin
SBL88, which is expected to offer various
health benefits■Next generation energy➤Based on the fermentation
technology developed over the years,
promote technology development
related to creation of next-generationenergy and initiatives for their practicaluse■Lemon➤Take advantage of the formidable
brand value of Pokka Lemon topromote the world’s best research inlemon and commercialize productswith new values
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Strengthen Corporate Governance

Strengthen corporate governance overseas
as well as in Japan◆ Of the 10 Sapporo Holdings directors, three are
independent outside directors, who have been
contributing to promoting an adequate governancestructure by actively expressing their views, etc.
◆ Familiarize the SAPPORO Group Code of Corporate
Conduct at overseas subsidiaries to reinforce anoperational and management structure that conforms
to the respective country’s laws and regulations
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Policy Regarding
Return of Profits to Shareholders
Providing fair returns to shareholders is a key
management policy of the Company. Our basic policy is
to pay stable dividends, taking our operating
performance and financial condition into account.
Concerning our internal reserves, we will appropriate
the reserves for making strategic investments in growthfields and for strengthening our financial foundation,
based on the new management plan, so as to maximize
our corporate value.
We aim to boost return of profits in line with ourachievement of the targets set forth by the management
plan.
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3. Overview of 2014 Results*For information on the profitability of each business, please see theSupplementary Information to our Earnings Report.

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Overview of 2014 Results (1) Vs. 2013
 Net sales: up YoY
・ Japanese Alcoholic Beverages: sales increased, as
sales volume of beer and beer-type beverages rosecompared with the same period a year earlier.
・ Food & Soft Drinks: sales increased reflecting a rise inoverseas soft drink sales and the impact of foreignexchange fluctuation.

 Operating income: down YoY

・ Japanese Alcoholic Beverages: profit increased,
despite sales promotion expenses for brandstrengthening, reflecting the reduction in various costs.
・ International: profit decreased due to priceadjustments in North America, sharp cost increase in
the U.S. soft drinks business and brand establishment
investment in Vietnam
・ Food & Soft Drinks: profit increased due to cost
reduction in the Japanese food and soft drinks businessand sales growth overseas
・ Real Estate: revenues declined due to lower rents
given that the properties under redevelopment are notoperating Net income: down YoY

Extraordinary income: negative factor includes reductionin the 3.5 billion yen gain on sales of investment
securities recorded in the previous year, while there
was a fixed asset sale gain of 3.5 billion yen in 2014.
Extraordinary loss: negative factors include therecording of 2.3 billion yen as cost for demolition,
removal, etc. in the Sapporo Ginza Building
redevelopment project this year, and recording of 11.6
billion yen as a difference in liquor tax amount due tovoluntary filing of revised tax liquor return for Goku Zerothis year.
Copyright, 2015 SAPPORO HOLDINGS LTD. All rights reserved.

(billions of yen)2013 results

2014 results

YoY changes(amount, %)Japanese Alcoholic
Beverages

274.9

281.8

6.9

2.5%

International

48.2

49.6

1.4

3.0%

Food & Soft Drinks

130.6

133.4

2.7

2.1%

Restaurants

26.8

26.3

(0.4)

(1.8)%

Real Estate

22.7

21.5

(1.2)

(5.5)%

Other

6.4

5.9

(0.4)

(7.7)%

Consolidated net sales

509.8

518.7

8.9

1.7%

Operating income before goodwill
amortization

19.3

18.4

(0.8)

(4.3)%

Japanese Alcoholic
Beverages

9.9

10.2

0.3

3.1%

International

1.2

0.1

(1.0)

(85.7)%

3.0
(1.8)

2.3
(2.1)

(0.8)
(0.2)

(25.7)％
―

(1.4)

0.1

1.6

―

Restaurants

0.4

0.2

(0.1)

(29.7)%

Real Estate

8.6

7.6

(0.9)

(11.4)%

Other

0.2

0.1

(0.0)

(20.5)%

(3.6)

(3.9)

(0.3)

―

Consolidated operating income

15.3

14.7

(0.6)

(4.0)%

Consolidated ordinary income

15.1

14.5

(0.5)

(3.7)%

Consolidated net income

9.4

0.3

(9.1)

(96.4)%

North America, other
VietnamFood & Soft Drinks

General corporate

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Overview of 2014 Results (2) Vs. Initial Targets
 Net sales: -3.5％ vs. target

・Japanese Alcoholic Beverages: Sales of beer and beertype beverages fell short of the target. The share of
happoshu and new-genre products in the beer andbeer-type beverages increased
・International: Sales of both SLEEMAN and Sapporo
brands fell short of the targets due to intensifying
competition and the cold wave in North America
・ Food & Soft Drinks: Sales fell short of the target partly
due to the impact of the inclement weather andconsumption tax rate increase on the Japanese foodand soft drinks business(billions of yen)Japanese Alcoholic
Beverages

2014
targets*

2014 results

vs. target(amount, %)

284.3

281.8

(2.4)

(0.9)%

International

57.2

49.6

(7.5)

(13.2)%

Food & Soft Drinks

140.0

133.4

(6.5)

(4.7)%

Restaurants

28.1

26.3

(1.7)

(6.2)%

Real Estate

22.3

21.5

(0.7)

(3.5)%

Other

5.8

5.9

0.1

2.5%

Consolidated net sales

537.7

518.7

(18.9)(3.5)%

Operating income before goodwill
amortization

19.0

18.4

(0.5)

(2.7)%

Japanese Alcoholic
Beverages

9.0

10.2

1.2

13.4%

International

1.1

0.1

(0.9)

(84.3)%

3.4
(2.3)

2.3
(2.1)

(1.0)
0.1

(33.7)%―

Food & Soft Drinks

0.1

0.1

0.0

20.1%

・Ordinary income exceeded the target due to improved
net financial expenses and foreign exchange gains
from the weaker yen despite operating income fallingshort of the target

Restaurants

1.0

0.2

(0.7)

(70.8)%

Real Estate

7.2

7.6

0.4

6.9%

Other

0.2

0.1

(0.0)

(8.0)%・ While there was a fixed asset sale gain of 3.5 billion
yen, net income declined due to the recording of 2.3
billion yen as cost for demolition, removal, etc. in the
Sapporo Ginza Building redevelopment project thisyear, and the recording of 11.6 billion yen as adifference in liquor tax amount due to voluntary filing ofrevised tax liquor return for Goku Zero this year.

General corporate

(3.6)

(3.9)

(0.3)

―

Consolidated operating income

15.0

14.7

(0.2)

(1.8)%

Consolidated ordinary income

13.6

14.5

0.9

7.1%

5.0

0.3

(4.6)

(93.2)%

 Operating income: -1.8％ vs. target

・Japanese Alcoholic Beverages: Profit increased as aresult of cost control over items including marketing
expenses, although the sales volume fell short of thetarget・International: Profit declined, as sales fell short of thetarget in North America and due to the sharp increasein raw ingredient prices for the U.S. soft drinks business・Restaurant: Profit fell due to suspension of business at
key restaurants and inclement weather as well as sharp
rises in raw ingredients and personnel expenses

 Ordinary income: ＋7.1％ vs. target Net income: -¥4.6 billion vs. target

Copyright, 2015 SAPPORO HOLDINGS LTD. All rights reserved.

North America, other
Vietnam

Consolidated net income*The earnings forecasts as of the announcement on February 12, 2014

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Overview of 2014 Results (3) Status of Capital Expenditure
Implementation Status of Strategic Investments(Including Ordinary Capex, on a cash basis)①<Capital expenditure and lease fees>
Consolidated total: Approx. ¥22.5 bn
 Property, plant and equipment, intangible assets, lease fees, etc.
Major items:
 Ojima plant for upgrading of carton line (Japanese Alcoholic
Beverages): approx. ¥0.5 billion, Nagoya plant constructionrelated (Food & Soft Drinks): approx. ¥1.2 billion, photovoltaic
power generation at Gunma plant (Food & Soft Drinks): approx.
¥0.3 billion, construction of Malaysian plant (Food & Soft
Drinks): approx. ¥1.5 billion, construction of Ebisu First Square(Real Estate): approx. ¥3.0 billion, value enhancement of Yebisu
Garden Place (Real Estate): approx. ¥2.3 billion, lease fees
(Food & Soft Drinks, Other): approx. ¥3.2 billion, etc.

②<Other investments>
Consolidated total: Approx. ¥7.0 billion
 Long-term prepaid expenses, investment securities,
compensation expenses, etc.
Major items:
 Long-term prepaid expenses (Japanese Alcoholic Beverages,
Food & Soft Drinks) : approx. ¥3.8 billion, investment securities,
etc.: approx. ¥1.5 billion, demolition, removal and compensation
expenses for Sapporo Ginza Building : approx. ¥1.7 billion①＋② <2014 strategic investment total (incl. ordinary
capex, on a cash basis)> Approx. ¥29.5 billion

Credit Ratings<Credit rating by JCR> As of February 13, 2015: A- (stable)<Credit rating by R&I>
 As of February 13,2015: BBB+ (stable)<Achievement of low-cost financing> In September 2014, issued ¥10 bn in five-year straight bonds at a low
cost of 0.308%

Direction of Long-Term Strategic Investments
 We will continue to actively carry out strategic investments for
growth.
 The scale of strategic investment from 2012 to 2016 isanticipated to be from ¥150 billion to ¥200 billion (in principle,
funded from accumulated operating cash flow).
– Including ordinary capex (approx. half of strategic
investments)– 2012 strategic investment total: Approx. ¥65.7 bn– 2013 strategic investment total： Approx. ¥23.5 bn– 2014 strategic investment total： Approx. ¥29.5 bn– (Plan : ¥33.9bn)– 2015 strategic investment plan: Approx. ¥35.1 bn–

Copyright, 2015 SAPPORO HOLDINGS LTD. All rights reserved.

(Capital expenditure ¥19.5bn, Other investments ¥15.3)

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Reference 1: Supplementary Information to 2014
Results (Overview by Business Segment)* For information on the profitability of each business, please see theSupplementary Information to our Earnings Report.

Copyright, 2015 SAPPORO HOLDINGS LTD. All rights reserved.

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Japanese Alcoholic Beverages
Net sales increased year over year , as total sales volumes
for beer and beer-type beverages rose 1% and sales of wine,
western spirits, Japanese liquor and RTD also grew.
Operating income rose as sales grew even after sales
expenses increased.
Status of products other than beer and beer-type beverages
Net sales trends (billions of yen)

Wine

Japanese
wine

16.0
14.0
12.0

11.9

6.0

Imported
wine
12.8

13.9

10.8

11.4
6.6

7.1

7.7

8.3

6.5
4.3

4.8

4.8

5.1

5.6

5.7

5.7

10.0
8.0
4.0
2.0

Western
spirits

7.0
6.0

4.8

5.0
4.0
3.0
2.0

1.4

(billions of yen)

*Incl. liquor taxes

Results highlights

2.2

YoY change

2013

2014

Amount%Net sales*

274.9

281.8

6.9

2.5%

Operatingincome

9.9

10.2

0.3

3.1％

 Wine: Net sales of Japanese and imported wine rose 9% year
over year. Among Japanese wine, sales volume of Grande
Polaire, premium wine made with 100% Japanese grapes,
increased 19%, while Yellow Tail and Santa Rita among
imported wine were strong.
 Western spirits: Net sales increased 1% year over year, led by
the world’s No. 1 rum brand Bacardi, including Bacardi Mojito.
 Japanese liquor: Net sales rose 10% year over year led byblended Imo Shochu Kokuimo and Mugi Shochu Koimugi.
Among umeshu, sales of San-shu no Zeitaku Porifenoru Aka
Umeshu, umeshu with extra functions added, were strong.
 RTD: Net sales increased about 40% year over year. Otoko
Ume Sour, a collaboration product, has been extremely strong.
Newly-launched Kireto Lemon Sour also posted strong sales.

1.0

RTD
Shochu

16.0

13.3

14.0

11.4

12.0
10.0
8.0

8.6

14.7

Sales volume(10,000 cases)

8.5

6.0
4.0
2.0

Copyright, 2015 SAPPORO HOLDINGS LTD. All rights reserved.

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International(billionsof yen)
単位：億円

2013

Results highlights
Sales fell due to intensifying competition in Canada andthe impact of the cold wave in the U.S. , while thebusiness in Vietnam grew steadily. Net sales increased
partly due to the impact of the foreign exchange
fluctuation.
Operating income decreased due to the spending on sales
promotion investment in North America and Vietnam andhigher raw ingredient prices in the soft drinks business.
Status of business other than North America and Vietnam

Asian and Oceania Market (excl. Vietnam)
South Korea

2014

YoY change
Amount%Net Sales

48.2

49.6

1.4

3.0%

Operatingincome

1.2

0.1

(1.0)

(85.7)%

3.0
(1.8)

2.3
(2.1)

(0.8)
(0.2)

(25.7)％－

North America,
othersVietnam

Oceania Entered the Australian/New Zealand premium beer market via alicensing agreement with Coopers Brewery Ltd. (No.3 in Australia’sbeer market, No. 2 in premium beer market with a 17.3% share) Full-scale start-up in 2012 Strengthened Sapporo brand value and sales structure in South
Korea by entering into an alliance with Maeil Dairies Co., Ltd.
Aim to be the No. 1 Japanese beer brand.
(market share leader in cheese, low-fat milk, and chilled coffee
drinks) in January 2012 and acquiring a 15% stake in M’s Beverage  2016 sales target of 500,000 cases(1 case = 355 ml×24 bottles ）Co., Ltd., a wholly owned liquor sales subsidiary of Maeil
Non-equity method affiliate

 Aiming to be the No. 1 imported brand 2014: More than 20% growth year over year

Singapore Household market sales channel expansion in collaboration withPOKKA for beer produced in Vietnam
 Striving to be the No. 1 Japanese beer brand 2014: In line with the previous fiscal year’s level 2014: Sales increased more than 40% year over year

North America (soft drinks business)
Silver Springs Citrus (U.S.)Country Pure Foods (U.S.)

Copyright, 2015 SAPPORO HOLDINGS LTD. All rights reserved.

The largest U.S. maker of private-brand chilled drinks (a 51% stake)In fiscal year 2014 profits declined as sales cost ratio increased reflecting
the sharp rise in raw ingredient prices. The company will focus on selling
price negotiation and expansion of raw ingredient procurement routes.
Decided the purchase in 2014 (a 51% stake), manufacturing anddistribution of fruit juice beverages
Strength in commercial-use sales. The Group will pursue synergies with
SSC and business expansion

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Food & Soft Drinks(billions of yen)

Results highlights
While sales of the domestic food and soft drinks businessdeclined slightly into the second year of the integration, thoseof the overseas soft drinks business increased. Partly due toforeign exchange fluctuation, net sales exceeded the previous
year's level.
The business posted operating income after goodwill
amortization due to increased overseas profits and improved
efficiency after the integration.

Status of other Japanese soft drink and restaurant
businesses■ Food and Soft Drinks (Domestic):
POKKA SAPPORO Food & Beverages Ltd.
(Businesses other than beverages [domestic],
lemon and food/soup)Vending machine
Overseas brandhard water

Commercial
marketchannel: 100,000
machine network
Per machine
improvement,
efficient sales
activities

Carbonated water
Gerolsteiner, Vittel,
ContrexRejuvenate the market
with the 3 brands

Utilizing Sapporo
Breweries
channelSales of lemon andmixer expanded

Copyright, 2015 SAPPORO HOLDINGS LTD. All rights reserved.

2013

2014

YoY change
Amount%Net sales

130.6

133.4

2.7

2.1%

Operatingincome

(1.4)

0.1

1.6

－

1.2

2.6

1.3

108.3%

Before GW
amortization■ Restaurants (Domestic): POKKA CREATE Co., Ltd.
 Café de Crié celebrated its 20th anniversary and actively
opened outlets in new areas and proposed new menu Further improve FC support system
 Nurture human resources for FC business, enhance educationand training system
Outlets: 185 (as of end of Dec, 2014)(Directly operated: 94 outlets; FC: 91 outlets)
Hokkaido 2, Kanto 104, Tokai 37
Kansai 31, Kyushu 8, Shikoku 3

Practicing select-and-focus approach: It sold all shares in
Pokka Corporation (H.K.) Limited, an overseas restaurant
business company, in 4Q in order to focus corporate resourceson its core soft drinks business and expand it aggressively.

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Restaurants
Results highlights
Net sales declined, although comparable-store sales were 100.5%
in 2014. This is mainly attributable to the inclement weather andthe fact that key restaurants in Ginza and Shimbashi suspended
operations as the buildings housing them are being renovated.
Operating income declined reflecting sales decline and sharp
increases in raw ingredient and personnel expenses(billions of yen)

YoY change

2013

2014

Amount%Net sales

26.8

26.3

(0.4)

(1.8)%

Operatingincome

0.4

0.2

(0.1)

(29.7)%

Status of the restaurant expansion

 Locations newly opened in Jan-Dec 2014: 15 (Japan)
 Opening new format restaurants
Apr: Opened Wine House Picnic Club, a restaurant offering
wine and food, in Osaki
Sep: Opened casual beer hall Bier Keller Tokyo in Shimbashi
Wine House Picnic Club

Copyright, 2015 SAPPORO HOLDINGS LTD. All rights reserved.

Outlet expansion in Singapore
Promoting international expansion inSoutheast Asia led by Singapore
Locations operating as of Dec 31, 2014 in
Singapore: 14 outlets
・ Ginza Lion (beer hall): 2 outlets
・ Tonkichi (pork cutlet): 4 outlets
・ Domani (Italian): 1 outlet
・ Rive Gauche (patisserie): 7 outlets
Singapore Tonkichi

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Real Estate(billions of yen)

Results highlights

YoY change

Both sales and profits declined year over year due to a decline in rents
resulting from reconstruction of Sapporo Ginza Building

2013

2014

AmountNet sales

22.7

21.5

(1.2)

(5.5)%

Operatingincome

8.6

7.6

(0.9)

(11.4)%*The property portfolio largely comprises the following properties in Tokyo (5 central
wards).

Occupancy rates are annual averages for 2014 (contract basis).
Major rental properties inTokyo’s 23 wards

Site area (m2)

Floor area (m2)Occupancy rate(%)

Yebisu Garden Place *1

56,943

298,00782%

Ebisu First Square*

2,596

15,496*23%

Ebisu Square

1,561

9,126

100%

Shibuya Sakuragaoka
SquareSapporo Ginza
Building*

1,200

9,268

100%

644

7,082

*14%

Strata Ginza *2

1,117

11,411100%%

No. of floors
40 floors above
ground, 5 below
12 floors above
ground, 1 below
7 floors above
ground, 1 below
10 floors above
ground, 1 below
11 floors above
ground, 2 below
13 floors above
ground, 1 below

Unrealized gain on real estate for lease was ¥140.3 billion as ofDec. 31, 2014.
Balance sheet value at December 31, 2014 : approx. ¥207.8 billion
Fair value at December 31, 2014 : approx. 348.2 billion yen

Site areas are taken from the land registry. Floor areas are as per building certification.
“*”s are redevelopment projects. Occupancy rates are previous figures, areas are new properties*1: The number of floors is for the office block only. Occupancy rates are for office areas only.
*2: Figures are for entire property. Sapporo owns 922m2 of the site (sectional ownership) and 89.72% of the building (joint management)

Operating income(billions of yen)

Jan-Dec 2013
Real estate leasing
Tokyo’s 23
wards

Jan-Dec 2014

Change

7.9

6.5

(1.3)

Other areas
Real estate leasing
total

1.1

1.2

0.1

9.0

7.8

(1.1)

Real estate total

－
(0.3)
8.6

0.1
(0.3)
7.6

0.1
(0.0)
(0.9)

Other operations*

EBITDA

Total* “Other operations” includes back-office operations.

Copyright, 2015 SAPPORO HOLDINGS LTD. All rights reserved.

Real estate leasing
Tokyo’s 23
wards
Other areas
Real estate leasing
total
Real estate total
Other operations*
Total

EBITDA =operating income + depreciation and amortization(billions of yen)

Jan-Dec 2013

Jan-Dec 2014

Change

11.2

10.0

(1.2)

1.7

1.9

0.1

13.0

11.8

(1.1)

－
0.0
13.1

0.1
(0.0)
11.9

0.1
(0.0)
(1.0)

* “Other operations” includes back-office operations.

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Reference 2: Sapporo Group’s New Management
Framework Announced in 2007

Copyright, 2015 SAPPORO HOLDINGS LTD. All rights reserved.

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Sapporo Group’s New Management Framework
Announced in 2007
Basic approach for working steadily toward long-term goals
while also boldly revising management resource allocation,
executing strategic investments, and enhancing competitivenessthrough “aggressive management”

New Management Framework(formulated October 2007)◆Consolidated sales: ¥600 bn (incl. liquor tax)
¥450 bn (excl. liquor tax)
◆Consolidated operating income: ¥40 bn◆ROE: 8% or higher◆D/E ratio: approx. 1:1

Copyright, 2015 SAPPORO HOLDINGS LTD. All rights reserved.

(before goodwill amortization)

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Sapporo Group’s Business Domains
Sapporo Group

Creating value in foodInternational
Japanese Alcoholic
Beverages

Restaurants

Food & Soft Drinks

Stable profit contribution
from the group’s corebusinesses

Creating comfortablesurroundings

Real Estate

Stable profit contribution
backed byprime properties

With the Japanese Alcoholic Beverages business and Real Estatebusinesses, which steadily generate profits, as the pillars, to continue investingin the International and Food & Soft Drinks businesses for the future growth
as well as in research and development which leads to future growths
Copyright, 2015 SAPPORO HOLDINGS LTD. All rights reserved.

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Profit Growth and Profit Management(Consolidated Operating Income)

Steady profit growth
after the financial crisis
Billions of yen

Target achieved

20.0

18.8

Impact of competitive
sales promotions within
the industry in reaction
to the earthquake
disaster

20.0

18.0

Target achieved

Target achieved

15.4

15.0

Target achieved
12.0

12.8

15.3
14.4

13.5

15.3

Current
fiscal year
15.0

14.7

10.0

5.0

0.0
Initial target
Copyright, 2015 SAPPORO HOLDINGS LTD. All rights reserved.

Result37/41

Changes to Sapporo Group
Promoting diversification of business portfolio
through M&As and alliances
2013
2012

Initiatives
thus farJapan
Overseas

2008
Sold 15%
stake in
Yebisu Garden
Place

2011

Started operations of
POKKA SAPPORO
Food & Beverages

Entered western
spirits business
2011

2009
Started operations of
Azumino Food Co., Ltd.

2006

2009

Entered shochu
business

Capital and businessalliance with POKKA

2012 Vietnam
Business integration2014 Malaysia
with POKKA
Soft drinks plant
Full-scale entry
starts production
into beer market
2011 Vietnam
Beer plant2013 Singapore
completed2006 Canada
2010 South Korea

Made SLEEMAN
into a subsidiary

From 2003 – Transition toholding company

Acquired 15%
stake in Yebisu
Garden Place

Full-scale salesof beer

Opened Sapporo Lion

2011 Australia

Beer production
under license

2012 U.S.

2013 U.S.

Made a major PB chilled
beverages manufacturer
into a subsidiary

Outsourced
production ofbeer

2014 U.S.
Decided to acquirea fruit juice
manufacturer

2007 Formulated New Management Framework

Copyright, 2015 SAPPORO HOLDINGS LTD. All rights reserved.

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Formulation of Next Long-term Management
Framework

What Sapporo Group aspires to be
in 2026 (150th anniversary)
The SAPPORO Group will be a group ofcompanies that is essential for customers
to enjoy rich lives throughout the world
by continuing the creation and supply
new products and services
that become No. 1 in the market.
Copyright, 2015 SAPPORO HOLDINGS LTD. All rights reserved.

39/41

Formulation of Next Long-term Management
Framework

Guidelines for corporate behavior
1. We seek continued innovation and provide
customers with valuable No. 1 products andservices to contribute to their attainment ofa richer life
2. We endeavor to create products andservices that will activate communications
among customers
3. We strive to ensure efficient business
operation by addressing changes in thebusiness environment
Copyright, 2015 SAPPORO HOLDINGS LTD. All rights reserved.

40/41

As an intrinsic part of people's lives, Sapporo will contribute to
the evolution of creative, enriching and rewarding lifestyles.

The earnings forecasts and forward-looking statements appearing in this document were prepared by the
SAPPORO Group based on currently available information and its best assessment of potential risks anduncertainties. Actual outcomes may differ materially from forecasts due to changes in various underlying
factors.

Copyright, 2015 SAPPORO HOLDINGS LTD. All rights reserved.

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