Sapporo Holdings Limited · TSE:2501

Sapporo — FY2018 Earnings Presentation

61 slides from Sapporo's earnings presentation, Feb 14, 2019

1. Slide 1: Sapporo Group Business Results for 2018 - Management Plan for 2019

   Sapporo Group Business Results for 2018 - Management Plan for 2019 February 14, 2019 URL http://www.sapporoholdings.jp/english Copyright, 2019 SAPPORO HOLDINGS LTD. All rights reserved. 1/61

2. Slide 2: Management Plan for 2019 - Year of Change

   Management Plan for 2019 -Year of Change- - Structural Reform and Foundation Building - Selection and Concentration Copyright, 2019 SAPPORO HOLDINGS LTD. All rights reserved. 2/61

3. Slide 3: Review from 2017 to 2018: Results (strengthening of core brands)

   Review from 2017 to 2018 2017 - 2018 Results (strengthening of core brands) Turned profitable 0.5 ＋¥ 1.4bln 5 ＋ % 13 0.0 4 3 ＋ % ＋ % -0.5 ＋ % -1.0 -1.5 -2.0 Black Label (can) Overseas brand total Alcoholic beverages Sales volume 2016 2017 2018 Sales volume 2016 2017 2018 in Vietnam 2016 2017 2018 Op

4. Slide 4: Review from 2017 to 2018: Results (transformation of platform)

   Review from 2017 to 2018 2017 - 2018 Results (transformation of the Group management platform) Personnel, human resources Finance ＋ ●Research on hops ●Selected as Won the top award for the third ●Work style improvement ●Asset efficiency improvement Competitive IT consecutive time at the 36th - Revis

5. Slide 5: Review from 2017 to 2018: Issues

   Review from 2017 to 2018 2017 - 2018 Issues (delay in new-genre category, canned coffee, overseas alcoholic beverages and soft drinks, which were given lower priority) 6 - % -12 % 18 - % -18 % Mugi to Hop Coffee drinks Sales volume 2016 2017 2018 Sales volume 2016 2017 2018 Delayed in competition as

6. Slide 6: Positioning of 2019 - SPEED150

   Positioning of 2019 2018 2019 SPEED150 First Medium-Term Management Plan (2017-2019) Transformation with unprecedented speed Towards shift to growth stage 2017 - 2018 2019 2020 - <Achievements> <Themes> - Transformation of the Group -Structural reform and foundation building -Law revision towards un

7. Slide 7: Structural Reform and Foundation Building: R&D and Value Chain

   Structural Reform and Foundation Building 2019 Research & Development Main initiatives for 2019 -Research into whiteness of beer foam (see Appendix for reference) ⇒Toward relaunch of Black Label A -To apply the results of research on hops, lemons, and soy beans A value chain New launches: March: “Pa

8. Slide 8: Structural Reform and Foundation Building: Business Domain Structure

   Structural Reform and Foundation Building 2019 Before From a 5 business domain structure to a 3 business domain structure After (Existing segments through 2018) (Revised segments from 2019) Holding Business Holding company Operating companies Subsidiaries Subsidiaries Operating companies Business do

9. Slide 9: Selection and Concentration

   Selection and Concentration 2019 2019: Particularly important categories and their positions Priority Non-Focus Maintenance Focus 2018 (Controlled investment, reduced scale, etc.) (Maintenance of status quo or stable growth) (Proactive investment, growth) Results High (Good results) Low priority but

10. Slide 10: Select-and-Focus Approach

    Select-and-Focus Approach 2019 2019: Concrete initiatives in the particularly important categories  Relaunch of Black Label - Utilize research results regarding white foam  Advance our urban development  Expand the scale of ready-to-drink projects in Ebisu and Sapporo category with 99.99 at the c

11. Slide 11: Management Plan for 2019

    Management Plan for 2019 2019 (billions of yen) 2018 2019 YoY changes （IFRS） （IFRS） (amount, %) Consolidated Revenue （incl. liquor tax) 521.9 548.8 26.9 5.2% Revenue(excl. liquor tax) 398.7 425.8 27.0 6.8% Overseas revenue to total (excl. liquor tax) 22.7％ 23.9％ 1.2% - EBITDA 40.4 42.0 1.6 4.0% Cons

12. Slide 12: Special Factors in the Business Results

    Special Factors in the Business Results 2019  One consolidated subsidiary to be added; the impact of exchange rates on operating profit is expected to be negligible <Special factors in the 2019 plan (YoY)> Business segment Details Impact on revenue Food & Soft Yasuma Co., Ltd. Approx. Drinks April

13. Slide 13: Revenue by Segment

    Revenue by Segment 2019 (billions of yen) 2018 2019 YoY changes YoY changes IFRS IFRS (amount) (%) Revenue by Segment 521.9 5.2% Alcoholic Beverages 330.0 4.8% Japan & Asia 252.1 12.0 4.8% North America 50.3 4.2 8.3% Restaurants 27.6 (0.2) (0.6)% Food & Soft Drinks 161.3 6.7% Japan & Asia 133.4 9.3

14. Slide 14: Main Factors Contributing to Changes in Revenue

    Main Factors Contributing to Changes in Revenue 2019 : We will focus on core brands in Japan and abroad and aim to = Increase increase revenue = Decrease Alcoholic Beverages Food & Soft Drinks Real Estate 2019 Wine＋1.7 Spirits ＋5.9 (billions of yen) Exports＋1.1 Other＋0.6 2018 Incl. ＋5.0 of net sales

15. Slide 15: Operating Profit by Segment

    Operating Profit by Segment 2019 (billions of yen) 2018 2019 YoY changes YoY changes IFRS IFRS (amount) (%) Operating Profit by Segment 10.8 16.4% Alcoholic Beverages 3.9 151.5% Japan & Asia 6.9 0.4 5.7% North America (2.8) 5.1 - Restaurants (0.2) 0.3 - Food & Soft Drinks 1.1 47.8% Japan & Asia 1.9

16. Slide 16: Main Factors Contributing to Changes in Operating Profit

    Main Factors Contributing to Changes in Operating Profit 2019 : We expect profits to increase by growing core brands despite = Increase plans for structural reform-related investment and temporary loss = Decrease as part of corporate expenses Alcoholic Beverages Food & Soft Drinks Real Estate Anchor

17. Slide 17: (Reference) Conversion Table of Revenue, Operating Profit by Segment

    (Reference) Conversion Table of Revenue, Operating Profit by Segment 2019 Former segments New segments *( ) denotes new segment (5 business domain (3 business domain Difference Remarks (billions of yen) structure) structure) Revenue 548.8 - Japanese Alcoholic Beverage (Alcoholic Beverages) 264.1 81.

18. Slide 18: Sapporo Group Business Results for 2018

    Sapporo Group Business Results for 2018 Copyright, 2019 SAPPORO HOLDINGS LTD. All rights reserved. 18/61

19. Slide 19: 2018 Results Highlight

    2018 Results Highlight 2018 While the slowness in the first half was offset by the recovery in the second half to the revised plan’s level, operating profit declined due to the impairment loss on Anchor (billions of yen) YoY change Profit attributable to Revenue Operating profit owners of parent YoY

20. Slide 20: 2018 Results Highlight

    2018 Results Highlight 2018 (billions of yen) *See p.34, 35 *See p.36 for for detailed BS Cash basis details Balance of net debt Equity investment 2017（IFRS） 2017（IFRS） 2018 plan 2018（IFRS） 2018（IFRS） YoY change YoY change D/E ratio times ±0.0 times Dividend per share ＋¥2.0 Transformation of the Gro

21. Slide 21: Revenue by Segment

    Revenue by Segment 2018 (billions of yen) Change <difference YoY change ①：2017 ②：2017 due to accounting ③：2018 YoY change (rate) (Japanese GAAP) standards> (③-②) （IFRS） (②-①) （IFRS） （③-②） Consolidated revenue 551.5 (15.0) (2.7)％ Japanese Alcoholic Beverages* 281.2 (19.8) (Rebate subtracted from reve

22. Slide 22: Main Factors Contributing to Changes in Revenue

    Main Factors Contributing to Changes in Revenue 2018 : Overall revenues fell as domestic beer and beer-type beverages and soft = Increase drinks remained slow although revenues increased in ready-to-drink = Decrease category, Japanese Sleeman, etc. Alcoholic Food & Soft Real (billions of yen) Bevera

23. Slide 23: Operating Profit by Segment

    Operating Profit by Segment 2018 (billions of yen) ① 2017 ② 2017 Change <difference ③ 2018 YoY change due to accounting (Japanese GAAP) (IFRS) standards> （IFRS） (③-②) (②-①) Consolidated operating profit 17.0 (4.2) (Depreciation and amortization -3.4, Japanese Alcoholic retirement benefit expenses -1

24. Slide 24: Main Factors Contributing to Changes in Operating Profit

    Main Factors Contributing to Changes in Operating Profit 2018 : Vietnam turned profitable and Real Estate saw increased profits, but profit = Increase declined due to lower sales of domestic beer and beer-type beverages and = Decrease impact of impairment Japanese Alcoholic loss at Anchor Food & Sof

25. Slide 25: Japanese Alcoholic Beverages

    Japanese Alcoholic Revenue IFRS Beverages YoY Change Operating profit YoY Change 2018 *YoY change is on an IFRS basis <YoY changes in Black Label brand sales volume> Positive  Black Label brand (can) was up % year on year 115 *Cumulative maintaining momentum significantly exceeding the 110 total de

26. Slide 26: International

    IFRS International Revenue YoY Change Operating profit YoY Change 2018 *YoY change is on an IFRS basis <Changes in overseas brand sales volume (cumulative from Jan. to Dec.> Positive  Sales at Sleeman in Canada continued to 1,400 (unit: 10,000 cases, calculated on large bottle bas increase 1,300 

27. Slide 27: Food & Soft Drinks

    IFRS Food & Soft Drinks Revenue YoY Change Operating profit YoY Change 2018 *YoY change is on an IFRS basis <YoY change in sales volume of lemon-based products> Positive  Sales volume of lemon-based products was up 120 *Cumulative 115 % year on year 110 Lemon-based drinks also grew by % 105 100  M

28. Slide 28: Restaurants

    IFRS Restaurants Revenue YoY Change Operating profit YoY Change 2018 *YoY change is on an IFRS basis  Strong performance by Yebisu Bar format, up % Positive year on year  Though raw material prices rose and difficulties in acquiring human resources continued, cost increases were kept in check by i

29. Slide 29: Real Estate

    IFRS Real Estate Revenue YoY Change Operating profit YoY Change 2018 *YoY change is on an IFRS basis Positive  All mainstay properties maintained stable occupancy rates  Improved profitability to end above initial plan at the beginning of the year Occupancy Occupancy  Recorded a gain on property

30. Slide 30: Special Factors in the Business Results

    Special Factors in the Business Results 2018  Impact of exchange rates on operating profit is negligible <Special factors in business results (YoY)> Business segment Details Impact on revenue ANCHOR BREWING COMPANY, LLC Approx. International Consolidated subsidiary from October 2017 +¥ 1.9 billion

31. Slide 31: Changes in Balance Sheets: Assets

    Changes in Balance Sheets 2018 : Total assets declined ¥25.0 billion compared with the end of the previous year (billions of yen) Total assets Total assets Cash and cash equivalents 12.5 Trade receivables 10.0  Decrease in accounts receivable 98.3 93.3 Current assets 37.9 37.1 Inventories 16.0 13.1

32. Slide 32: Changes in Balance Sheets: Liabilities and Equity

    Changes in Balance Sheets 2018 : Total liabilities down by ¥14.1 billion, total equity down by ¥11.0 billion compared with the end of the previous year (billions of yen) Trade payables Total liabilities and equity Total liabilities and equity Short-term financial liabilities 36.5  Decrease in curre

33. Slide 33: Financial Status

    Financial Status 2018 ① <Capital expenditure>  Investment on a cash basis was ¥32.7 billion about ¥ billion in consolidated total <Consolidated cash flow statements> (tangibles, intangibles) (billions of yen) <Major items> 2017 2018 Change % - Relating to “Alcoholic Beverages,” “Food,” and “Soft Dr

34. Slide 34: (Reference) Conversion Table of Revenue, Operating Profit by Segment

    (Reference) Conversion Table of Revenue, Operating Profit by Segment 2018 Former segments New segments *( ) denotes new segment (5 business domain (3 business domain Difference Remarks (billions of yen) structure) structure) Revenue 521.9 - Japanese Alcoholic Beverage (Alcoholic Beverages) 250.9 79.

35. Slide 35: Appendix: Reference Materials (FY2018)

    Appendix: Reference Materials (FY2018) Copyright, 2019 SAPPORO HOLDINGS LTD. All rights reserved. 35/61

36. Slide 36: Appendix: Major sales & sales volume

    Major sales & sales volume Appendix - Copyright, 2019 SAPPORO HOLDINGS LTD. All rights reserved. 36/61

37. Slide 37: Appendix: Beer, Happoshu and New Genre Sales Volume

    【Beer】（sales volume） ＜Y-o-y change in sales volume of 3 core brands> Jan-Dec down ％ y-o-y （total demand down 6％） % 110  Black Label Brand total down ％ y-o-y 100 （Sales of the canned version:up ％ y-o-y） 90  Yebisu Brand total down ％ y-o-y 80 Appendix 【Happoshu and new genre】 （sales volume） 70 Jan F

38. Slide 38: Appendix: Core Brand Sales Volume

    ＜3 core brand Jan- Dec Sales volume change＞ (10,000 cases) 6,000 5,000 4,000 3,000 ＜Beer lineup (Jan– Dec breakdown＞ 2,000 15% 1,000 Appendix 0 Japanese Alcoholic 2012 2013 2014 2015 2016 2017 2018 Beverages Beer, Happoshu and new genre Beer Happoshu and new genre 2,000 56% 29% 1,500 Black label Yeb

39. Slide 39: Appendix: Net Sales by Category

    Billions of yen ＜Jan- Dec Net Sales＞ ※incl. liquor tax Billions of yen 15 250 10 7.1 7.7 8.3 8.2 8.5 8.5 8.2 200 75.6 75.3 79.3 70.6 65.0 59.5 50.1 5 4.8 5.1 5.6 5.3 5 5.1 4.7 150 0 2012 2013 2014 2015 2016 2017 2018 100 Japanese wine Imported wine 167.2 170.9 165.8 10 158.0 159.7 157.6 159.3 50 5 5

40. Slide 40: Sapporo Draft Beer Black Label

    Sapporo Draft Beer Black Label 2018 Create real experiences Convey brand’s world view Perfect Black Label The “Otona ★ Nama” About 250,000 glasses Worldview Strategic target Create new opportunity for home use Youth in their 20s and Stores selling Perfect Black Label 30s Black Label Day Increased by

41. Slide 41: Foam whiteness index: Black Label relaunch

    Sapporo Draft Beer Black Label 2019 Reviewed manufacturing process to realize beautiful white foam. Relaunch of Black Label Freshness Retention Manufacturing What is meant by whiter and Process more beautiful foam? 2000: Won the JSBBA Award for Achievement in リニューアル前 Before relaunch リニューアル後 After re

42. Slide 42: Yebisu 2018 and 2019

    Yebisu 2018 – Despite shrinking of the overall high-price-range beer market, Yebisu Beer performing strongly! Sales of high price range beer Y-o-Y Sales Y-o-Y comparison million ltr 2017 2018 High price beer Yebisu brand total Yebisu Beer Source: SRI (total for all business formats) estimated sales

43. Slide 43: Beer Brand with a Distinct Personality

    Beer Brand with a Distinct Personality Sapporo Lager Beer - The beer brand with the longest history among existing brands in Japan Sapporo Classic - Nicknamed Akaboshi 18 consecutive years of - The Akaboshi★Tanteidan website and retro-chic store sales growth! Sapporo Classic brand only sales promoti

44. Slide 44: Ready-to-Drink beverage results

    Ready-to-Drink beverage results 99.99 (Four Nine) plan and results (10,000 cases) (％) 800 200 450 4 million cases (Total demand comparison) up 67％ YoY 400 600 150 (Cases sold) 350 20% higher 400 100 300 than planned 250 200 50 200 0 0 150 2016 2017 2018 2018 2019 2018 plan Cases sold YoY change Tota

45. Slide 45: Major new products (Beer, Happoshu and New genre)

    ＜Major new products (Beer, Happoshu and New genre)> *incl. improved products (※I) Yebisu Kaoru Rouge Yebisu Wa No Houjun Black Label (Special Edition) Special edition (Tohoku malt 100%) Sapporo Fuyumonogatari Fuku Yebisu (Winter Limited Edition) (New Year Edition) Appendix Sapporo Classic 2018 Furan

46. Slide 46: Major new products (RTD, Wine and Japanese liquor)

    ＜Major new products (RTD, Wine and Japanese liquor)> Otoko Ume sour Limecello (Honey Flavor Plum RTD) (Italian Lime RTD) Rirakusu Coto Coto (Peach vinegar Flavor RTD) (Fruit flavor RTD) Appendix Japanese Alcoholic Beaujolais Nouveau 2018 series Beverages Beaujolais Villages Nouveau Ai no Skal ichigo

47. Slide 47: Taittinger Chosen as Official Champagne for Tokyo International Film Festival

    Taittinger Chosen as the Official Champagne for the 31st Tokyo International Film Festival! - Chosen for the second consecutive year!- Appendix Champagne Taittinger, which is imported and sold by Sapporo Breweries Ltd., has been chosen as the official champagne for the 31st Tokyo International Film

48. Slide 48: Launched HOPPIN' GARAGE

    Launched HOPPIN’ GARAGE, a next-generation service aimed at creating value through full-fledged user innovation -Business tie-up with a start-up operating a C-to-C community- In October 22, 2018, Sapporo Breweries Ltd. launched HOPPIN’ GARAGE, a next generation service aimed at creating value throug

49. Slide 49: Appendix: International and U.S. Soft Drinks

    【Overseas brand】 【U.S. soft drinks business】 (Products of Sleeman and Anchor)  Jan- Dec down ％ y-o-y  Jan- Dec up ％ y-o-y *sales volume ＊sales revenue after elimination of inter- company transactions 【Sapporo brand】 ＜Ｕ.S. soft drinks business Sales Revenue (included export sales volume from Japan)

50. Slide 50: Appendix: Sleeman and Sapporo U.S.A. Revenue

    ＜SLEEMAN:Sales Revenue in Local Currency (Jan- Dec) Sapporo brand sales volume *before elimination of inter- company transactions breakdown by geographic area 600 J GAAP IFRS 9% （Excluded liquor tax） （Included liquor tax） 500 8% 34% 400 300 27% 4.47 6.28 496 515 million cases million cases 200 65% 2

51. Slide 51: Appendix: Food & Soft Drinks Sales

    【Lemon-based drinks】 【Lemon-based food products】  Jan- Dec up ％ y-o-y *sales volume  Jan- Dec up ％ y-o-y *sales volume 【Unsweetened tea drinks】 【Soups】  Jan- Dec up ％ y-o-y *sales volume  Jan- Dec down ％ y-o-y *sales volume 【Coffee drinks】 【Soy milk, chilled products】  Jan- Dec down ％ y-o-y *sa

52. Slide 52: Appendix: Food & Soft Drinks Revenue

    ＜Food & Soft Drinks segment Revenue> ＜Food & Soft Drinks segment (billions of Yen) (Jan- Dec) Revenue break down by geographic area＞ 160 ※April 2011 Consolidation of J GAAP IFRS 140 POKKA CORPORATION 120 85% 100 80 60 129 130.6 133.4 135.6 137.9 132.1 127.2 108 40 15% Appendix 20 36.8 30.7 33.9 0 Ja

53. Slide 53: Appendix: Pokka Create

    【Pokka Create CO., Ltd.】  Jan- Dec Revenue billion unchanged y-o-y ＜New & refurbish outlets ＞ <Number of outlets as of Dec. 31, 2018 : 202> 52 East Japan 202 113 Central Japan Appendix outlets West Japan Food & Soft Drinks Increased 6 outlets compared with 37 2017 4Q （East +6, Central+1,West-1） 94

54. Slide 54: Major New Products (Drink and instant soup)

    ＜Major New products (Drink and instant soup) > Left: Chocolate drink JELEETS Pudding Shake Café de Crie Rght: Milk shake Black coffee Yuzu JELEETS coffee jelly Kagabo hojicha Appendix Hibiscus tea Food & Soft Drinks Jikkuri kotokoto instant soup Jikkuri kotokoto Bottle can soup Kireto lemon Calcium

55. Slide 55: Lemons and bone health PR video

    Did you know that lemons are good for bone health? Started broadcasting PR video on “bone health and lemons” from mid-October 2018 Appendix Sustained consumption of lemons promotes bone health! POKKA SAPPORO Food & Beverages Ltd. has been carrying out various functional studies into lemons. Given th

56. Slide 56: Lemon no su series strong sales

    Rated highly as a “vinegar beverage that is easy to drink and tasty” Strong sales of “Lemon kaju o hakko sasete tsukutta lemon no su” series Sales of “Lemon kaju o hakko sasete tsukutta lemon no su” Supplement: Relative value when 2016 sales are defined as “1.0”; Based on sales volume (number of bot

57. Slide 57: Appendix: Restaurants Sapporo Lion Outlets

    (billions of yen) <Trends of Sales revenue and number of ＜Sapporo Lion outlets ＞ Sapporo Lion Outlets> *before rebate deduction As of Dec 31, 2018 30.0 220 25.0 191 193 190 200 7 10 20.0 185 180 14 Tokyo Metroporitan 170 175 170 169 15.0 160 4 Kanto(excl.Tokyo) 24.1 25.6 25.8 25.1 24.8 24.8 25.1 24.

58. Slide 58: Appendix: Major rental properties and occupancy rates

    ＜Major rental properties & occupancy rates:（Averages for 2018 )> ＜Information about Investment property＞ Occupancy Site area Floor area (billions of yen) rate No. of floors 400 （㎡） （㎡） （%） 350 40 floors above Yebisu Garden Place（1） 56,943 298,007 100 300 ground, 5 below 250 397.6 12 floors above Ebi

59. Slide 59: Various Initiatives by the Sapporo Group (2018)

    Various Initiatives by the Sapporo Group (2018) <Alliances> -Start of joint modal shift in Kansai – Chugoku/Kyushu -Advance start in 6 prefectures in Tohoku of joint collection of -Estimated CO2 emission reduction of about 1,500t (about 74% beer pallets compared to existing figures)- http://www.sapp

60. Slide 60: Various Initiatives by the Sapporo Group (2018)

    Various Initiatives by the Sapporo Group (2018) -“Keppare! Hokkaido” <Assistance, donations, etc. (partial selection)> -Sapporo Beer Garden supports Hokkaido with a special -Donated amount equivalent to the beer sales at Sapporo Beer limited-time-only plan! Donated part of sales as relief funds for

61. Slide 61: Sapporo will contribute to the evolution of lifestyles

    As an intrinsic part of people's lives, Sapporo will contribute to the evolution of creative, enriching and rewarding lifestyles. Copyright, 2019 SAPPORO HOLDINGS LTD. All rights reserved. 61/61

Sapporo Holdings — FY2018 Earnings Presentation on 6ix