No.9009   2005. 1. 20

Suntory “Food Company” policy for 2005

1. Review of 2004

2. “Food Company” policy for 2005

1. Food business
Soft drink market in 2004 appears to have hit 1.56 billion cases or 4% up from the previous year due to the summer heat wave. By category, non-sugar tea drink, which experienced a sharp increase of green tea drink, is assumed to have grown by 15%, and mineral water market by 13%.

Suntory's soft drink business reached a sales record of 315 million cases (111% of the year before) far exceeding the market figure. New products such as ”IEMON,” “Gaterade Extra,” and “Catechin shiki” were actively introduced to the market, along with strengthening the key brands including ”BOSS,” “Oolong Tea,” “PEPSI,” “Tennensui (or Natural Water),” and “DAKARA.”

2. Health food business
Health food business has been vigorously promoted via its mail order ”Shizen No Chikara (or Natural Power)“ series. ”Sesamin” series have remarkably increased, while ”Glucosamine & Chondroitin” and “Maca Cordyceps compound” continued to show favorable results. ”Arabita,” health food developed after a deliberate research, and "Aojiru,” newly released in May, were also well received by customers. In result, the health food business achieved a 50% rise compared to the previous year.

3. Health drink business
Health drink business, since its inauguration in 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 “Suntory Healthy Green Tea: Flavan Tea” in November 2003 was highly praised by health conscious consumers to sell 1.6 million cases last year.

4. Food Asia / China business
Soft drink business in China resulted in a decrease compared to the previous year due to its severe price competitions and other factors. However, the company carried out an entry to the Beijing market as well as a construction of the Shanghai second factory to be completed this spring to strengthen its production system and area coverage.

5. Haagen-Dazs Japan Inc.
Haagen-Dazs Japan Inc. has increased its sales steadily to exceed the previous year's figure in 2004. In addition to reinforcement of quality and brand, mini cups such as “Custard Pudding” and “Apple Pie” and a new line “Parfait” were highly supported by customers.

Suntory Food Company offers a wide range of products from soft drink and ice cream to health food, providing customers with food and drink selections to casually enjoy and/or enhance healthy life.

In 2005, Food Company will consolidate the key brands, while releasing new products to create fresh values in response to customers' needs together with the R&D team.

1. Food business
This year the soft drink market is expected to drop slightly below the previous year's level (97% of the year before) due to the weather factors. Therefore, the competition is likely to become even severe especially in non-sugar tea including green tea drink and coffee. Suntory strives for a further sales increase and share expansion with a tag line of “2005 BRAND - NEW SUNTORY” to foster and strengthen the brands like ”BOSS,” “Oolong Tea,” “IEMON,” “DAKARA,” “PEPSI,” “Tennensui,” and “DAKARA,” actively extending a variety of campaigns. In 2005, Suntory targets to sell 322 million cases or 102% of the previous year's figure, up by 5% from the market level.

▼ [BOSS]
- Continuing to offer attractive selections including Rainbow Mountain Blend
”BOSS,” beloved as ”professional men's partner coffee,” underwent another dynamic evolution throughout the previous year. Last September's new release “BOSS Rainbow Mountain Blend” was the biggest hit among “BOSS” new lines owing to customers' support, which contributed to achieving 60 million cases or 101% of the total “BOSS” sales compared to the year before. In 2005, “BOSS” will further propose a variety of attractive selections including Rainbow Mountain Blend in order to reach out to more supporters in a personal touch. In response to customers' needs, “BOSS” will expand its product lineups to introduce a new family with “clear-cut characters,” exploring the world of canned coffee. Starting February, “Look for the Treasure of Rainbow Mountain! Campaign (see news release No. 8978)” will kick off this year's promotional activities and advertising campaigns. “BOSS” targets to sell 62 million cases (103% of the previous year's figure) in 2005.

▼ [Oolong Tea]
- Celebrating the 25th anniversary. Proposing new taste.
This year marks the 25th anniversary for “Oolong Tea,” which has been long supported as a standard brand in all occasions among cross-bordered customers for its “tasteful body and astringency”. In the highly competitive non-sugar tea market, “Oolong Tea” in 2005 will return to the origin to pursue for “the unique taste of oolong tea” and create a new sphere. Adding to the existing standard line popular for ‘deep body and sharpness,’ “Oolong Tea On'incho” with rich fragrance and soft taste will join the family to introduce a fresh relish of “Oolong Tea.” Furthermore, eye-catching campaigns and advertisement will be implemented to communicate tasty features of “Suntory Oolong Tea.” The sales target of “Oolong Tea” in 2005 is set to 52 million cases or 103% of the previous year's result.

▼ [IEMON]
- The second year in market. Challenging for 5 million cases.
”IEMON,” released last March, is an authentic green tea using the leaves exclusively chosen by a tea master from a long-established teahouse “Fukuju-en” in Kyoto with over 200 years of history. With its carefully selected water and making process, “IEMON” received considerable market praise to achieve 26 million cases in 7.5 months, supposedly the record first-year sales for soft drink new release, selling 34.2 million cases in 2004, which can be converted to 45 million cases of an annual sales equivalent. This year the activities to expand its spheres are expected to take place. First, a new lineup of 350ml pet bottles will be released to make “IEMON” easier to accompany in all occasions. In addition, a popular TV commercial will continue to run featuring a celebrity Masahiro Motoki, as an established teahouse owner, and an actress Rie Miyazawa, as his wife. “IEMON”'s quality tea making and pursuant for the best will be communicated through various forms in advertisement. This year “IEMON” is targeted to sell 50 million cases or 146% to the year before.

▼ [DAKARA]
- Targeting for No.1 position in “daily health drink“
A standard brand in functional beverage “DAKARA,” since its release in 2000, has been supported by a wide range of customers as “daily health drink.” In an effort to consolidate its position in the category, “DAKARA” will be re-launched with a new content and package this year. Calcium, magnesium, and dietary fiber will be increased, of which the Japanese tend to be short as indicated in a national nutrition research. A new bottle will be used in the packaging for its “secure and healthy image” as well as fresh “evolution.” Advertising campaigns will be renewed to feature “the Japanese and Health” as a theme to push forward “DAKARA” characteristics. Moreover, sampling and various promotional activities will continue to be implemented at medical institutions and other locations. This year “DAKARA” is set to target for 28 million cases or 128% of the previous year figure.

▼ [PEPSI]
- Introducing “New PEPSI Twist” and “New Diet PEPSI Twist”!
PEPSI in the year 2005 will re-launch its contents and packaging with a theme of “more refreshing!” The family will welcome powerful additions of new “PEPSI Twist” and “Diet PEPSI Twist” with more refreshing taste to balance cola and increased lemon juice. Using the worldwide new PEPSI logo, the packaging will consolidate its refreshing feel as well as appealing its established position and new appearance.
This year PEPSI will throw fun and fresh advertisement to convey new charms of “New PEPSI Twist” and “New Diet PEPSI Twist,” actively implementing attractive “PEPSI” promotional campaigns to aim for 24 million cases or 104% of the previous year' sales.

▼ [Tennensui (or Natural Water)]
- Protecting environment around water source for everlasting safe natural water
”Suntory Tennensui” brand supports the activities to protect natural environment surrounding water source, delivering “pure, safe, and good” natural water to customers. The year 2005 will be another reinforcement to promote activities introducing majestic nature and small creatures around Japanese Southern Alps and Aso through labeling, campaigns and advertisement. “Suntory Tennensui <Southern Alps> 2 litters pet bottle” will be re-launched in a newly adopted UD or universal design “finger pocket bottle” to be carried along more easily. This year “Suntory Tennensui” is targeted to sell 26.3 million cases or 105% compared to the year before. Furthermore, mineral water business as a whole will consolidate the brand presence through a product re-launch and various campaigns for “100% Shinsosui (or Deep Seawater),” “Vittel,” “Contrex,” etc.

2. Health food business
Health food business in 2005 will continue to push forward the mail order "Shizen No Chikara“ series. Existing "Sesamin” series, “Arabita,” and “Maca Cordyceps compound” will be reinforced, while new products matching to consumers' needs be injected. In addition, sampling and advertising activities will be vigorously implemented to convey the features of the health food lineups more effectively to wider ranging consumers. This year's sales target is set as a 20% rise compared to the previous year's business.

3. Health drink business
Health drink business in 2005 will be expanded through the popular brand “Healthy Green Tea: Flavan Tea,” consolidating its position in the healthy tea market. In order to reach out to more customers, more active advertising and other communication campaigns will be implemented. Also, the R&D team will continue to pursue a new product development based on scientific proof, releasing “Mizumizu-shia” in March as the first water lineup with a function in blood sugar level control for a special health care food category.

4. Food Asia / China business
Soft drink business in China places the year 2005 as a “turnaround” for development, along with the Shanghai Second Factory's launch this spring. The marketing activities will be strengthened through Oolong Tea to aim for 8.5 million cases or 198% of the previous year sales in greater China especially around Shanghai and Beijing.

5. Haagen-Dazs Japan Inc.
Haagen-Dazs Japan Inc. will consolidate its branding and new product development, while improving the quality. As for branding, the company will push forward advertising campaigns, event implementation, attractive shop designing, and shop layout revisions for fun shopping. New product development will be directed in such a major category as mini cups and crispy sands. In order to improve quality, an assurance system will be strengthened in all processes from material procurement through a delivery to customers. The company is committed to provide customers with products to their satisfaction.