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Main Q&As at FY2021 Q1 Financial Results briefing

The sales decline in the on-premise channel of Europe business was large, but were any particular countries significantly negatively affected? Please tell us about the unit sales price as well.
Comparing the January-March period of this year with the October-December period of last year, the sales trend in the Czech Republic and other countries did not changed significantly, but the decline in Poland and Romania widened, attributed to the off-season and the greater negative impact of the Covid-19 related regulations in the on-premise channel. However, in addition to the U.K., some other countries have resumed outdoor operations in the on-premise channel and are planning to resume indoor operations in the future, so we expect a gradual recovery in business performance. In addition, the trend of improving unit sales price in the off-premise channel is continuing, and we will continue to strengthen our sales for premiumization.
What is the reason for the improvement in profitability of Oceania business? Did cost reductions contribute to this improvement? What are the sale trends in the off-premise channel and the on-premise channel?
We have factored in a certain amount of negative risk for the first half forecast due to the reemergence of Covid-19 infection. However, we made progress exceeding the plan due to a better-than-expected recovery in the on-premise channel, an improved channel mix, and efficient marketing investments.
In the off-premise channel, we strategically strengthened marketing investments in core brands such as Great Northern during the peak season of October-December last year, and the effects of these investments were sustained during the January-March period, resulting in growth above the market. In the on-premise channel, we have recovered slightly more slowly than the market, but we will aim for a recovery including synergies as the market normalizes in the future.
What extent will Asahi Super Dry Nama Jokki Can contribute to the annual business performance? Has it had a ripple effect on improving the brand value of Asahi Super Dry itself?
We believe that the reason why Asahi Super Dry Nama Jokki Can received such a great response was that it was able to provide new discoveries and excitement to the drinkers by producing fine froth and allowing them to experience like drinking by a beer mug. Currently the product is temporarily on hold, but we are planning to add a new production line to increase production capacity in the future.
In addition, the cannibalization rate with the regular Asahi Super Dry is lower than expected, and we have been able to acquire many trials from other brands. In particular, the percentage of young people of 20s and 30s who tried was high, and we believe that it is important to connect this to the enhancement of the value of Asahi Super Dry, so we will work to create a solid synergy effect when we are able to provide a stable supply.
What are the factors behind the increase in unit sales price in Soft Drinks business and how sustainable are they?
In addition to the strong performance of categories and brands with relatively high unit sales price, such as carbonated drinks and coffee, the strengthening of sales price optimization, including in other categories, led to the increase in unit sales price. Going forward, we will continue to strive to improve the mix of categories, containers, and sales channels resulted from the growth of core brands, especially carbonated drinks, and the recovery of vending machines, in order to make the improvement in unit sales price more sustainable.
Is there any change in Asahi's approach to cost management in its Europe business? Is Asahi strengthening its marketing investment to prepare for upcoming recovery period?
With sales volume sluggish, we implemented all kinds of cost efficiencies, such as controlling travel expenses, suspending new hiring, downsizing activities in on-premise channel, and improving manufacturing efficiency. However, in the European business, profits declined due to the high ratio of fixed costs in 1Q. While strengthening overall cost control, we are continuing to invest in marketing with an eye on medium- to long-term growth, focusing on strategic core brands, especially in the off-premise channel.
What were the sales trends of the Europe business in major countries in April?
Czech Republic and Poland continue to face difficult conditions for on-premise channel, as lockdowns and full suspension of restaurant operations remain in place. On the other hand, the on-premise channel is expected to recover in some countries, such as the reopening of outdoor operations in the UK. Therefore, we expect that the total business YoY will improve better than in March, partly due to the rebound from last year.
In 2021, the business environment is expected to be volatile, but what initiatives will Asahi take in Japan, Oceania, and Europe to respond flexibly to market changes?
Rather than simply waiting for the on-premise market to recover, we are striking a balance between the on-premise and off-premise markets, depending on the situation. In Japan, the off-premise beer canned market has been growing remarkably, and we will strengthen our efforts to sustain this trend. In the on-premise market in Japan, we will promote efforts to prepare for a market recovery in line with the end of the pandemic. In overseas markets, we will strengthen marketing investments in new growth categories including non-alcohol beverages, while making efforts to prepare for the recovery of the on-premise market in the same way as in Japan.
How much working capital has Asahi been able to reduce in order to improve operating cash flow? How sustainable is the reduction going forward?
Continuing from last year, we are taking measures to reduce working capital in order to improve operating cash flow. Excluding sales fluctuation factors, we managed to reduce working capital by 10 billion yen in 1Q in comparison to the same period last year. It will not be easy to continue to achieve the same level of improvement as in the current fiscal year, but we will continue to take proactive measures to achieve further progress.
In the monthly sales report for April, the sales volume of Asahi Super Dry increased significantly. How was it compared to the plan? Also, what is the reason for increasing production volume by 30% in May under the declared state of emergency?
In April, due to the declaration of a state of emergency, sales of bottles and kegs were lower than expected, but sales of cans were stronger thanks to the launch of Asahi Super Dry Nama Jokki Can. A 30 percent increase in production volume is planned for May in order to capture the strong demand for cans, in addition to the reactionary increase from last year.
In the breakdown of increase/decrease in profit in Soft Drinks business, what was the reason for the increase in "sales volume change" of "change in sales, category and container mix" despite the decrease in sales volume?
As "sales volume change" includes the impact of category mix, the improvement of category mix due to the increase in carbonated drinks contributed to the increase.
What were the YoY changes in sales volume and sales revenue of Oceania business, including last year Q1 result of former CUB, on an estimated basis? Also, please explain the reason for the increase in profit despite the deterioration in the channel mix.
Although this is just a rough estimate, we see both sales volume and sales revenue in the alcohol beverages business as rising in the mid-single-digit YoY. The channel mix deteriorated as the off-premise channel increased in the mid-single digits YoY while the on-premise channel declined in the high single digits YoY. However, due to higher sales volume of premium brands in the off-premise channel, as well as more efficient marketing costs and the creation of integration synergies, total Oceania business profit was expected to increase by around 10% YoY.
Please tell us the current progress toward the annual plan and the future initiatives for Asahi BEERY.
Asahi BEERY was launched on March 30 in the Tokyo metropolitan area and the Kan-shinetsu area only, and is scheduled to be launched nationwide in June. The product has received high praise from consumers, and in fact, sales of the product have exceeded those of other non-alcohol beverage products at customers who have actively promoted the product. In addition, at the same time as the nationwide launch in June, Asahi BEERY Fragrant Craft will be launched in limited areas, and we will aim to create a new market by strengthening various value proposals to gain fans.