SAPPORO HOLDINGS LIMITED
Positive Past,
Focused Future
Annual Report 2014
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.
“As an intrinsic part of people’s lives,
Sapporo will contribute to the evolution of creative,
enriching and rewarding lifestyles”
Management Philosophy
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
About the Group’s corporate logo, the Sapporo Shining Star
Annual Report 2014
Contents
Statements in this annual report with respect to the Company’s plans, strategies, forecasts and other statements that are not historical facts are forward-looking statements that are based on management’s judgment in light of currently available information. Factors that could cause actual results to differ materially from our earnings forecasts include, without limitation, global economic conditions, our response to market demand for and competitive pricing pressure on products and services and currency exchange rate fluctuations.
Forward-looking Statements
All figures in this annual report are rounded to the nearest applicable unit.
The Sapporo Group has been brewing
beer since 1876. Throughout its history,
the Group has diligently created products
using only carefully selected ingredients.
In the areas of food and surroundings, the
Group continues to provide products and
services designed to satisfy customers in Japan and overseas,
especially North America and Southeast Asia.
Sapporo
Group
1876
Founded
Number of employees
7,014
(Consolidated) (Parent company) 112
Group subsidiaries and affiliates (Consolidated)42
Consolidated
subsidiaries 3
Equity-method
affiliates
¥ 518.7 billion
( +1.7 % YoY)
Net sales
¥ 14.7 billion
( – 4.0 % YoY)
Operating income
The Group posted consolidated net sales of
¥518.7 billion, up 1.7% year on year. The result
mainly reflected a year-on-year increase in
sales volumes of beer and beer-type beverages
in the Japanese Alcoholic Beverages business,
as well as growth in the overseas soft drinks
business and the impact of foreign exchange rates. Consolidated
operating income declined 4.0% year on year; however, all
operations achieved profitability for a result of ¥14.7 billion.
2014
Business
Results
01 Profile
02 Our Business
04
Steps Towards Achieving the New Management FrameworkPositive Past, Focused Future
10 Financial Highlights
12 To Our Stakeholders
17 Creating New No. 1 Domains
18 Performance Review and Plan
18 Japanese Alcoholic Beverages
20 International
22 Food & Soft Drinks
24 Restaurants
25 Real Estate
26 CSR Feature
30 Corporate Governance
34 Board of Directors and Audit &
Supervisory Board Members
36 Financial Section
67 Corporate Data
Creating value in food >>>
The core domain driving the Group’s dynamic growthBusinesses Segments
Japanese Alcoholic
Beverages International
Pillar producing stable earnings contribution
Growth driver
With a vision of “Seek No. 1 by accumulating one-of-a-kind products,” the Group is developing its businesses in Japan, mainly the beer business, but also dealing in wine, spirits and Japanese liquors.
The Group operates an alcoholic beverages and soft drinks business, mainly in North America and Southeast Asia. In the alcoholic beverages business, we are working to penetrate markets with the Sapporo brand, expand our sales channels, and achieve a further forward leap. Business overview
281.8
2.5%
49.7
3.0%
Net sales
(billions of yen)
YoY
54.3% 9.6%
Share of
consolidated sales
10.2
3.1%
0.2
(85.7)%
Operating income
(billions of yen)
YoY
Main Brands
Beer and beer-type beverages:
Yebisu Beer, Sapporo Draft Beer Black Label, Mugi to Hop The gold, Goku Zero
Wine: Grande Polaire, Yellow Tail Shochu: Shochu Kokuimo (Imo Shochu) Spirits: Bacardi, Dewar’s
Main Brands
SAPPORO PREMIUM, SLEEMAN Main Sales Areas
North America, Canada, Vietnam, South Korea, Australia, Singapore Strength, Market, etc.
Our Business
The Sapporo Group’s business domains are “creating value in food,” through which it seeks to provide customers with value
in the area of “food,” and “creating comfortable surroundings,” where it provides special times in comfortable spaces. The
Group leverages its assets and strengths in developing its businesses.
The businesses are divided into five segments: Japanese Alcoholic Beverages, International, Food & Soft Drinks,
Restaurants, and Real Estate. The Japanese Alcoholic Beverages and Real Estate businesses are positioned as stable earnings
pillars, while the Group also promotes the International and Food & Soft Drinks businesses as future growth drivers.
Creating comfortable surroundings >>>
The business domain expected to contribute stable profits backed by prime propertiesFood & Soft Drinks Restaurants Real Estate
To become a third pillar for the Group
Contact point with customers
Pillar producing stable earnings contribution
The Group operates its Food & Soft Drinks business primarily in Japan and Southeast Asia. We are shoring up and developing our strengths in lemon-based products and soup brands, and working to create new categories such as healthcare and natural foods.
The Group operates Japan’s largest beer hall chains, GINZA LION and YEBISU BAR, along with various other restaurants. In addition to providing delicious draft beer, we are developing menus based on the theme of
“safety, security, authenticity, and healthiness.”
The Group’s Real Estate business includes leasing, management, operation, and development. We own two complex facilities—Yebisu Garden Place in Tokyo and Sapporo Factory in Sapporo—as well as well-sited office buildings in the Greater Tokyo Area, among others.
133.4
2.1.%
26.4
(1.8)%
21.5
(5.5)%
25.7% 5.1% 4.1%
0.1
—
0.3
(29.7)%
7.7
(11.4)%
Main Brands
Soft drinks: Kireto Lemon, Ribbon, GEROLSTEINER (natural mineral water), aromax (canned coffee)
Soup: Jikkuri Kotokoto
Lemon-based products: Pokka Lemon 100 Restaurants: Café de Crié (coffee shop)
Number of Café de Crié Outlets 185 (as of December 31, 2014)
Main Sales Areas Japan, Singapore, Malaysia
Main Brands
GINZA LION BEERHALL, YEBISU BAR Number of Outlets
185 in Japan, 14 overseas (As of December 31, 2014)
Main Facilities
Yebisu Garden Place, Sapporo Factory Main Areas
Ebisu, Ginza, Sapporo
F
>>
P ast
Steps Towards Achieving the New Management Framework
Positive Past,
Since 2007, the Sapporo Group has been working
on a New Management Framework with targets
set for 2016. We aim to achieve sustainable
growth by leveraging the strengths of our
existing businesses, while also creating and
nurturing new growth fields through aggressive
action in global expansion and implementing
M&As and business alliances.
2007
2007 Results
Net sales
¥ 449.0 billion
(incl. liquor tax)
Net sales
¥ 309.8 billion
(excl. liquor tax) Operating
income
¥ 13.2 billion
(before goodwill amortization) Operating
income to
net sales
4.3
(excl. liquor tax)%
(before goodwill amortization)
ROE
5.3 %
(before goodwill amortization)
D/E ratio
1.7 times
Path to Achieving
the New Management Framework
Sapporo Group’s
New Management Framework Group Strategies
1 Create High-Value-Added Products
and Services
2 Form Strategic Alliances
3 Promote International Expansion
4 Expand Synergies
among Group Companies
¥
449.0
billion 5.4%
6.4%
11.6%
70.3%
6.2%
2007
Changes
in Net Sales
by Segment
2014
¥ 518.7
billion
54.3
%9.6
%25.7
%5.1
%4.1
%1.1
%Japanese Alcoholic Beverages International
Food & Soft Drinks Restaurants Real Estate Other
04
F u t u r e
Focused Future
2016
2016 Targets
Net sales
¥ 600.0 billion
(incl. liquor tax)
Net sales
¥ 450.0 billion
(excl. liquor tax) Operating
income
¥ 40.0 billion
(before goodwill amortization) Operating
income to
net sales
9.0
(excl. liquor tax)%
(before goodwill amortization)
ROE
8.0 % or higher
(before goodwill amortization)
D/E ratio
Around 1.0 times
What the Sapporo
Group aspires to be
in 2026
The Sapporo Group will be a group of companies that is essential for customers to enjoy rich lives throughout the world by continuing to create and supply new products and services, in its effort to become No. 1 in the market.
Sapporo Group Management Plan
2015–2016
2026
Next Long-term Management
Framework in FY2026
150 th anniversary
2014
2014 Results
Net sales
¥ 518.7 billion
(incl. liquor tax)
Net sales
¥ 401.8 billion
(excl. liquor tax) Operating
income
¥ 18.5 billion
(before goodwill amortization) Operating
income to
net sales
4.6
(excl. liquor tax)%
(before goodwill amortization)
ROE
2.7 %
(before goodwill amortization)
D/E ratio
1.5 times
Next Long-Term Management
Framework Pursue M&A
Thorough cost reductions
2014 2015 2016 140th anniversary
Accelerate investment for growth
Efficient utilization of management resources
Achieve targets under the New Management Framework
SAPPORO HOLDINGS LIMITED Annual Report 2014
05
What We’ve Achieved
Positive Past
The global recession that followed the 2008 financial crisis created a slump in domestic
a foundation for sustainable growth through the strategies of our New Management
and services,” “Form strategic alliances,” “Promote international expansion,” and “Expand
Announced a New Management Framework
on October 30
Started construction of a brewery as part of
beer business expansion in Vietnam
2010
Launched Mugi to Hop.
Strong sales achieved results
above the initial plan
The Product as it appeared when launched.
Sold 15% stake in Yebisu Garden Place
Capital and business alliance with
POKKA CORPORATION
Reviewed the production structure and
closed the Osaka Brewery
Opened the first outlet of the YEBISU BAR chain
in the Ginza Corridor district
Beer production and sales under a licensing
agreement with Coopers Brewery Ltd.
(Australia)Annual sales volumes of
SAPPORO PREMIUM at Sapporo
U.S.A. topped 3 million cases
for the first time
since entering the market
2008
2007
Rich Taste
The world’s No.1 rum brand
Awarded Germany’s
“ National Honor
in the World”
the Bundesehrenpreis in Gold
2009
Business alliance with
Maeil Dairies Co., Ltd.
(South Korea)
Completed construction of
the Sapporo Vietnam Ltd. Long An Brewery
Business integration
with POKKA
CORPORATION
Sought to expand our beer sales channels in
the home-use market in Singapore through
cooperation with POKKA CORPORATION
Commenced sales through
a business alliance with
Bacardi Japan Ltd. relating to
spirits and other items
Initiatives
from 2007 to 2013
2011
First Concept in the World
What We’ve Achieved
The global recession that followed the 2008 financial crisis created a slump in domestic demand. In this situation, we worked to build
a foundation for sustainable growth through the strategies of our New Management Framework: “Create high-value-added products
and services,” “Form strategic alliances,” “Promote international expansion,” and “Expand synergies among Group companies.”
Started operations of
POKKA SAPPORO Food & Beverage LTD.
2013
2012
Acquired 15% stake in Yebisu Garden Place to 100%.
Started initiatives to increase value ahead of the
20th anniversary of operations in October 2014
Exporting to 12 Countries Mainly in ASEAN
SAPPORO VIETNAM LTD
POKKA CORPORATION (SINGAPORE) PTE. LTD Exporting to 60 countries
SAPPORO LION (SINGAPORE) PTE. LTD.
Reorganized production bases
in North America and outsourced production
of beer to City Brewing Company, LLC
(U.S.)Opened the first GINZA LION BEER HALL
in Singapore
Acquired 51% of the total shares of major
private-brand chilled beverages manufacturer
Silver Springs Citrus, Inc.
(U.S.)Strengthened alcoholic beverages and soft drinks
operations in Southeast Asia
Launched the world’s first beer-type
beverage to achieve zero purine
*1zero carbohydrate
*2, Goku Zero
*1: 0.00mg purines per 100ml
*2: Less than 0.5g carbohydrate per 100ml is shown as “zero carbohydrate” in accordance with nutrition labelling standards. The Product as it appeared when launched.
Net sales at SLEEMAN BREWERIES LTD. grew for the 8th consecutive year Net sales at SLEEMAN BREWERIES LTD. in Canada increased in local currency terms for the eighth consecutive year since 2007. In 2014, net sales had increased to 1.5 times the 2007 level.
Increased presence in the key areas of North America
and Southeast Asia
Green Shower, a new brand in the field of unsweetened carbonated water A new sensation in sparkling water enlivened with the refreshing aroma of hops. New genre beer WHITE BELG
wins recognition in the advanced beer-manufacturing country of Belgium
We created a new genre beer characterized by a sophisticated and lively aroma coupled with a fresh taste. WHITE BELG was awarded as
“Exceptional” in the Superior Taste Award sponsored by the International Taste & Quality Institute.
* The Superior Taste Award, held by the International Taste & Quality Institute headquartered in Brussels, Belgium, is a global food competition for judging and awarding foods and beverages of outstanding taste and quality from around the world.
Fiscal 2014
What We Aim to Achieve
Focused Future
In fiscal 2014, we utilized the results of the Group’s strategy
and the platforms we had built to continue accelerating our
initiatives for growth as a manufacturer of food products.
Started operations at the new POKKA Malaysia Factory We started construction of the new POKKA Malaysia Factory in 2013 and after obtaining halal certification commenced production in October 2014. Further strengthened
soft drinks business in North America Together with Toyota Tsusho America, Inc., we decided to acquire Country Pure Foods, Inc., a major commercial beverage manufacturer in the U.S., through our joint venture, Silver Springs Citrus, Inc.
Accumulated knowledge as a manufacturer of
food products, strengthened brand power and
promoted innovation
R & D
Initiatives in Each Business
Sapporo Group Management Plan
2015–2016
We will strive to create profits by growing each of our businesses, implementing
M&As and reducing costs throughout the Group, aiming for early achievement of
the New Management Framework targets. We are also looking ahead to the next
long-term management framework which will begin from 2017.
What We Aim to Achieve
ROE
8.0 % or higher
D/E ratio
Around 1.0 times
Quantitative Targets for 2016
(before goodwill amortization)
>> For further details, see p. 18–19
Guided by our vision, “Seek No. 1 by accumulating one-of-a-kind products,” we will concentrate investment in core brands to further enhance their value and realize growth in the beer business. In the wine and spirits business, a growth area, we will nurture our brands in line with the themes of each product category.
Japanese Alcoholic
Beverages
>> For further details, see p. 20–21
We will work to promote the Sapporo brand’s penetration in premium beer markets in the key regions of North America and Southeast Asia. In North America, SLEEMAN BREWERIES and Sapporo U.S.A. will team up to improve overall efficiency for the region. In Southeast Asia, we will accelerate the expansion of our beer business in Vietnam and use it as a base for strengthening our exports to surrounding countries.
International
Food & Soft Drinks
In the domestic food and soft drinks business, we will establish and cultivate our core lemon-based product and soup brands, which are unique to Sapporo. At the same time, we will accelerate our proposals for new value and products, drawing on the Group’s knowledge and ingredients. Overseas, we will strengthen sales and exports with the start of operations at the new POKKA Malaysia Factory.>> For further details, see p. 22–23
Restaurants
In Japan, we will solidify our core GINZA LION and YEBISU BAR brands. Overseas, we will promote further expansion of the overseas restaurant business, centered on the GINZA LION BEER HALL format.>> For further details, see p. 24
Real Estate
We will enhance the value of our properties, primarily in the key areas of Ebisu, Ginza, and Sapporo, helping to strengthen the Group’s earnings base. Specifically, we will increase the value of Yebisu Garden Place and advance our plan for a commercial facility complex that can contribute to the further revitalization of the Ginza area and help to usher in renewed energy through the Ginza 5-Chome Redevelopment Project.>> For further details, see p. 25
Among all beer breweries in the world, we believe that the Sapporo Group is the only one cultivating and improving species of both barley and hops. Leveraging the Group’s long- nurtured knowledge, experience and results, we will promote R&D that can create new value.
>> For further details, see p.17
Millions of yen
Years ended December 31
2007 2008 2009
For the Year:
Net sales
Including tax ¥449,011 ¥414,558 ¥387,534
Excluding tax 309,794 284,412 264,604
Operating income 12,363 14,685 12,896
Operating income before goodwill amortization 13,232 15,553 13,923
EBITDA 37,759 37,158 36,470
Net income 5,509 7,640 4,535
Capital expenditures (cash basis) 19,884 27,342 21,910
Depreciation and amortization 24,527 21,605 22,547
Goodwill amortization 870 867 1,027
Cash flows from operating activities 30,691 22,292 12,454
Free cash flows 17,196 39,148 (19,773)
At Year End:
Net assets 125,189 116,862 118,591
Total assets 561,859 527,287 506,875
Financial liabilities 212,464 189,252 196,794
Other Indicators:
Overseas sales ratio 9.0% 8.8% 8.5%
Operating income to net sales
Excluding tax 4.0% 5.2% 4.9%
Excluding tax; before goodwill amortization 4.3% 5.5% 5.3%
Debt-to-equity ratio (times) 1.7 1.6 1.7
Equity ratio 22.3% 22.1% 23.4%
ROE 4.6% 6.3% 3.9%
ROE (before goodwill amortization) 5.3% 7.0% 4.7%
Note: Yen amounts have been translated into U.S. dollar amounts at the rate of ¥120.53=U.S.$1.00, the exchange rate prevailing on December 31, 2014.
(¥ Million)
387,534 414,558 449,011
389,245 449,453
492,491 509,835 518,741
0 100,000 200,000 300,000 400,000 500,000 600,000
2014 2013 2012 2011 2010 2009 2008 2007
(¥ Million)
264,604 284,412 309,794
269,874 336,838
379,793 395,377 401,814
2014 2013 2012 2011 2010 2009 2008
0 2007
100,000 200,000 300,000 400,000 500,000
Net sales (including tax) Net sales (excluding tax)
Financial Highlights
SAPPORO HOLDINGS LIMITED and consolidated subsidiaries
Thousands of U.S. dollars
2010 2011 2012 2013 2014 2015
(plan)2014
¥389,245 ¥449,453 ¥492,491 ¥509,835
¥518,741¥545,700
$4,303,830269,874 336,838 379,793 395,377
401,814434,200
3,333,72515,403 18,884 14,415 15,344
14,72916,300
122,20016,576 21,993 18,294 19,330
18,49320,700
153,43139,080 46,477 44,100 44,388
42,97443,200
356,54610,773 3,165 5,394 9,452
3408,000
2,82119,801 13,423 53,870 13,769
19,13316,500
22,504 24,482 25,805 25,059
24,48122,500
203,1141,173 3,109 3,879 3,985
3,7644,400
31,23227,431 22,313 29,618 32,862
22,28442,500
184,88724,836 (28,579) (29,868) 19,594
5,05529,800
41,940126,645 124,775 134,947 155,367
160,005—
1,327,511494,798 550,784 597,636 616,753
625,439—
5,189,076181,335 219,168 257,647 247,828
247,557220,500
2,053,9039.4% 11.0% 14.1% 18.3%
19.2%21.5%
5.7% 5.6% 3.8% 3.9%
3.7%3.8%
6.1% 6.5% 4.8% 4.9%
4.6%4.8%
1.4 1.8 1.9 1.6
1.51.3
25.3% 22.4% 22.1% 24.6%
25.0%—
8.9% 2.5% 4.2% 6.7%
0.2%5.0%
9.8% 5.1% 7.3% 9.5%
2.7%7.8%
(¥ Million)
13,923 15,553 13,232
16,576 21,993
18,294 19,330 18,493
2014 2013 2012 2011 2010 2009 2008
0 2007
5,000 10,000 15,000 20,000 25,000
0 2 4 6 8 10 (%)
Operating income to net sales (excluding tax) Operating income
(¥ Million)
4,535 7,640
5,509
10,773
3,165 5,394
9,452
340 2013 2012 2011 2010 2009 2008 2007
(%)
ROE Net income
0 3,000 6,000 9,000 12,000
0 3 6 9 12
2014
Operating income and
Operating income to net sales (excluding tax) Net income and ROE
To Our Stakeholders
Tsutomu Kamijo
President,
Representative Director
and Group CEO
Creating Corporate Value
over the Medium and
Long Terms
At Sapporo Holdings, we have been working under a “New Management Framework”
— a long-term management plan launched in 2007 to propel us into a new growth stage.
There are now two years remaining until the final year of the plan in 2016. At the time of
its announcement, I was deeply involved with the planning of the new framework as a
member of the board and director of the Corporate Planning Department. Looking back
over our progress, I feel that we have achieved part of the plan, but I also feel a strong
sense of responsibility to ensure that we maintain our focus to attain our targets.
I would like to review these past eight years at this point. Under the New Management
Framework, the Group’s four growth strategies are: 1) Create high-value-added products
and services, 2) Form strategic alliances, 3) Promote international expansion, and 4) Expand
synergies among Group companies. To “Create high-value-added products and services,”
we delivered new products leveraging the brand value of premium Yebisu Beer, which is
one of our strengths. In 2008, we also launched a high-quality product in new genre beer
with Mugi to Hop, which has now grown into a core brand of Sapporo Breweries. In our Real
Estate business, we set about rebuilding and renovating our own aging buildings, which are
located on prime locations in the Tokyo Metropolitan Area. In projects currently underway,
we are involved with the Ginza 5-Chome Redevelopment Project in central Ginza. In efforts
to “Form strategic alliances,” in 2009 we entered a capital and business alliance with POKKA
CORPORATION, a company with powerful brands in lemon beverages despite its small scale.
In 2013 we commenced operations at a newly integrated POKKA SAPPORO Food & Beverage
Ltd. To “Promote international expansion” and “Expand synergies among Group companies,”
we have achieved eight consecutive years of net sales growth at Canadian SLEEMAN
Looking Back on Eight Years
of the New Management Framework
Profit Growth and Profit Management
(Consolidated Operating Income) (¥ Billion)12.012.9 12.4 13.5
12.5
14.7
13.5 15.4
18.018.9
20.0
14.4 15.3 15.3 15.0 14.7
Initial target Result
Steady profit growth
after the financial crisis
0 5 10 15 20
25 Impact of competitive sales
promotions within the industry in reaction to the earthquake disaster Target achieved
Target achieved Target achieved
Target achieved
Target achieved Current fiscal year
2014 2013
2012 2011
2010 2009
2008 2007
To Our Stakeholders
Summary of Fiscal 2014
In fiscal 2014, we encountered a harsh environment, not only with external factors such as
inclement weather in Japan and North America, the increase in the consumption tax rate in
Japan, the sharp depreciation of the yen, and high raw material costs, but also unexpected
factors such as the temporary suspension of Goku Zero sales. I believe we were able to show
resilience in this adverse environment by leveraging the Group’s strengths to achieve a solid
result, for example, the Yebisu Beer brand exceeded the previous year’s sales, while the new
genre Mugi to Hop The gold grew 10%, lemon-based drinks grew 7%, lemon-based flavoring
products grew 4%, and instant soups grew 9%. In the International business, we completed
a successful third year of operations in the Vietnamese beer market with net sales excluding
exports rising 34% year on year. Meanwhile, in the Food & Soft Drinks business, net sales at
POKKA CORPORATION (Singapore) Pte Ltd. climbed 16%, and the completed POKKA Malaysia
Factory commenced operations in October. Furthermore, in the Real Estate business we
increased the value of Yebisu Garden Place, which had its 20th anniversary of operations in
October 2014, and lifted its profitability. We have also been operating our new building in the
Ebisu area, Ebisu First Square, at full capacity since its entire operation started.
As a result of these efforts, the Sapporo Group posted consolidated net sales of ¥518.7
billion, up ¥8.9 billion, or 1.7% from 2013. In addition, although consolidated operating
income declined by ¥0.6 billion, or 4.0%, to ¥14.7 billion, all business segments returned
to profitability. Net income was ¥0.3 billion, a decline of ¥9.1 billion, or 96.4%, mainly
reflecting the posting of ¥11.7 billion for additional liquor tax paid and other (including
overdue tax) due to a voluntary decision to file a revised liquor tax return owing to the
inclusion of Goku Zero in a different tax rate category.
We have also been implementing Group-wide selection and concentration while
aggressively investing for future growth. In fiscal 2014, we decided to acquire the U.S. fruit
juice company Country Pure Foods, Inc., and in the Real Estate business, we started the Ginza
5-Chome Redevelopment Project with construction scheduled to be completed in 2016.
BREWERIES LTD. since acquiring it as a subsidiary in 2006, and expanded its market share. In
Vietnam, we completed construction of the Sapporo Vietnam Limited Long An Brewery in
2011 as a launching pad for expansion into Southeast Asian markets, and in 2012, we began
full-scale marketing in Vietnam. In Singapore, we have leveraged Pokka’s dominant position
in the green tea market to expand into neighboring countries. Through these aggressive
initiatives in Southeast Asia, our five consecutive years of sales volume growth at Sapporo
U.S.A. in the U.S. since 2010 and the aforementioned growth at SLEEMAN, our overseas sales
ratio has more than doubled from 9.0% at the end of 2007 to 19.2% at the end of 2014.
Currently, we are implementing balanced cash management to maintain the earning
power of our Japanese Alcoholic Beverages business and Real Estate business, which
produce stable income, and investing in the International business and Food & Soft Drinks
business as drivers of future growth. We are making steady progress toward achieving
our planned targets. Our upcoming challenges include further strengthening Group
governance and increasing capital efficiency through selection and concentration.
Achieving the New Management Framework Targets
The SAPPORO Group Management Plan 2015–2016 is designed to achieve the targets of
the New Management Framework. The plan positions the Japanese Alcoholic Beverages
business and Real Estate businesses as the Group’s main earnings pillars, and calls for
investment in the International business and Food & Soft Drinks business, as well as
continued investment in R&D, to gain future growth.
With regard to strategic investment, we decided to allocate between ¥150 billion
and ¥200 billion for investment over the five years from 2012 to 2016, including ordinary
capital expenditure. By the end of 2014, we had invested ¥119 billion. Our policy now is to
continue considering capital efficiency and carrying out strategic investments for future
growth while proceeding to reduce our financial leverage.
In each business, we are continuing to cut costs and propose new value in tandem with
making growth investments. I will discuss the main initiatives below.
In the Japanese Alcoholic Beverages business, since 2014 we have adopted the vision of
“Seek No. 1 by accumulating one-of-a-kind products.” We will provide unique Sapporo value
through numerous products under the slogan “Bringing more cheer to your ‘cheers’!” to
achieve further growth. In the International business, we will achieve market penetration in
North America and Southeast Asia with our premium brands, including Sapporo, and establish
a unique position. In the domestic food and soft drinks business, we will rigorously adopt the
customer’s perspective and propose and implement marketing plans for each category and
brand. In the Restaurants business, we will continue working to “provide 100% satisfaction to
customers,” by improving our basic service level and promoting initiatives to provide safe and
secure products. In the Real Estate business we will raise our competitive capability another
notch and continue working to increase the occupancy and rent levels of our property.
We have also positioned ROE as an important indicator for these business developments. In
fiscal 2016, we plan to improve our profitability and efficiency aiming for ROE of 8.0% or more.
2015–2016 Targets Based on Current Businesses
2016 New Management
Framework 2014 results 2015 targets 2016 targets
Net sales (including liquor tax) ¥518.7 ¥545.7 ¥579.5
¥600.0
Operating income ¥14.7 ¥16.3 ¥23.5
¥40.0
(before goodwill amortization) ¥18.5 ¥20.7 ¥28.0
Net income ¥0.3 ¥8.0 ¥11.4
—
Debt-to-equity ratio (times) 1.5 1.3 1.2
around 1.0
ROE 0.2% 5.0% 6.9%
8.0%
or higher
(before goodwill amortization) 2.7% 7.8% 9.6%
Note: Assumed exchange rates: 2015–2016: US$ = ¥113.00, CAN$ = ¥99.00
(¥ Billion)
To Our Stakeholders
In 2026, the Sapporo Group will mark its 150th anniversary. We are formulating the next
long-term management framework targeting this milestone year. Right now, our vision is
to “be a group of companies that is essential for customers to enjoy rich lives throughout
the world by continuing to create and supply new products and services, in its effort to
become No. 1 in the market.”
Realizing this vision will mean not only expanding our businesses, but also
strengthening our corporate governance and getting actively involved in CSR activities
to consolidate our corporate presence. We introduced a system of outside directors in
1997, and since 2009 have had an appropriate governance system that includes three
outside directors. As our overseas business expands, we will need to promote awareness
of the Sapporo Group Guidelines for Corporate Behavior among our overseas subsidiaries
and strengthen the management system for the entire Group. We have also positioned
CSR-focused management as one of the key strategies for realizing the sustained growth
of the Group, and we have determined six key CSR issues that we continue to tackle as we
aim to develop as a company while contributing to the creation of a sustainable society.
The issues include “Quality of food and space,” “Conservation of the global environment,”
“Harmonious coexistence with society,” “Fair and just dealings,” “Development of human
resources and enhancement of the working environment,” and “Sound corporate
management.”
Sustaining Medium- to Long-term Growth and
Enhancing Corporate Value
Providing appropriate returns of profit to shareholders is a key management policy of
Sapporo Holdings. Our basic policy is to pay dividends, taking our operating performance
and financial condition into account. In line with this policy, we paid an annual dividend
of ¥7 per share for fiscal 2014, the same dividend paid in fiscal 2013. In fiscal 2015, we plan
to maintain the annual dividend at ¥7 per share, while making strategic investments and
strengthening our financial foundation. However, we will aim to enhance our return of
profit in line with our achievement of the targets of the New Management Framework.
We will continue to strive for stable growth in our earnings, and work together as a
Group to maximize our corporate value, constantly providing new value to our customers
as a food manufacturer. We hope to meet your expectations and kindly ask for your
continued support.
Maximizing Shareholder Value
Creating New No. 1 Domains
The Sapporo Group will enhance the capabilities for new product development to meet customer’s and society’s needs. It will conduct our sustainable growth and also will enhance our corporate value.
In March 2014, the Group established new R&D system named “Sapporo innovation Labs” to enhance the innovative activities. Under “Sapporo innovation Labs,” Sapporo Breweries and POKKA SAPPORO Food
& Beverage cooperate together in a cross-sectional way. We have developed some R&D seeds in our 138 years history for food processing techniques and raw materials. We aim to develop and create the products which meet customer’s needs by matching our seeds. Under the next long-term management framework vision, we will realize new No. 1 domains.
To Gain Future Growth
Combination of existing seeds and new technologies
Combination
Existing R&D seeds
Food processing Product development Application varieties
Raw material To breed and develop for
barley and hops
Lemon application research New raw material research
New technologies
Taste research and sensory science Analyze customer’s senses scientifically Know customer’s insight
We will create high-value-added products with our proprietary plant-based lactic acid bacteria,
“Shiawase Nyuusankin SBL88” which means happiness-producing lactic acid bacteria.
Develop high value added
products by utilizing lactic
acid bacteria
1
We will take advantage of the brand value of Pokka Lemon and push forward with the world’s best
“Lemon” research to commercialize new-value-added products.
Aim for the world’s best
“Lemon” research
2
Based on our fermentation technology, we will proceed with technology development related to next-generation energy from disposable food waste and others. We currently try to support practical implementation of this technology both domestically and overseas.
Next-generation energy
3
Performance Review and Plan
Net sales
(¥ Million)
200,000 220,000 240,000 260,000 280,000 300,000
279,329
268,189 269,948274,909 281,820
290,200
2015 (Plan) 2014 2013 2012 2011 2010
Operating income to net sales Operating income
(¥ Million) (%)
0 1 2 3 4 5
0 2,000 4,000 6,000 8,000
10,000 9,290 9,305
7,522
9,902 10,207
2015 2014 2013 2012 2011
2010 2015
(Plan) 2014 2013 2012 2011 2010
9,500
Operating income and Operating income to net sales
Note: Figures are before goodwill amortization.
Japanese Alcoholic Beverages
the beer segment we released several limited editions in our Yebisu brand offering various flavors for a limited time or in gift packs only. In the new-genre beer segment we achieved a 10% increase in sales volume by renewing Mugi to Hop The gold. Meanwhile, we discontinued the new-genre beer Goku Zero with zero purine bodies, following the shipment of May output. After some revisions to the brewing process, we relaunched Goku Zero in July as a happo-shu. Despite a gap in sales of about one month due to the temporary withdrawal, the sales volume finally exceeded the initial plan for the year.
RTD Beverages
In the RTD category, sales increased by a significant 49% year on year. Sapporo Otoko Ume Sour, launched in 2013, continued to post solid sales, and in April 2014, we leveraged synergies with the Food & Soft Drinks business to launch the RTD Sapporo Kireto Lemon Sour, which achieved strong popularity.
Wine and Spirits Business
In the wine business, Grande Polaire, our core premium brand made from 100% domestic grapes, performed strongly, achieving a 19% year-on-year increase in sales volume. In the spirits business, we achieved 6% growth in Looking at the Japanese beer market in fiscal 2014, total
domestic demand for beer and beer-type beverages is estimated to have declined by 2% year-on-year, largely due to the negative impact of unseasonable weather nationwide in August. The Japanese Alcoholic Beverages business continued its efforts to realize further growth in beer and beer-type beverages by constantly providing customers with a unique value proposal. As a result, the Japanese Alcoholic Beverages business achieved year-on-year increases in sales volumes in all categories, including beer and beer-type beverages, ready-to-drink (RTD) beverages, wine, spirits, and Japanese liquors. Net sales in the Japanese Alcoholic Beverages business climbed by ¥6.9 billion year on year, or 2.5% compared with the previous year, to ¥281.8 billion, and segment operating income rose ¥0.3 billion, or 3.1% to
¥10.2 billion. Segment operating income before goodwill amortization rose ¥0.3 billion, or 3.1%, to ¥10.2 billion.
Beer Business
In the beer and beer-type beverages category, we expanded our market share for a third consecutive year. By genre, in
Fiscal 2014 Overview
Key Strategies under the Sapporo Group Management Plan 2015–2016
“Seek No. 1 by accumulating one-of-a-kind products”
and strengthen cultivation of brands in each field.
■ In the beer business, we will concentrate investments on the core brands to further enhance brand value and achieve growth.
■ With the start of the craft beer business, we will develop various types of beer by leveraging Sapporo Breweries’ long-nurtured brewing technology and carefully selected ingredients to offer new ways of enjoying beer.
■ In the wine and spirits business, we will nurture our brands in line with the theme of each product category.
Topic
Guided by a vision of “Seek No. 1 by accumulating one-of-a-kind products,” we are working to develop “Only One” products that only Sapporo Breweries can provide.
A String of “Only One” Products Launched
Green Aroma is a new-genre beer targeted at women. The product uses three botanical ingredients (hops, coriander seed, and orange peel) to create a relaxing aroma, while also achieving a light flavor that is 80% carbohydrate free.
1
Green Aroma
The Group has entered the growing craft beer market through a specialized subsidiary, offering beers made from carefully selected ingredients. Our first new beer in this category, Craft Label Kankitsukaoru Pale Ale, uses two types of flavored hops to create a refreshing citrus aroma and rich taste.
2
Craft Label
■SAPPORO BREWERIES LIMITED
■SAPPORO WINES LIMITED
■YEBISU WINEMART CO., LTD.
■TANOSHIMARU SHUZO CO., LTD.
■SAPPORO ENGINEERING LIMITED
■STARNET CO., LTD.
■NEW SANKO INC.
■SHINSEIEN CO.,LTD.
need to respond to increasing diversity in consumer preferences and the venues where our products are sold and consumed. In beer and beer-type beverages, we aim to achieve a fourth straight year of year-on-year growth in sales volumes by further enhancing the value of our core brands. Meanwhile, we will enter the craft beer market, which has been growing in recent years, and build a business on a new model by creating completely new value. The RTD, wine, spirits and Japanese liquor businesses will strengthen the proposals of “Only One” products. The Japanese Alcoholic Beverages business as a whole will strive to achieve its profit targets despite the higher costs of raw ingredients and materials and the impact of yen depreciation by effectively and flexibly controlling marketing expenses while also seeking to enhance brand values. The business will also continue efforts to cut other costs wherever possible.
sales volume for our various Bacardi products, including the world’s No. 1 rum brand Bacardi.
Japanese Liquor Business
In the Japanese liquor business, total sales volume expanded by 9% year on year. In our shochu offerings, the two blended shochus, Imo Shochu Kokuimo and Mugi Shochu Koimugi, performed strongly. Meanwhile, we also saw brisk sales of San-shu no Zeitaku Porifenōru Aka Umeshu—literally, a red plum wine loaded with three types of polyphenols, that results in an umeshu with added functionality.
We expect the operating environment for our Japanese Alcoholic Beverages business to remain challenging owing to a decline in the drinking population and the
Outlook for 2015
1
2
Performance Review and Plan
Net sales Operating income and Operating income to net sales
Note: Figures are before goodwill amortization.
to price competition in the value-brand market segment. In the United States, sales were affected by a winter cold wave early in the year, but rebounded in April, and Sapporo U.S.A. managed to achieve an increase in sales over the entire year for a fifth consecutive year. In the U.S. soft drinks business, the cost of sales ratio increased on rising raw material prices, leading to a year-over-year decline in profit; however, we succeeded in negotiating sales prices and expanding our raw material procurement channels.
Asia and Oceania Market
In Vietnam, sales volume increased steadily by 34% year on year, and 134%, more than double the level of fiscal 2012. We continued efforts to establish the Sapporo brand, including active sales promotions at local restaurants and supermarket chains. In Singapore, we worked with POKKA CORPORATION (Singapore) Pte. Ltd. to expand sales channels in the local household market. In South Korea and Oceania, we worked to strengthen sales in each market. The efforts outlined above enabled the International business to achieve an overall increase of 9% year on year in sales volume of Sapporo brand products, including North America, in 2014.
International
In the North American beer market, we estimate that total demand in Canada fell about 1% year-on-year in 2014 while demand in the U.S. was largely flat, despite some positive macro developments, including improving employment conditions. The Asian beer market, however, continued to expand steadily, supported by the region’s fast-growing economies. In the International business, we encountered intensifying competition with other companies in the same industry in Canada and a decline in sales in North America following a winter cold wave. In Vietnam, however, sales grew briskly. As a result, net sales increased by ¥1.5 billion, or 3.0% year on year, to ¥49.7 billion, and segment operating income decreased ¥1.0 billion to ¥0.2 billion. Segment operating income before goodwill amortization decreased ¥1.0 billion to ¥1.4 billion.
North American Market
In Canada, SLEEMAN BREWERIES achieved a year on year increase in sales for an eighth consecutive year by taking appropriate countermeasures despite being subjected
Fiscal 2014 Overview
(¥ Million)
25,386 25,888 36,121
48,216
67,800
49,673
2015 (Plan) 2014 2013 2012 2011
0 2010
10,000 20,000 30,000 40,000 50,000 60,000 70,000
Operating income to net sales Operating income
(¥ Million) (%)
2015 (Plan) 2014 2013 2012 2011 2010
1,607 1,433
1,053 2,448
3,100
1,430
0 500 1,000 1,500 2,000 2,500 3,000 3,500
0 2 4 6 8 10 12 14
Key Strategies under the Sapporo Group Management Plan 2015–2016
Promote further market penetration of the Sapporo brand in premium beer markets,
concentrating resources and efforts on North America and Southeast Asia.
■ Bolster initiatives for the area strategy and distribution channels in the Canadian and U.S. premium beer markets to achieve further growth.
■ Aim to maximize synergies with Country Pure Foods, Inc. which we will acquire together with Toyota Tsusho America, Inc. and Silver Springs Citrus, Inc., aiming to strengthen and expand the business platform in the U.S. beverages market.
■ In Vietnam, we will continue efforts to expand sales, improve operating profits, and achieve profitability through effective and efficient investment in marketing and sales activities with clearly defined targets.
Japanese-American market segment, we will redouble our efforts to expand sales to the wider Asian-American and general population segments. In the U.S. soft drinks market, we aim to expand sales by leveraging the business foundations of Silver Springs Citrus, Inc. and Country Pure Foods, Inc. which has its strengths in the commercial-use soft drinks market.
In Vietnam, we will continue efforts to establish the Sapporo brand supported by effective and efficient investment in marketing and sales activities with clearly defined targets. We expect such efforts will help expand sales and improve the profitability of our local business.
Moreover, we will continue to drive sales channel expansion in each of our markets, including South Korea and Oceania.
■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.
In North America, the U.S. economy has returned to a moderate growth pace amid improving employment conditions and a buoyant stock market. However, overall demand in the North American beer market is expected to remain largely flat in 2015. Meanwhile, we expect the Asian beer market to remain on a solid growth track, supported by a growing population and stable economic growth. Under such circumstances, in Canada, we will continue to promote our core premium brands by aggressively investing in marketing, while increasing sales staff in areas where we hope to increase sales of value-brand beers. In the U.S. market, we aim for sales volume growth in excess of total demand growth. While continuing to target the
Outlook for 2015
Topic
Vietnam is enjoying continued strong growth in real GDP at 5.4%,* much higher than Japan’s 1.6%.* Beer production volumes in the domestic Vietnamese market have grown by around 2.5 times over the past ten years. In light of these market trends, the Sapporo Group completed construction of its Vietnam brewery in 2011. Since then, we have been conducting local operations from production to sales, and have seen our sales improve steadily. Looking ahead, we will accelerate our expansion of the beer business in Vietnam, while also working to build up our exports from Vietnam. We will also take steps to accelerate the overall growth of the Group in Asia, mainly through our representative office registered in Singapore, which we established in 2014.
Growth Potential in the Vietnamese Market
* 2013 figures
0 500 1,000 1,500 2,000 2,500 3,000 3,500
2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 (Million liters)
Vietnamese Market
Source: General Statistics Office of Vietnam
Performance Review and Plan
Net sales Operating income and Operating income to net sales
Note: Figures are before goodwill amortization.
Domestic Food and Soft Drinks Business
In domestic soft drinks brands, we continued to build new brands in addition to our existing ones, with the 2014 launch of Green Shower, while providing new value for lemons with the launch of Fruit Vinegar Sparkling Apple Vinegar & Lemon Vinegar. In the lemon and natural foods category, we launched a new and improved version of our mainstay product, Kireto Lemon, while in the soup and related foods category, we strengthened our lineup of the Jikkuri Kotokoto series. As a result of these efforts, sales growth outpaced overall domestic demand.Domestic Restaurants Business
The Café de Crié coffee shop chain marked its 20th anniversary since foundation with steady growth in sales by opening shops in previously untapped areas and offering appealing new menu items.
Overseas Soft Drinks Business
In the overseas soft drinks business, POKKA CORPORATION (Singapore) won larger market shares for core products in its home base in Singapore while also steadily expanding exports. We also completed construction of the POKKA
Food & Soft Drinks
We estimate that domestic demand for soft drinks in 2014 slipped 2% year over year, owing in part to the negative impact of unseasonable weather. We also estimate that demand for lemon-based products was the same as in 2013*, and that demand for instant soups increased 4% year on year. As we started the second year of integrated operations as POKKA SAPPORO Food & Beverage Ltd., we concentrated investments on core brands in the domestic food and soft drinks business, aiming to strengthen and cultivate them, and achieve overall sales volumes in line with total demand. In the overseas soft drinks business, sales climbed 16% year on year, atop growth in Singapore with both domestic and export sales. As a result of the above, the Food & Soft Drinks business recorded sales of ¥133.4 billion in 2014, up ¥2.8 billion, or 2.1%, year on year, and posted segment operating income of ¥0.1 billion, compared with a ¥1.5 billion loss in 2013. Segment operating income before goodwill amortization rose ¥1.4 billion, or 111.1%, to ¥2.6 billion.
* Data sources: Year-on-year comparisons of cumulative sales values for January– December 2014 for the lemon foods market (Sapporo definition) and the instant soup market based on Intage SRI research on the supermarket and convenience store industries.
Fiscal 2014 Overview
0 50,000 100,000 150,000 (¥ Million)
33,938 108,061
129,017 130,672 133,439 133,700
2015 (Plan) 2014 2013 2012 2011 2010
Operating income to net sales Operating income
(%)
0 1,000 2,000 3,000 6,000 5,000 4,000
0 1 2 3 6
4 5 (¥ Million)
1,343 5,745
3,117
1,245
3,000 2,628
2015 (Plan) 2014 2013 2012 2011 2010 Key Strategies under the Sapporo Group Management Plan 2015–2016
Move on to a growth stage by cultivating brands and implementing structural reforms.
■ In the domestic food & soft drinks business, we will establish and cultivate core lemon-based products and soup brands. We will also accelerate the offering of new values and products, drawing on the accumulated knowledge of the Sapporo Group and selected ingredients.
■ In the restaurants business in Japan, we will open new formats of Café de Crié (intra-hospital and suburban-type restaurants).
■ In the overseas soft drinks business, we will strengthen sales and exports by leveraging the opening of the new factory in Malaysia, and expand into surrounding countries such as Myanmar, where we have signed a licensed manufacturing contract.
Topic
In October 2014, the POKKA Malaysia factory started operations. The factory has a cutting-edge sterilized filling line able to fill 500 ml and 1.5 L PET bottles with tea and beverages containing milk, among other drinks. Furthermore, both the factory and its production items have Malaysian halal certification, which is considered one of the most stringent and trusted standards in the world. The certification means that products made at the factory can be marked as halal foods, and that the factory is recognized for practicing adequate food hygiene and product quality management.
Meanwhile, in Myanmar, where the Group is aiming to increase its sales a step further, the local agent decided to construct a factory in Myanmar to conduct licensed production of POKKA brand fruit juice products. The start of construction was marked with a ceremony in November 2014.
Enhancing Production Capabilities in Southeast Asia
drinks business, we will implement sales promotion measures appropriate to our respective brands, such as aromax canned coffee, Ribbon, Gabunomi, and Green Shower. In the lemon and natural foods category, we plan to expand the applications of products used as seasonings and in beverages, while aggressively developing new product concepts to further demonstrate our position as the leader in lemon-based products. In the soup and related foods category, we plan to strengthen the Jikkuri Kotokoto soup lineup and brand, and to develop new products. In the domestic restaurants business, we will further enhance brand value and accelerate expansion of the Café de Crié chain. In the overseas soft drinks business, we plan to maintain our leading share of the core Singapore tea beverages market and expand sales in new product categories.
■ POKKA SAPPORO FOOD & BEVERAGE LTD.
■PS BEVERAGE LTD.
■ STAR BEVERAGE SERVICE CO., LTD.
■POKKA CREATE CO., LTD.
■POKKA SAPPORO HOKKAIDO LTD.
■ POKKA CORPORATION (SINGAPORE) PTE. LTD.
■ POKKA INTERNATIONAL PTE LTD. and another 8 companies
Malaysia Factory and started production in October. Meanwhile, in the overseas restaurant business we sold our entire equity interest in POKKA CORPORATION (HK) Limited to concentrate on our core soft drinks business.
Japan’s soft drinks industry continues to see lackluster consumer sentiment, and overall demand growth is likely to continue to be challenging. In the domestic food and soft drinks business, we will strive to thoroughly carry out low-cost operations with the aim of building a business structure capable of generating stable profits. We will also draw up and carry out marketing plans that thoroughly reflect the customer’s viewpoint. In the domestic soft
