Financial Results
for the Six Months Ended June 30, 2008—Consolidated
August 5, 2008

Company name

Sapporo Holdings Limited

Security code
Listings
URL
Representative
Contact

2501
Tokyo Stock Exchange (First Section); Sapporo Securities Exchange
http://www.sapporoholdings.jp/english/
Takao Murakami, President and Group CEO
Tsutomu Kamijo, Director and General Manager of the Corporate
Planning Department+81-3-5423-7407

Telephone
Scheduled dates:
Submission of financial statements

September 12, 2008

1. Consolidated Financial Results for the Six Months Ended June 30, 2008
(January 1 – June 30, 2008)(1) Operating Results(amounts rounded down to the nearest million yen;percentage figures represent year-over-year changes)
Net sales
Six months ended
June 30, 2008
Six months ended
June 30, 2007
Year ended
December 31, 2007

Six months ended
June 30, 2008
Six months ended
June 30, 2007
Year ended
December 31, 2007

Operating income

Ordinary income

Net income

million yen%

million yen%

million yen%

million yen%

193,486

(8.5)

1,157

-

(790)

-

9,594

-

211,458

5.7(1,234)-(2,829)-(5,543)-449,011

12,362

8,118

Net income
per share

Diluted
net income
per share

yen

yen

24.47

23.46

(14.24)

-

14.10

13.76

Note: Equity method investment gains or losses:
Six months ended June 30, 2008:(46) million yen
Six months ended June 30, 2007:

18 million yen

Year ended December 31, 2007:(132) million yen

1

5,508

(2) Financial Position
Total assets

Net assets

Shareholders’equity ratio

Net assets per
sharemillion yen

million yen%yen

Six months ended
June 30, 2008

521,104

128,09524.5

326.02Six months ended
June 30, 2007

582,107

117,280

20.1

298.83

Year ended
December 31, 2007

561,858

125,18922.3

319.07

Note: Shareholders’ equity
Six months ended June 30, 2008:

127,823 million yen

Six months ended June 30, 2007:

117,228 million yen

Year ended December 31, 2007:

125,135 million yen(3) Cash Flows
Cash flows from
Cash flows from
Cash flows fromoperating activities investing activities financing activities

Cash and cash
equivalents at
end of period

million yen

million yen

million yen

million yen

Six months ended
June 30, 2008

887

31,553(29,411)8,768

Six months ended
June 30, 2007

11,435(10,173)(2,158)

7,437

Year ended
December 31, 2007

30,690(13,495)(19,568)

5,881

2. Dividends
Dividend per share
Record dateYear ended
December 31, 2007
Year ended
December 31, 2008
(result)
Year ended
December 31, 2008
(forecast)InterimYear-end

Annual

yen

yen

yen

−

5.00

5.00

−

−

−

7.00

2

7.00

3. Forecast of Consolidated Earnings for the Year Ending December 31, 2008
(January 1 – December 31, 2008)

Net sales

Full year

Operating income(percentage figures represent year-over-year changes)
Net income
Ordinary income
Net income
per share

million yen%

million yen%

million yen%

million yen%

yen

426,300(5.1)

13,500

9.2

9,200

13.3

12,800

132.4

32.65

4. Others(1) Changes affecting the status of significant subsidiaries (scope of consolidation): None
(2) Changes in accounting principles, procedures, and methods of disclosure used to prepare
the interim financial results
1) Changes in accordance with amendments to accounting standards: Yes
2) Changes other than the above: Yes①Accounting method for sales
Effective from the accounting period under review, the Company has adopted a new
accounting method for the calculation of sales, and now deducts sales incentives paid
to clients from net sales. The value of sales incentives depends on the sales prices ofsoft drinks and other non-alcoholic beverages.
②Accounting method for calculating revenue and expenses of foreign subsidiaries
Effective from the accounting period under review, the Company has adopted a new
accounting method that uses the average exchange rate during the period whencalculating the revenue and expenses of foreign subsidiaries.
(3) Number of shares issued and outstanding (common stock)1) Number of shares issued at end of period (treasury stock included):Six months ended June 30, 2008:
Six months ended June 30, 2007:
Year ended December 31, 2007:

393,971,493 shares
393,971,493 shares
393,971,493 shares

2) Number of shares held in treasury at end of period:
Six months ended June 30, 2008:
Six months ended June 30, 2007:
Year ended December 31, 2007:

1,898,226 shares
1,674,611 shares
1,785,996 shares

3For reference: Overview of Financial Results on a Non-Consolidated Basis
1. Non-Consolidated Financial Results for the Six Months Ended June 30, 2008
(January 1 – June 30, 2008)(1) Operating Results(percentage figures represent year-over-year changes)
Operatingrevenue

Operating income

Ordinary income

Net income

million yen%

million yen%

million yen%

million yen

%

5,112

70.2

3,872

236.7

4,477

163.0

(131)

−

3,003

14.0

1,150

0.6

1,702

(10.0)

1,272(19.6)

Six months ended
June 30, 2008
Six months ended
June 30, 2007
Year ended
December 31, 2007

5,462

1,906

2,970

2,019

Net income
per shareyen

Six months ended
June 30, 2008
Six months ended
June 30, 2007
Year ended
December 31, 2007

(0.34)
3.27
5.17(2) Financial Position
Total assets

Net assets

Shareholders’equity ratio

Net assets per
sharemillion yen

million yen%yen

Six months ended
June 30, 2008

303,936

126,91141.8

323.69Six months ended
June 30, 2007

357,905

130,43136.4

332.48Year ended
December 31, 2007

342,614

129,55837.8

330.35

Note: Shareholders’ equity
Six months ended June 30, 2008:

126,911 million yen

Six months ended June 30, 2007:

130,431 million yen

Year ended December 31, 2007:

129,558 million yen

Appropriate Use of Earnings Forecasts and Other Important Information
For the assumptions underlying the forecasts given above and other relevant information,refer to pages 8 to 10 of the accompanying document.

4

1.Operating Results
1. Analysis of Operating Resultsa) Interim Results for the First Half of the Year Ending December 31, 2008
Net sales for the first half of 2008 (January 1 – June 30, 2008) were down \17.9 billion,
or 8%, year over year to \193.4 billion. Operating income improved \2.3 billion to \1.1
billion, while the Group recorded an ordinary loss of \0.7 billion, a year-over-year
improvement of \2.0 billion. Although advertising and sales promotion expenses
decreased along with other costs as the Group continued to pursue low-cost operations,net sales were impacted by a decline in sales volume in the Japanese Alcoholic Beveragebusiness and the review of unprofitable sales accounts in the Soft Drinks business.
Net income improved \15.1 billion yen year over year to \9.5 billion. This was mainly
attributable to a gain on the sale of a 15% co-ownership stake in Yebisu Garden Palace
and the absence of last year’s one-time depreciation charge due to the decision to stop
production at the Osaka plant.
1) Segment Information

Impact of Seasonal Factors

The Group’s operating results are subject to substantial seasonal variability because
demand in the Alcoholic Beverages, Soft Drinks, and Restaurants businesses isconcentrated disproportionately in the summer months. As a result, first-half net sales
and income tend to be lower than in the second half.

Alcoholic Beverages (Japan)
Net sales in the Japanese Alcoholic Beverages Business were down \11.2 billion, or 8%,
to \137.1 billion, and the business incurred an operating loss of ¥1.0 billion, an
improvement of ¥1.9 billion compared to the same period last year.
Total demand in the Japanese beer and beer-type beverages market was down anestimated 4% year over year, largely in response to two factors. First, companies
industry wide raised sales prices of beer and beer-type beverages amid extensive media
coverage of food and beverage price hikes since last year. Second, consumers
increasingly shifted into belt-tightening mode in response to increases in consumer
prices across the board.
Against this backdrop, sales of our core brands of canned beer and commercial-use kegs,
such as Sapporo Black Label and Yebisu, were strong. We launched two new beers
targeted at health-conscious consumers, Beer Fine and Viva Life, but they have failed togain sufficient notoriety so far. In the new-genre category, Mugi to Hop was launched inearly June, too late to contribute appreciably to first-half sales. Total first-half sales ofbeer and beer-type beverages were down 9% year over year.
Wine sales were up year over year, buoyed by solid growth in total demand for both
domestic and imported wines, buoyant sales of the new Aroma Mutenka line of domestic
wines, and price increases on imported wines.

5

Shochu sales also grew, up 1% year over year, by virtue of solid sales of large-volume
products and the launch of Triangle Smooth, a new product.

Cost-wise, rising prices of ingredients and materials, particularly imported malt, barley,
and aluminum cans, exerted upward pressure on cost of sales. In response, we raised
prices on beer and beer-type beverages from April, clamped down on advertising andsales promotion expenses, and cut general overheads and other costs. As result of suchinitiatives to improve its earnings structure, the domestic Alcoholic Beverage businesssubstantially reduced its operating loss relative to the same period last year.

Alcoholic Beverages (Overseas)

Despite solid sales volumes, net sales in the Overseas Alcoholic Beverage business fell
\1.0 billion, or 8% year over year, to ¥12.4 billion due to adverse exchange rate
movements and other factors. Operating income was negligible, down ¥0.7 billion, or
91%, year over year.
In the North American beer market, competition is intensifying against a backdrop ofmeager growth in estimated total demand, but demand is growing solidly in certain
premium categories, such as domestic craft beers. However, the U.S. economy is in the
midst of a slowdown triggered by subprime mortgage woes dating back to last year, andthe impact on consumer spending is beginning to show. Meanwhile, the market for beer
appears to be growing in Asian countries and other markets outside of North America.
Amid this environment, we engaged in aggressive sales activities in the premium
market, where Sapporo is particularly strong. In 2008, we launched Yebisu Beer as ahigh-end brand in the U.S. As a result of these efforts, first-half sales volume was up 8%
year over year at Sapporo USA and 5% year over year at Canadian subsidiary Sleeman
Breweries. Export sales volume was also up 22% year over year.
The Overseas Alcoholic Beverage business faced cost pressures from rising prices ofingredients and materials, mainly malt and aluminum cans. It also ramped up
marketing investments relative to the same period last year.

Soft Drinks
Net sales in the Soft Drink business were down \6.0 billion, or 25%, year over year to\18.1 billion, reflecting changes to accounting policies and other factors. The businessrecorded an operating loss of \0.3 billion, a \0.7 billion year-over-year improvement.
In the Japanese soft drink market, estimated total demand remained at around thesame level year over year, supported by robust sales of carbonated beverages anddomestic mineral water.
Against this background, the Group is implementing a rapid restructuring of its Soft
Drink business through a select-and-focus strategy to the stabilize earnings structure
and bolster competitiveness going forward. Specific measures include organizational
restructuring and the redeployment of personnel, reviews of unprofitable sales accounts,
the efficient use of sales promotion expenditures, and the reduction of vending machinecosts.
First-half sales volume was down 14.2% year over year. However, with the aim ofbuilding high-value-added brands, we launched Hop Kenkyujo Arelsmooth,6

strengthened the Ocean Spray Cranberry product line, and launched the renewed
Gerolsteiner naturally carbonated water, a differentiated imported beverage. We alsorolled out Kissui brand canned coffee nationwide following successful test marketing in
Hokkaido last year, and sales for this product have been strong.

Restaurants
Net sales in the Restaurant business were up \0.5 billion, or 4%, year over year to \14.0
billion. The business posted a negligible operating loss, in contrast with the \0.1
operating billion loss in the same period last year.
The restaurant industry faces an increasingly adverse operating environment, marked
by continued substantial increases in food prices and surging gasoline prices, whichweighs heavily on the performance of suburban restaurants.
Amid this environment, the Restaurant business worked to differentiate itself byimproving the quality of food and service it offers, based on a commitment to safety,
peace of mind, and authenticity.
Existing establishments achieved year-over-year sales growth, as the Kakoiya, Irimoya,
and Tomoru formats, which tend to be largely pre-booked, performed well. Beer halls
and restaurants in regional areas also turned in a solid performance.
We opened six new establishments, including the Nasu Mori no Beer En, a huge newrestaurant facility in Nasu, adjacent to the Nasu plant on April 15. We also closed threerestaurants for various reasons, including the reconstruction of a building in which a
restaurant was located. At the end of June 2008, we had 204 establishments in operation.
The Restaurant business’s cost-of-sales ratio was roughly flat year over year, partly
because we raised prices in April in response to the rising cost of inputs such as
foodstuffs and beer, and also because we streamlined food sourcing with a Web-basedordering system. The personnel cost ratio rose slightly, reflecting a tight labor market.
The overhead expense ratio, however, improved due to a decrease in new store opening
costs.

Real Estate
Net revenue in the Real Estate business was down \0.1 billion, or 1%, year over year, to\11.7 billion, while operating income was up \0.3 billion, or 10%, to \3.7 billion.
In the real estate market, vacancy rates in central Tokyo remain low, although they
have recently been slowly drifting upward, and office rents have been holding firm.
In Hokkaido, Sapporo Urban Development Co., Ltd., a new company formed with capital
investments from local companies in Hokkaido, commenced operations in March. From
April, we began co-managing the Yebisu Garden Palace property with the Morgan
Stanley Group. Meanwhile, we continue striving to maintain high occupancy rates andboost income from existing rental properties. In February, we acquired a new property inTokyo’s Shinjuku Ward with the aim of redeveloping it to increase its income.
The aforementioned sale of a 15% interest in the Yebisu Garden Palace detracted fromthe Real Estate business’s income on a year over year basis, but operating income
nonetheless grew as rent increases and a decrease in depreciation offset this effect.

7b) Full-Year Outlook for the Year Ending December 31, 2008

Alcoholic Beverages (Japan)

We project full-year net sales in the Alcoholic Beverage business at ¥307.5 billion, a
year-over-year decline of \8.4 billion, or 3%.
To boost operating income, in response to falling sales and soaring prices of ingredientsand raw materials, we will reduce manufacturing costs and make further fixed-cost cuts,
mainly focused on sales promotion expenses.
As a result of these efforts, we project the domestic Alcoholic Beverage business’s fullyear operating income at ¥7.5 billion, a ¥1.3 billion, or 21%, year-over-year increase.
Based on first-half data, we estimate that total demand for beer and beer-type products
will fall by around 5% year over year in 2008 as a whole.
We will continue providing safe, reliable products under the slogan (translated fromJapanese): “Flavor and confidence; Sapporo Breweries is committed to pure quality.” We
will also demonstrate our commitment to being an environmentally friendly company
through initiatives such as life-cycle assessment and carbon footprint reduction. We
intend to aggressively market our flagship Sapporo Black Label brand and other core
brands, focusing mainly on keg sales. For the Yebisu brand, we will endeavor to gain acompetitive advantage through sales promotions. We also aim to revitalize our newgenre product line with the new brisk-selling Mugi to Hop brand.
In the shochu business, Triangle Smooth will contribute to sales for the entire year in2008. In the wine business, we project sales growth driven by the popular Aroma
Mutenka line and imported wines newly added to our product line.

Alcoholic Beverages (Overseas)
We project full-year net sales in the Overseas Alcoholic Beverage business at \27.2 billion,a \0.6 billion, or 2%, year-over-year decline. We project operating income of \1.2 billion, a \0.5
billion, or 28%, decline.
We expect cost of sales to remain elevated throughout 2008 due to rising material andingredients prices. Another uncertainty is the risk of earnings fluctuations due toexchange rate movements. On the upside, we expect both Sleeman Breweries andSapporo USA to maintain sales volume growth rates in excess of their markets’ total
demand growth rates. We project solid growth in sales volume for Sapporo
International’s export business, also. We’re working to shore up profits by maximallyoffsetting cost of sales and other negative factors with sales volume growth andimprovements in the product mix derived from proactive marketing investment.

Soft Drinks
We project full-year net sales in the Soft Drink business at \37.8 billion, a \14.4 billion,or 28%, year-over-year decline. We project an operating loss \0.5 billion, a \0.3 billion
improvement over last year.

8For the remainder of 2008, the Soft Drink business will continue its rapid businessrestructuring efforts, pursing a select-and-focus strategy to its stabilize earnings
structure and bolster competitiveness going forward.
In terms of marketing strategy, we aim to prioritize sales activities by selectively
narrowing down the product line. We intend to strengthen the Kissui, Ocean Spray
Cranberry, and Gerolsteiner brands with the aim of building high-value-added brands.
We will also expand our offerings of plum soft drinks, a product we have been selling forover three decades.

Restaurants
We project full-year sales in the Restaurants business at \30.1 billion, a \1.1 billion, or
4%, year over year increase, due to the contribution over the full year of large
establishments opened in 2007 in addition to contributions from new establishments
opened this year.
We also project improved profitability due to efforts to hold the cost-of-sales ratio incheck, clamp down on personnel expenses, and reduce overheads and advertisingexpenses related to opening new establishments. As a result, we project the Restaurant
business’s full-year operating income at ¥0.8 billion, a \0.1 billion, or 22%, year-overyear increase.
With banquet demand shrinking amid deteriorating corporate earnings and consumers
tightening their belts in response to a spate of price increases, we expect 2008 to be therestaurant business’s most difficult year in recent memory.
In response to such an adverse operating environment, the Restaurant business will
improve the quality of existing restaurants and pursue revitalization by renovating
aging establishments. Additionally, three new restaurants are scheduled to open in thesecond half of 2008.

Real Estate
We project full-year net revenue in the Real Estate business of \23.7 billion, a \0.4
billion, or 2%, year-over-year decline, and operating income of ¥7.4 billion, a \0.3 billion,
or 5%, increase.
Although the real estate market environment needs to be closely monitored, we expect
the central Tokyo office rental market to continue to hold firm. We intend to maintainhigh office occupancy rates and to proceed with rent increases.
In terms of development projects, we will move forward with the redevelopment of the
Shinjuku property newly acquired in February. We will also pursue additional property
acquisitions.
The sale of the 15% stake in the Yebisu Garden Palace property will detract from 2008
income, but we still expect the Real Estate business to achieve operating income growth,with the loss of income offset by rent increases and lower depreciation.
All told, we project full-year consolidated net sales of ¥426.3 billion, a \22.7 billion, or
5%, year-over-year decline; consolidated operating income of ¥13.5 billion, a \1.1 billion,9

or 9%, increase; ordinary income of ¥9.2 billion, a \1.0 billion, or 13%, increase; and net
income of ¥12.8 billion, a \7.2 billion, or 132% increase.
Note: The above projections and other forward-looking statements are based on
information available to the Company as of the date of the release of this document aswell as assumptions, current as of the date of the release of this document, regarding
uncertainties that may affect future operating results. Actual results may differ
materially from those expressed or implied by the above projections and forward-looking
statements due to various factors.

10

2. Financial Condition(1) Assets, Liabilities, Net Assets, and Cash Flows
Total consolidated assets at the end of the interim period under review totaled \521.1 billion, down \61.0
billion compared with the end of the interim period last year. This primarily reflects a decrease in notes andaccounts receivable due to the last day of the interim period being a bank trading day, a decrease inproperty, plant and equipment due to the sale of a 15% co-ownership stake in Yebisu Garden Place, and adecrease in investment securities.
Liabilities totaled \393.0 billion, down \71.8 billion compared to the end of the interim period last year.
This primarily reflects a decrease in notes and accounts payable and a decrease in liquor taxes payable.
The balance of net assets was \128.0 billion, up \10.8 billion compared to the end of the interim period lastyear. This reflects an increase in retained earnings despite a decrease in both the unrealized holding gain on
securities and foreign currency translation adjustments.
Cash flows for the interim period under review are described below.
Consolidated cash and cash equivalents as of the end of the interim period were \8.7 billion, an increase of\2.8 billion, or 49.1%, from the end of last fiscal year. This primarily reflects the sale of property, plant andequipment and a positive net cash flow from operating activities, despite repayments on borrowings andother factors.
The following presents consolidated cash flow figures for the interim period under review together with an
overview of factors that affected each category.
Cash Flows from Operating Activities
Net cash provided by operating activities was \0.8 billion, an decrease of \10.5 billion, or 92.2%,
compared to last year’s interim period. This was mainly due to income before income taxes and minority
interests of ¥17.4 billion, depreciation and amortization of ¥11.0 billion, and a decrease in accounts
receivable of ¥12.2 billion, which were offset by a \25.8 billion gain on the sale of property, plant andequipment and a \14.4 billion reduction in liquor taxes payable. The Group’s cash flows from operating
activities are subject to significant seasonal variability due to demand in the Alcoholic Beverages, Soft
Drinks, and Restaurants segments being concentrated particularly in the summer months. Cash flows fromoperating activities therefore tend to be lower in the first half than in the second half of the fiscal year.
Cash Flows from Investing Activities
Net cash provided by investing activities was \31.5 billion, in contrast with the \10.1 billion used ininvesting activities in last year’s interim period. This primarily reflects outflows of \11.5 billion for theacquisition of property, plant and equipment being offset by proceeds of \48.9 billion from the sale ofproperty, plant and equipment.
Cash Flows from Financing Activities
Net cash used in financing activities was \29.4 billion. The Group used \2.1 billion in financing activities
in last year’s interim period. This primarily reflects a \19.1 billion decrease in short-term bank loans and\19.1 billion in repayments of long-term debt, which offset proceeds from long-term debt of \10.8 billion.

11

Cash Flow Indicators
Fiscal year ended December 31,
2004
2005
2006
2007
15.3
19.8
19.2
22.3
28.6
42.8
43.5
62.8

Six months ended
June 30, 2008
24.5
55.9

Equity ratio (%)
Equity ratio based onmarket capitalization (%)
Cash flow to interest10.1
6.5
9.4
8.0
122.0
bearing debt (%)
Interest coverage ratio
6.3
10.9
9.1
7.2
0.4
(times)Equity ratio: Equity capital / Total assets
Equity ratio based on market capitalization: Market capitalization / Total assets
Cash flow to interest-bearing debt: Interest-bearing debt / Cash flow
(Operating cash flow for the interim period was converted to an annual figure by multiplying it by 2.)
Interest coverage ratio: Cash flow / Interest payments
Notes:
1. All indicators above are based on consolidated figures.
2. Market capitalization is based on the number of shares issued and outstanding (i.e., excluding
treasury stock).
3. Operating cash flow is used as the figure for cash flow.
4. Interest-bearing debt refers to all debts recorded on the consolidated balance sheets that incur
interest payments.
3. Dividend Policy and Dividends for 2008
The Sapporo Group views the appropriate return of profits to shareholders as a key management policy.
The Group’s basic policy when setting dividends is to maintain a stable dividend payment with due
consideration given to operating performance and financial condition.
In accordance with the Group’s management plan, internal reserves will be allocated to strategic
investments with the potential to produce new growth as well as efforts to strengthen the Group’s financialbase, the ultimate objective being to maximize corporate value.
In accordance with its initial plans as of the start of the fiscal year, the Group will not pay an interim
dividend.
The Group intends to pay a year-end dividend of \7 per share, an increase of \2 compared to last fiscal year.

123. Management Policy
1) Fundamental Management Policy of the Sapporo GroupThe Sapporo Group’s management philosophy is “to make people’s lives richer and moreenjoyable,” and its business activities are based on the following fundamental
management policy: “The Sapporo Group strives to maintain integrity in corporate
conduct that reinforces stakeholder trust, and aims to achieve continuous growth incorporate value.”
2) Performance Indicator Targets
The Sapporo Group’s New Management Framework sets out the following management
goals to be achieved by the plan’s target year of 2016 (for reference, 2007 figures are
given in parentheses):• Consolidated net sales¥600.0 billion(2007: ¥449.0 billion)• Consolidated operating income¥40.0 billion(2007: ¥12.3 billion)• D/E ratio

1:1(2007: 1.7 times)• ROE

above 8%(2007: 4.6%)

3) Medium- to Long-Term Group Management Strategy
In October of last year, the Sapporo Group announced a new plan, the Sapporo Group’s

New Management Framework, which sets out a target year of 2016—a year that will
mark 140 years since the Group was founded.
The New Management Framework specifies two business domains in which the Groupwill develop its activities through the utilization of the assets and strengths at its
disposal: (i) the creation of value in food, and (ii) the creation of comfortablesurroundings. In addition to pursuing further growth and improved profitability, theGroup will strive to unearth new business opportunities in these two domains andcreate new business that will sustain growth through the next generation.
We will also be implementing a number of Group strategies for growth, including thecreation of high-value-added products and services, the formation of strategic alliances,the promotion of international expansion, and the expansion of Group synergies.

13Moving forward, based on the Sapporo Group’s New Management Framework, we will
strive enhance the Group’s corporate value through the implementation of anaggressive management style under which we plan to review the allocation ofmanagement resources and carry out strategic investments to enhance competitiveness,while also engaging in sound management that focuses on long-term goals.
We formulated the Sapporo Group’s 2008–2009 Management Plan to act as a practicalroadmap for Group strategy based on the Sapporo Group’s New Management

Framework.
The crucial themes and major management goals under the 2008–2009 Management
Plan are as follows:a) Crucial themes
1) Measures Toward Achieving Sustainable Growth
To forge a path for future growth, take action that will lead to an expansion ofbusiness domains, the development of new business, and so on over the mediumterm.
2) Utilization of strength to expand business and strengthen earnings base
Build a solid operating base that can generate stable earnings amid diverse changes.
Accelerate earnings structure reform to ensure that this is achieved.
4) Issues to be Addressed
The basic strategies set out in the Sapporo Group’s New Management Framework are
as follows:a) Group strategies for growth(1) Create High-Value-Added Products and Services
The Group aims to maximize capital efficiency by focusing its management resources onareas that offer the greatest competitive strengths while also building sustainable
market advantages in each of its businesses. The Group will foster common values that14

focus on “providing valuable products and services that customers can identify with,”
while also working to create high levels of value-added.
(2) Form Strategic Alliances
Rather than focusing solely on its own operations, the Group plans to promote strategic
alliances with powerful partners that will enable it to enhance Group strengths,
complement its capabilities, and acquire know-how, so as to rapidly develop competitive
advantages on a large scale.
(3) Promote International Expansion
The Group will work to expand not only the Alcoholic Beverages business but the Soft
Drinks and Food Products businesses, as well as, in overseas markets. The Group will
also be implementing efforts aimed at building brands in overseas markets by utilizing
technological capabilities and business alliances.
(4) Expand Group Synergies
The Group will pursue further synergies among businesses by promoting flexible
collaboration and cooperation that is unconstrained by existing organizational andGroup company boundaries. The Group aims to maximize synergies, addressing themfrom two separate perspectives: synergies in business strategies and operational
synergies.
b) Overall Strategy to Enhance the Sapporo Group’s Corporate Value(1) CSR Strategy
CSR-focused management is positioned as one of the key strategies for supporting thesustained growth of the Sapporo Group. And based on the Sapporo Group CSR Policy,
the Group will work to ensure continuous understanding of and adherence to therationale, objectives, and practices that CSR-focused management entails within theGroup, and implement concrete measures that meet the requirements of the business.
(2) Corporate Governance
Adhering to the Group’s basic policy on the development of a group governanceframework, Sapporo will bolster management monitoring functions to improvetransparency and achieve management goals with the aim of continuously enhancing
the corporate value of the entire Group.

15

Sapporo will develop new internal control systems to act as the fundamental basis forGroup governance and establish them firmly within the organization.
(3) Human Resources Strategy
Sapporo will foster interaction and exchange among people within and external to theGroup and provide career-development support with the aim of developing humanresources able to contribute to the creation of value.
Towards the creation of value, Sapporo will work to instill vibrancy and abundant
motivation into the organization by providing opportunities for Group personnel toutilize and experience the skills and abilities they have acquired.
(4) Financial Strategy
The Group plans to execute strategic investments in areas of potential future growth,with due consideration given to the business domain and basic strategies.
To build solid financial foundations that support the Group's future business activities
and enable it to respond and adapt to changes in the market environment, such as
future interest rate fluctuations, Sapporo will work to reduce financial liabilities andstrengthen the capital base with the aim of raising the Group’s market valuation.

16

Consolidated Balance Sheets(in millions of yen, except percentages)
As of June 30, 2007 (A)AmountAssetsI Current assets
1 Cash and cash equivalents
2 Notes and accounts receivable - trade
3 Inventories
4 Other current assets
5 Allowance for doubtful receivables
Total current assets
II Fixed assets
1 Property, plant and equipment(1)Buildings and structures(2)Machinery and vehicles(3)Land(4)Other
Total property, plant and equipment
2 Intangible assets(1)Goodwill(2)Other
Total intangible assets
3 Investments and other assets(1)Investment securities(2)Other(3)Allowance for doubtful receivables
Total investments and other assets
Total fixed assets
Total assets
Liabilities
I Current liabilities
1 Notes and accounts payable
2 Short-term bank loans and current
portion of long-term debt
3 Liquor taxes payable
4 Accrued bonuses
5 Deposits received
6 Other
Total current liabilities
II Long-term liabilities
1 Bonds
2 Long-term bank loans
3 Employees' retirement benefits
4 Directors' and corporate
auditors' severance benefits
5 Dealers' deposits for guarantees
6 Other
Total long-term liabilities
Total liabilities

As of June 30, 2008 (B)% of total

7,437
70,33628,50920,822(192)
126,913

Amount9,069
57,00524,88815,349(244)
106,06721.8

215,188
51,744
71,3738,731
347,038

185,018
50,86273,00910,438319,328

28,3506,138
34,48926,1104,948
31,05943,40532,678(2,418)73,665455,193582,107

33,67132,876(1,898)64,649415,036
521,104

78.2
100.0

(B)-(A)As of December 31, 2007
Amount% of total

Amount20.4

1,631(13,331)(3,621)(5,473)(52)(20,846)

6,511
69,68524,041
17,754(275)
117,71721.0(27,710)206,244
51,954
71,153
9,152
338,504

60.2(3,429)27,614
5,754
33,3685.9(9,015)(40,156)(61,003)37,393
37,110(2,235)72,267444,141
561,858

12.9
79.0
100.0

79.6
100.0

% of total

31,72524,507(7,218)26,121

84,263

42,116(42,147)

64,41538,385849
45,68545,920246,830

23,601802
44,01949,219184,267(14,783)(47)(1,665)
3,299(62,562)

38,140
1,056
48,72545,042
223,501

42.4

35.4

39.8

69,71070,794
15,53573,55368,3597,792

3,843(2,435)(7,742)

69,71074,33915,135

113

51

(62)

115

34,063
27,778217,995
464,82637.5
79.9

32,41826,565
208,740
393,008

40.0
75.4(1,645)(1,212)(9,255)(71,817)31,903
21,964
213,168
436,669

37.9
77.7

53,88646,3083,240(758)
102,677

9.3
7.9
0.5
(0.1)
17.6

53,88646,31421,926(942)
121,185

10.4
8.9
4.2
(0.2)
23.3

−
6
18,686(184)
18,50853,88646,31014,292(848)
113,641

9.6
8.2
2.5
(0.1)
20.2

1 Unrealized holding gain on
securities

12,921

2.2

6,901

1.3

(6,019)

9,640

1.7

2 Foreign currency translation
adjustments

1,630

0.3

(263)

(0.1)

(1,894)

1,853

0.4

14,551

2.5

6,637

1.2

(7,913)

11,493

2.1

52
117,280
582,107

0.0
20.1
100.0

272
128,095
521,104

0.1
24.6
100.0

219
10,814(61,003)53
125,189
561,858

0.0
22.3
100.0

Net Assets
I Shareholders' equity
1 Common stock
2 Capital surplus
3 Retained earnings
4 Treasury stock, at cost
Total shareholders' equity
II Valuation and translation
adjustments

Total valuation and translation
adjustments
III Minority Interests
Total net assets
Total liabilities and net assets

17

Consolidated Statements of Income
Six months ended June 30, 2007
（A)
AmountI Net sales
II Cost of sales
Gross profit
III Selling, general and administrative
expenses
Operating income (loss)
IV Non-operating income
1 Interest income
2 Dividend income
3 Rental income
4 Foreign exchange gain

Six months ended June 30, 2008
（B)
Amount% of total(B)-(A)% of total

Amount(amounts in millions of yen)
Fiscal year ended
December 31, 2007
Amount% of total

211,458
144,006
67,452

100.0
68.1
31.9

193,486
135,851
57,635

100.0
70.2
29.8

(17,971)(8,154)(9,816)

449,011305,078
143,933

100.0
67.9
32.1

68,68632.5

56,47729.2(12,208)

131,570

29.3(1,234)

(0.6)

1,157

0.6

2,391

12,362

2.8

2,306

0.5

6,550
8,118

1.5
1.8

7,596

1.7

15,493

3.5

221

0.0

(5,285)
1
5,508

(1.2)
0.0
1.2

217
368
194
−

204
336
22
41

431
594
387
304

5 Equity in income of affiliates

18

6 Other
V Non-operating expenses
1 Interest expense
2 Loss on disposal of inventories
3 Equity in loss of affiliates
4 OtherOrdinary income (loss)
VI Extraordinary gains

346
2,120
243
−
375

1 Gain on sales of property, plantand equipment

90

25,8096,769

2 Gain on sales of investment
securities

23

4

766

3 Reversal of provision for doubtfulreceivables

146

48

27

4 Compensation income from store
closures

−

111

−

5 Subsidy for installation of vending
machine

32

−
1,144

2,739
(2,829)

292

0.6

365
1,959
765
46
147

1.3
(1.3)

0.1

−

−
970

2,919
(790)

25,973

0.5

1.5
(0.4)

13.4

(173)

179
2,038

25,681

587
4,280
858
132
1,280

32

VII Extraordinary losses
1 Loss on disposal of property,
plant and equipment
2 Loss on impairment of property,
plant and equipment
3 Depreciation expenses resulting fromrevision of residual value
4 Provision for gift voucher redemptions
5 Loss on revision of retirement
benefits plan
6 Early retirement benefits
7 Business reorganization costs
8 Amortization of goodwill
9 Devaluation of marketablesecurities and investments

631

2,687

1,300

570

1,325

6,939

7,227

−

6,583

−

746

−

−

1,178

−

−
−
−

247
1,441
−

−
−
276

64

Income before income taxes and minority
interests
Current income taxes
Deferred income taxes
Minority interests
Net income

527(6,013)

8,494

4.0

(11,031)(5.2)(5,485)2(5,543)

85

2,146
5,760

(2.6)
0.0
(2.6)

18

7,712

4.0

(781)

17,4699.0

28,501

7,906
31
9,594

4.0
0.0
5.0

13,391
29
15,138393

3,349(8,634)

Consolidated Statements of Cash FlowsSix months ended
June 30, 2007
AmountI Cash flows from operating activities
1 Income (loss) before income taxes and minority interests
2 Depreciation and amortization(11,031)
12,508(in millions of yen, except percentages)
Six months ended
Fiscal year ended
June 30, 2008
December 31, 2007
AmountAmount17,46911,055

221
24,526

3 Depreciation expenses resulting from revision of residual value

7,227

−

6,583

4 Loss on impairment of property, plant and equipment
5 Amortization of goodwill
6 Decrease in employees’ retirement benefits
7 Decrease in allowance for doubtful receivables
8 Interest and dividend income
9 Interest expense
10 Gain on sales of property, plant and equipment
11 Loss on sales and disposal of property, plant and equipment
12 Gain on sales of investment securities
13 Loss on devaluation of investment securities
14 Decrease in notes and accounts receivable - trade
15 (Increase) decrease in inventories
16 Increase (decrease) in notes and accounts payable
17 Increase (decrease) in liquor taxes payable
18 Increase 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 time deposits
2 Proceeds from time deposits
3 Purchases of investment securities
4 Proceeds from sales and redemption of investment securities
5 Purchases of property, plant and equipment
6 Proceeds from sales of property, plant and equipment
7 Purchases of intangibles
8 Increase in long-term loans receivable
9 Collection of long-term loans receivable
10 OtherNet cash provided by (used in) investing activities
III Cash flows from financing activities
1 Increase (decrease) in short-term bank loans
2 Proceeds from long-term debt
3 Repayment of long-term debt
4 Proceeds from issuance of bonds
5 Redemption of bonds
6 Net increase (decrease) in commercial paper
7 Cash dividends paid
8 Other
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 perod
VII Cash and cash equivalents of additional consolidated
subsidiaries
VIII Cash and cash equivalents at end of period

570
−
(766)
(97)
(585)
2,120
(90)
631
(23)
64
3,773
(3,693)
2,572
38
−
949
14,169716(2,053)(1,397)
11,435

1,325
434(7,342)
(364)
(541)
1,959
(25,809)
2,687
(4)
85
12,271(1,222)(1,423)(14,476)
8,996
(143)
4,957
709
(1,980)(2,799)
887

6,939
869
(1,166)(295)(1,026)
4,280(6,769)
1,300
(766)
393
4,387
777
(3,015)(207)
327(1,072)36,288991(4,237)(2,350)30,690

−
655
(39)
1,783
(9,547)
117(1,828)(73)
230(1,471)(10,173)(298)
578(1,135)
104(11,505)
48,996(2,385)(520)
153(2,436)31,553

(629)
607
(250)
2,804
(17,815)7,206(2,067)(74)
414(3,689)(13,495)

11,551
8,001(34,570)
19,925(10,000)
5,000(1,883)(183)(2,158)
36
(860)
8,282

(19,168)
10,833(19,122)
3,843−(4,000)(1,957)160(29,411)
(142)
2,886
5,881

(4,999)24,001(50,335)
19,925(10,000)
4,000(1,888)(271)(19,568)(43)(2,416)
8,282

15

−

15

7,437

8,768

5,881

19

Statement of Changes in Shareholders’ Capital
Six months ended June 30, 2007

(January 1, 2007 – June 30, 2007)(millions of yen)
Shareholders' capital

Common stock Capital surplus
Balance as of December 31,
2006
Changes during period
Issuance of new shares
Increase in retained
earnings due to increase in
number of consolidated
subsidiaries
Cash dividends
Net loss
Purchase of treasury stock
Disposition of treasurystock
Net change in items otherthan shareholders’ capitalduring period
Total changes during period
Balance as of June 30, 2007

50,06642,484

3,820

3,820

Retainedearnings

Treasury stock

10,472

(571)

3,823
46,308102,451
7,640

202

202

(1,890)(5,543)(189)(1,890)(5,543)
(189)

3

6

(186)
(758)

225
102,677

3

3,820
53,886

Total
shareholders'
capital(7,232)
3,240

Valuation and translation adjustments
Net unrealized
gains (losses) onother securities
Balance as of December 31,
2006
Changes during period
Issuance of new shares
Increase in retained
earnings due to increase in
number of consolidated
subsidiaries
Cash dividends
Net loss
Purchase of treasury stock
Disposition of treasurystock
Net change in items otherthan shareholders’ capitalduring period
Total changes during period
Balance as of June 30, 2007

11,318Foreigncurrency
adjustments(276)

Total valuationand translation
adjustments
11,041

Minority
interests

Total net assets

2

113,495
7,640
202(1,890)(5,543)
(189)
6

1,603

1,906

3,509

50

3,559

1,603
12,921

1,906
1,630

3,509
14,551

50
52

3,785
117,28020

Statement of Changes in Shareholders’ Capital
Six months ended June 30, 2008

(January 1, 2008 – June 30, 2008)(millions of yen)
Shareholders' capital

Common stock Capital surplus
Balance as of December 31,
2007
Changes during period
Cash dividends
Net income
Purchase of treasury stock
Disposition of treasurystock
Net change in items otherthan shareholders’ capitalduring period
Total changes during period
Balance as of June 30, 2008

53,88646,310Retainedearnings
14,292

Treasury stock(848)

113,641(100)(1,960)
9,594
(100)

6

11

(94)
(942)

7,544
121,185(1,960)9,594
4−53,886

4
46,314

7,633
21,926

Total
shareholders'
capitalValuation and translation adjustments
Net unrealized
gains (losses) onother securities
Balance as of December 31,
2007
Changes during period
Cash dividends
Net income
Purchase of treasury stock
Disposition of treasurystock
Net change in items otherthan shareholders’ capitalduring period
Total changes during period
Balance as of June 30, 2008

9,640

Foreigncurrency
adjustments
1,853

Total valuationand translation
adjustments
11,493

Minority
interests

Total net assets

53

125,189(1,960)
9,594
(100)
11

(2,739)(2,116)(4,856)218(4,637)(2,739)6,901(2,116)(263)(4,856)
6,637

218
272

2,906
128,095

21

Statement of Changes in Shareholders’ CapitalYear ended December 31, 2007

(January 1, 2007 – December 31, 2007)(millions of yen)
Shareholders' capital

Common stock Capital surplus
Balance as of December 31,
2006
Changes during period
Issuance of new shares
Cash dividends
Increase in retained
earnings due to increase in
number of consolidated
subsidiaries
Net income
Purchase of treasury stock
Disposition of treasurystock
Net change in items otherthan shareholders’ capitalduring period
Total changes during period
Balance as of December 31,
2007

50,06642,484

3,820

3,820

Retainedearnings

Treasury stock

10,472

(571)

Total
shareholders'
capital102,451(1,890)7,640(1,890)

202

202

5,508
(284)

5,508
(284)

7

12

5

3,820

3,825

3,820

(277)

11,18953,88646,31014,292(848)

113,641

Valuation and translation adjustments
Net unrealized
gains (losses) onother securities
Balance as of December 31,
2006
Changes during period
Issuance of new shares
Cash dividends
Increase in retained
earnings due to increase in
number of consolidated
subsidiaries
Net income
Purchase of treasury stock
Disposition of treasurystock
Net change in items otherthan shareholders’ capitalduring period
Total changes during period
Balance as of December 31,
2007

11,318Foreigncurrency
adjustments(276)

Total valuationand translation
adjustments
11,041

Minority
interests

Total net assets

2

113,495
7,640(1,890)
202
5,508
(284)
12

(1,677)

2,129

452

51

503

(1,677)

2,129

452

51

11,693

9,640

1,853

11,493

53

125,18922

Segment Information
1. Segment Information by Business(millions of yen)Six months ended June 30, 2007
Alcoholic
Beverages

Soft
DrinksRestaurants(January 1, 2007 ‒ June 30, 2007)
Real
EstateTotal

Corporate andeliminations

Consolidated

I Net sales and operating expenses
Net sales(1) Operating revenues(2) Intra-group sales and161,941
2,990

24,194112

13,471−

11,851
1,306

211,458
4,409(4,409)211,458−

164,932
167,048(2,116)24,30625,442(1,135)

13,471
13,577(106)

13,157
9,781
3,375

215,867
215,849
17(4,409)(3,157)(1,251)

211,458
212,692(1,234)−transfers
Total
Operating expenses
Operating income (loss)(millions of yen)Six months ended June 30, 2008
Alcoholic
Beverages

Soft
DrinksRestaurants(January 1, 2008 ‒ June 30, 2008)
Real
EstateTotal

Corporate andeliminations

Consolidated

I Net sales and operating expenses
Net sales(1) Operating revenues(2) Intra-group sales and149,593
2,722

18,112
117

14,043−

11,736
1,179

193,486
4,019(4,019)193,486−

152,316
153,257(941)

18,23018,601(370)

14,04314,085(42)

12,916
9,189
3,726

197,505
195,133
2,372(4,019)(2,804)(1,215)

193,486
192,329
1,157−

transfers
Total
Operating expenses
Operating income (loss)(millions of yen)
Year ended December 31, 2007
Alcoholic
Beverages

Soft
DrinksRestaurants(January 1, 2007 ‒ December 31, 2007)
Real
EstateTotal

Corporate andeliminations

Consolidated

I Net sales and operating expenses
Net sales(1) Operating revenues(2) Intra-group sales and343,670
6,323

52,239330

28,954−

24,1472,639

449,0119,293(9,293)449,011−

349,993
342,139
7,854

52,56953,408(839)

28,95428,298656

26,787
19,714
7,073

458,305
443,560
14,744(9,293)(6,912)(2,381)

449,011436,648
12,362−transfers
Total
Operating expenses
Operating income (loss)

23

Notes:(1) Segment classifications reflect the similarity of constituent businesses and take into account standard industry
classifications in Japan.
(2) Main products in each segment
Business Segment
Main Products
Alcoholic beverages
Beer, happoshu and other beverages, wine, whiskey, shochu and other products,
distribution, brewing equipment, and agribusiness
Soft drinks
Soft drinks and other non-alcoholic beverages
Restaurants
Operation of beer halls and restaurants
Real estate
Real estate leasing, real estate sales, operation of commercial facilities,
utility supplies, and fitness clubs(3) Unallocated operating expenses included in "Corporate and eliminations" : 1,306 million yen at June 30, 2007,
1,240 million yen at June 30, 2008 and 2,477 million yen at December 31, 2007.
These are principally operating expenses incurred by Sapporo Holdings (as parent company) for each of theoperating companies.
(4) Change in accounting methods

January 1, 2007 ‒ June 30, 2007
No applicable information

January 1, 2008 ‒ June 30, 2008
1) Accounting method for sales
Effective from the accounting period under review, the Company has adopted a new accounting method forthe calculation of sales, and now deducts sales incentives paid to clients from net sales. The value of sales incentives
depends on the sales prices of soft drinks and other non-alcoholic beverages. Due to this change, net sales andoperating expenses in the Soft Drink segment for the period under review were each 3,197 million yen lower than theamounts that would have resulted with the previous method, but there was no effect on operating loss.

2) Accounting method for calculating revenue and expenses of foreign subsidiaries
Effective from the accounting period under review, the Company has adopted a new accounting methodthat uses the average exchange rate during the period when calculating the revenue and expenses of foreign subsidiaries.
Due to this change, in the Alcoholic Beverages segment, operating revenue for the period under review was 158 million yen
lower and the operating loss was 0 million yen higher than the amounts that would have resulted with the previous method.

January 1, 2007 – December 31, 2007
No applicable information
2. Segment Information by Geographic Area
Sales and assets in Japan constituted more than 90% of the consolidated sales and assets for each of thesix-month periods ended June 30, 2007 and 2008, and for the year ended December 31, 2007.
Accordingly, geographical segment information has not been disclosed.
3. Overseas Sales
Overseas sales constituted less than 10% of the consolidated sales for each of the six-month periods ended
June 30, 2007 and 2008, and for the year ended December 31, 2007.
Accordingly, overseas sales have not been disclosed.

24