KIRIN CSV R E P O
R T 2 0 1 9 Kirin Holdings Company, Limited KIRIN CSV REPORT 2019
Printed in Japan Kirin Holdings Company, Limited Published July 2019 Corporate slogan
About the legendary kirin
The KIRIN C the KIRIN It was portrayed as a merciful animal that could fly, keeping its feet off the ground to avoid stepping on insects and grass. The KIRIN Since first appearing on the Kirin Beer label in 1888, a KIRIN has been featured on Kirin products for over 130 years, C Inspired by this symbol, all members of the Kirin Group will Joy brings us together
This phrase captures the Kirin Group’s spirit, guiding us into the future. We believe that no matter how much the world may change, the joy of living a full and healthy life, in mind and body, brings us happiness -- for ourselves, for those we love, and for the whole society. Joy is the essence of what holds people and society together. Joy inspires us and generates positivity. The joy of healthy living. The joy of living in harmony with our local communities. The joy of connecting with other people. Kirin promises to keep working to spread the benefits of joy.
1 KIRIN CSV REPORT 2019 KIRIN CSV REPORT 2019 2 KIRIN CONTENTS CSV 1 C Editorial Policy 4 Editorial Policy/Publications available on Kirin’s global website 2027 and the new 2019 – 2021 Medium-Term Business Plan REPORT CSV K CEO C O K Past and Present The report also features the Group’s model for creating 9 New Approach to Business K K 2019 Vision 2027, now in its first year in 2019. To signal its new Path to Sustainable Growth K R 11 Message from Top Management K 17 Value Creation Model K CSV R I K V 19 Interview with the Chief Financial Officer 22 N Publications available on Kirin’s global website 23 S O N Kirin’s global website offers a wide range of clearly presented information for stakeholders, including integrated reports published annually, data books, and reports covering environmental initiatives, corporate governance, and financial results. For detailed information about financial results, ESG-related data, and other aspects of the Kirin Group’s performance, please The Stories behind Kirin’s Commitment to Creating Shared Value Kirin Group CSV Purpose and CSV Commitment ESG Data webpage 31 CSV Report 2019 Periodically updated Case1 Health and Well-being: I Published in July 2019 The webpage shows various annual results related to Case2 Health and Well-being: This entire booklet version of this CSV R K https://www.kirinholdings.co.jp/english/csv/esg_gri/ 37 Case3 Community Engagement: Château Mercian featuring financial and non-financial 39 Case4 The Environment: R 2019 – 2021 Medium-Term Business Plan webpage by 1 billion yen through a switchover to electricity https://www.kirinholdings.co.jp/english/ Published in February 2019 Case5 A Responsible Alcohol Producer: S 41 ir/library/integrated/ The webpage features the 2019 – 2021 Medium-Term N Business Plan, a Group’s first three-year plan focused on realizing the Kirin Group Vision 2027 long-term Advances in Each Businesses and Risk Management Environmental Report 2019 https://www.kirinholdings.co.jp/english/ir/policy/medium.html 43 Fiscal 2018 Segment and Business Overview Scheduled for publication in July 2019 45 Fiscal 2019 Market Conditions and Strategies by Segment The report details the Kirin Group’s annual environmental Corporate Governance Report 50 Risk Management Published in April 2019 I K The report provides information on the Group’s approach Corporate Governance C C Discussion with Management https://www.kirinholdings.co.jp/english/csv/report/env/ https://www.kirinholdings.co.jp/english/ir/governance/pdf/ 57 E C S e_governance_report.pdf 58 C S 59 Directors, Audit & Supervisory Board Members, Data Book Consolidated Financial Statements and Executive Officers Periodically updated Published on March 31, 2019 61 I O The book presents financial results for the past 11 years Compiled in accordance with Article 24-1 of the Financial I E Enhancing Management Effectiveness includes Kirin Holding’s financial statements along with https://www.kirinholdings.co.jp/english/ir/library/integrated/ Financial Information https://pdf.irpocket.com/C2503/szUc/YyaT/xmRj.pdf 67 Management Analysis of Financial Position, Operating Results, C Cautionary statement regarding forward-looking statements 73 Investor Information/Company Information S these forward-looking statements are subject to risks, uncertainties and other unpredictable factors, and may differ considerably from actual results, business performance, and other future events. In addition, forecasts of fiscal 2019 financial results were decided as of the disclosure of financial 74 Third-Party Evaluations results on February 14, 2019.
3 KIRIN CSV REPORT 2019 KIRIN CSV REPORT 2019 4 Past and Present
Creating an optimal business portfolio in response
Building a unique business portfolio spanning from Food & Beverages to Pharmaceuticals
The Kirin Group has been able to flexibly adapt to changes in P P society and the marketplace throughout its history. In the Beverages, operating profit Japan Beer and 19 0 food and other products Spirits Japan Beer tandem with the country’s rapid economic growth, Kirin and Spirits Beer Brewery Co., Ltd., succeeded in greatly expanding its beer 7.7% 35.5% 2018 35.1% production, sales, and shipments. By 1972, the company had 92.3% Japan Non-Alcoholic secured a domestic market share of about 60% for Kirin brand Beverages Consolidated revenue Japan Non-Alcoholic Beverages beer, produced by its network of 12 breweries nationwide. 14.7% Leveraging its ability to adapt and respond to new market ¥1,930.5 billion 9.9% K 1980 Oceania Integrated Beverages Consolidated normalized Oceania Integrated Beverage Company, Ltd., in 1963, which went on to expand Revenue Operating profit Beverages the soft drink business. Then in 1972, the Group launched its ¥855.8 17.1% whiskey business with the establishment of the forerunner to 22.0% billion Pharmaceuticals and ¥199.3 billion Kirin Distillery Co., Ltd. Later, the Kirin Group created its first Bio-Chemicals Pharmaceuticals 19 1 and Bio-Chemicals 17.6% 25.0% diversify its business portfolio. Diversification included entry Others Others into the life sciences market, which was projected to grow 15.2% 8.1% ment of Kyowa Hakko Kirin Co., Ltd., in 2008. Through this New reportable segments steady expansion, the Kirin Group has continued to offer new The breakdown of operating profit by segment equivalent to an amount excluding company-wide expenses and intersegment eliminations spanning from beverages to pharmaceuticals. (amounting to approximately ¥36.3 billion). R
Kirin Brewery Company founded in 1907 amid intense competition in Japan’s beer industry 10.3% Operating profit margin Japan Brewery Co., Ltd., was set up in 1885 by a number of foreign residents in Yokohama’s Yamate district, who envisioned great promise for a beer industry in Japan. To produce a 6.7% style beer that suited the tastes of Japanese consumers, they imported 5.0% 4.8% ingredients and brewing equipment from Germany and hired a qualified German brewmaster. 2015 4.3% 2001 2008 Kirin Beer 1 kirin, a legendary creature from ancient Capital stake acquired Launch of Kirin Chu-hi Hyoketsu E in Myanmar Brewery Ltd. Chinese myths that is said to be a harbinger of good luck. When 1991 Kyowa Hakko Kirin Co., Ltd. Japan’s beer industry entered a time of intense competition after E 2005 Kirin Beverage Co., Ltd. Launch of Kirin Nodogoshi 2007 the turn of the century, a group representing the Iwasaki family One year after the product launch, the (new genre) Kirin Beer 1990 Establishment of Kirin Holdings Co., Ltd. and the companies Mitsubishi and Meidi-Ya took over Japan Brew 1998 1 9 Launch of extremely popular Capital stake acquired in 2006 ery and, while leaving the brewery’s operations intact, established features a larger image of the kirin. This Kirin Ichiban Capital stake acquired Lion Nathan Limited Normalized operating profit from 2017 label remains as the prototype for the (currently Lion Pty Ltd) in Mercian Corporation Kirin Brewery Company in 1907. Kirin Lager Beer label used today.
5 KIRIN CSV REPORT 2019 KIRIN CSV REPORT 2019 6 Past and Present
In focus pharmaceuticals and bio-chemicals businesses
Kirin Group Establishment of Kirin Pharma Co., Ltd. Entry into the Release of ESPO, pharmaceuticals business a treatment drug for renal anemia • Inauguration of Kyowa pandin o a throu h er ers and ac uisitions Hakko Kirin Co., Ltd. • Bio-chemicals division The Kirin Group has been expanding its operations interna Development of a fully human split off and Kyowa Hakko tionally by actively pursuing mergers and acquisitions, focus lia, and Myanmar Brewery Ltd. Meanwhile, Kyowa Hakko Bio Co., Ltd. established Establishment of Kirin-Amgen, Inc. antibody generating ing on Asia and Oceania in particular as key markets. Subsid Kirin is striving to develop global pharmaceuticals by drawing technology Kyowa Hakko Kogyo iaries around the world are now helping drive the Group’s on a wealth of bio-technologies. Development of POTELLIGENT technology, growth as a whole, including Lion Pty Ltd, an operator of Establishment of Kyowa Hakko Kogyo Co., Ltd. dramatically enhancing antibody activities The Kirin Group around the world Mass production of the antibiotic streptomycin for the Alcoholic and non-alcoholic beverages businesses treatment of tuberculosis commenced for the first time in Japan Entry into the pharmaceuticals business Pharmaceuticals and bio-chemicals businesses
Drawing on bio-technology to break into the pharmaceutical business United Kingdom In 1981, as part of its first long-term management vision, Guided by its long-term management vision, the Group owa irin nternationa p c the Kirin Group set out to expand its business into style-, stepped up efforts to launch new businesses utilizing its health-, and culture-related markets, and to contribute to expertise in bio-technology, which was accumulated over people’s quality of life through its products, especially many years in fermentation and cell cultivation operations. beer, in the lifestyle industry. By proactively promoting Leveraging those technological capabilities, the Group United States more diversified operations, the Group worked to create a made advances in drug development, for which market he oca o a Bott in o pan o growth was projected over the medium to long terms, and Northern New n and nc Germany China further expands into the life sciences market. owa a o urope irin hina n est ent o td owa irin A o din s nc ing profitability. hina esources irin Be era es ESPO® launched as the first pharmaceutical product through a mutually beneficial partnership Vietnam reater hina o td with U.S.-based Amgen nter ood hareho din o pan Taiwan The Group made a major step forward in its efforts to anemia. Incredibly, the drug was commercialized after only owa a o aiwan irin o td expand the pharmaceutical business in 1984, when it six years since forming the partnership, demonstrating Bio o din s nc Philippines formed a partnership with the U.S.-based biotech company Kirin’s entrepreneurial spirit and achievement for well- our oses isti er Amgen, Inc., a venture firm at that time. Combining Amgen’s collaborated work with the partner. an i ue Brewer nc leading R&D capabilities with Kirin’s manufacturing techniques, O Myanmar the partnership succeeded in mass producing human erythro apply its bio-technologies in drug discovery and development. Singapore an ar Brewer td poietin. That led to the launch of their first pharmaceutical Its pharmaceutical business expanded as a result, and accounted irin o din s in apore Pte td 1990 ESPO®, a treatment drug mainly for renal for about 10% of consolidated operating profit in 2007. Kyowa Kirin Asia Pacific Pte. Ltd.
Accelerating outstanding growth in the pharmaceuticals business and cultivating new businesses Oceania Company consolidated under bridging Pharmaceuticals and Food & Beverages the equity method ion Pt td In 2007, Kirin Pharma Co., Ltd., was established following 2018 with the approval and launch of Crysvita the Group’s adoption of a pure holding company frame drug for X-linked hypophosphatemia, in Europe and the work and establishment of Kirin Holdings Co., Ltd. Kirin United States. Guided by Kirin Group Vision 2027, Kyowa Pharma then merged with Kyowa Hakko Kogyo Co., Ltd., in Hakko Kirin is aiming to take the next major step toward 2008 to form Kyowa Hakko Kirin Co., Ltd., and has been becoming a global specialty pharmaceutical company, creating new pharmaceuticals by leveraging the synergies while the Group is working to cultivate new businesses of the two companies’ antibody- and bio-related technolo bridging Pharmaceuticals and Food & Beverages. gies. One of the accomplishments of this business came in
7 KIRIN CSV REPORT 2019 KIRIN CSV REPORT 2019 8 New Approach to Business
T K C P ducatin e p o ees a out the irin roup s new approach to usiness T K to reflect its new long-term management vision P I 2019 K O V 202 K 0 CSV CSV I
Four initiatives launched to raise awareness and guide the actions of employees T K he irin roup s orporate Phi osoph CSV CSV CSV KIRIN CSV T E CSV T
ision schedu e o each cate or o acti ities CSV Main initiatives S O N P op ana e ent ed initiati es o ased initiati es
Group-wide newsletter ★S ★S K 1
Distribution of management messages ★V 1 ne N a ues Executive management inspections
Passion Integrity Diversity Top management-led initiatives ★T 22 O O Our respect for different Group workshops ★E Management by objectives and I R self-control system, principles of CSV that the “differences” have Performance evaluations Workplace and departmental forums I and the brands we offer. easures or pro idin education and hands on trainin
Personnel training programs for K C P various job levels T
Hands-on CSV training
easures or pro idin awards and pro otiona acti ities
N Awards system ★ 10 N ★K C P 1 Various promotional channels K V 202 CSV
9 KIRIN CSV REPORT 2019 KIRIN CSV REPORT 2019 10 Path to Sustainable Growth Message from Top Management
Revitalization ignites growth – creating economic and social value in Kirin’s unique portfolio of Progressive revitalization of the Kirin Group aligning each and every employee toward our common goal. food to pharmaceuticals through structural reforms raises cash flow in Through Group-wide communication and face-to-face con- existing domains while strengthening versations we drove home the fact that without following financial base through on structural reforms the Group’s future was dire. We also enhanced organizational competencies by filling The Kirin Group attained all quantitative targets of the 2016 leadership positions with talent from our own ranks and from Medium-Term Business Plan (MTBP) ending December 2018 outside the Group. This was particularly true in Marketing President & CEO which sought group revitalization through structural reforms. where we greatly improved our organizational capabilities. When I was appointed to the position of CEO in 2015 the Our business situation could not wait. We faced issues Group faced many challenges. Domestic sales of beer and not envisioned in the 2016 MTBP. Lion had no choice but to beverages were sluggish, and Brasil Kirin and Lion Dairy & end its beer distribution agreement in Australia for interna- Drinks of Australia had structural issues. Our share price was tional premium brands. Sales of Nodogoshi, our new-genre depressed as investors noted our record of missed targets beer brand slowed since the launch of the 2016 MTBP. One for the then-current MTBP. investor said, “You became CEO because you were capable In formulating the 2016 MTBP we selected three key of tackling many issues at once.” Speed was of the essence issues based on our decision that revitalization required a as I demanded results and regularly discussed strategy with single-minded focus on raising profitability. Group companies while pursuing structural reforms. The first was to ”invest, strengthen and grow the profit Every Group company and employee did their best to base” of our beer business. Here we placed the highest pri- achieve results regardless of which issues they grappled with. ority on restimulating growth in the Group’s core , our Japan By overcoming these difficult obstacles our organizations and beer business. Second was to “invest to achieve outstanding employees gained experience and self-confidence which will growth” in our pharmaceuticals and bio-chemicals businesses. reinforce performance in a virtuous cycle. Certainly, this will Centered on Kyowa Hakko Kirin (KHK), these businesses’ boost their ability to take successful action going forward. potential as growth drivers was already recognized, though We sold off Brasil Kirin and decided we would divest our- we had not yet clearly positioned them as core businesses. selves of Lion Dairy & Drinks business as well. This became Given that these initiatives began in the 1980s, however, the possible only because our rapid structural reforms restored time had come to make their centrality official and promote profitability so quickly. The other businesses surpassed their them to core status alongside alcoholic and non-alcoholic 2018 guidance, and cash flow of our existing businesses is beverages. Third and lastly was the task of restructuring and on a solid footing. Decisively liquidating non-core assets revitalizing low-profit businesses. Regarding these we took generated free cash flow greatly exceeding the projections the decisive position that if a low-profit business did not upon which 2016 MTBP was premised. Besides putting our achieve revitalization then we would sell it and withdraw from financial affairs on a firm foundation, this also allowed us to that domain. This would remove any temptation to try again, repurchase our own shares valued at about 100 billion yen. which would only hinder our major push in structural reforms. To pursue such a rigorous plan required motivating and
Review of 2016 Medium-Term Business Plan eached a tar ets
Indicator Target Result
ROE 15% plus 17.5%
A video presentation Normalized EPS CAGR 6% plus 12.6% of the Message from Top Management is Consolidated Normalized OP ¥196.0 bn plus ¥199.3 bn accessible via QR code.
11 KIRIN CSV REPORT 2019 KIRIN CSV REPORT 2019 12 Path to Sustainable Growth Message from Top Management
New long-term management vision for related health risks, pressure for a “sugar tax” on soft drinks, strive to create economic and social value at the same environment. While taking quick action to mitigate risk, we sustainable growth and regulatory efforts to rein in medical costs. time. Sustainable growth is simply unattainable through an will execute three growth scenarios. Though our current businesses may be buffeted by approach that makes trade-offs in putting profit above all First, in the food & beverages domain of alcoholic and Our alcoholic and non-alcoholic beverages businesses have these winds of change, the new environment presents fresh else. To the contrary, by seeing social issues as new growth non-alcoholic beverages we will strengthen our brands and become an unshakable foundation, and our pharmaceuticals opportunities for growth. Since we can expect our existing opportunities and thereby growing in step with society, CSV solidify our profit base to withstand changes in the business and bio-chemicals businesses are ready to achieve outstand- businesses to generate sufficient cash flow, now is the time is the one beacon lighting the path to sustainable growth in environment. At the same time we will pursue emerging ing growth. The question on the lips of investors is “How do to take a long-term view toward building a business portfolio this age of uncertainty. growth opportunities where we can put CSV into practice. you propose to pursue growth now that revitalization has targeting sustainable growth. From a risk standpoint taking our core alcoholic bever- Second, in pharmaceuticals domain we are enhancing been accomplished?” To provide clear answers we have for- The Kirin Group has an unusual portfolio comprising ages business as an example, WHO is considering regulations our marketing capabilities and expanding distribution of mulated in 2019 a new growth-oriented long-term manage- the strong core businesses of alcoholic beverages and non- regarding alcoholic beverage sales on a global scale. This global products to deliver new treatments to patients around ment plan, Kirin Group Vision 2027. alcoholic beverages, together with pharmaceuticals and would have an increasingly significant effect. It means that the world. In this way we are steadily progressing in our leap What kind of world will we inhabit in the future? No one bio-chemicals. Moreover, we have proven our ability to cre- growth is premised on winning the support of not only con- to become a global specialty pharmaceutical company (GSP). really knows. All we can say with confidence is that we are ate innovative products and services by leveraging the tech- sumers of alcoholic beverages but also non-drinkers. Third, we are exploiting opportunities to establish entering an age of increasing uncertainty. nologies that are our strengths. In Kirin Group Vision 2027 For growth to continue into the future we must become future-oriented businesses bridging Pharmaceuticals and Businesses of all kinds already feel the effects of Japan’s we envision ourselves in 2027 as being a global leader in a Group that enjoys the support of future generations as well Food & Beverages. dwindling population and workforce shortage. The very struc- CSV, creating value across our world of Food & Beverages as that of current stakeholders. Taking on social and environ- Why are we expanding into this area? Wellness is a social ture of industry is being transformed with the accelerating to Pharmaceuticals. Since adopting CSV in 2013 we aim to mental issues to mitigate future burdens is a vital element in issue not only in Japan but worldwide. Japan is a hyperaging pace of technological innovation. The Kirin Group’s business achieve sustainable growth by working through our busi- staying attractive to the generations of tomorrow. society where a 100-year lifespan is not unusual. The popu- development faces such factors as rising awareness of alcohol- nesses to help resolve social issues. In short, we always To align everyone in the Group with the CSV approach, lation of “active seniors” who hope to maintain their health we reformulated our Corporate Philosophy and set CSV regardless of age is only increasing. Meanwhile, the younger 2016 MTBP performance by business long-term and non-financial targets as our CSV Purpose. Our generations’ interest in wellness is also growing much stron- philosophy now incorporates the words “KIRIN brings joy ger. Providing services and products that support people’s 1．Beer business: Invest, strengthen and grow the profit base to society” to stress our commitment to achieving growth well-being enhances the quality of life. This initiative also helps Kirin Brewery Lion (Beer, Spirits & Wine) Myanmar Brewery with society. The initiatives we will take in pursuit of our CSV constrain burgeoning medical and social security costs while 2018 2018 Gui an e Purpose are laid out in our CSV Commitments, as part of our bringing sorely-needed people into the workforce. These are 19.3% 27.9% 19.0% Results FY2015 Results aintain ar et osition ＆ business plan. extremely valuable outcomes from a social-issues perspective. 2018 20 27 0 2 a ture share o ar et rowth Guidance * Excluding Recognizing our responsibility as an alcoholic beverages Leveraging the resources of the Kirin Group with our liquor tax 17 0 manufacturer, we are committed to the three major areas strengths covering food to pharmaceuticals, we can answer esults J-GAAP OPM uire a ar et share o a ro of health and well-being, community engagement, and the wellness needs unmet by current medical and nutritional IFRS n rease ro u tion a ilities 2015 2016 2017 2018 Normalized OPM 2015 2016 2017 2018 KV2027 and its first stage 2019 MTBP 2．Low-profit businesses: Restructure, revitalize
Kirin Beverage Lion (Dairy & Drinks) Brasil Kirin Goals for 2027 2018 2018 2018 Gui an e Results Guidance Results 2027 Vision Achieve profit in 2019 onstru t a business ort olio a able o sustainable rowth 5.9% 2 0 2018 Stren then or ani ational a abilities or inno ation to trans or so ial issues Guidance 4.9% Decision rans er o all shares o lete into rowth o ortunities or the Grou 0 made to sell business A global leader in CSV, 2015 2016 2017 2018 2015 2016 2017 2018 reatin alue a ross Goals for 2019-2021 our world of Food & ．Pharmaceuticals & Bio-chemicals businesses: Invest to achieve outstanding growth Grow profit from existing businesses (Food & Beverages, Pharmaceuticals) Beverages to Kyowa a o Kirin Establish and foster new businesses bridging Pharmaceuticals and Pharmaceuticals Launched global products, Crysvita in Europe Food & Beverages and the US, ot ig o in the US
13 KIRIN CSV REPORT 2019 KIRIN CSV REPORT 2019 14 Path to Sustainable Growth Message from Top Management
approaches. Through foods that help prevent illness, slow the itself. In terms of technology creating trusted value, we will based on growth, and improving the profit base. progression of disease, or maintain health, for example, we are put our experience and technical expertise behind idea gen- We aim to expand profitability at Kirin Brewery and Lion, building a third pillar to support Group growth in future decades. eration in existing businesses and new businesses alike. To which have a high return on assets (ROA) and large market create new products and services we have embraced open size. By concentrating investment in Kirin Brewery’s core Business model for new businesses bridging innovation and other ways of seeking synergy from outside brands, we intend to increase total sales volume in the beer, Pharmaceuticals and Food & Beverages and within the Group. Here we recognize that if we are to RTD, and non-alcoholic beverages segments, while improving attract good partners we must enhance our own technolog- product mix through a raised percentage of premium catego- ar etin the onsu er se ent with health an well bein relate issues irin ai s to establish ulti le businesses that ical capabilities. Regarding ICT accelerating value creation, ries such as craft beer and Japanese whisky. Through ongoing o rehensi el ro i e ersonali e ro u ts an ser i es we anticipate that the credibility of a strategy premised efforts to elevate marketing ROI and cut costs, we will imple- throu h new hannels base on stron e i en e upon mass consumption and mass production will continue ment a model that raises both revenue and profits. Lion will irin ositions owa a o io at the ore o usinesses bri in Phar a euti als an oo e era es an ai s or to erode. In its place, we are boosting our ability to respond strengthen marketing efforts in the contemporary, craft, and rowth b a i i in the Grou s resour es to individual consumer needs based on what Big Data tells us premium beer categories, which are growth segments in the about personal values and purchasing behavior. Australian market. Domestically and internationally Lion will Pre ention an ana e ent We consider diversity of human resources to be the pri- also allocate more management resources to high-profit cat- isease onsu ers mary driver of innovation. Marketing, engineering, and ICT are egories. Regarding Kirin Beverage and Myanmar Brewery, we ance of Kirin Holdings. re ention an e i al without health health ro otion treat ent all fields that call for highly specialized personnel, mid-career are continuously targeting profit generation based on growth. We will preferentially allocate cash generated by our on erns to slow ro ression professionals whom we are seeking from outside the Group. Kirin Beverage is carrying out integrated marketing existing businesses to create a foundation for future growth. o e i al on itions We look forward to a future where mid-career hires predom- that leverages consumer data, while also taking measures to Budgeting about ¥300 billion investment in growth over a inate in divisions of our workforce. The Kirin Group needs to strengthen cost competitiveness and build a robust brand three-year period, we will allocate most to alcoholic and non- become an employer sought out by diverse talent who demon- portfolio. Myanmar Brewery will seek growth exceeding that alcoholic beverages, and a lesser amount to establish and foster strate specialized expertise and high motivation. To attract of the market by focusing on specific brands and channel businesses bridging Pharmaceuticals and Food & Beverages. such talent we must offer a comfortable work environment strategies. Mercian and CCNNE* are focusing on improved A basic thrust of 2019 MTBP is to elevate shareholder where everyone can exhibit their full potential regardless of profitability. returns. Taking into account the increase in normalized EPS their values and mindset or their skill-set and experience. Bearing responsibility for our pharmaceuticals domain, resulting from profit growth in existing businesses together Leveraging the power of diversity for innovation Developing organizational capabilities and a corporate KHK is a growth driver in the Group's MTBP. KHK will continue with high consolidated dividend payout ratios of 40% or culture that can achieve innovation and create value is not to maximize value in global markets as it leaps forward while more, our sights are set on providing stable shareholder To implement our growth scenarios we are developing more something that can be accomplished overnight. It requires expanding its drug discovery pipeline of global products. returns on an ongoing basis. We are also considering addi- advanced technological resources and organizational capabili- a long-term view; even if results are not immediate we must Each Group member company will autonomously and tional shareholder returns in light of current cash generation, ties focused on innovation. The Kirin Group has a long history of press on with tenacity and determination. Indeed, KHK's expediently enhance its management, while Kirin Holdings growth investment, and other aspects of our situation. Like innovation born of our advances in technology and persistent global strategic product Crysvita was born of precisely this smartly assesses our business situation and exercises corpo- our own share repurchase in FY 2018 this also contributes to R&D efforts. If, however, we look at global innovators such as long-term approach. rate governance. maximizing shareholder value. GAFA (Google, Apple, Facebook, and Amazon), we have much With profit growth in our existing business as a corner- Following through from 2016 MTBP I will maintain a room for improvement. Their business domains may not over- Launching 2019 MTBP to create a foundation for stone, we plan to establish and foster businesses bridging strictly results-oriented stance to attain the goals of 2019 lap ours, but in comparison we need to reorient our corporate new growth in KV2027 Pharmaceuticals and Food & Beverages. We are reinforcing MTBP. With everyone in the Kirin Group striving to create new culture toward innovating in new business sectors and recon- business development of the iMUSE line and of applications value while staying mindful of social responsibilities, we can ceive our existing businesses to be ever more resolute pioneers. The first step toward realizing KV2027 has begun. Our 2019- of high-performance materials created by Kyowa Hakko Bio look forward to sustainable growth and enhanced corporate In KV2027 we fortify our organizational capabilities for 2021 Medium-Term Business Plan (2019 MTBP) is a 3-year which in 2019 has come under the direct ownership of Kirin value. As we progress along the path we have set for our- innovation which encompass expertise in four areas: con- plan establishing a launchpad for new growth. Our top prior- Holdings. Moreover, we are configuring a distinctive business selves, I can never stress enough that the continued trust and sumer centric marketing, technology creating trusted value, ity here is growing profits in our existing businesses – from model to provide products and services tailored to individu- support of our stakeholders is something to be earned and ICT accelerating value creation, and diversity and inclusion food & beverages domain to pharmaceuticals domain. als' physical characteristics and lifestyles. In initiatives such never taken for granted. culture for innovation. Consumer centric marketing is an area Our first agenda is solidifying our food & beverages as these, we are leveraging the maximum capabilities of our we continue to strengthen. Going forward we will enhance domain foundation which supports Group growth. To Group's domestic and overseas organizations under the guid- marketing capabilities company-wide by adopting a market- strengthen profitability we are allocating to each of our busi- Yoshinori Isozaki ing perspective in every division, in addition to marketing nesses the tasks of enhancing profitability, generating profits * The Coca-Cola Bottling Company of Northern New England, Inc. (U.S.A.), serving a territory of seven states in the New England region of the United States. President & CEO
15 KIRIN CSV REPORT 2019 KIRIN CSV REPORT 2019 16 Path to Sustainable Growth Value Creation Model
Throughout its management, the Kirin Group has integrat- and bio-chemicals businesses, and businesses bridging Enhancing economic and social value with the concept ed the model of creating shared value (CSV), a business Pharmaceuticals and Food & Beverages. Through the concept first introduced by Michael E. Porter. products and services offered by each of these businesses, “creating shared value” positioned at the heart of all Accordingly, it is driving innovations through its marketing the Group is bringing economic and social value to people expertise, leading-edge technologies, advanced informa- around the world. Looking ahead toward its next stage of management tion and communications technology (ICT), diverse human growth, the Group plans to bolster its innovation drivers resources and motivated workplaces. By leveraging these even more so that it can continue creating value and grow- competitive advantages, the Group is expanding its alcoholic ing sustainably into the future. and non-alcoholic beverages businesses, pharmaceuticals
Kirin Group orporate Philosophy P T B TP T TC M oundations for The Kirin Group is helping society with various The Group is leveraging its The Kirin Group gives value bac to the society it serves driving innovations issues while treating those challenges as foundations for driving opportunities for business growth innovations that enable its businesses to help society around the world settle the issues
Consumer centric Business domains inancial ey mar eting e pertise ealth and performance ell-being indicators
Providing products and Food & beverages services to build bonds Technology domain between people creating lcoholic and ommunity ngagement trusted value non alcoholic G of beverages normalized P billion businesses in R&D expenses in fiscal 2018 For more details, please refer to page 22.
ocial value Businesses bridging Providing products and Non-financial key conomic value V long-term and CT accelerating performance Pharmaceuticals and services to improve Maximized cash flows non-financial targets value creation Food & Beverages indicators For more details, chievement of V Purpose people’s quality of life please refer to page 19. For more details, ¥16.7 billion please refer to page 31. V ommitment in ICT expenses in fiscal 2018 billion in ICT investment in fiscal 2018 orporate brand value Pharmaceuticals The nvironment
mployee iversity and Continually developing engagement score inclusion culture innovative new drugs for innovation For more details, esponsible 30,464 employees please refer to page 22. lcohol Producer (consolidated) * The indicators are used in the (As of December 31, 2018) 2019 MTBP
Kirin Group corporate governance More details are available from page 55.
17 KIRIN CSV REPORT 2019 KIRIN CSV REPORT 2019 18 Path to Sustainable Growth Interview with the Chief Financial Officer
The Company also beat its targets for all key perfor- businesses that use assets efficiently and supply highly mar- mance indicators and profit guidance we gave priority to ketable products, while restraining investment in the mainte- under the 2016MTBP. Specifically, by the final year of the nance and upgrade of existing facilities to the extent possible. 2016MTBP, return on equity reached 17.5%, exceeding our With respect to growth investment, the highest prior- Aiming to establish a new target of 15%, the compound annual growth rate of normal- ity will be given to existing businesses that have potential ized EPS was 12.6%, beating our target of 6%, and consoli- for earnings growth. Among them, we will give priority to launchpad for sustainable dated operating profit totaled ¥199.3 billion, surpassing our the beer business, as its profitability is forecast to be very guidance of ¥196 billion. stable in the global market. With respect to these priority growth and to maximize businesses, we are also interested in investing in mergers corporate value through Financial strategies of the 2019 MTBP and acquisitions. Through a balanced variety of investments, Establishing a launchpad for achieving growth including in new business areas, we will allocate resources proactive and disciplined over the medium to long term to businesses that have strong potential to generate cash. Q How does the Group intend to achieve growth Q In the beer business, what specifically will the investments going forward? Company invest in? Noriya Yokota We formulated a new long-term management vision called We will invest in region and business domains that are growing. Kirin Group Vision 2027, and as the first step toward realiz- Among the regions, we are exploring opportunities primarily in Director of the Board, Senior Executive Officer & CFO ing it, we intend to create a foundation for the Kirin Group Southeast Asia. Among businesses, we will continue to expand aimed at achieving new growth under our 2019 MTBP. We the Group’s craft beer portfolio with a view to market it glob- To watch a video of the succeeded in revitalizing the Group, but it will be necessary to ally. Furthermore, in the Japanese market, growth is projected interview, please scan make proactive investments for achieving continuous growth for product categories besides beer, such as RTD beverages the QR code to the right. over the medium to long term. Our existing businesses are and Japanese whisky, so we are looking to proactively channel expected to generate substantial cash flows, so we plan to capital investment in and expand those categories. further invest in them. Q What do you plan to invest in to “bridge” those Review of the 2016 Medium-Term Business Plan cash flows increased substantially. Over the three years of Q What does the Company plan to invest in? main businesses? Business restructuring successfully carried out the plan, cumulative free cash flows amounted to about Over the three years of our new plan, we have earmarked There are various kinds of possibilities. For instance, in the con- and all quantitative targets achieved ¥680 billion, far exceeding our original target of ¥260 bil- about ¥300 billion for growth investment and another ¥310 text of providing better medical treatment and healthcare, lion. Consequently, we were able to greatly improve the billion for capital investment. Furthermore, we plan to invest which is an important challenge for society, we aim to “help Q To begin, how would you sum up the Kirin Group’s Company’s earnings structure. Before the plan in 2015, inter- in initiatives for improving organizational capabilities in order people independently lead healthy lifestyles and support pre- achievements under the previous medium-term est-bearing liabilities totaled around ¥750 billion and the gross to realize long-term growth. ventive healthcare.” That is a major pillar of the Kirin Group CSV business plan (MTBP)? debt-to-equity ratio was over 1.0, but in 2018, the final year of We will work to maximize returns on the capital invest- Commitment (see page 32 for more details). Accordingly, we Under our previous MTBP, which spanned from 2016 to 2018, the 2016MTBP, interest-bearing liabilities had been reduced ment by proactively and preferentially allocating funds to will make the most of the Group’s operational resources that we carried out restructuring with the goal of revitalizing the to about ¥415 billion and the debt-to-equity ratio came in at span from food and beverages to pharmaceuticals in order to Kirin Group. 0.45. The Company repurchased around ¥100 billion of its own Three-year cash flow plan create new businesses that benefit society. For example, based We succeeded in bolstering the earnings platform of the shares in 2018, thereby boosting shareholder returns. le ibl onsi er in reasin sharehol er returns a ter i in to on personal genetic characteristics determined via DNA tests, beer business by shifting our approach from costs to invest- priority to growth-oriented investment using cash flows from individually optimized healthcare and services are being offered ments, as well as concentrating investment in key brands and Three year cumulative results from 2016 to 201 o eratin a ti ities o rowin e istin businesses in various countries of the world. In that context, Kirin Holdings more efficiently allocating marketing expenses in Japan. In Balanced investment acquired a capital stake in Thorne Research, Inc., which devel- estrain a ital in est ent in Cash flows from Shareholder returns Capital the pharmaceutical business, we made steady progress in operating activities a ilit aintenan e an u ra es ops and sells personalized supplements in the United States. Approx. investment Proa ti el an re erentiall Approx. in est in businesses that use assets releasing global products to the market and boosting their billion 10 billion efficiently and supply highly We plan to expand that company’s business by supplying the billion Free cash flow sales. Meanwhile, we decided to terminate certain low- Including share Cash flows from ar etable ro u ts Kirin Group’s highly functional ingredients and products, and to Above billion Approx. repurchases of operating activities profit businesses, and, accordingly, sold off Brasil Kirin as target billion Total dividend Increase consolidated develop our own business model for Japan. We will also take billion 00 billion dividend payout ratio payments well as Lion Dairy & Drinks. We also sold off non-core assets o an a ount e ui alent to at steps to acquire or enhance any capabilities that may be lacking. Cash flows from Exceeding Repaid interest- least o nor ali e PS ro investing activities bearing liabilities 210 billion and repaid interest-bearing debt in order to strengthen the target of the re ious tar et o Approx. billion Approx. Disciplined investment Q How do you intend to enhance organizational Company’s financial base. billion billion Growth investment Approx. P a li able to the ost o a ital in ea h business an re ion capabilities? As a result of those accomplishments, the profitabil- Above billion Above billion Sale of assets, etc.* 00 billion ity of our existing businesses improved and consolidated target target Positioning issues facing society and the needs of customers Total sum for sale of Lion Dairy & Drinks, other assets, etc. yet to be determined
19 KIRIN CSV REPORT 2019 KIRIN CSV REPORT 2019 20 Path to Sustainable Growth Path to Sustainable Growth Interview with the Chief Financial Officer Financial and Non-Financial Highlights
Financial Highlights (Fiscal 2018 Results) CAGR of as opportunities for growth, we are taking steps to improve does not require dependence on interest-bearing liabilities. Capital efficiency indicator Profitability and growth indicator at least the capabilities of our existing organizations involved in both Instead of relying on easily available credit with interest for eturn on in este a ital or ali e PS (%) (yen) existing and new businesses. Moreover, we are incorporating funds needed for future growth, we intend to carefully man- 20 200 capabilities acquired from outside the Kirin Group to drive inno- age volatile assets with a view to create investment reserves. vations that create value. Therefore, we intend to enhance the For example, we intend to continue reducing cross-sharehold- t least Group’s intangible value—namely brands, research and devel- ings that are incommensurate with the cost of equity, and will 10 10 100 opment, ICT, and HR and organization—as organizational capa- aim to sell off assets worth a similar amount as those sold off bilities that underpin growth. over the past three years of the previous MTBP.
Q Concretely speaking, how do you intend to enhance Q Please tell us about your outlook for cash flows. 0 2014 2015 2016 2017 2018 2021 0 2014 2015 2016 2017 2018 2021 (Target) (Target) those value? The Company is expected to generate a cumulative total of JGAAP IFRS JGAAP IFRS Notes The target is averaged over a three-year period We intend to maximize the outcomes of investments ear- over ¥700 billion in cash flows from operating activities over • Results prior to fiscal 2015 exclude amortization of goodwill • ROIC = Earnings before interest and after tax /(Average interest bearing debt marked as expenses in the financial statements. Among our the next three years. Besides using it for growth investment between the beginning and the end of the FY average total equity between the beginning and the end of the FY) initiatives in the past, investment was lacking in some respects, and capital investment, we plan to allocate ¥210 billion for • FY2018 ROIC is 9.4% if calculated excluding transient impacts such as income from but now we are clearly specifying how much investment should dividends, which will raise the consolidated dividend payout sale of assets, etc. be allocated for the capabilities we need and then taking steps ratio from over 30% to more than 40%, a level commensurate Non-Financial Highlights to improve them. For example, we will install systems for utiliz- with normalized EPS. Results in each category of Kirin Brewery Company, Limited Kirin Beverage Company, Limited Mercian Corporation ing AI and robotic process automation, and improve core data- the Kirin Group’s CSV Commitment Lion Pty Limited Myanmar Brewery Limited Kyowa Hakko Kirin Company, Limited bases used for digital marketing. Using the latest technology, Q Finally, what message would you like to give to The Kirin Group sets targets for its key performance indicators in each category of its CSV Commitment with the goal of becoming a global the Group will quickly collect information on customers and shareholders and investors? leader in “creating shared value” (CSV). drive new innovations aimed at providing high-value-added Having revitalized the Kirin Group, management is now able Since some of these indicators were newly created in fiscal 2018, results for that year are not yet available. products and services to consumers. We are also proactively to proceed to the next stage. Kirin Group will help communi- A Responsible Alcohol Producer Health and Well-being investing in programs for promoting the diversity of our human ties take on challenges while bringing economic benefits by es onsible rin in assin a ulture o en o in al oholi be era es olution in e i al treat ent resources. Whether contributing to higher sales in the future positioning “Creating Shared Value” at the heart of all business to the ne t eneration or bringing down costs, these investments will lead to returns. activities. While we plan to proactively invest under our current Number of participants in appropriate drinking education Number of new drugs discovered in-house and MTBP, we will maintain discipline when making investment programs / viewers of drinking manner advertisements launched in multiple regions Key performance indicators and cash allocation decisions for the purpose of maximizing corporate value. Number of countries with markets for these new drugs Maximizing corporate value through disciplined 201 2021 target 201 2021 target Ideal alance sheet co osition Crysvita and Poteligeo were Three or more investment decisions 1 0 thousand 1 million launched in multiple regions. products launched i it the o bine a ount o rowth in est ent an olatile participants/viewers participants/ Benralizumab was launched in in over 50 countries Q Why were key performance indicators changed in assets to a le el not re uirin relian e on interest bearin liabilities viewers multiple regions by AstraZeneca. the new business plan? isciplined investment decisions to ma imize returns Community Engagement The Environment Given that the Company will proactively invest, how to make ore sustainable ro u tion o raw aterials tions re ar in ontainers an a a in disciplined investment decisions became an important issue. oninterest-bearing Current assets Interest-bearing liabilities are included under invested capital iabilities Contracted farming ratio of procured rice in Conversion rate of PET bottle resin to recycled resin Myanmar for brewing in the calculation of return on invested capital (ROIC), so we can 201 2021 target 201 2027 target more accurately determine the profitability of investments. Business ssets alan e a ital in est ents Interest-bearing iabilities Using ROIC and net present value (NPV) as indicators allows us 0 10 0 (High-profit business assets) to more effectively evaluate investment targets and maintain (Low-profit business assets) Ratio of materials from Myanmar discipline when making investment decisions. As for quantitative tocks of subsidiaries 201 2021 target key performance indicators, we are aiming for at least a 5% com- and affiliates Soli a itali ation Can uity pound annual growth rate (CAGR) of normalized EPS with a view Goodwill materials: 0 to increase shareholder value. We are also targeting a minimum Marketable securities ROIC of 10% in order to boost returns above the cost of equity. Growth investment Employee engagement score (%) Corporate brand value
Q How do you plan to manage the balance sheet? ell cross-shareholdings to reduce non-business assets 201 2021 target 201 2021 target We want to limit the combined amount of volatile assets and Volatile assets have relatively strong potential to generate cash 0 t least 2 million million and comparably high levels of volatility with respect to asset value 1, 1 2,200 assets associated with growth investment within a range that Source Best Japan Brands 2018 published by Interbrand Growth investment Equity Conceptual diagram 21 KIRIN CSV REPORT 2019 KIRIN CSV REPORT 2019 22 Path to Sustainable Growth Stren thenin ur on inan ial ssets The new strategy scores a success with Honkirin The first step Kirin Brewery took in the development of Honkirin was to analyze its past products. The company applied what it learned to product development, the mar- Innovation for sustained growth. rganizational capabilities that promote innovation keting plan, and every aspect of its Honkirin plan. Because The Kirin Group sees innovation as the key to sustained Kirin Brewery had so many products in its portfolio, it had growth and seeks to generate innovation by strengthen- Consumer centric Technology creating become difficult to get all departments aligned behind the ing its four fundamental organizational capabilities of marketing e pertise trusted value one brand strategy. With Honkirin, however, the marketing “Consumer centric marketing e pertise,” “Technology and sales departments were communicating from the very creating trusted value,” “ICT accelerating value creation,” early stages of the product development, and over time all and “ iversity and inclusion, culture for innovation.” ur recent efforts reconceptualizing our marketing e pertise ICT accelerating iversity and inclusion, of the departments came to understand the central role of to raise the brand value of Honkirin is a prime e ample of value creation culture for innovation the strategy and brand value. This enabled Kirin Brewery to how innovation leads to success. effectively coordinate the sales promotions and activities it needed for success. Kirin Brewery was able to put in place the organizational structure for an all-encompassing marketing effort covering the full range of customer contact points. The result was instant and sustaining sales momentum.
Honkirin and our marketing reform Turning its marketing into a strength Honkirin sales volume in each quarter K Katsuya Nagai, the Marketing Department assistant brand 50,000 Internal changes were key to successful marketing Strategies to break out of a downward spiral manager in charge of Honkirin, believes marketing is key to 40,000 building competitiveness. “We are confident that we can The 2018 launch of Honkirin was a resounding success with Kirin Brewery introduced more than 10 malt-type new genre use marketing to create a competitive edge.” The Marketing initial year total shipments surpassing 300 million bottles. brands in the past decade. However, the company struggled 30,000 Department combined Kirin’s manufacturing technology and One of the primary factors that produced the immense sales to attract sales for every brand. As its market share started its approach to quality with new knowledge and expertise 20,000 volume was the internal reform Kirin Brewery carried out to to shrink, Kirin Brewery turned to short-term fixes by releasing learned outside the company to form the new organizational become “the company that puts consumers first,” as cham- derivative products with impromptu promotions and with- 10,000 structure for delivering high brand value to customers. Kirin pioned by Kirin Brewery President Fuse. out thought for building up the brand. The company was Brewery will also use the latest information and communica- also worried about releasing products that would compete 0 2018.1Q 2018.2Q 2018.3Q 2018.4Q 2019.1Q tion technology to further deepen customer understanding. against its own brands. In short, the company was not provid- Kirin Brewery’s consumer centric marketing will be ing products that customers really wanted. As a result, it was spread throughout the Group to strengthen the Group’s orga- not building the brand from a long-term perspective of being nizational capabilities and create industry-leading innovation. atsu a a ai a brand that customers would view as having high value. ssistant ran ana er o Honkirin ar etin e art ent A focused marketing strategy to stop irin rewer the contraction N K 200 One of the key reform strategies Kirin Brewery implemented sing the latest IC to create added val e and f rther grow the leading rands to break out of this downward spiral was to focus its mar- keting on fewer products. Before the reforms, Kirin Brewery 2011 thought that decreasing its brand offerings would reduce its irin rewer is ai in to enerate urther rowth b aintainin an buil in the stron a eal o its lea in bran s Nodogoshi Na a yo ts S sales volume. However, it took a new tact of investing in a while le era in to reate urther a e alue O 201 small, select number of brands, which it would then continue o iri to invest in with a focus on developing and strengthening I at our sales sites igital marketing them for the long term. With this approach, rather than aim- K K ing to create a hit product now, the marketing department I 201 would advance strategies for the medium and long term and I T conduct Consumer-centric marketing to build a brand with a large customer following ten years in the future. The first T brand Kirin Brewery applied this approach to was its flagship brand Kirin Ichiban that it relaunched in 2017.
23 KIRIN CSV REPORT 2019 KIRIN CSV REPORT 2019 24 Path to Sustainable Growth Strengthening Our Non-Financial Assets Focus
R&D Strategy: Technology creating trusted value Pioneering smart cell culture technology using plant cells to meet needs in the medical field
Kirin’s unique platform to produce simplicity so it can be operated by just a few people. beneficial substances Kirin’s development of this technology put the Foo e erages o ain har aceuticals o ain Platforms for manufacturing biopharmaceuticals Group at the forefront of plant “smart cell” propaga- Kirin Brewery, Mercian Kyowa Hakko Bio Kyowa Hakko Kirin mainly use microorganisms and animal cells. Animal tion technology using plant cells to produce functional
Kirin Beverage cells are usually used to produce proteins with the substances. At the same time, the achievement of complex structures of protein. However, the process enabling sterile conditions for the propagation created Kirin Holdings requires high-precision environmental control of the an entry point for R&D directed at the medical field, technology and equipment. In recent years, simplified which requires strict quality control. Non-alcoholic and Biopharmaceutical alcoholic beverages Lifestyle support Immune system Brain function Plant “smart cells” products manufacturing equipment and production platforms using plants have been coming under the spotlight. The Aiming to manufacture pharmaceutical ingredients Non-alcoholic beverages Decaffeination o o i Citicoline Active vitamin D3 Kirin Group has extensive experience developing plant- from plant cells in 2027 Alcoholic beverages Controlling caffeine strain plasma Ingredients derived (NEDO Smart Cell Pro ect) o i o intake o i strain KW from food & Pharmaceutical materials r i based mass propagation technologies, and combining Kirin joined the government-led New Energy and High functioning beverages (hops/milk) (beneficial proteins) amino acids our expertise with the technologies of Kyowa Hakko Bio Industrial Technology Development Organization Functional ingredients in microorganisms and Kyowa Hakko Kirin in animal cells (NEDO). In 2016, NEDO launched a five-year plan to gives us an unmatched global scale with capabilities develop production techniques for highly functional across three functional substance cultivation platforms. biomaterials using smart cells of plants and other Kirin has amassed a wide variety of plant-related organisms. We are developing a propagation process Using unique Applying Applying plant Using leading-edge Offering products technologies since the 1980s. One of our biggest suc- using plant-based propagation technology that can e era es or a technologies and immunological “smart cells” to meet biotechnology to and services for leasant an providing functional research to create nee s or create new medicines cesses is the development of our unparalleled technol- efficiently mass-produce active-form vitamin D3 used one sto sel flourishing society foods to support new beverage and high-quality, that contribute to control solutions” ogy for mass propagation using liquid culture media in drug treatments for osteoporosis and other diseases. comfortable lifestyles medical businesses low-cost products health and well-being from plant bodies from stems and sprouts to somatic In 2018, we built the Plant Research Center on the embryos. Technology for mass propagation already grounds of our Fukuura Research Park to serve as a pilot Fermentation and biotechnology existed, but it was mainly labor-intensive manual work. facility with cleanroom specifications for demonstra- Packaging technology Quality assurance technology The techniques we developed using highly produc- tion of medical research reagents and production pro- Manufacturing technology tion-efficient liquid cultures that enabled commercial cesses of ingredients for pharmaceuticals from plant production of a wide range of plant species played a key cells. We are fine-tuning our technology for plant biol- role in the development of our agribio business. ogy platforms and laying the groundwork to enter the We will consolidate Kirin Group technologies to form new businesses in the food & beverages In commercial manufacturing, cost is also important. pharmaceutical ingredient business. domain, pharmaceuticals domain, and “bridging Pharmaceuticals and Food & Beverages” where we Our unique research has led to the development of a low- Our development roadmap for these operations will create new value that contributes to solving social issues around the world. cost bag-type culture vessel system that can take the place is to launch the medical research reagent business in The Kirin Group’s operations spanning both food and phar- In the pharmaceuticals domain, we aim to create new of expensive, large culture systems. We streamlined the 2021 and the veterinary medicine raw material business maceuticals ideally position it to create value and address medical value by leveraging our leading biotechnologies and mass propagation system to reduce both input and labor in 2024. We will then aim to enter the high value-added social issues by combining its specialties in fermentation advancing R&D mainly in the four areas of nephrology, oncol- costs by using specially designed plastic bags for the cul- field of pharmaceutical ingredients in 2027. technology and biotechnology developed through our orig- ogy, immunology/allergy, and the central nervous system. ture vessels to make it lightweight and by designing it for inal beer business and the pharmaceutical and biochemical The mission of the new businesses bridging Pharmaceuticals technologies acquired through our diversification strategy and Food & Beverages segment is to provide new value in the since 1980s. We are also building the new businesses bridging four areas of lifestyle support, immune system, brain function, Pharmaceuticals and Food & Beverages to be a core part of and plant-based “smart cells.” The new segment’s consumer the Kirin Group’s portfolio. In this domain, we will combine targets fall into the categories of individuals with specific Plant Biotechnology Project Reagent for Materials for Materials for launch (Plant Research Center) medical research veterinary medicine pharmaceutical our unique evidence-backed food ingredients and competi- needs and preventive healthcare. We will support specific products tive technological capabilities with open innovation to make needs by applying the high-function materials developed in this new domain a sustaining pillar of the Kirin Group. our food & beverages business to address unmet medical In the food & beverages domain, we will contribute to needs. In preventive healthcare, we will apply the Kirin Group’s society by developing products with new value by advancing proprietary expertise in the pharmaceuticals business to build technology throughout the supply chain to improve product a unique operation that meets specialized needs. quality and business profitability.
25 KIRIN CSV REPORT 2019 KIRIN CSV REPORT 2019 26 Path to Sustainable Growth Strengthening Our Non-Financial Assets Focus
Human resources strategies: Enhancing individual professional capabilities with Diversity and inclusion, culture for innovation competency evaluations Initiatives taken by Kirin Brewery’s Marketing Department
Aiming to speed up the development of Employees know what is happening in their respective To offer value to customers and communities, realizing Group will continuously create value through innovations by capabilities by improving the fairness and departments and understand the issues at hand. If they innovations is essential. Diversity and inclusion, culture for bringing together employees who have diverse values and transparency of employee evaluations think an issue can be solved through their own profes- innovation are necessary for the organizational capabilities specialties, and are sympathetic to its corporate philosophy In the Marketing Department, Kirin Brewery has been sional expertise in marketing, brand business, man- that provide a basis for realizing such innovations. The Kirin and strategies. training personnel and working to create a sustainable agement, or something else, they actively hold study system of human resource development in order to sessions to share their knowledge and then go about Realize innovations through the combination of diverse values, ways of thinking, skills and experience improve its organizational marketing capabilities. More trying to solve it. Kirin Brewery also has leaders who cre- recently, Kirin Brewery has been improving training to ate teams of employees that are struggling, encourage Diversity Professionals groom marketing leaders based on the goal of strength- and coach those employees to develop their skills, and ening human resources in its MTBP. Above all, Kirin lead efforts to solve problems. Recruiting diverse employees Realize Brewery has been focusing on competency evaluations. By promptly putting the conditions in place for Attracting diverse employees innovations Grooming individual The most beneficial aspect of a competency eval- facilitating these kinds of activities, Kirin Brewery Make the Group more professionals open to diversity uation is that it breaks down all of duties required of intends to continuously develop marketing profession- personnel at the level of specific actions, and clarifies als while helping achieve the performance targets set e iew re ruitin strate ies ulti ate ro essionals throu h how the performance of those duties is evaluated, by the company. e ise ersonnel s ste s wor an the e ansion o thereby improving fairness and transparency. That in i i uall ri en trainin s ste s e or wor la e ra ti es allows Kirin Brewery to standardize coaching terminol- Expanding similar systems group-wide based on ana e e lo ees so that the Corporate philosophy and vision ogy and approaches for helping employees develop and the successes at Kirin Brewery alues an e er ise an ontribute their i erse e ertise achieve goals. Consequently, the performance indica- Having consistently achieved success at Kirin Brewery, The basis for managing diverse human resources tors required for professional goals and evaluations are the Kirin Group plans plan to have its competency man- laid out clearly for employees, and they become more agement system adopted by the marketing departments Pro ote irin Grou ision motivated in their work because they understand the of other companies in the Group in the future. By pro- an new or orate hiloso h specific goals they need to achieve. It also fosters a gressively adopting the system group-wide and putting it e or or ani ational ulture spirit of challenge in the workplace and speeds up the into practice, the Kirin Group intends intend to continue development of professional capabilities. developing marketing leaders at each group company The Kirin Group’s diversity The Kirin Group’s professionals while meeting the expectations of stakeholders. Diversity was included under the Group’s shared values in Each member of the Kirin Group is committed to working in Selecting young employees with necessary Kirin Group Vision 2027. The Group is confident that diver- his or her respective workplace and position, refining indi- competencies—even as a brand manager of sity will be a driver of its efforts to create value in business vidual skills, and pursuing very high standards of expertise in flagship products We will keep improving the capabilities of domains spanning from food and beverages to pharmaceuti- terms of becoming the best in one’s occupation and industry. Another advantage of adopting a competency-based marketing personnel so that we can help cals, and to become a global leader in creating shared value. The Group believes that its businesses will be strengthened evaluation system is that it gives employees excellent achieve the Group’s goals The Group hopes to generate new value and innovations by and a new future will be opened up by having employees vol- opportunities regardless of their age when they acquire By adopting clear indicators of competency, we have encouraging open dialogue while accepting internal differ- untarily take on challenges while thinking outside the box. the necessary competencies. For example, the brand implemented a system for fairly and objectively ences like one’s values, sensitivities, and experience, without The source of that is the desire by each person to grow. By manager in charge of the renewed Kirin Ichiban and evaluating each employee. As a result, we have fostered regard for external characteristics such as gender, nationality, actively supporting and encouraging employees who main- Honkirin brands is aged mid-30s. Such young personnel workplaces that can take on challenges and created a and whether one is abled or disabled. The Kirin Group is pro- tain a desire to grow and aim higher, regardless of their age, who have similar lifestyles as Kirin Brewery’s custom- culture in which employees are highly aware of their work responsibilities. Moreover, marketing personnel moting changes to its diverse human resources by review- career, or job, and by creating opportunities for them, the ers carry out their duties seriously and with a sense of have been steadily improving their capabilities. We will ing recruitment procedures and carrying out organizational Kirin Group is developing human resources who can promote responsibility for the brand business they are in charge continue with these initiatives so that our highly skilled reforms of workplace practices. By leveraging these changes, its business. of. That has led to good results. marketing personnel strengthen the company as a the Group will aim to realize innovations going forward. As another new development, employees are inde- whole and help achieve the Kirin Group’s goals. pendently starting up exciting projects together. On Two of the Group’s initiatives for promoting diversity and professionalism itsuharu a a ata their own initiative, they are developing the best mar- Senior executive officer and general manager of Marketing Helping employees The Kirin Group has a unique program in which employees who have no children work as if they actually do in order keting professionals for Kirin Brewery and improving e art ent ar etin i ision irin rewer understand challenges to experience how working mothers and fathers deal with time constraints and child-related emergencies. Through faced by working improved individual productivity, awareness of the workplace, and management by superiors, the initiative has helped the collective capabilities of the entire organization. mothers and fathers create an organizational culture that continues to produce results. This program allows young employees to work for a non-profit organization or company in an emerging country. The aim Work-abroad program of the program is to develop human resources early on to support CSV management by having them make use of their talents and gain experience in initiatives aimed at solving social problems in emerging and other countries.
27 KIRIN CSV REPORT 2019 KIRIN CSV REPORT 2019 28 or ing to ar s the sustaina ilit o societ an the irin rou CSV S T By solving issues confronting people today and creating new value, the Kirin Group is aiming to evolve as I K a global leader in creating shared value (CS ). Toward that end, we formulated our CS Purpose, which N includes the Group’s long-term goals and direction, and our CS Commitment as an action plan. In C S 200 connection with these initiatives, we have set priority tasks to pursue under four broad themes of a responsible alcohol producer, health and well-being, community engagement, and the environment. K 10 P CSV P 2019 N S Health and T Well-being irin ol in s AS Pharmaceuticals business Pa e Presi ent 1 ro in ualit o li e o atients aroun Kirin Group CS the worl AS Purpose and Community Engagement Pa e CS Commitment i in to boost sales o Château Mercian in ollaboration with ra e rowin o unities P 1
Health and Well-being AS AS Businesses bridging pharmaceuticals The Environment Pa e and food & beverages Pa e e u in G G e issions b 2 e era in te hnolo i al assets an annual uel osts to ro i e un tional in re ients b billion en throu h that ontribute to health a swit ho er to lean ener AS A Responsible Alcohol Producer Pa e Sha in a ositi e rin in ulture that brin s eo le to ether in ustralia an ew ealan
29 KIRIN CSV REPORT 2019 KIRIN CSV REPORT 2019 30 The Stories behind Kirin’s Commitment to Creating Shared Value Kirin Group CSV Purpose and CSV Commitment
S ur ose esta lishe he a roaches an targets o the S o it ent
2017 2019 MTBP. Kirin will actively report on its progress in 2027 19 ments for each business segment as non-financial targets ealth an ell- eing o unit ngage ent he n iron ent or more in ormation about our CSV Commitment the a roa h and targets lease re er to the ollo ing ebsite htt s irinholdings o english s ommitment d CSV all d aise the number o health Create more o ortunities eali e a so iet based on that affect the Group. To face these eo le lo er the number o or ustomers to s end time resour e ir ulation si eo le and ontribute to ith their amilies and b CS Commitment Approach 2021 target the eo le ho are in ol ed riends and de elo the long-term and non-financial targets in the health are ommunities ithin our A Responsible es onsible drin ing 1 1 2027 su l hain Alcohol assing a ulture o 2. Label products with its alcohol to support en o ing al oholi Producer 2 be erages to the [Kirin Brewery, Mercian, Lion, and Myanmar 1 5 41 ne t generation Su orting sel are 1 1 1 or health eo le products with scientifically proven health benefits 2 and eo le ith purchasing: Five countries (roughly 650 A es onsi le Alcohol ro ucer re disease 2 Health and health benefits (e.g. Lactococcus lactis strain or more in ormation about the a e stead rogress to ard eradi ating the harm ul Well-being establishment o the CSV ur ose use o al ohol in all ountries o o eration ero arm ul rin ing 1 33 htt s irinholdings o olution in english s ur ose 2 35 medi al treatment of countries: Three or more products 50
Contributing to ommunit itali ation 2 irin rou aterialit atri re ise the rou S o ittee
Kirin Group Materiality Matrix ore sustainable Take a long-term perspective to enhance the value of 1 100 2027 Community rodu tion o 2 200 2027 Engagement ra materials contracted firming toward achieving sustainable 3 10 2021 Responsibility proactive and independent efforts by the Kirin Group as a whole A responsible Safety and Sustainable as a Health and 3 37 4 10 000 2025 alcohol security of supply chain pharmaceutical well-being producer our products 1 manufacturer m a t on so ial sustainabilit 2 The Community 3. Contracted firming ratio of procured rice for Human rights environment engagement 4
2018 Human acquisition of Rain Forest Alliance certification resources Corporate and governance corporate culture 3 tions regarding 30 limate hange 2030 2015 Kirin Brewery Company, Limited; Kirin Beverage Company, Ltd.; Mercian Corporation; The Lion Pty Ltd.; Myanmar Brewery Ltd.; and Kyowa Hakko Kirin Co., Ltd. Environment tions regarding 3 Conversion rate of PET bottle resin to Various management tas s or ensuring sustainable gro th 4 39 m a t on the Kirin rou ’s business ontainers and 50 2027 htt s irinholdings o english s materialit a aging
1 Target set by each company 2 Target under consideration 3
31 KIRIN CSV REPORT 2019 KIRIN CSV REPORT 2019 32 The Stories behind Kirin’s Commitment to Creating Shared Value Case 1: Health and Well-being
CS Commitment Evolution in medical treatment
The or orate hiloso h o K o a a o Kirin hi h ondu ts the Kirin rou ’s medi al ur Achievement
business is to ontribute to the health and ell being o eo le around the orld b reating umber o in house drug dis o eries ne alue through the ursuit o ad an es in li e s ien es and te hnologies nder this hilos mar eted in multi le regions ophy, we are focusing research and development efforts on the four key areas of nephrology, umber o ountries ith mar ets or these ne drugs on olog immunolog allerg and the entral ner ous s stem le eraging our utting edge 2 21 target biote hnolog an hored in antibod te hnolog ne re ent e am le o our a hie ements is the de elo ment o burosumab de el Three or more rodu ts mar eted in multi le regions o ed ith the ode name K as a treatment or lin ed h o hos hatemia The er ountries in total drug as a ro ed in b the uro ean Commission and the ood and rug dministra Pipeline tion o the nited States here it is sold under the name o Crysvita KR 23 as o ecember 31 2 1 Country or region of Indication Development phases development
lin ed Submitted srael S iss 1 2 3 for h o hos hatemia approval
lin ed orth meri a h o hos hatemia 1 2 3 uro e a an in adult atients Korea
orth meri a lin ed uro e h o hos hatemia 1 2 3 ustralia in ediatri atients a an Korea
Tumor indu ed osteomala ia S a an CASE idermal ne us 1 2 Korea s ndrome 1 harma euti als business
mproving uality o li e o patients around the orld iscovery G 23 regulates phosphate Ta e oshi amashita Revolutioni ing treatment o intractable Approved in Europe and the nited States disease H field of nephrology, a core field for our business. Phosphate ahead o apan h Crysvita 23 23 ire tor 2006 Cor orate Strateg 2018 lanning e artment K o a a o Kirin 23 PROFILE 2000 1987 20,000 individuals, people with XLH often suffer from phatemia (low phosphate in the blood), I was the first to deficient growth development. discover the central role that fibroblast growth factor 23 The European Commission granted conditional market 2000 23 2018 first to identify the fibroblast 23 23 23 multiple daily medicines and has the side effect of kidney that year. It became the world’s first drug with an indication calcification. Treatment with KRN23 vastly improves the 23 23 23 23 23 The challenge was to find a way to suppress the FGF23. resolve social issues in the health field, contribute to the finally produced the fully human antibody KRN23 that acts 23
33 KIRIN CSV REPORT 2019 KIRIN CSV REPORT 2019 34 The Stories behind Kirin’s Commitment to Creating Shared Value Case 2: Health and Well-being Supporting self-care for healthy people and CSV Commitment people with pre-disease
The Kirin rou has e anded its al oholi and non al oholi be erage businesses in the ood ur Achievement
industr and its harma euti als business in the health are industr e eraging s nergies in umber o ountries a able o these t o business areas the rou has laun hed a ne business bridging harma euti als ur hasing Kirin made and food & beverages” in an effort to create new value. Recognizing that healthcare needs are ingredients ith ositi e health effects (and total population) not being ull met b urrent medi al and ood rodu ts the rou is aiming to establish this ne business a illar o its ontinuous gro th 2021 target Specifically, the Kirin Group is proceeding to develop and supply functional healthcare i e ountries products with scientifically proven benefits by applying its expertise and technological assets as (roughly 650 million people) ell as b ollaborating ith a ademi resear h institutes around the orld it aims to make these products available in five countries with a combined population of 650 million eo le The ountries in lude a an Vietnam other ountries in Southeast sia and ountries in orth meri a ne o the rodu t ingredients that has been de elo ed is Lactococcus lactis strain lasma Lactococcus lactis outside the Group. In order to ensure that the benefits Lactococcus lactis CASE providing scientific information and providing the Lactococcus lactis 2 Helping improve people s through the widespread use of Lactococcus lactis strain Plasma can understand and share its scientifically proven benefits. The unique beneficial feature of Lactococcus lactis usinesses bridging harma euti als and ood e erages Leveraging technological assets to provide functional ingredients that contribute to health world-first. Our accumulated findings have been critically Tomomasa agisa a Senior anager Pursuing product development using only Partnership with Thorne Research ealth S ien e e artment scientifically proven ingredients Kirin oldings U.S. Supplement Sales and Forecast by Channel from 2011 2018 ore ast PROFILE 60 0 1997 0 40 scientific evidence. Its highly functional supple The scientific basis of many so-called “health food” 0 30 20 20 cialize them after demonstrating statistically significant benefits 10 0 2014 2015 2016 2017 2018 2019 2020 2021 difficult to demonstrate because the efficacy of health food 2013 C 3 9 2 9 Online retailers 12. 12.0 2016 Healthcare practitioners (including fitness clubs) . .1 6 3 6 3 4 8 4 8 6 6 6 6 Total . . Lactococcus lactis produces an effect on tissues, organs, and cells.
35 KIRIN CSV REPORT 2019 KIRIN CSV REPORT 2019 36 The Stories behind Kirin’s Commitment to Creating Shared Value Case 3: Community Engagement
CS Commitment More sustainable production of raw materials
The Group’s boutique winery oins hands Create more o ortunities or ustomers to s end time ith their amilies and riends and Our Achievement with the local community de elo the ommunities ithin our su l hain is one o the items in the Kirin rou ’s CSV Volume o gra es rodu ed at Purpose. Accordingly, the Group is making efforts to improve the sustainability of agriculture in our o n ine ards the areas that gro ra materials or its rodu ts su h as ho s and gra es in a an ri e in 2027 target 2019 Myanmar, and tea leaves in Sri Lanka. Among those efforts are activities intended to help solve issues on ronting su liers in arious ommunities The rou also aims to reate e en more t e onomi alue and ne so ial alue s an e am le o su h a ti ities the ollo ing initiati e is being arried out b er ian Cor oration hi h is ollaborating ith ine ards to strengthen its brand o a anese ine future. Staff at the Mariko Winery plan to offer from the terrace seating set up on the second floor.
CASE
3
By operating the three wineries, we can offer valuable Aiming to boost sales o Château Mercian in Contributing to the gro th o suppliers and collaboration ith grape-gro ing communities their communities through the development o three ineries Envisioning the uture o apanese ine Enhancing the Château Mercian brand in terms o At our wineries, we are offering satisfying experiences to both uality and uantity a indo Chie brand manager o Ch teau er ian 5 10 ar eting e artment er ian Château PROFILE Mercian 1 5 67 000 2019 1996 2027 29 to boost profit ratios and increase our direct sales ratio of 20 10 2014 Château Mercian Château Mercian markets overseas. The wine is being offered by three-star 2017 York in the future. We will continue these efforts and strive Château Mercian 50 with the local community,” as it will be difficult for the 76 2027 Japanese wine is defined as wine produced domestically with 100% of the
37 KIRIN CSV REPORT 2019 KIRIN CSV REPORT 2019 38 The Stories behind Kirin’s Commitment to Creating Shared Value Case 4: The Environment Applying our leading engineering capabilities ith that realizes the world’s lowest amount of GHG emissions. the aim o reali ing the orld s best energy system Through these efforts, we expect to reach our GHG emission CS Commitment Actions regarding climate change Heat pump systems are a key technology for reducing GHG reduction target before 2030. Moreover, reducing annual emissions. We have been able to both save energy and shift energy costs by 1 billion yen appears to be achievable. or the Kirin rou global arming is a serious issue n it set an ambitious target to Our Achievement to electric power by installing heat pump systems. Simply While monitoring results at the Okayama Factory and redu e C emissions b hal a ross the rou ’s entire global alue hain b om ared installing equipment, however, will not necessarily produce using it as a model, we plan to successively replace the edu tion o emissions ith the le el and has been or ing to ards that goal e er sin e S o e and results. Before installation, it is essential to analyze the entire energy systems at each of our other factories in Japan and n ar h the rou set a medium term target to redu e s hether dire tl heat flow of the production process and optimize it through abroad from 2019. 2030 target emitted rom its business a ti ities or emitted in the alue hain b b om ared advanced designs. The Kirin Group has accumulated leading Kirin Brewery will continue applying its technological ith the le el and began or ing to a hie e this target in its business o erations s engineering capabilities, and my team made use of that strengths with a view to realize the world’s best energy system. an as iring initiati e Kirin re er introdu ed a rodu tion s stem that reali es the orld’s om ared ith experience while aiming to put in place a production system lo est amount o emissions 2 This goal was the first GHG reduction target in Japan’s food and beverage industry to be recognized by the international initiative Science Based Targets. 3 Based on an in-house study
Heat pump system Electricity as the energy source
Collection of discharged heat Can use a greater amount of e haust heat rom energy than the amount of CASE rodu tion ro esses and ambient air heat energy consumed 4 tili ing the heating process High-pressure fluid Environment low-pressure fluid 1 Reducing GHG emissions by 3 and Method of reducing GHG emissions annual uel costs by 1 billion yen through a s itchover to Result of energy-saving initiatives GHG emission *1 Kirin Brewery has set a higher target for achieving the targets of the Kirin Group. clean energy reduction o Aiming to end dependence on ossil uels in an Greater use of Sosu e oshi a a renewable energy effort to reduce GHG emissions emissions anager Te hnolog Kirin Brewery reduced its GHG emissions by about 70% over 1 e elo ment e artment S o e 36 a 25-year period from 1990 to 2015 by applying its leading rodu tion i ision ossil uels Fuel costs cut Kirin re er technological capabilities in the global beer industry and by 1 billion yen carrying out numerous forward-looking initiatives. annually PROFILE Now the company is taking on the challenge of apply Sosuke Yoshikawa joined Kirin Brewery in 2005. He was ing even more technological innovations to achieve GHG responsible for all energy systems emission reduction targets set by the Kirin Group in 2017. Shift to when the company’s Shiga Factory electric power was upgraded in 2007. After that, As a means to achieve this, we are aiming to shift our S o e he was involved in engineering energy sources from fossil fuels to electric power. Both operations at the head office, and ele tri was assigned to work in Brazil in electric power and fossil fuels are currently used as energy o er 2014. Mr. Yoshikawa succeeded in sources at our breweries. Comparatively, the largest amount substantially reducing energy consumption while overseeing the of GHG emissions comes from fossil fuels, which are used to 201 Renewable construction of the company’s beer generate heat. Therefore, in order to reduce GHG emissions, and beverage factories and energy implementing innovative we need to improve energy efficiency and reduce the amount By 2030 energy-saving initiatives. At present, of energy consumption. At the same time, we believe that he oversees environmental and energy-related engineering and is in shifting the energy mix to electric power, and, furthermore, charge of devising forward-looking using electricity generated by renewable energy sources GHG emission reduction strategies. are the most effective ways of reducing GHG emissions.
39 KIRIN CSV REPORT 2019 KIRIN CSV REPORT 2019 40 The Stories behind Kirin’s Commitment to Creating Shared Value Case 5: A Responsible Alcohol Producer
Responsible drinking / passing a culture of en oying CS Commitment alcoholic beverages to the next generation
or man al ohol an bring o and ha iness at so ial gatherings but it an also be harm ul Our Achievement i not onsumed res onsibl Kirin rou ’s ero arm ul rin ing ro e t aims to ombat umber o arti i ants in irres onsible drin ing in all the regions it o erates in hile reating a ositi e drin ing ulture a ro riate drin ing edu ation that can be sustained for generations to come. Kirin strives to fulfill these aims by under rograms ie ers o drin ing manner ad ertisements standing and valuing local attitudes, as well as producing different ways to educate responsi ble drin ing a ording to ea h region Kirin does this b reating more drin ing o tions su h 2021 target as non al oholi and lo al oholi be erages and b im ro ing onsumer a e tan e ne million to ards these rodu ts Kirin also en ourages labeling al ohol ontent on be erages to arti i ants ie ers ensure im ortant in ormation is isible at all times earn more about the CSV ommitment o ion ustralia belo
CASE
5 Shaping a more responsible and social drin ing culture are numerous ways we do so, such as offering lower-alcohol options that don’t compromise on flavor and quality. And Shaping a positive drin ing culture that The ma or alcohol-related issues acing Australia experience rather than drinking purely for the effect. brings people together in and e ealand Alcohol-related problems Australia and e ealand DrinkWise Australia is an independent not-for-profit 2015 and contributes annually to high-profile campaigns. Cheers! causes and effects of their drinking behavior and make smart choices as a consequence. Our online interactive training ibb a idson 2018 ion rou eneral Counsel ternal elations ire tor PROFILE satisfied with life, have broader friendship and support 2005 14 affairs, client relations, mergers and acquisitions, and corporate
41 KIRIN CSV REPORT 2019 KIRIN CSV REPORT 2019 42 Advances in Each Businesses and Risk Management Fiscal 2018 Segment and Business Overview
The new reportable segments I Kirin Holdings’ reporting segments through fiscal 2018 were fiscal 2019 after determining the best structure for realizing Japan Integrated Beverages, Oceania Integrated Beverages, the Group’s future business strategies beginning with 2019 Core operating companies Revenue Normalized operating profit Other Overseas Integrated Beverages, Pharmaceuticals & Bio- MTBP. Kirin Holdings determined that the most effective chemicals, and Other. In fiscal 2019, the reporting segments way to further strengthen the integrated management of K C O were revised to Japan Beer and Spirits, Japan Non-alcoholic the group companies was to merge with Kirin Brewery to K 1 0 1 0 1 0 Beverages, Oceania Integrated Beverages, Pharmaceuticals formulate a flexible organizational structure and also to 0 1 2 2 and Bio-chemicals, and Other. revise the components of the internal monitoring within the K K 0 The segment organization was revised at the start of Kirin Group.
K K K 1 0 Through fiscal 2018 Starting fiscal 2019
201 201 O 201 201 Japan Beer and Spirits
O a an nteg ated Beve ages
Japan Non-alcoholic Beverages Note: Figures in parentheses are comparisons with the previous fiscal year. O O I Oceania Integrated Core operating companies Revenue Normalized operating profit Beverages Oceania Integrated 9 9 Beve ages O O 1 Pharmaceuticals and Bio-chemicals 2 1 2 2 the ve seas 1 nteg ated Beve ages O 201 201 201 201
Pharmaceuticals & Other Bio-chemicals P the O O Core operating companies Revenue Normalized operating profit
K K 9 * The segment name will be changed to Pharmaceuticals Business in the second quarter of fiscal 2019 following the acquisition of 95% of all outstanding shares of K 2 2 Kyowa Hakko Bio Co., Ltd. from Kyowa Hakko Kirin Co., Ltd. on April 24, 2019. 2 1 1
P P 1
201 201 201 201
43 KIRIN CSV REPORT 2019 KIRIN CSV REPORT 2019 44 Advances in Each Businesses and Risk Management Fiscal 2019 Market Conditions and Strategies by Segment
Japan Beer and Spirits Japan Non-alcoholic Beverages
Market environment Market environment Kirin Brewery expects the domestic total beer market to consumption tax in October 2019, Kirin Brewery expects Kirin Beverage expects the non-alcoholic beverages mar- to directly impact sales but it may have an indirect impact continue shrinking amid the declining birthrate and aging deteriorating consumer sentiment to continue increasing ket to continue growing at a brisk pace in 2019, but to if overall consumption slows. population in Japan and as consumer preferences becom- demand for lower-priced products in new genre catego- ultimately remain flat or contract modestly year on year At the same time, Kirin Beverage expects sales to grow ing increasingly diversified. ries while evolving consumer preferences continue to shift primarily owing to the strong sales during last year’s in the low- and sugar-free products category supported by In addition, the revision to the Liquor Tax Act in 2017 demand to RTD products. Anticipating a certain level of unseasonably hot weather. Because non-alcoholic bever- younger consumers’ preference for sugar-free drinks and the followed by the price increase on a portion of its on-prem- price differential between beer and new genre product ages are exempt from the consumption tax change, Kirin overall trend for health-conscious choices on the backdrop ise products in 2018 increased concern that higher retail prices in 2021, the year after the tax revision, Kirin Brewery Beverage does not expect the tax hike in October 2019 of the country’s declining birth rate and aging population. prices would reduce demand for beer products, and Kirin expects the share for traditional beer (defined in the nar- Brewery saw a shift in demand to low-priced and ready- row sense) in the overall alcohol market including RTDs to to-drink (RTD) products. With the plan to increase the remain at roughly 40%, about the same as in 2017. Strategies Kirin Beverage has vastly improved its profitability through Kirin Beverage will further strengthen the founda- the structural reform achieved under the previous MTBP. tions of its flagship brands Gogo-no-Kocha, Nama-cha, and Strategies The company has fortified its business foundation through FIRE. In response to consumer demand, in April 2019 Kirin Kirin Brewery continues to pursue the objectives of the previous happo-shu Tanrei Green Label, which it believes has promising better income and expense management and reduced supply Beverage introduced FIRE brand products in PET bottles and MTBP to raise both revenue and profit by emphasizing profit- growth potential. chain management costs. Successes strengthening its leading expanded its lineup of offerings in the sugar-free and health ability and investing in its core brands. Kirin Brewery has also set developing the craft beer oper- brands led to sales volumes bouncing back sharply for Nama- and well-being domains. In April, Kirin Brewery introduced a refreshed version of ation into a profitable business as a medium- to long-term cha and reaching a record high for Kirin Lemon, which marked Its container strategy is to continue to center its manage- its flagship Kirin Ichiban brand designed to appeal to a broader target. Kirin Brewery will continue developing the craft beer its 90th anniversary since its debut. ment targets on high-margin smaller PET containers while customer range. market by creating more opportunities for consumers to taste Since Kirin Beverage will also be strengthening its local- maximizing value by linking the strategy with its strategy for Kirin Brewery will also strengthen consumer recogni- its products. Kirin Brewery plans to increase the number of ization strategy, advancing its integrated marketing, and con- the Nama-cha, Kirin Lemon, and other brands. tion of its new genre products positioned close to our beer restaurants and drinking establishments equipped with our tinuing to promote the development of the FIRE brand, it will Kirin Beverage will also fortify the procurement, pro- products, specifically the popular Honkirin, launched in 2018, Tap Marché beer dispenser units from roughly 7,000 stores in follow the same strategic framework in 2019 that it had in duction, logistics, and other elements of its supply chain to and the revamped Nodogoshi. Kirin Brewery fully expects 2018 to close to 13,000 in 2019. 2018 aimed at generating profits by expanding its business. establish a sustainable operating structure. rival breweries to launch products to try to counter its suc- Kirin Brewery also plans to fortify its offerings in the RTD cat- cess with Honkirin. Rather than relying on extension products egory, particularly the core Hyoketsu and Honshibori brands. Kirin Grow Existing Domains or new products designed solely to boost sales volume, Kirin Brewery will be prepared to meet growing demand for RTD prod- Brewery will prioritize generating further growth for its exist- ucts when its new ¥5 billion RTD production facility at the Nagoya Strengthen three core brands ing products. Kirin Brewery will remain constantly focused on Plant commences operations in May 2019. Kirin Brewery will also Strengthen sugar-free and health and its customers as Kirin Brewery seeks to stimulate demand by boost its profit margins in the RTD category through more effi- well-being domains offering attractive beer products in all categories. cient transport operations between eastern and western Japan. Kirin Brewery is also developing a product portfolio strat- Kirin Brewery will also work to boost sales of its non- egy for the upcoming revision to the Liquor Tax Act in 2020 alcohol beer-taste beverage Kirin Zero ICHI and its Japanese Initiatives in New Domains and beyond. In 2019, Kirin Brewery will therefore increase whisky offerings, which Kirin Brewery is aiming to develop its investment in its signature beer Kirin Ichiban and also in its into a high margin business category for the company. Develop KIRIN naturals
Consumption Liquor tax Changes in 2019 tax hike Affordability × added value 2020 revision purchasing behavior
Create a Sustainable Structure Growth in beer category Opportunity in valuable new genre products Growth in RTD category Increasing attractiveness of o category Promote SCM cost reduction Build a stable distribution network
Renewal Renewal Renewal From From From mid-January early April late February
45 KIRIN CSV REPORT 2019 KIRIN CSV REPORT 2019 46 Advances in Each Businesses and Risk Management Fiscal 2019 Market Conditions and Strategies by Segment
Oceania Integrated Beverages Pharmaceuticals & Bio-chemicals
Market environment Market environment Lion anticipates beer sales volume in Australia to either At the same time, Lion expects the markets to continue The Japanese government is taking steps to preserve the efforts to control medicals costs by overhauling the drug remain flat or decline modestly in the broad trend of growing for contemporary and craft beer categories. public health insurance system as the country deals with a pricing system and allowing more generic drugs on the increasing health consciousness. Lion also expects higher Lion expects the growing health consciousness declining birthrate and aging society. Although the phar- market could further slow the market growth. purchase prices from the introduction of container deposit among consumers to support moderate overall growth in maceutical market is still expanding, we think government schemes aimed at reducing waste, such as those launched the dairy product and non-alcohol drink markets although in New South Wales in December 2017 and Queensland in with some variation in specific categories. November 2018, to affect consumer purchasing behavior. Strategies The Kyowa Hakko Kirin is committed to contributing strongly In the bio-chemicals business, after considering and dis- to the health and well-being of people around the world and cussing the possibility for further collaboration in the busi- Strategies becoming a Japan-based world-leading R&D-focused life sci- ness domain of health and well-being on which Kirin Holdings In the Beer, Spirits and Wine business, Lion will harness the ence company by engaging in “Creating Shared Value (CSV)” is focusing as a future growth driver, Kirin Holdings and Kyowa Build our brands to grow the beer business business potential from the shift away from traditional clas- management that helps boost corporate value. To this end, Hakko Kirin came to the decision that by making Kyowa Hakko sic categories to the contemporary and craft categories by the company will continue to rely on innovation as its foun- Bio a direct subsidiary of Kirin Holdings, it would be possible boosting its brand power in the growth categories while con- dation, utilize state-of-the-art biotechnology to changes and to more effectively use each other’s strengths and manage- tinuing to concentrate investment on its leading brands. The roll out products and services that meet true customer needs ment resources, as well as raise the speed of business devel- company is aiming for a higher sales ratio of high-priced and and have high unique value. opment, beginning with the health and well-being domain, high-margin products to improve profitability in the medium In the Pharmaceuticals business, although Kyowa Hakko and so open the way to maximizing group synergies and the and long term. Initiative to generate new growth Kirin expects impacts from a reduction in drug price standards corporate value of Kyowa Hakko Bio. In addition, the share The company will also increase investment to develop Premium crafted in Japan, Kyowa Hakko Kirin anticipates year-on-year revenue acquisition would allow Kyowa Hakko Kirin to concentrate Global craft beer business the markets for craft beer overseas and for premium beer adult beverages growth supported by expanding sales of the global strategic management resources on the Pharmaceuticals business, pri- as it seeks to develop them into a pillar of profit growth in products Crysvita and Poteligeo, which Kyowa Hakko Kirin marily new drug development, and to further accelerate the the future. released in the United States and Europe in 2018. Moreover, pace of growth. Kyowa Hakko Kirin shareholders approved Kirin Holdings has determined that selling Lion’s Dairy & although Kyowa Hakko Kirin expects increases in selling the proposal at the shareholders’ meeting in March 2019, Drinks business to a third party would be the most beneficial expenses for expanding revenues and maximizing the value and Kirin Holdings acquired 95% of the share of Kyowa Hakko to Lion in terms of business value and to the Kirin Group in of global strategic products and in research and development Bio on April 24. Invest to establish a sustainable business terms of shareholder value. The Company is examining the expenses, core operating profit* is expected to increase due * Revenue − cost of sales − selling, general and administrative expenses − Establish ICT systems research and development expenses + share of profit of equity-accounted feasibility of such a move in 2019. Business structural reform to growth in overseas revenue. for the future investees Energy costs are rising in Australia as the country seeks
to convert to clean energy and the closing of aging coal- Kirin Holdings Acquisition of Kyowa Hakko Bio Accelerating the creation of synergies Ma imi e the value of global strategic products fired power plants is reducing available power supply. Lion Ma imi e the c ate va ue a akk Bi is stepping up its ongoing efforts to reduce costs by making r i Continue to penetrate markets cus a akk i in es u ces n ha ma usiness o i o Plan to launch in E the supply chain more efficient and also by reformulating i in dings i in dings the functions of its headquarters, including by introducing KW-6002 Plan to file for regulatory approval in US i in a akk Bi enterprise resource planning (ERP) systems. Merger Establish the One yowa irin structure e usiness e usiness segment segment Establish North America as an independent business region a akk i in a akk i in Begin management on a regional x functional axis a akk Bi Focus on (Japan, EMEA (Europe/Middle East/Africa), North 95% acquisition further growth America, Asia/Oceania)
47 KIRIN CSV REPORT 2019 KIRIN CSV REPORT 2019 48 Advances in Each Businesses and Risk Management Advances in Each Businesses and Risk Management Fiscal 2019 Market Conditions and Strategies by Segment Risk Management
Other Approach to risk management The Kirin Group defines risk as uncertainty with the potential The Kirin Group’s basic risk management policy is to seek Strategies to seriously impede the accomplishment of business targets to prevent risk from being actualized, to effectively maintain Mercian aims to capture demand from the growing number of cus- or impact business continuity. A “crisis” refers to a situation compliance, and to continue earning the trust of customers, Mercian is strengthening its brands by selecting and concen- tomers in the beer-entry segment and from customers mov- in which a risk is actualized at a certain point and therefore employees, shareholders, and society over the long term. trating on the core brands in each category and is formulating ing up to higher price categories. Myanmar Brewery will focus needs to be addressed on an urgent basis. a portfolio of products with high growth and profit potential. investment and sales promotions on its core Myanmar Beer Château Mercian is using its three wineries as a foundation for and Andaman Gold brands as it heightens its presence in the strengthening its activities to create shared value by helping country’s growing beer market. Risk management structure invigorate local areas into active grape-growing industries. The Coca-Cola Bottling Company of Northern New The Kirin Holdings Group Risk and Compliance Committee Each Kirin Group company also has a committee dedi- Myanmar Brewery England (CCNNE) oversees the risk management activities of the Kirin Group. cated to risk management. The risk management committees Myanmar Brewery expects the Myanmar beer market to CCNNE is reorganizing its production bases as it continues to Kirin Holdings internal directors and executive officers serve of Kirin Holdings and the Kirin Group companies meet quar- continue expanding at an annual percentage rate in the high radically overall its operating structure to fortify its earning on the committee, and an executive officer serves as the com- terly to conduct risk monitoring. single digits. As the country’s economy grows, the company power. mittee chair.
Risk management structure Risk management PDCA cycle
FY2019 Full-year Forecast — Normalized Operating Profit u Risk and m iance mmittee i in dings hai man Board of Directors (Kirin Holdings Executive Officer) Group Risk and Compliance Committee 2019 Forecast 2018 Actual YoY (bn yen) %
Consolidated Normalized OP 190.0 199.3 -9.3 -4.7% ACTION PLAN Risk management Quarterly risk A m nit ing Japan Beer and Spirits 84.7 82.7 2.0 2.4% CHECK DO Kirin Brewery 83.5 80.9 2.6 3.2% nte na i ect s Executive Officers Group operating ACTION PLAN Risk management Others 1.2 1.8 -0.6 -31.9% companies A CHECK DO Japan Non-alcoholic Beverages 24.0 23.3 0.7 2.9% Kirin Beverage 24.0 23.3 0.7 2.9% * Domestic and overseas consolidated subsidiaries Oceania Integrated Beverages 48.2 51.8 -3.6 -7.0% Lion 48.2 51.8 -3.6 -7.0% Beer, Spirits, and Wine 52.1 53.3 -1.2 -2.3% Process for designation of serious risk Dairy and Drinks 5.7 5.1 0.5 10.0% Corporate -9.6 -6.7 -3.0 - Kirin Group companies, in conformance with the group risk veys and investigates all risks. The committee defines serious management policy, identify and examine the quantitative risks to the Group as risks considered to have a potentially Pharmaceuticals and Bio-chemicals 62.0 58.8 3.2 5.5% and qualitative risk associated with their business activities. strong impact, a high likelihood of occurring, or widespread Pharmaceuticals (Kyowa Hakko Kirin) 54.0 50.4 3.6 7.1% The Group Risk and Compliance Committee Administrative ramifications. Bio-chemicals (Kyowa Hakko Bio) 8.0 8.1 -0.1 -1.6% Office (Kirin Holdings Corporate Strategy Department) sur- Others - 0.3 -0.3 - Other 18.4 19.0 -0.6 -3.3% Designation of serious risk
Mercian 2.5 2.6 -0.0 -1.9% Risk management policy Myanmar Brewery 9.5 10.1 -0.6 -5.9% CCNNE 3.8 2.8 1.0 33.5% Identify and examine specific risks for each Group company (all companies) Identify and examine risks for the overall Group (Kirin Holdings) Others 2.5 3.5 -0.9 -27.0% Corporate expenses/inter-segment eliminations -47.3 -36.3 -11.0 - Kirin Holdings investigates the risks identified by each Group company and examines the potential overall quantitative and qualitative impact of serious risks from the Group perspective
he u Risk and m iance mmittee designates se i us isk
49 KIRIN CSV REPORT 2019 KIRIN CSV REPORT 2019 50 Advances in Each Businesses and Risk Management Risk Management
Business risk impact and countermeasures Climate-related risks and scenario analysis based on TCFD initiative The Kirin Group was the first company in the Japanese food sourcing materials for our paper container and packaging for- The Kirin Group quantitatively and qualitatively evaluates the each group company, establishes clear roles for each com- & beverage industry to endorse the recommendations of ests, preserving water resources and reducing greenhouse potential impact and probability of occurrence of each risk. pany and department, and prescribes risk reduction mea- the Financial Stability Board’s Task Force on Climate-related gas emissions, are strengthening our resilience to the impacts Risks determined to have a strong potential impact are des- sures. The Group regularly monitors the risk conditions and Financial Disclosures (TCFD). The Group conducted a trial of climate change. ignated as serious risks. The Group communicates the serious the progress with countermeasures and when necessary scenario analysis following the TCFD recommendations from We are applying the information we learn from the trial risks to the executive managements of Kirin Holdings and reviews the status of the serious risks. January to May 2018 to assess the impact of climate change analysis to strengthen our business planning. We are presently on its business. in the very early stage of comprehending the full environment Serious risks in each business domain The analysis confirmed that by the end of this century impact of climate change on our financial operations and are Serious risk Potential impact on business Countermeasures climate change would likely have a major impact on the agri- deepening our examinations of transition risk scenarios.
Changes in consumer preferences, such as The Group’s competitive Strengthen customer-centric cultural products that are important raw materials for the EB Further details related to our climate-related scenario analysis are available in from price polarization and diversification of advantage weakens due to sales marketing capability to maintain and the Kirin Group Environmental Report online at: Group. We also reconfirmed that existing strategies, such as https://www.kirinholdings.co.jp/english/csv/report/env/pdf/ preference, alter the market environment of core products falling short cultivate strong brand power supporting tea estates to obtain sustainability certifications, environmental2018_2_06e.pdf 1. Food & Beverages domain and competition and impact sales of of targets core products (Alcoholic & non-alcoholic beverages The impact of climate change, torrential Supply chain disruptions halt or Expand and strengthen delivery businesses) rain, drought, unusually cold summers, delay product deliveries capabilities; prepare and implement Action to plastic waste issue weather abnormalities or large-scale natural a business continuity plan; establish The Kirin Group established the Kirin Group Plastic Policy Promoting resource circulation of PET bottles disasters such as an earthquake crisis task forces in February 2019 to specifically address the issue of plastic The Kirin Group is actively promoting resource circulation of Inability to adequately accelerate business Delayed business development Develop business in Europe, the waste, one of the most pressing environment-related social its PET bottles and aims to increase its recycled plastic ratio in overseas along with developing and United States, and Asia; establish a 2. Pharmaceuticals domain launching global strategic products firm foundation for sustained issues. The Kirin Group understands the fundamental chal- Japan to 50% by 2027 while also redesigning its PET bottles, (Pharmaceuticals & business growth lenges concerning the use of plastic, and we are accelerating such as trimming the weight of its bottles, to improve the Bio-chemicals businesses) efforts regarding the use of plastic containers, packaging, and sustainability of PET raw materials. We are also seeking alter- Technical or legal problems at Product supply disruption, delay, Formulate a global supply chain manufacturing and logistics facilities or shortages management structure other items by group companies to promote the sustainable native sustainable materials to reduce the use of single-use use of plastic and resource circulation. plastic by our group companies. Slow progress formulating a competitive Stalled establishment or Use Kirin Group expertise and business model and suitable organizational fostering of new businesses experience to develop businesses The Kirin Group Plastic Policy is online at: 3. Businesses bridging EB and governance structures Incorporate insight received from https://www.kirinholdings.co.jp/english/news/2019/0207_01.html Pharmaceuticals and customers into our operations and Further details on the Kirin Group activities to reduce plastic waste are available Food & Beverages improve our organizational ability to online at: integrate customer insight https://www.kirinholdings.co.jp/english/csv/report/env/pdf/ environmental2018_2_04e.pdf
Opportunity, risk, and our plan for businesses bridging Pharmaceuticals and Food & Beverages Human rights impact assessment for our Myanmar operations With the amazing advances in medical technology helping the successful development of products like the iMuse with The Kirin Group inaugurated its Human Rights Policy in negative impacts on human people enjoy longer lives, attention in Japan and overseas is Lactococcus lactis strain plasma. We are developing innova- February 2018 and has since been actively working to address rights, areas to improve, and starting to focus on health management and disease preven- tive products and formulating a business model for long-term human rights issues related to its group operations. The first areas to monitor, and we tion, or what is being called the “pre-disease” area between business growth. step under the policy was to work with outside experts to further set specific action being healthy and being treated for illness. We believe this We also know that it is essential to use new information determine the scope of a human rights impact assessment, targets to achieve by 2021. is an opportunity for us to carry out the Kirin Group mission and communications technology (ICT) and to ally with special- and in May 2018 we conducted a human rights assessment of We are putting particular to contribute to resolving social issues and are applying our ists and business operators outside the Group to effectively our operations in Myanmar in reference to local laws and the effort into strengthening expertise and strengths in the food and health fields to create develop markets, cultivate sales, and advance R&D for the conventions of the International Labor Organization. After con- rice supply chain manage- Meeting with rice farmers “businesses bridging Pharmaceuticals and Food & Beverages,” new businesses. To this end, the Kirin Group is applying insight ducting a further assessment in June of that year, we convened ment and transparency. which will be a pillar of the Group’s future growth. derived from a deeper understanding of customers to create a meeting of outside experts, advisors, and local stakeholders The Kirin Group will continue to follow international At the same time, we are fully aware that creating new ICT platforms and solutions and is enhancing its organizational who determined that our operations in Myanmar presented a standards and employ best practices and will regularly review businesses is a huge undertaking involving not just formulat- capabilities by infusing our human resources with people relatively high level of risk of negative human rights impacts and revise its business practices and action targets as we step ing a winning business model but also establishing effective offering diverse perspectives and expertise. The Group is also in the areas of occupational safety and health, workers’ rights, up activities to ensure we conduct our operations with full organizational and governance systems, conducting new actively promoting open innovation, establishing legal, internal forced labor, child labor, supply chain working conditions, and respect for human rights.
research, and developing new technologies. Without being and external regulation, and social norm compliance and qual- impact on local communities. EB Further details on the Kirin Group human rights impact assessment for our Myanmar operations are online at: fully developed in each of these areas, business launches ity assurance systems, and utilizing productivity assessments to We then applied what we learned to categorize areas https://www.kirinholdings.co.jp/english/csv/human_rights/pdf/myanmar_en.pdf could be delayed and business plans could be put on hold. To set investment parameters and budgets. In addition, the Group where our business practices and policies created high risk of ensure success, the Kirin Group is organizing a group-wide is carrying out extensive due diligence prior to business and effort to utilize our expertise and experience gained from capital alliances and monitoring subsequent business activities.
51 KIRIN CSV REPORT 2019 KIRIN CSV REPORT 2019 52 Corporate Governance Discussion with Management
Committee, along with your deep understanding of business in both Our governance structure countries, I believe you are ideally suited to chair the Lion board. And you deserve a lot of credit for the successful integration between our adopts a global approach, companies, by acting as a bridge between Kirin and Lion. Sir Rod Thank you. The structure Kirin has put in place certainly helps the resulting in long-term bridge work effectively, while the people inside both our companies deserve praise for collaborating closely together in order to make Kirin successful. success and strengthened Isozaki CEO On top of your work with Lion, you also serve as a non- executive director on the boards of global companies such as 21st relationships Century Fox, Swire Group, and others, as well as being a member of the APEC Business Advisory Council. Paula Dwyer (Lion board member) also concurrently serves as the Chairperson of Tabcorp, a non-executive director of ANZ Bank, and is a member of the Australian Takeovers Panel. With Implementing Lion’s governance structure within Kirin Holdings such high-profile commitments, may I ask why you have continued to stay Isozaki CEO When Kirin acquired 100% of Lion in 2009, we made a engaged as non-executive directors of the privately-owned Lion for so long? strategic decision to retain the Lion board of directors in order to benefit Sir Rod The answer is because you value what we have to say. Plus, we from the highest levels of governance and discipline of an Australian-listed share your commitment to the success of not just Lion, but Kirin as a global company. At the time, it was quite unique for a privately-owned company business. We’re proud to represent Lion, but you have always made us feel to have a full board, including independent directors, but I believe our part of the Kirin family. decision has proven to be the right one. Sir Rod Yes, despite the fact that Lion was no longer publicly listed, Kirin took a conscious decision in 2009 to ensure it had sensible and appropriate The effectiveness of the International Advisory Board governance, which is a combination of independent directors and Kirin Isozaki CEO As a founding member of the International Advisory Board appointees. It also gives our own staff confidence using a governance (IAB)*, could you share your views on its effectiveness? structure they understand and have used in Australia. What’s more, since Sir Rod Since Kirin set up the IAB in 2012, the agenda of our biannual Kirin became the majority owner, Lion’s subsequent performance has meetings has changed over time, due to the company’s continual evolution shown that the decision the Kirin board took has been justified. and expansion overseas. We have effectively met this change because our Isozaki CEO What have you focused on most during your tenure as senior executives have operated in many different jurisdictions, so you chairman of Lion? can be sure to receive sound and reliable advice concerning new ways to Sir Rod I’ve worked very hard on ensuring a good working relationship enhance Kirin’s international reputation and prospects. between the Lion CEO (Stuart Irvine), CFO (Stephanie Nixon), and the Isozaki CEO That’s an accurate assessment because at our IAB meetings leadership team, as well as the team here in Japan. And the way in which we have discussed many important global agendas such as our Southeast you have set up the structure for Lion means close working relationships Asia strategy, anti-bribery and compliance, the human rights measures, and can be easily forged between executives at our respective companies. the opportunity of growing in the global craft beer market. I find that the discussions and recommendations from the IAB are always very productive. Sir Rod Eddington Sir Rod Yes, I feel this is a direct consequence of Kirin’s governance Yoshinori Isozaki Member of the International Advisory Board Building a strong bridge between Kirin and Lion structure being organized in a way that facilitates constructive dialogue and President & CEO Sir Rod Eddington was appointed as Chairman Since joining Kirin Beer in 1977, Mr. Isozaki to the board of Lion in March 2012, having been Isozaki CEO A successful global business requires both localized decision- prioritizes long-term success. And thanks to these invaluable meetings, Kirin has held position as director of San Miguel appointed to the board in March 2011. One of making and an alignment with group strategy. For example, the local will continue to make sound decisions now and in the future. Corporation and as senior executive officer Australia’s most experienced and accomplished and general manager of corporate planning business leaders, Sir Rod had a long career in board, along with the local CEO, can act as a crucial bridge between the Isozaki CEO The IAB didn’t used to require the presence of the CEO, but at Kirin Holdings. Mr. Isozaki was appointed the aviation industry and is a former CEO of subsidiary and headquarters. we have changed our policy to meet in person. chief executive officer and president of Kirin Cathay Pacific Airways, Executive Chairman of Holdings in 2015. Ansett and CEO of British Airways. In 2005, Sir Sir Rod That’s right. It’s really important our senior executives come to Sir Rod For me, the IAB without the CEO present is not nearly as valuable. Rod was awarded a Knighthood by the British Government for services to civil aviation. Along Japan to talk with you and your team. As you yourself do when you attend It’s really important that you’re there. There’s also another benefit in with a number of non-executive directorships, our leadership conference every year and speak with our senior team. that it brings our senior executives to Japan and it provides us with the Sir Rod also serves as President of Australia Japan Business Cooperation Committee. Isozaki CEO Yes, I believe in the power of face-to-face communication. opportunity for constructive dialogue – both formal and informal. As the long-standing Chair of the Australia Japan Business Cooperation
53 KIRIN CSV REPORT 2019 KIRIN CSV REPORT 2019 54 Corporate Governance Discussion with Management
How the IAB influences decision-making with global viewpoints technology and consumer behavior. We are well aware that some of these Isozaki CEO The purpose of the IAB is to infuse global diversity into changes can be painful because they disrupt our business model. But if we our decision-making. Consequently, importing western perspectives to don’t seize the opportunity of these changes, our business won’t survive in shape our decisions has resulted in us becoming more reactive and able to the long-term. proactively adjust more easily to our changing environment. Isozaki CEO I agree with you. The key concept for our long-term management Sir Rod Absolutely. Kirin’s structure ensures you and senior executives vision is CSV. I keep stressing the value of contributing to society and have access to informed diverse thinking. And the IAB, along with the Lion solving social issues. With this in mind, we have even changed our board, provides you with a framework to take advantage of this. corporate philosophy to reflect this, which is, “Bringing joy to society by Isozaki CEO That’s a valid point. And on a number of occasions, I am crafting food and healthcare products inspired by the blessing of nature asked by many investors about the appropriate governance structure for and the insights of our customers.” Do you have some thoughts on CSV, Kirin as a Japanese publically listed company, and whether that is likely to especially with regards to combatting social issues? change over time. The question ultimately leads to the issue of the board’s Sir Rod The way to be profitable and successful in the long-term is to function and composition, including whether non-Japanese non-executive sensibly address societal obligations and community expectations. If you directors add value, and how they can best contribute. I am also asked why don’t, consumers won’t buy your products, employees won’t want to work I don’t have a foreign member among the Kirin board. for you, and the community won’t welcome you. You have demonstrated Sir Rod By setting up an international advisory board, Kirin is well placed your awareness of these potential risks by clearly outlining your values in to answer many of these questions. Furthermore, you use the IAB as if it your corporate philosophy. We will now make sure our business decisions *About the International Advisory Board were part of the Kirin Holdings board with its focus on critical strategic reflect those values. After all, people want to feel confident that what we The International Advisory Board was set up as a consultative body to the CEO of Kirin issues, which makes you unique among other Japanese companies. do is consistent with what we say. Holdings. It offers advice and proposals Isozaki CEO Yes, a lot of our IAB discussions are really reflective of our Isozaki CEO Thank you very much for your valuable insight today, Sir Rod. regarding the Group’s global growth global strategy. For example, we made important decisions regarding our strategies, which include mergers and Southeast Asia strategy such as investing in the Myanmar opportunity, acquisitions, as well as risk management and corporate governance. The board is which involved entering into a compelling and promising new market. comprised of four members from countries And we also assessed the opportunities and risks investing in SABECO in outside Japan who have diverse backgrounds Vietnam, even though that didn’t go as well as we planned. Needless to and abundant international experience, along with three executive officers from say, a lot of valued contributions come from members of the IAB. Kirin Holdings. Kirin Holdings appoints the Sir Rod The important thing about the IAB is that it encourages open and chairperson of the board from among the free conversations and helps to nurture exciting new ideas. As a result, the international members. The board meets Kirin Group is perfectly equipped to consistently deliver the right results. at least twice annually, submits an official report to the CEO on the issues discussed, and, if requested by the CEO, reports to Kirin Holding’s Board of Directors. Kirin Group Vision 2027 and CSV International Advisory Board Isozaki CEO In 2019, the Kirin Group announced our new long-term management vision — Kirin Group Vision 2027. What do you think are the Chairperson Gavin Walker opportunities and challenges of this strategy? Sir Rod One of the great things about the 2027 vision is that it seeks to encourage everyone at Kirin, including those who work at Lion, to think holistically about our goals and ambitions for the future. And because the vision recognizes Kirin as a truly global business, we need to find ways to ensure it remains a success worldwide, as well as delivering the best long- Executive officers of International experts from Kirin Holdings outside the Kirin Group term outcomes for the shareholders. We also mustn’t lose sight of other responsibilities such as producing great products for customers in order to Keisuke Nishimura, Sir Rod Eddington, maintain Kirin’s leading status and longevity in the marketplace. In terms of Ryosuke Mizouchi, Paula Dwyer, Shinro Fujita Steve Burrows challenges, businesses need to be agile when dealing with the changes in
55 KIRIN CSV REPORT 2019 KIRIN CSV REPORT 2019 56 Corporate Governance Corporate Governance Evolution of the Corporate Governance System Corporate Governance Systems
General Meeting of Shareholders 200 2007 20 2 20 20 20 20 20 -2027 on ter ana e ent vision irin Group ision irin Group e irin Group irin Group 1 I Audit Supervisory Board of irectors P ision ision ision Board 2 Business plans Chairman O Clarification of Kirin V Auditing Auditing O CSV Independent accounting auditor 2 K P Inside Outside Inside Outside V 201 auditors 2 auditors directors 5 directors R CSV I omination and Remuneration 2007 200 20 0 20 2 20 20 20 20 20 -202 Advisory Committee Auditing B Auditing Chairman P T R S K R Inside Outside directors 2 directors
2007 20 20 irin oldin s President
Or anization I I I I K K K K E K C K C Group Executive Committee I Internal Group CS Committee 20 auditing Executive officers Group Risk and Compliance Committee I Internal Audit epartment 2 K K C Group Information isclosure Committee epartments
Internal auditing
20 0-20 2 20 Group o panies Operating companies unctional companies Introduction of new executive officer system at K K C Appointment of executive officers in charge of Corporate overnan e evolution esired un tions o the Board o ire tors o the irin Group Advisory body to the Board o ire tors K 1 E omination and Remuneration Advisory Committee I 201 K 20 unified the Appointment Advisory Committee and Compensation Advisory 200 C N R C E C N R C C C E R C R R Important decision-making S C C and executive officers of major Group companies. The committee is also 20 K CEO 200 E E C Specification of Oversight E I C 20 E E CSR C C and transparency. The term of office is one year. CSV C 20 7 P O S C K N Revision of officer remuneration system 20 2 I E utual ooperation bet een Audit Supervisory Board e bers I I T I 2 independent a ountin auditor and internal ontrol divisions S Advisory bodies to the president Group Executive Committee T E C Chan e in nu ber o 2002 Outside 200 20 2 20 CEO executive officers directors 2 S investments that will have a significant impact on the Kirin Group. S Outside 2007 Outside auditors of Group companies to enhance the effectiveness of audits. Group Information isclosure Committee directors directors 2 Termination of the retirement benefit and T I T I S 25 10 9 N R Group CS Committee R 1 C T I Inside directors 2 Inside Inside directors directors 5 S Group Risk and Compliance Committee R 0 R staff as necessary to conduct an effective audit. N I 1
57 KIRIN CSV REPORT 2019 KIRIN CSV REPORT 2019 58 Corporate Governance Directors, Audit & Supervisory Board Members, and Executive Officers
(As of March 28, 2019)
Directors Audit & Supervisory Board members Yoshinori Isozaki Keisuke Nishimura President & CEO Representative Director of the Board, Senior Executive Vice 1977 Joined the Company President 2015 President & CEO of the Company (current position) Investment Strategy, Overseas Business, Global Craft Beer Akihiro Ito Keiji Kuwata Chieko Matsuda Nobuo Nakata Yoshiko Ando 1980 Joined the Company Standing Audit & Standing Audit & Outside Audit & Outside Audit & Outside Audit & 2017 Representative Director of the Supervisory Board Member Supervisory Board Member Supervisory Board Member*3 Supervisory Board Member*3 Supervisory Board Member*3 Board, Senior Executive Vice President of the Company 1983 Joined the Company 1985 Joined the Company 1987 Joined The Long-Term 1985 Admitted to the Japanese 1982 Joined the Japan Ministry (current position) 2015 Director of the Board, 2019 Standing Audit & Credit Bank of Japan, bar and joined Ishiguro of Labor Senior Executive Officer Supervisory Board Limited Law Office as an associate 2003 Lieutenant Governor of a or Con urrent ositions of the Company Member of the Company 2006 Representative Director 1987 Associate of Masuda & Shiga Prefecture Director of Lion Pty Ltd 2018 Standing Audit & (current position) of Matrix, Inc. Ejiri (currently Nishimura 2006 Director of the Equal Director & Vice Chairman of Supervisory Board Auditor of Kyowa Hakko 2011 Professor of School of & Asahi) Employment Policy Div. Myanmar Brewery Limited Member of the Company Kirin Co., Ltd. (current Business Administration, 1991 Admitted to the New of Equal Employment, Director of San Miguel Brewery Inc. (current position) position) Department of Urban York Bar Children and Families Director of China Resources 2019 Auditor of Kyowa Hakko Liberal Arts at Tokyo 1992 Partner of Masuda & Ejiri Bureau of the Ministry of Kirin Beverages (Greater China) Bio Co., Ltd. (current Metropolitan University (currently Nishimura & Health, Labour and Company, Limited position, appointed April (current position), Asahi) Welfare (MHLW) 25, 2019) Professor of Department 2007 Partner of Allen & Overy 2013 Director-General of the of Business 2012 Representative Partner of Industrial Accident Administration, Social Hibiya-Nakata (current Compensation Dept. of Sciences at Tokyo position) Labour Standards Bureau, Metropolitan University 2018 Outside Audit & MHLW (Graduate School) Supervisory Board 2014 Director-General of the (current position) Member of the Company Equal Employment, 2016 Outside Audit & (current position) Children and Families Supervisory Board Bureau, MHLW Member of the Company 2015 Director-General for Labour (current position) Policy Planning, MHLW 2016 Director-General for Statistics and Information Policy, MHLW Toshiya Miyoshi Noriya Yokota Noriaki Kobayashi 2017 Director-General for Human Resources Director of the Board, Director of the Board, Director of the Board, Development, MHLW Senior Executive Officer Senior Executive Officer Senior Executive Officer 2019 Outside Audit & Supervisory Board HR and General Affairs Chief Financial Officer, IR, IT, R&D, uality Assurance, Member of the Company Business Transformation Health Strategy (current position)
1982 Joined the Company 1984 Joined the Company 1983 Joined the Company 2015 Director of the Board, 2018 Director of the Board, Senior 2019 Director of the Board, Senior Executive officers Senior Executive Officer of the Executive Officer of the Executive Officer of the Company (current position) Company (current position) Company (current position) a or Con urrent ositions a or Con urrent ositions a or Con urrent ositions Director of Kirin Brewery Company, Limited Director of Kyowa Hakko Kirin Co., Ltd. Director of Kyowa Hakko Bio Co., Ltd. Director of San Miguel Brewery Inc. Director of Kirin Business System (appointed April 25, 2019) Company, Limited
Hiroshi Ogawa Ryosuke Mizouchi Toru Yoshimura Junko Tsuboi Masao Maehara Senior Executive Vice Senior Executive Officer Senior Executive Officer Senior Executive Officer Senior Executive Officer President
Public Relations, CSV, Digital Strategy, General Manager of the Marketing, Supply Chain Management Risk Management, Legal North America Beer Business Corporate Planning Department Corporate Brand Strategy, (Production, Logistics, Director of Kirin Brewery Director of Lion Pty Ltd Director of Kirin Beverage Co., Ltd. General Manager of Strategic and Procurement) Company, Limited Director of The Coca-Cola Branding Department Director of Kirin Beverage Co., Ltd. Bottling Company of Northern New England, Inc Director of Mercian Corporation Information on matters related to the nomination of directors and Audit & Supervisory Board members can be found on the Company’s Shoshi Arakawa Katsunori Nagayasu Masakatsu Mori Hiroyuki Yanagi corporate website. Outside Director of the Board*2 Outside Director of the Board*1 Outside Director of the Board*2 Outside Director of the Board*2 Chairman of the Nomination and Member of the Nomination and Chairman of the Board Member of the Nomination and Management (profile and reasons for nomination) Remuneration Advisory Committee Remuneration Advisory Committee Remuneration Advisory Committee https www.kirinholdings.co.jp english company board 1968 Joined Bridgestone Corporation 1970 Joined The Mitsubishi Bank, Limited 1969 Joined Arthur Andersen, LLP 1978 Joined Yamaha Motor Co., Ltd. Criteria regarding the Independence of outside officers 2006 CEO and President, Representative 2008 Representative Director, 1995 Japan Representative of Andersen 2007 Executive Officer of Yamaha https www.kirinholdings.co.jp english ir governance pdf Board Member of Bridgestone President of The Bank of Consulting (currently Accenture Motor Co., Ltd. Corporation Tokyo-Mitsubishi UFJ, Ltd. Japan Ltd.) 2009 Senior Executive Officer of e_criteria_outsideofficer.pdf 2012 Chairman of the Board of 2012 Representative Director, 2015 Outside Audit & Supervisory Board Yamaha Motor Co., Ltd. Bridgestone Corporation Chairman of The Bank of Member of the Company 2010 President, CEO, and *1 Outside Director as described in Article 2–15 of the Companies Act of Japan 2013 Advisor of Bridgestone Tokyo-Mitsubishi UFJ, Ltd. 2018 Senior Advisor of International Representative Director of *2 Fulfills the requirements for designation as an Independent Director Corporation (current position) 2016 Senior Advisor of The Bank of University of Japan (current Yamaha Motor Co., Ltd. Takayuki Fuse Hideki Horiguchi stipulated by the Tokyo Stock Exchange and complies with the Company’s 2015 Outside Director of the Company Tokyo-Mitsubishi UFJ, Ltd. position) 2018 Chairman and Representative Senior Executive Officer Senior Executive Officer criteria regarding the independence of outside officers (current position) Outside Director of the Company 2019 Outside Director of the Company Director of Yamaha Motor Co., *3 Outside company auditor as described in Article 2–16 of the Companies (current position) (current position) Ltd. (current position) Act of Japan. Also fulfills the requirements for designation as an Independent President and CEO, President and CEO, auditor stipulated by the Tokyo Stock Exchange and complies with the 2018 Senior Adviser of MUFG Bank, Ltd. 2019 Outside Director of the Company Kirin Brewery Company, Limited Kirin Beverage Co., Ltd. (current position) (current position) Company’s criteria regarding the independence of outside officers
59 KIRIN CSV REPORT 2019 KIRIN CSV REPORT 2019 60 Corporate Governance Interview with the Outside Auditor
understanding of the business and its operations. Creating theme of our new Medium-Term Business Plan is to earn a con- such learning opportunities at Kirin Holdings has enhanced glomerate premium. This calls for Kirin Holdings to optimize effective governance. its business portfolio and leverage the Group’s management Maximizing group Diversity of board members is also essential to assure resources, such as capital, human resources, and customer effective governance. Diversity is often discussed as gender base. Here, it is important to maximize intra-business syner- synergy to gain a diversity, that is, appointment of female executives. This sim- gies in unique ways, as only a diversified business can. plistic formula is not enough. The important point here is to Worldwide we are seeing that skillful business portfo- conglomerate premium expand the definition of diversity to include each individual’s lio management is crucial to a diversified company’s perfor- knowledge, expertise, experience, and values. mance and its attractiveness to investors. Since Kirin Holdings The diversity of Kirin Holdings’ outside directors and out- itself is an investor in its several business domains, the finan- side auditors shows breadth and balance spanning the legal cial markets demand a finely honed ability to gauge risk and sector, government sector, corporate management and other return. Again, investors also expect Kirin as a whole to strive areas. Looking ahead to overseas expansion, diversity of the for intra-business synergies. Above all, the Kirin Group must Chieko Matsuda board could, possibly, be further reframed to encompass firmly establish its identity as a model of CSV management. Outside Audit & Supervisory Board Member nationality, ethnicity, and more. I think we will win the support of stakeholders in gen-
Ms. Matsuda was appointed as a member of the Outside Audit & eral and investors in particular by actively engaging them in Supervisory Board of Kirin Holdings in 2016. She had joined The Skillful investment for maximum synergies positive dialogue about matters of concern to them. As an Long-Term Credit Bank of Japan, Ltd., in 1987, after which she worked for Moody’s Japan, Ltd. Corporation, Corporate Directions, outside auditor, I am committed to carrying out my duties in Inc., and Booz & Co., Inc. Ms. Matsuda is also a professor on the In January 2019 the Kirin Group began executing Kirin Group a way that fulfills society’s expectations for the Kirin Group. faculty of the Economics and Business Administration and the Graduate School of Management of Tokyo Metropolitan University. Vision 2027 and the 2019-2021 Medium-Term Business Plan (2019 MTBP). In the planning process the board held spirited discussions focusing on CSV management as the core of our long-term-management vision and on growth scenarios in regard to the medium-term plan. More effective governance requires a more supervisory functions a consistent level of effectiveness. It is common for firms to bring in their outside directors diverse board Auditing offers many opportunities to visit a company and only after a plan has been more or less finalized internally. observe operations. By gathering information on the spot, an Kirin Holdings distinguishes itself by involving outside direc- Many companies have been focusing on corporate gover- outside auditor learns first-hand about a firm’s inner workings. tors in many discussions from the start. Giving outside direc- nance in recent years. Superficial changes cannot, however, At Kirin Holdings, the Audit & Supervisory Board arranges tors many chances to share their thoughts with management ignite the frank and open boardroom discourse that would inspections of manufacturing sites and other facilities, invit- is also worthy in terms of the governance goals of enhancing enhance oversight. At Kirin Holdings, our Board of Directors ing the outside directors as well, so they may gain a valuable transparency and fairness. and Audit & Supervisory Board meetings benefited from addition to their formal duties. A major pillar of our 2019 MTBP is launching and growing engaged outside members who contributed their honest Outside auditors and directors need to take an indepen- businesses bridging pharmaceuticals and food & beverages. opinions based on personal experience and specialized knowl- dent, third-party view of management. On-site inspections Progress in this direction will mean further diversification for edge. This kind of discussion gives our decision-making and and conversations with employees deepen our objective the Group. From an investor’s viewpoint, I think the unstated
61 KIRIN CSV REPORT 2019 KIRIN CSV REPORT 2019 62 Corporate Governance Enhancing Management Effectiveness
Expertise and experience of directors, Audit & Supervisory Board Evaluations of the Board of Directors’ effectiveness
members, and executive officers Kirin Holdings routinely evaluates the operation and discussion content of the Board of Directors and strives to ensure the proper functioning of important decision-making and oversight.
Expertise and Experience Corporate Human Academic management, Overseas Technology, Marketing, Finance, Government resources Legal teaching and Corporate business R&D sales accounting agency management research strategy Fiscal 2018 initiatives based on the 2017 effectiveness evaluation President & CEO Yoshinori Isozaki Representative Director of the Board, Keisuke Nishimura 1. Discussion from the standpoint of non-financial topics including the environment, society, and governance (ESG) Senior Executive Vice President Director of the Board, 2. Discussion of enterprise risk management (ERM) associated with globalization and increasing risk complexity Toshiya Miyoshi Senior Executive Officer Director of the Board, Noriya Yokota Senior Executive Officer & CFO Director of the Board, Noriaki Kobayashi Senior Executive Officer Director (outside)* Shoshi Arakawa Initiatives to enhance Board of Director effectiveness in fiscal 2018 Director (outside) Katsunori Nagayasu Director (outside)* Masakatsu Mori 1. Broader discussion of non-financial information Director (outside)* Hiroyuki Yanagi The Board of Directors formulated the Kirin Group Vision 2027 plan through a thorough discussion of growth scenarios Standing Audit & Akihiro Ito for the Group’s overall business portfolio from the perspective of resolving key CSV issues. The deep discussion of ESG Supervisory Board Member Standing Audit & topics led to the Board setting the fulfilment of its CSV commitment as a key performance indicator in 2019 MTBP. Keiji Kuwata Supervisory Board Member Outside Audit & 2. Full discussion of risk management Chieko Matsuda Supervisory Board Member* Potential global risks were reported in a timely manner and scenarios of risks escalating to a major crisis were considered. Outside Audit & Nobuo Nakata Risk strategy and business execution were also discussed as they pertained to the 2019 MTBP. Supervisory Board Member* Outside Audit & Yoshiko Ando Supervisory Board Member* Senior Executive Vice President Hiroshi Ogawa Senior Executive Officer Ryosuke Mizouchi Fiscal 2018 effectiveness evaluation and result Senior Executive Officer Toru Yoshimura Senior Executive Officer Junko Tsuboi The Board of Directors discussed the effectiveness evaluations and the results of surveys conducted on “evaluation Senior Executive Officer Masao Maehara criteria” based on assessments by third-party advisors and the status of measures and improvements. Senior Executive Officer Takayuki Fuse Senior Executive Officer Hideki Horiguchi 1. Supervision of development, execution, and 5. Supervision of executive remuneration and * Outside Director as described in Article 2-15 and outside corporate auditor as specified in Article 2–16 of the Companies Act of Japan. The appointment fulfills the requirements for monitoring of strategies plans such as succession planning for designation as an outside auditor stipulated by the Tokyo Stock Exchange and complies with the Company criteria for the independence of outside officers. 2. Risk management and supervision of crisis control next-generation leaders Evaluation 6. Supervision of overall disclosure to stakeholders Criteria 3. Thorough understanding and implementation of healthy corporate ethics and supervision thereof 7. Structure and management of the Board Candidate plan for President & CEO (succession planning) 4. Supervision of decision-making such as business of Directors acquisition withdrawal 8. Items to improve to increase the effectiveness The Kirin Holdings Nomination and Remuneration Advisory Board of Directors. Committee deliberated on the formulation of policy for the Based on this report, we have been selecting, evaluating The Board of Directors was found to be operating properly and generally functioning effectively. President & CEO succession planning in 2016 and reported and training candidates since 2017 under the supervision of We will strive to maintain and improve the effectiveness of the Board of Directors through constructive discussion as outlined below. the requirements (an image befitting the President & CEO of the Board of Directors in order to determine the future suc- Kirin Holdings) and the decision process for candidates to the cessor in a highly objective and transparent process.
Succession planning process
Requirement as Enhancement Policy in fiscal 2019 a person with Identify candidates Agree on skill Development Select successor an image befitting and issues development plan c r ana e ent re ate to r ro o a at on an ncrea n r co p e t the President & CEO 2. Discuss topics from the standpoint of non-financial topics, including CSV commitment, corporate brand value, an e p o ee en a e ent o n proce 3. Discuss “specific business strategies” needed to implement the overall strategy, including for businesses bridging the Pharmaceuticals and Food & Beverages operations, the development of craft beers, and “function-specific Board of Directors strategies,” such as for the brands, research and development, digitalization, and human resources and omination and emuneration Supervise succession process, decide final candidate or an at on Advisory ommittee
63 KIRIN CSV REPORT 2019 KIRIN CSV REPORT 2019 64 Corporate Governance Enhancing Management Effectiveness
Group company governance and performance assessment Overview of remuneration system for executive officers Fixed remuneration Performance-linked remuneration seats a director on each company’s Board of Directors to help Operational execution and monitoring system for Approximately 50 Approximately 50 Group companies maintain a high level of corporate governance. e tr cte toc a c re nerat on ear on Kirin Holdings formulates and promotes Group strategy, co pen at on monitors all Group businesses, and creates synergies across Group company performance evaluations the Group. The indicators used to evaluate the performances of Group com- Each Kirin Group company is located close to its customers panies are the quantitative targets of return on assets (ROA), e tr cte toc co pen at on a c re nerat on ear on and stakeholders and administers its operations autonomously which is directly linked to return on invested capital (ROIC), and per or ance a e Medium- to long-term and speedily with full authority to make business execution earnings before income tax (EBIT), which directly affect guid- Position Fixed remuneration Short-term incentive remuneration incentive remuneration decisions tailored to their specific strategies. Kirin Holdings ance for the growth rate of normalized operating profit. • Directors (excluding outside directors) ligible • Outside directors Directors (excluding outside directors) Directors (excluding outside directors) recipients Earnings before interest and after tax EBIT • Audit & Supervisory ROIC = ROA = Board members Average interest bearing debt between the beginning and the end of the Total assets Stock (monetary compensation receivables Allocation policy Cash Cash FY + average total equity between the beginning and the end of the FY for the allocation of restricted stock) • Consolidated normalized operating profit valuation • ROIC • Individual performance evaluation indicators • Normalized EPS (excluding President & CEO)
Remuneration system for executive officers • Shares with transfer restrictions will be allocated each fiscal year, in principle Kirin Holdings revised the remuneration system for execu- • Specific decisions concerning remuneration are based on the • The rate at which shares with restrictions Remuneration is 100 when tive officers in March 2017 with the aim of providing stron- report of the Nomination and Remuneration Advisory Committee. Allocation Establish remuneration that are to be lifted is set at a variable targets are achieved and varies policy for each role and duty rate between 33 and 100 according to ger incentive for officers to achieve the business plan and The Board of Directors decides director remuneration and Audit within a range of 0 to 200 the achievement of targets in the first to further promote medium- and long-term value sharing & Supervisory Board members deliberate and decide Audit & year of the transfer restriction period (in with shareholders and investors. Remuneration levels are Supervisory Board member remuneration within the total remu- principle, three years). reviewed each year versus those at other major domestic neration amount previously determined at the General Meeting of Calculation formula for individual Calculation formula for the rate of lifting Shareholders. corporations and using data for the period gathered by third- remuneration the restrictions party agencies. The performance evaluation benchmark for stock-based compensation with transfer restrictions was n v a re nerat on
changed from ROE to ROIC upon the launch of 2019 MTBP. = Position remuneration ate o t n t e re tr ct on tan ar on = Basic policy Directors (excluding outside directors)
1. Remuneration shall emphasize the link to business performance Because directors are responsible for the execution of 200 100 business, the remuneration structure takes into account and corporate value in the medium to long term, and shall encour- Company 150 Rate of lifting 67 achievement of short-term consolidated performance 100 1 age the sharing of value with shareholders. performance A the restriction targets and the improvement of corporate value over pay rates 50 33 2 2. Remuneration shall be at a level commensurate with the roles and based on ROIC alculation 0 Consolidated ( ) the medium to long term. normalized 0 responsibilities of a director of the Group. Lower Target Upper operating profit ROIC formula limit limit Lower Target Upper 3. Executive remuneration shall be reviewed by the Nomination and limit limit Outside directors + Remuneration Advisory Committee. To ensure objectivity and 200 + Because they are responsible for supervising and advis- transparency, outside directors shall account for the majority of Individual 150 ing Company and Group management from an objective 100 performance 100 the committee members. perspective, outside directors are provided basic remu- B Rate of lifting pay rate 50 67 Evaluation the restriction 1 neration (fixed remuneration) only. indicators for 0 based on commissioned 33 2 Decision process Lower Target Upper work normalized EPS limit limit ( ) 0 Normalized • The Nomination and Remuneration Advisory Committee, the chair- Audit & Supervisory Board members EPS Lower Target Upper Because of their role of auditing the performance of • A standard bonus is set for each officer based limit limit man and majority of which are outside directors, conduct delibera- on internal regulations tions and report to the Board of Directors. directors’ execution of their business from an objective • A is the ratio of the part linked to company performance, and B is the ratio linked to individual position, Audit & Supervisory Board members are pro- performance. The ratios are set for each position based vided basic remuneration (fixed remuneration) only. on internal regulations. Please refer to the Corporate Governance Report for details about director and Audit & Supervisory Board member compensation in fiscal 2018. https www.kirinholdings.co.jp english ir governance pdf e governance report.pdf
65 KIRIN CSV REPORT 2019 KIRIN CSV REPORT 2019 66 Financial Information Management Analysis of Financial Position, Operating Results, and Cash Flows
1. Operating Results to achieve the long-term New Kirin Group Vision 2021, we (2) Performance by reportable segments (1) Overall business conditions also stepped up activities to create shared value. We priori- Results by segment are as follows. In fiscal 2018, the final year of the Kirin Group 2016-2018 tized fulfilling our CSV commitments in the alcoholic bever- Medium-Term Business Plan (2016 MTBP), the Kirin Group ages and non-alcoholic beverages and pharmaceuticals and Fiscal 2018 Fiscal 2017* Increase (decrease) Increase (decrease) aimed to “revitalize the Kirin Group through restructuring” bio-chemicals businesses, including in the areas of health and Consolidated revenue 1,930.5 billion yen 1,863.7 billion yen 66.8 billion yen 3.6% by prioritizing strengthening the profit base of Kirin Brewery well-being, community engagement, the environment, and Japan Integrated Beverages 1,078.3 billion yen 1,051.0 billion yen 27.4 billion yen 2.6% while reinvigorating the maturing domestic alcoholic bever- a responsible alcohol producer. Oceania Integrated Beverages 329.5 billion yen 348.6 billion yen (19.1 billion yen) (5.5%) ages market. Following the Kirin Group CSV Commitment Other Overseas Integrated Beverages 167.4 billion yen 99.9 billion yen 67.5 billion yen 67.5% Pharmaceuticals and Bio-chemicals 339.3 billion yen 346.7 billion yen (7.4 billion yen) (2.1%) Fiscal 2018 Fiscal 2017* Increase (decrease) Increase (decrease) Other 16.0 billion yen 17.5 billion yen (1.5 billion yen) (8.4%) Consolidated revenue 1,930.5 billion yen 1,863.7 billion yen 66.8 billion yen 3.6% Consolidated normalized operating profit 199.3 billion yen 194.6 billion yen 4.7 billion yen 2.4% Consolidated normalized operating profit 199.3 billion yen 194.6 billion yen 4.7 billion yen 2.4% Japan Integrated Beverages 81.2 billion yen 72.5 billion yen 8.6 billion yen 11.9% Consolidated operating profit 198.3 billion yen 211.0 billion yen (12.7 billion yen) (6.0%) Oceania Integrated Beverages 51.7 billion yen 52.6 billion yen (0.9 billion yen) (1.7%) Consolidated profit before tax 246.9 billion yen 233.7 billion yen 13.1 billion yen 5.6% Other Overseas Integrated Beverages 13.4 billion yen 13.7 billion yen (0.4 billion yen) (2.6%) Consolidated profit attributable to owners of the Company 164.2 billion yen 242.0 billion yen (77.8 billion yen) (32.1%) Pharmaceuticals and Bio-chemicals 58.8 billion yen 62.2 billion yen (3.4 billion yen) (5.5%) * Fiscal 2017 figures have been revised retroactively in accordance with the settlement of the provisional accounting treatment related to the acquisition of a business that year. Other (5.7 billion yen) (6.5 billion yen) 0.8 billion yen - * Fiscal 2017 figures have been revised retroactively in accordance with the settlement of the provisional accounting treatment related to the acquisition of a business that year.
Fiscal 2018 overall revenue grew as expanded sales volume from the previous fiscal year level, which was elevated by at Kirin Brewery boosted revenue in the Japan Integrated gains on sales of fixed assets. Profit before tax attained a Consolidated revenue Consolidated normalized operating profit Beverages Business and increased sales volume at CCNNE record high on contributions from the share of profit of equi- 1,800.0 1,850.0 1,900.0 1,950.0 190.0 195.0 200.0 205.0 generated strong growth in revenue in the Other Overseas ty-accounted investees from higher year-on-year sales vol- Integrated Beverages Business. Normalized operating profit ume at San Miguel Brewery and the booking of a gain on sale 201 201 reached a record high as strong results at Kirin Brewery sup- of equity-accounted investees from the transfer of all shares ported a substantial profit increase for the Japan Integrated of Kirin Amgen. Profit attributable to owners of the Company I I Beverages Business that more than overcame decreased prof- decreased from last year when the Company booked a gain
its in the Oceania Integrated Beverages Business due to for- on the transfer of all shares of Brasil Kirin. However, profit- O O I I eign exchange rate fluctuations and in the Pharmaceuticals ability remained steady, considering that the level was essen- and Bio-chemicals Businesses from removing Kyowa Medex tially the same as last year when factoring out the impact of O O O O from the consolidated accounts. Operating profit declined the transfer. I I
P P
O O
201 201
67 KIRIN CSV REPORT 2019 KIRIN CSV REPORT 2019 68 Financial Information Management Analysis of Financial Position, Operating Results, and Cash Flows
• Japan Integrated Beverages Business • Oceania Integrated Beverages Business • Other Overseas Integrated Beverages Business selling, general and administrative expenses as the company Kirin Brewery focused on enhancing the appeal of its beer In the Beer, Spirits and Wine Business, Lion Pty Limited contin- Myanmar Brewery’s promotional campaigns and product sought to establish global strategic products overseas. products and on cost-efficient marketing for select brands. ued strengthening its brands in growth categories following revamp generated strong sales for its flagship Myanmar Beer, In the Bio-chemicals Business, sales declined 2.6 billion The increased sales volume worked to increase marginal its brand portfolio strategy to reestablish profit growth in particularly the canned beer offering, as the brand contin- yen, or 3.2%, year on year due mainly to the impact of the profit and decrease selling costs. In the beer category, year- the medium-to-long term. The Container Deposit Scheme ued to command high market share in an expanding market. previous year’s sale of the plant growth regulator business and on-year growth in the sales volume of the flagship Kirin Ichiban introduced in December 2017 in New South Wales, Australia, Sales volume for Andaman Gold in the economy category the intensifying competition for some products overseas. At brand exceeded the industry average. Installations of the impacted the sales result, but sales were strong for the Iron rose sharply year on year after the company expanded its the same time, improved costs from full-scale operations of Tap Marché beer dispenser unit reached near 7,000 stores Jack and James Squire brands and for the Furphy brand the production capacity and stabilized supply. Increased sales the overseas plant and a revised product mix helped increase nationwide during the year. Tap Marché, which is strategically company is rolling out nationwide in Australia as part of an volume and reduced costs offset the negative impacts from normalized operating profit by 0.9 billion yen, or 13.1%. aimed at expanding and invigorating the craft beer market, active effort to accelerate the development of craft beer an increased ratio of economy category sales and increased * G-Lasta is a treatment to increase the number of neutrophil white blood cells. offered 19 brands from seven breweries during the year. markets overseas. Lion’s sales volume ultimately remained import material costs due to local currency weakness, and Substantial contributions from the increased sales volume of essentially unchanged at -0.1% year on year. The company’s the company posted growth in sales of 9.4% and profits of (3) Progress toward achieving management indices Honkirin launched in March in the new genre category and success lowering supply chain-related costs, notably in the 9.4% on a local currency basis. Despite the foreign exchange The Kirin Group 2016-2018 Medium-Term Business Plan (2016 the revamped Nodogoshi Nama released in May fueled year- procurement activities, helped lift the normalized operating impact (-1.9 billion yen in revenues and -0.7 billion yen in nor- MTBP) to “revitalize the Kirin Group through restructuring” on-year growth of 5.2% in sales volume for Kirin beer prod- profit ratio on a local currency basis from 27.9% a year ago malized operating profit), revenues grew 0.6 billion yen, or set raising ROE to 15% or higher and lifting the CAGR in nor- ucts amid an overall contraction in the domestic beer market. to 28.8%. In the Dairy and Drinks Business, Lion continued to 2.2%, year on year and normalized operating profit increased malized EPS to 6% or higher as key performance indicators. RTD category sales volume rose 13.1% year on year on solid strengthen its brands in key categories. Sales volume rose 0.2 billion yen, or 2.1% year on year. We achieved both targets by steadily raising profitability and sales of the core Hyoketsu and very brisk sales of Honshibori TM year on year for the leading brand Dare in the dairy beverage The Coca-Cola Bottling Company of Northern New diligently reducing costs throughout the Group. Chu-hi and KIRIN The STRONG, which launched in April. category and for the Farmers Union brand in the yogurt cat- England (CCNNE) recorded sharp growth in sales volume Performance Revenue rose by 21.1 billion yen, or 3.3%, year on year egory. Smaller sales volume of ambient and chilled juice in from the September 2017 expansion of its marketing area 2015 2016 2017 2018 CAGR indicator and normalized operating profit grew 9.3 billion yen, or large containers led to overall sales volume in the Dairy and in North America. 13.0%, year on year, helping to lift normalized operating Drinks Business decreasing 3.9% year on year while a bet- ROE (6.3%) 17.6% 29.1% 17.5% - profit ratio (versus sales revenue excluding liquor taxes) to ter product mix from higher unit prices held the decline in • Pharmaceuticals and Bio-chemicals Business Normalized EPS 117 yen 125 yen 151 yen 167 yen 12.6% 20.8% year on year, compared with 19.3% in the previous revenue to just 1.3%. Cost cutting measures helped lift the In the Pharmaceuticals Business, Kyowa Hakko Kirin continued fiscal year. normalized operating profit ratio on a local currency basis to its drive to make the leap to a “Global Specialty Pharmaceutical 2. Financial Status Kirin Beverage strengthened its business base and built 3.6%, up from 3.5% a year earlier. Lion’s profits rose 3.7% year Company” by maximizing the value of global strategic prod- (1) General overview a more robust brand portfolio. Sales volume of the flagship on year on a local-currency basis, and its overall contribution ucts, infusing new products into its existing product lines Total assets at the end of the current consolidated fiscal year brand Gogo-no-Kocha declined overall, largely due to heavy to consolidated earnings was also impacted by the foreign to increase market penetration, strengthening customer amounted to 2,303.6 billion yen, a decrease of 94.9 billion rains in Western Japan temporarily suspending shipments exchange rates (-16.8 billion yen in revenues and -2.9 billion relationships in each region, and filling out its new product yen from the end of the previous consolidated fiscal year. of large PET-bottle products while sales volume of smaller yen in normalized operating profit). As a result, the Oceania development pipelines. Domestic sales declined year on year. The decline was mainly due to decreases in property, plant PET-bottle products increased. Sales grew for a third straight Integrated Beverages Business recorded a revenue decline of Sales were solid for G-Lasta*, an agent for decreasing the and equipment, goodwill and other intangible fixed assets, year for Nama-cha, which was boosted by a brand makeover 19.1 billion yen, or 5.5%, year on year and a normalized oper- incidence of febrile neutropenia; NOURIAST, a treatment for financial assets (non-current), and non-current assets held in March. Helped by a revamp in April, sales of Kirin Lemon ating profit decline of 0.9 billion yen, or 1.7%, year on year. Parkinson’s disease; and Onglyza, a treatment for type 2 dia- for sale. The decline in property, plant and equipment was more than doubled from last year, providing a strong con- In October 2018, Kirin and Lion announced the deci- betes. However, sales were impacted by Kyowa Medex being caused by the yen appreciation versus the same period last tribution to the overall growth in sales volume. At the same sion to seek a third-party buyer for the Lion Dairy and Drinks removed from the scope of consolidation, the April revision year, which caused the value of subsidiary assets overseas to time, sales volume stagnated for FIRE in the coffee category Business. The structurally reformed business is steadily to drug prices in Japan’s national health insurance system, decline when converted to Japanese yen. The decline in other amid an overall contraction in the canned coffee market. The becoming more profitable, and the companies rigorously the increasing presence of generics as part of government non-current asset was due to decreased market value for end result was an increase in sales volume but a deteriorated examined all strategic options for taking the operation to efforts to reduce medical costs, and competitor products. shareholdings. Other financial assets (non-current) declined composition ratio of products and containers, which led to the next stage of growth. After careful consideration, it was Overseas sales increased on steady market penetration of by 30.8 billion yen due to reduced value of equity holdings a 0.9 billion yen, or 0.3%, year-on-year decline in revenue. decided that selling the Dairy and Drinks Business was the Crysvita, a treatment for X-linked hypophosphatemia launched and the sale of strategically held shares. However, strong Management measures to cut costs, including controlling most viable course of action. In the accounting books, Lion’s in 2018, and Poteligeo, a treatment for skin T-cell lymphoma. earnings at San Miguel Brewery helped boost share of profit raw material procurement and reducing waste, as well as to Dairy and Drinks Business has not been designated as a dis- Pharmaceuticals business revenue increased when factoring of equity-accounted investees, supporting a 29.8 billion yen lower sales costs enabled normalized operating profit to rise continued operation and is included in continuing operations. out the impact from removing Kyowa Medex from consoli- increase in investments booked under the equity method. 1.6 billion yen, or 7.5%, year on year and the normalized oper- dated accounts. Normalized operating profit declined 4.6 The sale of the Company’s stake in Kirin Amgen reduced ating profit ratio to expand from 7.6% a year ago to 8.2%. billion yen, or 8.4%, year on year, owing mainly to increased non-current assets held for sale by 76.3 billion yen.
69 KIRIN CSV REPORT 2019 KIRIN CSV REPORT 2019 70 Financial Information Management Analysis of Financial Position, Operating Results, and Cash Flows
While retained earnings increased, equity decreased by • Other Overseas Integrated Beverages Business year on year to 226.7 billion yen. Proceeds included 30.6 bil- cate resources to intangible value such as brands, research 28.2 billion yen from the end of the previous consolidated Segment assets amounted to 674.6 billion yen at the end of lion yen from long-term borrowings and 25.0 billion yen from and development, information and communication tech- fiscal year to 1,200.9 billion yen. This is primarily due to a 73.9 fiscal 2018, an increase of 272.2 billion yen from the end of the issuance of bonds. Outflow included 100.1 billion yen for nology, and human resources expected to support future billion yen decrease in reserves and an increase of treasury the previous fiscal year. The increase was mainly due to a rise payment for acquisition of treasury shares, 70.0 billion yen growth of cash flow as well as to establish and foster new stocks through a 100 billion yen of share buyback executed in other non-current assets due to intersegment loans. for payment for redemption of bonds, 55.7 billion yen for businesses bridging pharmaceuticals and food & beverages. to further increase of shareholder returns. The decline in dividends paid, and 54.9 billion yen for repayment of long- The Company will take a disciplined approach to investment reserves was due to a foreign exchange gain (loss) associ- • Pharmaceuticals and Bio-chemicals Business term borrowings. to maintain and improve the capital efficiency of the Kirin ated with overseas operators due to reduced income owing Segment assets amounted to 706.3 billion yen at the end of We ultimately met all of the quantitative targets in the Group while controlling capital costs. to a stronger yen versus the Australian dollar and Myanmar fiscal 2018, a decrease of 28.2 billion yen from the end of 2016 MTBP and, through extensive restructuring, vastly Kirin Holdings considers it a management priority kyat along with reduced income arising from a net change the previous fiscal year. The decrease was mainly due to a improved the cash-generating abilities of existing busi- to appropriately distribute profits to shareholders. The in equity instruments measured at fair value through other decline in non-current assets held for sale associated with nesses such that we were able to provide greater shareholder Company raised the consolidated target payout ratio in the comprehensive income. Kyowa Hakko Kirin divesting of a portion of its shareholdings returns and pay down more interest-bearing debt than was 2019 MTBP and plans to continue providing dividends based Liabilities decreased 66.7 billion yen from the end of the in Kyowa Medex. initially targeted in the plan. The gross debt-to-equity ratio on a consolidated dividend payout ratio on normalized EPS previous consolidated fiscal year to 1,102.7 billion yen mainly was 0.45x at the end of 2018, as we were able to bring it to of 40% or higher. While comprehensively taking into account due to debt repayment. Non-current liabilities decreased 43.7 3. Cash Flow an optimal level while preserving our financial flexibility and factors including optimum capital structure, market condi- billion yen to 512.8 billion yen. In March 2018, the Company (1) Cash flow and liquidity status soundness. tions and reserve funds after investments, Kirin Holdings paid down roughly 70 billion yen in bonds coming due. In The balance of cash and cash equivalents (hereinafter “net In fiscal 2019, we are seeking to generate 190 billion yen will also flexibly consider share buybacks as a way to provide November 2018, the Company paid down other long-term cash”) at the end of the current consolidated fiscal year was in cash flows from operating activities and plan to earmark additional shareholder returns when the Company receives borrowings and also issued 25.0 billion yen in straight bonds 173.1 billion yen, an increase of 11.1 billion yen from the end 120 billion yen of cash from investing activities for capital an inflow of additional funds, such as from gains on the sale with a redemption date in December 2023. In current liabil- of the previous consolidated fiscal year. Consolidated cash investment. In line with our financial strategy, the first priority of assets. ities, accrued corporate income taxes increased by 7.5 bil- flows were as follows. for the use of the free cash flow generated during the year When management deems it necessary to raise funds, lion yen while bonds and long-term borrowings redeemable Cash flows from operating activities will be to invest in growth for the alcoholic and non-alcoholic the Company’s primary financing source is loans. Funds are within one year declined by 26.8 billion yen as the Company Net cash provided by operating activities decreased 23.7 bil- beverage business and other existing core businesses. We will procured to ensure the Company is prepared for sudden fluc- continued to pay off and pay down liabilities. Total current lion yen year on year to 198.1 billion yen. Profit before tax also use funds to establish and foster new businesses bridg- tuations in the economic environment, and in such a manner liabilities decreased 23.0 billion yen to 589.9 billion yen. increased 13.1 billion yen. Corporate tax payments declined ing the pharmaceuticals and food & beverages businesses as to maintain the resiliency of the Company’s high credit rat- As a result of the above, the ratio of consolidated profit 21.2 billion yen, primarily due to the 5% tax rate on the 19.8 while also flexibly allocating funds for additional shareholder ing to financial conditions. The Board of Directors examines attributable to owners of the Company was 39.8% and the billion yen in gain on the sale of shares of Kirin Amgen, which returns. Regarding shareholder return, in fiscal 2019, we and verifies all fund procurement proposals that would affect gross debt-to-equity ratio was 0.45. is booked as dividends for tax accounting purposes. However, raised our benchmark for the consolidated dividend payout the controlling stake in the Company or cause significant the decline in interest payments due to the reduction of cor- ratio of normalized EPS from 30% or higher to 40% or higher. stock dilution. Proposals are scrutinized in terms of the tar- (2) Financial status of each reportable segment porate bonds and borrowings led to a 21.5 billion yen increase We intend to provide shareholder returns valued at approxi- gets in the long-term management vision “Kirin Group Vision • Japan Integrated Beverages Business in outflow of working capital. mately 60 billion yen in fiscal 2019. While building profit and 2027” and the 2019 MTBP plans and with full consideration Segment assets amounted to 819.1 billion yen at the end Cash flows from investing activities enhancing our ability to generate cash flow, we will maintain of the impact on stakeholders. The Board of Directors has the of fiscal 2018, an increase of 23.5 billion yen from the end Net cash provided by investing activities decreased 15.8 bil- a sensible capital structure that is well-balanced with capital responsibility to provide full accountability for its decisions. of the previous fiscal year. The increase was mainly due to lion yen year on year to 47.4 billion yen. Outflow for acquisi- costs and financing. Through the above initiatives, the Company seeks to systems investment to install enterprise resource planning tion of property, plant and equipment and intangible value achieve the 2019 MTBP to raise ROIC to 10% or higher and (ERP) beginning in 2017 to support future business growth. decreased 0.9 billion yen to 87.9 billion yen. Inflows included (2) Basic capital policy CAGR in normalized EPS of 5% or higher. 85.1 billion yen from the sale of equity-accounted invest- Based on the fiscal policy set forth in the Kirin Group 2019- • Oceania Integrated Beverages Business ments (shares of Kirin Amgen), 30.4 billion yen from the sale 2021 Medium-Term Business Plan (2019 MTBP), Kirin Segment assets amounted to 489.6 billion yen at the end of of strategic holdings and other investments, 18.7 billion yen Holdings will allocate resources to its businesses and distrib- fiscal 2018, a decrease of 30.8 billion yen from the end of the from the sale of property, plant and equipment and intan- ute profits to its shareholders as set out below. previous fiscal year. The decrease was mainly due to declines gible value; and 9.1 billion yen from the sale of shares of a Resource allocation to businesses will prioritize investing in property, plant and equipment and goodwill due to the subsidiary (Kyowa Medex) as the Company continued its plan to improve asset efficiency and to improve the attractiveness strong yen rate versus the Australian dollar used in the con- to divest non-core assets. of our plants as well as investing in equipment and business version of Lion Pty Limited assets. Cash flows from financing activities to fortify and grow existing businesses. Net cash used in financing activities increased 44.5 billion yen Kirin Holdings will also steadily and consistently allo-
71 KIRIN CSV REPORT 2019 KIRIN CSV REPORT 2019 72 Investor Information/Company Information
I ird Party valuations
201 201 201 201 201 201 T K T K CSV R K R E R Cumulative dividend income per share (from fiscal 2013, Yen) Amount of increase in stock price per share (from fiscal 2013, Yen) T R
Total shareholder return per share is calculated at fiscal year-ends, starting in fiscal 2014 as if the investment was made at the closing stock price at the end of fiscal 2013.
S
S N 22 TSE I TSE I SCI E I IN
C P C P S E E 2019 00 T
S 100 N 2019 0 C
C
rade name K C Stock listings T N S Date of incorporation 2 190 N O 1 200 ransfer agent K C K C T C C Head office N K NO CENTR P RK SO T 10 2 1 1 N S T 1 00 work with Pride, Gold Certification N N T T 1 91 1900 9 00 1 00 1 0001 Depositary Paid in capital 102 0 9 P C N P P O 0 umber of employees 0 S P N 1 0 0 (consolidated) N K 1 201 C S 1 00 990 11 C S 1 1 212
73 KIRIN CSV REPORT 2019 KIRIN CSV REPORT 2019 74