Management Information

Medium-Term Management Policy

1. Overview of the Medium-Term Management Policy

Enhancing "Glocal Value Creation Management" based on Asahi Group Philosophy

(1) Strengthening earning power driven by high added value enhancement and earning structure reform
• Enhancing high added value brands both in Japan and overseas and achieving revenue growth with expanding cross-selling
• Reforming the earning structure through introduction of zero based budgeting and optimization of procurement system
*The target of earning structure reform impact including zero based budgeting (2019-2021 accumulated): over JPY30.0 billion
• Sophisticating business administration utilizing ROIC and improving asset and capital efficiency through cash flow maximization
(2) Sophisticating management resources aimed at expansion of the new foundation for growth
• Reforming corporate culture for realizing innovation and disruption and investing intangible assets (R&D and human resources and others)
• Promoting bolt-on type M&As complementing the existing businesses and expanding alliances with competitors and other industries' players
• Implementing business structure reform taking advantage of digital transformation and advancing business model
(3) Reinforcing ESG initiatives supporting sustainable value creation process
• Formulating "Asahi Group Environmental Vision 2050" and improving sustainable activities through value creation leveraging the unique strength
• Enhancing glocal talent management and HR diversity and fostering human rights management system
• Sophisticating risk management system (Enterprise Risk Management) and reforming governance system supporting group and global growth

<Key Performance Indicator (KPI) Concept and Guidelines>

2017 Result Guidelines for next 3 years out
Revenue JPY 2,084.9 billion Stable growth from existing businesses – Business restructuring + New M&As
Core Operating Profit JPY 196.4 billion CAGR : mid to high single digit
EPS (adjusted*) 262.2 yen CAGR : mid to high single digit
ROE (adjusted*) 13.70% Maintain 13% or above

Core operating profit is the reference index for normalized business performance.
Core operating profit = Revenue - (COGS + general administrative cost)
*Adjusted figures are calculated after the deduction of one off special factors including business portfolio restructuring and foreign exchange impact

<Financial and Cash Flow Strategy>

Guidelines from 2019 onward
Cash Flow FCF : above JPY170.0 billion (annual average)
Investment for Growth Prioritize M&As for expansion of foundations for growth and promote debt reduction for enhancing investment capacity
Debt Reduction Net debt / EBITDA : below 2 times by the end of FY2021
Shareholder Returns Stable dividend increases with the aim of a dividend payout ratio of 35% * (-2021)
Note: aiming at dividend payout ratio of 40% in the future

*Adjusted profit attributable to owners of parent is used for calculation

2. Key Initiatives by Business

[Alcohol Beverages Business]

Sophisticating structure for innovation and cost reduction and establishing the position as a leading company in the domestic alcohol industry
(1) Implementing integrated marketing strategy for new market creation looking toward the future environmental change and renovating the core brands value
(2) Promoting zero based budgeting, minimizing the cost and creating resources for investments for growth through building optimal production and logistics system
(3) Sophisticating product development process, expanding new drinking opportunity and enhancing business utilizing digital transformation

[Soft Drinks Business]

Aiming at an leading company in the soft drinks industry with industry-wide top-class profitability
(1) Enhancing core 6 brands values and improving profitability driven by building optimal production and logistics system and reforming vending machines business
(2) Establishing new foundation for growth through challenging new category creation and allocating business resources for health-conscious category
(3) Strengthening corporate brand value driven by solving social challenges in the region of health and environment and expanding alliances with partners

[Food Business]

Enhancing the unique strength further and expanding foundation for growth through new market creation
(1) Improving core brand and category values further utilizing core technologies and materials
(2) Nurturing growth drivers in new categories and markets and developing overseas business
(3) Streamlining overall value-chain, improving productivity and reinforcing quality assurance system

[Overseas Business]

Leading sustainable group growth centered on promoting premiumization and expanding cross-selling of core premium brands
(1) Reinforcing premium portfolio in each country and expanding cross-selling of core premium brands centered on Europe
(2) Creating opportunity for growth driven by innovation in the region of non-alcohol beer taste beverages and functional drinks in light of consumption diversification
(3) Promoting continuous zero based budgeting, reinvesting for further growth and strengthening foundation for growth through bolt-on type M&As

3. Reinforcing ESG Initiatives

Reinforcing ESG initiatives supporting sustainable value creation process

(1) Formulating "Asahi Group Environmental Vision 2050" and improving sustainable activities through value creation leveraging the unique strength
We aim to improve sustainable activities and expand CSV (creating shared value) initiatives that capitalize on our unique strengths, including yeast and lactobacilli technologies. Additionally, we intend to formulate “Asahi Group Environmental Vision 2050” as a medium/long-term target and step up efforts toward attainment of zero greenhouse gas emissions and 100% sustainable resource usage by 2050.

(2) Enhancing glocal talent management and HR diversity and fostering human rights management system
With non-Japanese personnel accounting for a majority of the workforce, we will promote human resource development and diversity in combination with optimal HR management on a local basis and deployment of global human resources on a “best fit for the job” basis. We also intend to further upgrade our human rights management through such means as revamping human rights due diligence.

(3) Sophisticating risk management system (Enterprise Risk Management) and reforming governance system supporting group and global growth
We will start conducting enterprise risk management (ERM) and build a global risk-management system that supports appropriate risk-taking. We will also move forward with governance reforms conducive to transparent, fair, swift and decisive decision-making, including monitoring-based governance upgrades and reform and further diversification of Boards of Directors.