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2008年8月4日

Kirin Group Business Approach for 2009

February 10, 2009

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AgendaAgenda

1) 2008 results and future challenges1) 2008 results and future challenges

2) KV2015: Three patterns for growth and specific initiatives2) KV2015: Three patterns for growth and specific initiatives・・Initiatives following announcement of revised mediumInitiatives following announcement of revised medium--term business planterm business plan・・From quantity to quality ~Verification of growth stage~From quantity to quality ~Verification of growth stage~・・Toward further growth through organic linksToward further growth through organic links

3) Assignments ~4 key issues~3) Assignments ~4 key issues~

4) Maximizing group synergies4) Maximizing group synergies・・14 issues for creating synergies and associated initiatives14 issues for creating synergies and associated initiatives

5) Internal management 5) Internal management (Balanced scorecard, shortened PDCA cycle)(Balanced scorecard, shortened PDCA cycle)

6) Financial strategy 6) Financial strategy (Maximize cash flow, balance sheet management)(Maximize cash flow, balance sheet management)

7) Progress of medium7) Progress of medium--term business plan term business plan (2008 results and 2009 forecasts)(2008 results and 2009 forecasts)

8) Promoting CSR activities8) Promoting CSR activities

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2008 results and future challenges2008 results and future challenges

■ In 2008, Kirin Group succeeded in expanding business scale through strategic investment (Kyowa Hakko Kirin, National Foods + Dairy Farmers). Kirin Brewery, the Group’s core business with stable growth, achieved profit targets.

■ Deteriorating business environment ⇒“Must change the environment ourselves

and take a more aggressive stance in order to secure opportunities.”Ex. Strong desire to change, quantum leap in growth, capabilities on the work floor

■ Management aim for 2009: Pursue qualitative growth*Position 2009 as ‘Year Zero’ in run-up to next medium-term business plan and initiate new top management

■ Kirin business model ⇒ Promote development as a comprehensive beverages group in Japan and overseas (Create value by integrating value chains for alcohol beverages and soft drinks)

■ Create optimum management structure: Group governance, BSC, PDCA etc.

Pursuing a qualitative transformation:

Kirin has grown bigger—now we have to grow better

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KV2015: Three patterns for growth and specific initiatives KV2015: Three patterns for growth and specific initiatives (Following announcement of revised medium(Following announcement of revised medium--term business plan)term business plan)

• Reinforced Kirin Brewery as core business• Positioned Kirin Beverage as pillar of comprehensive

beverages business• Exchanged personnel between Kirin Brewery and

Kirin Beverage• Started marketing health foods and functional

foods in addition to beverages

• Merged Kyowa Hakko and Kirin Pharma

• Announced merger of Kyowa Hakko Food Specialties and Kirin Food-Tech

• Quantified objectives of synergy from 2009

• Acquired all shares in Dairy Famers (NFL)

• Concluded MOU regarding investment in SMB (SMC)

■ Specific action following announcement of revised plan (August 2008)

NFL: National Foods Limited, SMC: San Miguel Corporation, SMB: San Miguel Brewery, ＬＮ: Lion Nathan

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From quantity to quality ~Verification of growth stage~From quantity to quality ~Verification of growth stage~

■ Achieve sales targets ahead of schedule through large-scale investment ⇒ Enhance profitability going forward

・ Exploit competitive advantages in group infrastructure and resources・ Synergies, efficiency, personnel exchange ・ Execute strategic investment aimed at driving growth (shift focus from creating infrastructure to creating profit)

Kirin Group Business Expansion Concept

Profitability

Business scale

07-09 medium-term plan (2nd half)Shift focus to qualitative expansion

07-09 medium-term plan (1st half)Growth in scale

Effectively use increased cash flow for further expansion

Currentstage

>

>

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Three patterns for growth in 2009 Three patterns for growth in 2009 Toward further growth through organic linksToward further growth through organic links

Promote comprehensive beverages group strategy by creating organic links in value chains of alcohol beverage business and soft drink business

Quantify and manage objectives for synergies, and optimize the Group’s operational bases

Continue investment in soft drink and alcohol beverage businesses mainly in Asia and Oceania that show strong synergy potential in terms of product and geographical region, and optimize business portfolio.

■ Enter a stage of further growth through inter-pattern initiatives

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Assignment ~4 key issues~Assignment ~4 key issues~

1. Create Group synergiesSet quantitative and qualitative targets, including PMI for M&A, and initiate PDCA cycle. 2. Create renewed growth in the domestic alcohol beverage businessImprove popularity among customers and enhance profitability3. Advance domestic comprehensive beverages group strategy・Reinforce earnings base at KBC and strengthen competitiveness along new axes・Create value by forming alliances in the value chains of KBC and KB ・Develop health food and functional food business centered on beverages4. Advance international comprehensive beverages group strategyFormulate comprehensive beverages group strategy in Asia and Oceania⇒Execute strategy mainly at KC, KBC, NFL, and LN. Increase corporate value at NFL in particular.

Key issues

KBC: Kirin Beverage Corp., KB: Kirin Brewery, KCI: Kirin (China) Investment, NFL: National Foods Limited, LN: Lion Nathan

■ Basic management strategies for 2009Based on three core growth strategies, strengthen Kirin’s business foundations and realize a quantum leapin growth1.Create renewed growth in the domestic alcohol beverage business 2.Pursue a domestic comprehensive beverages group strategy 3.Internationalize Kirin’s business under an international comprehensive beverages group strategy 4.Develop the health food and functional food business 5.Accelerate growth inpharmaceuticals business 6.Further develop existing businesses 7.Improve cost competitiveness・ Realize Group synergies in the context of global competition・ Adopt an optimum group management structure and enhance operational capabilities with the aim of

maximizing corporate value・ Pursue Kirin Group CSR

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Maximizing group synergiesMaximizing group synergies

■ Specified and announced 14 priority issues for creating synergies in revised medium-term business plan in August 2008

Sales channels expansionProduction technology, cost reduction

Product development

Sell, marketDistributeProducePurchaseDevelop

Priority issues for creating synergies

Material development

Operating companies

Holding company

KH: Kirin Holdings

KB: Kirin Brewery

ME: Mercian

KBC: Kirin Beverage Corp.

KCI: Kirin (China) Investment

KFT: Kirin Food-Tech

NFL: National Foods Limited

LN: Lion Nathan

KHK: Kyowa Hakko Kirin

KLC: Kirin Logistics Corp.

KMD: Kirin Merchandising

Strengthen sales channels in domestic alcohol beverage (KB, ME, domestic alcohol Group companies)

Promote cooperation in domestic comprehensive soft drinks production & distribution (KB, KBC, KLC, ME)

Restructure China operations (KCI, KB, KBC etc.)

Promote comprehensive Asia beverage operations (KH, local business)

Promote health foods and functional foods operations (KH,KBC, KB, ME, KFT, Kyowa Hakko Bio etc.)

Promote comprehensive Japan, Australia soft drinks operations (domestic: KBC, Aus: NFL)

Promote comprehensive Australia beverage operations (KH, LN, NFL)

Integrate pharmaceuticals operations (KHK)

R&D personnel structure

Strengthen Group sales capabilities, channel functions

Review production, distribution locations

Group internal/external purchasing

Pursue human resources measures

Integrate back office functions

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14 issues for creating synergies and associated initiatives 14 issues for creating synergies and associated initiatives ①①■ We will set targets from 2009 for challenges that can be quantified, and manage them via PDCA

cycle

Challenge Initiatives in 2009Quantitative targets for 2009

Sales synergy Cost synergy

Strengthen sales channels in domestic alcohol beverage

Cooperate in wine sales for commercial and mass-merchandising markets using the sales capabilities of KB-ME, KB/KMD. (Start in January 2009) Approx. ¥ 2.0 bn (sales) -

Promote cooperation in domestic comprehensive soft drinks production & distribution

Suppress non-plant inventory at KB-KBC and continue joint procurement of cardboard boxes with other companies in the food industryShare cartons at shipping locations KB-ME

- Approx. ¥ 0.2 bn

Strengthen group sales capabilities, channel functions

Expand sales of cold beverages and number of vending machines for commercial market using the sales capabilities of KB-ME, KB/KMDDevelop and market products using group synergies (non-alcohol beer, Tanrei W, Hyoketsu Aperitif, Tanrei Straight)

KBC: Approx. ¥ 0.8 bn (sales)KB: Approx. ¥ 19.0 bn (sales) -

Promote comprehensive Japan, Australia soft drinks operations

Strengthen new product development capabilities and expand product categories at NFL in Australia through alliance with KBC Project underway

Promote comprehensive Australia beverage operations

Terminate negotiations for acquisition of Coca Cola Amatil by LN, and review strategy -

Promote comprehensive Asia beverage operations

Formulate Group strategy that utilizes KBC and NFL resources, including strengthening strategic alliance with San Miguel through investment in beer business subsidiary (under negotiation) (1Q)→Implement

Conclude MOU regarding exclusivity for Kirin to negotiate investment in San Miguel

⇒Strengthen strategic alliance

Restructure China operations

Formulate proposal for integrating organizational and strategic operations of alcohol beverage business and soft drinks business (Business office integration planned for 2Q; promote cooperation in sales)

Project underway

Create global comprehensive beverages group m

odel

KB: Kirin Brewery, ME: Mercian, KMD: Kirin Merchandising, KBC: Kirin Beverage Corp., LN: Lion Nathan, NFL: National Foods Limited

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14 issues for creating synergies and associated initiatives14 issues for creating synergies and associated initiatives ②②

Optimize Kirin Group value chain

Others

*Figure at time of KHK medium-term business plan formulation (plan to revise)

Challenges Initiatives in 2009Quantitative targets for 2009

Sales synergy Cost synergy

Enhance Group purchasing function to reduce purchase transactions by a fixed amount

Promote measures to reduce Group purchasing costs, mainly at KB,KBC(Raw materials, other materials, equipment and construction, utilities, advertising, sales and marketing materials, promotional materials, general materials, fuel for automobiles, property leases, service provision, etc.)

-Approx. ¥ 0,7 bn

~Toward significant growth from 2010~

Boost production and distribution cost competitiveness to optimize systems Group-wide

Conduct a fundamental review of production and distribution locations from the perspective of Group optimization, include in medium-term business plan and specify details and schedule

Project underway

Strengthen the Group’s technical capabilities to improve R&D personnel structure and business

Formulate Group R&D strategy that includes an efficient location and personnel structures (3Q) → Implement Project underway

Integrate back office functions to improve Group management structure

Specify details and schedule concerning integration strategy for head office functions and transfer certain operations of KH as required Project underway

Implement human resource measures to increase group management competency

① Confirm key group personnel and review management strategies② Proactively create personnel exchange opportunities between Group

companies③ Establish and promote shared group values (KIRIN WAY, focus on

diversity) through employment, evaluation, training, etc.

Project underway

Create health food and functional food business foundations and business model

Complete preparations for launch of cross-divisional Group products in 2010 Project underway

Accelerate integration in pharmaceuticals business

Pursue ongoing sales synergies in ESARealize cost synergies through restructuring of labs etc.

Approx. ¥ 1.2 bn2011: Approx. ¥ 8.0 bn*

Approx. ¥ 3.7 bn2011: Approx. ¥ 5.0 bn

KB: Kirin Brewery, KBC Kirin Beverage, KH: Kirin Holdings

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Internal management (balanced scorecard, shortened PDCA cycle)Internal management (balanced scorecard, shortened PDCA cycle)

D[Shorten PDCA cycle and revise plan]

D

A

PLAN

ACT

DO

CHECK

PLAN

DO

CHECK

ACT

PLAN

DO

CHECK

ACT

PLAN

DO

CHECK

ACT

PLAN

DO

CHECK

Time,level

P

C

P

Short PDCA cycle

Long PDCA cycle

[Group management system]~BSC (Balanced scorecard)~

■ BSC: Link strategies, bolster cooperation, stress commitment to targets, and focus on process management ■ PDCA: Shorten cycle, prioritize plan execution in deteriorating environment, and quickly revise challenges

Quickly and frequently feed results back, and update and improve strategy (MAP)

Enhance head office disclosure

Communicate at local level

Provide fun

Initiatives to make reality

Reflect customer opinion

Nurture next generationand protect ecosystem

Financial

Customers

Processes

Learn,･develop

[Learn, develop 3]

[Process 12]

[Process 3]

[Process 11]

[Process 13]

[Process 5]

[Process 6]

[Learn, develop 1]

[Process 7]

[Process 4]

[Process 1]

[Process 2]

[Process 14]

[Process 15]

[Learn, develop 4]

[Process 10]

Communication

[Learn, develop 2]

[Process 9]

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Growth strategyGrowth strategy

Cash flowCash flowP/LP/L 07-09 operating CF¥390.0 bn

07-09 operating CF¥390.0 bn

Improve capital efficiencyImprove capital efficiency

B/SB/S

Shareholder returns

Shareholder returns

■ Targeting operating CF in 2009 of ¥143.0 bn (Up ¥118.0 bn YoY cf. ¥131.2 bn in 2008)■ Targeting FCF in 2009 of approx. ¥81.0 bn (Operating CF: ¥143.0bn, investment CF: ▲¥62.0 bn)■ Planning to raise over ¥100.0 bn in cash through further asset liquidation

Completed investment for growth:¥550.0 bn(NFL, KHK, DF etc)

07-09 capex: ¥310.0 bn

Consolidated payout ratio

Over 30%

Further growth

Liquidated assets¥90.0 bn

Liquidated assets¥90.0 bn

Interest-bearing debt¥420.0 bn

Interest-bearing debt¥420.0 bn

Further investment for growthApprox. ¥300.0 bn

Further asset liquidation¥100.0 bn plus

*From now on and during next medium-term plan

Financial strategy Financial strategy ①① ~Maximize cash flow~~Maximize cash flow~

Announced in revised medium-term business plan (August 2008)

Disclosed in revised medium-term plan in August 2008

Create profitCreate profit

Share buybacksConsidered in context of financial position and investment needed for growth

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Financial strategy Financial strategy ②② ~Balance sheet management~~Balance sheet management~

AssetsAssetsLiabilitiesLiabilities

CapitalCapital■ Review assets held

( Non-core assets, shares )・Investment securities・Unused real estate・Business portfolio

■ Focus on efficiency in capital investment

Debt to equity balanceDebt to equity balance■ Secure liquidity on hand ( Issue CP etc )

■ Current: 0.72

■ Maintain careful watch on credit rating, ensure financial health

■ Continue to use mainly debt financing to fund business investment under growth strategy

■ Aim for D/E ratio of 0.5 over long-term, but allow up to approx. 1.0 for a while for growth-oriented investment

■ Shareholder return policy: Aim to increase dividends using real profit as index, and consider share buybacks

DebtShort-term loans: 119.2Bonds (long + 1 yr): 286.9 Long-term loans: 257.7Total debt: ¥663.8 bn

EquityNet assets total: 1,150.0

-Minority interest: 222.0Equity: ¥928.0 bn

Improve ROEImprove ROE

~Achieve 10% by 2015~

■ Reduce accounts receivable and inventory ・Reduce assets in each business

to improve turnover rate

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Progress of mediumProgress of medium--term business plan term business plan 2008 results and 2009 forecasts2008 results and 2009 forecasts

Quantitative goals 2008 results 2009 targetsInitial MTP

2009 targets(Dec. ‘06)

Revised MTP2009 targets（Aug. ‘08)

Sales incl. liquor tax 2,303.5 2,300.0 2,150.0 2,500.0

Sales excl. liquor tax 1,922.8 1,930.0 1,700.0 2,100.0

Operating income 145.9 121.0 Over 150.0 175.0

Operating income ratio incl. liquor tax 6.3% 5.3% Over 7% Over 7%

Operating income ratio excl. liquor tax 7.6% 6.3% Over 9% Over 8.3%

ROE 8.1% 6.0% Over 7% Over 7%

GuidelineEBITDA 264.6 269.1 - 330.0

EPS (prior to goodwill amortization for investments since 2007) 25* 76 - Approx. ¥105

EPS (subsequent to goodwill amortization for investments) 84 60 - Approx. ¥85

Ratio of overseas sales excl. liquor tax 27% 24% Approx. 22% Approx. 26%

■ The global economy has changed significantly since announcing the revised medium-term business plan, and in particular, rapid economic deterioration and yen appreciation (weak Australian dollar) since autumn 2008 have exceeded expectations.

■ Basically achieved initial sales and operating income targets for 2008. ■ Reformulate fiscal 2009 targets in light of the severe economic situation and strive to quickly achieve KV2015

goals.

*Calculation excludes ¥72.6 bn in gain on change in equity from the exchange of shares with Kyowa Hakko Kogyo Co., Ltd.

( Millions of yen )

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Promoting CSR activitiesPromoting CSR activities

Kirin Brewery has been endorsed as an ‘eco-first’ company

Planting trees near Kirin’s water source

KWN (Kirin Women’s Network) aims to promote women’s activities

■ Kirin Group believes in the importance of coexisting harmoniously with nature and society, and keeps CSR firmly in mind when conducting all corporate activities.

■ With respect to “CSR through Business,” we work hard to enhance compliance in our activities and to strengthen quality assurance systems to ensure the safety and security of our products. In 2009, we will start a long-term Group-wide program aimed at becoming “Low Carbon Cooperate Group”.

■ With respect to “CSR as a Corporate Citizen,” we promote social contribution activities, including efforts to protect the environment and supporting sports, that transcend the domain of business activities.

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