Main Q&As at FY2023 Q4 Financial Results briefing

A.It would have been possible to achieve our Core Operating Profit CAGR guidelines by curbing investment in the short term amid tough market conditions such as the COVID-19 pandemic and cost-push inflation. However, we decided to expand investment because we were also thinking about the need to ensure medium- to long-term growth. In terms of the expected benefits from our investments, if we can continue steadily expanding our global brands, such as Asahi Super Dry, they should become a major source of profit around 2030. Our sustainability investment is expected to soften the impact of the introduction of carbon taxes. Our investment in digital transformation (DX) will likely lead to future growth by renewing our systems. Regarding R&D investment, we are already monetizing Kozel 0.0% product development that uses alcohol removal technologies, and other products too.
In terms of specific profit measures, we would like to gradually raise our guideline levels over the next two to three years assuming a normalization in cost-push inflation and other factors.

A.We have some top brands in Japan, Europe, and Oceania and a quick look at brand power and other external indicators will show that we are reaping returns on our investments. We use the investment-to-revenue ratio as a measure of investment discipline. Regarding our preemptive investment in global brands, we are monitoring the investment returns on sports sponsorships in terms of media value and other parameters, and are reaping the anticipated benefits.

A. The opportunity to large-scale M&A will not always present itself going forward, but we are considering investing in beer adjacent categories (BAC)* with strong future growth potential based on our broader business portfolio strategy. In addition, our U.S. investment management company has made its first investment and will continue to consider various other investment options. Our basic investment approach involves (1) acquiring production facilities with the aim of promoting organic growth, (2) investing in BAC, and (3) expanding investments in targeted areas of operation. When investment opportunities are limited, we will consider further enhancing shareholder returns. We are entering an investment-led phase, so we will consider introducing business management indicators that also focus on cost of capital.

• Includes low-alcohol beverages, alcohol-free alcohol-tasted (flavored) beverages, and soft drinks for adults

A.Octopi Brewing is a contract beverage production company so we will manage sales ourselves. The reasoning behind this acquisition was to provide fresh beer products for the North American market and reduce logistics-related CO2 emissions by shifting from imported goods to local production. We know it will take some time, but we are ultimately aiming to expand our presence in the U.S. and Canadian markets.

A.We need to pursue some basic activities in order to form a solid foundation on established sales routes in some of the world’s major cities, such as London, Melbourne, Sydney, and Seoul. We believe we can achieve a certain amount of growth through sponsorships of City Football Club, Ferrari, the Rugby World Cup, and other events. However, we know that we have to expand our operations in each region in order to ensure long-term success, so we also be considering different ways of doing that going forward.

A.We expect to generate cost efficiencies in the region of USD 70-80 million in 2024, the first year of operation for the AGPRO global procurement initiative. Breaking that total down by region, we expect Japan, Europe, and Oceania will each generate roughly a third of the total, and that has been factored into the 2024 estimates for each region. We aim to generate even greater efficiencies from 2025 onward.

A.Revenue has grown faster than Core Operating Profit over the past two years due to pricing strategies and significant cost increases, so we believe it will take time for the Core Operating Profit margin to return to pre-pandemic levels. In Japan, we aim to generate a recovery in the Core Operating Profit for the Alcohol Beverages Business in 2025, and to see profit return to pre-pandemic levels for Japan as a whole in 2026. In Europe, we hope to see Core Operating Profit approach pre-pandemic levels around 2026. In Oceania, profit is already fairly close to pre-pandemic levels, so we are looking to fuel a swift recovery and promote further growth through the implementation of various measures.

A.As a market leader, we have been expanding investment to provide added momentum to consumers’ desire to return to beer. We are reaching out to the target customer base for Asahi Super Dry Crystal and steadily fueling awareness of smart drinking. In addition, we captured demand through the end of the year and into the new year for Super Dry Nama Jokki. The main Asahi Super Dry brand also performed well in January, and we intend to continue generating benefits from our advertising spend throughout the year.

A.Regarding the Alcohol Beverages Business, we plan to increase profit by harnessing the benefits of higher revenue, including pricing strategies and product mix. Regarding the Non-Alcohol Beverages Business, while we will seek to revise prices and pursue other initiatives, we only expect to see a slight expansion in profits due to predicted increases in variable costs and other expenses. Regarding Other Business, we expect our intermediate holding company, Asahi Group Japan, to report a decline in profit in 2024 on active DX investment into reforming core systems and other areas, investment into exploring new business, and higher labor costs. As a result, profit is expected to increase by 1.9% YoY for our Japan operation as a whole.

A.The main factors are rising fixed costs in the face of soaring labor costs and increased brand investment designed to fuel future growth. We expect sales volume will increase by approximately 1% YoY in 2024 and we intend to ensure an expansion in profits by using pricing strategies and higher revenue to offset the aforementioned cost increases. It will take time for the Core Operating Profit margin to recover given the persistent cost increases over the past two years. However, we intend to improve that margin from 2025 onward through the development of innovative products that satisfy market needs, pricing strategies and premiumization, and firm cost management. On the macroeconomic front, consumer sentiment is likely to improve, albeit with a certain time lag, as CPI and PPI indices peak and wages rise in individual European countries.

A.Sales volume declined by just 1% in 2023 Q4 partly due to unusually warm weather, and volumes actually showed signs of a recovery in some areas. While the general environment will continue to be tough in 2024, our main scenario envisages a gradual dissipation in recent high inflationary pressures and a gradual recovery in consumption from the second half of the year. Breaking the region down into different countries, topline growth in the Czech Republic, Poland, Romania and other Central and East European countries is exceeding the market average, and our five global brands are growing favorably, having achieved 4% YoY growth in 2023.

A.We have seen some changes in the competitive environment and consumer spending sentiment in 2023 Q4, so we will need to closely monitor market trends going forward. In Australia, the government is considering cutting interest rates in view of the severe employment situation. The authorities are also planning to cut income tax rates in July, so we expect to see a gradual recovery in the consumer environment. We consider any changes in the competitive environment to also be temporary, so we will continue to pursue investment strategies that enhance our brand value.