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Integrated Report 2017
SAPPORO HOLDINGS LIMITED
As an intrinsic part of people’s lives,
Sapporo will contribute to
the evolution of creative,
enriching and rewarding lifestyles.
The Sapporo Group strives to
maintain integrity in corporate conduct
that reinforces stakeholder trust
and aims to achieve continuous growth
in corporate value.
Management Philosophy
Fundamental Management Policy
01
Integrated Report 2017
Inheriting Aspirations for the Future Alongside Our Stakeholders
H i s torySAPPORO BRAND STORY 01
In 1876, the Sapporo Group marked its founding with the completion
of the Kaitakushi Brewery in Sapporo, Hokkaido Prefecture.
Throughout the over 140 years of history since its founding,
the Sapporo Group has expanded its business domains to
include not only Alcoholic Beverages but also Food, Soft Drinks,
Restaurants, and Real Estate. Through these business domains,
we have contributed to the evolution of enriching and
rewarding lifestyles for our customers in a variety of settings.
02
SAPPORO HOLDINGS LIMITED
H i s tory
SAPPORO BRAND STORY
03
Integrated Report 2017
Inheriting Aspirations for the Future Alongside Our Stakeholders
SAPPORO BRAND STORY
DialoguesThe history of the Sapporo Group is one made of dialogues
accumulated over time with its customers and other stakeholders.
We have been deeply involved in people’s lives, developing products
and services to please our customers while providing a new eating
and drinking scene that delivers joy and excitement.
02
04
SAPPORO HOLDINGS LIMITED
Dialogues
SAPPORO BRAND STORY
05
Integrated Report 2017
Inheriting Aspirations for the Future Alongside Our Stakeholders
SAPPORO BRAND STORY 03
The Sapporo Group has acquired insight and understanding
from dialogues with its customers and implemented them
toward innovation and the pursuit of quality. Those aspirations
have crystallized as our many brand assets, which we want to share
with our stakeholders.
Innovation
06
SAPPORO HOLDINGS LIMITED
SAPPORO BRAND STORY
Innovation & Quality
07
Integrated Report 2017
The Sapporo Group’s Value Creation Story
The brand story we will inherit together with our stakeholders
Strengthening bonds through our brand story
CSR Basic policy P.48
Refining our brands
Business model P.22
P.02–07
Effective use of sustainable natural resources
P.52
Natural capital
Breweries, factories, equipment, and infrastructure indispensable
for manufacturing
P.23
Manufactured capital
A sound financial base and trust from the capital market
P.40
Financial capital
Good relationships with customers and other stakeholders
P.51
Social and relationship
capital
Human capital
Healthy employees who inherit the Sapporo Group’s DNA
P.38
Intellectual capital
Innovative ideas and inspiration
P.36
Our value creation story aims to realize our Management Philosophy–“As an intrinsic part of people’s lives, Sapporo will
contribute to the evolution of creative, enriching and rewarding lifestyles.” This value creation story is drawn from a brand
story based on over 140 years of history that we want to share with our stakeholders.
While boldly pushing forward with a two-pronged approach that focuses on a business model for refining our brands,
which have crystallized through our pursuit of innovation and quality, and our CSR activities, which strengthen bonds
through our brand story, we will work to attain our 2026 Group Vision and create corporate value unique to the Company.
History Dialogue
Innovation & Quality
Crystallization
08
SAPPORO HOLDINGS LIMITED
As an intrinsic part of people’s lives,
Sapporo will contribute to the evolution of creative,
enriching and rewarding lifestyles.
Management Philosophy
Value Created by the Sapporo Group
Deliver new products and services by pursuing innovation and quality
Pioneer new markets by refining tangible and intangible brand assets
Contribute to revitalizing communication among customers by providing products and services
Provide “fun,” “joy,” and “vitality for tomorrow” to all stakeholders through business expansion
2026Group Vision
The Sapporo Group will be a company with highly
unique brands in the fields of “Alcoholic Beverages,”
“Food,” and “Soft Drinks” around the world.Food
Alcoholic Beverages
Soft Drinks
The Sapporo Group Long-Term
Management Vision “SPEED150”
P.34
09
Integrated Report 2017
2017
2017 Highlights
January February March April May June
Business Operations
Launched Yebisu Hana Miyabi white beer, Yebisu’s first beer using top-fermented yeast
Launched Plus Nyusankin Tonyu Inryo, a soy milk drink using the Group’s unique strain of the plant-based lactic acid bacteria, SBL88
Renovated the Beer Hall Lion Ginza 7-chome
Celebrated 40 years of Sapporo Draft Beer Black Label
Launched Lemon no Genki, a lemon-based drink with a functional food label
PT. POKKA DIMA INTERNATIONAL commenced operations at new factory in Indonesia
Completed construction of N3E4 Project, TDY Sapporo Collaboration, redeveloping the area neighboring the Sapporo Factory
Certified as an Excellent Enterprise of Health and Productivity Management (White 500)
Management
Won Best Poster Award for research on the aroma of Sorachi Ace, a hop variety developed in Japan, at the 36th European Brewery Convention, the third consecutive year of Sapporo Breweries receiving the top prize
November 2016 Announced the Sapporo Group Long-Term Management Vision “SPEED150” and First Medium-Term Management Plan 2020
Celebrated 40 years of operation of POKKA CORPORATION (SINGAPORE) PTE. LTD.
Established Food Technology Laboratories for Value Creation at the Group’s R&D Headquarters
Opened consortium-type (for multiple companies) on-site nursery / day care at Yebisu Garden Place
Celebrated 60 years in the lemon business
10
SAPPORO HOLDINGS LIMITED
The Sapporo Group’s Value Creation Story
2017 Highlights
July August September October November December
Introduced limited run of Sapporo Draft Beer Black Label “Black”
Won Food Action Nippon MIP Award for our unsweetened tea series
Opened Anchor Public Taps in San Francisco under ANCHOR BREWING COMPANY, LLC.
Welcomed over 4 million visitors to GINZA PLACE
Introduced AI technology at Company-owned Azuminoikeda Vineyard
Held grand opening of DINING & SKY “TOP of YEBISU” on 38th and 39th floors of Yebisu Garden Place Tower
Began selling Yebisu Beer in Korea
Held the Yebisu Beer Festival
Began joint logistics between the four major beer companies in the eastern area of Hokkaido
Developed 4 Key Promises for CSR materiality
Selected as a member of the SNAM Sustainability Index, used for SNAM sustainable fund management
Formulated the Sapporo Group Health Creation Declaration
Acquired all interests in ANCHOR BREWING COMPANY, LLC. Began Sapporo Breweries Work Style
Improvement 2020
Sapporo Breweries obtained Platinum Kurumin certification from the Ministry of Health, Labour and Welfare
11
Integrated Report 2017
Since our founding in 1876, we have put our Management Philosophy as
the cornerstone of our actions as we have helped provide creative, enrich-
ing and rewarding lifestyles not only to Japan, but to the world. Over our
long history, we have engaged our customers and steadily cultivated rela-
tionships with them through dialogue. The Group’s unique brands repre-
sent the assets that have crystallized through this engagement and dialogue.
While further refining our brands through the pursuit of innovation and
quality, we are working to create distinct corporate value by sharing our
aspirations with our stakeholders and strengthening bonds through our
brand story.
Our Long-Term Management Vision “SPEED150” outlines our goals for
2026, 150 years after our founding. This vision positions the “Alcoholic
Beverages,” “Food,” and “Soft Drinks” fields as our core business areas.
Under this vision, we will aim for solid growth through transformation of
our Group management platform in response to changes in the business
environment and by steadily carrying out our global growth strategy.
This integrated report will showcase how the Sapporo Group has
strengthened and cultivated its brands, not only by reciting its history or
explaining how its businesses came about, but also by demonstrating its
distinct value as a group with highly unique brands and by expressing its
direction and intentions toward the future—a future where the Group
plays an indispensable part for society. We hope that our stakeholders will
read this report and evaluate our efforts from all angles.
It is our constant wish for our integrated report to spark dialogues with
our stakeholders. We ask for your continued support and understanding as
we push ahead with business activities aimed at achieving our goals.
June 2018
To Our Stakeholders
We will display the distinct value
of our existence while helping provide
creative, enriching, and rewarding
lifestyles to Japan and the world beyond.
12
SAPPORO HOLDINGS LIMITED
Masaki OgaPresident and Representative Director
Tsutomu KamijoChairman and Representative Director
13
Integrated Report 2017
Contents The Sapporo Group’s Value System01 Management Philosophy and Fundamental Management Policy
02 Sapporo Brand Story
08 The Sapporo Group’s Value Creation Story
10 2017 Highlights
12 To Our Stakeholders
The Sapporo Group’s Business Model16 Our History
18 Our Businesses
20 Financial and Non-Financial Highlights
22 The Sapporo Group’s Business Model
24 Special Feature 1 Delivering Value Unique to the Sapporo Group by Refining Our Brands
28 Message from the President
The Sapporo Group’s Growth Strategies34 The Sapporo Group Long-Term Management Vision “SPEED150”
36 R&D Strategy
38 Human Resource Strategy
40 Financial Strategy: Message from the Director of Corporate Finance
42 Risk Management
43 Business Strategy
The Sapporo Group’s Stakeholder Management48 Basic CSR Policy
51 Stakeholder Engagement
52 Initiatives Based on Our 4 Key Promises
54 Special Feature 2 Inheriting Aspirations by Strengthening Bonds through Our Brand Story
56 Message from the Chairman
58 Corporate Governance
64 Board of Directors, Audit & Supervisory Board Members, and Group Operating Officers
Results / Results Indicators66 Eleven-Year Summary of Financial and Non-Financial Data
68 Management’s Discussion and Analysis
72 Consolidated Financial Statements
77 List of Group Companies
78 Corporate Data
28
24
54
58
14
SAPPORO HOLDINGS LIMITED
Editorial Policy
Information Framework
Forward-Looking StatementsStatements in this integrated report with respect to the Company’s forecasts, perfor-mance or otherwise, are based on the Company’s judgments in light of the latest information available as of the publication of this report and contain potential risks and contingencies. For that reason, please be aware that due to various changing factors, actual results may vary from the forecasts published in this report.
Period CoveredThis report covers the fiscal year ended December 2017 (Jan. 1, 2017–Dec. 31, 2017).However, it may refer to events before or after this period as necessary.
Organizations CoveredSapporo Holdings, Ltd. and Group companies
Referenced Guidelines• International Integrated Reporting Council
(IIRC), The International <IR> Framework• Ministry of Economy, Trade and Industry,
Guidance for Collaborative Value Creation
• GRI (Global Reporting Initiative)Sustainability Reporting Standards (International guidelines on corporate sustainability reporting)
• International Organization for Standardization ISO 26000 (Guidance on social responsibility)
• Ministry of the Environment Environmental Reporting Guidelines 2012
Supported Initiatives• UN Global Compact
The Sapporo Group considers its dialogues with shareholders, investors, and all
other stakeholders to be of the utmost importance. In that vein, and with the goal
of deepening overall understanding of the Group’s economic and social value
through the reporting of our management strategy, business activities, and CSR
activities, we have started publishing an integrated report as of fiscal 2017.
In addition, we have decided to publish a “Communication Book” as a digest
version of the integrated report that will elaborate on the report’s contents.
In doing so, we hope that all stakeholders, including shareholders and other
investors, will understand the Sapporo Group’s vision toward sustainable growth.
June 2018
For more information regarding financial and non-financial matters, please visit the
Company website.
Detailed
Financial
Non-financialDetailedSummarized
• Securities reports• Financial results and Supplementary information• Presentation
materials• Fact Book
Sapporo Holdings has signed the United Nations Global Compact.
Integrated Report
Communication Book
• Corporate Governance Report
• CSR information (website)
15
Integrated Report 2017
Established the Kaitakushi Brewery in Sapporo, Hokkaido
Established Japan Beer Brewery Company in Ginza, Tokyo
Started manufacture and sale of CitronThe launch of Citron (soda) marked the Sapporo Group’s entry into the soft drinks business.* Citron was renamed Ribbon Citron
in 1915 due to the launch of a large number of imitation products.
Established Seiwa Real Estate Co., Ltd. (now SAPPORO REAL ESTATE CO., LTD.)Provides real estate services starting from real estate development of former factory sites
Completed construction of Yebisu Garden Place on the former site of SAPPORO BREWERIES’ Yebisu Brewery
Established Kokusai Inryo Co., Ltd., which later became Sapporo Beverage Co., Ltd.
Completed construction of the Sapporo Factory on the former site of SAPPORO BREWERIES’ Sapporo Brewery
1964
1890
19561877
1993 1994
1957
Company name changed to SAPPORO BREWERIES LIMITED
Launched Yebisu Beer
Revival of Sapporo Beer
Launched Sapporo Lager Beer, the first product
Began exporting beer to the United StatesSAPPORO BREWERIES started its overseas expansion with the export of beer to the United States.
Established SAPPORO U.S.A., INC.
1984
Opened YEBISU BEER HALL, Japan’s first beer hall in Ginza, Tokyo
Changed Company name to SAPPORO LION LIMITED
Opened the Beer Hall Lion Ginza 7-chome, now the oldest existing beer hall in Japan
19791934
1876
1887
1964
1909
1899
1988
Our History
16
SAPPORO HOLDINGS LIMITED
Japanese
Alcoholic
Beverages
Food & Soft Drinks
Real EstateCompleted construction of Strata Ginza
Made POKKA CORPORATION a wholly owned subsidiary
Entered the soy milk and chilled products business
2006 2012 2017
2011
2006 2014 2016
2013 2015
Entered the shochu business
Completed construction of Ebisu First Square
Opened the Grande Polaire Katsunuma Winery, eyeing the growing market for fine wines
Completed construction of GINZA PLACE
40th anniversary of the launch of Sapporo Draft Beer Black Label
Integrated business with POKKA CORPORATION and started operations as POKKA SAPPORO FOOD & BEVERAGE LTD.
InternationalMade SLEEMAN BREWERIES LTD. into a consolidated subsidiary and focused on strengthening the SLEEMAN brand
2006 2010 20152012
Entered the U.S. soft drinks business andacquired 51% of the shares of SILVER SPRINGS CITRUS, INC., making it a consolidated subsidiary
Made SAPPORO VIETNAM LIMITED into a consolidated subsidiary and expanded business in Southeast Asia
Acquired 51% of the shares of COUNTRY PURE FOODS, INC., making it a consolidated subsidiary
RestaurantsOpened the first YEBISU BAR jointly developed with SAPPORO BREWERIES in the Ginza Corridor district
Made primarily Sapporo-based restaurant operator MARUSHINKAWAMURA INC. into a consolidated subsidiary
2009 2013 2016
Opened the first GINZA LION BEER HALL in Singapore, using the strength of the beer hall format for overseas development
Started operation under a holding company framework
with SAPPORO HOLDINGS LIMITED
as a pure holding company2003
New Business2016: Acquired 51% of the shares of SHINSYU-ICHI MISO CO., LTD., which manufactures and sells miso, instant miso soup, and freeze-dried products, making it a consolidated subsidiary
2016
17
Integrated Report 2017
Since 1876, we have been committed to using only the finest raw materials to always pursue new possibilities and to create the high-quality products that embody our drive toward providing joy and enrichment to our customers. Based on our Company slogan, “Bringing more cheer to your ‘Cheers!,’” we have devel-oped a broad range of businesses that are centered on beer prod-ucts and which also include wine and spirits, and continue to propose new products and services in line with our unique value.
Domestically, our business centers on the production and sale of items including lemon-based products, soups, soft drinks, and soy-based products in addition to the operation of café chains. Overseas, we continue to take on challenges ranging from the expansion of POKKA brand drinks from our base in Singapore to the rest of the world, to the promotion of a business model centered on local production in Southeast Asia. With novel ideas, sparks of inspiration, and overflowing passion, we will continue to create products one after another and provide a sense of “deliciousness” in each one.
The Sapporo Group has a business for managing, operating, and developing real estate centered in Ebisu, Sapporo, and Ginza, three locations where the Group has deep roots. Through urban development projects in these areas such as Yebisu Garden Place, Sapporo Factory, and GINZA PLACE, we hope to create and cultivate both “luxurious time” and “luxurious space.”
We have a rich history that extends over a century. The YEBISU BEER HALL was established as the first of its kind in Japan. Our subsequently established beer halls, such as the GINZA LION and YEBISU BAR, and our and other restaurants, run with a Japanese style of service spread the idea of omotenashi through offering our customers a safe, secure, and delicious dining experience in comfortable surroundings.
We promote a growth strategy focused on North America and Southeast Asia and adapted to the characteristics of each specific area. We are currently working to expand our business in North America by leveraging the strengths of our SAPPORO PREMIUM brand, the No. 1 selling Asian beer in the U.S., our SLEEMAN brand in Canada, and our ANCHOR brand, acquired in 2017. In Southeast Asia, Vietnam has seen remarkable growth, and we are continuing to raise the value of the Sapporo brand with our flagship brand, SAPPORO PREMIUM Beer.
Japanese
Alcoholic
Beverages
Food & Soft Drinks
Real Estate
International
Restaurants
Our Businesses Fiscal year ended December 2017
18
SAPPORO HOLDINGS LIMITED
Number of Employees
7,902(Consolidated)
187(Parent company)
As of December 31, 2017
Consolidated Subsidiaries
and Equity-Method Affiliates
57(Consolidated subsidiaries)
2(Equity-method affiliates)
As of December 31, 2017
Net Sales
¥137.8 billion
Net Sales
¥24.1 billion
Net Sales
¥281.3 billion
EBITDA
¥8.3 billion
EBITDA
¥15.6 billion
EBITDA
¥19.9 billion
Main Brands: Beer and beer-type beverages: Sapporo Draft Beer Black Label, Yebisu Beer, Mugi to Hop, Goku Zero Wine: Grande Polaire, Penfolds Champagne: Taittinger Spirits: Bacardi, Dewar’s
Net Sales
¥29.1 billion
EBITDA
¥0.9 billion
Main Brands: GINZA LION BEER HALL, YEBISU BAR Number of Outlets: 195 in Japan, 13 overseas (As of December 31, 2017)
Main Brands: Soft drinks: Kireto Lemon, Aromax, Gabunomi Soups: Jikkuri Kotokoto Lemon-based products: POKKA Lemon 100 Soy milk: SOYAFARM Cafe chain: Café de Crié Ice cream: BLUE SEAL
Net Sales
¥67.1 billion
EBITDA
¥3.1 billionMain Brands: SAPPORO PREMIUM, SLEEMAN, ANCHOR Main Sales Areas: United States, Canada, Vietnam, South Korea, Australia, Singapore
Main Facilities: Yebisu Garden Place, Sapporo Factory, GINZA PLACEMain Areas: Ebisu, Sapporo, Ginza
● Japanese Alcoholic Beverages ● International ● Food & Soft Drinks ● Restaurants ● Real Estate ● Other* Starting from the fiscal year ending December 31, 2018,
the export business of Sapporo International Inc. has been transferred to Sapporo Breweries Ltd. The figures for fiscal 2017 have been retroactively adjusted to reflect this transfer.
Consolidated Net Sales
¥551.5 billion
(+1.8% YoY)
Consolidated EBITDA
¥44.5 billion(–4.2% YoY)
Fiscal year ended December 2017
Consolidated Net Sales
Consolidated EBITDA
19
Integrated Report 2017
Financial and Non-Financial Highlights
Net Sales (Including Liquor Tax) / Operating Margin (Before Goodwill Amortization)*1
Sales increased during fiscal 2017, as they have done continuously since fiscal 2010. However, operating profit declined due to difficult conditions in the overseas soft drink business, among others. As a result, the operating margin edged down 0.9 of a percentage point year on year, to 4.8%.
1413
551,548
4.8%
16 170
100,000
300,000
500,000
400,000
600,000
0
3
1
200,000 2
4
5
6
15
1413
10,977
140.9
16 170
3,000
9,000
6,000
12,000
0
50
100
150
200
15
1413
40
28.4%
16 170
10
20
40
30
50
0
20
10
30
40
50
15
1413
44,558
10.3%
16 170
10,000
20,000
40,000
30,000
50,000
0
8
4
12
16
20
15
1413
10,977
8.9%
16 170
3,000
6,000
9,000
12,000
0
8
4
12
16
15
1413
220,871
1.2
16 170
50,000
100,000
200,000
150,000
250,000
0
2
1
3
4
5
15
Profit Attributable to Owners of Parent / Earnings per Share*4
Profit attributable to owners of parent rose 15.9% year on year, to ¥10.9 billion, due mainly to a gain on sales of investment securities and a gain on sales of property, plant and equipment.
Dividend per Share*5 / Dividend Payout RatioIn fiscal 2017, EPS increased ¥3, to ¥40 per share, with the dividend payout ratio coming to 28.4%. Under the First Medium-Term Management Plan 2020, the Company has adopted a financial target of reaching a dividend payout ratio of around 30%.
EBITDA*2 / EBITDA Margin*3
EBITDA decreased 4.2% year on year, to ¥44.5 billion. As a result, the EBITDA margin was down 0.7 of a percentage point, to 10.3%.
Profit Attributable to Owners of Parent / ROE (Before Goodwill Amortization)
ROE (before amortization of goodwill) edged up 0.5 of a percentage point year on year, to 8.9%, as profit attributable to owners of parent increased for the third year in a row.
Net Financial Liabilities / Net Debt-to-Equity (D/E) RatioNet financial liabilities declined 2.9%, to ¥220.8 billion. Net D/E ratio came to 1.2 times.
Net sales (including liquor tax) Operating margin (before goodwill amortization)
*1 Operating margin = operating profit before amortization of goodwill ÷ net sales excluding liquor tax
Profit attributable to owners of parent Earnings per share*4 On July 1, 2016, the Company carried out a share consolidation at a ratio of 1 share for
5 shares of the Company’s common stock. Accordingly, per share information is presented on a basis that reflects this share consolidation.
Dividend per share Dividend payout ratio*5 On July 1, 2016, the Company carried out a share consolidation at a ratio of 1 share for
5 shares of the Company’s common stock. Accordingly, per share information is presented on a basis that reflects this share consolidation.
EBITDA EBITDA margin*2 EBITDA = Operating profit + depreciation cost + amortization of goodwill*3 EBITDA margin = EBITDA ÷ net sales excluding liquor tax
Profit attributable to owners of parent ROE (before goodwill amortization)
Net financial liabilities Net debt-to-equity (D/E) ratio
Millions of yen %
Millions of yen Yen
Yen %
Millions of yen %
Millions of yen Yen
Millions of yen Times
20
SAPPORO HOLDINGS LIMITED
1413
30,004
29,185
11,363
16 170
10,000
20,000
30,000
50,000
40,000
15
44,558
0907 13 17150
1,000
2,000
1,500
2,500
0
30
10500
20
40
50
11
40.0%
1,943
360
1.8%
16 170
100
200
400
300
500
0
0.8
0.4
1.2
1.6
2.0
15
8.1%
135
16 170 0
40
80
160
120
200
4
2
6
8
10
15
Cash Flows from Operating Activities and Status of InvestmentsThe Company used cash provided by operating activities to actively carry out growth investments.
Awards Related to R&D In fiscal 2017, the Company received a total of six awards related to its R&D activities, including the Best Poster Award at the 36 th European Brewery Convention, which it received for the third year in a row.
Recycling Ratio Environment
Since 1998, Sapporo Breweries has achieved a 100% recycling ratio of byproducts and waste that accompany product development at its beer, soft drink, and food product factories. Since 2006, POKKA SAPPORO Food & Beverage has achieved the same accomplishment.
Percentage of Women in Management Positions*7 Human Resources
For its approach to valuing and utilizing diversity of all kinds, the Sapporo Group will work to establish an environment where it is commonplace for women to continue their profession while playing an active role with a high level of engage-ment. In fiscal 2017, the percentage of women in management positions was 8.1%.
Trends in Overseas Beer Sales VolumeThe ratio of overseas beer sales volume to domestic sales volume in 2017 reached 40.0%, an increase of 2.2 times compared with the 18.3% in 2007.
Results of Social Contribution Activities Society
In fiscal 2017, the Sapporo Group spent ¥360 million on social contribution activities, which accounts for 1.8% of the Group’s ordinary income.
Cash flows from operating activities Investment amount*6 Gain on sales of investment securities and gain on sales of property, plant and equipment EBITDA
*6 Investment amount = Cash flows from investing activities + gain on sales of investment securities and gain on sales of property, plant and equipment
Overseas beer sales volume Ratio of overseas beer
Amount spend on social contribution activities Percentage of ordinary income
Number of women in management positions Percentage of women in management positions
*7 Percentage of women in management positions at domestic and overseas Group companies
Millions of yen Millions of yen %
Millions of yen %
Person %
See page 79 for details.
6(2017)
100%
20 consecutive years for SAPPORO BREWERIES12 consecutive years for POKKA SAPPORO
Food & Beverage
(2017)
Alcoholic Beverages, Food, and Soft Drinks
21
Integrated Report 2017
Our unique brands represent the crystallization of our history and dialogues as well as our pursuit of
innovation and quality. While cultivating and strengthening these brands by further refining them
through our unique value chain, we will work to sustainably improve corporate value.
The Sapporo Group’s Business Model
A Business Model for Refining Our Brands
Brands
A
B
CD
E
Research & Development
Procurement
DistributionSales
Experience
We position the strengthening and enhancement
of corporate governance as one of our priority
management issues in order to maximize the
sustainability of our business model.
We are working to improve sustainable corpo-
rate value by reinforcing the risk management
structure of the entire Group and conducting
sound corporate management.
Corporate Governance P.58 Risk Management P.42
Value chain for refining our brands
22
SAPPORO HOLDINGS LIMITED
Value Chain for Refining Our Brands
Spaces to Experience Our Brand
We provide brand-inspired spaces through the
operation of our much-beloved restaurants,
commercial complexes, and other facilities,
and in doing so grow our brand alongside the
customer.
Raw material procurement / Marketing / Production / Logistics
External research institution
Planning Product development
Planning
Planning and development
Production planning
Research & Development
By way of our Groupwide R&D structure, “Sapporo innovation Labs,” we improve the
value we currently generate and pursue new
value creation while promoting Groupwide col-
laboration and open innovation.
Procurement
As part of our unique efforts to pursue quality for our beer, our fieldman communicate directly with collaborative contract farmers.* We work to
procure safe, reliable, and high-quality raw
materials for our products.
Distribution
Through the development of production methods tailored to product characteristics, we are able to
deliver high-quality goods in a stable manner in
addition to preparing a waste-free supply system
with an appropriate production plan.
Sales
We continue to work toward delivering custom-ers our goods and services via the most optimal points of contact with them, ranging from super-
markets, convenience stores, and restaurants to
specialty stores, Internet sales, and vending
machines.
A
B
C
D
E
Products / Service proposals
Fieldman
Collaborative contract farmers
Distribution
Customers
Brand-inspired spaces
Restaurants Museums Commercial complexes
Planning
Suppliers
Procurement Production
LogisticsProduction
Sales
Flow of information Flow of goods
Production technology development
Marketing
Marketing
Marketing / Business support
Research & development
Distribution Customers
Sapporo innovation Labs
* Refers to a system whereby we carefully select the production area for barley and hops, the two main raw materials for beer, and work closely with growers from cultivation to processing. See page 52 for details.
23
Integrated Report 2017
DNA
Delivering Value Unique to the Sapporo Group by Refining Our BrandsThe Sapporo Group is promoting initiatives to refine its brands utilizing its unique value chain. By
expanding its points of contact with customers and deepening the trust-based relationships it has with
them, the Group has acquired the support of a strong fan base and has fostered a love for its brands.
In doing so, the Group has been working to create unique corporate value.
This section introduces examples of how the Group is working to refine three of its distinctive
brands: Sapporo, Yebisu, and POKKA Lemon.
SAPPORO01Topic
The Sapporo brand has inherited rich traditions starting from the establishment of Kaitakushi Brewery
in 1876. By pursuing innovation and quality throughout the entire value chain, the Group is continuing
to increase the number of fans of Sapporo Draft Beer Black Label.
Over 40 Years of Sapporo Draft Beer Black Label —Pursuing Deliciousness with the Aim of Creating the Perfect Draft Beer
Sapporo Draft Beer Black Label was created in 1977 with
an aspiration for letting people enjoy truly delicious draft
beer in the comfort of their own homes, and this desire
remains unchanged to this day. With Sapporo Draft Beer
Black Label, we have continued to be passionate about
offering the deliciousness of draft beer. In raw material
procurement, production methods, and all our efforts for
the brand, we have pursued the creation of the perfect
draft beer that is loved by adults. The perfect balance
between barley and hops gives Sapporo Draft Beer Black
Label a bold and refreshing taste than can be enjoyed
from the first sip to the last.
In addition, the brand makes use of our original fresh-
tasting, long-lasting malt, which we developed from barley
free of components that deteriorate beer flavor, helping
maintain a fresh taste and aroma and realize long-lasting
foam. These are just a few examples of our never-ending
efforts to achieve the ideal level of deliciousness.
Going forward, we will continue to refine Sapporo Draft
Beer Black Label so that an even greater number of adults
can experience the deliciousness of the perfect draft beer.
Special Feature 1
24
SAPPORO HOLDINGS LIMITED
Offering High-Quality Worldviews That Embody the Perfect Draft Beer Loved by Adults
We have continued to engage in activities to consistently communicate the appeal of Sapporo
Draft Beer Black Label under the theme of “a draft beer loved by adults.”
In our television advertisements, not only do we highlight the deliciousness of draft beer,
which is one of the brand’s unique strengths, we also promote Sapporo Draft Beer Black Label’s
value as a beer enjoyed by adults with unique value system. In these ways, we are using the
Sapporo Draft Beer Black Label to offer unique worldviews.
Providing Distinctive Drinking Experiences through the Expansion of Brand Contact Points
The Perfect Black Label Beer, a draft beer only available at stores, offers a
delicious taste realized through our aim to perfect the Sapporo Draft Beer
Black Label. As such, we are expanding efforts aimed at having people expe-
rience the appeal of this beer’s unique taste.
To this end, we hold “THE PERFECT DAYS,” “THE PERFECT BAR,” and
“THE PERFECT BEER GARDEN” events that allow adults to experience
The Perfect Black Label Beer at bars and beer gardens in major cities through-
out Japan. At these events, with a firm commitment to offering draft beer of the highest quality, we provide an
environment, atmosphere, and service lineup that are ideal for drinking The Perfect Black Label Beer. In 2018,
we will continue to increase the number of opportunities for people to enjoy the worldview and delicious taste
offered by The Perfect Black Label Beer, including new plans to promote “THE PERFECT STAR WAGON,”
a food car that will provide the beer in a variety of settings.
Communicating the History, Ideas, and Story of Sapporo Beer in the Area of Our Founding
The Sapporo Beer Museum is one of Japan’s only beer museums. The
museum helps communicate the history of Japanese beer that was cre-
ated through the passionate efforts of Japanese brewers. It also conveys
the dedication and commitment to beer that Sapporo Breweries inher-
ited. The Sapporo Beer Museum is a facility located inside Sapporo
Garden Park, together with the Sapporo Beer Garden. The museum’s redbrick interior is reminiscent of
architecture during the Meiji period. In addition, the museum has received the official “Hokkaido
Heritage” designation.
In April 2016, we carried out a comprehensive renovation of the Sapporo Beer Museum, transforming
it into a location that better communicates the passion of Sapporo Breweries to an even greater number
of visitors.
Over its 40-year history, Sapporo Draft Beer
Black Label has continued to realize sales
growth as one of the Sapporo Group’s rep-
resentative brands.
Sapporo Beer Museum
Sales Volume of the Sapporo Draft Beer Black Label Brand (On a cumulative basis compared with the same month of the previous fiscal year)
110%
115%
105%
100%
95%
Jan.2017
Apr.2017
Jul.2017
Oct.2017
Mar.2018
25
Integrated Report 2017
YEBISU02Topic
The Yebisu brand, which has embodied the district of Ebisu as a hub of culture and lifestyle for over
100 years, continues its evolution into the future as a beer that is loved by customers.
Proposing New Value with Yebisu Beer
Yebisu Beer illustrates its theme of “More joy today with Yebisu,” promoting value
proposals that drive food culture further by epitomizing both Japanese culture and
the spirit of innovation. At the same time, Yebisu maintains its value as a premium
Japanese beer with a rich history. Through Yebisu, we work to enhance the drinking
experience by complementing the best seasonal foods and occasional special events
as well as by bringing a little more joy to any special day, including not only New
Year’s, Mother’s Day, and Father’s Day but also any other special occasion.
In March 2017, we introduced our first white beer under the Yebisu brand,
Yebisu Hana Miyabi. To achieve a flavor befitting the Yebisu name, we selected a
top-fermented yeast from over 1000 strains to create a fruity taste with authentic
richness (“KOKU”) that enjoys the support of a new customer base.
Furthermore, The Yebisu Beer Museum, located in the birthplace of Yebisu Beer, is regularly
bustling with local and international visitors. With an “All-things-Yebisu” concept, the museum is
a space where its many visitors can experience the Yebisu brand and understand the Yebisu worldview
through sight, touch, and taste. We hope to bring visitors back again and inspire them to spread the
good word about Yebisu.
Enjoying a “Luxurious Time” and “Luxurious Space” at Yebisu Garden Place
Yebisu Garden Place celebrated its 20th anniversary in
2014, born as a pioneer integrated urban area in 1994, in
tandem with the relocation of Yebisu Brewery. We have also
unveiled a new brand message, “Ebisu, a city on the grow.”
To become such a “city,” we aim to increase brand strength
and user-friendliness and are promoting various measures
to increase value. In 2017, we opened a consortium-style
(serving multiple companies) in-house childcare center and
renovated the food and drinks floor. In addition, Sapporo
Real Estate established an urban development department
at its main office in order to promote
urban development in the Ebisu area—
with which we have a deep relation-
ship—that forms connections within the
area and contributes to people’s lives.
Number of Visitors to The Yebisu Beer MuseumSince the grand reopening of The Yebisu Beer Museum in 2010, an aggregate total of 1.8 million visitors have experienced the worldview of the Yebisu brand.
P r ide
Yebisu Garden Place13 14 15 16 17
260,000
240,000
220,000
200,000
0
250,000 people
Special Feature 1
26
SAPPORO HOLDINGS LIMITED
03Topic
POKKA Lemon was first launched in 1957 as a lemon product used in cocktails at standing bars.
Since then, supported by the rise in popularity of Western cuisine, POKKA Lemon has received customer
approval as a lemon product that can be used easily at home. Over the years, we have pursued product
development for POKKA Lemon that caters to the changing times, including promoting a variety of uses
for lemons and increasing variation in product containers and volume. In these ways, POKKA Lemon
has continued to grow over the course of 60 years as one of our long-selling products.
Proposing Comprehensive Lemon-Based Eating Habits in Celebration of the 60-Year Anniversary of the Lemon Business
2017 marked the 60th year since the launch of POKKA Lemon. Over this time, the product has continued
to be a major part of the eating habits of people. In addition to promoting POKKA Lemon in a supporting
role on the dinner table as a dressing for food, we have introduced a wide variety of recipes using the
product that take full advantage of the delicious taste of lemons, thereby proposing lemon-based eating
habits to people. Furthermore, we have communicated information on the health benefits offered by lemons
themselves and how they can contribute to the healthy eating habits of people. For children, who are the
next generation, we have hosted lectures and nutritional seminars where children can learn about the
various health benefits of lemons through experiments and various hands-on
activities. In doing so, we have created opportunities for children to become
more familiar with lemons.
In addition, in Nagoya and Ebisu, we open the lemon antenna shop Lemon
Healthy Stand for a limited period during the summer where people can
experience the deliciousness of lemons in comfort. At this shop, we offer an
extensive menu of healthy food and drinks that let people fully enjoy lemons.
Thoroughly Researching Lemons as a Pioneer in the Lemon Business
POKKA SAPPORO Food & Bevarage has spent many years engaged in research on lemons, analyzing the
various health benefits of lemons and communicating relevant information on them. During 2017, in the
lemon-producing area of Osakikamijima Town, Hiroshima Prefecture, we conducted a fact-finding survey on
the health benefits received from consuming lemons on a daily basis. In addition, we carried out a cultivation
test utilizing information and communication technologies
in an effort to support domestic lemon production. Through
these means, we are promoting a broad range of research
with the aim of becoming lemon professionals.
Offering Another Lemon Brand: Kireto Lemon
In 2001, we launched Kireto Lemon, a drink that allows
customers to easily enjoy the health benefits of lemons. This
product is the result of our years of research on lemon-
based materials and of our constant pursuit of
deliciousness. Positioning Kireto Lemon as a core brand
alongside POKKA Lemon, the brand is currently helping
drive growth in the lemon business of POKKA SAPPORO.
Insp i ra t ionPOKKA LEMON
Lemon Healthy Stand
Sales Volume of POKKA Lemon By creating lemon-related value in the food market, we have been working to expand the market since the launch of POKKA Lemon.
5,000 kl
4,000 kl
3,000 kl
2,000 kl
1,000 kl
1974 1980 1990 2000 2010 2017
Note: From 1974 to 2011, totals are calculated using the period from April to March of the following year. From 2012 to 2017, totals are calculated using the period from January to December of the same year.
27
Integrated Report 2017
Masaki OgaPresident and Representative Director
We aim to realize solid growth as a company
with highly unique brands. To this end, we will
develop appealing products and services on a global
basis in the business fields of “Alcoholic Beverages,”
“Food,” and “Soft Drinks” as we boldly aim to
realize growth by expanding the points of
contact with our customers.
Message from the President
28
SAPPORO HOLDINGS LIMITED
Delivering Unique Value by Refining Our Brands
Our brands represent the crystallization of the aspira-
tions we would like to share with our stakeholders—
aspirations fostered through the dialogues and
trust-based relationships we have established with
them over many years. Guided by these aspirations,
we are pushing forward with a two-pronged approach
that revolves around a business model for refining our
brands and CSR activities that strengthen bonds with
our stakeholders through our brand story while work-
ing to create distinctive corporate value. Refining our
brands means constantly moving ahead with new
ideas without entering into a repetitive cycle. By con-
tinuously working to refine our brands, we will create
value unique to the Sapporo Group.
There are three major aspects behind the unique
value the Sapporo Group offers. The first aspect is our
relentless efforts to enhance the value of deliciousness
as a food manufacturer that designates “Alcoholic
Beverages,” “Food,” and “Soft Drinks” as its core busi-
ness areas. In the case of Sapporo Draft Beer Black
Label, we remain committed to finding ways to offer
customers a beer that maintains the consistent quality
and delicious taste of draft beer fresh from the tap.
Going forward, we will identify ways to further enhance
the taste of Sapporo Draft Beer Black Label, taking into
account a variety of viewpoints, including improve-
ments to the production process, the bolstering of raw
material procurement and distribution, and the creation
of various settings and scenes in which customers can
enjoy the product. The second aspect is identifying, envi-
sioning, and materializing the kind of value that brings
joy to our customers—specifically, convenience, simplic-
ity, and sensibility—and delivering that value to them
through our products and services. To this end, we will
actively provide value that caters specially to each cus-
tomer. The third aspect is the absolutely essential value
of providing safe and secure products of high quality as
a food manufacturer. For example, we are promoting a
Collaborative Contract Farming System to ensure that
our raw materials are safe, secure, and of high quality.
We are also enhancing the traceability of the raw mate-
rials we use. Furthermore, we are implementing produc-
tion management that uses highly sophisticated analysis
technologies developed in our research and development
departments and are closely studying the flavor compo-
nents of our end products. These kinds of efforts reflect
our commitment to quality at every stage of product
development, from procuring raw materials up until the
product reaches our customers, and we will further
enhance the quality of our products going forward.
Supported by these three major aspects behind the
unique value we deliver, we will continue to refine our
highly distinctive brands while focusing on ensuring
originality, which involves creating products and services
that other companies cannot imitate; relevancy, which
means catering to the tastes and needs of the modern-
day consumer; and continuity, which entails building
trust by continuing to push forward with new ideas.
Sharing Aspirations with Our Stakeholders by Strengthening Bonds through Our Brand Story
Since its founding, the Sapporo Group has remained
committed to manufacturing. At the same time, the
Group has conducted its business operations with a
constant awareness of the connections and relation-
ships it has with various regions, including Sapporo,
Ebisu, Ginza, and Nagoya, which are also major con-
tact points with customers. Specifically, we have proac-
tively contributed to urban development in areas such
as Sapporo and Ebisu, which has helped us cultivate
and strengthen a broad range of distinctive brands. We
are extremely proud of such efforts, the likes of which
are not commonly pursued by other companies.
Furthermore, at the heart of these efforts are the aspira-
tions we wish to share with our stakeholders by
strengthening bonds through our original brand story.
To turn our aspirations into a reality, we have
adopted the enhancement of corporate communication
as a theme of the Sapporo Group Long-Term
Management Vision “SPEED150.” We have also identi-
fied our CSR priority issues and organized them by
field to help determine the 4 Promises of “Contributing
to Creative, Enriching and Rewarding Lifestyles
Through Alcoholic Beverages, Food, and Soft drinks,”
“Promoting Coexistence with Society,” “Promoting
Environmental Conservation,” and “Cultivating Highly
Unique Employees.” We are providing products and
29
Integrated Report 2017
services and conducting business activities that relate
closely to the Sustainable Development Goals (SDGs),
which were adopted at a UN Summit in 2015.
Referencing the SDGs, we have determined medium- to
long-term targets aimed at resolving our CSR priority
issues. By pursuing these efforts while working to
enhance our corporate governance, which provides the
foundation for all our businesses, we will contribute to
the realization of the SDGS and will develop brands
and earn trust that will provide the source for growth
going forward.
In particular, from the perspective of environmental
conservation, we use all-natural materials throughout
the beer production process and when we put the
finishing touches on our products. Additionally, we
recycle all of the product containers we use, such as
bottles, cans, and barrels. We also conduct advanced
initiatives geared toward the environment, including
the use of sophisticated water processing technologies.
Going forward, we will continue to contribute to the
resolution of environmental issues from perspectives
unique to the Company and take steps to communi-
cate these issues to the world.
Moreover, while we understand the importance of
continuing an aggressive approach with our growth
strategies, we also recognize the need to remain defen-
sive in some aspects. As such, we will constantly con-
sider not only business risks but also natural disasters
and other risks that will inevitably inflict damage
upon us and begin systematically managing and
responding to such risks.
Through these initiatives, we will strengthen bonds
through our brand story well into the future.
Aiming for the Best Way to Realize Growth for the Sapporo Group and an Ideal Approach to Growth Strategies
Under the First Medium-Term Management Plan 2020,
we aim to transition to a new growth stage based on
the theme of “Transform with Unprecedented Speed.”
In addition to realizing continuous growth in our exist-
ing businesses, we are undertaking initiatives to accel-
erate our expansion in the “Food” field, capitalize on
growth opportunities geared toward business global-
ization, and strengthen our earnings structure. Also, we
are taking steps to establish an R&D structure that
will drive our growth as a food manufacturer.
Furthermore, by making a bold shift to allocating
human resources to growth fields, we are accelerating
the pace of efforts to strengthen the Group’s manage-
ment foundation in response to the changes occurring
in the business environment. Going forward, we will
generate cash flows by strengthening our fundamental
functions, realizing continuous growth in our existing
businesses, and producing results in the investment
business. Meanwhile, we will pick up the pace for
growth by carrying out proactive investments totaling
¥130.0 billion in our core business areas of “Alcoholic
Beverages,” “Food,” and “Soft Drinks” over the four-
year period from 2017 through 2020.
Recognizing and Responding to the Business Environment
Consumption trends in Japan are by no means favor-
able, and we find ourselves in a fairly challenging busi-
ness environment. With that said, there is no
question that many of the domains in which we are
Message from the President
By pursuing efforts under the
4 Promises, we will develop brands and
earn trust that will become the source of
our business growth going forward.
30
SAPPORO HOLDINGS LIMITED
involved are growing, including alcoholic beverages
such as ready-to-drink (RTD) beverages and wine.
Amid the changes occurring in consumer tastes and
needs and in the market overall, we will move forward
with comprehensive initiatives in the core business
areas of “Alcoholic Beverages,” “Food,” and “Soft
Drinks” while putting in place a structure that will
allow these businesses and our other businesses, includ-
ing our overseas and real estate businesses, to mutually
complement each other. These initiatives will help us
realize steady growth as we ascertain areas on which
the Company should focus its efforts, keeping in mind
the significance of building on our existing brands.
Accelerating Expansion in the “Food” FieldOver the past 10 years, we have taken great steps to
expand our business domains, including making an
entrance into the food business through the acquisi-
tion of POKKA CORPORATION. To further expand
in the “Food” field going forward, we will promote
efforts centered on developing a strong connection
and relationship between the food business and our
existing businesses and technologies as well as on
aligning the food business with our Management
Philosophy. As part of our expansion efforts, we
acquired SHINSYU-ICHI MISO CO., LTD. (formerly
MIYASAKA JOZO CO., LTD.), a company involved
in the manufacture and sale of miso and instant miso
soup, in 2016. As the main ingredient in miso is soy-
beans, Shinsyu-Ichi Miso has a high level of affinity
with the soy milk and yogurt businesses of the Group
company POKKA SAPPORO Food & Beverage from
the perspective of raw materials. Additionally, with its
miso soup products, Shinsyu-Ichi Miso is also highly
familiar with the soup business of POKKA SAPPORO
Food & Beverage. As such, we will work to generate
synergies with Shinsyu-Ichi Miso as we continue to
expand in the “Food” field going forward.
Meanwhile, in growing our “Food” fields, we will
not only work to expand the range of products we
offer, we will also make rigorous efforts to deepen
and enhance each individual field, including overseas
expansion. We are a food manufacturer with beer as
our mother business. As such, we have been involved
in various other alcoholic beverage businesses that
derive from our beer business. Furthermore, we have
expanded into peripheral domains such as soft drinks,
soups, and lemon-based products. In all of our existing
businesses, we see the potential for growth if we are
able to expand overseas and will therefore work to
develop food businesses overseas as well.
Expanding Our Overseas Businesses as a Growth Driver
As we pursue efforts to expand in the “Food” field,
we are also actively promoting the development of
businesses overseas, centered on North America and
Southeast Asia. In doing so, we have been steadily
establishing a presence as a global food manufacturer.
In particular, our overseas beer business has experi-
enced remarkable growth, with the ratio of overseas
We will establish even higher and more
meaningful targets, including aiming to
enter the top-10 ranking for imported
beers in America, and steadily take steps
to accomplish these targets.
31
Integrated Report 2017
beer sales volume to domestic beer sales volume
increasing 2.2 times from 18.3% in 2007 to 40.0%
today. With that said, we believe there is a great deal of
growth potential upon which we have yet to capitalize
in our overseas businesses, and we intend to continue
to grow these businesses as a major growth driver.
Specifically, we will enhance the presence of the
Sapporo brand primarily in North America and
Southeast Asia while also working to heighten aware-
ness of the brand. In addition to Sleeman Breweries,
which continues to perform strongly, our North
American businesses include Sapporo U.S.A. and
Anchor Brewing Company, and we are greatly looking
forward to seeing just how far we can leverage these
companies to expand our presence in the region.
Sapporo has already become the top-selling Japanese
beer and the top-selling Asian beer in North America.
However, given the sheer size of the North American
beer market, we cannot be completely satisfied with
these results. As such, we will establish even higher
and more meaningful targets, including aiming to enter
the top-10 ranking for imported beers in America, and
steadily attempt to accomplish these targets.
Meanwhile, an urgent task for us is to promptly
return to profitability after recording a deficit in the
Vietnam business and other businesses. To this end, we
will rigorously enhance the function of our business in
the region with the aim of rapidly realizing investment
returns.
Also, as collaboration with other companies that
possess prominent brands is one way to effectively
reduce the amount of time it will take us to realize
business expansion, we accordingly keep this option
on the table. For potential M&A projects, we carry
out comprehensive examinations from a brand-based
viewpoint as well as from the perspectives of the
regions in which we operate. From a regional perspec-
tive, while our focus is on North America and
Southeast Asia, the main factor in deciding an M&A
is whether or not it can generate mutual synergies
with our existing businesses and Group companies.
With respect to brands, a major factor is considering
how a particular brand will be received and supported
by our customers. We also give thorough consider-
ation to the conditions in each country and region and
to the negative aspects of pursuing M&A. These steps
reflect how we make investment decisions based on a
comprehensive list of factors.
Turning Global Movements and Trends into Growth Opportunities for the Company
As our fundamental approach, we aim to be a com-
pany that is constantly aware of the changes and
trends that are occurring around the world. From
a diversity standpoint, while previously most of our
employees were men, the percentage of women is
dramatically increasing today, particularly among new
and young employees. Although the current percent-
age of women in management positions is still not
quite sufficient, we believe that opportunities will
The strong push for encouraging
diversity around the world is a trend that
we can turn into a growth opportunity,
and we are therefore pursuing
wholehearted efforts to promote
diversity on a Groupwide basis.
Message from the President
32
SAPPORO HOLDINGS LIMITED
significantly increase for women to play an active role
going forward. The strong push for encouraging diver-
sity around the world is a trend that we can turn into
a growth opportunity, and we are therefore pursuing
wholehearted efforts to promote diversity on a
Groupwide basis. These efforts are exemplified in the
composition of the Company’s Board of Directors, as
in 2016 we took the lead over other companies in the
industry and appointed a woman as an internal direc-
tor. In 2018, we appointed a non-Japanese person as
an outside director, thereby further deepening our
efforts toward diversity from a global perspective. In
the years ahead, we will continue to accelerate initia-
tives aimed at encouraging diversity and promoting
globalization.
In a manner similar to how we are turning global
trends into growth opportunities, we are constantly
aware of social movements in regard to corporate
governance, working to enhance and bolster our cor-
porate governance as a listed company in accordance
with each principle of the Corporate Governance
Code. As we pursue such efforts, we place high expec-
tations on our outside directors, as they offer original
perspectives and possess expertise in fields that differ
from those in which we are involved. We believe the
straightforward opinions, suggestions, and advice that
the outside directors offer us are extremely valuable.
While closely observing our management processes
and the evolution of our management itself, the outside
directors have emphasized to us the importance and
necessity of further deepening the relationships we
have with our customers based on our long-cultivated
brands. Looking ahead, we will leverage the
perspectives of the outside directors in a highly
constructive manner as we work to improve the
effectiveness of the Board of Directors.
Becoming a Highly Unique Corporate Group with Highly Unique Employees
We aim to be a company with highly unique brands,
which entails both leveraging the special characteris-
tics of each Group company and allowing all Group
employees to fully draw upon their own uniqueness.
Doing so will ultimately enable us to realize the kind
of brands we seek to create. Not only will we refine
our brands by turning to our products and services for
inspiration, we will also promote Groupwide efforts
to refine our brands from the perspective of people to
truly enhance the value that our brands offer.
To this end, we will make sure that our employees
have the proper mind-set for achieving success within
a fiercely competitive business environment and will
work to play the role that Sapporo needs to fulfill as
a listed company, including in terms of compliance.
As a starting point for ensuring that our employees
are enjoying their work, we will work to have them
develop an affection for our products and services.
Additionally, we will establish a workplace environ-
ment that lets employees make full use of their indi-
viduality and skills. In doing so, we will provide
organizational support that enables our employees to
work proactively toward achieving their individual
goals. As president of the Company, I will clearly
identify the hurdles we must overcome to achieve our
vision. At the same time, I will take steps to ensure
that the necessity of overcoming such hurdles is fully
recognized Groupwide by communicating that neces-
sity in a manner that all Group employees can easily
understand.
June 2018
Masaki Oga
President and Representative Director
Not only will we refine our brands
by turning to our products and services
for inspiration, we will also promote
Groupwide efforts to refine our brands from
the perspective of people to truly enhance
the value that our brands offer.
33
Integrated Report 2017
The Sapporo Group Long-Term Management Vision “SPEED150”
Action Guidelines
1. Make customers lifestyle around world more fulfill by creating new value through the pursuit of innovation and quality.
2. Strive to provide products and services and to nurture brands that foster communication among customers.
3. Practice efficient management in tandem with addressing changes in the environment.
Three Major Strategic Themes1 Establish Robust Profitability in the Japanese Alcoholic Beverages and
Soft Drinks Businesses In the Japanese Alcoholic Beverages business, the Group will strengthen brands in
the beer business and nurture the wine business. In the Soft Drinks business, the
Group will strategically shift to a profitable structure and expand overseas busi-
ness. Through these measures, robust profitability will be established to drive the
growth of the entire Group.
2 Accelerate Growth in the “Food” FieldWe will broadly increase the presence of the Sapporo Group in the “Food” field by
strengthening existing businesses and entering new businesses through the provi-
sion of deliciousness, enjoyment, and fulfillment to all dining settings.
3 Promote Global Business ExpansionWe will increase the Group’s presence globally by strengthening the global manage-
ment platform as the Group’s growth driver and promoting the expansion of exist-
ing businesses and such new business development initiatives as M&A activities.
Management PlatformR&D Pursue innovative food value creation P.36
HR Develop “Go Beyond Boundaries” personnel P.38
Finance Enhance cash generation capabilities P.40
Strengthening Corporate CommunicationFor the various corporate activities we pursue based on our Management
Philosophy, we will work to enhance the Group’s presence among our stakeholders
by strengthening our ability to communicate information to them.
First Medium-Term Management Plan
(2017–2020)
Fundamental Policy
Transform with Unprecedented Speed
Second Medium-Term Management Plan
(2021–2023)
Proactively invest and produce results
Third Medium-Term Management Plan
(2024–2026)
Tackle the challenge of creating new opportunities
Long-Term Vision Road Map
2026 Group Vision
The Sapporo Group will be a company with highly unique brands in the fields of
“Alcoholic Beverages,” “Food,” and “Soft Drinks” around the world.
We are taking on management reforms with speed,
promoting existing business growth, and pursuing
new growth opportunities.
Hiroyuki NoseDirector (Member of the Board), Director of Strategic Planning Department
34
SAPPORO HOLDINGS LIMITED
First Medium-Term Management Plan 2020
Group Management
Quantitative Targets
Strategies for Business Activities
The Sapporo Group will execute Group management by taking the lead in strengthening its platform
functions through the strategic shift of resources, business structure reforms, and the promotion of
segment management, which will spur the Group’s growth.
By 2018, the Group will put in place an organizational structure optimal for the “Food” field, which
will drive growth and expand global business growth, along with optimal Group Head Office func-
tions for supporting that structure.
The Group will accelerate initiatives to promote growth within R&D, personnel and human resources,
and finance.
While executing strategic investments in the fields of “Alcoholic Beverages,” “Food,” and “Soft Drinks,”
the Group will achieve continuous growth in existing businesses and produce results in the investment
business as early as possible. The Group will enhance its cash flow generation capabilities, and allocate
cash to investments in new growth opportunities.
Continuous Growth in Existing BusinessesThe Group will enhance brand strength and achieve continuous growth by focusing on issues
in the competitive areas identified by each business segment.
Produce Results in the Investment BusinessThe Group will pave the way for a transition to an expansive growth stage as early as possible by work-
ing to enhance the profitability of the investment business, where results are still forthcoming.
Capture Growth Opportunities Accelerate Growth in the “Food” Field: The Group will nurture a high-value-added food business by
identifying target fields based on consumer needs, in addition to taking new approaches to value
creation from both the materials and processing fronts.
Promote Global Business Expansion: The Group will explore new growth opportunities in conjunc-
tion with executing strategies based on the characteristics of each area, centered on North America
and Southeast Asia, and strengthening the business platform for boosting profitability.
To be achieved during the four years from 2017 to 2020
Cash flows from investing activities:
¥130.0billionProactively allocate cash to the fields of “Alcoholic Beverage,” “Food,” and “Soft Drinks”
Shareholder returnsTarget a dividend payout ratio of 30%
Financial Indicators
IFRS
2020(Plan)
1918(Plan)
171615141312111009
625.0
555.8551.5541.8533.7518.7509.8492.4449.4
389.2387.5
58.045.644.546.542.342.944.344.046.439.036.4
Net sales (Including liquor tax) EBITDA
(Billions of yen)
First Medium-Term Management Plan 2020
Net sales: Maintain sales growth that has continued since 2010
EBITDA: Aim for record-high profits on a Groupwide basis
Cash flows from operating activities:
¥180.0 billionGenerate cash flows by achieving continuous growth in existing businesses and producing results
Interest-bearing liabilitiesTarget a debt-to-equity (D/E) ratio of around 1.0 times
35
Integrated Report 2017
R&D Strategy
Our R&D will accelerate new food value creation
to achieve further growth of the Sapporo Group.
Ikuya YoshidaDirector (Member of the Board),
Director of Group Research and Development Division
Cross-Functional R&D Structure “Sapporo Innovation Labs”
The Sapporo Group established a cross-functional R&D struc-
ture, “Sapporo Innovation Labs,” with the goal of creating
technology synergies. We are advancing R&D efforts that will
lead to further growth as global food company group under this
structure. We will enhance our R&D competitiveness with a
focus on promoting collaboration in the Group and accelerating
open innovation as we expand our business fields and activities,
in order to expand our market presence in the world.
As part of our efforts to facilitate new value creation, we
have organized the Sapporo Group’s strengths into “4 Core
Technologies” and positioned them as a source of R&D com-
petitiveness. Through research centered on food materials
that are focal points for the Group, we will be able to explore
the intrinsic value of those materials and create new value for
our customers.
4 Core Technologies
Sapporo BreweriesSapporo Holdings
Shinsyu-Ichi MisoPOKKA SAPPORO Food & Beverage
Learn about customers
Food information science
Create new tasty food
Manufacturing and processing technology
Seek out new tasty food
Research into the materials and functions
Ensure tasty food
Quality assurance
Cross-Functional R&D Structure
Sapporo Innovation Labs
New Food Value Creation
The Sapporo Group’s R&D Vision
We will deliver happiness and satisfaction to our customers through
the continued creation and production of food.
36
SAPPORO HOLDINGS LIMITED
We promote unique R&D efforts toward such materials as barley, hops, lemons, soybeans, and lactic acid bacteria. We seek out the
intrinsic value in our food materials, which leads to new value creation for our customers.
Learn about customers
Food information science We create new value by thoroughly communication with our customers to determine what they consider delicious and how they choose goods and services.
Create new tasty food
Manufacturing and processing technologyAll products offered by the Sapporo Group are subject to manufacturing and processing technology to deliver products of the best quality to customers.
Ensure tasty food
Quality assurance We leverage advanced analysis technologies at each stage of the production process, from raw materials to the final product, thereby supporting the Sapporo Group’s quality assurance system for ensuring food that is tasty, reliable, and safe.
Value of Materials to Our Customers Lemon is an ingredient overflowing with unique value, and
features a refreshing aroma and characteristic sourness as well
as containing several health functional ingredients such as
polyphenols. The Sapporo Group has concluded a number of
collaborative partnerships with Hiroshima Prefecture, the
largest lemon cultivation region in Japan, including joint pro-
duction promotion and research and development activities.
Moreover, further research into soybeans, which are impor-
tant ingredients in miso and soy milk, and our barley-derived
lactic acid bacteria SBL88 will accelerate new value creation to
achieve further growth.
Creating Value by Developing Beer IngredientsSapporo Draft Beer Black Label makes use of a Sapporo
Breweries-developed barley that lacks the activity of LOX-1, an
enzyme known to catalyze oxidation of linoleic acid. This “fresh-
tasting and long-lasting barley” enables beer with long-lasting
freshness and keeps the beer foam stable. In addition, Sorachi
Ace, our original hop developed in 1983 for its varietal aroma,
has fascinated craft beer fans around the world in recent years.
We are leveraging the results of our many years of research on
barley and hops to improve the quality of our beer and imbue it
with distinctive characteristics. Furthermore, our research has
been highly praised worldwide and has received several academic
awards.
Seek out new tasty food
Research into the materials and functionsWe seek out the intrinsic value in our food materials that lead to the produc-tion of tasty food, such as barley and hops, as well as other materials includ-ing lemons, soybeans, and lactic acid bacteria.
Our 4 Core Technologies, which represent the strengths of the Sapporo Group, accelerate new food value creation.
4 Core Technologies That Lead to Food Value Creation
Turning Results from Our Materials Research into Customer Value
1
3 4
2
37
Integrated Report 2017
Human Resource Strategy
Group Human Resource Management
We advance human resource management on a
Groupwide basis by developing “Go Beyond Boundaries”
personnel who can provide new value and create
a deep feeling. In doing so, we will continue to lead
the Group toward sustainable growth.
Mayumi FukuharaDirector (Member of the Board), Director of Human Resource Department
Appoint and Promote the Success of Human Resources across the Boundaries of Gender, Age, Nationality, and Company
To realize its Management Philosophy, “As an intrinsic part
of people’s lives, Sapporo will contribute to the evolution of
creative, enriching and rewarding lifestyles,” the Sapporo
Group has established “Go Beyond Boundaries” as the basic
idea underlying its human resource strategy. To “Go Beyond
Boundaries” is to advance beyond the unconscious walls we
create ourselves, the barriers of organizations, and the bound-
aries of business and country. In order to “Go Beyond
Boundaries” and realize our Management Philosophy, we
believe it is essential that the Group recognizes the differences
that exist between each individual within the boundary and
that we make this understanding one of our strengths as an
organization. To that end, we will enhance human resources
by promoting diversity and through a wide array of ideas and
ways of thinking. In doing so, we will establish an
environment where each individual can realize their maximum
potential. To promote recruitment that contributes to growth
and to eliminate seniority aspects, we will work to appoint
and promote the success of human resources across the
boundaries of gender, age, nationality, and company.
Give Top Priority to Shifting Human Resources to the “Food” and Global Fields
To promote “Go Beyond Boundaries” among Group employees,
we are working to strengthen human resources in growth areas.
By enhancing human resources in strategic departments such
as new business incubation and M&A, strengthening food
departments with the Group’s R&D personnel, fostering a
global mind, and cultivating globally successful human
resources through systematic and continuous training, we will
give top priority to shifting human resources to the “Food” and
global fields, both of which are growth areas within the Group.
Group Human Resource
Management Vision
The Sapporo Group’s most valuable asset is its human resources. Every indi-
vidual represents the corporate brand itself. The individuality and execution
capabilities of the Group’s human resources make the brand successful. With
that in mind, the Sapporo Group aims to be a company that creates human
resources who are glad to be part of a team and tackle challenges and venture
out into unfamiliar fields to acquire new skills by way of a healthy mind and
body and a bright, energetic, and forward-facing spirit.
38
SAPPORO HOLDINGS LIMITED
Nurture Human Resources Who Are Ambitious and Healthy Both in Body and Mind
Introduce Measures That Help Promote the Health of Human Resources
In December 2017, Sapporo Breweries initiated a new system
of measures and reforms aimed at improving productivity,
physical and mental health, and promoting a fulfilling lifestyle.
By effectively implementing this system, dubbed Work Style
Improvement 2020, and by promoting measures toward
greater pleasure and satisfaction for work, we can better
embody our corporate philosophy of providing a “rich and
rewarding lifestyle for our customers” through our products
and services. Furthermore, we are working to promote work-
style reforms as part of our efforts in creating environments
that are adapted to each specific workplace for greater produc-
tion and ease of working. This extends to all of our companies,
including POKKA SAPPORO Food & Beverage, Sapporo Lion,
Sapporo International, and Sapporo Real Estate.
To this end, we have implemented the Sapporo Group
Health Creation Declaration in support of physical and
mental health for human resources. Against
this backdrop, Sapporo Holdings was
among several businesses to be certified
as an Excellent Enterprise of Health and
Productivity Management (White 500).
Create Opportunities to Tackle Challenges
Since 2011, the Sapporo Group has conducted an annual
training program, “Global Resource Development Program
for Coming Generation,” to nurture human resources so that
they can play an active role globally. In addition to training in
Japan, we are developing a program to conduct on-the-job
training in Singapore and Vietnam from 2015 with the aim of
raising cross-cultural response skills and English communica-
tion ability. We select members who wish to participate in this
program on their own initiative.
Among these participants, we select those who are ready to
do full-fledged work overseas or conduct business related to
overseas work. In addition, we actively create opportunities
for employees to challenge themselves in such ways as
establishing a personnel recruitment system across business
companies.
Work Style Improvement 2020 System Revisions and Additions
Revised Telecommuting System
We have relaxed the conditions for telecommuting. Employees can apply for telecommuting on a same-day basis and are free to work at locations other than their homes, including at hotels when on business trips or traveling by Shinkansen, so long as they are able to focus on their work.
Introduced super flextime system
We have introduced a flextime system without any designated core working times. Flextime may be taken between the hours of 5 a.m. and 10 p.m. This system also applies to employees making use of systems for reduced working hours.
Introduced hourly paid holiday system
Employees can receive up to 40 hours (five days) of paid leave per year, usable in one-hour increments.
Establish a Group Human Resource Management Platform
Each Group company develops employment policies with
careful consideration to the characteristics and environment
of each respective business and forms a portfolio of human
resources who will contribute to growth of the business
through education and training. Meanwhile, from the
perspective of actively promoting human resources on a
Groupwide basis, we are working to visualize the duties and
human resource structures of each operating company, while
simultaneously positioning the best possible human resources
in the best possible place and vice versa. On that platform, we
will make optimal revisions to personnel systems and measures
while ascertaining their effectiveness, thus enhancing human
resources on a Groupwide basis.
1. People are the bearers of a business You can take on challenges in a new field and cross the finishing line
with a cheerful and positive attitude only because you are healthy both physically and mentally. The business grows because its employ-ees are healthy and this in turn leads to the Company’s growth.
2. The Sapporo Group’s business and health are directly related The core business areas of “Alcoholic Beverages,” “Food,” and “Soft
Drinks” contribute to customers’ physical and mental health and happiness. We believe that employees, who produce and offer the products, being physically and mentally healthy is proof that our products and services can offer happiness to our customers.
3. Being an attractive place of work leads to sustainability as a company Employees spend lots of time at the workplace. A workplace that
works proactively to enhance and maintain employees’ health will be attractive to existing and future employees, and this leads to sustain-ability as a company.
We hereby make the Health Creation Declaration based on the conviction that the physical and mental health of the Group’s human resources leads to creation of happiness for our employees, their families, and the Company.
Sapporo Group Health Creation Declaration
39
Integrated Report 2017
Financial Strategy: Message from the Director of Corporate Finance
By enhancing our asset efficiency and
cash generation capabilities and carrying
out proactive investments in the fields of
“Alcoholic Beverages,” “Food,” and “Soft
Drinks,” we will realize sustainable profit
growth and shareholder returns.
Generating Cash, Allocating Resources, and Strengthening the Financial Base
To increase our shareholder value over the medium to
long term, there is a need for us to carry out proactive
investments in growth fields. To this end, it is essential
that we establish a robust financial base that allows for
such investments.
Under the Sapporo Group Long-Term Management
Vision “SPEED150,” we have designed a road map that
splits the 10-year period from 2016 to 2026 into three
terms. For the First Medium-Term Management Plan
2020, we are working to establish a robust financial base
that will enable us to respond to changes in the business
environment and capitalize on investment opportunities.
In doing so, we will proceed with preparations for reach-
ing the next growth stage. In 2017, we generated ¥8.2
billion through the sale of cross-shareholdings in an effort
to enhance our asset efficiency. Over the four-year period
from 2017 through 2020, we will provide our customers
with even higher levels of value through our products and
services, thereby generating ¥180.0 billion in cash flows
from operating activities. Of this amount of generated
cash, we intend to allocate ¥130.0 billion to active invest-
ments in the growth fields of “Alcoholic Beverages,”
“Food,” and “Soft Drinks,” which represent our core
business areas. The remaining amount will be used to
reinforce the stability of our financial base through the
reduction of interest-bearing debt with the aim of reaching
a debt-to-equity ratio of around 1.0 times. At the same
time, we will meet the expectations of our shareholders
and other investors by steadily carrying out shareholder
returns in line with profit growth, keeping our sights set
on maintaining a dividend payout ratio of around 30%.
Also, we examine investment decisions from a broad
range of perspectives, including how an investment aligns
with our Management Philosophy and vision as well as
the business environment, the conditions at our competi-
tors, and the potential for growth and sustainability. We
also give comprehensive consideration to the various
kinds of risks that could occur in the future before
making our final decision. After executing an investment,
we take steps to bolster our monitoring functions with an
awareness of capital cost. Going forward, we will transi-
tion to a management structure that enables us to realize
prompt returns on our investments.
Enhancing Awareness of Management Risks, Developing Response Measures, and Placing Importance on Financial Human Resources
We have assembled a portfolio of numerous businesses
with differing business cycles and terms and are making
diligent efforts to reduce management risks and curtail
volatility. Furthermore, as a food manufacturer that
positions “Alcoholic Beverages,” “Food,” and “Soft
Drinks” as its core business areas, we are promoting
business expansion not only in Japan but also overseas.
We therefore maintain a sharp focus on risks related to
raw material procurement and fluctuations in foreign
currency translations while establishing methods to
hedge these risks appropriately. In terms of procuring
Shinichi SoyaDirector (Member of the Board), Director of Corporate Finance and Business Management Department
40
SAPPORO HOLDINGS LIMITED
funds, we are working to lengthen and solidify procure-
ment terms, diversify procurement methods, and stan-
dardize repayment schedules while taking into account
such future risks as a rise in interest rates. As for taxes,
we are developing measures to respond to the potential
risk of tax system revisions in the countries where we
operate. We are also promoting tax planning through the
effective use of deferred tax assets and other means.
In this manner, we are steadily creating measures to
respond to foreseeable management risks. With that said,
I feel that in recent years human resource-related risks have
started to impact more significantly on financial perfor-
mance. Accordingly, I believe that there will be a greater
need going forward for investments to secure outstanding
human resources and for efforts to improve the productiv-
ity of each employee. I also believe that the relationship
between employee satisfaction and the added value and
cash flows we generate as a company will become even
more important. Furthermore, as the Company’s financial
divisions play a major role in improving corporate value,
the human resources within these divisions need to have
comprehensive strengths, such as an abundance of experi-
ence and a high level of skills and ethics. In the past, we
emphasized enhancing the expertise of our employees in
the financial divisions. However, we are now placing more
importance on actively rotating personnel within these
divisions on a Groupwide basis. Going forward, by having
these employees experience working in different compa-
nies and offices and acquire skills related to finance,
accounting, tax management, and globalization, we will
develop financial human resources who have a high level
of both expertise and flexibility.
Promoting Stakeholder Dialogues
It is essential for our human resources in the financial divi-
sions to be able to envision how the events that occur on
the front lines of the Company’s business operations will
eventually impact our financial statements. To this end, we
place importance on adopting an “analog” approach, even
in the digital era, that puts particular emphasis on face-to-
face communication. We adopt the same kind of approach
when dealing with our shareholders and other investors as
well as with financial institutions, promoting engagement
that focuses on identifying common ground with these
parties while keeping in mind the points that interest them
most. Starting in fiscal 2018, we will voluntarily transition
from the Japanese generally accepted accounting principles
(JGAAP) to International Financial Reporting Standards
(IFRS). As we are diversifying our businesses and moving
forward with globalization, this transition will help us
reach appropriate management decisions by establishing
uniform accounting standards across the Group. In addi-
tion, this transition will stimulate dialogues with our stake-
holders by allowing them to better compare our financial
information with that of our competitors.
To improve corporate value going forward, it is crucial
that we receive the blunt but fair opinions of our share-
holders and other investors and engage in meaningful
dialogues with them. As the director of corporate
finance, I will make sure that the Company puts forth
the utmost effort to realize increases in corporate value
so that we can meet the expectations of our shareholders
and other investors. I therefore ask for your continued
support and understanding as we work to do so.
First Medium-Term Management Plan
Cash flows from operating activities
Strengthen the cash generation capabilities
of businessesProactively invest in
growth strategies
2012–2015 result
Japanese Alcoholic Beverages
Japanese Alcoholic Beverages
¥180.0 billion
¥130.0 billion“Alcoholic Beverages,”
“Food,” and “Soft Drinks”
Shareholder returns
2012–2015 result
“Alcoholic Beverages,” “Food,” and “Soft Drinks”
Shareholder returns
Allocate profits to repay interest-bearing liabilities
Real Estate Real Estate
International
International
RestaurantsRestaurants
Food & Soft Drinks
Food & Soft Drinks
Real estate
Interest-bearing liabilities
Reshape the asset portfolio
Real estate
Cash flows from investing and financing activities
ReinvestmentRealignment of the real estate portfolio
Reshape the asset portfolio
41
Integrated Report 2017
Risk Management
Sapporo Holdings is working to conduct sound corporate management and improve corporate value in a sustainable manner by strengthening Groupwide risk and crisis management structures. In addition, the Company recognizes the possibility of new risks occurring as it promotes strategies aimed at realizing the Sapporo Group Long-Term Management Vision “SPEED150.” Accordingly, the Company and its subsidiaries are carrying out appropriate risk and crisis management. In particular, the Company is focus-ing on the following three tasks.
• Preventing the loss of life and maintaining safety • Pursuing quality • Thoroughly implementing compliance
Basic Policy on Risk Management
The Sapporo Group has established a structure for managing risks inherent in the decision-making and business execution processes that are essential for carrying out its operations. The Group has also set up a crisis management structure for times of emergency. The Group will draw on these structures to put into motion a PDCA cycle.
Risk Management Structure
SH president and representative director
Secretariat to Group Risk Management Committee (SH Group Risk Management Department)
Group Management Strategy Council
Business Strategy Council
Crisis management organization of operating companies, etc.
Manage risks inherent in the decision-making and business execution processes essential for carrying out operations
Management Council and Secretariat to Group Management Strategy Council (SH Business Management Department)
Crisis management
Declare states of emergency when they occur and identify issues that have the potential to cause a state of emergency
Operating companies, subsidiaries, and affiliated companies
Sapporo Holdings (SH)
SH Board of DirectorsSH Audit & Supervisory Board
Major Business-Related RisksRisk Details
Risks related to business environment
Laws, regulations, and tax systems
The strengthening of legal regulations, such as the Liquor Tax Law, or the introduction of new regulations could restrict business operations. Consequently, the Group could incur new expenses.
Litigation could be brought against the Group in terms of issues pertaining to the Product Liability Act, intel-lectual property laws, tax laws, or other regulations.
The Group’s overseas business activities are subject to a variety of factors that could have a negative impact on operating results.
Fluctuations in foreign currency translations and market interest rates
In the event that market interest rates rise or the Group’s credit rating is lowered due to a comparatively high ratio of financial liabilities to total assets, the Group could become weighed down by financial burden and face adverse conditions for procuring funds.
The cost of sales could increase due to a rise in the price of raw materials and supplies.
Climate change, natural disasters, and infectious diseases
The Group could sustain damage as a result of a large-scale natural disaster or a secondary disaster. This, in turn, could disrupt the supply of products.
The Group’s overseas business activities are subject to a variety of factors that could adversely affect operating results.
Risks related to business execution
Changes in economic conditions and popula-tion movements
The selling price of the Group’s core products could decline due to changes in the shipment of such products and deflation trends.
The value of assets held by the Group could decrease.
The Group’s overseas business activities are subject to a variety of factors that could have a negative impact on operating results.
Business portfolio As the Group is highly dependent on its domestic businesses, a decline in sales in the domestic market could have adverse effects on operating results.
Product safety A quality issue that jeopardizes the safety of Group products, products produced through manufacturing agree-ments, or stocked merchandise could give rise to product recalls, defective shipments, the suspension of opera-tions, or other negative scenarios.
Information security The Group could face claims for damages and suffer a loss of credibility in the event of a leak of personal or other information. This could cause expenses to increase and have a negative impact on operating results.
Business and capital alliances
The deterioration of the business operations of an alliance partner or investee could have a negative impact on operating results.
Capital investments Schedule delays, investment budget overruns, and other factors could adversely affect operating results.
Please see the Company’s website for more information on business and other risks. http://www.sapporoholdings.jp/english/ir/management/risk.html
Manage risks related to the decision-making process for
individual agenda items
Manage risks involved with the business execution process through monthly forecasts
Management Council Group Risk Management Committee
42
SAPPORO HOLDINGS LIMITED
Efforts under “SPEED150”
In the Japanese Alcoholic Beverages segment, we are working to reinforce profitability by enhancing our brand strength in the beer business and estab-lishing the wine business as a second pillar next to beer. In doing so, we aim to leverage this segment to drive overall Group growth. For the beer business in 2018, we have adopted the policy of “continuation of strengthening the beer business” and are promoting a consistent marketing strat-egy by concentrating resources into core beer brands. In doing so, we will realize genuine growth. In the wine business, we are taking steps to develop and strengthen our foundation for both fine wines and everyday wines.*2 Through these means, we aim to be No. 1 in cus-tomer value. In addition, for spirits, we are promoting “brand visualization” through the expansion of contact points with customers. In these ways, we will propose and promote various ways for our customers to enjoy alcoholic bever-ages going forward. In addition, we will create one-of-a-kind products and services that can respond to the diversifying needs of our customers, thereby paving the way for realizing sustainable growth.
Consolidated SubsidiariesSAPPORO BREWERIES LIMITED
YEBISU WINEMART CO., LTD.
TANOSHIMARU SHUZO CO., LTD.
STARNET CO., LTD.
SHINSEIEN CO., LTD.
Business Strategy
Japanese Alcoholic Beverages
Seeking No.1 by accumulating one-of-a-kind products
Market Environment Total demand declining against the backdrop of a declining birth rate and an aging population as well as an overall population decrease Consumers becoming thriftier, with preferences and consumption behavior diversifying
Movement toward changing the defini-tion of beer under the Liquor Tax Act from 2020 through 2026
Strengths Highly competitive brands such as Sapporo Draft Beer Black Label and Yebisu Beer
One-of-a-kind raw material procurement realized through the cultivation of barley and hops under the Collaborative Contract Farming System (CCFS)
Product development capabilities and production systems that meet customer needs
Development of diversified alcoholic beverage products such as wine, shochu, and spirits through strategic partnerships with global brands
Growth Strategy Strengthen beer brands based on revisions to the Liquor Tax Act starting in 2020
Establish the wine business as a growth pillar second to beer
Take on challenges in the growing ready-to-drink (RTD) beverage market Pursue new initiatives aimed toward growth, such as expansion in the EC market and promotion of beer export businesses
1615
273.6 279.4 281.3 272.5293.4
20(Target)
IFRS
17*1 18(Plan)
1615
16.8
6.1%6.8% 7.0% 6.8%
7.6%
19.019.9
18.8
22.5
IFRS
17*1 20(Target)
18(Plan)
EBITDA EBITDA margin
Revenue (Billions of yen)
EBITDA (Billions of yen) /EBITDA Margin (%)
*1 Starting from the fiscal year ending December 31, 2018, the export business of Sapporo International Inc. has been transferred to Sapporo Breweries Ltd. The figures for fiscal 2017 have been retroactively adjusted to reflect this transfer.
*2 Fine wines: Mid- to high-priced wines (over ¥1,500 per bottle); Everyday wines: Low-priced wines (less than ¥1,500 per bottle)
43
Integrated Report 2017
Business Strategy
Efforts under “SPEED150”
Positioning the International segment as a driver for Groupwide growth, we have been working to strengthen our global business foundation, grow our existing businesses, and develop new businesses, which includes the promotion of M&A. Through these means, we have been growing the presence of the Group on a global scale. Going forward, in the premium beer market in North America, we will actively implement sales activities through Canada-based Sleeman Breweries and Sapporo U.S.A. In addition, we will use the momentum we gained from the acquisition of Anchor Brewing Company to accelerate growth in the region. In the North American soft drinks market, we will move forward with the management integration of Country Pure Foods, Inc., and Silver Springs Citrus, Inc., and work to generate synergies between these two companies post integration. In Southeast Asia, with the aim of improving the value of the Sapporo brand in Vietnam, we are taking steps to revise sales methods and improve profitability.
Consolidated SubsidiariesSAPPORO INTERNATIONAL INC.
SAPPORO U.S.A., INC.
SAPPORO NORTH AMERICA INC.
ANCHOR BREWING COMPANY, LLC
SAPPORO CANADA INC.
SLEEMAN BREWERIES LTD.
SAPPORO ASIA PRIVATE LIMITED
SAPPORO VIETNAM LIMITED
COUNTRY PURE FOODS, INC.
13 other companies
International
Making the Sapporo Brand Shine throughout the World
Market Environment Economic instability brought about by political and religious issues, various changes including revisions to tax sys-tems in the United States
Population increases and economic growth in emerging Asian nations, emer-gence of a new middle class
Global corporate restructuring, progres-sion of M&A by Japanese corporations
Strengths Strong presence and growth potential of Sleeman Breweries Ltd. (third largest share in the Canadian beer market, 11 consecutive years of sales growth)
No. 1 share for Asian beer in the U.S. market (No. 1 Asian beer for 31 consecutive years)
Growth Strategies Grow North American businesses by generating synergies between Sleeman Breweries, Sapporo U.S.A., Inc., and Anchor Brewing Company, LLC
Establish a business foundation and leverage resources by drawing on the strengths of the two North American soft drink companies
Strengthen the value of the Sapporo brand in Vietnam and improve profits in the region by revising sales methods and enhancing operational efficiency
IFRS
1615
70.565.4 67.1
81.9
91.7
17*1 20(Target)
18(Plan)
IFRS
1615
5.3
7.5%8.5%
4.6%
7.4%
9.8%
5.6
3.1
6.1
9.0
17*1 20(Target)
18(Plan)
*1 Starting from the fiscal year ending December 31, 2018, the export business of Sapporo International Inc. has been transferred to Sapporo Breweries Ltd. The figures for fiscal 2017 have been retroactively adjusted to reflect this transfer.
EBITDA EBITDA margin
Revenue (Billions of yen)
EBITDA (Billions of yen) /EBITDA Margin (%)
44
SAPPORO HOLDINGS LIMITED
Efforts under “SPEED150”
By providing deliciousness, joy, and luxury in the Food & Soft Drinks seg-ment, we will strengthen our existing businesses and expand new businesses. In doing so, we will enhance the presence of the Sapporo Group in the fields of “Food” and “Soft Drinks.” In Japan, we will concentrate invest-ments in fields where we can display our competitiveness as we work to create new and unique food value. We will also promote business expansion for lemons, a Company strength, and move forward with functional research on lemons and efforts to communicate their value. For soup, we will expand the range of prod-uct development and work to increase production capacity. In terms of soft drinks, we will steadily improve sales while promoting such products as soft drinks that use select domestic ingredi-ents. Additionally, we will set our sights on the potential of soybeans and plant-based milk products, thereby working to establish new business pillars. Overseas, with Singapore service as a foundation, we will expand POKKA brand soft drinks in a manner that caters to the market needs in each country. In doing so, we will enhance our overseas presence.
Consolidated SubsidiariesPOKKA SAPPORO FOOD & BEVERAGE LTD.
POKKA SAPPORO HOKKAIDO LTD.
OKINAWA POKKA CORPORATION CO., LTD.
POKKA CREATE CO., LTD.
FOREMOST BLUE SEAL, LTD.
PS BEVERAGE LTD.
POKKA CORPORATION (SINGAPORE) PTE. LTD.
POKKA INTERNATIONAL PTE. LTD.
9 other companies
Food & Soft Drinks
Creating Delicious New Products That Enrich and Brighten People’s Lives
Market Environment Diversifying tastes and consumption habits of consumers
Heightened need for health and convenience in terms of food
Revisions to tax systems and regulations in Japan and overseas
Strengths Know-how on both food and soft drink businesses
Development capabilities for lemon-based and soup products, high market share
High market share for green tea drinks in Singapore
Growth Strategies Strengthen lemon procurement capabili-ties and communicate the value of lemons through functional research
Implement capital expenditures, such as increasing soup production capacity, in accordance with market needs
Display a strong presence in the sugarless tea and fruit juice categories, which make use of domestic ingredients
Promote business expansion centered on soy milk yogurt
Develop stable overseas soft drink busi-nesses through strategic cultivation
IFRS
171615
135.6 137.9 137.8 135.6
156.5
20(Target)
18(Plan)
IFRS
171615
8.8
6.4% 6.5%6.0% 6.4%
7.9%
9.18.3 8.7
12.4
20(Target)
18(Plan)
EBITDA EBITDA margin
Revenue (Billions of yen)
EBITDA (Billions of yen) /
EBITDA Margin (%)
45
Integrated Report 2017
Business Strategy
Efforts under “SPEED150”
In the Restaurants segment, we will contribute to the strengthening of Group brands by providing establishments where people can experience the products and value of the Group. Guided by our aim of delivering 100% satisfaction to customers, we are making efforts to improve the sales quality of our products, services, store environments, and other core elements of the restaurant business as well as to provide products that are safe and offer peace of mind. In terms of opening new stores, we will work to expand the area served by our core outlets GINZA LION and YEBISU BAR. At the same time, we will focus our efforts on developing new outlets. Furthermore, to maintain and increase profitability well into the future, we are actively remodeling and changing the format of existing stores. Overseas, as part of our efforts to spread the beer hall culture, we will revamp the GINZA LION brand in Singapore while taking steps to reform our cost structure.
Consolidated SubsidiariesSAPPORO LION LIMITED
NEW SANKO INC.
MARUSHINKAWAMURA. INC.
GINRIN SUISAN INC.
SAPPORO LION (SINGAPORE) PTE. LTD.
Restaurants
Enhancing the Joy of Living for Our Customers through Our Restaurants
Market Environment Polarization of price strategies, expand-ing needs for specialized outlets
Increase in labor costs, difficulty in acquiring personnel
Rising cost of vegetables and other ingredients
Strengths Rich history of Japan’s oldest beer hall and highly competitive brands
Store development know-how that caters to the discerning eye and diverse needs of consumers
Growth Strategies Further improve the sales quality and profitability of locations operated by Sapporo Lion, Marushinkawamura, and New Sanko
Contribute to the utilization and rein-forcement of Group brands such as Yebisu Beer and Grande Polaire
IFRS
171615
1.1
4.0% 4.2%3.0% 3.4%
7.9%1.2
0.91.0
2.5
20(Target)
18(Plan)
EBITDA EBITDA margin
Revenue (Billions of yen)
EBITDA (Billions of yen) /EBITDA Margin (%)
IFRS
171615
27.0 28.1 29.1 28.831.5
20(Target)
18(Plan)
46
SAPPORO HOLDINGS LIMITED
Efforts under “SPEED150”
In the Real Estate segment, we will rein-force our earnings base by increasing the property value and enhancing the effi-ciency of our owned properties centered on the Ebisu, Sapporo, and Ginza dis-tricts. At the same time, we will contrib-ute to improving Group brands by promoting urban development in areas where the Group has a long history. At Yebisu Garden Place, a key Group property, we will work to enhance value in order to create new added value for the property and improve brand value. For GINZA PLACE, we will further enhance our ability to communicate information centered on the property’s concept of being a “base for information dissemination and exchange,” thereby improving brand value. Additionally, we will contribute to revitalizing and attract-ing customers to the area surrounding the property. Also, we are proceeding with the renovation of the Sapporo Factory commercial complex as part of Sapporo City’s urban development program focused on the nearby area on the east side of the Sosei River.
Consolidated SubsidiariesSAPPORO REAL ESTATE CO., LTD.
YGP REAL ESTATE CO., LTD.
TOKYO ENERGY SERVICE CO., LTD.
YOKOHAMA KEIWA BUILDING CO., LTD.
Real Estate
Offering a “Luxurious Time” in a “Luxurious Space” for Cities and for Society as a Whole
Market Environment Improvement in occupancy rates at office buildings in the Tokyo metropolitan area, gradual increase in rent levels
Steady market conditions in the Ebisu, Sapporo, and Ginza districts
Difficult market conditions expected in the future due to a rapid increase in supply in the Tokyo metropolitan area
Strengths Superior properties and strong relation-ships with local communities primarily in the Ebisu, Sapporo, and Ginza districts, grounded on the history of the Sapporo Group
Growth Strategies Maintain high occupancy rates by increasing property value and flexibly revise rent levels in accordance with market conditions
Build and deepen long-term relationships with local communities through collab-orative urban development
IFRS
171615
20.822.9
24.1 24.9 24.9
20(Target)
18(Plan)
IFRS
171615
12.4
59.6% 62.8% 64.7% 62.6% 65.4%
14.415.6 15.6
16.3
20(Target)
18(Plan)
Enhancing the Joy of Living for Our Customers through Our Restaurants
EBITDA EBITDA margin
Revenue (Billions of yen)
EBITDA (Billions of yen) /EBITDA Margin (%)
47
Integrated Report 2017
The Sapporo Group will inherit a brand story grounded in its over 140-year history as a collection of aspiration it wishes to
share with its stakeholders. In addition, through its CSR activities, the Group aims to connect this brand story to the future.
In line with our 4 Key Promises, which summarize our CSR initiatives, we will forge ahead with our CSR endeavors in a
bold and swift manner.
The Sapporo Group’s Basic CSR Policy
We are determined to remain a group that is trusted by society by conducting business in a way that keeps our customers happy.
Since the Sapporo Group’s founding in 1876, we have existed in harmony with society and have been sustained by the happiness of
our customers as we forged our path to the present. From here on, the Sapporo Group will aim to grow as a company and contribute
to sustainable social development by remaining an honest group that makes customers happy, based on its Management Philosophy:
“As an intrinsic part of people’s lives, Sapporo will contribute to the evolution of creative, enriching and rewarding lifestyles.”
Our 4 Key Promises for Strengthening Bonds through Our Brand Story
Promise 1
Promise 3 Promise 4
Promise 2
Contributing to Creative, Enriching and Rewarding Lifestyles Through Alcoholic
Beverages, Food, and Soft drinks
Promoting Environmental Conservation
Cultivating Highly Unique Employees
Promoting Coexistence with Society
Corporate Governance
BrandTrust Human
ResourcesEnvironment
Alcoholic Beverages, Food, and Soft Drinks
Society
Materiality Preventing global warming
Promoting the 3Rs
Harmonizing with nature
Materiality Health and productivity management
Diversity and human rights
Human resources development and training
Materiality Safety, reliability, and quality
Creating new value
Alcoholic Beverages-related issues
Materiality Supporting local communities
Sustainable procurement
Basic CSR Policy
48
SAPPORO HOLDINGS LIMITED
Our Promise Our Priority Medium- to Long-Term Goals (KPI) Related SDG Goals
Promise 1
Contributing to Creative, Enriching and Rewarding Lifestyles Through Alcoholic Beverages, Food, and Soft drinksWe will offer the joy of living and richer lives to our customers by creating new value through “Alcoholic Beverages,” “Food,” and “Soft Drinks.”
Safety, reliability, and quality
By 2020, we intend to have a full set of quality assurance systems in place for each product category to ensure quality and safety so that anyone, from local residents to inbound visitors, can enjoy the “Alcoholic Beverages,” “Food,” and “Soft Drinks” produced by the Group. We will extend this commitment to include our exports and businesses overseas to facilitate further growth of the Group’s reputation as a trusted global brand.
Creating new value
By 2020, we will combine our food processing technologies with our research on the health benefits and taste of five key ingredients (barley, hops, lemons, soybeans, and lactic acid bacteria) to create and propose new value in the areas of “Alcoholic Beverages,” “Food,” and “Soft Drinks” based on the changing demands of the market and consumers. We will continue to spur innovation in both new and existing fields and strive to expand our distinctive value domestically and abroad.
Alcoholic Beverages-related issues
• By 2020, we plan to establish a concrete education program for proper drinking awareness with a focus on how to enjoy alcohol in a healthy manner.
• We will offer opportunities for customers to raise their awareness of Japan’s rich beer culture through contact points such as museums and open factory visits.
Promise 2
Promoting Coexistence with SocietyWe will contribute to the development of the commu-nity and solve issues as part of the local society, and create a better future along with everyone in society
Supporting local communities
• By 2020, we will establish a system to support local communities around all of our business sites.
• We will promote activities in the area of our founding, areas with Company offices, and disaster-affected areas to encourage the consump-tion of local goods, transmit information, and support the next generation. In addition, we will continue to strengthen our partnerships with local communities through urban development projects and the promotion of businesses centered on the enjoyment of food.
Sustainable procurement
By 2030, we will aim to have at least 90% of our major suppliers in support of CSR procurement.
Promise 3
Promoting Environmental ConservationIn order to pass on nature’s bounty to the future, we will strive to prevent global warming, promote 3Rs, and achieve symbiosis with nature at every phase.
Preventing global warming
By 2030, we will reduce CO2 emissions per unit 12% from levels detected in 2013.
Promoting the 3Rs
• We will continue to promote the 3Rs in all aspects of business, from raw material procurement to disposal and recycling.
• We will establish quantitative targets for water use in 2018 and strive for efficient usage.*
• By 2020, we will recycle 100% of waste at all of our domestic breweries and factories.
Harmonizing with nature
We will plan and implement measures every year for preserving biodiversity that leverage the specific attributes of each business.
Promise 4
Cultivating Highly Unique EmployeesWe respect all sorts of diver-sity of employees and bolster the development of an envi-ronment that allows each employee to demonstrate his or her individual ability to the maximum extent.
Health and productivity management
• We will improve efforts to promote employee health throughout the Group (via deployment of area nurses, declaration of employee health measures, etc.).
• We will develop food education programs for infants in collaboration with in-house childcare centers.
Diversity and human rights
• By 2020, we will double the number of women in management positions relative to 2014.
• We will achieve each target as set forth in the “General Employers Action Plan Based on the Act on Promotion of Women’s Participation and Advancement in the Workplace.”
Human resource development and training
We will continue to provide active support for diversity and inclusion through education aimed at supporting women, people with disabilities, those providing care, and members of the LGBT community.
Our 4 Key Promises and CSR Materiality Action Plan
* In May 2018, we formulated the target of reducing the amount of water used at the factories of Sapporo Breweries and POKKA SAPPORO Food & Beverage by 6% compared with 2013 amounts (target covers factories included in the business scope as of 2013).
49
Integrated Report 2017
Sapporo International Inc.
Sapporo Lion Limited
POKKA SAPPORO Food & Beverage Ltd.
Sapporo Real Estate Co., Ltd.
Sapporo Breweries, Ltd.
Basic CSR Policy
Identifying and Updating Materiality
The Sapporo Group identifies and maps CSR priority issues on a materiality
matrix, with significance to stakeholders on one axis and significance to manage-
ment on the other. From there, potential top materiality are analyzed from various
perspectives such as guidelines, and the viewpoints of both stakeholders and man-
agers. Based on that analysis, the materiality are identified and updated.
Sapporo Holdings Ltd.
Corporate Communications Department, CSR Office
Administration Department
Human Resources
Research & Development
Group Legal Affairs
Strategic Planning
Group Risk Management
Quality Assurance
Group CSR Promotion Committee Chair: President and Representative Director
Group CSR Representative
● Environmental communication● Work-life balance● Disaster recovery efforts● Disaster risk management● Rigorous information security● Reinforcing fair and impartial
partnerships● Dialogue and cooperation with
stakeholders
CSR Implementation Structure
Sapporo Holdings formulates the overall
policy for implementing the Sapporo
Group’s CSR management and has
established a Group CSR Promotion
Committee. This committee is chaired
by the President and representative
director of the Company, who is respon-
sible for coordination and adjustment
within the Group.
The CSR Office within Sapporo
Holdings’ Corporate Communications
Department develops and implements
various measures to promote CSR
activities in each Group company, holds
monthly meetings with CSR personnel,
and shares information and progress via
its CSR Office.
Listing up and update of materiality candidates
Sorting out issues in industry by analyzing guidelines
Grasping interest and needs by studying stakeholders
Quantitative needs / impact analysis based on scoring method
Analysis of consistency with CSR strategy through management review
Drafting materiality map and identifying materiality
Process 1
Process 2
Process 3
Process 4
Process 5
Process 6
CSR Department
CSR Department
CSR Department
CSR Department
CSR Department
Sapporo Group Management Ltd. Procurement Department
Sapporo Group Management Ltd. Reform Promotion Department
Impact on management
Impact on and interest of stakeholders
Materiality
Other issues
Other issues
Materiality
CSR Representative
CSR Representative
CSR Representative
CSR Representative
CSR Representative
● Procurement from companies fulfilling CSR
● Proper drinking awareness
● Enhancement of compliance/adherence
● Pursuit of quality that ensures customer satisfaction
● Ensuring safety, reliability, and quality
● Establishment/maintenance of corporate governance system
● Respect for human rights
● Environmental management
● Recycling-oriented society
● Pursuit of innovation
● Employee health management ● Diversity
● Measures against global warming
● HR development/training
● Community support
50
SAPPORO HOLDINGS LIMITED
Stakeholder Engagement
As a business practice done in earnest and in accordance with its basic CSR policy, the Sapporo Group works toward
proactive and appropriate disclosure of information and mutual communication in order to deepen trust between
the Group and its stakeholders.
Specific Examples of Activities
At POKKA SAPPORO, we implemented
“Lemon University,” a food education program
designed to teach the next generation about
the power of lemons in an enjoyable manner.
In collaboration with distributors in each area, company
employees designated as “Lemon Meisters” (having received
internal qualification via
examination) work as
instructors. We also propose
ways for adults to incorporate
the health benefits of lemons
in their diets to promote
healthy and active lives.
Sapporo Breweries and POKKA SAPPORO
hold an annual policy briefing with their main
suppliers in Japan in order to share efforts
related to procurement. We ask suppliers to
implement and submit self-checks on their CSR efforts. At
the same time, we encourage any inquiries as to whether we
are performing activities in
line with the Group procure-
ment basic policy. In doing
so, we are working to build
a two-way relationship with
our suppliers.
SAPPORO GROUP
CustomersProviding valuable products and
services that build trust
• Customer consultation window • Brewery and factory tours • Events, etc.
Shareholders/ Investors
Adhering to the Corporate Governance Code, implementing appropriate shareholder returns
• General Meeting of Shareholders • Financial results briefings • Individual dialogues with
domestic and foreign institu-tional investors
• Publication of reports, etc.
SuppliersRespecting human rights and
promoting environment-friendly procurement
• Daily communication • Group procurement basic
policy, procurement from a CSR perspective, etc.
Community/ Society
Implementing training/food education for next generation, regional activities, and environmental conservation using
each business’ characteristics
• Next-generation training • Regional contribution activities • Disaster-recovery efforts • Environmental conservation
activities, etc.
EmployeesCreating an environment that embraces
diversity, promotes health improve-ment, and encourages challenge
• Graduated and department- specific training
• Mental health care • Corporate ethics hotline, etc.
Customers Suppliers
Supplier policy briefing sessions“Lemon University” food education program
51
Integrated Report 2017
Initiatives Based on Our 4 Key Promises
Promise 1 Promise 2
Contributing to Creative, Enriching and Rewarding Lifestyles Through Alcoholic Beverages, Food, and Soft drinks
Promoting Coexistence with Society
Establish CSR Procurement Guidelines for Suppliers
To contribute to the realization of a sustainable society, the
Sapporo Group believes it necessary to preserve the under-
standing and cooperation of the suppliers who share its raw
materials while also ensuring CSR throughout the entire
supply chain.
Up until now, our procurement activities were carried out
in accordance with our Sapporo Group basic procurement
policy; however, in March 2018 we established a new set of
Sapporo Group CSR procurement guidelines for suppliers
linked to the basic policy. We are working to promote two-way
communication with our suppliers and engage in collaborative
CSR in six main subjects: safety and quality, compliance with
laws, human rights and
labor, environmental con-
servation, coexistence with
society, and alcohol
beverage-related issues.
By maintaining this rela-
tionship, we aim to realize
a sound and rich society.
Initiatives toward supporting local communitiesSince the founding of the Sapporo Group, we have contributed to the social communities rooted in the countries and regions where we have expanded our businesses to show our appreciation for their sup-port. Just as before, all of our employees will take a proactive approach in enhancing understanding of a region’s strengths, sports, cultures, and traditions and will work toward collaboration in business solutions and regional development as members of those com-munities. In doing so, we hope to create a better future. In Nagoya City, the POKKA Lemon Fire Department Band, the orchestral group for the Nagoya City Fire Department, has put on over 200 performances a year since April 2016. With POKKA SAPPORO Food & Beverage receiving naming rights from the city of Nagoya, it became the first company in the country to gain naming rights over organiza-tions in local towns. In the same vein, 2017 marked the 60th anniver-sary of POKKA Lemon, originated in Nagoya, and its cooperation in creating community awareness with local municipalities.
Safety and Reliability Initiative— the Collaborative Contract Farming System
As a food manufacturer, the Sapporo Group makes every
effort to provide safe, reliable, and high-quality products
and services. As part of those efforts, we have employed the
Collaborative Contract Farming System (CCFS), Sapporo
Breweries’ proprietary raw material procurement system.
This system, of which there is no other in the world, is sup-
ported by the following three pillars.
Specifying growing areas and the growers
Specifying growing methods
Ensuring communication between growers and Sapporo
Breweries
Internal experts on malt and hops called “Fieldman”
make direct visits to CCFS production areas in about 10
countries around the world to engage in ongoing communi-
cation with growers. Not only does this enable the stable
procurement of raw materials for great-tasting beer, it also
ensures that the “where,” “who,” and “how” questions of
procurement have clear answers. In this way, Sapporo
Breweries is working
together with the suppliers
and growers to create safe,
reliable, and delicious raw
materials for its products.
Alcoholic beverage-related issuesThe Sapporo Group believes that, as a corporate entity engaged in the distribution of alcoholic bever-ages, it bears a responsibility to communicate proper drinking practices and a proper understanding about the characteristics of alcohol.
Policy related to proper drinking practices In light of the nature of alcohol, we must consider social impact when engaging in the manufacture, sale, and advertisement of alcohol.
We must support moderation in alcohol drinking consistent with a healthy and joyful lifestyle while moving forward with measures to prevent alcohol abuse, such as underage drinking, driving while intoxicated, and drinking by pregnant and nursing mothers.
52
SAPPORO HOLDINGS LIMITED
Promise 3 Promise 4
Promoting Environmental Conservation Cultivating Highly Unique Employees
Toward further advancement of diversity
In the spirit of promoting a diverse environment, in
November 2017 the Sapporo Group held Groupwide train-
ing sessions in order to educate management and to spread
awareness of LGBT issues. In addition, as part of an effort
to create an environment where human resources with a
variety of ideas and ways of thinking can continue to work
safely, we changed the definition of spouses in our employ-
ment regulations.*4 As of January 2018, same-sex and
common-law partners will be seen as equivalent to spouses
in terms of receiving benefits and welfare.
Moving forward, we will continue to put our utmost
effort toward creating an environment that heightens
awareness of these respective differences.
*4 Relevant companies: Sapporo Holdings, Sapporo Breweries
Part of Ministry of the Environment’s Joint Crediting Mechanism Model ProjectIn August 2017, as part of the Ministry of the Environment’s Financing Programme for JCM Model Projects,*3 Sapporo International’s efforts in the introduction of energy-saving equipment in its brew-eries were approved for subsidy. This project, in accordance with the expansion of the Sapporo Vietnam Long An Brewery, will intro-duce high-efficiency, energy-saving equipment—an air compressor, cold water chiller, and once-through boiler—to reduce electric-ity and LPG consumption and is expected to reduce CO2 emissions by approx-imately 111 tons per year.
*3 The Ministry of the Environment aids with capital investment expenses to support projects for companies that introduce superior low-carbon technologies in developing countries to reduce greenhouse gas emissions on a global scale.
Support for balancing work and child careAt Sapporo Breweries, we are working for continu-ous system expansion and promotion of use centered on our “Next-Generation Development Project,” consisting of representatives of both the Company and labor unions. Based on our efforts up to the present as a top-level company that offers its support in raising chil-dren, we were recognized with a Platinum Kurumin mark in 2017 by the Ministry of Health, Labour and Welfare. Presently, in order to make work and family more compatible, we promote the use of systems such as flextime and telecommuting. Sapporo Breweries continues to support and implement mea-sures to ensure that its human resources maintain sound mental and physical health.
Platinum Kurumin mark in recognition of company support for raising children.
Recipient of the Agriculture, Forestry and Fisheries Minister’s Award at the 27th Grand Prize for the
Global Environment Awards
Sapporo Holdings was a recipient of the Agriculture,
Forestry and Fisheries Minister’s Award at the 27th Grand
Prize for the Global Environment Awards*1 based on the
evaluation of efforts toward bioethanol production from
cassava pulp.*2 These developments are a result of the
Sapporo Group’s work to create biomass energy technology
using brewing technology cultivated over the course of
many years of producing alcoholic beverages domestically
and overseas. Our goal is to disseminate biofuel production
technology to ASEAN countries where cassava cultivation
is prevalent, and contribute to solving energy and environ-
mental problems.
*1 Award system established in 1992 by Fujinsankei Communications Group
with special cooperation of World Wildlife Foundation (WWF) Japan, awarded to industries that work to balance production and development and environmental conservation.
*2 Refers to the byproducts of tapioca production from cassava roots.
53
Integrated Report 2017
The city of Sapporo is where the prede-cessor of Sapporo Breweries, Kaitakushi Brewery, was founded. This makes Sapporo the place in which the Sapporo Group was born as well as where genu-ine beer was first made by Japanese brewers. As such, it would be no exag-geration to refer to it as the birthplace of Japanese beer. As a reflection of that status, the city’s Sapporo Factory repre-sents the origin of beer breweries in Japan. In addition to tours where par-ticipants can learn about the history of the Kaitakushi Brewery era, the Sapporo Factory is home to various shops, res-taurants, cafés, and much more, making it a spacious facility that functions as a place of relaxation and refreshment for members of the local community. In 1972, Sapporo became a sister city of Munich, a German city famous for the global beer event Oktoberfest. In doing so, Sapporo concluded a one-of-a-kind sister city agreement for Japan. Since then, the city has deepened its friendship with Munich through various events in which the Sapporo Group has participated. In 2012, to celebrate the 40th anniversary of the sister city relationship, the City of Beer Sapporo Project was started. In 2011, the Autumn Beer Festival com-menced at the Sapporo Factory. At the events, people can come together to enjoy delicious beer and food. Inheriting Kaitakushi Brewery’s passion for manufactur-ing, we will continue to further improve the value of the Sapporo brand while cherishing the connections we have formed with the local community.
01 S A P P O R O
Special Feature 2
Sapporo Factory
Since its establishment, the Sapporo Group has been passionate about manufacturing, remaining
committed to using the finest raw materials and pursuing a wide variety of activities to attain the
highest levels of quality. At the same time, we have valued the points of contact and connections we
have made with local communities, society, and the earth. Through our various business activities, we
have delivered happiness, deliciousness, creativity, and enrichment to our customers, thereby earning
their trust. We will continue to be a corporate group that contributes to the development of local
communities and society as a whole.
Going forward, we will deepen our points of contact, connections, and relationships with local commu-
nities as we work to strengthen bonds with our stakeholders through our brand story well into the future.
Kaitakushi Brewery
Inheriting Aspirations by Strengthening Bonds through Our Brand Story
54
SAPPORO HOLDINGS LIMITED
In 1889, construction of the Yebisu Brewery was completed in Mitamura Village, Ebara County (now the Mita district of Meguro Ward, Tokyo). In 1901, the Ebisu Railway Station was established for the purpose of shipping beer. This station would later become a passenger station (now JR Ebisu Station), which led to the surrounding area being renamed as Ebisu. This is an extremely rare case in which the name of a district originated from the brand name of a product. In 1994, Yebisu Garden Place was established on the site of the Yebisu Brewery follow-ing the brewery’s relocation. The name Yebisu Garden Place derives from the unique style of urban development that was formed through the integration of the GARDEN-CITY and MARKET-PLACE retail and entertainment areas. Yebisu Garden Place is made up of 60% open space and has an abundance of greenery. Such features create an urban setting where people can enjoy a rewarding experience in a spacious area. At this location, we will con-tinue to hold such events as the Yebisu Beer Festival, which aims to further enrich Japanese beer culture, and the Yebisu Culture Festival, which contributes to the revitalization of local culture. In doing so, we are working together with the local community to encourage the development of the Ebisu area.
The Sapporo Group has a deep connection with Ginza, one of Japan’s most well-known commercial districts. The connection started in 1887 with the establishment of the Japan Beer Brewery Company, a predecessor of Sapporo Breweries, in what is currently Ginza 2-chome. The connec-tion deepened in 1899 when Japan’s first beer hall, the YEBISU BEER HALL, opened in what is now Ginza 8-chome. In 1934, we opened Beer Hall Lion Ginza 7-chome. Currently the oldest existing beer hall in Japan, it is loved by our customers to this day. By giving thorough attention to quality assurance and traditional pouring techniques, this beer hall consistently offers draft beer that is of the highest quality. In 2016, we opened the commercial complex GINZA PLACE, which was developed under a concept of being a “base for information dissemination and exchange.” In the ever-growing district of Ginza, we aim to establish GINZA PLACE as a landmark that shapes the future of the district by realizing the further revitalization of the surrounding area and creating a lively atmosphere.
02
03
Y E B I S U
G I N Z A
Yebisu Garden Place
Beer Hall Lion Ginza 7-chome
GINZA PLACE
Forming Connections with Nagoya and Hiroshima through LemonsPOKKA CORPORATION, the predecessor of POKKA SAPPORO Food & Beverage Ltd., was founded in 1957 in Nagoya City, Aichi Prefecture, as a production and sales company of lemon prod-ucts used in cocktails. In the over 60 years since its establishment, POKKA SAPPORO Food & Beverage has not only worked to develop various lemon products but has also pursued lemon-related research and promoted activities to spread knowledge about the fruit. Recently, POKKA SAPPORO Food & Beverage has formed collaborative partnerships and alliances with Hiroshima Prefecture itself and Kure City, Osakikamijima Town, and agricultural cooperatives therein, to promote efforts to increase demand for Setouchi Hiroshima Lemons and enhance their brand value.
A lemon-producing area in Osakikamijima Town, Hiroshima Prefecture
Yebisu Brewery
YEBISU BEER HALL
55
Integrated Report 2017
Message from the Chairman
Emphasizing Dialogues Based on Various Opinions and Ways of Thinking
Since I was appointed as a director of Sapporo
Holdings in 2007, I have engaged in countless dia-
logues with our shareholders and other investors as
well as with members of companies possessing voting
rights. These experiences have taught me that there is
no one absolute answer for solving an issue. I am
currently involved in a variety of outside activities as
the chairman and representative director, and I have
witnessed many instances where the common ways of
thinking within Sapporo itself are not understood by
outside parties. I therefore place emphasis on engag-
ing in dialogues that do not simply assert the good
aspects and strengths of the Company but which
focus on clarifying the Company’s reasons for select-
ing its management policies and structure, based on
an understanding of the diverse range of opinions and
approaches that exist outside the Company. To this
end, in addition to maintaining an ability to clearly
summarize the Company’s approach so that I can
hold discussions at any time and location, I place
value on the issues brought up by our stakeholders
without fear of how that may change the course of
the conversation.
Considering the Ideal Approach for a Board of Directors That Utilizes Diverse, Outside Opinions
Under the Sapporo Group’s Long-Term Management
Vision “SPEED150,” which sets its sights on 2026, the
year marking the 150th anniversary of the Group’s
founding, we are working to realize steady profit
growth and establish a robust financial foundation.
At the same time, we are taking steps to ensure man-
agement transparency and fairness through the
enhancement of our corporate governance. In doing
so, we are striving to realize sustainable growth and
improve corporate value.
When it comes to the management of the Board of
Directors, I am aware that my most significant role as
its chairman is to draw on the abundance of knowl-
edge and experience that the outside directors pos-
sess. Taking into consideration the opinions offered to
us by our stakeholders, I communicate a wide range
of outside viewpoints and approaches to the inside
We will continue efforts to enhance and
strengthen a corporate governance system
that leverages stakeholder feedback
as we work to boost our corporate value
and improve our appeal.
Tsutomu KamijoChairman and Representative Director
56
SAPPORO HOLDINGS LIMITED
directors while also making a point to draw out the
candid opinions and viewpoints of the outside direc-
tors. To ensure that the outside directors can make
sufficient use of their experience and capabilities, we
encourage them to visit our factories and research
labs and provide them with regular opportunities to
meet with Group executive officers and the presidents
of the operating companies. In these ways, we work
to offer information to the outside directors in an
appropriate fashion.
In the process of formulating the Long-Term
Management Vision and the First Medium-Term
Management Plan, we created opportunities aside from
Board meetings to explain to the outside directors the
content of the numerous internal discussions we had,
which allowed us to receive constructive feedback from
them. A particularly impressive takeaway from this
feedback was how highly our unique brands were
evaluated by the outside directors, higher, in fact, than
many of the evaluations conducted internally. As a
B-to-C corporate group, we pursue our business activi-
ties while forming deep connections with the daily lives
of our customers, and the high evaluation we received
from the outside directors allowed us to once again
recognize the significant level of impact we have on
society. In addition, we have fostered an understanding
among the outside directors regarding the environmen-
tal and regional contribution efforts we are promoting,
and they have indicated to us the importance of confi-
dently communicating these efforts to our stakeholders
and provided us with support to sufficiently do so. We
have reflected the opinions and approaches of the out-
side directors in our 4 Promises, which organize our
CSR priority issues. Going forward, we will steadily
work to fulfill these promises while taking into account
various social issues, starting with those laid out in the
Sustainable Development Goals (SDGs).
Boosting the Corporate Value and Appeal of the Sapporo Group
I feel that discussions on the corporate governance of
listed corporations have evolved over the years. In
response to the Corporate Governance Code, we
intend to implement specific initiatives based on the
themes of the code that are drawing the highest level
of interest. One particular theme of which we are
constantly aware is considering a management struc-
ture and design that can gain the understanding of
outside parties. Accordingly, at the Ordinary General
Meeting of Shareholders held at the end of March
2018, a resolution was passed to revise the Articles of
Incorporation and abolish the Senior Advisor System
to ensure that the former presidents of the Company
do not affect the Company’s current management.
Another important theme is promoting diversity on
the Board of Directors. With the aims of encouraging
interaction between Group personnel and promoting
the active role of women, we took the lead over other
companies in the industry and selected a woman to
serve as an internal member of the Board of Directors
in 2016. We also welcomed Mackenzie Clugston, a
Canadian national, as an outside director following the
innovative and leading-edge examples of general trad-
ing companies. Mr. Clugston has experience serving as
a diplomat in North America and Southeast Asia,
regions that are deeply connected to our businesses,
and also has a vibrant background with close connec-
tions to Japan, including a strong command of the
Japanese language. We believe that he will provide us
with valuable insight that will help us achieve our
Long-Term Management Vision.
Going forward, while taking steps to further invig-
orate discussions with the outside directors and out-
side Audit & Supervisory Board members, we will
promote improvements in terms of our organizational
and management structure and various other aspects,
including the approach for our overseas business
activities, which represent a significant growth driver.
As we work to receive comprehensive and positive
evaluations from our stakeholders, we will maintain
an awareness of the duties we need to fulfill as a
listed company. We will also promote efforts to boost
our corporate value and appeal as a company with
highly unique brands.
June 2018
Tsutomu Kamijo
Chairman and Representative Director
57
Integrated Report 2017
Corporate Governance
Format While Sapporo Holdings is a Company with Company Auditors, we voluntarily established a Nominating Committee and a Compensation Committee in November 1998 and have been making efforts to enhance the transparency of our management relating to the nomination and remuneration of directors, and to preserve a sound management structure. Furthermore, in December 2015, we set up the Outside Director Committee in an effort to strengthen the exchange of information and sharing of knowledge with the independent outside directors regarding such matters as Groupwide management strategies and corporate governance issues.
Governance Digest
By ageBoard of Directors Constituent members
Audit & Supervisory Board Constituent members
Independent outside Audit & Supervisory Board members
Independent outside directors
Female
Under 55 years
2
Under 60 years
3
60 years or older
4
Reasons for appointment of directorsTsutomu Kamijo
Mr. Kamijo has been representative director of the Company since 2011 and has a wealth of experience, a rich track record, and great insight as a manager. The Company has determined that he will be the right administrator and supervisor of overall Group management.
Masaki Oga
Mr. Oga has served as a director of the Company and president and representative director of an operating company, and has a wealth of experience, a rich track record, and great insight as a manager. The Company has determined that he will be the right person to promote Group management and strengthen the corporate governance of the Company.
Hiroyuki Nose
Mr. Nose has wide experience in sales and marketing departments of operating companies and has been in charge of the brand planning department. He therefore has the experience, track record, and insight for marketing strategies. The Company has determined that he will be the right person to formulate and promote the growth strategy of the Sapporo Group.
Shinichi Soya
Mr. Soya has had wide experience in the accounting and finance departments of operating companies and has been in charge of corporate planning and international departments. He therefore has the experience, track record, and insight for overall corporate planning. The Company has determined that he will be the right person to strengthen the Group management structure and global management of the Company.
Mayumi Fukuhara
Ms. Fukuhara has been in charge of the human resource departments of operating companies. She therefore has the experience, track record, and insight for overall human resource strategy. The Company has determined that she will be the right person to promote the diversity and strengthen human resource development of the Sapporo Group.
Ikuya Yoshida
Mr. Yoshida has a wealth of experience, a rich track record, and great insight for the planning and development of new products gained through his employment as a person in charge of the production and technology and product development departments of an operating company. The Company has determined that he will be the right person to promote research and development as well as quality improve-ment at the Sapporo Group.
Shigehiko Hattori
Outside Director
Mr. Hattori has a wealth of experience, a rich track record, and great insight as the president of a business corporation. He also has a wealth of overseas management experience. Mr. Hattori offers pertinent opinions and advice to the Company’s Board of Directors from his objec-tive standpoint, independent of the management team engaged in executing the operations of the Company. The Company has determined that he will contribute greatly to the corporate governance of the Company, which is moving forward with overseas expansion.
Shizuka Uzawa
Outside Director
Mr. Uzawa has a wealth of experience, a rich track record, and great insight as the president of a holding company as well as extensive insight in the treasury and corporate management fields. Mr. Uzawa offers pertinent opinions and advice to the Company’s Board of Directors from his objective standpoint, independent of the management team engaged in executing the operations of the Company. The Company has determined that he will contribute greatly to the corporate governance of the Company in such areas as the strengthening of the Group’s management structure.
Mackenzie Clugston
Outside Director
Mr. Clugston has extensive insight in the fields of diplomacy and trade in North America and Southeast Asia where the Company is pursuing business development. Based on that wealth of experience, rich track record, and great insight, Mr. Clugston can offer pertinent opinions and advice to the Board of Directors of the Company from his objective standpoint, independent of the management team engaged in executing the operations of the Company. The Company has determined that he will contribute greatly to the corporate governance of the Company, which is moving forward with global expansion.
58
SAPPORO HOLDINGS LIMITED
Corporate Functions and Internal Control Relationships
Basic Governance ApproachThe Sapporo Group has enacted the Basic Policy on Corporate Governance for the purpose of specifying its thinking and
operational policy regarding corporate governance with the goal of attaining sustained growth and enhanced corporate
value over the medium to long term, and in light of the purport and spirit of the Corporate Governance Code set forth in the
Listing Rules of the Tokyo Stock Exchange.
As part of the policy, the Group’s basic philosophy is to regard strengthening and enhancing corporate governance as one
of its top management priorities. The Group is working to clarify supervisory, business execution, and auditing functions
throughout the Group under the holding company framework. The Group is also working to strengthen management super-
visory functions to increase management transparency and achieve management goals.
For details on the Company’s basic approach to corporate governance, management direction, and other policies, please refer to the Basic Policy on Corporate Governance.
http://www.sapporoholdings.jp/english/ir/management/pdf/basic_governance_approach.pdf
1 Board of DirectorsThe Board of Directors performs a supervisory role and makes decisions on statutory matters and important matters related
to business execution stipulated by the Board’s regulations. The Board of Directors also elects and supervises the business
execution of the representative director, president, directors, Group operating officers, and other key personnel.
About Independent Outside Directors
Three of the nine members of the Company’s Board of Directors are independent outside directors. All three have submitted
notification to the Tokyo Stock Exchange and the Sapporo Securities Exchange of their independent director status as stipu-
lated by the exchange regulations. The independent outside directors are expected to objectively advise and supervise the
management team from a neutral standpoint, based on their high perception. The independent outside directors offer advice
and suggestions from their independent and objective standpoints and are expected to fulfill a role raising corporate value.
Supervision
Appointment / Dismissal
Election/ SupervisionReport
Monitoring
Appointment / Dismissal
1 Board of Directors
Directors
Outside Directors
2 Group Companies
General Meeting of Shareholders
Internal Control/ Risk Management
Advice Audit4 Nominating Committee Compensation Committee
5 Independent Outside Directors CommitteePresident
Accounting Auditor (Independent Auditor)
Legal Advisor (Law Firm)
Management Council
Group Management Council
Group Risk Management Committee
Group Information Protection Committee
Group CSR Committee
Other Expert Committees
3 Audit & Supervisory Board Audit & Supervisory
Board MembersOutside Audit & Supervisory
Board Members
6 Group Audit Department
59
Integrated Report 2017
2 Group Operating OfficersThe president controls business execution across the entire Group based on the resolutions of the Board of Directors. The
Group operating officers, under the direct authority of the president, control business execution in the main business segments.
3 Audit & Supervisory BoardSapporo Holdings Ltd. uses the Audit & Supervisory Board Member system, in which Audit & Supervisory Board members,
who are completely independent from the Board of Directors, audit the job performance of directors from an independent
standpoint.
About Independent Outside Audit & Supervisory Board Members
Sapporo Holdings has four Audit & Supervisory Board members, two of whom are independent outside Audit &
Supervisory Board members. Both independent outside Audit & Supervisory Board members have submitted notification
to the Tokyo Stock Exchange and the Sapporo Securities Exchange of their independent auditor status as stipulated by the
exchange regulations. The independent outside Audit & Supervisory Board members audit the duties executed by the
directors from an objective and neutral standpoint, and offer input where fitting to preserve the propriety and appropriate-
ness of decisions by the directors. Similarly, the independent outside Audit & Supervisory Board members are expected to
provide input where needed during discussion on proposals and fulfill a role to secure sound management.
Standards and Policies Regarding Independence of Outside Directors and Outside Audit & Supervisory Board MembersSapporo Holdings’ Nominating Committee recommends personnel as candidates for outside director provided that they
meet the standards for independence set out by financial instrument exchanges that have applied them, and that they have a
strong background, track record, and insight into corporate management or certain specialist fields that will enable them to
offer accurate proposals and advice on the Company’s management issues. Moreover, outside Audit & Supervisory Board
member candidates are required to meet the standards for independence set out by financial instrument exchanges that have
applied them.
For details on the Company’s standards for the independence of outside officers, please refer to the separate document Basic Policy on Corporate Governance.
http://www.sapporoholdings.jp/english/ir/management/pdf/basic_governance_approach.pdf
All of the Company’s outside directors and outside Audit & Supervisory Board members satisfy the applicable standards
of independence specified by the financial instruments exchanges and are therefore registered as independent officers with
the Tokyo Stock Exchange and the Sapporo Securities Exchange.
NameImportant concurrent occupations or positions at other organizations
Policy on independence
Directors
Shigehiko Hattori
Senior Advisor of Shimadzu Corporation
Outside Director of Mitsubishi Tanabe Pharma Corporation
Outside Director of Brother Industries, Ltd.
Outside Director of Meiji Yasuda Life Insurance Company
Outside Auditor on Supervisory Board of Nikkei Inc.
Mr. Hattori was engaged in business execution at Shimadzu Corporation until June 2015. Although said company’s products were purchased by certain plants of the Company’s subsidiaries in the past, the amount of such transactions is immaterial, and the Company has determined Mr. Hattori is unlikely to have a conflict of interest with shareholders. The Company designated Mr. Hattori as an independent director as provided for by the rules of the Tokyo Stock Exchange and the Sapporo Securities Exchange and has notified each of the exchanges of his designation.
Shizuka Uzawa
External Executive Director of Japan Finance Corporation
Outside Director of Nichirei Corporation
Mr. Uzawa was engaged in business execution at Nisshinbo Holdings Inc. until June 2016. No transactions have or are being made between said company and the Company or its subsidiaries, and the Company has determined Mr. Uzawa is unlikely to have a conflict of interest with shareholders. The Company designated Mr. Uzawa as an independent director as provided for by the rules of the Tokyo Stock Exchange and the Sapporo Securities Exchange and has notified each of the exchanges of his designation.
Mackenzie Clugston
Outside Director of KAMEDA SEIKA CO., LTD.
Professor under special tenure program of Kwansei Gakuin University Outside Director of Idemitsu Kosan Co., Ltd.
Mr. Clugston satisfies “Standards for Independence of Outside Officers” estab-lished by the Company. Since September 2016, the Company’s management has been receiving advice from Mr. Clugston as a consultant of the Company. The remuneration paid to Mr. Clugston was compensation for his advice to the Company’s management based on his experience and insight, and such remunera-tion in the business term ended December 31, 2017 was ¥5 million or less; thus the arrangement does not affect Mr. Clugston’s independence.
Corporate Governance
60
SAPPORO HOLDINGS LIMITED
NameImportant concurrent occupations or positions at other organizations
Policy on independence
Audit & Supervisory Board Members
Junya Sato
Lawyer at the Law Offices of Ishizawa, Ko & Sato
Outside Director of Nikki Co., Ltd.
Outside Director of Mitsui Mining & Smelting Co. Ltd.
Outside Audit & Supervisory Board Member of Taisho Pharmaceutical Holdings, Co., Ltd.
Although Mr. Sato has no experience directly managing a company aside from being an outside director or an outside corporate auditor, he has a wealth of practi-cal experience as an attorney, particularly regarding corporate law. The Company has determined that Mr. Sato will be able to monitor the performance of duties by directors of the Company from an objective and fair perspective, and he has been appointed as an outside Audit & Supervisory Board member.Mr. Sato is currently a lawyer at the law offices of Ishizawa, Ko & Sato. No trans-actions have or are being made between said firm and the Company or its subsid-iaries. Accordingly, the Company has determined Mr. Sato is unlikely to have a conflict of interest with shareholders. The Company designated Mr. Sato as an independent Audit & Supervisory Board member as provided for by the rules of the Tokyo Stock Exchange and the Sapporo Securities Exchange and has notified each of the exchanges of his designation.
Kazuo Sugie
As the president of a business corporation, Mr. Sugie has a wealth of experience and highly developed insight based on extensive knowledge and information. The Company has determined that, from his objective and neutral position as an outside Audit & Supervisory Board member, Mr. Sugie will monitor the perfor-mance of duties by directors of the Company and contribute greatly in strength-ening the Company’s Audit & Supervisory Board Member system, and he has been appointed as an outside Audit & Supervisory Board member.Mr. Sugie was involved in business execution at DIC Corporation until March 2015. Although there have been transactions of said company’s products between said company and the Company’s subsidiaries, the amount of such transactions in the most recent business term has been less than 0.1% of either the consoli-dated net sales of the Company or the consolidated net sales of said company. Accordingly, the Company has determined Mr. Sugie is unlikely to have a conflict of interest with shareholders. The Company designated Mr. Sugie as an indepen-dent Audit & Supervisory Board member as provided for by the rules of the Tokyo Stock Exchange and the Sapporo Securities Exchange and has notified each of the exchanges of his designation.
4 Nominating and Compensation CommitteesAlthough Sapporo Holdings is a Company with Company Auditors, it has also established a Nominating Committee and a
Compensation Committee with the goals of increasing transparency with respect to the nomination and remuneration of
directors and preserving a sound management structure. The three outside directors and the president and representative
director generally comprise the four members of both committees, while the committee chair of each committee is selected
from the outside directors. However, regarding the Nominating Committee, when it recommends Audit & Supervisory
Board member candidates, a standing Audit & Supervisory Board member joins the committee, thereby increasing its mem-
bers to five. Furthermore, when choosing president and representative director candidates from among Group operating
officers, the committee chair will stand in place of the incumbent president and representative director on the committee.
5 Outside Director CommitteeIn December 2015, the Company established the Outside Director Committee. This committee works to share information
with the Company’s independent outside officers pertaining to Groupwide management strategies, corporate governance
policies, and other matters, thereby fostering and strengthening a mutual understanding.
Nominating Committee Compensation Committee
Independent outside directors
Standing Audit & Supervisory Board
member
President and representative
director
The committee chair
Independent outside directors
President and representative
director
The committee chair
61
Integrated Report 2017
Corporate Governance
Compensation for Directors and Audit & Supervisory Board MembersCompensation for directors is decided within remuneration limits set by the General Meeting of Shareholders. Compensation
consists of a base salary for each director, determined by the duties performed, and that may, based on predetermined criteria,
be adjusted in line with job performance in the previous fiscal year. Compensation for Audit & Supervisory Board members is
also decided within remuneration limits set by the General Meeting of Shareholders, and consists of a base salary for each
Audit & Supervisory Board member calculated in accordance with standards decided by the Audit & Supervisory Board.
The compensation amounts in 2017 were as follows.
Classification Payment recipientPayment amount (Millions of yen)
Directors (including outside directors) 11 (3) 241 (25)
Audit & Supervisory Board members (including outside Audit & Supervisory Board members) 4 (2) 46 (17)
Total (including outside officers) 15 (5) 287 (42)
*1 The Company had nine directors and four Audit & Supervisory members as of December 31, 2017.*2 At the 93rd Ordinary General Meeting of Shareholders held on March 30, 2017, it was determined that director remuneration amounts should not exceed ¥500 million
(however, this amount does not include salaries in instances where employees serve concurrently as directors). At the 83rd Ordinary General Meeting of Shareholders held on March 29, 2007, it was determined that Audit & Supervisory Board member remuneration amounts should not exceed ¥84 million.
*3 The performance-linked, stock-based compensation of ¥34 million was calculated based on the book value.*4 The Company abolished and suspended reserves for its retirement benefit system for directors and Audit & Supervisory Board members at the close of the 80th Annual
Meeting of Shareholders held on March 30, 2004.
Assessment of the Effectiveness of the Board of DirectorsEvery year, the Company conducts an analysis and assessment of the effectiveness of the Board of Directors based on the self-evaluations of each director. The Company also discloses an overview of the results of the analysis and assessment.
(1) Initiatives in Response to the Results of Board of Directors’ Effectiveness Assessment for Fiscal 2016In response to the issues identified based on the results of the Board of Directors’ effectiveness assessment for fiscal 2016, the Company endeavored to create ample opportunities for not only the provision of the information necessary for decision-making processes, including reports starting from the project evaluation stage, but also prior explanations and off-site meetings other than Board of Directors’ meetings, as needed. These efforts were undertaken with the aim of ensuring constructive discussions based on medium- to long-term policies and the direction of management strategies. The Company also implemented officer training sessions and, through factory tours and other means, created opportunities for outside officers to develop an under-standing of the Sapporo Group’s corporate profile, industrial information, and various other important matters.
(2) Results of Board of Directors’ Effectiveness Assessment for Fiscal 2017With respect to the Board of Directors’ effectiveness assessment for fiscal 2017, in continuation of similar practices in fiscal 2016, all directors underwent an anonymous survey. In consideration of the results of this survey, the Board of Directors held a discussion at a Board meeting in December 2017 with the aim of ascertaining the current state of affairs and recognizing current issues. By means of an evaluative comparison with the results of the fiscal 2016 assessment and other similar activities, it was confirmed that there is room for further improvement in regard to the content and the volume of Board of Directors’ meeting materials. It was also verified that, in order to fulfill the First Medium-Term Management Plan 2020, there is a need for all directors to draw on their knowledge and experience to bring about more vigorous discussions. Through the resolution of acknowledged issues and the implementation of continuous assessments that make use of appropriate methods, the Company is making an effort to further improve the effectiveness of its Board of Directors.
62
SAPPORO HOLDINGS LIMITED
In addition to the abovementioned payment amounts, Sapporo Holdings has introduced a performance-linked, stock-
based compensation system (Board Benefit Trust, or BBT) for directors (excluding outside directors), and contributed ¥445
million (over three business years) in accordance with the officer stock benefit rules stipulated by the system. The system is
separate from the abovementioned directors compensation, in accordance with a resolution of the 92nd Ordinary General
Meeting of Shareholders held on March 30, 2016. The system applies to Group operating officers of the Company, including
directors (excluding outside directors), and some of the directors of the Company’s subsidiaries, with the total number as of
December 31, 2017 being 28 persons.
6 Internal Audits Under instructions from the president, Sapporo Holdings has established a Group Audit Department as an internal auditing
organization independent of the executive chain of command. The Group Audit Department performs internal audits across
the entire Group, including operating companies and their subsidiaries. The Group Audit Department and the Audit &
Supervisory Board members meet regularly to exchange views on the results of the internal audits, the status of internal
control, and other related matters. The internal audit report of the Group Audit Department is read by the Audit &
Supervisory Board members as part of the information that they share.
Upgrading the Internal Control SystemTo ensure thorough implementation of the basic policies decided by the Board of Directors and carry out ongoing develop-
ment and strengthening of systems across the entire Group, the Board of Directors takes responsibility for appointing direc-
tors with specific responsibilities and promoting specific measures. Moreover, the Guidelines on the Construction of Internal
Control Systems at Sapporo Group have been enacted to set out specific matters in relation to internal control systems at the
Group, and these guidelines are used to confirm the level of progress being made in individual measures and to promote
collaboration.
Risk Management Sapporo Holdings manages risks relating to itself and its subsidiaries and prepares crisis management measures. To achieve a
more robust risk management structure for the entire Group, the Company has formulated basic policies and management
systems for Group risk management, as well as crisis management regulations. Specifically, Sapporo Holdings and its subsid-
iaries upgrade and develop systems for managing risks associated with important decisions made during business execution
or risks inherent to it, and systems for managing crisis situations that may arise. These efforts are governed by the basic
policies for the development of internal control systems.
Compliance The Group has set out the Sapporo Group Code of Business Conduct to provide a solid set of ethical guidelines for the con-
duct of all executives and employees. The Group CSR Committee has created a Groupwide compliance system and estab-
lished a Whistle-Blower’s Hotline and Helpline to help with prevention and early detection of misconduct. In addition, the
Group Audit Department, which is an internal auditing body that is independent of the executive chain of command, audits
the general business operations of Sapporo Holdings and its subsidiaries to ensure compliance with laws and regulations, the
Company’s Articles of Incorporation, and internal rules.
63
Integrated Report 2017
Board of Directors, Audit & Supervisory Board Members, and Group Operating Officers
Tsutomu Kamijo Chairman and Representative Director
(January 6, 1954)
Shigehiko Hattori Outside Director (Independent Officer)
(August 21, 1941)
Mackenzie ClugstonOutside Director (Independent Officer)
(June 19, 1950)
Hiroyuki Nose Director
(February 3, 1963)
Mayumi Fukuhara Director
(April 2, 1964)
Masaki Oga President and Representative Director
(December 2, 1958)
Shizuka Uzawa Outside Director (Independent Officer)
(January 30, 1946)
Shinichi Soya Director
(September 20, 1963)
Ikuya Yoshida Director
(December 21, 1961)
Apr. 1976 Joined the Company
Mar. 2001 Director (Member of the Board), Director of Sales Planning Department, of Sapporo Beverage Co., Ltd.
Mar. 2007 Director (Member of the Board), Director of Corporate Planning Department of the Company
Mar. 2009 Managing Director (Member of the Board) of the Company
Mar. 2011 President of Sapporo Beverage Co., Ltd. President of the Company and CEO of the Group
Jan. 2017 Chairman and Representative Director (up to the present)
Apr. 1964 Joined Shimadzu Corporation
June 1993 Director (Member of the Board) of Shimadzu Corporation (seconded to the United States of America)
June 2003 President and Representative Director of Shimadzu Corporation
June 2009 Chairman and Representative Director of Shimadzu Corporation
Mar. 2012 Outside Director (Member of the Board) of the Company (up to the present)
June 2015 Senior Advisor of Shimadzu Corporation (up to the present)
Apr. 1986 Joined the Company
Mar. 2011 Director of Shochu Planning Department, of Sapporo Breweries Limited
Mar. 2013 Director of Brand Planning Department of Sapporo Breweries Limited
Mar. 2015 Director (Member of the Board), Director of Business Planning Department, of the Company (up to the present)
Mar. 2018 Director, Sapporo International Inc. (up to the present)
June 1982 Joined Ministry of Foreign Affairs, Trade and Development Canada
Aug. 2000 Consul General of Canada in Osaka
Aug. 2003 Minister, Embassy of Canada in Japan
Aug. 2009 Ambassador of Canada to the Republic of Indonesia, to the Democratic Republic of Timor-Leste and to the Association of Southeast Asian Nations (ASEAN)
Nov. 2012 Ambassador Extraordinary and Plenipotentiary of Canada to Japan
Sept. 2016 Consultant of the Company
Mar. 2018 Outside Director (Member of the Board) of the Company (up to the present)
Apr. 1988 Joined the Company
Mar. 2013 Director of Human Resources and General Affairs Department of Sapporo Breweries Limited
Mar. 2014 Director of Human Resources Department of Sapporo Breweries Limited
Mar. 2016 Director (Member of the Board), Director of Human Resources Department of the Company (up to the present)
Apr. 1982 Joined the Company
Oct. 2006 Director, Tokyo Headquarters Office, Tokyo Metropolitan Area Sales and Marketing Division of Sapporo Breweries Limited
Mar. 2009 Operating Officer, Director of Hokkaido Sales & Marketing Division of Sapporo Breweries Limited
Mar. 2010 Director (Member of the Board) and Managing Officer, Director of Marketing Department of Sapporo Breweries Limited
Mar. 2013 President and Representative Director of Sapporo Breweries Limited Director (Member of the Board) and Group Operating Officer of the Company
Mar. 2015 Group Operating Officer of the Company
Jan. 2017 President and Group Operating Officer of the Company
Mar. 2017 President and Representative Director of the Company (up to the present)
Apr. 1969 Joined Nisshinbo Industries, Inc. (currently Nisshinbo Holdings Inc.)
June 2001 Director (Member of the Board), Chief of Accounting and Finance Division of Nisshinbo Industries, Inc.
June 2009 President and Representative Director of Nisshinbo Holdings Inc.
June 2013 Chairman and Representative Director of Nisshinbo Holdings Inc.
Mar. 2015 Outside Director (Member of the Board) of the Company (up to the present)
June 2016 Advisor of Nisshinbo Holdings Inc.
Apr. 1986 Joined the Company
Oct. 2006 Director of Strategic Planning Department, Hokkaido Headquarters, of Sapporo Breweries Limited
Nov. 2009 Director (Member of the Board) of POKKA CORPORATION (currently POKKA SAPPORO Food & Beverage Ltd.)
Mar. 2015 Director (Member of the Board) and Managing Executive Officer of POKKA SAPPORO Food & Beverage Ltd.
Mar. 2016 Director (Member of the Board), Director of Corporate Finance and Business Management Department of the Company (up to the present)
Mar. 2018 Director, Sapporo International Inc. (up to the present) Director, Sapporo Real Estate Co., Ltd. (up to the present)
Apr. 1985 Joined the Company
Sept. 2010 Director of Kyushu Hita Brewery of Sapporo Breweries Limited. President and Representative Director of Tanoshimaru Shuzo Co., Ltd.
Mar. 2013 Operating Officer and Director of Chiba Brewery of Sapporo Breweries Limited
Mar. 2015 Senior Operating Officer and Director of Chiba Brewery of Sapporo Breweries Limited
Mar. 2017 Director (Member of the Board), Director of Group Research and Development Division of the Company (up to the present)
As of March 29, 2018
64
SAPPORO HOLDINGS LIMITED
Board of Directors, Audit & Supervisory Board Members, and Group Operating Officers
Audit & Supervisory Board Members
Group Operating Officers
Shouji Osaki Standing Audit & Supervisory Board Member
(August 17, 1955)
Junya Sato Outside Audit & Supervisory Board Member (Independent Officer)
(May 4, 1953)
Tetsuo Seki Audit & Supervisory Board Member
(July 29, 1938)
Kazuo Sugie Outside Audit & Supervisory Board Member (Independent Officer)
(October 5, 1945)
Apr. 1979 Joined the Company
Mar. 2010 Managing Officer and Director of Tokai Hokuriku District Headquarters, of Sapporo Breweries Limited
Mar. 2013 Standing Audit & Supervisory Board Member of POKKA SAPPORO Food & Beverage Ltd.
Mar. 2015 Standing Audit & Supervisory Board Member of the Company (up to the present)
Apr. 1982 Registered as a lawyer (Daiichi Tokyo Bar Association) Joined the Law Offices of Furness, Sato & Ishizawa (currently the Law Offices of Ishizawa, Ko & Sato) (up to the present)
Oct. 1990 Registered as a lawyer in the state of New York
Apr. 2011 Vice Chairman of Daiichi Tokyo Bar Association
Mar. 2012 Outside Audit & Supervisory Board Member of the Company (up to the present)
Hideya TakashimaExecutive Group Operating OfficerPresident and Representative Director, Sapporo Breweries Limited
Yoshihiro IwataExecutive Group Operating OfficerPresident and Representative Director, POKKA SAPPORO Food & Beverage Ltd.
Yuichiro MiyakeExecutive Group Operating OfficerPresident and Representative Director, Sapporo Lion Limited
Toshiyuki IkomaExecutive Group Operating OfficerPresident and Representative Director, Sapporo Real Estate Co., Ltd.
Toshio MizokamiExecutive Group Operating OfficerPresident and Representative Director, Sapporo Group Management Ltd.
Hirofumi KishiGroup Operating OfficerPresident, Sapporo North America Inc.
Apr. 1963 Joined Yawata Iron & Steel Co., Ltd. (currently NIPPON STEEL & SUMITOMO METAL CORPORATION)
June 1993 Director (Member of the Board) of Nippon Steel Corporation (currently NIPPON STEEL & SUMITOMO METAL CORPORATION)
Mar. 2007 Outside Director (Member of the Board) of the Company (until September 2008)
Oct. 2007 Chairperson of the Japan Audit & Supervisory Board Members Association
Oct. 2008 President and Representative Director of The Shoko Chukin Bank, Ltd.
June 2015 Honorary Advisor of The Shoko Chukin Bank, Ltd. (up to the present)
Mar. 2016 Audit & Supervisory Board Member of the Company (up to the present)
Aug. 1970 Joined Dainippon Ink and Chemicals, Inc. (currently DIC Corporation)
June 2001 Director of Dainippon Ink and Chemicals, Inc.
Apr. 2009 Representative Director, President and CEO of DIC Corporation
Apr. 2012 Chairman of the Board of DIC Corporation
Mar. 2013 Outside Audit & Supervisory Board Member of the Company (up to the present)
Mar. 2015 Senior Advisor of DIC Corporation
65
Integrated Report 2017
Eleven-Year Summary of Financial and Non-Financial Data
Millions of yen
For the Year: 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Net sales
Including liquor tax 449,011 414,558 387,534 389,244 449,452 492,490 509,834 518,740 533,748 541,847 551,548
Excluding liquor tax 309,794 284,411 264,604 269,874 336,837 379,792 395,377 401,813 418,319 424,059 433,260
Operating profit before goodwill amortization 13,232 15,552 13,922 16,575 21,994 18,294 19,329 18,493 18,103 24,188 20,987
Operating profit 12,362 14,685 12,895 15,403 18,883 14,414 15,344 14,728 13,950 20,267 17,032
EBITDA 37,759 37,157 36,469 39,080 46,476 44,099 44,388 42,974 42,327 46,529 44,558
Profit attributable to owners of parent 5,508 7,640 4,535 10,772 3,164 5,393 9,451 340 6,108 9,469 10,977
Capital expenditures (cash basis) 19,883 27,342 21,909 19,801 13,422 53,870 13,768 19,133 20,339 21,809 15,253
Depreciation 24,526 21,604 22,546 22,504 24,482 25,805 25,058 24,481 24,224 22,341 23,571
Goodwill amortization 869 867 1,027 1,172 3,110 3,879 3,985 3,764 4,153 3,920 3,954
Cash flows from operating activities 30,690 22,291 12,454 27,431 22,313 29,618 32,861 22,284 35,265 32,570 30,004
Free cash flow 17,195 39,147 (19,773) 24,837 (28,578) (29,867) 19,593 5,055 25,510 4,984 12,182
At Year-End:
Total assets 561,858 527,286 506,874 494,798 550,784 597,636 616,752 625,439 620,388 626,351 630,630
Net assets 125,189 116,862 118,590 126,645 124,775 134,946 155,366 160,004 163,822 166,380 177,662
Net financial liabilities 205,952 166,758 190,406 167,944 209,963 247,891 236,275 237,775 224,310 227,553 220,871
Other Indicators:
Overseas sales ratio (excluding liquor tax) 9.0% 8.8% 8.5% 9.4% 11.0% 14.1% 18.3% 19.2% 22.6% 20.5% 21.2%
Operating profit to net sales
Excluding liquor tax; before goodwill amortization 4.3% 5.5% 5.3% 6.1% 6.5% 4.8% 4.9% 4.6% 4.3% 5.7% 4.8%
Excluding liquor tax 4.0% 5.2% 4.9% 5.7% 5.6% 3.8% 3.9% 3.7% 3.3% 4.8% 3.9%
Net debt-to-equity ratio (times) 1.6 1.4 1.6 1.3 1.7 1.8 1.5 1.5 1.4 1.4 1.2
Equity ratio 22.3% 22.1% 23.4% 25.3% 22.4% 22.1% 24.6% 25.0% 25.5% 25.7% 27.5%
ROE (before goodwill amortization) 5.3% 7.0% 4.7% 9.8% 5.1% 7.3% 9.5% 2.7% 6.5% 8.4% 8.9%
ROE 4.6% 6.3% 3.9% 8.9% 2.5% 4.2% 6.7% 0.2% 3.9% 5.9% 6.6%
Interest coverage ratio*1 (times) 7.2 6.0 3.5 7.6 6.2 8.4 11.9 8.9 14.8 14.9 15.3
Number of employees*2 (people) 4,075 3,858 3,895 3,983 6,649 7,264 7,434 7,014 7,484 7,858 7,902
Groupwide ratio of women in management positions*2, 3 — — — — — — — — 8.1% 7.6% 8.1%
Groupwide CO2 emissions*4 (kt) — — — — — — 304.6 279.6 306.2 305.7 —
Domestic groupwide water use*5 (1,000 m3) — — — — — — 6,861 6,492 6,498 6,500 —
*1 Interest coverage ratio calculated as operating cash flow divided by interest payment.*2 As of December 31st of each period.*3 Percentage of women in management positions at domestic and overseas Group companies.*4 In Japan, uses figures as per periodic report submitted in accordance with Act on Rationalizing Energy Use. Applicable to Sapporo Breweries, POKKA SAPPORO Food & Beverage,
Pokka Create, Sapporo Lion, and Sapporo Real Estate. Applicable to production facilities of overseas Group companies (2013–2014: 4 companies, 2015–2016: 6 companies). Amounts totaled from April to March of the following year.
*5 Applicable to Sapporo Breweries, POKKA SAPPORO Food & Beverage production facilities, Sapporo Lion, and Sapporo Real Estate. Amounts totaled from April to March of the following year.
66
SAPPORO HOLDINGS LIMITED
Millions of yen
For the Year: 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Net sales
Including liquor tax 449,011 414,558 387,534 389,244 449,452 492,490 509,834 518,740 533,748 541,847 551,548
Excluding liquor tax 309,794 284,411 264,604 269,874 336,837 379,792 395,377 401,813 418,319 424,059 433,260
Operating profit before goodwill amortization 13,232 15,552 13,922 16,575 21,994 18,294 19,329 18,493 18,103 24,188 20,987
Operating profit 12,362 14,685 12,895 15,403 18,883 14,414 15,344 14,728 13,950 20,267 17,032
EBITDA 37,759 37,157 36,469 39,080 46,476 44,099 44,388 42,974 42,327 46,529 44,558
Profit attributable to owners of parent 5,508 7,640 4,535 10,772 3,164 5,393 9,451 340 6,108 9,469 10,977
Capital expenditures (cash basis) 19,883 27,342 21,909 19,801 13,422 53,870 13,768 19,133 20,339 21,809 15,253
Depreciation 24,526 21,604 22,546 22,504 24,482 25,805 25,058 24,481 24,224 22,341 23,571
Goodwill amortization 869 867 1,027 1,172 3,110 3,879 3,985 3,764 4,153 3,920 3,954
Cash flows from operating activities 30,690 22,291 12,454 27,431 22,313 29,618 32,861 22,284 35,265 32,570 30,004
Free cash flow 17,195 39,147 (19,773) 24,837 (28,578) (29,867) 19,593 5,055 25,510 4,984 12,182
At Year-End:
Total assets 561,858 527,286 506,874 494,798 550,784 597,636 616,752 625,439 620,388 626,351 630,630
Net assets 125,189 116,862 118,590 126,645 124,775 134,946 155,366 160,004 163,822 166,380 177,662
Net financial liabilities 205,952 166,758 190,406 167,944 209,963 247,891 236,275 237,775 224,310 227,553 220,871
Other Indicators:
Overseas sales ratio (excluding liquor tax) 9.0% 8.8% 8.5% 9.4% 11.0% 14.1% 18.3% 19.2% 22.6% 20.5% 21.2%
Operating profit to net sales
Excluding liquor tax; before goodwill amortization 4.3% 5.5% 5.3% 6.1% 6.5% 4.8% 4.9% 4.6% 4.3% 5.7% 4.8%
Excluding liquor tax 4.0% 5.2% 4.9% 5.7% 5.6% 3.8% 3.9% 3.7% 3.3% 4.8% 3.9%
Net debt-to-equity ratio (times) 1.6 1.4 1.6 1.3 1.7 1.8 1.5 1.5 1.4 1.4 1.2
Equity ratio 22.3% 22.1% 23.4% 25.3% 22.4% 22.1% 24.6% 25.0% 25.5% 25.7% 27.5%
ROE (before goodwill amortization) 5.3% 7.0% 4.7% 9.8% 5.1% 7.3% 9.5% 2.7% 6.5% 8.4% 8.9%
ROE 4.6% 6.3% 3.9% 8.9% 2.5% 4.2% 6.7% 0.2% 3.9% 5.9% 6.6%
Interest coverage ratio*1 (times) 7.2 6.0 3.5 7.6 6.2 8.4 11.9 8.9 14.8 14.9 15.3
Number of employees*2 (people) 4,075 3,858 3,895 3,983 6,649 7,264 7,434 7,014 7,484 7,858 7,902
Groupwide ratio of women in management positions*2, 3 — — — — — — — — 8.1% 7.6% 8.1%
Groupwide CO2 emissions*4 (kt) — — — — — — 259.1 239.3 263.7 263.1 —
Domestic groupwide water use*5 (1,000 m3) — — — — — — 6,861 6,492 6,498 6,500 —
*1 Interest coverage ratio calculated as operating cash flow divided by interest payment.*2 As of December 31st of each period.*3 Percentage of women in management positions at domestic and overseas Group companies.*4 In Japan, uses figures as per periodic report submitted in accordance with Act on Rationalizing Energy Use. Applicable to Sapporo Breweries, POKKA SAPPORO Food & Beverage,
Pokka Create, Sapporo Lion, and Sapporo Real Estate. Applicable to production facilities of overseas Group companies (2013–2014: 4 companies, 2015–2016: 6 companies). Amounts totaled from April to March of the following year.
*5 Applicable to Sapporo Breweries, POKKA SAPPORO Food & Beverage production facilities, Sapporo Lion, and Sapporo Real Estate. Amounts totaled from April to March of the following year.
67
Integrated Report 2017
Management’s Discussion and Analysis
Business Overview
During the fiscal year under review, the Japanese economy
showed signs of a gradual recovery due to a rebound in
exports and an improved employment environment. On the
other hand, the future outlook of the economy remained
uncertain as geopolitical risks and unfavorable weather placed
downward pressure on investments and personal consumption.
Conditions in the industries in which the Group conducts
operations were as follows.
In the Japanese alcoholic beverages industry, demand declined
due to higher store prices following a revision to Japan’s liquor
tax law, unseasonable summer weather, and the downward
pressure of consumer thriftiness on demand at drinking outlets.
Overseas, the North American beer market performed at a level
lower than that of the previous fiscal year, while the Asian beer
market continued to grow. Demand in the domestic soft drinks
industry was relatively flat. In the real estate industry, vacancy
rates in the office leasing market in the Tokyo metropolitan area
improved, while rent levels rose gradually.
Under these circumstances, in the Japanese Alcoholic
Beverages segment, we focused our efforts on strengthening
core brands under our “Beer Revival Declaration.” Specifically,
we implemented a consistent marketing strategy for our main-
stay beer brand, Sapporo Draft Beer Black Label. Attesting to
the success of this approach, we achieved a sales increase for
the third consecutive year for this brand, amid a decline in
overall beer demand. In non-beer growth areas, we focused on
high-value-added products in the wine and spirits categories,
thereby promoting further diversification.
In the International segment, Sleeman Breweries Ltd. in
Canada and Sapporo U.S.A., Inc., in the United States of America
aggressively implemented sales promotions in the premium beer
markets in North America. Additionally, in September we
acquired Anchor Brewing Company, LLC, in a move to acceler-
ate growth in this region. In the U.S. soft drinks market, while
sales increased at Country Pure Foods, Inc., Silver Springs Citrus,
Inc., was adversely affected by such factors as changing consumer
tastes. In Vietnam, we revised our sales promotion methods and
moved forward with efforts to improve profitability.
In the Food & Soft Drinks segment, we endeavored to
strengthen marketing and lower costs in Japan as part of our
management initiatives. We also concentrated investments on
core brands centered on soft drinks, for which we carefully
select ingredients, as well as lemon-based and soup products,
which are areas where we have a strong competitive edge.
In the Restaurants segment, we continued to open new outlets,
focusing on our core GINZA LION and YEBISU BAR formats,
while closing or changing the formats of unprofitable outlets
in a bid to improve profitability. In Singapore, we continued
with initiatives aimed at spreading the reputation of our
GINZA LION brand throughout the world.
In the Real Estate segment, we continued to enjoy high
occupancy rates at our rental properties. In addition, we pur-
sued efforts to improve the dining area of Yebisu Garden
Place, our core property, in order to enhance its property value
and the appeal of the surrounding area. GINZA PLACE,
a commercial complex conceptualized as a “base for informa-
tion dissemination and exchange,” also contributed to improv-
ing the overall performance of this segment.
In terms of the scope of consolidation, the Company had
57 consolidated subsidiaries and two equity-method affiliates
as of December 31, 2017.
Consolidated Operating Results
Net SalesNet sales increased ¥9,701 million, or 1.8% year on year, to
¥551,548 million.
In the Japanese Alcoholic Beverages segment, despite the
strong performance of beer, which was a result of efforts to
enhance our brands, and the diverse lineup of alcoholic beverage
products, sales declined as sales volumes in the happoshu and
new-genre beer categories were lower than those in the previous
fiscal year. Meanwhile, in the International segment, sales
increased due in part to a rise in the sales volume of the Sapporo
brand and contributions from the frozen fruit juice business of
Country Pure Foods. In the Food & Soft Drinks segment, a rise
in sales volumes of lemon-based and soup products in Japan
was offset by a decline in both domestic and export sales in
Singapore. As a result, sales remained at around the same level
as the previous fiscal year. Sales in the Restaurants segment grew
on the back of solid sales at existing outlets in Japan and full-
year contributions from two new subsidiaries that were consoli-
dated in June 2016—Marushinkawamura Inc. and Ginrin
Suisan Inc. In the Real Estate segment, sales increased thanks in
part to full-year contributions from GINZA PLACE, which
opened in September 2016.
1413
551,548
16 170
100,000
300,000
500,000
400,000
600,000
200,000
15
278,692
69,837
137,89829,14024,13411,845
Net Sales by Segment
Japanese Alcoholic Beverages International Food & Soft Drinks Restaurants Real Estate Other
Millions of yen
68
SAPPORO HOLDINGS LIMITED
Cost of Sales and Selling, General and Administrative ExpensesCost of sales rose ¥6,152 million, or 1.7%, year on year to
¥358,572 million, due to the impact of the rise in raw material
costs in the International segment and the depreciation of the
yen. The cost of sales ratio was 65%, the same as in the previ-
ous fiscal year, owing to improved cost of sales ratios in the
Japanese Alcoholic Beverages segment and the Food & Soft
Drinks segment, which helped offset the increase in raw mate-
rial costs in the International segment.
Selling, general and administrative (SG&A) expenses rose
¥6,784 million, or 4.0%, year on year to ¥175,943 million.
This increase was attributable mainly to increases in sales
promotion expenses and labor costs in the Japanese Alcoholic
Beverages segment.
Operating ProfitOperating profit declined ¥3,235 million, or 16.0%, year on
year to ¥17,032 million.
Profits in the Japanese Alcoholic Beverages segment were up
year on year, despite lower sales, as strong sales growth of
beer and multilayered alcoholic beverage products helped
enhance our product mix and reduce manufacturing costs. In
the International segment, robust sales of alcoholic beverages
in North America were offset by lower sales volumes at Silver
Springs Citrus and expenses related to the acquisition of
Anchor Brewing Company, with profits declining as a result.
In the Food & Soft Drinks segment, profits were down due to
such factors as lower sales in Singapore. In the Restaurants
segment, despite solid sales, profits decreased due to the rising
costs of food materials and higher labor costs, among other
factors. In the Real Estate segment, profits were up due to an
increase in rental income at core properties and full-year con-
tributions from GINZA PLACE.
Other Income (Expenses)Other income was ¥769 million, compared with other
expenses of ¥3,863 million in the previous fiscal year.
With regard to net financial income (expenses), calculated
as the sum of interest and dividend income minus interest
expenses, the Company recorded net financial expenses of
¥597 million, which was an improvement from the previous
fiscal year due to lower interest rates.
The Company recorded gain on sales of investment securi-
ties of ¥4,836 million.
On the other hand, the Company recorded foreign exchange
losses totaling ¥86 million.
Loss on retirement of non-current assets of ¥1,068 million
was recorded. This loss was attributable primarily to the reno-
vation of beer production facilities and rental properties.
Impairment loss totaling ¥3,735 million was recorded, due
mainly to a decline in the profitability of beer production
facilities in the International segment and the closing of
unprofitable outlets in the Restaurants segment.
Income Taxes and Profit Attributable to Owners of ParentIncome taxes applicable to the Company, calculated as the sum
of corporation, inhabitants and enterprise taxes, were ¥8,182
million. Income taxes accounted for 46.0% of profit before
income taxes. The difference between this percentage and the
statutory effective tax rate of 31% mainly reflects the recording
of non-deductible depreciation expenses.
As a result, profit attributable to owners of parent increased
¥1,508 million, or 15.9%, year on year to ¥10,977 million.
Financial Position
AssetsTotal assets as of December 31, 2017, stood at ¥630,630 mil-
lion, up ¥4,279 million from a year earlier. This asset growth
reflects increases in notes and accounts receivable—trade, land,
and investment securities, which offset declines related to
amortization of goodwill and long-term loans receivable.
LiabilitiesTotal liabilities came to ¥452,968 million, down ¥7,003 mil-
lion from the end of the previous fiscal year, primarily owing
to decreases in long-term loans payable and net defined benefit
liability, which outweighed increases in short-term loans pay-
able, income taxes payable, and other liability categories.
Net AssetsNet assets totaled ¥177,662 million, an increase of ¥11,282
million from the end of the previous fiscal year. This increase
primarily reflects increases in profit attributable to owners of
parent and valuation difference on other securities, which
offset factors such as an increase in loss attributable to non-
controlling interests and the payment of year-end dividends.
13
551,548
16 17(10,000)
0
20,000
30,000
10,000
(2)
0
4
6
2
15
11,822
5042,685390
4.8%
(5,728)
11,261
14
Operating Profit by Segment (Before Goodwill Amortization) /Operating Margin*
Japanese Alcoholic Beverages International Food & Soft Drinks Restaurants Real Estate Other Companywide elimination Operating margin
* Operating margin calculated as operating profit before goodwill amortization divided by net sales excluding liquor tax.
Millions of yen %
69
Integrated Report 2017
Management Indicators
The current ratio declined 0.7 of a percentage point, from 77.4% to 76.7%. This decrease reflects a rise in current assets of ¥4,669 million and an increase in current liabilities of ¥8,050 million due to factors such as an increase in short-term loans payable. The equity ratio rose from 25.7% a year earlier to 27.5%. This increase mainly reflects a rise in shareholders’ equity due to increases in profit attributable to owners of parent and valua-tion difference on other securities, which was partially out-weighed by such factors as the recording of a loss attributable to non-controlling interests and the payment of year-end dividends. Return on equity (ROE) was up from 5.9% in the previous year to 6.6% due to the year-on-year rise in profit attributable to owners of parent.
The debt-to-equity (D/E) ratio, calculated as financial liabili-ties divided by net assets, was 1.3 times due to a decline in financial liabilities from the previous fiscal year.
Analysis of Resources for Capital and Liquidity of Funds
1. Cash FlowsCash and cash equivalents (collectively, “cash”) totaled ¥12,536 million as of December 31, 2017, a ¥2,061 million, or 19.7%, increase from December 31, 2016. The following is an explanation of consolidated cash flows by category and the factors that affected cash flows in each category.
Cash Flows from Operating ActivitiesNet cash provided by operating activities was ¥30,004 million, down ¥2,566 million, or 7.9%, from the previous fiscal year. Major sources of operating cash flow included ¥23,571 million from depreciation and ¥17,801 million from profit before income taxes. The largest cash outflow was the record-ing of ¥5,595 million in income taxes paid.
Cash Flows from Investing ActivitiesNet cash used in investing activities was ¥17,822 million, which was ¥9,764 million, or 35.4%, less than in fiscal 2016. Major investment outflows included ¥13,056 million for purchases of property, plant and equipment and ¥11,622 million for the purchase of subsidiaries’ shares resulting in change in scope of consolidation.
Cash Flows from Financing ActivitiesNet cash used in financing activities came to ¥10,171 million, up ¥5,344 million, or 110.7%, compared with net cash used in the previous fiscal year. The main inflows from financing activities included ¥12,500 million in proceeds from long-term loans payable and ¥9,960 million in proceeds from the issuance of bonds. These inflows were more than offset by outflows including ¥12,603 million for the repayment of long-term loans payable and ¥10,083 million for the redemption of bonds.
Management’s Discussion and Analysis
1413
551,548
16 170
2,000
6,000
10,000
8,000
12,000
4,000
0
2
6
10
8
12
4
15
10,977
6.6%
8.9%
Profit Attributable to Owners of Parent / ROE
Profit attributable to owners of parent ROE (before goodwill amortization) ROE
Millions of yen %
13
551,548
16 170
50,000
150,000
200,000
250,000
100,000
0
0.8
1.6
1.2
2.0
0.4
15
1.3
233,588
14
Financial Liabilities (Gross) / D/E Ratio
Financial liabilities (gross) D/E ratio
Millions of yen Times
13
551,548
16 17(30,000)
(20,000)
0
20,000
30,000
10,000
40,000
(10,000)
15
(10,171)
(17,822)
12,182
30,004
14
Cash Flows
Cash flows from operating activities Cash flows from investing activities Cash flows from financing activities Free cash flow
Millions of yen
70
SAPPORO HOLDINGS LIMITED
2. Liquidity of FundsThe Sapporo Group has introduced a cash management system (CMS) that enables Sapporo Holdings to centrally manage fund allocation within the Group in Japan. The concentration at the Company of cash flows generated by individual Group companies helps preserve fund liquidity, while flexible and efficient fund allocation within the Group serves to minimize financial liabilities.
3. Procurement of FundsThe Company strives to secure fund procurement channels and liquidity to ensure that there are sufficient funds to cover present and future operating activities, as well as the repayment of debts and other funding needs. The necessary funds are procured mainly from cash flows from operating activities and loans, primarily from financial institutions.
Outlook for Fiscal 2018
In 2018, the second year of the Sapporo Group Long-Term Management Vision “SPEED150” and the First Medium-Term Management Plan 2020, we will redouble our efforts to provide distinctive products and services worldwide in our three core busi-ness areas—“Alcoholic Beverages,” “Food,” and “Soft Drinks”—and expand contact points with customers as we strive to achieve robust growth going forward.
In addition, from fiscal 2018 we have decided to voluntarily apply International Financial Reporting Standards (IFRS) to our con-solidated financial statements. Accordingly, business forecasts for fiscal 2018 were determined on an IFRS basis. The voluntary application of IFRS results in certain types of rebates on product sales being excluded from revenue, which in turn results in revenue on an IFRS basis being less than on the Japanese GAAP basis used until now. Operating profit, meanwhile, is positively affected (increased) by the exclusion of amortization of goodwill, a requirement under Japanese GAAP, but negatively affected (decreased) by the reclassification of income statement line items, changes in the method for calculating retirement benefit expenses, and other accounting changes.
Overall Forecasts
(Millions of yen) Revenue Operating profit Profit before tax Profit attributable to owners of parent
Fiscal 2018 forecast 555,800 18,700 17,700 11,100
Fiscal 2017 result 551,548 17,032 17,801 10,977
Difference (%) 0.8 9.8 (0.6) 1.1
Forecast by Segment
(Millions of yen)Revenue Operating profit
Fiscal 2017 result Fiscal 2018 forecast Difference (%) Fiscal 2017 result Fiscal 2018 forecast Difference (%)
Japanese Alcoholic
Beverages
278,692 272,500 (2.2) 11,767 10,500 (10.8)
International 69,837 81,900 17.3 (1,214) 1,400 —
Food & Soft
Drinks
137,898 135,600 (1.7) 564 3,600 538.2
Restaurants 29,140 28,800 (1.2) 330 100 (69.8)
Real Estate 24,134 24,900 3.2 11,261 10,500 (6.8)
71
Integrated Report 2017
Consolidated Balance SheetsDecember 31, 2015, 2016 and 2017
Millions of yen
Thousands of U.S. dollars
2015 2016 2017 2017
Assets
Current assets
Cash and deposits ¥ 10,430 ¥ 10,589 ¥ 12,717 $ 112,497
Notes and accounts receivable—trade 92,335 96,850 98,604 872,221
Merchandise and finished goods 24,912 24,657 24,681 218,319
Raw materials and supplies 13,722 13,315 13,638 120,638
Deferred tax assets 4,457 3,639 3,900 34,499
Other 10,570 15,213 15,413 136,340
Allowance for doubtful accounts (64) (82) (103) (912)
Total current assets 156,364 164,183 168,852 1,493,604
Non-current assets
Property, plant and equipment
Buildings and structures 383,087 393,022 395,836 3,501,426
Accumulated depreciation (213,567) (220,233) (224,311) (1,984,177)
Buildings and structures, net 169,519 172,788 171,524 1,517,248
Machinery, equipment and vehicles 227,534 231,559 230,812 2,041,686
Accumulated depreciation (183,165) (187,660) (188,393) (1,666,457)
Machinery, equipment and vehicles, net 44,368 43,898 42,419 375,228
Land 105,121 111,636 113,041 999,924
Leased assets 15,498 16,970 15,081 133,403
Accumulated depreciation (7,739) (7,694) (7,131) (63,083)
Leased assets, net 7,758 9,276 7,949 70,320
Construction in progress 6,637 3,694 4,363 38,597
Other 18,487 17,731 17,822 157,648
Accumulated depreciation (14,850) (13,529) (13,358) (118,160)
Other, net 3,636 4,201 4,464 39,487
Total property, plant and equipment 337,042 345,495 343,763 3,040,807
Intangible assets
Goodwill 30,235 27,439 26,948 238,373
Other 10,743 10,511 13,575 120,082
Total intangible assets 40,978 37,950 40,523 358,456
Investments and other assets
Investment securities 61,848 59,296 62,145 549,718
Long-term loans receivable 9,016 4,789 427 3,785
Deferred tax assets 1,009 1,070 1,306 11,556
Other 15,362 14,760 14,827 131,161
Allowance for doubtful accounts (1,234) (1,195) (1,216) (10,756)
Total investments and other assets 86,002 78,721 77,491 685,465
Total non-current assets 464,023 462,168 461,778 4,084,729
Total assets ¥ 620,388 ¥ 626,351 ¥ 630,630 $ 5,578,334
The U.S. dollar amounts represent the Japanese yen exchange rate against the U.S. dollar as of December 31, 2017 ($1 = ¥113.05).
72
SAPPORO HOLDINGS LIMITED
Millions of yen
Thousands of U.S. dollars
2015 2016 2017 2017
Liabilities
Current liabilities
Notes and accounts payable—trade ¥ 36,772 ¥ 38,503 ¥ 36,530 $ 323,133
Short-term loans payable 65,822 30,337 37,882 335,090
Commercial papers 17,000 33,000 32,000 283,060
Current portion of bonds 10,000 10,083 10,068 89,059
Lease obligations 2,932 3,024 2,690 23,803
Accrued alcohol tax 33,903 34,228 34,408 304,361
Income taxes payable 6,114 1,680 5,202 46,018
Provision for bonuses 2,219 2,980 3,089 27,332
Deposits received 8,824 8,214 7,817 69,148
Other 50,054 50,071 50,484 446,567
Total current liabilities 233,643 212,123 220,173 1,947,575
Non-current liabilities
Bonds payable 50,000 50,128 50,060 442,818
Long-term loans payable 91,919 114,593 103,578 916,214
Lease obligations 5,353 6,968 5,960 52,721
Deferred tax liabilities 21,216 18,804 21,292 188,345
Net defined benefit liability 7,636 8,995 5,492 48,589
Guarantee deposits received 32,833 33,241 31,086 274,979
Other 13,963 15,115 15,323 135,550
Total non-current liabilities 222,921 247,847 232,794 2,059,218
Total liabilities 456,565 459,971 452,968 4,006,794
Net assets
Shareholders’ equity
Capital stock 53,886 53,886 53,886 476,662
Capital surplus 45,913 46,089 46,090 407,702
Retained earnings 35,189 41,932 50,022 442,481
Treasury shares (1,595) (1,795) (1,806) (15,981)
Total shareholders’ equity 133,394 140,112 148,193 1,310,865
Accumulated other comprehensive income
Valuation difference on other securities 23,926 22,517 25,951 229,556
Deferred gains or losses on hedges (11) 41 (6) (55)
Foreign currency translation adjustment (1,255) (1,943) (818) (7,241)
Remeasurements of defined benefit plans 1,874 (41) 148 1,309
Total accumulated other comprehensive income 24,533 20,574 25,274 223,569
Non-controlling interests 5,894 5,693 4,194 37,105
Total net assets 163,822 166,380 177,662 1,571,539
Total liabilities and net assets ¥620,388 ¥626,351 ¥630,630 $5,578,334
73
Integrated Report 2017
Consolidated Statements of Income and Consolidated Statements of Comprehensive IncomeThree years ended December 31
Consolidated Statements of Income
Millions of yen
Thousands of U.S. dollars
2015 2016 2017 2017
Net sales ¥533,748 ¥541,847 ¥551,548 $4,878,803
Cost of sales 352,808 352,420 358,572 3,171,805
Gross profit 180,940 189,426 192,976 1,706,997
Selling, general and administrative expenses 166,990 169,159 175,943 1,556,334
Operating profit 13,950 20,267 17,032 150,663
Other income (expenses):
Interest income 252 231 164 1,453
Dividend income 1,123 1,111 1,162 10,282
Interest expenses (2,279) (2,142) (1,924) (17,021)
Share of profit of entities accounted for using equity method 17 15 19 170
Gain on sales of non-current assets 7,453 45 1,977 17,491
Loss on sales of non-current assets (24) (26) (38) (340)
Loss on retirement of non-current assets (1,534) (1,413) (1,068) (9,452)
Impairment loss (5,956) (1,018) (3,735) (33,043)
Gain on sales of investment securities 46 13 4,836 42,778
Gain on valuation of derivatives 468 — — —
Loss on valuation of derivatives — (252) (73) (652)
Foreign exchange losses (537) (217) (86) (767)
Gain on sales of shares of subsidiaries and associates 72 — — —
Subsidy income 322 — — —
Loss on valuation of investment securities (1,758) (22) (273) (2,415)
Compensation expenses (142) (376) (307) (2,716)
Other, net 217 188 117 1,035
Other income (expenses), net (2,259) (3,863) 769 6,803
Profit before income taxes 11,690 16,403 17,801 157,466
Income taxes—current 7,409 6,185 8,243 72,923
Income taxes—deferred (1,830) 838 (61) (543)
Total income taxes 5,578 7,023 8,182 72,379
Profit 6,112 9,380 9,619 85,087
Profit (loss) attributable to non-controlling interests 3 (89) (1,358) (12,018)
Profit attributable to owners of parent ¥ 6,108 ¥ 9,469 ¥ 10,977 $ 97,105
The U.S. dollar amounts represent the Japanese yen exchange rate against the U.S. dollar as of December 31, 2017 ($1 = ¥113.05).
Consolidated Statements of Comprehensive Income
Millions of yen
Thousands of U.S. dollars
2015 2016 2017 2017
Profit ¥ 6,112 ¥ 9,380 ¥ 9,619 $ 85,087
Other comprehensive income
Valuation difference on other securities 3,819 (1,408) 3,416 30,218
Deferred gains or losses on hedges (17) 52 (60) (533)
Foreign currency translation adjustment (3,767) (896) 1,019 9,016
Remeasurements of defined benefit plans, net of tax 1,434 (1,915) 189 1,675
Total other comprehensive income 1,467 (4,168) 4,564 40,377
Comprehensive income ¥ 7,579 ¥ 5,211 ¥14,183 $125,464
Comprehensive income attributable to
Comprehensive income attributable to owners of parent ¥ 7,506 ¥ 5,509 ¥15,677 $138,681
Comprehensive income attributable to non-controlling interests 73 (298) (1,494) (13,216)
The U.S. dollar amounts represent the Japanese yen exchange rate against the U.S. dollar as of December 31, 2017 ($1 = ¥113.05).
74
SAPPORO HOLDINGS LIMITED
Consolidated Statements of Changes in Net AssetsThree years ended December 31
Millions of yen
Thousands of U.S. dollars
2015 2016 2017 2017
Shareholders’ equity
Capital stock:
Cumulative effects of changes in accounting policies ¥ — ¥ — ¥ — $ —
Restated balance of current period 53,886 53,886 53,886 476,662
Changes of items during period — — — —
Balance at end of current period ¥ 53,886 ¥ 53,886 ¥ 53,886 $ 476,662
Capital surplus:
Cumulative effects of changes in accounting policies ¥ — ¥ — ¥ — $ —
Restated balance of current period 45,912 45,913 46,089 407,691
Disposal of treasury shares 1 175 1 11
Balance at end of current period ¥ 45,913 ¥ 46,089 ¥ 46,090 $ 407,702
Retained earnings:
Cumulative effects of changes in accounting policies ¥ (3,105) ¥ — ¥ — $ —
Restated balance of current period 31,808 35,189 41,932 370,919
Profit attributable to owners of parent 6,108 9,469 10,977 97,105
Dividends of surplus (2,727) (2,726) (2,887) (25,543)
Balance at end of current period ¥ 35,189 ¥ 41,932 ¥ 50,022 $ 442,481
Treasury shares:
Cumulative effects of changes in accounting policies ¥ — ¥ — ¥ — $ —
Restated balance of current period (1,544) (1,595) (1,795) (15,883)
Purchase of treasury shares (54) (471) (17) (151)
Disposal of treasury shares 3 271 6 54
Balance at end of current period (1,595) (1,795) (1,806) (15,981)
Total shareholders’ equity ¥133,394 ¥140,112 ¥148,193 $1,310,865
Accumulated other comprehensive income
Valuation difference on other securities:
Cumulative effects of changes in accounting policies ¥ — ¥ — ¥ — $ —
Restated balance of current period 20,112 23,926 22,517 199,184
Net changes of items other than shareholders’ equity 3,813 (1,408) 3,433 30,371
Balance at end of current period ¥ 23,926 ¥ 22,517 ¥ 25,951 $ 229,556
Deferred gains or losses on hedges:
Cumulative effects of changes in accounting policies ¥ — ¥ — ¥ — $ —
Restated balance of current period (0) (11) 41 366
Net changes of items other than shareholders’ equity (11) 52 (47) (421)
Balance at end of current period ¥ (11) ¥ 41 ¥ (6) $ (55)
Foreign currency translation adjustment:
Cumulative effects of changes in accounting policies ¥ — ¥ — ¥ — $ —
Restated balance of current period 2,582 (1,255) (1,943) (17,191)
Net changes of items other than shareholders’ equity (3,838) (687) 1,124 9,950
Balance at end of current period ¥ (1,255) ¥ (1,943) ¥ (818) $ (7,241)
Remeasurements of defined benefit plans:
Cumulative effects of changes in accounting policies ¥ — ¥ — ¥ — $ —
Restated balance of current period 440 1,874 (41) (365)
Net changes of items other than shareholders’ equity 1,434 (1,915) 189 1,675
Balance at end of current period 1,874 (41) 148 1,309
Total accumulated other comprehensive income ¥ 24,533 ¥ 20,574 ¥ 25,274 $ 223,569
Non-controlling interests
Cumulative effects of changes in accounting policies ¥ — ¥ — ¥ — $ —
Restated balance of current period 3,700 5,894 5,693 50,363
Net changes of items other than shareholders’ equity 2,193 (200) (1,498) (13,258)
Balance at end of current period 5,894 5,693 4,194 37,105
Total net assets ¥163,822 ¥166,380 ¥177,662 $1,571,539
The U.S. dollar amounts represent the Japanese yen exchange rate against the U.S. dollar as of December 31, 2017 ($1 = ¥113.05).
75
Integrated Report 2017
Consolidated Statements of Cash FlowsThree years ended December 31
Millions of yen
Thousands of U.S. dollars
2015 2016 2017 2017Cash flows from operating activities Profit before income taxes ¥ 11,690 ¥ 16,403 ¥ 17,801 $ 157,466
Depreciation 24,224 22,341 23,571 208,502
Impairment loss 5,956 1,018 3,735 33,043
Amortization of goodwill 4,153 3,920 3,954 34,980
Increase (decrease) in net defined benefit liability 446 (1,720) (3,229) (28,568)
Increase (decrease) in allowance for doubtful accounts (137) (53) 34 307
Interest and dividend income (1,376) (1,342) (1,326) (11,735)
Interest expenses 2,279 2,142 1,924 17,021
Loss (gain) on sales of non-current assets (7,453) (45) (1,977) (17,491)
Loss (gain) on sales and retirement of non-current assets 1,559 1,440 1,107 9,792
Loss (gain) on sales of investment securities (46) (13) (4,836) (42,778)
Loss (gain) on valuation of investment securities 1,758 22 273 2,415
Decrease (increase) in notes and accounts receivable—trade (2,779) (3,756) (1,152) (10,197)
Decrease (increase) in inventories (1,211) 968 196 1,734
Increase (decrease) in notes and accounts payable—trade (202) 1,608 (2,336) (20,670)
Increase (decrease) in accrued consumption taxes (3,057) (807) 291 2,576
Increase (decrease) in accrued alcohol tax 457 338 131 1,166
Increase (decrease) in deposits received (729) (623) (401) (3,553)
Increase (decrease) in guarantee deposits received 496 350 (2,155) (19,065)
Increase (decrease) in other current liabilities 376 173 316 2,802
Other, net (447) 1,999 (425) (3,766)
Subtotal 35,957 44,364 35,495 313,983
Interest and dividend income received 1,380 1,359 1,382 12,232
Interest expenses paid (2,384) (2,190) (1,963) (17,368)
Income taxes paid (2,944) (10,986) (5,595) (49,499)
Income taxes refund 3,257 22 685 6,063
Net cash provided by (used in) operating activities 35,265 32,570 30,004 265,411
Cash flows from investing activities Purchase of property, plant and equipment (18,298) (19,748) (13,056) (115,491)
Proceeds from sales of property, plant and equipment 19,563 428 3,085 27,296
Purchase of intangible assets (2,041) (2,060) (2,197) (19,435)
Purchase of investment securities (875) (235) (1,020) (9,026)
Proceeds from sales and redemption of investment securities 511 137 8,278 73,226
Purchase of shares of subsidiaries and associates (3,260) (154) (298) (2,637)
Proceeds from sales of shares of subsidiaries and associates 1,794 — — —
Purchase of shares of subsidiaries resulting in change in scope of consolidation (3,989) (438) (11,622) (102,810)
Payments for transfer of business — (1,493) — —
Increase in long-term loans receivable (304) (77) (68) (605)
Collection of long-term loans receivable 417 167 4,265 37,735
Other, net (3,273) (4,112) (5,189) (45,905)
Net cash provided by (used in) investing activities (9,755) (27,586) (17,822) (157,655)
Cash flows from financing activities Net increase (decrease) in short-term loans payable (3,366) (1,248) (3,076) (27,210)
Net increase (decrease) in commercial papers (13,000) 16,000 (1,000) (8,845)
Proceeds from long-term loans payable 14,319 32,746 12,500 110,570
Repayments of long-term loans payable (16,625) (46,594) (12,603) (111,481)
Proceeds from issuance of bonds 9,960 9,960 9,960 88,102
Redemption of bonds (12,000) (10,016) (10,083) (89,192)
Cash dividends paid (2,730) (2,730) (2,893) (25,590)
Dividends paid to non-controlling interests (28) (9) (19) (174)
Repayments of finance lease obligations (3,039) (2,910) (2,946) (26,066)
Purchase of treasury shares (56) (471) (17) (151)
Proceeds from sales of treasury shares 4 447 7 65
Proceeds from share issuance to non-controlling shareholders 1,760 — — —
Net cash provided by (used in) financing activities (24,802) (4,827) (10,171) (89,974)
Effect of exchange rate change on cash and cash equivalents (56) (79) 50 450
Net increase (decrease) in cash and cash equivalents 651 76 2,061 18,232
Cash and cash equivalents at beginning of period 9,748 10,399 10,475 92,663
Cash and cash equivalents at end of period ¥ 10,399 ¥ 10,475 ¥ 12,536 $ 110,895
The U.S. dollar amounts represent the Japanese yen exchange rate against the U.S. dollar as of December 31, 2017 ($1 = ¥113.05).
76
SAPPORO HOLDINGS LIMITED
List of Group Companies
■ Consolidated subsidiary ● Equity-method affiliate
Company Name Business Lines
Japanese Alcoholic Beverages
■ SAPPORO BREWERIES LIMITED Manufacture and sale of beer, wine and other alcoholic beverages
■ YEBISU WINEMART CO., LTD. Sale of alcoholic beverages, foods, and sundries
■ TANOSHIMARU SHUZO CO., LTD. Manufacture and sale of shochu
■ STARNET CO., LTD. In-store merchandising/draft beer quality improvement
■ SHINSEIEN CO., LTD. Operation of restaurants
● KEIYO UTILITY CO., LTD. Comprehensive management service for Keiyo combinat
International ■ SAPPORO INTERNATIONAL INC. Manage international liquor subsidiaries; others
■ SAPPORO NORTH AMERICA INC. Overseas Alcoholic Beverages subsidiary holding companies
■ SAPPORO U.S.A., INC. Sale of beer
■ ANCHOR BREWING COMPANY, LLC Manufacture and sale of beer
■ SAPPORO CANADA INC. Overseas Alcoholic Beverages subsidiary holding companies
■ SLEEMAN BREWERIES LTD. Manufacture and sale of beer
■ SAPPORO ASIA PRIVATE LIMITED Overseas Alcoholic Beverages subsidiary holding companies
■ SAPPORO VIETNAM LIMITED Manufacture and sale of beer
■ COUNTRY PURE FOODS, INC. Manufacture and sale of chilled beverages
13 other companies
Food & Soft Drinks ■ POKKA SAPPORO FOOD & BEVERAGE LTD. Beverage & food businesses, restaurant business, etc.
■ POKKA SAPPORO HOKKAIDO LTD. Sale and marketing of beverages and foods
■ OKINAWA POKKA CORPORATION CO., LTD. Sale and marketing of beverages and foods
■ POKKA CREATE CO., LTD. Operation of café chain
■ FOREMOST BLUE SEAL, LTD. Manufacture and sale of ice cream; operation of restaurants
■ PS BEVERAGE LTD. Operation of vending machines; tea dispenser business
■ PUBLIC VENDING SERVICE LTD. Operation of vending machines
■ OKINAWA SUN POKKA CO., LTD. Operation of vending machines
■ STAR BEVERAGE SERVICE CO., LTD. Operation of vending machines
■ IWATA POKKA FOODS CO., LTD. Manufacture of foods
■ OKINAWA POKKA FOODS CO., LTD. Manufacture of beverages and foods
■ POKKA CORPORATION (SINGAPORE) PTE. LTD. Manufacture and sale of beverages
■ POKKA INTERNATIONAL PTE. LTD. Sale and marketing of beverages
■ POKKA (MALAYSIA) SDN. BHD. Manufacture and sale of beverages
■ POKKA ACE (M) SDN. BHD. Manufacture and sale of beverages
■ PT. POKKA DIMA INTERNATIONAL Manufacture and sale of beverages
1 other company
Restaurants ■ SAPPORO LION LIMITED Operation of restaurants
■ NEW SANKO INC. Operation of restaurants
■ MARUSHINKAWAMURA. INC. Operation of restaurants
■ GINRIN SUISAN. INC. Sale of fresh fish, operation of restaurants
■ SAPPORO LION (SINGAPORE) PTE. LTD. Operation of restaurants; manufacture and sale of fresh cakes and patisseries
Real Estate ■ SAPPORO REAL ESTATE CO., LTD. Leasing and rental of real estate, real estate development, operation of restaurants
■ YGP REAL ESTATE CO., LTD. Sale of real estate, rental management for real estate
■ TOKYO ENERGY SERVICE CO., LTD. Utility services
■ YOKOHAMA KEIWA BUILDING CO., LTD. Real estate rental
● THE CLUB AT YEBISU GARDEN CO., LTD. Real estate rental
Other Companies ■ SAPPORO GROUP MANAGEMENT LTD. Acts in a corporate capacity for the Sapporo Group and handles Groupwide operational tasks
■ SAPPORO GROUP LOGISTICS CO., LTD. Consigned freight forwarding, cargo handling, and ware-housing; packaging and distribution processing, etc.
■ SAPPORO LOGISTICS SYSTEMS CO., LTD. Freight forwarding, cargo handling, and warehousing; distribution processing, etc.
■ SHINSYU-ICHI MISO CO., LTD. Manufacture and sale of miso, instant miso soup, and freeze-dried products
Consolidated subsidiaries: 57, equity-method affiliates: 2
As of December 31, 2017
77
Integrated Report 2017
Corporate Data
Corporate Information Stock Information
Trends in Stock Price and Volume
Breakdown of Shareholders by Investor Type
Company Name SAPPORO HOLDINGS LIMITED
Business Holding company
Date of Establishment September 1, 1949
Head Office 20-1, Ebisu 4-chome, Shibuya-ku, Tokyo 150-8522, Japan
Capital ¥53,886 million
Fiscal Year-End Date December 31 on an annual basis
Number of Employees 7,902 (Consolidated) 187 (Parent company)
Total Number of Authorized Shares
200,000,000
Total Number of Issued Shares
78,794,298
Number of Shareholders 53,667
Securities Traded Tokyo Stock Exchange, First SectionSapporo Securities Exchange(Securities Code: 2501)
Shareholder Register Manager
Mizuho Trust & Banking Co., Ltd.
Major Shareholders
Name of ShareholderNumber of
Shares (Thousands)
Percentage (%)
The Master Trust Bank of Japan, Ltd. 4,916 6.30
Japan Trustee Services Bank, Ltd. 3,362 4.31
STATE STREET BANK AND TRUST COMPANY 505001 2,546 3.26
Trust & Custody Services Bank, Ltd., as retirement benefit trust
assets Mizuho Trust and Banking Co., Ltd.2,442 3.13
Nippon Life Insurance Company 2,237 2.87
Meiji Yasuda Life Insurance Company 2,236 2.87
The Norinchukin Bank 1,875 2.40
Mizuho Bank, Ltd. 1,806 2.32
Marubeni Corporation 1,649 2.11
Trust & Custody Services Bank, Ltd., as trustee for Mizuho Bank Ltd.
Retirement Benefit Trust Account re-entrusted by
Mizuho Trust and Banking Co., Ltd.
1,594 2.04
150 20,000
125 15,000
100 10,000
75
0 0
5,000
2015 2016 2017
*1 The stock prices of Sapporo Holdings and TOPIX are indexed with the closing price data of December 2014 set at 100.*2 Stock prices have been adjusted to reflect the impact of the stock consolidation.
Note: Shareholding ratios are calculated after deduction of treasury stock (752,472).
● Japanese financial institutions 32,259 thousand
● Foreign institutions and individuals 16,230 thousand
● Japanese individuals 15,570 thousand
● Japanese corporations 12,815 thousand
● Japanese securities firms 1,166 thousand
● Treasury stock 752 thousand
0.95%
40.94%
20.60%
19.76%
16.26%
1.48%
Sapporo Holdings TOPIX Volume (thousand)
As of December 31, 2017
78
SAPPORO HOLDINGS LIMITED
Website InformationFor further details (activities by each business,
financial and non-financial data, CSR, governance
information, etc.), please visit our Company website.
Investor Relations
http://www.sapporoholdings.jp/english/ir/index.html
CSR
http://www.sapporoholdings.jp/english/csr/index.html
Outside Evaluations
Included in SRI Indices
• FTSE4Good Global Index (FTSE Russell, the United Kingdom)
• FTSE Blossom Japan Index (FTSE Russell, the United Kingdom)
• MSCI Japan ESG Select Leaders Index (MSCI Inc., the United States)
• SNAM Sustainability Index (Sompo Japan Nipponkoa Asset Management, Japan)
Major Evaluations and Awards for Our R&D Activities • Best Poster Award at the 36th European Brewery Convention Title: Identification of geranic acid* contributing to the varietal
aroma of Sorachi Ace and synergy with other hop-derived flavor compounds.
* Geranic acid is an organic compound found in citrus and wine and produces a woody- and lemongrass-like aroma.
• Industrial Award for Food Immunization from the Japanese Association for Food Immunology
Reason for receiving award: Verified the allergy prevention proper-ties of hops and the anti-inflammatory properties of Lactobacillus brevis SBC8803 through fundamental research and undertook clinical studies to pave the way for the practical application of the effects of these materials.
• The Brewing Society of Japan Technology Award from the Brewing Society of Japan
Title: Beer proteome analysis for improvement of foam quality, and its application to malting barley breeding.
• Topics Award from the Japan Society for Bioscience, Biotechnology, and Agrochemistry
Identification and characterization of unique flavor compounds contributing to the specific flavor of the Japanese hop Sorachi Ace.
• Human Communication Award from the Institute of Electronics, Information and Communication Engineers
Title: Interaction among sweetness, sourness, and lemon flavor on sensory evaluation of lemon-flavor beverages.
• Award of Excellence from the Japan Transporter Research Association
Title: Xanthohumol, a hop-derived prenylated flavonoid, promotes urate excretion from the intestine.
79
Integrated Report 2017
SAPPORO HOLDINGS LIMITED20-1, Ebisu 4-chome, Shibuya-ku, Tokyo 150-8522, Japan
http://www.sapporoholdings.jp/english/ Printed in Japan
Contents
1. Consolidated Financial Statements: P.1~
2. Notes to the Consolidated Financial Statements: P.9~
3. Independent Auditor's Report: P.77
Financial Section 2017
- 1 -
1. Consolidated Financial Statements(1) Consolidated Financial Statements
i) Consolidated Balance Sheets
(Millions of yen) (Thousands of U.S. dollars)
As of December 31,
2015 December 31,
2016 December 31,
2017 December 31,
2017
Assets Current assets
Cash and deposits (Note 4) 10,430 10,589 12,717 112,497 Notes and accounts receivable – trade (Note 2)
92,335 96,850 98,604 872,221
Merchandise and finished goods (Note 4) 24,912 24,657 24,681 218,319 Raw materials and supplies (Note 4) 13,722 13,315 13,638 120,638 Deferred tax assets 4,457 3,639 3,900 34,499 Other 10,570 15,213 15,413 136,340Allowance for doubtful accounts (64) (82) (103) (912)
Total current assets 156,364 164,183 168,852 1,493,604
Non-current assets Property, plant and equipment
Buildings and structures (Notes 3 and 4)
383,087 393,022 395,836 3,501,426
Accumulated depreciation (213,567) (220,233) (224,311) (1,984,177)
Buildings and structures, net 169,519 172,788 171,524 1,517,248
Machinery, equipment and vehicles 227,534 231,559 230,812 2,041,686 Accumulated depreciation (183,165) (187,660) (188,393) (1,666,457)
Machinery, equipment and vehicles, net
44,368 43,898 42,419 375,228
Land (Notes 3 and 4) 105,121 111,636 113,041 999,924 Leased assets 15,498 16,970 15,081 133,403
Accumulated depreciation (7,739) (7,694) (7,131) (63,083)
Leased assets, net 7,758 9,276 7,949 70,320
Construction in progress 6,637 3,694 4,363 38,597 Other 18,487 17,731 17,822 157,648
Accumulated depreciation (14,850) (13,529) (13,358) (118,160)
Other, net 3,636 4,201 4,464 39,487
Total property, plant and equipment 337,042 345,495 343,763 3,040,807
Intangible assetsGoodwill 30,235 27,439 26,948 238,373Other 10,743 10,511 13,575 120,082
Total intangible assets 40,978 37,950 40,523 358,456
Investments and other assets Investment securities (Notes 1 and 4) 61,848 59,296 62,145 549,718 Long-term loans receivable 9,016 4,789 427 3,785 Deferred tax assets 1,009 1,070 1,306 11,556 Other (Notes 1 and 4) 15,362 14,760 14,827 131,161 Allowance for doubtful accounts (1,234) (1,195) (1,216) (10,756)
Total investments and other assets 86,002 78,721 77,491 685,465
Total non-current assets 464,023 462,168 461,778 4,084,729
Total assets 620,388 626,351 630,630 5,578,334
The accompanying notes to consolidated financial statements are an integral part of these statements.
- 2 -
(Millions of yen) (Thousands of
U.S. dollars)
As of December 31,
2015 December 31,
2016 December 31,
2017
December 31, 2017
Liabilities Current liabilities
Notes and accounts payable – trade (Note 2)
36,772 38,503 36,530 323,133
Short-term loans payable (Note 4) 65,822 30,337 37,882 335,090 Commercial papers 17,000 33,000 32,000 283,060 Current portion of bonds 10,000 10,083 10,068 89,059 Lease obligations 2,932 3,024 2,690 23,803 Accrued alcohol tax 33,903 34,228 34,408 304,361 Income taxes payable 6,114 1,680 5,202 46,018 Provision for bonuses 2,219 2,980 3,089 27,332 Deposits received 8,824 8,214 7,817 69,148 Other 50,054 50,071 50,484 446,567
Total current liabilities 233,643 212,123 220,173 1,947,575
Non-current liabilities Bonds payable 50,000 50,128 50,060 442,818 Long-term loans payable (Note 4) 91,919 114,593 103,578 916,214 Lease obligations 5,353 6,968 5,960 52,721 Deferred tax liabilities 21,216 18,804 21,292 188,345 Net defined benefit liability 7,636 8,995 5,492 48,589 Guarantee deposits received 32,833 33,241 31,086 274,979 Other 13,963 15,115 15,323 135,550
Total non-current liabilities 222,921 247,847 232,794 2,059,218
Total liabilities 456,565 459,971 452,968 4,006,794
Net assets Shareholders’ equity
Capital stock 53,886 53,886 53,886 476,662 Capital surplus 45,913 46,089 46,090 407,702 Retained earnings 35,189 41,932 50,022 442,481 Treasury shares (1,595) (1,795) (1,806) (15,981)
Total shareholders’ equity 133,394 140,112 148,193 1,310,865
Accumulated other comprehensive income Valuation difference on other securities 23,926 22,517 25,951 229,556 Deferred gains or losses on hedges (11) 41 (6) (55)Foreign currency translation adjustment (1,255) (1,943) (818) (7,241)Remeasurements of defined benefit plans
1,874 (41) 148 1,309
Total accumulated other comprehensive income
24,533 20,574 25,274 223,569
Non-controlling interests 5,894 5,693 4,194 37,105
Total net assets 163,822 166,380 177,662 1,571,539
Total liabilities and net assets 620,388 626,351 630,630 5,578,334
The accompanying notes to consolidated financial statements are an integral part of these statements.
- 3 -
ii) Consolidated Statements of Income and Consolidated Statements of Comprehensive Income
Consolidated Statements of Income
(Millions of yen) (Thousands of
U.S. dollars)
For the fiscal year ended December 31,
2015 December 31,
2016 December 31,
2017
December 31, 2017
Net sales 533,748 541,847 551,548 4,878,803 Cost of sales (Notes 1 and 3) 352,808 352,420 358,572 3,171,805
Gross profit 180,940 189,426 192,976 1,706,997 Selling, general and administrative expenses (Notes 2 and 3)
166,990 169,159 175,943 1,556,334
Operating profit 13,950 20,267 17,032 150,663
Other income (expenses): Interest income 252 231 164 1,453 Dividend income 1,123 1,111 1,162 10,282 Interest expenses (2,279) (2,142) (1,924) (17,021)Share of profit of entities accounted for using equity method
17 15 19 170
Gain on sales of non-current assets (Note 4) 7,453 45 1,977 17,491 Loss on sales of non-current assets (Note 5) (24) (26) (38) (340)Loss on retirement of non-current assets (Note 6)
(1,534) (1,413) (1,068) (9,452)
Impairment loss (Note 7) (5,956) (1,018) (3,735) (33,043)Gain on sales of investment securities 46 13 4,836 42,778 Gain on valuation of derivatives 468 – – – Loss on valuation of derivatives – (252) (73) (652)Foreign exchange losses (537) (217) (86) (767)Gain on sales of shares of subsidiaries and associates
72 – – –
Subsidy income 322 – – – Loss on valuation of investment securities (1,758) (22) (273) (2,415)Compensation expenses (142) (376) (307) (2,716)Other, net 217 188 117 1,035
Other income (expenses), net (2,259) (3,863) 769 6,803
Profit before income taxes 11,690 16,403 17,801 157,466
Income taxes - current 7,409 6,185 8,243 72,923 Income taxes – deferred (1,830) 838 (61) (543)
Total income taxes 5,578 7,023 8,182 72,379
Profit 6,112 9,380 9,619 85,087 Profit (loss) attributable to non-controlling interests
3 (89) (1,358) (12,018)
Profit attributable to owners of parent 6,108 9,469 10,977 97,105
The accompanying notes to consolidated financial statements are an integral part of these statements.
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Consolidated Statements of Comprehensive Income
(Millions of yen) (Thousands of
U.S. dollars)
For the fiscal year ended December 31,
2015 December 31,
2016 December 31,
2017
December 31, 2017
Profit 6,112 9,380 9,619 85,087Other comprehensive income
Valuation difference on other securities 3,819 (1,408) 3,416 30,218Deferred gains or losses on hedges (17) 52 (60) (533)Foreign currency translation adjustment (3,767) (896) 1,019 9,016Remeasurements of defined benefit plans, net of tax
1,434 (1,915) 189 1,675
Total other comprehensive income (Note 1) 1,467 (4,168) 4,564 40,377
Comprehensive income 7,579 5,211 14,183 125,464
Comprehensive income attributable to Comprehensive income attributable to owners of parent
7,506 5,509 15,677 138,681
Comprehensive income attributable to non-controlling interests
73 (298) (1,494) (13,216)
The accompanying notes to consolidated financial statements are an integral part of these statements.
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iii) Consolidated Statements of Changes in Net Assets
(Millions of yen) (Thousands of
U.S. dollars)
For the fiscal year ended December 31,
2015 December 31,
2016 December 31,
2017
December 31, 2017
Shareholders’ equity
Capital stock:
Cumulative effects of changes in accounting policies
– – – –
Restated balance of current period 53,886 53,886 53,886 476,662
Changes of items during period – – – –
Balance at end of current period 53,886 53,886 53,886 476,662
Capital surplus:
Cumulative effects of changes in accounting policies
– – – –
Restated balance of current period 45,912 45,913 46,089 407,691
Disposal of treasury shares 1 175 1 11
Balance at end of current period 45,913 46,089 46,090 407,702
Retained earnings:
Cumulative effects of changes in accounting policies
(3,105) – – –
Restated balance of current period 31,808 35,189 41,932 370,919
Profit attributable to owners of parent 6,108 9,469 10,977 97,105
Dividends of surplus (2,727) (2,726) (2,887) (25,543)
Balance at end of current period 35,189 41,932 50,022 442,481
Treasury shares:
Cumulative effects of changes in accounting policies
– – – –
Restated balance of current period (1,544) (1,595) (1,795) (15,883)
Purchase of treasury shares (54) (471) (17) (151)
Disposal of treasury shares 3 271 6 54
Balance at end of current period (1,595) (1,795) (1,806) (15,981)
Total shareholders’ equity 133,394 140,112 148,193 1,310,865
Accumulated other comprehensive income
Valuation difference on other securities:
Cumulative effects of changes in accounting policies
– – – –
Restated balance of current period 20,112 23,926 22,517 199,184
Net changes of items other than shareholders’ equity
3,813 (1,408) 3,433 30,371
Balance at end of current period 23,926 22,517 25,951 229,556
Deferred gains or losses on hedges:
Cumulative effects of changes in accounting policies
– – – –
Restated balance of current period (0) (11) 41 366
Net changes of items other than shareholders’ equity
(11) 52 (47) (421)
Balance at end of current period (11) 41 (6) (55)
Foreign currency translation adjustment:
Cumulative effects of changes in accounting policies
– – – –
Restated balance of current period 2,582 (1,255) (1,943) (17,191)
Net changes of items other than shareholders’ equity
(3,838) (687) 1,124 9,950
Balance at end of current period (1,255) (1,943) (818) (7,241)
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(Millions of yen) (Thousands of
U.S. dollars)
For the fiscal year ended December 31,
2015 December 31,
2016 December 31,
2017
December 31, 2017
Remeasurements of defined benefit plans:
Cumulative effects of changes in accounting policies
– – – –
Restated balance of current period 440 1,874 (41) (365)
Net changes of items other than shareholders’ equity
1,434 (1,915) 189 1,675
Balance at end of current period 1,874 (41) 148 1,309
Total accumulated other comprehensive income
24,533 20,574 25,274 223,569
Non-controlling interests
Cumulative effects of changes in accounting policies
– – – –
Restated balance of current period 3,700 5,894 5,693 50,363
Net changes of items other than shareholders’ equity
2,193 (200) (1,498) (13,258)
Balance at end of current period 5,894 5,693 4,194 37,105Total net assets 163,822 166,380 177,662 1,571,539
The accompanying notes to consolidated financial statements are an integral part of these statements.
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iv) Consolidated Statements of Cash Flows
(Millions of yen) (Thousands of
U.S. dollars)
For the fiscal year ended December 31,
2015 December 31,
2016 December 31,
2017
December 31, 2017
Cash flows from operating activities Profit before income taxes 11,690 16,403 17,801 157,466 Depreciation 24,224 22,341 23,571 208,502 Impairment loss 5,956 1,018 3,735 33,043 Amortization of goodwill 4,153 3,920 3,954 34,980 Increase (decrease) in net defined benefit liability
446 (1,720) (3,229) (28,568)
Increase (decrease) in allowance for doubtful accounts
(137) (53) 34 307
Interest and dividend income (1,376) (1,342) (1,326) (11,735)Interest expenses 2,279 2,142 1,924 17,021 Loss (gain) on sales of non-current assets (7,453) (45) (1,977) (17,491)Loss (gain) on sales and retirement of non-current assets
1,559 1,440 1,107 9,792
Loss (gain) on sales of investment securities
(46) (13) (4,836) (42,778)
Loss (gain) on valuation of investment securities
1,758 22 273 2,415
Decrease (increase) in notes and accounts receivable – trade
(2,779) (3,756) (1,152) (10,197)
Decrease (increase) in inventories (1,211) 968 196 1,734 Increase (decrease) in notes and accounts payable – trade
(202) 1,608 (2,336) (20,670)
Increase (decrease) in accrued consumption taxes
(3,057) (807) 291 2,576
Increase (decrease) in accrued alcohol tax 457 338 131 1,166 Increase (decrease) in deposits received (729) (623) (401) (3,553)Increase (decrease) in guarantee deposits received
496 350 (2,155) (19,065)
Increase (decrease) in other current liabilities
376 173 316 2,802
Other, net (447) 1,999 (425) (3,766)
Subtotal 35,957 44,364 35,495 313,983
Interest and dividend income received 1,380 1,359 1,382 12,232 Interest expenses paid (2,384) (2,190) (1,963) (17,368)Income taxes paid (2,944) (10,986) (5,595) (49,499)Income taxes refund 3,257 22 685 6,063
Net cash provided by (used in) operating activities
35,265 32,570 30,004 265,411
The accompanying notes to consolidated financial statements are an integral part of these statements.
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(Millions of yen) (Thousands of
U.S. dollars)
For the fiscal year ended December 31,
2015 December 31,
2016 December 31,
2017
December 31, 2017
Cash flows from investing activities Purchase of property, plant and equipment (18,298) (19,748) (13,056) (115,491)Proceeds from sales of property, plant and equipment
19,563 428 3,085 27,296
Purchase of intangible assets (2,041) (2,060) (2,197) (19,435)Purchase of investment securities (875) (235) (1,020) (9,026)Proceeds from sales and redemption of investment securities
511 137 8,278 73,226
Purchase of shares of subsidiaries and associates
(3,260) (154) (298) (2,637)
Proceeds from sales of shares of subsidiaries and associates
1,794 – – –
Purchase of shares of subsidiaries resulting in change in scope of consolidation (Notes 2 and 3)
(3,989) (438) (11,622)
(102,810)
Payments for transfer of business (Note 4) – (1,493) – – Increase in long-term loans receivable (304) (77) (68) (605)Collection of long-term loans receivable 417 167 4,265 37,735 Other, net (3,273) (4,112) (5,189) (45,905)
Net cash provided by (used in) investing activities
(9,755) (27,586) (17,822) (157,655)
Cash flows from financing activities Net increase (decrease) in short-term loans payable
(3,366) (1,248) (3,076) (27,210)
Net increase (decrease) in commercial papers
(13,000) 16,000 (1,000) (8,845)
Proceeds from long-term loans payable 14,319 32,746 12,500 110,570 Repayments of long-term loans payable (16,625) (46,594) (12,603) (111,481)Proceeds from issuance of bonds 9,960 9,960 9,960 88,102 Redemption of bonds (12,000) (10,016) (10,083) (89,192)Cash dividends paid (2,730) (2,730) (2,893) (25,590)Dividends paid to non-controlling interests (28) (9) (19) (174)Repayments of finance lease obligations (3,039) (2,910) (2,946) (26,066)Purchase of treasury shares (56) (471) (17) (151)Proceeds from sales of treasury shares 4 447 7 65 Proceeds from share issuance to non-controlling shareholders
1,760 – – –
Net cash provided by (used in) financing activities
(24,802) (4,827) (10,171) (89,974)
Effect of exchange rate change on cash and cash equivalents
(56) (79) 50 450
Net increase (decrease) in cash and cash equivalents
651 76 2,061 18,232
Cash and cash equivalents at beginning of period
9,748 10,399 10,475 92,663
Cash and cash equivalents at end of period (Note 1)
10,399 10,475 12,536
110,895
The accompanying notes to consolidated financial statements are an integral part of these statements.
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Notes to the Consolidated Financial Statements
Basis of Presentation
Sapporo Holdings Limited (the “Company”) and its consolidated subsidiaries maintain their accounting records and prepare their financial statements in accordance with accounting principles generally accepted in Japan, which are different in certain respects as to the application and disclosure requirements of International Financial Reporting Standards. The accompanying financial statements have been compiled from the consolidated financial statements prepared by the Company as required by the Financial Instruments and Exchange Act of Japan.
Certain reclassifications of previously reported amounts have been made to reconcile the consolidated financial statements for the years ended December 31, 2015 and 2016 to the 2017 presentation.
For the convenience of the reader, the accompanying consolidated financial statements as of and for the year ended December 31, 2017 have been translated from yen amounts into U.S. dollar amounts at the rate of ¥113.05=U.S.$1.00, the exchange rate as of December 31, 2017.
Uncertainties of Entity’s Ability to Continue as Going Concern
Not applicable
Significant Accounting Policies for Preparation of Consolidated Financial Statements
1. Disclosure of scope of consolidation
(1) Consolidated subsidiaries
The Company has 57 consolidated subsidiaries (55 as of December 31, 2016 and 54 as of December 31, 2015)
(Increase due to new establishment)
SAPPORO NORTH AMERICA, INC.
(Increase due to equity acquisition)
Anchor Brewing Company, LLC and one other company
(Extinction by merger)
Sapporo Engineering Limited
(2) Unconsolidated subsidiaries
Sapporo Energy Service Co., Ltd. and others
None of total assets, net sales, profit or loss (amount corresponding to the Company’s equity interest) and retained earnings (amount corresponding to the Company’s equity interest) of unconsolidated subsidiaries on aggregate has significant effects on the consolidated financial statements.
2. Disclosure about application of equity method
(1) Associates accounted for using equity method
The Company has 2 associates accounted for using equity method (2 as of December 31, 2016 and 2 as of December 31, 2015)
(2) Companies not accounted for using equity method
Since unconsolidated subsidiaries (Sapporo Energy Service Co., Ltd. and others) and associates (SAITAMA ARENA Co., Ltd. and others) that are not accounted for using equity method have
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insignificant effects on profit or loss and retained earnings and have no significance as a whole, investments in these companies are not accounted for using equity method, and are valued at cost.
3. Disclosure about fiscal years, etc. of consolidated subsidiaries
The fiscal year-ends of all consolidated subsidiaries are aligned to the consolidated fiscal year-end.
4. Disclosure of accounting policies
(1) Accounting policy for measuring significant assets
i) Inventories
Merchandise, finished goods, semi-finished goods, raw materials (such as barley, malt, bottles and boxes) and supplies for sale: Stated principally at the lower of cost or net realizable value, cost being determined by the average method.
Real estate for sale: Stated principally at the lower of cost or net realizable value, cost being determined by the identification method.
Production supplies: Stated at the last cost method. (The value stated in the balance sheet is determined in consideration of write-downs based on the decreased profitability of assets.)
ii) Securities
Held-to-maturity debt securities: Stated at amortized cost method.
Other securities
Securities with readily determinable fair value: Stated at fair value, determined mainly based on market quotation at the consolidated balance sheet date. (Net unrealized holding gains and losses on these securities, net of applicable income taxes, are included directly in accumulated other comprehensive income of net assets. The cost of securities sold is determined based on the moving-average method.)
Securities without readily determinable fair value: Stated at cost determined based on the moving-average method.
iii) Derivatives: Stated at fair value.
(2) Accounting policy for depreciation of significant assets
i) Property, plant and equipment (except for leased assets)
Depreciated mainly by the straight-line method.
Main useful lives of property, plant and equipment are as follows.
Buildings and structures: 2-65 years
Machinery, equipment and vehicles: 2-17 years
ii) Intangible assets (except for leased assets)
Amortized by the straight-line method. Software for internal use is amortized by the straight-line method over the internally estimated useful lives (5 years).
iii) Leased assets
Leased assets are amortized by the straight-line method with useful life which is the lease period as well as residual value which is the guaranteed residual value.
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Finance lease transactions that do not transfer ownership whose transaction commenced on or before December 31, 2008, are accounted for using the accounting treatment that conforms to methods for operating lease transactions.
(3) Accounting policy for deferred assets
Bond issuance costs are fully recognized as expenses when incurred.
(4) Accounting policy for significant allowance/provisions
i) Allowance for doubtful accounts
To prepare for losses from bad debt, an estimated uncollectible amount is provided either by making an estimation using the historical rate of credit loss for normal receivables, or based on individual consideration of collectibility for specific receivables such as highly doubtful receivables.
ii) Provision for bonuses
To prepare for payment of bonuses to employees, a portion of the estimated future bonus payment attributable to the current fiscal year is provided.
(5) Accounting policy for retirement benefits
To prepare for employees’ retirement benefits, net defined benefit liability is provided based on estimated amounts of retirement benefit obligation and pension plan assets for the current fiscal year.
i) Method of attributing the projected amount of retirement benefit to the period
In calculating retirement benefit obligation, the Company uses the benefit formula basis to allocate the projected retirement benefit payment to the period up to the end of the current fiscal year.
ii) Method of amortizing actuarial gains or losses and past service cost
Past service cost is amortized by the straight-line method over a certain number of years (10-14 years) within the average remaining years of service of the employees as occurred.
Actuarial gains or losses are amortized using the straight-line method over a certain number of years (10-14 years) within the average remaining years of service of the employees as occurred from the following fiscal year of the fiscal year in which such gains or losses are incurred.
(6) Basis for translating significant assets or liabilities denominated in foreign currencies into Japanese yen
Monetary receivables and payables denominated in foreign currencies are translated into Japanese yen at the spot exchange rates at the consolidated balance sheet date. The resulting exchange gain or loss is recognized as profit and loss.
All assets and liabilities of foreign subsidiaries are translated into Japanese yen at the spot exchange rates prevailing at the consolidated balance sheet date. Revenues and expenses of foreign subsidiaries are translated into Japanese yen at the average exchange rate for the period. Any translation differences are included in foreign currency translation adjustment and non-controlling interests in the net assets section of the consolidated balance sheets.
(7) Accounting policy for hedging
i) Accounting policy for hedging
The deferred hedge method is applied. If foreign currency monetary payables with currency swaps or forward foreign exchange contracts and others satisfy requirements for allocation treatment (furiate shori: exceptional hedge accounting under Japanese GAAP), this accounting treatment is employed. In addition, interest-rate swaps that satisfy requirements for special treatments are accounted for by the special treatment.
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ii) Hedging instruments and hedged items
Hedging instruments: Interest-rate swaps transactions, currency swaps transactions and forward foreign exchange contracts
Hedged items: General external financing (loans payable) and foreign currency transactions (monetary payables, forecast transactions and others)
iii) Hedging policy
In accordance with internal regulations that provide for authority related to derivatives transactions, interest rate fluctuation risks and foreign exchange rate fluctuation risks associated with hedged items are hedged within a certain range.
iv) Method of assessing hedge effectiveness
Hedge effectiveness is determined by comparing the cumulative changes in the hedged item with those in the hedging instrument.
(8) Accounting policy for goodwill
Goodwill is amortized over a reasonable period not exceeding 20 years.
(9) Scope of cash and cash equivalents in consolidated statements of cash flows
Cash in the consolidated statements of cash flows (cash and cash equivalents) consists of cash on hand, deposits which can be withdrawn as needed, and short-term investments with a maturity within three months from the acquisition date that can be easily converted into cash and are not exposed to significant risk of changes in value.
(10) Other basis of preparing consolidated financial statements
i) Accounting policy for consumption taxes
Transaction subject to consumption taxes are recorded at amounts exclusive of consumption taxes.
ii) Application of consolidated taxation system
The Company has applied a consolidated taxation system.
ii) Shareholders’ equity
The Companies Act of Japan (the “Companies Act”) provides that an amount not exceeding one half of the issue price of new shares may, with the approval of the Board of Directors, be accounted for as capital surplus.
Retained earnings include a legal reserve provided in accordance with the provisions of the Companies Act. This reserve is not available for the payment for dividends, but it may be used to reduce or eliminate a deficit by resolution of the shareholders or may be transferred to capital stock by resolution of the Board of Directors.
If the sum of legal capital surplus and legal retained earnings exceeds 25 percent of the capital stock account, the excess may be distributed to the shareholders either as a return of capital or as dividends subject to the approval of the shareholders.
Changes in Accounting Policies
(Application of Accounting Standard for Retirement Benefits and its Guidance)
Effective from the fiscal year ended December 31, 2015, the Sapporo Group has applied the Accounting Standard for Retirement Benefits (Accounting Standards Board of Japan - ASBJ - Statement No. 26 of May 17, 2012) and the Guidance on Accounting Standard for Retirement Benefits (ASBJ Guidance No. 25 of March 26, 2015), in accordance with the provisions specified in the main clauses of paragraph 35 of the Accounting Standard for Retirement Benefits and paragraph 67 of the Guidance on Accounting Standard for Retirement Benefits. As a result, the method for calculating retirement benefit obligation and service cost has been revised, and the method for attributing projected amount of retirement benefit to
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periods has been changed from the straight-line basis to the benefit formula basis. As to the discount rate, it used to be calculated based on the periods, comparable to employees’ average remaining years of service. Under the new accounting standard, however, the method of determining the discount rate has now been changed to use a single weighted-average discount rate that reflects the periods until the expected payment of retirement benefits and the amount of projected benefits for every such period.
In applying the Accounting Standard for Retirement Benefits and its Guidance and in accordance with the transitional treatment provided in paragraph 37 of the Accounting Standard for Retirement Benefits, the effect of the change in calculation method for retirement benefit obligation and service cost has been recognized by adjusting retained earnings at the beginning of the fiscal year ended December 31, 2015.
Consequently, as of the beginning of the fiscal year ended December 31, 2015, net defined benefit liability increased by ¥4,799 million, while retained earnings decreased by ¥3,105 million. Furthermore, during the fiscal year ended December 31, 2015, operating profit and profit before income taxes increased each by ¥168 million.
(Changes in accounting policies)
Effective from the fiscal year ended December 31, 2016, the Sapporo Group has applied the Accounting Standard for Business Combinations (Accounting Standards Board of Japan - ASBJ - Statement No. 21 of September 13, 2013), the Accounting Standard for Consolidated Financial Statements (ASBJ Statement No. 22 of September 13, 2013), the Accounting Standard for Business Divestitures (ASBJ Statement No. 7 of September 13, 2013), etc. Accordingly, in cases where the parent company continues to have control, differences arising from changes in the Company’s ownership interests in subsidiaries are now recorded in capital surplus, and acquisition-related expenses are now treated as expenses in the consolidated financial statements for the fiscal year in which they arise. Regarding business combinations that take place on or after the beginning of the fiscal year ended December 31, 2016, any change to the purchase price allocation arising from finalization of the provisional accounting treatment must now be reflected in the consolidated financial statements for the fiscal year in which the business combination occurred. In addition, the presentation of the profit category has been revised and minority interests has been renamed to non-controlling interests. Consolidated financial statements for the fiscal year ended December, 2015 have been reclassified in order to reflect these changes in presentation.
In the consolidated statements of cash flows, cash flows related to the purchase or sales of subsidiaries’ shares not resulting in change in scope of consolidation are included in “Cash flows from financing activities.” Cash flows related to expenses incurred in the purchase of subsidiaries’ shares resulting in change in scope of consolidation as well as cash flows related to expenses incurred in connection with the purchase or sales of subsidiaries’ shares not resulting in change in scope of consolidation are included in “Cash flows from operating activities.”
Application of the newly applied accounting standards has been implemented from the beginning of the fiscal year ended December 31, 2016, in accordance with the transitional provisions in paragraph 58-2 (4) of the Accounting Standard for Business Combinations, paragraph 44-5 (4) of the Accounting Standard for Consolidated Financial Statements, and paragraph 57-4 (4) of the Accounting Standard for Business Divestitures.
The impact of these changes on profit or loss is immaterial.
(Changes in accounting policies which are difficult to distinguish from changes in accounting estimates)
The Sapporo Group has in the past applied the declining-balance method for depreciation of property, plant and equipment (however, the straight-line method was applied to the Hokkaido Brewery, rental properties acquired since January 1988, Yebisu Garden Place, Sapporo Factory, buildings (excluding fixtures and equipment) acquired since April 1, 1998, Kyushu Hita Brewery, the Gunma Brewery’s Japanese liquor manufacturing equipment, and Nasu Brewery). However, from the fiscal year ended December 31, 2016 all property, plant and equipment are depreciated using the straight-line method.
The Company’s consolidated subsidiaries Sapporo Breweries Ltd. and POKKA SAPPORO Food & Beverage Ltd. have carried out aggressive capital investments on the assumption that growth in total demand would deliver early returns on those investments. However, in recognition of the maturation of our markets and operating environment, we plan to formulate a policy prioritizing stable supply from
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existing facilities and to invest mainly in the renewal of existing facilities. In the fiscal year ended December 31, 2016, we established new manufacturing facilities to secure additional stable supplies of core products. Under this environment, in preparation for the drafting of the next long-term and medium-tem management plans to be implemented from January 1, 2017, we have examined the current state of usage of the Group’s property, plant and equipment and plans for future capital investments. This examination indicates that we will be able to maintain stable utilization of such domestic property, plant and equipment, which in turn has led to the decision that using the straight-line method to evenly distribute the purchase price of these assets over their useful lives will lead to more appropriate calculations of profit and loss for the period.
As a result of this change, depreciation decreased by ¥1,750 million, operating profit increased by ¥1,688 million, and profit before income taxes increased ¥1,701 million in the fiscal year ended December 31, 2016, compared with their respective figures calculated using the former method.
Changes in Presentation
(Consolidated Statements of Cash Flows)
Effective from the fiscal year ended December 31, 2017, “increase (decrease) in guarantee deposits received” under “cash flows from operating activities,” which was previously included in “other, net” under “cash flows from operating activities,” is individually presented because of an increase in its quantitative materiality. Furthermore, effective from the fiscal year ended December 31, 2017, “collection of sales of shares of subsidiaries for prior periods” under “cash flows from investing activities” is included in “other, net” under “cash flows from investing activities” because of a decrease in its quantitative materiality. Accordingly, the consolidated statements of cash flows for the fiscal year ended December 31, 2015 and the fiscal year ended December 31, 2016 have been reclassified to reflect the change.
As a result, ¥48 million included in “other, net” under “cash flows from operating activities” in the consolidated statements of cash flows for the fiscal year ended December 31, 2015 is presented as “increase (decrease) in guarantee deposits received” of ¥496 million and “other, net” of ¥(447) million. ¥2,349 million included in “other, net” under “cash flows from operating activities” in the consolidated statements of cash flows for the fiscal year ended December 31, 2016 is presented as “increase (decrease) in guarantee deposits received” of ¥350 million and “other, net” of ¥1,999 million. Furthermore, ¥3,198 million and ¥30 million presented as “collection of sales of shares of subsidiaries for prior periods” under “cash flows from investing activities” for the fiscal years ended December 31, 2015 and 2016, respectively, are included in “other, net” under “cash flows from investing activities” of ¥(3,273) million and ¥(4,112) million, respectively.
Additional Information
(Board Benefit Trust (BBT) for directors, group operating officers of the Company, and some directors of the Company’s subsidiaries)
Following the approval of shareholders of a resolution at the 92nd Ordinary General Meeting of Shareholders held on March 30, 2016, the Company on May 31, 2016, introduced a new stock-based compensation system (Board Benefit Trust, or BBT) (hereinafter referred to as the “System”), for directors, group operating officers of the Company, and some of the directors of the Company’s subsidiaries (excluding outside directors, hereinafter referred to as the “Group Target Officers”). The new System is designed to increase Group Target Officers’ awareness of their contributions to improving the performance of the Company over the medium to long term and to enhancing corporate value.
1. Overview of transaction
The Company shall grant points to the Group Target Officers according to their respective positions and performance achievements. The BBT will then provide the Company’s shares to Group Target Officers who meet certain conditions in proportion to the points granted to them.
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In principle, Group Target Officers will receive the Company’s shares when they retire.
The shares to be awarded to Group Target Officers, including shares for future allocation, shall be purchased using money trusted by the Company at the time of the System’s establishment, and shall be managed separately as trust property.
2. Company shares remaining in the trust
Upon the introduction of the System during the current fiscal year, Trust & Custody Services Bank, Ltd. (Trust Account E) acquired 754,600 shares of the Company.
The book value (excluding incidental costs) of the Company shares now held by the trust are accounted for as treasury shares in the net assets section of the Company’s balance sheet. As of December 31, 2016, the book value and total number of the treasury shares are ¥445 million and 150,920, respectively.
With an effective date of July 1, 2016, the Company implemented a consolidation of shares at a ratio of one share for each five shares of the Company’s common shares.
(Implementation Guidance on Recoverability of Deferred Tax Assets)
Effective from the fiscal year ended December 31, 2017, the Company has applied the Implementation Guidance on Recoverability of Deferred Tax Assets (ASBJ Guidance No. 26 of March 28, 2016).
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Consolidated Balance Sheets
1 Major assets and liabilities related to the investments in unconsolidated subsidiaries and associates are as follows:
(Millions of yen) (Thousands of U.S. dollars)
As of December 31,
2015 December 31,
2016 December 31,
2017
December 31, 2017
Investment securities (shares) 2,206 2,704 1,963 17,368
Other under investments and
other assets (capital investments) 215 429 429 3,802
2 Treatment of notes matured at the end of the fiscal year
Since the final day of the fiscal year falls on a holiday of financial institutions, the method where payments for notes matured at the end of the fiscal year are accounted for on their clearing day is applied.
Accordingly, the following notes matured at the end of the fiscal year are included in the balance at the end of the fiscal year:
(Millions of yen) (Thousands of U.S. dollars)
As of December 31,
2015 December 31,
2016 December 31,
2017
December 31, 2017
Notes receivable – trade 17 22 18 167
Notes payable – trade 2 62 – –
3 Accumulated reduction entry that was deducted from acquisition cost of property, plant and equipment due to state subsidy and others
(Millions of yen) (Thousands of U.S. dollars)
As of December 31,
2015 December 31,
2016 December 31,
2017
December 31, 2017
882 1,053 1,291 11,424
4 Pledged assets and secured liabilities
The assets pledged as collateral are as follows:
(1) Assets pledged as collateral
(Millions of yen) (Thousands of U.S. dollars)
As of December 31,
2015 December 31,
2016 December 31,
2017
December 31, 2017
Inventories – 643 666 5,899
Buildings and structures 73 407 397 3,517
Land 612 2,050 2,050 18,139
Investment securities 8,885 7,498 8,692 76,894
Other under investments and other assets 25 25 25 221
Total 9,597 10,624 11,833 104,672
- 17 -
(2) Debt relating to the above pledged assets
(Millions of yen) (Thousands of U.S. dollars)
As of December 31,
2015 December 31,
2016 December 31,
2017
December 31, 2017
Short-term loans payable 6,150 5,902 5,610 49,624
Long-term loans payable 12,820 15,309 14,470 128,005
Total 18,970 21,211 20,080 177,629
In addition, cash and deposits of POKKA INTERNATIONAL PTE. LTD. (¥28 million as of December 31, 2015, ¥26 million as of December 31, 2016 and ¥27 million ($247 thousand) as of December 31, 2017) are pledged as collateral for a credit limit (¥921 million as of December 31, 2015, ¥870 million as of December 31, 2016 and ¥912 million ($8,073 thousand) as of December 31, 2017). Short-term loans payable (¥16 million as of December 31, 2015, ¥9 million as of December 31, 2016 and ¥7 million ($67 thousand) as of December 31, 2017) have been borrowed against said credit limit.
5 Contingent liabilities
The Company has provided guarantees for borrowings of its employees and others as follows:
(Guarantee obligations)
(Millions of yen) (Thousands of U.S. dollars)
As of December 31,
2015 December 31,
2016 December 31,
2017
December 31, 2017
Employees (loans for employees’
housing) 367 307 272 2,408
Other 1,300 691 501 4,440
Total 1,668 999 774 6,848
- 18 -
Consolidated Statements of Income
1 Amount of write-downs due to the decreased profitability of inventories held for regular sales
(Millions of yen) (Thousands of U.S. dollars)
For the fiscal year ended December 31,
2015 December 31,
2016 December 31,
2017
December 31, 2017
Cost of sales 928 838 882 7,806
2 Components of selling, general and administrative expenses
(Millions of yen) (Thousands of U.S. dollars)
For the fiscal year ended December 31,
2015 December 31,
2016 December 31,
2017
December 31, 2017
Selling, general and administrative expenses:
Sales incentives and commissions 35,841 38,750 39,918 353,107
Advertising expenses 21,982 20,420 20,239 179,030
Salaries and allowances 31,954 32,039 33,493 296,269
Provision for bonuses 1,218 1,726 1,921 16,999
Retirement benefit expenses 2,690 784 715 6,326
Other 73,303 75,438 79,655 704,601
Total selling, general and administrative expenses 166,990 169,159 175,943 1,556,334
3 Research and development expenses included in production cost and general and administrative expenses
(Millions of yen) (Thousands of U.S. dollars)
For the fiscal year ended December 31,
2015 December 31,
2016 December 31,
2017
December 31, 2017
2,724 2,766 2,791 24,689
4 Components of gain on sales of non-current assets are as follows:
(Millions of yen) (Thousands of U.S. dollars)
For the fiscal year ended December 31,
2015 December 31,
2016 December 31,
2017
December 31, 2017
Land 5,396 – 1,871 16,555
Buildings and structures 1,998 11 77 682
Machinery, equipment and
vehicles 57 32 28 252
Other 1 1 0 1
Total 7,453 45 1,977 17,491
- 19 -
5 Components of loss on sales of non-current assets are as follows:
(Millions of yen) (Thousands of U.S. dollars)
For the fiscal year ended December 31,
2015 December 31,
2016 December 31,
2017
December 31, 2017
Land – 4 0 7
Buildings and structures 20 13 10 91
Machinery, equipment and
vehicles 2 7 26 234
Other 1 1 0 7
Total 24 26 38 340
6 Components of loss on retirement of non-current assets are as follows:
(Millions of yen) (Thousands of U.S. dollars)
For the fiscal year ended December 31,
2015 December 31,
2016 December 31,
2017
December 31, 2017
Buildings and structures 610 1,004 568 5,028
Machinery, equipment and
vehicles 651 295 187 1,654
Other 272 113 313 2,769
Total 1,534 1,413 1,068 9,452
- 20 -
7 Components of impairment loss are as follows:
The Sapporo Group recorded impairment loss on the following asset groups:
Fiscal year ended December 31, 2015
Location Use Classification Impairment loss(Millions of yen)
Sapporo Breweries Ltd. (Seirou-machi, Niigata and another)
Idle real estate/Welfare facilities
Land and others 3,083
Sapporo Vietnam Ltd. (Long An Province, Vietnam)
International business Goodwill 2,082
PS Beverage Ltd. (Koto-ku, Tokyo)
Machinery for operations Leased assets and others 332
Sapporo Lion Ltd. (Chiyoda-ku, Tokyo and other 6)
Restaurants for operations Buildings and others 177
POKKA SAPPORO Food & Beverage Ltd. (Toyota-shi, Aichi)
Beverage manufacturing facilities
Machinery, equipment and others 137
Pokka Create Co., Ltd. (Nakagyo-ku, Kyoto and other 5)
Restaurants for operations Buildings and others 86
Public Vending Service Co., Ltd. (Koto-ku, Tokyo)
Machinery for operations Leased assets and others 53
Sapporo Lion (Singapore) Pte. Ltd. (Singapore)
Restaurants for operations Buildings 2
Okinawa Pokka Foods Co., Ltd. (Kunigami-gun, Okinawa)
Beverage manufacturing facilities
Machinery and equipment 0
The Sapporo Group groups its assets in consideration of the units in management accounting. The assets for business and beverage manufacturing facilities are grouped into respective businesses, the restaurants are grouped mainly into respective stores, and the idle real estate and company condominiums are grouped based on each real estate.
Idle real estate and welfare facilities have been written down to the recoverable amount upon sale. The amount of the write-down has been recorded in other expenses as an impairment loss (¥3,083 million), which is broken down into idle real estate of ¥1,688 million (land of ¥1,652 million, buildings and structures of ¥35 million, and other of ¥0 million) and welfare facilities of ¥1,394 million (land of ¥1,291 million, buildings and structures of ¥102 million, and other of ¥0 million).
In the international business, assets have been written down to the recoverable amount as it is expected to be difficult to recover the investment due mainly to declining profitability. The amount of the write-down has been recorded in other expenses as an impairment loss (¥2,082 million).
Machinery for operations has been written down to the recoverable amount as it is expected to be difficult to recover the investment due mainly to declining profitability. The amount of the write-down has been recorded in other expenses as an impairment loss (¥386 million), which is broken down into machinery for operations of ¥386 million (leased tangible assets of ¥192 million, land of ¥130 million, buildings and structures of ¥34 million, and other of ¥28 million).
Restaurants for operations have been written down to the recoverable amount as it is expected to be difficult to recover the investment due mainly to declining profitability. The amount of the write-down has been recorded in other expenses as an impairment loss (¥266 million), which is broken down into restaurants for operations of ¥266 million (buildings and structures of ¥233 million, machinery, equipment and vehicles of ¥15 million, and other of ¥18 million).
Beverage manufacturing facilities have been written down to the recoverable amount due mainly to the termination of production of roasted beans. The amount of the write-down has been recorded in other expenses as an impairment loss (¥138 million), which is broken down into beverage manufacturing facilities of ¥138 million (buildings and structures of ¥78 million, machinery, equipment and vehicles of ¥55 million, and other of ¥4 million).
- 21 -
The recoverable amount is measured by the net realizable value and the value in use, with the net realizable value determined based on an appraisal value provided by a real estate appraisal company. The value in use is calculated based on future cash flows discounted by the rate of 6.6% to 14.7%.
Fiscal year ended December 31, 2016
Location Use Classification Impairment loss(Millions of yen)
Nihon Beans Co., Ltd. (Isesaki-shi, Gunma)
Food manufacturing facilitiesMachinery, equipment and others 415
Pokka Create Co., Ltd. (Fukuoka-shi, Fukuoka and other)
Restaurants for operations Buildings and others 156
PS Beverage Ltd. (Koto-ku, Tokyo)
Machinery for operations Leased assets and others 140
Sapporo Lion Ltd. (Sendai-shi, Miyagi and other)
Restaurants for operations Buildings and others 138
POKKA SAPPORO Food & Beverage Ltd. (Kitanagoya-shi, Aichi)
Beverage manufacturing facilities
Machinery, equipment and others 64
Sapporo Breweries Ltd. (Ota-shi, Gunma)
Food manufacturing facilitiesMachinery, equipment and others 55
Public Vending Service Co., Ltd. (Koto-ku, Tokyo)
Machinery for operations Leased assets and others 42
Miyasaka Jozo Co., Ltd. (Kofu-shi, Yamanashi)
Food manufacturing facilitiesMachinery, equipment and others 4
The Sapporo Group groups its assets in consideration of the units in management accounting. The assets for business, beverage manufacturing facilities and food manufacturing facilities are grouped into respective businesses, and the restaurants are grouped mainly into respective stores.
Food manufacturing facilities have been written down to the recoverable amount as it is expected to be difficult to recover the investment due mainly to declining profitability. The amount of the write-down has been recorded in other expenses as an impairment loss (¥476 million), which is broken down into machinery and equipment of ¥328 million, goodwill of ¥53 million, leased assets of ¥50 million and other of ¥44 million.
Restaurants for operations have been written down to the recoverable amount as it is expected to be difficult to recover the investment due mainly to declining profitability. The amount of the write-down has been recorded in other expenses as an impairment loss (¥294 million), which is broken down into buildings and structures of ¥265 million, machinery, equipment and vehicles of ¥14 million, leased assets of ¥6 million, and other of ¥8 million.
Machinery for operations has been written down to the recoverable amount as it is expected to be difficult to recover the investment due mainly to declining profitability. The amount of the write-down has been recorded in other expenses as an impairment loss (¥183 million), which is broken down into leased tangible assets of ¥171 million, and other of ¥11 million.
Beverage manufacturing facilities have been written down to the recoverable amount due to the termination of some parts of the production line. The amount of the write-down has been recorded in other expenses as an impairment loss (¥64 million), which is broken down into machinery, equipment and vehicles of ¥61 million, buildings and structures of ¥3 million, and other of ¥0 million.
The recoverable amount is measured by the net realizable value and the value in use, with the net realizable value determined based on an appraisal value provided by a real estate appraisal company. The value in use is calculated based on future cash flows discounted by the rate of 6.1% to 7.9%.
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Fiscal year ended December 31, 2017
Location Use Classification Impairment loss (Millions of yen)
Impairment loss(Thousands of U.S. dollars)
Sapporo Vietnam Ltd. (Long An Province, Vietnam)
Beer manufacturing facilities
Machinery, equipment and others 2,686 23,761
Sapporo Lion Ltd. (Chuo-ku, Tokyo and other)
Restaurants for operations
Buildings and others 505 4,471
Shinsyu-ichi Miso Co., Ltd. (Note 1) (Uenohara-shi, Yamanashi and other)
Food manufacturing facilities
Machinery, equipment and others 164 1,458
PS Beverage Ltd. (Koto-ku, Tokyo and other)
Machinery for operations
Leased assets and others 156 1,386
Pokka Create Co., Ltd. (Toshima-ku, Tokyo and other)
Restaurants for operations
Buildings and others 104 927
Sapporo Lion (Singapore) Pte. Ltd. (Singapore)
Restaurants for operations
Buildings and others 43 382
Public Vending Service Co., Ltd. (Koto-ku, Tokyo and other)
Machinery for operations
Leased assets and others 43 381
POKKA SAPPORO Food & Beverage Ltd. (Kitanagoya-shi, Aichi and other)
Idle real estate Buildings and others 29 265
NH Beans Co., Ltd. (Note 2) (Isesaki-shi, Gunma)
Food manufacturing facilities
Other 0 8
(Notes) 1. In the fiscal year ended December 31, 2017, “Miyasaka Jozo Co., Ltd.” changed its company name to “Shinsyu-ichi Miso Co., Ltd.”
2. In the fiscal year ended December 31, 2017, “Nihon Beans Co., Ltd.” changed its company name to “NH Beans Co., Ltd.”
The Sapporo Group groups its assets in consideration of the units in management accounting. The assets for manufacturing facilities and business are grouped into respective businesses. The restaurants are grouped mainly into respective stores, and idle real estate and company condominiums are grouped based on each real estate.
Beer manufacturing facilities have been written down to the recoverable amount as it is expected to be difficult to recover the investment due mainly to declining profitability. The amount of the write-down has been recorded in other expenses as an impairment loss (¥2,686 million ($23,761 thousand)), which is broken down into machinery, equipment and vehicles of ¥2,057 million ($18,200 thousand), buildings and structures of ¥626 million ($5,545 thousand), and other of ¥1 million ($14 thousand).
Restaurants for operations have been written down to the recoverable amount as it is expected to be difficult to recover the investment due mainly to declining profitability. The amount of the write-down has been recorded in other expenses as an impairment loss (¥653 million ($5,782 thousand)), which is broken down into buildings of ¥524 million ($4,639 thousand), machinery, equipment and vehicles of ¥72 million ($637 thousand), leased assets of ¥13 million ($119 thousand), and other of ¥43 million ($385 thousand).
Food manufacturing facilities have been written down to the recoverable amount as it is expected to be difficult to recover the investment due mainly to declining profitability. The amount of the write-down has been recorded in other expenses as an impairment loss (¥165 million ($1,467 thousand)), which is broken down into machinery, equipment and vehicles of ¥153 million ($1,356 thousand), structures of ¥3 million ($28 thousand) and other of ¥9 million ($82 thousand).
Machinery for operations has been written down to the recoverable amount as it is expected to be difficult to recover the investment due mainly to declining profitability. The amount of the write-down has been recorded in other expenses as an impairment loss (¥199 million ($1,767 thousand)), which is broken down into leased tangible assets of ¥170 million ($1,510 thousand), land of ¥15 million ($136 thousand), buildings and structures of ¥3 million ($33 thousand) and other of ¥9 million ($86 thousand).
- 23 -
Since there is no specific future plan for use of idle real estate and this asset is not expected to be used in the future, its carrying value has been written down to the recoverable amount and the amount of the write-down has been recorded in other expenses as an impairment loss (¥29 million ($265 thousand)), which is broken down into buildings of ¥26 million ($237 thousand), machinery and equipment of ¥2 million ($18 thousand), and land of ¥1 million ($8 thousand).
The recoverable amount is measured by the net realizable value and the value in use, with the net realizable value determined based on an appraisal value provided by a real estate appraisal company. The value in use is calculated based on future cash flows discounted by the rate of 7.3% to 11.7%.
- 24 -
Consolidated Statements of Comprehensive Income
1 Reclassification adjustments and tax effects relating to other comprehensive income
(Millions of yen) (Thousands of U.S. dollars)
For the fiscal year ended December 31,
2015 December 31,
2016 December 31,
2017
December 31, 2017
Valuation difference on other securities:
Amount arising during the year 4,220 (3,144) 10,101 89,354
Reclassification adjustments (45) (35) (4,829) (42,723)
Before tax effects 4,175 (3,180) 5,271 46,631
Tax effects (356) 1,771 (1,855) (16,412)
Valuation difference on other securities
3,819 (1,408) 3,416 30,218
Deferred gains or losses on hedges:
Amount arising during the year (5) 76 (75) (669)
Reclassification adjustments (13) – – –
Before tax effects (19) 76 (75) (669)
Tax effects 1 (23) 15 136
Deferred gains or losses on hedges
(17) 52 (60) (533)
Foreign currency translation adjustment:
Amount arising during the year (3,767) (896) 1,019 9,016
Reclassification adjustments – – – –
Before tax effects (3,767) (896) 1,019 9,016
Tax effects – – – –
Foreign currency translation adjustment
(3,767) (896) 1,019 9,016
Remeasurements of defined benefit plans, net of tax
Amount arising during the year 472 (2,434) 775 6,863
Reclassification adjustments 1,635 (425) (503) (4,450)
Before tax effects 2,107 (2,860) 272 2,413
Tax effects (673) 944 (83) (738)
Remeasurements of defined benefit plans, net of tax
1,434 (1,915) 189 1,675
Total other comprehensive income
1,467 (4,168) 4,564 40,377
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Consolidated Statement of Changes in Net Assets
Fiscal year ended December 31, 2015
1. Matters concerning class and total number of shares issued and class and number of treasury shares
(Thousands of shares)
Number of shares at beginning of fiscal
year
Increase in shares during fiscal year
Decrease in shares during fiscal year
Number of shares at end of fiscal year
Shares issued
Common shares 393,971 – – 393,971
Total 393,971 – – 393,971
Treasury shares
Common shares (Notes 1., 2.)
4,348 113 9 4,451
Total 4,348 113 9 4,451
(Notes) 1. The increase of 113 thousand shares in the number of treasury shares of common shares is an increase due to buyback request of shares less than one unit.
2. The decrease of 9 thousand shares in the number of treasury shares of common shares is a decrease due to demand for sale of shares less than one unit.
2. Matters concerning subscription rights to shares and treasury subscription rights to shares
Not applicable
3. Matters concerning dividend
(1) Dividend payment
Resolution Class of shares Total amount of
dividends (Millions of yen)
Dividends per share (Yen)
Record date Effective date
Ordinary General Meeting of Shareholders on March 27, 2015
Common shares 2,727 7.00December 31,
2014 March 30, 2015
(2) Dividend with a record date that falls in the current fiscal year but whose effective date falls in the following fiscal year
Resolution Class of shares
Total amount of dividends (Millions of
yen)
Source of dividends
Dividends per share (Yen)
Record date Effective date
Ordinary General Meeting of Shareholders on March 30, 2016
Common shares
2,726Retained earnings
7.00December 31,
2015 March 31, 2016
- 26 -
Fiscal year ended December 31, 2016
1. Matters concerning class and total number of shares issued and class and number of treasury shares
(Thousands of shares)
Number of shares at beginning of fiscal
year
Increase in shares during fiscal year
Decrease in shares during fiscal year
Number of shares at end of fiscal year
Shares issued
Common shares (Note 1.) 393,971 – 315,177 78,794
Total 393,971 – 315,177 78,794
Treasury shares
Common shares (Notes 2., 3., 4.)
4,451 772 4,324 898
Total 4,451 772 4,324 898
(Notes) 1. Since the Company implemented a consolidation of shares at a ratio of one share for each five shares of common shares, effective as of July 1, 2016, the number of shares issued decreased by 315,177 thousand shares to 78,794 thousand shares.
2. The increase of 772 thousand shares in the number of treasury shares of common shares is due to an increase of 11 thousand shares because of buyback request of shares less than one unit conducted before the share consolidation, an increase of 754 thousand shares because of the acquisition of the Company’s shares by Board Benefit Trust (BBT), an increase of 1 thousand shares because of buyback request of shares less than one unit conducted after the share consolidation, and an increase of 4 thousand shares because of the purchase of allotted fractional shares upon the share consolidation.
3. The decrease of 4,324 thousand shares in the number of treasury shares of common shares consists of a decrease of 2 thousand shares due to demand for sale of shares less than one unit conducted before the share consolidation, a decrease of 754 thousand shares due to the transfer to Board Benefit Trust (BBT) conducted before the share consolidation, and a decrease of 3,567 thousand shares due to the share consolidation.
4. With regard to the number of own shares held by Trust & Custody Services Bank, Ltd. (Trust Account E) in association with BBT, 150 thousand shares were included in the number of treasury shares as of the end of the current fiscal year.
2. Matters concerning subscription rights to shares and treasury subscription rights to shares
Not applicable
3. Matters concerning dividend
(1) Dividend payment
Resolution Class of shares Total amount of
dividends (Millions of yen)
Dividends per share (Yen)
Record date Effective date
Ordinary General Meeting of Shareholders on March 30, 2016
Common shares 2,726 7.00December 31,
2015 March 31, 2016
(Note) The Company implemented a consolidation of shares at a ratio of one share for each five shares of common shares, effective as of July 1, 2016. Dividends per share for the fiscal year ended December 31, 2015 represent the actual amount of dividends before the share consolidation.
- 27 -
(2) Dividend with a record date that falls in the current fiscal year but whose effective date falls in the following fiscal year
Resolution Class of shares
Total amount of dividends (Millions of
yen)
Source of dividends
Dividends per share (Yen)
Record date Effective date
Ordinary General Meeting of Shareholders on March 30, 2017
Common shares
2,887Retained earnings
37.00December 31,
2016 March 31, 2017
(Note) The total amount of dividends based on the resolution of the Ordinary General Meeting of Shareholders on March 30, 2017 includes dividends of ¥5 million on own shares held by Trust & Custody Services Bank, Ltd. (Trust Account E).
Fiscal year ended December 31, 2017
1. Matters concerning class and total number of shares issued and class and number of treasury shares
(Thousands of shares)
Number of shares at beginning of fiscal
year
Increase in shares during fiscal year
Decrease in shares during fiscal year
Number of shares at end of fiscal year
Shares issued
Common shares 78,794 – – 78,794
Total 78,794 – – 78,794
Treasury shares
Common shares (Notes 1., 2., 3.)
898 5 2 901
Total 898 5 2 901
(Notes) 1. The increase of 5 thousand shares in the number of treasury shares of common shares is an increase due to buyback request of shares less than one unit.
2. The decrease of 2 thousand shares in the number of treasury shares of common shares consists of a decrease of 0 thousand shares due to demand for sale of shares less than one unit, and a decrease of 1 thousand shares due to the transfer to Board Benefit Trust (BBT).
3. With regard to the number of own shares held by Trust & Custody Services Bank, Ltd. (Trust Account E) in association with BBT, 149 thousand shares were included in the number of treasury shares as of the end of the current fiscal year.
2. Matters concerning subscription rights to shares and treasury subscription rights to shares
Not applicable
3. Matters concerning dividend
(1) Dividend payment
Resolution Class of shares Total amount of
dividends Dividends per share
Record date Effective date
Ordinary General Meeting of Shareholders on March 30, 2017
Common share ¥2,887 million
[$25,543 thousand]¥37.00[$0.32]
December 31, 2016
March 31, 2017
(Note) The total amount of dividends based on the resolution of the Ordinary General Meeting of Shareholders on March 30, 2017 includes dividends of ¥5 million ($49 thousand) on own shares held by Trust & Custody Services Bank, Ltd. (Trust Account E).
- 28 -
(2) Dividend with a record date that falls in the current fiscal year but whose effective date falls in the following fiscal year
Resolution Class of shares
Total amount of dividends
Source of dividends
Dividends per share
Record date Effective date
Ordinary General Meeting of Shareholders on March 29, 2018
Common share
¥3,121 million[$27,613 thousand]
Retained earnings
¥40.00[$0.35]
December 31, 2017
March 30, 2018
(Note) The total amount of dividends based on the resolution of the Ordinary General Meeting of Shareholders on March 29, 2018 includes dividends of ¥5 million ($52 thousand) on own shares held by Trust & Custody Services Bank, Ltd. (Trust Account E).
Consolidated Statements of Cash Flows
1 Reconciliation between the ending balance of cash and cash equivalents and the amounts recorded in the items shown on the consolidated balance sheets
(Millions of yen) (Thousands of U.S. dollars)
For the fiscal year ended December 31,
2015 December 31,
2016 December 31,
2017
December 31, 2017
Cash and deposits 10,430 10,589 12,717 112,497
Time deposits with maturity over 3 months (31) (113) (181) (1,601)
Cash and cash equivalents 10,399 10,475 12,536 110,895
2 Major components of assets and liabilities of company that became new consolidated subsidiary through share acquisition
Fiscal year ended December 31, 2015
Components of assets and liabilities at the inception of consolidation upon the new consolidation of Country Pure Foods, Inc. (and other 10 companies), PT.POKKA DIMA INTERNATIONAL and Nihon Beans Co., Ltd. through share acquisition, and the relationship between the amount of the share acquisition and payments for the acquisition (net amount) are as follows:
(Millions of yen)
Current assets 5,174
Non-current assets 11,159
Goodwill 4,242
Current liabilities (3,302)
Non-current liabilities (10,532)
Foreign currency translation adjustment 10
Non-controlling interests (928)
Share acquisition price
Cash and cash equivalents of newly consolidated subsidiaries
5,824
(1,835)
Net: purchase of shares of subsidiaries resulting in change in scope of consolidation 3,989
- 29 -
Fiscal year ended December 31, 2016
Components of assets and liabilities at the inception of consolidation upon the new consolidation of Marushinkawamura Inc., Ginrin Suisan Inc. and Miyasaka Jozo Co., Ltd. through share acquisition, and the relationship between the amount of the share acquisition and payments for the acquisition (net amount) are as follows:
(Millions of yen)
Current assets 2,303
Non-current assets 3,420
Goodwill 346
Current liabilities (1,970)
Non-current liabilities (3,247)
Non-controlling interests (103)
Share acquisition price
Cash and cash equivalents of newly consolidated subsidiaries
747
(309)
Net: purchase of shares of subsidiaries resulting in change in scope of consolidation 438
3 Major components of assets and liabilities of company that became a new consolidated subsidiary through equity acquisition
Fiscal year ended December 31, 2017
Components of assets and liabilities at the inception of consolidation upon the new consolidation of Anchor Brewing Company, LLC and one other company through equity acquisition, and the relationship between the amount of the equity acquisition and payments for the acquisition (net amount) are as follows:
(Millions of yen) (Thousands of U.S. dollars)
Current assets 1,126 9,963
Non-current assets 4,029 35,641
Goodwill 3,532 31,248
Other intangible assets 4,005 35,432
Current liabilities (778) (6,883)
Non-current liabilities (1) (16)
Foreign currency translation adjustment (60) (532)
Equity acquisition price
Cash and cash equivalents of newly consolidated subsidiaries
11,853
(230)
104,853
(2,042)
Net: purchase of shares of subsidiaries resulting in change in scope of consolidation 11,622 102,810
4 Main components of assets and liabilities in relation to the business transfer in exchange for cash and cash equivalents
Fiscal year ended December 31, 2016
Components of assets and liabilities acquired through transfer of business, and the relationship between the amount of the acquisition of business and payments for transfer of business are as follows:
(Millions of yen)
Current assets 121
Non-current assets 747
Goodwill 715
Current liabilities (77)
Foreign currency translation adjustment (13)
Acquisition cost for transfer of business 1,493
Payments for transfer of business 1,493
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Leases
1. Finance lease transactions
(Lessee)
Finance lease transactions that do not transfer ownership
i) Contents of leased assets
(a) Property, plant and equipment
Furniture for operations (other) and vending machines (other)
(b) Intangible assets
Software
ii) Depreciation method of leased assets
Depreciation of leased assets is as stated in “iii) Leased assets” of “(2) Accounting policy for depreciation of significant assets” under “4. Disclosure of accounting policies” in Significant Accounting Policies for Preparation of Consolidated Financial Statements.
Finance lease transactions that do not transfer ownership whose transaction commenced on or before December 31, 2008, are accounted for using the accounting treatment that conforms to methods for operating lease transactions. The details are as follows:
(1) Amount equivalent to acquisition cost, amount equivalent to accumulated depreciation, amount equivalent to impairment loss and amount equivalent to year-end balance of leased properties
(Millions of yen)
As of December 31, 2015
Amount equivalent to acquisition cost
Amount equivalent to accumulated depreciation
Amount equivalent to impairment loss
Amount equivalent to year-end balance
Machinery, equipment and vehicles 48 48 – –
Other 4 3 – 0
Total 52 51 – 0
(Millions of yen)
As of December 31, 2016
Amount equivalent to acquisition cost
Amount equivalent to accumulated depreciation
Amount equivalent to impairment loss
Amount equivalent to year-end balance
Tools, furniture and fixtures 4 4 – 0
Total 4 4 – 0
(Millions of yen)
As of December 31, 2017
Amount equivalent to acquisition cost
Amount equivalent to accumulated depreciation
Amount equivalent to impairment loss
Amount equivalent to year-end balance
Tools, furniture and fixtures 4 4 – –
Total 4 4 – –
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(Thousands of U.S. dollars)
As of December 31, 2017
Amount equivalent to acquisition cost
Amount equivalent to accumulated depreciation
Amount equivalent to impairment loss
Amount equivalent to year-end balance
Tools, furniture and fixtures 37 37 – –
Total 37 37 – –
(Note) The amount equivalent to acquisition cost is calculated using the interest-inclusive method because the year-end balance of future lease payments accounts for a low percentage of the year-end balance of property, plant and equipment and others.
(2) Amount equivalent to year-end balance of future lease payments
As of
(Millions of yen) (Thousands of U.S.
dollars)
December 31, 2015 December 31, 2016 December 31, 2017 December 31, 2017
Due within 1 year 0 0 – –
Due after 1 year 0 – – –
Total 0 0 – –
(Note) The amount equivalent to year-end balance of future lease payments is calculated using the interest-inclusive method because the year-end balance of future lease payments accounts for a low percentage of the year-end balance of property, plant and equipment and others.
(3) Lease payments, reversal of accumulated impairment loss on leased assets, amount equivalent to depreciation and impairment loss
For the fiscal year ended
(Millions of yen) (Thousands of U.S.
dollars)
December 31, 2015 December 31, 2016 December 31, 2017 December 31, 2017
Lease payments 2 0 0 1
Reversal of accumulated impairment loss on leased assets
– – – –
Amount equivalent to depreciation 2 0 0 1
(4) Calculation method for the amount equivalent to depreciation
The amount is calculated using the straight-line method, with useful life which is the lease period, considering the residual value to be zero.
(Impairment loss)
There is no impairment loss allocated to leased assets.
- 32 -
2. Operating lease transactions
Future lease payments on non-cancellable transactions among operating lease transactions
(Lessee)
For the fiscal year ended
(Millions of yen) (Thousands of U.S.
dollars)
December 31, 2015 December 31, 2016 December 31, 2017 December 31, 2017
Due within 1 year 1,867 1,951 2,212 19,570
Due after 1 year 7,923 7,678 10,270 90,848
Total 9,791 9,629 12,482 110,418
(Lessor)
For the fiscal year ended
(Millions of yen) (Thousands of U.S.
dollars)
December 31, 2015 December 31, 2016 December 31, 2017 December 31, 2017
Due within 1 year 5,884 5,751 3,775 33,397
Due after 1 year 13,650 11,185 14,683 129,884
Total 19,534 16,936 18,458 163,281
Financial Instruments
1. Matters related to financial instruments
(1) Group policy regarding financial instruments
The Sapporo Group procures the funds it requires mainly through borrowings from banks and the issue of corporate bonds. Any temporary surpluses are then invested in highly secure, highly liquid financial assets. Short-term operating capital is procured through bank loans and commercial paper. Derivatives are not used for speculative purposes, but rather are used mainly to mitigate exposure to market risks associated with fluctuations in foreign exchange rates, interest rates and commodity values.
(2) Breakdown of financial instruments and related risks
Operating receivables, such as notes and accounts receivable – trade, are exposed to customer credit risks. To cope with these risks, the Sapporo Group, in line with internal regulations, engages in due date control and balance management for each respective business partner.
Securities and investment securities mainly consist of stocks of companies with which the Group has business relations and the investment of temporary surpluses in bonds. These securities are exposed to risks of market price volatility. The Sapporo Group periodically evaluates the fair value of these stocks and bonds. The Group also makes long-term loans to business partners and other entities.
Operating payables, such as notes and accounts payable – trade, are due for payment within 1 year.
Short-term loans payable and commercial paper consist mainly of operating funds procured for business transactions. Long-term loans payable and bonds payable are funds procured mainly for capital investment purposes. Long-term loans payable is exposed to risks of interest-rate and foreign exchange volatility. For certain long-term loans payable, the Sapporo Group uses derivatives transactions (interest rate swaps and currency swaps transactions) as a hedge against these risks.
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Currency-related derivatives transactions consist of forward foreign exchange contracts and currency swap transactions. Interest-rate derivatives transactions are interest rate swaps. Derivative financial instruments consist of commodity futures and commodity option transactions.
(3) Risk management system for financial instruments
i) Management of credit risks (risks associated with default, etc. by business partners)
Regarding operating receivables and long-term loans receivable, the Company and its major consolidated subsidiaries, in line with internal regulations at each company, periodically monitor the status of main business partners engaging the executive department of each business division. Along with managing due dates and balances for each partner, the Company and its major subsidiaries take steps to preventatively assess and mitigate losses from instances in which the recovery of receivables or loans may become doubtful due to deterioration, etc., in financial condition.
In derivatives transactions, the Company and its major subsidiaries, based on internal regulations, only enter into contracts with financial institutions possessing high credit ratings. These controls are followed as a rule to prevent the emergence of possible credit risks.
ii) Management of market risks (risks from exchange-rate, interest-rate volatility, etc.)
With regard to operating receivables and payables denominated in foreign currencies, the Company and certain of its consolidated subsidiaries use forward foreign exchange contracts to mitigate the risks of exchange-rate volatility to a certain extent. Interest rate swaps are also used to control volatility risks involved in the interest rates on borrowings. To mitigate exchange-rate volatility risks associated with foreign currency transactions, currency swap transactions are used. Commodity futures and commodity option transactions are used to hedge the risk of fluctuating raw material purchase prices to limit such risk within a certain range.
For securities and investment securities, the Company and its major consolidated subsidiaries periodically assess the fair value of the securities and the financial condition, etc. of the issuer (business partners), and, as necessary, review the holding status of such securities, taking into account their relationship with the business partner.
Derivatives transactions are executed and managed pursuant to internal regulations. These controls clearly stipulate matters pertaining to derivatives, including their purpose, product range, transaction counterparties, settlement approval procedures, the segregation of duties within executive departments, and the system for reporting such transactions. The balance and status of profit (loss) for derivatives transactions are reported periodically to the Board of Directors.
iii) Management of liquidity risk associated with fund procurement (risk of failing to meet payment due dates)
To minimize financial liabilities, the Sapporo Group has introduced a cash management system (CMS) for the Company to centrally manage fund allocation to the Company and its major consolidated subsidiaries. Financial divisions formulate plans for fund procurement and fund management in an effort to manage liquidity risk.
(4) Supplementary explanation of matters concerning fair value, etc. of financial instruments
Fair values of financial instruments comprise values determined based on market prices and values calculated reasonably when there is no market price. Because variable factors are incorporated into the calculation of the relevant values, the adoption of different terms and assumptions can cause fair values to vary. Furthermore, contract amounts for derivatives transactions stated in the note “Derivatives,” in themselves, should not be considered indicative of the market risk associated with derivatives transactions.
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2. Matters concerning fair value, etc. of financial instruments
Carrying value on the consolidated balance sheets, fair value and their variances are as follows. Items for which the assessment of fair value is not feasible were omitted (see Note 2).
Fiscal year ended December 31, 2015
(Millions of yen)
Carrying value Fair value Variance
(1) Cash and deposits 10,430 10,430 –
(2) Notes and accounts receivable – trade 92,335
Allowance for doubtful accounts (*1) (61)
92,273 92,273 –
(3) Investment securities
Other securities 54,653 54,653 –
(4) Long-term loans receivable (*2) 9,366
Allowance for doubtful accounts (*1) (6)
9,360 9,360 0
Total assets 166,718 166,718 0
(1) Notes and accounts payable – trade 36,772 36,772 –
(2) Short-term loans payable 19,219 19,219 –
(3) Commercial papers 17,000 17,000 –
(4) Accrued alcohol tax 33,903 33,903 –
(5) Income taxes payable 6,114 6,114 –
(6) Bonds payable (*3) 60,000 60,431 431
(7) Long-term loans payable (*4) 138,522 139,634 1,112
Total liabilities 311,532 313,075 1,543
Derivatives transactions to which (*5)
i) Hedge accounting is not applied 525 525 –
ii) Hedge accounting is applied (12) (12) –
Total derivatives transactions 513 513 –
(*1) Allowance for doubtful accounts corresponding to notes and accounts receivable – trade and long-term loans receivable has been deducted from the amount.
(*2) Current portion of long-term loans receivable is included in long-term loans receivable. (*3) Current portion of bonds is included in bonds payable. (*4) Current portion of long-term loans payable is included in long-term loans payable. (*5) Net receivables and payables resulted from derivatives transactions are presented on a net basis.
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Fiscal year ended December 31, 2016
(Millions of yen)
Carrying value Fair value Variance
(1) Cash and deposits 10,589 10,589 –
(2) Notes and accounts receivable – trade 96,850
Allowance for doubtful accounts (*1) (76)
96,773 96,773 –
(3) Investment securities
Other securities 52,318 52,318 –
(4) Long-term loans receivable (*2) 9,108
Allowance for doubtful accounts (*1) (5)
9,102 9,102 0
Total assets 168,784 168,784 0
(1) Notes and accounts payable – trade 38,503 38,503 –
(2) Short-term loans payable 18,506 18,506 –
(3) Commercial papers 33,000 33,000 –
(4) Accrued alcohol tax 34,228 34,228 –
(5) Income taxes payable 1,680 1,680 –
(6) Bonds payable (*3) 60,212 60,617 405
(7) Long-term loans payable (*4) 126,424 127,078 653
Total liabilities 312,555 313,613 1,058
Derivatives transactions to which (*5)
i) Hedge accounting is not applied 17 17 –
ii) Hedge accounting is applied 66 66 –
Total derivatives transactions 84 84 –
(*1) Allowance for doubtful accounts corresponding to notes and accounts receivable – trade and long-term loans receivable has been deducted from the amount.
(*2) Current portion of long-term loans receivable is included in long-term loans receivable. (*3) Current portion of bonds is included in bonds payable. (*4) Current portion of long-term loans payable is included in long-term loans payable. (*5) Net receivables and payables resulted from derivatives transactions are presented on a net basis.
- 36 -
Fiscal year ended December 31, 2017
(Millions of yen)
Carrying value Fair value Variance
(1) Cash and deposits 12,717 12,717 –
(2) Notes and accounts receivable – trade 98,604
Allowance for doubtful accounts (*1) (69)
98,535 98,535 –
(3) Investment securities
Held-to-maturity bonds 1,000 1,040 40
Other securities 54,278 54,278 –
(4) Long-term loans receivable (*2) 4,695
Allowance for doubtful accounts (*1) (0)
4,694 4,695 1
Total assets 171,226 171,268 41
(1) Notes and accounts payable – trade 36,530 36,530 –
(2) Short-term loans payable 15,355 15,355 –
(3) Commercial papers 32,000 32,000 –
(4) Accrued alcohol tax 34,408 34,408 –
(5) Income taxes payable 5,202 5,202 –
(6) Bonds payable (*3) 60,128 60,326 198
(7) Long-term loans payable (*4) 126,104 127,017 913
Total liabilities 309,729 310,840 1,111
Derivatives transactions to which (*5)
i) Hedge accounting is not applied (96) (96) –
ii) Hedge accounting is applied 14 14 –
Total derivatives transactions (81) (81) –
- 37 -
Fiscal year ended December 31, 2017
(Thousands of U.S. dollars)
Carrying value Fair value Variance
(1) Cash and deposits 112,497 112,497 –
(2) Notes and accounts receivable – trade 872,221
Allowance for doubtful accounts (*1) (610)
871,611 871,611 –
(3) Investment securities
Held-to-maturity bonds 8,845 9,205 360
Other securities 480,131 480,131 –
(4) Long-term loans receivable (*2) 41,533
Allowance for doubtful accounts (*1) (8)
41,525 41,535 10
Total assets 1,514,610 1,514,981 370
(1) Notes and accounts payable – trade 323,133 323,133 –
(2) Short-term loans payable 135,833 135,833 –
(3) Commercial papers 283,060 283,060 –
(4) Accrued alcohol tax 304,361 304,361 –
(5) Income taxes payable 46,018 46,018 –
(6) Bonds payable (*3) 531,877 533,629 1,751
(7) Long-term loans payable (*4) 1,115,472 1,123,552 8,080
Total liabilities 2,739,756 2,749,588 9,831
Derivatives transactions to which (*5)
i) Hedge accounting is not applied (850) (850) –
ii) Hedge accounting is applied 128 128 –
Total derivatives transactions (722) (722)
(*1) Allowance for doubtful accounts corresponding to notes and accounts receivable – trade and long-term loans receivable has been deducted from the amount.
(*2) Current portion of long-term loans receivable is included in long-term loans receivable. (*3) Current portion of bonds is included in bonds payable. (*4) Current portion of long-term loans payable is included in long-term loans payable. (*5) Net receivables and payables resulted from derivatives transactions are presented on a net basis.
- 38 -
(Note) 1. Calculation method for fair value of financial instruments and matters concerning securities and derivatives transactions
Assets
(1) Cash and deposits, and (2) Notes and accounts receivable – trade
Book value is used since the variance between fair value and book value is immaterial due to the short-term settlement of these accounts.
(3) Investment securities
In determining fair value, the stock market price is used for stocks. For bonds, the method for determining fair value is to discount the sum total of the outstanding principal and interest at an interest rate reflecting the credit risks. For matters concerning securities according to holding purposes, please refer to the note “Securities.”
(4) Long-term loans receivable
Within the Sapporo Group, the fair value of long-term loans receivable is calculated as follows. Loans are first classified into certain periods. The fair value is then calculated at present value obtained by discounting the future cash flows at a rate that is derived by adding a credit spread on top of an appropriate indicator such as yield on a government bond, according to the credit risk category for credit management purposes. The fair value of potentially doubtful receivables is calculated either at discounted present value of estimated future cash flows using the same discount rate formula, or based on the projected amount of collateral or guarantees deemed recoverable and others.
Liabilities
(1) Notes and accounts payable – trade, (2) Short-term loans payable, (3) Commercial papers, (4) Accrued alcohol tax, and (5) Income taxes payable
Book value is used since the variance between market value and book value is immaterial due to the short-term settlement of these accounts.
(6) Bonds payable
The fair value of bonds issued by the Company is calculated based on the market price for bonds that have market prices.
(7) Long-term loans payable
For long-term loans payable, the method for determining fair value is to discount the sum total of the outstanding principal and interest by the estimated interest-rate cost of refinancing it. Long-term loans payable based on variable interest rates are subject to the special treatments for interest rate swaps and allocation treatments for currency swaps. This is calculated by discounting the sum total amount of principal and interest, which is treated as a unit including said interest rate swaps and currency swaps, at a reasonably estimated interest rate that applies when refinancing.
Derivatives transactions
Please refer to the note “Derivatives.”
(Note) 2. Financial instruments for which the assessment of fair value is extremely difficult
As of
(Millions of yen) (Thousands of U.S.
dollars)
December 31, 2015 December 31, 2016 December 31, 2017 December 31, 2017
Unlisted stocks, etc. (*1) 7,194 6,977 6,866 60,741
Guarantee deposits received (*2) 32,833 33,241 31,086 274,979
(*1) Since unlisted stocks, etc. have no market price and their future cash flows cannot be estimated, it is considered
extremely difficult to assess the fair value. Therefore, unlisted stocks, etc. are not included in “(3) Investment
securities.”
(*2) Since guarantee deposits received have no market price and their future cash flows cannot be estimated, it is
considered extremely difficult to assess the fair value. Therefore, guarantee deposits received are not subject to
disclosure of the fair value.
- 39 -
(Note) 3. Estimate of monetary claims and securities with maturity due for redemption after the end of fiscal year
Fiscal year ended December 31, 2015
(Millions of yen)
Within 1 year Over 1 year and within 5 years
Over 5 years and within 10 years
Over 10 years
Cash and deposits 7,813 – – –
Notes and accounts receivable – trade 92,335 – – –
Long-term loans receivable 350 893 65 8,057
Total 100,499 893 65 8,057
Fiscal year ended December 31, 2016
(Millions of yen)
Within 1 year Over 1 year and within 5 years
Over 5 years and within 10 years
Over 10 years
Cash and deposits 5,946 – – –
Notes and accounts receivable – trade 96,850 – – –
Long-term loans receivable 4,319 4,616 47 126
Total 107,116 4,616 47 126
Fiscal year ended December 31, 2017
(Millions of yen)
Within 1 year Over 1 year and within 5 years
Over 5 years and within 10 years
Over 10 years
Cash and deposits 7,696 – – –
Notes and accounts receivable – trade 98,604 – – –
Long-term loans receivable 4,267 335 60 31
Total 110,568 335 60 31
(Thousands of U.S. dollars)
Within 1 year Over 1 year and within 5 years
Over 5 years and within 10 years
Over 10 years
Cash and deposits 68,078 – – –
Notes and accounts receivable – trade 872,221 – – –
Long-term loans receivable 37,748 2,970 538 276
Total 978,048 2,970 538 276
- 40 -
(Note) 4. Estimate of bonds payable, long-term loans payable and other interest-bearing liabilities due for repayment after the end of fiscal year
Fiscal year ended December 31, 2015
(Millions of yen)
Category Within 1 year Over 1 year
and within 2 years
Over 2 years and
within 3 years
Over 3 years and
within 4 years
Over 4 years and
within 5 years Over 5 years
Short-term loans payable 19,219 – – – – –
Commercial papers 17,000 – – – – –
Bonds payable 10,000 10,000 10,000 10,000 20,000 –
Long-term loans payable 46,602 13,214 19,372 17,284 19,379 22,667
Total 92,822 23,214 29,372 27,284 39,379 22,667
Fiscal year ended December 31, 2016
(Millions of yen)
Category Within 1 year Over 1 year
and within 2 years
Over 2 years and
within 3 years
Over 3 years and
within 4 years
Over 4 years and
within 5 years Over 5 years
Short-term loans payable 18,506 – – – – –
Commercial papers 33,000 – – – – –
Bonds payable 10,083 10,068 10,013 20,013 10,008 26
Long-term loans payable 11,830 22,542 20,518 19,790 17,467 34,274
Total 73,420 32,611 30,531 39,803 27,475 34,300
Fiscal year ended December 31, 2017
(Millions of yen)
Category Within 1 year Over 1 year
and within 2 years
Over 2 years and
within 3 years
Over 3 years and
within 4 years
Over 4 years and
within 5 years Over 5 years
Short-term loans payable 15,355 – – – – –
Commercial papers 32,000 – – – – –
Bonds payable 10,068 10,013 20,013 10,008 10,003 22
Long-term loans payable 22,526 20,454 19,511 19,543 14,540 29,528
Total 79,950 30,467 39,524 29,551 24,543 29,551
(Thousands of U.S. dollars)
Category Within 1
year
Over 1 year and
within 2 years
Over 2 years and
within 3 years
Over 3 years and
within 4 years
Over 4 years and
within 5 years Over 5 years
Short-term loans payable 135,833 – – – – –
Commercial papers 283,060 – – – – –
Bonds payable 89,059 88,573 177,029 88,528 88,484 201
Long-term loans payable 199,257 180,935 172,589 172,872 128,619 261,198
Total 707,211 269,508 349,618 261,401 217,103 261,399
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Securities
1. Trading securities
Not applicable
2. Held-to-maturity debt securities
As of December 31, 2015
Not applicable
As of December 31, 2016
Not applicable
As of December 31, 2017
(Millions of yen)
Classification Carrying value Fair value Variance
Securities whose fair value exceeds their carrying value
(1) Government
and municipal
bonds
– – –
(2) Corporate
bonds 1,000 1,040 40
(3) Other – – –
Subtotal 1,000 1,040 40
Securities whose fair value does not exceed their carrying value
(1) Government
and municipal
bonds
– – –
(2) Corporate
bonds – – –
(3) Other – – –
Subtotal – – –
Total 1,000 1,040 40
- 42 -
(Thousands of U.S. dollars)
Classification Carrying value Fair value Variance
Securities whose fair value exceeds their carrying value
(1) Government
and municipal
bonds
– – –
(2) Corporate
bonds 8,845 9,205 360
(3) Other – – –
Subtotal 8,845 9,205 360
Securities whose fair value does not exceed their carrying value
(1) Government
and municipal
bonds
– – –
(2) Corporate
bonds – – –
(3) Other – – –
Subtotal – – –
Total 8,845 9,205 360
3. Other securities
As of December 31, 2015
(Millions of yen)
Classification Carrying value Acquisition cost Variance
Securities whose carrying value exceeds their acquisition cost
(1) Stock 50,713 15,305 35,407
(2) Debt securities 16 16 0
(3) Other – – –
Subtotal 50,729 15,321 35,407
Securities whose carrying value does not exceed their acquisition cost
(1) Stock 3,924 4,453 (529)
(2) Debt securities – – –
(3) Other – – –
Subtotal 3,924 4,453 (529)
Total 54,653 19,774 34,878
(Note) Unlisted stocks, etc. (carrying value: ¥7,194 million) have no observable market price and it is unfeasible to assess fair value. Such stocks have been excluded from the above.
- 43 -
As of December 31, 2016
(Millions of yen)
Classification Carrying value Acquisition cost Variance
Securities whose carrying value exceeds their acquisition cost
(1) Stock 48,751 16,654 32,096
(2) Debt securities – – –
(3) Other – – –
Subtotal 48,751 16,654 32,096
Securities whose carrying value does not exceed their acquisition cost
(1) Stock 3,566 3,965 (398)
(2) Debt securities – – –
(3) Other – – –
Subtotal 3,566 3,965 (398)
Total 52,318 20,620 31,698
(Note) Unlisted stocks, etc. (carrying value: ¥6,977 million) have no observable market price and it is unfeasible to assess fair value. Such stocks have been excluded from the above.
As of December 31, 2017
(Millions of yen)
Classification Carrying value Acquisition cost Variance
Securities whose carrying value exceeds their acquisition cost
(1) Stock 53,294 16,037 37,257
(2) Debt securities – – –
(3) Other – – –
Subtotal 53,294 16,037 37,257
Securities whose carrying value does not exceed their acquisition cost
(1) Stock 984 1,249 (265)
(2) Debt securities – – –
(3) Other – – –
Subtotal 984 1,249 (265)
Total 54,278 17,286 36,991
(Note) Unlisted stocks, etc. (carrying value: ¥6,866 million) have no observable market price and it is unfeasible to assess fair value. Such stocks have been excluded from the above.
- 44 -
(Thousands of U.S. dollars)
Classification Carrying value Acquisition cost Variance
Securities whose carrying value exceeds their acquisition cost
(1) Stock 471,422 141,858 329,563
(2) Debt securities – – –
(3) Other – – –
Subtotal 471,422 141,858 329,563
Securities whose carrying value does not exceed their acquisition cost
(1) Stock 8,709 11,055 (2,345)
(2) Debt securities – – –
(3) Other – – –
Subtotal 8,709 11,055 (2,345)
Total 480,131 152,914 327,217
(Note) Unlisted stocks, etc. (carrying value: $60,741 thousand) have no observable market price and it is unfeasible to assess fair value. Such stocks have been excluded from the above.
4. The realized gain and loss on sales of other securities
Fiscal year ended December 31, 2015
(Millions of yen)
Classification Sales Gain on sales of
securities Loss on sales of
securities
(1) Stock 276 46 –
(2) Debt securities
i) Government and municipal bonds – – –
ii) Corporate bonds – – –
iii) Other – – –
(3) Other – – –
Total 276 46 –
Fiscal year ended December 31, 2016
(Millions of yen)
Classification Sales Gain on sales of
securities Loss on sales of
securities
(1) Stock 121 13 –
(2) Debt securities
i) Government and municipal bonds – – –
ii) Corporate bonds – – –
iii) Other – – –
(3) Other – – –
Total 121 13 –
- 45 -
Fiscal year ended December 31, 2017
(Millions of yen)
Classification Sales Gain on sales of
securities Loss on sales of
securities
(1) Stock 8,278 4,836 –
(2) Debt securities
i) Government and municipal bonds – – –
ii) Corporate bonds – – –
iii) Other – – –
(3) Other – – –
Total 8,278 4,836 –
(Thousands of U.S. dollars)
Classification Sales Gain on sales of
securities Loss on sales of
securities
(1) Stock 73,226 42,778 –
(2) Debt securities
i) Government and municipal bonds – – –
ii) Corporate bonds – – –
iii) Other – – –
(3) Other – – –
Total 73,226 42,778 –
5. Marketable securities written down for impairment loss
Marketable securities were written down by ¥1,758 million for impairment loss (¥1,758 million of other securities) in the fiscal year ended December 31, 2015.
Marketable securities were written down by ¥22 million for impairment loss (¥22 million of other securities) in the fiscal year ended December 31, 2016.
Marketable securities were written down by ¥254 million ($2,246 thousand) for impairment loss (¥254 million ($2,246 thousand) of other securities) in the fiscal year ended December 31, 2017.
Marketable securities are written down when their market value falls by 50% or more than their acquisition cost at the fiscal year-end. If their value falls by between 30% and 50%, the Company records the amount of write-downs deemed necessary based on the possibility of recovery for individual securities.
- 46 -
Derivatives
1. Derivatives transactions to which hedge accounting is not applied
(1) Currency-related
As of December 31, 2015
(Millions of yen)
Category Type of transaction Contract amountContract
amount payable after one year
Fair value Valuation gain
(loss)
Transactions other than market transactions
Forward foreign exchange contract
Purchased
USD 2,384 1,072 334 334
Sold
USD 186 – (33) (33)
Currency swaps
Receiving in USD, paying in CAD 727 – 3 3
Total 3,298 1,072 304 304
(Note) Calculation method for fair value
It is calculated based on a price, etc. provided by counterparty financial institutions and others.
As of December 31, 2016
(Millions of yen)
Category Type of transaction Contract amountContract
amount payable after one year
Fair value Valuation gain
(loss)
Transactions other than market transactions
Forward foreign exchange contract
Purchased
USD 1,674 – 39 39
Sold
USD 114 – (16) (16)
Currency swaps
Receiving in USD, paying in CAD 116 – 0 0
Total 1,905 – 23 23
(Note) Calculation method for fair value
It is calculated based on a price, etc. provided by counterparty financial institutions and others.
- 47 -
As of December 31, 2017
(Millions of yen)
Category Type of transaction Contract amountContract
amount payable after one year
Fair value Valuation gain
(loss)
Transactions other than market transactions
Forward foreign exchange contract
Purchased
USD 1,619 – 3 3
Sold
USD 40 – (2) (2)
Total 1,659 – 0 0
(Thousands of U.S. dollars)
Category Type of transaction Contract amountContract
amount payable after one year
Fair value Valuation gain
(loss)
Transactions other than market transactions
Forward foreign exchange contract
Purchased
USD 14,323 – 29 29
Sold
USD 354 – (25) (25)
Total 14,677 – 4 4
(Note) Calculation method for fair value
It is calculated based on a price, etc. provided by counterparty financial institutions and others.
- 48 -
(2) Commodity-related
As of December 31, 2015
(Millions of yen)
Category Type of transaction Contract amountContract
amount payable after one year
Fair value Valuation gain
(loss)
Market transactions
Commodity option contract
Purchased
Call 2 – 14 14
Sold
Put 8 – 8 8
Commodity future trading
Purchased 2,010 – 198 198
Total 2,022 – 220 220
(Note) Calculation method for fair value
It is calculated based on the final price of the Intercontinental Exchange (ICE) in the U.S. and others as at the end of the fiscal year.
As of December 31, 2016
(Millions of yen)
Category Type of transaction Contract amountContract
amount payable after one year
Fair value Valuation gain
(loss)
Market transactions
Commodity option contract
Purchased
Call 5 – (2) (2)
Sold
Put 7 – (0) (0)
Commodity future trading
Purchased 121 – (2) (2)
Total 134 – (5) (5)
(Note) Calculation method for fair value
It is calculated based on the final price of the Intercontinental Exchange (ICE) in the U.S. and others as at the end of the fiscal year.
- 49 -
As of December 31, 2017
(Millions of yen)
Category Type of transaction Contract amountContract
amount payable after one year
Fair value Valuation gain
(loss)
Market transactions
Commodity option contract
Purchased
Call 0 – 0 0
Sold
Put 91 – (79) (79)
Commodity future trading
Purchased 413 – (17) (17)
Total 504 – (96) (96)
(Thousands of U.S. dollars)
Category Type of transaction Contract amountContract
amount payable after one year
Fair value Valuation gain
(loss)
Market transactions
Commodity option contract
Purchased
Call 2 – 0 0
Sold
Put 807 – (701) (701)
Commodity future trading
Purchased 3,653 – (153) (153)
Total 4,463 – (854) (854)
(Note) Calculation method for fair value
It is calculated based on the final price of the Intercontinental Exchange (ICE) in the U.S. and others as at the end of the fiscal year.
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2. Derivatives transactions to which hedge accounting is applied
(1) Currency-related
As of December 31, 2015
(Millions of yen)
Hedge accounting method
Type of transaction Main hedged
item Contract amount
Contract amount payable after one year
Fair value
Allocation treatment applied to forward foreign exchange contracts
Forward foreign exchange contract
Purchased
USD Accounts payable 130 – (1)
EUR Accounts payable 600 – (10)
Allocation treatment applied to currency swaps
Receiving in USD, paying in JPY
Long-term loans payable 11,804 11,804 (Note 2.)
Total 12,534 11,804 (12)
(Notes) 1. Calculation method for fair value
It is calculated based on a price, etc. provided by counterparty financial institutions and others.
2. Because those based on currency swap allocation treatments are treated as a unit with long-term loans payable, which are regarded as hedged items, their fair value is shown inclusive of the fair value of the long-term loans payable.
As of December 31, 2016
(Millions of yen)
Hedge accounting method
Type of transaction Main hedged
item Contract amount
Contract amount payable after one year
Fair value
Allocation treatment applied to forward foreign exchange contracts
Forward foreign exchange contract
Purchased
USD Accounts payable 127 – 15
EUR Accounts payable 711 – 50
Sold
USD Accounts receivable 112 – 0
Allocation treatment applied to currency swaps
Receiving in USD, paying in JPY
Long-term loans payable 11,804 6,804 (Note 2.)
Total 12,755 6,804 66
(Notes) 1. Calculation method for fair value
It is calculated based on a price, etc. provided by counterparty financial institutions and others.
2. Because those based on currency swap allocation treatments are treated as a unit with long-term loans payable, which are regarded as hedged items, their fair value is shown inclusive of the fair value of the long-term loans payable.
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As of December 31, 2017
(Millions of yen)
Hedge accounting method
Type of transaction Main hedged
item Contract amount
Contract amount payable after one year
Fair value
Allocation treatment applied to forward foreign exchange contracts
Forward foreign exchange contract
Purchased
USD Accounts payable 167 – 3
EUR Accounts payable 617 – 8
Sold
USD Accounts receivable 192 – 0
USD Accounts receivable – other
693 – 1
Allocation treatment applied to currency swaps
Received in USD, paid in JPY
Long-term loans payable 6,804 1,804 (Note 2.)
Total 8,476 1,804 14
(Thousands of U.S. dollars)
Hedge accounting method
Type of transaction Main hedged
item Contract amount
Contract amount payable after one year
Fair value
Allocation treatment applied to forward foreign exchange contracts
Forward foreign exchange contract
Purchased
USD Accounts payable 1,486 – 26
EUR Accounts payable 5,464 – 78
Sold
USD Accounts receivable 1,703 – 8
USD Accounts receivable – other
6,133 – 14
Allocation treatment applied to currency swaps
Receiving in USD, paying in JPY
Long-term loans payable 60,188 15,960
Total 74,975 15,960 128
(Notes) 1. Calculation method for fair value
It is calculated based on a price, etc. provided by counterparty financial institutions and others.
2. Because those based on currency swap allocation treatments are treated as a unit with long-term loans payable, which are regarded as hedged items, their fair value is shown inclusive of the fair value of the long-term loans payable.
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(2) Interest rate-related
As of December 31, 2015
(Millions of yen)
Hedge accounting method
Type of transaction Main hedged
item Contract amount
Contract amount payable after one year
Fair value
Special treatment for interest rate swaps
Interest rate swaps Receive variable rate, pay fixed rate
Long-term loans payable 54,995 49,572 (Note)
(Note) Because those based on special treatment for interest rate swaps are treated as a unit with long-term loans payable, which are regarded as hedged items, their fair value is recorded inclusive of the fair value of the long-term loans payable.
As of December 31, 2016
(Millions of yen)
Hedge accounting method
Type of transaction Main hedged
item Contract amount
Contract amount payable after one year
Fair value
Special treatment for interest rate swaps
Interest rate swaps Receive variable rate, pay fixed rate
Long-term loans payable 49,367 44,226 (Note)
(Note) Because those based on special treatment for interest rate swaps are treated as a unit with long-term loans payable, which are regarded as hedged items, their fair value is recorded inclusive of the fair value of the long-term loans payable.
As of December 31, 2017
(Millions of yen)
Hedge accounting method
Type of transaction Main hedged
item Contract amount
Contract amount payable after one year
Fair value
Special treatment for interest rate swaps
Interest rate swaps Receive variable rate, pay fixed rate
Long-term loans payable 37,243 33,243 (Note)
(Thousands of U.S. dollars)
Hedge accounting method
Type of transaction Main hedged
item Contract amount
Contract amount payable after one year
Fair value
Special treatment for interest rate swaps
Interest rate swaps Receive variable rate, pay fixed rate
Long-term loans payable 329,445 294,062 (Note)
(Note) Because those based on special treatment for interest rate swaps are treated as a unit with long-term loans payable, which are regarded as hedged items, their fair value is recorded inclusive of the fair value of the long-term loans payable.
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Retirement Benefits
1. Outline of the current retirement benefit plans
The Company and its consolidated subsidiaries have corporate welfare pension fund plans, defined contribution pension plans and lump-sum retirement payment plans. Certain consolidated subsidiaries have joined the Smaller Enterprise Retirement Allowance Mutual Aid System. In addition, certain consolidated subsidiaries have set up a retirement benefits trust. When employees leave, they are entitled, in certain circumstances, to receive additional retirement benefits, which are not included in retirement benefit obligation that are based on actuarial calculations as prescribed by retirement benefit accounting.
2. Defined benefit plans
(1) Reconciliation of balance of retirement benefit obligation at the beginning of the period and at the end of the period (except for plans applying simplified methods in (3))
(Millions of yen) (Thousands of U.S. dollars)
For the fiscal year ended December 31,
2015 December 31,
2016 December 31,
2017
December 31, 2017
Balance of retirement benefit obligation at the beginning of the period
44,626 47,924 49,538 438,196
Cumulative effect of changes in accounting policies 4,799 – – –
Restated balance at the beginning of the period 49,425 47,924 49,538 438,196
Service cost 1,407 1,352 1,441 12,751
Interest cost 301 350 197 1,745
Actuarial gain or loss (694) 2,520 879 7,780
Payment of retirement benefits (2,516) (2,517) (2,508) (22,186)
Other – (92) – –
Balance of retirement benefit obligation at the end of the period 47,924 49,538 49,548 438,286
(2) Reconciliation of balance of pension plan assets at the beginning of the period and at the end of the period (except for plans applying simplified methods in (3))
(Millions of yen) (Thousands of U.S. dollars)
For the fiscal year ended December 31,
2015 December 31,
2016 December 31,
2017
December 31, 2017
Balance of pension plan assets at the beginning of the period 41,152 41,789 42,319 374,340
Expected return on plan assets 956 963 960 8,493
Actuarial gain or loss (222) (6) 1,655 14,644
Contribution from employer 2,225 1,855 2,987 26,430
Payment of retirement benefits (2,323) (2,281) (2,317) (20,501)
Balance of pension plan assets at the end of the period 41,789 42,319 45,605 403,406
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(3) Reconciliation of balance of net defined benefit liability at the beginning of the period and at the end of the period for plans applying simplified methods
(Millions of yen) (Thousands of U.S. dollars)
For the fiscal year ended December 31,
2015 December 31,
2016 December 31,
2017
December 31, 2017
Balance of net defined benefit liability at the beginning of the period
1,037 1,501 1,776 15,714
Retirement benefit expenses 264 190 207 1,832
Payment of retirement benefits (106) (108) (408) (3,616)
Contribution to the plans (24) (27) (25) (222)
Other 330 220 – –
Balance of net defined benefit liability at the end of the period 1,501 1,776 1,549 13,708
(4) Reconciliation of balance of retirement benefit obligation and pension plan assets at the end of the period and net defined benefit liability and asset stated on the consolidated balance sheets
(Millions of yen) (Thousands of U.S. dollars)
For the fiscal year ended December 31,
2015 December 31,
2016 December 31,
2017
December 31, 2017
Retirement benefit obligation for funded plans 45,732 47,260 47,210 417,602
Pension plan assets (42,036) (42,567) (45,859) (405,654)
3,695 4,693 1,350 11,948
Retirement benefit obligation for unfunded plans 3,940 4,301 4,142 36,640
Net amount of liabilities and assets on the consolidated balance sheets 7,636 8,995 5,492 48,589
Net defined benefit liability 7,636 8,995 5,492 48,589
Net amount of liabilities and assets on the consolidated balance sheets 7,636 8,995 5,492 48,589
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(5) Amounts of retirement benefit expenses and breakdown
(Millions of yen) (Thousands of U.S. dollars)
For the fiscal year ended December 31,
2015 December 31,
2016 December 31,
2017
December 31, 2017
Service cost 1,407 1,352 1,441 12,751
Interest cost 301 350 197 1,745
Expected return on plan assets (956) (963) (960) (8,493)
Amortization of net retirement benefit obligation at transition 1,503 – – –
Amortization of actuarial gain or loss 836 278 188 1,671
Amortization of past service cost (703) (703) (692) (6,122)
Retirement benefit expenses calculated by simplified methods 264 190 207 1,832
Retirement benefit expenses relating to defined benefit plans 2,653 504 382 3,386
(6) Remeasurements of defined benefit plans recognized during the period
The breakdown of remeasurements of defined benefit plans recognized during the period (before tax effects) is as follows.
(Millions of yen) (Thousands of U.S. dollars)
For the fiscal year ended December 31,
2015 December 31,
2016 December 31,
2017
December 31, 2017
Net retirement benefit obligation at transition (1,503) – – –
Actuarial gain or loss (1,308) 2,156 (964) (8,535)
Past service cost 703 703 692 6,122
Total (2,107) 2,860 (272) (2,413)
(7) Remeasurements of defined benefit plans
The breakdown of remeasurements of defined benefit plans (before tax effects) is as follows.
(Millions of yen) (Thousands of U.S. dollars)
For the fiscal year ended December 31,
2015 December 31,
2016 December 31,
2017
December 31, 2017
Unrecognized actuarial gain or loss 335 2,491 1,526 13,506
Unrecognized past service cost (3,136) (2,432) (1,740) (15,398)
Total (2,801) 59 (213) (1,891)
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(8) Matters related to pension plan assets
i) Main breakdown of pension plan assets
The ratio of each major category to total pension plan assets is as follows.
For the fiscal year ended December 31, 2015 December 31, 2016 December 31, 2017
Bonds 44% 38% 39%
Stocks 22 28 30
Cash and deposits 2 2 1
Life insurance general account 23 24 23
Other 9 9 7
Total 100 100 100
ii) Method of determining expected long-term rate of return
To determine the expected long-term rate of return on pension plan assets, the Company considers the current and expected allocation of pension plan assets, and the current and expected long-term rates of return on the various assets comprising the pension plan assets.
(9) Matters related to actuarial assumptions
Major actuarial assumptions
For the fiscal year ended December 31, 2015 December 31, 2016 December 31, 2017
Discount rate 0.5-0.7% 0.3-0.5% 0.5-0.7%
Expected long-term rate of return 0.8-2.5 0.8-2.5 0.5-2.5
Planned remuneration increase rate 0.8-5.7 0.8-5.7 1.5-5.7
3. Defined contribution plans
The required contribution amount for the defined contribution plans of the Company and its consolidated subsidiaries at December 31, 2015, 2016 and 2017 were ¥462 million, ¥504 million and ¥814 million ($7,201 thousand), respectively.
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Tax Effect Accounting
1. Significant components of deferred tax assets and liabilities
(Millions of yen) (Thousands of U.S.
dollars)
As of December 31, 2015 December 31, 2016 December 31, 2017 December 31, 2017
Deferred tax assets:
Tax loss carryforwards 2,506 8,130 10,297 91,090
Non-current assets 3,358 4,302 4,533 40,100
Accrued expenses 2,366 2,374 2,455 21,721
Securities 2,316 2,199 2,099 18,572
Net defined benefit liability 2,495 2,825 1,741 15,400
Gift coupon income 1,712 1,405 1,243 11,003
Provision for bonuses 588 856 829 7,335
Allowance for doubtful accounts 403 404 492 4,355
Asset retirement obligations 385 403 407 3,605
Other 2,192 1,911 1,852 16,405
Gross deferred tax assets 18,327 24,813 25,955 229,591
Valuation allowance (6,670) (13,797) (15,663) (138,553)
Total deferred tax assets 11,657 11,016 10,291 91,037
Deferred tax liabilities:
Valuation difference on other securities (11,199) (9,914) (11,349) (100,390)
Non-current assets (7,949) (7,724) (6,963) (61,599)
Reserve for advanced depreciation of non-current assets
(6,632) (6,272) (6,652) (58,842)
Gain on valuation of assets received through merger (469) (446) (427) (3,784)
Other (1,207) (847) (984) (8,711)
Total deferred tax liabilities (27,457) (25,206) (26,377) (233,327)
Net deferred tax liabilities (15,800) (14,190) (16,085) (142,290)
(Note) Net deferred tax liabilities are included in the following accounts on the consolidated balance sheets.
(Millions of yen)
(Thousands of U.S. dollars)
As of December 31, 2015 December 31, 2016 December 31, 2017 December 31, 2017
Current assets - Deferred tax assets 4,457 3,639 3,900 34,499
Non-current assets - Deferred tax assets 1,009 1,070 1,306 11,556
Current liabilities - Other (51) (96) (0) (0)
Non-current liabilities - Deferred tax liabilities (21,216) (18,804) (21,292) (188,345)
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2. Reconciliation of significant difference between the effective statutory tax rate and effective tax rates reflected in the consolidated statements of income
For the fiscal year ended December 31, 2015 December 31, 2016 December 31, 2017
Effective statutory tax rates 35.6% 33.1% 30.9%
Effect of:
Disallowed expenses, including entertainment expenses 3.4 2.1 2.1
Dividends and other income deductible for income tax purposes (1.9) (0.8) (0.5)
Inhabitants’ per capita taxes 2.5 1.6 1.3
Tax deductions (4.3) (2.3) (1.7)
Changes in valuation allowance (7.6) 3.9 5.2
The tax rate difference of overseas subsidiary company 0.7 (0.5) 1.2
Amortization of goodwill 11.2 7.9 6.8
Loss on impairment of goodwill 6.3 0.1 –
Other, net 1.7 (2.3) 0.7
Effective tax rates reflected in the consolidated statements of income 47.7 42.8 46.0
3. Amendment to amounts of deferred tax assets and liabilities due to changes in income tax rates
For the fiscal year ended December 31, 2015
The “Act for Partial Amendment of the Income Tax Act, etc.” (Act No. 9 of 2015) and the “Act for Partial Amendment of the Local Tax Act, etc.” (Act No. 2 of 2015) were promulgated on March 31, 2015, and the income tax rates were lowered for the fiscal years beginning on or after April 1, 2015. Accordingly, the effective statutory tax rates used for calculation of deferred tax assets and liabilities were changed in the fiscal year ended December 31, 2015, from the previously applied rate of 35.6% to 33.1% for temporary differences which were expected to be reversed in the fiscal year beginning on January 1, 2016, and to 32.3% for temporary differences which were expected to be reversed in fiscal years beginning on or after January 1, 2017.
Consequently, as of December 31, 2015, the amount of deferred tax liabilities (net of the amount of deferred tax assets) decreased by ¥990 million, whereas deferred income taxes, valuation difference on other securities and deferred gains or losses on hedges increased by ¥159 million, ¥1,149 million and ¥0 million, respectively.
For the fiscal year ended December 31, 2016
The “Act for Partial Amendment of the Income Tax Act, etc.” (Act No. 15 of 2016) and the “Act for Partial Amendment of the Local Tax Act, etc.” (Act No. 13 of 2016) were enacted in the Diet on March 29, 2016, and the “Act for Partial Amendment of the Act for Partial Amendment of the Consumption Tax Act and Others to Make Fundamental Reform of the Taxation System for Securing Stable Financial Resources for Social Security, etc.” (Act No. 85 of 2016) and the “Act for Partial Amendment of the Act for Partial Amendment of the Local Tax Act and the Local Allocation Tax Act to Make Fundamental Reform of the Taxation System for Securing Stable Financial Resources for Social Security, etc.” (Act No. 86 of 2016) were enacted in the Diet on November 18, 2016. Then, in the fiscal year ended December 31, 2016, the effective statutory tax rates used for calculation of deferred tax assets and liabilities were changed (only for those which are reversed on and after January 1, 2017) from 32.3% in the fiscal year ended December 31, 2015 to 30.9% for those which are expected to be collected or paid during the period from January 1, 2017 to December 31, 2018, and to 30.6% for those which are expected to be collected or paid on or after January 1, 2019.
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Consequently, as of December 31, 2016, the amount of deferred tax liabilities (net of the amount of deferred tax assets) decreased by ¥481 million, whereas deferred income taxes, valuation difference on other securities and deferred gains or losses on hedges increased by ¥22 million, ¥503 million and ¥0 million, respectively.
For the fiscal year ended December 31, 2017
On December 22, 2017 (U.S. local time), a tax reform act was enacted in the United States, effectively lowering the federal income tax rates for fiscal years beginning on and after January 1, 2018. Consequently, deferred tax assets and deferred tax liabilities in U.S. consolidated subsidiaries were calculated using the effective statutory tax rate based on the tax rate after the revision.
As a result, as of December 31, 2017, deferred tax liabilities (amount after deducting the amount of deferred tax assets) and deferred income taxes have both decreased by ¥366 million ($3,240 thousand).
Business Combinations
[Business combinations by acquisition]
(Country Pure Foods, Inc.)
Fiscal year ended December 31, 2015
The Company’s consolidated subsidiary Sapporo International Inc. (“SI”) and Toyota Tsusho Group company Toyota Tsusho America, Inc. (“TAI”) acquired the shares of Country Pure Foods, Inc. (“CPF”), a major food service juice manufacturer in the U.S., through Silver Springs Citrus, Inc. (“SSC”), a U.S. juice manufacturing joint venture of SI and TAI.
1. Outline of the business combination
(1) Name and business content of acquired company
Name: Country Pure Foods, Inc.
Location: Akron, Ohio, U.S.
Business content: Manufacture and sales of juices for commercial use (school and hospital catering services)
Manufacture and sales of retail chain private label juices
Licensed manufacture and sales of leading-brand juices
(2) Major reason for the business combination
The Sapporo Group formulated the Sapporo Group Medium-term Management Plan 2014-2016 in February 2014, and has accelerated its growth strategy as a “manufacturer of food products.” It is taking steps to achieve the financial targets for 2016 by generating synergies among Group companies and by pursuing M&As.
As part of the plan, SI has defined North America, its operational base, together with the fast-growing Asian market, as its first priority markets for the beer business. It has also launched its soft drinks business in North America by acquiring SSC in 2012. Since then, it has been accumulating expertise and knowledge in that market.
Looking ahead, SI will maximize synergies with SSC by bringing CPF into its corporate Group together with TAI, its partner in the North American soft drinks business, to accelerate its growth strategy for the international business in North America, including the beer business.
(3) Counterparty to the acquisition of shares
Mistral Winthorpe Holdings, LLC. and others
(4) Date of business combination
February 24, 2015
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(5) Legal form of business combination
Shares were acquired for a cash consideration.
(6) Name of acquired company after acquisition
No change
(7) Share of acquired voting rights
51%
(8) Main grounds for determining the acquired company
A consolidated subsidiary of the Company acquired the shares for a cash consideration.
2. Period for which the acquired company’s results are included in the consolidated financial statements
The acquired company’s results from February 24, 2015 to December 31, 2015 are included.
3. Purchase price for the acquired company and its breakdown
Considerations transferred: ¥4,370 million
Costs incurred directly for acquisition: ¥491 million
Purchase price: ¥4,861 million
4. Amount of goodwill arising, reason for its recognition, amortization method and amortization period
(1) Amount of goodwill
¥4,162 million
The amount of goodwill is calculated on a tentative basis, because the designation and calculation of fair value of assets and liabilities that are identifiable on the date of business combination are incomplete and the purchase price allocation has not been completed.
(2) Reason for its recognition
Future business activities are expected to generate excess profitability.
(3) Amortization method and amortization period
9 years with the straight-line method
5. Amount and major components of assets acquired and liabilities assumed at the date of business combination
Current assets ¥3,306 million
Non-current assets ¥10,135 million
Total assets ¥13,441 million
Current liabilities ¥2,636 million
Non-current liabilities ¥8,982 million
Total liabilities ¥11,619 million
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6. Approximate effects on the consolidated statements of income for the fiscal year ended December 31, 2015, assuming that the business combination was completed on January 1, 2015, and method of calculation
Net sales ¥3,008 million
Loss ¥(6) million
(Method adopted to estimate approximate effects)
The approximate effects correspond to net sales and profit and loss information recorded on the acquiring company’s consolidated statements of income assuming that the business combination was completed on January 1, 2015.
Fiscal year ended December 31, 2016
1. Content and amount of adjustment in the case where a significant adjustment was made to the initial allocation amount of acquisition cost
In the fiscal year ended December 31, 2015, provisional accounting treatment was conducted for the purchase price allocation of Country Pure Foods, Inc. based on reasonable information, etc. available at the time of preparing the consolidated financial statements, and the purchase price allocation had not been completed.
In the fiscal year ended December 31, 2016, the amount of adjustment to goodwill due to completion of the purchase price allocation is as follows:
Items relevant to adjustment Adjustment of goodwill
Goodwill (before adjustment) ¥4,162 million
Intangible assets ¥310 million
Deferred tax assets ¥(20) million
Deferred tax liabilities ¥(76) million
Other adjustment ¥51 million
Adjustment of goodwill ¥264 million
Goodwill (after adjustment) ¥4,426 million
2. Amount of goodwill arising, reason for its recognition, amortization method and amortization period
i) Amount of goodwill
¥4,426 million
ii) Reason for its recognition
Future business activities are expected to generate excess profitability.
iii) Amortization method and amortization period
9 years with the straight-line method
(Anchor Brewing Company, LLC)
The Company acquired 100% of the outstanding shares of Anchor Brewing Company, LLC (hereinafter referred to as “Anchor”) through a subsidiary newly established in the U.S.
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1. Outline of the business combination
i) Name and business content of acquired company
• Name: Anchor Brewing Company, LLC (and one other company)
• Location: San Francisco, California, USA
• Business content: Beer brewing and sales
ii) Major reason for the business combination
In November 2016, the Sapporo Group formulated the new Long-Term Management Vision “SPEED 150” through 2026, the year marking the Group’s 150th anniversary since its founding. The vision set forth in SPEED 150 is for the Sapporo Group to be a company with highly unique brands in the fields of “Alcoholic Beverages,” “Food,” and “Soft Drinks” around the world.
Regarding its “Promote Global Business Expansion” policy, a key component of the Group’s growth strategy, the Sapporo Group is promoting a distinctive plan that prioritizes expanding business in North America, already a core part of the Group’s business foundation, and Southeast Asia, a regional market with high growth prospects.
The addition of Anchor’s strong brand power to the Sapporo Group’s US beer business portfolio through the equity acquisition is expected to generate further synergies and accelerate the growth of the Group’s US business.
iii) Counterparty to the acquisition of shares
Anchor Brewers & Distillers, LLC
iv) Date of business combination
August 31, 2017
v) Legal form of business combination
Equity shares were acquired for a cash consideration.
vi) Name of acquired company after acquisition
No change
vii) Proportion of equity shares acquired
100%
viii) Main basis for determining the acquiring company
A consolidated subsidiary of the Company acquired the equity shares for a cash consideration.
2. Period for which the acquired company’s results are included in the consolidated financial statements
The acquired company’s results from October 1, 2017 to December 31, 2017 are included.
3. Acquisition cost and consideration paid, by type, for the acquired company
Acquisition cost (cash): ¥11,913 million ($105,386 thousand)
4. Main acquisition-related expenses and amount
Advisory fees, commissions, etc.: ¥404 million ($3,576 thousand)
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5. Amount of goodwill arising, reason for its recognition, amortization method and amortization period
i) Amount of goodwill
¥3,532 million ($31,248 thousand)
ii) Reason for its recognition
Future business activities are expected to generate excess profitability.
iii) Amortization method and amortization period
12 years with the straight-line method
6. Amount and major components of assets acquired and liabilities assumed at the date of business combination
Current assets ¥1,126 million ($9,963 thousand)
Non-current assets ¥8,034 million ($71,074 thousand)
Total assets ¥9,161 million ($81,037 thousand)
Current liabilities ¥778 million ($6,883 thousand)
Non-current liabilities ¥1 million ($16 thousand)
Total liabilities ¥780 million ($6,900 thousand)
7. Approximate effects on the consolidated statements of income for the fiscal year ended December 31, 2017, assuming that the business combination was completed on January 1, 2017, and method of calculation
Net sales ¥2,577 million ($22,801 thousand)
Operating loss ¥(217) million ($1,926 thousand)
Loss attributable to owners of parent ¥(126) million ($1,116 thousand)
(Method adopted to estimate approximate effects)
The approximate effects correspond to net sales and profit and loss information recorded on the acquiring company’s consolidated statements of income assuming that the business combination was completed on January 1, 2017.
This note has not received audit certification.
Real Estate for Lease, etc.
The Sapporo Group holds office buildings and commercial facilities (including land) for lease in the Tokyo metropolitan and other areas. Net leasing income on those properties in the fiscal year ended December 31, 2015 was ¥7,606 million (leasing income was recorded as operating revenue; leasing expenses were mainly recorded as operating expenses). Net leasing income on those properties in the fiscal year ended December 31, 2016 was ¥9,453 million (leasing income was recorded as operating revenue; leasing expenses were mainly recorded as operating expenses). Net leasing income on those properties in the fiscal year ended December 31, 2017 was ¥10,625 million ($93,986 thousand) (leasing income was recorded as operating revenue; leasing expenses were mainly recorded as operating expenses).
The carrying value of those properties on the consolidated balance sheets, change in carrying value during the fiscal years and the fair value as of December 31, 2015, 2016 and 2017 appear in the following table.
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For the fiscal year ended
(Millions of yen) (Thousands of U.S.
dollars)
December 31, 2015 December 31, 2016 December 31, 2017 December 31, 2017Carrying value on consolidated balance sheets
At the beginning of the period 207,864 197,666 201,763 1,784,727
Change during the period (10,198) 4,097 (1,761) (15,582)
At the end of the period 197,666 201,763 200,001 1,769,145
Fair value at the end of the period 357,395 389,101 397,581 3,516,862
(Notes) 1. Carrying value on the consolidated balance sheets represents acquisition costs net of accumulated depreciation and accumulated impairment loss.
2. The change during the fiscal year ended December 31, 2015 comprises increase mainly arising from property acquisitions (¥6,595 million) and decrease mainly due to depreciation (¥3,804 million), sales (¥12,535 million), and disposal (¥328 million).
The change during the fiscal year ended December 31, 2016 comprises increase mainly arising from property acquisitions (¥10,134 million) and decrease mainly due to depreciation (¥3,804 million) and disposal, etc. (¥1,911 million).
The change during the fiscal year ended December 31, 2017 comprises increase mainly arising from property acquisitions (¥3,742 million ($33,100 thousand)) and decrease mainly due to depreciation (¥4,000 million ($35,389 thousand)), sales (¥266 million ($2,356 thousand)), and disposal (¥405 million ($3,583 thousand)).
3. The fair value at the end of the period is mainly based on property valuations performed by third-party real estate appraisers.
Segment Information, etc.
[Segment information]
1. Description of reportable segments
The Company’s reportable segments are components of the Sapporo Group about which separate financial information is available. These segments are subject to periodic examinations to enable the Company’s board of directors to decide how to allocate resources and assess performance.
Each of the Group’s business operating companies proposes business development and strategies for the products, services and sales markets in which it is involved and conducts business activities under the corporate umbrella of the Company, which is a pure holding company.
Accordingly, when reporting segments, the Company reports its five businesses of “Japanese Alcoholic Beverages,” “International,” “Food & Soft Drinks,” “Restaurants,” and “Real Estate” as its reportable segments, which have been mainly organized according to the products, services and sales markets in which each of the business operating companies and their subsidiaries and associates are involved.
The Japanese Alcoholic Beverages segment produces and sells alcoholic beverages in Japan, while the International segment produces and sells alcoholic beverages and soft drinks overseas.
The Food & Soft Drinks segment produces and sells foods and soft drinks.
The Restaurants segment operates restaurants of various styles.
The Real Estate segment’s activities include leasing of real estate.
2. Explanation of measurements of sales, profit (loss), asset, and other items for each reportable segment
Accounting methods applied in reportable segments by business largely correspond to those presented under “Significant Accounting Policies for Preparation of Consolidated Financial Statements.” Reportable segment profit is based on operating profit. Intersegment sales or transfers are based on the transaction prices among third parties.
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(Change to depreciation method)
As described in “Changes in accounting policies which are difficult to distinguish from changes in accounting estimates,” the depreciation method for property, plant and equipment in Japan has been changed with effect from the fiscal year ended December 31, 2016.
This change increased segment profit of Japanese Alcoholic Beverages segment by ¥957 million, Food & Soft Drinks segment by ¥374 million, Restaurants segment by ¥194 million and Real Estate segment by ¥105 million in the fiscal year ended December 31, 2016, compared with their respective figures calculated using the former method. The change also reduced segment loss of other businesses by ¥4 million and corporate costs by ¥51 million in the fiscal year ended December 31, 2016.
(Application of Accounting Standard for Retirement Benefits and its Guidance)
Effective from the fiscal year ended December 31, 2015, the Sapporo Group has applied the Accounting Standard for Retirement Benefits (Accounting Standards Board of Japan - ASBJ - Statement No. 26 of May 17, 2012) and the Guidance on Accounting Standard for Retirement Benefits (ASBJ Guidance No. 25 of March 26, 2015), in accordance with the provisions specified in the main clauses of paragraph 35 of the Accounting Standard for Retirement Benefits and paragraph 67 of the Guidance on Accounting Standard for Retirement Benefits. As a result, the method for calculating retirement benefit obligation and service cost has been revised, and the method for attributing projected amount of retirement benefit to periods has been changed from the straight-line basis to the benefit formula basis. As to the discount rate, it used to be calculated based on the periods, comparable to employees’ average remaining years of service. Under the new accounting standard, however, the method of determining the discount rate has now been changed to use a single weighted-average discount rate that reflects the periods until the expected payment of retirement benefits and the amount of projected benefits for every such period.
As a result, segment profit for Japanese Alcoholic Beverages increased by ¥160 million in the fiscal year ended December 31, 2015, compared with the figure calculated using the former method. The effect of the said revision on the segment profit in other segments than the Japanese Alcoholic Beverages is immaterial.
3. Disclosure of sales, profit (loss), asset, and other items for each reportable segment
Fiscal year ended December 31, 2015 (Millions of yen)
Reportable segments
Other (Note 1.) Total
Adjust-ment
(Note 2.)
Amounts reported on the
consoli-dated
financial statements (Note 4.)
Japanese Alcoholic Beverages
Inter-national
Food & Soft
Drinks
Restau-rants
Real Estate Total
Sales Revenues from external customers 273,651 70,501 135,670 27,004 20,872 527,700 6,048 533,748 – 533,748
Intersegment sales and transfers 2,793 102 297 5 2,549 5,747 19,834 25,582 (25,582) –
Total 276,445 70,604 135,967 27,009 23,421 533,448 25,882 559,331 (25,582) 533,748
Segment profit 8,635 154 434 522 8,281 18,028 1 18,029 (4,079) 13,950
Segment assets 220,009 67,068 100,463 12,271 206,649 606,463 6,788 613,252 7,136 620,388
Other items Depreciation (Note 3.) 8,144 3,380 6,185 668 4,202 22,581 36 22,617 1,606 24,224
Increase in property, plant and equipment and intangible assets
4,607 2,558 5,117 844 6,196 19,324 2 19,326 1,256 20,583
(Notes) 1. “Other” comprises businesses, such as logistics businesses, that are not included in reportable segments.
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2. Among the adjustments, the adjustment to depreciation was depreciation and amortization of corporate assets, while the adjustment to increase in property, plant and equipment and intangible assets was mainly the increase in assets in the general administration divisions.
3. Depreciation includes amortization of long-term prepaid expenses.
4. Segment profit has been adjusted for operating profit on the consolidated statements of income.
Fiscal year ended December 31, 2016 (Millions of yen)
Reportable segments
Other (Note 1.) Total
Adjust-ment
(Note 2.)
Amounts reported on the
consoli-dated
financial statements (Note 4.)
Japanese Alcoholic Beverages
Inter-national
Food & Soft
Drinks
Restau-rants
Real Estate Total
Sales Revenues from external customers 279,476 65,400 137,918 28,120 22,900 533,815 8,031 541,847 – 541,847
Intersegment sales and transfers 2,860 96 282 0 2,569 5,810 20,158 25,968 (25,968) –
Total 282,337 65,497 138,200 28,121 25,469 539,625 28,190 567,815 (25,968) 541,847
Segment profit 11,745 906 1,314 663 10,328 24,958 (95) 24,862 (4,595) 20,267
Segment assets 214,326 66,292 100,594 13,571 211,312 606,097 10,042 616,140 10,211 626,351
Other items Depreciation (Note 3.) 7,221 3,042 5,711 521 4,125 20,622 43 20,665 1,675 22,341
Increase in property, plant and equipment and intangible assets
2,691 2,649 8,096 1,143 9,648 24,230 58 24,288 2,384 26,673
(Notes) 1. “Other” comprises businesses, such as logistics businesses, that are not included in reportable segments.
2. Among the adjustments, the adjustment to depreciation was depreciation and amortization of corporate assets, while the adjustment to increase in property, plant and equipment and intangible assets was mainly the increase in assets in the general administration divisions.
3. Depreciation includes amortization of long-term prepaid expenses.
4. Segment profit has been adjusted for operating profit on the consolidated statements of income.
Fiscal year ended December 31, 2017
(Millions of yen)
Reportable segments
Other (Note 1.) Total
Adjust-ment
(Note 2.)
Amounts reported on the
consoli-dated
financial statements (Note 4.)
Japanese Alcoholic Beverages
Inter-national
Food & Soft
Drinks
Restau-rants
Real Estate Total
Sales Revenues from external customers 278,692 69,837 137,898 29,140 24,134 539,702 11,845 551,548 – 551,548
Intersegment sales and transfers 3,526 108 287 0 2,670 6,593 21,001 27,595 (27,595) –
Total 282,218 69,945 138,185 29,141 26,804 546,296 32,847 579,143 (27,595) 551,548
Segment profit 11,767 (1,214) 564 330 11,261 22,709 51 22,761 (5,728) 17,032
Segment assets 218,403 76,535 95,907 12,550 212,010 615,406 10,254 625,661 4,969 630,630
Other items Depreciation (Note 3.) 7,656 3,159 5,696 609 4,436 21,558 85 21,643 1,927 23,571
Increase in property, plant and equipment and intangible assets
3,468 3,529 4,486 800 2,812 15,097 207 15,305 2,225 17,530
(Notes) 1. “Other” comprises businesses, such as logistics businesses, that are not included in reportable segments.
2. Among the adjustments, the adjustment to depreciation was depreciation and amortization of corporate assets, while the adjustment to increase in property, plant and equipment and intangible assets was mainly the increase in assets in the general administration divisions.
3. Depreciation includes amortization of long-term prepaid expenses.
4. Segment profit has been adjusted for operating profit on the consolidated statements of income.
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(Thousands of U.S. dollars)
Reportable segments
Other (Note 1.) Total
Adjust-ment
(Note 2.)
Amounts reported on the
consoli-dated
financial statements (Note 4.)
Japanese Alcoholic Beverages
Inter-national
Food & Soft
Drinks
Restau-rants
Real Estate Total
Sales Revenues from external customers 2,465,210 617,757 1,219,801 257,763 213,484 4,774,018 104,784 4,878,803 – 4,878,803
Intersegment sales and transfers 31,195 958 2,538 8 23,622 58,323 185,773 244,097 (244,097) –
Total 2,496,406 618,716 1,222,340 257,772 237,106 4,832,342 290,558 5,122,901 (244,097) 4,878,803
Segment profit 104,094 (10,746) 4,990 2,926 99,618 200,884 454 201,338 (50,674) 150,663
Segment assets 1,931,917 677,005 848,365 111,016 1,875,365 5,443,670 90,704 5,534,375 43,959 5,578,334
Other items Depreciation (Note 3.) 67,729 27,944 50,393 5,389 39,239 190,696 756 191,453 17,048 208,502
Increase in property, plant and equipment and intangible assets
30,677 31,216 39,689 7,077 24,882 133,543 1,839 135,383 19,686 155,070
(Notes) 1. “Other” comprises businesses, such as logistics businesses, that are not included in reportable segments.
2. Among the adjustments, the adjustment to depreciation was depreciation and amortization of corporate assets, while the adjustment to increase in property, plant and equipment and intangible assets was mainly the increase in assets in the general administration divisions.
3. Depreciation includes amortization of long-term prepaid expenses.
4. Segment profit has been adjusted for operating profit on the consolidated statements of income.
4. Description of nature of differences between amounts of reportable segments total and consolidated financial statements
Profit
For the fiscal year ended
(Millions of yen) (Thousands of U.S.
dollars)
December 31, 2015 December 31, 2016 December 31, 2017 December 31, 2017
Reportable segments total 18,028 24,958 22,709 200,884 Profit (loss) from other businesses 1 (95) 51 454 Unallocated corporate costs (Note) (4,002) (4,784) (5,880) (52,018) Intrasegment eliminations (77) 189 151 1,343 Operating profit on the consolidated financial statements 13,950 20,267 17,032 150,663
(Note) Unallocated corporate costs consist mainly of general and administrative expenses that are not attributable to reportable segments.
Assets
As of
(Millions of yen) (Thousands of U.S.
dollars)
December 31, 2015 December 31, 2016 December 31, 2017 December 31, 2017
Reportable segments total 606,463 606,097 615,406 5,443,670 Assets of other businesses 6,788 10,042 10,254 90,704 Elimination of receivables due from the general administration divisions at the head office
(12,253) (11,134) (14,461) (127,920)
Unallocated corporate assets (Note) 19,390 21,345 19,431 171,880 Total assets on the consolidated financial statements 620,388 626,351 630,630 5,578,334
(Note) Unallocated corporate assets do not belong to reportable segments and consist mainly of working funds (cash and deposits and marketable securities), long-term investment funds, and assets related to general administration divisions.
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[Information associated with reportable segments]
Fiscal year ended December 31, 2015
1. Information for each product or service
Information for each product or service is omitted here, as the same information is disclosed in segment information.
2. Information for each region
(1) Revenues from external customers (Millions of yen)
Japan North America Asia Other Total
439,197 67,001 20,969 6,580 533,748
(Note) Revenues are classified by country or region based on the location of customers.
(2) Property, plant and equipment
Information is omitted as the amount of property, plant and equipment held in Japan constitutes more than 90% of that shown on the consolidated balance sheets.
3. Information for each of main customers (Millions of yen)
Name Net sales Segment
KOKUBU & CO., LTD. 79,177 Japanese Alcoholic Beverages, Food & Soft Drinks
Fiscal year ended December 31, 2016
1. Information for each product or service
Information for each product or service is omitted here, as the same information is disclosed in segment information.
2. Information for each region
(1) Revenues from external customers (Millions of yen)
Japan North America Asia Other Total
455,001 61,915 19,910 5,020 541,847
(Note) Revenues are classified by country or region based on the location of customers.
(2) Property, plant and equipment
Information is omitted as the amount of property, plant and equipment held in Japan constitutes more than 90% of that shown on the consolidated balance sheets.
3. Information for each of main customers
(Millions of yen)
Name Net sales Segment
KOKUBU & CO., LTD. 82,686 Japanese Alcoholic Beverages, Food & Soft Drinks
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Fiscal year ended December 31, 2017
1. Information for each product or service
Information for each product or service is omitted here, as the same information is disclosed in segment information.
2. Information for each region
(1) Revenues from external customers
(Millions of yen)
Japan North America Asia Other Total
459,611 65,781 20,631 5,524 551,548
(Thousands of U.S. dollars)
Japan North America Asia Other Total
4,065,560 581,875 182,497 48,869 4,878,803
(Note) Revenues are classified by country or region based on the location of customers.
(2) Property, plant and equipment
Information is omitted as the amount of property, plant and equipment held in Japan constitutes more than 90% of that shown on the consolidated balance sheets.
3. Information for each of main customers
(Millions of yen)
Name Net sales Segment
KOKUBU & CO., LTD. 77,851Japanese Alcoholic Beverages, Food & Soft Drinks
(Thousands of U.S. dollars)
Name Net sales Segment
KOKUBU & CO., LTD. 688,651Japanese Alcoholic Beverages, Food & Soft Drinks
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[Disclosure of impairment loss on non-current assets for each reportable segment]
Fiscal year ended December 31, 2015
(Millions of yen)
Reportable segments
Other Unallocated amounts and elimination
Total
Japanese Alcoholic Beverages
Inter-national
Food & Soft Drinks
Restaurants Real Estate Total
Impairment loss 3,083 2,082 610 179 – 5,956 – – 5,956
Fiscal year ended December 31, 2016
(Millions of yen)
Reportable segments
Other Unallocated amounts and elimination
Total
Japanese Alcoholic Beverages
Inter-national
Food & Soft Drinks
Restaurants Real Estate Total
Impairment loss 55 – 819 138 – 1,014 4 – 1,018
Fiscal year ended December 31, 2017
(Millions of yen)
Reportable segments
Other Unallocated amounts and elimination
Total
Japanese Alcoholic Beverages
Inter-national
Food & Soft Drinks
Restaurants Real Estate Total
Impairment loss – 2,686 335 548 – 3,570 164 – 3,735
(Thousands of U.S. dollars)
Reportable segments
Other Unallocated amounts and elimination
Total
Japanese Alcoholic Beverages
Inter-national
Food & Soft Drinks
Restaurants Real Estate Total
Impairment loss – 23,761 2,968 4,854 – 31,584 1,458 – 33,043
(Note) The amount in “Other” consists of an amount relating to Shinsyu-ichi Miso Co., Ltd.
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[Amortization and unamortized balance of goodwill for each reportable segment]
Fiscal year ended December 31, 2015
(Millions of yen)
Reportable segments
Other Unallocated amounts and elimination
Total
Japanese Alcoholic Beverages
Inter-national
Food & Soft Drinks
Restaurants Real Estate Total
Amortization 41 1,833 2,278 0 – 4,153 – – 4,153
Unamortized balance as of December 31, 2015
343 12,122 17,769 – – 30,235 – – 30,235
Fiscal year ended December 31, 2016
(Millions of yen)
Reportable segments
Other Unallocated amounts and elimination
Total
Japanese Alcoholic Beverages
Inter-national
Food & Soft Drinks
Restaurants Real Estate Total
Amortization 54 1,670 2,160 34 – 3,920 – – 3,920
Unamortized balance as of December 31, 2016
288 11,214 15,556 379 – 27,439 – – 27,439
Fiscal year ended December 31, 2017
(Millions of yen)
Reportable segments
Other Unallocated amounts and elimination
Total
Japanese Alcoholic Beverages
Inter-national
Food & Soft Drinks
Restaurants Real Estate Total
Amortization 54 1,719 2,121 59 – 3,954 – – 3,954
Unamortized balance as of December 31, 2017
233 12,958 13,435 320 – 26,948 – – 26,948
(Thousands of U.S. dollars)
Reportable segments
Other Unallocated amounts and elimination
Total
Japanese Alcoholic Beverages
Inter-national
Food & Soft Drinks
Restaurants Real Estate Total
Amortization 485 15,207 18,763 523 – 34,980 – – 34,980
Unamortized balance as of December 31, 2017
2,065 114,630 118,842 2,835 – 238,373 – – 238,373
[Information about gain on bargain purchase for each reportable segment]
Fiscal year ended December 31, 2015
Not applicable
Fiscal year ended December 31, 2016
Not applicable
Fiscal year ended December 31, 2017
Not applicable
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[Related parties]
Fiscal year ended December 31, 2015
Not applicable
Fiscal year ended December 31, 2016
Not applicable
Fiscal year ended December 31, 2017
Not applicable
Per Share Information
For the fiscal year ended
(Yen) (U.S. dollars)
December 31, 2015 December 31, 2016 December 31, 2017 December 31, 2017
Net assets per share 2,027.21 2,062.86 2,227.02 19.69
Basic earnings per share 78.40 121.56 140.93 1.24
(Notes) 1. Diluted earnings per share is not presented since no potential shares exist.
2. On July 1, 2016, the Company implemented a consolidation of shares at a ratio of 1 share for each 5 shares of the Company’s common shares. Assuming that the consolidation of shares was conducted at the beginning of the fiscal year ended December 31, 2015, net assets per share and basic earnings per share have been calculated.
3. Own shares held by Trust & Custody Services Bank, Ltd. (Trust Account E) in association with the “Board Benefit Trust (BBT)” system are included in treasury shares that are deducted in calculation of the year-end number of shares and the average number of outstanding shares during the period for the purpose of calculating net assets per share and basic earnings per share.
The year-end number and average number during the period of the treasury shares that were deducted for the purpose of calculating net assets per share and basic earnings per share were 149,320 shares for the fiscal year ended December 31, 2017 (150,920 shares for the fiscal year ended December 31, 2016) and 150,253 shares for the fiscal year ended December 31, 2017 (150,920 shares for the fiscal year ended December 31, 2016), respectively.
4. The basis of computation of basic earnings per share is as follows:
For the fiscal year ended
(Millions of yen) (Thousands of U.S. dollars)
December 31, 2015 December 31, 2016 December 31, 2017 December 31, 2017Profit attributable to owners of parent in consolidated statements of income
6,108 9,469 10,977 97,105
Amount not attributable to common shareholders – – – –
Profit attributable to owners of parent related to common shares 6,108 9,469 10,977 97,105
Average number of outstanding shares during the period (Thousand shares)
77,917 77,900 77,894 77,894
Significant Subsequent Events
Not applicable
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v) Annexed consolidated detailed schedules
[Annexed consolidated detailed schedule of corporate bonds] (Millions of yen)
Company name Issue Date of issuance
Balance at beginning of
current period
Balance at end of current period
Interest rate(%)
Collateral Maturity
Sapporo Holdings Limited (the Company)
26th uncollateralized
straight corporate bonds March 2, 2012
10,000(10,000)
– 0.64 None March 2, 2017
27th uncollateralized
straight corporate bonds March 14, 2013 10,000
10,000(10,000)
0.39 None March 14, 2018
28th uncollateralized
straight corporate bonds December 5, 2013 10,000 10,000 0.61 None December 4, 2020
29th uncollateralized
straight corporate bonds
September 12, 2014
10,000 10,000 0.31 None September 12, 2019
30th uncollateralized
straight corporate bonds
September 10, 2015
10,000 10,000 0.33 None September 10, 2020
31st uncollateralized
straight corporate bonds March 22, 2016 10,000 10,000 0.25 None March 22, 2021
32nd uncollateralized
straight corporate bonds June 1, 2017 – 10,000 0.15 None June 1, 2022
MARUSHIN-KAWAMURA INC. (Note 2.)
Straight corporate bonds
of subsidiaries
October 2, 2012 to March 14, 2016
212(83)
128(68)
0.47to
0.65None
September 25, 2017 to February 28, 2029
Total – – 60,212
(10,083)60,128
(10,068)– – –
(Thousands of U.S. dollars)
Company name Issue Date of issuance
Balance at beginning of
current period
Balance at end of current period
Interest rate(%)
Collateral Maturity
Sapporo Holdings Limited (the Company)
26th uncollateralized
straight corporate bonds March 2, 2012
88,456(88,456)
– 0.64 None March 2, 2017
27th uncollateralized
straight corporate bonds March 14, 2013 88,456
88,456(88,456)
0.39 None March 14, 2018
28th uncollateralized
straight corporate bonds December 5, 2013 88,456 88,456 0.61 None December 4, 2020
29th uncollateralized
straight corporate bonds
September 12, 2014
88,456 88,456 0.31 None September 12, 2019
30th uncollateralized
straight corporate bonds
September 10, 2015
88,456 88,456 0.33 None September 10, 2020
31st uncollateralized
straight corporate bonds March 22, 2016 88,456 88,456 0.25 None March 22, 2021
32nd uncollateralized
straight corporate bonds June 1, 2017 – 88,456 0.15 None June 1, 2022
MARUSHIN-KAWAMURA INC. (Note 2.)
Straight corporate bonds
of subsidiaries
October 2, 2012 to March 14, 2016
1,875(735)
1,139(603)
0.47to
0.65None
September 25, 2017 to February 28, 2029
Total – – 532,613 (89,192)
531,877(89,059)
– – –
(Notes) 1. Amounts in the balance at end of current period shown in parentheses represent amounts to be redeemed within one year.
2. This represents corporate bonds issued by MARUSHINKAWAMURA INC., a domestic subsidiary, in the aggregate.
- 74 -
3. Amounts to be redeemed on an annual basis within five years after the end of the fiscal year are as follows: (Millions of yen)
Within 1 year Over 1 year and within 2 years
Over 2 years and within 3 years
Over 3 years and within 4 years
Over 4 years and within 5 years
10,068 10,013 20,013 10,008 10,003
(Thousands of U.S. dollars)
Within 1 year Over 1 year and within 2 years
Over 2 years and within 3 years
Over 3 years and within 4 years
Over 4 years and within 5 years
89,059 88,573 177,029 88,528 88,484
[Annexed consolidated detailed schedule of borrowings] (Millions of yen)
Category Balance at
beginning of current period
Balance at end of current period
Average interest rate
(%) Repayment period
Short-term loans payable 18,506 15,355 0.79 –
Current portion of long-term loans payable 11,830 22,526 0.42 –
Current portion of lease obligations 3,024 2,690 2.88 –
Long-term loans payable (excluding current portion of long-term loans payable) 114,593 103,578 0.70 From 2019 to 2026
Lease obligations (excluding current portion of lease obligations) 6,968 5,960 3.19 From 2019 to 2023
Other interest-bearing liabilities
Commercial papers 33,000 32,000 0.00 –
Deposits received 343 289 0.03 –
Guarantee deposits received 32,856 30,663 1.01 –
Total 221,123 213,064 – –
(Thousands of U.S. dollars)
Category Balance at
beginning of current period
Balance at end of current period
Average interest rate
(%) Repayment period
Short-term loans payable 163,700 135,833 0.79 –
Current portion of long-term loans payable 104,652 199,257 0.42 –
Current portion of lease obligations 26,751 23,803 2.88 –
Long-term loans payable (excluding current portion of long-term loans payable) 1,013,657 916,214 0.70 From 2019 to 2026
Lease obligations (excluding current portion of lease obligations) 61,642 52,721 3.19 From 2019 to 2023
Other interest-bearing liabilities
Commercial papers 291,906 283,060 0.00 –
Deposits received 3,034 2,564 0.03 –
Guarantee deposits received 290,636 271,238 1.01 –
Total 1,955,981 1,884,694 – –
(Notes) 1. “Average interest rate” represents the weighted-average interest rate applicable to the balance of borrowings, etc. at end of period.
2. Since guarantee deposits received under other interest-bearing liabilities are not expected to be returned, as a general rule, during the period in which the business transaction is continued, their “repayment period” and “amounts to be repaid within five years after the end of the fiscal year (Note 3)” have not been provided.
- 75 -
3. Amounts to be repaid within five years after the end of the fiscal year for long-term loans payable and leaseobligations (excluding current portion of them) are as follows:
(Millions of yen)
Category Over 1 year and within 2 years
Over 2 years and within 3 years
Over 3 years and within 4 years
Over 4 years and within 5 years
Long-term loans payable 20,454 19,511 19,543 14,540
Lease obligations 2,121 1,514 1,103 1,219
(Thousands of U.S. dollars)
Category Over 1 year and within 2 years
Over 2 years and within 3 years
Over 3 years and within 4 years
Over 4 years and within 5 years
Long-term loans payable 180,935 172,589 172,872 128,619
Lease obligations 18,763 13,400 9,764 10,784
[Annexed consolidated detailed schedule of asset retirement obligations]
Since the amount of asset retirement obligations at the beginning and the end of the fiscal year ended December 31, 2017 was not more than one percent of the combined total of liabilities and net assets at the beginning and the end of the fiscal year ended December 31, 2017, this schedule has been omitted in accordance with the provisions of Article 92-2 of the Regulation on Terminology, Forms, and Preparation Methods of Consolidated Financial Statements.
(2) Other information
i) Quarterly information in the fiscal year ended December 31, 2017 and others
(Cumulative period) 1st quarter 2nd quarter 3rd quarter Full year
Net sales (Millions of yen) 117,788 257,970 400,845 551,548
Profit (loss) before income taxes (Millions of yen) (2,367) 1,928 9,940 17,801
Profit (loss) attributable to owners of parent (Millions of yen) (2,307) 222 5,424 10,977
Basic earnings (loss) per share (Yen) (29.62) 2.85 69.64 140.93
(Accounting period) 1st quarter 2nd quarter 3rd quarter 4th quarter
Basic earnings (loss) per share (Yen) (29.62) 32.48 66.79 71.29
(Cumulative period) 1st quarter 2nd quarter 3rd quarter Full year
Net sales (Thousands of U.S. dollars) 1,041,914 2,281,912 3,545,733 4,878,803
Profit (loss) before income taxes (Thousands of U.S. dollars) (20,945) 17,054 87,930 157,466
Profit (loss) attributable to owners of parent (Thousands of U.S. dollars) (20,412) 1,966 47,985 97,105
Basic earnings (loss) per share (U.S. dollars) (0.26) 0.02 0.61 1.24
(Accounting period) 1st quarter 2nd quarter 3rd quarter 4th quarter
Basic earnings (loss) per share (U.S. dollars) (0.26) 0.28 0.59 0.63
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ii) Litigation
On December 12, 2014 (Ontario, Canada local time), a lawsuit was filed against SLEEMANBREWERIES LTD. (“SBL”), a consolidated subsidiary of the Company, in the Superior Courtof Justice of Ontario, Canada, and SBL was served with the complaint effective January 14,2015 (Ontario, Canada local time). In this regard, a judgement dismissing the plaintiffs’ claimagainst SBL was issued on March 15, 2018 (Ontario, Canada local time).
1. Name and address of the consolidated subsidiary, and name of the representative
• Name: SLEEMAN BREWERIES LTD.• Address: Guelph, Ontario, Canada• Name of the representative: Yasuhiro Hanazawa
2. Date on which the lawsuit was filed
December 12, 2014 (Ontario, Canada local time)
3. Name and address of the plaintiffs, and name of the representative
1) Name: David HughesLocation: Ontario, Canada
2) Name: 631992 Ontario Inc.Location: Ontario, CanadaThe representative of this company is not described in the complaint.
4. Content of the lawsuit, amount of compensatory damages claimed and content of thejudgement
1) Reason for and background to the lawsuit
With regard to the fact that an agreement was made in June 2000 between LiquorControl Board of Ontario (a corporation that operates as a provincially owned enterprise;“LCBO”) and Brewers Retail Inc. (a corporation which operates retail stores under thetrade name “The Beer Store”; “TBS”) regarding their beer sales, two plaintiffs claimingthat they, and other beer purchasers in Ontario, paid, and continue to pay, higher pricesfor beer sold in Ontario, filed an action seeking status as a class action against fivecompanies; LCBO, TBS, Labatt Breweries of Canada LP, Molson Coors Canada andSBL.
The Company understands that SBL has been named as a defendant in this lawsuitbecause SBL is a shareholder of TBS. However, since SBL is only a non-controllingshareholder, it has not dispatched any member of the board of directors of TBS and is notinvolved in the management of TBS.
2) Amount of compensatory damages claimed
According to the complaint filed in the Ontario Superior Court of Justice, the plaintiffsclaim compensatory damages and others in the amount not exceeding 1,405,000,000Canadian dollars, etc.
3) Content of the judgement
A summary judgement dismissing the plaintiffs’ claim against SBL was issued.
5. Future prospects
The judgement has no impact on the future results of operations of the Company. If theplaintiffs appeal the judgement in the future, the Company will continue to take actions sothat the SBL’s arguments will be accepted.The Company will make a timely disclosure as necessary.
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