Financial Results
for the Year Ended December 31, 2011 — Consolidated(Based on Japanese GAAP)
February 10, 2012

Company name

Sapporo Holdings Limited

Code No.
Shares Listed
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 29, 2012

Filing of annual financial report

March 30, 2012

Commencement of dividend payments

March 30, 2012

Supplementary information to the year-end earnings results

Available

Year-end earnings results briefing heldYes(mainly targeted at institutional
investors and analysts)

1. Consolidated Financial Results for the Year Ended December 31, 2011
(January 1 – December 31, 2011)(Amounts in million yen rounded down to the nearest million yen)

(1) Operating Results(Percentage figures represent year-over-year changes)
Net salesYear ended
December 31, 2011

Operating income

Ordinary income

Net income

million yen%

million yen%

million yen%

million yen%

454,099

16.7

18,88322.6

16,807

17.3

3,164

(70.6)

14,32833.6

10,772

137.5

Year ended
389,244
0.4
15,403
19.4
December 31, 2010
Note: Comprehensive income:Year ended December 31, 2011: 812 million yen (△91.3%)
Year ended December 31, 2010: 9,306 million yen ( - %)1

Net income per
share

Diluted net
income per
share

Return on
equityOrdinary
income to total
assetsOperatingincome to net
sales

yen

yen

%

%

%

8.08

-

2.5

3.2

4.2

8.9

2.9

4.0

Year ended
December 31, 2011

Year ended
27.50
26.44
December 31, 2010
Note: Equity method investment gains or losses:
Year ended December 31, 2011: 33 million yen
Year ended December 31, 2010: 610 million yen(2) Financial Position
Total assets

Net assets

Shareholders’equity ratio

Net assets per
sharemillion yen

million yen%

yen

December 31, 2011

550,784

124,775

22.4

314.87

December 31, 2010

494,798

126,64525.3

319,32

Cash 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, 201122,313(50,891)

24,245

9,057

Year ended
December 31, 2010

27,431(2,594)(18,119)

13,270Note: Shareholders’ equity
December 31, 2011: 123,293 million yen
December 31, 2010: 125,047 million yen(3) Cash Flows22. Dividends
Total

Dividend per share

Dividends

dividends

Payoutto net

paid

ratio

assetsRecord date or
periodEnd Q1End Q2End Q3Year-end

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

yen

yen

yen

yen

yen

million yen%%

Year ended
December 31, 2010

—

0.00

—

7.00

7.00

2,741

25.5

2.3

Year ending
December 31, 2011

—

0.00

—

7.00

7.00

2,740

86.6

2.2

Year ending
December 31, 2012
(forecast)

—

0.00

—

7.00

7.00

43.5

3. Forecast of Consolidated Earnings for the Year Ending December 31, 2012
(January 1 – December 31, 2012)(Percentage figures represent year-over-year changes)
Net
Net sales

Operating income

Ordinary income

Net income

incomeper share

million yen%

million yen%

Six months
ending June 30,
2012

230,000

18.3

1,300

(56.7)

Full year

510,000

12.3

20,0005.9

million yen%

million yen

%

yen

100

(95.0)(1,500)--17,000

1.1

6,300

99.1

16.09

4. Other(1) Changes affecting the status of significant subsidiaries (scope of consolidation): None
(2) Changes in accounting principles, procedures, and methods of presentation used to prepare
the financial statements
1) Changes in accordance with amendments to accounting standards: Yes
2) Changes other than the above: None
(3) Number of shares issued and outstanding (common stock)1) Number of shares issued at end of period (treasury stock included):
December 31, 2011: 393,971,493 shares
December 31, 2010: 393,971,493 shares
2) Number of shares held in treasury at end of period:
December 31, 2011: 2,400,991 shares
December 31, 2010: 2,367,424 shares33) Average number of outstanding share during the period:
Year ended December 31, 2011: 391,580,207 sharesYear ended December 31, 2010: 391,688,891 shares

Reference:
1. Non-consolidated Financial Results for the Year Ended December 31, 2011
(January 1 – December 31, 2011)(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, 2011

6,244

(34.9)

3,759(42.6)

3,344(51.9)

1,867(59.3)

Year ended
December 31, 2010

9,590

5.7

6,546

7.4

6,955

3.1

4,588

(26.0)Net income per
share

Diluted net income
per share

yen

yen

Year ended
December 31, 2011

4.77

-

Year ended
December 31, 2010

11.72

-

(2) Financial Position
Total assets

Net assets

Shareholders’equity ratio

Net assets per
sharemillion yen

million yen%

yen

December 31, 2011

343,955

133,72238.9

341.50December 31, 2010

313,052

134,97743.1

344.68

Note: Shareholders’ equity
December 31, 2011: 133,722 million yen
December 31, 2010: 134,977 million yen

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

4

underlying the forecasts herein and other information on the use of earnings forecasts, refer to“Outlook for the fiscal year ending December 31, 2012” on page 14.

5

1. Analysis of Operating Results(a) Review of the fiscal year ended December 31, 2011
(1) Overview
Millions of yen, except percentages
Net sales

Operating income

Ordinary income

Net income

2011

454,099

18,883

16,807

3,164

2010

389,244

15,403

14,328

10,772

16.7

22.6

17.3

（70.6）

Change (%)

In 2011, the Japanese economy showed signs of a moderate recovery in businessconditions in the early part of the year, but the Great East Japan Earthquake and tsunami
disaster struck on March 11 and subsequent electricity shortages dealt a heavy blow to theeconomy, resulting in a sharp slowdown. Thereafter, consumer spending showed some
improvement as recovery efforts began, but the European debt crisis, continued yen
appreciation and other adverse factors continue to cloud the outlook for a full-fledged
economic recovery.
The industries in which the Sapporo Group operates were variously affected by theadverse external environment. The alcoholic beverage and restaurant industries both saw
profits drop sharply on weak consumer spending and the direct impact of the post-disasterenvironment. On the other hand, the soft drinks industry saw demand rise on special
post-disaster demand and favorable weather conditions in October and November. In thereal estate industry, vacancy rates flattened out in the Greater Tokyo office leasing market,
but rents remained on a moderate downward slope.
Amid this environment, the Sapporo Group began implementing its Medium-Term
Management Plan 2011–2012, under which the plan’s two-year period is envisioned as aperiod for firmly setting the Group on a growth trajectory. Efforts centered on the plan’s threecore strategies: 1) growth in new areas, 2) growth in all businesses, and 3) bolster
management capabilities that underpin growth.
Prominent among measures taken to achieve “growth in new areas” was turning the
POKKA Group into a consolidated subsidiary in March and the continued efforts to integrate
its operations with the rest of the Sapporo Group. In addition, we completed construction ofa brewery in Vietnam in November and started producing and selling Sapporo brand beer
locally. We also laid foundations for future growth by starting up sales via new strategic
alliances. In the Oceania market, the Australian beer maker Coopers Brewery began
brewing and selling Sapporo’s premium brand beer. In Japan, meanwhile, we teamed up
with South Korea’s largest food maker, CJ CheilJedang, to launch sales of makgeolli, amilky, sweet alcoholic beverage made from rice. We also formed an alliance with Bacardi
Japan to distribute that company’s spirits in Japan.
The strategy of achieving “growth in all businesses” is focused on leveraging the brand6

strength and enterprise resources of our many businesses to build unique competitive
advantages.
Meanwhile, efforts at “bolster management capabilities that underpin growth” included
dividing up Sapporo Holding’s group headquarter functions and transferring to Sapporo
Group Management Co., Ltd., functions requiring a high degree of specialization andfunctions common to all of our operating companies.
As a result of these efforts, the Sapporo Group posted sharp year-over-year growth inconsolidated sales and achieved large gains in consolidated operating income and ordinary
income. Consolidated operating income was up year over year even without thecontributions of the newly consolidated POKKA Group, while growth in consolidated
ordinary income was achieved for the fifth straight year. The Group’s 2011 consolidated
results are summarized below.
Net Sales
Consolidated net sales totaled ¥454.0 billion, up ¥64.8 billion or 17% from 2010. Sales in
the Japanese Alcoholic Beverages and Restaurants businesses were negatively affected by
the post-disaster environment, but this was more than offset by increased sales at the Soft
Drinks business thanks to a successful marketing strategy launched at the start of 2011 andthe inclusion of POKKA Group on the income statement from April.
Operating Income
Consolidated operating income increased by ¥3.4 billion or 23% to ¥18.8 billion, as all
businesses posted earnings gains except for the International Alcoholic Beverages business,where profits were depressed by forward investment related to entry into Vietnam, and theSoft Drinks business, where profits were curtailed by goodwill amortization costs.
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 ¥2.4 million or 17% to¥16.8 billion, extending the streak in consecutive years of ordinary income growth to five.
Net Income
Consolidated net income declined ¥7.6 billion or 71% to ¥3.1 billion. Despite the gains inconsolidated operating income, net income declined due to the posting of extraordinary
losses related to changes in accounting standards for asset retirement obligations and todisaster-related losses stemming from the earthquake and tsunami. Net income was also
impacted by the absence of gains on the sale of property, plant and equipment that wereposted in 2010.
Credit Ratings Raised
In recognition of our efforts to strengthen the Group’s earnings base and financial
foundation, our bond ratings were upgraded one notch during 2011Ú, enabling us to launcha five-year straight bond issue with a low annual coupon rate of 0.62% in September.
Ú (In February, Japan Credit Rating Agency (JCR) raised our rating from BBB+ to A-, and in
March Ratings & Investment Information (R&I) upgraded our rating from BBB to BBB+)

7

Contributing to the Recovery from the Great East Japan Earthquake
The Sapporo Group has made various contributions to recovery efforts after the Great
East Japan Earthquake. In addition to monetary donations and the provision of drinking
water, our Restaurants business began distributing food to disaster-struck areas
immediately after the disaster and continued to do so until June. The Sapporo Group has
continued its support for recovery efforts by donating a portion of sales from draft beer
campaigns held at our nationwide chain of Ginza Lion, from beer festivals held in our
corporate birthplace of Hokkaido and in Tokyo’s Ebisu district, and from our Japanese
Alcoholic Beverage business’s sales of a beer beverage made entirely from Tohoku-grownhops cultivated in a cooperative venture with local growers.
Segment information is outlined below. The presentation of segment information haschanged owing to adoption of the management approach from this fiscal year. Changes
from the previous fiscal year are explained in the supplementary materials.
(2) Results by Business Segment
Millions of yen, except percentages
Net sales

Operating income

2010

2011

% change

2010

2011

% change279,329

268,189

（4.0）

9,290

9,304

0.2

25,38625,888

2.0

497

378

(24.0)

33,93736,857

8.6

1,280

756

(40.9)——

Japanese
Alcoholic
Beverages
International
Alcoholic
Beverages
Soft Drinks
POKKA
Group

—

75,8502,933—

Restaurants

26,42924,091

(8.8)

148

219

47.2

Real Estate

23,537

22,468

(4.5)

7,986

8,552

7.1

Japanese Alcoholic Beverages
Domestic demand for beer and beer-type beverages in 2011 fell about 4% year over year,
reflecting the earthquake/tsunami disaster’s negative impact on all beer makers’ productsupply chains and marketing activities. Sales volume of beer-flavored beverages was downslightly while sales of happoshu showed substantial decline. New-genre beer sales volume
growth slowed but surpassed the previous year.
In this market environment, our Japanese Alcoholic Beverages business suffered a major
hit to its product supply capability and had to curtail marketing activities for a lengthy period
owing to earthquake damage to two of its five main breweries, the Sendai and Chiba
breweries, which supply markets that account for a large share of total company sales. As a8result, total unit sales of our beer products in 2011 were down 6.7% year over year. The
damage to these plants prompted us to concentrate production and supply on our three core
brands—Yebisu, Sapporo Draft Beer Black Label, and Mugi to Hop. While sales of otherproducts consequently declined sharply, sales of canned versions of the three core products
exceeded previous-year levels.
In the nonalcoholic beer category, we introduced Sapporo Premium Alcohol Free on
March 16. The new product was received enthusiastically and sales far exceeded original
targets.
In the low-alcohol category, in April we launched a new and improved version of Sapporo
Nectar Sour Sparkling Peach. We also introduced several limited volume, seasonal flavorsof cocktails, all of which were favorably received by customers.
The wine and liquor business enjoyed solid demand for domestic and imported wines,
enabling it to achieve unit sales above 2010 levels. As a result, the business achieved
year-over-year growth in sales and income in 2011. Of particular note, the quality of ourGrande Polaire series of premium wines made exclusively from domestic-grown grapes wasrecognized with an award at the Japan wine competition.
We also laid the groundwork for further expansion of our western spirits business andother growth areas by forming a business alliance in May with Bacardi, the world’s No.1
seller of rum, and signing a sales agreement with South Korea’s No.1 foods maker CJ
CheilJedang in June.
The shochu business also posted year-over-year gains in both sales and profits, with suchnew products as Triangle Ginger Highball canned cocktail, Sasainata shochu, and Kuro
Ume-shu (a dark plum wine liqueur).
Our Waramugi shochu was awarded a gold prize in the “Singly Distilled Shochu” categoryby the Alcohol Appreciation and Evaluation Committee of the Fukuoka Regional Taxation
Bureau.
Overall, the Japanese Alcoholic Beverages business posted sales of ¥268.1 billion (down¥11.1 billion, or 4%, year over year) in 2011. Despite the drop in sales, the business
managed to keep operating income level with the previous year, at ¥9.3 billion.
International Alcoholic Beverages
North American beer demand has remained sluggish despite signs of a recovery inconsumer spending. General demand appears to have contracted 1–2% from the 2010 level.
The Asian beer market, meanwhile, has continued to grow steadily, supported by
fast-growing economies in the region.
In this environment, our International Alcoholic Beverages business continued marketing
activities targeting the premium beer segment. Canadian subsidiary SLEEMAN
BREWERIES achieved a 9% year-over-year increase in unit sales (excluding outsourced
production of Sapporo brand products), sustaining its five-year growth streak. SAPPORO
USA, meanwhile, boosted its sales of Sapporo brand beers by 10% over the volume
achieved in 2010. Sales outside of North America, which are concentrated mainly in Asia,

9expanded by 40% year over year.
In Vietnam, our local subsidiary SAPPORO VIETNAM completed construction of its Long
An Brewery on November 24 and started production of locally produced beer. In otheroverseas markets, we pursued various growth strategies. For example, in Singapore weteamed up with the POKKA Group to expanding sales channels in the local householdmarket, while in South Korea we began selling Sapporo brand beers to the household andcommercial markets via an alliance with Maeil Dairies Co., Ltd. In Oceania, Coopers
Brewery of Australia started brewing and selling Sapporo brand beer from October under alicensing agreement.
As a result of the above activities, our International Alcoholic Beverages businessachieved solid sales gains on local-currency bases. Yen appreciation, however, diluted
much of these gains in yen terms, resulting in reportable sales of ¥25.8 billion (up ¥0.5
billion, or 2%, year over year). Operating income, however, was ¥0.3 billion (down ¥0.1
billion, or 24%), reflecting startup investments totaling ¥1.0 billion in Vietnam.
Soft Drinks
We estimate that domestic demand for soft drinks in 2011 increased by about 1% over2010 demand. The March disaster and raw material supply shortages led to the cancellationof many planned product launches and shipment adjustments. Unit sales were further
curtailed by weak demand amid unfavorable weather conditions in August and September
and by the impact of electricity-saving measures. These negatives were overcome, however,by sharp expansion in demand for mineral water and an upturn in demand for soft drinks
amid favorable weather conditions in October and November.
In this environment, our Soft Drinks business continued to strengthen and cultivate its
brands and stabilize its profitability in an aim to sustain growth during a targeted growthphase during the three-year period from 2011.
The segment’s sales and marketing activities focused on investment in the marketing ofcore brands. Marketing of our Gabunomi series focused on broadening sales points andsolidifying the products’ market presence. Key measures included a marketing tie-up with a
new movie release and a consumer-participation campaign that took advantage of mobile
contents. Meanwhile, we sought greater market penetration for our Ribbon soft drink lineup
through in-store promotions using the Ribbon-chan character and implementation of the “Tie
Together with Ribbon Hokkaido Project” to celebrate the 100th anniversary of Ribbon
Naporin. Regarding Gerolsteiner, a naturally carbonated water from Germany, we tookaggressive marketing steps that included running TV commercials, passing out samples,in-store trial offers, repeat purchase promotions, and other campaigns. As a result of theabove and the post-quake surge in sales of mineral water and unsweetened beverages,
shipments of our soft drinks rose 4% year over year in 2011.
With regard to costs, the Soft Drinks business took steps to build a more stable earnings
base. These efforts focused on realizing synergies with the POKKA Group and adhering to
the rigorous select-and-focus approach that has enabled us to carry out cost-structure10reforms throughout the value chain, including optimization of our production structure andthe reduction of procurement costs.
As a result of the above activities, the Soft Drinks business achieved sales of ¥36.8 billion(up ¥2.9 billion, or 9%, year over year). Operating income, however, was ¥0.7 billion (down¥0.5 billion, or 41%), owing to a goodwill amortization charge of ¥0.6 billion.
POKKA GroupOur estimate of total domestic demand for soft drinks in 2011 is as stated in the section
immediately above. Meanwhile, total demand for lemon-based products (flavorings) was
generally even with 2010 levels while demand for instant soups appears to have declined byabout 2% year over year.
In this environment, the POKKA Group’s Domestic Beverage & Foods businessendeavored to strengthen and cultivate brand power by focusing investments on core
brands and newer growth brands.
In addition to the impact of marketwide demand conditions, POKKA’s domestic
beverages business was adversely affected by a decline in demand caused byunseasonably warm weather in November. To overcome these adverse conditions, POKKA
carried out a 10th anniversary sales campaign for Kireto Lemon, launched Kireto Lemon
Soukai Sparkling, bolstered the POKKA Coffee lineup, and introduced annual promotionalcanned drinks to the usual favorable market response.
POKKA’s domestic foods business offset the negative impact of the March disaster,
including adjustments to soup shipments and fewer in-store bargain sales with strong salesof focus products, supported by its efforts to market POKKA Lemon 100 as an invigorating
drink suitable for consumption in the morning, a TV ad campaign for the Kantanbimi soupline, and the introduction of several new products, including Jikkuri Kotoko Shrimp Bisque inAugust.
POKKA’s Domestic Restaurants business achieved solid results as its core Café de Criécoffee shop chain continued with operational improvements amid a difficult post-quake
market environment for the café industry. Improvements included the introduction of newmenu items on a regular basis and ongoing store remodeling.
The Overseas Beverage & Foods business made steady progress in improving its COGS
ratio and lowering distribution costs as it dealt with intensifying price competition in the
Singapore market and falling sales in other markets.
The Overseas Restaurants business posted steady gains in sales as it continued to open
new outlets in Hong Kong, the business’s core overseas market.
Overall, the POKKA Group posted sales of ¥75.8 billion, while operating income came to¥2.9 billion (no year over year comparisons available for either) as the company took a ¥1.3
billion charge for goodwill amortization.
POKKA Group Overview
POKKA Group results were added to our income statement from April 1. As such,
SAPPORO Holdings’ consolidated results for 2011 include POKKA’s results for the nine11

months from April through December. We therefore provide the previous-year data forreference.
* For reference: POKKA Corporation (including subsidiary companies) results forApril–December 2010 and 20112010 Sales ¥76.8 billion
Operating income ¥4.1 billion
2011 Sales ¥77.3 billion (up ¥0.4 billion or 1% year over year)
Operating income ¥3.9 billion (down ¥0.2 billion or 5% year over year)
Restaurants
Japan’s restaurant industry has been slowly recovering from the adverse conditions thatgripped the industry immediately after the March 2011 disaster, when a nationwide
self-restraint mood curbed customer traffic. However, the restaurant business environment
remains challenging, with consumers still concerned about protecting their livelihoods andincreasingly conscious of food safety.
To bring customers back to our restaurants, the Restaurants business conducted a variety
of beer campaigns and strengthened marketing efforts to corporations.
We have also been revitalizing existing outlets by switching them to new formats. For
example, we converted an outlet in Tokyo’s Kanda district and two in the Otemachi district to
our Ooi Hokkaido (Hello Hokkaido) Betsukai Pub format, a Japanese-style pub officiallyrecognized by and featuring fare from the town of Betsukai in Hokkaido.
To improve the profit structure of our Restaurants business, we endeavored to lower costs,
including shop rental costs, and closed ten unprofitable locations.
New outlet openings included three new YEBISU Bar outlets—in Osaka’s Umeda district
and in Tokyo’s Kagurazaka area and the Tokyo Dome City facility. We also assumed
operation of food services in some leisure facilities and opened four new restaurants,
including the takeover of already operating shops. As a result, we had 191 restaurants
operating as of the end of the fiscal year.
As a result of the above, the Restaurants business managed to post sales of ¥24.0 billion(down ¥2.3 billion, or 9%, year over year). However, good results at new outlets,cost-reduction efforts, and the closure of unprofitable stores enabled the business to post
operating income of ¥0.2 billion (up 47% year over year).
Real Estate
In Japan’s real estate industry, vacancy rates in the Greater Tokyo office leasing market
were largely the same as a year earlier, but rents remained on a moderate downward slope.
Amid such an operating environment, our Real Estate business endeavored to maintainrents and occupancy rates while further cutting costs. Properties damaged by the March
earthquake were quickly repaired, and we maintained high occupancy rates at coreproperties in the Tokyo metropolitan area, including Yebisu Garden Place. Our properties
sustained their energy-conservation measures, including measures to reduce electric power

12

consumption.
Real estate development activities in 2011 featured the opening in June of a new wing at
the Pal Urayasu fitness club in Urayasu, Chiba. The new wing has been well received byclub clientele.
The primary new acquisition of the year, the Storia Shirokanedai rental apartment buildingin Tokyo’s Minato district, which we acquired in February, is already contributing to segment
earnings.
As a result of the above, Real Estate business sales in 2011 totaled ¥22.4 billion (down¥1.0 billion, or 5%, year over year). Segment operating income, however, increased to ¥8.5
billion (up ¥0.5 billion, or 7%).

13

(b) Outlook for fiscal year ending December 31, 2012
(1) Overview
Millions of yen, except percentages
Net sales

Operating

Ordinary

incomeincomeNet income

2012 forecast

510,000

20,00017,0006,300

2011 results

454,099

18,883

16,807

3,164

12.3

5.9

1.1

99.1

Projected increase (%)

In 2012, in accordance with the Sapporo Group Management Plan 2012-2013, a rolling
two-year plan, the Group will focus on three fundamental strategies: (1) Creating newopportunities for growth, (2) Challenge toward growth in all businesses, and (3) Carrying out
growth measures. We regard the next two years as a period for starting up a new
management structure that will place the Sapporo Group firmly on a robust growth trajectoryand enable us to further raise our corporate value. In 2011, we aim to increase Group sales
and expand operating, ordinary and net income as we target a third consecutive year of
growth in operating income and a sixth straight year of growth in ordinary income. Ourconsolidated forecasts for the Sapporo Group in 2012 are outlined below.
Net Sales
The Japanese Alcoholic Beverage business will continue to focus on expanding its
existing brands while aggressively pursuing growth opportunities in non-beer product areas.
In particular, we are targeting a tripling of sales in the low-alcohol category, a growth area
where we are enhancing our product offerings through tie-ups with Bacardi and CJ
CheilJedang.
The renamed International Business segment is targeting further growth in all coreoverseas markets. In North America, SLEEMAN will continue its efforts to help Sapporo
brand beers better penetrate the local market, while expansion in Southeast Asia will center
on Vietnam. We also target accelerated growth of beer sales in the South Korea market,
where we formed a new joint venture at the end of January by taking a 15% stake in a
subsidiary of our local partner Maeil Dairies Co., Ltd. We also signed a licensing agreementwith Coopers Brewery in Australia to propel sales growth of Sapporo brand beers in the
Oceania market. In addition, we will pursue M&A and alliance opportunities in new
businesses where we can demonstrate Group synergies in soft drinks and foods. At the endof January, we took a 51% equity stake in Silver Springs Citrus, Inc., the largest maker ofprivate-brand chilled drinks in the United States. This tie-up will pave our way for afull-fledged entry into the U.S. soft drinks market and further sales expansion.
In the new Foods and Soft Drinks segment, we plan to expand sales and nurture thegrowth of competitive brands by concentrating our investments in distinctive products,
categories and brands.
In the Restaurants segment, we will continue to revitalize existing outlets and to pursue

14

sales growth driven by a store-opening strategy focused on opening small and midsize
shops in our YEBISU Bar and Brasserie LION formats.
Our Real Estate business will continue efforts to maintain and raise occupancy rates whiletargeting appropriate rent levels. The business also plans to increase sales by implementing
various measures to add value to its core Yebisu Garden Place property.
Based on the above, we forecast consolidated sales will expand to ¥510.0 billion (ayear-over-year increase of ¥55.9 billion or 12%) in 2012.
Operating Income
The Japanese Alcoholic Beverages business plans to increase profits by boosting sales
and continuing cost control measures. The International Business segment, however,expects another decrease in profits as continued forward investments to build brandrecognition in Vietnam are expected to offset profit gains by our other existing overseas
operations. The Foods and Soft Drinks business forecasts increased sales but expects
profits to fall owing to the planned posting of goodwill amortization expenses. The
Restaurant business forecasts gains in both sales and profits, as it plans to continue its
efforts to strengthen the profitability of its operations. Finally, the Real Estate business plans
to increase sales by raising occupancy rates to normal levels. It also plans to increase
profits by reducing costs.
Overall, we forecast consolidated operating income of ¥20.0 billion (up ¥1.1 billion or 6%
year over year) in 2012, when we target a third consecutive year of growth at the operatinglevel.
Ordinary Income
We project a 6th consecutive year of growth with consolidated ordinary income of ¥17.0
billion, up just ¥0.1 billion or 1% from 2011, because we expect higher interest payments tooffset most of the gains at the operating level.
Net Income
We project consolidated net income of ¥6.3 billion in 2012, a ¥3.1 billion or 99% increaseover 2011. The main differences with 2011 are expected to be the absence of losses
stemming from the application of revised accounting standards relating to asset retirement
obligations, lower extraordinary losses related to earthquake damages, and an increase incorporate taxes owing to a rise in income before income taxes and minority interests.

15

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

2012

268,189

288,000

25,888Operating income% change

2011

2012

% change

7.4

9,304

10,50012.8

37,300

44.1

378

0

(100.0)112,707

134,600

19.4

3,690

3,000

(18.7)

Restaurants

24,091

24,900

3.4

219

600

173.8

Real Estate

22,46824,400

8.6

8,552

9,300

8.7

Japanese
Alcoholic
Beverages
International
Business
Foods & Soft
Drinks(Changes to Presentation of Segment Information)
As of the first quarter of fiscal 2012, we have changed the names of reportable businesssegments as follows: “International Alcoholic Beverages” is now “International Business”
and the Soft Drinks segment and the POKKA Group have been merged into a single
segment, which we call the “Foods & Soft Drinks”.
Japanese Alcoholic Beverages
We expect the Japanese Alcoholic Beverages business’s operating environment toremain challenging as the drinking population shrinks, consumer preferences and venues
for drinking alcoholic beverages grow increasingly diverse, and uncertainties remain about
the many political, economic and nuclear power issues facing Japan.
In this environment, we aim to overcome the damage caused by the March 2011
earthquake and tsunami disaster and once again display to the markets the qualities uniqueto the Sapporo brand while further enhancing profitability, raising corporate value and brandvalue. While doing all the above, we will create deeper bonds with our customers, in whom
we hope to inspire excitement and joy through our products.
Our beer business will again focus on its three core brands—Yebisu, Sapporo Draft Beer
Black Label, and Mugi to Hop—while also building brand power for our Sapporo Premium
Alcohol Free offering in the nonalcoholic beer beverage market, which we expect willcontinue to grow.
In the low-alcohol category, we will cooperate with our new business partners Bacardi and
CJ CheilJedang to develop products that take advantage of our respective strengths andsolidify our growth in expanding areas of the low-alcohol content beverage market.
Our wine and liquor business, meanwhile, will strive to strengthen core imported winebrands, such as Yellowtail, while also focusing on growth areas for domestic wines, which
include additive-free wines and wines in PET bottles. In particular, we aim to strengthen ourGrand Polaire brand of wines made exclusively from domestically grown grapes and will be

16reopening the Grande Polaire Katsunuma Winery in April.
Our western spirits business will continue to focus on such core brands as Bacardi,
Bombay, and Dewars. In particular, we aim to make Bacardi rum the ingredient of choice forthe increasingly popular mojito cocktail in Japan.
In our shochu business, we will seek to boost sales volumes to solidify this business’s
position as a new stable source of profits, along with the wine business. Toward that end, weplan to release new products into the market for blended shochu (blends of singly andmultiply distilled shochu).
On the cost front, we will continue to strengthen the Japanese Alcoholic Beverages’
business’s earnings base by continuing to implement effective procurement policies in
response to fluctuating ingredient and raw material prices, building a more flexible andadaptable production structure, and further improving cost effectiveness, particularly withrespect to spending on sales promotions.
International Business
In North America, many uncertainties continue to cloud the prospects for a full-fledged
recovery, and we therefore expect total demand in the North American beer market to belargely flat. In this environment, our International Business aims to continue solidifying its
North American market position by capitalizing on its strengths in the premium beer
category.
In the Canadian market, SLEEMAN BREWERIES will continue its aggressive spendingon marketing as it seeks to maintain and enhance the value of its core premium brands.
Including sales of its growing value brands, the company aims to achieve unit sales growththat exceeds total demand growth.
In the US market, SAPPORO USA again aims for unit sales growth in excess of the total
demand growth rate. The subsidiary will continue to target the Japanese-American market
segment while strengthening our presence in the wider Asian-American and general
population market segments. At the end of January, we purchased a 51% equity stake in
Silver Springs Citrus, Inc., the largest maker of private-brand chilled juices in the UnitedStates.

The acquisition marks our full-fledged entry into the North American beverages

market.
Outside of North America, we aim to boost sales by actively engaging in growth markets in
Asia and elsewhere while keeping an eye on opportunities to tap into new markets as we
strengthen the foundations of our International Business and expand its operations. In
particular, we are making a full-fledged entry into Vietnam, where our local subsidiarycompleted construction of brewery in Long An in November and is now poised to begin fullmarketing of Sapporo brand beer and brand development after Vietnam’s Tet holidays
celebrating the lunar new year. In Singapore, we will continue to work with the POKKA
Group to expand sales channels in the domestic household market. At the end of 2010, we
re-entered the South Korean market when we formed a business alliance with Maeil Dairies
Co., Ltd. Toward the end of January 2012, we took a 15% equity stake in a subsidiary of our17

Korean partner. We plan to use this JV to accelerate our penetration of that country’s
household and commercial-use beer markets. Finally, we plan to boost beer sales in the
Oceania market by leveraging our relation with Coopers Brewery, with which we entered intoa license last October to brew and sell Sapporo brand beer in Australia and New Zealand.
Foods & Soft Drinks(Sapporo Beverage Co., Ltd.)
Japan’s soft drink industry continues to face rising material costs and strong consumer
price consciousness, even as the economy begins to recover. Consequently, we think an
increase in total industrywide demand in 2012 is unlikely.
Amid this environment, Sapporo Beverage is adhering to its policy of “growthaccompanied by earnings quality”. To further solidify its earnings structure, the subsidiaryremains focused on concentrating management resources on growing and strengthening
key brands.
Specifically, the business will continue to focus marketing expenditures and sales efforts
on core brands, including our Ribbon series, the Gabunomi series, and its Gerolsteiner
naturally carbonated water from Germany. We will also continue to develop innovative value
propositions that enable us to communicate the Sapporo brands’ unique qualities tocustomers.
With regard to cost, we will strive to strengthen profitability through rigorous application of
the selection-and-focus approach. We will strive to derive synergies from our alliance withPOKKA Corporation and continue our relentless efforts throughout the value chain—fromprocurement to production and on to distribution—to achieve low-cost operations.
POKKA GroupOur forecast of total demand in Japan’s soft drink industry in 2012 is as stated at the
beginning of the previous section. Given that forecast, the POKKA Group plans to maintainthe stable earnings base of its Domestic Soft Drinks business by concentrating available
resources on two core brands —Kireto Lemon drinks and Aromax coffee drinks—andstrengthen its marketing of products into specific market segments.
The Japanese food industry is benefiting from households’ preference for eating at homebut, like the soft drinks industry, must cope with consumers’ increasing preference forlow-priced products. As such, we see rather dim prospects for growth in total domestic
demand for food. Given this outlook, the POKKA Group’s domestic foods business plans tosecure continued growth by sharply expanding sales of its Kongari Pan and Jikkuri Kotokoto
soups, nurturing its Kantanbimi Korean soups, and expanding sales of POKKA Lemon
drinks by cultivating regular users. In addition, the company plans an aggressive expansionof its health food products.
POKKA’s Domestic Restaurants business targets continued growth and enhancement of
its Café de Crié brand value. In addition to remodeling existing outlets in line with a new
brand package, the company is promoting effective chain expansion targeted at creating a18

dominant market presence. It is also developing a new market for its Café de Crié shops by
opening outlets inside hospitals.
POKKA’s Overseas Soft Drinks business expects to see stiffer price competition in its
core Singapore market owing to the pricing policies of its competitors. In response, it plans
to maintain its share of the Singapore market for tea drinks and expand sales of carbonatedbeverages. Meanwhile, it will promote greater efficiencies by adjusting output in line withdemand and by introducing energy-saving measures at its plant. It also plans to expand
sales to other countries in Southeast Asia and to expand its export market to the Middle
East and other regions. It also will establish a production network capable of supporting
those plans.
POKKA’s Overseas Restaurants business plans to grow by opening new outlets in Hong
Kong and some other parts of China. It also plans to improve profitability through reforms at
its operations in Singapore.
Restaurants
Stiff price competition has become the norm in Japan’s restaurant industry as increasingly
frugal consumers dine out less often. Our Restaurants business therefore continues to facea difficult market environment again in 2012.
We will continue our various promotional campaigns aimed at attracting customers backto our existing restaurants while also stepping up marketing to corporations and shiftingsome outlets to other formats, such as our YEBISU Bar format.
We will also continue recent efforts to reform our profit structure, including reducing costsby, for example, creating a distribution system with a single center for serving our Tokyo
metropolitan logistics network; lowering fixed costs by, through such measures as seeking
lower rents; and closing unprofitable locations.
New restaurant openings will focus on the YEBISU Bar format and the small-scale
Brasserie format. We will also open restaurants at facilities managed by the Sapporo Groupand at vacated commercial premises where we are able to keep store-opening costs down.
Real Estate
Japan’s real estate industry continues to face difficult conditions, especially in the rental
office market, where we expect a recovery in rent levels to be delayed by an increase in
office supply in the Tokyo area.
Amid this environment, on January 1, 2012, we changed the name of our consolidated
real estate subsidiary Yebisu Garden Place Co., Ltd., to Sapporo Real Estate Co., Ltd., aspart of our plan to raise the Sapporo brand value and strengthen Group synergies while
continuing efforts to raise occupancy rates and rent levels at Group properties. In March, wewill acquire the trust beneficiary rights that amount to a 15% interest in Yebisu Garden Place
held by the joint holder in the complex, which will return the complex to 100% ownership by
the Sapporo Group and pave the way for us to accelerate efforts to enhance the value of theproperty.

19

In addition, we will begin redevelopment of the Seiwa Yebisu Building in order to position
the office building as our second key property in the Ebisu area, after Yebisu Garden Place.
The redevelopment project is scheduled for completion in 2014.
*The earnings forecasts and forward-looking statements above were prepared are based on
currently available information and its best assessment of potential risks and uncertainties.
Actual outcomes may differ materially from forecasts due to changes in various underlying
factors.
(2) Review of Consolidated Financial Condition(a) Consolidated Financial Condition
Consolidated assets totaled ¥550.7 billion at December 31, 2011, a ¥55.9 billion increase
from December 31, 2010. The increase is attributable to addition of the POKKA Group to theCompany’s consolidated subsidiaries and to an increase in goodwill stemming from theacquisition of shares of Sapporo Beverage Co., Ltd.
Consolidated liabilities totaled ¥426.0 billion, a ¥57.8 billion increase from December 31,
2010. Although deposits received and bonds both fell from the previous year-end, liabilities
increased owing to consolidation of the POKKA Group and to the issue of commercial
paper.
Consolidated net assets totaled ¥124.7 billion, a ¥1.8 billion decline from December 31,
2010. The decline is largely attributable to the distribution of dividends and a decrease in
the foreign currency translation adjustment account balance as a result of yen appreciation.
(b) Consolidated Cash Flows
Cash and cash equivalents (collectively, “cash”) totaled ¥9.0 billion at December 31, 2011, a¥4.2 billion or 32% decrease from December 31, 2010. The decrease resulted from the useof cash provided by operating activities and financing activities to support investing activities,
including purchases of subsidiary shares, investment securities, and fixed and intangible
assets.
Following are consolidated cash flow figures for 2011 and an overview of factors that
affected each category.
Cash flows from operating activities
Operating activities provided net cash of ¥22.3 billion, a ¥5.1 billion or 19% decrease from2010. Major sources of operating cash flow included ¥5.8 billion in income before income
taxes and minority interests and ¥24.4 billion in depreciation and amortization. Major uses ofoperating cash flow included a ¥4.7 billion increase in notes and accounts receivable – trade,¥4.1 billion reduction in deposits received, a ¥1.6 billion reduction in liquor taxes payable,

20and a ¥1.5 billion increase in inventories.
Cash flows from investing activities
Investing activities used net cash of ¥50.8 billion, a ¥48.2 billion or 1,861% increase from2010. Major investment outflows included ¥18.6 billion to acquire subsidiary shares in linewith a change in the scope of consolidation, ¥16.1 billion for the purchase of shares of othersubsidiaries, and ¥11.6 billion to acquire property, plant and equipment.
Cash flows from financing activities
Financing activities provided net cash of ¥24.2 billion (versus a net cash outflow of ¥18.1
billion in 2010). Major financing inflows included ¥13.0 billion in net inflows from commercial
paper issuance, ¥13.1 billion in net inflows from short-term bank loans, ¥38.6 billion fromlong-term bank loans and ¥9.9 billion from bond issuance. Major outflows included ¥24.9
billion in repayments of long-term bank loans and ¥20.0 billion in bond redemptions.
Cash Flow Indicators
As of December 31,

Equity ratio (%)
Equity ratio based on market
capitalization (%)
Cash flow to interest-bearing
debt (years)
Interest coverage ratio (%)

2007

2008

2009

2010

2011

22.3

22.1

23.4

25.3

22.4

62.8

41.5

33.9

29.1

20.7

8.0

9.9

18.4

7.8

11.8

7.2

6.0

3.5

7.6

6.2

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 and outstanding,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 2011 and 2012
Providing fair returns to our shareholders is a key management policy of our Group. Ourbasic policy is to pay stable dividends to the extent permitted by our operating performanceand financial condition.
In accordance with the above and despite a decrease in net income as a result of factors
such as losses related to the earthquake, we plan to pay annual dividends for 2011 of ¥7 pershare.

21

For 2012, we plan to again pay annual dividends of ¥7 per share by steadily carrying out
our Management Plan while also making strategic investments and strengthening ourfinancial foundation.
Dividends for 2011 and 2012 (yen per share)
InterimYear-end

Total

2011

0.00

7.0

7.0

2012

0.00

7.0

7.0

22

2. 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 yen (Before goodwill amortization)

Debt/equity ratio:around 1.0

ROE:

above 8% (Before goodwill amortization)(3) Medium- to Long-Term Management Strategies
1) Create High-Value-Added Products and Services
In all of our businesses, we will build sustained market advantages and pursue maximal
capital efficiency by concentrating management resources in market segments where
we are most competitive. We will create high value-added, placing priority on “providing
valuable products and services that customers can identify with” as a shared Groupvalue.
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 of not only alcoholic beverage operations but also
soft drink and food operations. We aim to build brands in overseas markets bycapitalizing on operational alliances and proprietary technological capabilities.
4) Expand Group Synergies
We will pursue greater inter-business synergies through flexible coordination andcooperation that transcends individual Group companies and organizationalframeworks.
(4) Issues to be Addressed
The integration of POKKA Corporation with Sapporo Beverage Co., Ltd, into POKKASAPPORO Food & Beverage Ltd. will mark a major change in our Group structure when the23integrated company begins operation in January 2013. The next two years is therefore an
important period during which we must place the Sapporo Group firmly on a growthtrajectory. We have therefore positioned 2012–2013 as the inaugural period for a new
management structure designed to promote robust growth. To guide us during this crucial
two-year period we have formulated the Sapporo Group Management Plan 2012–2013.
Following the plan’s three basic strategies, as outlined below, will provide the basis for ourefforts to realize a new management framework.
1) Challenge toward growth in all businesses
While leveraging the strengths of our various business’s brands and their othermanagement resources, we will accept new challenges to beat the competition in allof our businesses.
2) Carrying out growth measures
To realize the fruits of the many initiatives undertaken by the Group in recent
years—including the integration of the POKKA Group, entry into the Vietnamese
market, and the reversion of Yebisu Garden Place to 100% ownership by the Sapporo
Group—we will continue to make forward investments and take other steps tostrengthen our foundations.
3) Creating new opportunities for growth
We will continue to aggressively pursue attractive M&A deals and alliances, both inJapan and overseas.
We regard management rooted in corporate social responsibility (CSR) as a key strategy
conducive to our Group’s sustained growth. We will conduct programs with such themes as“Provision of safe products of reliable quality”, “Coexisting with the wider society”, and“Preservation of the earth’s environment”. Additionally, we will continue to build CSR andcompliance programs as the foundation that always governs our corporate behavior, andimplant CSR and compliance within our corporate culture through in-house education.

24

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

25

December 31, 2010

December 31, 2011

AmountAmount13,39061,352
2
12,4129,756
2,810
10,173(161)
109,737

9,204
79,34017,113
10,948
4,539
8,258
(386)
129,018

357,769(185,485)
172,284
180,519(142,521)
37,997
77,583
3,563
20,400(15,201)
5,199
296,629376,200(201,765)
174,435
203,307(163,080)
40,226
83,82619,150(9,071)
10,0792,058
20,149(16,396)
3,752
314,379

14,128
10,331
24,45940,147
8,844
48,99238,027
10,3962,649
14,493(1,594)
63,972
385,061494,798

31,208
10,142
2,203
16,251(1,411)
58,394
421,766
550,784

(millions of yen)

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

26

December 31, 2010

December 31, 2011

AmountAmount24,34828,08920,00034,253
1,818
2,055
19,21837,259167,043

32,35457,37010,0003,899
32,535
2,985
2,118
15,301
56,024
212,589

35,843
97,402
13,4557,190
42
31,935
15,239201,109368,152

32,000106,798
7,715
12,186
7,452
53
32,623
14,589213,418
426,008

53,88646,31528,317(1,190)127,32953,88646,31028,741(1,197)
127,741

2,985(7)(5,258)(2,281)
1,597
126,645494,798

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

(2) Consolidated Statements of Income

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 (loss) on gift voucher redemptions
6 Other
Total non-operating income
V Non-operating expenses
1 Interest expense
2 Exchange loss
3 Other
Total non-operating expenses
Ordinary income
VI Extraordinary gains
1 Gain on sales of property, plant and equipment
2 Gain on sales of investment securities
3 Reversal of provision for doubtful receivables
4 Reversal of removal costs
5 Settlement received
Total extraordinary gains

27

Year ended
December 31, 2010
Amount389,244
261,211
128,032(millions of yen)
Year ended
December 31, 2011
Amount454,099
286,678
167,421

20,38917,19619,1801,245
2,865
51,752
112,629
15,40331,037
17,532
27,117
1,357
3,245
68,246
148,537
18,883

485
572
610
11
677
581
2,939

343
595
33
511
769
2,253

3,646
366
4,013
14,328

3,557
107
664
4,330
16,807

16,575657
61
569
17,864

315
25
261
602

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

1,723
8,409
2,374
1,245
12
664

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

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

14,43017,762
3,170
3,822
6,993
(3)
10,772

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

-

3,042

-

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

-

998
(186)

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

For reference:*1. Other comprehensive income for the fiscal year ended December 31, 2010
(millions of yen)
Unrealized holding gain on securities: 363
Deferred hedge gain (loss): (8)Foreign currency translation adjustments: (1,749)
Share of other comprehensive income of associates accounted for using equity method:(67)
Total other comprehensive income : (1462)*2. Comprehensive income for the fiscal year ended December 31, 2010
(millions of yen)Comprehensive income attributable to owners of the parent company: 9,480
Comprehensive income attributable to minority interests: (173)
Total comprehensive income: 9,306

28

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

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

29

Year ended
December 31, 2010
AmountYear ended
December 31, 2011
Amount53,88653,88653,88653,88646,31846,315(2)(2)
46,315(4)(4)
46,31020,28628,317(2,742)
10,772
8,030
28,317(2,741)
3,164
423
28,741(1,131)(1,190)

(74)
16
(58)
(1,190)

(18)
11
(7)
(1,197)

119,360

127,329(2,742)
10,772
(74)
13
7,968
127,329(2,741)
3,164
(18)
7
411
127,741

2,637

2,985

347
347
2,985

(992)
(992)
1,993

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

30

0

(7)

(8)
(8)
(7)

(0)
(0)
(8)

(3,627)(5,258)(1,631)(1,631)(5,258)(1,174)(1,174)(6,432)(988)(2,281)(1,292)(1,292)(2,281)(2,166)(2,166)(4,447)

218

1,597

1,378
1,378
1,597

(115)
(115)
1,482

118,590

126,645(2,742)
10,772
(74)
13
86
8,054
126,645(2,741)
3,164
(18)
7
(2,281)(1,869)124,775

31

32

33

34

35

Business Combinations
Year ended December 31, 2011 (January 1, 2011 - December 31, 2011)
Business combination through acquisition
1. Outline of the business combination
1) Name and business of acquired company
Name: POKKA CORPORATIONBusiness: Beverages, food, restaurant, confectionaries, distribution, and other businesses
2) Primary reasons for business combination
In September 2009, the Company and POKKA CORPORATION entered into a new capitaland business alliance agreement to strengthen their existing business alliance in thebeverage industry and to expand both companies' business areas. Subsequent efforts toenhance the vending machine business, generate costs savings through joint procurement,
optimize production systems, and jointly develop businesses in foreign markets haveproduced some results. Since that time, however, market circumstances have become
increasingly severe, and both companies have to enhance corporate value by expanding
into new business areas and further pursuing synergies through collaboration.
In the current market climate, the Company and POKKA reached the decision that jointly,
not independently, building a new food value creation group that is highly competitive in thealcoholic and non-alcoholic beverages, food, and restaurant industries in Japan andoverseas would be the best way for both companies to enhance corporate value by
accelerating expansion into new business areas, generating added value throughcollaborative synergies, and building a solid business foundation.
3) Date of business combination
March 29, 2011
4) Legal form of business combination
Cash payment in exchange for shares5) Name of companies after business combination
POKKA Corporation
6) Percentage of voting rights acquired
Percentage of voting rights held before the business combination:
Percentage of voting rights acquired on the date of business combination:
Percentage of voting rights held after the business combination:

21.41%
65.35%
86.76%

7) Primary reasons for deciding on the acquiring company
The Company was decided on as the acquiring company because it proposed to buy theequity in exchange for cash.
2. Accounting period for which earnings of the acquired company were included in the
consolidated statements of income
The acquired company's earnings for the nine months from April 1, 2011 throughDecember 31, 2011 are reflected in the Company's consolidated financial statements.
The acquired company's earnings for the three months from January 1, 2011 throughMarch 31, 2011 are recorded as equity in losses of affiliates on the consolidated financial
statements.

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3. Acquisition cost and breakdown
Acquisition price:
Costs incurred directly in the acquisition:
Acquisition cost:

29,514 million yen
18 million yen
29,533 million yen

4. Difference between the acquisition cost and the accumulated acquisition cost paid for eachtransaction
Difference arising from phased acquisition: 566 million yen
5. Amount of goodwill, reason for its recognition, amortization method, and amortization period
1) Amount of goodwill: 16,680 million yen
2) Reason for its recognition: Future business activities are expected to generate excess profitability.
3) Amortization method and amortization period: 15 years with the straight-line method

6. Assets acquired and liabilities assumed as of the date of the business combination
Current assets:
24,609 million yen
Fixed assets:
32,231 million yen
Total assets:
56,840 million yen
Current liabilities:
Long-term liabilities:
Total liabilities:

30,734 million yen
11,291 million yen
42,026 million yen

7. Approximate effects on the consolidated statements of income for the fiscal year ended
December 31, 2011 assuming that the business combination was completed on 1 January,
2011 and method of calculation.
Net sales:
22,305 million yen
Ordinary loss:(123) million yen
Net loss:(817) million yen
Method adopted to estimate the approximate effects
The approximate effects correspond to the acquired company's net sales and income/loss
recorded on its consolidated statements of income assuming that the business combination
was completed on 1 January, 2011. These approximate effects have not been audited.
After the acquisition transactions stated above, the Company additionally acquired POKKA
Corporation’s shares. Data concerning the acquisition as of December 31, 2011 are as follows.
* The following data incorporates the above transactions.
Percentage of voting rights:
98.59%
Acquisition cost:
34,803 million yen
Balance of goodwill related to the acquisition as of December 31,
18,414 million yen
2011:

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Transactions under common control
1. Information related to constituent company in business combination
1) Name and business of constituent company
Name: Sapporo Beverage Co., Ltd.
Business: Beverages and other businesses
2) Date of business combination
April 28, 2011
3) Legal form of business combination
Cash payment in exchange for shares4) Name of company after business combination
Sapporo Beverage Co., Ltd.
5) Purpose and outline of transactions
On April 15, 2011, the Company terminated its business alliance with Yugen Kaisha
Crescent Partners and Goudou Kaisha CRPBH (the “Investor”) , a fund operated by
Crescent Partners.
Accordingly, on April 28, the Company purchased all shares in Sapporo Beverage afterconversion of all bonds with stock acquisition rights of Sapporo Beverage Co., Ltd. held by
the Investor. As a result, the Company has ownership of all voting rights in Sapporo
Beverage.
2. Outline of accounting methods adopted
The Company accounted for the transaction as a transaction under common control inaccord with the Accounting Standard for Business Combinations (ASBJ Statement No.21,
issued December 26, 2008) and its accompanying Revised Guidance on AccountingStandard for Business Combinations and Accounting Standard for Business Divestitures(ASBJ Guidance No.10, issued December 26, 2008).
3. Additional acquisition of subsidiary's shares
1) Acquisition cost and breakdown
Cash and cash equivalent: 10,871 million yen
2) Amount of goodwill, reason for its recognition, amortization method, and amortization
period1) Amount of goodwill: 7,691 million yen
2) Reason for its recognition: Future business activities are expected to generate
excess profitability.
3) Amortization method and amortization period: 10 years with the straight-line method.

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Property Leasing
Year ended December 31, 2010 (January 1, 2010 – December 31, 2010)
Sapporo Holdings and certain of its subsidiaries hold office buildings and commercial facilities forlease (including land) in the Tokyo metropolitan and other areas.
Net leasing income on those properties in the year ended December 31, 2010, was ¥6,098
million (leasing income was mainly recorded as operating revenues; leasing expenses weremainly recorded as operating expenses).
The carrying value of those properties on the consolidated balance sheets, change in carrying
value from 2009 to 2010, and the total fair value appear in the following table.
(millions of yen)
Carrying value of properties for lease on consolidated balance sheets
Fair value at
end of 2010
End of 2009
Change in 2010
End of 2010
165,537
8,064
173,601
313,812
Notes:
1. Carrying values on the consolidated balance sheets represent acquisitions costs net ofaccumulated depreciation.
2. The value for “Change in 2010” mainly represents an increase arising from property
acquisitions (¥13,268 million) net of decrease mainly due to depreciation charges (¥5,107
million).
3. The fair value at the end of 2010 is mainly based on property valuations performed by thirdparty real estate appraisers.
Year ended December 31, 2011 (January 1, 2011 – December 31, 2011)
Sapporo Holdings and certain of its subsidiaries hold office buildings and commercial facilities forlease (including land) in the Tokyo metropolitan and other areas.
Net leasing income on those properties in the year ended December 31, 2010, was ¥7,049
million (leasing income was mainly recorded as operating revenues; leasing expenses weremainly recorded as operating expenses).
The carrying value of those properties on the consolidated balance sheets, change in carrying
value from 2010 to 2011, and the total fair value appear in the following table.
(millions of yen)
Carrying value of properties for lease on consolidated balance sheets
Fair value at
end of 2011
End of 2010
Change in 2011
End of 2011
173,601(304)
173,297299,800
Notes:
1. Carrying values on the consolidated balance sheets represent acquisitions costs net ofaccumulated depreciation.
2. The value for “Change in 2011” mainly represents an increase arising from property
acquisitions (¥3,993million) net of decrease mainly due to depreciation charges (¥3,951
million) and impairment charges (318 million yen).
3. The fair value at the end of 2011 is mainly based on property valuations performed by thirdparty real estate appraisers.

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Subsequent Events
Year ended December 31, 2011 (January 1, 2011 – December 31, 2011)
Acquisition of trust beneficiary rights (noncurrent assets) by a consolidated subsidiary
At the meeting held on January 27, 2012, the Company’s Board of Directors decided that
Sapporo Real Estate Co., Ltd. (“SRE,” for which the trade name was changed from Yebisu
Garden Place Co., Ltd. on January 1, 2012), a consolidated subsidiary of the Company, would
acquire 15% trust beneficiary rights (noncurrent assets) held by its joint holder in the complex
known as Yebisu Garden Place (located at Ebisu, Shibuya-ku, Tokyo, and others; the “Yebisu
Garden Place Complex”).
Purpose of the acquisition of trust beneficiary rights (noncurrent assets)
SRE is a core real estate company of the Sapporo Group. The Yebisu Garden Place Complex,
which is the mainstay real estate property of SRE, is jointly owned in the form of trust
beneficiary rights 85% by SRE and 15% by Tamachi Holding Tokutei Mokuteki Kaisha (“TMK,”a special-purpose company), of which the asset adviser is Morgan Stanley Capital K.K.
(“Morgan Stanley”).
SRE and Morgan Stanley had previously taken specific initiatives to further enhance the realestate value of the Yebisu Garden Place Complex, and TMK recently broached the possibilityof selling the above jointly held interest of 15% to SRE.
SRE is striving to acquire new real estate properties with the aim of developing and extending
its real estate business, and having judged that the profit-earning capacity of the Yebisu Garden
Place Complex could be clearly demonstrated through measures to enhance corporate value inthe future, SRE agreed to purchase TMK’s trust beneficiary rights.
Furthermore, it has been agreed to dissolve the strategic business and capital alliance inthe real estate and other businesses entered into by and between the Company, Morgan
Stanley Capital K.K. (including the real estate funds that are operated thereby or to which
it issues advice, as well as the Tokubetsu Mokuteki Kaisha (special-purpose company)that incorporates such funds in its business operation.
Overview of the acquisition of the trust beneficiary rights (noncurrent assets)
1. Description of assets to be acquired
Designation of real estate properties: Yebisu Garden Place (jointly held interest of 15% inland and buildings)
Location: Ebisu 4-chome, Shibuya-ku, Tokyo, and Mita 1-chome, Meguro-ku, Tokyo, Japan
Land area: 62,571.80 m2 (actual measurement: including jointly held land lots)
Total floor area: 284,780.31 m2 (total registered area of the Office Tower and 10 otherbuildings)
Completion: August 1994
Fiduciary: Mizuho Trust & Banking Co., Ltd.

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2. Partner of the trust beneficiary rights (noncurrent assets) acquisition
Company name: Tamachi Holding Tokutei Mokuteki Kaisha
Director: Kazuhiro Matsuzawa
Head office: 56-15, 6-chome, Kameido, Koto-ku, Tokyo, Japan
3. Acquisition price¥40.5 billion
4. Ownership ratio of the property after the acquisition100%
5. Financing
Own funds and debt
6. Future outlook
The acquisition is scheduled to be completed on March 1, 2012.

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