Sapporo Holdings Limited · TSE:2501

Sapporo — H1 2017 Earnings Presentation

53 slides from Sapporo's earnings presentation, Aug 4, 2017

1. Slide 1: Sapporo Group Business Results Presentation for the Six Months Ended June 30, 2017

   Sapporo Group Business Results Presentation for the Six Months Ended June 30, 2017 August 4, 2017 URL http://www.sapporoholdings.jp/english Copyright, 2017 SAPPORO HOLDINGS LTD. All rights reserved. 1/53

2. Slide 2: Contents

   Contents 1. 2017 2Q Point P3 2. 2017 2Q Results P4~32 Appendix：Collection of Data by business P33~52 Copyright, 2017 SAPPORO HOLDINGS LTD. All rights reserved. 2/53

3. Slide 3: First-Half 2017 Results Point

   First- Half 2017 Results Point  Progress in line with initial plan  No change to full-year forecast First-Half 2017 Point  Promote initiatives for transformation of the Group management platform and enhancement brand  Toward growth in the “Food” field and global business expansion ・Acquisition o

4. Slide 4: Highlight

   (billions of yen) 2016 2Q 2017 2Q YoY changes (amount, %) Net sales (incl. liquor tax) 248.9 257.9 9.0 3.6% Net sales (excl. liquor tax) 195.7 203.6 7.8 4.0% Overseas net sales to total (excl. liquor tax) 21.9 ％ 22.0 ％ 0.0% - Operating income 3.0 3.0 (0.0) (1.0)% First-Half Operating income before 2

5. Slide 5: Progress in line with initial plan; no change to full-year forecast

   Progress in line with initial plan; no change to full-year forecast Sales of all businesses increased y-o-y, operating income remained unchanged (billions of yen) Net Sales YoY Change  Sales increased at all businesses, top-line continues to grow First-Half 2017 Operating income Group Executive YoY

6. Slide 6: Net Sales by Segment

   (billions of yen) YoY changes 2016.2Q 2017.2Q (amount, %) Consolidated Net sales 248.9 3.6％ Japanese Alcoholic Beverages 125.7 1.4％ International 31.6 6.6% Net Sales by Segment Food & Soft Drinks 64.9 0.8% Restaurants 12.6 9.2% Real Estate 10.9 8.6% Other 3.0 82.7% Copyright, 2017 SAPPORO HOLDINGS L

7. Slide 7: Main Factors Contributing to Changes in Net Sales

   Sales growth led by beer in Japan, diversification, food & soft drinks, and North America Net increase from Ginza Place, Shinsyu-ichi Miso since September 2016 Japanese Alcoholic Food & Soft Beverages International Drinks Restaurants Real Estate 2017 (billions of yen) 1H Main Factors Contributing to

8. Slide 8: Operating Income by Segment

   (billions of yen) 2016 2Q 2017 2Q YoY changes Consolidated operating income 3.0 Japanese Alcoholic Beverages 1.4 International (0.3) Food & Soft Drinks (0.8) Restaurants (0.0) Operating Income Real Estate 5.1 by Segment Other (0.0) General corporate and intercompany (2.2) eliminations Amortization o

9. Slide 9: Main Factors Contributing to Changes in Operating Income

   Profit growth from high-performing businesses, while operating income remain unchanged y-o-y due to investment in brand enhancement and management platform development Japanese Real Alcoholic International Food & Soft Restaurants Estate Beverages Drinks (billions of yen) Main Factors Contributing to

10. Slide 10: Overview of Each Business

    Overview of Each Business Copyright, 2017 SAPPORO HOLDINGS LTD. All rights reserved. 10/53

11. Slide 11: Japanese Alcoholic Beverages: Strong beer sales boosted marginal profit ratio

    Strong sales of beer and diversification products boosted marginal profit ratio; fixed cost increased due to brand investment, while operating income remained unchanged y-o-y  Sales of all beer including Black Label, Yebisu and others remained Japanese Alcoholic strong Positive Beverages (Black Lab

12. Slide 12: Japanese Alcoholic Beverages

    Japanese Alcoholic Beverages （(billions of yen) YoY Net Sales change （Reference) *Estimates Total Beer down demand : Happoshu down Beer Happoshu, new genre RTD, wine, Japanese liquor, New genre unchanged etc. Operating YoY income change *Estimates Total Beer sales volume Happoshu, new Product mix, I

13. Slide 13: Going Forward

    ◎Implement strategy that focuses further on the 2 major brands Black Label’s sales channels for young people have been expanding markedly and the number of outlets offering the product also has been expanding Almost 90% of those who purchased Yebisu’s Hanamiyabi are users of brands other than Yebi

14. Slide 14: North America continues to be strong; pursuing reforms in Vietnam

    North America continues to be strong; pursuing reforms in Vietnam International  Despite stagnation in the North American beer market, both Positive (billions of yen) Sleeman and Sapporo grew YoY (Sales volume at Sleeman %, Sapporo brand at Sapporo USA %) Sales change  At CPF, food service and co-

15. Slide 15: International

    International （(billions of yen) YoY Net Sales change 0.3 0.0 （Reference) *Estimates 1.1 Total Canadian beer demand : down about U.S. beer 1.2 down about NORTH AMERICAN NORTH AMERICAN SOFT VIETNAM EXPORTS, OTHER ALCOHOLIC BEVERAGES DRINKS Operating YoY income change *Estimates Total Sales volume inc

16. Slide 16: Going Forward

    ◎SLEEMAN expanding partner business  SLEEMAN adopts the expansion of partner business as part of its growth strategy  It has been building a relationship of trust with DIAGEO over the years. SLEEMAN has been operating for more than 15 years in Quebec, continuing with the partner agreement in logis

17. Slide 17: Going Forward

    ◎Promoting optimization of global supply chain  Transfer production of so-called Silver cans which have been produced by Guelph Plant of SLEEMAN to Vietnam  As the transfer will create redundant capacity at SLEEMAN, the company will make those products which it had been outsourcing to City Brewing

18. Slide 18: Going Forward: Acquisition of entire equity in Anchor Brewing Company

    ◎Acquisition of entire equity in Anchor Brewing Company  Anchor is a U.S. beer manufacturer which owns the prominent Anchor Steam Beer brand  We signed an equity transfer agreement with Anchor Brewers & Distillers, LLC (hereinafter, “ABD”) and made Anchor Brewing a group company by acquiring the e

19. Slide 19: Food & Soft Drinks: focus areas performing strongly

    Areas in which we focus have been performing strongly, but concerns over changes in overseas business environment  Lemon-based products registered high growth rate Food & Soft (Lemon-based soft drinks sales volume % y-o-y, lemon-based food products %) Positive Drinks(billions of yen)  Brand streng

20. Slide 20: Food & Soft Drinks

    Food & Soft Drinks （(billions of yen) YoY Net Sales change （Reference) *Estimates 0.0 Domestic soft drinks Total up 0.5 demand : Lemon-based products up Instant soups up JAPANESE FOOD & SOFT DRINKS OVERSEAS SOFT DRINKS, CAFÉ,ETC. Operating YoY income change *Estimates Sales increase, product Increas

21. Slide 21: Going Forward

    ◎Focused investment in high-performing lemon-based products, tea drinks, soups  Leveraging canned cold soups, in which we have the top share, we will stimulate demand in the summer and expand the market  Further expand the tea drink business with the Tabicha retto series, which uses rare ingredien

22. Slide 22: Restaurants: sales growth trend continues

    Continuing with the sales growth trend, but at a rate slightly weaker than the plan Restaurants Positive  Nonconsolidated sales of Sapporo Lion continued to be strong (Comparable-store sales % y-o-y) (billions of yen) Sales YoY  Marushinkawamura contributed to sales change (Total sales for Jan-Jun

23. Slide 23: Going Forward

    ◎Maintain sales with the mainstay outlets and the successful Yebisu Bar format ◎Measures to reduce cost Going Forward  In a market environment where the pressure of cost increase is mounting, we will implement maximum measures such as COGS control and reduction of various expenses to reduce the imp

24. Slide 24: Real Estate: Stable operation of mainstay properties

    Stable operation of mainstay properties contributed to sales and profits Real Estate Positive  Yebisu Garden Place (YGP) maintained stable occupancy rate (billions of yen) （Jan-Jun total occupancy rate %) YoY Sales change  Ginza Place, opened in September 2016, contributed to sales and profits  P

25. Slide 25: Going Forward

    ◎Stable operation of mainstay properties  Yebisu Garden Place (YGP), Ginza Place and other mainstay properties maintained stable Going Forward occupancy  Renovation work of the YGP Tower Restaurant Street on the 39th floor is progressing for August opening ◎Completion of TDY Sapporo Collaboration

26. Slide 26: Special Factors in the Business Results

    Difference in consolidated period of 2 group companies Impact of exchange rates negligible (- = negligible) <Special factors in business results> (YoY) Impact on Impact on Business segment Details operating sales income Marushinkawamura Inc.: consolidation began Approx. Restaurants in June 2016 - ¥0

27. Slide 27: Changes in Other Income and Expenses

    No significant factors affecting Other Income and Expenses (billions of yen) 2016 2Q 2017 2Q Change Primary Reasons Operating income 3.0 3.0 (0.0) - Financial account balance (0.2) (0.1) 0.1 - Other non-operating (0.2) (0.2) (0.0) -- expenses Changes in Ordinary income 2.6 2.6 0.0 - Other Income Gai

28. Slide 28: Changes in Balance Sheets: Assets

    20.3 billion yen decline y-o-y in total assets <Comparison with the end of FY2016> Cash and cash Total assets equivalent (billions of yen) 10.5 10.5 Trade receivables 12.1 12.4 13.2 9.4 96.8 78.9 →Impact of seasonal factors, 64.3 74.8 71.2 68.4 Current assets bank holidays, etc. 41.2 37.9 40.7 42.0

29. Slide 29: Changes in Balance Sheets: Liabilities and Net Assets

    Total liabilities down by 19.5 billion yen, total net assets down by 0.7 billion yen <Comparison with the end of FY2016> Accounts payable Total (billions of yen) Short-term bank liabilities 38.5 36.2 34.6 37.8 38.8 35.8 73.4 Deposits received 66.2 78.8 Current 94.8 8.2 79.0 101.4 liabilities 7.5 8.4

30. Slide 30: Financial Status: Cash flow and investment

    Cash basis investment totaled 11.9 billion yen (billions of yen) <Consolidated cash flow statements> 2016 2Q 2017 2Q Change % ①<Capital expenditure, lease fees> about ¥ billion in consolidated total Cash flow from （tangibles, intangibles, lease fees, etc.) 14.8 16.4 1.6 11.2% operating activities Ca

31. Slide 31: Promote initiatives for transformation of the Group management platform

    Promote initiatives for transformation of the Group management platform - Established Delicious Taste Technology Research Center in first quarter R&D - Pursue measures for creating values in food - Started health survey research related to lemon in Osakikamijima-cho in Hiroshima Prefecture - Started

32. Slide 32: Sapporo Breweries wins top prize at 36th European Brewery Convention

    Sapporo Breweries wins the top prize at the 36th European Brewery Convention for the third consecutive time, a first in Japan  The Group presented its research on the aroma of SORACHI ACE, a hop variety developed in Japan, at the 36th European Brewery Convention (EBC) held in Slovenia from May 14 t

33. Slide 33: Appendix

    Appendix Copyright, 2017 SAPPORO HOLDINGS LTD. All rights reserved. 33/53

34. Slide 34: Major sales & sales volume

    Major sales & sales volume Appendix - Copyright, 2017 SAPPORO HOLDINGS LTD. All rights reserved. 34/53

35. Slide 35: Japanese Alcoholic Beverages: sales volume

    【Beer】 （sales volume） ＜Y-o-y change in sales volume of 3 core brands> Jan-Jun up ％ y-o-y （total demand down 1％） 115  Black Label Brand total up ％ y-o-y 110 （Sales of the canned version：up ％ y-o-y） 105  Yebisu Brand total up ％ y-o-y 100 95 【Happoshu+new genre】 （sales volume） Jan Feb Mar Apr May Jun

36. Slide 36: Beer and beer-type beverages sales volume

    (10,000 cases) ＜Beer and beer-type beverages category Jan- Jun sales volume Y-o-y Change (Shipment base) 3,000 2,500 2,000 1,500 1,000 ＜Beer lineup (Jan – Jun breakdown＞ 500 14% Appendix 0 2011 2012 2013 2014 2015 2016 2017 Japanese Alcoholic Beer, happoshu, new genre Beer Happoshu, new genre Bevera

37. Slide 37: Japanese Alcoholic Beverages net sales

    (billions of yen) 8 ＜Jan- Jun Net Sales＞ (billions of yen) ※incl. liquor tax 6 120.0 3.5 3.4 3.6 3.7 4 2.8 3.1 3.3 100.0 2 28.9 2.3 2.3 2.3 2.7 2.5 2.4 2.4 34.6 35.4 33.4 38.4 33.3 31.8 0 80.0 2011 2012 2013 2014 2015 2016 2017 60.0 Japanese wine Imported wine 4 40.0 76.2 68.0 68.0 69.2 68.0 67.8 72

38. Slide 38: Major New Products

    ＜Jan-Jun Major New Products> Black label extra brew Black Label Sapporo lager beer (Limited amount) Special edition can (Limited amount) Appendix Japanese Alcoholic Beverages YEBISU Sapporo Classic Shizuoka bakushu Gokuzero Special edition can Natsuno soukai (Regionally product) Special edition can

39. Slide 39: Awards in 2017

    Awards in 2017  Grande Polaire Hokkaido dry bacchus 2016*1 became the only Japanese wine to win Gold at the International Wine & Spirits Competition 2017 (IWSC) http://www.sapporobeer.jp/news_release/0000021618/index.html *1 Sales limited to Hokkaido area (excluding directly run outlets and Interne

40. Slide 40: Sapporo Draft Beer Black Label: Expand brand contacts

    Sapporo Draft Beer Black Label Expand brand contacts THE PERFECT BEER GARDEN THE PERFECT DAYS THE PERFECT BEER GARDEN 2017 OSAKA 2017 2017 TOKYO Appendix http://www.sapporobeer.jp/news_release/search/index.php?pageID=3#results Copyright, 2017 SAPPORO HOLDINGS LTD. All rights reserved. 40/53

41. Slide 41: International: sales volumes

    【SLEEMAN】 【U.S. soft drinks business】  Jan- Jun up ％ y-o-y *sales volume  Jan- Jun up ％ y-o-y *sales revenue （total demand down 2%) ＜Ｕ.S. soft drinks business Net Sales in Local Currency (Jan-Jun)＞ * before elimination of inter- company transactions 【Sapporo U.S.A.】 160 127 134  Jan- Jun up ％ y-o

42. Slide 42: International: SLEEMAN and Sapporo U.S.A. net sales

    ＜SLEEMAN：Net Sales in Local Currency (Jan- Jun)) Sapporo brand sales volume *before elimination of inter- company transactions breakdown by geographic area 8% 200 180 6% 34% 160 140 2.92 17% 120 1.81 million 100 174 million cases 80 147 154 156 163 164 cases 60 124 127 105 115 2012 2017 40 77% 58% ２

43. Slide 43: Food & Soft Drinks: category sales

    【Lemon-based drinks】 【Lemon-based food products】  Jan- Jun up ％ y-o-y  Jan-Jun up ％ y-o-y 【Unsweetened tea drinks】 【Soups】  Jan- Jun up ％ y-o-y  Jan- Jun up ％ y-o-y 【Soy milk, chilled products】 【Coffee drinks】  Jan –Jun Net Sales approx. billion  Jan- Jun down ％ y-o-y Appendix ＜Japanese soft d

44. Slide 44: Food & Soft Drinks segment net sales

    ＜Food & Soft Drinks segment Net sales> ＜Food & Soft Drinks segment (Jan- Jun) Net sales break down by geographic area＞ 70.0 ※April 2011 Consolidation of POKKA CORPORATION 60.0 84% 50.0 40.0 30.0 59.5 60.7 62.7 63.9 64.9 65.4 20.0 39.4 16% 10.0 24.1 18.1 14.8 14.5 Appendix 0.0 2007 2008 2009 2010 201

45. Slide 45: Pokka Create Co., Ltd.

    【Pokka Create CO., Ltd.】  Jan- Jun Net sales billion up ％ y-o-y ＜New & refurbish outlets ＞ <Number of outlets as of June 30, 2017 : 192> 105 Appendix 50 East Japan 192 Central Japan Food & Soft Drinks West Japan 37 107 Directory operated 85 192 FC Copyright, 2017 SAPPORO HOLDINGS LTD. All rights re

46. Slide 46: Major new products

    ＜Jan- Jun Major new products＞ Lemon no genki Kireto lemon sparkling Spice lemonade (Functional food label) improved Ribbon yuubari Ribbon yuubari Ribbon Napolin melon soda classic melon gelly Appendix Tabicha retto series Food & Soft Drinks Yakitoukibicha Nippon mugicha Furano Lavender tea Jikkuri k

47. Slide 47: Soft drinks production plant in Indonesia began operation

    Soft drinks production plant in Indonesia PT. POKKA DIMA INTERNATIONAL began operation  One PET bottle filling line to fill green tea, black tea and fruit juice drinks in 350 to 500 ml PET bottles was introduced in the new plant  It mainly produces tea drinks such as Jasmine Green Tea 450 ml and 3

48. Slide 48: Restaurants: net sales and outlets

    (billions of yen) Trends of net sales and number of ＜Sapporo Lion outlets ＞ Sapporo Lion Outlets As of June 30, 2017 15.0 20.0 19.6 19.6 18.9 19.0 18.3 17.4 17.3 17.4 18.0 9 8 10.0 17.0 14 Tokyo Metropolis 16.0 15.0 6 Kanto (excl.Tokyo) 11.8 12.1 11.8 11.8 11.5 11.9 14.0 Hokkaido 10.6 174 5.0 13.0 T

49. Slide 49: Major rental properties & occupancy rates

    ＜Major rental properties & occupancy rates：（Averages for 2017 2Q ) ＜Information about Real Estate for lease＞ Occupancy (billions of yen) Site area Floor area 450.0 rate No. of floors （㎡） （㎡） （%） 400.0 40 floors above 350.0 Yebisu Garden Place（1） 56,943 298,007 98 ground, 5 below 300.0 12 floors abov

50. Slide 50: TDY Sapporo Collaboration Showroom completed

    New commercial facility in the plot adjacent to Sapporo Factory TDY Sapporo Collaboration Showroom completed Redevelopment of the former parking lot 3 site adjacent to Sapporo Factory Inaugurated in July 2017 The surrounding area is a key area in the Sapporo City Development Strategy promoted by t

51. Slide 51: Poppins Nursery School Ebisu Hop Kids opened

    Shibuya Ward’s first company-led in-office nursery Poppins Nursery School Ebisu Hop Kids opened on April 1 at Yebisu Garden Place  A consortium-type (for multiple companies) in-office nursery utilizing the company-led childcare project*1, a childcare support system of the Cabinet Office  Establish

52. Slide 52: Various Initiatives by the Sapporo Group

    Various Initiatives by the Sapporo Group  Selected as a member of the SNAM Sustainability Index again in 2017 -Sapporo Group’s ESG-related initiatives have been highly rated- *The index is used for the SNAM sustainable fund management. The SNAM sustainable fund management began by SNAM in August 20

53. Slide 53: Forward-looking statements

    As an intrinsic part of people's lives, Sapporo will contribute to the evolution of creative, enriching and rewarding lifestyles. The earnings forecasts and forward‐looking statements appearing in this document were prepared by the SAPPORO Group based on currently available information and its best

Sapporo Holdings — H1 2017 Earnings Presentation on 6ix