Food and beverage business of the Suntory Group, conducted by Suntory Beverage & Food Limited, Suntory Wellness Limited, and others, has involved building core brands, conducting active ongoing marketing, and other efforts in Japan and overseas.
In domestic beverages, results have surpassed last year's levels despite the difficult market environment, with sales of BOSS exceeding 70 million cases and other notable achievements.
Overseas, Frucor Beverages Limited and the Orangina Schweppes Group (managing soft drink portfolios in New Zealand/Australia and Europe, respectively) were acquired by the Suntory Group. In China, Kuro Oolong Tea has proven a hit product.
Moreover, in health food and supplements, Sesamin E Plus and other products continue to be popular with consumers.

2010 is expected to be an even more difficult year in the competitive beverages market. Suntory views this year in particular as a time for an aggressive stance aimed at sustainable growth and greater profitability, according to our medium-term management vision for food and beverage business.
Domestic beverage business strategy will involve building core brands, cutting supply chain costs, and managing advertising budgets effectively.
Overseas strategy will involve establishing local platforms for growth in new beverage business by the Orangina Schweppes Group in Europe, Frucor Beverages in Oceania, and Tipco F&B in Southeast Asia, among others, as well as further expansion of existing business by Cerebos Pacific and Pepsi Bottling Ventures as we step up implementation of global strategies of the Suntory Group as a whole.
As Suntory health food and supplements business continues to grow, further development and business expansion is planned to exploit this relatively untapped source of group earnings.

1. Domestic Food and Beverage Business

Review of 2009

The soft drink market in 2009 was estimated at 1.585 billion cases, representing an approximate 3% decline from the previous year. While building core brands such as Suntory Oolong Tea, Pepsi, BOSS, Iyemon, Suntory Natural Mineral Water (Tennensui), and DAKARA, Suntory Beverage & Food introduced new products in a variety of categories. As a result, sales of 354.9 million cases (up 1% from 2008) were recorded in Suntory soft drink business.

Strategy for 2010

The scale of the soft drink market as a whole is expected to remain essentially unchanged in 2010.
As market competition intensifies, we will build core brands and seek steady growth, continuing to cut supply chain costs and manage advertising budgets effectively. These efforts will help us achieve our sales target of 367.4 million cases (up 4%) this fiscal year, reinforcing our position in the domestic soft drink market.

Core Brands

Suntory Oolong Tea and Kuro Oolong Tea: Redoubling efforts for higher standards in oolong tea

Refreshing oolong tea complements meals, and new flavor and packaging is being developed for Suntory Oolong Tea to highlight oolong tea's inherent qualities of being healthy and going well with food. Prominent advertising, sales campaigns, and other marketing will be conducted to promote oolong tea and demonstrate what makes this tea special. The sales target this fiscal year for both types of tea combined is 45.5 million cases, up 5%.

BOSS: Focusing on four products to solidify brand position

The highest sales volume in the history of Suntory soft drink business was recorded for BOSS products in 2009, at 71.9 million cases (up 5%). To continue solidifying the brand position, we will be conducting active and ongoing marketing. While building on the four leading varieties of Rainbow Mountain Blend, Zeitaku Bito ("indulgent low-sugar"), Sugar-Free Black, and Café Au Lait, we are also introducing new varieties such as Otona no Ryugi ("mature style") and Dry to reinforce our position in the competitive canned coffee market. The sales target this fiscal year is 74 million cases, up 3%.

Iyemon: Flavorful, enjoyable tea steeped in the Iyemon tradition

Again this year, we will take the opportunity to coordinate a variety of activities introducing people to tea and the richness of the traditional, everyday Japanese culture it represents. Enhanced flavor and packaging for Iyemon and Iyemon Koime ("strongly brewed Iyemon"), year-round sales of Iyemon Genmaicha (with roasted rice), and other sales campaigns and promotional activities are on the agenda as we pursue more satisfying tea and tap into the distinctive Iyemon brand image to promote new ways to enjoy it. The sales target this fiscal year is 50 million cases, up 2%.

Pepsi: Enhanced flavor and packaging

Pepsi Nex enjoys a solid position in the growing zero-calorie market, a position Suntory will reinforce this year through refinements in flavor and packaging and through an additional container designed to preserve the refreshing taste of this carbonated beverage, in the form of a "hybrid"" 500 ml PET bottle. Additionally, large-scale promotions to be unveiled include ads and publicity events with impact. The sales target this fiscal year for Pepsi-branded products is 30 million cases, up 3%.

Suntory Natural Mineral Water: Reinforcing the leading brand position

To demonstrate our environmental commitment, the lightest *¹ (36 g) two-liter PET bottle in Japan is used for Suntory Natural Mineral Water (Tennensui), the leading brand in the mineral water market. This reduces environmental impact while making bottles easier to use. Moreover, to support efforts in offering safe and refreshing natural mineral water under strict quality control, construction is slated to begin on April 22 at an additional base of production in the form of the Hakushu Plant managed by Suntory Natural Waters Minami Alps Limited (Minami Alps), which will produce Suntory Natural Mineral Water. (See release no. 10658.) To meet consumer needs, the Suntory mineral water portfolio is rounded out by Contrex and several other imported brands. The sales target this fiscal year for Suntory water business is 52.6 million cases, up 3%.

• *¹ As of January 18, 2010

DAKARA: Updated, with Vitamin Water

Health beverage DAKARA will have a new taste and packaging, and similarly, packaging of Vitamin Water will be updated. Promotions of many kinds are planned again this year. The sales target this fiscal year for DAKARA-branded products is 24.4 million cases, up 1%.

2. Overseas Food and Beverage Business

Review of 2009

In China, Suntory has enjoyed strong sales of Kuro Oolong Tea, launched in Shanghai and elsewhere in April. The tea has proven popular among women in their 20s and 30s, as well as other consumers. Sales were also favorable elsewhere in Asia and in Oceania (served by health food and processed food manufacturer Cerebos Pacific Limited), on the East Coast of the U.S. (served by soft drink bottler Pepsi Bottling Ventures, LLC), and in New Zealand and Australia (served by soft drink maker Frucor Beverages Limited, which joined the Suntory Group in February).
To build a stronger European base of operations in food and beverage business and pursue business expansion, the Suntory Group completed the full acquisition of soft drink maker Orangina Schweppes Group in November. This corporate group maintains a strong network of operations across Europe, particularly in France and Spain.

Strategy for 2010

In China, legal agreements have paved the way to utilize the sales network of PepsiCo. Among other plans, the dairy beverage "Rich" will be sold in Guangdong as we look forward to an expanded business territory. In Southeast Asia, gearing up for a full-scale launch of Suntory brands through Tipco F&B and other means will help establish a new platform for growth.
Additionally, Oceania-based Frucor Beverages Limited, Europe-based Orangina Schweppes Group (both new Suntory Group companies), and others will establish similar bases of growth locally, while further business expansion is planned by existing group companies Cerebos Pacific Limited and Pepsi Bottling Ventures LLC business, as we step up implementation of global Suntory Group strategies.

3. Consumer Health Products Business

Review of 2009

Popular Sesamin E Plus, DHA&EPA+Sesamin E, Kurozu Ninniku ("black vinegar and garlic"), ARA (arachidonic acid), and other supplements continue to enjoy stronger sales. As a result, Suntory Wellness sales have grown by nearly 20% year-on-year.

Strategy for 2010

Suntory will build and strengthen leading "Power of Nature" series brands Sesamin E Plus, DHA&EPA+Sesamin E, Kurozu Ninniku, and ARA while introducing new offerings to meet consumer needs. The sales target is approximately 10% growth over the previous year.