Coca-Cola West Holdings Company, Limited
Annual Review 2006

Coca-Cola West Holdings Company, Limited

Coca-Cola West Holdings Company, Limited
1-2-25 Sumiyoshi, Hakata-ku, Fukuoka, Japan
PR·IR Group TEL 81-(0)92-283-5718
http://www.ccwh.co.jp/

Cert no. SA-COC-1210

Printed in Japan

Annual Review 2006
Year ended December 31, 2006

Coca-Cola West Holdings Co., Ltd.
Coca-Cola West Holdings Co., Ltd. (CCWH) operates in the west Japan region.
It is the largest Coca-Cola bottler in Japan and one of the top ranked from a global perspective.
On July 1, 2006, Coca-Cola West Holdings Co., Ltd. (CCWH) was established as a joint holding company byintegrating the management of Coca-Cola West Japan Co., Ltd. (CCWJ) and Kinki Coca-Cola Bottling Co., Ltd.
(Kinki CCBC). The Company entered into a capital and business alliance with Minami Kyushu Coca-Cola BottlingCo., Ltd. on March 8, 2007.
The operating area of the new Group is a massive market accounting for around 30% of the overall Japanesemarket. It is also a leading bottler in world terms among listed bottlers, ranking fourth in sales and seventh inoperating income.
As the largest bottler in Japan, and one of the largest in the world, CCWH is acting as a Strategic Leading Partnerwith The Coca-Cola Company and Coca-Cola (Japan) Co., Ltd. In this capacity, it is playing a leading role in thetransformation of the Coca-Cola system in Japan by engaging in product development, test marketing and othercollaborative activities that go beyond the traditional scope of a bottler.

Group Overview (As of April 2007)
Note: Figures in brackets show voting rights (percentage of shares)

Investment(100%)
The
Coca-Cola
Company(TCCC)

Coca-Cola
Tokyo Research &Development Co., Ltd.
(CCTR&D)

July 2006
Management integration with
Kinki Coca-Cola Bottling Co., Ltd.
March 2007
Capital and business alliance with
Minami Kyushu Coca-Cola Bottling Co., Ltd.

4

(25.0%)
6

Coca-Cola Integrated
Business Systems
Co., Ltd.
(CCIBS)
7
Coca-Cola Customer
Marketing Company,
Limited(CCCMC)
8

Coca-Cola (Japan)
Co., Ltd.
(CCJC)

3

June 1998
Kita Kyushu Coca-Cola Bottling Co., Ltd.
listed on the First Section of the Tokyo Stock Exchange

April 2001
Mikasa Coca-Cola Bottling Co., Ltd. became a subsidiary

Coca-Cola National
Beverages Co., Ltd.
(CCNBC)(15.0%)(3.9%)
1(20.0%)(20.0%)(21.7%)FV Corporation(FVC)

Coca-ColaWest Holdings
Co., Ltd.
(CCWH)

Minami Kyushu
Coca-Cola BottlingCo., Ltd.

2(100%)

July 1999
Merger with Sanyo Coca-Cola Bottling Co., Ltd.

5

Joint companies of
TCCC/CCJC and bottlers

9

Coca-Cola Bottling(10 companies)(CCBC)

 Coca-Cola West Holdings Co., Ltd. (CCWH)

 Coca-Cola National Beverages Co., Ltd. (CCNBC)

Japan’s largest Coca-Cola bottler, formed in July 2006 by integrating the management of Coca-Cola West Japan Co., Ltd. and Kinki
Coca-Cola Bottling Co., Ltd. The Company entered into an equitybased business alliance with Minami Kyushu Coca-Cola BottlingCo., Ltd. in March 2007.

Established in April 2003 as a joint company of The Coca-Cola
Company and all the Japanese bottlers to create an optimum
national supply chain management (SCM) system for the Coca-Colasystem in Japan. CCNBC started its operations in October thesame year. The company oversees the group’s joint procurementof raw materials/ingredients, manufacturing on a national level, andsupply-demand planning and coordination, and supplies products
to the bottlers.

 The Coca-Cola Company (TCCC)
Established in 1919 in Atlanta, Georgia, in the United States. TCCC
holds the rights to license bottlers to manufacture and distributeCola-Cola products. Bottling contracts with bottlers are entered into
by TCCC or one of its subsidiaries.

 Coca-Cola (Japan) Co., Ltd. (CCJC)
Established in 1957 in Tokyo as “Nihon Inryo Kogyo K.K.,” a wholly
owned subsidiary of The Coca-Cola Company of the U.S., and thenrenamed in 1958 to Coca-Cola (Japan) Co., Ltd. CCJC is engaged
in marketing, planning, and manufacture of Coca-Cola and otherconcentrates in Japan.

 Coca-Cola Tokyo Research & Development Co., Ltd.
(CCTR&D)
Established in January 1993 as a wholly owned subsidiary of The
Coca-Cola Company of the U.S. Since January 1995, the centerhas been involved in product development and technical support
responding to needs in the Asian region.

 Coca-Cola Bottlers (CCBC)
In Japan, there are 12 bottlers. Each bottler manufactures anddistributes products within the region for which it is responsible.

 Coca-Cola Integrated Business Systems Co., Ltd.
(CCIBS)
Established in January 2007 as a joint company of The Coca-Cola
Company and all the Japanese bottlers, CCIBS provides businessconsulting for the Coca-Cola system in Japan. It also develops supporting information systems and is responsible for their overall maintenance and running.

 Coca-Cola Customer Marketing Company, Limited(CCCMC)
Established in January 2007 as a joint company of Coca-Cola (Japan)
Co., Ltd. and all the Japanese bottlers. Responsible for businessnegotiations with major retailers, such as nationwide convenience
store and supermarket chains, as well as developing proposals forsales promotions and storefront activities.

 FV Corporation (FVC)
Established in May 2001 as a joint company of Coca-Cola (Japan)
Co., Ltd. and all the Japanese bottlers. Its functions include: sales
to organizations spread over wide areas in the vending machine
business and handling of products other than corporate products(those authorized by Coca-Cola (Japan) Co., Ltd.).

Annual Review 2006 ●39

Consolidated Financial Highlights(Millions of yen)
Fiscal year:

2005

2006

Net revenues
Operating income
Recurring income
Net income¥ 245,874
11,83012,2567,305¥ 327,821
12,321
13,225
7,570

Total assets
Equity ratio (%)*

208,711
83.2

304,907
82.1(Yen)

Per share data:
Net income per share (EPS)
Net assets per share (BPS)
Dividend per share¥ 93.422,228.79
40.00

¥

82.22
2,358.05
42.00* In fiscal 2005, Shareholders’ equity ratio = Shareholders’ equity / Total assets; from fiscal 2006, Equity ratio = Total equity / Total assets

Contents

1 ● Consolidated Financial Highlights
2 ● To Our Shareholders and Other Investors

4 ● Medium-Term Management Plan
6 ● Initiatives Following the Establishment of Coca-Cola West Holdings
8 ● A Sales Framework Tuned to Consumer and Customer Needs

10 ● CCWH’s Core Brands

12 ● Market Information
16 ● Corporate Social Responsibility—Contributing to Society
16 ● Contributions to Regional Society
18 ● Environmental Activities
20 ● Operating Performance
22 ● Consolidated Balance Sheets
24 ● Consolidated Statements of Income
25 ● Consolidated Statements of Shareholders’ Equity /Forward-looking Statements

Consolidated Statements of Changes in Shareholders’ Equity
This annual review contains statements regarding theCompany’s future plans, strategies, projected performance and
26 ● Consolidated Statements of Cash Flows
outlook. These forward-looking statements are not historical●
27 Five-year Summary
facts, but represent management’s opinions and beliefs basedon information available at the time of writing. Readers are
28 ● Financial Data
cautioned that any number of risks and factors beyond the
32 ● Risk Information
Company’s control could cause actual results to differ materiallyfrom those projected by management. These include, but are
33 ● Stock Information / Credit Rating Information
not limited to, economic trends, intensifying competition in the
34 ● Corporate Governancesoft drink industry, market supply and demand, and changes intaxation and other applicable laws and regulations.
36 ● Corporate Data / Management
37 ● Coca-Cola West Group
Coca-Cola, Sprite, Fanta, Qoo, Georgia, Emblem, Aquarius, Sokenbicha, Morino Mizu Dayori,
38 ● Coca-Cola System in Japan
Hajime and their Japanese-character counterparts are all trademarks of The Coca-Cola Company.

Annual Review 2006 ●1

To Our Shareholders and Other Investors

Operating Results
In fiscal 2006, the year ended December 31, 2006, the Japanese
economy showed signs of gradual recovery. Amid rising materials
prices due to escalating crude oil prices and an increased interest
burden caused by the lifting of the Bank of Japan’s zero interest
rate policy, there was an increase in capital investment and a slight
upturn in the job market. However, consumer spending was sluggish with a limited ripple effect from strong corporate earnings
on the household sector.
The Japanese soft drink market shrank on factors including
unseasonable weather and a relative lack of big product launches
as the industry concentrated efforts on growing existing brands.
The soft drink industry is becoming increasingly tough as theever-present competition in the industry intensifies.
Against this market backdrop, we took steps to enhance corporate value by strengthening our business base with a new startas the Coca-Cola West Group (CCWG). This was achieved byintegrating operational management of Coca-Cola West Japan
Company, Limited (CCWJ) and Kinki Coca-Cola Bottling Co.,
Ltd. (Kinki CCBC) through the new Coca-Cola West Holdings
Co., Ltd. (CCWH).
The corporate mission statement of CCWG is Create future ofbeverage business. Guided by this mission and under the new management structure, the whole Group engaged in a range of activities to enhance value for all stakeholders including shareholders,consumers and employees as well as in terms of our contribution
to society and the environment.
As a result of these efforts, CCWH reported consolidated net
revenues of ¥327,821 million, up 33.3% from the previous year.
Operating income rose 4.1% year on year to ¥12,321 million,2●

Coca-Cola West Holdings Company, Limited

and recurring income increased 7.9% to ¥13,225 million. Net
income also increased, rising 3.6% to ¥7,570 million.

Activities During the YearThe first step following the operational integration was to put inplace a structure to strengthen business in the growing mineralwater sector. We did this by making mineral water manufacturer
Daisen Beverage Co., Ltd., a joint venture with other Coca-Colabottlers, a wholly owned subsidiary. This company was subsequently renamed Coca-Cola West Daisen Products Co., Ltd. Next,
to create a Group company framework capable of rapidly responding to changes in the market as soft drink sales companies, in
December we reduced the capital of three companies—Kinki
CCBC, Mikasa Coca-Cola Bottling Co., Ltd. and Kansai Beverage
Service Co., Ltd.—in the same manner as CCWJ when it was
newly established by corporate separation at the time of theoperational integration. Further, with the objective of expanding
the Coca-Cola distribution business in west Japan, on January 1,
2007 we merged Group distribution companies Coca-Cola WestJapan Logistics Co., Ltd., Kansai Logistics Co., Ltd. and Mikasa
Logistic Co., Ltd. to launch Coca-Cola West Logistics Co., Ltd.
As part of the Group’s ongoing corporate stewardship we gaveback to local communities by supporting cultural, educationaland social welfare activities as well as in other ways. We also
worked to promote sound environmental practices in line with
our role as a beverage producer. This included entering into joint
management with the Forestry Agency of part of a national forest
in Tosu, Saga Prefecture. Named Sawayaka Shizen-no-Mori (fresh
natural forest), this project aims to preserve the forest and its
water-holding capacity.

In terms of our product strategy, we concentrated on strengthening our core brands: Georgia, Coca-Cola, Aquarius, Sokenbichaand Hajime. This involved taking steps specific to the brand toinfuse each with new momentum. We also strove to increase
both sales and market share in the tea drink category with theintroduction of Karada Meguricha, promoting a new emphasis
on health benefits.
Creating a strong sales structure capable of focusing on consumers and customers and improving distribution efficiency wereother themes. To this end, we restructured sales and distribution
locations in the Fukuoka, Kita-Kyushu, Yamaguchi, San-in,
Okayama and Kobe regions.

The New Medium-Term Management Plan,
Turning to the future, the economy is expected to remain robust,with strong corporate earnings supporting continued active capital
investment and job growth.
The maturing soft drink market, however, is not expected toexperience significant growth. Thus, CCWH expects its operating environment to become increasingly tough as soft drink
producers increase the pace of the restructuring on which theirsurvival depends.
With these circumstances in mind, the Group has formulated
its next medium-term management plan,, for the threeyear period from 2007 through 2009. The plan aims to achievesustained growth in corporate value. Part of our approach will
be to grow significantly faster than our competitors and establish a solid revenue base by strengthening the strategic partnership with The Coca-Cola Company (TCCC) and Coca-Cola(Japan) Co., Ltd. (CCJC), to new levels. We also aim to become

the world’s leading bottler through further initiatives to integrate and improve the management structure and through the
pursuit of expansion and increased efficiency.

Dividends
In return for the loyal support of our shareholders, we havedeclared a year-end dividend applicable to 2006 of ¥22 per share.
The full-year dividend, including the interim dividend, is thus
¥42 per share, an increase of ¥2 on the previous year.
I hope we can count on the continued support and understanding of shareholders and other investors going forward.
April 2007

Representative Director & CEO

Norio Sueyoshi

Annual Review 2006 ●3

Medium-Term Management Plan,
Becoming the Leading Bottler in the WorldThe Coca-Cola West Group (CCWG) has formulated a mediumterm management plan,, covering the next three years from2007 to 2009. The
plan incorporates the four concepts
shown on the right.
The plan encapsulates the aims of CCWG as it proceeds withthe transformation to a consumer-centric approach based on thestrong relationship of trust between the Company and its employees. The ultimate aim of the plan is to become the world’s
leading bottler.
The Group ranks among the world’s leading listed Coca-Colabottlers in terms of size—it is currently ranked fourth in the worldin sales, eleventh in sales volume and seventh in operating income.
But the Group is not preoccupied with becoming the world’s leading bottler through expansion. Rather, our aim is to achieve resultsin the Japanese market by growing significantly faster than ourcompetitors and establishing a solid earnings base.

<

>

Wing:

The Coca-Cola West Group will continue
to soar for the next several decades.

West:

CCWG will constantly develop and evolve.

We+ing: Each one of us will constantly develop andevolve as individuals.
Win:

Prevail in the battle with competitors in
the eyes of consumers.

<Overall View>

I. Business Environment
External: Change in operating environment, outpacing expectations
Internal: Move towards next stage of growth

II. Corporate Mission
Create future of beverage businessIII. Basic Management StanceGroup Management
Corporate GovernanceCorporate Social Responsibility (CSR)

Management goals
Maximization of sales and earnings
Maximization of value provided
to customers
High-quality work
Job satisfaction and employee
personal development

4●

Coca-Cola West Holdings Company, Limited

Give back to employees,
shareholders and society

Strategy
There are four main strategies on which the success of theplan depends. In order to expand, we will evolve as a bottler throughstrengthening the strategic partnership with The Coca-Cola
Company (TCCC) and Coca-Cola (Japan) Co., Ltd. (CCJC),
and also increase sales and earnings by outperforming our competitors in the eyes of consumers. To increase efficiency, our strategy hinges on utilizing the enhanced functionality and efficiency
provided by the management integration. Finally, our strategy toenhance our fundamental strengths will involve strengthening thecapabilities of our employees and organizations. The relationshipbetween these four strategies is broadly as shown in the pyramid
structure in the diagram to the right. Our strategy to enhance ourfundamental strengths provides the base for our expansion andefficiency strategies. In this way we aim to realize the Group’s
vision and succeed in increasing sales and earnings.

<Four Strategies>
Achieving the Group Vision
Expanding Sales
and Earnings

Expansion strategies
1. Evolve as a bottler through strengthening the strategic partnershipwith TCCC and CCJC
2. Increase sales and earnings byoutperforming our competitors
in the eyes of our consumers

Strategy to increase
efficiency
3. Utilize the enhanced functionality
and efficiency provided by the
management integration

Strategy to enhance fundamental strengths
4. Strengthen the capabilities of our employees and organizations

IV. Vision

Becoming the Leading Bottler in the World• Grow significantly faster than our competitors• Establish a solid earnings baseTransformation to a consumer-centric approach
Strong relationship of trust between Company and employees

V. Strategies
1. Evolve as a bottler through strengthening the strategic partnership with TCCC and CCJC
Utilizing the new structure for strategic collaboration created with TCCC and CCJC we will build an integrated process, ranging from the proposal of consumer-centric marketing strategy to product distribution
and operations. We will also develop new products and sales approaches for business areas where we don’t
have a presence with the aim of gaining new opportunities to grow.

2. Increase sales and earnings by outperforming our competitors in the eyes of consumers
First, we will create a framework for better incorporating customer feedback into our operational cycle tofirmly anchor our business activities on all-important consumer opinion. Next, in order to achieve new earningsgenerated growth we will restructure the vending machine business and improve the quality of customer
management by providing consumers with products and services of the highest quality.

3. Utilize the enhanced functionality and efficiency provided by the management integration
First, we will maintain and enhance decision-making, reporting and oversight structures to increase theresponsiveness of management and ensure our management system is functioning robustly. We will alsoendeavor to enable agile and flexible responses to market changes while establishing a thoroughly ingrained
low-cost philosophy. This will be achieved by integrating and improving the management structure and making the business structure stronger and more efficient.

4. Strengthen the capabilities of our employees and organizations
Employees are the backbone of a company. With this in mind, we will promote personnel development andimprove personnel systems to increase employee motivation and job satisfaction.

Annual Review 2006 ●5

Initiatives Following the Establishment of Coca-Cola West Holdings

In this section, we introduce the main initiatives that
CCWH is already undertaking following its inception on
July 1, 2006 to act as a leader for the Coca-Cola system in Japan,
with the aim of becoming the world’s leading bottler.

I. Evolving as a bottler through strengthening thestrategic partnership with TCCC and CCJC
(1) Management meetings (once every two months)
The top management of CCWG and CCJC meet to discuss how
CCWG and TCCC/CCJC should collaborate to realize continued growth of the Coca-Cola system as a whole. The participants take the annual business plan as a base to share progress
updates and ideas for changes in approaches with respect to sales,
market share, earnings and strategies. They also exchange opinions regarding the transformation of the Coca-Cola system as awhole. Such discussions allow the top management of bothcompanies to act as one in leading the transformation of the
Coca-Cola system.
(2) Marketing forum (once every two months)
The marketing forum is held in order to reflect CCWG’s insight
into consumer sentiment gained from its close proximity to consumers in the strategies formulated by CCJC. The forum provides an opportunity to track progress of the annual businessplan and formulate collaborative marketing plans based on discussions of CCJC’s marketing strategies and the market viabilityof its business programs.
The meeting is attended by CCJC’s Sales Promotion Division
and CCWH’s Sales Planning Division. In order to facilitate thesharing of market information and enable the representatives of
the two companies to communicate as one, the CCJC Sales Promotion Division (west Japan region) has relocated its office to
CCWH’s Osaka office.
This is the first time that a bottler has directly involved itself
with marketing in Japan. As such, the Company has establishedthe Product Development Team within the Sales Planning Division to increase the effectiveness of marketing strategies and product development. The team is working to promote chilled
products, develop products for CVM, and develop products andretail methods for on-premise sales.

6●

Coca-Cola West Holdings Company, Limited(3) Strengthening of ties with Coca-Cola Integrated
Business Solutions (company integrating information system functions)
Efforts are underway in the Fukuoka office aimed at creating acore information system and bottler purchasing process as partof a standard model for the Coca-Cola system. This initiative isbeing carried out with the input of employees from each bottler
regarding sales, financial aspects and other relevant matters.
CCWH is once again taking a leading role in this area, acting asa pilot bottler for the system building project.

II. Utilize the enhanced functionality and efficiency
provided by the management integration(1) Integration of distribution

Kansai
Logistics
Co., Ltd.
Coca-ColaWest Japan
Logistics
Co., Ltd.

Coca-ColaWest Logistics
Co., Ltd.
MikasaLogisticCo., Ltd.

The Group merged the three companies effective January 1, 2007
to form Coca-Cola West Logistics Co., Ltd., with the aim ofgenerating the following five synergies: increased business throughwider coverage and better quality through improved efficiency;
sharing and promotion of best practices and cost reduction knowhow; faster decision-making and enhanced capacity to executeplans through unification of purpose; gathering together of management and supporting divisions, and capturing external business opportunities, particularly through CCNBC.

(2) Reduction of capital in Kinki and Mikasa bottlingcompanies and Kansai Beverage Service
Kinki Coca-Cola Bottling Co., Ltd.:¥10.9 billion to ¥0.1 billion
Mikasa Coca-Cola Bottling Co., Ltd.:¥4.1 billion to ¥0.1 billion
Kansai Beverage Service Co., Ltd.:¥1.4 billion to ¥0.1 billion
Reference: Coca-Cola West Japan Co., Ltd.: ¥0.1 billion

The share capital of the three companies was reduced to ¥100
million without compensation to shareholders to allow flexible
organization and more agile management as the Group’s beverage sales businesses. The capital of CCWJ was ¥100 million at
the time of its inception on July 1, 2006.

(4) Improved SCM dispensing with the concept ofbottler territories
We are endeavoring to increase efficiency with the use of distribution that crosses former bottler territories and by collaborating in matching supply and demand. For example, it is more
efficient for the sales centers in Okayama, located in the easternpart of the CCWJ area, to be supplied by warehouses in theneighboring Kinki CCBC area. The same can be said for neighboring sales centers in the Kinki CCBC and Mikasa CCBC areas.
Such efforts to improve efficiency target cost reductions andincreased earnings.
(5) Effective use of capital
The Group is making effective use of capital thanks to the introduction of a cash management system that pools surplus funds
in CCWH.

(3) Name change for Daisen Beverage

DaisenBeverageCo., Ltd.

Coca-ColaWest Daisen
Products
Co., Ltd.

Making Daisen Beverage Co., Ltd. a wholly owned subsidiary
put in place a structure for strengthening business in the growing
mineral water sector. Use of the Coca-Cola West brand nameboth clarifies Daisen’s status as a Group company and instills a
sense of unity.

III. Capital and business alliance with Minami Kyushu
Coca-Cola Bottling
On March 8, 2007, the Company entered into a capital and businessalliance with this bottler, which covers the territory in southern
Kyushu comprising the prefectures of Kumamoto, Kagoshima,
Miyazaki and Oita. As bottlers with neighboring territories, and driven
by the idea that the Kyushu region should be treated as one, the twocompanies had developed a collaborative relationship, particularly
in marketing activities. This tie-up formalizes that relationship byuniting the Kyushu region, and aims at increased sales based on strategies targeting Kyushu as a whole, including product development
and promotions.

Annual Review 2006 ●7

A Sales Framework Tuned to Consumer and Customer Needs
Fiscal 2006 Activities
The vending machine channel is a pillar of sales and earnings for thegroup. It accounts for 31.8% of overall sales volume and contributes
significantly to sales and earnings. In fiscal 2006, the channel worked
to increase both sales and earnings with initiatives including installing
more vending machines and optimizing product lineups. The increasein machine numbers included a concerted effort to introduce more
vending machines with benefits for local communities. This effort
grew the number of vending machines provided to local governments
and other bodies in the Company’s territory by 626 to 1,113 units
during fiscal 2006. The Company also continued to actively invest in
IT-enabled vending machines, as it strove to provide product lineups
to meet consumer needs and more efficient operation.

Vending Machine Channel
This channel provides products to consumers through its
extensive network of vending machines.
Sales Volume 60,000(Thousand cases)

59,06258,44905

06

50,00040,00030,00020,00010,000

Policies for Fiscal 2007 and Beyond
The aims for this channel in fiscal 2007 are to build a highly profitable business structure and further entrench the Company’s competitive advantage. To this end, we will undertake initiatives to increase
profitability. These will include conducting marketing targeted to thelocation where vending machines will be installed, thoroughly strengthening operations in existing locations, engaging in new development
to generate earnings from more tightly focused target markets andusing IT technology. At the same time, the Company will continue toconsider and conduct M&As of vending machine operators with thegoal of securing prime locations in the urban and indoor vending
machine markets.

0

Fiscal 2006 Activities
Chain store operations are home to considerable consumer needs. Thisis helping to make this channel one of CCWH’s fastest growing sales
channels. In fiscal 2006, CCWH formulated and introduced optimum product lineups, price ranges, and sale promotions for specificretail formats. These formats were identified and segmented based on
consumer rationale for store visits. We also worked to improve earnings by concentrating efforts on selling products in highly profitable
500ml PET bottles.

Chain Store Channel
This channel encompasses sales to supermarkets, discountstores and home centers.
Sales Volume 40,000(Thousand cases)

37,03437,51005

06

30,00020,00010,00008●Coca-Cola West Holdings Company, Limited

Policies for Fiscal 2007 and Beyond
In fiscal 2007, the Company will further strengthen customer management on three fronts: category management, which covers product lineup and product mix; promotion management, which deals
with the execution and review of effective promotions, and revenue
growth management, which seeks to maximize profits for plannedsales volumes.

Fiscal 2006 Activities
Sales volumes in the general retail channel are declining due to changes
in the constitution of the market in recent years. In fiscal 2006, CCWH
opened up new markets with ongoing development of new customers. This involved making proposals targeted at hotels and other businesses that attract large numbers of consumers and conducting sales
activities closely tailored to regions to capitalize on demand at events.
The Company also succeeded in minimizing the impact of market
contraction allowing it to maintain earnings. This was achieved bystrengthening proposal-based sales activities, taking measures to reinforce business operation, including upgrading training for each employee occupation and realigning its network of sales branches, andby seeking to cut costs.

General Retail Channel
This channel encompasses sales to liquor stores, foodretailers and the traffic market.
Sales Volume 30,000(Thousand cases)

29,534

Policies for Fiscal 2007 and Beyond
CCWH will continue to take steps to develop new customers in fiscal 2007. It will also endeavor to maintain and expand sales volume
and earnings from sales to existing high-volume retailers. There will
be a particular focus on raising profitability by capturing sales volume
from hotels, restaurants and cafes.

26,821

25,00020,00015,00010,000
5,000
0

05

06

Fiscal 2006 Activities
In fiscal 2006, CCWH endeavored to reinforce relationships withexisting stores via customer management activities, develop new customers and improve profitability. In terms of the first initiative, actions
included building an IT-based framework to manage product expiry
dates and quality in addition to storing and using a variety of information concerning customers to assist the Company’s efforts to
expand sales volume. As part of efforts to capture new customers, theCompany developed the institutional hot beverage market by using
machines with advanced functions that sell hot beverages, including
regular coffee. Earnings were boosted by improving the performanceof unprofitable customer accounts, revising contract terms and using
machine inventories more effectively.

Food Service Channel
The food service channel’s core operations encompass thesale of soft drink syrup to fast food chains, cinemas, sports
facilities, casual dining restaurants and theme parks.
Sales Volume 20,000(Thousand cases)

18,992

18,51905

06

15,000

Policies for Fiscal 2007 and Beyond
In fiscal 2007, CCWH aims to increase sales volume and earnings
by continuing its consumer-centric approach and focusing efforts
on developing new customers from outside its current sphere while
also concentrating on relationships with existing high-volumeretailers. The Company will also take further comprehensive quality
control measures to ensure that consumers can enjoy our productswith peace of mind.

10,0005,000
0Annual Review 2006 ●9

CCWH’s Core Brands

Breakdown of Sales Volume (2006)
Coca-Cola 8%

CCWH is striving
at every level to strengthen
its four core brands.

Georgia

23%
Other

50%
Aquarius

11%
Sokenbicha 8%

Coca-Cola

Accounting for around 10% of CCWH’s sales volume, Coca-Cola
has a dominant market share in CCWH’s operating area of 78%.
In 2006, the Company rolled out a new advertising campaign
under the slogan, “Coke, Please!”, centered around the Coca-Cola
120 Anniversary Plan.
In 2007, CCWH will aim to further boost sales volume and market share, particularly by increasing the consumer base in the 10–20
age bracket, based on a new global advertising campaign, “the Cokeside of life” and other initiatives.

Georgia

Launched in 1975, Georgia is now a byword for canned coffee.
CCWH pioneered Georgia for its own target region prior to the
product’s nationwide launch. Georgia accounts for more than 20%
of CCWH’s sales volume and enjoys a commanding market share of
50% in CCWH’s operating area.
In 2006, the Company strove to increase the number of consumers in the core demographic of males in their 30s and 40s with a new
advertising campaign, “NEW GEORGIA START ! ”
In 2007, CCWH aims to consolidate these gains and grow thecoffee business by continuing to run the current advertising campaign.

10●

Coca-Cola West Holdings Company, Limited

Home Market Share by Product Category (2006)
Cola

Canned Coffee

Sports Drinks

Blended Tea

Coca-Cola

Georgia

Aquarius

Sokenbicha

78%

50%

53%

77%

Note: Home market share is the share of the OTC market (excluding vending machines) in the Company’s sales territory
Source: Intage Inc. of Japan Store Audit

Aquarius

Developed in Japan and growing in stature as a global brand, Aquarius
is Japan’s most-loved sports drink. Aquarius has a dominant 53%
market share in CCWH’s operating area.
In 2006, the Company succeeded in growing sales with the introduction of a new product, Aquarius Freestyle.
In 2007, CCWH aims to broaden and strengthen the trust of consumers based on the use of sports science. This will see CCWH launcha new advertising campaign, “Beyond the Limit”, and new products.

Sokenbicha

Underpinned by the motto, “For refreshment, health and beauty,”
Sokenbicha is a tea for health and beauty-conscious people. CCWJ
pioneered Sokenbicha for its own target region prior to the product’s
nationwide launch. Sokenbicha has an impressive 77% share of themarket in CCWH’s operating area. Even today, Sokenbicha remains
synonymous with blended tea in Japan.
In 2006, the Company worked to build an even firmer market
position for Sokenbicha with the roll out of a new campaign titled,“Power My Beauty,” and a robust yet refined natural fit bottle.
In the coming year, CCWH will target young women consumers, centered on the 20-30 age bracket, with a new advertising campaign aimed atdeveloping and strengthening the product’s association with the conceptof beauty with the slogan “Because Beauty Comes From Within.”Annual Review 2006 ●11Market Information
Trends in the Japanese Soft Drink Market
In 2006, production volume in the soft drink market dropped
0.4% year on year due to factors including unseasonable weather
and a relative lack of big product launches as the industry concentrated efforts on growing existing brands.
Markets for the tea, coffee and carbonated beverages productcategories—the top three categories by production volume—all

shrank. The market for sports drinks and functional drinks similarly fell back from 2005.
In other categories, mineral water and vegetable juice grew significantly, while the cocoa and jelly-type drinks categories, althoughsmall in market size, experienced strong growth.

Market Information for CCWH Sales Territory
1. Trends in CCWH Sales Territory
CCWH’s sales territory encompasses three prefectures in thenorthern Kyushu region (Fukuoka, Saga and Nagasaki), five prefectures in the Chugoku region (Hiroshima, Okayama, Yamaguchi,
Shimane and Tottori) and six prefectures in the Kinki region(Osaka, Kyoto, Hyogo, Nara, Shiga and Wakayama). According
to 2006 population statistics and the Basic Resident Register,

Production volume of soft drinks(Total industry)

Japan’s population totaled 127,055,000, of which 35,739,000
people lived in CCWH’s sales territory, representing 28.1% of
the country’s total population. The yearly per capita consumption of soft drinks in this sales territory is 163 bottles, based on aserving size of 237ml.

Population trends in Japan

Per capita consumption in
CCWH sales territory(Population, 1,000s)(1,000kl)(Bottles)

20,000200,000

40,000200

35,738 35,754 35,756 35,962 35,739

17,846 17,780
17,174

165

16,167 16,162

159

15,000150,000

30,000

150

165

166

163

04

05

06

126,479 126,688 126,824 127,757 127,055

10,000100,000

20,000100

5,000

50,00010,000

50

0

0

0

0

02

03

04

05

06

CarbonatedCoffeeTea
Others
Source: Japan Soft Drinks Association(Annual Statistic Report on Soft
Drinks FY2006)

12●

Coca-Cola West Holdings Company, Limited

02
All Japan

03

04

05

06

CCWH’s sales territory

Source: Basic Resident Register

0203

2. Home Market Share in Sales Territory(OTC market excluding vending machines)
In 2006, CCWH’s share of its target market dipped 0.9 of apercentage point year on year to 22.1%. CCWH has also built
the following market positions in different business formats:grocery stores, 38.2%; liquor stores, 23.4%; supermarkets,
21.5%; and convenience stores, 19.8%. These figures represent
the leading market share for the soft drinks industry for eachbusiness format.

Home market share in CCWH
sales territory(OTC market excluding vending machines)(%) 403. Vending Machine Installation
The number of CCWH vending machines installed in the
Company’s territory was 258,444 units at the end of 2006, a
decrease of 1,937 from the end of 2005. The Company’s shareof the outdoor vending machine market was 36.3% in 2006, still
an exceptionally high figure compared to competitors. The dropin the number of machines was primarily due to the removal ofunits with low sales as part of a focus on profitability.

Number of vending machines(Machines)

Share of outdoor vending
machine market(%)

300,000

50

257,222 256,661 258,955 260,381 258,444
250,000
40

38.0

37.6

30

25.7

36.8

36.3

36.3

04

05

06

200,000

24.5
23.2

23.0

30

22.1

20

150,000

20
100,000
10
10
50,000

0

0

02

03

04

05

06

Source: Intage Inc. of Japan Store Audit

0

02

03

04

05

06

02

03

Source:ACNielsen Corporation JapanStore Audit (2006)

Annual Review 2006 ●13

Sales Volume in CCWH Sales Territory
Sales Volume by Brand
CCWG is focused on fundamentally strengthening its core brands:
Coca-Cola, Georgia, Sokenbicha and Aquarius. Nevertheless, total
sales volume in fiscal 2006 decreased by 4,239,000 cases, or 2.3%,
to 183,663,000 cases. Sales volume of the four core brands fell
1,732,000, or 1.9%, to 91,309,000 cases. Sales volume for otherbrands was also down at 92,354,000 cases, a drop of 2,507,000
cases, or 2.6%.
The core brands accounted for 49.7% of total sales volumes.
Georgia contributed the most at 23.2%, followed by Aquarius

at 10.5%, then Sokenbicha and finally Coca-Cola. In 2006,
Georgia’s sales volume dropped by 1,701,000 cases, or 3.8%,
to 42,665,000 cases, and Coca-Cola’s sales volume fell to
14,635,000 cases, a decline of 1,166,000 cases, or 7.4%. The
other two core brands fared better. The launch of Aquarius
Freestyle helped boost Aquarius sales volume by 897,000 cases,
or 4.9%, to 19,298,000 cases, and Sokenbicha grew 238,000
cases, or 1.6%, to 14,711,000 cases, supported mainly by strong
sales of the 500ml natural fit bottle.

Sales by brand(Thousand cases)

200,000

184,466

186,076

187,902179,105

183,663150,000

100,000

Coca-Cola
Georgia

50,000

Sokenbicha
Aquarius
Other
0

Fiscal year:

14

●

2002

2003

2004

2005

2006

■ Coca-Cola

17,506

16,661

17,09615,801

14,635■ Georgia

45,25044,83544,43344,366

42,665■ Sokenbicha

15,707

14,896

17,01814,473

14,711■ Aquarius

15,251

13,11015,47818,401

19,298■ Other

90,75289,60392,051

94,861

92,354

Total

184,466

179,105

186,076

187,902

183,663

Coca-Cola West Holdings Company, Limited

Sales Volume by Package
Sales volume of PET bottle products increased by 1,601,000
cases, or 2.4%, from 66,807,000 cases in fiscal 2005, reaching
68,409,000 cases in the year under review. In particular, 500ml
PET bottles and PET bottles of 350ml or less saw significant
year-on-year increases in sales volume, rising 6.0% and 3.4%,
respectively. Meanwhile, sales volume of cans declined by
2,798,000 cases, or 4.8%, to 55,780,000 cases, and sales volume of bottle-cans fell by 1,753,000 cases, or 16.0%, to
9,236,000 cases.
Recent packaging trends show an ongoing shift away from cansto PET bottles. CCWH’s policy will continue to be to boost
sales volume of PET bottles as a core packaging format.

Sales Volume by Channel
Four of CCWH’s five sales channels reported lower sales volumes compared to a year earlier (decreases in brackets). Generalretail channel: 26,821,000 (9.2%); convenience store channel:
18,845,000 (3.5%); food service channel: 18,519,000 (2.5%);and vending machine channel: 58,449,000 (1.0%). The chain
store channel recorded the sole gain of 1.3% to 37,510,000 cases.
Recent trends show an ongoing shift in sales from the generalretail channel to other sales channels. The Coca-Cola WestGroup’s policy going forward will be to increase sales volume byfocusing on the vending machine and chain store channels.

Sales by package

Sales by channel(Thousand cases)(Thousand cases)

200,000

200,000

184,466

186,076

187,902179,105

184,466

183,663150,000

150,000

100,000

100,000

50,00050,0000

186,076

187,90204

05

179,105

183,663

002
Bottles
Cans

03

04

PET bottles (up to 500ml)
Bottle-cans
Other

05

06

PET (over 500ml)
Post mix

Note: Post mix refers mainly to diluted drinks sold in paper
cup-dispensing vending machines.

02

03

Vending machines
Convenience stores
Food service

06

Chain stores
General retail
Other

Annual Review 2006 ●15

Corporate Social Responsibility—Contributing to Society
Committed to being a good corporate citizen, CCWH always thinks and acts from a social standpoint.
Consequently, CCWH is involved in a range of activities that contribute to local communities and theenvironment. CCWH allocates a fixed portion of earnings every year to fund these ongoing activities with theunderstanding and support of shareholders.

Contributions to Regional Society
Fundamental
StanceTogether With Society
CCWH’s support for the healthy development of youth and its efforts to promote closer communication with target regions consists of four areas of activity: community welfare, sports activities,
cultural events and educational programs, and regional events.

● Sawayaka Family Musical
CCWH hosts this musical for parents and children during the summer holidays.

● Ichimura Nature School in Kyushu
This facility uses plant cultivation and cooperative
living to help children develop into well-balanced,
mature young people.

Cultural and
Educational
Activities● Sawayaka Classical Concert
CCWH hosts this high-quality, full-fledged classical music event.

● Sawayaka Concert
This entertaining concert brings together local
orchestras and notable guest singers.

● The 60th National Sports
Festival, Okayama Prefecture

16●

Coca-Cola West Holdings Company, Limited● National Cultural Festival
Yamaguchi 2006

● Saruku Urban Walking Tour
Expo 2006 in Nagasaki

● Donation of Educational
Materials to Special Schools
CCWH donates PCs and other educational materials to special stateschools with the hope of helping children at these schools lead independent lives.

Social
WelfareServices

Contributions toRegional Society● Sawayaka Rugby Clinic
Members of the Coca-Cola West Red Sparks rugby
team teach the fundamentals of the game to elementary, junior high and senior high school students.

● Sawayaka Sports Hiroba
This well-grassed sports ground isopen to the local community.

SportsActivities● Donation of Unicycles to
Elementary Schools
CCWH donates unicycles to public
elementary schools.

Regional
EventsOther● Japan Inter-High School
Sports Meet● Japan Youth Soccer
Tournament● H.I.H. Prince Takamado
Trophy All Japan Inter-Middle
School English OratoricalContestAnnual Review 2006 ●17

Environmental Activities
Refreshing the Community and the Environment
Basic
Philosophy

ActionPlan

As a company dedicated to creating the future of the beverage business we recognize the preservation of the
Earth’s environment as an issue of the greatest importance and endeavor to contribute to the realization ofa sustainable society.
We will continue to carry out environmental protection activities with the combined efforts of theCompany and each individual employee as a company trusted by the local community.

● Consider the environment and prioritize environmental protection measures to guard against environmental
risks in all aspects of our business activities.
● Operate and continuously improve systems designed to reduce the environmental burden in our daily business activities.
● Use water effectively, use energy efficiently and reduce and recycle waste.
● Comply with applicable laws and ordinances, agreements and voluntary standards introduced as needed.
● Engage in activities that contribute to local communities and leave a beneficial legacy for the next generation.
● Raise employee awareness of environmental protection issues through training and education.
● Act as a good corporate citizen by promoting communication with stakeholders.

Creating a
Recycling
Society● Operation of Recycling Center
This facility sorts, processes andrecycles empty glass bottles, cansand plastic bottles collected at Company sites.

Supporting
Environmental
Education● School Biotope Creation
Projects
CCWH supports this activity in whichchildren build wildlife refuges with theirown hands and in the process learn
about the splendor and importanceof the natural environment.

18●

Coca-Cola West Holdings Company, Limited● School Tree Planting Projects
Under this program, which is designed
to nurture a love of nature and teachits importance, children become “foster parents” for oak seedlings, which
they plant in the mountains.

● Coca-Cola Ecology School
With the trees, insects and other floraand fauna in the countryside as the
textbook, CCWH holds environmental education classes that provide
important experiences for coexistingwith nature.

● Coca-Cola Clean Day
CCWH designates the 8th of eachmonth, in principle, as Coca-Cola
Clean Day when employees clean
roads and public spaces around
CCWH offices.

Cleaning Up
Local
Communities

Preserving
Water-holding
Capacity ofForests

Environmental
Activities● Activities in Sawayaka Shizenno-Mori
As a company that uses water, oneof nature’s gifts, in its products,
CCWH engages in activities to preserve the water-holding capacity ofthis forest such as pruning trees.

Fight Against
GlobalWarming● Plan to Reduce Greenhouse Gases
CCWH reduces emissions of greenhouse gases, seen
as one of the causes of global warming, through effective operation of its environmental management system.

● Introduction of Eco-vehicles
CCWH is promoting the “Eco-Drive” concept byproactively adding hybrid and natural gas-powered
vehicles to its fleet.

Annual Review 2006 ●19

FINANCIAL SECTION

Operating Performance
Overview of Fiscal 2006 Operating Results

Creating a strong sales structure capable of focusing on consumers
and customers and improving distribution efficiency were other themes.

Net Revenues

To this end, we restructured sales and distribution locations in theConsolidated net revenues increased ¥81,946 million, or 33.3%, year

Fukuoka, Kita-Kyushu, Yamaguchi, San-in, Okayama and Kobe regions.

on year to ¥327,821 million. This was primarily the result of an expan-

As a result of these efforts, the Manufacturing and Marketing ofsion of scale in terms of sales area and other operational aspects due to

Beverages & Foods segment reported a 32.9% increase in revenues tointegration with Kinki Coca-Cola Bottling Co., Ltd. (Kinki CCBC) in¥318,677 million before the elimination of intersegment transactions.

July 2006.

Operating income was ¥20,992 million, an increase of 27.7%.

Operating Income

Other Businesses

Operating income increased ¥490 million, or 4.1%, to ¥12,321

Prior to the operational integration, this segment consisted of distribu-

million, the result of the increase in scale from integration of opera-tion, vending machine-related, insurance agency and lease businesses.

tional management.

The integration added companies engaged in motor vehicle repair andmaintenance, real estate and restaurants and retail. As a result of on-

Recurring Income

going efforts by the companies comprising Other Businesses to improve

Recurring income increased ¥969 million, or 7.9%, to ¥13,225 million.

quality of service, the segment recorded an increase in revenues of 29.9%
to ¥25,150 million before the elimination of intersegment transactions.

Net Income

Operating income jumped 62.7% to ¥821 million.

Net income was ¥7,570 million, up ¥264 million, or 3.6%, on fiscal
2005. This resulted in net income per share of ¥82.22, a decline of¥11.20 year on year.

Financial Position

Dividends

Total Assets

The dividend per share rose ¥2 from fiscal 2005 to ¥42, representing

Compared to the end of the previous fiscal year, total assets increased

a dividend payout ratio of 112.4%.

¥96,195 million, or 46.1%, to ¥304,907 million. This was chiefly due
to assets acquired from Kinki CCBC following the integration of opera-

Operating Results by Segmenttional management in July 2006.

Manufacturing and Marketing of Beverages & Foods
In terms of brand strategy, the segment actively implemented a range ofCurrent Assets

new campaigns and various promotions with the aim of strengthening

Current assets amounted to ¥78,173 million, an increase of ¥27,499

its core brands—Georgia, Coca-Cola, Aquarius, Sokenbicha and Hajime.

million, or 54.3%, from a year ago. The increase was mainly attribut-

Specific initiatives included redesigned packaging and a new graphic

able to assets acquired due to the operational integration and reclassifi-

for the Georgia brand. Efforts were also directed at strengthening thecation of marketable securities from fixed assets to current assets.

Coca-Cola brand, leveraging the 120th anniversary of the brand and theFIFA World Cup™ to distribute product samples and carry out pro-

Fixed Assets

motions. With Aquarius, to further strengthen the functional drinks

Total fixed assets increased ¥68,695 million, or 43.5%, to ¥226,734

category, Aquarius Freestyle was introduced in an effort to break into

million. The increase was primarily due to assets acquired as a result of

the emerging carbonated sports drink category. Regarding the Sokenbicha

the operational integration and an increase in advanced payments for

and Hajime brands, further brand-specific initiatives were taken to instill

retirement expenses from contributions to the corporate pension fund.

new momentum, including using new packaging for 500ml plastic bottles.
We also strove to increase both sales and market share in the tea drink
category with the introduction of Karada Meguricha, promoting a newemphasis on health benefits

20●

Coca-Cola West Holdings Company, Limited

Cash Flows

Liabilities
Total liabilities were ¥54,444 million, an increase of ¥23,734 million,
or 77.3%, compared to the end of fiscal 2005. This was mainly due toCash Flows From Operating Activities

liabilities assumed as a result of the operational integration.

Operating activities provided net cash of ¥21,806 million, an increaseof 31.3% year on year. Factors including an increase in cash due to the

Net Assets

expanded scale (sales area) following the operational integration and a

There was an increase in net assets of ¥76,855 million, or 44.3%, tolarge reduction in income taxes paid compared to the previous fiscal¥250,463 million. As a result of this, the equity ratio fell by 1.1 per-year resulted in an increase of ¥5,198 million.

centage points from 83.2% to 82.1%. Net assets per share rose around

Cash Flows From Investing Activities

6% from ¥2,228.79 to ¥2,358.05.

Investing activities used net cash of ¥14,956 million, a decrease of 2.0%

Assets Acquired and Liabilities Assumed
From Kinki Coca-Cola Bottling Co., Ltd.
Item

Current assets
Cash and deposits

efforts to develop markets were strengthened. Combined with cash used

Amount

Item(Millions of yen)Amount25,046

Current liabilities

19,8044,101

Trade notes and accounts
receivable

9,890

Inventories

4,797

Other current assets

6,257

Fixed assets

year on year. Investment in vending machines increased significantly as
for capital investment such as in vending machines of Kinki CCBC,
there was a large increase in outgoings for the acquisition of fixed assets.
Cash was provided by the dissolution of a bond investment trust andTrade notes and accounts
payable4,046

sale of securities. Overall, this resulted in a drop in cash used in invest-

Other accounts payable

5,503

ing activities of ¥300 million year on year.

Other current liabilities

10,255

81,273

Cash Flows From Financing Activities

Buildings and structures

13,936Long-term liabilities

10,218

Machinery, equipment
and vehicles

6,362

Total liabilities

30,023than a year earlier. The group achieved debt-free management in theSales equipment

15,674

Minority interests

49

Land

23,093previous fiscal year, but the operational integration resulted in some

Investment securities

7,882

Deferred tax assets

5,158

short- and long-term debt (¥5,633 million) which these subsidiaries

Other assets

9,165

borrowed for working capital, net cash used increased by ¥6,343 mil-

Total assets

106,320

Financing activities used net cash of ¥9,244 million, 218.7% more

consolidated subsidiaries having external debt. As a result of repaying

Net assets

76,247lion compared to the previous fiscal year.
Cash and cash equivalents at end of year stood at ¥22,284 million,
an increase of ¥2,045 million, or 10.1%, compared to a year earlier.

Annual Review 2006 ●21

Consolidated Balance Sheets(As of December 31, 2004, 2005 and 2006)(Millions of yen)
2004

2005

2006

¥ 15,524¥ 13,101¥ 16,311

Trade notes and accounts receivable

13,66911,994

22,280Marketable securities

8,923

7,706

10,668Inventories

12,762

7,169

11,778Deferred tax assets

812

728

2,200

Other current assets

7,930

10,04015,031

(81)

(67)

(97)

59,54050,67378,173

Buildings and structures

18,55918,85635,617

Machinery, equipment and vehicles

14,252

13,981

20,134

Sales equipment

17,196

15,25330,857

Land

34,38934,36957,366

93

425

56

Other property, plant and equipment

1,344

1,398

2,211

Total property, plant and equipment

85,83784,285

146,243

Intangible assets:

2,843

2,925

5,730

Investment securities

47,36960,34853,277

Deferred tax assets

890

862

4,703

Advanced payments for retirement expenses

7,749

6,746

10,406

Other assets

3,265

3,111

6,967

Allowance for doubtful accounts

(279)

(241)

(594)

58,99570,826

74,760Total fixed assets

147,676

158,038

226,734

Total assets¥207,216¥208,711¥304,907

ASSETS
Current assets:
Cash and deposits

Allowance for doubtful accounts
Total current assets

Fixed assets:
Property, plant and equipment:

Construction in progress

Investments and other assets:

Total investments and other assets

22●

Coca-Cola West Holdings Company, Limited

(Millions of yen)
2004

2005

2006

LIABILITIESCurrent liabilities:
Trade notes and accounts payable
Current portion of long-term debt
Accrued income taxes
Other accounts payable
Notes payable for equipment
Other current liabilities

¥

7,891
203
3,743
7,125
96
5,390

¥

2,809
–
2,166
7,787
183
4,833

¥

3,828
2,300
2,674
13,866702
7,059

Total current liabilities

24,451

17,78030,431Long-term liabilities:
Long-term debt
Deferred tax liabilities
Allowance for employees’ retirement benefits
Liabilities for directors’ and corporate auditors’ retirement benefits
Goodwill on consolidation
Negative goodwill
Other long-term liabilities

–
6,911
3,146
345
–
–
963

–
9,785
2,768
206
48
–
120

2,000
11,122
4,770
249
–
1,867
4,002

Total long-term liabilities

11,366

12,92924,012

Total liabilities

35,81730,70954,444

Shareholders’ equity:
Common stock
Additional paid-in capital
Retained earnings
Treasury stock (at cost)

–
–
–
–

–
–
–
–

15,231109,072
135,623(11,229)

Total shareholders’ equity––

248,697

Valuation and translation adjustments:
Net unrealized gains on other marketable securities
Gain on deferred hedges

–
–

–
–

1,604
106

Total valuation and translation adjustments
Minority interests

–
–

–
–

1,710
54

Total net assets––

250,463

Total liabilities and net assets––¥304,907

4,362

4,394

–

Common stock
Capital surplus
Retained earnings
Net unrealized gains on other marketable securities
Treasury stock (at cost)

15,23135,400127,849449(11,895)

15,23135,399131,982
2,437(11,442)

–
–
–
–
–

Total shareholders’ equity

167,036

173,608–

Total liabilities, minority interests and shareholders’ equity¥207,216¥208,711–

NET ASSETSMINORITY INTERESTS
Minority interests

SHAREHOLDERS’ EQUITY

Annual Review 2006 ●23

Consolidated Statements of Income(Years ended December 31, 2004, 2005 and 2006)(Millions of yen)

Net revenues
Cost of goods sold
Gross profit

2004

2005

2006

¥253,248
139,675¥245,874
138,351¥327,821
186,265

113,572

107,523

141,556

96,712

95,693

129,235

16,86011,83012,321

1,090
273
37
–
44
294
440

1,183
339
160
–
36
224
422

1,836
399
248
256
–
110
822

884
8
–
463
135
276

758
–
–
362
95
300

932
38
18
593
38
242

17,065

12,256

13,225

158
71
–
86
–

2,045
117
62
53
121

1,569
954
586
28
–

–

1,689

–

2,564
161
505
–
168
88
–
–
40
55
383
–
583

2,100
66
208
61
–
11
372
–
93
–
–
33
1,103

1,686
95
–
–
48
–
120
60
19
–
–
–
–

576
–
–
–
–

–
149
–
–
–

–
–
1,131
74
137

14,659
5,310
707
76

12,201
3,222
1,632
40

13,108
3,237
2,389
(89)

Selling, general and administrative expenses
Operating income
Non-operating income
Interest income
Dividends
Amortization of negative goodwill
Equity in earnings of affiliates
Property rental income
Other non-operating income
Non-operating expenses
Interest expense
Equity in loss of affiliates
Loss on disposal of property, plant and equipment
Property rental costs
Other non-operating expenses
Recurring income
Extraordinary income
Gain on sales of property, plant and equipment
Gain on sales of investment securities
Proceeds from government assistance grants
Compensation for expropriations
Amortization of actuarial difference from return of trust
for retirement benefits
Extraordinary losses
Loss on sales of property, plant and equipment
Impairment loss
Loss from earthquake damage
Loss from typhoon damage
Loss on disposals of property, plant and equipment
Compensation for retirement of fixed assets
Loss on sales of investment securities
Write-down of investment securities
Write-down of golf club memberships
Expense for realignment of sales structure of subsidiaries
Expense for change of subsidiary name
Expense for compatibility with new currency
Lump-sum amortization of adjustments accompanying partial
reimbursement of trust for retirement benefits
Additional collection of liquor taxes
Expense related to integration of operational management
Expense for earthquake precautions
Quality problem countermeasure losses
Income before income taxes, minority interestsand other adjustments
Income taxes
Income tax deferred
Minority interests
Net income

24●

Coca-Cola West Holdings Company, Limited

¥

8,564

¥

7,305

¥

7,570

Consolidated Statements of Shareholders’ Equity(Years ended December 31, 2004 and 2005)(Millions of yen)
2004

2005

¥ 35,399¥ 35,400

0

–

0

–

Capital surplus:
Capital surplus at beginning of year
Increase in capital surplus
Differences from cancellation of treasury stock
Decrease in capital surplus

–

0

–

0

35,40035,399122,372

127,849

8,564

7,305

8,564

7,305

3,087

3,173

3,057

3,106

Bonus to directors and corporate auditors

30

38

Loss on cancellation of treasury stock–

27¥127,849¥131,982

Gain on cancellation of treasury stock
Capital surplus at end of year

Retained earnings:
Retained earnings at beginning of year
Increase in retained earnings
Net income
Decrease in retained earnings
Dividends

Retained earnings at end of year

Consolidated Statements of Changes in Shareholders’ Equity(Millions of yen)
Shareholders’ equity
Year ended December 31, 2006
(January 1, 2006 to December 31, 2006)

Balance as of December 31, 2005

Valuation and translation adjustments
Net unrealized
Total
gains on other Gain (loss)
shareholders’ marketableon deferred
equityhedgessecurities

Total
valuation andtranslation
adjustments

Minority
interests

Total
net assets¥2,437¥ 4,394¥178,002———

73,672

Commonstock

Additional
paid-in
capitalRetainedearnings

Treasurystock(at cost)¥15,231¥ 35,399¥131,982¥(11,442)¥171,171¥2,437¥ ——73,672——73,672—

Changes during the consolidated
fiscal year
Issue of new stock
Distribution of dividends——(3,867)—(3,867)

—

—

—

—

(3,867)

Net income

—

—

7,570

—

7,570

—

—

—

—

7,570

Bonus to directors andcorporate auditors

—

—

(46)

—

(46)

—

—

—

—

(46)

Acquisition of treasury stock

—

—

—

(148)

(148)

—

—

—

—

(148)

Cancellation of treasury stock

—

—

(15)

361

345

—

—

—

—

345

Net changes in items other thanshareholders’ equity during
the fiscal year

—

—

—

—

—

(832)

106

(726)

(4,339)(5,065)

Total changes during the fiscal year—

73,672

3,641

212

77,526

(832)

106

(726)

(4,339)72,460

Balance as of December 31, 2006

¥15,231¥109,072¥135,623¥(11,229)¥248,697¥1,604¥106¥1,71054¥250,463¥

Annual Review 2006 ●25

Consolidated Statements of Cash Flows(Years ended December 31, 2004, 2005 and 2006)(Millions of yen)

Cash flows from operating activities:
Income before income taxes, minority interests and other adjustments
Depreciation and amortization
Impairment gains
Write-off of consolidation adjustment account
Amortization of negative goodwill
Increase (decrease) in liabilities for directors’
and corporate auditors’ retirement benefits
Increase (decrease) in liabilities for retirement benefits
Decrease (increase) in advanced payments for retirement expenses
Increase in investment securities from partial
reimbursement of trust for retirement benefits
Increase in investment securities from return oftrust for retirement benefits
Interest and dividend income
Interest expense
Equity in losses (earnings) of affiliates
Loss (gain) on sales of marketable and investment securities
Write-down of marketable and investment securities
Loss (gain) on sales of fixed assets
Loss on disposals of fixed assets
Decrease (increase) in accounts receivable
Decrease (increase) in inventories
Decrease (increase) in other assets
Decrease in accounts payable
Increase (decrease) in other liabilities
Payment of directors’ bonuses
Other, net
SubtotalInterest and dividends received
Interest paid
Income taxes paid
Net cash provided by operating activities
Cash flows from investing activities:
Acquisition of marketable and investment securities
Proceeds from sales of marketable and investment securities
Acquisition of fixed assets
Proceeds from sales of fixed assets
Acquisition of shares of subsidiaries
Proceeds from collection of loans to affiliates
Increase in time deposits
Proceeds from refund of time deposits
Other, net
Net cash used in investing activities
Cash flows from financing activities:
Decrease in short-term borrowings
Repayment of long-term debt
Payments for acquisition of treasury stock
Proceeds from sales of treasury stock
Dividends paid
Dividends paid to minority interests
Net cash used in financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents, beginning of year
Increase in cash and cash equivalents due to change inscope of consolidation
Cash and cash equivalents at end of year26●

Coca-Cola West Holdings Company, Limited

2004

2005

2006

¥14,659
14,927505
83–¥12,201
13,860208
83–¥13,108
19,571
–
–
(256)

21
(247)
5,556

(139)
(378)
1,002

(115)
104
(3,660)(8,722)

–

–

–
(310)
8
(44)
38
40
112
460
(493)
(191)
68
(1,058)241(30)
72
25,697304(8)(4,491)
21,502(4,644)
(500)
–
(36)
(32)
93
(38)
394
1,675
5,592
(2,001)(5,082)(1,020)(38)(84)
21,113480–(4,985)
16,607

–
(647)
38
18
(577)
19
(850)
448
827
193
(1,711)(3,027)
949
(46)
(234)
24,153638(37)(2,949)21,806(5,718)
5,682(15,049)
511
–
62
(100)
15
3
(14,592)(6,023)
3,030(15,642)
3,163
–
62
(0)
150
3
(15,256)(2,876)
8,420(23,327)
3,392
(652)
63
(20)
30
14
(14,956)––(3,937)3(3,057)–(6,991)(81)
21,869

–
(203)
(14)
439
(3,106)(15)(2,901)(1,549)21,788(3,410)(2,223)(73)
345(3,867)(15)(9,244)(2,394)
20,238–¥21,788–¥20,238

4,440¥22,284

Five-year Summary(Millions of yen)
Fiscal year:

2002

2003

2004

2005

2006

¥ 247,737¥ 240,825¥ 253,248¥ 245,874¥ 327,821

Operating income

16,704

19,63816,86011,83012,321

Recurring income

17,00519,895

17,065

12,256

13,225

Net income

7,086

9,380

8,564

7,305

7,570

Total assets

204,070

204,180

207,216

208,711

304,907

80.7

81.0

80.6

83.2

82.1

Net revenues

Equity ratio (%)*(Yen)

Per share data:
Net income per share (EPS)

¥

85.49

¥ 116.25¥ 108.80

Net assets per share (BPS)

2,009.39

2,089.94

2,149.99

2,228.79

2,358.05

34.00

36.00

40.00

40.00

42.00

Dividend per share

¥

93.42

¥

82.22

* Until fiscal 2005, Shareholders’ equity ratio = Shareholders’ equity / Total assets; from fiscal 2006, Equity ratio = Total equity / Total assets

Net revenues

Operating income

Net income(Millions of yen)

(Millions of yen)

(Millions of yen)

350,000

19,63820,00010,0009,380

327,8218,564

16,86016,704300,000

8,000
250,000

247,737

253,248
240,825

15,000245,874

7,305

7,086

11,8307,570

12,321
6,000

200,000
10,000150,000
4,000

100,000
5,000
2,000
50,000

0

0

02

03

04

05

06

0

02

03

04

05

06

02

03

04

05

06

Annual Review 2006 ●27

Financial Data
Operating income (Millions of yen)
Operating income/Net revenues (%)

Recurring income (Millions of yen)
Recurring income margin (%)

50,00010

50,0008

40,000

10

8.3

8.2
40,000

6.7

8

6.9

6.7

30,0006

6.7

30,0006

5.0

4.8
20,0003.8

19,63816,86016,704

11,830003

Operating income

04

05

20,0002

10,0000

0

4

17,065
12,25606

Operating income/Net revenues

13,225
2

0

02

03

Recurring income

Net income (Millions of yen)
Return on sales (%)

04

05

06

Recurring income margin

Cost of goods sold (Millions of yen)
Cost of goods sold/Net revenues (%)

3.9

20,0004.0

19,89517,005

12,321

10,00002

4

4

250,000

55.2

54.9

56.3

55.2

56.8

60

3.4
15,0003.0

2.9

200,000

40

2.3
9,380

10,000186,2653

150,000

132,995

138,351

2

8,564
7,305

7,086

135,989

139,675

7,570

100,000
20

5,000

1
50,0000

002
Net income

03

04

05

0

0

06

02

Return on sales

03

Cost of goods sold

04

05

06

Cost of goods sold/Net revenues(Millions of yen)
2002

2003

2004

2005

2006

Operating income
Operating income/Net revenues (%)

16,704
6.7

19,638
8.2

16,860
6.7

11,830
4.8

12,321
3.8

Recurring income
Recurring income margin (%)

17,005
6.9

19,895
8.3

17,065
6.7

12,256
5.0

13,2254.0

Net income
Return on sales (%)

7,086
2.9

9,380
3.9

8,564
3.4

7,305
3.0

7,570
2.3

135,98954.9

132,995
55.2

139,675
55.2

138,35156.3

186,265
56.8

Cost of goods soldCost of goods sold/Net revenues (%)

28●

Coca-Cola West Holdings Company, Limited

Total assets (Millions of yen)
Total assets turnover ratio (Times)

Total equity* (Millions of yen)
Equity ratio** (%)

500,000

1.5

400,000

100

1.3
1.2

1.2

1.2

81.0

80.7

1.2

83.2

80.6

82.1
80

400,000
300,000

304,907250,408

1.0

60

300,000
200,000

204,070

204,180

207,216

208,711

164,658

165,454

167,036

173,60840

200,000
0.5
100,000
100,000

20

0

0

02
Total assets

03

04

05

0

0

06

02

Total assets turnover ratio

03

Total equity

Inventories (Millions of yen)
Inventory turnover ratio (Times)

04

05

06

Equity ratio

Current assets (Millions of yen)
Current ratio (%)
34.6

30,00035

200,000

400

30

24.7
25

19.7
12,361

19.3

20.0

12,57012,762285.0

150,000

256.3

20,000

239.5

300

256.9

243.5

20
200

100,000

11,77815

70,142

10,00010

7,169

78,17357,13459,54050,00050,673

100

5
0

0

02
Inventories

03

04

05

0

0

06

02

Inventory turnover ratio

03

Current assets

04

05

06

Current ratio(Millions of yen)
2002

2003

2004

2005

2006

Total assets
Total assets turnover ratio (Times)

204,070
1.2

204,180
1.2

207,216
1.2

208,711
1.2

304,907
1.3

Total equity*
Equity ratio** (%)

164,658
80.7

165,45481.0

167,03680.6

173,608
83.2

250,408
82.1

Inventories
Inventory turnover ratio (Times)

12,361
19.7

12,57019.3

12,762
20.0

7,169
24.7

11,778
34.6

Current assets
Current ratio (%)

70,142
256.3

57,134239.5

59,540243.5

50,673285.0

78,173
256.9

Total assets turnover ratio = Net revenues / The average of assets at the beginning and end of the fiscal period* Until fiscal 2005, Shareholders’ equity; from fiscal 2006, Total equity = Shareholders’ equity + Valuation and translation adjustments** Until fiscal 2005, Shareholders’ equity ratio = Shareholders’ equity / Total assets; from fiscal 2006, Equity ratio = Total equity / Total assets
Inventory turnover ratio = Net revenues / The average of inventory taken at the beginning and end of the fiscal period
Current ratio = Current assets / Current liabilities

Annual Review 2006 ●29

Interest coverage ratio (Times)

Capital expenditures (Millions of yen)

3,000

25,00022,02021,0272,402.0
20,0002,000
15,00015,611

16,19904

05

13,846

10,000
1,000

894.9

589.3
5,000

353.9
0

0

02

03

04

05

06

02

Depreciation and amortization (Millions of yen)

9.7

10

8.4
15,395

15,8888.3

814,927

15,00006

Return on equity (ROE) (%)
Return on assets (ROA) (%)

19,571

20,00003

13,86010,000

5.9

5.7

6

5.2
4.4

5.1
4.3
3.6

4

5,000
2

0

0

02

03

04

05

06

02

03

Return on equity (ROE)

04

05

06

Return on assets (ROA)(Millions of yen)
2002

2003

2004

353.9

894.9

2,402.0–

589.3

Capital expenditures

21,027

13,846

15,611

16,19922,020Depreciation and amortization

15,395

15,88814,927

13,86019,571

4.4
8.4

5.7
9.7

5.2
8.3

4.3
5.9

3.6
5.1

Interest coverage ratio = Operating cash flow / Interest paid
(This calculation uses net cash provided by operating activities and interest paid from the Consolidated Statements ofCash Flows for operating cash flow and interest payments, respectively.)
Return on equity = Net income / The average of shareholders’ equity at the beginning and end of the fiscal period
Return on assets = Recurring income / The average of assets at the beginning and end of the fiscal period

●

2006

Interest coverage ratio (Times)

Return on equity (ROE) (%)
Return on assets (ROA) (%)

30

2005

Coca-Cola West Holdings Company, Limited

Net income per share (Yen)Price earnings ratio (PER) (Times)

Net assets per share* (Yen)Price book-value ratio (PBR)** (Times)
33.5

200

35

29.5

5,000

1.5

30

1.2

1.2

1.2

4,000
150

24.2
20.8

100

85.49

116.25

1.0

25

1.0

0.9
108.80

20

3,000

93.42

18.1

82.22

15

2,000

2,149.99 2,228.79
2,009.39 2,089.94

2,358.05

0.5
10

50

1,000
5
0

0

02

03

Net income per share

04

05

02

Price earnings ratio (PER)

15

40

10.1
313.7

6.5

8.8

34.00

9.3

299.3

05

06

Price book-value ratio (PBR)

50

400

272.3

04

Dividend per share (Yen)

500

200

03

Net assets per share

Cash flows per share (Yen)Price cash flow ratio (PCFR) (Times)

300

0

0

06

272.4

40.00

40.00

04

05

42.00

36.00

10
30

294.8

6.7

20
5

100

10

0

0

02

03

Cash flows per share

04

05

0

06

02

03

06

Price cash flow ratio (PCFR)

(Yen)
2002

2003

2004

2005

2006

Net income per share
Price earnings ratio (PER) (Times)

85.49
20.8

116.2518.1

108.80
24.2

93.42
29.5

82.22
33.5

Net assets per share*
Price book-value ratio (PBR)** (Times)

2,009.39
0.9

2,089.94
1.0

2,149.99
1.2

2,228.79
1.2

2,358.05
1.2

Cash flows per share
Price cash flow ratio (PCFR) (Times)

272.3
6.5

313.7
6.7

299.3
8.8

272.4
10.1

294.8
9.3

Dividend per share

34.00

36.00

40.00

40.00

42.00

Net income per share = Net income / The average number of shares during the period
Price earnings ratio = Market value at the end of the period / Net income per share* Until fiscal 2005, Shareholders’ equity per share = Shareholders’ equity / The number of shares outstanding at the end of the period;
from fiscal 2006, Net assets per share = Net assets / The number of shares outstanding at the end of the period** Until fiscal 2005, Price book-value ratio = Market value at the end of the period / Shareholders’ equity per share;from fiscal 2006, Price book-value ratio = Market value at the end of the period / Net assets per share
Cash flows per share = Cash flows / The average number of shares during the period
Price cash flow ratio = Market value at the end of the period / Cash flows per share

Annual Review 2006 ●31

Risk Information
Business results and other aspects of the Company’s operations mentioned in this annual review are subject to a variety of risks. Those risks
deemed most likely to have a significant impact on potential investment
decisions are found below. The Coca-Cola West Group (CCWG) is
fully aware of the possibility of these risks and thus works to avoid
them or deal effectively with them should they arise. Statements herein
regarding future events or assumptions reflect the judgment of CCWG
as of March 26, 2007.
(1) Business agreements with The Coca-Cola Company of
the United States and Coca-Cola (Japan) Co., Ltd.

CCWH conducts business activities based on a manufacturing licensing agreement with The Coca-Cola Company, Coca-Cola (Japan) Co.,
Ltd. and CCNBC, and a distribution licensing agreement with The
Coca-Cola Company and Coca-Cola (Japan) Co., Ltd.

(5) Impact of economic conditions
 Trends in personal consumption

Sales of beverages, CCWG’s core products, are closely linked to trends
in personal consumption. Current economic conditions in Japan suggest that a rapid recovery in personal consumption is unlikely. A sudden
decline in personal consumption, however, could adversely affect theoperating results of CCWG.
 Fluctuations in asset value

Fluctuations in the value of land, marketable securities and other assets
owned by CCWG could potentially impact the Group’s operating results
and financial position. Marketable securities with a fair value, for example,
are subject to changes in fair market value in capital markets becausethat is how they are valued.
(6) Public regulations(2) Business ties with CCNBC

CCWH has an equity interest in CCNBC, a company established toconsolidate and oversee procurement, manufacturing and distribution
operations nationwide for the Coca-Cola Group in Japan, and to build
an optimal nationwide supply chain structure, thereby reducing costs.
CCNBC’s operations are conducted in partnership with CCWH andother Coca-Cola bottlers across Japan. The future progress and statusof cost-cutting plans of CCNBC could potentially impact the operating
results of CCWG.

CCWG’s Manufacturing and Marketing of Beverages & Foods segment
is subject to a number of regulations in Japan, including the Act Against
Unjustifiable Premiums and Misleading Representations (Premiums andRepresentations Act) and the Food Sanitation Law. The Group fullycomplies with these and all other regulations in its commitment to providing safe and reliable products. Accordingly, tougher regulations, forexample, might incur new compliance costs, which could potentiallyaffect the operating results of CCWG.
(7) Management of personal information(3) Quality assurance

Beverages are the core product of CCWG. The Group makes every effort
to raise employee awareness regarding quality and implements programs
aimed at preventing incidents concerning quality in order to offer its
customers (consumers) high-quality and reliable beverages. Nevertheless,in the event of an incident related to product quality, the Company’s
brand image could be tarnished, irrespective of whether or not CCWG
was actually at fault. An incident of this nature could adversely affectthe operating results of CCWG.
(4) The soft drink industry
 Market competitiveness

Sales of beverages, CCWG’s core products, are readily influenced bychanges in customer (consumer) preference. In a beverage market of
this kind, CCWG strives to continuously offer appealing products andservices. Nevertheless, failure to amply forecast market changes could
potentially affect the operating results of CCWG.
 Impact of weather-related factors

Weather conditions tend to have an effect on the sales of beverages,
CCWG’s core products. Cool summers or warm winters, for example,
often have a significant impact on customer (consumer) demand.
Although CCWG makes every effort to minimize the influence of
weather-related factors on sales, the Group offers no guarantee that it
can completely eliminate the effect of such factors.

32●

Coca-Cola West Holdings Company, Limited

CCWG holds large volumes of personal information. In handling thisinformation, the Group works on a unified basis to formulate and adhere
to related guidelines and implement ongoing training and educational
activities. However, an external leak of personal information could leadto a deterioration of trust in CCWG and potentially impact the operating results of CCWG.
(8) Impact of disasters

CCWG has a system in place to minimize the effects of power outages,
as well as other scenarios for which assumptions must be made, on its
business operations. Typhoons, earthquakes and other natural disasters,
however, could trigger conditions that exceed these assumptions. Conditions of this magnitude could potentially impact the operating results
and financial position of CCWG.

Stock Information(As of December 31, 2006)

Authorized shares:
Outstanding shares:
Number of shareholders:

270,000,000
111,125,714
23,744

Major shareholders:Shareholders

Number of shares held(Thousands)

Percentage ofshares (%)

16,792
11,626
5,294
4,780
4,177
4,074
3,912
3,703
2,261
2,169

15.9
11.0
5.0
4.5
4.0
3.9
3.7
3.5
2.1
2.1

Ricoh Company, Ltd.
Kirin Brewery Company, Limited
The New Technology Development Foundation
Japan Trustee Services Bank, Ltd. (Trust account)
Mellon Bank Treaty Clients Omnibus
Coca-Cola Holdings West Japan, Inc.
Mitsubishi Heavy Industries Food & Packaging Machinery Co., Ltd.
The Nishi-Nippon City Bank, Ltd.
The Master Trust Bank of Japan, Ltd. (Trust account)
Morgan Stanley

Note: The Company owns 4,932,000 shares of treasury stock. This shareholding is not shown in the table and has not been included in the calculationof voting rights (percentage of shares).

Number of shares held and percentage of shares held by shareholder category:

Individuals
and others
11.6%

Foreigncorporations
22.5%

Treasury
stock
4.4%

Financial
institutions
16.8%
Securities
companies
0.7%

Other domestic
corporations
44.0%

Financial institutions
Securities companies
Other domestic corporations
Foreign corporations
Individuals and others
Treasury stock

Number ofshareholders

Number of shares(Thousands)

84
28
510
248
22,873
1
23,744

18,676822
48,83925,008
12,845
4,932
111,125<Composition of shareholders>
2002

2003

2004

2005

2006

PER (Times)
20.8
PBR (Times)
0.9
FY-end stock price (Yen)
1,775
Dividend (Yen)
34.00
Payout ratio (%)
52.1
Dividend–on-equity ratio (%)
1.7

18.1
1.0
2,100
36.00
28.3
1.8

24.2
1.2
2,630
40.00
37.7
1.9

29.5
1.2
2,755
40.00
39.3
1.8

33.5
1.2
2,755
42.00
112.4
1.9

Credit Rating Information
Japan Credit Rating Agency, Ltd.
Long-term credit rating
Rating and Investment Information, Inc.
Long-term credit rating

2002

2003

2004

2005

2006

AA–

AA–

AA–

AA–

AA–

A+

A+

A+

A+

A+

Annual Review 2006 ●33

Corporate Governance
CCWH’s fundamental stance on corporate governance is to improve• Support for Outside Appointments

management efficiency and transparency, while striving to maximize

Outside directors are supported by the General Affairs Group, while

shareholder value.

outside corporate auditors are supported by the Audit Group.
• Business Execution and Management Oversight(1) Corporate Governance System

Outside appointments comprise more than half the members of the

 Status of Related Internal Bodies

Board of Corporate Auditors. This gives CCWH the capacity to suf-

• Corporate Auditor System or Company With Committees System
CCWH has adopted the Corporate Auditor system in accordance withits decision to separate decision-making and management oversightfrom business execution through a restructuring of the Board of
Directors and the adoption of the corporate executive officer system
in March 1999.
• Number of Directors
The Company’s articles of incorporation stipulate that there shall be a
maximum of 15 directors.

ficiently monitor the performance of duties by directors and also allows
it to draw on independent third-party advice from external experts
appointed as outside directors. Directors and corporate auditors also
fully monitor how corporate officers execute business operations. This
includes participating in meetings of the executive committee, which
is made up of corporate officers, as well as other key company meetings. When questions arise during the course of business execution,
CCWH consults attorneys, CPAs and other specialists for advice on
determining the best way to proceed.

• Requirements for Electing Directors

 Risk Management System

The Company’s articles of incorporation stipulate that election of

CCWH has established the Coca-Cola West Group Risk Management

directors shall be by a majority of votes where shareholders holding at

Committee. The objective of this body is to minimize damage in theleast one-third of the voting rights of shareholders than can exercise

event of a crisis by preventing confusion within the Group and ensuringvoting rights are in attendance.

a rapid and appropriate response. The Group believes that compliance• Outside Directors and Corporate Auditorswith all applicable laws and regulations, and the spirit in which they are

At present, two of CCWH’s eight directors and four of its five corpo-

written, is fundamental to its business activities, as is the proper obser-

rate auditors are from outside the Group.

vance of social norms and customary business practices. This belief is

The Company has concluded with one outside director and three

enshrined in a code of conduct created to encourage a compliance mindset

outside corporate auditors agreements limiting liability in case ofamong all Group corporate officers and employees.

neglect of duty, based on the provisions of Article 427, Paragraph 1 of

 Audit System

the Company Law. Under these agreements, liability is limited to theminimum amount permissible under the law.
• Overview of Committees
In July 2006, the Company established the Management Advisory
Committee as an internal body of the Board of Directors. This committee allows appropriate advice to be given by experts with the goalsof improving the efficiency and transparency of management andincreasing shareholder value. The committee is responsible for advisingon matters concerning candidates for director and corporate auditor
positions and directors’ and corporate auditors’ remuneration as wellas important strategic and other matters related to the general management of the Group.

• Participating Personnel and Organizations
CCWH aims to comply with corporate rules and regulations, carryout appropriate corporate activities and operational management, andprotect its assets. To help it achieve these goals, CCWH has established an Audit Group within the Internal Audit Department. The
group has 12 members and reports directly to the CEO.
Corporate auditors attend meetings of the Board of Directors,
executive committee and other important company meetings. They
also meet a representative director on a regular basis and examine theresults of audits performed by the Audit Group. Using these andother methods, corporate auditors monitor the executive actions of
directors and corporate officers in accordance with relevant laws andregulations, the Company’s own articles of incorporation and internal auditing standards.

34●

Coca-Cola West Holdings Company, Limited

The Audit Group carries out prior discussions with corporate auditors concerning its auditing policy and plans for each fiscal year. Corporate auditors also receive reports about the results of audits of the
Audit Group as needed. In addition, at the start of the fiscal year, theCompany’s independent auditor provides the corporate auditors withan explanation of its audit plans, and as needed, supplies information
and reports to the auditors during and at the end of the audit process.
• Independent Auditor and Related Personnel

 Committee Activities

The Management Advisory Committee convened four times in the
period from July 2006 to January 2007. The committee discussed thefollowing topics on each occasion:• August 2006
The Group’s business plan for the second half of the fiscal year.
• October 2006

CCWH has appointed KPMG AZSA & Co. as its independent auditor. The names of the firm’s certified public accountants (engagement
and management partners) that audit the Company’s financial statements are listed below.
Name(3) Initiatives to Strengthen Corporate Governance

The Group’s medium-term management plan, corporate officer system
and restructuring of the Group.
• December 2006
The Group’s medium-term management plan, the organization of

Auditing Experience

Group companies and the corporate officer system.

Tetsuzo Hamashima

2 years• January 2007

Mikihiro Himeno

7 years

The Group’s business plan, candidates for director, corporate auditor

The auditing team has seven additional members including threeand other positions, appropriation of retained earnings as dividends,

CPAs and three assistant CPAs.

remuneration and salaries for directors, corporate auditors and other

 Director and Corporate Auditor Remuneration

personnel, and elections to the Management Advisory Committee.

Remuneration paid to directors and corporate auditors for the year under

 Other Initiatives

review was as follows.

In March 2006, the Group reduced the term of office for directors

Directors (12):¥112 million

from two years to one. This move was taken to clarify the management

Corporate auditors (7):¥ 54 million

responsibility of directors as relating to each fiscal year and to create a

Total:¥167 million

more dynamic management framework capable of responding rapidlyWith the approval of the annual general meeting of shareholders held

to changes in the operating environment. At the same time, after review-on March 24, 2006, the Company also appropriated earnings to pay

ing executive remuneration, the Company abolished the retirement¥33 million in bonuses to 10 directors and paid retirement benefits ofallowance system for directors and corporate auditors.

¥2 million to 5 directors and ¥8 million to 2 corporate auditors.
 Audit Fees

The Company paid ¥65 million in fees to the independent auditor

Going forward, ongoing efforts will be made to enhance corporate
governance in the Group.

KPMG AZSA & Co. for services relevant to the year under review. Of
that amount, ¥35 million was for services pursuant to Article 2-1 of theCertified Public Accountant Law.
(2) Conflicts of Interest

Two of the Company’s outside directors are representatives of companies that have business relationships with CCWH.
One of the Company’s four outside corporate auditors is a representative of a partner financial institution. The remaining three corporate
auditors have no conflicts of interest with the Company.

Annual Review 2006 ●35

Corporate Data
(As of December 31, 2006)● Company name: Coca-Cola West Holdings Company, Limited● Offices:

Head office
7-9-66 Hakozaki, Higashi-ku, Fukuoka, Japan
Fukuoka office 1-2-25 Sumiyoshi, Hakata-ku, Fukuoka, Japan
Osaka office
4-15-10 Nishitenma, Kita-ku, Osaka, Japan● Established:

December 20, 1960

● Paid-in capital:¥15,231,000,000● Employees:

8,499 (Consolidated)● Principal
businesses:

Manufacture and sales of Coca-Cola and other soft drinks;
management of Group companies● Stock exchange Tokyo Stock Exchange (First Section)
listings:
Osaka Securities Exchange (First Section)
Fukuoka Stock ExchangeManagement(As of April 1, 2007)

Directors

Corporate Officers

Representative Director
Director
Director
Director
Director
Director

Norio Sueyoshi
Tadatsugu Harada
Kouichi Morii
Tamio Yoshimatsu
Shigeki Ota
Masamitsu Sakurai

Director

Masahiko Uotani

Director

Koukichi Honbou

*
*
*
*
*
Representative Director & Chairman,
Ricoh Company, Ltd.
Director & Chairman,
Coca-Cola (Japan) Company, Limited
Representative Director & President,
Minami Kyushu Coca-Cola Bottling Co., Ltd.

Note: *Corporate Officer

Auditors
Executive Corporate Auditor Yasumasa Niimi
Executive Corporate Auditor Hiroshi Kanda
Corporate Auditor
Tatsuo Hirakawa
Corporate Auditor

Katsumi Sasaki

Corporate Auditor

Yukiko Kyokane

CEO
Norio Sueyoshi
Executive Corporate Officer Hijiri Morita
Senior Corporate Officer Shigejiro Sato
Senior Corporate Officer Akira Noguchi
Senior Corporate Officer Hiroyoshi Miyaki
Corporate Officer
Kiyoshi Fujiwara
Corporate Officer
Kazuhiko Shinpa
Corporate Officer
Yoshimitsu Yoshitani
Corporate Officer

Kiyotaka Yamada

Corporate Officer

Hidetoshi Shimizu

Group Corporate Officers
Group Senior Corporate Officer Tadatsugu Harada
Former Representative Director & Vice
President, Ricoh Company, Ltd.
Representative Director & Vice President,
Nishinippon City Bank Company, Limited
Attorney, Kyokane Law OfficeGroup Senior Corporate Officer Kouichi MoriiGroup Senior Corporate Officer Tamio YoshimatsuGroup Senior Corporate Officer Takeaki Sueyasu

Management Advisory Committee
Chairman

Masamitsu Sakurai

MemberMasahiko Uotani

MemberShingo Matsuo

MemberKazuhiko Enomoto

MemberToshiaki Hanawa

MemberSusumu Ishihara

MemberTakashi Matsuzaki

Member

Eiji Muto

MemberMemberKunio Ito
Masakazu Morito

Representative Director & Chairman,
Ricoh Co., Ltd.
Director & Chairman,
Coca-Cola (Japan) Co., Ltd.
Representative Director & President,
Kyushu Electric Power Co., Inc.
Representative Director & Chairman,
Fukuoka Jisho Co., Ltd.
Representative Director & Chairman,
Royal Holdings Co., Ltd.
Representative Director & President,
Mitsubishi Heavy Industries Food &Packaging Machinery Co., Ltd.
Representative Director & President,
Kyushu Railway Company
Attorney, Representative of Tokunaga,
Matsuzaki & Saito Law OfficeDirector & Chairman, NTT Data Instituteof Management Consulting, Inc.
Professor, Hitotsubashi University
Adviser, Kinki Coca-Cola Bottling Co., Ltd.

Group Senior Corporate Officer Nobuji KiharaGroup Senior Corporate Officer Nobuo Shibata
Group Senior Corporate Officer Junji KatsuraGroup Senior Corporate Officer Shigeki Ota
Group Senior Corporate Officer Taijiro Naniwa
Group Senior Corporate Officer Masayuki Yamasaki
Group Senior Corporate Officer Noriyasu YabumotoGroup Senior Corporate Officer Minoru Yoshizawa
Group Senior Corporate Officer Mitsuo IsobeGroup Senior Corporate Officer Noriyuki Korasaki
Group Senior Corporate Officer Yukio Sako
Group Senior Corporate Officer Takuo Shibata
Group Senior Corporate Officer Toyojiro Yoshinaga

36●

Coca-Cola West Holdings Company, Limited

Senior Officer
Business System Group Manager
SCM Group Manager
Corporate Planning Group Manager
Marketing Planning Group Manager
SCM 2nd Office Manager, SCM Group
Finance 3rd Office Manager,
Finance Group
Finance 2nd Office Manager,
Finance GroupBS 1st Office Manager,
Business System Group

Group Corporate Officer

Tadanori Taguchi

Group Corporate Officer

Toshio Fukami

Representative Director & President,
Coca-Cola West Japan Co., Ltd.
Director & Vice President,
Coca-Cola West Japan Co., Ltd.
Representative Director & President,
Kinki Coca-Cola Bottling Co., Ltd.
Representative Director & President,
Mikasa Coca-Cola Bottling Co., Ltd.
Director & Executive Corporate Officer,
Mikasa Coca-Cola Bottling Co., Ltd.
Representative Director & President,
Coca-Cola West Japan Products Co., Ltd.
Executive Corporate Officer,
Coca-Cola West Japan Co., Ltd.
Representative Director & President,
Coca-Cola West Japan Vending Co., Ltd.
Director & Senior Corporate Officer,
Kinki Coca-Cola Bottling Co., Ltd.
Director & Senior Corporate Officer,
Kinki Coca-Cola Bottling Co., Ltd.
Representative Director & President,
Coca-Cola West Daisen Products Co., Ltd.
Director & Executive Corporate Officer,
Mikasa Coca-Cola Bottling Co., Ltd.
Representative Director & President,
Mikasa Beverage Services Co., Ltd.
Vice President of Engineering,
Coca-Cola National Beverages Co., Ltd.
Representative Director & President,
Coca-Cola West Japan Customer Service
Co., Ltd.
Account Manager, Coca-Cola IBS Co., Ltd.
Manager,
Coca-Cola Vending Partnership Structure
Representative Director & President,
Kinki Coca-Cola Products Co., Ltd.
Representative Director & President,
Kansai Beverage Service Co., Ltd.
Administration Division Manager,
Minami Kyushu Coca-Cola Bottling Co., Ltd.
Representative Director & President,
Nishinihon Beverage Co., Ltd.

Coca-Cola West GroupThe Coca-Cola West Group carries out business essentially in the manner of a single company. In order to effectively promotebusiness, Group companies with functions that are in close contact with the market are organized by region and more highly
specialized companies are managed on a functional basis.

< West Japan Region >Nishinihon Beverage Co., Ltd.

Coca-Cola WestJapan Co., Ltd.

Coca-Cola West Japan Vending Co., Ltd.
Coca-Cola West Japan Customer Service Co., Ltd.

Coca-Cola West Holdings Co., Ltd.

< Kinki Region >Kansai Beverage Service Co., Ltd.

Kinki Coca-Cola
Bottling Co., Ltd.

Nesco Co., Ltd.
Kadiac Co., Ltd.

< Mikasa Region >Mikasa Coca-Cola
Bottling Co., Ltd.

Mikasa Beverage Service Co., Ltd.
Mikasa Service Co., Ltd.

< Manufacturing >Coca-Cola West Japan Products Co., Ltd.
Kinki Coca-Cola Products Co., Ltd.
Coca-Cola West Daisen Products Co., Ltd.

< Distribution >Coca-Cola West Logistics Co., Ltd.

< Other >Nichibei Co., Ltd.
Takamasamune Co., Ltd.
West Japan Service Co., Ltd.
Rex Estate Co., Ltd.
Seiko Corporate Japan Co., Ltd.
C & C Co., Ltd.
Akiyoshi Systems Co., Ltd.

Annual Review 2006 ●37

Coca-Cola System in Japan
Japan’s Coca-Cola system consists of Coca-Cola (Japan) Co., Ltd.,
12 bottling companies (bottlers) that manufactureand sell Coca-Cola products in the different regions of the country and other companies.
Coca-Cola (Japan) Co., Ltd. produces concentrates of Coca-Cola and other beverages. Coca-Cola National Beverages Co., Ltd.,
which oversees procurement, manufacturing and distribution on a national level, then supplies these concentrates to the bottlers,
which in turn use them to manufacture various products under strict quality control in their respective plants. The bottlers
distribute products to their 515 sales centers throughout Japan, which ship the products directly to nearly 1.15 million shops
and other outlets by delivery trucks called “route trucks.” In addition, approximately 980,000 vending machines are installed
extensively and efficiently all over the country for the convenience of consumers. Thus, the unique Coca-Cola system can growwith the changing needs of local industries and communities.

12 Bottlers (As of January 2007)
Note: Major investor shown in brackets

Michinoku Coca-Cola Bottling Co., Ltd.

Hokkaido Coca-Cola Bottling Co., Ltd.

(Yamura family)
Iwate/Akita/Aomori(Dai Nippon Printing Co., Ltd.)
Hokkaido

Sendai Coca-Cola Bottling Co., Ltd.

Mikuni Coca-Cola Bottling Co., Ltd.

(Kamei Corporation)
Miyagi/Fukushima/Yamagata(Mitsui & Co., Ltd.)
Saitama/Gunma/Niigata

Tone Coca-Cola Bottling Co., Ltd.

Hokuriku Coca-Cola Bottling Co., Ltd.

(Kikkoman Corporation)
Chiba/Ibaraki/Tochigi(Wakatsuru Shoji)
Nagano/Toyama/Ishikawa/Fukui

Tokyo Coca-Cola Bottling Co., Ltd.

Coca-Cola West Holdings Co., Ltd.

(Marujin Corporation)
Tokyo(Ricoh Company, Ltd.)

Coca-Cola Central Japan Co., Ltd.
(Mitsubishi Corporation)
Kanagawa/Shizuoka/Yamanashi/Aichi/Gifu/Mie

Shikoku Coca-Cola Bottling Co., Ltd.
(Nippon Paper Group, Inc.)
Kagawa/Ehime/Kochi/Tokushima

Minami Kyushu Coca-Cola Bottling Co., Ltd.
(Satsuma Shuzo Co., Ltd.)
Kumamoto/Kagoshima/Oita/Miyazaki

Okinawa Coca-Cola Bottling Co., Ltd.
(Marujin Corporation)
Okinawa38●

Coca-Cola West Holdings Company, Limited

Coca-Cola West Holdings Co., Ltd.
Coca-Cola West Holdings Co., Ltd. (CCWH) operates in the west Japan region.
It is the largest Coca-Cola bottler in Japan and one of the top ranked from a global perspective.
On July 1, 2006, Coca-Cola West Holdings Co., Ltd. (CCWH) was established as a joint holding company byintegrating the management of Coca-Cola West Japan Co., Ltd. (CCWJ) and Kinki Coca-Cola Bottling Co., Ltd.
(Kinki CCBC). The Company entered into a capital and business alliance with Minami Kyushu Coca-Cola BottlingCo., Ltd. on March 8, 2007.
The operating area of the new Group is a massive market accounting for around 30% of the overall Japanesemarket. It is also a leading bottler in world terms among listed bottlers, ranking fourth in sales and seventh inoperating income.
As the largest bottler in Japan, and one of the largest in the world, CCWH is acting as a Strategic Leading Partnerwith The Coca-Cola Company and Coca-Cola (Japan) Co., Ltd. In this capacity, it is playing a leading role in thetransformation of the Coca-Cola system in Japan by engaging in product development, test marketing and othercollaborative activities that go beyond the traditional scope of a bottler.

Group Overview (As of April 2007)
Note: Figures in brackets show voting rights (percentage of shares)

Investment(100%)
The
Coca-Cola
Company(TCCC)

Coca-Cola
Tokyo Research &Development Co., Ltd.
(CCTR&D)

July 2006
Management integration with
Kinki Coca-Cola Bottling Co., Ltd.
March 2007
Capital and business alliance with
Minami Kyushu Coca-Cola Bottling Co., Ltd.

4

(25.0%)
6

Coca-Cola Integrated
Business Systems
Co., Ltd.
(CCIBS)
7
Coca-Cola Customer
Marketing Company,
Limited(CCCMC)
8

Coca-Cola (Japan)
Co., Ltd.
(CCJC)

3

June 1998
Kita Kyushu Coca-Cola Bottling Co., Ltd.
listed on the First Section of the Tokyo Stock Exchange

April 2001
Mikasa Coca-Cola Bottling Co., Ltd. became a subsidiary

Coca-Cola National
Beverages Co., Ltd.
(CCNBC)(15.0%)(3.9%)
1(20.0%)(20.0%)(21.7%)FV Corporation(FVC)

Coca-ColaWest Holdings
Co., Ltd.
(CCWH)

Minami Kyushu
Coca-Cola BottlingCo., Ltd.

2(100%)

July 1999
Merger with Sanyo Coca-Cola Bottling Co., Ltd.

5

Joint companies of
TCCC/CCJC and bottlers

9

Coca-Cola Bottling(10 companies)(CCBC)

 Coca-Cola West Holdings Co., Ltd. (CCWH)

 Coca-Cola National Beverages Co., Ltd. (CCNBC)

Japan’s largest Coca-Cola bottler, formed in July 2006 by integrating the management of Coca-Cola West Japan Co., Ltd. and Kinki
Coca-Cola Bottling Co., Ltd. The Company entered into an equitybased business alliance with Minami Kyushu Coca-Cola BottlingCo., Ltd. in March 2007.

Established in April 2003 as a joint company of The Coca-Cola
Company and all the Japanese bottlers to create an optimum
national supply chain management (SCM) system for the Coca-Colasystem in Japan. CCNBC started its operations in October thesame year. The company oversees the group’s joint procurementof raw materials/ingredients, manufacturing on a national level, andsupply-demand planning and coordination, and supplies products
to the bottlers.

 The Coca-Cola Company (TCCC)
Established in 1919 in Atlanta, Georgia, in the United States. TCCC
holds the rights to license bottlers to manufacture and distributeCola-Cola products. Bottling contracts with bottlers are entered into
by TCCC or one of its subsidiaries.

 Coca-Cola (Japan) Co., Ltd. (CCJC)
Established in 1957 in Tokyo as “Nihon Inryo Kogyo K.K.,” a wholly
owned subsidiary of The Coca-Cola Company of the U.S., and thenrenamed in 1958 to Coca-Cola (Japan) Co., Ltd. CCJC is engaged
in marketing, planning, and manufacture of Coca-Cola and otherconcentrates in Japan.

 Coca-Cola Tokyo Research & Development Co., Ltd.
(CCTR&D)
Established in January 1993 as a wholly owned subsidiary of The
Coca-Cola Company of the U.S. Since January 1995, the centerhas been involved in product development and technical support
responding to needs in the Asian region.

 Coca-Cola Bottlers (CCBC)
In Japan, there are 12 bottlers. Each bottler manufactures anddistributes products within the region for which it is responsible.

 Coca-Cola Integrated Business Systems Co., Ltd.
(CCIBS)
Established in January 2007 as a joint company of The Coca-Cola
Company and all the Japanese bottlers, CCIBS provides businessconsulting for the Coca-Cola system in Japan. It also develops supporting information systems and is responsible for their overall maintenance and running.

 Coca-Cola Customer Marketing Company, Limited(CCCMC)
Established in January 2007 as a joint company of Coca-Cola (Japan)
Co., Ltd. and all the Japanese bottlers. Responsible for businessnegotiations with major retailers, such as nationwide convenience
store and supermarket chains, as well as developing proposals forsales promotions and storefront activities.

 FV Corporation (FVC)
Established in May 2001 as a joint company of Coca-Cola (Japan)
Co., Ltd. and all the Japanese bottlers. Its functions include: sales
to organizations spread over wide areas in the vending machine
business and handling of products other than corporate products(those authorized by Coca-Cola (Japan) Co., Ltd.).

Annual Review 2006 ●39

Coca-Cola West Holdings Company, Limited
Annual Review 2006

Coca-Cola West Holdings Company, Limited

Coca-Cola West Holdings Company, Limited
1-2-25 Sumiyoshi, Hakata-ku, Fukuoka, Japan
PR·IR Group TEL 81-(0)92-283-5718
http://www.ccwh.co.jp/

Cert no. SA-COC-1210

Printed in Japan

Annual Review 2006
Year ended December 31, 2006