Suntory Group Alcoholic Beverages Business Strategy for 2014

In 2013, the Suntory Group's alcoholic beverages business was up on the previous year due to factors such as the creation of new demand by breaking ground in the RTS*¹category, in addition to the strengthening of its core brands such as The Premium Malt's, Kin-Mugi, All-Free, Kakubin, Yamazaki, Hakushu, and -196°C.
The group will continue to roll out proactive initiatives in an effort toward further growth in 2014.

*¹RTS (Ready to Serve): Alcoholic beverages finished with a balanced taste optimized for drinking on ice, with an alcohol content between roughly 10% and 20%.

1. Suntory Liquors Limited
Beer Business
Spirit Business (Whisky, RTDs, Liqueurs, Spirits, RTSs)
Overseas Alcoholic Beverage Business
2. Suntory Wine International Limited
3. Suntory (China) Holding Co., Ltd.

1. Suntory Liquors Limited

In 2014, Suntory Liquors Limited will make "premium" in the sense of high added value our key focus and work to build demand by offering value. In addition, we will take on the challenge of innovation in every area from product development to the creation of new categories, all oriented toward creating new value.
Suntory will roll out proactive marketing initiatives for core brands such as The Premium Malt's, Kakubin, and -196°C, RTS beverages, and more.On top of that, outside of Japan we will seek to develop a portfolio of brands that engage the unique circumstances of each region in order to establish solid bases for business.

<Beer Business>

Review of 2013: The total market*²as well as the beer category (which includes beer, happoshu, and new-category beverages) were estimated to shrink in 2013 by about 1% compared to the previous year.
Under these circumstances, Suntory Liquors Limited's beer business*² had total sales of 70.53 million cases, a 3% increase compared to the previous year, achieving a record high sales volume. Beer sales totaled 63.48 million cases, a 3% increase compared to the previous year.
By brand, The Premium Malt's, grew favorably, selling 17.67 million cases (up 7% year-on-year) and setting a new record for sales volume for the tenth year in a row. In addition to Kin-Mugi growing favorably, selling 27.43 million cases (up 4% year-on-year), Kin-Mugi (70%*³ less sugar) also sold well, hitting 5.74 million cases (up 36% year-on-year).
Similarly, All-Free, the best-selling*⁴ brand of non-alcoholic beer-type beverage, grew significantly to sell 6.93 million cases (up 10% year-on-year), taking the lead in the non-alcoholic beer-type beverage market, which was estimated to grow by 3% compared to the previous year.
Strategy for 2014: The total market in 2014 is forecast to shrink by about 1% compared to the previous year, while the beer market (which includes beer, happoshu, and new-category beverages) is forecast to shrink by around 2% compared to the same period. Not only further bolstering activities related to Kin-Mugi, Kin-Mugi (70% less sugar), and All-Free in addition to The Premium Malt's, which continues to lead the premium beer market, but Suntory will also provide added impetus to the markets for beer, new-category beverages, and non-alcoholic beer-type beverages. In the beer business, Suntory's goal is to sell 73.2 million cases (up 4% year-on-year) with the aim of selling 65.2 million cases in the beer category (up 3% year-on-year).

The Premium Malt's: With the beer market in 2014 forecast to shrink by 1% compared to the previous year, Suntory aims to sell 18 million cases (up 2% year-on-year). Suntory will take "Premium richness and fragrance*⁵" as the new key message for this product and roll out new sales promotion activities in cooperation with on- and off-premise advertisements to continue to lead the premium beer market.
To begin with, in gratitude for the help in achieving record high sales volumes in 2013 for ten years running, Suntory will hold the "Loyalty Appreciation Campaign," linking to advertisements to make a strong appeal for the brand's best-selling points, starting from January 20. Further, in addition to quality appeal seminars at breweries as well as at businesses and shops, Suntory will strengthen its activities for improving quality at the point of consumption at restaurants, including Cho-tatsujin cuisine establishments. With the beer gift market forecast to remain flat compared to the previous year, we are aiming for a 15% increase in sales of gift sets, which are doing well.
New-category Kin-Mugi: Suntory aims to sell 28.55 million cases (up 4% year-on-year) of Kin-Mugi, recently re-launched for a better mouthfeel and a flavor drinkers don't tire of. To appeal to an even wider range of users, Suntory will roll out promotional activities that draw themes from the family dining table and its seasonal changes throughout the year, as well as new television commercials and public transit advertisements with actress Rei Dan in continuous rotation.
As for Kin-Mugi (70% less sugar) which was re-launched it with a new level of umami flavor, Suntory's goal is to sell 6 million cases (up 5% year-on-year).
Non-alcoholic beer-type beverage All-Free: With All-Free, which will be re-launched with a taste nearer to that of a smoother, more refined beer, Suntory aims to sell 8 million cases (up 15% year-on-year). In March, Suntory will begin an active marketing campaign that includes the release of new television commercials in continuous rotation featuring Nana Eikura, Tomokazu Miura, and Tomoko Yamaguchi for further improving brand recognition and expanding consumption experience, as well as the "Everyone feel the flavor!" campaign and a million-unit product sampling drive.

<Spirit Business>

Suntory's spirits business in 2013, due to the breaking of new ground in the RTS category and other achievements in addition to the favorable growth of core brands including Kakubin, Yamazaki, Hakushu, and -196°C, 3% growth was achieved compared to the previous year.
In 2014, we will aim for 1% growth compared to the previous year by continuing to cultivate and strengthen our brands further in growing categories including highballs, premium whiskies, RTDs, and RTSs.

[Whisky]

Review of 2013

The whisky market is estimated to perform better than the previous year due to expanding demand for highballs and premium category beverages. With that, there were effects due to some changes in the brands of imported whiskies purveyed, but the core brands performed favorably.
Kakubin showed growth of 3% compared to the previous year as a result of efforts to more actively promote its compatibility with food with the aim of further market expansion and the establishment of highballs. Additionally, Premium Kakubin, which went on sale in May, has received high praise.
As for domestic premium whiskies, Yamazaki, Hakushu, and Hibiki 12 Years Old (in a 500 mL size) made favorable movement, up 16% compared to the previous year. Suntory's whiskies have taken prizes in worldwide liquor competitions, with Hibiki 21 Years Old winning a "Trophy," the highest prize in its category, "Worldwide Whiskies," and Suntory Liquors Limited being named Distiller of the Year for the third time at the 2013 International Spirits Challenge (ISC).
Further, Jim Beam, the world's top*⁶ bourbon, which Suntory began handling in January, has made great contributions in terms of acquiring new consumers and activating the import whisky market.

*⁶ 2012 sales numbers (Source: IMPACT NEWSLETTER February Volumes 1 & 15, 2013)

Strategy for 2014

Suntory will work to activate the whisky market through such efforts as bolstering marketing activities for Kakubin, strengthening premium whisky value promotion activities, strengthening marketing activities for Jim Beam and Maker's Mark, all with the aim of 1% growth over the previous year.

Strengthening Kakubin marketing activities: Suntory will strengthen its marketing activities related to Kakubin using good flavor and compatibility with food as themes. The relevant television commercials will be re-launched in February, and in conjunction with those commercials Suntory will make appeals to shops involving how to create delicious kaku highballs and the allure of the same as drinks to go with food. Suntory will work with drinking establishments to expand kaku highball fandom by further bolstering activities related to quality at the point of consumption.
Strengthening premium whisky value promotion: In order to help consumers experience the luxurious frame of mine inherent to whisky, Suntory will continue to strengthen its marketing activities related to premium whiskies with a central focus on the Hibiki brand and appeal to the high quality that comes with the group's various malts and superior blending techniques. Additionally, by strengthening marketing activities for smaller size units of Yamazaki, Hakushu, and Hibiki 21 Years Old, the group is working to expand the arena of premium whisky drinking. The Hakushu brand has garnered high praise from the younger generation for Hakushu highballs with mint, and Suntory will work to make active proposals for television commercials and more to promote the brand and acquire new consumers.
Strengthening marketing activities for Jim Beam and Maker's Mark: Suntory will be investing in new television commercials starting in mid-January for Jim Beam, the world's top bourbon, keeping "cool bourbon" as its key message with the aim of further improving brand recognition and desirability. As for Maker's Mark, the group will make appeals based on the high quality carefully distilled into each and every bottle through seminars and other events.

[RTDs]

Review of 2013

With the total market for RTD beverages expected to grow roughly 5%*⁷ compared to the previous year, Suntory has sold 47.09 million cases (up 10% year-on-year)*⁷to break set a new high sales record for the ninth year running, leading the market.

*⁷ Excludes non-alcoholic beverages.

The -196°C brand has shown extremely favorable movement with the significant growth for the -196°C Strong Zero series and a brand total of 23.04 million cases (up 19% year-on-year). Among these, -196°C Strong Zero DRY, launched in April, broke a total 2 million cases for the year after upward revision. As for Horoyoi, the Cassis and Orange flavor and others were well received, selling 11.32 million cases and showing favorable growth of 7% over the previous year. Canned highball products showed favorable movement at 6.35 million cases (up 11% year-on-year) with contributions from promotional activities related to compatibility with food, the expansion of outlets for canned Kaku Highball Koime.

Further, Suntory also rolled out experience-based events and other proactive initiatives in an effort to expand drinking experience for Non-aru-kibun, a non-alcoholic beverage.

Strategy for 2014

With the total market for RTD beverages expected to grow roughly 3% compared to the previous year, Suntory aims to sell 48.90 million cases (up 4% year-on-year) by cultivating and strengthening -196°C, Horoyoi, canned highballs, and more.

-196°C

The -196°C Strong Zero series will be re-launched in January. As part of the series, activities related to -196°C Strong Zero DRY will be strengthened, including the introduction of television commercials that appeal to the dry, refreshing taste that goes great with meals in an effort to build demand within a wide swath of consumers including beer drinkers. Suntory's aim is to sell a total of 24.2 million cases (up 5% year-on-year) of the -196°C brands.

Horoyoi

In addition to efforts toward strengthening the group's standard lineup and actively introduce seasonal products, Suntory is aiming to use television commercials, social networking services and more to further expand contact with a focus on consumers in their 20s, with a goal of 11.5 million cases (up 1% year-on-year).

Calori

Calori will be re-launched in February with a new, stronger bite, and will be introducing new television commercials featuring the actress Yuka. The group will also introduce Berry Mojito as part of the new standard Cocktail Calori lineup.

Canned highballs

In addition to introducing new television commercials for canned kaku Highball, Suntory will strengthen its activities that appeal to its compatibility with food in an effort to grow demand. For the canned Torys Highball, the group will actively develop a variety of flavors and region specific products in an effort to acquire new consumers. Through these activities, Suntory's aim is to sell a total of 6.9 million cases (up 9% year-on-year) of its canned highballs.

Non-aru-kibun

With a renewal in February, Suntory will strengthen the flavor of this non-alcoholic beverage by taking it even closer to the taste of an alcoholic drink. The group will also add Chardonnay Sparkle as part of its new standard lineup in an effort to expand its consumer base.

For RTDs, one case is equivalent to twenty-four 250 mL units.

[Liqueurs, Spirits, RTSs]

Review of 2013

With Suntory's active deployment of RTS beverages meant to introduce new value to alcoholic beverages, our core brands Funwari Kyogetsu and Cocktail Tours showed such favorable growth that we upwardly revised our annual plan. The group has also made efforts toward stimulating the genuine liqueur and spirits market by holding events like the "Cocktail Awards" (now in its 20th year).

Strategy for 2014

Along with continued efforts to strengthen the lineup of core RTS brands, we are aiming to increase sales 56% over the previous year through the introduction of new television commercials and transit advertisements, seasonal promotional activities, and more. We are also aiming to stimulate the genuine liqueur and spirits market with the introduction of the PRO-MIX*⁸ beverage, a style that allows consumers to taste the deliciousness that only comes with authentic cocktails while allowing them to experience the joy of mixology.

*⁸ PRO-MIX: Expresses both the pleasure of "mixing" drinks oneself without sacrificing "professional" flavor.

<Overseas Alcoholic Beverage Business>

Review of 2013: In terms of whisky, our active promotion of Yamazaki, Hakushu, and Hibiki in Europe and America and Kakubin in Asia enjoyed favorable reception, and we expanded our whisky sales abroad. The Premium Malt's showed favorable growth in Asia. With Morrison Bowmore Distillers Limited we have expanded sales with a focus on Bowmore and Auchentoshan single malt whiskies.
Strategy for 2014: We will strengthen marketing campaigns in accordance with the unique circumstances of each region throughout the world. In Europe and America, we will develop the Yamazaki, Hakushu, and Hibiki lines of premium whisky, as well as the liqueur MIDORI, while in Asia we will develop Kakubin and The Premium Malt's. Similarly, we will continue our active efforts to strengthen Bowmore and Auchentoshan single malt whiskies as global brands.

2. Suntory Wine International Limited

Review of 2013

As overall wine market continues to grow owing to the expansion of the Spanish bar business and increased demand for drinking at home, Suntory's wine business was up 4% compared to the previous year.
In terms of domestic wines, the Japanese Wine product line, which is made from 100% domestic grapes, continued to grow and earn high praise, with three products including Tomi Red 2008, Suntory Tomi no Oka Winery, taking gold medals at the Japan Wine Competition 2013. Similarly, brands such as the antioxidant additive-free Sankaboshizai Mutenka no Oishii Wine showed extremely favorable growth, breaking 1 million cases*⁹ for the first time after the launch, up 39% over the previous year. For import wines, in addition to the vigorous growth of Carlo Rossi, popularly enjoyed over ice in a style called "Rossi on the rocks," sales of sparkling wine Freixenet showed favorable growth of 6% compared to the previous year.

*⁹ One case is equivalent to twelve 720 mL bottles.

Strategy for 2014: With the total market for wine in 2014 is forecast to continue to grow, and our company will aim for 8% growth compared to the previous year. For domestic wines, in addition to focusing on the Japanese Wine product line, made from 100% domestic grapes, which includes Sankaboshizai Mutenka no Oishii Wine and Delica Maison Delicious, we will strengthen marketing activities for Bar de nonda Sangria in an effort to acquire new consumers. In terms of imported wines, in addition to focusing efforts on core brands such as Carlo Rossi, Freixenet, and Santa Carolina, we are also working to fill out our lineup by introducing new products.

3. Suntory (China) Holding Co., Ltd

Review of 2013: In the beer business, Suntory's joint venture with Tsingtao Brewing Company Limited has begun doing business. In addition to focused efforts to cultivate the premium priced Jun-nama (Chun sheng) brand, the standard priced Cho-jun (Chao chun) has continued to grow. The group also strengthened wine sales through ASC Fine Wines Holding Limited.

Strategy for 2014: In the beer business, Suntory will continue to boost profitability through cost reductions and the like. In Suntory's joint venture with Tsingtao Brewing Company Limited, we will aim for further business expansion by maximizing the synergy between our two companies and by further strengthening Suntory (China) brands such as Jun-nama (Chun sheng) and Cho-jun (Chao chun) and Tsingtao brands.

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