Premium, highly value-added offerings remain the focus of intensive development and marketing in Suntory alcoholic beverage business in Japan and overseas. Consumer support has been strong for The PREMIUM MALT'S, YAMAZAKI, and other brands, which have grown tremendously.

As of April 2009, Suntory Limited will move to a pure holding company structure. This will promote rapid and flexible decision-making, responsive to consumption and market trends, to succeed in difficult economic conditions and despite tougher competition in the alcoholic beverage market. We are also reinforcing our framework for R&D, as we work to introduce an appealing selection for consumers.

1. Beer

Review of 2008

Growth in Suntory beer business*¹ saw a 9% increase over last year's sales volume, at 59.59 million cases. Marketing for the Suntory beer portfolio was focused particularly on The PREMIUM MALT'S. At 11.49 million cases (up 21%), this continues to be a leading brand. New-category beverage KIN-MUGI is also developing into a major brand, with a volume of 11.96 million cases, a 2.3-fold increase over 2007. Total volume in this category, which includes Jokki Nama and other brands, accounted for 26.55 million cases, up 29%.

• *1 Excluding FINE BREW low-alcohol beer.

Strategy for 2009

The premium beer market and new-category market show good potential for sustained growth, and Suntory marketing efforts will be focused on The PREMIUM MALT'S and KIN-MUGI. We are also looking to stimulate demand in the new-category market, and April will see the introduction of a new beverage in this category, The Straight. Through these efforts, we seek a target sales volume of 62.30 million cases in Suntory beer business, representing 5% growth over 2008 levels.

1. The PREMIUM MALT'S

   With a flowery aroma and rich, satisfying taste, The PREMIUM MALT'S has won many awards. As of December 2008, the beer has enjoyed constant growth for four consecutive years, compared to the same month in the previous year. Target sales volume for 2009, when the scale of the premium beer market is expected to grow by 6% to 27 million cases, is 13.2 million cases (up 15%) as we seek to secure a solid market position.
   Marketing this year will emphasize the brand's strong sales record and its exceptional taste. Coordinated marketing will include advertisements, sales promotions, and POS activities. Consumers will have more opportunities to try The PREMIUM MALT'S and appreciate the taste for themselves.

2. New-category KIN-MUGI

   Promotion of KIN-MUGI ("golden barley") will make the quality of this beverage clear. To broaden its popularity, advertisements will present an image that feels familiar, comfortable, and refreshing, and POP displays will highlight its superior quality. These efforts will help us attain the target sales volume of 12.5 million cases, an increase of 5% over 2008.

3. New-category Jokki Nama

   New flavor and packaging for Jokki Nama ("mug draft beer") will build the brand value, which draws on the refreshing taste of draft beer. Promotional items, popular last year, will continue to be offered as a way to help demonstrate brand ideals of satisfying taste and good times. A sales target of 10 million cases (96% of the 2008 level) is sought for the brand.

4. New-category The Straight

   The Straight will be introduced in early April to encourage greater demand in the new-category market, with a sales target of 6 million cases in the first fiscal year after launch. Several characteristics set this beverage apart. Dark malt is used, as is decoction brewing for fuller, richer flavor. Additionally, the highest degree of fermentation among regular Suntory new-category beverages is used, for a refreshing finish. This satisfying drink also has a slightly higher alcohol content (6%).

5. Diet Nama Clear-Taste, health-oriented happoshu

   Diet Nama Clear-Taste is being promoted as having half the calorie content, 70% less carbs, and half the purines*² but additionally, its clear, smooth, and refreshing flavor make this low-malt beverage popular. The sales target in 2009 is set at 4.6 million cases, up 11%.

• *2 Calorie and carbohydrate information is based on Standard Tables of Food Composition in Japan, Fifth Revised and Enlarged Edition, MEXT. Purine content is relative to other Suntory happoshu.

2. Spirits Business

Whisky

Review of 2008

KAKUBIN sales surpassed 2007 levels, with sales of regular 700 ml bottles in particular up 13%. Meanwhile, YAMAZAKI is now offered at more restaurants and bars serving food in Japan. Sales are up 4% here from 2007, but growth is especially strong overseas (mainly in Europe), where the whisky enjoyed a nearly 80% gain. At the International Spirits Challenge (ISC) in the U.K., HIBIKI 30 YEARS won its fourth trophy. The whisky has been distinguished with the highest honor for three consecutive years.

Strategy for 2009

In maintaining our position as a leading whisky distributor, Suntory will create more and better opportunities for people to enjoy whisky. With this as a key strategy, we will encourage greater demand and appreciation for whisky.

1. Kaku highball promotion to introduce whisky to new drinkers

   Suntory is taking the initiative in a "kaku highball" promotion targeting new drinkers. (Kaku refers to the shape of traditional, faceted rectangular whisky bottles.) Kaku highballs are a popular way to enjoy whisky every day with meals. Suntory plans to promote model environments for enjoying whisky to make the experience even more familiar to consumers, in addition to organizing kaku highball events and encouraging whisky-and-soda cocktails.

2. Showcasing the value of premium whisky

   Suntory will continue efforts to emphasize the qualities that distinguish finer whisky. Brands promoted will include single malt YAMAZAKI, HAKUSHU, and The Macallan, as well as the premier Suntory whisky, HIBIKI, and leading scotch blended whisky Ballantine's. A variety of sales promotions and publicity events are planned to commemorate the 25th anniversary of the YAMAZAKI brand in particular, and global marketing efforts are being stepped up.

Shochu

Review of 2008

Suntory shochu business grew 1% over the previous year. Sales of blended shochu such as Muginoka and Hanaimo remain strong, up 40% over 2007 and far surpassing the market trend. Honkaku potato shochu Kuromaru also enjoyed growth, buoyed by marketing that reached consumers through wider advertising and demonstrations of shochu drinks.

Strategy for 2009

Current marketing strategies underway are focused on the blended shochu and honkaku potato shochu markets. Blended shochu offers the distinctive flavors of its natural ingredients and a clean finish. Drinkers also appreciate the reasonable prices of shochu. Thus, the category has grown steadily in recent years. In addition to launching exceptional new products in line with consumer preferences, Suntory will create opportunities to introduce more drinkers to the qualities that have made Muginoka and Hanaimo favorite brands. The same marketing approach taken in 2008 for honkaku potato shochu Kuromaru will be used to build otsu-rui shochu brands, emphasizing their quality and reaching consumers through advertisements.

RTD

Review of 2008

Suntory ready-to-drink (RTD) business grew 8% over last year. In -196°C offerings, sugar-free*³ -196°C ZERO DRY has proven popular among health-conscious consumers. As a whole, the -196°C brand sold 10.68 million cases (up 85%). Calori-branded drinks with 50% fewer calories*4 also enjoyed stronger sales. The brand now dominates the market of health-oriented, low-alcohol drinks.

• *3 Zero sugar content is indicated as less than 0.5 g per 100 ml, according to official nutritional labeling standards
• *4 Compared to the average of Suntory fruit-flavored chu-hi cocktails

Strategy for 2009

Suntory RTD business for 2009 targets sales of 28.6 million cases (up 7%). The health-oriented -196°C brand and sugar-free Calori series will be joined by new HOROYOI, designed to encourage demand among younger drinkers.

1. Building two leading health-oriented brands

   Suntory intends to establish the two top brands in the market for health-oriented, low-alcohol beverages: the sugar-free -196°C series and Calori offerings. In the sugar-free -196°C series, a satisfying "double lemon" STRONG ZERO variety with an alcohol content of 8% is now available. The sales target for this brand, which includes a series with enhanced fruit flavors (kodawari kajuen) is 11.2 million cases, up 5%.
   New Calori-branded products will continue to be introduced this year, and we are pursuing a sales target of 12.6 million cases (up 2%).

2. Increased demand from the launch of HOROYOI, a "next-generation" chu-hi

   HOROYOI chu-hi, developed especially for younger drinkers in their 20s, will be launched in mid-March. Research has revealed a trend among younger generations in Japan toward lighter, sweeter drinks. With this change in drinking tastes in mind, Suntory has developed a low-alcohol chu-hi to encourage demand among younger drinkers. HOROYOI's slightly fruity flavor and low 3% alcohol content make it easy to enjoy.

Liqueur

Review of 2008

The liqueur market is growing, and Japanese plum wine in particular is a favorite of younger drinkers and women. This category is estimated to have grown about 15% over the previous year. Suntory introduced a low-calorie plum wine (umeshu ni shimasenka) in March , and this variety and others sold in cartons enjoyed tremendous growth, up 60% from 2007. Another popular brand was the imported liqueur UMESHU DE FRANCE PRUCIA, a premium French plum wine.

Strategy for 2009

The growing plum wine market will remain a focus of Suntory business. We are expanding offerings of plum wine sold in cartons and meeting demand for upscale varieties of plum wine (kodawari umeshu) with exceptional ingredients and production methods. In imported liqueur, one approach to encouraging demand will be to introduce new drinks and styles of drinking, with liqueur as the base in light martinis and liqueur mojitos.

3. Wine

Review of 2008

In Suntory wine business, sales grew by 2% year-on-year. Japanese wine currently holds a solid market share, and as consumers seek products that are safe and reliable, Suntory offerings made with organic grapes (specifically, yukisaibai budo no oishi wain) are even more appealing. Additionally, the quality and technical expertise of Suntory winemaking has been internationally recognized many times, recently with a silver medal for Tomi no oka 2005 white at the Challenge International du Vin and a trophy of excellence for Shiojiri Shinshu 2004 merlot at Les Citadelles du Vin. In sparkling wine, Suntory has been a driving force in the market, with sales (centered on Freixenet) up 10% over 2007.

Strategy for 2009

This year marks the 100th anniversary of Tomi no oka Winery, a good springboard for ongoing publicity in which we will build the brands that wineries represent. Meanwhile, as we take steps to sustain the growth of organic wine, new vintages will be released for the organic and additive-free wine market. In imported wine, we will offer a compelling portfolio across a wide range of prices to meet diverse consumer preferences: Torres, Baron de Lestac, Vina Maipo, Carlo Rossi, Gallo Family Vineyards, and others. Growth is anticipated for sparkling wine, although shifting demographics in Japan mean that more consumers enjoy sparkling wine in smaller groups or would prefer smaller bottles. Suntory will therefore introduce various bottle sizes to encourage demand while stepping up promotion, with a focus on Freixenet and Cinzano.

4. Chinese alcoholic beverage business

Review of 2008

Building successful beer brands (including new Jun Nama) at all price levels and better sales infrastructure in Shanghai and elsewhere has helped Suntory brands grow in China.

Strategy for 2009

Effective marketing investment centered in Shanghai on the leading brand (Refreshing) and premium beer brands (Fresh and Direct, Jun Nama) will enhance profitability in beer business here. Marketing efforts will also be concentrated on HIBIKI, YAMAZAKI, and Prime Blue whiskies, quickly becoming popular in Shanghai and other large cities.

5. Other overseas alcoholic beverage business

Review of 2008

Liquor business overseas remained brisk, up 20% from 2007. Suntory Aust noted positive sales of melon liqueur Midori and other offerings, Morrison Bowmore reported favorable single malt whisky sales, and Louis Royer enjoyed significant gains in cognac exports to China.

Strategy for 2009

Morrison Bowmore will continue marketing efforts focused in growing European and North American markets, promoting Bowmore and other single malt whiskies. Suntory Aust seeks ongoing growth in Australia while expanding business in the larger regional market of Southeast Asia. Finally, Louis Royer will promote cognac, liqueurs, and other offerings in premium brands that represent superior quality.