GAINING MOMENTUM
SAPPORO HOLDINGS LIMITED
Annual Report 2011
00
RAISING CORPORATE VALUE WITH PORTFOLIO MANAGEMENT 00 Profile02 Our Business Portfolio
04 Strategies and Financial Highlights
06
TO OUR STAKEHOLDERS12
FEATURE: LAYING THE GROUNDWORK FOR DYNAMIC GROWTH 12 1 Taking the Sapporo Brand to the World 14 2 POKKA SAPPORO FOOD &BEVERAGE LTD. Established
16
PERFORMANCE REVIEW AND PLAN 16 Japanese Alcoholic Beverages18 International Alcoholic Beverages 20 Soft Drinks
21 POKKA Group 22 Restaurants 23 Real Estate
24
SPECIAL DIALOGUE: THE SAPPORO GROUP’S CORPORATE GOVERNANCE27
CORPORATE GOVERNANCE30
BOARD OF DIRECTORS AND AUDITORS32
FIVE-YEAR SUMMARY33
MANAGEMENT’S DISCUSSION AND ANALYSIS38
CONSOLIDATED BALANCE SHEETS40
CONSOLIDATED STATEMENTS OF INCOMECONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
41
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY42
CONSOLIDATED STATEMENTS OF CASH FLOWS43
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS65
CORPORATE DATACONTENTS
PRESERVATION
THROUGH PROGRESS
2011 2013
(Plan)
Target
¥535.0
billionOther Businesses 1.0
0.8
Real Estate 24.0
22.5
Restaurants 26.0
24.1
Food & Soft Drinks
140.0
International 44.0
Japanese
Alcoholic Beverages 300.0 268.2
25.9 112.7
Results
¥454.1
billionNet Sales
(¥ Billion,)
The Sapporo Group’s Portfolio Management
In 2007, the Sapporo Group formulated the New Management Framework to be realized by 2016, the Group’s
140th founding anniversary. Guided by this framework, we are boldly executing the Sapporo Group Management
Plan 2012-2013, a growth strategy designed to put the Sapporo Group on a path to dynamic growth.
In the year ended December 31, 2011, we made powerful strides towards shifting from a phase of creating
an earnings base to a period for solidifying our growth trajectory. We revitalized the Japanese Alcoholic Beverages
business and the Real Estate business, both of which are steady sources of earnings for the Group, while executing
a steady series of strategic investments in the International Alcoholic Beverages business and the Food & Soft
Drinks business, which are positioned as future growth drivers.
For example, the integration of the POKKA Group into the Sapporo Group alone had a considerable positive
impact on the Sapporo Group’s business performance. However, Sapporo Beverage Co., Ltd. and the POKKA Group
will be combined into a single company, POKKA SAPPORO FOOD & BEVERAGE LTD., which will become the driving
engine behind the Food & Soft Drinks business. We are confident that the Food & Soft Drinks business is well
positioned to grow into the Sapporo Group’s third core business alongside the Alcoholic Beverages business and
the Real Estate business.
Profile
Net Sales (¥ Million)
11 12 (plan) 13 (plan) 300,000
200,000
100,000
0 268,189
288,000 300,000
Net Sales (¥ Million)
11 12 (plan) 13 (plan) 45,000
30,000
15,000
0
25,888 37,300
44,000
Operating Income (¥ Million)
11 12 (plan) 13 (plan) 15,000
10,000
5,000
0
9,305 10,500 12,000
Operating Income (¥ Million)
11 12 (plan) 13 (plan) 450
300
150
0
378
0*
200
Japanese Alcoholic
Beverages International Restaurants
Products and Services
• Beer
• Soft drinks
• Expected to become a Group growth driver, although current business scale and earnings contribution are small relative to the Group as a whole
• North American business has contin- ued to perform well
• Developing business in Southeast Asia following the start of operation of the Vietnam Plant in November 2011
• Basic plan is to improve earnings mainly through cost cutting
• Opening restaurants under new formats, such as Yebisu Bar, this business will harness synergies with the Japanese Alcoholic Beverages business as it offer customers comfortable surroundings. Products and Services
• Ginza Lion and other general restaurant chains
• Core business accounting for majority of net sales and earnings
• Working to create new growth brands, in addition to enhancing brand power through the concen- trated investment of business resources in core products Recent example: Premium Alcohol Free, a strong-selling, non-alcoholic beer brand
• Also pursuing efficiency through cost cutting
Products and Services
• Beer
• Happo-shu (low-malt beer)
• New product genres
• Non-alcoholic beer
• Wine and spirits
• Shochu (Japanese distilled spirits)
• Ready to drink beverages
Net Sales (¥ Million)
11 12 (plan) 13 (plan) 30,000
20,000
10,000
0
24,091 24,900 26,000
Operating Income (¥ Million)
11 12 (plan) 13 (plan) 900
600
300
0
219 600
800
* ¥1.8 billion impact of upfront investment costs in Vietnam
Net Sales (¥ Million)
11 12 (plan) 13 (plan) 150,000
100,000
50,000
0
112,708 134,600
140,000
Operating Income (¥ Million)
11 12 (plan) 13 (plan) 4,500
3,000
1,500
0 3,691
3,000* 3,100
Products and Services
• Soft drinks
• Mineral water products
Soft Drinks
Food & Soft Drinks
Real Estate
• The Food & Soft Drinks business is the third source of stable profits after Alcoholic Beverages and Real Estate
• Utilize Group synergies and strategic alliances, focusing on investing business resources in core brands
• Capture synergies through manage- ment integration with the POKKA Group (expand sales of Sapporo products through increase in the number of vending machines owned, etc.) going forward
• A beverage and food product group with strengths in beverages containing lemon juice and soups
• Possesses high brand recognition and business development capabili- ties in Asia, including the restaurants business
• From the first quarter of 2012, the former Soft Drinks and POKKA Group segments were integrated to work towards targets as the Food & Soft Drinks business.
• From the first quarter of 2012, , the former Soft Drinks and POKKA Group segments were integrated to work towards targets as the Food & Soft Drinks business.
• Strong earnings contributor, supporting the Sapporo Group’s business results
• Majority of operating income is gener- ated from real estate rental business
• Basic plan is to enhance the value of existing properties
• Also acquiring new assets focusing on prime properties only
• Large unrealized gains due to hold- ing premium property in an area with high market prices for real estate (See page 60 Note 19 Real Estate for Lease)
Products and Services
• Soft drinks (Domestic and International)
• Lemon-based products
• Soup
• Restaurants (Domestic and International) Products and Services
• Yebisu Garden Place
• Sapporo Factory
• Sapporo Ginza Building
• Seiwa Yebisu Building, etc.
Our Business Portfolio
Net Sales (¥ Million)
11 12 (plan) 13 (plan) 30,000
20,000
10,000
0
22,468 24,400 24,000
Operating Income (¥ Million)
11 12 (plan) 13 (plan) 12,000
8,000
4,000
0
8,553 9,300 8,600*
* Impact of increased amortization of goodwill
* Impact of redeveloping the Seiwa Yebisu Building
POKKA Group
Years ended December 31 2007 2008 2009 2010 For the Year
Net sales
Including tax . . . ¥449,011 ¥414,558 ¥387,534 ¥389,245 Excluding 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 36,475 39,080
Net income . . . 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 1,032 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 tax . . . 4.0% 5.2% 4.9% 5.7%
Excluding 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%
Strengthening the Group’s Business Foundations
Bolster earnings base and financial base
Groundwork for future growth strategies
Sapporo Group New Management Framework
Net Sales
(¥ Million)
n Net Sales
n Operating Income before goodwill amortization n ROE (Before goodwill amortization)
9.8%
4.7% 7.0%
5.3%
0 200,000 400,000 600,000
Millions of yen
2011 2012 (plan) 2013 (plan) 2016 (plan)
¥454,100 ¥510,000 ¥535,000
341,485 396,000 420,000
18,884 20,000 21,000
21,994 23,900 24,800
46,477 49,600 —
3,165 6,300 7,400
13,423 58,400 —
24,482 25,700 —
3,109 3,900 —
22,313 — —
(28,579) — —
124,775 — —
550,784 — —
219,168 245,000 247,000
10.8% 13.7% —
5.5% 5.1% 5.0%
6.4% 6.0% 5.9%
1.8 1.9 1.9
22.4% — —
2.5% 5.0% 5.7%
5.1% 8.2% 8.7%
About 1 time
9.0 %
¥600,000 million
¥450,000 million
¥40,000 million
8.0 %
Net sales (incl. tax)
Operating income to net sales
(excl. tax; before goodwill amortization)
Net sales (excl. tax)
Debt-to-equity ratio (times)
Operating income before goodwill amortization
ROE (Before goodwill amortization)
Strategic Targets for 140th anniversar y of Group’s founding (2016)
Dynamic Growth
Solidifying the Growth Trajectory
Build unique competitive advantages
in each business
Enhance existence value in new areas
through growth strategies
Operating income before goodwill amortization
(¥ Million)
Strategies and Financial Highlights
8.7% 8.0% 8.2%
5.1%
0 15,000 30,000 45,000
Business Climate in Fiscal 2011
During 2011, the Japanese economy experienced a sharp slowdown as a result of the impact of the Great East Japan Earthquake, which struck on March 11. Thereafter, although consumer spending picked up in step with the disaster recovery effort, the economic outlook was shrouded in uncertainty due to the European debt crisis, the continued appreciation of the yen and other factors.
In the alcoholic beverages and restaurant industries, the earthquake had a significant impact on corporate earnings both indirectly and directly. In the soft drinks industry, however, the disaster boosted demand, along with the effects of fine weather. In the real estate industry, vacancy rates in the Tokyo office rental market were mostly unchanged, but rents continued to fall.
In this climate, the Sapporo Group worked to implement the Sapporo Group Management Plan 2011–2012.
Higher Net Sales and Operating Income
Consolidated net sales jumped ¥64.9 billion, or 16.7%, to ¥454.1 billion, reflecting in part the inclusion of the POKKA Group in the consolidated accounts since April 2011. Operating income increased in all business segments when upfront investment costs of expanding into Vietnam were excluded from the International Alcoholic Beverages business and the amortization of goodwill was excluded from the Soft Drinks business. As a result, operating income increased sharply by ¥3.5 billion, or 22.6%, to ¥18.9 billion. However, the Sapporo Group was impacted by the application of accounting standards for asset retirement obligations and recorded disaster losses caused by the Great East Japan Earthquake under extraordinary losses. Moreover, an extraordinary gain on the sale of property, plant and equipment was recorded in the previous fiscal year. As a result, net income decreased ¥7.6 billion, or 70.6%, year on year to ¥3.2 billion.
Business Climate in Fiscal 2011
President Kamijo Talks About Strategy
TSUTOMU KAMIJO
President and Representative Director, Group CEO
25.0 20.0 15.0 10.0 5.0 0.0
2006 2007 2008 2009*1 2010*2 2011*3
(¥ billion)
8.6
13.2 15.6 13.9 16.6
22.0
Long-term Management Strategies: Sapporo Group’s New Management Framework
Target (for 2016, 140th anniversary of founding)
•Consol. sales ¥600 bn (incl. liquor taxes)
¥450 bn (excl. liquor taxes)
• Consol. operating income ¥40 bn (before goodwill amortization)
• Operating margin 9% (excl. liquor taxes; before goodwill amortization)
• ROE 8% or higher (before goodwill amortization)
•D/E ratio about 1.0 time Four basic strategies for
growth
1. Concentrate resource on high-value-added prod- ucts and services 2. Engage in strategic
alliances aimed at build- ing competitive advan- tage and expanding business
3. Actively expand overseas operation
4. Expand group synergies on the strategic and operational fronts Food value
creation
Creating comfortable surroundings
2007
Basic approach: Working steadily toward long-term goals while also boldly revising resource allocations, executing strategic investments, and enhancing competitiveness through aggressive management
n Operating income before goodwill amortization
Overview of 2011 Results –Trends–
Steady growth in operating income before goodwill amortization.
Profits growth trend intact even after excluding the contributions from the consolidation of POKKA Group
Trends in operating income before goodwill amortization
*1: ¥2.4 billion increase in cost burden in 2009 owing to accounting changes from 2009
*2: ¥1.8 billion cost increase from amortization costs for new sales and logistics system, etc.
*3: POKKA Group income items consolidated from Q2
In other developments in 2011, I am pleased to report that the Sapporo Group was able to launch a five-year straight bond issue with a five-year maturity at a low annual coupon rate of 0.62% in September. This bond issue was facilitated by the Group’s recently upgraded bond rating, which was raised by one notch in recognition of the Group’s efforts to enhance its earnings base and financial position.
Progress With the Sapporo Group’s
New Management Framework
Looking Back at the Sapporo Group Management Plan 2011–2012
We positioned 2011 as the first year of a period for solidifying our growth trajectory so that the Group can drive dynamic growth and achieve the New Management Framework. Accordingly, we promoted three basic strategies under the Sapporo Group Management Plan 2011–2012. The three strategies are “growth in new areas,” “growth in all businesses” and “bolster management capabilities that underpin growth.”
Our first strategy is “growth in new areas.” The Sapporo Group has completed the conversion of the POKKA Group into a consolidated subsidiary. The POKKA Group will bring new competitive advantages to the Sapporo Group’s business portfolio. In March 2012, we established POKKA SAPPORO FOOD & BEVERAGE LTD., eyeing the start of business operations in 2013. We have also been active in forming alliances. We entered into a commission sales contract for Makgeolli, a South Korean alcoholic beverage, with CJ CheilJedang Corp., the leading South Koreans food manufacturer. We also forged a domestic business alliance concerning exclusive sales of spirits and certain other products with BACARDI JAPAN LIMITED, the owner of leading brands such as BACARDI rum, which boasts the highest global rum sales volume. In other alliances, we commenced production and sales of SAPPORO PREMIUM-brand beers in the Oceanian market through a licensing agreement with Coopers Brewery. We also completed the Long An Brewery in Vietnam, achieving a longstanding goal to build a manufacturing site in this strategic region. In November 2011, the Sapporo Group commenced beer production and sales in Vietnam.
Growth in All Businesses
Our next strategy is “growth in all businesses.” The Sapporo Group has steadily produced results by focus- ing on the key priority of strengthening the Sapporo brand. For details on business performance, please refer to the detailed review of operations starting on page 16 of this report.
Bolster Management Capabilities That Underpin Growth
Finally, our third strategy is to “bolster management capabilities that underpin growth.” We have parti- tioned the group headquarters functions of Sapporo Holdings Limited, our pure holding company, and centralized highly specialized professional operations and common functions among the Group’s operating companies at Sapporo Group Management Co., Ltd. Under this structure, Sapporo Group Management will provide strong, efficient support to the entire Group.
Through these strategies, the Sapporo Group has achieved its initial operating income forecast. We believe that the Sapporo Group has thus made steady progress with management strategies designed to solidify its growth trajectory.
Aiming for a New Group Management Structure
The Sapporo Group will strive to develop businesses that leverage its strengths, focusing on two business domains we refer to as the “food value creation business” and the “creating comfortable surroundings business.” In the food value creation business, we have positioned the Japanese Alcoholic Beverages business, the International Alcoholic Beverages business and Food & Soft Drinks business as core domains that will drive significant growth for the Group as a whole. As such, our priority is to invest in the growth of each of these fields. In the creating comfortable surroundings business, we expect our Real Estate business to deliver stable profits based on excellent properties. Meanwhile, our Restaurants business shares the characteristics of both the food value creation and creating comfortable surroundings businesses.
Under this new management structure, we aim to develop the Food & Soft Drinks business into the Group’s third source of stable profits, alongside Alcoholic Beverages and Real Estate, in 2016, the target year of the New Management Framework. Specifically, we aim to increase the share of net sales from the Food & Soft Drinks business to approximately 30% of the Group’s net sales target for 2016.
Medium-term Target of New Group Management Structure
In addition to alcoholic beverages and real estate, we aim to grow the Food & Soft Drinks business into the Group’s third source of stable profits.
Share of Food & Soft Drinks business in the Group’s targets
(¥ billion) 2010 results* 2016 targets Change Growth rate
Net sales 133.0 170.0 37.0 128%
Operating income
(Before goodwill amortization) 5.2 8.5 3.3 163%
Operating margin
(Before goodwill amortization) 3.9% 5.0% 1.1% –
2016 sales breakdown (incl. liquor taxes)
Food & Soft Drinks
¥170.0 bn Others
¥430.0 bn
About 30% of the Group target
International Business Development
The Pacific Rim region is as a key region for the Sapporo Group. Within this area, the Group has adopted a strategy focused on two particular regions, namely North America and Asia and Oceania.
In North America, we will accelerate the growth of the strong-performing Canadian premium brand SLEEMAN, along with that of SAPPORO U.S.A., INC., which has cemented a dominant position for the Sapporo brand as the top Asian beer in the U.S.
In Asia and Oceania, we will first seek to rapidly establish a foothold in the Vietnam market from the Vietnam-based Long An Brewery, which was completed in November 2011. From there, we plan to move into other countries in Southeast Asia.
The Sapporo Group also intends to promote international business development in the Food & Soft Drinks business. In addition to developing the POKKA brand, which boasts a large market share mainly in Singapore, we have taken other actions such as acquiring the majority of shares issued by Silver Springs Citrus, Inc., one of the biggest private-brand chilled beverage manufacturers in the U.S.
Sapporo Group Management Plan 2012–2013
Under the Sapporo Group Management Plan 2012–2013, the next two years are a critical period for solidi- fying the growth trajectory of the Sapporo Group and advancing to a dynamic growth stage. Accordingly, we are currently building a new Group management structure.
The former Soft Drinks and POKKA Group segments have been integrated into the new Food & Soft Drinks segment, paving the way for POKKA SAPPORO FOOD & BEVERAGE LTD. to start business operations in 2013. In addition, the former International Alcoholic Beverages segment has been renamed as the
International segment from the year ending December 2012. Under this new structure, the Sapporo Group is targeting net sales of ¥535.0 billion, operating income of ¥21.0 billion and net income of ¥7.4 billion for the year ending December 2013.
* 2010 results are the total of actual results for the Soft Drinks business prior to integration with POKKA Group and the results of the POKKA Group.
2012 2013 2014 2015 2016 Launch the new group management
structure for dynamic growth!
I. Challenge toward growth in all businesses II. Carrying out growth measures
140th anniversary of Group’s founding
Achievement of the New Management Framework’s targets III. Creating new opportunities for growth
Basic Strategies
We have three basic strategies for spurring the Sapporo Group to dynamic growth. The first strategy is called “Challenge toward growth in all businesses.” While harnessing the strengths of each business seg- ment, including their respective brands and business resources, we will tackle new challenges to prevail in the markets.
The second strategy is “Carrying out growth measures.” We will further solidify our foundations, includ- ing through additional upfront investments, to ensure that we reap the benefits of initiatives taken over the past few years. Examples include completing the integration process of POKKA SAPPORO FOOD & BEVERAGE LTD. and capturing synergies, developing the Vietnamese market, and increasing our equity in Yebisu Garden Place to 100%.
The third strategy is “creating new opportunities for growth.” This strategy will entail actively promoting M&As and alliances both in Japan and overseas.
Strategic Investments
Proactive investment in the Sapporo Group’s growth will remain a priority. During the 5 years from 2012 to 2016, we plan to strategically invest between ¥150 billion and ¥200 billion (including ordinary expendi- tures). Our basic policy is to execute these investments within the scope of our operating cash flows. In fiscal 2012, we plan to invest approximately ¥64.0 billion, including ordinary capital expenditures. Main investment projects approved at this time include increasing our equity in Yebisu Garden Place to 100%, and the investment in Silver Springs Citrus of the U.S.
The Sapporo Group has strengthened its foundations for promoting growth strategies, and has seen its credit rating return to an A-level rating. Therefore, we believe that business conditions now warrant proactive investments in growth.
Overall Group Strategy
1. Further promotion of efficiency in Group management
2. Initiatives for enhancing Group brand
To expand the Sapporo Group’s customer base, we will implement Group-wide initiatives in the areas where we can leverage the Group’s strengths.
3. Strengthening development of Group human resources
We will develop human resources to strengthen abilities to implement growth strategy and respond to changes. Holding company/Group headquarters
Sapporo Holdings Ltd.
Functional company
Operating companies
Sapporo Group Management Co., Ltd.
As the size of the Group expands, we will further concen- trate common operations on Sapporo Group Management Co., Ltd., a functional support company.
To additionally handle purchasing and logistics for the Group
Established in March 2012 Operations to start in January 2013
Changed name in January 2012
Overall Group Strategy
As the size of the Group has expanded through M&As and organic growth, we have centralized common operations of each operating company, such as purchasing and logistics, at Sapporo Group Management Co., Ltd., to promote even more efficient Group management.
Another priority is to enhance Group brands. To expand the Group’s customer base, we will imple- ment Group-wide initiatives primarily in key areas where we can leverage the Group’s strengths.
Finally, we believe that human resources development is of paramount importance, as human resources are the driving force behind the Sapporo Group’s ability to execute strategies, adapt to change and achieve growth across the Group. To this end, we will continue to conduct our training program for global human resources. The program will focus on nurturing leaders who will develop business in key strategic regions such as North America and Southeast Asia going forward.
For details on strategies for each business segment, please see the review of operations starting on page 16 of this report.
TSUTOMU KAMIJO
President and Representative Director, Group CEO Sapporo Breweries Ltd.
Sapporo International Inc. POKKA SAPPORO FOOD&BEVERAGE LTD.
Sapporo Lion Limited Sapporo Real Estate Co., Ltd
Taking the Sapporo Brand to the World
1
Construction of Sapporo Vietnam Limited Long
An Brewery Completed
In November 2011, the Sapporo Group completed construction of the Sapporo Vietnam Limited Long An Brewery. This is the first brewery built by a Japanese brewer in Vietnam.
The completion of the Long An Brewery means that the Sapporo Group has now established its own breweries in three locations world- wide, adding Southeast Asia, to Japan and Canada. The Sapporo Group will continue promoting further global development of SAPPORO PREMIUM-brand* beers.
Sapporo Holdings sees Vietnam as a bridgehead for expanding
sales of SAPPORO PREMIUM-brand beers. As such, the Sapporo Group plans to use its convenient loca- tion to maximum advantage as it makes inroads into surrounding countries in Asia. In tandem with this expansion, the Sapporo Group aims to successively ramp up production capacity at the Long An Brewery to 150,000 kiloliters in 2019.
* SAPPORO PREMIUM is the Sapporo Group’s international brand name.
Outline of the Long An Brewery
• Name: Sapporo Vietnam Limited Long An Brewery
• Location: Viet Hoa, Duc Hoa III Industrial Zone, Duc Lap Ha Ward, Duc Hoa District, Long An Province
• Plant Manager: Yasuhiro Hanazawa
• Annual production capacity: 40,000 kiloliters
• Production: Manufacture of SAPPORO PREMIUM-brand beers, Sapporo’s international strategic product
• Construction cost: Approximately ¥5.2 billion
Outdoor advertising in Vietnam
Sapporo Premium brand
South Korea: Took a stake of M’s Beverage Co., Ltd., a wholly owned alcoholic beverage sales subsidiary of Maeil Diaries Co., Ltd. Driving forward sales expansion efforts
Hong Kong:
HK POKKA’s restaurants business has been strong Vietnam:
Long An Brewery was completed on Nov. 24, 2011. Start full-scale marketing
Singapore:
Build on POKKA’s high brand awareness and market share
Canada:
Grow sales by strengthening investment in premium brands
USA:
Acquired majority stake in Silver Springs Citrus, Inc., the largest U.S. maker of private- brand chilled drinks USA:
Establish Sapporo as No. 1 Japanese/Asian beer brand
Australia:
Start local production and sales by Coopers Brewery
Sales in the U.S.
Sales in South Korea
The Sapporo Group has expanded business in the Asia-Pacific region centered on North America, Asia and Oceania, focusing on the highly priced SAPPORO PREMIUM-brand beers. In 1984, the Sapporo Group fully launched North American sales of SAPPORO PREMIUM-brand beers after establishing Sapporo U.S.A., Inc., as a U.S. subsidiary. SAPPORO PREMIUM-brand beers went on to win a solid reputation in the market as a premium beer. Ever since 1986, the Sapporo Group has maintained SAPPORO PREMIUM- brand beers’ position as the top Asian beer in the U.S. In 2002, the Sapporo Group began OEM production of SAPPORO PREMIUM-brand beers at SLEEMAN BREWERIES LTD. of Canada. Through the acquisition of SLEEMAN BREWERIES LTD. in 2006, the Sapporo Group established a production and sales base in North America.
Elsewhere, the Sapporo Group is developing business in the Asia-Pacific region with SAPPORO PREMIUM-brand beers as its premium brand. The Group’s markets its products in several countries includ- ing South Korea through exports from Japan, Taiwan through local production, and Australia through licensed production.
In January 2012, the Sapporo Group acquired 51% of the shares issued by Silver Springs Citrus, Inc., one of the biggest private brand chilled beverage manufacturers in the United States, for US$24 million. In the International business, the Sapporo Group will use this acquisition as a starting point to actively develop overseas businesses in beverages other than beer, and in food.
Sapporo Group’s Global Business Development
Exporting Products to
60 Countries
POKKA ACE (M) SDN. BHD.
(Malaysia)
POKKA CORPORATION (SINGAPORE) PTE LTD.
(Singapore)
POKKA SAPPORO FOOD &
BEVERAGE LTD. Established
Toward Growth in the Food & Soft Drinks Business
In March 2012, the Sapporo Group integrated its soft drinks business Sapporo Beverage Co. Ltd. with the POKKA Group to establish POKKA SAPPORO FOOD & BEVERAGE LTD. Operations at the new company are scheduled to start in January 2013. The Sapporo Group is currently examining business strategies and launching the divisions needed to maximize synergies from the current competitive advantages of both companies.
Under the new management system, the Sapporo Group plans to drive growth in both the food and soft drinks businesses by nurturing competitive brands through product differentiation and concentrated investment in key categories and brands. In addition to examining business schemes and the organiza- tional structure, the Group will further optimize production and procurement systems and build a joint distribution system, structuring the new company so that it can efficiently produce results. In this manner, the Sapporo Group aims to rapidly achieve concrete benefits from the integration.
2
Ribbon Series
Impact of POKKA Group Integration
By December 31, 2011, the Sapporo Group had made a total investment of ¥53.7 billion in POKKA CORPORATION, bringing its shareholding ratio to 98.6%. This investment includes the acquisition cost for management integration with POKKA CORPORATION, as well as its net financial liabilities and lease obli- gations. The inclusion of POKKA CORPORATION’s nine-month results from April to December 2011 in the Sapporo Group’s consolidated financial results had a positive impact of ¥75.9 billion on net sales, ¥4.2 billion on operating income before goodwill amortization and ¥8.5 billion on EBITDA for the year ended December 31, 2011.
Going forward, the Sapporo Group aims to grow the Food & Soft Drinks business into one of the Group’s core businesses alongside the Alcoholic Beverages business and the Real Estate business. To this end, the Sapporo Group plans to develop a management system at the new company in anticipation of the full-scale commencement of operations in January 2013. Under this new management system, the Group will strive to enhance its business to expand Group-wide synergies. In 2012, the Sapporo Group is forecasting net sales of ¥134.6 billion and operating income before goodwill amortization of ¥5.7 billion in the Food & Soft Drinks business. In 2016, Group’s forecasts for the same business are for net sales of
¥170 billion, representing nearly 30% of Group-wide net sales, and operating income before goodwill amortization of ¥8.5 billion.
(¥ billion) 2012 forecast 2016 forecast Change Growth rate
Net sales 134.6 170.0 35.4 126.3%
Operating income
(Before goodwill amortization) 5.7 8.5 2.8 149.1%
Operating margin
(Before goodwill amortization) 4.2% 5.0% 0.8% –
Green tea on sale in Singapore MIKICHI, Hong Kong
TONKICHI, Singapore
• SAPPORO BREWERIES LTD.
• SAPPORO WINES LIMITED
• YEBISU WINEMART CO., LTD.
• SAPPORO LOGISTICS SYSTEMS CO., LTD.
• TANOSHIMARU SHUZO CO., LTD.
• SAPPORO ENGINEERING LIMITED
• STARNET CO., LTD.
• NEW SANKO INC.
Outlook
The Japanese beer and beer-type beverages market saw total demand decrease by an estimated 4% year on year, mainly because product supply and sales promotion activities of companies were impacted by the Great East Japan Earthquake.
In our Japanese Alcoholic Beverages business, we have five core breweries in Japan. Two of these breweries, in Sendai and Chiba, were damaged in the earthquake. Because these breweries account for a large share of our sales, our product supply and marketing activities were impacted heavily over an extended period. Conse- quently, net sales in our Japanese Alcoholic Beverages business declined by ¥11.1 billion, or 4.0% year on year, to ¥268.2 billion. However, as a result of ongoing cost control focusing mainly on sales promotion expenses and equipment costs, operating income rose by ¥14 million, or 0.2%, to ¥9.3 billion. Operating income before goodwill amortization rose by ¥14 million, or 0.2%, to ¥9.3 billion.
Beer Business
Our overall sales volume for beer decreased 6.7% from the previous fiscal year. Because of the damage to our breweries, we focused on supplying our three core brands: Yebisu Beer, Sapporo Draft Beer Black Label and Mugi to Hop. Consequently, although sales of products other than these three core brands dropped sharply, sales volume of canned products for the three core brands increased year on year.
In March 2011, we launched a non-alcoholic beer called Premium Alcohol Free, which achieved sales far in excess of initial targets. Meanwhile, in ready-to-drink (RTD) beverages, we launched seasonal offerings in limited production runs that won strong con- sumer support, in addition to a new and improved Nectar Sour Sparkling Peach.
JAPANESE ALCOHOLIC BEVERAGES
From left: Sapporo Draft Beer Black Label, Yebisu, Premium Alcohol Free
Wine and Spirits Business
Sales volumes increased year on year, leading to higher sales and earnings for this category, as demand grew for both imported and domestic wines. The Grande Polaire series of premium wines made from 100% domestic grapes was particularly noted for its quality, receiving a prize at the Japan Wine Competition.
In western spirits, the Group laid the foundations for expansion into new areas. In May 2011, the Group concluded a business alliance with BACARDI JAPAN LIMITED, holder of the world’s leading rum brand, Bacardi. In May 2011, it signed a sales licensing agreement with CJ CheilJedang Corporation, the leading South Korean food manufacturer.
Shochu Business
The shochu (Japanese distilled spirits) category saw sales and profits increase year on year, with new offering Triangle Ginger Highball, the singly distilled shochu Sasainata, and the Japanese plum liquor Kuroumesyu contributing to higher sales volume. The singly distilled shochu Waramugi won the gold prize from the Alcohol Appreciation and Evaluation Committee of the Fukuoka Regional Taxation Bureau.
59.2 % 36.8 % 39.3 %
Net Sales (¥ Billion)
¥268.2
Identifiable Assets (¥ Billion)
¥215.1
Operating Income before Goodwill Amortization
(¥ Billion)
¥9.3
Note) Percentages are calculated after excluding Other from the consolidated total
1. Bolster alcoholic-beverage marketing
Increase sales by winning additional customer support using a select-and-focus approach (selectively focusing resources on key areas).
• Enhance brand power by focusing resources on core products We will enhance our presence in the beer and new-genre markets by strategically focusing resources on Yebisu, Sapporo Draft Beer Black Label, and Mugi to Hop, which account for approximately three-quarters of case sales.
• Lay the groundwork for growth in expanding areas
To lay the groundwork for growth, we will offer products that embody our strengths in the non-alcoholic beer market, which we expect to expand in line with market changes, and in the market for RTD beverages, which are a highly suitable alternative to beer for home use.
• Expand the wine, spirits and shochu sectors
Over the medium term, we intend to expand our non-beer alcoholic beverages operations, which include RTD beverages. We will do this by boosting brand power and offering innova- tive value propositions.
2. Strengthen the operating base
To achieve our financial targets, we will implement management- driven projects to resolve issues, especially with respect to critically important cross-organizational priorities such as cost structure reforms and organizational strengthening. In cost structure reforms in particular, our activities will be directed at achieving ¥3.0 billion in cost reductions from 2011 to 2013.
Growth Strategy for the Japanese Alcoholic Beverages Business
The Japanese Alcoholic Beverages business is the core business of the Sapporo Group, accounting for over half its earnings. We will therefore focus management resources here, concentrating on core products that leverage superior brand power. At the same time, this business will remain a leader in high-value-added fields by developing and providing products that meet diverse customer needs. Along with the Real Estate business, the Japanese Alcoholic Beverages business will provide stable earnings to support the growth of the entire Group.
Management Plan 2012–2013 Key Points
¥ Million
2008 2009 2010 2011 Target2012 Target2013
Net sales 299,699 282,914 279,329 268,189 288,000 300,000
Operating income 7,709 7,483 9,290 9,305 10,500 12,000
Operating income before
goodwill amortization 7,709 7,483 9,290 9,305 10,500 –
0 100,000 200,000 300,000 400,000
0 10,000 20,000 30,000 40,000
(¥ Million) (¥ Million)
2008 2009 2010 2011 2012 Target
n Net sales (left scale) n Operating income before goodwill amortization (right scale)
Strengthening the Group’s Business Foundations Solidifying the Growth Trajectory
Figures have been restated based on the segment classifications for the management approach from 2011 onward. This change has also been reflected in figures of 2010.
Outlook
In the North American beer market, total demand was estimated to have contracted by 1–2% as consumer spending remained weak despite signs of recovery. Meanwhile, the beer market in rapidly growing Asian economies continued to expand steadily.
Given this context, in the International Alcoholic Beverages business we focused in North America on sales activities targeting the premium-price range market, where the Sapporo brand has a strong presence. In the Asian and Oceanian markets, meanwhile, we continued our growth strategy of expanding sales channels, establishing production sites, and forging business alliances. Net sales in the International Alcoholic Beverages business rose only
¥0.5 billion, or 2.0%, year on year to ¥25.9 billion, with growth on a local currency basis negated by the impact of the strong yen. However, due to a ¥1.0 billion impact from upfront investment costs in Vietnam, among other factors, operating income declined ¥0.1 billion, or 24.0%, to ¥0.4 billion. Operating income before goodwill amortization declined ¥0.2 billion, or 11.8%, to ¥1.4 billion.
North American Market
Despite the contraction of the North American beer market, the Sapporo Group’s Canadian subsidiary SLEEMAN BREWERIES LTD. recorded a 5th consecutive term of increased sales volume (exclud- ing outsourced production of Sapporo brand products), up 9% year on year. At Sapporo U.S.A., Sapporo brand sales volume was up 10% year on year.
INTERNATIONAL ALCOHOLIC BEVERAGES
Sapporo brand and SLEEMAN brand
Asian and Oceanian Market
Sapporo Group sales volume outside of North America, most notably in Asia, rose 40% over the previous year.
In Vietnam, Sapporo Vietnam Limited commenced sales of locally produced beer, following completion of the Sapporo Vietnam Limited Long An Brewery on November 24, 2011. In other markets, we continued to pursue our growth strategies, expanding sales channels in the home-use market in Singapore through coopera- tion with POKKA Group and commencing sales of beer for the home-use and commercial-use markets in South Korea in conjunc- tion with the Maeil Dairies Co., Ltd. From October 2011, we began brewing and sales in the Oceanian market under a licensing agree- ment with Australian beer manufacturer Coopers Brewery Ltd.
• 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.
5.7 % 5.7 % 7.4 %
Net Sales (¥ Billion)
¥25.9
Identifiable Assets (¥ Billion)
¥40.3
Operating Income before Goodwill Amortization
(¥ Billion)
¥1.4
Note) Percentages are calculated after excluding Other from the consolidated total
1. Bolster brand power in the North American market
• Canada
Continuing a five-year streak of growth above the market average, SLEEMAN BREWERIES LTD. will continue to strive for more growth in sales through further investment in marketing of strong-selling premium beer brands.
• U.S.A.
Sapporo U.S.A. achieved sales of 3 million cases (24 12oz cans) in 2011. Going forward, we will seek to accelerate growth of the Sapporo brand, which has been the top Asian beer brand in the U.S. market since 1986, in order to boost sales even higher.
2. Execute marketing strategies for capturing growth
in the Asian market
• Vietnam
Sapporo Vietnam Limited Long An Brewery commenced ship- ments from November 2011, and in 2012 will start full-scale marketing operations. Moving ahead, the Sapporo Group will position Vietnam as a beachhead in its Southeast Asia strategy, using its convenient location to maximum advantage as it makes inroads into surrounding countries.
• Singapore
In Singapore, we will expand our sales channels for export beer in the home-use market in cooperation with POKKA Corporation.
• South Korea
In the South Korean market, we have formed an alliance with Maeil Dairies Co., Ltd., through which we are steadily increas- ing our sales channels. We have acquired 15% of the shares of M’s Beverage Co., Ltd., a wholly owned alcoholic beverage sales subsidiary of Maeil Dairies, deepening our involvement in management and marketing strategies. Going forward, we aim to enhance the value of the Sapporo brand and strengthen our product sales network in South Korea.
• Oceania
In Oceania, the Group will make a full-scale entry into the premium markets of Australia and New Zealand in 2012 through Coopers Brewery, with whom it has a licensing agreement. Our aim is to establish Sapporo as the leading Japanese beer brand in these markets.
Management Plan 2012–2013 Key Points
Growth Strategy for the International Alcoholic Beverages Business
The International Alcoholic Beverages business is expected to grow rapidly going forward. In fast-growing Asia in particular, the beer market is expected to expand steadily. The Sapporo Group is pursing a unique international growth strategy in these markets with a focus on organic growth and alliances with local companies.
¥ Million
2008 2009 2010 2011 Target2012 Target2013
Net sales 25,021 22,582 25,386 25,888 37,300 44,000
Operating income 901 693 498 378 0* 200
Operating income before
goodwill amortization 1,768 1,720 1,607 1,433 1,200 –
0 50,000 40,000 30,000 20,000 10,000
0 5,000 4,000 3,000 2,000 1,000
(¥ Million) (¥ Million)
2008 2009 2010 2011 2012 Target
Strengthening the Group’s Business Foundations Solidifying the Growth Trajectory
*¥1.8 billion impact of upfront investment costs in Vietnam
n Net sales (left scale) n Operating income before goodwill amortization (right scale)
8.1 % 6.0 % 4.0 %
Net Sales (¥ Billion)
¥36.9
Identifiable Assets (¥ Billion)
¥21.9
Operating Income before Goodwill Amortization
(¥ Billion)
¥1.5
Outlook
Overall demand in the Japanese soft drinks market is estimated to have grown slightly by only around 1% year on year, due to the impact of the Great East Japan Earthquake and weather conditions.
We continued to concentrate marketing investment and sales efforts on our core brand products. At the same time, we pursued cost structure reforms to create a stable earnings base. The Soft Drinks business saw sales increase by ¥2.9 billion, or 8.6%, year on year to ¥36.9 billion, while operating income declined by ¥0.5 billion, or 40.9%, year on year to ¥0.8 billion due in part to a ¥0.7 billion
SOFT DRINKS
From left: Ribbon Citron, Gerolsteiner
increase in amortization of goodwill. Operating income before goodwill amortization increased ¥0.2 billion, or 12.5%, to ¥1.5 billion.
Bolstering Brands in the Soft Drinks Business
We pursued aggressive marketing measures for the Gabunomi and Ribbon series, and for Gerolsteiner naturally carbonated water from Germany. Moreover, sales of mineral water and unsweetened bever- ages increased following the earthquake, lifting sales volumes by 4% year on year.
1. Enhance our brand power
• We will focus our investments on product differentiation and key categories and brands. The goal is to develop competitive brands to ensure the growth of both the Soft Drinks business and the Food business.
2. Generate synergies with the POKKA Group
• Food business: We will strengthen the POKKA Lemon brand and expand the lemon-based products category. We will also enhance the product lineup in the soup category.
• Soft Drinks business: We will strengthen and develop the brands that both companies have developed. We will also work to develop unique, high-value-added products that utilize both companies’ processing technologies and materials.
• Sales: We will strengthen the vending machine channel, and work to develop the commercial-use channel, where there is the potential for Group synergies.
Growth Strategy for the Soft Drinks Business
In the Soft Drinks business, the Group is preparing for the start of operations at POKKA SAPPORO FOOD & BEVERAGE LTD. in January 2013. To ensure that the business structure is capable of efficiently producing results, the Group is examining options for business schemes, organizations and other aspects, while working to optimize the production system and develop a Group procurement and distribution system, among other measures.
Management Plan 2012–2013 Key Points
• SAPPORO BEVERAGE CO., LTD.
• STELLA BEVERAGE SERVICE CO., LTD.
• STAR BEVERAGE SERVICE CO., LTD.
Strengthening the Group’s Business Foundations
Solidifying the Growth Trajectory
¥ Million
2008 2009 2010 2011
2012* Target
2013 Target
Net sales 36,849 30,746 33,938 36,857 134,600 140,000
Operating income 221 301 1,280 757 3,000 3,100
Operating income before
goodwill amortization 221 301 1,343 1,511 5,700 –
(¥ Million) (¥ Million)
2008 2009 2010 2011 2012
Target
150,000 9,000
100,000 6,000
50,000 3,000
0 0
n Net sales (left scale)
n Operating income before goodwill amortization (right scale)
*From the first quarter of 2012, the former Soft Drinks and POKKA Group segments were integrated to work towards targets as the Food & Soft Drinks business.
Note) Percentages are calculated after excluding Other from the consolidated total
• Realize synergies
• Start work towards integration
• Expand efforts to maximize synergies
• Study business strategies
• Set up necessary divisions
16.7 % 16.8 % 14.4 %
Net Sales (¥ Billion)
¥75.9
Identifiable Assets (¥ Billion)
¥78.8
Operating Income before Goodwill Amortization
(¥ Billion)
¥4.2
From left: Pokka Lemon 100, Jikkuri Kotokoto Soup
Outlook
Total domestic demand for soft drinks rose slightly year on year, and lemon-based products (flavorings) were generally in line with the previous year, while demand for instant soups (including cup soups) declined by about 2% year on year. All figures are estimates.
The POKKA Group strengthened and developed its brands in Japan, while overseas it made steady progress in improving the cost of goods sold ratio, lowering distribution costs, and other measures. As a result, the POKKA Group recorded net sales of ¥75.9 billion and operating income of ¥2.9 billion after recording amortization of goodwill of ¥1.3 billion. Operating income before goodwill amorti- zation was ¥4.2 billion. No year-on-year comparisons are available.
POKKA GROUP
Growth Strategy of the POKKA Group
In March 2012, POKKA Corporation and Sapporo Beverage Co., Ltd. merged to form POKKA SAPPORO FOOD & BEVERAGE LTD. Cur- rently, the two companies are making every effort to establish an organization that will capture maximum synergies from the integra- tion. By 2016, the new company is targeting annual sales of ¥170.0 billion.
POKKA Group’s Domestic Business
In its domestic beverages business, the POKKA Group promoted sales of Kireto Lemon, launched a new product called Kireto Lemon Soukai Sparkling, and bolstered the POKKA Coffee lineup. The domes- tic foods business, meanwhile, saw strong sales of core products POKKA Lemon 100 and Kantanbimi soup as well as new product Jukkuri Kotokoto Shrimp Bisque. In the domestic restaurants business, the POKKA Group’s coffee shop chain Café de Crié achieved strong sales through effective store remodeling and progressive opening of new stores.
POKKA Group’s International Business
The overseas restaurant business posted steady gains in sales as it continued to open new outlets in Hong Kong, a core overseas market.
• POKKA CORPORATION
• SUN POKKA CO., LTD.
• POKKA CREATE CO., LTD.
• POKKA CORPORATION (Singapore) Pte Ltd.
2011
Established in March 2012
Scheduled to start business operations
in January 2013 Sapporo
Beverage POKKA Corporation
New operating company, POKKA SAPPORO FOOD &
BEVERAGE
POKKA SAPPORO FOOD
& BEVERAGE
2016
¥170.0 billion in net sales
• Established a new company (POKKA SAPPORO FOOD & BEVERAGE LTD.) in March 2012 as an entity to drive forward integration.
• Set up necessary organizations, including management strategy divisions that play a central role in business strategy, one by one.
¥ Million
2008 2009 2010 2011
2012* Target
2013 Target
Net sales – – – 75,850 134,600 140,000
Operating income – – – 2,934 3,000 3,100
Operating income before
goodwill amortization – – – 4,234 5,700 –
(¥ Million) (¥ Million)
2008 2009 2010 2011 2012
Target
180,000 9,000
120,000 6,000
60,000 3,000
0 0
Strengthening the Group’s Business Foundations
Solidifying the Growth Trajectory
*From the first quarter of 2012, the former Soft Drinks and POKKA Group segments were integrated to work towards targets as the Food & Soft Drinks business.
Note) Percentages are calculated after excluding Other from the consolidated total
n Net sales (left scale)
n Operating income before goodwill amortization (right scale)
Outlook
The restaurant industry showed some signs of a gradual recovery, but the business environment remains as severe as ever.
In the restaurant business, we introduced measures to stimulate demand and made progress with reducing costs at existing restau- rants. Despite these efforts, net sales declined by ¥2.3 billion, or 8.9%, year on year to ¥24.1 billion. Nevertheless, operating income rose ¥0.1 billion, or 47.2%, to ¥0.2 billion, bolstered by steady perfor- mance at new restaurants, cost reductions, and the closure of unprofitable locations.
Existing Restaurants
In an attempt to restore customer traffic at existing restaurants, we conducted promotional campaigns and boosted sales activities directed at corporate customers. We revitalized two existing
RESTAURANTS
Sapporo Lion Beer-Hall in Ginza 7-chome, Tokyo
• SAPPORO LION LIMITED
restaurants in Tokyo’s Kanda and Otemachi districts, by converting them to our Ooi Hokkaido Betsukai Pub format, a Japanese-style pub format originating from the Hokkaido town of Betsukai and featuring traditional local fare. We also improved the profit structure of our Restaurants business by reducing costs and closing 10 unprofitable locations.
New Restaurants
In new openings, we opened three new locations for our Yebisu Bar chain—in Osaka’s Umeda district, inside Tokyo Dome City, and in Tokyo’s Kagurazaka district. We also opened four new locations by undertaking operation of food services in some leisure facilities and taking over restaurants already in operation. The total number of locations operating on December 31, 2011 stood at 191.
• Strengthen the restaurant management system with a focus on area to increase profitability
• Open new medium-sized restaurants totaling around 1,650 square meters, primarily in the successful Yebisu Bar and brasserie formats
• Reduce costs through the new distribution system that uses the Tokyo Metropolitan Logistics Center established in 2011.
Growth Strategy for the Restaurants Business
The Restaurants business will work to improve its business performance to contribute to the overall performance of the Sapporo Group, and realizing synergies within the Group.
Management Plan 2012–2013 Key Points
5.3 % 0.9 % 1.9 %
Net Sales (¥ Billion)
¥24.1
Identifiable Assets (¥ Billion)
¥10.5
Operating Income before Goodwill Amortization
(¥ Billion)
¥0.2
¥ Million
2008 2009 2010 2011
2012 Target
2013 Target
Net sales 29,538 28,026 26,429 24,091 24,900 26,000
Operating income (loss) 551 (172) 149 219 600 800
Operating income (loss)
before goodwill amortization 551 (172) 149 219 600 –
(¥ Million) (¥ Million)
2008 2009 2010 2011 2012
Target 40,000
30,000 20,000 10,000 0
2,000 1,500 1,000 500 0 -500 -10,000
Strengthening the Group’s Business Foundations
Solidifying the Growth Trajectory
n Net sales (left scale)
n Operating income (loss) before goodwill amortization (right scale)
REAL ESTATE
Outlook
In Japan’s real estate sector, vacancy rates in the Tokyo area office building rent market remained roughly the same year on year, with rent levels continuing to decline gradually.
In our Real Estate business, we worked to maintain occupancy rates and rent levels, while taking steps to reduce costs even further. Our businesses involving real estate development and acquisition of new properties performed well. The Real Estate business recorded a year-on-year decrease in net sales of ¥1.1 billion, or 4.5%, to ¥22.5 billion, and an increase in operating income of ¥0.6 billion, or 7.1%, to ¥8.6 billion.
Moreover, the Real Estate business has large unrealized gains due to holding premium property in an area with high marked prices for real estate. (See page 60 Note 19 Real Estate for lease)
Yebisu Garden Place
• SAPPORO REAL ESTATE CO., LTD.
• YGP REAL ESTATE CO., LTD.
• SAPPORO URBAN DEVELOPMENT CO., LTD.
• TOKYO ENERGY SERVICE CO., LTD.
• SAPPORO SPORTS PLAZA CO., LTD.
• YOKOHAMA KEIWA BUILDING CO., LTD.
Existing Properties
We worked quickly to restore Group-owned existing properties and facilities in the aftermath of the March 2011 earthquake. As a result, we maintained high occupancy rates in our main Tokyo area build- ings, including Yebisu Garden Place.
Real Estate Development
In June 2011, we opened a new wing at the PAL Urayasu fitness club in Urayasu City, Chiba Prefecture. The new wing was well received by the club’s clientele.
New Income-Generating Property Acquisitions
The Storia Shirokanedai rental apartment building newly acquired in February 2011 contributed to segment earnings. The building is located in Tokyo’s Minato district.
• In 2012, Yebisu Garden Place Co., Ltd. changed its name to Sapporo Real Estate Co., Ltd. as part of a plan to raise the value of the Sapporo brand, and to strengthen Group synergies.
• Having acquired 100% ownership of Yebisu Garden Place in March 2012, we will work to maintain and improve occupancy rates and achieve appropriate rent levels. We will also proceed with renovation of the shop and restaurant facilities for the 20th anniversary of the complex in 2014.
• We will embark on measures to boost future earnings. Specifi- cally, we will examine options for redeveloping prime Group- owned properties in Tokyo’s Ginza “Sapporo GInza Building” and Ebisu districts “Seiwa Yebisu Building” to enhance their value.
From April 2008 to February 2012 the Sapporo Group held an 85% stake in Yebisu Garden Palace.
Growth Strategy for the Real Estate Business
The Real Estate business is a source of stable earnings for the Group alongside the Japanese Alcoholic Beverages business. It generates cash flow that contributes to Group growth.
Management Plan 2012–2013 Key Points
5.0 % 33.9 % 33.0 %
Net Sales (¥ Billion)
¥22.5
Identifiable Assets (¥ Billion)
¥180.2
Operating Income before Goodwill Amortization
(¥ Billion)
¥8.6
¥ Million
2008 2009 2010 2011
2012 Target
2013 Target
Net sales 23,452 23,267 23,537 22,468 24,400 24,000
Operating income 7,612 7,524 7,986 8,553 9,300 8,600*
Operating income before
goodwill amortization 7,612 7,524 7,986 8,553 9,300 –
(¥ Million) (¥ Million)
2008 2009 2010 2011 2012
Target
30,000 30,000
20,000 20,000
10,000 10,000
0 0
Strengthening the Group’s Business Foundations
Solidifying the Growth Trajectory
*Impact of redeveloping the Seiwa Yebisu Building n Net sales (left scale)
n Operating income before goodwill amortization (right scale)
