SAPPORO
HOLDINGS
LIMITED Annual Report 2 0 13
Building a Foundation for Future Success
Annual Report 2013
Contents
Statements in this annual report with respect to the Company’s plans, strategies, forecasts and other statements that are not historical facts are forward-looking statements that are based on management’s judgment in light of currently available information. Factors that could cause actual results to differ materially from our earnings forecasts include, without limitation, global economic conditions, our response to market demand for and competitive pricing pressure on products and services and currency exchange rate fluctuations.
Forward-looking Statements
All figures in this annual report are rounded to the nearest applicable unit.
01 Profile
02 Our Business
04 Financial Highlights
06 To Our Stakeholders
13
Special FeatureBuilding a Foundation for Future Success
20 Performance Review and Plan
20 Japanese Alcoholic Beverages
22 International
24 Food & Soft Drinks
26 Restaurants
27 Real Estate
28 Corporate Social Responsibility
32 Corporate Governance
36 Board of Directors and
Audit & Supervisory Board Members
38 Financial Section
67 Corporate Data
¥ 616,753
million
7,434
[ Consolidated ]
[ Parent Company ] 66
[ Subsidiaries ] 51
[ Affiliates ] 3
1876
since it began brewing beer in 1876, has been providing products and services that satisfy
customers as a manufacturer of food products focused on the beer business. In 2007, the
Group formulated the New Management Framework to be achieved by 2016, the 140th
anniversary of its founding, and it is taking steps to raise corporate value. With three years
including this year remaining until 2016, the Group started “Sapporo Group Medium-Term
Management Plan 2014-2016” ending in 2016 with the aim of achieving its targets by
accelerating its growth strategy and realizing sustained growth. We expand our business in
North America, Asia, and Oceania as well as in Japan with the goal of becoming a company
that is essential for customers to enjoy rich lives throughout the world by continuing the
creation and supply of new products and services that become No.1 in the market.
SAPPORO Group,
Number of employees
Capital
Founded
Total assets
Consolidated net sales
Group subsidiaries and affiliates
¥ 53,887
million
¥ 509,835
million
P r o f i l e
Th e c
ore do
ma in d
rivi ng
the Gro
up’s dyna
mic g rowth
Cre atin
g va lue i
n foo d
Our Business
Japanese
Alcoholic
Beverages
International
As the Group’s core business, we are aggressively expanding into such areas as wine, shochu, ready-to-drink (RTD) beverages, and non-alcoholic beverages focusing on its leading products such as Mugi to Hop brand in the new genres market and the innovative new beer Goku Zero, in addition to our core products such as Sapporo Draft Beer Black Label in the standard beer market and the Yebisu Beer brand in the premium beer market.
The Group is strengthening and expanding the Sapporo brand, especially in the beer business in North America, where growth remains steady, and in Vietnam, where business is in full swing, as well as Southeast Asia including Singapore, South Korea, and Oceania. The Group is also expanding its business by entering the soft drinks market in North America.
In Japan, the Group is conducting the Food & Soft Drinks business as POKKA SAPPORO Food & Beverage Ltd. and is rolling out diverse brands such as the strong lemon-based product and soup brands in its food business, and Ribbon, POKKA Coffee, and other brands in its Soft Drinks business. Also, we are aggressively expanding the Café de Crié chain. In its overseas Soft Drinks business by leveraging its high visibility in Singapore, it is strengthening its business presence in neighboring countries.
Food &
Soft Drinks
Sapporo Group, through its five business domains,
is expanding the business of creating value in food and
creating comfortable surroundings in order to continue to accelerate
its growth strategy as a manufacturer of food products.
Th e b
usi nes
s do ma
in e xpe
cted to c
ontr ibute
stabl e prof
its bac ked by p
rime proper ties
Cre ati
ng com
fort able
surrou ndings
274.9
305.2 68.0 154.8
33.5
26.9
48.2
Japanese Alcoholic Beverages
130.7
26.8
[ Medium-Term Management Plan]
6.4
6.6
22.8
Target ¥595.0
billion
Result ¥509.8
billion
International Food & Soft Drinks
Restaurants Real Estate
Other
2013
2016
Restaurants
The Real Estate business mainly develops rental real estate, including Yebisu Garden Place, Sapporo Factory, and office buildings principally located in three areas: Ebisu, Ginza, and Sapporo, with the aim of raising the value of its existing properties. In autumn 2014, the construction of the Sapporo Ebisu Building (tentative name) will be completed. We decided to redevelop the Sapporo Ginza Building located at the main Ginza intersection and will begin demolition work in spring 2014, with completion targeted for the first half of 2016.
Real Estate
Through Sapporo Lion Limited, with its more than a century of history as a restaurant industry pioneer, we are expanding the key brands such as GINZA LION BEER-HALL , the YEBISU BAR chain and other brands in order to provide value by combining food with comfortable surroundings. We are also expanding our GINZA LION BEER-HALLS business internationally including in Singapore.
Net sales by Segment (¥ Billion)
Millions of yen
Years ended December 31
2007 2008 2009
For the Year:
Net sales
Including tax ¥449,011 ¥414,558 ¥387,534
Excluding tax 309,794 284,412 264,604
Operating income 12,363 14,685 12,896
Operating income before goodwill amortization 13,232 15,553 13,923
EBITDA 37,759 37,158 36,470
Net income 5,509 7,640 4,535
Capital expenditures (cash basis) 19,884 27,342 21,910
Depreciation and amortization 24,527 21,605 22,547
Goodwill amortization 870 867 1,027
Cash flows from operating activities 30,691 22,292 12,454
Free cash flows 17,196 39,148 (19,773)
At Year End:
Net assets 125,189 116,862 118,591
Total assets 561,859 527,287 506,875
Financial liabilities 212,464 189,252 196,794
Other Indicators:
Overseas sales ratio 9.0% 8.8% 8.5%
Operating income to net sales
Excluding tax 4.0% 5.2% 4.9%
Excluding tax; before goodwill amortization 4.3% 5.5% 5.3%
Debt-to-equity ratio (times) 1.7 1.6 1.7
Equity ratio 22.3% 22.1% 23.4%
ROE 4.6% 6.3% 3.9%
ROE (before goodwill amortization) 5.3% 7.0% 4.7%
Note: Yen amounts have been translated into U.S. dollar amounts at the rate of ¥105.40=U.S.$1.00, the exchange rate prevailing on December 31, 2013.
(¥ Million)
2013 2012 2011 2010 2009
387,534 389,245 449,453
492,491 509,835
0 100,000 200,000 300,000 400,000 500,000 600,000
2013 2012 2011 2010
0 2009
100,000 200,000 300,000 400,000 500,000 (¥ Million)
264,604 269,874 336,838
379,793 395,377
Net sales (including tax) Net sales (excluding tax)
Financial Highlights
SAPPORO HOLDINGS LIMITED and consolidated subsidiaries
Thousands of U.S. dollars
2010 2011 2012 2013 2014
(plan)2013
¥389,245 ¥449,453 ¥492,491 ¥509,835 ¥537,700
$4,837,141269,874 336,838 379,793
395,377430,100
3,751,20715,403 18,884 14,415
15,34415,000
145,58216,576 21,993 18,294
19,33019,000
183,39539,080 46,477 44,100
44,38843,200
421,14210,773 3,165 5,394
9,4525,000
89,67719,801 13,423 53,870
13,76923,200
130,63522,504 24,482 25,805
25,05924,200
237,7471,173 3,109 3,879
3,9854,000
37,81227,431 22,313 29,618
32,86229,700
311,78124,836 (28,579) (29,868)
19,5942,700
185,898126,645 124,775 134,947
155,367—
1,474,067494,798 550,784 597,636
616,753—
5,851,544181,335 219,168 257,647
247,828247,800
2,351,3119.4% 11.0% 14.1%
18.3%19.7%
5.7% 5.6% 3.8%
3.9%3.5%
6.1% 6.5% 4.8%
4.9%4.4%
1.4 1.8 1.9
1.61.6
25.3% 22.4% 22.1%
24.6%—
8.9% 2.5% 4.2%
6.7%3.3%
9.8% 5.1% 7.3%
9.5%5.9%
2013 2012 2011 2010 2009
Operating income to net sales (excluding tax) Operating income
(%)
0 5,000 10,000 15,000 25,000
20,000 (¥ Million)
0 2 4 6 10
8
13,923 16,576
21,993
18,294 19,330
2013 2012 2011 2010 2009
ROE Net income
(%)
0 3,000 6,000 9,000 12,000
0 3 6 9 12 (¥ Million)
4,535
10,773
3,165 5,394
9,452
Operating income and
Operating income to net sales (excluding tax) Net income and ROE
Note: Figures are before goodwill amortization. Note: ROE is before goodwill amortization.
To Our Stakeholders
Accelerating
Growth Strategies
Tsutomu Kamijo
President,
Representative Director
and Group CEO
The Sapporo Group formulated the Sapporo Group’s New Management Framework with a target set for 2016,
which coincides with its 140th anniversary, and is working to achieve stable earnings growth while maximizing
its corporate value. Further, the Group formulated the New Medium-Term Management Plan for fiscal 2016, the
final year of the Framework. As a “manufacturer of food products,” we will accelerate the four growth strategies
of the New Management Framework with the aim of achieving our targets. We hope to meet your expectations
and ask for your continued support.
Summary of Fiscal 2013
Business Environment in Fiscal 2013
In 2013, the Japanese economy saw the emergence of positive developments from
the beginning of the year amid a backdrop of monetary easing and economic stimulus
measures. However, the consumer spending environment remained clouded in
uncertainty. More specifically, conditions in the industries in which Sapporo Group
companies operate were as follows.
The soft drinks industry enjoyed rising demand supported by favorable weather
conditions, including another hot summer in Japan. The alcoholic beverage and restaurant
industries, however, did not see demand rebound as much as expected despite signs of
a recovery in consumer spending. In the real estate industry, vacancy rates in the Greater
Tokyo office leasing market continued to decline, but rent levels remained weak.
Fiscal 2013 Results
The Group implemented the new Sapporo Group Management Plan 2013-2014, which
sets out three basic strategies, namely to “Accept challenges leading to growth in
all businesses,” “Steadfastly implement growth measures,” and “Create new growth
opportunities.” The Group leveraged the strengths of each businesses’ brands and
management resources while accepting new challenges to enable it to stay ahead
of the competition. We took a number of measures such as starting the integrated
operations of POKKA SAPPORO Food & Beverage Ltd., as well as outsourcing production
and restructuring the existing production network in the United States. As a result of
these efforts, along with the fact that the sales volume of beer and beer-type beverages
surpassed that of the previous fiscal year, the impact of the weak yen, and the inclusion to
the consolidated accounts of Silver Springs Citrus, Inc., a U.S. maker of private-brand chilled
drinks, Sapporo Group posted consolidated net sales of ¥509.8 billion, up ¥17.3 billion, or
3.5%, from 2012. In addition, operating income totaled ¥15.3 billion, rising ¥0.9 billion, or
6.4%. Consolidated net income was ¥9.5 billion, climbing ¥4.1 billion, or 75.2%, partly due
to the posting of a ¥3.5 billion gain on sales of investment securities in extraordinary gains.
To Our Stakeholders
Outlook for Fiscal 2014
In fiscal 2014, amid uncertainty over consumer spending increases, the consumption
tax increase, and other factors, we will work toward the goals for 2016 outlined in the
Sapporo Group’s New Management Framework by accelerating our growth strategies as
a manufacturer of food products. The Japanese Alcoholic Beverages business will seek
to further raise the value of core beer and beer-type beverage brands, while in non-beer
businesses, we will aggressively expand the key growth areas of ready-to-drink (RTD)
beverages, wine, shochu, and western spirits by focusing our management resources.
The International Business will expand sales by gaining wider brand recognition for the
SLEEMAN and Sapporo brands in the North American market. The Food & Soft Drinks
business plans to increase sales in Japan by establishing core brands and strengthening
its marketing efforts in terms of both quality (ability to make proposals and develop new
customers) and quantity (increased marketing activities).
Through these measures we expect consolidated net sales of ¥537.7 billion, a growth
of ¥27.9 billion, or 5.5%. In the Japanese Alcoholic Beverage business, we foresee a decline
in operating income due to higher raw material costs caused by the yen’s depreciation and
aggressive spending to strengthen our brands. In the International Business, we expect
operating income to be largely the same as in 2013 due to continued spending to create
markets with the aim of building a stronger brand in Vietnam. In the Restaurants Business,
operating income should also increase as we expand sales and take continued steps to
raise our earning capacity. In the Real Estate Business, the outlook is for operating income
to decline due to lower rental income as we begin redevelopment of the Sapporo Ginza
Building.
As a result, in fiscal 2014, we forecast consolidated operating income of ¥15.0 billion,
a decline of ¥0.3 billion, or 2.2%, year on year. Consolidated net income is expected to
be ¥5.0 billion, down ¥4.5 billion, or 47.1%, owing to extraordinary losses related to the
redevelopment of the Sapporo Ginza Building.
Shareholder Returns
Providing fair returns to shareholders is a key management policy of the Sapporo Group.
Our basic policy is to pay stable dividends to the extent permitted by our operating
performance and financial condition. In line with this policy, and to maintain a stable
dividend payout, we paid an annual dividend of ¥7 per share for 2013, the same dividend
paid in 2012. In 2014, we plan to maintain the annual dividend at ¥7 per share, while
making strategic investments and strengthening our financial foundation.
Sapporo Group’s New Management Framework
(released on October 30, 2007)The Sapporo Group’s New Management Framework with targets set for 2016 contains
the financial indicators described below. To achieve these targets, as a medium- to long-
term management strategy, the Group will actively work to, 1) Create high-value-added
products and services, 2) Form strategic alliances, 3) Promote international expansion, and
4) Expand synergies among Group companies.
Overview of the Sapporo Group’s New Management Framework
Basic strategy Management
Philosophy and
Fundamental Management Policy
Management goals (2016 target)
Enhanced corporate value Sapporo Group’s
business domains
Creating Comfortable Surroundings Creating Value
in Food
Group strategies for growth
Create high-value-added products and services Form strategic alliances Promote international expansion
Expand group synergies
Overall strategy for enhancing group value
CSR-focused management Corporate governance Human resources strategy Financial strategy
Reallocation of management resources Sapporo Group Management Philosophy
“ To make people’s lives richer and
more enjoyable”
Fundamental Management Policy
The Sapporo Group strives to maintain integrity in corporate conduct that reinforces stakeholder trust and aims to achieve continuous growth in corporate value.
Net sales
¥600 billion (including liquor tax)
ROE >8% Operating income
¥40 billion before goodwill amortization
2014-2016 Targets Based on Current Businesses
Notes: 1. Assumed exchange rates: 2014-2016: US$ = ¥105.00, CAN$ = ¥101.00
2. We aim to achieve the goals of the 2016 New Management Framework through further cost reduction, creation of group synergies and M&As in addition to achievement of targets based on the performance of current businesses under the Medium-Term Management Plan 2014-2016.
2016 New Management
Framework 2013 results 2014 targets 2015 targets 2016 targets
Net sales
(including liquor tax)
¥509.8
¥537.7 ¥563.0 ¥595.0¥600.0
(excluding liquor tax)
¥395.4
¥430.1 ¥454.3 ¥484.4¥450.0
Operating income
¥15.3
¥15.0 ¥19.5 ¥27.5¥40.0
(before goodwill amortization)
¥19.3
¥19.0 ¥23.4 ¥31.2Net income
¥9.5
¥5.0 ¥8.6 ¥13.4—
Operating income to net sales
(excluding liquor tax)
3.9%
3.5% 4.2% 5.2%(excluding liquor tax;
9.0%
before goodwill amortization)
4.9%
4.4% 5.2% 6.4%Debt-to-equity ratio (times)
1.6
1.6 1.5 1.3 around1:1
ROE
6.7%
3.3% 5.5% 8.1%8.0%
or higher(before goodwill amortization)
9.5%
5.9% 8.0% 10.4%(¥ Billion)
To Our Stakeholders
Outline of the Medium-Term Management Plan 2014-2016
To achieve the New Management Framework, the Sapporo Group formulated the
Sapporo Group Medium-Term Management Plan 2014-2016, a new management plan.
As a “manufacturer of food products,” we will accelerate the four management strategies
contained in the Framework based on this plan and promote further cost reductions, expand
synergies among Group companies, and pursue M&As to achieve the targets set for 2016.
Thorough cost reductions
Pursue M&A
Next Long-Term Management
Framework Achieve targets
under
New Management Framework
2014 2015
2016
140th anniversaryCreate high-value-added products and services Form strategic alliances
Promote international expansion Expand group synergies
Group Strategy
Japanese Alcoholic Beverages Business
To fulfill the new vision of “Seek No.1 by accumulating one-of-a-kind products,” we will
continue to create innovations unique to Sapporo in order to be the “No.1 creator of
moving experiences.” We will aggressively invest in branding and other efforts during
2014–2015 with the aim of achieving a profit increase in 2016.
International
We will promote market penetration of the Sapporo brand chiefly in North America and
Southeast Asia. In Canada and U.S. markets, we will seek better performance in the beer
and soft drinks businesses for which we have enjoyed favorable results. In Southeast Asia,
we will continue to pursue the beer business according to plan in Vietnam and improve
operating income and achieve profitability.
Food & Soft Drinks
In the domestic food and soft drinks business, we will seek earlier recovery of business
performance through focused efforts to establish the core brands of POKKA SAPPORO,
enhance marketing power in terms of the quality of proposals and pioneering ideas as well
as the number of activities, and reduce costs to achieve growth in 2015 and thereafter. In
the restaurants business, we will accelerate the opening of Café de Crié franchised coffee
shops, which have been operating favorably. In the overseas soft drinks business, based on
the increased capacity of manufacturing due to the completion of a Malaysian factory, we
will maintain the top share of the tea beverages market in Singapore and further expand
their sales, while accelerating the growth of sales in other countries.
Restaurants
By supplying hospitable services and safe and delicious food menus, we will seek to offer
“Japan’s No.1 enjoyable stores.” In the domestic market, we will strengthen the core GINZA
LION and YEBISU BAR brands. Overseas, we will promote the expansion of the GINZA LION
BEER HALL restaurant format, the first store of which was opened in Singapore last fall and
has been operating favorably.
Real Estate
We will enhance the value of the properties we hold in Ebisu, Ginza and Sapporo to
contribute to a stronger Group brand. Through two redevelopment projects—Sapporo Ebisu
Building (tentative name) and Sapporo Ginza Building—and enhancement of the value of
Yebisu Garden Place, we aim for a significant profit increase during fiscal 2015–2016.
Expanding Synergies Among Group Companies
Led by Group headquarters, we will promote alliances and cooperation between different
businesses of the Group. To accelerate its growth as a “manufacturer of food products,”
Group headquarters will integrate and reinforce the R&D functions within the Group. The
To Our Stakeholders
CSR Activities
The Sapporo Group has positioned CSR-focused management as one of the key strategies
for realizing the sustained growth of the Group. Based on the Group’s basic CSR policy,
we will promote “quality of food and space,” “conservation of the global environment,”
“harmonious coexistence with society,” “fair and just dealings,” “development of human
resources and enhancement of the working environment,” and “sound corporate
management.” Through these efforts, we will continuously conduct in-house training and
entrench CSR and compliance awareness and behavior.
Formulating the Next Long-Term Management Framework
Target of the Group
In order to begin formulating the next long-term management framework targeting
2026, our 150th anniversary, we established an approach that forms the basis of the
Group’s target. The Sapporo Group will focus on achieving its target of becoming a group
of companies that is essential for customers to enjoy rich lives throughout the world by
continuing to create and supply new products and services that become No.1 in the market.
Guidelines for Corporate Behavior
To achieve our ideal, the Group established the following guidelines for corporate behavior.
headquarters will also promote the sharing of skills and expertise through communication
among personnel within the Group to create an environment that stimulates innovation,
thereby enhancing the Group’s ability to develop and expand new products and services.
In addition, structural reforms and cost reductions will be promoted across Group
companies to maximize cost-related synergies.
(1) We seek continued innovation and provide customers with valuable No.1
products and services to contribute to ensuring their richer life.
(2) We endeavor to create products and services that will activate communications
between customers.
(3) We strive to ensure the efficient business operations by addressing changes in
the business environment.
Group Strategies
1 Create High-Value-Added Products and Services
2 Form Strategic Alliances
3 Promote International Expansion
4 Expand Group Synergies
Special Feature
Building
a Foundation for
Future Success
2007
2006
2008
2009
2010
The Sapporo Group is implementing its medium-term management plan and is steadily
building the foundations for achieving its targets under the New Management Framework in
FY2016. With its sights set on 2026, the year marking the 150th anniversary of its foundation,
the SAPPORO Group will be a group of companies that is essential for customers to enjoy rich
lives throughout the world by continuing the creation and supply of new products and services
that become No.1 in the market.
Group Strategies 1 2 3 4
8.6 13.2
15.6
13.9
16.6
Business alliance with
Maeil Dairies Co., Ltd.
(South Korea)
Capital and business alliance
with POKKA CORPORATION
Started operations of Azumino Food
Co., Ltd. through joint venture
with Marudai Food Co., Ltd.
Acquired SLEEMAN
BREWERIES LTD. of
Canada
Entered shochu
business
Formulated long-term
management plan:
Sapporo Group New Management
Framework
Awarded Germany’s
“National Honor in the world”
(the Bundesehrenpreis in Gold)
Sold 15% stake in Yebisu Garden Place
Sapporo Group’s New Management Framework
Operating income before goodwill amortization
(¥ Billion)
Building a Foundation for Future Success
Changes to Sapporo Group
2011
2012
2013
2016
Entered Western spirits business through
business alliance with Bacardi Japan Ltd.
Business integration with POKKA
CORPORATION
Beer plant completed (Vietnam)
Beer production and sale under licensing
agreement with Coopers Brewery Ltd.
(Australia)
Launched Goku Zero
Started operations of POKKA SAPPORO Food & Beverage Ltd.
Started construction of soft drinks plant (Malaysia)
Opened first overseas GINZA LION BEER HALL (Singapore)
Reorganized production bases in North America and outsourced
production of beer to City Brewing Company, LLC.
Acquired 15% stake in Yebisu Garden Place
Full-scale entry into beer market (Vietnam)
Acquired 51% of the total shares of major
PB chilled beverages manufacturer Silver
Springs Citrus, Inc. (U.S.)
18.3 19.3
22.0 Goals to be Achieved
¥ 40 billion
(before goodwill amortization)
Operating income
¥ 600 billion
(incl. liquor tax)
¥ 450 billion
(excl. liquor tax)
Net sales
9 %
(excl. liquor tax)
(before goodwill amortization)
Operating income to net sales
8 % or higher
ROE
D/E ratio
Targets for 2016,
140th anniversary
Around 1:1
Create High-Value-Added Products
and Services
In each of its businesses, the Sapporo Group is concentrating management resources on the areas in which it is most
competitive, to ensure that it maintains market superiority. As a group, we are committed to creating high-value-
added products and services in order to provide valuable products and services that customers can identify with.
1
Group Strategies
*1: 0.00mg purines per 100ml
*2: Less than 0.5g carbohydrate per 100ml is shown as “zero carbohydrate” in accordance with nutrition labelling standards.
*3: Cases of large bottles (633ml×20 bottles)
Goku Zero, launched in June 2013, is a new genre beer that is the world’s first zero purine*1, zero carbohydrate*2 beer-type beverage. This product focuses on increased interest in purines among customers and uses the new Goku Zero manufacturing method developed using technology now being patented. Goku Zero delivers both in terms of performance and taste: zero purines and zero carbohydrates with a pleasant taste and clean finish. In FY2013, we sold 3.58 million cases*3, outperforming our initial plan by 63%, and our 2014 sales target is 5.5 million cases (a 54% increase year on year).
Goku Zero
- First such concept in the world
*1: Source: Lemon juice survey in Foodstuff Marketing Handbook 2014 by Fuji Keizai Co., Ltd. (2012 results)
The lemon products (flavorings) sold by POKKA SAPPORO Food & Beverage are undisputedly No.1 in their category*1, with a market share of 86%. In FY2013, core brands POKKA Lemon and Kireto Lemon grew strongly, and Kireto Lemon Sparkling was also well received. In March 2014, we are launching new versions of products, which are expected to help further enhance brand appeal.
Strong brands
in the lemon category
Purine
0.00
Market Share
86 %
Carbohydrate
0
Building a Foundation for Future Success
Total RTS
170 %
YoY increase
Form of Strategic Alliances
The Sapporo Group will promote strategic alliances with powerful partners that will enable the Group
to enhance its strengths, complement its capabilities, and acquire know-how, so as to rapidly develop
competitive advantage on a large scale, instead of being constrained by group business operation alone.
2
Group Strategies
The Sapporo Group formed a capital and business alliance with POKKA CORPORATION (“POKKA”) in September 2009, and POKKA and Sapporo Beverage were integrated in 2011 and made a new start as POKKA SAPPORO Food & Beverage Ltd. from January of 2013. The new company will concentrate management resources on brands owned by Sapporo Beverage and POKKA that can be differentiated and are competitive. It will take charge of the Group’s food and beverage business and contribute to the Group’s growth as its third core business, alongside the alcoholic beverages business and real estate business. POKKA SAPPORO Food & Beverage also aims to leverage technologies and ingredients of the two companies to develop new brands and products, and to strengthen and nurture brands owned by POKKA in the food business and turn them into an engine of growth.
POKKA SAPPORO Food & Beverage
starts operation
Alliance with Bacardi,
the world’s No.1 rum brand
The Sapporo Group started selling 90 items of 29 brands, mainly Western spirits, in October 2011, following its alliance with Bacardi Japan Ltd., which owns the world’s No.1 rum brand*1. Together, we are leveraging our respective brand power and marketing expertise to nurture these offerings into a stable source of profits along with wine and shochu. In 2013, we launched Mojito RTD (can/bottle) and RTS, and total RTS sales in 2013 were up 170% from 2012.*2
*1: IWSR *2: Total of Mojito, Daiquiri and Pina Colada
(2013 result; compared with 2006)
Promote International Expansion
We will achieve expansion of the Food and Soft Drinks businesses as well as the Alcoholic Beverages
business in foreign markets, and we will leverage our technologies and business alliances to build and
expand Sapporo brands in overseas markets.
3
Group Strategies
Since becoming part of the Sapporo Group in 2006, leading Canadian brewery SLEEMAN has achieved sales growth for 7 straight years. In FY2013, annual sales topped 19 million cases (1 case = 355ml×24 bottles) and sales volumes reached 1.5 times the 2006 level. SLEEMAN is playing a key part in the Sapporo Group’s rapid development in the North America.
7th straight year of sales increase
in Canada: SLEEMAN
North America (Canada)
Asia (Vietnam)
Sapporo USA, the Sapporo Group’s base in the U.S., has established the Sapporo brand as the No.1 Japanese/Asian beer brand for 28 consecutive years. It is now aiming to promote and expand the Sapporo brand in non-Japanese and non-Asian local markets.
North America (U.S.)
Sapporo USA: No.1 brand
for 28 consecutive years
In the ASEAN market, which has a population of around 600 million people, the Sapporo Group is working to build and expand Sapporo brands out of its base, Sapporo Vietnam Ltd. Vietnam is Asia’s third largest beer market and has huge growth potential. In 2010, the Sapporo Group built its first overseas beer factory in Vietnam, and now exports to 12 countries, mainly in ASEAN.
Sapporo Vietnam is implementing thorough marketing and sales activities with the focus on Ho Chi Minh City. In FY2013, sales in Vietnam grew sharply, up 96% year on year, and are expected to continue growing in the future.
Exporting to 12 countries mainly
in ASEAN Sapporo Vietnam
Building a Foundation for Future Success
Sales Volumes
1.5 times
2013 Sales Up
96 % YoY
Japanese/Asian No.1
beer brand
Expand Group Synergies
The Sapporo Group is pursuing greater synergies among our businesses by promoting flexible collaboration
and cooperation, unconstrained by our current Group companies or existing organizational boundaries, and
we aim to maximize our corporate value through synergies in our business strategies and operations.
4
Group Strategies
Asia (Singapore)*1: Brand Alliance Pte. Ltd., Singapore
POKKA CORPORATION (Singapore) Pte Ltd., a subsidiary of POKKA SAPPORO Food & Beverage, has 37 years of history in Singapore, and the POKKA brand, including Jasmine Green Tea, which boasts the largest share of the green tea beverage market, has made inroads into the market. The brand was selected as the No.1 brand in the non-carbonated beverage category of the INFLUENTIAL BRANDS AWARDS 2013*1, a consumer trend survey targeting people from 18 to 28 years
old. In 2014, a new plant will be completed in Malaysia, and POKKA Singapore plans to strengthen its production structure to meet growing demand in Singapore and to aggressively market POKKA brand products in countries in South East Asia and the Middle East.
37 years of history: POKKA Singapore
Sapporo
Breweries
POKKA SAPPORO
Food & Beverage
In April 2014, Sapporo Breweries Ltd. will launch Sapporo Kireto Lemon Sour. This is a new offering in the RTD market, which has been growing continuously over recent years. It uses POKKA SAPPORO Food & Beverage’s long-selling brand Kireto Lemon to make a pleasant sour lemon tasting cocktail. The Sapporo Group will continue to energize the market by harnessing group synergy to create new value.
Product development through
collaboration between group companies:
Sapporo Kireto Lemon Sour
INFLUENTIAL BRANDS
AWARDS 2013
TOP1
BRAND
Performance Review and Plan
Net sales
2013 2012 2011 2010 2009
(¥ Million)
200,000 220,000 240,000 260,000 280,000 300,000
282,914 279,329
268,189 269,948 274,909
Operating income to net sales Operating income
(¥ Million) (%)
2013 2012 2011 2010
2009 0
1 2 3 4 5
0 2,000 4,000 6,000 8,000 10,000
7,483
9,290 9,305
7,522 9,902
Operating income and Operating income to net sales
Note: Figures are before goodwill amortization.
Japanese Alcoholic
Beverages
Beer Business
In the beer and beer-type beverages category, sales of our Yebisu brand grew strongly and, in the new-genre beer segment, we launched Goku Zero, the world’s first beer-type beverage with zero purine bodies, in addition to introducing new versions of Mugi to Hop and Mugi to Hop Black, and sales volumes were substantially above our planned target. As a result, sales volumes of beer and beer-flavored beverages increased year on year, and we also succeeded in expanding our market share.
Non-Alcoholic Beer and RTD Beverages
In the RTD category, the strongly favorable consumer response received by the limited-volume seasonal release in April of Sapporo Otoko Ume Sour, developed in collaboration with Nobel Confectionary Co., Ltd., encouraged us to launch the product as a year-round offering in September, as sales during the rest of the year exceeded our targets. In the bottled RTD market, we followed up our success with Bacardi Mojito and several other bottled offerings, helping to raise brand recognition for Bacardi, the world’s No.1 selling rum. We also released new versions of Sapporo Premium Alcohol Free and Sapporo Premium Alcohol Free Black, which were favorably received.
Wine and Spirits Business
Among business products, we expanded the offerings of our core imported wine, Yellow Tail, and our domestic premium brand, Grande Polaire, was supported by favorable product reviews, including gold medal awards at the Japan Wine Competition 2013 for three wines in the series. As a result, overall wine sales in 2013 rose above the previous-year level. Our Western spirits business enjoyed rising sales volumes, with strong contributions from Bacardi products.
Shochu Business
The shochu business sharply increased sales over the previous year’s level thanks to the continued favorable consumer response to two blended shochus: Imo Shochu Kokuimo and Mugi Shochu Koimugi .
Fiscal 2013 Overview
Looking at the Japanese beer market in 2013, total domestic demand for beer and beer-type beverages is estimated to have declined by 1% year on year. During the period under review, beer sales declined slightly and happo-shu sales also decreased, while sales of new-genre beer slowed but continued to show year-on- year growth. Under these market conditions, the Sapporo Group’s Japanese Alcoholic Beverages business achieved higher sales than the year-ago level and reported increased sales of wine products, Western spirits and shochu by strengthening investment in its core beer brands and energetically introducing new value proposals. As a result, net sales in the Japanese Alcoholic Beverages business climbed by ¥5.0 billion, or 1.8% compared with the previous year, to ¥274.9 billion. Operating income rose ¥2.4 billion, or 31.6% year on year, to ¥9.9 billion, reflecting successful efforts to control costs, starting with marketing expenses.
2013 Result
¥ 9.9 billion
[Operating income]
¥ 274.9 billion
[Net sales]
Topic
Stronger advertising and sales promotion during the summer and year-end demand season of 2013 helped push Yebisu brand beer sales up 1.7%, surpassing those of the previous year for the first time in three years. In 2014, with the expected further growth of the high-priced beer category, we launched Yebisu Natsu no Koku, a product produced exclusively for the summer gift-giving season, and Yebisu Royal Selection, a limited-edition product for sale in convenience stores. As a premium brand launched more than a century ago that appeals to consumers with its distinctive values of “richness” and “history,” we will continue to set our sights on offering the
“No.1 Premium Value” as Japan’s leading premium beer.
Yebisu Brand Beers Surpass Previous Year’s Sales for the First Time in Three Years
Outlook for 2014
We expect the operating environment for our Japanese Alcoholic Beverages business to remain challenging as the negative impact of the trends toward a smaller drinking population and increasing diversity in consumer preferences and venues for drinking alcoholic beverages are compounded by an increase in Japan’s consumption tax rate. The beer and beer-type beverages business will endeavor to further enhance the value of core brands as it aims for a third straight year of sales volume growth. It will concentrate management resources on the core Yebisu Beer, Sapporo Draft Beer Black Label, and Mugi to Hop brands while also aiming for a big increase in sales of Goku Zero. Similarly, the RTD, wine and shochu businesses will strengthen their offerings of “Only One” products, and endeavor to build greater brand recognition. The Japanese Alcoholic Beverages business as a whole will strive to achieve its profit targets despite the higher raw material prices caused by yen depreciation by effectively and flexibly controlling marketing expenses while also seeking to further enhance brand values. The business will also continue efforts to cut other costs wherever possible.
■
To fulfill the new vision “Seek No.1 by accumulating one-of-a-kind products,” we will continue
innovations unique to Sapporo to be the “No.1 creator of moving experiences.”
■
We will make intensive investments in branding and other efforts during the 2014–2015 period
commensurate with the increase in profit planned for 2016.
[ Key Strategies under the Medium-Term Management Plan 2014-2016 ]
■SAPPORO BREWERIES LIMITED
■SAPPORO WINES LIMITED
■YEBISU WINEMART CO., LTD.
■TANOSHIMARU SHUZO CO., LTD.
■SAPPORO ENGINEERING LIMITED
■STARNET CO., LTD.
■NEW SANKO INC.
■SHINSEIEN CO.,LTD.
¥ 9.0 billion
[Operating income]
¥ 284.3 billion
[Net sales]
2014 Targets
Performance Review and Plan
Net sales
2013 2012 2011 2010 2009
(¥ Million)
22,582 25,386 25,888 36,121
48,216
0 10,000 20,000 30,000 40,000 50,000
Operating income to net sales Operating income
1,720 1,607
1,433 1,053
2,448
2013 2012 2011 2010 2009
(¥ Million) (%)
0 500 1,000 1,500 2,000 2,500
0 2 4 6 8 10
Operating income and Operating income to net sales
Note: Figures are before goodwill amortization.
International
North American Market
Canadian subsidiary SLEEMAN BREWERIES achieved a 4% year- on-year increase in unit sales (excluding outsourced production of Sapporo brand products and sales of domestic brands), stretching its growth streak to seven years. Sapporo USA recorded a 5% year-on-year increase in sales volumes of Sapporo brand beers. Silver Springs Citrus, in which we hold a 51% equity stake, also continued to steadily increase sales volumes.
Asia and Oceania Market
In Vietnam, we continued the full-fledged marketing offensive as part of efforts to build market recognition for the Sapporo brand. These efforts produced a solid increase in sales in 2013, with sales particularly strong during the traditional Tet (New Year’s holiday) sales campaign. In South Korea, the continued efforts of the Maeil Dairies’ subsidiary are expanding sales of Sapporo brand beers in Korea’s household and commercial markets. In Oceania, we continued to bolster sales via our brewing and sales licensing agreement with Australia’s Coopers Brewery, and in Singapore we worked with our local subsidiary to expand sales channels in the local household market. The efforts outlined above enabled the International Business to achieve a 43% year-on-year increase in beer volume sales in Asia and other overseas markets outside North America in 2013.
Fiscal 2013 Overview
In North America, where the economic outlook remains unclear, we estimate that total demand in the beer market declined 2 to 3% in 2013. The Asian beer market, however, continues to grow steadily. Our International Business segment continued marketing activities targeting the premium beer market, where it has core strengths. As a result, net sales of the business increased by
¥12.1 billion, or 33.5% year on year, to ¥48.2 billion, supported by increased sales on local-currency bases at continuing operations, a full year’s contribution from Silver Springs Citrus, which was consolidated in April 2012, and the positive impact of yen depreciation. Segment operating income increased ¥1.3 billion year on year, to ¥1.2 billion.
2013 Result
¥ 48.2 billion
[Net sales]
[Operating income]
¥ 1.2 billion
Topic
Sapporo is expanding its marketing in Vietnam, one of Asia’s leading beer consuming nations, and now has more than 2,600 outlets in Ho Chi Minh City that sell SAPPORO PREMIUM-brand beers. Its draft beer from kegs is also highly acclaimed. Sapporo is marketing not only in Vietnam, but has begun exporting SAPPORO PREMIUM-brand beers brewed in Vietnam to Singapore, where a POKKA CORPORATION subsidiary has been built, as well as Thailand, Malaysia, and other countries. In total, Sapporo is operating in eight of the 10 ASEAN countries.
Sapporo Brand is Spreading in Vietnam
Outlook for 2014
In North America, the economic outlook remains uncertain, and we therefore assume that total demand in the North American beer market will be the same level as the previous year. In Canada, SLEEMAN BREWERIES will continue to spend aggressively on marketing for its core premium brands. In the United States, while continuing to target the Japanese-American market segment, Sapporo USA will redouble its efforts to strengthen its presence in the wider Asian-American and general population segments of the US beer market. Both companies aim for unit sales growth in excess of total demand growth.
In Vietnam, we are continuing full-scale marketing efforts to quickly establish our Sapporo brand in that market. In South Korea, we are accelerating sales of Sapporo brand beers in the household and commercial markets via the Maeil Dairies’ subsidiary. In Singapore, we will continue to expand sales channels into the household beer market in a cooperative effort with our local subsidiary. In Oceania, we will continue efforts to expand sales via our brewing and sales licensing agreement with Australia’s Coopers Brewery.
■
We will promote market penetration of the Sapporo brand chiefly in North America and Southeast Asia.
■
In Canada and the U.S. markets, we will seek better performance in the beer and soft drinks businesses
for which we have enjoyed favorable results.
■
In Southeast Asia, we will continue to pursue the beer business according to plan in Vietnam to improve
operating income and achieve profitability.
[ Key Strategies under the Medium-Term Management Plan 2014-2016 ]
■SAPPORO INTERNATIONAL INC.
■SAPPORO U.S.A., INC.
■SAPPORO CANADA INC.
■SLEEMAN BREWERIES LTD.
■SAPPORO ASIA PRIVATE LIMITED
■SAPPORO VIETNAM LIMITED
■SILVER SPRINGS CITRUS, INC.
¥ 1.1 billion
[Operating income]
¥ 57.2 billion
[Net sales]
2014 Targets
Performance Review and Plan
Net sales
2013 2012 2011 2010
0 2009
50,000 100,000 150,000 (¥ Million)
30,746 33,938
108,061
129,017 130,672
Operating income to net sales Operating income
(%)
2013 2012 2011 2010
0 2009
1,000 2,000 3,000 6,000 5,000 4,000
0 1 2 3 6
4 5 (¥ Million)
301
1,343 5,745
3,117
1,245
Operating income and Operating income to net sales
Food & Soft Drinks
segment’s profits, resulting in an operating loss of ¥1.5 billion, a deterioration of ¥1.8 billion from 2012.
Domestic Food and Soft Drinks Business
Our domestic food and soft drinks business saw a decline in sales of its soft drinks as business integration led to consolidation of product lineups in our core drink offerings, including canned coffee, tea, and water drinks. On the other hand, the Gabunomi series and the Fujiya brand made strong showings. In the lemon and natural foods category, we launched a new version of Kireto Lemon Sparkling packaged in a 410ml PET bottle, which together with our core Pokka Lemon 100 brand posted solid sales. Among our overseas brands, Gerolsteiner naturally carbonated water from Germany enjoyed steady sales growth as we expanded its sales channel to vending machines.
Domestic Restaurants Business
In the domestic restaurants business, the Café de Crié coffee shop chain posted strong sales, reflecting strategies such as regular introductions of new menu items and renovations of existing outlets. As of the end of 2013, the chain had 170 outlets in operation.
Overseas Food & Soft Drinks Business
The overseas Food & Soft Drinks business saw profitability affected by stiff competition in Singapore but was able to expand its exports to the Middle East and other markets.
Fiscal 2013 Overview
Demand for soft drinks in Japan is estimated to have increased by about 3% over 2012, boosted by the summer heat wave in Japan. We estimate that domestic demand for lemon-based products declined 2% year on year, while demand for instant soups appears to have been about even with the 2012 level. In this overall demand environment, the Sapporo Group’s Food & Soft Drinks business began integrated operations in January as POKKA SAPPORO Food & Beverage Ltd., and new investments were concentrated on core brands as the new subsidiary seeks to strengthen and nurture its various brands. As a result of the above, the Food & Soft Drinks segment recorded sales of ¥130.7 billion in 2013, an increase of ¥1.7 billion, or 1.3%, with the consolidation of POKKA ACE (M) SDN. BHD. from January helping to offset the decline in sales at the domestic Food & Soft Drinks business. However, business integration expenses weighed on the
2013 Result
¥ –1.5 billion
[Operating income]
¥ 130.7 billion
[Net sales]
Note: Figures are before goodwill amortization.
Outlook for 2014
In Japan’s soft drinks industry, the outlook for an increase in industry wide demand in 2014 is not very favorable, largely due to strong consumer price consciousness and the consumption tax increase. Faced with this less than favorable external environment, our food and soft drinks business plans to offset costs to the maximum degree possible by thoroughly promoting low-cost operations in each link of the value chain.
In the domestic food and soft drinks segment, the soft drinks business plans to focus its marketing spending and activities on its core domestic brands, such as Ribbon and Gabunomi. In the lemon and natural foods category, we will continue to solidify our unique market position centering on Kireto Lemon. The overseas soft drinks business plans to maintain its leading share of the Singapore market for tea drinks and expand sales in new product categories.
■
In the domestic food and soft drinks business, we will seek to attain growth in 2015 and thereafter through
focused efforts to establish the core brands of POKKA SAPPORO, enhance marketing power in terms of the
quality of proposals and pioneering ideas as well as the number of activities, and reduce costs.
■
In the overseas soft drinks business, based on the increased capacity of manufacturing due to the
completion of a Malaysian factory, we will maintain the top share of the tea beverages market in Singapore
and further expand their sales, while accelerating the growth of sales in other countries as well.
[ Key Strategies under the Medium-Term Management Plan 2014-2016 ]
¥ 0.1 billion
[Operating income]
¥ 140.0 billion
[Net sales]
2014 Targets
Topic
In recent years, Singapore’s domestic and export sales of beverages in PET bottles have been very successful. To cope with this success, POKKA CORPORATION (Singapore) has built a new factory in neighboring Malaysia that is slated to begin operation in July 2014. The POKKA Malaysia Factory will be fully environmentally-friendly, with a cutting-edge aseptic bottling line for bottling juice and tea and other beverages in 500ml and 1.5 liter PET bottles, LED lighting, and a water and energy recycling system.
POKKA Malaysia Factory
■POKKA SAPPORO FOOD & BEVERAGE LTD.
■STELLA BEVERAGE SERVICE CO., LTD.
■STAR BEVERAGE SERVICE CO., LTD.
■SUN POKKA CO., LTD.
■PS BEVERAGE LTD.
■POKKA CREATE CO., LTD.
■ POKKA CORPORATION (SINGAPORE) PTE. LTD.
Performance Review and Plan
Fiscal 2013 Overview
Japan’s restaurant industry began to see some signs of improvement in consumer sentiment amid growing expectations of an economic recovery in Japan. However, the operating environment remained severe with increased competition for customers from prepared food manufacturers and retail outlets. In this environment, our Restaurants Business endeavored to raise customer satisfaction and enhance core menu offerings, including by conducting aggressive sales campaigns. As a result of its efforts outlined above, the Restaurants Business achieved sales of ¥26.8 billion in 2013, ¥0.2 billion, or 0.8%, more than in 2012. Segment operating income, however, amounted to ¥0.4 billion, some ¥0.1 billion, or 22.9%, less than in the previous year.
Japan
In Japan, we opened 13 restaurants in 2013, focusing on formats with strong growth potential, such as our YEBISU BAR chain and small GINZA LION outlets. In line with our efforts to improve profit structure, we closed 16 outlets, bringing the total number of restaurants open in Japan at the end of the year to 190.
Overseas
Overseas, we opened our first GINZA LION BEER HALL in Singapore, the first step in our plan to spread the beer hall culture we have nurtured in Japan to the rest of the world. Going forward, we plan to further promote the GINZA LION brand in the Singapore market. We also opened two Rive Gauche cake and patisserie shops in Singapore, bringing the Restaurants Business’ total number of overseas outlets to 13.
Outlook for 2014
We expect the operating environment for restaurants in Japan to remain challenging mainly due to the impact of the consumption tax increase on consumer spending. In this difficult environment, our Restaurants Business plans to continue creating outlets that customers love to frequent in line with its guiding principle of providing 100% satisfaction. New store openings will focus on territorial expansion for our core formats with high growth potential. At the same time, we will continue measures to improve the business’ profit structure, including the closing of unprofitable outlets. Overseas, we will work to enhance the appeal of our GINZA LION outlet brand in Singapore.
Net sales
2013 2012 2011 2010
0 2009
10,000 20,000 30,000 (¥ Million)
28,026 26,429
24,091
26,621 26,827
Operating income (loss) and Operating income (loss) to net sales
(¥ Million) (%)
2013 2012 2011 2010 2009
Operating income (loss) to net sales Operating income (loss)
-200 0 200 400 600
-1 0 1 2 3
(172) 149
219 539
415
Note: Figures are before goodwill amortization.
■ By supplying hospitable services and safe and delicious food menus, we will seek to offer “Japan’s No.1 enjoyable stores,” continuously loved and appreciated by customers.
■ In the domestic market, we will strengthen the core GINZA LION and YEBISU BAR brands. Overseas, we will promote the expansion of the GINZA LION BEER HALL restaurant format, the first store of which was opened in Singapore and has been operating favorably.
Key Strategies under the Medium-Term
Management Plan 2014-2016
Restaurants
■SAPPORO LION LIMITED■ SAPPORO LION (SINGAPORE) PTE. LTD.
2013 Result
¥ 26.8 billion
[Net sales]
¥ 0.4 billion
[Operating income]
2014 Targets
¥ 28.1 billion
[Net sales]
¥ 1.0 billion
[Operating income]
