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Main Q&As at FY2021 Q2 Financial Results briefing

Consumers seem to have a stronger desire to purchase high value-added products after experiencing the spread of the COVID-19. How is Asahi analyzing the market and what is Asahi's policy toward the change?
In Europe and Oceania, unit sales in the off-premise channel have been on the rise since last year. This is due to the possibility that drinking beer and communicating with others, including eating out, has become a special experience for consumers, amidst various restrictions on their activities. We believe that while it is important to read change, it is also important to create what is needed beyond the change. We will continue to deepen our analysis of consumer trends, as increasing the value of our products and services will lead to sustainable growth.
We believe that the sales management methods that we are using in Europe and Oceania will also be effective in improving unit prices in the Japanese off-premise channel.
Rather than the conventional strategy of chasing volume, we would like to establish a system to increase unit sales in total by optimizing the timing of special sales in each category, and we would like to promote premiumization.
In Japan, where recovery from COVID-19 has been delayed, what is your strategy for improving profitability? In the April-June period, SUPER DRY cans recovered significantly, up 16% YoY, but is the recovery sustainable?
COVID-19 has brought about major changes in society, and we are considering strategies to achieve sustainable growth in response to changes in market trends and consumers.
Currently, Overseas Business is the main driver of the Group's overall performance, but we need to build momentum for recovery in the domestic Alcohol Beverages Business. First of all, it has been a challenge for "SUPER DRY" to attract younger buyers, but we have gained confidence since we were able to attract almost twice as many target customers with SUPER DRY NAMA JOKKI CAN released this year compared to SUPER DRY itself. We will continue to strengthen our communication with a new sense of worldview targeting young people and women, and we will step up our marketing investment so that we can continue to be the best brand product when the liquor tax revision is scheduled in 2023 and 2026.
In addition, for those drinkers who cannot be reached by “SUPER DRY”, we will attract them by launching a new rich flavored product in September. We will also aggressively invest in brands that are expected to grow in the future, such as the new genre CLEAR ASAHI and THE RICH, and the RTD THE LEMON CRAFT, to revitalize the domestic Alcohol Beverages Business, especially beer, and turn it into a highly sustainable business. On the cost side, we will further strengthen our earnings base by curbing variable costs at plants, improving marginal profit margins, and strengthening control of costs and expenses.
Regarding the new beer brand, what makes you think that this new product will be successful? Also, will there be any change in your policy of adopting SUPER DRY as the main brand?
Although we cannot talk about the details before the announcement, we are planning to launch a new beer product in September. We plan to launch a product that combines "taste" and "packaging" to win out in the canned beer market after conducting a number of surveys beforehand. In addition to restoring the strength of the SUPER DRY brand, the product is designed to attract users who are not captured by SUPER DRY and are drifting to competitors.
In the future, as you formulate management strategies based on backcasting from megatrends, is there a possibility that strategies will differ from the current ones?
If so, when do you think a change in strategy will likely emerge?
We have already made the strategic change from backcasting. The Smart Drinking Declaration and the new product BEERY are initiatives that reflect changes in the business environment over the very long term, and are part of a strategy based on the decline in alcohol consumption per adult that is expected to become apparent in the near future. We have set a goal of increasing the percentage of non-alcohol and low-alcohol sales to 20% by 2025, with the aim of establishing the smart-drinking category in the market. In order to achieve this goal, it is important to continue to propose new values and products to consumers, and we will continue to expand our lineup of new products following the launch of HIBALLY in September.
In the Off-premise channel, brand extensions have recently become more diverse than ever, such as the launch of SUPER DRY NAMA JOKKI CAN and new products, but is there any change in Asahi's marketing policy?
Since the sales volume of beer-type has decreased by almost 40% compared to its peak in 2001, only pursuing efficiency will not lead to sustainable growth. In the future, the market is expected to shift to an environment where the value of premium products is better understood by consumers. We have decided to change our marketing policy in order to make it our strength to provide added value that meets such changes in consumer needs.
Top-line synergies from the acquisition of the CUB business are progressing better than planned, but is there a possibility that they will exceed the JPY 5 billion synergy target for 2024? Also, as part of your Total Beverage Strategy, please tell us about the progress in creating synergies through the expansion and development of categories other than beer.
Sales synergies of SUPER DRY and PERONI NASTRO AZZURRO are progressing steadily against the plan through 2024. Compared to last year, sales volume and sales value of both brands have grown in the mid-single digits YoY, exceeding the plan. In addition, there is a lot of potential to further expand the number of bars and restaurants handling both brands in the future. In terms of synergies other than beer, we are making steady progress in introducing non alcohol beverages, RTDs, and non alcohol beer such as GREAT NORTHERN ZERO by utilizing its strong network of the on-premise channels, one of the strengths of the CUB business.
In the Southeast Asia Business, sales in the Philippines have been strong.
With Kirin's San Miguel having a strong position in beer, what are the possibilities in the Philippines for you?
We do not sell beer in the Philippines. The products that we are expanding include condensed milk and lactic acid drinks. In particular, lactic acid drinks are in the category that is growing faster than planned due to the rise in health consciousness.
In Alcohol Beverages Business, you plan to increase investment in sales promotion expenses for product development and brand enhancement from the second half. Have you established an organizational structure and foundation that will lead to future sales and profit growth?
We are taking steps to strengthen the organizational foundation, and we are already seeing achievement in some areas. In order to strengthen marketing, it is important to accumulate and effectively utilize data, so Value Creation Office in Japan Regional Headquarters is taking the lead in developing and strengthening digital talent from a long-term perspective. In addition, we are strengthening our marketing foundation by assigning the right people to the right places and hiring career professionals.
In Oceania Business, top-line synergies are being generated steadily. What specifically is the "Premium Strategy" in Oceania, and how do you plan to further improve profitability in the future?
Our premium strategy in Oceania can be divided into three groups: (1) Local Champion Brands, (2) Global Brands, and (3) Beyond Beer (RTD, hard seltzer, non alcohol beer, craft beer, etc.). Since each group has a different sales price range, there will be no cannibalization. We will increase unit prices by strengthening brands and launching extension products within each group, and improve the total mix across the groups, to maximize overall sales and profits. In order to achieve this, we are working on revenue management, and will set appropriate pricing and optimize the timing of promotions according to the situation, to enhance brand value and further improve profitability.
How do you see the growth potential of non alcohol beer and the Minimal Alcohol category? Can they become drivers that contribute significantly to improve profitability? Also, what are Asahi's differentiators?
Although the non alcohol beer and the Minimal Alcohol category are not subject to liquor tax, the brewers have set higher prices to prevent underage drinking. As for the future outlook, although there is a shift in demand from existing beer categories, we see this as a category with high growth potential based on changes in customer needs. We are confident that BEERY and HIBALLY, scheduled for release in September, have achieved excellent taste thanks to our advanced technology. We have been sharing best practices in dealcoholization technology within the group, and built a competitive advantage in this category as the overall group.
In Europe Business, what are your future initiatives for challenge: improving the channel mix deteriorated by the sales decrease of on-premise channel?
The on-premise sales have declined significantly due to the lockdown, and the channel mix have deteriorated, but we will make a strong recovery in line with the Covid-19 convergence. In June, we recorded record-high monthly sales in the UK and sales volume in the Czech Republic exceeding that of 2019. We have made a significant recovery including the on-premise channel and expect further improvement.
In Alcohol Beverages Business, you plan to strengthen brand investment in the second half. Why did you decide to strengthen investment at this timing? What is different from the past situation?
The number of users of ASAHI SUPER DRY is significantly increasing with the launch of NAMA JOKKI CAN, and we are seeing this as an opportunity and have decided to make aggressive investments. We will also establish minimal alcohol category, which has been highly evaluated by customers, and strengthen it as the next growth driver. While fostering a corporate culture that allows us to tackle various reforms based on zero-based thinking, we will create an ideal model for manufacturing companies to achieve sustainable growth by investing in categories with high profitability and future growth potential, using the earnings generated from the strong ASAHI SUPER DRY brand as a foundation.