No.9673   January. 23. 2007

Beverage and Food Company Strategy for 2007

In 2007, Suntory Limited Beverage and Food Company will continue expanding business aimed at sustainable growth and greater profitability as cited in our medium-term management vision.

Despite an anticipated decline in the scale of the domestic food market in general from a lower birthrate, a greater proportion of seniors, and other factors, Suntory is firmly promoting food business at home and abroad. In particular, soft drinks and health foods in China and Southeast Asia are targeted for business growth, for which we are committed to increasing sales significantly.

In Japan, we are working to strengthen brand recognition of mega-brand products, such as IEMON, Oolong Tea and BOSS, as we develop more diversified business encompassing premium foods designed with health in mind (such as Kuro Oolong Tea) as well as chilled food and other offerings in new product categories.

1. Beverage and Food Business
2. Health Food Business
3. Overseas Food Business
4. Häagen-Dazs Japan, Inc.

• Review of 2006
The soft drink market in 2006 was estimated at 1.6 billion cases, representing a 1% dip from the previous year. Despite this, Suntory worked to build stronger brands in core offerings, including IEMON, Oolong Tea, BOSS, DAKARA, Tennensui and PEPSI, while introducing new products such as Kuro Oolong Tea. Meanwhile, Suntory cold drinks sold well, notably, Starbucks Discoveries premium iced coffee. As a result, sales of 323.8 million cases (equivalent to last year's level) were recorded in Suntory soft drink business.

• Strategy for 2007
Competition in the soft drink market is expected to intensify, particularly in unsweetened tea and coffee.
Suntory is focused on further increasing sales and expanding market share by developing and strengthening key brands, including IEMON, Oolong Tea, BOSS, DAKARA, Tennensui and PEPSI, as we introduce new offerings.
The sales target this fiscal year is 336 million cases, up 4% from last year and 4% above the overall market level.

• Review of 2006
Sesamin E Plus, Glucosamine & Chondroitin, and other supplements proved popular and helped this business reach 27 billion yen in sales, up 17% over fiscal 2005.

• Strategy for 2007
Suntory will further develop and strengthen the Sesamin series and related product lines. Continued investment will introduce new health food products that meet consumer needs. The sales target this year is 29 billion yen, a 9% increase over the previous year.

• Review of 2006
In soft drink business in China and Taiwan, new marketing campaigns for varieties of oolong tea, stronger sales of new products, and increased juice consumption led to total sales of approximately 6 million cases, up 17% year-on-year. Sales were also favorable in Singapore at health food and processed food manufacturer Cerebos Pacific Limited, and on the east coast of the United States at soft drink bottler Pepsi Bottling Ventures, LLC.

• Strategy for 2007
The coming year will see a renewed effort to build brand recognition through aggressive marketing focused in the Shanghai area. The sales target this fiscal year in soft drink business in China and Taiwan is more than 7 million cases, for 22% growth year-on-year. In addition, business expansion is planned on the U.S. east coast, in Singapore, and elsewhere.

• Review of 2006
Sales surpassed the previous year's level, buoyed by the popularity of core products such as mini ice cream cups in vanilla and strawberry flavors, as well as the launch of affogato and crispy ice cream sandwiches in royal milk tea flavor, among other new offerings.

• Strategy for 2007
Häagen-Dazs Japan will continue to focus on building brand recognition, improving quality, and developing new offerings. Working for stronger brand appeal, the company will introduce products in new categories, following on success with crispy ice cream sandwiches and parfaits.