Financial Results
for the Year Ended December 31, 2013 — Consolidated(Based on Japanese GAAP)
February 12, 2014

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, 2014

Filing of annual financial report

March 31, 2014

Commencement of dividend payments

March 31, 2014

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, 2013
(January 1 – December 31, 2013)(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, 2013

509,834

3.5

15,3446.4

15,130

10.5

9,451

75.2

Year ended
December 31, 2012

492,490

9.6

14,414(23.7)

13,689(18.6)

5,393

70.4

Note: Accumulated other comprehensive income
Year ended December 31, 2013: 24,339 million yen(119.5%)
Year ended December 31, 2012: 11,090million yen(1265.4%)

1

Net income
per share

Diluted net
income per
share

Return on
equityOrdinary
income tototal assets

Operatingincome tonet sales

Yen

yen

%

%

%

24.20

-

6.7

2.5

3.0

13.77

-

4.2

2.4

2.9

Year ended
December 31, 2013
Year ended
December 31, 2012

Note: Equity method investment gains
Year ended December 31, 2013: 99 million yen
Year ended December 31, 2012: 180 million yen(2) Financial Position

Total assets

Net assets

Shareholders’equity ratio

Net assets per
sharemillion yen

million yen%

yen

December 31, 2013

616,752

155,36624.6

388.77

December 31, 2012

597,636

134,94622.1

336.60Cash flows fromoperating activities

Cash flows frominvesting activities

Cash flows fromfinancing activities

Cash and cash
equivalents at endof period

million yen

million yen

million yen

million yen

Year ended
December 31, 2013

32,861(13,268)(19,147)

11,518Year ended
December 31, 2012

29,618(59,485)

30,1599,725

Note: Shareholders’ equity
December 31, 2013: 151,683million yen
December 31, 2012: 131,795 million yen(3) Cash Flows22. Dividends
Total

Dividend per share
Record date or
periodDividends

dividends

Payoutto net

paid

ratio

assetsEnd Q1End Q2End Q3Year-end

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

yen

yen

yen

yen

yen

million yen%%

Year ended
December 31, 2012

—

0.00

—

7.00

7.00

2,753

50.8

2.1

Year ended
December 31, 2013

—

0.00

—

7.00

7.00

2,731

28.9

1.9

Year ending
December 31, 2014
(forecast)

—

0.00

—

7.00

7.00

54.6

3. Forecast of Consolidated Earnings for the Year Endin g December 31, 2014
(January 1 – December 31, 2014)(Percentage figures represent year-over-year changes)
Net
Net sales

Operating income

Ordinary income

Net income

incomeper share

Year ending
December 31,
2014

million yen%

million yen%

million yen%

million yen%

Yen

537,700

5.5

15,000(2.2)

13,600(10.1)

5,000(47.1)

12.82

Note: Earnings forecasts for the six months ending Jun 30, 2014, are omitted because the company manages performance targets on a yearly basis.

4. Other(1) Changes to scope of consolidation: Yes*Changes affecting the status of significant subsidiaries (scope of consolidation)
Newly consolidated: -Newly excluded: Sapporo Beverage Co., Ltd.

(Note) Sapporo Beverage Co., Ltd. was absorbed by Pokka Sapporo Food & Beverage Ltd.
via a merger conducted on January 1, 2013. Sapporo Beverage Co., Ltd. was dissolved andceased to be a subsidiary of the Company; while Pokka Sapporo Food & Beverage Ltd.
became a subsidiary.
(2) Changes in accounting policy, changes in accounting estimates, and retrospective restatement
1) Changes in accordance with amendments to accounting standards etc.: None
2) Changes other than 1) above: None
3) Changes in accounting estimates: None
4) Retrospective restatement: None3(3) Number of shares issued and outstanding (common stock)1) Number of shares issued at end of period (treasury stock included):
December 31, 2013: 393,971,493 shares
December 31, 2012: 393,971,493 shares
2) Number of shares held in treasury at end of period:
December 31, 2013: 3,805,058 shares
December 31, 2012: 2,418,030 shares
3) Average number of outstanding share during the period:
Year ended December 31, 2013: 390,568,806 sharesYear ended December 31, 2012: 391,560,982 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 completed
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, 2014” on page 12.

4

1. Analysis of Operating Results(a) Review of the fiscal year ended December 31, 2013
(1) Overview
Millions of yen, except percentages
Net sales

Operating income

Ordinary income

Net income

2013

509,834

15,344

15,130

9,451

2012

492,490

14,414

13,689

5,393

3.5

6.4

10.5

75.2

Change (%)

In 2013, the Japanese economy saw the emergence of positive developments from the
beginning of the year amid a backdrop of monetary easing and economic stimulus
measures. However, the consumer -spending environment remained clouded in uncertainty.
More specifically, conditions in the industries in which SAPPORO Group companies operate
were as follows.
The soft drinks industry enjoyed rising demand supported by favorable weather conditions,
including another hot summer in Japan. The alcoholic beverage and re staurant industries,
however, did not see demand rebound as much as expected despite signs of a recovery inconsumer spending. In the real estate industry, vacancy rates in the Greater Tokyo officeleasing market continued to decline but rent levels remain ed weak.
Amid this environment, we began implementing the new Sapporo Group Management
Plan 2013–2014, which envisions these two years as “a crucial period for establishing thefoundations for realizing a new Group management structure.” The new plan sets out threestrategies for achieving dynamic growth , namely to “Accept challenges leading to growth inall businesses,” “Steadfastly implement growth measures,” and “Create new growth
opportunities.”
With regard to the first of these three strategies, “Acc ept challenges leading to growth inall businesses,” our businesses are leveraging the strengths of each business’ brands andmanagement resources while accepting new challenges to enable us to stay ahead of thecompetition.
Regarding our second strategy, “Steadfastly implement growth measures,” our Real
Estate business continued to implement its plans for raising the value of its core property,
Yebisu Garden Place, which celebrates its 20th anniversary in 2014. During 2013, these
efforts included the installation of additional emergency power -generating systems.
Meanwhile, our Food & Soft Drinks business began integrated operations in January 2013
as Pokka Sapporo Food & Beverage Ltd. During 2013, we continued to grow ourinternational business by strengthening our alcoholic beverage and soft drink operations inSoutheast Asia. The alcoholic beverage business is using its base in Vietnam as abridgehead for expansion into neighboring countries, while the soft drink business built a
new plant in Malaysia as part of its plan to increase production capacity in the region.
Finally, with regard to our third strategy , to “Create new growth opportunities,” ourInternational Business is working to strengthen its foothold in the North American b eer

5market to ensure a platform for further growth. To this end, the business began outsourcing
production in the United States and restructured its existing production network in thatcountry so as to meet growing demand . The Restaurants Business, meanwhi le, isintroducing its beer halls to other countries. In October, it opened a Ginza Lion outlet in
Singapore, marking its entry into that Southeast Asian country.
The efforts outlined briefly above contributed to the SAPPORO Group’s consolidated
results in 2013, as presented below.
Net Sales
In 2013, the Sapporo Group posted consolidated net sales of ¥ 509.8 billion, up ¥17.3
billion, or 4%, from 2012. Sales growth was supported by a year -over-year increase in sales
volumes of beer and beer -type beverages at the Japanese Alcoholic Beverage businessand continued growth in the International Business’ sales volumes in North America andVietnam.
Sales were also boosted by the inclusion of two recent additions to the consolidate daccounts , with Silver Springs Citrus, the largest US maker of private -brand chilled drinks,
consolidated as part of the International Business in April 2012, and Pokka Ace (M) SDN.
BHD. added in January 2013 to the Food & Soft Drinks Business.
Operating Income
Consolidated o perating income totaled ¥ 15.3 billion, a year-over-year increase of ¥ 0.9
billion, or 6%. Profit growth was supported by higher sales at the Japanese Alcoholic
Beverage business coupled with reduced marketing expenses. The Internationa l Business’sales growth in North American and Vietnam also contributed to higher profits. The Real
Estate business, however, saw profit decline owing to a decline in rental income caused byredevelopment of Seiwa Yebisu Building, which is scheduled to reopen in September 2014
as the Sapporo Ebisu Building (provisional name). Profits were also lower at the Food & Soft
Drinks business, mainly owing to the reduction in its product lineup in line with businessintegration.
Ordinary Income
In addition to the increase in consolidated operating income, the Group posted a solid
year-over-year gain in consolidated ordinary income, which rose ¥1.4 billion or 11% to¥15.1 billion.
Net Income
Consolidated net income in creased by ¥4.0 billion or 75% to ¥9.4 billion, owing to theposting of a ¥3.4 billion gain on the sale of investment securities.

Segment information is outlined below. At the start of the previous fiscal year, Sapporo
Logistics Systems Co., Ltd., which was previously included in the Japanese Alcoholic
Beverages segment, and Pokka Logistics Co., Ltd., which was previously included in the
Food & Soft Drinks segment, were reclassified to the other segment. Pokka Logistics Co.,

6

Ltd., was subsequently dissolved on July 1, 2013, and its operations merged into Sapporo
Logistics Systems Co., Ltd.
In addition, Pokka Food (Singapore) Pte. Ltd. was moved from the Food & Soft Drinks
segment to the Restaurants segment, and on April 1, 2013, the company’s name waschanged to Sapporo Lion (Singapore) Pte. Ltd.
To enable year-over-year comparisons in this document, figures for the year -earlier period
have been adjusted to reflect the above changes and new segmentation.

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

2013

% change

1.8

7,522

9,901

31.6

48,215

33.5

(73)

1,208

-

129,017130,671

1.3

364(1,483)-

Restaurants

26,621

26,827

0.8

538

415

(22.9)

Real EstateBusiness

23,21722,767

(1.9)

9,396

8,685

(7.6)

Japanese
Alcoholic
Beverages
International
Business
Food &
Soft Drinks

2012

2013

269,947

274,90936,121

Operating income% change

Japanese Alcoholic Beverages
We estimate that total domestic demand for beer and beer -type beverages declined 1%
year over year in 2013. We estimate that beer and happoshu sales volumes declined slightly,
while sales of new -genre beer slowed but continued to show year -over-year growth.
Under these market conditions, the Japanese Alcoholic Beverage Business continued toinvest management resources in its core beer brands while striving to expand the Sapporo
fan base by energetically introducing new value proposals. The business also co ntinued toestablish the foundations for growth of its nonalcoholic beer beverages and ready -to-drink(RTD)* cocktails while solidifying its wine & western spirits business and its Japaneseshochu business. Through this diversification of our product offer ings, we are endeavoring
to raise the Sapporo brand value.
In the beer and beer -type beverages category, strong sales of our canned Yebisu beerofferings were supplemented by the February launch of the limited -volume version Kaori
Hanayagu Yebisu , the May release of Yebisu Premium Black, and the October launch of
Kohaku Yebisu , a limited-release amber-colored beer. Overall, sales of our Yebisu brandbeers increased year over year in 2013. In the new -genre beer segment, we followed up the
February launch of renewal versions of Mugi to Hop and Mugi to Hop Black with theintroduction of the limited -volume Mugi to Hop Red in April and again in September. In
November, we introduced a limited-volume version of Mugi to Hop called Zeitaku Hatsu
Zumi. All these new offerings were favorably received by consumers. In June, we launched
Goku Zero, the world’s first beer -type beverage (new-genre beer product ) with zero purine

7bodies. The new offering was favorably received, with sales in 2013 ending the year
substantially above our planned target. As a result, sales of our beer and beer -flavored
beverages in 2013 showed a solid year -over-year gain, and we succeeded in expanding ourmarket share.
Offerings in our nonalcoholic beer category also continued to receive a strong customer
support, as indicated by the successful launches in February of renewal versions of Sapporo
Premium Alcohol Fee and Sapporo Premium Alcohol Free Black.
In the RTD category, the strongly favorable consumer response received by thelimited-volume seasonal release in April of Sapporo Otoko Ume Sour, developed incollaboration with Nobel Confectionary Co., Ltd., encouraged us to launch the product as ayear-round offering in Septemb er, as sales during the rest of the year exceeded our targets.
In the growing bottled RTD market, we followed up our success with Bacardi Mojito withseveral other bottled offerings, helping to raise brand recognition and expand the fan basefor Bacardi, t he world’s No. 1 selling rum.
Among wine products, we expanded the offerings of our core imported wine, Yellow Tail,with the September introduction of Yellow Tail Sweet Red Roo. Sales of our mainstay
domestic premium brand, Grand Polaire, were also solid, supported by favorable productreviews, including gold medal awards at the Japan Wine Competition for three wines in theseries. As a result of the above, overall wine sales in 2013 rose above the previous -yearlevel.
Our western spirits business e njoyed rising sales volumes, with strong contributions from
Bacardi products, including the Bacardi Classic Cocktails Mojito.
The shochu business sharply increased sales over the previous year’s level, thanks to thecontinued favorable consumer response to two blended shochus introduced in 2012 – Imo
Shochu Kokuimo and Mugi Shochu Koimugi .
Overall, the Japanese Alcoholic Beverage Business posted sales of ¥ 274.9 billion (up¥4.9 billion, or 2%, year over year) in 2013. Successful efforts to control costs, starting withmarketing expenses, enabled the business to record segment operating income of ¥ 9.9
billion, up ¥2.3 billion, or 32%.
* (RTD, or ready-to-drink, beverages are already-mixed, low-alcohol content cocktail-like beverages thatcan 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 market declined 2 to 3% in 2013. The Asian beermarket, however, continues to grow steadily, supported by the region’s fast -growing
economies.
In this environment, our International Business segme nt 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), stretching8

its growth streak to seven years. Sapporo USA recorded a 5% year -over-year increase insales volumes of Sapporo brand beers. Silver Springs Citrus, in which we acquired a 51%
equity stake in January 2012, also continued to steadily increase sales volumes.
In Vietnam, we continued the full -fledged marketing offensive began in April 2012 as partof efforts to build market recognition for the Sapporo brand. These efforts produced a solidincrease in sales in 2013, with sales p articularly strong during the traditional Tet (NewYear’s holiday ) sales campaign. In South Korea, the continued efforts of our local partner, a
Maeil Dairies’ subsidiary in which we acquired a 15% equity stake in January 2012, isexpanding sales of Sappor o brand beers in Korea’s household and commercial markets. In
Oceania, we continued to bolster sales via our brewing and sales licensing agreement with
Australia’s Coopers Brewery, and in Singapore we worked with our local subsidiary to
expand sales channe ls in the local household market. The efforts outlined above enabled
the International Business to achieve a 43% year -over-year increase in beer volume sales in
Asia and other overseas markets o utside North America in 2013.
Overall, the business posted sales of ¥48.2 billion (up ¥12.0 billion, or 33%, year overyear), supported by increased sales on local -currency bases at continuing operations, a fullyear’s contribution from Silver Springs Citrus, which was consolidated in April 2012, and thepositive impact of yen depreciation. Segment operating income rebounded to ¥1.2 billion (up¥1.2 billion year over year).

Food & Soft Drinks
We estimate that domestic demand for soft drinks in 2013 increased by about 3% over2012, boost ed by the summer heat wave in Japan. We estimate that domestic demand forlemon-based products (flavorings) declined 2% year over year while demand for instantsoups (including soups in a cup) appears to have been about even with the 2012 level.
In this overall demand environment, the Sapporo Group’s Food & Soft Drinks businessbegan integrated operations in January as Pokka Sapporo Food & Beverage Ltd., and newinvestments were concentrated on core brands as the new subsidiary seeks to strengthen
and nurture its v arious brands.
Our domestic food and soft drinks business saw a decline in sales of its soft drinks as
business integration led to consolidation of product lineups in our core drink offerings,
including canned coffee, tea, and water drinks. One bright spot was the Gabunomi series,
which saw sales stimulated by promotion campaigns started in March and the launch of new
flavored carbonated beverages in the summer. The Fujiya brand, which introduced Fujiya
Nectar Sparkling in November, also made a strong show ing. In the lemon & natural foods
category, our core Pokka Lemon 100 brand continued to post solid sales, and we also
received a favorable consumer response to a renewal version of Kireto Lemon Sparklingpackaged in a 410ml PET bottle. Among our overseas b rands, Gerolsteiner naturally
carbonated water from Germany enjoyed steady sales growth as we expanded its sales
channel to vending machines. The soup and foods category also saw steady growth in9

volume sales as we strengthened our Jikkuri Kotokoto Kongari Pan Soup series by
expanding their product lineups. Sales of our commercial-use products were up year overyear, supported by stable sales of our core lemon and syrup product lineups and steady
growth in sales of our soups, deserts and other offerings.
In the domestic restaurants business , the Café de Crié coffee shop chain overcame anincreasingly competitive operating environment, including challenges fromconvenience

stores and fast-food chains that are attracting customers with low -priced coffee and otherfood items, through regular introductions of new menu items and renovations of exi stingoutlets. The chain also opened 14 new outlets in 2013, while closing seven in line with its
profit structure reforms. As of the end of 2013, the chain had 170 out lets in operation.
The overseas food & soft drinks business saw profitability affected by stiff competition in
Singapore but was able to expand its exports to the Middle East and other markets. Pokka
Ace (M) SDN. BHD. , which was included in the Group’s co nsolidated results from January,contributed to this category’s overall sales as it steadily expanded its business.
The segment’s overseas restaurant business posted somewhat weak results owing todelays in opening new outlets in Hong Kong and a decline i n mainland Chinese tourists tothe city.
As a result of the above, the Food & Soft Drinks segment recorded sales of ¥ 130.6 billion
in 2013, an increase of ¥1.6 billion, or 1%, with the consolidation of Pokka Ace (M) SDN.
BHD. from January helping to offset the decline in sales at the domestic food & soft drinks
business. However, business integration expenses weighed on the segment’s profits,
resulting in an operating loss of ¥ 1.4 billion, a ¥1.8 billion reversal from an operating incomeof ¥0.3 billion in 2012.
Restaurants
Japan’s restaurant industry began to see some signs of improvement in consumer
sentiment amid growing expectations of an economic recovery in Japan. However, theoperating environment remained severe with increased competition forcustomers fromprepared food manufacturers and retail outlets.
In this environment, our Restaurants Business, seeking growth through a differentiation
strategy, continued to strengthen its core restaurant brands, endeavor ed to raise customer
satisfaction, and enhance core menu offerings , including by conducting aggressive sales
campaigns.
In Japan, we opened 13 restaurants in 2013, focusing on formats with strong growthpotential, such as our Yebisu Bar chain and small Ginza Lion outlets. In line with our efforts
to improve profit structure, we closed 16 outlets, bringing the total number of restaurants
open in Japan at the end of the year to 190.
Overseas, we opened our first Ginza Lion Beer Hall in Singapore, the first step in our plan
to spread the beer hall culture we have nurtured in Japan to the rest of the world. Goingforward, we plan to further penetrate the Singapore market and create outlets that build astrong following for the Ginza Lion brand. We also opened our first two Rive Gauche cake10

and patisserie shop in Singapore, bringing the Restaurants Business’ total number ofoverseas outlets to 13.
As a result of its efforts outlined above, the Restaurants Business achieved sales of ¥ 26.8
billion in 2013, ¥ 0.2 billion, or 1%, more than in 201 2. Segment operating income, however,amounted to ¥0.4 billion, some ¥0.1 billion, or 23%, less than in the previous year.
Real Estate
In the real estate industry, vacancy rates in the Greater Tokyo office leasing market
continued to decline in 2013 but rent levels remained weak.
Amid such market conditions, our real estate leasing business maintained high occupancy
rates at its properti es in the Tokyo Metropolitan area, including its core property, Yebisu
Garden Place.
In preparation for Yebisu Garden Place’s 20thanniversary in 2014, we stepped up efforts

to enhance the property’s value and convenience by improving facilities to ensure that
Yebisu Garden Place continues to provide tenants and visitors with enjoyable experiences in
comfortable and pleasant surroundings. To enhance the building’s commercial functions, we
carried out a major renovation of the restaurant floor on the second basement level in
preparation for the opening of a new large, upscale restaurant tenant in April 2014.
Moreover, to enhance convenience for office workers, we renovated a dedicated cafeteria
serving office workers in Yebisu Garden Place. We also began the installation of additional
emergency power-generating systems that will help ensure our tenants’ business continuity
in the event of a disaster that cuts off power from the grid. The installation is scheduled forcompletion in April 2014.
The real estate development business began redevelopment of the Seiwa Yebisu Buildingin March 2013, and the project is running on schedule for completion in autumn 2014, when
we plan a reopening as the Sapporo Ebisu Building (provisional name) , which we expect tobecome a new center of activity in Tokyo’s Ebisu district. We also continue to consider
redevelopment of the Sapporo Ginza Building located at the Ginza 4 -chome intersection
and have been engaged in consultations with concerned parties.
As result of the above a ctivities in 2013, the Real Estate Business posted sales of ¥ 22.7
billion, down ¥ 0.4 billion, or 2%, year over year. Operating income declined ¥ 0.7 billion, or
8%, to ¥8.6 billion, largely due to a decline in rental income as the redevelopment of the
Sapporo Ebisu Building (provisional name) .

11

(b) Outlook for fiscal year ending December 31, 2014
(1) Overview
Millions of yen, except percentages

Net sales

Operating

Ordinary

incomeincomeNet income

2014 forecast

537,700

15,00013,6005,000

2013 results

509,834

15,344

15,130

9,451

5.5

(2.2)

(10.1)(47.1)

Projected increase (%)

In 2014, we will continue to work toward the goals for 2016 outlined in the Sapporo
Group’s New Management Framework by accelerating the implementation of its four growthstrategies—“Create high-value-added products and services,” “ Form strategic alliances,”“Promote international expansion ,” and “Expand group synergies.” In 2014 and the following
two years, we will strive to realize our goals for 2016 by acceleratin g growth strategies as a“manufacturer of food products” and realizing sustainable growth. In 2014, we will undertake
investments targeted at higher profits in 2015 and beyond and strive for higher levels of
consolidated sales. Our consolidated forecasts and outlook for the Sapporo Group in 2014
are as follows.
Net Sales
The Japanese Alcoholic Beverage business will seek to boost its share of the beer andbeer-type beverages market for a third consecutive year by concentrating resources in core
brands in order to further enhance brand value. In non -beer businesses, we expect toachieve further growth by aggressively expanding the key growth areas of RTD, wine,
shochu, and western spirits.
The International Business will seek to expand its sales by gaining wider brandrecognition for the SLEEMAN and Sapporo brands in the North American market andmoving aggressively into growth markets, starting with Southeast Asia, where it has alreadyestablished Vietnam as the center of its regional operations. The Intern ational Business alsoplans to use Group company Silver Springs Citrus, as a platform for expanding soft drink
sales in the North American market.
The Food & Soft Drinks business plans to increase sales in Japan by establishing core
brands and strengtheni ng its marketing effort in terms of both quality (ability to makeproposals and develop new customers) and quantity (increased marketing activities). In
preparation for a full -fledged effort to increase overseas sales, the business is boostingproduction c apacity by constructing a plant in Malaysia.
The Restaurants Business targets higher sales by further strengthening the branding of its
existing outlets and opening new stores to expand the market footprint for its restaurant
formats with strong growth potential. It will also continue to develop new formats to enablefurther sales growth. In Singapore, it will continue its efforts to firmly establish the Ginza Lionbrand as a means of spreading Japan’s beer hall culture.

12

The Real Estate business will continue efforts to maintain occupancy rates while alsoraising rents at existing properties. It will also endeavor to raise the value of Yebisu Garden
Place and move steadily forward with the Sapporo Ebisu Building (provisional name)redevelopment project. It also aims for an early start on redevelopment project of the
Sapporo Ginza Building located at the Ginza 4 -chome intersection , including the expansionof floor space.
We expect the efforts by our various businesses will lead to consolidated sales of ¥ 537.7
billion in 2014, representing growth of ¥ 27.8 billion, or 6%, over our 2013 result.
Operating Income
We envisage that segment operating income at the Japanese Alcoholic Beveragebusiness will decline in 2014. Although we expect the business to achieve sales growth, we
think those gains will be m ore than offset by the higher costs of raw materials caused by yen
depreciation as well as aggressive spending to strengthen our brands. The International
Business ’ profits are expected to be largely the same as in 2013, as we expect higher profits
in North America to be offset by continued spending to create markets and strengthen ourbrand in Vietnam. The Food & Soft Drinks business, however, should see sales growthtranslate to higher profits. The Restaurants Business should also achieve profit growth, a s it
will implement additional measures to raise its profitability while it also increases sales.
Finally, we expect a decline in profits in the Real Estate business segment profits owing to a
decline in rental income as we begin redevelopment of the Sappo ro Ginza Building.
Overall, we forecast that consolidated operating income in 2014 will total ¥ 15.0 billion,
representing a decline of ¥ 0.3 billion, or 2%, from 2013.
Ordinary Income

We forecast consolidated ordinary income of ¥ 13.6 billion, down ¥1.5 billion, or 10%,owing to the decline in operating income and higher interest payments.
Net Income
We expect consolidated net income in 2014 of about ¥ 5.0 billion, a ¥4.4 billion, or 47%,
decline from 2013, owing to the factors noted above and extraordin ary losses related to theredevelopment of the Sapporo Ginza Building.

The 2014 outlook for each segment is outlined below.

13(2) Outlook by Business Segment
Millions of yen, except percentages
Net sales
2013

2014

% change

3.4

9,901

9,000

(9.1)

57,200

18.6

1,208

1,100

(9.0)

130,671

140,000

7.1(1,483)

100-

Restaurants

26,827

28,100

4.7

415

1,000

140.7

Real EstateBusiness

22,76722,300

(2.1)

8,685

7,200

(17.1)

Japanese
Alcoholic
Beverages
International
Business
Food &
Soft Drinks

2013

2014

274,909284,300

48,215

Operating income% change

Japanese Alcoholic Beverages
We expect the operating environment for our Japanese Alcoholic Beverages business toremain challenging as the negative impact of the trends toward a smaller drinking populationand increasing diversity in consumer preferences and venues for drinking alcoholic
beverages are compounded by an increase in Japan’s consumption tax rate.
The Japanese Alcoholic Beverage business will strive to meet the challenge of its
operating environment and realize further growth by implementing its new vision of being No.
1 in as many areas as possible (the “Only One” strategy) while adhering to its campaign
slogan “Bringing more cheer to your ‘Cheers’!” as it constantly provides its cus tomers thekind of value only Sapporo can offer.
The beer and beer -type beverages business will endeavor to further enhance the value ofcore brands as it aims for a third straight year of sales volume growth. It will concentrate
resources on the Yebisu, Sapporo Draft Beer Black Label, and Mugi to Hop The Goldbrands while also aiming for a big increase in sales of Goku Zero. Efforts undertaken toachieve “Only One” status will include realizing a 13 th consecutive year of sales growth for
our Sapporo Class ic, one of our strategic area -specific products.
The RTD business will also strengthen its offerings of “Only One” products. In addition tocapitalizing on our relation with Bacardi, manufacturer of the world’s best -selling rum, todevelop more Bacardi-based RTD offerings, we will also endeavor to build greater brandrecognition for Sapporo Otoko Ume Sour, a Japanese plum wine –based RTD. This spring,
the RTD business will launch a new product developed in collaboration with our Food & Soft
Drinks business. Kireto Lemon Sour will be a new type of RTD that brings out the true
essence of lemons in a cocktail drink.
Our wine business will focus on further expansion of our Grand Polaire series madeentirely from domestic-grown grapes. This spring, we will launch two Polaire Sangria Ricodrinks in lightweight PET bottles for the household -use market. We also plan to expand
sales of our barreled Polestar sparkling wine to commercial customers.
The shochu business will concentrate on its popular blended shochus and its plum wine(umeshu). We aim to further expand sales of our No. 1 selling blended shochu Kokuimo by

14

increasing its market coverage rate though campaigns targeted at consumers and otherpromotions.
In the western spirits business, we will plan to develop a full lineup of Bacardi brandofferings for household and commercial markets, beginning with RTD and RTS* offerings,
such as our Bacardi -based Mojito offerings made from the world’s best -selling rum.
The Japanese Alcoholic Beverages busin ess as a whole will strive to achieve its profit
targets despite the higher raw material prices caused by yen depreciation by effectively andflexibly controlling marketing expenses while also seeking to further enhance brand values.
The business will also continue efforts to cut other costs wherever possible.
*RTS refers to ready-to-serve liquors used to make cocktails by mixing with soda and other mixers.

International Business
In North America, prospects for a full-fledged economic recovery remain unc ertain, andwe therefore assume that total demand in the North American beer market will be largely
unchanged in 2014. Under such circumstances, our International Business will continue its
efforts to solidify its North American market position by leveragi ng 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 growth in sales volume 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 pr esence to the wider Asian -Americanand general population segments of the US beer market. We also plan to expand sales in
the North American soft drink market, with Silver Springs Citrus playing a central role.
Outside of North America, we aim to boost sa les by actively engaging in growth markets
in Southeast Asia and elsewhere while keeping an eye on opportunities to tap into newmarkets as we strengthen the foundations of our International Business and expand its
operations . In particular, we are continu ing full-scale marketing efforts in Vietnam to quickly
establish our Sapporo brand in that market. In South Korea, we are accelerating sales of
Sapporo brand beers in the household and commercial markets via our local partner, a
Maeil Dairies’ subsidiary i n which we have a 15% equity stake. In Oceania, we will continue
efforts to expand sales via our brewing and sales licensing agreement with Australia’s
Coopers Brewery, and in Singapore we will continue to expand sales channels into thehousehold beer market in a cooperative effort with our local subsidiary.
Food & Soft Drinks
Japan’s soft drinks industry continues to face rising material costs and strong consumer
price consciousness. Add to those continuing conditions the consumption tax increase in
April and increasingly unfavorable demographic trends and the outlook for an increase inindustry wide demand in 2014 is not very favorable.

15

Faced with this less than favorable external environment, our Food & Soft Drinks businessplans to offset cost s to the maximum degree possible by thoroughly promoting low -cost
operations in each link of the value chain. We conduct its marketing activities with athorough focus on the customer’s viewpoint and strategies targeting specific market
segments.
In the domestic food and soft drinks segment, the soft drinks business plans to focus its
marketing spending and activities on its core domestic brands, such as Ribbon andGabunomi. Marketing of coffee drinks will focus on ascertaining the characteristics unique todifferent regions . In 2014, we plan to launch several new products, including the April debutof Green Shower, a flavored carbonated beverage based on the hop research of ourJapanese Alcoholic Beverage business, which cooperated in the product’s develo pment.
Among our overseas brands sold in Japan, marketing expenses and activities will focus on
our core Gerolsteiner brand and the imported bottled water brands Vittel and Contrex,

bothof which we started distribution in January 2014. In the lemon and natural foods category,
we will continue to solidify our unique market position centering on Kireto Lemon. We also
will solidify our leading p osition in the market for lemon juice–based seasonings bylaunching a full renewal version of POKKA Lemon 100. In ad dition, we will introduce POKKA
Lemon Lemotte, a lemon juice –based seasoning that can be stored at normal temperatures,
which will enable us to target its use outside the home. We also plan to expand its market
potential by marketing the new product as a m ix for shochu, and plan aggressive expansionof healthy beverages, such as cranberry and prune juice. In November 2013 , we completed
construction of a third line at our Nagoya Plant. The new line boosts our production capacity
by 70% at full operation and its use of proprietary technologies will enable us to raise
product quality to new heights. In the soup and related foods category, we plan to add to the
Kongari Pan and Jikkuri Kotokoto soup brand lineups, which continue to achieve solid sales.
We will also nurture our lineup of Kantanbimi Korean soups and aggressively expand intosuch new categories as cold soups, breakfast -oriented cup soups, and desserts. The
commercial-use products category will remain focused on lemon juic es and syrups, teas,and soups. We expect group synergies to contribute to significant growth in sales for theseproducts.
The domestic restaurants business plans to continue its efforts to enhance the brandvalue of its Café de Crié chain and accelerate chain expansion by effectively opening new
shops and entering new market areas as it seeks to create a dominant market presence.
The overseas soft drinks business expects to see stiffer competition in its core Singapore
market. In response, it plans to maintain its leading share of the Singapore market for tea
drinks and expand sales in new product categories. In addition, it aims t o support the growthof its exports by allocating more management resources in Southeast Asia and the Middle
East, its two core export markets. Meanwhile, the new plant now under construction in
Malaysia is scheduled to start operations around the middle of 2014. This new plant will
boost our local production capacity and help us overcome the supply shortages that have
limited our business growth for many years now.

16

The overseas restaurants business targets growth by fully leveraging its multiple
restaurant formats in Hong Kong , including the core POKKA Café chain as well as its
Tonkichi tonkatsu (breaded pork cutlets) restaurants and Mikichi ramen shops.
Restaurants BusinessWe expect the operating environment for restaurants in Japan to remain chall enging, as
the domestic restaurant industry will have to overcome rising material prices and the impactof the consumption tax increase on consumer spending .
In this difficult environment, our Restaurants Business plans to continue creating outlets
that customers love to frequent. The business plans to enhance service levels, improve thequality of its menu offerings, and deliver food and drinks that customers can enjoy withconfidence in their quality and safety. Through such efforts the business seeks to raisecustomer satisfaction in line with its guiding principle of provi ding 100% satisfaction.
New store openings will focus on territorial expansion for our core formats with highgrowth potential. However, we will also continue to develop new formats a nd new customer
groups as we target sustained growth.
At the same time, we will continue measures to improve the business’ profit structure,including the closing of unprofitable outlets.
Overseas, we are targeting Singapore as the first stage for our effort to spread Japan’sbeer hall culture to other countries through enhancing the appeal of our Ginza Lion outlet
brand in that market .
Real Estate
Japan’s real estate industry broadly expects to see improvement in vacancy rates andrent levels in the Greater Tokyo office leasing market as the supply of new office buildings
remains low and the domestic economy strengthens.
In this improving environment, our Real Estate business will seek to maintain or raiseoccupancy rates and rent levels at its l easing operations. It also plans to further strengthen
the brand power of its flagship property, Yebisu Garden Place, and to enhance theproperty’s convenience and thereby raise its asset value. In the property’s office space s, wewill continue to invest i n order to raise the functionality of dedicated office areas andenhance the convenience and comfort of communal spaces. Meanwhile, we are consideringrenovations to the property’s commercial spaces that would raise their appeal to potential
tenants and th eir customers , and will continue discussions with concerned parties.
addition, with the property celebrating its 20thIn

anniversary in 2014, we aim to enhance its

drawing power and name recognition through an aggressive program that informs people of
the appeal of the property and surrounding areas.
The segment’s real estate development business is on track to complete construction
work on the Sapporo Ebisu Buildi ng (provisional name) in September 2014. The business isalso planning to launch an aggressive leasing campaign to ensure a high occupancy ratefrom the building’s opening. The redevelopment of the Sapporo Ginza Building at the Ginza
4-chome intersection i s still in its planning stages, including the preparation of a design that17

will increase the property’s floor space and provide an external appearance suitable for a
Ginza landmark. We look forward to starting reconstruction work in the near future.

Note: The above forecast and other forward -looking statements are based on information
available as of the date of this document’s preparation. Actual results may differ from thoseexpressed or implied by forward -looking statements due to various factors.

2. Review of Consolidated Financial Condition(a) Consolidated Financial Condition
Consolidated total assets as of December 31, 2013, totaled ¥616.7 billion, a ¥19.1 billion
increase from December 31, 2012. The gain is attributable to increases in notes andaccounts receivable -trade and investment securities, partially offset by a decrease inintangible fixed assets owing to goodwill amortization.
Consolidated total liabilities totaled ¥461.3 billion, a ¥1.3 billion decline from December 31,
2012, primarily owing to a decrease in commercial paper, which outweighed an increase in
short-term bank loans.
Consolidated net assets totaled ¥155.3 billion, up ¥20.4 billion from December 31, 2012.
Asset growth was supported by increases in unrealized gains on securit ies and in theforeign currency translation adjustment account, as well as the posting of net income forfiscal 2013.
(b) Consolidated Cash Flows
Cash and cash equivalents (collectively, “cash”) totaled ¥11.5 billion as of December 31,
2013, a ¥1.7 billio n or 18% increase from December 31, 2012. The increase reflects the net
result of cash generated by operating activities and net cash used in financing and investing
activities, including purchases of subsidiary shares, investment securities, and fixed andintangible assets.
Following is an explanation of consolidated cash flows by category in 2013 and the factorsthat affected cash flows in each category.
Cash flows from operating activities
Operating activities provided net cash of ¥32.8 billion, a ¥3.2 billion or 11% increase over2012. Major sources of operating cash flow included ¥16.5 billion from income before
income taxes and minority interests and ¥25.0 billion from depreciation and am ortization.
Major uses included a ¥2.3 billion increase in notes and accounts receivable -trade, a ¥1.6
billion decline in deposits received, and ¥7.9 billion in corporate income taxes.
Cash flows from investing activities
Investing activities used net cas h of ¥13.2 billion, a reduction of ¥46.2 billion, or 78%,
compared with 2012. Major investment outflows included purchases of property, plant andequipment of ¥12.2 billion and purchases of intangible fixed assets amounting to ¥1.5 billion,
the sum of which outweighed inflows from the sale of investment securities of ¥4.4 billion.
Cash flows from financing activities

18

Financing activities used net cash of ¥19.1 billion, compared with a net cash inflow of ¥30.1
billion in 2012. Major inflows included ¥32.2 b illion from long-term bank loans and ¥19.9
billion from the issuance of corporate bonds. These inflows were more than offset by
outflows, which included a ¥22.0 billion net decrease in commercial paper, ¥21.9 billion for
the repayment of long -term bank loans, and ¥10.0 billion in bond redemptions.

Cash Flow Indicators
As of December 31,

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

2009

2010

2011

2012

2013

23.4

25.3

22.4

22.1

24.6

39.3

29.1

20.7

18.3

28.0

18.4

7.8

11.8

10.2

8.8

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

3.5
7.6
6.2
8.4
11.9
(%)
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 201 3 and 2014
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 conditio n.
In accordance with the above policy, we plan to pay annual dividends of ¥7 per share for2013, the same dividend we paid in 201 2.
In 2014, we plan to maintain the annual dividend at ¥7 per share, as we steadily carry out
our management plan while also making strategic investments and strengthening ourfinancial foundation.

Dividends for 201 3 and 2014 (yen per share)
InterimYear-end

Total

2013

0.00

7.0

7.0

2014

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 stakeholder 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 net sales:¥600 billion

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

1.0
above 8%(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 create 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 International 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 and 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
We have established a new medium-term management plan, the Sapporo GroupManagement Plan 2014–2016, to guide the Group over the three years remaining to20

achieve the goals of the New Management Framework by the end of 2016. We intend toachieve those goals by accelerating implementation of the four strategies outlined earlier topropel our transition into a “manufacturer of food products”. Our efforts to produce visible
results will include making additional cost cuts, generating group synergies, and realizing
new M&A deals.
In addition, we are positioning these next three years as a period to prime ourselves for theendeavors we will undertake from 2017. We will be developing a new long-term
management framework targeted at guiding the Sapporo Group to its 150th anniversary in
2026. Below we explain the basic thinking that will serve as the basis for this new long-term
framework.
■Target of the Group:
The SAPPORO Group will be a group of companies that is essential for customers
to enjoy rich lives throughout the world by continuing the creation and supply of new
products and services that become No. 1 in the market.
■Guidelines for corporate behavior:(1) We seek continued innovation and provide customers with valuable No. 1 products
and services to contribute to ensuring their richer life.
(2) We endeavor to create products and services that will activate communications
between customers.
(3) We strive to ensure the efficient business operations by addressing changes in thebusiness environment.
(1) Initiatives in each business segment
Japanese Alcoholic Beverages
To fulfill the new vision “Seek No. 1 by accumulating one-of-a-kind products,” wewill continue innovations unique to Sapporo, to be the “No. 1 creator of moving
experiences.”We will make intensive investments in branding and other efforts during the
2014–2015 period commensurate with the increase in profit planned for 2016.

International BusinessWe will promote market penetration of the Sapporo brand chiefly in North
America and Southeast Asia.

In Canada and the U.S. markets, we will seek better performance in the beerand soft drinks businesses for which we have enjoyed favorable results.



In Southeast Asia, we will continue to pursue the beer business according to21

plan in Vietnam, in which we have operated on a full scale for two years since2012, to improve operating income and achieve profitability.
Food & Soft DrinksIn the domestic food and soft drinks business, we will seek earlier recovery ofbusiness performance through focused efforts to establish the core brands of
POKKA SAPPORO, enhance marketing power in terms of the quality of
proposals and pioneering ideas as well as the number of activities, and reduce
costs to attain the growth stage in 2015 and thereafter.

In the restaurants business, we will accelerate the opening of Café de Criéfranchised coffee shops, which have been operating favorably.

In the overseas soft drinks business, based on the increased capacity of
manufacturing due to the completion of a Malaysian factory, we will maintain the
top share of the tea beverages market in Singapore and further expand theirsales, while accelerating the growth of sales in other countries as well.

Restaurants

By supplying of hospitable services and safe and delicious food menus, we willseek to offer “Japan’s No. 1 enjoyable stores,” continuously loved andappreciated by customers.

In the domestic market, we will strengthen the core Ginza Lion and YEBISU
BAR brands. Overseas, we will promote the expansion of the GINZA LION
BEER HALL restaurant format, the first store of which was opened in Singapore
last fall and has been operating favorably.

Real EstateWe will enhance the value of the properties we hold in Ebisu, Ginza andSapporo to contribute to enhancement of the Group’s branding strength.

Through two redevelopment projects—Sapporo Ebisu Building (tentative name)and Sapporo Ginza Building—and enhancement of the value of Yebisu Garden
Place, we aim for a significant increase in profit during the 2015–2016 period.

(2) Toward greater group synergies
Expanding synergies among Group companies

Led by Group headquarters (the headquarters functions are shared by SH and
SAPPORO GROUP MANAGEMENT LTD.), we will promote alliances andcooperation between different businesses of the Group. Group headquarters
will address the issue of management restructuring to optimize the overallmanagement of the Group across its different businesses.

22To accelerate its growth as a “manufacturer of food products,” Group
headquarters will integrate and reinforce the R&D functions within the Group.
The headquarters will also promote the sharing of skills and expertise throughcommunication among personnel within the Group to create an environmentthat stimulates innovation, thereby enhancing the Group’s ability to develop andexpand new products and services. In addition, structural reforms and cost
reductions will be promoted across Group companies to maximize cost-relatedsynergies.

In addition, the Sapporo Group regards the fulfillment of our corporate social responsibility(CSR) as crucial to the Group’s sustained growth. As such, we will conduct in a manner that
conforms to key Group CSR policies calling for the “Provision of safe products of reliable
quality,” “Coexistence with the wider society,” and “Preservation of the earth’s environment.”
Additionally, we will ensure that CSR and compliance with corporate governance serve as
the foundation for our corporate behavior by maintaining in-house education programs thatmake awareness and compliance with CSR and corporate governance a deep-rooted partof our corporate culture.

23

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) Land(4) Lease assets
Accumulated depreciation
Lease assets, net(5) Construction in progress(6) 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

24

December 31, 2012

December 31, 2013

AmountAmount9,755
83,581
20,372
12,072
3,737
9,026
(287)
138,258

11,55287,14820,832
13,552
4,172
10,306(228)
147,336

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

390,326(212,741)
177,585
218,275(176,691)
41,583
115,056
18,242(8,921)
9,320
5,668
19,515(15,847)
3,667
352,882

37,541
7,444
44,98534,418
7,566
41,98535,6709,783
2,040
15,222(1,386)
61,330459,377
597,636

51,221
9,544
931
14,177(1,326)74,548469,416
616,752

Liabilities
I Current liabilities
1 Notes and accounts payable - trade
2 Short-term bank loans
3 Commercial Paper
4 Current portion of bonds
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 Dealers' deposits for guarantees
7 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
3 Foreign currency translation adjustments
Total accumulated other comprehensive income
III Minority Interests
Total net assets
Total liabilities and net assets

25

December 31, 2012

December 31, 2013

AmountAmount32,98555,27047,00010,0003,860
33,3973,830
1,860
12,35842,583
243,146

35,902
63,64225,0003,384
33,7003,837
2,090
10,82448,925
227,308

32,000113,376
7,346
13,002
7,385
32,914
13,518219,543
462,689

52,000107,185
6,298
17,805
5,907
32,423
12,457
234,077
461,386

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

53,88645,91137,409(1,311)
135,896

5,122
9(3,725)
1,406
3,151
134,946597,636

15,4674314
15,786
3,683
155,366
616,752

(2) Consolidated Statements of Income(millions of yen)
Year ended December 31, Year ended December
2012
31, 2013
AmountAmount492,490509,834
313,117329,605
179,373
180,229

I 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 on gift voucher redemptions
6 Other
Total non-operating income
V Non-operating expenses
1 Interest expense
2 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
Total extraordinary gains
VII Extraordinary losses
1 Loss on disposal of property, plant and equipment
2 Sales of fixed assets
3 Impairment loss
4 Loss on devaluation of investment securities
5 Loss on sales of investment securities
6 Business structure improvement expenses
Total extraordinary losses
Income before income taxes and minority interests
Income taxes: current
Income taxes: deferred
Total income taxes
Income before minority interests
Minority interests in losses
Net income
Net income before minority interests
Other comprehensive income
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(Breakdown)Comprehensive income attributable to owners of the parent
Comprehensive income attributable to minority interests

26

32,83820,221
31,1471,225
3,499
76,027
164,958
14,41433,067
21,211
31,406
1,088
3,350
74,760164,884
15,344

263
734
180
535
570
980
3,264

245
797
99
849
1,226
3,218

3,448
541
3,990
13,689

2,704
728
3,432
15,130

83

61

21
104

3,491
3,553

2,087
11
188
582
64
346
3,281
10,512
5,668
(317)
5,350
5,161
(232)
5,393

1,158
220
425
59
3
253
2,120
16,562
7,677
(534)
7,143
9,419
(32)
9,451

5,161

9,419

3,130
9
2,739
49
5,928
11,09010,3448
4,567
14,92024,33911,24823,832(158)

507

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

Shareholders’ Equity
Common stock
Balance at beginning of year
Balance at end of period
Capital surplus
Balance at beginning of year
Changes during period
Disposition of treasury stock
Total changes during period
Balance at end of period
Retained earnings
Balance at beginning of year
Changes during period
Cash dividends
Net income

Year ended
December 31, 2012
AmountYear ended
December 31, 2013
Amount53,88653,88653,88653,88646,31046,308(2)(2)
46,308(396)(396)
45,911

28,741

31,393(2,740)5,393(2,740)
9,451

-

(695)

Changes in scope of consolidation /Changes in scope of application of the equity method
Total changes during period
Balance at end of period
Treasury stock
Balance at beginning of year
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 beginning of year
Changes during period
Cash dividends
Net income
Purchase of treasury stock
Disposition of treasury stock
Changes in scope of consolidation /Changes in scope of application of the equity method
Total changes during period
Balance at end of period
Total accumulated other comprehensive income
Unrealized holding gain on securities
Balance at beginning of year
Changes during period
Net change in items other than shareholders' equity during period
Total changes during period
Balance at end of period

27

2,652
31,393

6,015
37,409(1,197)(1,199)(7)
5(1)(1,199)(1,024)912(111)(1,311)

127,741

130,389(2,740)
5,393
(7)
2

(2,740)9,451(1,024)
516

-

(695)

2,648
130,389

5,507
135,896

1,993

5,122

3,129
3,129
5,122

10,344
10,344
15,467

Deferred hedge gains (losses)
Balance at beginning of year
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 beginning of year
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 beginning of year
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 beginning of year
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 beginning of year
Changes during period
Cash dividends
Net income
Purchase of treasury stock
Disposition of treasury stock
Changes in scope of consolidation /Changes in scope of application of the equity method
Net change in items other than shareholders' equity during period
Total changes during period
Balance at end of period

28

(8)

9

17
17
9

-4
-4
4

(6,432)(3,725)

2,707
2,707
(3,725)

4,040
4,040
314

(4,447)

1,406

5,854
5,854
1,406

14,38014,38015,786

1,482

3,151

1,668
1,668
3,151

532
532
3,683

124,775

134,946(2,740)
5,393
(7)
2

(2,740)9,451(1,024)
516

-

(695)

7,523
10,171
134,946

14,912
20,419155,366(4) Consolidated Statements of Cash Flows
Year ended
December 31, 2012
AmountI Cash flows from operating activities
1 Income 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 (Increase) decrease in notes and accounts receivable - trade
14 (Increase) decrease in inventories
15 Increase (decrease) in notes and accounts payable - trade
16 Increase (decrease) in liquor taxes payable
17 Increase (decrease) in deposits received
18 Increase (decrease) in other current liabilities
19 Other
Sub total
20 Interest and dividends received
21 Interest paid
22 Income taxes paid
Net cash provided by (used in) operating activities
II Cash flows from investing activities
1 Payments for purchases of investment securities
2 Proceeds from redemption and sale of investment securities
3 Payments for purchase of affiliates securities
4 Payments for acquisition of newly consolidated subsidiaries
5 Payments for acquisition of associates accounted for using equity method
6 Purchases of property, plant and equipment
7 Proceeds from sales of property, plant and equipment
8 Purchases of intangibles
9 Payments of long-term loans receivable
10 Collection of long-term loans receivable
11 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 Cash dividends paid to 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

29(millions of yen)
Year ended
December 31, 2013
Amount10,51225,805
188
3,879
(82)
(132)
(997)
3,480
(83)
2,099
43
582
(2,015)(1,826)(697)
769(2,955)(927)(723)
36,9201,045(3,515)(4,832)
29,61816,562
25,058425
3,985(1,474)(114)(1,043)
2,751
(61)
1,379
(3,487)59(2,314)
108
2,225
194
(1,653)2,487(2,594)42,493
1,055(2,772)(7,915)32,861(1,186)419(87)(1,611)(51,133)
178(2,736)(25)
93(3,395)(59,485)

(346)
4,435
(264)
(286)
(12,243)
171(1,525)(232)
440(3,417)(13,268)

6,475
27,878(31,488)
9,960(10,000)
34,000(2,737)(3,923)(7)
230,159
253
545
9,057

(9,362)
32,249(21,964)
19,920(10,000)(22,000)(2,737)(16)(4,217)(1,024)
6(19,147)
607
1,053
9,725

122

740

9,725

11,518(5) Notes on the Going-concern Assumption
Not applicable(6).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 "creationof comfortable surroundings." Under Sapporo Holdings, a pure holding company, each group company formulates development plans and strategies 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 isbased on market price. Intra-group sales and transfers are calculated as if the transactions were to third parties based on market prices.
3. Changes to reportable segments
The Sapporo Group conducted a reorganization of its logistics business on May 1, 2013. The Company’s consolidated subsidiaries
Sapporo Logistics Systems Co., Ltd. and Pokka Logistics Co., Ltd. were reorganized under Sapporo Group Logistics Co., Ltd., which is under the control of
Sapporo Group Management LTD.
In line with this, effective the three months ended March 31, 2013, Sapporo Logistics Systems Co., Ltd., which was previously
included in the Japanese Alcoholic Beverages segment, and Pokka Logistics Co., Ltd., which was previously included in the Food & Soft Drinks segment, werereclassified to the Other segment.
Additionally, effective the three months ended March 31, 2013, Pokka Food (Singapore) Pte. Ltd. which was previously
included in the Food & Soft Drinks segment was reclassified to the Restaurants segment in conjunction with changes in organizational structure through sharetransfers between consolidated subsidiaries.
The segment information for the fiscal year ended December 31, 2012 has been recast to reflect the change of segmentation.
(Note) On April 1, 2013, Pokka Food (Singapore) Pte. Ltd. changed its name to Sapporo Lion (Singapore) Pte. Ltd.
On July 1, 2013, Pokka Logistics Co., Ltd., was dissolved following an absorption-type merger with Sapporo Logistics Systems Co., Ltd.

30

4. Sales, income (or loss), assets, and other items(millions of yen)
Year ended December 31, 2012 (January 1, 2012 – December 31, 2012)
Japanese
Alcoholic
Beverages

International

Food &
Soft Drinks

269,947

36,121129,017

26,621

23,217

2,360

34

312

-

2,574

484,924
5,281

272,308

36,155

129,329

26,621

25,791490,206

7,522

(73)

364

538

9,396

17,748201,652

50,474

103,501

10,721

215,189

581,538

Depreciation and amortization

10,307

1,506

6,653

567

4,611

23,646

Increase in property, plant and equipment, andintangible assets

2,772

1,441

7,632

808

42,20654,862

Net sales(1) Operating revenues(2) Intra-group sales and transfers
Total
Segment income (loss)
Segment assets

Restaurants Real Estate

Total

Other

Year ended December 31, 2012 (January 1, 2012 – December 31, 2012)
Other *1

Total

Amounts reported on thestatements of income*2

Adjustment

Net sales(1) Operating revenues

7,565(2) Intra-group sales and transfers

492,490-

492,490

19,61024,892(24,892)-

Total
Segment income (loss)

27,176517,383(24,892)

492,490(413)

17,335(2,920)14,414

Segment assets

9,527

591,066

6,569

597,636

2,157

25,8052,200

57,071

Other
Depreciation and amortization
0
Increase in property, plant and equipment, andintangible assets

8

23,64754,871(millions of yen)
Year ended December 31, 2013 (January 1, 2013 – December 31, 2013)
Japanese
Food &
International
Alcoholic
Total
Restaurants Real EstateSoft Drinks
Beverages
Net sales(1) Operating revenues(2) Intra-group sales and transfers
Total
Segment income (loss)
Segment assets

274,909

48,215

130,671

26,82722,767

2,533

83

309

0

2,667

503,391
5,594

277,442

48,298130,981

26,82725,435508,986

9,901

1,208

(1,483)

415

8,685

18,727

212,664

54,815

102,752

11,991

215,874

598,096

8,683

1,855

6,776

643

4,412

22,371

2,123

2,218

8,516

813

4,467

18,139

Other
Depreciation and amortization
Increase in property, plant and equipment, andintangible assets

Year ended December 31, 2013 (January 1, 2013 – December 31, 2013)
Other *1

Total

Amounts reported on thestatements of income*2

Adjustment

Net sales
509,834(1) Operating revenues

6,442

509,834-(2) Intra-group sales and transfers

19,54525,140(25,140)-

Total
Segment income (loss)

25,988534,975(25,140)

509,834

231

18,959(3,614)

15,344

Segment assets

7,466

605,563

11,189616,752

2,601

25,0581,169

19,465

Other
Depreciation and amortization
85
Increase in property, plant and equipment, andintangible assets

156

22,456
18,296

Notes:(1) "Other" comprises businesses, such as food businesses, that are not included in reportable segments.
reported on the quarterly consolidated statements(2) Segment income and losses are adjusted based on operating income31
of income for the corresponding period.

5. Reconciliation and main components of differences between income and loss of reportable segments and figures on the statement of income(information on differences)

Segment income (loss)(millions of yen)
Year ended
December 31, 2013

Year ended
December 31, 2012

Total for reportable segments

17,748

Income(loss) from other segments

(413)

231

(3,035)(3,309)Unallocated corporate costs*

115

(305)

14,414

15,344Intra-segment sales
Operating income on the statement
Note:

18,727

Unallocated corporate costs consist mainly of SGA that is not attributable to reportable segments.

Segment income (loss)(millions of yen)
Year ended
December 31, 2013

Year ended
December 31, 2012

Totalofffor
segments
Set
ofreportable
receivablesfrom the Company’s administrative
Assetsof other segments
divisions581,538
9,527

Unallocated corporate assets*

598,096
7,466(22,458)(9,259)29,02820,448

Total assets on the consolidated financial statements
597,636
616,752
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.
6. Related Information
1. Information by product and service
Year ended December 31, 2012 (January 1, 2012 – December 31, 2012)
Information by product and service is omitted here, as the same information is disclosed elsewhere.
Year ended December 31, 2013 (January 1, 2013 – December 31, 2013)
Information by product and service is omitted here, as the same information is disclosed elsewhere.
2. Segment Information by Geographic Area
(1) Net sales(millions of yen)

Year ended December 31, 2012 (January 1, 2012 – December 31, 2012)
North
Japan
America
Asia
Other
Total
439,11334,657

14,835

3,883

492,490

Year ended
NorthDecember 31, 2013(January 1, 2013 – December 31, 2013)
Japan

America

Asia

Other

Total

437,60745,84321,927

4,457

509,834(2) Property, plant and equipment
Year
ended December 31, 2012 (January 1, 2012 – December 31, 2012)
Information
Year ended December 31, 2013 (January 1, 2013 – December 31, 2013)
Information
3. Information by major customer
Year ended December 31, 2012 (January 1, 2012 – December 31, 2012)
The
Compa
Year ended December 31, 2013 (January 1, 2013 – December 31, 2013)(millions of yen)Company NameNet Sales

KOKUBU & CO.,LTD.

63,858Segment
Japanese Alcoholic Beverages
Food & Soft Drinks

32

7. Impairment loss on fixed assets or goodwill by reportable segment
Year ended December 31, 2012 (January 1, 2012 – December 31, 2012)(millions of yen)
Reportable segments

Impairment loss

Japanese
Alcoholic
Beverages-

Other
Food &
Soft Drinks

International-

Restaurants
50

Real Estate

125

Total
-

175

12

Generalcorporate andintercompany
eliminations

Total

-

188

Year ended December 31, 2013 (January 1, 2013 – December 31, 2013)(millions of yen)
Reportable segments
Japanese
Alcoholic
Beverages
Impairment loss

17

Other
International

Food &
Soft Drinks

227

Restaurants

Real Estate

126

16

38

Total
425

-

Generalcorporate andintercompany
eliminations

Total

-

425

8. Amortization for and unamortized balance of goodwill
Year ended December 31, 2012 (January 1, 2012 – December 31, 2012)(millions of yen)
Reportable segments
Other
Japanese

International

Alcoholic
Beverages

Amortization
Unamortized
Balance as ofDec. 31, 2012

Food &
Soft Drinks

Restaurants

Real Estate

Total

Generalcorporate andintercompany
eliminations

Total

-

1,126

2,753

-

-

3,879

-

-

3,879

-

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

Year ended December 31, 2013 (January 1, 2013 – December 31, 2013)(millions of yen)
Reportable segments
Other
Japanese
AlcoholicInternational

Food &
Soft Drinks

Restaurants

Real Estate

Total

Generalcorporate andintercompany
eliminations

Total

Beverages

Amortization

-

1,239

2,728

-

17

3,985

-

-

3,985

Unamortized
Balance as ofDec. 31, 2013-

11,09823,320--34,418--34,418

9. Gain on negative goodwill by reportable segment
Year ended December 31, 2012 (January 1, 2012 – December 31, 2012)
Not applicableYear ended December 31, 2013 (January 1, 2013 – December 31, 2013)
Not applicable33

(7) 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, 2012 was ¥7,945 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, 2013 was ¥7,087 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, 2012 and 2013, and the total fair value
appear in the following table.
Year ended December 31,
2012(millions of yen)
Year ended December 31,
2013

Carrying value on consolidated balance sheets
January 1

173,297

Change during the period

36,627

154

December 31

209,924

210,078335,672

337,771

Fair value at December 31

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, 2012 comprises increase mainly arisingfrom property acquisitions (¥41,663 million) and decrease mainly due to depreciation (¥4,122
million) and disposal (¥873 million). The change during the year ended December 31,
2013 comprises increase mainly arising from property acquisitions (¥4,098 million) anddecrease mainly due to depreciation (¥3,907 million) and disposal (¥34 million).
3. The fair value at December 31 is mainly based on property valuations performed bythird-party real estate appraisers.

34

209,924

6.Change in the method of presentation(Consolidated balance sheets)“Directors’ and audit & supervisory board members’ severance benefits” was independently
reported under “long -term liabilities” in the fiscal year ended December 31, 2012; however,in the fiscal year ended December 31, 2013, “directors’ and audit & supervisory board
members’ severance benefits” was included in “other” because the amount was notconsidered to be signifi cant. The financial statements for the fiscal year ended December 31,
2012 have been adjusted to reflect the change in presentation method.
As a result, the 26 million yen of “directors’ and audit & supervisory board members’
severance benefits” previously reported under “long -term liabilities” in the consolidatedbalance sheets for the fiscal year ended December 31, 2012, is now included in “other.”

7.Subsequent Events(Extraordinary losses resulting from redevelopment of real estate )The Company, at a meeting of its Board of Directors held on February 12, 2014, passed a
resolution to redevelop Sapporo Ginza Building (8 -1, Ginza 5-chome, Chuo-ku, Tokyo(residence indication)) owned by Sapporo Real Estate Co., Ltd.
In line with this, extraordinary losses totaling 2,600 million yen for demolition of the existingbuilding, loss on disposal, expenses related to operation, and other costs are expected tobe recorded during the fiscal year ending December 31, 2014.
1. Overview of redevelopment
・Scale (planned) : 12 floors above ground, 2 below
Floor area: about 7,082 ㎡
・Use (planned): commercial building complex<Schedule>
・Demolition of the existing building: starting in Spring 2014 (planned)・Start of construction: Spring 2015 (planned)
・Completion of the new building: during the first half of 2016 (planned)
2. Impact on consolidated financial results
These extraordinary losses are factored into the consolidated full -year earnings forecast
released on February 12, 2014.

35