Management Information

Medium-Term Management Policy

1. Overview of Medium-Term Management Policy

Further development of management to enhance corporate value in order to achieve sustained growth

<Key Priorities>
1) Strengthening of earning power by positioning the domestic profit base as the cornerstone of earnings and the overseas business as a growth engine
• Promote innovation and demonstrate leadership in the industry with high added value and differentiation as key areas of focus
• Reform the earning structure and evolve business model through business integration and value chain sophistication
• Acquire foundations for growth, mainly in overseas markets, leveraging strengths originating in Japan
2) Asset and capital efficiency improvement that takes into consideration capital cost
• Improve capital efficiency with an emphasis on equity spread (ROE - cost of shareholders' equity)
• Restructure business administration and business portfolio utilizing ROIC (rate of return on invested capital) as a performance indicator
3) Reinforcement of ESG (environment, social, and governance) initiatives to increase sustainability
• Upgrade intangible assets such as nature, social and relationship capital and personnel and develop them toward a CSV (creating shared value) strategy
• Implement “growth-oriented corporate governance” that contributes to the practice of management to enhance corporate value

<Key Performance Indicator (KPI) Concept and Guidelines>
2015 Results Guidelines for 2016 to 2018
Revenue ¥1,857.4 billion • Stable growth from main businesses – Business restructuring + New M&As
Core Operating Profit ¥135.1 billion • Existing businesses (Average annual growth rate in the high single digits) + Impact of new M&As
EPS ¥166.3 • Average annual growth of approx. 10%
ROE 8.8% • Maintain and grow to 10% or higher

*Core Operating Profit is the reference index for normalized business performance.
Core Operating Profit = Revenue – (COGS + general administrative cost)
*The above indicators take into account the impact of IFRS transition at the end of FY2016.
*The calculation basis excludes special factors such as foreign exchange impact and one-off extraordinary items.

<Financial and Cash Flow Strategy>
FY2016 to FY2018 Cumulative Guidelines
Cash flow
• Generated cash flow: ¥470.0 billion or more (Operating cash flow + Maximization measures + Assets review)
• Capital expenditures: ¥180.0 to ¥220.0 billion
Growth investment
• Active investment in M&As and alliances to acquire foundations for growth
(Maximum D/E ratio of approx. 1.0 time acceptable if major capital demands arise)
Shareholder returns
• Stable dividend increases with the aim of a dividend payout ratio of 30% (IFRS basis) by FY2018
• Flexible common stock buybacks taking into account an appropriate balance with growth investment

2. Medium-Term Key Priorities by Business

[Alcohol Beverages Business]

• Maintain high profitability and improve profitability as the Group’s largest cash cow business.
1) Demonstrate leadership in the industry in high added value and increase the profit pool of the industry as the No. 1 comprehensive alcohol beverages company
2) Strengthen new value creation proposals through innovation and develop strong core brands in each category
3) Reform earnings structure through value chain upgrading and collaboration, and evolve business model including e-commerce

[Soft Drinks Business]

• Realize growth with profit by establishing a differentiated position as the Group’s second mainstay business.
1) Establish a distinctive, prominent position centered on reinforcement of the brand power of core products
2) Add high value in response to consumer health consciousness and propose new value through innovation, including in the chilled beverages business
3) Reform earnings structure such as maximization of integration synergies, sales channel and container mix improvement, and SKU reduction

[Food Business]

• Develop the Group’s next-generation foundations for growth by focusing on strengths and leveraging business integration.
1) Enhance brand value and strengthen high-added value product proposals through focus on existing categories where our strength lies
2) Create new value and demand through innovation that leverages business integration in areas such as foods with function claims
3) Reform earnings structure through focus on core competence creation of integration synergies, and value chain optimization

[Overseas Business]

• Expand the global foundation for growth leveraging strengths and drive the Group’s sustained growth.
1) Implement strategies for growth centered on brand reinforcement and development in existing businesses in Oceania, Southeast Asia, and other regions
2) Reform earnings structure through means including expansion of integration synergies and restructure business portfolio by region
3) Acquire new foundations for growth by leveraging strengths originating in Japan, such as brand power and cost competitiveness

*Aim for efficiency effects of ¥20.0 billion to ¥30.0 billion (2016 to 2018 cumulative) from profit structure reforms.