SAPPORO HOLDINGS LIMITED
Taking Food Further
The Sapporo Shining Star is a motif representing a polestar. The Group has used this logo since its predecessor, the Kaitakushi (the national government Hokkaido development commission) Brewery, was established in 1876. It is a symbol of the pioneering spirit in which the Group was founded. About the Group’s corporate logo, the Sapporo Shining Star
01 Profile
02 Our Business
04 Financial Highlights
06 To Our Stakeholders
11 Special Feature
First Medium-Term Management Plan 2020 (2017–2020)
Transform with
Unprecedented Speed
14 Our History of Development
over 140 Years
16 Performance Review and Plan
16 Japanese Alcoholic Beverages
18 International
20 Food & Soft Drinks
22 Restaurants
23 Real Estate
24 CSR Activities
30 Corporate Governance
34 Board of Directors and Audit &
Supervisory Board Members
36 Financial Section
69 Corporate Data
All figures in this annual report are rounded to the nearest applicable unit.
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
enriching and rewarding lifestyles”
The Sapporo Group has been brewing beer since 1876. Throughout its history, the Group has diligently created products using only carefully selected ingredients. Pursuing strong growth all over the world by delivering a wider range of distinctive products and services and thereby expanding opportunities for engagement with customers.
Sapporo Group
In fiscal 2016, the Group accelerated growth strategies based on “Sapporo Group Management Plan 2015–2016” to demonstrate its presence as a distinctive
“manufacturer of food products” with an aim to achieve its financial targets for 2016. Consolidated net sales rose 1.5% year on year to ¥541.8 billion. Consolidated operating income was up 45.3% to ¥20.3 billion reflecting increases in all business segments with the additional effect of cost reductions.
2016 Business Results
The Sapporo Group strives to maintain integrity in corporate conduct
that reinforces stakeholder trust and aims to achieve continuous growth
in corporate value.
Fundamental Management Policy
Net sales
¥ 541.8 billion
( +1.5 % YoY)
Operating income
¥ 20.3 billion
( +45.3 % YoY)
1876
Founded Number of employees
7,858
(Consolidated)
160 (Parent company)
Consolidated subsidiaries and equity-method affiliates
55
Consolidated
subsidiaries
2
Equity-method
affiliates
The Sapporo Group operates under a holding company framework, with Sapporo
Holdings Limited as a pure holding company, and has five business segments: Japanese
Alcoholic Beverages, International, Food & Soft Drinks, Restaurants and Real Estate.
We have positioned “Alcoholic Beverages,” “Food” and “Soft Drinks” as the Group’s
three core business fields, and will work to nurture and strengthen the Group’s brands
Japanese Alcoholic
Beverages International
Main Brands
Beer and beer-type beverages: Yebisu Beer, Sapporo Draft Beer Black Label, Mugi to Hop The gold, Goku Zero Wine: Grande Polaire, Penfolds Champagne: Taittinger
Shochu: Shochu Kokuimo (Imo Shochu) Spirits: Bacardi, Dewar’s
279.5 2.1%
11.7 36.0%
Main Brands
SAPPORO PREMIUM, SLEEMAN Main Sales Areas
United States, Canada, Vietnam, South Korea, Australia, Singapore
65.4 (7.2)%
0.9 487.8%
In the International segment, the Group offers alcoholic beverages and soft drinks, mainly in North America and Southeast Asia. In the North American market, we are aiming to take another leap forward, while working to build inroads in the Asian and Oceanian markets, starting in Vietnam, where we have now built our own plant. With its message of “Making those
‘Kampai!’ toasts taste even better,” the Group is developing the Japanese Alcoholic Beverages segment focused mainly on the beer business, but also including the wine and western spirits business and the shochu business. The Group will continue to propose products and services that represent the distinctive Sapporo value.
Share of consolidated sales
4.2%
5.2%
25.5% 51.6
%
12.1%
1.4%
Japanese Alcoholic Beverages International Food & Soft Drinks Restaurants Real Estate Other
¥ 541.8 billion
Net sales
Strength, market, etc. Business overview
Net sales
(billions of yen) YoY
Operating income
(billions of yen) YoY
Restaurants Real Estate
Food & Soft Drinks
Main Brands
Soft drinks: Kireto Lemon, Ribbon, GEROLSTEINER (natural mineral water), aromax (canned coffee)
Soups: Jikkuri Kotokoto
Lemon-based products: POKKA Lemon 100 Soy milk: SOYAFARM
Restaurants: Café de Crié (coffee shop) Number of Café de Crié Outlets 190 (as of December 31, 2016)
Main Sales Areas Japan, Singapore, Malaysia, Indonesia, Myanmar
137.9 1.7%
1.3 202.6%
Main Brands
GINZA LION BEER HALL, YEBISU BAR Number of Outlets
200 in Japan, 14 overseas (As of December 31, 2016)
28.1 4.1%
0.7 27.0%
Main Facilities
Yebisu Garden Place, GINZA PLACE, Sapporo Factory
Main Areas Ebisu, Ginza, Sapporo
22.9 9.7%
10.3 24.7%
The Group is a pioneer in the restaurant industry, operating the GINZA LION and YEBISU BAR beer hall chains along with various restaurants. In addition to providing delicious draft beer, we will continue to develop menus based on the theme of “safety, peace of mind, authenticity, and health.”
In the Food & Soft Drinks segment, the Group operates primarily in Japan and Southeast Asia. We will carefully nurture the bonds we have built up with customers as we continue to create a stream of delicious new products that enrich and brighten people’s lives.
The Group’s Real Estate segment includes leasing, management, operation, and development. We operate and manage three commercial complexes—Yebisu Garden Place, Sapporo Factory, and GINZA PLACE—as well as office buildings and others. We will continue to maintain high occupancy rates and strive to increase rent levels.
“Alcoholic Beverages,” “Food” and “Soft Drinks.” Leveraging this unique strength, we
will work to supply distinctive products and services worldwide in conjunction with
expanding our contact points with customers, with the aim of driving robust growth.
Millions of yen
Years ended December 31
2007 2008 2009 2010
For the Year:
Net sales
Including liquor tax ¥449,011 ¥414,558 ¥387,534 ¥389,245
Excluding liquor tax 309,794 284,412 264,604 269,874
Operating income 12,363 14,685 12,896 15,403
Operating income before goodwill amortization 13,232 15,553 13,923 16,576
EBITDA 37,759 37,158 36,470 39,080
Profit attributable to owners of parent 5,509 7,640 4,535 10,773
Capital expenditures (cash basis) 19,884 27,342 21,910 19,801
Depreciation and amortization 24,527 21,605 22,547 22,504
Goodwill amortization 870 867 1,027 1,173
Cash flows from operating activities 30,691 22,292 12,454 27,431
Free cash flows 17,196 39,148 (19,773) 24,836
At Year-End:
Net assets 125,189 116,862 118,591 126,645
Total assets 561,859 527,287 506,875 494,798
Financial liabilities 212,464 189,252 196,794 181,335
Other Indicators:
Overseas sales ratio 9.0% 8.8% 8.5% 9.4%
Operating income to net sales
Excluding liquor tax 4.0% 5.2% 4.9% 5.7%
Excluding liquor tax; before goodwill amortization 4.3% 5.5% 5.3% 6.1%
Debt-to-equity ratio (times) 1.7 1.6 1.7 1.4
Equity ratio 22.3% 22.1% 23.4% 25.3%
ROE 4.6% 6.3% 3.9% 8.9%
ROE (before goodwill amortization) 5.3% 7.0% 4.7% 9.8%
Note: Yen amounts have been translated into U.S. dollar amounts at the rate of ¥116.53=U.S.$1.00, the exchange rate prevailing on December 31, 2016.
449,453 389,245 387,534 414,558 449,011
492,491509,835 518,741 533,749 541,847 (¥ Million)
0 100,000 200,000 300,000 400,000 500,000 600,000
2016 2015 2014 2013 2012 2011 2010 2009 2008 2007
336,838 269,874 264,604 284,412 309,794
379,793395,377 401,814418,320 424,059 (¥ Million)
0 100,000 200,000 300,000 400,000 500,000
2016 2015 2014 2013 2012 2011 2010 2009 2008 2007
Net sales (including liquor tax) Net sales (excluding liquor tax)
¥449,453 ¥492,491 ¥509,835 ¥518,741 ¥533,749
¥541,847¥563,800
$4,649,853336,838 379,793 395,377 401,814 418,320
424,059443,061
3,639,05818,884 14,415 15,344 14,729 13,950
20,26721,300
173,92421,993 18,294 19,330 18,493 18,103
24,18825,100
207,57146,477 44,100 44,388 42,974 42,327
46,53048,300
399,2953,165 5,394 9,452 340 6,109
9,46910,700
81,26213,423 53,870 13,769 19,133 20,340
21,80925,500
187,15424,482 25,805 25,059 24,481 24,224
22,34223,200
191,7243,109 3,879 3,985 3,764 4,153
3,9213,800
33,64722,313 29,618 32,862 22,284 35,266
32,57139,700
279,503(28,579) (29,868) 19,594 5,055 25,510
4,9844,600
42,767124,775 134,947 155,367 160,005 163,822
166,381—
1,427,795550,784 597,636 616,753 625,439 620,388
626,352—
5,375,027219,168 257,647 247,828 247,557 234,742
238,143236,400
2,043,62211.0% 14.1% 18.3% 19.2% 22.6%
20.5%21.2%
5.6% 3.8% 3.9% 3.7% 3.3%
4.8%4.8%
6.5% 4.8% 4.9% 4.6% 4.3%
5.7%5.7%
1.8 1.9 1.6 1.5 1.4
1.41.4
22.4% 22.1% 24.6% 25.0% 25.5%
25.7%—
2.5% 4.2% 6.7% 0.2% 3.9%
5.9%6.5%
5.1% 7.3% 9.5% 2.7% 6.5%
8.4%8.8%
(%)
Operating income to net sales (excluding liquor tax) Operating income
21,993
16,576 13,923 15,553 13,232
18,294 19,330 18,493 18,103 24,188 (¥ Million)
0 5,000 10,000 15,000 20,000 25,000
2016 2015 2014 2013 2012 2011 2010 2009 2008
2007 0
2 4 6 8 10
ROE Profit attributable to owners of parent
(%)
3,165 10,773
4,535 7,640
5,509 5,394
9,452
340 6,109
9,469 (¥ Million)
0 3,000 6,000 9,000 12,000
2016 2015 2014 2013 2012 2011 2010 2009 2008
2007 0
3 6 9 12
Operating income and
Operating income to net sales (excluding liquor tax)
Profit attributable to owners of parent and
ROE
Note: Figures are before goodwill amortization. Note: ROE is before goodwill amortization.
In fiscal 2016, we experienced an economic environment marked by unpredictability and rapid changes, including
changes in the geopolitical and economic situation overseas, a slump in consumer spending in Japan, and the yen’s
further appreciation. Nevertheless, the Sapporo Group demonstrated its presence as a distinctive food manufacturer
to achieve increases in sales and profits.
By segment, in the Japanese Alcoholic Beverages segment, the Company worked to strengthen its mainstay
brands for the first year of our campaign to strengthen beer. In particular, our integrated marketing strategy for our
core Sapporo Draft Beer Black Label brand proved successful as consolidated sales rose for a second consecutive year
amid a decrease in overall demand for beer. In the International segment, aggressive marketing activities in the
North American premium beer market were undertaken by SLEEMAN BREWERIES of Canada and Sapporo U.S.A.
Meanwhile, in Vietnam, we continued to invest in marketing to build the Sapporo brand. In the Food & Soft Drinks
segment, we worked on our management priorities of strengthening our sales capabilities and reducing costs,
while concentrating investment on our core brands, primarily lemon-based products and soup. In the Restaurants
segment, we opened new outlets, with a primary emphasis on our core GINZA LION and YEBISU BAR formats, and also
continued efforts to improve profitability by closing or changing the format of unprofitable outlets. In the Real Estate
segment, we increased the value of Yebisu Garden Place amid high occupancy rates at our rental properties, and in
September, we opened the commercial complex GINZA PLACE, which was developed as a “base for information
dissemination and exchange.”
As a result of these efforts, the Sapporo Group posted consolidated net sales of ¥541.8 billion in fiscal 2016, up ¥8.1
billion, or 1.5%, from fiscal 2015. Consolidated operating income increased by ¥6.3 billion, or 45.3%, to ¥20.3 billion.
Profit attributable to owners of parent was ¥9.5 billion, up ¥3.4 billion, or 55.0%, despite posting ¥1.4 billion in loss on
disposal of property, plant and equipment as an extraordinary loss and ¥1.0 billion in impairment losses.
As we marked our 140th anniversary last year, we formulated the Sapporo Group Long-Term Management Vision
“SPEED150,” which sets forth the overall direction the Company should pursue over the next 10 years through 2026,
the year marking the Group’s 150th anniversary of founding. Under the plan, we aim to transition to a growth stage
as early as possible based on the theme of “Transform with Unprecedented Speed.” Furthermore, to accelerate our
move to a new growth stage, Masaki Oga was appointed as President and Group
Operating Officer in January 2017, and in March, he was appointed as President and
Representative Director through the General Meeting of Shareholders to
launch a new management system.
We look forward to the continued
support and understanding of our
stakeholders.
Tsutomu Kamijo
Chairman and Representative Director
Masaki Oga
President and Representative Director
Last year, Sapporo Holdings marked its 140th anniversary. The roots of our Company stretch
back to 1876, with the construction of the Kaitakushi Brewery by the Hokkaido Development
Commission. Over this time, we have created numerous brands, such as Sapporo Draft Beer
Black Label and Yebisu Beer; we have aggressively expanded our overseas business through
entry into North America and Southeast Asia; and we have started the food business with the
acquisition of POKKA CORPORATION. Through these achievements, we have established a
firm position as a comprehensive manufacturer of food products. As the newly appointed
President, I have inherited these achievements and traditions that have been built by my
predecessors. I am steeling myself for the challenge ahead, and feel keenly aware of my great
responsibility. Based on the DNA that the Group has cultivated throughout its 140-year
history, I will do my utmost to guide the Group to a new growth stage.
Carrying on 140 Years of Tradition, Making a New Start
We succeeded in establishing a solid earnings base, but profits have not yet been achieved
Review of the New Management Framework:
We have formulated the Sapporo Group Long-Term Management Vision “SPEED150,” which
sets forth the overall direction the Company should pursue over the next 10 years through
2026, the year marking the Group’s 150th anniversary of founding. Before I describe the
details and objectives of this plan, I would like to review our achievements and challenges
over the past 10 years.
Masaki Oga
President and
Representative Director
Moving to a growth stage
with the theme of
“transform with unprecedented speed”
Looking Ahead to the Next 10 Years
In 2007, we formulated the New Management Framework for the Sapporo Group
through 2016 to ensure its sustainable growth by considering changes in the environment
and a long-term perspective. Our quantitative targets were consolidated net sales of ¥600.0
billion (including liquor tax) and consolidated operating income of ¥40.0 billion. Aiming for
growth and expansion in the two business domains of “Creating value in food” and “Creating
comfortable surroundings,” the Group sought to develop its businesses by utilizing its assets
and strengths. Specifically, we worked to create high-value-added products and services,
form strategic alliances, promote international expansion, and expand synergies among
Group companies.
Our journey over the past 10 years has involved numerous new and unconventional
challenges. In the Japanese Alcoholic Beverages segment, while retaining our three core
brands, Sapporo Draft Beer Black Label, Yebisu Beer, and Mugi to Hop The gold, we have also
diversified our products outside of beer, such as wine, Japanese liquor, and spirits. We have
been working to enhance our structure for wine in particular, positioning it as a second
pillar after beer. In the International segment, we acquired SLEEMAN BREWERIES LTD. in
Canada and expanded into Vietnam, building a new brewery there. Meanwhile in the U.S.,
we brought Silver Springs Citrus, Inc. and Country Pure Foods, Inc. into the Group, thereby
entering the soft drinks field as well. In the Food & Soft Drinks segment, we integrated
Sapporo Beverage Co., Ltd. and POKKA CORPORATION to establish POKKA SAPPORO Food &
Beverage Ltd. In the Real Estate segment, we completed several major tasks, such as
increasing the value of Yebisu Garden Place and opening GINZA PLACE. These initiatives
in Japan and overseas over the past 10 years have been steadily reflected in our business
results; the Group has achieved seven consecutive years of sales growth since 2010, and
has also developed a structure capable of securing stable profits. However, neither sales nor
profits have met the targets that we set 10 years ago, and the swift achievement of these
targets remains a challenge for us to address. In that sense, my intention is to further expand
and develop the efforts of the past 10 years over the next 10 years.
Quantitative Results for the Entire Group
(¥ Billion) (¥ Billion)
New Management Framework
0 100 200 300 400 500 600 700
0 10 20 30 40 50
Initial Target of the New Management
Framework 2016
2015 2014
2013 2012
2011 2010
2009 2008
449.0
414.6
600 541.8 533.7
518.7 509.8
492.5 449.5
389.2 387.5
2007
Achievement
of target
Profit growth
Sales growth
Earnings base
Operating income (after goodwill amortization) Operating income (before goodwill amortization) Net sales
In light of the above results, we have established a new long-term management vision and
formulated the 2026 Group Vision and the Action Guidelines, both of which will be achieved
by pursuing management reforms and business growth with speed while continuing to
adhere to the Management Philosophy and Fundamental Management Policy. Recognizing
once again that the source of the Group’s growth lies in the brand assets cultivated over
the Group’s 140-year history since it was founded, the Company has positioned “Alcoholic
Beverages,” “Food” and “Soft Drinks” as the Group’s three core business fields, and will work
to nurture and strengthen the Group’s brands along with the Real Estate segment. The
Company stands out among the numerous food companies in Japan for conducting business
in all three fields of “Alcoholic Beverages,” “Food” and “Soft Drinks.” Leveraging this unique
strength, the Company will work to supply distinctive products and services worldwide
in conjunction with expanding its contact points with customers, with the aim of driving
robust growth. The 10 years through 2026 have been divided into three periods, the first
being a four-year period (2017–2020) that is covered by the First Medium-Term Management
Plan 2020, during which time the Company aims to transition to a growth stage as early as
possible based on the theme of “Transform with Unprecedented Speed.” Quantitative targets
for 2020 are for net sales of ¥640.0 billion (including liquor tax) and operating income before
amortization of goodwill of ¥34.0 billion. For net sales, we plan to continue the unbroken
trend of sales growth since 2010, and for operating income, we aim to achieve a record high
for the Group during the First Medium-Term Management Plan period.
Our business strategy is to enhance our cash generation capabilities by achieving
continuous growth and producing results based on the identification of competitive fields
in each business. These efforts will follow three themes: 1) achieve steady growth based on
identification of competitive fields in the existing five segments; 2) enhance profitability in
the Vietnamese business, North American soft drinks business and the food & soft drinks
business; and 3) capture growth opportunities by allocating resources to growth in the food
field and global business expansion.
In Group management, the Company will take the lead in strengthening its platform
through the strategic shift of resources along with business structure reforms and promotion
of segment management. We will implement a Group structure that fits the actual state of
growth and optimization of Head Office functions, and strengthen three platform functions:
for the R&D function, we will bolster human resources and research and development
expenses to drive growth in the food field; for the personnel and human resources function,
we will shift human resources to growth fields and implement health promotion measures;
and for the finance function, we will enhance our overall cash flow generation capabilities
and strengthen our financial base to enable us to promptly address the changing market
environment and investment opportunities by enhancing asset efficiency and bolstering
monitoring.
We intend to accelerate the pace of our growth over the next years up to our 150th
anniversary. At the same time, we have made it an important management priority to return
profits to shareholders appropriately. Under our current plan, we have set a financial indicator
for our dividend payout ratio of around 30%. Moreover, on July 1, 2016, we implemented a
consolidation of shares at a ratio of 1 share for each 5 shares of the Company’s common
shares, and conducted a dividend payment of ¥37 per share for fiscal 2016 in line with our
basic policy. This corresponds to a dividend payout ratio of 30.4%. We also plan to pay an
annual dividend from surplus of ¥37 per share for fiscal 2017.
Furthermore, to enhance corporate communication as set forth in SPEED150, we will
ensure transparency and fairness in management by enhancing corporate governance in
conjunction with maintaining integrity in corporate conduct based on the Sapporo Group’s
Basic CSR Policy. Through these measures, we will strive to disclose information proactively
and appropriately and foster interactive communication, thereby deepening our relationships
of trust with all stakeholders.
Our mission is to build brands that will delight our customers and nurture their passion
for tomorrow through our businesses in the fields of “Alcoholic Beverages,” “Food” and “Soft
Drinks.” To achieve this mission, it is essential that employees perform their jobs with joy and
a sense of satisfaction. We will maximize our results by building organizations and systems
that enable each employee to contribute their individual strengths and generate a powerful
sense of Group solidarity.
I ask all our stakeholders to continue their faithful support for Sapporo Holdings.
To Our Stakeholders
The Sapporo Group will identify its competitive advantages in every business, achieve continuous growth and produce results by conducting management focused on leveraging strengths and solving issues in those fields. In this way, the Group will enhance its cash generation capabilities and transform with unprecedented speed to reach a new growth stage.
Transform with Unprecedented Speed
First Medium-Term Management Plan 2020 (2017–2020)
The Group will enhance
brand strength and
achieve continuous growth
Japanese Alcoholic Beverages International
Food & Soft Drinks Restaurants Real Estate
Continuous growth in existing businesses
The Group will enhance
the profitability
of the investment business
Producing results from our investments
Vietnamese Business
North American Soft Drinks Business Food & Soft Drinks Business
Create Sapporo’s unique
“new food value”
Develop North American regional management functions, establish a business portfolio and promote growth [North America]
Improve the Group’s presence in each business in many different countries [Southeast Asia]
Promote global business
expansion in North America
and Southeast Asia
Capturing growth opportunities
Focus on potential of soybeans, including their contribution to solving environmental issues and the fulfillment of health functions as a source of vegetable protein
Research into materials and functions
Acquire the resources needed to strengthen product development and seasoning and processing, in addition to harnessing fermentation technology
Manufacturing and processing technology
Focus on the fields of seasonings, seasoned foods, and prepared foods, leveraging knowledge in the lemon and soup businesses
Consumer viewpoint
Transformation of the Group management platform
Finance
Proactive invest in the fields of “Alcoholic Beverages,” “Food,” and “Soft Drinks” and shift to a strong financial position
HR
Dramatically shift human resources to growth fields
R&D
Strengthen the R&D framework to spearhead growth
Under the First Medium-Term Management Plan 2020, the Group will take the lead in executing the transformation of the management platform with unprecedented speed, in order to spur Group-wide growth. In particular, in the Group management strategy, we will put in place an organizational structure and supportive Group Head Office functions optimal for the “Food” field, which will drive growth, and the Group’s global business growth by 2018. At the same time, we will also accelerate initiatives to promote growth at each stage of R&D, human resources, and finance.
The Group will enhance its cash flow generation capabilities, and
allocate cash to investments in new growth opportunities.
Business activities
Take the lead in executing the transformation of the management platform
with unprecedented speed, in order to spur the Group’s growth
Group management
Maintain sales growth that has continued since 2010
SOYAFARM
Food for specified health uses (FOSHU) soy milk yogurt
SOYAFARM FOSHU soy milk Lemon
Soybeans Lactic acid bacteria Barley
Hops Research into materials and functions
Fermentation Granulation Extraction Sterilization Pulverization Manufacturing and processing technology Products and services
that enhance dining experiences
Sapporo’s unique
“new food value”
Consumer viewpoint Convenient
Authentic
Health functions Diversified
Group Management Strategy
(¥ Billion)
2017 (Plan)
2020 (Target)
541.8 563.8 640.0
Up18.1%
2016 (Result) 0
300 600 900
(%)
34.0
4.5
5.3
4.5
(¥ Billion)
Operating margin Operating income
2016
(Result) 2017(Plan) (Target)2020
24.2 25.1
0 10 20 30 40 50
0 2 4 6 8
Up40.6% 10
Net sales Operating income (before goodwill amortization) and
Operating margin
R&D
Director (Member of the Board),IKUYA YOSHIDA
Director of Group Research and Development Division of the Company
* Highest-ever operating income: ¥29.2 billion (1995)
Deliver the Group’s highest-ever earnings
*during the First Medium-Term Management Plan period
2020Quantitative Targets
Operating income Net sales
We will enhance R&D competitiveness by promoting Group collaboration and acceleration of open innovation through the establishment of a new Group R&D framework and intensive strategic investment. While strengthening the ability to promote commercialization, we will vigorously push ahead with the creation of new value in the fields of “Alcoholic Beverages,”
“Food” and “Soft Drinks,” thereby guiding the Group to growth.
In our R&D strategy, human resource and R&D expenses will be increased to spur growth in the “Food” field. The Group will tackle the challenges of developing new operations and innovative businesses unique to the Company based on material and function research and manufacturing and processing technology.
Material and function research into the origin of “delicious taste”: In addition to research on the functionality and food cultures of lemons, we are also using our unique knowledge and technology regarding soybeans to promote research and technology development aimed at creating extensive value from soybean materials, ranging from traditional foods to new proposals including use as a source of vegetable protein. Manufacturing and processing technologies to create “delicious taste”: Regarding fermentation, the Group will leverage knowledge of yeast-based fermentation technology centered on alcoholic beverages to develop approaches to the workings of other fermented foods and develop processing and applied technologies. In processing technology, we will develop new processing methods such as freeze-drying, granulation, pulverization, etc.
Financial indicators to be achieved during the four years from 2017 to 2020
¥180.0 billion
Generate cash flow by achieving continuous growth in existing businesses and producing results Cash flowsfrom operating activities
Interest-bearing liabilities
Targeting a debt-to-equity (D/E) ratio of around 1.0
Shareholder returns
Targeting a dividend payout ratio of 30 %
Cash flows
from investing activities
¥130.0 billion
Proactively allocate cash to the fields
of “Alcoholic Beverages,” “Food” and “Soft Drinks”
Finance
Director (Member of the Board),SHINICHI SOYA
Director of Corporate Finance and Business Management Department of the Company
We aim to move quickly to our next growth stage and build a strong financial platform that will enable us to promptly address the changing environment and investment opportunities. To this end, we will enhance asset efficiency and increase our cash flow generation
capabilities, as well as transform our management structure to rapidly recover investments by strengthening plan execution and monitoring of investment strategies.
We plan to achieve the following four financial indicators during the four years from 2017 to 2020.
Cash flows from operating activities of ¥180.0 billion. We will generate cash flow by achieving continuous growth in existing businesses and produce results. We will also start to
generate cash flow by reorganizing our real estate investment portfolio and reshaping our asset portfolio.
Cash flows from investment activities of ¥130.0 billion. We will allocate cash proactively to investments in “Alcoholic Beverages,”
“Food,” and “Soft Drinks.” These will be funded from operating cash flow, with leftover cash being used to reduce interest-bearing liabilities, targeting a reduction in the D/E ratio to around 1.0, and to make returns to shareholders, targeting a dividend payout ratio of around 30%. Shareholder returns have remained fixed with stable dividends so far, but we intend to increase dividends in line with profit growth, maintaining a dividend payout ratio of around 30%.
The Sapporo Group’s most valuable asset is its human resources. Every individual represents the corporate brand itself, and it is the individuality and execution capabilities of each individual that make the brand successful. The basic idea underlying our human resource strategy is to “go beyond boundaries,” and we aim to be an enterprise where our human resources are able to tackle challenges and venture out into unfamiliar fields with cheerfulness, optimism and positive energy.
The Group’s human resource management gives top priority to shifting human resources to the “Food” and global fields, while assigning the right people to the right posts throughout the Group. We will strengthen strategic divisions such as incubation and M&As, as well as the food division, and develop globally successful human resources
through systematic and continuous training, while also concentrating on promoting diversity. To establish a Group human resource management platform, we will review and optimize personnel systems and measures for each individual company and enhance human resources by monitoring and strengthening training of human resources on a Group-wide basis. Furthermore, we will continue to promote work-life balance initiatives and work style reforms and strengthen health promotion measures that seamlessly integrate management, personnel, and health insurance society. Through these measures, we aim to expand and enhance our human resource management platform.
1957: Established Kokusai Inryo Co., Ltd., which later became Sapporo Beverage Co., Ltd. Citron remains popular today.
The launch of Citron (Soda) marked the Sapporo Group’s entry into the soft drinks business.
Started manufacture
and sales of Citron
1909
1979: Changed Company name to SAPPORO LION LIMITED 1934: Opened the Beer Hall
Lion Ginza 7-Chome, now the oldest existing beer hall in Japan The highly modern beer hall has flourished
since its opening. More than 100 years have passed since it was opened in Ginza. Its history of continued development is also a history of continuing support from customers.
Opened YEBISU BEER HALL,
Japan’s first beer hall
1899
1993: Completed construction of the Sapporo Factory on the former site of SAPPORO BREWERIES’ Sapporo Brewery
1994: Completed construction of Yebisu Garden Place on the former site of SAPPORO BREWERIES’ Ebisu Brewery
Provides real estate services starting from real estate development of former factory sites. Provides a stable base that contributes significantly to the Group’s growth.
Established Seiwa
Real Estate Co., Ltd.
1988
SAPPORO BREWERIES started overseas expansion in this year. Later, it expanded sales channels throughout North America and Southeast Asia, creating a foundation for further growth.
Began exporting beer
to the United States
1964
1984: Established SAPPORO
U.S.A. INC. and strengthened the foothold for business expansion in North America
1964: Company name changed to SAPPORO BREWERIES LIMITED
Established
the Kaitakushi
Brewery
1876
1877: Launched Sapporo Lager Beer, the first product
1956: Revival of Sapporo Beer The Kaitakushi Brewery
was launched in Sapporo as a government-operated brewery of the Hokkaido Development Commission.
1890: Launched Yebisu Beer
Established
Japan Beer
Brewery Company
1887
Japan Beer Brewery Company was established in Ginza, Tokyo.
The Sapporo Group has
positioned “Alcoholic Beverages,”
“Food,” and “Soft Drinks” as its three core business fields, and will work to nurture and strengthen its brands along with the real estate business. We seek to become an enterprise that helps to provide creative, enriching, and rewarding lifestyles to customers not only in Japan, but also throughout the world.
Taking Food Further
Food & Soft Drinks
2011: Made POKKA CORPORATION a wholly owned subsidiary
2013: Integrated business with POKKA CORPORATION and started operations as POKKA SAPPORO Food & Beverage Ltd.
2014: Completed construction of the new POKKA Malaysia Factory following the main factory in Singapore, and started operations
2015: Entered the soy milk and chilled products business
Restaurants
2009: Opened the first YEBISU BAR jointly developed with SAPPORO BREWERIES in the Ginza Corridor district
2013: Opened the first GINZA LION BEER HALL in Singapore, using the strength of the beer hall format for overseas development
2016: Made primarily Sapporo- based restaurant operator Marushinkawamura Inc. into a consolidated subsidiary
Real Estate
2014: Completed construction of Ebisu First Square 2012: Renamed
Sapporo Real Estate Co., Ltd.
2016: Completed construction of GINZA PLACE
International
2006: Made SLEEMAN BREWERIES LTD. into a consolidated subsidiary and focused on strengthening the SLEEMAN brand
2010: Made SAPPORO VIETNAM LIMITED into a consolidated subsidiary and expanded business in Southeast Asia
2012: Acquired 51% of the shares of Silver Springs Citrus, Inc., making it a consolidated subsidiary 2015: Acquired 51% of the shares of Country Pure Foods, Inc., making it a consolidated subsidiary
2012: Entry into the U.S. soft drinks business
Japanese Alcoholic
Beverages
2006: Entered the shochu business
2012: Opened the Grande Polaire Katsunuma Winery, eyeing the growing market for fine wines
2017: 40th anniversary of the launch of Sapporo Draft Beer Black Label
Started operation
under a holding company framework with SAPPORO HOLDINGS LIMITED as a pure holding company
2016: Acquired 51% of the shares of Miyasaka Jozo Co., Ltd., which manufactures and sells miso, instant miso soup, and freeze-dried products, making it a consolidated subsidiary
Net sales
(¥ Million)
281,032
273,652 279,476 286,000
315,000
2016 2017
(Plan) (Target)2020 2015
200,000 2014
220,000 240,000 260,000 280,000 300,000 320,000
Operating income to net sales Operating income
(¥ Million) (%)
10,193 8,677
11,801 11,850 14,000
0 3,000 6,000 9,000 12,000 15,000
0 2 4 6 8 10
2016 2017 (Plan)
2020 (Target) 2015
2014
Operating income and Operating income to net sales
Note: Figures are before goodwill amortization.
■SAPPORO BREWERIES LIMITED
■YEBISU WINEMART CO., LTD.
■TANOSHIMARU SHUZO CO., LTD.
■SAPPORO ENGINEERING LIMITED
■STARNET CO., LTD.
■SHINSEIEN CO.,LTD.
Segment operating income before goodwill amortization increased by ¥3.1 billion, or 36.0%, to ¥11.8 billion.
Beer Business
In the beer category, strong sales of canned versions of Sapporo Draft Beer Black Label and Yebisu Beer led to a 4% year-on-year increase in the domestic sales volume of beers, marking the second consecutive year of growth. In the happoshu category, sales volume of Goku Zero declined year on year, but in the new-genre beer category Mugi to Hop The gold continued to perform strongly. As a result, overall sales volume in the beer and beer-type beverages category fell 1% year on year, a smaller decline than that seen in the overall market.
RTD Beverages
In the RTD category, sales increased year on year owing to solid performances primarily by the high-value-added collaboration products Sapporo Otoko Ume Sour and Nectar Sour, as well as Kireto Lemon Sour.
In the Japanese beer market, we estimate that total demand for beer and beer-type beverages fell about 2% year on year in 2016, owing to a large drop in demand from the commercial-use market and to consumers shifting from beer and beer-type beverages to RTD beverages. Guided by management’s vision to “Seek to be No. 1 by accumulating one-of-a-kind products,” we worked to achieve further growth by constantly providing customers with a value proposal unique to Sapporo, in conjunction with positioning 2016 as the “first year of a new period of growth in the beer business” and investing aggressively in this business. As a result, net sales in the Japanese Alcoholic Beverages segment rose by ¥5.8 billion, or 2.1%, compared with the previous year to ¥279.5 billion and segment operating income increased by ¥3.1 billion, or 36.0%, to ¥11.7 billion.
Fiscal 2016 Overview
Japanese
Alcoholic Beverages
Wine and Spirits Business
In the wine business, we strengthened marketing of domestic and imported fine wines*, leading to higher sales of Penfolds, an imported wine from Treasury Wine Estates, as well as Taittinger champagne and our Grande Polaire series of Japanese wines. In the spirits business, we achieved year-on-year sales growth, led by solid sales of major international brands such as Bacardi and Dewar’s.
Japanese Liquor Business
In the Japanese liquor business, overall sales increased from the previous year due to continued strong sales of Shochu Kokuimo, Japan’s No. 1 selling blended imo shochu.
We expect the operating environment for our Japanese Alcoholic Beverages segment to remain challenging owing to a shrinking drinking population and the impact of customers shifting from beer and beer-type beverages to
other alcoholic beverages. In the beer category, having set forth our “Beer Revival Declaration” as the core direction of the beer business, we will continue efforts to strengthen our beer brands that have been achieving sales growth amid a decline in overall demand for beer. As we approach the 40th anniversary of the launch of Sapporo Draft Beer Black Label, we will accelerate the brand’s solid sales trend by appealing to its unique style and further expanding the opportunities for consumers to enjoy high-quality drinking experiences. We will strengthen ties with Yebisu brand fans and expand our contact points with these customers for example by introducing Yebisu Hana Miyabi. In the RTD category, under the slogan “Give shape to surprise,” we will add to our success with hit products by developing a lineup of new collaboration RTD beverages that offer consumers unique value. In the wine category, we will continue to strengthen our lineup of fine wines. We also plan to aggressively expand sales of shochu, spirits, and Japanese liquor offerings. In parallel, we will strive to achieve our profit targets by spending effectively and efficiently on marketing that enhances brand value while cutting other costs wherever possible.
* Fine wines are wines priced at ¥1,500 or higher per bottle.
Outlook for 2017
Fiscal 2016 was positioned as the “first year of a new period of growth in the beer business” and all three of our mainstay brands, Sapporo Draft Beer Black Label, Yebisu Beer and Mugi to Hop The gold, achieved growth. Among them, Sapporo Draft Beer Black Label celebrated its 40th product anniversary this year. Its predecessor, Sapporo Bottled Draft Beer was launched on April 1, 1977, with the concept of providing a high-quality draft beer to be enjoyed at home. The product has retained its popularity through the decline in overall demand for beer-type beverages in recent years, recording year-on-year increases in sales volume for two consecutive years since 2015.
Sales Volume of Sapporo Draft Beer Black Label Up
for a Second Consecutive Year and 40th Product Anniversary in 2017
TOPIC
Continue strengthening Black Label and Yebisu
Strengthen Lager, Shirohonoka and other beers
Promote a new genre with Mugi to Hop at the core
Strengthen core beer brands
Strengthen brand leveraging wineries Strengthen dedicated sales structure
for wine
Promote luxury marketing
Expand fine wine sales
Establish small-lot multi-product production structure, promote product development
Carry out activities to expand presence in the EC market
Promote Photo, Beer & Smiles and similar unique initiatives
New measures for growth
Note: Sales volume of Sapporo Draft Beer Black Label brand were up 0.2% year on year in 2015 and 2.8% in 2016.
Net sales
(¥ Million)
49,673
65,401 70,300 79,000 70,501
0 20,000 40,000 60,000 80,000
2016 2017
(Plan) (Target)2020 2015
2014
Operating income and Operating income to net sales
Note: Figures are before goodwill amortization.
Operating income to net sales Operating income
0 1,000 2,000 3,000 4,000 5,000
0 2 4 6 8 10
(¥ Million) (%)
1,430
5,000
1,988
2,577 3,000
2016 2017 (Plan)
2020 (Target) 2015
2014
while segment operating income increased by 487.8%, or
¥0.8 billion, to ¥0.9 billion.
Segment operating income before goodwill amortization increased by 29.7%, or ¥0.6 billion, to ¥2.6 billion.
North American Market
In Canada, SLEEMAN BREWERIES continued to spend aggressively on marketing its core premium brands. As a result, its overall beer sales volume (excluding Sapporo brand beer) increased by 2% year on year. Sapporo U.S.A. achieved a 1% year-on-year increase in sales volume as a result of efforts to expand its core target customer markets to the wider Asian-American and general population market segments in addition to continuing its existing measures targeting the Japanese-American market segment. In the U.S. soft drinks market, sales increased year on year due to a solid performance by a fruit juice sorbet business acquired by Country Pure Foods, Inc. in May. Silver Springs Citrus, Inc. also posted higher sales year on In the North American beer market, we estimate that
total demand was largely flat year on year for the U.S. and Canada. In Asia, meanwhile, the beer market remained on an expansion track as signs of slower growth in China were countered by robust markets in other Asian countries, supported by growing populations and firm economic growth. In the International segment, we conducted aggressive marketing activities targeting the premium beer markets in the key regions of North America and Southeast Asia. Thanks to these activities, overall beer sales volume for the Sapporo brand increased by 6% year on year for the International segment as a whole. In addition, we expanded our sales channels in the U.S. fruit juice market. Despite these efforts, the International segment’s net sales decreased by ¥5.1 billion, or 7.2%, to ¥65.4 billion, partly due to the negative impact of the stronger yen,
Fiscal 2016 Overview
International
■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.
■COUNTRY PURE FOODS, INC. and another 11 companies
production system to lower costs. Sapporo U.S.A. plans to establish a wider presence for the Sapporo brand by strategically allocating resources in areas and sales channels that are expected to grow. In the U.S. soft drinks market, we plan to expand sales and profits by acquiring new sales channels, improving our production network, and establishing a management platform that will leverage the strengths of our two subsidiaries, Silver Springs Citrus, Inc. and Country Pure Foods, Inc. In the Vietnamese market, we aim to expand sales and improve profits by promoting the brand value of SAPPORO PREMIUM Beer in stores, which serve as points of contact with customers, and by undertaking effective marketing activities that stimulate consumer purchasing behavior. In the Singapore market, we will push ahead with expanding sales channels in the household and commercial-use markets.
year (after adjustment for the period included in Sapporo Group results) by capturing new sales channels.
Asia and Oceania Market
In Vietnam, sales volume increased year on year, reflecting a solid performance supported by the renewal of canned versions of SAPPORO PREMIUM Beer in November 2015. In addition, in July 2016 we launched SAPPORO BLUECAP, which has proven popular among customers. In Singapore, we achieved year-on-year growth in sales volume thanks to cooperative efforts with our local subsidiary to expand sales channels to local household and commercial-use markets. In South Korea and Oceania, we worked to strengthen sales, resulting in year-on-year increases in sales volumes for beer.
In North America, SLEEMAN BREWERIES aims to achieve its profit goals and expand its share of the overall beer market by executing marketing strategies that match the special characteristics of its brands and by optimizing its
Outlook for 2017
In 2006, the Company acquired SLEEMAN BREWERIES LTD., Canada’s third-largest beer manufacturer with a strong reputation in premium beer, which shares many common approaches to manufacturing with Sapporo. Since the acquisition, SLEEMAN has achieved a 10-year streak of sales increases, recording a record-high profit in fiscal 2016. The acquisition secured Sapporo a manufacturing base and distribution channels in North America, helping it to stay the No. 1 Asian beer in the U.S. for 30 consecutive years.
10-Year Journey Since the Acquisition of SLEEMAN BREWERIES
TOPIC
Actively invest in premium brand Focus on the four provinces that
account for 90% of beer consumption Value brand pricing and packaging
strategy
SLEEMAN BREWERIES
Focus on California and Texas Bolster sales staff and promote
products to Asian restaurants Sapporo U.S.A.
Promote the SAPPORO PREMIUM brand consistently
Foray into medium-priced product market with SAPPORO BLUECAP Propose new products for export to
Southeast Asia
Vietnam
Strengthen measures targeting South Korea, Singapore and Taiwan
Other Asian countries
Expand sales channels through differentiated products
Strengthen West Coast, promote sales of small-capacity plastic containers Silver Springs Citrus
Ensure enhanced production capacity following expanded Sidekicks (fruit juice sorbet) sales Develop differentiated products, reduce cost
and appeal the price Country Pure Foods
North America (beer)
Improve foundation and prepare for integration of Silver Springs Citrus and Country Pure Foods
North America (soft drinks)
Net sales
(¥ Million)
133,439 135,671 137,918 142,200 162,000
2016 2017
(Plan) (Target)2020 2015
0 2014
60,000 120,000 180,000
Operating income and Operating income to net sales
Note: Figures are before goodwill amortization.
(%) (¥ Million)
2,628
3,475 3,900
6,500
2,713
0 1,000 2,000 3,000 4,000 5,000 6,000 7,000
2016 2017 (Plan)
2020 (Target) 2015
2014 0
1 2 3 4 5 6 7
Operating income to net sales Operating income
sharply, supported by solid sales of our core Kireto Lemon (in PET and glass bottles) along with new markets created through the launch of new products, such as Kireto Lemon- Moisture, which is labeled as a Food with Function Claims. In domestic food, we worked to strengthen the brand lineup with several new additions, including Jikkuri Kotokoto Gohobi Dining, packaged in a microwavable pouch. In the lemon- based food category, sales value increased 5% year on year, reflecting solid sales of our mainstay POKKA Lemon 100.
Domestic Restaurants Business
In the domestic restaurants business, the Café de Crié coffee shop chain achieved year-on-year sales growth as it aggressively opened shops in collaboration with bookstores and inside hospitals.
Overseas Soft Drinks Business
In the overseas soft drinks business, we maintained our top share* of Singapore’s tea drinks market, including We estimate that domestic demand for soft drinks
increased 2% year on year. In this environment, we concentrated investments on core brands centered on lemon-based products and soups in order to strengthen and cultivate them. As a result, the Food & Soft Drinks segment recorded net sales of ¥137.9 billion, up ¥2.2 billion, or 1.7%, year on year, and posted segment operating income of ¥1.3 billion, up ¥0.9 billion, or 202.6%.
Segment operating income before goodwill amortization increased by 28.1%, or ¥0.8 billion, to ¥3.5 billion.
Domestic Food and Soft Drinks Business
In domestic soft drinks, we worked to establish a unique market position by launching various products tailored to customer preferences, including Nippon Oolong made from domestic tea leaves. In lemon beverages, sales expandedFiscal 2016 Overview
Food & Soft Drinks
■ POKKA SAPPORO FOOD & BEVERAGE LTD.
■POKKA CREATE CO., LTD.
■PS BEVERAGE LTD.
■ STAR BEVERAGE SERVICE CO., LTD.
■POKKA SAPPORO HOKKAIDO LTD.
■NIHON BEANS CO., LTD.
■ POKKA CORPORATION (SINGAPORE) PTE. LTD.
■ POKKA INTERNATIONAL PTE LTD.
■ PT. POKKA DIMA INTERNATIONAL and another 8 companies
our approximately 70% share of the green tea market. In addition, our POKKA brand was named the top brand in the non-carbonated drinks category of Singapore’s
“Influential Brands Awards 2016,” an annual award program that recognizes companies that have established good relationships with customers and continue to provide brand value.
Japan’s soft drinks industry is expected to continue facing a difficult operating environment, characterized by the diversification of consumer preferences, stiff competition among beverage makers, and cost increases caused by a weaker yen and rising raw material prices. Against this backdrop, in the domestic food and soft drinks business, we plan to focus intensively on customer perspectives and deliver new value to our customers in areas where we can demonstrate our advantages. In domestic soft drinks, we
Outlook for 2017
will carve out a unique market position by strengthening our Shokkan-kei (texture), Sozai-kei (ingredient) and Gabunomi series of brands. In the lemon beverages category, we will strengthen our position as a leader in the lemon-based drinks market by developing products featuring new forms of added value in conjunction with bolstering marketing of Kireto Lemon brand products. In the soups category, we will increase demand by gradually expanding the lineup to include soups that are optimal for consumption in a more diverse range of situations, such as the retort-packaged soup we launched in 2016. In the new soy milk category, we plan to expand sales of our existing SOYAFARM brand. In the domestic restaurants business, we will work to stimulate business at existing outlets, and develop new restaurant formats. In the overseas soft drinks business, we will work to expand sales and streamline operations in the core Singapore market. In Indonesia, we will begin full-fledged production and sales activities at our local joint venture. Licensed-out production has also begun in Myanmar. Through these and other measures, we will propose products that meet the needs of consumers in each country with the aim of driving further growth. Bolster profits by sorting out unprofitable
products and channels
—Strengthen food texture-type, ingredient-type and Gabunomi brands
Soft drinks
* Based on data from Nielsen Singapore MarketTrack March 2016 (Copyright 2016, The Nielsen Company)
POKKA Lemon was launched in February 1957. The product created domestic demand for lemon-based products in Japan and expanded the market. This year marks its 60th anniversary.
In lemon beverages in 2016, mainstay Kireto Lemon (PET and glass bottle) was complemented by the launch of Kireto Lemon- Moisture, which is labeled as a Food with Function Claims. In 2017, we plan to launch a series of lemon-related products, and to promote the development of products offering new value to further consolidate our position as the leader in the lemon-based products market.
Expanding Lemon-Based Products with a Secure Position as the Leader
in the Lemon-Based Drinks Market
TOPIC
Focus on function research, pursue feasibility of unexplored fields Carry out procurement corresponding
to the application features and expand business to B-to-B
Implement strategic public relations activities in collaboration with the regions
Lemon-based products
Increase soup consumption scenarios Break into the staple food field such as
risotto produced using a new method
Soups
Expand new format for Café de Crié restaurants
Increase Maison de VERRE brand penetration
Domestic restaurants
Ensure smooth launch in Indonesia and Myanmar
Strengthen existing market based on demand information in the Middle East, etc.
Maintain position in Singapore market
Overseas soft drinks
Grow soy milk yogurt
Consider streamlining business structure, building own production facility
