In alcoholic beverage business in Japan and overseas last year, Suntory Liquors Limited and Suntory Wine International Limited encouraged new demand through promotion and marketing efforts emphasizing qualities that distinguish the Suntory portfolio, focused on The PREMIUM MALT'S, KAKUBIN, and other leading beverages.

2010 is likely to bring greater competition to the domestic alcoholic beverage market. For sustainable growth and greater profitability, Suntory will maintain ongoing marketing in many categories (beer, whisky, low-alcohol beverages, and wine) as we offer consumers an appealing, high-quality selection. Meanwhile, building the foundation for profitability in the overseas alcoholic beverage market will be a goal as we implement global strategies of the Suntory Group as a whole.

1. Beer

Review of 2009

The overall market for beer, happoshu, and new-category beverages is seen as contracting by a few percent relative to 2008. But despite an approximate 7% decline in the beer market and 16% decline in the happoshu market year-on-year, the new-category market expanded tremendously, by about 20%.
Total sales volume in the beer business of Suntory Liquors Limited*¹ was in line with the overall market trend, at 57.73 million cases (down 3%). In contrast, 12.66 million cases of The PREMIUM MALT'S was sold, in part buoyed by concerted marketing activities. This represents 10% growth year-on-year. KIN-MUGI ("golden barley") also significantly topped 2008 results, at 16.84 million cases (up 40%), driving a sales volume of 29.96 million cases (up 13%) in new-category beverages as a whole.

• *¹ Excluding FINE BREW and FINE ZERO low- and non-alcohol beer.

Strategy for 2010

The market in general is expected to continue declining in 2010, perhaps dropping by about 2% from the 2009 level. In the premium and new-category markets in particular, Suntory marketing efforts will be focused on The PREMIUM MALT'S and KIN-MUGI. February will see an updated release of Jokki Nomigotae Karakuchi Nama (with satisfying, dry mug draft beer taste), followed in March by a new zero-carb offering called Relax, made with seven types of hops, in a move to stimulate further demand in the new-category market. Through these efforts, we seek a target sales volume of 60 million cases in Suntory beer business, representing 4% growth over 2009 levels.

The PREMIUM MALT'S

Anticipating that the scale of the premium beer market will stand at 25 million cases, we plan to promote the exceptional taste that has earned The PREMIUM MALT'S Grand Gold Medals*² to reach our target sales volume of 15 million cases (up 18%), securing a solid position in this market.

• *² Winner of the Grand Gold Medal in a beer category for three consecutive years (2005–2007) at Monde Selection, an international food and beverage competition

2. Spirits

Whisky

Review of 2009

With the whisky market as a whole estimated to have gained about 10% over the previous year, whisky of Suntory Liquors Limited has driven market growth, climbing 14% and surpassing the market trend.
2009 saw a concerted effort to provide more points of contact for consumers to enjoy whisky in the following strategies.

1. Greater home and on-premise consumption of whisky-and-soda Kaku highballs using KAKUBIN

2. Development of inviting model environments serving whisky (in Kaku highballs or drinks with HIBIKI 12 Years, for example), such as the Tokyo establishment Anthemble

3. Showcasing the value of premium whisky

To promote Kaku highballs in off-premise consumption, ongoing sales campaigns were held at liquor stores and other points of sale while new RTD offerings were developed. To promote on-premise consumption, Kaku highball servers (similar to beer taps) and newly developed keg products were employed to enlarge the network of establishments serving KAKUBIN, and ways to prepare and enjoy satisfying highballs were promoted. Highballs in particular have made whisky more familiar to those in their twenties and thirties. As a result, sales of KAKUBIN are up 31% year-on-year, and it has become a driving force in the resurgence of whisky.
As the 25th anniversary of the launch of YAMAZAKI whisky was celebrated, special limited-time offerings were marketed in Japan and more events were held to introduce the quality of this whisky, which helped push sales up 7% from 2008. Overseas, YAMAZAKI has won acclaim at spirits competitions in the homeland of whisky in Europe and elsewhere. Sales grew some 30% year-on-year. Meanwhile, HIBIKI 12 Years was launched in May in Europe followed by a launch in September in Japan, and sales are growing faster than expected in both markets. In imported whisky, The Macallan and Bowmore single malt whisky remained mainstays of the Suntory portfolio.

Strategy for 2010

As a leading whisky maker and distributor, Suntory will work to expand the popularity of highballs and help establish the drink as more than a passing trend while continuing efforts to highlight the qualities of finer whisky. The sales target in 2010 is set at 10% above the 2009 level.

1. Creating more opportunities to enjoy whisky-and-soda highballs, making them a regular favorite

   A variety of whisky will be used in highballs, not only KAKUBIN but YAMAZAKI, HIBIKI, and others. The fun and flavor of highballs will be promoted to satisfy a wide range of tastes. More points of contact for people to enjoy highballs will be created in an effort to make the pleasures unique to whisky more than a passing trend. In on-premise scenarios, we will be encouraging bartenders and others to suggest whisky drinks as the first choice of the evening, and in off-premise scenarios, we will recommend ways to enjoy whisky with meals, both part of our attempt to expand the whisky market.

2. Showcasing the value of premium whisky

   So that a wider audience can appreciate the unique allure of premium whisky, we will be holding educational events and reaching out through promotional media to build brands, focusing on YAMAZAKI, HAKUSHU, The Macallan, Bowmore, and HIBIKI single malt whisky (the pinnacle of the Suntory portfolio), mainstay premium scotch whisky Ballantine's 17 Years, and others. Meanwhile, we will be expanding our presence in the gift market, providing special offerings for those who wish to give the gift of premium whisky to a special recipient. In Europe (where Suntory whisky has gained renown through spirits competitions) and elsewhere, we will also be stepping up marketing efforts and publicizing Suntory whisky more than before.

RTD

Review of 2009

Overall, the low-alcohol beverage market is seen as growing 5% over the previous year, but Suntory ready-to-drink (RTD) business topped this with an 11% gain. In -196°C beverages, -196°C STRONG ZERO, a variety without sugar*³ and slightly higher alcohol content (8%) announced in February, proved popular and helped bring the brand total to approximately 14.5 million cases (up 36%).
Meanwhile, for lighter HOROYOI chu-hi, introduced in March with lower alcohol content (3%), we have launched horo-yoi.com as a forum for communication about the beverage, and the site has been popular with younger generations.

• *³ Less than 0.5 g per 100 ml, according to official nutritional labeling standards

Strategy for 2010

Stepping up promotion of the two leading health-oriented brands—zero-sugar -196°C and health-conscious Calori—and encouraging greater demand through brands that satisfy new preferences such as HOROYOI will help us attain our sales target of 31.1 million cases (up 5%) in the RTD category.

Liqueur

Review of 2009

The liqueur market expanded slightly in 2009, and sales in the Suntory portfolio rose nearly 10% year-on-year through cocktail advertising campaigns inviting younger generations and women to enjoy cocktails at home, as well as on-premise events introducing cocktails. As the plum wine market is seen as expanding by 10% over 2008, Suntory sales grew tremendously, at nearly 30%. Suntory low-calorie plum wine (Umeshu ni Shimasenka) in particular is up 220% from 2008, and this variety and others in cartons are quite popular.

Strategy for 2010

To encourage greater off-premise cocktail demand, stronger marketing efforts focused on enjoying cocktails at home will be conducted. New offerings will be developed with women in mind. In on-premise promotion, patrons will be introduced to cocktails and bartenders will have opportunities to demonstrate their skill and creativity in cocktails at sponsored cocktail competitions to enhance demand.
In the growing plum wine market, we will build brand value in boxed plum wine, launch new, high-quality offerings, and conduct ongoing marketing campaigns.

Shochu

Review of 2009

The slight dip in the shochu market was reflected in Suntory sales, which were down 1% year-on-year. However, sales of Suntory domestic ko-otsu blended shochu defied this trend. Popular Muginoka and new on-premise offerings Wanko and Nanko contributed to an impressive 30% gain year-on-year. In continuously distilled "ko-rui" shochu, special limited-time offerings of Kyogetsu varieties, sales campaigns, and ongoing marketing led to growth of 2% over the 2008 level.

Strategy for 2010

In anticipation of ongoing growth in domestic ko-otsu blended shochu, we will focus efforts on Muginoka, Wanko, Nanko, and similar brands, inviting consumers to enjoy shochu not only at home but at establishments. With a broader range of consumption scenarios in mind, we will be introducing more consumers to the pleasure of shochu. Additionally, refinement and updating of honkaku potato shochu Kuromaru will help build otsu-rui shochu brands.

3. Other overseas alcoholic beverage business

Review of 2009

Despite the shadow cast by the global economic recession, sales of Midori liqueur and other beverages by Suntory (Aust.) Pty. Limited made gains, matched by European sales of the single malt whisky Bowmore by Morrison Bowmore Distillers Limited, contributing to growth in overseas business. In beer business in China, efforts have paved the way for more efficient marketing, and other initiatives are underway to provide a solid basis for business.

Strategy for 2010

Building the foundation for profitability in the overseas alcoholic beverage market will be a goal as we implement global strategies of the Suntory Group as a whole.
Suntory (Aust.) Pty. will seek expanded sales of Midori and other liqueurs, intent on further growth. In Europe and North America, where sales continue to be favorable, Morrison Bowmore Distillers Limited will step up marketing for Bowmore and other single malt whisky. Meanwhile, Louis Royer S.A.S. will be pouring effort into expansion of premium brands of cognac, liqueur, and other offerings.
In Chinese beer business, ongoing marketing will be conducted in Shanghai and elsewhere as we continue to build a strong foundation for local business. In conjunction with this, the acquisition of ASC Fine Wines (one of the largest wine importers and distributors in China) has enabled greater expansion into the surging domestic wine market and secured Suntory distribution channels. We will be looking to enlarge Chinese operations as a whole.

4. Wine

Review of 2009

Sales generally remained level in the 2009 wine market, but the wine business of Suntory Wine International Limited marked a 3% increase in sales volume.
In domestically produced wine, a limited offering (Tomi Réserve Spéciale) was launched to commemorate a century of winemaking at Tomi no oka Winery, and a forward-looking project was organized to enhance the quality of Japanese wine over the next 100 years, in which Suntory worked more closely with Domaines Barons de Rothschild to share winemaking insight.
Having perceived a growing consumer appreciation for safety and reliability in the food supply, we introduced more organic and additive-free wine, which contributed to significant growth overall in Japanese wine (up 26% year-on-year).
Meanwhile, Japanese wine continues to gain international acclaim. Tomi Noble d'Or 2002 was awarded a gold medal at the Vino Ljubljana international wine competition in Slovenia, and Tomi White 2006 captured silver at the Chardonnay du Monde Competition in France.
In imported wine, Chilean Viña Maipo offerings have proven popular. These wines offer exceptional value at their price points. In sparkling wine, favorable sales of Delica-branded offerings (expanded in September) contributed to a nearly 10% gain in this category.

Strategy for 2010

As domestically produced wine continues to attract consumer interest, we will be focusing on enhancing the quality of wines from renowned wineries such as Tomi no oka Winery, which will be promoted in more aggressive advertising. The unique benefits of casual wine to enjoy at home, such as offerings made with organic grapes and no additives (Yukisaibai Budo no Oishii Wain and Sanka Boshizai Mutenka no Oishii Wain, respectively) and Akadama Sweet Wine, will be highlighted in promotion to encourage stronger demand.
In imported wine, we will continue building mainstay brands Carlo Rossi, Viña Maipo, Baron de Lestac, Torres, and Freixenet. Moreover, by offering tips on how to enjoy wine in different seasons throughout the year and after various harvests, and by expanding the range of packaging (in boxed wine, for example), we will demonstrate ways to enjoy wine and highlight the variety of wine available to meet diverse consumer preferences.