[Top Page]

Link to other pages

[first sentense]

February 10, 2009

Kirin Group Business Approach for 2009
Year Zero in lead-up to next three-year plan, as Kirin aims to create Group premium

Kirin Group has positioned 2009, the final year of the 2007-2009 Kirin Group medium-term business plan, as Year Zero in the run-up to its next medium-term business plan.

During 2008, Kirin maintained an aggressive, forward-looking and fast-moving management approach amid a rapidly changing economic environment, undertaking a range of initiatives aimed at shifting the Company to a new trajectory and achieving a quantum leap in growth.

In 2009, we will continue to pursue three core growth strategies: facilitate independent growth at operating companies; generate growth through Group synergies; and allocate resources on a large scale. Rather than aiming for purely quantitative growth, we are instigating a major strategic shift toward qualitative growth that will enhance the value of the KIRIN brand. In addition, we will pursue CSR initiatives that reflect the kind of company Kirin is while reinforcing the level of public trust in Kirin Group.

Outline of 2009 Business Plan

Focus on three core growth strategies to achieve qualitative expansion

  • Facilitate organic growth at operating companies
    Pursue a comprehensive beverages group strategy; accelerate independent growth at operating companies
  • Create Group synergies
    Establish and monitor synergy targets; optimize group management structure and enhance operational capabilities
  • Allocate resources dynamically
    Invest in product and area synergies with greatest potential; optimize business portfolio
Qualitative expansion

Basic management strategies

  • Based on three core growth strategies, strengthen Kirin's business foundations and realize a quantum leap in growth
    1. Create renewed growth in the domestic alcohol beverage business
    2. Pursue a domestic comprehensive beverages group strategy
    3. Internationalize Kirin's business under an international comprehensive beverages group strategy
    4. Develop the health food and functional food business
    5. Accelerate growth in pharmaceuticals business
    6. Further develop existing businesses
    7. Improve cost competitiveness
  • Realize Group synergies in the context of global competition
  • Adopt an optimum group management structure and enhance operational capabilities with the aim of maximizing corporate value
  • Pursue Kirin Group CSR

Quantitative targets for 2009

  2008 2009 target FYI: 2009 target
(original mid-term business plan)
FYI: 2009 target
(revised mid-term business plan)
Consolidated sales including liquor tax ¥2303.5 billion ¥2.3 trillion ¥2.15 trillion ¥2.5 trillion
Consolidated sales excluding liquor tax ¥1922.8 billion ¥1.93 trillion ¥1.7 trillion ¥2.1 trillion
Operating income ¥145.9 billion ¥121.0 billion ¥150 billion plus ¥175 billion
Operating income ratio including liquor tax 6.3% 5.3% 7% plus 7% plus
Operating income ratio excluding liquor tax 7.6% 6.3% 9% plus 8.3% plus
ROE 8.1% 6.0% 7% plus 7% plus
Sales ratio from Overseas business excluding liquor tax 27% 24% Approx. 22% Approx. 26%

Specific initiatives during 2009

1. Facilitate organic growth at operating companies

Kirin Group aims to increase our corporate value and become a leading company in Asia and Oceania by creating a group premium using group synergies. To accelerate the independent growth at operating companies needed to support this, it is important that we maximize synergies in each business based on our strategy of becoming a comprehensive beverages group, a unique business model which we aim to establish.

Kirin Brewery, the foundation business of the Group and our largest Group operating company in the domestic market, heads our strategy of becoming a comprehensive beverages group in Japan. Kirin Brewery will continue to win unparalleled levels of customer support by improving its product solutions in the alcohol beverages business and strengthening collaboration between Group companies, while building the robust company structure needed to yield stable earnings in a tough business environment. During 2009 we will continue to pursue a marketing strategy based on three core policies: (i) strengthen core brands; (ii) improve our response to consumer health consciousness; and (iii) increase overall demand. We will also address diversifying customer needs by advancing the concept of evidence marketing1 and thereby further increase the levels of customer support that we receive.

1. A marketing technique that promotes products by providing customers with easy-to-understand evidence and product value that is supported by technological or other forms of proof

Mercian will focus its resources on wine and processing liquors, working to improve revenue and earnings while pursuing a customer-oriented strategy of selection and concentration toward becoming Japan's strong number one. Mercian will also collaborate with Kirin Brewery and Kirin Merchandising in measures aimed at strengthening its marketing capabilities.

Kirin Beverage, another key to our strategy of becoming a comprehensive beverages group in the domestic market, has returned to fundamental customer-oriented values with a major strategic shift from quantitative growth to qualitative growth. Targeting medium- to long-term growth, our aims at Kirin Beverage are to reinforce our earnings base and strengthen competitiveness along new axes. Kirin Beverage will also continue to create new value using alliances with Kirin Brewery in each value chain.

We are pursuing our strategy of becoming a comprehensive beverages group overseas, and aim to continue to achieve qualitative growth mainly in Asia and Oceania with the objective of achieving an overseas sales ratio of 30% in 2015.

In China we will strengthen alliances with soft drinks companies that carry leading brands such as Gogono-kocha Milk Tea, mainly through Kirin (China) Investment Co., Ltd., and enhance our activities with a focus on the priority region of the Yangtze delta. In Australia we will reinforce the foundations of our businesses in the food and health sector, which includes health and functional foods, mainly through National Foods Limited. We will also examine a comprehensive beverages group strategy involving Lion Nathan Limited. In the Philippines we will strengthen our strategic alliance with San Miguel.

In Vietnam, which continues to gain prominence as a growth market, we will start full-fledged beverage operations in the second half of 2009 with the commissioning of a factory. In Thailand we will enhance our product portfolio by developing products in new categories.

In the health and functional food business, we have started initiatives aimed at channeling the capabilities of the entire Group into a project to promote health and functional food business development. We will pursue groupwide product development of "all foods that customers consume for the benefit of their health," with beverages forming the core, aiming to launch the first phase of products in 2010.

In the seasoning business, Kirin Kyowa Foods Co., Ltd., which will be newly established in 2009, will leverage fermentation technologies developed at Kyowa Hakko Foods Co., Ltd. and Kirin Food-Tech Company Limited to provide a platform for new food ingredient proposals that appeal to customers' taste and health values.

In the pharmaceuticals business, we will aim to maximize synergies and, based on the 2008-2010 Kyowa Hakko Kirin medium-term management plan, will pursue a global specialty pharmaceuticals strategy, aiming to contribute to the health and wellbeing of people around the world using antibody-related and other cutting-edge biotechnology—particularly in the key fields of cancer, kidney diseases and infectious diseases. We have prioritized the creation of specific synergic effects in marketing and research and development; and in domestic sales we will prioritize kidney therapies in our allocation of resources to increase our share of the ESA2 market. In addition, in overseas operations we will begin building a long-term earnings base in Asia and examine the feasibility of establishing a proprietary sales network in North America. In research and development, we will build a research framework that fully leverages the strengths of the integrating companies, and will concentrate our overseas development locations while also newly establishing production facilities. We will clarify the order of priority for items currently in the development pipeline, with the aim of early commercialization of pharmaceuticals that address the needs of the global market.

2. Erythropoiesis Stimulating Agents

2. Create group synergies

During the first half of the current medium-term management plan, we mainly focused on expanding our business territories with a view to achieving quantum growth. From 2009 until the next business plan, we will prioritize the creation of revenue synergies, by combining these expanded operational resources, and cost synergies, from the effective use, adjustment and integration of expanded operational resources.

First, we will focus on fourteen priority tasks that arise in synergy projects, and pursue alliances between operating companies and division. We will set specific synergy targets, formulate timelines for their achievement, and monitor progress for each of these key tasks.

In revenue synergies, we will strengthen sales channels through alliances between Kirin Brewery and Kirin Merchandising and Mercian, and pursue initiatives through Kirin Brewery and Kirin Beverage in the commercial market and in vending machine business, while strengthening sales of ESAs through the pharmaceuticals business integration. To achieve this we will set specific synergy targets, formulate timelines for their achievement, and monitor progress for each key task. In cost synergies we will pursue collaboration in production, group-wide initiatives to cut procurement costs (some of which is already underway), upgrade our procurement capabilities, and reassess our production and distribution location network to devise the optimal configuration from a group perspective. Overseas we will also set synergy targets for our business in China, mainly through Kirin (China) Investment Co., Ltd., and for our strategy of becoming a comprehensive beverages group in Australia.

Another issue that we will address toward creating synergies in 2009 will be to start specific measures to strengthen our management structure and operational capabilities. In our aim to achieve the optimal Group management structure, we will transfer functions from Kirin Holdings to the operating companies and Group service businesses. We have designated four divisions as Centers of Excellence (our production technology division, our packaging research center, our market research office, and the Kirin Holdings Center for Food Safety Science), and we will continue our endeavor to improve the competence of the Group as a whole.

In addition, we will focus on the allocation of personnel needed to achieve the quantum leap in growth targeted by KV2015. As part of our aim of becoming a leading company in Asia and Oceania we will develop a framework for the steady cultivation of dynamic, globally minded personnel with strong management potential. We will also ensure that the creation is supported from an administrative and organizational point of view, making use of personnel exchanges within the group while also aiming to leverage the resources of key management personnel in the Group. Furthermore, by instilling a culture of diversity and respect for work-life balance, we will revitalize not only the Group as a whole but also the individuals within it.

3. Allocate resources dynamically

In order to more extensively pursue our initiatives to facilitate organic growth at operating companies and create group synergies, we will continue to explore opportunities for investment in fields with strong synergistic effects between existing core businesses and products.

Investment targets overview

  1. Pursue unique growth strategy of becoming a comprehensive beverages group
  2. Achieve a quantum leap in growth to create revenue/cost synergies
  3. Reinforce infrastructure and functions to create cost synergies

As a means to support these initiatives and maximize corporate value, we will continue to pursue a financial strategy to realize shareholder-focused management and a quantum leap in growth.

To secure the funds required for a quantum leap in growth, we will also review our asset and business portfolio while preserving strong financial fundamentals with a focus on our rating. The main options we will consider in our fund procurement activities will include borrowings, corporate bonds, and other interest-bearing liabilities. We aim to continue making consistent payments, targeting a consolidated dividend payout ratio of 30% or more. In fiscal year 2009, while giving due consideration to goodwill and other amortization costs that arise from strategic growth investments, we plan to pay the same amount of dividend as in the previous year. We will consider the possibility of implementing share buybacks as appropriate, while taking into account investment required for strategic growth along with the need to maintain robust financials.

4. Kirin Group CSR

Kirin Group will address the CSR perspective in all of its corporate activities, proactively pursuing initiatives from the perspectives of CSR through Business and CSR as a Corporate Citizen in its aim to coexist harmoniously with nature and society.

CSR through Business means that we will always maintain an awareness of CSR throughout our day-to-day operations, aiming to bring CSR to a higher level. We will observe our obligations as a corporation, ensuring stricter enforcement of compliance, enforcing thorough risk management, reinforcing our quality assurance systems to ensure thorough provision of food safety and reliability, promoting respect for diversity, implementing environmental management, maintaining strong IT security, and promoting responsible drinking, while transmitting information and presenting value proposals that encourage people to maintain diets supportive of personal wellbeing.

In addition, from 2009, to better enable us to make a contribution to society that befits a group whose business philosophy is food and health, we have set a medium-to-long-term group-wide goal of becoming a "Low Carbon Corporate Group," and will initiate actions based on this. Throughout all the value chains of our business activities we will aim not only to minimize carbon emissions but also to work to realize a society based on a simple yet prosperous way of living and a harmonious coexistence with nature.

CSR as a Corporate Citizen involves going beyond the scope of our regular business activities to pursue additional CSR activities such as environmental initiatives and sports sponsorship. In addition to continuing forest conservation activities aimed at protecting water quality, this year we will again be the official sponsors of Japan's national soccer team and will hold Kirin Soccer Field, an initiative aimed at cultivating the next generation. Through the United Nations University—Kirin Fellowship Program, which is now entering its 17th year, we will also provide study opportunities for research fellows from developing countries who specialize in fermentation and biotechnology, and in doing so continue to make our contribution toward resolving the food-supply issues in developing countries.

[footer]

© 2007 Kirin Holdings Company, Limited.

Back to top