For the past year and a half we have been working to acquire major brands and carry out profit structure reforms ahead of plan. At the same time, we have taken measures to eliminate losses in our Overseas Business and to maximize cash flow. I am pleased to report that our efforts to date have produced the expected results.
We have also continued with internal reforms, including those aimed at enhancing the professional development of our people and establishing the most desirable corporate culture. From this July, we have moved to a pure holding company structure and taken necessary steps to revamp our management structure into one capable of carrying out global group management.
Under our new holding company structure, we see three key issues that we need to work on over the next year or two as we strive to achieve the goals of our medium-term plan.
1.Design and execution of new growth portfolio
First is the “design and execution of a new growth portfolio” for the Asahi Group. The recently announced M&A deals in Australia and Southeast Asia are in keeping with our efforts to expand our foundations for global growth, and we have no intention at stopping there. Rather we plan to step up M&A activities as we seek to create synergies through business alliances and establish a business foundation that will enable us to widen the scope of our global investments.
In Japan, our Soft Drinks Business continues to grow faster than the industry average, but the domestic soft drink industry remains in a state of excessive competition. To date, we have only entered into partial alliances or acquired some brands, but going forward as a holding company we plan to more aggressively pursue alliances and industry restructuring aimed at creating a more profitable business model for our Soft Drinks Business.
Our Food Business has been pursuing a wide variety of new business opportunities. Going forward, we plan to pursue alliances and industry restructurings while keeping a close eye on business scale and adhering to a policy of “selection and concentration”. We expect the domestic economic environment to become increasingly severe. Therefore we think it is most important that we speed up our efforts to create a new growth portfolio.
2.SCM innovations needed in existing businesses
We need to take more innovative approaches to supply chain management at existing business lines. Our Alcoholic Beverage Business, the core strength of the Asahi Group, is currently on pace to achieve the profit margin goal in our medium-term plan. However, it has not made any major progress in creating new value propositions or upturning new demand, as called for in the plan.
If we draw up a rather severe scenario of falling beer demand, which seems to be supported by the growth of imports in the new-genre segment and recent trends in the beer-flavored beverage market, sooner or later the Alcoholic Beverage Business will cease to be the cash cow we now rely on, unless we undertake further structural reforms.
We have already taken some steps, including reforming our marketing operations and cooperating with industry rivals to achieve greater efficiencies in certain areas. Going forward, we intend to step up our efforts in such areas.
3.Draw up framework for establishing new medium-term plan
While grappling with the first two issues, we must also begin considering the issues that will face us when we draft our next medium-term plan and long-term vision, which must be completed by the end of our current medium-term plan, which runs through 2012. Therefore the third key issue we face going forward is consideration of the framework for our next medium-term plan.
In doing so, we will need to consider the paradigm shift that has transpired and altered the framework we assumed when we laid out our current long-term vision and medium-term plan three years ago.
In the near term, the Group’s operating companies will use the authority delegated to them to draw up and execute their own business strategies as they strive to achieve the goals set for their businesses.
Meanwhile, the holding company will focus on Group strategies, including the most appropriate allocation of management resources, the pursuit of M&A and PMI, and further strengthening of our overseas business. We expect this division of management responsibility between the operating companies and the holding company will help us speed up decision-making regarding the issues facing the Asahi Group.