No.9324   2006. 1. 10

Suntory Alcoholic Beverages Company Strategy for Fiscal 2006

In September, Suntory Limited integrated its two alcoholic beverage companies—Beer & RTD (Ready-to-Drink) and Wine & Spirits—enhancing its position in the marketplace as an all-around alcoholic beverage maker and enabling Suntory to react more quickly to market trends and consumer needs.
For fiscal 2006, Suntory will expand its activities, focusing on the marketing of its premium high value-added products—The PREMIUM MALT’S, HIBIKI and YAMAZAKI.

1. Beer
• Review of Fiscal 2005
The market in 2005 saw a more than three-fold year-on-year sales increase in so-called “third beers,” while the beer market shrank by about 8% and the happoshu market fell by 25%, an overall decrease estimated to be about 3%. Suntory’s sales reflected the market as a whole.
Despite this, in June, The PREMIUM MALT’S received the Monde Selection Gold Medal, the first time a beer from Japan has received the honor, bringing with it high praise for the beer’s quality and sales of 1.26 million cases—an increase of more than two-fold over fiscal 2004.

• Strategy for Fiscal 2006
While the beer market will likely fall short of its 2005 levels, Suntory will continue to expand on last year’s sales of The PREMIUM MALT’S, working to establish a premium market. With a “growth strategy focused on our key brands,” Suntory has set a target to move 54.5 million cases of beer products in fiscal 2006, a 105% increase over 2005.

1) Using The PREMIUM MALT’S to create a new premium beer market
Suntory will pursue an aggressive marketing campaign centered on The PREMIUM MALT’S the brand that symbolizes the high quality of Suntory beer. Under the slogan “Spend a world-class weekend with a world-class beer,” Suntory hopes to attract consumers by showcasing the high quality and great taste of The Premium Malt’s. The sales goal for fiscal 2006 will be 5 million cases, a 398% increase over fiscal 2005.

2) A new strategy for Malt’s
In honor of the 20th anniversary of our flagship Malt’s brand beer, Suntory will improve the beer’s image and quality under the name Tennensui Nama Beer Malt’s (Malt’s natural water draft beer). The release of the new beer will be preceded by television advertisements and a large-scale tasting campaign, with the aim of increasing our customer base and raising sales to 16.5 million cases, up 103% over fiscal 2005.

3) Jokki Nama strategy
On February 21, Suntory will roll out its new Jokki Nama (mug draft beer), a so-called “third beer.” Brewed with ingredients produced using our corn brewing technology, Suntory has successfully perfected the “crisp and refreshing” flavor for which third beer drinkers have been searching. Through an aggressive marketing campaign, including widespread tastings and television commercials prior to the release of Jokki Nama, we hope to move 15 million cases in fiscal 2006.

2. Western liquors
• Review of Fiscal 2005
While the Western liquor market as a whole fell more than 2 percent on a year-to-year basis, Suntory saw a 101 percent rise over fiscal 2004, outperforming the market.
Whisky sales for the industry were down by about 3% over the previous year, but aggressive marketing resulted in growth for Suntory’s whiskies, especially for our HIBIKI blended whisky and YAMAZAKI single malt whisky, which outsold the previous year. Sales of Suntory’s imported single malt whiskies were up 20%, thereby pulling up the market as a whole. In May, HIBIKI 21 Years Old and YAMAZAKI 18 Years Old each took gold medals at international competitions, earning high praise overseas for Suntory’s distilling techniques. On the liqueur front, Suntory saw a more than 20% expansion over Fiscal 2004.

• Strategy for Fiscal 2006
As Japan’s top Western liquor company, Suntory will work to further invigorate the market in fiscal 2006.
With the whisky market bottoming out and finally beginning to show signs of recovery, Suntory will continue to work to entrench whisky in the market, eyeing an increase in sales over fiscal 2005. By anticipating the consumption habits of consumers, who tend to prefer either premium or economy whiskies—not mid-range whiskies—Suntory will focus its efforts on stimulating demand for our premium whiskies by promoting HIBIKI, our top whisky, and YAMAZAKI, recognized worldwide as the leading Japanese Single Malt, under the slogan “the world of refined whiskies for adults.” At the same time, we hope to further expand the single malt whisky market, highlighting the charm of the individual characters of our imported whiskies, including The MACALLAN, BOWMORE and Glenfiddich.
For fiscal 2006, Suntory also plans to further stimulate household demand for our liqueurs, including LEJAY-CASSIS, KAHLUA and CAMPARI.

3. Shochu
• Review of Fiscal 2005
Overall, the shochu market was in line with sales in fiscal 2004. Sales of Suntory shochu were up by 105% in 2005. Suntory’s KYOGETSU brand shochu, in particular, showed steady growth. Sales of 5.18 million cases—a year-on-year increase of 112%—firmly established it as Japan’s No. 1 Korean shochu.

• Strategy for Fiscal 2006
Amid the continuing popularity of KYOGETSU, Suntory will mark the shochu brand’s 10th anniversary in fiscal 2006 with special campaigns and promotions, working to further increase its selling power. We will also implement a marketing campaign for the wide range of products that only Suntory can offer.

4. RTD
• Review of Fiscal 2005
The low-alcohol beverage market grew an estimated 4% in fiscal 2005 over the previous year. Suntory’s fresh fruit chu-hi, -196ºC and Calori, a line of chu-hi for health-conscious consumers, played a large part in the 17% increase we had over the market. Released in May, --196ºC created a new level of fresh fruit chu-hi. Meanwhile, Calori, with half the calories of regular chu-hi, attracted consumers worried about health issues, bringing a year-on-year increase of more than 20%, and cementing the brand’s image as a “healthy chu-hi.”

• Strategy for Fiscal 2006
As the low-alcohol beverage market is expected to continue to expand several percentage points in fiscal 2006, Suntory plans to strengthen its position in the market by focusing on its key products in this line, -196ºC and Calori. With a proposed new added-value product for the chu-hi line, Suntory has set a target of a 114% increase over fiscal 2005, to 25 million cases. Suntory will also work in fiscal 2006 to create new chu-hi brands and further develop existing ones.

5. Wine
• Review of Fiscal 2005
In fiscal 2005, Suntory saw its wine sales fall 5% to 6% over the previous year, in line with the market as a whole.
We aimed to further introduce wine into the lives of our customers with such brands as RIVERCREST wine from California and Georges Duboeuf Beaujolais Nouvelle. Suntory also pursued an aggressive marketing campaign throughout the year in the expanding sparkling wine and champagne market, which saw a healthy growth of 3% over fiscal 2004.

• Strategy for Fiscal 2006
In addition to boosting our efforts in the expanding market, Suntory will aggressively work to bring wine more into our customers’ lives. Also, while working to further cultivate and strengthen its high-quality line of wines from around the world, Suntory will continue to promote the quality of Japanese wines. In the growing market for sparkling wine and champagne, Suntory plans to stimulate further demand throughout the year, centering its efforts on Freixenet, CINZANO, G.H. MUMM and PERRIER JOUET. While continuing to fully support imported wines, such as RIVERCREST and Georges Duboeuf, Suntory will also work to gain international acceptance for Japanese wines, centering its campaign on the Tomi no Oka winery, which grows 100% of the grapes it uses in its own vineyard.

5. Asian, Chinese beer and liquor
• Review of Fiscal 2005
As demand for beer continued to grow in China, Suntory continued its aggressive push into the market. In January, we gained an even stronger foothold in the Shanghai area with the purchase of Shanghai Donghai Beer Co., giving Suntory a more than 50% market share. In fiscal 2005, Suntory experienced a more than 50% growth in China’s beer market.

• Strategy for Fiscal 2006
For fiscal 2006, Suntory will continue to market a wide range of products in China, particularly in the Shanghai area, ranging from high-end premium beers to beer products from the standard and economy lines. We aim to increase the standing of our premium brands, focusing on the already-existing Jun-Nama line and our commercial premium beer, SUNTORY Premium Draft, which we began offering in fiscal 2005.