February 10, 2011
Kirin Group Business Approach for 2011
All members of the Group are committed to achieving the targets and further increasing enterprise value
The Kirin Group kicked off 2011 as the second year in the 2010-2012 medium-term business plan, which marks the second stage in realizing the aims of Kirin Group Vision 2015 ("KV2015"), Kirin's long-term business framework.
In 2010, we have made steady progress in implementing qualitative expansion in this first year of the Kirin Group's 2010-2012 medium-term business plan, which forms the second stage in realizing our long-term business framework: the "Kirin Group Vision 2015" (KV2015).
In 2011, we will continue to focus on qualitative expansion while working towards autonomous growth and improved profitability in the medium to long term and striving to generate new forms of value that meets the needs of customers in both domestic and overseas markets. These programs will be executed using the combined resources of the entire Group, in order to further increase the enterprise value of the Group.
Outline of 2011 Business Plan
- 1. Increase Group enterprise value by realizing autonomous growth at operating companies
- (1) Pursue an integrated beverages group strategy
- (2) Promote internationalization
- (3) Accelerate growth in pharmaceuticals business
- (4) Develop the health food and functional food business
- 2. Generate growth through Group synergies
- 3. Realize lean management by eliminating strain, waste and irregularity
- 4. Strengthen Group management capabilities
- 5. Engage in CSR activities that enhance Kirin's coexistence with society
Quantitative targets for 2011
|2010 results||2011 target||Change|
including liquor tax
|¥2,177.8 billion||¥2,140.0 billion||¥(37.8) billion|
excluding liquor tax
|¥1,835.2 billion||¥1,810.0 billion||¥(25.2) billion|
|Operating income||¥151.6 billion||¥152.0 billion||¥ 0.4 billion|
|Operating profit margin
excluding liquor tax
Note: ROE is prior to amortization of goodwill.
Initiatives during 2011
1. Increase Group enterprise value by realizing autonomous growth at operating companies
(1) Pursue an integrated beverages group strategy
Under KV2015, Kirin Group is developing a unique integrated beverages group business model based on greater collaboration between alcoholic and non-alcoholic beverage operations, with the aim of increasing the enterprise value of the Kirin Group in a competitive global environment.
In Japan, we aim to further develop the business foundations of Kirin Brewery, Mercian and Kirin Beverage, while utilizing correlations in the value chain to generate group synergies.
At Kirin Brewery, we will concentrate our resources on growth categories and leading brands in order to strengthen our brand. During 2011 we will maintain our commitment to ongoing value creation designed to yield new products, categories and business models. We are also continuing our work in the area of value proposal marketing in the lead-up to the January 2012 launch of Kirin Beer Marketing Company, Limited, a new company to be formed through the integration of the existing sales division with Kirin Merchandising. Preparations involve the development of durable and efficient sales structures on a local-area basis.
At Mercian, management resources will be concentrated in the wine business, including more retail tie-ups with Kirin Brewery for expanding sales while fostering key brands. Together with Lion Nathan, we will be introducing a new domestically bottled brand called Tatiara. The domestic bottling operation will provide an important new component in our wine business to complement the existing line-up of domestic and imported wines.
At Kirin Beverage, we will continue working to improve product competitiveness and sales outcomes while at the same time reforming the revenue structure based on last year's performance. In order to increase both sales and profitability in a highly competitive environment, we will seek to strengthen flagship brands, create new products and in turn new categories, and build strong brands, while at the same time pursuing value proposal marketing designed to deliver value to our customers.
(2) Promote internationalization
Overseas, we will continue to focus on strengthening our operational foundations, particularly in Asia and Oceania.
In Asia, we are working together with Fraser and Neave to expand our operations in a bid to capitalize on the growing soft drink industry in Southeast Asia. The collaboration with Fraser and Neave covers a range of areas including exchanges of production technology, marketing and research technology, sharing of production facilities, and joint product development and development of new markets. We are also working to strengthen the foundations of our alcohol beverage business in Asia through a tie-up with San Miguel Brewery, in combination with other strategies designed to generate new forms of synergy.
In China, at the new joint venture with China Resources Enterprise, excellent synergy will be created by the combination of Kirin Group, with the strengths in product development, technology, and research/marketing, and China Resources Enterprise, with its strong business franchise in the nation including its logistics and sales network. By exploiting full potential of the synergy, the joint venture will speed up its foray into new product categories and new markets throughout China, aiming to become a leading player in this rapidly growing market.
In Oceania, Lion Nathan National Foods, the cornerstone of Kirin's integrated beverages group strategy in Asia and Oceania, is making progress in improving profitability and efficiency through its brand focused business strategy. In Lion Nathan National Foods' alcohol beverages business, Lion Nathan National Foods continues to drive premiumisation and innovation. In its soft drinks and foods business, it continues to strengthen its brand portfolio by focusing investment on its core ‘Power Brands' and by generating synergies through its integration with the former Dairy Farmers business, including through optimising its manufacturing footprint.
(3) Accelerate growth in pharmaceuticals business
In the pharmaceuticals business of Kyowa Hakko Kirin, we aim to accelerate the realization of integration benefits and develop as a global specialty pharmaceutical company.In Japan, we will apply for approval of blood cancer antibody drugs developed using our advanced proprietary technologies, while continuing to design and develop new candidate products. We will work to strengthen sales of core products in kidney disease and other areas while enhancing the marketing of new products. Outside Japan, we will expand our sales operations in China and the rest of Asia, and also set up an Asian Development Department Development Division for reinforcing its development capability. In Europe and the United States, we will continue to develop our sales networks in accordance with product development.
(4) Develop the health food and functional food business
In the health and functional food business, we will further enhance activities for the Group-wide brand Kirin Plus-i in a project that was launched last year to promote the health and functional food business through collaboration between different Group companies. We will promote health products featuring ornithine, created through independent research and development and production by Kyowa Hakko Bio.
Our aim is to provide greater value to our customers by utilizing the combined technological resources of the Kirin Group in product development. At the same time, we will implement a range of customer communication strategies through the Kirin Health Project, a Group-wide initiative with the objective of offering customers appealing products that provide new value in the area of food and health.
2. Generate growth through Group synergies
Under the direction of functionally organized Cross Company Teams (CCTs), we will continue our efforts to further increase profitability and efficiency by realizing group synergies.
In Japan, we will promote transferring skills among Kirin Brewery, Mercian and Kirin Beverage and generating greater customer value by sharing the sales and marketing operations and expertise for further revenue synergies.
With respect to Group procurement, procedural standardization and functional integration will help to raise productivity and facilitate joint procurement. We will also promote CSR procurement throughout the Group.
We will strive to create new synergies through global tie-ups while promoting expertise sharing among domestic and overseas operating companies in areas such as production technology and marketing, and identifying areas with potential for joint procurement initiatives.
3. Realize lean management by eliminating strain, waste and irregularity
We will continue to pursue better efficiency and profitability through lean management designed to raise cost competitiveness, striving to eliminate strain, waste and irregularity with no contribution to customer value. Every group company will promote a fundamental reform of its revenue structure through optimization of production and sales systems with ongoing reform programs over the entire value chain.
The new indirect operational management structure for domestic Group companies, launched just this year, will focus on integration and standardization of company operations. Meanwhile, reduction of operational assets and liquidation of assets in line with the medium-term business plan will help to improve overall management efficiency.
4. Strengthen Group management capabilities
During FY2011 we will set in place the foundations for the introduction of new frameworks and global management structures designed to promote autonomous growth and boost profitability in the medium to long term.
Kirin Group companies will be migrated to a model of "brand management predicated on customer value." The model involves positioning of product brands on the basis of accurately identifying the value sought by customers and then supplying this value in the form of products that generate customer satisfaction. Through the introduction of effective support frameworks for this model, in combination with effective resource distribution and process reviews, we will strive to further increase brand value.
Turning now to global management, Kirin Holdings Singapore has assumed responsibility for the entire Southeast Asia, together with the commensurate authorities, resources, and funding for recruitment of local staff. Kirin Holdings Singapore will be better placed to promptly respond to developments in the local region and will also be able to create synergies while identifying opportunities for growth and undertaking key investment decisions. Together with Lion Nathan National Foods, which has responsibility for the Australia region, Kirin Holdings Singapore will form the core of the overseas integrated beverages group strategy of the Kirin Group.
In the medium to long term, Kirin aims to strengthen organizational ability through more aggressive global hiring, personnel training and positioning. Training programs will be used to develop talented overseas business managers and promote personnel exchanges between domestic and overseas Group companies, thereby contributing to the ongoing growth of the Kirin Group as a whole.
5. Engage in CSR activities that enhance Kirin's coexistence with society
As a corporate group that provides new ways to enjoy food and health, we at Kirin consider CSR to be an important management issue within our Group. We are actively addressing social challenges through our business and promoting initiatives as a corporate citizen to help realize a sustainable society.
In CSR through Business, we are undertaking resource- and energy-saving initiatives to reduce our environmental footprint across product value chains, and developing and marketing eco-friendly products to our customers. We are also striving to become a low-carbon corporate group. As one social responsibility of a business focused on manufacturing and selling alcoholic beverages, we have been active in the fight to eliminate drunk driving by offering Kirin FREE, a beer-taste beverage with 0.00% alcohol content, and by working to educate consumers on responsible drinking.
With regard to CSR as a corporate citizen, we have continued our support of Japan's national soccer team as part of our many sports promotion activities. We also contribute to society bu conserving forests through the water-source protection project and supporting employee volunteer activities.
At the same time, we strive to increase the effectiveness of our compliance and risk management systems, an integral part of any CSR mission.
In the spirit of its Group slogan, "Oishisa wo Egao ni" (Good taste makes you smile), 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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