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January 8, 2010

Kirin Brewery: Business Approach for 2010

2010: Kirin Brewery basic policies

For the first year of the Kirin Group's 2010 − 2012 medium-term business plan we are aiming to be a company that inspires sustained customer support by raising Kirin Brand value through strengthening core product brands and creating categories with new value propositions. We will also pursue qualitative growth by promoting lean management that effectively and efficiently generates customer value and by pursuing reform of our corporate structure. Finally, we will strengthen our CSR activities based on the themes of reducing the use of resources and through health- and alcohol-related initiatives.

Key issues
  • With beer, happo-shu, new genre and RTDs as our core categories, and with a long-term perspective we aim to cultivate No.1 brands, further gain our customer support by striving to generate categories through new value propositions, and raise Kirin brand value.
  • We will strengthen the RTD category, which is a source of future growth and aim to dramatically improve our comprehensive range of alcohol products through our Western liquor brand line up including the Diageo brand products. We will also generate synergies and work together on all value chains with Group companies such as Mercian and Kirin Beverage.
  • Strengthen profitability and promote cost restructuring through production facility reorganization, strengthening the Group's common logistics base, TCR*1 activities, kaizen initiatives and others.
    • *1. Total Cost Reform: Interdepartmental collaborative effort to reduce costs by resolving root causes of issues that drive up costs in each of the Production, SCM and sales departments.
  • We will strengthen our CSR initiatives based on the themes of reducing the use of resources and health- and alcohol-related issues. Further, as a leader in environmental awareness, we are aiming for early realization of Kirin Group's target of a 60% reduction of CO2 emissions from 1990 levels by 2012.
Review of 2009

Amidst a contraction in the overall beer, happo-shu and new genre market impacted by an aging population, diversifying preferences, and more conservative spending, as well as unseasonable summer weather, Kirin Brewery volume was 176.8 million cases.

In 2009, our primary focus was on strengthening core products, strengthening our response to health consciousness and expanding aggregate demand. In the significantly expanded new genre market, we continued to enjoy high customer support for Kirin Nodogoshi. In happo-shu, we further strengthened the market leading position of the core Tanrei series, while in beer the renewed Kirin Ichiban Shibori recorded strong sales. Further, Kirin FREE, the world's first 0.00% alcohol beer-taste beverage*2 launched in April, became a hit product of 2009, having grown in popularity at an exceptional pace in response to a heightened awareness among consumers of driving under the influence of alcohol.

  • *2. According to a Kirin survey of products in the beer-taste beverage category
Initiatives in 2010

In 2010, the industry is expected to continue on its overall negative growth trend in the combined domestic market for beer, happo-shu and new genre, and Kirin will focus on the priority issues outlined above. We aim to raise customer support, strengthen our comprehensive alcohol beverage operations by advancing group alliances, and improve our profitability in the domestic alcohol market, despite continued harsh and changing business conditions.

We will also strive to fulfill our responsibilities as the core business contributing to the overall growth of the Kirin Group, strengthening the foundation of Kirin's development strategy as a comprehensive beverages group.

2010 Kirin Brewery sales targets (one case=20 633ml bottles for beer/ happo-shu and new genre, and 24 250ml cans for RTD)
Beer/ happo-shu/
new genre
Beer Happo-shu New genre RTD
176.10 million cases
(−0.4%)
59.50 million cases
(−5.6%)
51.90 million cases
(−9.6%)
64.80 million cases
(+14.9%)
33.00 million cases
(−0.3%)

1. Product strategies

(1) Beer, happo-shu, new genre

We intend to continue to advance the three key themes that we pursued successfully in 2009: strengthening of core brands; strengthening our response to health consciousness; and increasing overall demand. We will also proactively address diversifying customer needs by leveraging group technology to advance the concept of evidence marketing*3, based on our awareness that customers are looking for product clarity and a simple rationale for their purchases.

  • *3. 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
Strengthen core brands

In the beer market, we will further strengthen Kirin Lager Beer brand power by improving taste and generating appeal for its refreshing and satisfactory sensation through new advertising in addition to further strengthening the renewed Kirin Ichiban Shibori. In the happo-shu market where we enjoy a high ratio of customer support, we are aiming for expanded market share and will generate appeal through Tanrei authenticity. In the new genre market where competitors will continue to launch new products, we will raise the brand power of Nodogoshi and a renewed Koku No Jikan, which we will revitalize through appealing commercials and an expanded in-store presence.

Strengthening our response to health consciousness

Health consciousness is expected to continue to grow in 2010. Kirin Brewery aims to further increase market share through a wide ranging product line up matching the broadening market, primarily through products such as Tanrei Green Label with 70% reduced sugar*4 as well as through Tanrei W (Double) with 99% reduced purines*5 and Kirin Zero a new, sugar free, low-calorie product with a taste well matched to the market.

  • *4: Compared to Kirin Brewery happo-shu products
  • *5: Products can be labeled as low calorie if there are 20 calories or less per 100 ml and as zero sugar if there is less than 0.5g of sugar per 100 ml. (based on nutritional labeling)
Increase overall demand

Continuing on from the exceptional demand for Kirin FREE, the non-alcohol beer-taste beverage launched in 2009, in March we will launch new genre Kirin 1000 (Thousand) with an endlessly clear taste in line with new plans for evidenced-based marketing on the utilization of hard water. Aiming to expand overall demand, we will actively pursue new value proposals for customers this year.

(2) RTD category

Aiming to strengthen the Hyoketsu brand, launched ten years ago, we will renew the standard series on the theme: Hyoukestu Celebration — Thank you for 10-years, and will launch Hyoketsu Ice Vodka in March. We are aiming to further expand the market through February launch of Sekai No Highball, a highball enjoyed by households, in addition to Cola Shock and Cola Zero, for which sales forecasts have been revised upwards having performed strongly since their launch in 2009. We are also planning to add to our product line up products other than existing juice-based products.

(3) Japanese-Western liquor category

In Western liquor, we are aiming for significantly expanded market support, focusing primarily on Fuji-Sanroku, Four Roses, and Diageo brands such as Jonnie Walker Black Label 12 years old. In the growing plum wine market, we will launch Houjun Umeshu Select in February as a premium product and renew Karoyaka Umeshu and Houjun Umeshu. In shochu, we will elevate the presence of products in the market, primarily for the Hakusui brand.

2. Comprehensive alcohol and integrated beverages group strategy; Bolstering marketing and technological capabilities

We aim to generate growth and cost synergies and strengthen collaboration on all value chains in order to strengthen the foundations of our integrated beverages group strategy and promote our comprehensive alcohol strategy. We will also collaborate with Kirin Merchandizing to strengthen sales of Mercian's daily wine and pursue the development of new products following Kirin Oolong Tea, developed by Kirin Beverage. Further, by integrating our head office with that of Kirin Beverage in February, we will accelerate the collaborative initiatives between each division through speeding up shared product development and other approaches.

We will continue to strengthen our marketing and technological capabilities. In marketing, in order to make our products the closest to customers and their favored choice, we will utilize our market-covering organizational structure and initiate more region-based sales activities. In sales promotions, we will develop initiatives including plans for supporting Japan soccer representatives amid the excitement generated in anticipation of the 2010 FIFA WORLD CUP in South Africa. In technology, for each alcohol category we will seek to enhance new product development and raise productivity, and also through environmentally conscious initiatives we will foster our unique technological strengths to generate the innovation that will form the basis of our future competitive position.

3. Cost structure reform in each division

In production, we aim to improve productivity by eliminating the supply-demand gap through reorganization of production locations. In distribution, we will strengthen the shared Group base through a review of locations, structure, systems, etc. We will also further promote TCR activities by collaborating between each division on production, SCM and sales, as well as through increasing tonnage capacity and reducing wait times for trucks, and strengthening pallet returns. In addition, we aim to surpass our competitors in productivity and cost competitiveness by initiating kaizen activities throughout the company.

4. CSR initiatives through operating activities

As a company that prioritizes environmental management, we will strengthen our activities surrounding resources reduction such as reducing CO2 to combat global warming, by applying the 3Rs to containers and packaging, and reducing water usage. We are striving to achieve an aggregate 60% reduction of manufacturing, distribution and office CO2 emissions in Japan compared to 1990 levels prior to the target year 2012. Further, we will introduce our resource reduction and other initiatives under a GREEN HEART and Tanrei Green Label theme through Tanrei Green Label advertising.

On health and alcohol related issues, we support designated drivers as advocated by the Japan Traffic Safety Association and promoted by the Japan Food Service Association (JF) and the Japan Automobile Federation (JAF), furthering our efforts to eradicate driving under the influence of alcohol through 0.00% alcohol Kirin FREE. Further, we are strengthening initiatives aimed at addressing potential health awareness needs, including through the launch of revolutionary new products.

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© 2007 Kirin Holdings Company, Limited.

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