No.8980   2004. 12. 17

Company Updates

Suntory Ltd. announces the following company updates for 2004:

<Beverage & Food Company>

Overall soft drink market is expected to grow by 4% compared to the previous year (1.55 billion cases; 104% of 2003 sales). By category, non-sugar tea drink market is assumed to have risen 15% due to a large growth of green tea, and mineral water by 13%.

Suntory's soft drink business is likely to far exceed the industry trend to reach 111% sales compared to the previous year (315 million cases).

This year Suntory has actively introduced such new products as “IEMON (reads ee-emon),” “Gaterate Extra,” and “Catechin Shiki,” while strengthening its key brands including “BOSS,” “Oolong Tea,” “PEPSI,” “Tennensui (Natural Water),” and “DAKARA.”

New green tea product “IEMON” has been strongly supported by consumers to sell over 26 million cases in 7.5 months, supposedly the largest first-year record sales for new soft drink category, and its annual sales is expected to reach 34 million cases. “Gaterade Extra” and “Catechin Shiki” also contributed to the growth.

“BOSS” released a new key line “BOSS Rainbow Mountain Blend” in September, and continued to lead a canned coffee market in each distribution channel including convenience stores to reach 101% of the previous year's total sales as the “BOSS” family. “Suntory Tennensui” brand has been marketed with a theme of symbiosis with natural environment, and is estimated to achieve 117% of the previous year's figure. “Oolong Tea” and “PEPSI” have shown a steady increase as well.

Suntory's health products business has been actively promoted through its mail order “Shizen No Chikara (Natural Power)” series. “Sesamin” series such as “Sesamin E plus” and “DHA & EPA + Sesamin E” have remarkably grown, while “Glucosamine & Chondroitin” and “Maca Cordyceps compound” maintained a favorable sales figure. Other lines popular among customers were “Arabita,” health products launched in 2003 as a result of long-term research, and “Aojiru” released in May. This year health products sales amount is forecast to increase by approximately 50% compared to the previous year.

Healthy beverage department, since its inauguration in March 2002, has been concentrated on research and development for new products with a basic concept to deliver “effective, safe, and healthy drink for daily consumption based on scientific proof.” The first release of “Flavan Tea” last November was well received by the market as a totally new type of healthy green tea with expected annual sales of 1.7 million cases.

This year marks the 20th anniversary of Haagen-Dazs Japan Inc. Every year the sales has been constantly increasing, and the 2004 fiscal year is also forecast to exceed the previous year's figure. In addition to reinforcement of quality and brand for key products, freshly introduced were mini cups such as “Custard Pudding” and “Apple Pie” as well as new category “Parfait.”

Soft drink business in China is expected to drop in sales volume compared to the previous year due to a severe price competition and other factors. Yet the second food factory in Shanghai is planned to complete next year to strengthen its production system.

<Beer & RTD (ready-to-drink) Company>

Beer market shrunk by 2 to 3 % compared to the previous year, presumably hitting the bottom in a prolonged downward trend. On the other hand, happoshu market is likely to decrease by approximately 10% due to an introduction of beer-taste new genre. The total market volume including the new genre seems to have shifted as in the previous year. Suntory's beer business is estimated to remain around 101% to the previous year including the new genre.

“Malts” underwent a renewal in April, and reassured the fact being made from quality natural water of four river systems at four beer factories. The home use (canned) after renewal is forecast to grow by close to 20 % compared to the previous year. As for happoshu, “Magnum Dry” has taken root in the market as ‘dry happoshu’ with an annual sales estimate of 14.5 million cases. “Diet” has also been widely known for its product feature “50% calories cut,” which resulted in a strong double-digit jump in sales compared to the previous year since its October re-launch. In the new genre, a June release “Super Blue” has shown a favorable shift to revise the sales plan to 2.5 times upward and the half-year sales to break 6 million cases.

Low alcohol drink market is expected to grow by 6 to 7 % compared to the previous year. Suntory's RTD business is predicted to follow the similar trend to the market with a 7% increase.

As for can chu-hi, “Calori.” has captured health conscious consumers for its features of “refreshing and fruity” flavor and “calories 50% off,” creating a new category in chu-hi. With an annual sales estimate of over 6 million cases, “Calori.” has established a solid position in the chu-hi market. A new product “Double Shibori (double flavored chu-hi)” was well received for its fruity flavor. Total can chu-hi sales is estimated to grow by some 10%. Also, a long-selling brand “Cocktail Bar” was re-launched in a variety of new products, offering a new sphere for cocktail fans.

Beer business in China has been steadily growing, and the year of 2004 followed the same favorable trend. The sales in Shanghai area increased over 10% of the previous year's figure, and the performance in Jiangsu Province also shifted upward. The beer sales total in China is predicted to reach 113% of the previous year's result.

Suntory Brewing (Shanghai) Co., Ltd. received “Excellent Enterprise Award” from Chinese Brewers Association for its quality and technology this year.

<Wine & Spirits Company>

• Whisky update

Signs of economic recovery have yet to be reflected in consumers' confidence, and liquor market remained in such an adverse condition where whisky market is expected to shrink by some 10% compared to the previous year. Suntory's whisky business also declined by the market equivalent 10%, however, while exploring to create a new whisky demand to push forward “whisky regeneration.”

Bringing a fresh image of whisky to create “new drinkers,” Suntory offered a flavorsome whisky drinking style named “Half Rock.” “Half Rock Campaign” and “Final Touch” activities at bars and clubs were actively implemented especially for young people in 20s and 30s to try “Kakubin” and “Jack Daniels.” As a result, “Kakubin (regular size)” is estimated to grow by 5% compared to the previous year.

Moreover, “single malt whisky” has been recognized as a ‘character’ liquor to increase the sales, whose demand was further stimulated through introductions of “Hokuto 12 Years” in June for beginners, “Vintage Malt” in October, and “The Owner's Cask” in November exclusively sold as in whole casks. “Yamazaki 12 Years” and other imported single malt whiskies such as “Macallan” and “Bowmore” have followed a favorable trend to result in a 20% increase in total estimated sales of the malt whisky compared to the previous year.

In May, “Hibiki 30 Years” received an honor to win the “Trophy” for the highest prize at International Spirits Challenge, an international liquor competition held in UK. Seiichi Koshimizu, Suntory chief blender, was invited to be a judge as a leading blender in Japan, and the year of 2004 turned out for Suntory and the Japanese whisky to be internationally acclaimed for its technology and uniqueness.

Suntory also released an analytical paper on ingredients for long-term aging in oak casks and other research findings at an academic congress, which contributed to a pursuit of new values in whisky for healthy life.

• Liqueur / spirits update

As for domestic liqueur, “Macadia,” released in April, has been well received especially among female consumers to create a new market called ‘New Healthy Liqueur,’ with a 15% estimated sales increase compared to the previous year.

Imported liqueur is predicted to have shifted as in the previous year. More female consumers started to enjoy making cocktails at home with their favorite liqueur, which led small-bottled liqueur sales to jump by 10% compared to the previous year. Furthermore, the existing cocktail competition was renamed and reintroduced as “Suntory Cocktail Award” to include not only professional bartenders but also non-professional participants, which resulted in over 10,000 entries from predominantly female contestants in 20s and 30s, and stimulated home sectors' demand.

Shoshu market has been expanded by 8 to 9% in total sales compared to the previous year. Korean shochu market is to grow by 7 to 8%, and type “Otsu” market to soar by 14 to 15% due to a pulling factor of Imo Jochu (potato shochu).

Suntory's shochu business is expected to increase 114% of the previous year's total sales. “Sorekara” has been consolidated as a key brand shochu carrying a new value by introducing “Imo (potato)” and “Shochu-and-water can” in addition to existing “Mugi (barley)” and “Kome (rice),” which is predicted to result in strong sales of 80% increase compared to the year before.

“Kyogetsu Green” has been supported by shochu fans for its quality derived from premier natural water of Mt. Sorak in South Korea, and the sales is expected to surpass even the upward market trend to rise by 15% compared to the previous year.

Type “Otsu” shochu is another growing segment. In addition to the 2003 release Imo Jochu “Kuromaru” and genuine Awamori “Tenryugura,” the market has responded favorably to new products introduced in March such as Soba Jochu (Japanese soba flour shochu) “Kagura no Mai,” genuine Awamori “Churajima,” and others. Imo Jochu nouveau “Kuromaru Shinshu,” released on November 1st for the two consecutive years, was also highly recognized by the market.

Overall wine market is forecasted to shrink by 5-6% in sales amount compared to the year before, while Suntory's wine business appears to maintain the previous year's level by focusing on high quality overseas wine.

(1) Value creation and proposal to offer more diversity for wine drinkers

Suntory has suggested more diversified styles for consumers to enjoy wine through a variety of brands. “Georges Duboeuf” has achieved the record sales for the November-release Beaujolais Nouveaux together with the spring edition Beaujolais and the gorgeously packaged new generation wine to reach a sales estimate of 450,000 cases (approximately 40% up from the previous year). Additionally, the US No.1 E & J Gallo Winery has actively marketed its casual wine “Rivercrest” as well as its new lineup “Redwood Creek” to promote a charm of California wine.

The Athens Olympic Games have notably raised attention to Greek wine, and “Boutari” has sold over 30,000 cases, 6 times to the previous year.
Furthermore, Suntory released a research paper on health and wine that “red wine works effectively for cataract prevention.”

(2) Consolidated activities of sparkling wine & champagne

For the growing sparkling wine segment, Suntory has proposed a daily casual use of “Freixenet” and “Cinzano” through point-of-sales activities, and has run a TV commercial for “Freixenet Baby” during its peak month of December. Affordable delicatessen sparkling wine was released in September to strengthen the product lineups. As for champagne, new brands “Perrier-Jouet” and “Mumm” joined the family in April to extend the hotels & restaurants use. Total sales figure of imported sparkling wine and champagne is expected to substantially exceed the market trend with a 40% jump compared to the previous year.

(3) Wine making in Japan

At Tomi-no-Oka Winery together with a self-owned vineyard in Yamanashi Prefecture, Suntory has devoted in making wine from 100% domestic grapes, releasing a new vintage of “Tomi,” premier Japanese red wine in November for the first time in 5 years. “Tsutaishizakaen <Chardonnay> 2002” won a special award as the top wine of the country at “Le Citadelle du Vin 2004.” In July, the Winery acquired ISO9001 in the agriculture sector as the second recipient in Japan.

Two red wine selections under “Suntory - Li Ang Zhuang Yuan” brand were released this September in Shanghai area to mark the company's wine market entry in China. The first year performance is expected to hit the target as planned.

<Food Service & Business Development Company>

Food service market has favorably shifted during the first half of the year, yet to presumably decrease by 1 to 2% compared to the previous year due to the televised Olympic Games and other effects such as typhoon. However, Suntory Group forecasts to slightly surpass the previous year's sales.

Diversified restaurants operator “Dynac Co.” has acquired 12 shops including “Tori Saisai” from Unimat Offisco Corp. in June to pursue its strategic direction through ‘selection and concentration.' “First-Kitchen Co., Ltd.” has introduced a variety of menus including pizzas and hotdogs to further expand its fast food operations. “PRONTO Corp.,” with a unique concept of ‘daytime cafe and after-dusk bar,’ has opened new branches as in the previous year. “PRONTO IL BAR,” launched at a posh multiple shopping complex “Marunouchi oazo” in September, has offered exclusive ambience as a stylish standing bar. “Subway Japan Inc.” has also developed its unique menus as a healthy sandwich fast food specialist, and the summer's limited edition “BLT Dog” has become a regular entry from autumn because of its success and popularity.

Development business of Suntory Group has been touching the ground in various fields with a theme of “health,” “nature,” and “life environment.”

A fitness club chain “Tipness Ltd.” opened its first branch in Nagoya this April to launch its business in Chubu area. Adding to favorable performances in Tokyo metropolitan and Kansai areas, four more branches cut in the market to operate in total of 37 branches with a sales estimate to exceed a 10 % rise compared to the previous year. “Suntory Flowers Ltd.” has also consolidated new lineups of stylish interior plants “Vert Vert” by utilizing its unique planting system, while being getting ready for commercial release of “Blue Rose” which was successfully developed this year.

<Overseas Company>

Singapore-based “Cerebos Pacific Limited,” a manufacturer of health food and other processed food products in Asia and Oceania, has steadily increased its sales with a favorable performance of its key health food section.

In North America, a soft drink bottler “Pepsi Bottling Ventures LLC” has acquired “Salisbury Co.,” a US-based bottling company, to expand its business.

“Morrison Bowmore Distillers Ltd.” has successfully sold its worldly acclaimed single malt whisky “Bowmore” in increased volume.

Suntory's wine business has shown a steady growth at its wineries including French Bordeaux “Chateau Lagrange” and German Robert Weil.

In December, Suntory has decided to acquire shares in “Lejay Lagoute,” a French liqueur maker.

▽ Further information:
　 Suntory Ltd.
　 (Osaka) TEL: 06-6346-0835
　 Dojimahama 2-1-40, Kita-ku, Osaka, 530-8203, Japan
　 (Tokyo) TEL: 03-5579-1150
　 Daiba 2-3-3, Minato-ku, Tokyo 135-8631, Japan
　 Suntory HP: http://www.suntory.co.jp/