No.9664   January. 11. 2007

Alcoholic Beverages Company Strategy for 2007

Suntory Limited has firmly promoted the product development and marketing of premium, high-value-added domestic and international offerings since the establishment of the Alcoholic Beverages Company in 2005. In response, consumers have supported The PREMIUM MALT'S, HIBIKI, YAMAZAKI, and our other exceptional drinks, and our brand recognition has grown tremendously.

2007 will see Suntory leveraging core competencies in the alcoholic beverage business as a whole, with greater marketing of beer, whisky, shochu, low-alcohol beverages, wine, and other premium drinks, as we work to bring customers an appealing, high-quality selection.

1. Beer
2. Western liquors
3. Shochu
4. RTD
5. Wine
6. Chinese and other Asian beer and liquor

• Review of 2006
The PREMIUM MALT'S enjoyed outstanding sales at 5.5 million cases, a 4.4-fold increase over last year's level. This contributed to the total of 53.02 million cases (3% growth year-on-year) in Suntory’s beer business, in contrast to a general decline in this market.

• Strategy for 2007
The PREMIUM MALT'S will continue to be highlighted in marketing campaigns to secure a solid market position. Aggressive marketing will also target MALT'S, Jokki Nama (mug draft beer), and other key brands. These efforts are aimed at total sales in Suntory’s beer business of 55 million cases (4% growth year-on-year).

1. Striving for 13 million cases in annual sales for The PREMIUM MALT'S
The scale of the premium beer market in 2007 is expected to grow to 30 million cases, and Suntory is pursuing sales of 13 million cases (up 140% from last year) for The PREMIUM MALT'S to make this the leading premium beer brand.

2. MALT'S brand strategy
Since its introduction in 1986, MALT'S has been acclaimed as a rich and satisfying beer, with the taste only an all-malt beer can offer. Measures to make this beer the best it can be will help it attain an even higher position in the regular beer market.

3. Jokki Nama strategy
Reinforcing the brand image for this satisfying, enjoyable beverage will secure a solid market position for Jokki Nama. Consumers can also look forward to enjoying additions to this refreshing and fun line, such as the popular Jokki "Dark Taste," launched last year.

• Review of 2006
In the Suntory whisky business, premium whisky gained 10% over last year's level. HIBIKI, YAMAZAKI, and HAKUSHU have won awards worldwide, establishing Japanese whisky as a serious contender in the international arena. Meanwhile, imported single malt whiskies such as The MACALLAN and BOWMORE made even greater gains, up 23% from the previous year.
In the Suntory liqueur business as well, household demand is growing, and sales surpassed 2005 levels.

• Strategy for 2007
As a leading source of Western liquors in Japan, Suntory will continue educating consumers about the rich heritage of Western liquors and fostering an appreciation for them among Japanese consumers.

1. Stimulating demand for premium whisky
Suntory will take many approaches to convey to consumers the distinctive appeal and exceptional quality of the premier Suntory whisky, HIBIKI, as well as YAMAZAKI and HAKUSHU, Japanese single malts that are internationally renowned, and imported single malts including The MACALLAN.

2. Further promotion of The SUNTORY OLD and KAKUBIN
In Japan, whisky became popular domestically as baby boomers came of age and continued to enjoy it throughout their working lives. The generation that grew fond of this drink is now entering the retirement years. Launched last year, The SUNTORY OLD is promoted as a whisky baby boomers will appreciate, and this year, more prominent advertising campaigns will celebrate the 70th anniversary of KAKUBIN, both efforts intended to stimulate the whisky market.

• Review of 2006
As a whole, Suntory shochu business rose 3% over last year's level, surpassing the market trend. Domestic blended shochu in particular enjoyed tremendous growth, with sales up 30% year-on-year. Sales were steady for continuously distilled "ko-rui" shochu, including the leading Korean shochu in Japan, Kyogetsu, and other popular brands such as Juhyo. At the same time, pot-still distilled "otsu-rui" shochu, such as Yaemaru, marked significantly higher sales than last year.

• Strategy for 2007
In ko-rui shochu, Suntory will aim for even greater brand recognition for Kyogetsu and Juhyo. Meanwhile, additional otsu-rui shochu offerings will be developed in line with consumer preferences. Stronger sales of domestic blended shochu, which continues to gain popularity, are also part of this strategy.

• Review of 2006
Suntory's ready-to-drink (RTD) business grew 4% over last year. Sales are up for the -196°C brand, and the Calori brand has gained 20% year-on-year. At the same time, the Ginza Cocktail (introduced last September) has already won appreciation for selections brimming with fruit flavors.

• Strategy for 2007
Core brands such as -196°C and Calori will be joined by premium offerings such as the Ginza Cocktail in an effort to sell 23.8 million cases, 5% over the 2006 level.

• Review of 2006
Suntory’s wine business also enjoyed year-on-year growth. Notably, sparkling wine as a whole (including champagne) was up 20%. Sales were steady in imported wine, including Georges Duboeuf and Torres offerings, as measures were taken to bolster these brands. Making a debut last year in Japanese wine was Tomi no uta, produced exclusively from domestic grapes.

• Strategy for 2007
Suntory will stimulate new demand in sparkling wine throughout the year, focusing on Freixenet and POMPADOUR. In imported wine, consumers will enjoy a generous offering of many brands as part of the value Suntory represents. For domestic wine, campaigns will highlight the quality of Japanese wine, as represented by the Tomi, Tomi no oka, and Tomi no uta vintages. Promotional events are also planned to celebrate the centennial anniversary of Akadama.

• Review of 2006
With the acquisition in June of Shanghai Foster's Brewery, now Suntory Brewing (Shanghai) Co., Ltd., the Suntory Group attained a nearly 60% share in the Shanghai market and is in an excellent position for growth. The overall beer business in China was up 15% over the previous year.

• Strategy for 2007
Alcoholic beverages in all price ranges from low-cost to premium drinks will be offered in the Shanghai area and elsewhere, and marketing efforts for our wide selection will help attain sales 11% over the level of last year in the China beer business as a whole.