Main Q&As at Asahi IR Day 2021

A.We are integrating offices of three separate organizations in Japan: the domestic alcohol beverage, soft drinks, and food businesses. We expect some effects, but we would like to refrain from giving a clear quantitative answer. We will start the integration from this spring and try to complete within 1-2 years.

A.In April this year, Asahi Breweries will launch "Super Dry nama Jokki Can," which is not only the first of its kind in Japan but also the first of its kind in the world. We believe that it is an example of a major innovation that has never been seen before, as it allows customers to enjoy the moment of satisfaction of drinking draft beer at a restaurant at home or anywhere else. By building on the success of new products such as the new low-alcohol beverage "Beery" and the new genre "The Rich," we hope to create experience value that is unlikely to exist. The "Home Server" business is based on Super Dry, but it is an innovation designed to create experiential value, such as drinking inside the house with the family or drinking outdoors, and we would like to continue to enhance the experiential value for consumers. Through these marketing initiatives, we will strike a balance between efforts to have people appreciate the value of Super Dry and the creation of new categories such as smart drinking style.

A.Asahi Breweries places great importance on having a live consumer touch point to determine whether the product, including the packaging of “Beery”, will appeal to new customer segments or not. In previous times, we conducted surveys and analyzed by age group to formulate hypotheses, but now we are focusing on the qualitative aspect of how consumers feel when they take the product in their hands and drink it. The " Beery" package has been highly evaluated by consumers in their 20s and 30s, and we will continue to listen to the voices of consumers and reflect them when we launch the second and third version of products.

A.Last year, the brand was supposed to increase the number of users and gain momentum with the Tokyo Olympics and liquor tax revision, but the brand is subject to a variety of factors due to its large sales volume. In terms of overall cans last year, the cans handled for on-premise channel and the cancel of events pushed down the YoY sales by about 2% and 6% respectively, and if we look at pure cans alone for the off-premise channel, there was a slight increase. We hope to create a buzz among young people, increase the number of appearances on SNS, and grow the brand this year, using " Super Dry nama Jokki Can" as a major catalyst.

A.Worldwide, while the growth of the alcohol beverage market is flat, the growth rate of products with less than 0-1% alcohol by volume is around 6%. While there are gaps between regions, Europe has the highest average annual growth in the world at 8%. On the other hand, the low-alcohol market in Asia, including Japan, is gradually growing, but only at a CAGR of about 3%, and some parts of the market have yet to be revitalized. Although we have not set a numerical target for " Beery", Asahi Breweries' sales of non-alcohol beverages are approximately 32 billion yen, and we are planning to achieve 40 billion this year. We want to challenge and develop new categories.

A.That's right. Also, we will strengthen our proposals for products with an alcohol content of 0-3.5% or less, starting with "Beery", and aim to increase the ratio to 20% by 2025.

A.Although the distributors are very positive about "Beery", it is an untapped market, and I think we will have to go through a trial and error process to find an appropriate way to sell. So far, non-alcohol beverage has been a product for beer drinkers, but “Beery” is highly regarded for its "taste" itself, and we believe there is potential for expansion in this new field if marketing is successful. Also, looking at global consumption trends, it is certain that there will be an increase in demand for non-alcoholic and micro-alcoholic drinks in Japan.

A.The target of "Beery" is people of all ages, including those who normally do not actively drink. Even those who were dissatisfied with non-alcohol beverages have given high marks to the taste of "Beery" and the drinking scene it offers. We would like to implement sales promotion that can actually be experienced. In terms of drinking situations, we are developing marketing communications of "while doing” that are not just focusing on drinking, like with beer in the past, but also about drinking while cooking, playing games, reading, watching movies, or doing creative activities.
In terms of sales, we would like to expand "Beery" to on-premise channel, which has been struggling due to the COVID-19. Among those who cannot drink, there are people who do not want to participate in drinking parties. By expanding the lineup of menu items that allow customers to choose based on the alcohol content, we believe there is a possibility of attracting people who are no longer interested in drinking.

A.As we start that business, we want to make sure that our marketing is not only about being able to drink good beer at home, but also about providing new experience value to our customers. We would like to work on fan marketing, which allows customers to enjoy the product in various ways, and provide added value in the form of new fun for each household. Up until now, our marketing has been based on two axes, physical and functional benefits and emotional value, but from now on, we will work on adding experience value as the third axis.

A.We expect it to be 70% to 80%.However, since the food service industry changes quickly and new growth trends may emerge, the forecast we have provided could change depending on future factors.

A.Currently, we will prioritize structural reform of the vending machine business. Our goal is not to reduce the number of vending machines installed, but to increase the value of each vending machine by re-examining the locations of the machines and improving the efficiency of fixed costs, as well as enhancing the product lineup and improving the functionality of the machines. Also, we will increase the profitability of the soft drinks business as a whole by expanding and developing high-margin products that provide added value to consumers in other sales channels.

A.We will continue to increase the in-house production of PET and the ratio of in-house manufacturing. By steadily increasing the ratio of in-house production, we have created the effect of lowering the cost ratio. In May of this year, a new soft drink production line will be installed at Asahi Breweries' Nagoya brewery, which will further increase the ratio of in-house production.
However, if we were to increase the in-house production ratio to 100%, there would be seasonal volatility in sales volume, resulting in a decline in capacity utilization, so a certain amount of outsourcing would be necessary.

A.Asahi Soft Drinks is aiming to establish a leading company position in the market in the future. This is not just about increasing our market share, but also about becoming the most trusted company in the society, thereby strengthening new value creation and enhancing brand value.

A.We consider that proactively addressing environmental issues will be a point of differentiation from other companies because we need to increase our competitiveness in a wide range of areas, such as quality maintenance technology, in addition to replacing containers with environmentally friendly materials. The cost increase for the current fiscal year due to environmental measures is expected to be several hundred million yen, and it is expected to continue to incur a certain level of expenses in the future. However, in order to minimize the impact, we will implement cost reduction measures including efficiency improvement through technological innovation. In addition, the entire industry must work together to solve these social problems, so if there are areas where we can collaborate, we will lead it actively.

A.We consider that there is a certain amount of potential for collaboration in the environmental and logistics fields. Also, in the area of vending machines, we will positively consider ways in which we can improve efficiency through collaboration.

A.We recognize that the creation of new growth brands is one of Asahi Soft Drinks' top priorities that we need to tackle. We have been discussing this issue with R&D and marketing, and we would like to release the results of our research from next year. We are also conducting research on a wide range of functionalities, from lactic acid bacteria to carbonated drinks, and we will work on both creating brands that utilize the strengths of our proprietary technologies with health as the core, and further strengthening the value of our main brands.

A.In light of the future business environment, it will not be easy to increase profit margins. However, the number of customers who are willing to pay a considerable amount of money for valuable products is increasing, and the key is to develop brands that meet such consumer needs. In addition, we would like to improve the profit margin by steadily increasing the efficiency of SCM and streamlining through DX (Digital Transformation).

A.As for the tea market, we expect sugar-free teas to continue to expand in the future, partly due to growing health consciousness. Asahi Soft Drinks will concentrate its marketing efforts on "Jurokucha" and rebrand it this year. Coffee sales volume has been declining due to the slump in the vending machine market and the increasing number of people making coffee at home, but demand for coffee is expected to recover this year due to the rebound. The sales volume of our bottled "Wanda Kiwami" in 2020 is growing at 107% compared to the previous year, and the brand concept has been highly evaluated. We think it is important to reproduce the taste of freshly brewed coffee, which is highly demanded by customers. As for the stay‐on‐tab canned Wanda Morning Shot, we aim to enhance the brand value by sharing with customers the situation where they want to drink it in the morning, aiming for sales promotion that is close to their daily lives. We will aim for growth through vending machine recovery and branding. In addition, we do not foresee any major concerns about price competition.

A.Due to factors such as the impact of COVID-19 in January-March, it is difficult to forecast total demand. However, from spring onward, we expect a gradual recovery, including a rebound from last year and the penetration of vaccines. In terms of sales channels, we expect vending machines and convenience stores, which declined significantly last year, to start recovering, while supermarkets are also expected to see steady demand. In addition, in order to return the market size to the level of 2019, competitors are also undertaking new marketing activities based on the major changes of last year, and the results of these activities will be seen from next year. We are not very pessimistic about the future growth of the whole market.