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Suntory Beverage & Food Limited Beverage & Food Limited

Strategy in 2014

Seven Core Brands

SUMMARY • Further Strengthening the Seven Core Brands • Creating New Demand with FOSHU Drinks and Other High Value-Added Products • Promoting Reductions in Manufacturing and Distribution Costs

In 2013, the overall market in Japan was estimated to have rank at either No. 1 or No. 2 within their respective categories, grown 3% year on year, boosted by an extremely hot summer and we now plan to strengthen their positions and increase and other factors. In this environment, SBF outgrew the mar- sales volumes for the seven core brands by 7% compared to the ket, with sales increasing strongly at 6% year on year for the previous fiscal year. 21st consecutive year of sales increases*. In 2014, we continue Another theme is creating new demand. We will develop new to reinforce the initiatives we have taken to date, such as markets and grow by proposing products with new value that strengthening our core brands and reducing costs. Our aim is to win customers’ approval. In addition to insisting on delicious build an even stronger business structure for achieving further taste, we focus on proposing products that accurately capture profit growth. We are targeting an increase of 3.2% in sales to customers’ needs. A case in point is Food for Specified Health ¥740.0 billion, and an increase of 5.7% in segment profit to Uses (FOSHU). In addition to Suntory Black Oolong Tea and ¥48.0 billion. We believe that the market changes due to the Goma Mugicha, we introduced Pepsi Special in 2012, Iyemon Sales volume: 75 % of total, +7% YoY （ Forecast*） April consumption tax hike and the effects of “Abenomics” Tokucha in 2013, and BOSS GREEN in 2014. The FOSHU­ drinks We are concentrating our management resources on the following seven core brands: Suntory Tennensui, BOSS, Iyemon, represent major opportunities for SBF with its strong brands market is expanding rapidly in scale driven by rising health Pepsi, Suntory Oolong Tea, GREEN DAKARA and Orangina. We plan to grow the sales volume of these seven brands by 7% in and fast-acting management style. awareness among consumers. 2014 and expect their composition of overall sales volume to reach 75%. Our major theme for ensuring growth is fostering and reinforc- To increase our profits, we are not only working to grow our ing our core brands. The beverage market in Japan is expected top line, but also to reduce costs. We are promoting measures *Forecast as of February 14, 2014 to be almost flat in 2014 compared to the previous year due in to achieve cost reductions to overcome cost-push factors such part to the impact of the consumption tax hike; however, with as the yen’s depreciation and rising oil prices and create a lean Leveraging the Suntory Tennensui Brand Creating New Demand with FOSHU Drinks our strengths in branding capabilities we are planning to in- earnings structure. For example, in packaging we will expand crease sales volume by 3%. Once again in 2014, we are con- our technology for reducing the weight of PET bottles and The Suntory Tennensui we launched a sparkling Iyemon Tokucha was the fats. The product contains a centrating our management resources on our seven core making ultra-thin labels to more product categories. In manu- brand holds the No. 1* water under this brand, first FOSHU drink to draw polyphenol called quercetin brands: ­Suntory Tennensui, BOSS, Iyemon, Pepsi, Suntory Oolong facturing, we are continuously working to improve manufactur- position in the mineral followed in 2014 by the attention to the mecha- glycoside that helps to Tea, GREEN DAKARA, and Orangina. Competition is intense in ing efficiency and cut distribution costs by concentrating on water market. In 2013, launch of flavored water. nism of breaking down reduce body fat. BOSS the Japanese market, and we believe that only brands ranking core brands. In raw materials, we continue to expand our global We will continue to GREEN not only helps to in the top two within each category will survive. Suntory procurement activities. leverage our strong brand block the absorption of fat ­Tennensui, BOSS, Iyemon, Pepsi and Suntory Oolong Tea each * Suntory’s performance for sales volume in Japan and expand our product from food, but also offers Figures for 2014 are based on forecasts as of February 14, 2014 lines to drive further delicious refreshment as a growth in the Suntory low- canned RTD 2014 Forecast (JAPAN) Tennensui series. coffee thanks to SBF’s * INTAGE MBI data; mineral water product development capa- Sales Segment profit market; sales of Suntory Tennensui for Jan.–Dec. 2013 bilities, which have been (SM·CVS·DRUG total) refined over many years. ¥740.0bil. +3.2% YoY ¥48.0bil. +5.7% YoY

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Strategy in 2014

The second ranking* soft drink company in both the French and Spanish beverage markets, the Orangina Group’s offerings include Orangina and Schweppes. The company manufactures and sells Overseas Segment beverages in-house, and also manufactures and exports concentrates as part of its wide-ranging Orangina Schweppes Group business centered on Europe. SUMMARY Other Orangina A semi-carbonated fruit drink Belgium • Advance to a new growth stage led by business in marketed in more than 40 countries around the world. Europe with the acquisitions of and Schweppes A carbonated soft drink available in a , and in , where the market is growing. multitude of flavors.

*Source: Euromonitor 2013CY, Off-trade Value, RSP Share of sales volume by country (Excluding mineral water) *Source: Company The global beverage market is expanding overall, but is expect- ed to contract in some countries. Meanwhile, global competi- tion has become even more intense. During fiscal 2013, SBF positioned each of Europe, Oceania, Initiatives in Europe Asia and the Americas as markets with growth potential and In Europe, although there are signs of recovery, the economic worked to expand its business and increase profitability by environment is expected to continue to be tough. In these strengthening existing brands and launching Suntory brands. As circumstances, the Group has launched Suntory Beverage & a result, we achieved increases in both sales and segment profit. Food Europe Limited and given it the role of managing the In fiscal 2014, we are continuing to concentrate on strengthen- European business, which is comprised of the Orangina ing the core brands in each area and to expand our business Schweppes Group and Lucozade Ribena Suntory Limited. As scale by launching Suntory brands. At the same time, we are the managing company, Suntory Beverage & Food Europe Lucozade constructing a new global management structure to speed up Limited are pursuing to accelerate business growth through the Launched in 1927. group synergy creation and profitability improvement. For the formulation and execution of comprehensive strategies. At the Lucozade is a long-selling energy sports drink with an overseas segment, we are planning to achieve sales of ¥520.0 Orangina Schweppes Group, marketing investment is concen- 80-year history. It has a strong international presence billion and segment profit of ¥60.5 billion. trated on key products such as Orangina and Schweppes, while centered on the U.K. efforts are made to further strengthen the business foundation U.K. Market Share and boost profitability. At Lucozade Ribena Suntory Limited, Energy drink market: No. 1* Lucozade Ribena Suntory new sales channels for Lucozade and Ribena will be explored Sports drink market: No. 1* Limited not only in Europe, but also in such emerging markets as South- Other east Asia, Africa and the Middle East. Ribena 2014 Forecast* (OVERSEAS) We are also promoting cost reductions by leveraging expertise Launched in 1938. Asia from our Japanese operations to reduce manufacturing and A fruit juice that is most popularly known for its Africa Sales distribution costs, as well as to move forward with a better blackcurrant (cassis) flavor. Ribena has an expansive Ireland aligned and structured business processes. lineup of products including RTD beverages, as well as a concentrate and a low-calorie version. ¥520.0bil. +28.6% YoY U.K. Market Share U.K. Fruit drink market: No. 4* Segment profit (Including concentrates) Lucozade and Ribena *Source: Euromonitor 2013CY, Off-trade Volume Share of sales volume by region *Source: Euromonitor 2013CY, Off-trade Volume ¥60 .5 bil. +19.7% YoY *Forecast as of February 14, 2014

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Strategy in 2014

Asia In 1990, Suntory acquired the manage- Oceania In 2009, SBF acquired the Frucor Group, ment rights for Cerebos Pacific Limited which runs a soft drink business, mainly in Initiatives in Asia (headquartered in Singapore), a general Initiatives in Oceania Oceania. In addition to its flagship energy Although Asia is subject to concerns foods company with a strong network In Oceania, although competition is drink product, V, the group has a strength about the economic impacts of exchange throughout Southeast Asia and Oceania. expected to intensify further, V is being in its Just Juice line of fruit juice products. rates and other factors, in countries with The company operates a health food reinforced at the Frucor Group as the Going forward, we will reinforce Frucor continuing economic growth, we are business, mainly in Thailand, , leading brand in the energy drink cat- Group’s position as the leader in the working to strengthen our business Hong Kong, China, Malaysia, and Singa- egory and aggressive steps will be taken energy drink category in Oceania. With foundation and realize business expansion pore, with the products Essence of Chick- to expand the brand portfolio and launch bottling operations for Pepsi brand bever- by such means as new product launches. en and Bird’s Nest, sold under the flagship new products outside the energy drink ages in New Zealand, the group is also With respect to the Cerebos Group, the brand BRAND’S. Cerebos Pacific will category, as well as implement cost growing in the carbonates category. value of the flagship BRAND’S health concentrate on BRAND’S to consolidate reductions. food products are being emphasized and its position in Southeast Asia. the Group’s position in Southeast Asia will be strengthened further. At Suntory Garuda Group and Suntory PT Suntory Garuda Beverage PepsiCo Beverage Co., Ltd., (headquartered in Jakarta, Indonesia) was further efforts will be made to foster established in 2011 as a joint venture Suntory brands and launch new products with Indonesian food and beverage group Americas In 1980, the Suntory Group acquired in addition to existing flagship brands with GarudaFood Group. In addition to the PepCom Industries, Inc. and commenced Initiatives in the Americas the aim of achieving business expansion in jelly drink Okky, SBF has launched Mirai, bottling business in the U.S. In 1999, the In the Americas, we reorganized the excess of the market’s overall growth. the first Suntory branded green tea in group established Pepsi Bottling Ventures geographical areas in which Pepsi Bot- In addition, having achieved a certain Indonesia, along with MYTEA Oolong Tea. LLC (headquartered in Raleigh, North tling Ventures LLC operates in fiscal 2013 scale of sales in each of Thailand, Indone- PT Suntory Garuda Beverage will Carolina) as a joint venture with PepsiCo, and worked to streamline its manage- sia and Vietnam, it is now possible to expand its business scale by continuing to Inc. and expanded the geographical area ment. In fiscal 2014, we will strengthen undertake activities to improve costs strengthen the Garuda brand and launch- of the business, mainly in North Carolina, sales of our core products and also focus across these countries, including in-house ing Suntory branded products. by acquiring neighboring bottlers. our efforts on the non-carbonated cat- production of packaging and joint pur- egory, which is expected to see market chasing. In this way, we will promote growth. Furthermore, we continue to activities to improve cost efficiencies Suntory PepsiCo Vietnam Beverage Co., strengthen our business foundation throughout Asia. Ltd. (headquartered in Ho chi Minh, following the business area reorganiza- Moreover, since these markets are sub- Vietnam) has been manufacturing and tion by working to achieve further busi- ject to rapid changes and intense compe- selling soft drinks in Vietnam since 2013. ness efficiency improvements, primarily tition, we will respond by strengthening The company’s offerings include Pepsi in sales and logistics. local authority and responsibility to brand carbonated beverages Pepsi and further expedite decision making and 7UP, the energy drink Sting, along with activity cycles. Suntory branded TEA+ Oolong Tea.

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