Sapporo Group Business Results for 2018 - Management Plan for 2019
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Sapporo Group Business Results for 2018 - Management Plan for 2019 February 14, 2019 URL http://www.sapporoholdings.jp/english Copyright, 2019 SAPPORO HOLDINGS LTD. All rights reserved. 1/61 Management Plan for 2019 -Year of Change- - Structural Reform and Foundation Building - Selection and Concentration Copyright, 2019 SAPPORO HOLDINGS LTD. All rights reserved. 2/61 2017 Review from 2017 to 2018 - 2018 Results (strengthening of core brands) Turned profitable 0.5 +¥1.4bln +5% 0.0 +13% +3% -0.5 +4% -1.0 -1.5 -2.0 Black Label (can) Overseas brand total Alcoholic beverages Sales volume 2016 2017 2018 Sales volume 2016 2017 2018 in Vietnam 2016 2017 2018 Operating profit +7% +2% +17% +14% +4% +9% Lemon-based food YEBISU BAR Ebisu, Sapporo, products and drinks 2016 2017 2018 Net sales 2016 2017 2018 Ginza, etc. 2016 2017 2018 Sales volume (nationwide) Real estate EBITDA *Overseas brands: SLEEMAN+ANCHOR+SAPPORO PREMIUM (All figures are YoY comparisons) Copyright, 2019 SAPPORO HOLDINGS LTD. All rights reserved. 3/61 2017 Review from 2017 to 2018 - 2018 Results (transformation of the Group management platform) Personnel, human Finance resources + ●Research on hops ●Asset efficiency improvement ●Selected as Won the top award for the third ●Work style improvement Competitive IT consecutive time at the 36th - Revised the teleworking system -Reviewed strategic cross- Strategy Company European Brewery Convention - Introduced super flexible working hours shareholdings and shares worth →Sapporo is the only Japanese system -Reform of legacy company that has won an award at - Introduced hourly paid holiday system ¥8.2 billion in total were sold off system the convention - Obtained Platinum Kurumin -Integration of core certification system - Nikkei Smart Work Management rating ●Research on lemons ●Financial strategy -Utilization of AI, -Promoted research on citric acid improved etc. ●Health and productivity management (procurement) and lemon polyphenols - Drafted the Health Creation Declaration -Quantified sensations such as the - Certified as “2018 Excellent Enterprise -Promoted extension of pleasant taste of lemon-based of Health and Productivity Management” procurement terms, stabilization of drinks and applied it in new product (White 500) interest rates, standardization of development ●Human resources development, redemption timing ●Research on SBL88 lactic acid recruitment -Issued convertible bonds bacteria -Newly established management - Utilized research results of barley- development program ●SR/IR derived SBL88 lactic acid bacteria in - Expanded cross-border global meetings the development of products such -Global human resources development - Sapporo Group’s first Integrated as soymilk and miso through GPC training, etc. Report issued -In Rakuten Min-Shu survey on best company to work for, Sapporo Breweries ●Other ●Environmental technology ranking improved from 189th last time to -Began voluntary application of IFRS - Received the 2018 JSBBA Award 32nd for Achievement in Technological Copyright, 2019 SAPPORO HOLDINGS LTD. All rights reserved. 4/61 Research 2017 Review from 2017 to 2018 - 2018 Issues (delay in new-genre category, canned coffee, overseas alcoholic beverages and soft drinks, which were given lower priority) -6% -12% -18% -18% Mugi to Hop Coffee drinks Sales volume 2016 2017 2018 Sales volume 2016 2017 2018 Delayed in competition as strengthening The style of coffee consumption has of beer was prioritized changed and canned coffee market is 0.00 stagnant 0 -1.0 -2.0 -¥0.8bln -¥4.4bln -3.0 -4.0 Anchor North American -5.0 2018 2016 2017 2018 Impairment loss soft drinks (CPF+Former SSC) Operating profit Our resources were geographically dispersed due to the pre-acquisition policy of expanding across the U.S. Health consciousness increased further in the U.S. and demand for We switched to a strategy of concentrating on Anchor’s orange juice declined local area, but the craft beer market in San Francisco The rise in price of Florida-grown oranges also weighed on business stagnated due to new emerging craft beers and outflow performance and results of former SSC worsened of demand to wine and spirits → We therefore recorded *Former SSC has merged with CPF an impairment loss. Copyright, 2019 SAPPORO HOLDINGS LTD. All rights reserved. 5/61 Positioning of 2019 20182019 SPEED150 First Medium-Term Management Plan (2017-2019) Transformation with unprecedented speed Towards shift to growth stage 2017 - 2018 2019 2020 - <Achievements> <Themes> - Transformation of the Group -Structural reform and foundation building -Law revision towards unification of management platform -Selection and focus liquor taxes -Strengthening of core brands -Tokyo Olympic and Paralympic Games We position 2019 as a year of change in which we <Issues> -The 130th anniversary of Yebisu beer -Major environmental changes in the will solve all issues alcoholic beverage and soft drinks Dynamic growth of the Sapporo Group businesses in Japan and overseas ⇒ Resulting in delayed progress Copyright, 2019 SAPPORO HOLDINGS LTD. All rights reserved. 6/61 Structural Reform and Foundation Building 2019 Main initiatives for 2019 Research & Development -Research into whiteness of beer foam (see Appendix for reference) A ⇒Toward relaunch of Black Label -To apply the results of research on hops, lemons, and soy beans A value chain New launches: March: “Papatto Miso Powder” April: Lemon the Rich to further enhance Raw Materials Procurement products - Vineyard in Hokuto, Hokkaido (to start planting saplings in 2019, first harvest expected in 2021) B - Continue and further develop initiatives to promote lemon production in collaboration with the Hiroshima Prefectural Government. Brands - Raw materials procurement utilizing Yasuma Co., Ltd.’s knowhow Production, Distribution - Strengthen production facility for ready-to-drink products - Introduce production facility for secondary in-bottle fermentation sparkling C wine - Establish new hybrid plant for cup soup in Sapporo Sendai Brewery - Establish new soy milk yogurt production line - Consider further joint distribution, open Sapporo Logistics University (human resources development) Sales, Space to Experience Our Brand Overall -Streamlining of Head Office functions and - Establish a European sales subsidiary administration transformation of business administration (segment changes, etc. ⇒*See the next slide) D - Add spaces for consumers to experience brands, such as Yebisu Bar - Promote Ebisu urban development, refurbish Sapporo Factory -Cross-border human resources development, work Personnel, E - Establish Furusato Nagoya Lemon Orchard to develop lemon-related style reform, promotion of diversity HR, finance -Continue with initiatives to improve balance sheet communications Copyright, 2019 SAPPORO HOLDINGS LTD. All rights reserved. quality 7/61 Structural Reform and Foundation Building 2019 Before From a 5 business domain structure to a 3 business domain structure After (Existing segments through 2018) (Revised segments from 2019) Holding Business Operating companies Subsidiaries Subsidiaries Operating companies Business domains Holding company domains company -Subsidiaries in Japan Japanese Sapporo Breweries Japan, Asia -Subsidiaries in -Sapporo Vietnam Alcoholic Sapporo Breweries Japan Beverages Sleeman Breweries Canada Alcoholic -Sleeman Breweries Beverages Sapporo USA & Anchor Sapporo International -Sapporo USA U.S. Holdings Sapporo *Integration of two Sapporo Holdings Sapporo International ⇒Absorbed by Sapporo -Anchor companies planned Breweries -Sapporo Vietnam -Subsidiaries in Restaurants - CPF Japan and abroad Sapporo Lion -Subsidiaries in Food & Soft -Subsidiaries in POKKA SAPPORO Japan and POKKA SAPPORO Drinks Japan and abroad abroad Japan, Asia Food & Soft Drinks -Subsidiaries in -Shinsyu-ichi Miso Restaurants Sapporo Lion Japan and ⇒Alcoholic Beverages Country Pure Foods abroad U.S. (CPF) Real Real Estate Sapporo Real Estate Sapporo Real Estate Real Estate *No change Estate Other Shinsyu-ichi Miso Other ⇒Food & Soft Drinks Copyright, 2019 SAPPORO HOLDINGS LTD. All rights reserved. 8/61 Selection and Concentration 2019 2019: Particularly important categories and their positions Priority Non-Focus Maintenance Focus 2018 (Controlled investment, reduced scale, etc.) (Maintenance of status quo or stable growth) (Proactive investment, growth) Results High (Good results) Low priority but favorable Favorable performance with stable Favorable performance with strong performance growth targeted growth targeted - Standard beer in Japan - Ready-to-drink products - Lemon-based food, soft -Not applicable -Real Estate business drinks - Soy beans and chilled Medium products, miso (Results in line with the previous year) Poor performance but strong Poor performance but strong Low priority, poor performance growth targeted growth targeted -Japanese premium beer -North American soft -American alcoholic -New genre drinks beverages -Japanese soft drinks Low (Poor results) Copyright, 2019 SAPPORO HOLDINGS LTD. All rights reserved. 9/61 Select-and-Focus Approach 2019 2019: Concrete initiatives in the particularly important categories Relaunch of Black Label - Utilize research results regarding white foam Advance our urban development Expand the scale of ready-to-drink projects in Ebisu and Sapporo category with 99.99 at the center - Introduce new products and aim to expand volume Securitize some real estate Further expand the lemon market -Strategically reshuffle property portfolio - Showcase the value of lemon-based products