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January 10, 2007
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Kirin: Business Approach for 2007
Proactive, fast-moving stance in Kirin's centenary year to mark the first year of KV2015
Stage I and initiate a quantum leap in growth
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| 2007: Kirin Group Strategy |
| 2007 marks Kirin's 100th year of business and the start of KV2015 Stage I. We intend to reform our corporate structure, pursue initiatives aimed at raising KIRIN brand value and maximize corporate value to initiate a quantum leap in growth. |
Basic Groupwide Policies
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Ensure a stable domestic alcohol beverage business as the foundation of the Group's operations, meet diverse customer needs by strengthening the Group's position as a comprehensive beverages group, and secure high levels of customer support and loyalty |
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Create new value in response to customer expectations by accelerating initiatives that target a new stage in the overseas alcohol, pharmaceutical, and health and functional food businesses, and pursuing a comprehensive beverages group strategy in the soft drinks business |
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Implement Kirin Group CSR and secure the trust of society |
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| 2007: Segmental strategy |
1. Domestic alcohol business
Report on 2006
The combined domestic market for beer, happo-shu and new genre contracted, influenced by Japan's aging and declining population, the diversification of individual tastes, alcohol tax revisions and other factors. Despite this difficult market background, Kirin outperformed the industry and delivered its second consecutive year of growth recording sales of 187.10 million cases (up 4.8% year-on-year; 12.66 liters/case). Kirin Nodogoshi, which was launched in 2005, continued to perform well in 2006, and Kirin recorded year-on-year growth in happo-shu —despite a major decline in the happo-shu industry—due to proposing and launching products such as Kirin Enjuku that meet customers' expectations. In beer, Kirin has revitalized the market through its new value proposals for special premium beers* such as Kirin Ichiban Shibori Muroka.
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Chilled beer: Mature, unfiltered beer that is packaged directly at low temperatures at specialized chilled beer breweries and delivered to stores via cold storage delivery systems. |
Approach to 2007
In order to ensure a stable domestic alcohol business as the foundation of the Group's operations, Kirin aims to secure high levels of customer support and loyalty and achieve a growth rate that significantly outperforms the industry, by responding to customers' diverse needs and engaging in marketing that is closer to customers than anyone else.
Key Issues
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Secure the highest level of customer support and loyalty by strengthening Kirin's position in the happo-shu and new genre categories and fundamentally reinforcing the beer category |
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Further strengthen Kirin's position in the growing RTD* category, and build a foundation for the future while strengthening our comprehensive beverages business with attractive proposals in categories such as shochu, wine and spirits
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Ready to Drink products. RTDs are pre-mixed cocktails that are ready to be consumed on opening. The market in Japan is growing considerably, mainly driven by sales of chu-hi in cans. |
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Continue to implement area marketing activities tailored to individual areas, with all members of the Kirin Group working together as a team |
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Deliver better tasting products through efforts to achieve high levels of quality in all processes from R&D and manufacturing to delivery to customers |
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Encourage a more stable industry environment and prevent underage drinking, and promote a fair trading environment based on a cost plus mindset |
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Through addressing these issues, Kirin aims to achieve a sales target of 197.50 million cases in 2007 (up 5.6% from the previous year), and forecasts a slight decline in the industry as a whole. Kirin's 2007 targets for the major categories are as follows: beer: 83.40 million cases (up 4.6%); happo-shu: 70.90 million cases (up 3.5%); new genre: 43.10 million cases (up 10.8%); chu-hi: 34.60 million cases (down 7.7%; 250ml can basis).
(1) Product Strategies
[1] Beer
As consumers' lifestyles and tastes diversify, customers' expectations of beer are changing, with an increased emphasis on taste and perceptions of quality. By fundamentally reinforcing its position in the beer category, Kirin aims to meet these expectations and successfully counter the overall decline in the category. In its 100th year of business, Kirin will launch Kirin The Gold—a new mainstream beer that offers to the younger generation of beer drinkers the pleasure of drinking good beer—in March 2007. Furthermore, we will continue to promote the brand value of Kirin Lager and Kirin Classic Lager as "a genuinely great taste enjoyed through the generations." For Kirin Ichiban Shibori, we will refine the design and advertising, creating an even higher sense of quality. Meanwhile, in the growing premium market we will seek to expand the market by offering the rich taste and aroma of premium products such as Kirin Braumeister and chilled beers.
[2] Happo-shu
The happo-shu market contracted in 2006 due to the influence of new genre products and other factors, but Kirin maintained its strong position in the home-use market, supported by its top brands and brands with a distinct individuality. In addition to the Tanrei series, Kirin offers Kirin Enjuku, which has won the support of customers as a full-bodied happo-shu. Thanks to these brands, Kirin achieved year-on-year growth in this category and further strengthened its position as category leader. Kirin continues to position happo-shu as a key category for 2007, and will renew Kirin Tanrei Nama, the market leader, while also continuing to strengthen Kirin Tanrei Green Label and Kirin Tanrei Alpha. Meanwhile, we are planning new value proposals and will launch Kirin Enjuku Kuro in February 2007 to meet demand for a product with full body and flavor.
[3] New genre
This market continued its expansion in 2006, and grew to comprise approximately 20% of the total beer, happo-shu and new genre market. Kirin Nodogoshi Nama sustained its strong performance, and Kirin maintained its clear lead in this market, with annual sales volume of approximately 38.90 million cases. In 2007, we will carry out a renewal based on the current highly rated flavor and respond to customers' needs with further refinements.
[4] Chu-hi and RTD
Kirin Chu-Hi Hyoketsu continues to lead the market, driven by new offerings, and maintained strong support and loyalty from customers in 2006. In 2007, we will make proposals unique to the Hyoketsu series, such as the launch of a limited Spring edition chu-hi drink Kirin Hyoketsu Hayazumi Mandarin Orange (with 50% less sugar). Furthermore we will seek to meet consumer's diversifying taste preferences, through products including Kirin Anzu Soda, Kirin Sanzashi Soda, Two Dogs, which will be produced in Japan from 2007, the products of Mercian Corporation, and others, ensuring that the overall RTD category remains an attractive area.
From January 2007, the open pricing system and new voluntary guidelines have been introduced for chu-hi, and we aim to promote a fair trading environment based on a cost plus mindset, while also working to combat underage drinking.
[5] Shochu, wine and spirits
Kirin will pursue comprehensive beverage business, expand the Group's lineup, and increase its market presence, by developing a new product portfolio evolving around Mercian Corporation's wide product lineup combined with KIRIN brands. In shochu, our offering covers each price zone—premium, standard, and low-cost—through a combination of KIRIN brands such as Kirin Mugi Shochu Pure Blue, Kirin Kaori Mugi, Kirin Maroyaka Imo, and the products of Mercian Corporation. In wine, we aim to be the category leader, by adding KIRIN brands such as Franzia and Café de Paris to the Mercian Corporation product range. In spirits, we are targeting further growth, driven by Chivas Regal, Four Roses and KIRIN brand whisky Fuji-Sanroku.
(2) Marketing strategies
As members of the Kirin team, breweries, distribution and sales offices, and all divisions will pursue activities that are closer to the customer than anyone else, and strengthen the community-based development and proposal-style marketing system. By doing so, we aim to further evolve our community-based marketing. In the on-premise consumption market, we have adopted the slogan "impressive quality" as the guiding principle for our activities in keg beer, our core product range, and are striving to increase customers' levels of satisfaction in beer by targeting across-the-board quality improvement, such as through the Kirin Manten Nama No Mise satisfaction system, under which bars and restaurants are rated in accordance with certain quality standards. We are also complying with voluntary guidelines, extending the open pricing system introduced in 2005 to the chu-hi category, and preparing the ground for a trading environment based on a cost plus mindset. As Kirin marks its 100th year of business, we are determined to further strengthen our bonds with customers, through the implementation of the Kirin Centenary Appreciation Campaign and other measures.
(3) Expanding Group synergies through the comprehensive beverages group strategy
Together with wholly-owned subsidiary Kirin Beverage Corporation, we will view the market overall from the combined perspective of the alcohol beverages and soft drinks businesses, and will seek to strengthen collaboration all along the value chain, to meet customers' expectations and create new value. We are currently harnessing Group synergies, through measures such as the centralization of product development functions, production of soft drinks at breweries, joint merchandising activities and overseas production and marketing collaboration. From now on, based on a comprehensive group beverages strategy, we will actively invest resources in the growing soft drinks business and aim to maximize the support and loyalty of customers by conducting business more dynamically.
2. Other businesses
In the overseas alcohol business, the Company aims to raise its presence by expanding Group synergies while also looking at possible new partnerships, mainly in Asia and Oceania. In China, the most important region of all, Kirin is progressing from the development of platforms and entering a new stage of growth in three target regions—the Yangtze River Delta, the Pearl River Delta and the three Northeast provinces. We will strengthen our position in the beer business in China through the development of a new production and sales system at Hangzhou Qiandaohu Brewery Company, Limited in Shanghai, and an increase in the scale of operations with the completion of a new brewery at Kirin Brewery (Zhuhai) Company, Limited. We will also expand our business in ASEAN countries.
In pharmaceuticals, Kirin is aiming to create a solid business base through the launch of KRN321, a new long-acting erythropoiesis stimulating agent, and the acquisition of approval for KRN1493, an agent for the treatment of secondary hyperparathyroidism that makes use of a new mechanism. Furthermore, the domestic marketing structure will be boosted through an increase in the number of medical representatives, and R&D will be conducted into human antibody and cell medicine, which we have positioned as key future businesses. Kirin also intends to strengthen its business through expansion of the scale of operations in ASEAN countries, building a development system in the United States, and development of new partnerships.
In the health food and functional food business, we will pursue the development of new health food and functional foods that offer new value and increase the scale of business operations, centered on Kirin Yakult NextStage Company, Limited. We will strengthen our product base through expansion of the Lieta brand lineup of dietary aids, development of new products following on from BBcube, which was jointly developed by Kirin and Yakult Honsha, and other initiatives. Furthermore, we will seek to develop our bonds with customers by expanding our range of unique products and services distributed through mail-order sales. Takeda-Kirin Foods Corporation will be made a wholly owned subsidiary within 2007 and its name will be changed to Kirin Food-Tech Company, Limited. Meanwhile, full-scale production will begin at our new seasonings plant in Indonesia, with the aim of boosting Kirin's competitive position.
In agribio, resources will be concentrated in the seeds business for floriculture, potatoes and other plant-related area, while also developing advanced cultivation and growth proliferation techniques. Furthermore, the Kirin Agribio Floricultural Product Development Center (provisional name) will be established in Hamamatsu City.
3. Kirin Group CSR
In CSR, key tasks will include building on the trust society has in Kirin, applying risk management processes across the Group based on further strengthening of compliance procedures and internal controls, while ensuring the delivery of high quality, safe and secure food products and acting appropriately with regard to responsible drinking and issues associated with alcohol.
With regard to initiatives to protect the environment, the Group will formulate the Kirin Group Basic Policy on Environmental Management and will develop systems for pursuing environmental management throughout the entire Group. On the issue of prevention of global warming, in 2007 the Shiga brewery will shift to the use of natural gas, making a total of nine breweries that have transferred to natural gas. We are also striving to reduce CO2 emissions by pursuing the use of onsite power generation and energy conservation. Furthermore, Kirin will use the opportunity provided by its centenary to further broaden the scope and the number of employee volunteers involved in the Kirin Brewery Forest Reservoir project for protecting the water resources of breweries nationwide.
In activities unique to Kirin, we are involved in sports sponsorship and the advancement of food culture. To continue its strong support for Japan's national soccer team, Kirin renewed its contract as the team's official sponsor, for the period from 2007 to 2015. Meanwhile, we aim to raise KIRIN brand value, through conducting a broad range of research and study in the fields of food and lifestyle culture, and through the advancement of food culture.
Adopting "Good taste makes you smile" as its Group slogan, Kirin Group will seek to stand beside its customers, develop diverse bonds with them, and share the happiness of food and health.
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