Sapporo Group Business Results Presentation for the Three Months Ended March 31, 2018 May 10, 2018 URL http://www.sapporoholdings.jp/english Copyright, 2018    SAPPORO HOLDINGS LTD.  All rights reserved.    1/40 2018
Main beer brands and structure reform in Vietnam have been smooth, while soft drinks were sluggish both in Japan and abroad. We aim to revamp the North American soft drinks business in the first half and produce results in the second half. (billions of yen) Revenue ■ 2017 1Q (ifrs) ■ 2018 1Q  (ifrs) *See p.4, 5 for details A Revenue declined ¥3.2 billion year on year due to the slump in the food and soft drink business (-¥2.5 billion) and the decline in revenue at the North American soft drinks business, which we are rebuilding. A Operating profit declined ¥1.9 billion year on year due to the impact of inventory adjustment ahead of the relaunch of Mugi to Hop in March and the sluggish performance of the North American and Japanese soft drinks businesses. Profit attributable to owners of parent A decline of ¥900 million reflecting the A decline in operating profit
2018 J ( O )
Balance of Net debt
■ 2017-end  (IFRS) D/E ratio 1.4 times Group Management Platform > Received the 2018 JSBBA Award for Achievement in Technological Research from Japan Society for Bioscience, Biotechnology, and Agrochemistry A Began test cultivation of lemons leveraging ICT in Osakikamijima- cho in Hiroshima Prefecture ▷ Certified as “2018 Excellent Enterprise of Health and Productivity Management-White 500” > Selected as Telework Declaration Company by the Ministry of Health, Labour and Welfare *See p.20 for details Equity sheet Cash basis investment Others A Began optional application of IFRS A Won the Agriculture, Forestry and Fisheries Minister’s Award in the 27th Global Environment Award *See Appendix p.39 for details (billions of yen)
2018 10
※ : The export business of Sapporo International Inc. has been transferred to Sapporo Breweries Ltd. effective January 1, 2018. The consolidated financial statements for 2017 1Q have been adjusted retroactively to reflect these changes. (Net sales: 0.5 billions of yen, Operating income: 0.1 billions of yen) ee P.5 for more details Copyright, 2018    SAPPORO HOLDINGS LTD.  All rights reserved. 2018
: The main factors behind revenue decline are new genre and soft drinks business in Japan and abroad = Increase = Decrease *From 2018, the export business of Sapporo International Inc. was transferred to Sapporo Breweries Ltd.
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2018 10
The consolidated financial statements for 2017 1Q have been adjusted retroactively to reflect these changes. 2018. (Net sales: 0.5 billions of yen, Operating income: 0.1 billions of yen) Copyright, 2018    SAPPORO HOLDINGS LTD.  All rights reserved. 6/40 2018
Declined due to forward investment in RTD and sales decline in he soft drink business (Japan, abroad) Smooth progress in the structure reforms in Vietnam = Increase (billions of yen) Japanese Alcoholic Beverages Breakeven .1.9 Copyright, 2018    SAPPORO HOLDINGS LTD.  All rights reserved. Japanese Alcoholic Beverages IFRS 2018 Positive ▷ Conspicuous impact of the “Continuation of strengthening beer business” → Sales volume of Black Label brand products were U% year on year A 115 110 105 RTD continued to be strong, up ZD% year on year *Sales value-based 100 A To expand and strengthen sales of Japanese wine Grande Polaire, we plan to open a new vineyard in Hokuto, Hokkaido (June) *See Appendix p.29 for details A Sales volume of new genre products were down  // % year on year → Relaunched Mugi to Hop on March 6 Though there was some impact from the product inventory reduction before the relaunch, Negative % year on year March sales volume was up <YoY changes in sales volume of Black Label brand products> <YoY changes in sales volume of Mugi to Hop brand products> 120 110 100 90 80 70 *Cumulative Copyright, 2018    SAPPORO HOLDINGS LTD.  All rights reserved. International 2018 Positive A Sleeman’s brand was further strengthened and sales continued to increase A Sales volume in Vietnam increased "🌸 year 60 Earnings improved ¥0°4 billion as the structure reforms progressed ▷  Sluggish earnings at the North American soft drinks business → Business integration of the two soft drinks companies in North America was completed in April CPF is taking initiatives in SSC’s management improvement. While sales volume of private label products are showing signs of recovery, it has been struggling in the co-packing business <North American soft drinks: Changes in sales in local currency> 75 10 4Q Negative Copyright, 2018    SAPPORO HOLDINGS LTD.  All rights reserved. 9/40 Food & Soft Drinks 2018 *YoY change is on an IFRS basis <YoY change in sales volume of lemon-based foods> Positive Sales of lemon-based food products and tea A drinks remained strong, continuing from last year → Sales volume of lemon-based food products were ù% year on year 115 110 105 A Began manufacturing and distribution of Almond Breeze 100 95 2017 1Q 2017 2Q 2017 3Q 2017 4Q 2018 1Q <YoY change in sales volume of coffee drinks> 105 *Cumulative 100 95 90 85 80 ▷  Export sales from Singapore declined → Hurrying to build a flexible product development structure 75 70 65 60 2017 1Q
2017 4Q
2018 1Q
2017 2Q
2017 3Q
Copyright, 2018    SAPPORO HOLDINGS LTD.  All rights reserved.
10/40 A Sales in Singapore on a recovery track A Sales of coffee drinks were sluggish → Aim to recover sales with strong products such as tea drinks Negative 2018 10 Positive >  The Yebisu Bar Hakata 1 Bangai restaurant opened (March 26) (The first outlet in Kyushu) → All new restaurants have been performing strongly >  While steep rise in ingredient prices and difficulty in acquiring human resources continue, their impact has been negligible in the first quarter thanks to cost control ▷  Sales of existing stores were ♕♕% year-on-year → To supplement with new restaurants and formats including new Japanese restaurant format Sobaemon launched in April Copyright, 2018    SAPPORO HOLDINGS LTD.  All rights rese Negative Real Estate YoY change 2018 Positive A Mainstay properties maintained stable occupancy rate >   Nothing special to mention regarding the business content > The entire amount of real-estate tax was recorded in January due to the introduction of IFRS → No impact on annual profit/loss, but first quarter profit declined compared with operating profit based on J-GAAP. Negative YoY change is on an IFRS YEBISU GARDEN PLAC <Operating profit of the real estate business> 2017 1Q （J-GAAP） 2018 1Q  (IFRS)
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<Special factors in business results (YoY)>
<Impact of foreign exchange rates>
-: negligible impact 2018
(billions of yen) <Changes in amount of investment (cash basis)> ①<Capital expenditure> billion in consolidated total (tangibles, intangibles) <Major items> • “Alcoholic Beverages,” “Food” and “Soft Drinks” -related: about ¥2.1 billion SGM Group infrastructure streamlining, etc.: about ¥0.4 billion *SGM: Sapporo Group Management Ltd. ②<Investment properties> about ¥U consolidated total ③<Lease fees> about ¥ L consolidated total ④<Other investment> about ¥∪。 consolidated total (Long-term prepaid expense, investment securities, etc.) ①＋②＋③＋④ <2018 1Q investment total> (cash basis; including current capital expenditure, lease fees)
Copyright, 2018    SAPPORO HOLDINGS LTD.  All rights reserved.
2018
10 > Balance sheet as of the end of the previous year changed due to shift to IFRS Balance sheet as of the end of 2017 (J-GAAP) Balance sheet as of the end of 2017 (IFRS) Balance sheet as of the end of 2018 1Q (IFRAS)
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2018
10
■ Cash and cash equivalents ■ Trade receivables
■ Other current assets →Deferred tax assets was transferred to non-current account ■ Fixed assets →Change in depreciation method, application of deemed cost, increase in lease assets, transfer to investment property ■ Investment property →Transfer from fixed assets ■ Goodwill →Non-amortization of goodwill Treated additionally acquired goodwill after acquiring control as capital surplus ■ Other non-current assets →Fair value assessment of unlisted stocks Increase in deferred tax assets
End of 2017 (J-GAAP) (billions of yen) Current assets 164.8 Non-current assets 500.0 End of 2017 (IFRS) 2018
10 : Total liabilities increased ¥36.1 billion due to the application of IFRS and total equity decreased ¥2.0 billion
2018
10 Total assets declined ¥34.5 billion compared with the end of the revious year m Cash and cash equivalents ■ Trade receivables →Impact of seasonal factors and bank holidays ■ Inventories ■ Other current assets ■ Fixed assets ■ Investment property ■ Goodwill
■ Other non-current assets End of 2017 (IFRS) 2018 1Q (IFRS) →Decline in investment securities 2018 Changes in Balance Sheets 10 : Total liabilities declined ¥18.5 billion compared with the end of the previous year, total equity declined ¥16.0 billion ■ Trade payables ■ Short-term financial liabilities ■ Other current liabilities →Decline in liquor taxes payable ■ Long-term financial liabilities →Transfer to short-term bank loans ■ Net defined benefit liability ■ Other non-current liabilities ■ Total equity attributable to owners of parent →Net loss, payment of dividends, etc. ■ Non-controlling interests
3.3 2018 1Q (IFRS)
Research of hop A A A Received the 2018 JSBBA Award for Achievement in Technological Research*¹ from Japan Society for Bioscience, Biotechnology, and Agrochemistry (JSBBA). Sapporo’s diverse analysis of hop quality over a long period of time and initiatives regarding its application were highly rated, and the company’s track record in the “global contribution to stable hop cultivation,” “continuous development of superior hop varieties” and “diversified analysis of components particular to hops” was the deciding factor for the award. This is the third time for the company to receive the award on a beer brewing technology theme at the Society, following its successes in 2000 and 2015. http://www.sapporobeer.jp/news_release/0000021863/index.html *1 A historic award established in 1968. It is an extremely authoritative award given to a member who made remarkable technological  achievement in the field of agricultural chemistry. JSBBA website: http://www.jsbba.or.jp/ Research of lemon A Began full scale test cultivation of lemons, leveraging ICT, in Osakikamijima-cho in Hiroshima Prefecture from this spring to ensure stable production of lemon grown in Japan.んAim to improve efficiency of lemon cultivation and boost quality of lemon fruits by utilizing ICT and quantifying agricultural activities. http://www.sapporoholdings.jp/news_release/0000020427/index.htmlんCertified as “2018 Excellent Enterprise of Health and Productivity Management-White 500" for the second consecutive year, following FY2017. Of the 1,239 companies that responded, Sapporo scored in the top 20% and won the five-star rating. A Appointed as Telework Declaration Company by the Ministry of Health, Labour and Welfare https://www.sengen7.com/ Appendix: Reference Materials
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Major Sales and Sales Volume
Appendix
Japanese Alcoholic
Beverages
【Beer】(sales volume) Jan-Mar up  l% y-o-y  (total demand down 2%) Black Label Brand total up 10% y-o-y (Sales of the canned version : up 13% y-o-y) Yebisu Brand total down  10% y-o-y (Reverse effect of Yebisu Hana Miyabi, launched in March 2017. Yebisu canned version improved than last year' 【Happoshu+ New genre】 (sales volume) Jan- Mar down 8% (total demand unchanged) Mugi to Hop Brand total down 17% y-o-y (Impact from the product inventory reduction before the relaunch) Goku Zero Brand total down  25% y-o-y 【Wine , Spirits and others】(sales value) Wine： down  5% y-o-y RTD：up 26% y-o-y Spirits : up 15% v-o-v Japanese liquor： down <Y-o-y change in sales volume of 3 core brands> 100 Appendix Japanese Alcoholic Beverages <3 core brand Jan- Mar Sales volume change> *sales base (10,000 cases) 400 Appendix Japanese Alcoholic Beverages ◾ Black label    ◾ Yebisu    ◾ Other <Jan- Mar Net Sales>   (billions of yen) ※incl. liquor tax *before rebate deduction 60 50 40 30 20 10 Appendix Japanese Alcoholic Beverages ■ Happoshu and New genre ■ Beer <Jan- Mar sales breakdown by category> *before sales of subsidiary companies, elimination of inter- company transactions and rebate deduction 4.0 3.0 2.0 1.0 0.0 2012 2013 2014 2015 2016 2017 2018 ■ Japanese wine ✔ Imported wine 2.0 2.0 1.5 1.0 0.5 0.0 (billions of yen) 2012 2013 2014 2015 2016 2017 2018 ■ R T D Copyright, 2018    SAPPORO HOLDINGS LTD.  All rights reserved. <2018 Jan-Mar Major new products> *incl. improved products Beer, Happoshu, New genre and RTD “YEBISU Hanamiyabi” “YEBISU with Joel Robuchon" “Mugi to Hop” "Goku zero Sokai zero" Left: “Kireto lemon sour- Hyaluronic plus” Middle : “Kireto lemon sour” (improved product) Right: “Kireto lemon sour- Strong” Appendix Japanese Alcoholic Beverages “Ai no Skal Mango sour" Left: “Umekaku- Pink Grape” Right: “Umekaku- Peach” (improved products) “Napolin Classic sour” Copyright, 2018    SAPPORO HOLDINGS LTD.  All rights reserved. 26/40 Wine, Spirits and Japanese liquor <2018 Jan-Mar  Major new products> *incl. improved products Appendix Japanese Alcoholic Beverages Champagne “TAITTINGER Brut Reserve FIFA bottle 2018" France wine Emma MYTHIQUE GRANDE POLAIRE Plum flavor liquor “Otokoume no sake” (Improved product) Shochu Kokuimo series Italian wine Tenuta Carretta series
> Penfolds Bin 8 Shiraz Cabernet 2016, a fine wine marketed by Sapporo Breweries Ltd., won the Diamond Trophy at the “SAKURA” Japan Women’s Wine Awards 2018. > > The trophy is given to the wine that is especially superior among the products that won Double Gold, approved as the best quality wines. It is an extremely prestigious award, which was given only to 47 items, or about 1% of the entire 4,342 entries in 2018. http://www.sapporobeer.jp/news_release/0000021860/index.html Appending
Grande Polaire Dry Koshu 2016 and Yamanashi Koshu Barrel Fermentation 2016 win Gold
Asian Wine Review 2018
> > > At the Asian Wine Review 2018, both Grande Polaire Dry Koshu 2016 and Yamanashi Koshu Barrel Fermentation 2016 won Gold. The two products have been selected as TOP12 and Dry Koshu 2016 in particular won the top most award for white wine. At the same time, it won Bronze in four items. Sapporo’s products were the only ones with multiple Gold prizes among Japanese wines, and the wins, in each of the four production areas of Hokkaido, Nagano, Yamanashi and Okayama, which is one of the strengths of Grande Polaire, could be attributed to Grande Polaire's high quality, unique wine production. http://www.sapporobeer.jp/news_release/0000021836/index.html
Copyright, 2018    SAPPORO HOLDINGS LTD.  All rights reserved.

> We will open Grande Polaire Hokkaido Hokuto Vineyard (tentative name) in June 2018 to secure high-quality grapes and improve brand power of Japanese wine Grande Polaire. We will prepare the soil of the vast 25.4 ha land within 2018, start planting the first nursery stocks of grapevine in 2019 and harvest the first grapes in 2021. We aim to sell the wine brewed using the grapes harvested as the first vintage in http://www.sapporobeer.jp/news_release/0000021899/index.html 2022. <Profile of Grande Polaire Hokkaido Hokuto Vineyard (tentative name)>
Appendix > > 【Overseas Brand】 (Products of Sleeman and Anchor) > Jan- Mar up &% y-o-y *sales volume 【Sapporo Brand】 > Jan- Mar up 2% y-o-y *sales volume
【Vietnam】
> Jan- Mar up 11% y-o-y *sales volume <Y-o-y change in domestic sales volume in Vietnam＞ 16.1Q 16.2Q 16.3Q 16.4Q 17.1Q 17.2Q 17.3Q 17.4Q 18.1Q 【U.S. soft drinks business】 ✓   Jan- Mar down 8% y-o-y * sales revenue ＜U.S. soft drinks business Net Sales in Local Currency (Jan- Mar)> * before elimination of inter- company transactions 2017 2018 ■ Silver Springs Citrus （US$ million） ■ Country Pure Foods （US$ million） Appendix International Appendix International ■ USA（US$ millions） 300 250 200 <Trend of overseas sales volume of Sapporo brand products (Jan- Mar)> 2011 2012 2013 2014 2015 2010 2016 2017 2018 ■ SAPPORO Brand ■ SLEEMAN ■ Overseas Brand (SLEEMAN + ANCHOR) Copyright, 2018    SAPPORO HOLDINGS LTD.  All rights reserved. 31/40 【Lemon-based drinks】 *sales volume Jan- Mar down 2% y-o-y 【Unsweetened tea drinks】 *sales volume Jan- Mar up ⑤ y-o-y 【Coffee drinks】 *sales volume Jan- Mar down 21% y-o-y ＜Japanese soft drinks POKKA SAPPORO Food & Beverage Sales composition by sales channel (Jan- Mar)> + Multi-brand machines 【Lemon-based food products】 *sales volume Jan- Mar up 15% y-o-y 【Soups】 *sales volume Jan- Mar down 10% y-o-y > 【Soy milk, chilled products】 *sales volume Jan- Mar up 11W% v-o-v > ＜Japanese soft drinks Sales composition by genre (Jan- Mar)＞ Appendix Food & Soft Drinks Appendix Food & Soft Drinks <Food & Soft Drinks segment Net sales break down by geographic area> * before elimination of inter- company transactions <Overseas soft drinks POKKA Corporation (Singapore) Sales composition (Jan- Mar)＞ ■ Within Singapore     ■ Export 【Pokka Create CO., Ltd.】 ✓   Jan- Mar Net sales平2.0  billion down 2% y-o-y <New & refurbish outlets > <Number of outlets as of March 31, 2017 : 200> Appendix Food & Soft Drinks ＜2018 Major new products＞ *incl. improved products Left: JELEETS coffee jelly Right: JELEETS Uji maccha jelly Left: Gabunomi Milk coffee Right: Gabunomi Cola Float (improved product) Almond milk “Almond Breeze” series Plum flavor sparking “Kishu no ume Sparking” “Kumamoto genmai tea” “Limone Granita” Tsugaru apple flavor juice “Tsugaru no Ringo” Hita pear favor juice “Hita no nashi” “Gyokuro iri tea” (improved product) “Hokkaido hasukappu sparking" “White grape fruit & Natural water" Lemon vinegar “Lemon no su” Copyright, 2018    SAPPORO HOLDINGS LTD.  All rights reserved. Appendix Food & Soft Drinks ＜2018 Major new products＞ *incl. improved products Jikkuri Kotokoto Kongari Pan PREMIUM soup series Risorante Cup-based risotto “Gekikara Tonkotsu soup” Cold soups series Appendix Food & Soft Drinks Jikkuri Kotokoto Kongari Pan soup “Jikkuri Kotokoto Gohobi Dinning cold soup” Jikkuri Kotokoto Potage can series Reisei eraberu Minna no soup (billions Trends of net sales and number of of yen) Sapporo Lion Outlets  *before rebate deduction <Sapporo Lion outlets > As of Mar 31, 2018 Appendix Restaurants
<Major rental properties & occupancy rates :
(Averages of Jan-Mar, 2018)
＜Information about Real Estate for lease>
■ Balance sheet value     ■ Fair value
※Under IFRS, EBITDA=   Profit from operations before non-recurring items+ Depreciation and amortization Appendix Real Estate *1: The number of floors is for the office block only. Occupancy rates are for office areas only. *2: Figures are for entire property. Sapporo owns 922m² of the site (sectional ownership) and 89.72% of the building (joint management)
※There’s no disclosure of operating income for 2017.1Q
<Awards  (initiatives for preserving environment)  ➤ Agriculture, Forestry and Fisheries Minister’s Award of the 27th Global Environment Award  -In recognition of biomass energy technology development applying brewing technology- (Photo 1) http://www.sapporoholdings.jp/news_release/0000020423/index.html
<Support, donation, etc. (excerpt) >
> Donated amount equivalent to the beer sales at Sapporo Beer Festival Cheering up hometown Hokkaido through support for promotion of Ainu culture (Photo 2) http://www.sapporoholdings.jp/news_release/0000020417/index.html Donated earnings from charity sales at Hakone Ekiden relay race to Hakone Town (Photo 3) Sapporo Breweries supports Hakone Town http://www.sapporobeer.jp/news_release/0000021831/index.html > > Tohoku restoration support activities through shareholder benefit plan in FY2017 Supporting a new project in which overseas high school students disseminate safety information of food grown in Fukushima http://www.sapporoholdings.jp/news_release/0000020425/index.html Two years from the Kumamoto earthquake: support for the Mashikimachi Next Generation Nurturing Project by Kumamoto Prefecture Held Comedy Live in Mashikimachi for Adults and Children as the first initiative this year http://www.sapporoholdings.jp/news_release/0000020431/index.html
SAPPORO
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